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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Section 240.14a-12
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SUNRISE INTERNATIONAL LEASING CORPORATION
--------------------------------------------------------------------------------
(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.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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SUNRISE INTERNATIONAL LEASING CORPORATION
5500 WAYZATA BOULEVARD, SUITE 725
GOLDEN VALLEY, MINNESOTA 55416
May 31, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders of
Sunrise International Leasing Corporation to be held on June 28, 2000, at 10:00
a.m., local time, at The DoubleTree Park Place Hotel, 1500 Park Place Boulevard,
Minneapolis, Minnesota 55416.
At this meeting, you will be asked to consider and vote on the merger of Sunrise
with The King Management Corporation, a company controlled by Sunrise's Chairman
of the Board and Chief Executive Officer, Peter J. King, and his affiliates.
King Management will continue as the surviving company.
If the merger is completed, you will receive $5.25 in cash for each share of
Sunrise common stock you own.
Because two of Sunrise's four directors have a conflict of interest in the
transaction, Sunrise's board of directors formed a special committee of the two
disinterested directors to mitigate any conflict of interest concerns in
evaluating this merger transaction. This special committee negotiated the $5.25
per share merger consideration and other terms of the merger agreement with King
Management. The members of the special committee, Thomas R. King and Donald R.
Brattain, are not employees of Sunrise or otherwise affiliated with Peter J.
King or King Management. The special committee unanimously approved the merger
agreement and recommended that the entire board of directors of Sunrise approve
it. The board of directors of Sunrise, acting solely on the recommendation of
the special committee, unanimously approved the merger agreement and decided to
submit it to Sunrise's stockholders for approval.
The special committee and the board of directors believe that the terms and
conditions of the merger agreement and the proposed merger are advisable and are
fair to and in the best interests of Sunrise's stockholders (other than King
Management and its affiliates). THEREFORE, THE SPECIAL COMMITTEE AND THE BOARD
OF DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF THE MERGER AGREEMENT.
The attached notice of meeting and proxy statement describe the proposed merger
and the merger agreement. We urge you to read these materials carefully.
In considering the recommendations of the special committee and the entire board
of directors, you should be aware that, as discussed above and in more detail in
the proxy statement, two of the four members of Sunrise's board of directors
have a conflict of interest in recommending approval of the merger agreement
because they are affiliated with King Management.
The merger is an important decision for Sunrise and its stockholders. Whether or
not you plan to attend the special meeting, I urge you to vote by completing,
dating, signing and promptly returning the enclosed proxy card to ensure that
your shares will be voted at the meeting.
Sincerely,
/s/ Thomas R. King
Thomas R. King
Chairman of the Special Committee
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION, OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This proxy statement and form of proxy are being mailed to Sunrise's
stockholders beginning on or about May 31, 2000.
<PAGE> 3
SUNRISE INTERNATIONAL LEASING CORPORATION
5500 WAYZATA BOULEVARD, SUITE 725
GOLDEN VALLEY, MINNESOTA 55416
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
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DATE.......................... June 28, 2000
TIME.......................... 10:00 a.m., local time
PLACE......................... The DoubleTree Park Place Hotel, 1500 Park
Place Boulevard, Minneapolis, Minnesota 55416
ITEMS OF BUSINESS............. - To consider and vote on a proposal to approve
and adopt an Agreement and Plan of Merger
dated as of January 31, 2000 between Sunrise
International Leasing Corporation and The
King Management Corporation, a company
controlled by Peter J. King and his
affiliates, as amended.
- To transact any other business as may
properly come before the special meeting or
any adjournment or postponement of the
special meeting.
RECORD DATE................... You can vote if you were a stockholder of
record on May 25, 2000.
APPRAISAL RIGHTS.............. If you do not vote in favor of approving the
merger agreement and the merger, and you
otherwise comply with the applicable statutory
procedures of Section 262 of the Delaware
General Corporation Law, you will be entitled
to appraisal rights under Section 262 of the
DGCL in connection with the merger and, you
will be entitled to receive, in lieu of the
$5.25 merger consideration, payment in cash of
the "fair value" of your shares of Sunrise
common stock.
A copy of these provisions is included as
Appendix D to this proxy statement. We also
refer you to the information under the heading
"Appraisal Rights" beginning on page 50 of this
proxy statement.
VOTING........................ Your vote is important. Please vote in one of
the following two ways:
- attend the special meeting and vote in
person; or
- mark, sign, date and promptly return the
enclosed proxy card in the postage-paid
envelope.
ADDITIONAL MATERIALS.......... In addition to the appendices to this proxy
statement, we are also providing you with a
copy of our most recent annual report on Form
10-K for the fiscal year ended March 31, 1999
and our most recent quarterly report on Form
10-Q for the quarter ended December 31, 1999.
These materials are specifically incorporated
by reference in this proxy statement and are
included to aid you in your consideration of
the merger.
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TABLE OF CONTENTS
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SUMMARY TERM SHEET.................. 1
The Companies..................... 1
The Merger........................ 1
Vote Required..................... 2
Consequences of the Merger........ 2
Recommendations of the Special
Committee and Sunrise's Board
of Directors................... 2
Interests of Certain Persons in
the Merger..................... 3
Conditions to the Merger.......... 3
Termination of the Merger
Agreement...................... 4
No Solicitation................... 4
Termination Fee................... 4
Reasons for the Merger............ 4
Fairness Opinion of U.S. Bancorp
Piper Jaffray.................. 5
Agreement to Facilitate the
Merger; Security Ownership of
Management..................... 5
Appraisal Rights.................. 5
Financing; Source of Funds........ 6
Reorganization Prior to the
Merger......................... 6
Material Federal Income Tax
Consequences................... 6
Accounting Treatment.............. 6
Stockholder Lawsuits Challenging
the Merger..................... 6
Questions About the Merger........ 7
QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING................... 8
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION....... 9
INFORMATION CONCERNING THE SPECIAL
MEETING........................... 10
Date, Time, and Place............. 10
Purpose........................... 10
Record Date and Quorum
Requirement.................... 10
Solicitation, Revocation and Use
of Proxies..................... 10
Voting Procedures................. 11
Vote Required..................... 11
Agreement to Facilitate the
Merger......................... 11
Voting on Other Matters........... 12
Additional Voting Information..... 12
Appraisal Rights.................. 12
SPECIAL FACTORS..................... 13
Background of the Merger.......... 13
Recommendations of the Special
Committee and the Board of
Directors; Reasons for the
Merger......................... 17
Opinion of the Financial Advisor
for the Special Committee...... 21
King Management's Purpose; Reasons
for and Structure of the
Merger......................... 27
Position of King Management as to
Fairness of the Merger......... 28
Analysis of Financial Advisor to
King Management................ 28
Interests of Certain Persons in
the Merger..................... 32
Consequences of the Merger........ 34
Benefits and Detriments of the
Merger to Sunrise and Sunrise's
Stockholders................... 35
Plans for Surviving Company After
the Merger..................... 35
U.S. Federal Income Tax
Consequences................... 36
Accounting Treatment.............. 38
Public Offerings and Repurchases
of Common Stock................ 38
Financing; Source of Funds........ 38
Fees and Expenses................. 39
Regulatory Requirements........... 39
Stockholder Lawsuits Challenging
the Merger..................... 40
THE MERGER AGREEMENT................ 42
The Merger........................ 42
Time of Closing................... 42
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Exchange and Payment Procedures... 42
Transfers of Shares............... 42
Treatment of Stock Options........ 42
Representations and Warranties.... 43
Sunrise's Covenants............... 43
King Management's Covenants....... 44
Additional Agreements............. 45
Conditions........................ 45
Termination of the Merger
Agreement...................... 46
Termination Fee................... 47
Expenses.......................... 47
Amendments; Waivers............... 47
Agreement to Facilitate the
Merger......................... 48
APPRAISAL RIGHTS.................... 50
You Have a Right to Dissent....... 50
We Must Provide You Notice........ 50
You Must Perfect Appraisal
Rights......................... 50
We Must Provide Each Stockholder
that has Properly Asserted
Appraisal Rights Notice........ 51
A Petition Must be Filed in the
Delaware Chancery Court........ 51
Stockholders May Request
Information.................... 52
A Court Will Determine
Stockholders Entitled to
Appraisal Rights, Fair Value
and Allocation of Expenses..... 52
No Right to Vote Appraisal Shares
or Receive Dividends or
Distribution on Appraisal
Shares......................... 52
Failure to Perfect Appraisal
Rights......................... 52
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA.................... 54
PRO FORMA FINANCIAL INFORMATION..... 55
FINANCIAL PROJECTIONS............... 56
COMMON STOCK MARKET PRICE AND
DIVIDEND INFORMATION.............. 61
COMMON STOCK PURCHASE INFORMATION... 62
Purchases by Sunrise.............. 62
Purchases by Directors and
Executive Officers of
Sunrise........................ 63
Purchases by King Management...... 64
Purchases by Directors and
Executive Officers of King
Management..................... 65
Recent Transactions............... 66
CURRENT MANAGEMENT OF SUNRISE....... 67
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT........................ 69
KING MANAGEMENT..................... 72
RELATED PARTY TRANSACTIONS.......... 74
STOCKHOLDER PROPOSALS............... 76
INDEPENDENT ACCOUNTANTS............. 76
WHERE YOU CAN FIND MORE
INFORMATION....................... 76
DOCUMENTS INCORPORATED BY
REFERENCE......................... 77
</TABLE>
APPENDICES
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Appendix A -- Agreement and Plan of Merger, as amended...... A-1
Appendix B -- Agreement to Facilitate Merger................ B-1
Appendix C -- Fairness Opinion of U.S. Bancorp Piper Jaffray
Inc....................................................... C-1
Appendix D -- Appraisal Rights -- Section 262 of the
Delaware General Corporation Law.......................... D-1
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SUMMARY TERM SHEET
--------------------------------------------------------------------------------
This summary term sheet, together with the "Questions and Answers About the
Special Meeting" on the page following this summary term sheet, highlight
important selected information from this proxy statement relating to our
proposed merger with King Management. This summary term sheet and this question
and answer section may not contain all the information that is important to you.
To more fully understand the proposed merger and for a more complete description
of the legal terms of the proposed merger, you should read carefully this entire
proxy statement and all of its appendices before voting on the proposed merger.
We have included page references parenthetically to direct you to more complete
descriptions of the topics presented in this summary term sheet.
THE COMPANIES (PAGES 54 TO 71)
- Sunrise International Leasing Corporation, a Delaware corporation, is
principally engaged in developing market-oriented vendor programs emphasizing
customized lease and rental programs for vendors of high technology,
telecommunications and other capital equipment, and providing such vendors
with lease financing. Sunrise is a publicly-held company. Its common stock
trades on the Nasdaq National Market. Approximately 62.6% of its outstanding
common stock is held by Peter J. King and his affiliates, including King
Management. Sunrise's principal executive office is located at 5500 Wayzata
Boulevard, Suite 725, Golden Valley, Minnesota 55416, and its telephone number
is (612) 593-1904.
- The King Management Corporation, a Minnesota corporation, is principally
engaged in the leasing of computer and other technology equipment, the sale of
software and operating coin operated copiers. King Management is a
privately-held company owned by Peter J. King and his affiliates. King
Management's principal executive office is located at 5500 Wayzata Boulevard,
Suite 750, Golden Valley, Minnesota 55416, and its telephone number is (612)
513-3230.
THE MERGER (PAGE 42)
Upon the effectiveness of the merger, Sunrise will be merged with King
Management, and King Management will continue as the surviving corporation. The
merger will occur according to the terms and conditions of the merger agreement.
The merger agreement is described in this proxy statement and is attached to
this proxy statement as Appendix A. You should read the description of the
merger agreement in this proxy statement under the heading "The Merger
Agreement" and the attached merger agreement carefully.
If the merger is completed:
- You will receive $5.25 in cash for each of your shares of Sunrise common stock
outstanding at the time of the merger. This cash payment is referred to as the
"merger consideration" in this proxy statement.
- Holders of vested options granted under Sunrise's 1991 Stock Option Plan, will
receive for each outstanding vested option an amount determined by multiplying
(1) the excess, if any, of $5.25 over the exercise price per share of the
option by (2) the number of shares subject to the option that have vested as
of the effective time of the merger, less any amounts needed to pay any
applicable withholding of income or payroll taxes. This cash payment is
referred to as the "option consideration" in this proxy statement.
- Holders of any unvested options granted under Sunrise's 1991 Stock Option Plan
or any options, whether vested or unvested, not granted under Sunrise's 1991
Stock Option Plan, will not receive anything for these outstanding options.
- The executive officers and directors of King Management at the effective time
of the merger will be the executive officers and directors of King Management,
the surviving company.
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VOTE REQUIRED (PAGE 11)
- Under Delaware law, the proposed merger must be approved by a majority of the
outstanding shares of Sunrise common stock entitled to vote on the proposed
merger at the special meeting (3,633,627 shares).
- In addition, the merger agreement requires the proposed merger to be approved
by a majority of the outstanding shares of Sunrise common stock held by
Sunrise's stockholders present and entitled to vote in person or by proxy at
the special meeting, other than King Management and its stockholders, which
stockholders include Peter J. King and Stephen D. Higgins, as trustee under
six trust established for the benefit of Peter J. King's two sons, Russell S.
and William B. King.
CONSEQUENCES OF THE MERGER (PAGE 34)
After the merger:
- Sunrise will no longer be a public company;
- Sunrise common stock will no longer be traded on the Nasdaq National Market,
price quotations will no longer be available and the registration of Sunrise
common stock under the Securities Exchange Act of 1934 will terminate;
- you will no longer have an interest in or be a stockholder of Sunrise and,
therefore, you will not be able to participate in the surviving company's
future earnings and growth, if any;
- King Management will be the surviving company and will be privately held; and
- King Management will be wholly owned by a newly-created parent company that
will be owned by King Management's existing shareholders, Peter J. King and
six separate trusts established for the benefit of William B. King and Russell
S. King, sons of Peter J. King.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND SUNRISE'S BOARD OF DIRECTORS (PAGE
17)
- Sunrise's board of directors formed a special committee consisting of
independent directors to act on behalf of Sunrise's stockholders (other than
King Management and its affiliates) in considering the merger because Peter J.
King and Jeffrey G. Jacobsen are board members and executive officers of both
Sunrise and King Management and therefore have conflict of interests in the
transaction. The two members of this committee, Thomas R. King and Donald R.
Brattain, are not employees of Sunrise or otherwise affiliated with Peter J.
King or King Management. In considering the recommendation of the special
committee below, you should be aware of these conflicts of interest which
present actual or potential, or the appearance of actual or potential,
conflicts of interest in connection with the merger. For a brief discussion of
these interests, we refer you to the summary in the paragraph below and for a
more detailed discussion of these interests, we refer you to "Special
Factors -- Interests of Certain Persons in the Merger," beginning on page 32.
- Based on all the factors the special committee considered, including a written
fairness opinion of U.S. Bancorp Piper Jaffray Inc. dated January 27, 2000,
the special committee unanimously approved the merger agreement, and
recommended that the entire board of directors of Sunrise approve it.
Sunrise's board of directors, acting solely on the recommendation of the
special committee, unanimously approved the merger agreement, and decided to
submit it to Sunrise's stockholders for approval. On May 12, 2000, the special
committee unanimously reaffirmed its approval of the merger agreement and its
recommendation to Sunrise's board of directors.
- On May 25, 2000, the parties amended the merger agreement to require that the
proposed merger be approved by a majority of the outstanding shares of Sunrise
common stock held by Sunrise's stockholders present and entitled to vote in
person or by proxy at the special meeting, other than King Management and its
stockholders, which stockholders include Peter J. King and Stephen D. Higgins,
as trustee under six trusts established for the benefit of Peter J. King's two
sons, Russell S. and William B. King. The members of the special committee
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<PAGE> 8
believe the additional required vote will help in alleviating conflict of
interests concerns.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 32)
In considering the recommendations of the special committee and the board of
directors with respect to the merger and the merger agreement, you should be
aware that some of Sunrise's officers and directors have interests in the merger
or have certain relationships, including those referred to below, that may
present actual or potential, or the appearance of actual or potential, conflicts
of interests in connection with the merger:
- Peter J. King, Sunrise's Chief Executive Officer and Chairman of the Board,
and his affiliates own approximately 62.6% of Sunrise's outstanding common
stock;
- Peter J. King and his affiliates own all of the outstanding shares of common
stock of King Management;
- Peter J. King and Jeffrey G. Jacobsen are officers and directors of both King
Management and Sunrise;
- King Management and its affiliates entered into an agreement to facilitate the
merger under which they agreed, among other things, to vote all of the
outstanding shares of Sunrise common stock they currently own (approximately
62.6% of Sunrise's outstanding common stock) in favor of the merger agreement
and against any proposal that would impede, prevent or nullify the merger
agreement;
- excluding Peter J. King and his affiliates, Sunrise's board of directors and
executive officers own 361,346 shares of Sunrise common stock entitling them
to receive an aggregate of $1,897,067 in merger consideration; and
- all of Sunrise's directors and executive officers have outstanding vested
options which were granted to them under Sunrise's 1991 Stock Option Plan
entitling them to receive an aggregate of $766,748 in option consideration.
For a more detailed discussion of these interests, we refer you to "Special
Factors -- Interests of Certain Persons in the Merger," beginning on page 32.
CONDITIONS TO THE MERGER (PAGE 45)
The obligations of Sunrise and King Management to complete the merger are
subject to several conditions. For example,
- the merger agreement and merger must be approved by a majority of the voting
power held by the stockholders of Sunrise and by a majority of the outstanding
shares of Sunrise common stock present and entitled to vote in person or by
proxy at the special meeting, other than shares held by King Management and
its stockholders;
- there must be no legal or judicial restraints or prohibitions preventing
completion of the merger;
- Sunrise's and King Management's representations and warranties in the merger
agreement must be accurate;
- holders of not more than five percent of Sunrise's outstanding common stock
have exercised their appraisal rights; and
- King Management must have access to enough funds to complete the transaction,
including paying the (1) merger consideration to Sunrise's stockholders, (2)
option consideration to Sunrise's option holders to surrender their
outstanding vested options under Sunrise's 1991 Stock Option Plan; and (3)
fees and expenses arising in connection with the merger agreement and the
merger.
If these conditions are satisfied, the merger should be completed within several
days after the special meeting.
If these conditions are not satisfied, Sunrise and/or King Management may be
able to terminate the merger agreement. For information on the status of King
Management's ability to obtain sufficient financing to complete the merger, we
refer you to the discussion under the heading "Special Factors -- Financing;
Source of Funds," beginning on page 38.
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TERMINATION OF THE MERGER AGREEMENT (PAGE 46)
- The merger agreement may be terminated before the merger is completed, whether
before or after approval by Sunrise's stock holders, upon the occurrence of
specified events.
NO SOLICITATION (PAGE 43)
In the merger agreement Sunrise agreed that neither it nor its affiliates will
solicit or participate in any way in any discussions or negotiations with a
third party concerning the sale of Sunrise, except that Sunrise may, among other
things, approve a bona fide written acquisition proposal submitted on an
unsolicited basis from a third party if and only if:
- Sunrise's board determines in good faith, based on, among other things, advice
of its legal counsel that its fiduciary duties requires it to take action on
the acquisition proposal;
- Sunrise's board determines, after consultation with its financial advisors,
that the acquisition proposal would result in a transaction more favorable to
Sunrise's stockholders (other than King Management and its affiliates) from a
financial point of view than the transaction contemplated by the merger
agreement. This type of acquisition proposal is referred to in this proxy
statement as an "approved offer;"
- Sunrise's board promptly notifies King Management of its determination that
the acquisition proposal constitutes an approved offer; and
- King Management does not make, within three business days of King Management's
receiving this notice, an offer which Sunrise's board, after consultation with
its financial advisors, determines is superior to the approved offer.
TERMINATION FEE (PAGE 47)
- In recognition of the time, effort and expenses expended and incurred by King
Management with respect to Sunrise and the opportunity that the acquisition of
Sunrise presents to King Management, Sunrise has agreed to pay King Management
a termination fee of up to $1 million in the event the merger agreement is
terminated under specific circumstances.
REASONS FOR THE MERGER (PAGE 17)
In reaching its conclusion to approve and recommend the merger agreement, the
special committee considered, among other factors, the following:
- the special committee's knowledge of Sunrise's management and the history of
its business, operations, properties, assets, liabilities, liquidity,
financial condition and operating results;
- the presentations and written opinions of U.S. Bancorp Piper Jaffray regarding
the fairness of the merger consideration from a financial point of view;
- King Management's offer of $5.25 per share represents approximately a 23.5%
premium over the closing price per share of $4.25 on September 7, 1999, the
last day of trading prior to Sunrise's public announcement of Peter J. King's
interest in acquiring Sunrise;
- the merger consideration will consist entirely of cash;
- no investment analyst follows Sunrise's common stock which, given the
substantial insider holdings, has resulted in a substantially illiquid market
for Sunrise's common stock;
- Sunrise relies on two customers, Cisco Systems, Inc. and Sun Microsystems,
Inc., for approximately 80% of its revenues, and the increasing risk that
either or both could look elsewhere for their leasing alternatives or lease
their own equipment, either of which would significantly harm the value of
Sunrise;
- these two customer relationships are heavily dependent on Peter J. King and
the possibility that Sunrise may not be able to keep its major customers if
Peter J. King were not available to Sunrise for any reason;
- Sunrise has not been able to successfully broaden its customer base given the
competition it faces;
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<PAGE> 10
- leasing companies in general are having difficulties obtaining adequate
financing;
- Sunrise's need for additional financing to keep pace with the growth of
equipment purchases from its two key customers and the failure to obtain this
financing would result in an unfavorable impact on these two key customer
relationships;
- Sunrise's margins are decreasing due to rising interest rates along with
increases in its level of debt, depreciation costs associated with declining
equipment values and provisions for losses;
- Sunrise discontinued its direct leasing business in September 1999 due to
diminished portfolio size and volume during the last four years;
- Delaware law entitles Sunrise's stockholders, who follow certain statutory
procedures, to a judicial appraisal to determine the fair value of their
shares if the merger is completed and they believe the merger consideration is
not fair; and
- no potential alternative offer has been presented to the special committee,
and even if such an offer had been presented, it could not be approved without
the consent of Peter J. King and his affiliates who control a majority of
Sunrise's outstanding common stock; Peter J. King has advised Sunrise's board
and the special committee that neither he nor his affiliates are currently
interested in selling Sunrise to a third party.
FAIRNESS OPINION OF U.S. BANCORP PIPER JAFFRAY (PAGE 21)
- U.S. Bancorp Piper Jaffray Inc. delivered to the special committee its written
opinion, dated January 27, 2000, that as of that date and based upon and
subject to the assumptions, factors and limitations presented in the opinion,
the merger consideration King Management is paying to Sunrise's stockholders
(other than King Management and its affiliates) in the merger is fair from a
financial point of view to those stockholders. U.S. Bancorp Piper Jaffray has
confirmed that opinion in an updated opinion dated May 11, 2000.
- The full text of U.S. Bancorp Piper Jaffray's written opinions are included as
Appendix C to this proxy statement. WE ENCOURAGE YOU TO READ THESE OPINIONS
CAREFULLY IN THEIR ENTIRETY. The opinions of U.S. Bancorp Piper Jaffray are
directed only to the matters described in the opinions and do not constitute a
recommendation as to how you should vote at the special meeting.
AGREEMENT TO FACILITATE THE MERGER (PAGE 48); SECURITY OWNERSHIP OF MANAGEMENT
(PAGE 69)
- King Management and its affiliates entered into an agreement to facilitate the
merger. In this agreement they agreed, among other things, to vote all of
their outstanding shares of Sunrise common stock in favor of the merger
agreement and against any proposal that would impede, prevent or nullify the
merger agreement.
- Sunrise's directors and executive officers have also indicated that they
intend to vote their shares of Sunrise common stock in favor of the merger
agreement.
- As a result of the agreement to facilitate the merger and these indications,
approximately 68.1% of Sunrise's outstanding common stock (4,515,972 shares)
will be voted in favor of the merger agreement.
APPRAISAL RIGHTS (PAGE 50)
- If you do not wish to accept the $5.25 merger consideration in the merger and
you do not vote in favor of it, you have the right under Delaware law to seek
a judicial appraisal of your shares to determine the "fair value" of your
shares, in lieu of the $5.25 merger consideration if the merger is completed.
We refer you to the information under the heading "Appraisal Rights" in this
proxy statement and to the applicable Delaware statute attached as Appendix D
to this proxy statement for information on how to exercise your appraisal
rights. FAILURE TO FOLLOW ALL OF THE STEPS REQUIRED UNDER DELAWARE LAW WILL
RESULT IN THE LOSS OF YOUR APPRAISAL RIGHTS.
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FINANCING; SOURCE OF FUNDS (PAGE 38)
- Sunrise has estimated that the amount of funds required to fund the payment of
the merger consideration and the option consideration and pay the fees and
expenses in connection with the merger is approximately $15.0 million.
- King Management intends to obtain these funds from a capital contribution made
by a company that will be formed immediately prior to the merger and will own
100% of the outstanding common stock of King Management. This parent company
will obtain these funds by entering into a bank credit agreement. A commitment
letter with respect to this financing was entered into on April 27, 2000.
- The obligations of Sunrise and King Management to complete the merger are
subject to King Management obtaining the requisite financing, of which there
can be no assurance.
REORGANIZATION PRIOR TO THE MERGER (PAGE 48)
Under the agreement to facilitate the merger, stockholders of Sunrise who also
constitute stockholders of King Management have agreed to take all necessary
actions between the date of the merger agreement and the date the merger becomes
effective to:
- Form a new Minnesota corporation which after its formation will hold all of
the outstanding common stock of King Management. This newly-formed corporation
is referred to as King Management's "parent company" in this proxy statement.
- Eliminate their stock ownership of Sunrise so that they are not entitled to
receive the $5.25 merger consideration. These stockholders intend to do this
by (1) contributing all of their outstanding King Management common stock to
the parent company in exchange for an equal number of shares of the parent
company's common stock, and (2) contributing (other than King Management) all
of their outstanding shares of Sunrise common stock to the parent company in
exchange for shares of the parent company's common stock. The parent company
will then contribute all the shares of Sunrise common stock it received from
these stockholders to King Management.
- Receive as payment for any outstanding vested options to purchase shares of
Sunrise common stock that were not granted under Sunrise's 1991 Stock Option
Plan at the effective time of the merger options to purchase shares of the
parent company's common stock under the same terms and conditions as the
options that will be cancelled, except that the number of shares and the
exercise price will be determined in good faith by the parent company's board
of directors.
- Appoint Peter J. King as their proxy to perform these actions.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 36)
- You will be taxed on your receipt of the $5.25 in cash per share to the extent
that the amount you receive exceeds your tax basis in your shares. Because
determining the tax consequences of the merger can be complicated, you should
consult your tax advisor in order to understand fully how the merger will
affect you.
ACCOUNTING TREATMENT (PAGE 38)
- The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles.
STOCKHOLDER LAWSUITS CHALLENGING THE MERGER (PAGE 40)
Two purported stockholder class action lawsuits have been filed in the Delaware
Chancery Court on behalf of Sunrise's unaffiliated stockholders. These lawsuits
both allege, among other things, that Sunrise's board of directors breached its
fiduciary duties to Sunrise's unaffiliated stockholders.
On May 25, 2000, Sunrise, the defendant directors and the named plaintiffs, on
behalf of themselves and the putative class of persons on behalf of whom the
plaintiffs brought the lawsuits, reached an agreement in principle with
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respect to the settlement of this litigation. In consideration of the
settlement, Sunrise agreed, among other things, to amend the merger agreement to
require the merger to be approved by a majority of the outstanding shares of
Sunrise common stock present and entitled to vote in person or by proxy at the
special meeting, other than shares held by King Management and its stockholders.
On that date, counsel to each of the parties to the litigation entered into a
memorandum of understanding, agreeing to execute and present to the court as
soon as is practicable an appropriate stipulation of settlement and any other
documentation required in order to obtain approval by the court of the
settlement. Any proposed settlement would be subject to the approval of the
court and would not be effective unless the merger is completed. Sunrise
anticipates that any settlement of this litigation will not have a material
adverse effect on its financial condition, operating results or liquidity. We
refer you to the more detailed discussion of these lawsuits beginning on page 40
under the heading "Special Factors -- Stockholder Lawsuits Challenging the
Merger."
QUESTIONS ABOUT THE MERGER
- If you have more questions about the merger or would like additional copies of
this proxy statement, you should contact:
Jeffrey G. Jacobsen
Sunrise International Leasing Corporation
5500 Wayzata Boulevard, Suite 725
Golden Valley, Minnesota 55416
(612) 513-3229
- The following page presents answers to some of the more commonly asked
questions about the special meeting.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
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Q: WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A: Stockholders as of the close of business on May 25, 2000, the record date.
Q: WHAT HAPPENS IF I SELL MY SUNRISE SHARES BEFORE THE SPECIAL MEETING?
A: The record date for the special meeting is earlier than the expected date of
the merger. If you transfer your shares of Sunrise common stock after the
record date, but before the merger, you will retain your right to vote at the
special meeting, but the right to receive the $5.25 per share will pass to
the person to whom you transferred your shares.
Q: HOW MANY SHARES NEED TO BE REPRESENTED AT THE MEETING?
A: The holders of a majority of the outstanding shares entitled to vote at the
special meeting (3,633,627 shares) must be present in person or represented
by proxy to constitute a quorum for the transaction of business. If you vote
by proxy card or in person at the special meeting, you will be considered
part of the quorum.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Generally, your broker will not have the power to vote your shares. Your
broker will vote your shares only if you provide him or her with instructions
on how to vote. Any failure to instruct your broker on how to vote in favor
of the merger will have the effect of a vote "against" the proposed merger.
You should follow the directions provided by your broker on how to instruct
your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may revoke your proxy any time before the special meeting by:
- giving written notice of your revocation to Sunrise's Secretary;
- filing a revoking instrument or a duly executed proxy bearing a later date
with the Secretary; or
- attending the special meeting and voting in person.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. Soon after the merger is completed, we will send you written instructions
explaining how to exchange your Sunrise certificates for cash.
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
--------------------------------------------------------------------------------
This proxy statement and the documents to which we refer you and incorporate
into this proxy statement by reference contain forward-looking statements. In
addition, from time to time, we or our representatives may make forward-looking
statements orally or in writing. We base these forward-looking statements on our
expectations and projections about future events, which we derive from the
information currently available to us. Such forward-looking statements relate to
future events or our future performance, including statements regarding:
- the future growth of our vendor leasing business;
- our growth in revenue and earnings;
- our ability to finance our business;
- our ability to anticipate and adjust lease rate factors and terms to allow for
reasonable margins after deducting accelerated depreciation charges which must
match the accelerating rates of equipment obsolescence; and
- our ability to manage our growth while maintaining acceptable ranges of
delinquency and default percentages.
You can identify forward-looking statements by those that are not historical in
nature, particularly those that use terminology such as "may," "will," "should,"
"expects," "anticipates," "contemplates," "estimates," "believes," "plans,"
"projected," "predicts," "potential" or "continue" or the negative of these or
similar terms. In evaluating these forward-looking statements, you should
consider various factors, including:
- the competitive environment of our business;
- general economic conditions;
- the impact of higher interest rates and our ability to continue to find
adequate financing;
- the risks and uncertainties associated with our reliance on a few large
vendors for our business; and
- our ability to sell equipment at the end of the lease term at prices that are
equal to or better than book value.
These and other factors may cause our actual results to differ materially from
any forward-looking statement.
Forward-looking statements are only predictions. The forward-looking events
discussed in this proxy statement, the documents to which we refer you and other
statements made from time to time from us or our representatives, may not occur,
and actual events and results may differ materially and are subject to risks,
uncertainties and assumptions about us. We are not obligated to publicly update
or revise any forward-looking statement, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this proxy statement, the
documents to which we refer you and other statements made from time to time from
us or our representatives, might not occur.
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INFORMATION CONCERNING THE SPECIAL MEETING
--------------------------------------------------------------------------------
DATE, TIME, AND PLACE
The special meeting will be held on June 28, 2000, 10:00 a.m., local time, at
The DoubleTree Park Place Hotel, 1500 Park Place Boulevard, Minneapolis,
Minnesota 55416.
PURPOSE
At the special meeting, you will be asked to consider and vote upon a proposal
to approve and adopt the merger agreement. A copy of the merger agreement is
attached as Appendix A to this proxy statement.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS HAVE UNANIMOUSLY DETERMINED
THAT THE MERGER AGREEMENT AND MERGER ARE ADVISABLE AND ARE FAIR TO AND IN THE
BEST INTERESTS OF SUNRISE AND ITS STOCKHOLDERS (OTHER THAN KING MANAGEMENT AND
ITS AFFILIATES) AND EACH HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER. ACCORDINGLY, THE SPECIAL COMMITTEE AND THE BOARD RECOMMEND THAT YOU VOTE
IN FAVOR OF APPROVING THE MERGER AGREEMENT.
In considering the recommendations of the special committee and the entire board
of directors above, you should be aware that, as discussed in more detail under
the heading "Special Factors -- Interests of Certain Persons in the Merger,"
beginning on page 32, two of the four members of Sunrise's board of directors
have a conflict of interest in recommending approval of the merger agreement
because they are affiliated with King Management.
To review the background and reasons for the merger in greater detail, we refer
you to the information on pages 13 through 21 of this proxy statement under the
headings "Special Factors -- Background of the Merger" and "-- Recommendations
of the Special Committee and the Board of Directors; Reasons for the Merger."
RECORD DATE AND QUORUM REQUIREMENT
We have fixed the close of business on May 25, 2000 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the special
meeting. At the close of business on May 25, 2000, there were 7,267,253 shares
of our common stock issued and outstanding with 66 record holders.
Each record holder of our common stock at the close of business on May 25, 2000
is entitled to one vote for each share then held on each matter submitted to a
vote of the stockholders at the special meeting.
The holders of a majority of the outstanding shares entitled to vote at the
special meeting (3,633,627 shares) must be present in person or represented by a
proxy to constitute a quorum for the transaction of business at the special
meeting. If you vote by proxy card or in person at the special meeting, you will
be considered part of the quorum.
SOLICITATION, REVOCATION AND USE OF PROXIES
Our board of directors is requesting that, after you read this proxy statement
and the appendices attached to this proxy statement, you complete, date and sign
the accompanying form of proxy and return it promptly in the enclosed
postage-paid envelope. Alternatively, you may vote in person at the special
meeting. We refer you to the heading "Voting Procedures" below for additional
information on how to vote at the special meeting.
We will pay the costs of soliciting proxies. These costs include the
preparation, assembly and mailing of this proxy statement, the notice of special
meeting of stockholders and the enclosed proxy card, as well as the cost of
forwarding these materials to the beneficial owners of our common stock. In
addition to the solicitation of proxies by mail, our directors, officers and
employees may solicit proxies by
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telephone, telecopy and personal contact, without separate compensation for
these activities. We may decide to retain a proxy solicitation firm for
assistance in connection with the solicitation of proxies for the special
meeting. If we retain a proxy solicitation firm, we anticipate that the costs we
will incur will be approximately $5,000 plus reimbursement of reasonable
out-of-pocket expenses. Copies of solicitation materials will be furnished to
fiduciaries, custodians and brokerage houses for forwarding to beneficial owners
of common stock, and these persons will be reimbursed for their reasonable
out-of-pocket expenses.
You may revoke your proxy at any time before the special meeting by:
- giving written notice of your revocation to our Secretary at 5500 Wayzata
Boulevard, Suite 725, Golden Valley, Minnesota 55416; Attention: Jeffrey G.
Jacobsen;
- filing a revoking instrument or a duly executed proxy bearing a later date
with the Secretary; or
- attending the special meeting and voting in person.
VOTING PROCEDURES
Vote by Mail. If you chose to vote by mail, simply mark your proxy card, date
and sign it, and return it to Norwest Bank Minnesota, N.A. in the postage-paid
envelope provided.
Vote at the Special Meeting. Voting by mail will not limit your right to vote
at the special meeting if you decide to attend in person. If your shares are
held in the name of a bank, broker or other nominee, however, you must obtain a
proxy, executed in your favor, from the holder of record to be able to vote the
shares at the special meeting.
How Shares are Voted. Subject to revocation, all shares represented by each
properly executed proxy received by the Secretary of Sunrise will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated, the shares will be voted to approve the merger agreement and in the
manner as the persons named on the proxy card in their discretion determine upon
any other matter that may properly come before the special meeting or any
postponements or adjournments thereof.
VOTE REQUIRED
Approval of the merger agreement by our stockholders will require the
affirmative vote of a majority of our outstanding shares of common stock
entitled to vote at the special meeting (3,633,627 shares). In addition, the
merger agreement requires the proposed merger to be approved by a majority of
the outstanding shares of Sunrise common stock held by Sunrise's stockholders
present and entitled to vote in person or by proxy at the special meeting, other
than King Management and its stockholders, which stockholders include Peter J.
King and Stephen D. Higgins, as trustee under six trusts established for the
benefit of Peter J. King's two sons, Russell S. and William B. King.
AGREEMENT TO FACILITATE THE MERGER
Peter J. King and Stephen D. Higgins, in his capacity as sole trustee for four
trusts, and co-trustee for two trusts that hold Sunrise common stock and King
Management common stock for the benefit of Peter J. King's sons, William B. and
Russell S. King, have executed and delivered an agreement to facilitate the
merger with King Management. Under this agreement these stockholders have agreed
to vote their shares of Sunrise common stock in favor of the merger agreement,
and against any proposal that would prevent, impede or nullify the merger.
Together, these stockholders have agreed to vote 4,154,626 shares, or
approximately 62.6% of our currently outstanding shares, in favor of the merger.
The agreement to facilitate the merger is attached as Appendix B to this proxy
statement and is described in more detail on page 48 of this proxy statement
under the heading "Agreement to Facilitate the Merger."
In addition, all of our directors and executive officers have indicated to us
that they intend to vote their shares in favor of the merger agreement.
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As a result of the agreement to facilitate the merger and these indications,
approximately 68.1% of the outstanding Sunrise common stock will be voted in
favor of the merger agreement.
VOTING ON OTHER MATTERS
You may also be asked to consider other matters that may properly come before
the special meeting and any postponements or adjournments thereof. It is not
anticipated that any other matters will be brought before the special meeting.
If other matters should properly come before the special meeting, however, the
holders of proxies solicited hereby will have the authority to vote on any new
matters in their discretion, unless you withhold such authority.
ADDITIONAL VOTING INFORMATION
Proxies that are returned and reflect abstentions from voting are counted as
present and entitled to vote for purposes of determining whether a quorum exists
at the special meeting. Proxies that reflect abstentions and proxies that are
not returned will have the same effect as a vote against approval of the merger
agreement.
Brokers who hold shares in street name for customers have the authority to vote
on "routine" proposals when they have not received instructions from beneficial
owners. These brokers, however, are precluded from exercising their voting
discretion with respect to the approval of non-routine matters like approving
the merger agreement. A broker "non-vote" occurs when a bank, broker or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power for that
particular item and has not received instructions from the beneficial owner.
Properly executed broker non-votes will be treated as shares that are present
and entitled to vote at the special meeting for purposes of determining whether
a quorum exists and will have the same effect as votes against approval of the
merger agreement.
If the special meeting is adjourned for any purpose, 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 meeting,
except for any proxies which have been revoked or withdrawn, even though they
may have been voted on the same or any other matter at a previous meeting.
APPRAISAL RIGHTS
Stockholders on the record date who do not vote in favor of approving the merger
agreement, who file with Sunrise before the vote on the merger agreement a
written notice of intent to demand the fair value of their shares and comply
with the other statutory requirements of Section 262 of the Delaware General
Corporation Law, will be entitled to appraisal rights. If you vote in favor of
approving the merger, you will waive your appraisal rights. A copy of the
Delaware appraisal statute is attached as Appendix D to this proxy statement and
is described in more detail on page 50 of this proxy statement under the heading
"Appraisal Rights."
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PLEASE DO NOT SEND ANY CERTIFICATES REPRESENTING SHARES OF SUNRISE COMMON STOCK
WITH YOUR PROXY CARD. IF THE MERGER IS COMPLETED, THE PROCEDURES FOR THE
EXCHANGE OF CERTIFICATES REPRESENTING SHARE OF SUNRISE COMMON STOCK WILL BE AS
DESCRIBED IN THIS PROXY STATEMENT. WE REFER YOU TO THE INFORMATION ON PAGE 42 OF
THIS PROXY STATEMENT UNDER THE HEADINGS "THE MERGER AGREEMENT -- EXCHANGE AND
PAYMENT PROCEDURES."
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SPECIAL FACTORS
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BACKGROUND OF THE MERGER
Prior to July 1999
The board of directors of Sunrise had at times prior to July 1999 discussed the
fact that Sunrise suffered significant limitations as a public company,
including limited trading volume and public float of its common stock,
substantial insider holdings, small market capitalization and diminishing
research attention from market analysts. As a result, the board in October 1998
implemented a stock repurchase program in an attempt to increase the value of
Sunrise's outstanding shares of common stock. The board, however, did not at any
time prior to July 1999 believe it was necessary to actively seek out strategic
alternatives to Sunrise remaining an independent public company and, prior to
July 1999, Sunrise had no plans or proposals relating to an extraordinary
transaction.
July 1999
At a Sunrise board of directors meeting held on July 14, 1999, Peter J. King,
Sunrise's Chief Executive Officer and Chairman of the Board, who currently owns
or controls approximately 62.6% of Sunrise's outstanding common stock, advised
other members of the board that he was concerned with the performance and
illiquidity of Sunrise's common stock and the risks related to maintaining and
growing the vendor leasing business of Sunrise's two principal customers. He
advised the board that while a final decision had not been made, he and his
affiliates, including King Management, were considering making an offer to take
Sunrise private.
August 1999
On August 9, 1999, King Management retained Greene Holcomb & Fisher LLC as its
independent financial advisor to assist King Management in performing an
analysis of the feasibility of a transaction with Sunrise, structuring the
transaction, negotiating the merger consideration and other terms of the merger
agreement and identifying and contacting potential financing sources in
connection with the transaction.
September 1999
On September 7, 1999, Greene Holcomb & Fisher recommended to King Management
that it submit an initial bid of $5.25 for all of the outstanding shares of
Sunrise common stock not owned or controlled by King Management or its
affiliates. Greene Holcomb & Fisher provided to King Management a written
analysis of this recommended bid. This analysis compared the ratios of company
value/revenues, company value/operating income, price/earnings and price/book
value suggested by the recommended bid with these ratios for a group of
unidentified public companies. In addition, this analysis compared the value of
Sunrise suggested by the recommended bid with (a) the premiums in certain going
private transactions, (b) the value of Sunrise using a discounted cash flow
analysis, (c) the ratios of company value/revenues, company value/operating
income, price/earnings and price/book value of a group of public leasing
companies, and (d) certain financial ratios of one acquisition transaction
deemed particularly comparable. Finally, this analysis included a review of
market prices of Sunrise stock and trading volumes over various periods and a
summary of the number of shares traded at various prices.
At a Sunrise board of directors meeting held on the morning of September 8,
1999, Peter J. King advised the board that he was in the process of putting
together a proposal to acquire all of the outstanding shares of Sunrise common
stock not controlled by him, King Management and the trusts established for the
benefit of his sons, William B. and Russell S. King.
Because Peter J. King and Jeffrey G. Jacobsen are directors and executive
officers of both Sunrise and King Management, the board of directors of Sunrise
unanimously decided to create a special committee of independent directors to
evaluate any proposal received by
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Peter J. King. Thomas R. King and Donald R. Brattain, who are not employees of
Sunrise or otherwise affiliated with Peter J. King or King Management, were
elected as members of the special committee, with Thomas R. King elected as its
Chairman. The purpose of the special committee was to represent Sunrise's
stockholders (other than King Management and its affiliates) in negotiations
with Peter J. King, and to evaluate the terms of any proposal.
Sunrise's annual meeting of stockholders was held on September 8, 1999,
immediately after the board of directors meeting. At this meeting, Peter J. King
announced to Sunrise's stockholders his intention to make a proposal to
Sunrise's board of directors to acquire all of the outstanding shares of Sunrise
common stock, other than shares owned or controlled by Peter J. King and his
affiliates.
On September 8, 1999, Sunrise issued a press release announcing Peter J. King's
intention to acquire all of the outstanding shares of Sunrise's common stock,
other than shares owned or controlled by him and his affiliates.
On September 15, 1999, the special committee engaged U.S. Bancorp Piper Jaffray
Inc. to serve as its financial advisor and Leonard, Street and Deinard
Professional Association to serve as its special legal counsel. On September 15,
1999, U.S. Bancorp Piper Jaffray submitted to Sunrise a request for documents to
begin its due diligence review of Sunrise.
On September 20, 1999, the special committee held its first meeting to generally
review U.S. Bancorp Piper Jaffray's engagement, King Management's proposal and
issues related to Sunrise's business.
October 1999
On October 1, 1999, the special committee held its second meeting to review,
among other things, the history of Sunrise's business, operations and financial
condition, the potential merger with King Management, the decline and decision
to discontinue Sunrise's direct leasing business, the growth of Sunrise's vendor
leasing business, Sunrise's dependence on two key customers, and Sunrise's
difficulty in obtaining financing. The special committee also discussed the
process by which it would review any offer received from Peter J. King, and
decided it would request Peter J. King to submit a formal offer to acquire
Sunrise.
On October 18, 1999, Peter J. King submitted to the special committee a
non-binding letter of intent in which he indicated his interest to have King
Management acquire all of the outstanding shares of Sunrise common stock, other
than shares owned or controlled by King Management and its affiliates, for a per
share price of between $5.00 and $5.25.
Between October 18, 1999 and November 18, 1999, Greene Holcomb & Fisher and U.S.
Bancorp Piper Jaffray had a number of conversations regarding King Management's
October 18, 1999 offer. Throughout this period, the special committee also had
numerous telephone conferences with its financial and legal advisors relating to
King Management's October 18, 1999 offer. The consensus among the special
committee and its financial and legal advisors was that the special committee
should seek an offer in excess of $5.25.
November 1999
On or about November 8, 1999, Greene Holcomb & Fisher advised U.S. Bancorp Piper
Jaffray that King Management's offer would not exceed $5.25 per share and that
King Management's offer of $5.00 to $5.25 remained in effect.
On November 11, 1999, the special committee met again with its financial and
legal advisors to discuss King Management's offer of $5.05 to $5.25 per share.
At this meeting, U.S. Bancorp Piper Jaffray indicated that, based upon its
preliminary work to date, but subject to completing its due diligence and
analysis, it would be in a position to opine that the $5.25 offer would be fair,
from a financial point of view, to Sunrise's stockholders (other than King
Management and its affiliates). The special committee then discussed Sunrise's
heavy reliance on its two key customers and the risks associated with the loss
of either or both of them. The special committee also discussed the
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possibility of attracting an additional offer to acquire Sunrise, given the fact
that no potential offer had appeared in the two months since Sunrise publicly
disclosed Peter J. King's intentions to acquire Sunrise. In addition, Peter J.
King, Sunrise's majority stockholder, had indicated to the special committee
that he was not currently willing to approve the sale of Sunrise to a third
party. Peter J. King's unwillingness to sell to a third party had not been made
public. Nevertheless, no third party had indicated any desire or intention to
make an offer to purchase Sunrise, and the special committee did not believe any
indication of interest would be forthcoming. Consequently, the special committee
decided at this meeting, given all the circumstances, to focus solely on
obtaining an offer from King Management that was fair and reasonable to
Sunrise's stockholders (other than King Management and its affiliates).
At a meeting between Greene Holcomb & Fisher and U.S. Bancorp Piper Jaffray on
November 18, 1999, U.S. Bancorp Piper Jaffray discussed King Management's offer
of $5.05 to $5.25 and U.S. Bancorp Piper Jaffray advised Greene Holcomb & Fisher
that the special committee would not accept an offer of $5.00 per share and that
King Management's offer should exceed $5.25 per share. Greene Holcomb & Fisher
agreed to convey this information to King Management.
December 1999
On or about December 7, 1999, Greene Holcomb & Fisher advised U.S. Bancorp Piper
Jaffray that King Management was willing to submit a firm offer of $5.25 per
share and was unwilling to increase its offer to more than $5.25 per share.
On December 9, 1999, the special committee met at the offices of U.S. Bancorp
Piper Jaffray. The special committee discussed with U.S. Bancorp Piper Jaffray
Sunrise's current difficulties in obtaining financing, as well as the
difficulties facing leasing companies in general. The special committee then
discussed with U.S. Bancorp Piper Jaffray several other factors impacting
Sunrise's business and prospects, and Sunrise's prospects if the special
committee rejected King Management's offer. The special committee decided that
Thomas R. King should try to obtain a higher price from King Management. If
Thomas R. King was unable to obtain a higher price, however, the special
committee decided it would accept the $5.25 offer from King Management, but only
if the special committee was able to negotiate an acceptable definitive merger
agreement and receive from U.S. Bancorp Piper Jaffray a written opinion with
respect to the fairness, from a financial point of view, of the merger
consideration to Sunrise's stockholders (other than King Management and its
affiliates).
Later that day Thomas R. King had discussions with both Greene Holcomb & Fisher
and King Management regarding increasing the $5.25 offer price. Peter J. King
indicated to Thomas R. King his refusal to increase the offer. After telephone
conversations with U.S. Bancorp Piper Jaffray and its legal counsel, the special
committee agreed to accept the offer of $5.25 per share, subject to the
conditions it had identified earlier that day.
On December 10, 1999, the special committee advised Peter J. King that King
Management's offer of $5.25 had been accepted, subject to obtaining a written
opinion from U.S. Bancorp Piper Jaffray that the $5.25 price per share was fair,
from a financial point of view, to Sunrise's stockholders (other than King
Management and its affiliates) and the execution of an acceptable definitive
merger agreement.
On December 21, 1999, the special committee received the first draft of the
definitive merger agreement from Oppenheimer Wolff & Donnelly LLP, King
Management's legal counsel. Between December 21, 1999 and January 31, 2000, the
special committee, King Management and their representatives continued to
negotiate the terms and conditions of the definitive merger agreement. The
special committee was primarily concerned with two issues. First, the special
committee did not want the closing of the merger to be subject to
representations and warranties to be made by officers of Sunrise, who were also
controlled by or affiliated with Peter J. King or King Management or to be
subject to conditions, the
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fulfillment of which was under the control of Peter J. King. After several
discussions, Peter J. King and his legal advisors agreed to revise the merger
agreement to significantly reduce the ability of Peter J. King and King
Management to terminate the merger agreement and abandon the merger as a result
of misrepresentations made by Sunrise or failures to meet conditions. The
special committee was also concerned that the merger agreement provided that
King Management's obligation to complete the merger was conditioned on its
ability to secure necessary bank financing. After several discussions among the
parties and their legal representatives, the special committee agreed to allow
King Management to have a "financial out." This "financial out," however, was
subject to King Management strengthening the representations as to its belief
that the necessary financing would be available, and the special committee's
ability to satisfy itself prior to signing the merger agreement that King
Management could obtain the financing necessary to complete the merger.
January 2000
During the week of January 24, 2000, Jeffrey G. Jacobsen, Chief Financial
Officer of Sunrise, and U.S. Bancorp Piper Jaffray had a telephone conversation
in which they discussed the preparation and accuracy of financial projections
provided by Sunrise to U.S. Bancorp Piper Jaffray. During this meeting, based on
Sunrise's actual performance to date, Jeffrey G. Jacobsen revised the net income
number for fiscal year 2000 from $2,583,000 to $2,850,000 because he believed
that this revised number was more indicative of Sunrise's future performance
than the projection previously provided to U.S. Bancorp Piper Jaffray.
On the morning of January 26, 2000, Thomas R. King met with Jeffrey G. Jacobsen
and Peter J. King to discuss Peter J. King's efforts, on behalf of King
Management, to obtain the bank financing necessary to complete the merger. Based
on his conversations with Jeffrey G. Jacobsen and Peter J. King and their
history of successful dealings with financial institutions, Thomas R. King
advised Donald R. Brattain, the other member of the special committee, later on
January 26, 2000, that he believed the special committee should approve the
merger agreement and the merger notwithstanding the financing contingency.
Donald R. Brattain agreed.
On January 27, 2000, the special committee met with its legal counsel and
financial advisors at the offices of U.S. Bancorp Piper Jaffray. They discussed
the terms of the merger agreement and its status. U.S. Bancorp Piper Jaffray
then delivered to the special committee its opinion that, subject to the
limitations and qualifications as stated in its opinion, the merger
consideration to be received by Sunrise's stockholders (other than King
Management and its affiliates) is fair to these stockholders from a financial
point of view. The special committee then unanimously approved the merger
agreement as being fair to Sunrise and its stockholders (other than King
Management and its affiliates) and recommended that the entire board of
directors of Sunrise approve it.
On January 28, 2000, Sunrise's board of directors by unanimous written action,
based solely on the recommendation of the special committee, adopted the merger
agreement and declared it advisable and fair to and in the best interests of
Sunrise and its stockholders (other than King Management and its affiliates).
On January 31, 2000, Sunrise and King Management executed and delivered the
definitive merger agreement. After the close of the market on January 31, 2000,
Sunrise issued a press release announcing the execution of the merger agreement.
On May 25, 2000, the parties amended the merger agreement to require that the
proposed merger be approved by a majority of the outstanding shares of Sunrise
common stock held by Sunrise's stockholders present and entitled to vote in
person or by proxy at the special meeting, other than King Management and its
stockholders, which stockholders include Peter J. King and Stephen D. Higgins,
as trustee under six trusts established for the benefit of Peter J. King's two
sons, Russell S. and William B. King.
16
<PAGE> 22
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS; REASONS FOR THE
MERGER
Special Committee
In arriving at its recommendation and determination that the merger agreement
and merger are fair to Sunrise's stockholders (other than King Management and
its affiliates), the special committee carefully considered the terms of the
merger agreement. As part of this process, the special committee considered the
advice and assistance of its financial and legal advisors regarding the terms of
the merger agreement and the fairness of the merger transaction to Sunrise's
stockholders (other than King Management and its affiliates). In determining to
approve and adopt the merger agreement, and in determining the fairness of the
merger agreement and merger to Sunrise's stockholders (other than King
Management and its affiliates), the special committee considered, among others,
the following:
- The special committee's knowledge of Sunrise's management and the history of
its business, operations, properties, assets, liabilities, liquidity,
financial condition, and operating results, including Sunrise's recent and
current financial performance and the implications of these factors on the
potential market performance of Sunrise's common stock.
- U.S. Bancorp Piper Jaffray's presentation to the special committee, which
contained its opinion and included the underlying assumptions and
methodologies, that the $5.25 price per share of Sunrise common stock to be
received by Sunrise's stockholders (other than King Management and its
affiliates) is fair, from a financial point of view, to these stockholders. We
refer you to the information on page 21 of this proxy statement under the
heading "Opinion of the Financial Advisor for the Special Committee" for more
information on U.S. Bancorp Piper Jaffray's fairness opinion. This opinion is
included as Appendix C to this proxy statement.
- King Management's $5.25 per share offer represents approximately a 23.5%
premium over the closing price per share of $4.25 on September 7, 1999, the
last day of trading prior to Sunrise's public announcement of Peter J. King's
interest in acquiring all of the outstanding shares of Sunrise common stock,
other than shares owned or controlled by him and his affiliates.
- The history of the negotiations between the special committee and King
Management with respect to the merger consideration which, among other things,
led to the price of $5.25 per share of Sunrise common stock, and the special
committee's inability to negotiate a higher price.
- The merger consideration will consist entirely of cash.
- Sunrise suffered significant investment limitations as a public company
because it did not have any investment analysts following its common stock and
had substantial insider holdings. This has resulted in a substantially
illiquid market for Sunrise's common stock.
- Sunrise relies exclusively on its vendor leasing business and primarily on two
customers, Cisco Systems, Inc. and Sun Microsystems, Inc., who together
accounted for 78.2% of Sunrise's total revenues for the nine months ended
December 31, 1999. While the relationships with these customers are good, one
of the customers has entered into an alliance with a major leasing company and
the other operates its own leasing company. As a result, there is an
increasing risk that either or both of these customers could look elsewhere
for their leasing alternatives or lease their own equipment, either of which
would significantly harm the value of Sunrise. There is, therefore, no
assurance that the revenues generated from leases with these customers will
continue to increase as they have in the past or that Sunrise will be able to
maintain these relationships.
- Sunrise's two key customer relationships are heavily dependent on Peter J.
King, and Sunrise may not be able to keep these customers if Peter J. King
were not available to Sunrise for any reason. Additionally, Sunrise has not
been able to successfully
17
<PAGE> 23
broaden its customer base and reduce its reliance on these two customers,
given the competition it faces.
- Obtaining increased levels of financing to keep pace with the growth of
equipment purchases from Sunrise's two key customers has been extremely
difficult in the current equipment leasing environment and the failure of
Sunrise to obtain this financing would result in an unfavorable impact on
these two key customer relationships.
- The debt used to fund the increases in vendor equipment purchases is primarily
full recourse, variable rate debt which increases Sunrise's exposure to
defaults and interest rate increases.
- The risks associated with the lack of predictability as to what will happen to
Sunrise's equipment when a lease expires or terminates and the equipment is
returned to Sunrise given the ongoing rapid technological advances in the
computer industry.
- Although leasing revenues have increased significantly, net income has not
increased at the same rate because Sunrise's margins are decreasing due to
rising interest rates along with increases in its debt level, depreciation
costs associated with declining equipment values, and provisions for losses.
- Sunrise discontinued its direct leasing business in September 1999 due to
diminished portfolio size and volume during the last four years.
- Delaware law entitles Sunrise's stockholders, who follow certain statutory
procedures, to seek a judicial appraisal of the fair value of their shares if
the merger is completed and they believe the merger consideration is not fair.
- The merger cannot be completed until the parent company obtains the necessary
financing to distribute to King Management to enable King Management to pay
the merger and option consideration and the fees and expenses associated with
the merger agreement and the merger.
- The likelihood of the parent company being able to obtain the necessary
financing to distribute to King Management.
- The absence of any indications of interest or offers to acquire Sunrise after
public announcement in September 1999 of Peter J. King's intention to acquire
all of the outstanding shares of Sunrise's common stock, other than shares
owned or controlled by him and his affiliates.
- The only other alternative available to Sunrise at the time was to remain as a
public company, which would not allow stockholders to take advantage of the
immediate cash premium offered by King Management and would not address the
disadvantages inherent in Sunrise remaining a publicly-traded company.
The foregoing list of factors considered by the special committee is not
intended to be exhaustive. The foregoing discussion, however, addressed the
material information and factors considered by the special committee in its
consideration of the merger.
In view of the variety of factors and the amount of information considered, the
special committee did not find it practicable to, and did not specifically make
assessments of, quantify or otherwise assign relative weights to all of the
various factors and analyses considered in reaching its determination. The
special committee did, however, give special consideration to the premium to be
paid by King Management over Sunrise's closing price per share on September 7,
1999, the last day of trading prior to Sunrise's public announcement of Peter J.
King's interest in acquiring Sunrise. The special committee focused on the
period from March 31, 1997 through September 8, 1999, in which the low closing
price of Sunrise's common stock was $2.50 and the high closing price of
Sunrise's common stock was $4.75. After consultation with its legal and
financial advisors, the special committee concluded that the $5.50 per share
closing price of Sunrise's common stock was not a true indication of value on
the day prior to the public announcement of the signing of the merger agreement,
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<PAGE> 24
because it believed that the $5.50 per share price was solely attributable to
speculation by the market, stimulated by Sunrise's public announcement on
September 8, 1999 that Peter J. King intended to make an offer to acquire
Sunrise, rather than Sunrise's financial performance or intrinsic value. During
1999, up to the day prior to the September 8 stockholder meeting, the per share
price of the Sunrise common stock fluctuated between $4.75 and $3.00, and in the
30 days prior to the September 8 announcement, the average per share price was
$4.197. After the date of the announcement, the per share stock price varied,
but was generally greater than $5.00. Since there had been no significant change
in Sunrise's business, the special committee concluded that the run up in the
per share price was attributable to the announcement. The special committee
concluded, therefore, that historically the trading prices of Sunrise common
stock had fluctuated and that the $5.25 per share merger consideration was a
significant premium over generally prevailing prior Sunrise common stock prices.
We refer you to the information under the heading "Common Stock Market Price and
Dividend Information" on page 61 of this proxy statement for more information on
the history of the trading prices of Sunrise common stock.
The special committee also gave special consideration to the limited strategic
alternatives available to Sunrise. Since Sunrise's public announcement of Peter
J. King's intention to acquire Sunrise in September 1999, no third party offer
was presented to the special committee for consideration. Even if an alternative
offer would have been presented to the special committee, it could not be
approved without the consent of Peter J. King and his affiliates because they
control a majority of Sunrise's outstanding common stock, and Peter J. King
advised the board and the special committee that neither he nor his affiliates
are currently interested in selling Sunrise to a third party. Peter J. King's
unwillingness to sell to a third party had not been made public. Nevertheless,
no third party had indicated any desire or intention to make an offer for
Sunrise, and the special committee did not believe any indication of interest
would be forthcoming. Consequently, Sunrise's only viable alternative to the
proposed merger with King Management, therefore, is to continue in its present
form. The special committee concluded, after a consideration of all of the
factors as a whole, that King Management's offer was a better alternative.
The special committee took note of the fact that the $5.25 merger consideration
was in excess of the book value of Sunrise's common stock, which was $4.46 per
diluted share as of December 31, 1999, and that several public leasing companies
are currently trading at less than book value. In considering the fairness, from
a financial point of view, to Sunrise's stockholders (other than King Management
and its affiliates) of the merger consideration, the special committee also
noted that the range of portfolio liquidation values of Sunrise, as analyzed by
U.S. Bancorp Piper Jaffray and described on page 21 under the heading "Special
Factors -- Opinion of the Financial Advisor to the Special Committee" was
between $3.77 and $5.35 per share, depending upon the assumed discount rates and
residual realization as a percent of net book value rates, which, in all but one
case, was significantly less than the $5.25 per share merger consideration.
The special committee did not consider the prices paid by Sunrise, King
Management or any of their affiliates in connection with purchases of Sunrise
common stock by any of these persons during the last two fiscal years, because
it did not believe that the prices of these purchases would provide as useful a
comparison for the merger consideration as the other factors listed above. The
special committee believed that these purchases provide a useful comparison,
since they were at then current market prices which are significantly below the
merger consideration price and were for relatively small amounts of Sunrise's
outstanding shares.
On May 12, 2000, the special committee met with representatives of U.S. Bancorp
Piper Jaffray. After receiving the updated fairness opinion of U.S. Bancorp
Piper Jaffray, the special committee unanimously voted to reaffirm its approval
of the merger agreement and
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<PAGE> 25
its recommendation to Sunrise's board of directors.
On May 25, 2000, the parties amended the merger agreement to require that the
proposed merger be approved by a majority of the outstanding shares of Sunrise
common stock held by Sunrise's stockholders present and entitled to vote in
person or by proxy at the special meeting, other than King Management and its
stockholders, which stockholders include Peter J. King and Stephen D. Higgins,
as trustee under six trusts established for the benefit of Peter J. King's two
sons, Russell S. and William B. King. The members of the special committee
believe the additional required vote will help in alleviating conflict of
interests concerns.
Board of Directors
Because two of Sunrise's four directors have a conflict of interest in the
transaction, Sunrise's board of directors unanimously formed the special
committee to act solely on behalf of Sunrise's stockholders (other than King
Management and its affiliates) for purposes of negotiating the merger agreement
and considering the merger. The special committee, in turn, retained U.S.
Bancorp Piper Jaffray to prepare and deliver an opinion that the merger
consideration is fair, from a financial point of view, to Sunrise's stockholders
(other than King Management and its affiliates). Because the only two directors
not affiliated with King Management acted as the special committee, the full
board of directors of Sunrise did not separately conduct deliberations
concerning the merger and the merger agreement.
Sunrise's board of directors believes that sufficient procedural safeguards to
ensure the fairness of the proposed merger and to permit the special committee
to effectively represent the interests of Sunrise's stockholders (other than
King Management and its affiliates) were present. The directors who served on
the special committee were not employees of Sunrise or otherwise affiliated with
Peter J. King or King Management. The special committee believed there was no
need to retain any additional unaffiliated representatives to act on behalf of
Sunrise's stockholders (other than King Management and its affiliates).
Sunrise's board reached this conclusion in view of:
- the special committee's retention of independent legal counsel and financial
advisors;
- the fact that the special committee consisted of two disinterested directors
whose sole purpose was to represent the interests of Sunrise's stockholders
(other than King Management and its affiliates);
- the fact that the use of a special committee, even though consisting of two
directors of Sunrise and therefore not completely unaffiliated with Sunrise,
is a mechanism well recognized to provide for fairness in transactions of this
type; and
- the arms' length negotiations that had taken place between Peter J. King and
his affiliates and the special committee.
Sunrise's board of directors believes the negotiations between the Peter J. King
and his affiliates and the special committee were arms' length because:
- other than the fact that the members of the special committee were directors
of Sunrise and Mr. Thomas King's law firm served as legal counsel to Sunrise,
the members of the special committee otherwise had no relationship with Peter
J. King or his affiliates prior to the receipt of Peter J. King's proposal to
acquire Sunrise and will have no relationship with Peter J. King or his
affiliates after the transaction is completed;
- neither member of the special committee is otherwise obligated to Peter J.
King or his affiliates or under their control or influence;
- the personal interest of the members of the special committee as stockholders
of Sunrise is to obtain the highest price possible for their Sunrise common
stock which is identical to the interest of all of Sunrise's stockholders; and
- the special committee had retained independent legal counsel and financial
advisors to assist it in the negotiations with Peter J. King and his
affiliates.
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<PAGE> 26
SUNRISE'S BOARD OF DIRECTORS HAS ADOPTED THE ANALYSIS OF THE SPECIAL COMMITTEE
AS TO THE FAIRNESS OF THE MERGER TRANSACTION AND, BASED SOLELY ON THE
RECOMMENDATION OF THE SPECIAL COMMITTEE, UNANIMOUSLY APPROVED THE PROPOSED
MERGER AND THE MERGER AGREEMENT AND DECLARED THAT THE MERGER AND MERGER
AGREEMENT ARE ADVISABLE AND ARE FAIR TO AND IN THE BEST INTERESTS OF SUNRISE'S
STOCKHOLDERS (OTHER THAN KING MANAGEMENT AND ITS AFFILIATES). SUNRISE'S BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSED MERGER AND MERGER
AGREEMENT.
In considering the recommendations of the special committee and the entire board
of directors above, you should be aware that, as discussed above and in more
detail under the heading "Special Factors -- Interests of Certain Persons in the
Merger," beginning on page 32, two of the four members of Sunrise's board of
directors have a conflict of interest in recommending approval of the merger
agreement because they are affiliated with King Management. On May 25, 2000,
however, the parties amended the merger agreement to require that the proposed
merger be approved by a majority of the outstanding shares of Sunrise common
stock held by Sunrise's stockholders present and entitled to vote in person or
by proxy at the special meeting, other than King Management and its
stockholders, which stockholders include Peter J. King and Stephen D. Higgins,
as trustee under six trusts established for the benefit of Peter J. King's two
sons, Russell S. and William B. King. The members of the board of directors
believe the additional required vote will help in alleviating conflict of
interests concerns.
OPINION OF THE FINANCIAL ADVISOR FOR THE SPECIAL COMMITTEE
Pursuant to an engagement letter dated September 15, 1999, Sunrise retained U.S.
Bancorp Piper Jaffray to act as the exclusive financial advisor to the special
committee with respect to King Management's offer to acquire Sunrise and any
other offers to purchase Sunrise or the assets and business of Sunrise,
including by merger, and, if requested, to render to the special committee a
written opinion as to the fairness from a financial point of view of the merger
consideration to be received by Sunrise's stockholders (other than King
Management and its affiliates).
At a meeting of the special committee held on January 27, 2000, U.S. Bancorp
Piper Jaffray rendered to the special committee its opinion that, as of that
date and based on and subject to the assumptions, factors and limitations
presented in the opinion and described below, the $5.25 per share in cash to be
paid to Sunrise's stockholders (other than King Management and its affiliates)
in the merger was fair from a financial point of view to those stockholders.
U.S. Bancorp Piper Jaffray has confirmed that opinion in an updated opinion
dated May 11, 2000. Copies of U.S. Bancorp Piper Jaffray's opinions are included
as Appendix C to this proxy statement and the opinions are incorporated into
this proxy statement by reference. YOU ARE URGED TO READ THE OPINIONS CAREFULLY
IN THEIR ENTIRETY.
While U.S. Bancorp Piper Jaffray rendered its opinion and provided certain
financial analyses to the special committee, the opinion of U.S. Bancorp Piper
Jaffray to the special committee was among many factors taken into consideration
by the special committee in making its determination to approve and recommend
the merger agreement. When reading the discussion of the opinion of the special
committee's financial advisor in this proxy statement we urge you to consider
the following:
- U.S. Bancorp Piper Jaffray's written opinions, which were delivered to the
special committee, are directed only to the fairness from a financial point of
view of the proposed merger consideration to be received by Sunrise's
stockholders (other than King Management and its affiliates);
- U.S. Bancorp Piper Jaffray's written opinions do not address Sunrise's
underlying business decision to participate in the merger; and
- U.S. Bancorp Piper Jaffray's written opinions do not constitute a
recommendation to any Sunrise stockholder as to how a stockholder should vote
with respect to the merger or any related matter.
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<PAGE> 27
In arriving at its opinion, U.S. Bancorp Piper Jaffray reviewed, among other
things:
- a draft of the merger agreement dated January 24, 2000 and, with respect to
its updated opinion, the merger agreement dated January 31, 2000;
- publicly available financial, operating and business information related to
Sunrise;
- internal financial information of Sunrise prepared for financial planning
purposes and furnished by Sunrise's management;
- to the extent publicly available, financial terms of a number of acquisition
transactions involving companies operating in industries deemed similar to
that in which Sunrise operates;
- valuation and other financial information on selected public companies deemed
comparable to Sunrise; and
- publicly available financial and securities data for Sunrise's common stock.
In addition, U.S. Bancorp Piper Jaffray engaged in discussions with members of
Sunrise's management concerning the financial condition, current operating
results and business and financial prospects of Sunrise.
In delivering its January 27, 2000 opinion to the special committee, U.S.
Bancorp Piper Jaffray prepared and delivered to the special committee written
materials containing various analyses and other information material to the
opinion. The following is a summary of those analyses. The summary includes
information presented in tabular format. In order to understand fully the
financial analyses used by U.S. Bancorp Piper Jaffray, these tables must be read
together with the text of each analysis summary. The tables alone do not
constitute a complete summary of the analyses. The order in which the analyses
are presented below should not be taken as any indication of the relative weight
given to the analyses by U.S. Bancorp Piper Jaffray in the rendering of its
opinion.
Merger Consideration. Based on the $5.25 per share merger consideration to be
paid for each share of Sunrise common stock and the capitalization data provided
by Sunrise's management, U.S. Bancorp Piper Jaffray calculated the implied
aggregate equity value of Sunrise to be approximately $35.6 million, consisting
of approximately $34.8 million in consideration payable to holders of
outstanding shares of Sunrise common stock and $0.8 million in consideration
payable to holders of outstanding vested options to purchase shares of Sunrise's
common stock.
Based on these implied aggregate equity values for Sunrise, Sunrise's revenue,
and Sunrise's earnings for the latest twelve months, which is referred to in
this proxy statement as "LTM," as of September 30, 1999 and management's
estimates for Sunrise's net income for fiscal years 1999 and 2000, U.S. Bancorp
Piper Jaffray also calculated the following valuation multiples for the proposed
transaction:
<TABLE>
<CAPTION>
IMPLIED
SUNRISE
MULTIPLES
---------
<S> <C>
Price/Earnings Ratio(1)
LTM (Actual)................... 9.2x
Calendar 1999 (Projected)...... 11.4x
Calendar 2000 (Projected)...... 9.6x
Equity Value/Book Value.......... 1.1x
</TABLE>
-------------------------
(1) Based on fully diluted shares outstanding as of January 24, 2000 assuming
exercise of all vested plan options with an exercise price below $5.25 per
share.
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<PAGE> 28
The Market for Sunrise Common Stock. U.S. Bancorp Piper Jaffray reviewed the
stock trading history of shares of Sunrise's common stock. U.S. Bancorp Piper
Jaffray presented the following data:
<TABLE>
<CAPTION>
CLOSING STOCK PRICES:
---------------------
<S> <C>
September 7, 1999 (1 calendar day
prior to announcement of receipt
of proposal from King
Management)...................... $4.25
August 24, 1999 (15 calendar days
prior to announcement of receipt
of proposal from King
Management)...................... $4.25
August 9, 1999 (30 calendar days
prior to announcement of receipt
of proposal from King
Management)...................... $4.28
January 26, 2000 (1 calendar day
prior to rendering opinion and 5
calendar days prior to
announcement of merger agreement
execution)....................... $5.38
January 12, 2000 (15 calendar days
prior to rendering opinion and 19
calendar days prior to
announcement of merger
agreement)....................... $5.31
December 28, 1999 (30 calendar days
prior to rendering opinion and 34
calendar days prior to
announcement of merger
agreement)....................... $5.06
</TABLE>
Portfolio Run-off and Liquidation/Sale Analysis. U.S. Bancorp Piper Jaffray
performed portfolio analyses on Sunrise in which it analyzed the value of
Sunrise's existing portfolio under two scenarios:
- the "portfolio run-off" scenario -- present value of servicing and collecting
the lease payments remaining on Sunrise's existing contracts, prioritizing
cash receipts to retire existing debt prior to allocating to Sunrise's
stockholders; and
- the "portfolio liquidation/sale" scenario -- present value of Sunrise's
existing operating and direct finance lease portfolio, less the underlying
debt.
In making these calculations, U.S. Bancorp Piper Jaffray assumed that lessees
provide 90-days prior notice on all leases currently classified as
month-to-month, resulting in the realization of three additional residual lease
payments, and disregarded prepayment penalties as immaterial. U.S. Bancorp Piper
Jaffray applied a range of residual value realizations one month after the date
of the last firm-term contractual lease payment as a percentage of net book
value ranging from 75.0% to 125.0%. A range of discount rates of 14.0% to 18.0%
was applied to the resulting cash flows.
This analysis yielded the following implied per share "portfolio run-off" values
for Sunrise common stock:
<TABLE>
<CAPTION>
RESIDUAL REALIZATION
AS A PERCENT OF
NET BOOK VALUE
DISCOUNT ---------------------
RATE 75% 100% 125%
-------- ----- ----- -----
<S> <C> <C> <C>
14.0%................. $4.72 $5.22 $5.71
16.0%................. $4.55 $5.03 $5.51
18.0%................. $4.40 $4.86 $5.32
</TABLE>
This analysis yielded the following implied per share "portfolio
liquidation/sale" values for Sunrise common stock:
<TABLE>
<CAPTION>
RESIDUAL REALIZATION
AS A PERCENT OF
NET BOOK VALUE
DISCOUNT ---------------------
RATE 75% 100% 125%
-------- ----- ----- -----
<S> <C> <C> <C>
14.0%................. $4.34 $4.84 $5.35
16.0%................. $4.05 $4.54 $5.03
18.0%................. $3.77 $4.25 $4.73
</TABLE>
Discounted Dividend Stream Analysis. U.S. Bancorp Piper Jaffray performed a
discounted dividend stream analysis on Sunrise in which it calculated the sum
of:
- the present value of maximum future dividends that could be paid by Sunrise
while maintaining an assumed required capital ratio (tangible equity/tangible
assets) of 25.0%; and
- the present value of the estimated terminal value, which is an estimate of the
future value of Sunrise.
In making these calculations, U.S. Bancorp Piper Jaffray used projected net
income assumptions derived from Sunrise's management's projection models, and
applied a range of terminal value net income multiples of 7.0x to 11.0x and a
range of discount rates of 14.0% to 18.0%. This analysis yielded the following
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<PAGE> 29
implied per share equity values for Sunrise common stock:
<TABLE>
<CAPTION>
NET INCOME MULTIPLE
DISCOUNT ---------------------
RATE 7.0X 9.0X 11.0X
-------- ----- ----- -----
<S> <C> <C> <C>
14.0%................. $4.62 $5.57 $6.52
16.0%................. $4.26 $5.12 $5.99
18.0%................. $3.92 $4.72 $5.52
</TABLE>
Comparable Transaction Analysis. Based upon information obtained from SEC
filings, public company disclosures, press releases, industry and popular press
reports, databases and other sources believed to be reliable, U.S. Bancorp Piper
Jaffray reviewed the terms of 10 recent merger and acquisition transactions
involving commercial specialty finance companies deemed similar to Sunrise with
deal values not exceeding $100.0 million and announcement dates from January 1,
1996 to January 25, 2000 in which the following entities were sold: PS Group
Holdings Inc.; Standard Funding Corp.; JLA Credit Corp.; Rockford Industries
Inc.; Leasing Technology Inc.; Firestone Financial Corp.; Information Leasing;
Ziegler Leasing Corporation; Transcisco Industries Inc.; and CTL Credit Inc.
U.S. Bancorp Piper Jaffray calculated valuation multiples for the acquired
companies in the comparable transactions equal to the ratio of their equity
values to their earnings and book values. U.S. Bancorp Piper Jaffray then
compared these multiples to the Sunrise valuation multiples derived as described
above.
U.S. Bancorp Piper Jaffray presented the following implied valuation multiple
data:
<TABLE>
<CAPTION>
MERGER AND ACQUISITION
TRANSACTION MULTIPLES
SUNRISE ---------------------------------
MULTIPLES MINIMUM MEAN MEDIAN MAXIMUM
--------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C>
Transaction Value/
LTM Earnings....... 9.2x 2.6x 13.9x 12.7x 29.7x
Transaction Value/
Book Value......... 1.1x 0.9x 1.5x 1.3x 2.4x
</TABLE>
Premiums Paid Analysis. Based upon information obtained from SEC filings,
public company disclosures, press releases, industry and popular press reports,
databases and other sources believed to be reliable, U.S. Bancorp Piper Jaffray
analyzed the implied premium paid or proposed to be paid in selected
transactions relative to public market pre-announcement trading prices for the
following two groups:
- merger and acquisition transactions announced since January 1, 1996 involving
commercial specialty finance companies deemed similar to Sunrise with deal
values less than $100.0 million; and
- going-private transactions announced since January 1, 1996 with deal values of
less than $100.0 million where the acquirer owned in excess of 50% of the
entity's outstanding common stock prior to the transaction.
U.S. Bancorp Piper Jaffray presented the following implied premium paid data:
<TABLE>
<CAPTION>
SUNRISE FINANCE COMPANY
PREMIUM DATA GROUP PREMIUM DATA
--------------------- ---------------------------------
DAY
PROPOSAL PRECEDING
ANNOUNCED OPINION MINIMUM MEAN MEDIAN MAXIMUM
--------- --------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 day prior to
announcement........ 23.5% (7.7)% (29.3)% 24.0% 30.7% 67.5%
15 days prior to
announcement........ 23.5% 1.2% (33.2)% 36.7% 40.7% 67.5%
30 days prior to
announcement........ 22.6% 2.4% (50.7)% 42.9% 38.5% 121.0%
</TABLE>
<TABLE>
<CAPTION>
SUNRISE GOING PRIVATE TRANSACTION
PREMIUM DATA GROUP PREMIUM DATA
--------------------- ---------------------------------
DAY
PROPOSAL PRECEDING
ANNOUNCED OPINION MINIMUM MEAN MEDIAN MAXIMUM
--------- --------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 day prior to
announcement........ 23.5% (7.7)% 2.6% 28.5% 22.6% 56.3%
15 days prior to
announcement........ 23.5% 1.2% 4.2% 31.1% 26.7% 58.7%
30 days prior to
announcement........ 22.6% 2.4% 3.6% 37.3% 39.0% 77.8%
</TABLE>
Comparable Public Company Analysis. U.S. Bancorp Piper Jaffray compared
financial, operating and market performance data and valuation ratios relating
to Sunrise to corresponding data and ratios from the following seven
publicly-traded companies deemed comparable to Sunrise: Amplicon, Inc.; Electro
Rent Corp; First Sierra Financial Inc; Linc Capital, Inc.; Resource America,
Inc.; T & W Financial, Inc.; and UniCapital Corp. This group was selected based
upon, in part, U.S. Bancorp Piper Jaffray's expertise with companies in the
commercial specialty finance industry.
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<PAGE> 30
Based on the comparable companies' share prices and shares outstanding as of
January 26, 2000 and research analysts' consensus earnings per share estimates
for these companies, U.S. Bancorp Piper Jaffray calculated valuation multiples
for the comparable companies equal to the quotient of their respective valuation
data, such as price, and their associated operating data and tangible book
values. U.S. Bancorp Piper Jaffray then compared these multiples to the Sunrise
valuation multiples derived as described above.
U.S. Bancorp Piper Jaffray presented the following comparable public company
valuation data:
<TABLE>
<CAPTION>
COMPARABLE PUBLIC
COMPANY MULTIPLES
SUNRISE ---------------------------------
MULTIPLES MINIMUM MEAN MEDIAN MAXIMUM
--------- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C>
Price/Tangible Book
Value............... 1.1x 0.2x 1.2x 0.9x 3.3x
Price/Earnings Ratio
LTM (Actual)........ 9.2x 1.1x 5.6x 6.9x 7.6x
Calendar 1999
(Projected)....... 11.4x 1.3x 9.7x 9.7x 18.1x
Calendar 2000
(Projected)....... 9.6x 0.9x 14.0x 10.3x 34.5x
</TABLE>
In connection with its written opinion dated May 11, 2000, U.S. Bancorp Piper
Jaffray performed certain procedures, including the financial analyses described
above, based upon updated information available to U.S. Bancorp Piper Jaffray.
Assumptions; Limitations of Opinion. In reaching its conclusion as to the
fairness from a financial point of view to Sunrise's stockholders (other than
King Management and its affiliates) of the merger consideration, U.S. Bancorp
Piper Jaffray did not rely on any single analysis or factor described above,
assign relative weights to the analyses or factors considered by it, or make any
conclusion as to how the results of any given analysis, taken alone, supported
its opinion. The preparation of an opinion from a financial point of view of the
consideration to be received by stockholders in a merger is a complex process
and not necessarily susceptible to partial analysis or summary description. U.S.
Bancorp Piper Jaffray believes that its analyses must be considered as a whole
and that the selection of portions of its analyses and of the factors considered
by it, without considering all of the factors and analyses, would create a
misleading view of the processes underlying its opinion.
The analyses of U.S. Bancorp Piper Jaffray are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Analyses relating to the value of
companies do not purport to be appraisals or valuations or necessarily reflect
the prices at which businesses or securities may actually be sold. No company or
transaction used in any analysis for purposes of comparison is identical to
Sunrise or the merger. In addition, in performing its analyses, U.S. Bancorp
Piper Jaffray made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of the parties to the merger and U.S.
Bancorp Piper Jaffray. Accordingly, an analysis of the results of the
comparisons is not mathematical; rather, it involves complex considerations and
judgments about differences in the companies to which Sunrise was compared and
other factors that could affect the public trading value of Sunrise common
stock. Because these analyses are inherently subject to uncertainty, being based
upon numerous factors and events beyond the control of the parties to the merger
and U.S. Bancorp Piper Jaffray, neither the parties nor U.S. Bancorp Piper
Jaffray assume responsibility if future results are materially different from
those forecast.
For purposes of its opinion, U.S. Bancorp Piper Jaffray relied upon and assumed
the accuracy, completeness and fairness of the financial statements and other
information provided to it by Sunrise or otherwise made available to U.S.
Bancorp Piper Jaffray and did not assume responsibility for the independent
verification of that information. With respect to the financial statement data
and other internal financial information, including the projected financial
planning data, provided to U.S. Bancorp Piper Jaffray in connection with its
review of the financial aspects of the merger, U.S. Bancorp Piper Jaffray relied
upon the assurances of
25
<PAGE> 31
Sunrise's Chief Financial Officer and his staff that the information was
prepared on a reasonable basis, and, with respect to the financial planning
data, reflected the best currently available estimates, and that they were not
aware of any information or facts that would make the information provided to
U.S. Bancorp Piper Jaffray incomplete or misleading.
For purposes of its January 27, 2000 opinion, except as provided in the
following sentence, U.S. Bancorp Piper Jaffray assumed that the merger would be
completed on the terms described in the draft of the merger agreement dated
January 24, 2000 it reviewed. Upon the advice of Thomas R. King, a member of the
special committee, U.S. Bancorp Piper Jaffray assumed that section 1.11 of the
merger agreement dealing with the treatment of stock options had been revised to
make it clear that only vested options would receive the difference between the
per share merger consideration and the exercise price of the options. For
purposes of its updated opinion dated May 11, 2000, U.S. Bancorp Piper Jaffray
assumed that the merger would be completed on the terms described in the merger
agreement dated January 31, 2000.
Scope of Opinion. In arriving at its opinion, U.S. Bancorp Piper Jaffray was
not requested to perform, did not perform, and was not furnished with any
appraisals or valuations of any specific assets or liabilities of Sunrise. U.S.
Bancorp Piper Jaffray was not requested to opine as to, and its opinion does not
address, the basic business decision to proceed with or effect the merger or to
compare the merger to, or to consider, alternative transactions that may have
been available to Sunrise. U.S. Bancorp Piper Jaffray analyzed Sunrise as a
going concern and, accordingly, except as described in the portfolio analyses,
expressed no opinion as to its liquidation value.
The opinion is based on information available to U.S. Bancorp Piper Jaffray and
the facts and circumstances as they existed and were subject to evaluation on
the opinion date. Events occurring after that date could materially affect the
assumptions used in preparing the opinion.
Updated Opinion. U.S. Bancorp Piper Jaffray has reaffirmed its January 27, 2000
opinion in its written opinion to the special committee dated May 11, 2000,
which has been updated to reflect the financial information of Sunrise for the
three months ended March 31, 2000. U.S. Bancorp Piper Jaffray has informed
Sunrise that the basis for its updated opinion are otherwise substantially the
same as are set forth above with respect to its January 27, 2000 opinion. The
full text of its fairness opinion dated May 11, 2000, which sets forth
assumptions made, procedures followed and matters considered by U.S. Bancorp
Piper Jaffray, is attached as Appendix C to this proxy statement.
Background of U.S. Bancorp Piper Jaffray. U.S. Bancorp Piper Jaffray, as a
customary part of its investment banking business, evaluates businesses and
their securities in connection with mergers and acquisitions, underwritings and
secondary distributions of securities, private placements and valuations for
estate, corporate and other purposes. The special committee selected U.S.
Bancorp Piper Jaffray because of its expertise, reputation and familiarity with
Sunrise and the specialty lease industry in general. In the ordinary course of
business, U.S. Bancorp Piper Jaffray and its affiliates may actively trade
securities of Sunrise for their own accounts or the accounts of their customers
and, accordingly, may at any time hold a long or short position in those
securities.
Compensation to U.S. Bancorp Piper Jaffray. Under the terms of the engagement
letter dated September 15, 1999, as amended, Sunrise agreed to pay U.S. Bancorp
Piper Jaffray the following:
- $125,000 upon execution of the engagement letter, which was already paid and
became nonrefundable upon U.S. Bancorp Piper Jaffray's rendering of its
opinion; and
- $425,000 upon the closing of a transaction, including the merger.
The engagement letter also provides that Sunrise will reimburse U.S. Bancorp
Piper Jaffray for its reasonable out-of-pocket expenses, including fees and
disbursements of counsel and allocated overhead for database and
26
<PAGE> 32
communication costs, and will indemnify U.S. Bancorp Piper Jaffray and related
parties from and against certain liabilities, including liabilities under the
federal securities laws, arising out of or in connection with the engagement of
U.S. Bancorp Piper Jaffray. Sunrise has also agreed to pay U.S. Bancorp Piper
Jaffray $25,000 upon U.S. Bancorp Piper Jaffray's rendering of its updated
opinion.
KING MANAGEMENT'S PURPOSE; REASONS FOR AND STRUCTURE OF THE MERGER
The purpose of the merger is to enable King Management to acquire the entire
equity interest in Sunrise other than those shares owned by King Management and
its affiliates. The transaction has been structured as a cash merger in order to
provide Sunrise's stockholders cash for all of their shares of Sunrise common
stock and to provide a prompt and orderly transfer of complete ownership of
Sunrise common stock from Sunrise's stockholders (other than King Management and
its affiliates) to King Management.
The purpose of King Management and its affiliates in proceeding with the merger
is to allow the formal combination of King Management and Sunrise into a single
private leasing entity while providing Sunrise's stockholders (other than King
Management and its affiliates) the opportunity to liquidate their investments in
Sunrise common stock for cash at a price representing a premium over the market
prices for Sunrise common stock prior to Sunrise's public announcement of Peter
J. King's intentions to acquire all of Sunrise's outstanding common stock (other
than held by King Management and its affiliates). Although the closing price of
Sunrise's common stock on the day the merger agreement was signed was higher
than the merger consideration of $5.25, the merger consideration of $5.25 per
share represents a 23.5% premium over the closing price per share of $4.25 on
September 7, 1999, the last day of trading prior to Sunrise's public
announcement of Peter J. King's proposal to acquire all of the outstanding
shares of Sunrise common stock (other than held by King Management and its
affiliates). Given the fluctuation in the historical trading prices of Sunrise
common stock, King Management believes that the $5.25 per share merger
consideration is a significant premium over generally prevailing prior Sunrise
common stock prices.
King Management's desire to proceed with the merger is motivated primarily by
the continuing low valuation placed on Sunrise's common stock by the investing
public despite Sunrise's improved operating results derived from the increased
focus on Sunrise's vendor business segment over the past two and one half years.
King Management and its affiliates believe that this low valuation results from
the lack of liquidity in Sunrise common stock, as well as the business risks
associated with faster technological obsolescence of leased equipment, increased
leverage, increased provisions for losses, and Sunrise's reliance on two vendor
programs to generate the vast majority of its revenue.
The relationship between King Management, as a private company, and Sunrise, as
a public company, with Peter J. King serving as the Chief Executive Officer of
both companies, continues to add complexity to the funding, management and
public perception of Sunrise and King Management. This is in spite of the
financial assistance which King Management has provided to Sunrise over the past
three years, evidenced by a total of $30 million of loan advances at below
market interest rates, the rapid growth of the Sunrise's vendor portfolio, net
of King Management's participation, and Sunrise's improved financial results.
King Management and its affiliates believe that after the merger it, as a
private company, will be better positioned to manage the vendor business risks.
King Management and its affiliates have concluded that with this more
streamlined entity the long-term benefits outweigh the short-term market
valuation of Sunrise common stock allowing King Management to offer Sunrise's
stockholders (other than King Management and its affiliates) the premium
reflected in the $5.25 per share merger consideration that has been negotiated
by the special committee of the board of directors of Sunrise.
27
<PAGE> 33
POSITION OF KING MANAGEMENT AS TO FAIRNESS OF THE MERGER
The rules of the SEC require King Management and its affiliates to express their
belief as to the fairness of the merger to Sunrise's unaffiliated stockholders.
As described in more detail under "Special Factors -- Background of the Merger,"
the terms of the merger agreement and agreement to facilitate the merger were
negotiated at arms' length between Sunrise and King Management. Neither King
Management nor its affiliates, which include Peter J. King and Stephen D.
Higgins, as trustee under six trusts established for the benefit of Peter J.
King's two sons, Russell S. and William B. King, independently considered the
fairness of the merger consideration to Sunrise's stockholders (other than King
Management and its affiliates). Although Greene Holcomb & Fisher recommended a
bid for Sunrise of $5.25 per share, Greene Holcomb & Fisher did not provide a
fairness opinion or other advice as to the fairness of the merger consideration.
Based exclusively on the evaluation of the merger by the special committee,
including a review of the description in this proxy statement of the information
and factors considered by each of them in concluding that the terms of the
merger agreement are advisable and are fair to and in the best interests of
Sunrise's stockholders (other than King Management and its affiliates), King
Management and its affiliates have adopted the analysis of the special committee
as to the fairness of the merger consideration and believe that the terms of the
merger agreement are advisable and are fair to and in the best interests of
Sunrise's stockholders (other than King Management and its affiliates).
While King Management and its affiliates recognize that there may be some
detriments to Sunrise's other stockholders as a result of the merger, for
example, ceasing to have an interest in Sunrise's future growth, if any, going
forward, King Management and its affiliates also recognize that these
stockholders will benefit from the merger, if it is approved, since the merger
consideration to be paid to Sunrise's stockholders represents a premium over the
market price of Sunrise's shares prior to Sunrise's public announcement of Peter
J. King's intention to acquire Sunrise.
King Management retained Greene Holcomb & Fisher to assist it in performing an
analysis of the feasibility of a transaction with Sunrise, structuring the
transaction, negotiating the merger consideration and other terms of the merger
agreement and identifying and contacting potential financing sources in
connection with the transaction. Although Greene Holcomb & Fisher recommended to
King Management that it submit an initial bid of $5.25 and provided to King
Management a written analysis of this recommended bid, it did not deliver a
fairness opinion as to the merger consideration or provide other advice as to
the fairness of the merger to Sunrise's stockholders not affiliated with King
Management.
ANALYSIS OF FINANCIAL ADVISOR TO KING MANAGEMENT
King Management retained Greene Holcomb & Fisher LLC on August 9, 1999 to act as
its financial advisor and to assist it in performing an analysis of the
feasibility of a transaction with Sunrise, structuring the transaction,
negotiating the merger consideration and other terms of the merger agreement and
identifying and contacting potential financing sources in connection with the
transaction.
Selection of Greene Holcomb & Fisher. King Management based its decision to
retain Greene Holcomb & Fisher upon Greene Holcomb & Fisher's knowledge of the
leasing industry and qualifications, expertise and experience as an investment
banking and financial advisory firm. Greene Holcomb & Fisher, as part of its
investment banking business, is regularly engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, private
placements and valuations for corporate and other purposes.
September 7, 1999 Presentation to King Management. On September 7, 1999, Greene
Holcomb & Fisher made a presentation to King Management recommending to King
Management that it submit an initial bid of $5.25 for
28
<PAGE> 34
all of the outstanding shares of Sunrise common stock not owned or controlled by
King Management or its affiliates. We refer to this presentation in this proxy
statement as the "September 7, 1999 presentation." THE SEPTEMBER 7, 1999
PRESENTATION IS NOT A REPORT OR OPINION AS TO THE FAIRNESS OF THE TRANSACTION TO
THE PUBLIC STOCKHOLDERS OF SUNRISE, DOES NOT CONSTITUTE A RECOMMENDATION TO KING
MANAGEMENT OR THE STOCKHOLDERS OF SUNRISE AS TO THE TRANSACTION OR AS TO HOW
SUNRISE'S STOCKHOLDERS SHOULD VOTE WITH RESPECT TO THE TRANSACTION, OR AN
OPINION AS TO VALUATION OR OTHERWISE BY GREEENE HOLCOMB & FISHER, AND SHOULD NOT
BE RELIED UPON AS THE BASIS FOR ANY INVESTMENT DECISION.
Assumptions; Information Received. Greene Holcomb & Fisher did not assume
responsibility for the independent verification of, and did not independently
verify, any information, whether publicly available or furnished to it,
concerning Sunrise, including, without limitation, any financial information.
Accordingly, Greene Holcomb & Fisher assumed and relied upon the accuracy and
completeness of all such information. Greene Holcomb & Fisher did not conduct a
physical inspection of any of the properties or assets, and did not prepare any
independent evaluation or appraisal of any of the assets or liabilities of
Sunrise. The September 7, 1999 presentation was necessarily based upon economic,
market and other conditions as in effect on, and the information made available
to Greene Holcomb & Fisher as of, September 7, 1999. King Management did not
impose any limitations on Greene Holcomb & Fisher or the investigations made or
procedures followed by Greene Holcomb & Fisher.
In performing the analyses reflected in the September 7, 1999 presentation,
Greene Holcomb & Fisher:
- reviewed Sunrise's historical financial statements and other operating and
business information;
- reviewed internal financial information of Sunrise prepared for financial
planning purposes and furnished by Sunrise's management;
- held discussions with Sunrise's senior management about the company's
business, capital requirements and prospects of future growth;
- reviewed publicly available information about Sunrise, including the
historical market prices and trading volume for Sunrise common stock;
- reviewed and analyzed financial data for certain publicly held companies that
Greene Holcomb & Fisher deemed comparable;
- reviewed and analyzed certain publicly available financial information for
precedent transactions that Greene Holcomb & Fisher deemed comparable to the
pending merger transaction; and
- performed a discounted cash flow analysis using certain assumptions of future
performance provided to and discussed with Greene Holcomb & Fisher by Sunrise
management.
The following is a summary description of the September 7, 1999 presentation
given by Greene Holcomb & Fisher. Because it is a summary, it does not include
all of the information that is included in the written presentation. You can
obtain a copy of the written presentation for inspection and copying at the
principal executive offices of Sunrise during its regular business hours.
Bid Analyses and Recommendation. In recommending to King Management that it
submit an initial bid of $5.25 for all of the outstanding shares of Sunrise
common stock not owned or controlled by King Management or its affiliates,
Greene Holcomb & Fisher performed five primary valuation analyses:
- an analysis of precedent going private transaction premiums;
- a discounted cash flow analysis;
- a comparable public companies analysis, which consisted of reviewing and
considering certain financial and stock market data for certain publicly
traded companies engaged in businesses deemed by Greene Holcomb & Fisher to be
similar to Sunrise's business;
29
<PAGE> 35
- a precedent transaction analysis, which consisted of reviewing certain
financial data of a selected comparable transaction deemed similar to the
pending merger transaction by Greene Holcomb & Fisher; and
- a stock price and volume analysis.
Set forth below is a brief summary of the financial analyses performed by Greene
Holcomb & Fisher in connection with its September 7, 1999 presentation.
Analysis of Selected Precedent Going Private Premiums. Greene Holcomb & Fisher
reviewed a list of transactions in which the acquiring entity owned 50% or more
of the outstanding capital stock of the target company prior to the transaction.
The list was limited to all transactions with a total purchase price under $100
million and excluded all real estate transactions or transactions with negative
premiums. The following 10 transactions were analyzed for premiums paid one day
prior to announcement of the transaction, one week prior to announcement, and
one month prior to announcement: Arkansas Best Corp./Treadco Inc.; Fairchild
Corp./Banner Aerospace Inc.; UntiliCorp United Inc./Aquila Gas Pipeline Corp.;
Union Planters Bank National Association/Caital Factors Holdings Inc.; COMNET
Corp./Group 1 Software Inc.; Thermedics (Thermo Electron)/Thermo Voltek Corp.;
Xerox Corp./XL Connect Solutions Inc.; World Access Inc./NACT Telcommunications;
Wandel & Goltermann Mana/Wandel & Goltermann Tech; Rayonier Inc./Rayonier
Timberlands L.P.
These transactions were compared to the recommended initial bid price of $5.25
as summarized in the table below:
<TABLE>
<CAPTION>
PREMIUM ONE PREMIUM ONE PREMIUM FOUR
DAY PRIOR TO WEEK PRIOR TO WEEKS PRIOR TO
ANNOUNCEMENT ANNOUNCEMENT ANNOUNCEMENT
OF PROPOSAL OF PROPOSAL OF PROPOSAL
------------ ------------- --------------
<S> <C> <C> <C>
MEAN................. 24.4% 31.1% 33.5%
MEDIAN............... 23.3% 23.2% 27.6%
SUNRISE AT $5.25..... 23.5% 21.8% 29.3%
</TABLE>
Greene Holcomb & Fisher calculated that if Sunrise's stockholders received $5.25
per share in merger consideration, they would receive:
- a 23.5% premium over Sunrise's common stock price of $4.25 on the day before
the announcement of the receipt of the proposal from King Management;
- a 21.8% premium over Sunrise's common stock price of $4.3125 one week prior to
the announcement of the receipt of the proposal from King Management; and
- a 29.3% premium over Sunrise's common stock price of $4.0625 four weeks prior
to the announcement of the receipt of the proposal from King Management.
Discounted Cash Flow. The discounted cash flow valuation is based on the
assumption that the value of a business can be determined with reference to the
present value of the future cash flow that the assets will generate for their
owners. To establish a current value under this approach, future cash flow must
be estimated and an appropriate discount rate determined. Greene Holcomb &
Fisher performed a discounted cash flow analysis on Sunrise in which it
calculated the sum of the following:
- the present value of maximum future dividends that could be paid by Sunrise
while maintaining an assumed total debt/equity ratio of 3:1; and
- the present value of the estimated terminal (future) value of Sunrise.
Greene Holcomb & Fisher applied a range of terminal net income multiples of 8.0x
to 12.0x, and a range of discount rates of 16.0% to 20.0%. This analysis yielded
the following implied per share equity values for Sunrise common stock:
<TABLE>
<CAPTION>
NET INCOME MULTIPLE
DISCOUNT ---------------------
RATE 8.0X 10.0X 12.0X
-------- ----- ----- -----
<S> <C> <C> <C>
16.0%................. $4.87 $5.68 $6.49
18.0%................. $4.47 $5.21 $5.96
20.0%................. $4.10 $4.79 $5.47
</TABLE>
30
<PAGE> 36
Comparable Public Companies Analysis. Greene Holcomb & Fisher developed a list
of nine public leasing companies engaged in businesses that Greene Holcomb &
Fisher deemed similar to Sunrise's business. These companies were Amplicon,
Inc.; Capital Associates, Inc.; Chancellor Corp.; Electro Rent Corp.; Linc
Capital, Inc.; Leasing Solutions, Inc.; Microfinancial, Inc.; T & W Financial
Corp.; and Unicapital Corp. Greene Holcomb & Fisher used this list to compare
valuation multiples with Sunrise. Using publicly available information, Greene
Holcomb & Fisher calculated valuation multiples for the public companies listed
above and compared those multiples to Sunrise's valuation multiples at the
current stock price of $4.25 and the recommended initial bid price of $5.25, as
summarized in the table below:
<TABLE>
<CAPTION>
COMPANY
COMPANY VALUE/
VALUE/ OPERATING PRICE/
REVENUES INCOME P/E BOOK(1)
-------- --------- ----- -------
<S> <C> <C> <C> <C>
Comparable Public
Companies.......... 2.1x 9.8x 11.3x 1.2x
Sunrise @ $4.25...... 1.4x 7.7x 8.7x .9x
Sunrise @ $5.25...... 1.5x 8.4x 10.7x 1.1x
</TABLE>
-------------------------
(1) Excludes outlier of 14.5.
Comparable Precedent Transaction Analysis. Greene Holcomb & Fisher reviewed over
200 transactions from the computer leasing and equipment leasing and rental
industries that occurred over the past four years. Out of all of the
transactions that were reviewed, including nine completed by First Sierra
Financial, only the acquisition of Winthrop Resources by TCF Financial Corp. was
deemed by Greene Holcomb & Fisher to be comparable to the Sunrise/King
Management transaction. Greene Holcomb & Fisher did not, however, believe that
the Winthrop/TCF transaction was entirely comparable as it was an acquisition by
a financial institution and represented an unusual circumstance that created a
new strategic platform for the buyer and significantly reduced the seller's cost
of funds. Greene Holcomb & Fisher compared the valuation multiples of the
Winthrop transaction to the Sunrise valuation multiples at the recommended
initial bid price of $5.25, as summarized in the table below:
<TABLE>
<CAPTION>
COMPANY
COMPANY VALUE/
VALUE/ OPERATING PRICE/ PREMIUM
REVENUES INCOME P/E BOOK PAID
-------- --------- --- ------ -------
<S> <C> <C> <C> <C> <C>
TCF/Winthrop......... 4.8x 9.5x 20.6x 3.8x 21.7%
Sunrise @ $5.25...... 1.5x 8.4x 10.7x 1.1x 23.5%
</TABLE>
Historical Stock Performance. Greene Holcomb & Fisher reviewed and analyzed the
historical market prices and trading volume of Sunrise stock for the period from
August 23, 1996 through September 2, 1999. Greene Holcomb & Fisher also
performed an analysis of total volume of shares traded at various prices of
Sunrise stock for the period from August 26, 1994 through August 30, 1999.
Comparable Stock Price Analysis. At the request of King Management, Greene
Holcomb & Fisher prepared a comparable company stock price analysis on April 20,
2000. This analysis compared the average stock prices of the following 10 public
leasing companies on September 8, 1999 to their respective average stock prices
on April 20, 2000 and calculated an average percent change for the 10 companies:
Amplicon, Inc.; Capital Associates, Inc.; Chancellor Corp.; Electro Rent Corp.;
Linc Capital,Inc.; Leasing Solutions, Inc.; Microfinancial, Inc.; Resource
America; T & W Financial Corp.; and Unicapital Corp. Greene Holcomb & Fisher
concluded that the stock prices of the 10 comparable companies declined by an
average of 50.9%. The average percent change was then multiplied by Sunrise's
average stock price on September 7, 1999 (one calendar day prior to announcement
of receipt of proposal from King Management) to calculate a comparable average
stock price for Sunrise that mirrored the comparable companies' stock
performance, assuming no effects from the merger announcement. Assuming a 50.9%
decline in value from September 7, 1999, Sunrise's common stock price would have
been
31
<PAGE> 37
valued at $2.09 on April 20, 2000, as illustrated in the table below.
<TABLE>
<CAPTION>
STOCK PRICE AVERAGE % COMPARABLE
ON 9/7/99 CHANGE STOCK PRICE*
----------- --------- ------------
<S> <C> <C> <C>
Sunrise.............. $4.25 (50.9)% $2.09
</TABLE>
-------------------------
* Price of Sunrise common stock assuming a 50.9% decline from September 7, 1999
to one day prior to announcement of the merger agreement.
Limitations. The above analyses performed for the September 8, 1999
presentation were prepared by Greene Holcomb & Fisher solely for the purposes of
providing its recommendation to King Management of an initial bid for all of the
outstanding shares of Sunrise common stock not owned or controlled by King
Management or its affiliates. The above analysis performed on April 20, 2000 was
prepared by Greene Holcomb & Fisher solely for the purposes of providing King
Management information on the comparison of the merger consideration to the
recent average stock price of publicly traded companies deemed comparable to
Sunrise by Greene Holcomb & Fisher. Analyses based on forecasts of future
results are inherently subject to substantial uncertainties and are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, analyses
relating to the value of the businesses do not purport to be appraisals or to
reflect the prices at which businesses may actually be sold or combined.
Interests of Greene Holcomb & Fisher in the Merger. King Management entered
into an engagement letter with Greene Holcomb & Fisher on August 9, 1999 for the
rendering of financial advisory and investment banking services to King
Management for a possible transaction with Sunrise. In connection with this
engagement, King Management agreed to pay Greene Holcomb & Fisher:
- $35,000 upon execution of the engagement letter, which has already been paid;
and
- $400,000 upon the closing of a transaction, including the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the recommendation of the special committee you should
be aware that some of Sunrise's officers and directors have interests in the
merger or have relationships, including those referred to below, that present
actual or potential, or the appearance of actual or potential, conflicts of
interest in connection with the merger. The special committee was aware of these
actual or potential conflicts of interest and considered them along with other
matters which have been described in this proxy statement under the heading
"Special Factors -- Recommendations of the Special Committee and the Board of
Directors; Reasons for the Merger."
Relationship between Sunrise and its Officers and Directors. We refer you to
the information on page 67 of this proxy statement under the heading "Current
Management of Sunrise" and page 69 under the heading "Security Ownership of
Certain Beneficial Owners and Management" for information regarding our current
officers and directors and their stock ownership in Sunrise. Sunrise's officers
and directors (other than Peter J. King) who own Sunrise common stock at the
effective time of the merger will be entitled to receive the $5.25 merger
consideration for their shares.
Ownership of King Management. Peter J. King and Stephen D. Higgins, as trustee
for six trusts established for the benefit of William B. and Russell S. King,
Peter J. King's sons, own all of the outstanding shares of common stock of King
Management. Under the agreement to facilitate the merger, these shareholders
will become the owners of the newly-formed parent company of King Management and
will therefore have the ability to control King Management after the merger is
completed. This agreement also provides that these shareholders will vote their
shares of Sunrise common stock in favor of the merger and merger agreement. This
agreement relates to an aggregate of approximately 62.6% of Sunrise's
outstanding common stock and any shares that Peter J. King and his affiliates
may become entitled upon the exercise of their options prior to your vote on the
merger.
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King Management Phantom Stock. Jeffrey G. Jacobsen, Sunrise's Chief Financial
Officer, Executive Vice President, Secretary and member of its board of
directors, and King Management's Treasurer and member of its board of directors,
currently holds 90,000 shares of King Management phantom stock, all of which are
vested. These phantom shares of King Management stock may be exercised by
Jeffrey G. Jacobsen at $3.00 per share. As of the effective time of the merger,
the value of this phantom stock, net of the exercise price, is expected to be
approximately $190,000.
Treatment of Sunrise Options. Peter J. King, Sunrise's Chief Executive Officer
and Chairman of the Board, currently holds vested options to purchase 250,000
shares of Sunrise common stock that were granted to him under Sunrise's 1991
Stock Option Plan. Under the terms of the merger agreement, Peter J. King will
be entitled to receive at the effective time of the merger $500,000 of option
consideration in exchange for cancellation of these options. Peter J. King also
has the right to purchase 666,506 shares of Sunrise common stock under stock
options that were not granted under Sunrise's option plan. Under the terms of
the merger agreement and the agreement to facilitate the merger, these options
will be canceled prior to the effective time of the merger and in exchange Peter
J. King will be entitled to receive options to purchase shares of the parent
company's common stock under the same terms and conditions as the options that
were canceled. The board of directors of parent company will determine, based on
the relative values of the shares of Sunrise common stock and parent company
common stock at the effective time of the merger, the number of shares of parent
company common stock, and the exercise price of these new options, Peter J. King
will be entitled to receive.
Donald R. Brattain, a member of Sunrise's board and the special committee,
currently holds vested options to purchase 30,000 shares of Sunrise common stock
granted to him under Sunrise's 1991 Stock Option Plan. Of this total, 28,000
shares have option exercise prices below the $5.25 merger consideration. Under
the terms of the merger agreement, Donald R. Brattain will be entitled to
receive at the effective time of the merger $51,124 of option consideration in
exchange for cancellation of these options.
Thomas R. King, a member of Sunrise's board and chairman of the special
committee, currently holds vested options to purchase 38,000 shares of Sunrise
common stock granted to him under Sunrise's 1991 Stock Option Plan. Of this
total, 28,000 shares have option exercise prices below the $5.25 merger
consideration. Under the terms of the merger agreement, Thomas R. King will be
entitled to receive at the effective time of the merger $51,124 of option
consideration in exchange for cancellation of these options.
Jeffrey G. Jacobsen, Sunrise's Chief Financial Officer, Executive Vice
President, Secretary and member of its board of directors, currently holds
vested options to purchase 74,667 shares of Sunrise common stock granted to him
under Sunrise's 1991 Stock Option Plan. Under the terms of the merger agreement,
Jeffrey G. Jacobsen will be entitled to receive at the effective time of the
merger $145,334 of option consideration in exchange for cancellation of these
options.
James C. Teal, Sunrise's Corporate Controller and King Management's Assistant
Secretary currently holds vested options to purchase 9,333 shares of Sunrise
common stock granted to him under Sunrise's 1991 Stock Option Plan. Under the
terms of the merger agreement, James C. Teal will be entitled to receive at the
effective time of the merger $19,166 of option consideration in exchange for
cancellation of these options.
Any amounts actually paid to these officers and directors of Sunrise for the
cancellation of their stock options under Sunrise's 1991 Stock Option Plan will
be reduced by any applicable federal and state income and payroll tax
withholdings.
Continued Employment by King Management. Following the merger, the current
officers of King Management will continue to provide
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<PAGE> 39
services to King Management, the surviving corporation, as they did prior to the
merger.
Legal Counsel. Thomas R. King, a member of Sunrise's board and Chairman of the
special committee, is a partner in the law firm of Fredrikson & Byron, P.A.
which has provided legal services to Sunrise in connection with the merger
transaction.
Indemnification. The merger agreement provides that for six years after the
date the merger is completed King Management will indemnify Sunrise's officers
and directors against matters occurring before the merger became effective to
the extent provided under Sunrise's articles of incorporation and bylaws in
effect on the date of the merger agreement. King Management has also agreed
under the merger agreement that for three years following the completion of the
merger, it will provide officers' and directors' liability insurance for each
person currently covered by Sunrise's officers' and directors' liability
insurance policy on terms no less favorable than Sunrise's current policy. King
Management, however, will not be obligated to pay premiums in excess of 150% of
the amount Sunrise currently pays for its insurance.
CONSEQUENCES OF THE MERGER
Pursuant to the merger agreement, following approval of the proposed merger and
subject to the fulfillment or waiver of specified conditions, Sunrise will be
merged with King Management, and King Management will continue as the surviving
company in the merger. As a result of the merger, you will be entitled to
receive $5.25 in cash for each of your shares of Sunrise common stock
outstanding at the time of the merger. Following the merger, Sunrise's
stockholders (other than King Management and its affiliates) will cease to
participate in Sunrise's future earnings or growth, if any, or benefit from any
increases, if any, in the value of Sunrise common stock.
As a result of the merger, the entire interest in Sunrise's net book value and
net earnings will be owned by King Management and King Management will have
complete control over the conduct of Sunrise's business. In addition, King
Management will have 100% of the benefit of any future earnings of Sunrise or
increases in the value of Sunrise and will bear 100% of the risk of any future
losses of Sunrise or decrease in value of Sunrise. The effect of the merger will
be to increase King Management and its affiliates ownership interest of Sunrise
from 62.6% to 100% resulting in a 100% interest in the net book value of Sunrise
at December 31, 1999 of $31,828,000 and 100% of the net earnings for the nine
month period ended December 31, 1999 of $2,275,000.
We will delist our common stock from the Nasdaq National Market and price
quotations will no longer be available. Our common stock is currently registered
under the Securities Exchange Act of 1934. Following the merger, we will
terminate the registration of our common stock under the Exchange Act, and, we
will be relieved of the obligation to comply with the public reporting
requirements of the Exchange Act. Accordingly, we will no longer be required to
file periodic reports with the SEC, for example, Form 10-Ks, 10-Qs and 8-Ks. In
addition, we will no longer be subject to the proxy rules of Regulation 14A, the
short-swing trading profit provisions of Section 16 and, with respect to future
transactions, the going-private provisions of Rule 13e-3 of the Exchange Act.
At the close of the merger, unexercised and vested options to purchase shares of
our common stock under our 1991 Stock Option Plan will be converted into cash.
For more information about the effect of the merger on options held by King
Management and its affiliates we refer you to "Special Factors -- Interests of
Certain Persons in the Merger" in this proxy statement. Unexercised and unvested
options to purchase shares of our common stock granted under our 1991 Stock
Option Plan and all unexercised options, whether vested or not, not granted
under any of our stock option plans will be cancelled.
King Management's articles of incorporation and by-laws in effect immediately
before the merger will become the surviving company's
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articles of incorporation and by-laws immediately after the merger.
King Management's directors and executive officers immediately before the merger
will become the surviving company's directors and executive officers immediately
after the merger.
BENEFITS AND DETRIMENTS OF THE MERGER TO SUNRISE AND SUNRISE'S STOCKHOLDERS
Benefits and Detriments of the Merger to Sunrise. Sunrise believes that the
merger will have the following benefits to Sunrise:
- by becoming a private company (which will occur as a result of the merger),
the operating flexibility of Sunrise will be increased by enabling Sunrise's
management to react with greater speed and flexibility to changing conditions
and opportunities and to make decisions based on Sunrise's long-range business
interests without having to consider the possible adverse short-term effect of
such decisions upon the market price of Sunrise's common stock and the
interests of Sunrise's public shareholders; and
- by reverting to private ownership, the overall operational and administrative
costs arising from and in connection with Sunrise's status as a reporting
public company will be reduced.
Sunrise believes the detriments to Sunrise of the completion of the merger are:
- Sunrise will be unable to use publicly traded securities as acquisition
capital; and
- Sunrise will be unable to grant options to its employees to purchase publicly
traded securities.
Benefits and Detriments of the Merger to Sunrise's Stockholders. Sunrise
believes that the merger will result in the following benefits to you:
- it will allow you to immediately realize the value of your investment in
Sunrise in cash at a price which represents a significant premium to the
market price for Sunrise common stock before the public announcement of Peter
J. King's interest in acquiring all of the outstanding shares of Sunrise
common stock, other than shares owned or controlled by him and his affiliates.
The merger consideration of $5.25 per share represents a 23.5% premium over
the $4.25 closing price of Sunrise common stock on that day; and
- it will eliminate the risk of a future decline in the value of your investment
in Sunrise.
Sunrise believes the detriments to you of the completion of the merger are:
- you will cease to have any ownership in Sunrise and will cease to participate
in Sunrise's future earnings or growth, if any, or benefit from increases, if
any, in Sunrise's value; and
- you may recognize a taxable gain as a result of the merger (see "-- U.S.
Federal Income Tax Considerations").
King Management and its affiliates, which include Peter J. King and Stephen D.
Higgins, as trustee under six trusts established for the benefit of Peter J.
King's two sons, Russell S. and William B. King, will have the opportunity to
participate in Sunrise's future earnings and growth, but they will bear the risk
of any decrease in the value, or increase in the leverage, of Sunrise.
All holders of options to purchase shares of Sunrise common stock, including
Peter J. King, will receive a cash payment for cancellation of their outstanding
vested options granted under Sunrise's stock option plan.
PLANS FOR SURVIVING COMPANY AFTER THE MERGER
Extraordinary Corporate Transactions. It is expected that following the merger,
the business and operations of King Management, as the surviving company, will
be continued substantially as they are currently being conducted. King
Management will, however, continue to review its assets, business, operations,
properties, policies, corporate structure, dividend policy, capitalization and
management and will consider whether any changes would be desirable in light of
the circumstances then existing.
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At this time, however, Sunrise has not, and Sunrise has not been advised by King
Management that it has, approved any:
- specific plans or proposals for any extraordinary corporate transaction
involving King Management, as the surviving company after the completion of
the merger; or
- sale or transfer of a material amount of assets currently held by Sunrise or
King Management after the completion of the merger.
Management. King Management's directors and executive officers immediately
before the merger will become the surviving company's directors and executive
officers immediately after the merger. For more information regarding management
of the surviving company we refer you to "-- Interests of Certain Persons in the
Merger" in this proxy statement.
Share Ownership. King Management has advised Sunrise that after the merger the
shareholders of the parent company intend to hold their shares of capital stock
of King Management and parent company for long-term investment.
Right to Change Plans. Although King Management deems it unlikely, it reserves
the right to change its plans at any time. Accordingly, parent company, as the
sole stockholder of King Management after the merger, may elect to sell,
transfer or otherwise dispose of all or any portion of the shares of capital
stock owned by it after the merger or may decide that the surviving company
should sell, transfer or otherwise dispose of all or any portion of its assets
in each case to one or more of its affiliates or to any other parties as
warranted by future conditions. In connection with the reorganization of King
Management, described on page 48 of this proxy statement under the heading
"Agreement to Facilitate the Merger," King Management intends to distribute
assets relating to its software and copier vending businesses to its parent
company immediately before the merger. Although King Management deems it
unlikely, it reserves the right to make whatever personnel changes to the
management of King Management as it deems necessary after completion of the
merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of material United States federal income
tax consequences of the merger to Sunrise, King Management and its affiliates
and Sunrise's stockholders whose shares of common stock are held as capital
assets and converted into the right to receive $5.25 cash in the merger. Because
it is a summary, it does not include an analysis of all potential tax effects of
the merger.
For example, this summary:
- does not consider the effect of any applicable state, local or foreign tax
laws;
- does not address all aspects of federal income taxation that may affect
particular stockholders in light of their particular circumstances;
- is not intended for stockholders that may be subject to special federal income
tax rules, such as:
-- insurance companies;
-- tax-exempt organizations;
-- financial institutions or broker-dealers;
-- stockholders who hold their common stock as part of a hedge, straddle or
conversion transaction;
-- stockholders who acquired their common stock pursuant to the exercise of an
employee stock option or otherwise as compensation; and
-- stockholders who are not citizens or residents of the United States or that
are foreign corporations, foreign partnerships or foreign estates or trusts
as to the United States;
- does not address tax consequences to holders of stock options; and
- does not, except as expressly set forth below, address tax consequences to
King Management, any of its affiliates or any person who
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would be treated as constructively owning King Management common stock
immediately after the merger by reason of the attribution rules of Section 318
of the Internal Revenue Code, and these persons must consult with their tax
advisor to determine the tax consequences to them.
This summary assumes that stockholders have held their Sunrise common stock as a
"capital asset" under the Internal Revenue Code. Generally, a "capital asset" is
property held for investment.
This summary is based on the current provisions of the Internal Revenue Code,
applicable Treasury Regulations, judicial authorities and administrative rulings
and practice. It is possible that the Internal Revenue Service will take a
contrary view. Neither Sunrise nor King Management nor any of its affiliates has
sought or intends to seek a ruling from the Internal Revenue Service with
respect to any aspect of the merger. Future legislative, judicial or
administrative changes or interpretations could alter or modify the statements
and conclusions set forth in this section. Any of these changes or
interpretations could be retroactive and could affect the tax consequences of
the merger to you.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
Treatment of Holders of Common Stock. The conversion of your shares of common
stock into the right to receive $5.25 cash in the merger, or pursuant to the
exercise of your appraisal rights, will be fully taxable to you. Subject to the
assumptions and limitations described above, you will recognize a capital gain
or loss equal to the difference between:
- the amount of cash you receive in the merger; and
- your tax basis in the common stock.
Generally, your tax basis in your common stock will be equal to what you paid
for your stock.
If you are an individual,
- long-term capital gain will be taxable at a maximum capital gains rate of 20%
if you held your shares for more than one year at the time of the merger, gain
on shares held for one year or less will be subject to ordinary income tax
rates; and
- capital loss may only be offset against capital gains or up to $3,000 per year
of ordinary income, with a carryover of capital loss to subsequent years to
the extent unused.
Prior to the merger, King Management shares and Sunrise shares owned by King
Management affiliates will be transferred to a newly-created parent company in
exchange for shares of common stock of this newly-created parent company. We
refer you to the discussion under the heading "Special Factors -- Agreement to
Facilitate Merger" for more information on this exchange. It is intended that
the exchange of King Management and Sunrise stock for newly created parent
company stock should qualify under Section 351 of the Internal Revenue Code and
should not result in gain or loss to King Management and its affiliates, the
newly created parent company, or Sunrise.
King Management is currently taxed as an S corporation pursuant to Subchapter S
of the Internal Revenue Code. In general, subject to certain exceptions, an S
corporation does not pay income tax on its earnings, but instead its taxable
income is taxed at the shareholder level. The affiliates of King Management
intend to maintain S corporation status for the newly-created parent company and
its subsidiary, King Management. To this end they intend to elect S corporation
status for the newly-created parent company and Qualified Subchapter S
Subsidiary status for King Management. It is intended that pursuant to the
Regulations under Section 1361 of the Internal Revenue Code, the Qualified
Subchapter S Subsidiary election should cause King Management to be treated as
if it had liquidated into the newly-created parent company in a tax-free
liquidation under Section 332 of the Internal Revenue Code. It is further
intended that the merger of Sunrise into King Management should be treated for
tax purposes as a tax-free reorganization pursuant to Section 368(a)(1)(D) of
the Internal
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Revenue Code and should not result in gain or loss to King Management and its
affiliates, the newly created parent corporation, or Sunrise.
Backup Withholding. You may be subject to backup withholding at the rate of 31%
with respect to the gross proceeds you receive from the conversion of your
common stock into cash unless you:
- are a corporation or other exempt recipient and, when required, establish this
exemption; or
- provide your correct taxpayer identification number, certify that you are not
currently subject to backup withholding and otherwise comply with applicable
requirements of the backup withholding rules.
If you, after the merger, do not provide the paying agent with your correct
taxpayer identification number, and any other documents or certifications
required by the Internal Revenue Service, including, among others, Form W-9 or a
substitute for this Form, you may be subject to penalties imposed by the
Internal Revenue Service. Any amount withheld under these backup withholding
rules will be creditable against your federal income tax liability. The paying
agent will report to you and to the Internal Revenue Service the amount of any
reportable payment made to you (including payments made to you pursuant to the
merger) and any amount withheld pursuant to the merger.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles. Under this method the
total consideration paid in the merger will be allocated among King Management's
consolidated assets and liabilities based on the fair values of the assets
acquired and liabilities assumed.
PUBLIC OFFERINGS AND REPURCHASES OF COMMON STOCK
Sunrise has not made an underwritten public offerings for cash in the past three
years. On October 13, 1998, however, our board approved a stock repurchase
program under which we allocated up to $5 million to purchase shares of our
common stock in the open market at suitable market prices. On April 23, 1999,
our board increased the stock repurchase program from $5 million to $7 million
and granted management the authority to exercise options held by Sunrise to
purchase its own shares or make other purchases, either directly or through King
Management, as long as Sunrise's ability to fund pending and future lease
equipment purchases was not jeopardized.
Under the stock repurchase program, Sunrise purchased a total of 1,196,400
shares of its common stock for a total cost of $5,079,000 since April 1999.
Sunrise repurchased 566,400 shares of its common stock from the public market at
a cost of $2,195,000 during its fiscal quarter ended December 31, 1998. The
price per share of these repurchases during its fiscal quarter ended December
31, 1998 ranged from $3.25 to $3.94 and the average repurchase price was $3.88.
Sunrise repurchased 630,000 shares of its common stock from King Management by
exercising an option held by Sunrise at a cost of $2,884,000 during its fiscal
quarter ended September 30, 1999. The price per share of such repurchases was
$4.58 and the average price during this quarter was $4.49. For more information
regarding Sunrise's repurchases of its own shares we refer you to the
information on page 62 of this proxy statement under the heading "Common Stock
Purchase Information -- Purchases by Sunrise."
FINANCING; SOURCE OF FUNDS
The amount of funds required to (1) fund the payment of the merger consideration
and the option consideration to surrender outstanding vested stock options
granted under Sunrise's 1991 Stock Option Plan; and (2) pay the fees and
expenses in connection with the merger is estimated to be $15.0 million.
King Management intends to obtain these funds from a company that will be formed
immediately prior to the merger and that will hold all of the outstanding common
stock of King Management immediately before and after the merger. For more
detail on the creation of this
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parent company and the reorganization of the ownership of King Management that
is expected to take place immediately before the merger, we refer you to the
information under the heading "Agreement to Facilitate the Merger," beginning on
page 48 of this proxy statement.
Although the parent company has not yet been formed, it expects to obtain the
funds for King Management under a $15.0 million credit facility. On April 27,
2000, King Management entered into a commitment letter agreement with LaSalle
Bank, N.A. under which LaSalle Bank agreed to provide the parent company a $15.0
million term loan, the proceeds of which will then be contributed by the parent
company to King Management. This commitment is subject to customary conditions,
including the negotiation, execution and delivery of a definitive credit
agreement and related documentation. As of the date of this proxy statement, the
new credit agreement has not yet been executed. Execution of the credit
agreement is anticipated at or about the effective time of the merger. When
executed, the loan from LaSalle Bank to the parent company is expected to have a
term of three years, bear interest at a variable rate equal to LaSalle's prime
rate and call for monthly payments of interest and principal equal to the
greater of 100% of monthly lease payments received pursuant to all leases on
equipment and all proceeds of sale of equipment at the end of the lease term or
$416,667. The loan will be secured by a pool of specific leases and related
equipment. The credit agreement will contain several customary covenants,
including customary financial covenants relating to limitation on additional
indebtedness and the maintenance of certain financial ratios.
Neither the parent company nor King Management has any present plans to
refinance the credit facility. King Management does not have any alternative
financing arrangements in place.
FEES AND EXPENSES
Sunrise estimates that merger-related fees and expenses, consisting primarily of
financial advisory fees, SEC filing fees, fees and expenses of investment
bankers, attorneys and accountants and other related charges, will total
approximately $1 million, assuming the merger is completed. This amount consists
of the following estimated fees:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ----------
<S> <C>
Advisory fees and expenses....... $ 550,000
Legal fees and expenses.......... 210,000
Accounting fees and expenses..... 30,000
SEC filing fee................... 2,800
Printing, solicitation and
mailing costs.................. 50,000
Loan commitment fees and
expenses....................... 100,000
Miscellaneous expenses........... 57,200
----------
Total....................... $1,000,000
==========
</TABLE>
REGULATORY REQUIREMENTS
In connection with the merger, Sunrise will be required to make a number of
filings with and obtain a number of approvals from various federal and state
governmental agencies, including:
- filing of a certificate of merger with the Secretary of State of the State of
Delaware in accordance with the Delaware General Corporation Law after the
approval of the merger proposal by Sunrise's stockholders;
- filing of articles of merger with the Secretary of State of the State of
Minnesota in accordance with the Minnesota Business Corporation Act after the
approval of the merger proposal by Sunrise's stockholders;
- complying with federal and state securities laws; and
- notifying and furnishing certain information to the Federal Trade Commission
and the Antitrust Division of the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Under the HSR Act, the merger may not be completed until the expiration of a
waiting period of 30 calendar days following the receipt of all required
filings, unless the waiting period is terminated earlier by the FTC or the
Antitrust Division, or unless the waiting period is extended by a request for
additional information or documentary material. The appropriate entities or
persons made the requisite filings under
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the HSR Act and early termination of the waiting period applicable to the merger
was granted on May 8, 2000. Both Sunrise and King Management believe that
consummation of the merger will not violate any antitrust laws. The FTC and the
Antitrust Division have the authority to challenge the merger on antitrust
grounds before or after the merger is completed. Each state in which Sunrise or
King Management has operations may also review the merger under state antitrust
laws.
STOCKHOLDER LAWSUITS CHALLENGING THE MERGER
On February 3, 2000, a purported stockholder class action lawsuit was filed
against Peter J. King, Donald R. Brattain, Thomas R. King and Jeffrey G.
Jacobsen, as directors of Sunrise, and Sunrise in the Delaware Chancery Court on
behalf of the plaintiff and Sunrise's other unaffiliated stockholders. The
lawsuit alleges, among other things, that:
- the officers and directors of Sunrise possessed non-public information about
Sunrise and its future anticipated growth;
- no truly independent body, including the special committee, has operated to
protect the interests of Sunrise's stockholders (other than King Management
and its affiliates);
- all of the directors, including the members of the special committee, suffer
from disabling conflicts of interest;
- Sunrise's board of directors breached its fiduciary duties to Sunrise's
stockholders (other than King Management and its affiliates) by facilitating,
through unfair procedures, King Management's proposal to acquire Sunrise's
common stock to the exclusion of others, for unfair and inadequate
consideration; and
- the proposed transaction is not entirely fair to Sunrise's stockholders (other
than King Management and its affiliates) because the merger consideration is
unfair and inadequate.
The plaintiff sought:
- a declaration that the lawsuit be a class action and certification of the
plaintiff as the class representative;
- an order that the defendants carry out their fiduciary duties;
- an accounting to Sunrise's stockholders (other than King Management and its
affiliates) for all damages suffered and to be suffered by them as a result of
the acts and transactions alleged;
- a declaratory judgment that the defendants have breached their fiduciary
duties;
- an award to the plaintiff of the costs and disbursements of the action,
including a reasonable allowance for the plaintiff's attorneys' and experts'
fees; and
- such other and further relief as the court may deem to be just and proper.
On February 8, 2000, another similar purported class action lawsuit was filed
against the same defendants in the Delaware Chancery Court on behalf of the
plaintiff and Sunrise's other unaffiliated stockholders. In this lawsuit, the
plaintiff sought the following additional remedies:
- an injunction enjoining the merger transaction under the terms presently
proposed;
- if the transaction takes places, rescission or, in the alternative,
unspecified rescissory damages; and
- payment to the plaintiff and other members of the class of unspecified damages
and all profits and any special benefits obtained by the defendants as a
result of the transaction.
On May 25, 2000, Sunrise, the defendant directors and the named plaintiffs, on
behalf of themselves and the putative class of persons on behalf of whom the
plaintiffs brought the lawsuits, reached an agreement in principle with respect
to the settlement of this litigation. In consideration of the settlement,
Sunrise agreed, among other things, to amend the merger agreement to require the
merger to be approved by a majority of the outstanding shares of Sunrise common
stock present and entitled to vote in person or by proxy at the special
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meeting, other than shares held by King Management and its stockholders. On that
date, counsel to each of the parties to the litigation entered into a memorandum
of understanding, agreeing to execute and present to the court as soon as is
practicable an appropriate stipulation of settlement and any other documentation
required in order to obtain approval by the court of the settlement. Any
proposed settlement would be subject to the approval of the court and would not
be effective unless the merger is completed. Sunrise anticipates that any
settlement of this litigation will not have a material adverse effect on its
financial condition, operating results or liquidity.
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THE MERGER AGREEMENT
--------------------------------------------------------------------------------
ON JANUARY 31, 2000, SUNRISE ENTERED INTO THE MERGER AGREEMENT WITH KING
MANAGEMENT. ON MAY 25, 2000, THE PARTIES AMENDED THIS MERGER AGREEMENT TO CHANGE
THE STOCKHOLDER VOTE REQUIRED TO APPROVE THE PROPOSED MERGER. THE FOLLOWING IS A
SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER AGREEMENT. BECAUSE IT IS A
SUMMARY, IT DOES NOT INCLUDE ALL OF THE INFORMATION THAT IS INCLUDED IN THE
MERGER AGREEMENT. THE TEXT OF THE MERGER AGREEMENT, WHICH IS ATTACHED AS
APPENDIX A TO THIS PROXY STATEMENT, IS INCORPORATED INTO THIS SECTION BY
REFERENCE. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT CAREFULLY IN ITS
ENTIRETY.
THE MERGER
Upon effectiveness of the merger, Sunrise will be merged with King Management,
and King Management will continue as the surviving company. As a result of the
merger, you will be entitled to receive $5.25 in cash for each of your shares of
Sunrise common stock outstanding at the time of the merger.
As the surviving company after the merger, King Management will have all the
property, rights and powers of both King Management and Sunrise before the
merger, and it will be liable for all of the debts, liabilities and obligations
of both King Management and Sunrise before the merger. After the merger, the
separate corporate existence of Sunrise will cease.
TIME OF CLOSING
The merger will close as soon as possible after satisfaction or waiver of the
conditions to the merger. To complete the merger, King Management and Sunrise
will make certain filings with the Secretary of State of the State of Minnesota,
the Secretary of State of the State of Delaware, the Federal Trade Commission
and the Antitrust Division of the Department of Justice.
EXCHANGE AND PAYMENT PROCEDURES
Sunrise has appointed Norwest Bank Minnesota, N.A. as its paying agent to handle
the exchange of Sunrise's stock certificates in the merger for cash. Soon after
the merger becomes effective, the paying agent will mail to you a letter of
transmittal and instructions explaining how to exchange your stock certificates
for cash. Upon surrender to the paying agent of a valid share certificate and a
properly completed letter of transmittal, along with such other documents as the
paying agent may reasonably require, you will be entitled to receive $5.25 in
cash per share. Until surrendered in this manner, each stock certificate will
represent only the right to receive the merger consideration.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY
AFTER YOU RECEIVE A LETTER OF TRANSMITTAL FROM THE PAYING AGENT. A LETTER OF
TRANSMITTAL WILL BE MAILED TO YOU SOON AFTER THE MERGER IS COMPLETED.
Any merger consideration made available to the paying agent that remains
unclaimed by Sunrise's stockholders for six months after the time the merger is
completed will be returned to King Management, as the surviving company after
the merger, and any of Sunrise's stockholders who have not by that time made an
exchange must then look to the surviving company for payment of their claim for
merger consideration.
TRANSFERS OF SHARES
No transfers of shares of Sunrise's common stock will be made on Sunrise's share
transfer books after the merger is completed.
TREATMENT OF STOCK OPTIONS
At the time the merger becomes effective, all outstanding vested and unvested
options to purchase shares of Sunrise common stock that were granted under
Sunrise's 1991 Stock Option Plan will be canceled. In exchange, the holders of
vested options will receive an amount deter-
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mined by multiplying (1) the excess, if any, of $5.25 over the exercise price
per share of the option by (2) the number of shares subject to the option that
have vested as of the effective time of the merger, less any amount required to
pay any applicable income or withholding taxes. The holders of unvested options
will not receive anything in exchange.
All other outstanding options to purchase shares of Sunrise's common stock that
were not granted under Sunrise's 1991 Stock Option Plan will be cancelled at the
time the merger becomes effective, and the holders of these options will not
receive anything in exchange.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Sunrise has represented and warranted certain matters
to King Management. These include, among other things, representations and
warranties relating to:
- its organization, standing and similar corporate matters;
- its authorization to enter into the merger agreement;
- its capital structure;
- the accuracy of its SEC filings;
- the absence of material undisclosed liabilities;
- regulatory consents;
- non-contravention of its agreements;
- compliance with applicable laws;
- the absence of pending or threatened material litigation;
- the absence of certain changes or events since the date of its most recent
quarterly financial statements filed with the SEC;
- the accuracy of information supplied by Sunrise in connection with this proxy
statement;
- the inapplicability of certain restrictions of Minnesota law;
- the nonexistence of any stockholder rights plan or similar agreement;
- the receipt of a written fairness opinion from U.S. Bancorp Piper Jaffray
Inc.; and
- finders' fees and expenses.
The merger agreement also contains representations and warranties of King
Management relating to, among other things:
- its organization, standing and similar corporate matters;
- its authorization to enter into the merger agreement;
- regulatory consents;
- non-contravention of its agreements;
- the accuracy of information supplied by King Management in connection with
this proxy statement;
- financing commitments in connection with the merger; and
- finders' fees and expenses.
The representations and warranties in the merger agreement do not survive the
closing of the merger or termination of the merger agreement.
SUNRISE'S COVENANTS
Sunrise has undertaken certain covenants in the merger agreement. The following
summarizes the more significant of these covenants:
No Solicitation. Sunrise has agreed that it and its subsidiaries and their
respective officers, directors, financial advisors, counsel, representatives,
agents or affiliates will not, directly or indirectly, encourage, solicit,
initiate or, except to the extent provided in the merger agreement, participate
in any way in discussions or negotiations with, or provide any confidential
information regarding Sunrise or any subsidiary to, any third party concerning
or in connection with any acquisition proposal.
An "acquisition proposal" as referred to in this proxy statement means any
tender offer (including a self-tender offer), exchange offer, merger, sale of
substantial assets outside the ordinary course of business, sale of securities
or
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similar transactions involving Sunrise or any subsidiary or division of Sunrise.
A "third party" as referred to in this proxy statement means any corporation,
partnership, person or other entity or "group" (as defined under the Exchange
Act) other than King Management or any affiliate of King Management and their
respective directors, officers, employees, representatives and agents.
Despite this restriction, neither Sunrise nor its board of directors is
prohibited from:
- taking and disclosing to Sunrise's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act; or
- making such disclosure to Sunrise's stockholders as, in the reasonable
judgment of Sunrise's board of directors with the advice of outside counsel,
is required under applicable law.
In addition, this restriction does not prohibit Sunrise from furnishing
confidential information regarding Sunrise to, and enter into discussions or
negotiations with, any third party if and only if:
- this third party, has on an unsolicited basis, submitted a bona fide written
acquisition proposal;
- Sunrise's board of directors determines in good faith, based on, among other
things, the legal advice of its outside counsel, that its fiduciary duties
require it to take such action; and
- Sunrise and this third party enter into a confidentiality agreement with
standard terms and provisions.
Subject to the termination provisions described below under the heading
"-- Termination of the Merger Agreement," Sunrise may approve, accept and
recommend an acquisition proposal from a third party if and only if:
- Sunrise's board of directors determines in good faith, based on, among other
things, advice of its legal counsel that its fiduciary duties requires it to
take this action;
- Sunrise's board of directors determines, after consultation with its financial
advisors, that the acquisition proposal would result in a transaction more
favorable to Sunrise's stockholders (other than King Management and its
affiliates) from a financial point of view than the transaction contemplated
by the merger agreement. This type of acquisition proposal is referred to in
this proxy statement as an "approved offer:"
- Sunrise promptly notifies King Management of its board of directors'
determination that an acquisition proposal constitutes an approved offer; and
- King Management does not make, within three business days of King Management's
receiving this notice, an offer which Sunrise's board of directors, after
consultation with its financial advisors, determines is superior to this
approved offer.
We have agreed to promptly notify King Management of the receipt and the terms
of any acquisition proposal that we may receive, including the identity of the
offeror, and we will keep King Management reasonably informed of the status of
any such acquisition proposal.
Covenants Relating to the Special Meeting and Proxy Materials. We have agreed
to call a special meeting to vote on the merger agreement. We have also agreed
that our directors will recommend approval and adoption of the merger agreement
and the merger by our stockholders and that they will not withdraw their
recommendation. This obligation is subject, however, to the fiduciary duties of
our directors. We have also agreed to prepare and mail this proxy statement and
to solicit your vote to approve the merger agreement.
KING MANAGEMENT'S COVENANTS
King Management has also undertaken certain covenants in the merger agreement.
The following summarizes the more significant of these covenants:
SEC Filings. King Management agreed to file a transaction statement with the
SEC relating to the merger as required by the SEC's
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Rule 13e-3 under the Exchange Act. The information included in this proxy
statement is intended to comply with Rule 13e-3.
Financing. King Management agreed to use its reasonable best efforts to:
- obtain monies sufficient to fund the merger and satisfy all other costs and
expenses arising in connection with the merger in a manner that is mutually
and reasonably satisfactory to Sunrise and King Management on or before the
closing date of the merger; and
- execute and deliver definitive agreements with respect to the financing of the
merger as will be mutually and reasonably satisfactory to Sunrise and King
Management on or before the closing date of the merger. These agreements are
referred to as the "definitive financing agreements" in this proxy statement.
Sunrise has agreed to use its reasonable best efforts to assist and cooperate
with King Management to satisfy on or before the closing date of the merger all
of the conditions to closing the transactions constituting the financing which
are applicable to Sunrise.
Indemnification and Insurance of Sunrise's Directors and Officers. King
Management also agreed to cause King Management, as the surviving company after
the merger, to indemnify Sunrise's present and former officers and directors
against matters occurring before the merger became effective. This obligation
lasts for a period of six years. King Management has also agreed that for three
years after the closing date of the merger, it will, as the surviving company,
provide officers' and directors' liability insurance for each person currently
covered by our officers' and directors' liability insurance policy on terms no
less favorable than our current policy. However, King Management will not be
obligated to pay premiums in excess of 150% of the amount Sunrise currently pays
for its insurance.
ADDITIONAL AGREEMENTS
Both parties to the merger agreement have agreed to use commercially reasonable
best efforts to do or cause to be done anything necessary, proper or advisable
to consummate the merger. The parties have also agreed to cooperate with each
other in relation to certain matters, including making the necessary SEC
filings, obtaining regulatory and other consents and making public
announcements.
CONDITIONS
Mutual Closing Conditions. Both Sunrise's and King Management's obligations to
complete the merger are subject to the satisfaction, if legally permissible, or
waiver at or before the closing date of the merger of the following conditions:
- the absence of any legal prohibition preventing or materially delaying the
completion of the merger or would impose a material limitation on the ability
of King Management effectively to exercise full rights of ownership of Sunrise
or the assets or business of Sunrise; and
- the expiration of the HSR Act waiting period.
Additional Closing Conditions for King Management's Benefit. King Management's
obligation to complete the merger is subject to the following additional
conditions:
- the accuracy as of the closing date of the merger to the extent specified in
the merger agreement of Sunrise's representations and warranties in the merger
agreement;
- the material performance by Sunrise of its obligations under the merger
agreement, except that the obligation of King Management to complete the
merger will not be subject to the satisfaction of this condition if the reason
that Sunrise has not performed or complied in all material respect with a
particular agreement, obligation or condition is the result of the action or
inaction by the officers of Sunrise that constitutes a breach of any such
agreement, obligation or condition;
- the obtaining by Sunrise of all permits, authorizations, consents and
approvals required on our part to perform its obligations
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under the merger agreement and to complete the merger;
- the completion of the funding of the financing under the definitive financing
agreements or the immediate access by King Management to otherwise secure
sufficient funds under any other commitment acceptable to King Management to
enable the performance of the obligations of King Management under the merger
agreement; or
- the exercise of appraisal rights by the holders of no more than five percent
of Sunrise's outstanding common stock.
Additional Closing Conditions for Sunrise's Benefit. Sunrise's obligation to
complete the merger is subject to the following additional conditions:
- the approval by Sunrise's stockholders of the merger agreement;
- the material performance by King Management of its obligations under the
merger agreement; and
- the accuracy as of the closing date of the merger to the extent specified in
the merger agreement of King Management's representations and warranties in
the merger agreement.
TERMINATION OF THE MERGER AGREEMENT
Right to Terminate. The merger agreement may be terminated at any time before
the effective time of the merger in any of the following ways:
- by mutual written consent of Sunrise and King Management;
- by either Sunrise or King Management if the merger is not completed by October
31, 2000, unless Sunrise is required to submit additional information to
obtain any required antitrust clearance. However, the party seeking to
terminate for this reason must not be in breach of its obligations under the
merger agreement in any material respect;
- by either Sunrise or King Management if completion of the merger is illegal or
prohibited;
- by either Sunrise or King Management if Sunrise's stockholders do not approve
the merger agreement, except that the right to terminate the merger agreement
will not be available to any party whose failure to perform any material
obligation under the merger agreement has been the proximate cause of, or
resulted in, the failure of Sunrise's stockholders to approve the merger
agreement;
- by King Management if:
-- Sunrise has materially breached the non-solicitation covenant described
above under the heading "Sunrise Covenants -- No Solicitation;"
-- Sunrise's board of directors has recommended, approved, accepted or entered
into an agreement (other than a confidentiality agreement) regarding an
acquisition proposal or an approved offer;
-- Sunrise's board of directors has withdrawn or modified in a manner adverse
to King Management the recommendation of its board of directors of the
merger;
-- a tender offer or exchange offer for 15% or more of the outstanding shares
of Sunrise's common stock is commenced, and Sunrise's board of directors,
within 10 business days after such tender offer or exchange offer is so
commenced, either fails to recommend against acceptance of such tender
offer or exchange offer by Sunrise's stockholders or takes no position with
respect to the acceptance of such tender offer or exchange offer by
Sunrise's stockholders; or
-- Sunrise has failed to mail this proxy statement to its stockholders within
10 days after being cleared by the SEC, failed to include in this proxy
statement the recommendation of its board of directors to approve the
merger or have postponed or, without having obtained the approval of the
merger agreement by Sunrise's stockholders, adjourned the stockholders
meeting (unless such failure to mail, postponement or adjournment, as
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the case may be, was necessitated by applicable law);
- by Sunrise if (1) it is not in material breach of its obligations under the
merger agreement, (2) its board of directors has approved, accepted or
recommended an approved offer; and (3) Sunrise pays to King Management a $1
million termination fee;
- by King Management if (1) King Management is not in material breach of its
obligations under the merger agreement and (2) there has been a material
breach by Sunrise of any of its representations, warranties or obligations
under the merger agreement so that the conditions to the merger described
above under the heading " -- Conditions" will not be satisfied, and the breach
is not curable or, if curable, is not cured by Sunrise within 10 calendar days
after receipt by Sunrise of written notice from King Management of such
breach;
- by Sunrise if (1) it is not in material breach of its obligations under the
merger agreement and (2) there has been a material breach by King Management
of any of its representations, warranties or obligations under the merger
agreement so that the conditions to the merger described above under the
heading " -- Conditions" will not be satisfied, and the breach is not curable
or, if curable, is not cured by King Management within 10 calendar days after
receipt by King Management of written notice from us of such breach; or
- by King Management, if the holders of more than 5% of the outstanding Sunrise
common stock exercise appraisal rights.
If the merger agreement terminates, it will become void. However, termination
will not affect the rights of either party against the other for breach of the
merger agreement. Also, certain obligations survive termination of the
agreement, including the obligation to pay the fees as described below under
"Termination Fee" below and certain confidentiality obligations.
TERMINATION FEE
In recognition of the time, efforts and expenses expended and incurred by King
Management with respect to Sunrise and the opportunity that the acquisition of
Sunrise presents to King Management, Sunrise has agreed to pay King Management
$1 million in cash if Sunrise terminates the merger agreement when King
Management is not in material breach of any of its obligations under the merger
agreement and Sunrise's board has approved, accepted or recommended an approved
offer.
In addition, Sunrise must pay King Management $1 million in cash if:
- the merger agreement is terminated by King Management under certain
circumstances as described above; and
- within 12 months of the termination of the merger agreement, Sunrise enters
into an agreement providing for an acquisition proposal or approved offer or a
third party acquires 50% or more of Sunrise's outstanding common stock in a
tender or exchange offer.
Sunrise must also pay King Management $1 million in cash if:
- the merger agreement is terminated by King Management for certain
circumstances as described above; and
- within 12 months of the termination of the merger agreement, Sunrise enters
into an agreement providing for an acquisition proposal or approved offer.
EXPENSES
Except as described above, all costs and expenses incurred in connection with
the merger agreement will be paid by the party incurring those costs or
expenses.
AMENDMENTS; WAIVERS
Any provision of the merger agreement may be amended or waived before the merger
becomes effective. After approval of the merger agreement by Sunrise's
stockholders, no amendment or waiver can be made that alters the considera-
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tion to be received for Sunrise common stock or that would adversely affect the
rights of Sunrise's stockholders, without their further approval.
AGREEMENT TO FACILITATE THE MERGER
As an inducement and condition to the willingness of King Management to enter
into the merger agreement, stockholders of Sunrise who also constitute the
stockholders of King Management entered into an agreement to facilitate the
merger. Under this agreement, these stockholders agreed to perform, or to take
all actions necessary to ensure the performance of, between the date the merger
agreement was signed and the date the merger becomes effective, we refer to this
period in this proxy statement as the "reorganization period," the following
actions:
- Form a new Minnesota parent company to hold all of the outstanding common
stock of King Management.
- Following the completion of the formation of the parent company, these
stockholders (other than King Management) and other shareholders of King
Management will contribute all of their outstanding shares of common stock of
King Management owned by these stockholders to the parent company in exchange
for an equal number of shares of the parent company's common stock. As a
result of this exchange, all of the outstanding shares of common stock of King
Management will be owned one hundred percent (100%) by the parent company, and
King Management will become a wholly-owned subsidiary of the parent company.
- At the same time as the completion of the formation of the parent company,
these stockholders (other than King Management) will contribute all of their
outstanding shares of Sunrise common stock owned by them to the parent company
in exchange for shares of the parent company's common stock. The parent
company will then contribute all of the shares of Sunrise common stock it
received from these stockholders to King Management.
- Any outstanding vested options to purchase shares of Sunrise common stock
granted under Sunrise's 1991 Stock Option Plan and held by any of these
stockholders at the effective time of the merger will be cancelled upon the
effective time of the merger as provided in the merger agreement, and these
stockholders (and any other holder of these vested options) will be entitled
to receive a cash payment, less any applicable withholding taxes, in the
aggregate amount equal to the product of (1) the number of shares of Sunrise
common stock into which such option would have been exercisable at the
effective time of the merger if such option had not been cancelled and (2) the
excess, if any, of $5.25 over the exercise price per share for the shares of
Sunrise common stock subject to such option as expressly stated in the
applicable stock option agreement or other agreement.
- Any outstanding vested options to purchase shares of Sunrise common stock that
were not granted under Sunrise's 1991 Stock Option Plan and are held by any of
these stockholders at the effective time of the merger will be cancelled upon
the effective time of the merger as provided in the merger agreement, and
these stockholders will be entitled to receive options to purchase shares of
the parent company's common stock under the same terms and conditions as the
options that were cancelled.
- As a result of the actions described in the foregoing paragraphs, these
stockholders at the effective time of the merger will have no share ownership,
or right to receive any shares of capital stock, of Sunrise, and will
therefore have no right to receive the $5.25 per share merger consideration
paid pursuant to the terms of the merger agreement.
- These stockholders irrevocably appointed Mr. King, during the reorganization
period, as proxy for and on behalf of them to perform the actions contemplated
by the agreement to facilitate merger.
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Under the terms of the agreement to facilitate the merger, these stockholders
also agreed, except as otherwise provided above, not to:
- make any sales, gifts, transfers, pledges, or other dispositions of Sunrise
common stock (including any shares of Sunrise common stock issued upon the
exercise of outstanding options) or King Management common stock;
- deposit any Sunrise common stock (including any shares of Sunrise common stock
issued upon the exercise of options) or King Management common stock into a
voting trust;
- enter into any voting agreement or arrangement with respect thereto; or
- enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition, sale, assignment transfer or
other disposition of Sunrise common stock (including any shares of Sunrise
common stock issued upon the exercise of outstanding options) or King
Management common stock, without first making any such transferee, assignee or
pledgee fully aware of the obligations under the agreement to facilitate
merger and obtaining such transferee's or pledgee's written agreement to
comply with the terms of the agreement to facilitate merger.
In addition, these stockholders hold approximately 62.6% of the outstanding
Sunrise common stock, and have agreed to vote all these shares in favor of
approval of the merger agreement and the other transactions contemplated by the
merger agreement and against any proposal that would interfere with or prevent
the closing of the merger.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE
AGREEMENT TO FACILITATE THE MERGER. BECAUSE IT IS A SUMMARY, IT DOES NOT INCLUDE
ALL OF THE INFORMATION THAT IS INCLUDED IN THE AGREEMENT TO FACILITATE THE
MERGER. THE FOREGOING SUMMARY OF THE AGREEMENT TO FACILITATE THE MERGER IS
QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE AGREEMENT TO FACILITATE THE
MERGER WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX B AND INCORPORATED
INTO THE SECTION BY REFERENCE.
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APPRAISAL RIGHTS
--------------------------------------------------------------------------------
YOU HAVE A RIGHT TO DISSENT
Under the Delaware General Corporation Law, if you do not wish to accept the
merger consideration of $5.25 per share for your shares of Sunrise common stock
as provided in the merger agreement, you have the right to dissent from the
merger and to seek an appraisal of, and to be paid the fair value (exclusive of
any element of value arising from the accomplishment or expectation of the
merger) for, the shares of Sunrise common stock held by you, provided that you
comply with the provisions of Section 262 of the DGCL.
Holders of record of Sunrise common stock who do not vote in favor of the merger
agreement and who otherwise comply with the applicable statutory procedures will
be entitled to appraisal rights under Section 262 of the DGCL. A person having a
beneficial interest in shares of Sunrise common stock 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 appraisal rights.
The following discussion is a summary of the material provisions of Section 262
of the DGCL. The following summary is qualified in its entirety by the full text
of Section 262 of the DGCL which is reprinted in its entirety in Appendix D
attached to this proxy statement. All references in Section 262 of the DGCL and
in this summary to a "stockholder" or "holder" are to the record holder of the
shares of Sunrise common stock as to which appraisal rights are asserted.
Under Section 262 of the DGCL, holders of shares of Sunrise common stock who
follow the procedures set forth in Section 262 of the DGCL will be entitled to
have their shares appraised by the Delaware Chancery Court and to receive
payment in cash of the "fair value" of these shares, exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, as determined by such court.
WE MUST PROVIDE YOU NOTICE
Under Section 262 of the DGCL, since we are submitting for approval at a meeting
of stockholders the proposed merger, we must notify, not less than 20 days prior
to the stockholder meeting, each of our stockholders who was a stockholder on
the record date for the meeting with respect to shares for which appraisal
rights are available, that appraisal rights are so available, and must include
in such notice a copy of Section 262 of the DGCL.
This proxy statement constitutes notice to the holders of shares for which
appraisal rights are available and the applicable statutory provisions of the
DGCL are attached to this proxy statement as Appendix D. If you wish to exercise
your appraisal rights or you wish to preserve your right to do so you should
review the following discussion and Appendix D to this proxy statement
carefully, because failure to timely and properly comply with the procedures
therein specified will result in the loss of appraisal rights under the DGCL.
YOU MUST PERFECT APPRAISAL RIGHTS
A holder of shares for which appraisal rights are available wishing to exercise
the holder's appraisal rights (1) must not vote in favor of the merger agreement
or consent thereto in writing (including by returning a signed proxy without
indicating any voting instructions as to the proposal) and (2) must deliver to
Sunrise prior to the vote on the merger agreement at the special meeting, a
written demand for appraisal of the holder's shares. This written demand for
appraisal must be in addition to and separate from any proxy or vote abstaining
from or against approving the merger. This demand must reasonably inform Sunrise
of the identity of the stockholder and of the stockholder's
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intent to demand appraisal of his, her or its shares. A holder of appraisal
shares wishing to exercise such holder's appraisal rights must be the record
holder of the shares for which appraisal rights are available on the date the
written demand for appraisal is made and must continue to hold these shares
until the completion of the merger. Accordingly, a holder of shares for which
appraisal rights are available who is the record holder of these shares on the
date the written demand for appraisal is made, but who thereafter transfers
these shares prior to the completion of the merger, will lose any right to
appraisal in respect of these shares.
Only a record holder of shares for which appraisal rights are available is
entitled to assert appraisal rights for the shares registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the record
holder, fully and correctly, as this holder's name appears on this holder's
stock certificates. If the shares for which appraisal rights are available are
owned of record in a fiduciary capacity, for example by a trustee, guardian or
custodian, execution of the demand should be made in that capacity, and if these
shares are owned of record by more than one owner as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record. The agent, however, must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or officers.
A record holder that is a broker who holds shares for which appraisal rights are
available as nominee for several beneficial owners may exercise appraisal rights
with respect to these shares for which appraisal rights are available held for
one or more beneficial owners while not exercising these rights with respect to
the shares held for other beneficial owners. In such case, the written demand
should set forth the number of shares for which appraisal rights are available
and is being sought. When no number of shares for which appraisal rights are
available is expressly mentioned, the demand will be presumed to cover all the
shares in brokerage accounts or other nominee forms and those who wish to
exercise appraisal rights under Section 262 of the DGCL are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.
All written demands for appraisal should be sent or delivered to:
Sunrise International Leasing Corporation
5500 Wayzata Boulevard, Suite 725
Golden Valley, Minnesota 55416
Attention: Secretary
WE MUST PROVIDE EACH STOCKHOLDER THAT HAS PROPERLY ASSERTED APPRAISAL RIGHTS
NOTICE
Within ten days after the completion of the merger, King Management, as the
surviving company, will notify each stockholder that has properly asserted
appraisal rights under Section 262 of the DGCL, and that has not voted in favor
of the merger agreement, of the date the merger became effective.
A PETITION MUST BE FILED IN THE DELAWARE CHANCERY COURT
Within 120 days after the completion of the merger, but not thereafter, King
Management, as the surviving company, or any stockholder who has complied with
the statutory requirements summarized above may file a petition in the Delaware
Chancery Court demanding a determination of the fair value of the shares that
are entitled to appraisal rights. Neither Sunrise nor King Management is under
any obligation to and has no present intention to file a petition with respect
to the appraisal of the fair value of the shares that are entitled to appraisal
rights. Accordingly, it will be the obligation of stockholders wishing to assert
appraisal rights to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262 of the DGCL.
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STOCKHOLDERS MAY REQUEST INFORMATION
Within 120 days after the completion of the merger, any stockholder that has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from King Management, as the
surviving company, a statement setting forth the aggregate number of shares of
Sunrise common stock not voted in favor of adoption of the merger agreement and
with respect to which demands for appraisal have been received and the aggregate
number of holders of these shares. These statements must be mailed within 10
days after a written request therefor has been received by King Management, or
within 10 days after expiration of the period for delivery of demands for
appraisal under Section 262 of the DGCL, whichever is later.
A COURT WILL DETERMINE STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS, FAIR VALUE AND
ALLOCATION OF EXPENSES
If a petition for an appraisal is filed on a timely basis, after a hearing on
such petition, of which the Register in Chancery (if so ordered by the Delaware
Chancery Court) will give notice to stockholders, the Delaware Chancery Court
will determine the stockholders entitled to appraisal rights and will appraise
the "fair value" of their shares of Sunrise common stock, exclusive of any
element of value arising from the accomplishment or expectation of the merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value.
STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE
OF THEIR SHARES OF SUNRISE COMMON STOCK AS DETERMINED UNDER SECTION 262 OF THE
DGCL COULD BE MORE THAN, THE SAME AS OR LESS THAN THE VALUE OF THE MERGER
CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID
NOT SEEK APPRAISAL OF THEIR SHARES OF SUNRISE COMMON STOCK AND THAT INVESTMENT
BANKING OPINIONS AS TO FAIRNESS FROM A FINANCIAL POINT OF VIEW ARE NOT
NECESSARILY OPINIONS AS TO FAIR VALUE UNDER SECTION 262 OF THE DGCL. The
Delaware Supreme Court has stated, however, that "proof of value by any
techniques or methods that are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if any, to be
paid upon the amounts to be received by stockholders whose appraisal shares have
been appraised. The costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware Chancery Court deems
equitable. The Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the appraisal shares entitled to appraisal.
NO RIGHT TO VOTE APPRAISAL SHARES OR RECEIVE DIVIDENDS OR DISTRIBUTION ON
APPRAISAL SHARES
Any holder of shares for which appraisal rights are available that has duly
demanded an appraisal in compliance with Section 262 of the DGCL will not, after
the consummation of the merger, be entitled to vote these shares subject to such
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other distributions payable
to holders of record of these shares as of a record date prior to the completion
of the merger).
FAILURE TO PERFECT APPRAISAL RIGHTS
If any stockholder that properly demands appraisal of his, her or its appraisal
shares under Section 262 of the DGCL fails to perfect, or effectively withdraws
or loses, his, her or its right to appraisal, as provided in Section 262 of the
DGCL, the stockholder's shares of Sunrise common stock will be converted into
the right to receive the merger consideration of $5.25 per share. A stockholder
will fail to perfect, or effectively lose or withdraw, his, her or its right
52
<PAGE> 58
to appraisal if, among other things, no petition for appraisal is filed within
120 days after the completion of the merger, or if this stockholder delivers to
Sunrise a written withdrawal of his, her or its demand for appraisal. Any
attempt to withdraw an appraisal demand more than 60 days after the completion
of the merger will require the written approval of King Management, the
surviving company.
Cash received pursuant to the exercise of your appraisal rights will be subject
to income tax. We refer you to the information under the heading "Special
Factors -- U.S. Federal Income Tax Consequences" on page 36 of this proxy
statement.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF YOUR RIGHTS. UNDER THESE
CIRCUMSTANCES, YOU WILL BE ENTITLED TO RECEIVE THE $5.25 MERGER CONSIDERATION
RECEIVABLE WITH RESPECT TO YOUR SHARES OF SUNRISE COMMON STOCK IN ACCORDANCE
WITH THE MERGER AGREEMENT.
53
<PAGE> 59
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
--------------------------------------------------------------------------------
The tables below set forth selected consolidated financial information for
Sunrise for each of the five fiscal years ended March 31, 1995 to 1999 and the
nine-month periods ended December 31, 1999 and 1998. We derived the consolidated
statements of operations data and consolidated balance sheet data as of and for
the five years ended March 31, 1995 to 1999 from our consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants, as of and for the years ended March 31, 1995 through March 31, 1997
and Deloitte & Touche LLP, independent auditors, as of and for the years ended
March 31, 1998 and March 31, 1999. We derived the consolidated statements of
operations data and consolidated balance sheet data as of and for the nine-month
periods ended December 31, 1999 and 1998 from our unaudited consolidated
financial statements, which include all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for a fair
presentation of results for these unaudited periods. The results of operations
for the nine months ended December 31, 1999 are not necessarily indicative of
the results of operations that may be expected for the full fiscal year 2000.
You should read the selected consolidated financial data presented below in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements with
related notes and other financial information contained or incorporated by
reference in our Annual Report on Form 10-K for the year ended March 31, 1999,
and our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999,
which we incorporate by reference in this proxy statement. We refer you to the
information under the heading "Documents Incorporated By Reference" on page 77
of this proxy statement.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED DECEMBER 31, YEARS ENDED MARCH 31,
------------------ -----------------------------------------------
1999 1998 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Operating leases.................. $49,723 $28,705 $40,481 $33,714 $26,483 $21,998 $10,722
Direct financing leases........... 2,631 2,228 3,134 4,792 7,528 9,625 5,613
Equipment sales................... 7,235 5,435 7,701 9,971 8,394 10,049 3,141
Interest income................... -- 15 15 202 304 1,447 869
Fee income........................ 181 235 317 413 254 369 1,710
------- ------- ------- ------- ------- ------- -------
Total revenue....................... 59,770 36,618 51,648 49,092 42,963 43,488 22,055
------- ------- ------- ------- ------- ------- -------
Costs and expenses
Depreciation...................... 36,178 18,344 26,680 19,974 15,297 13,777 7,518
Interest.......................... 4,629 2,897 3,791 5,424 6,541 7,559 3,865
Provision for lease and loan
losses.......................... 2,512 1,555 1,925 2,790 7,512 1,853 9,502
Cost of equipment sold............ 6,993 5,101 7,209 9,966 7,418 9,145 2,495
Compensation expense.............. 2,761 2,403 3,330 4,010 3,729 3,596 2,151
Other operating expenses.......... 2,774 2,105 2,786 2,945 2,800 2,671 1,861
Arbitration settlement............ -- -- -- -- 2,022 -- --
------- ------- ------- ------- ------- ------- -------
Total costs and expenses............ $55,847 $32,405 $45,721 $45,109 $45,319 $38,601 $27,392
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes... 3,923 4,213 5,927 3,983 (2,356) 4,887 (5,337)
Provision (benefit) for income
taxes............................. 1,648 1,769 2,489 1,792 191 2,384 (1,085)
------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $ 2,275 $ 2,444 $ 3,438 $ 2,191 $(2,547) $ 2,503 $(4,252)
Net income (loss) per common
share -- basic.................... $ 0.32 $ 0.32 $ 0.45 $ 0.29 $ (0.35) $ 0.35 $ (0.93)
======= ======= ======= ======= ======= ======= =======
Net income (loss) per common share--
diluted........................... $ 0.31 $ 0.31 $ 0.45 $ 0.29 $ (0.35) $ 0.35 $ (0.93)
======= ======= ======= ======= ======= ======= =======
</TABLE>
54
<PAGE> 60
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------ ---------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
-------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
(AT END OF PERIOD)
Investment in leasing operations..... $152,971 $83,059 $ 95,491 $81,472 $ 94,972 $101,394 $ 96,188
Loans receivable..................... 1,961 2,390 2,556 3,328 7,503 14,074 18,638
Total assets......................... 161,354 90,003 103,015 92,933 109,489 123,085 120,147
Borrowing under lines of credit...... 27,028 17,726 4,156 6,661 13,329 18,298 15,608
Notes payable to The King Management
Corporation........................ 5,433 12,114 8,476 14,986 -- 4,127 11,733
Notes payable to others.............. 65,239 1,537 22,011 7,532 15,481 -- --
Discounted lease rentals............. 9,019 16,301 13,589 25,476 40,198 56,520 50,435
Participations in loans receivable... -- -- -- -- 435 4,582 7,585
Total liabilities.................... 129,526 58,608 70,609 61,925 84,143 93,781 93,347
Retained earnings.................... 8,989 5,719 6,713 3,275 1,084 3,631 1,128
Stockholders' equity................. 31,828 31,395 32,406 31,008 26,757 29,304 26,800
OTHER DATA:
Book value per diluted share......... 4.46 4.12 4.24 4.04 N/A N/A N/A
Ratio of earnings to fixed charges... 1.85x 2.45x 2.56x 1.73x N/A N/A N/A
Cash dividends declared per share.... -- -- -- -- -- -- --
</TABLE>
PRO FORMA FINANCIAL INFORMATION
--------------------------------------------------------------------------------
We have not provided any pro forma financial information giving effect to the
proposed merger in this proxy statement. We do not believe that this information
is material to you in evaluating the proposed merger since:
- the proposed merger consideration is all cash;
- if the proposed merger is completed, Sunrise's common stock will cease to be
publicly traded; and
- you will not retain or receive a continuing interest in Sunrise's business
after the merger.
55
<PAGE> 61
FINANCIAL PROJECTIONS
--------------------------------------------------------------------------------
We do not as a matter of course make public forecasts as to future
revenues, earnings or other financial information. We did, however, prepare
certain projections which we provided to U.S. Bancorp Piper Jaffray in
connection with its analysis of the fairness, from a financial point of view, of
the merger consideration to be received by Sunrise's stockholders (other than
King Management and its affiliates) and to Greene Holcomb & Fisher in connection
with its analyses performed for King Management. The projections set forth below
are included in this proxy statement solely because this information was
provided to U.S. Bancorp Piper Jaffray and Greene Holcomb & Fisher. We refer you
to the information under the heading "Special Factors -- Background of the
Merger" and "Special Factors -- Opinion of the Financial Advisor for the Special
Committee" for more information about U.S. Bancorp Piper Jaffray's role in the
merger and "Special Factors -- Background of the Merger" and "Special
Factors -- Analysis of Financial Advisor to King Management" for more
information on the role of Greene Holcomb & Fisher in the merger.
THE PROJECTIONS SET FORTH BELOW WERE NOT PREPARED BY SUNRISE WITH A VIEW TO
PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROSPECTIVE
FINANCIAL INFORMATION. IN ADDITION, THE PROJECTIONS WERE NOT PREPARED WITH THE
ASSISTANCE OF OR REVIEWED, COMPILED OR EXAMINED BY, SUNRISE'S INDEPENDENT
AUDITORS, NOR ANY OTHER INDEPENDENT ACCOUNTANTS. THE PROJECTIONS REFLECT
NUMEROUS ASSUMPTIONS, ALL MADE BY SUNRISE'S MANAGEMENT, WITH RESPECT TO INDUSTRY
PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND
OTHER MATTERS, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE
BEYOND SUNRISE'S CONTROL. IN THE VIEW OF SUNRISE'S MANAGEMENT, HOWEVER, THIS
INFORMATION WAS PREPARED ON A REASONABLE BASIS AND REFLECTS THE BEST CURRENTLY
AVAILABLE ESTIMATES AND JUDGMENTS AND PRESENTS, TO THE BEST OF SUNRISE'S
MANAGEMENT'S KNOWLEDGE AND BELIEF, THE EXPECTED COURSE OF ACTION AND THE
EXPECTED FUTURE FINANCIAL PERFORMANCE OF SUNRISE. THE FOLLOWING PROJECTIONS AND
INFORMATION ARE NOT FACTS. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS SET FORTH BELOW WILL PROVE
ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE
CONTAINED IN THE PROJECTIONS SET FORTH BELOW. IN ADDITION, WE REFER YOU TO THE
INFORMATION ON PAGE 9 OF THIS PROXY STATEMENT UNDER THE HEADING "CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION."
THE INCLUSION OF THE PROJECTIONS IN THIS PROXY STATEMENT SHOULD NOT BE
REGARDED AS AN INDICATION THAT SUNRISE OR ANY OF ITS RESPECTIVE REPRESENTATIVES,
OR RESPECTIVE OFFICERS AND DIRECTORS, CONSIDER SUCH INFORMATION TO BE AN
ACCURATE PREDICTION OF FUTURE EVENTS OR NECESSARILY ACHIEVABLE. IN LIGHT OF THE
UNCERTAINTIES INHERENT IN FORWARD-LOOKING INFORMATION OF ANY KIND, WE CAUTION
AGAINST UNDUE RELIANCE ON SUCH INFORMATION. WE DO NOT INTEND TO UPDATE OR REVISE
SUCH PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN PREPARED
OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, UNLESS REQUIRED BY LAW.
56
<PAGE> 62
The tables on the following pages summarize the projections that were
provided to U.S. Bancorp Piper Jaffray:
CONSOLIDATED FORECAST
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
---------------------------------------------------------------
2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Operating lease revenue..... $66,862 $93,512 $109,772 $116,648 $116,619 $115,444
DFL revenue................. 2,795 2,370 1,800 1,800 1,800 1,800
Fee income.................. 516 738 912 1,200 1,488 1,776
Equipment sales............. 11,532 14,622 23,213 32,321 35,071 35,280
-------- -------- -------- -------- -------- --------
Total revenue................. $81,705 $111,242 $135,696 $151,968 $154,978 $154,300
-------- -------- -------- -------- -------- --------
Costs and expenses
Depreciation................ 48,463 66,943 78,234 83,365 83,344 82,467
Interest expense............ 6,470 9,954 11,112 11,004 10,392 9,732
Provision for losses........ 3,260 4,974 5,624 5,982 5,995 5,951
Cost of equipment sold...... 11,133 14,270 22,749 31,674 34,370 34,574
Compensation expense........ 3,895 4,284 3,547 4,079 4,690 5,394
Other operating expense..... 4,030 3,936 3,629 4,174 4,800 5,520
-------- -------- -------- -------- -------- --------
Total costs and expenses...... $ 77,252 $104,361 $124,894 $140,278 $143,591 $143,638
======== ======== ======== ======== ======== ========
Income before income taxes.... 4,453 6,881 10,802 11,690 11,387 10,662
Income taxes.................. (1,870) (2,890) (4,537) (4,910) (4,783) (4,478)
Net income.................... $2,583 $3,991 $6,265 $6,780 $6,605 $6,184
Depreciation/operating lease
revenue..................... 72.5% 71.6% 71.3% 71.5% 71.5% 71.4%
Gross margin equipment
sales....................... 3.5% 2.4% 2.0% 2.0% 2.0% 2.0%
Leasing margin................ 17.1% 15.3% 15.6% 16.1% 16.8% 17.5%
Vendor assumptions:
Purchases................... $114,994 $120,000 $120,000 $120,000 $120,000 $120,000
Disposals................... (31,440) (43,740) (77,376) (107,736) (116,904) (117,600)
Lease rate-new.............. 0.0360 0.0345 0.0335 0.0330 0.0325 0.0320
Lease rate-disposals........ 0.0451 0.0414 0.0377 0.0356 0.0343 00334
Interest rate............... 8.25% 8.25% 8.25% 8.25% 8.25% 8.25%
Gross operating assets...... $181,228 $257,488 $300,112 $312,376 $315,472 $317,872
Rent % of gross assets...... 3.43% 3.32% 3.22% 3.13% 3.06% 3.01%
</TABLE>
57
<PAGE> 63
FORECASTED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
---------------------------------------------------------------
2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
At end of period:
Assets
Cash........................ $ 62 $ 43 $ 44 $ 68 $ 50 $ 57
Receivables................. 3,839 3,740 4,188 4,317 4,350 4,375
Investment in leasing
operations............... 142,634 171,027 181,114 181,893 179,984 178,792
Other assets................ 2,750 2,750 2,750 2,750 2,750 2,750
Total assets................ $149,285 $177,560 $188,096 $189,028 $187,134 $185,974
======== ======== ======== ======== ======== ========
Liabilities &
Stockholders' Equity
Lines of credit............. 9,410 9,410 9,410 9,410 9,410 9,410
Notes payable............... 91,712 115,962 119,617 113,477 104,812 97,342
Discounted lease rentals.... 7,464 7,464 7,464 7,464 7,464 7,464
Financing arrangements........ 108,586 132,836 136,491 130,351 121,686 114,216
Payables & accruals........... 2,810 2,647 3,060 3,152 3,120 3,045
Customer deposits............. 5,700 5,900 6,100 6,300 6,500 6,700
Stockholders' equity.......... 32,189 36,177 42,445 49,225 55,828 62,013
Total Liabilities &
Stockholders' Equity........ $149,285 $177,560 $188,096 $189,028 $187,134 $185,974
======== ======== ======== ======== ======== ========
Senior debt/tangible net
worth......................... 3.37 3.67 3.22 2.65 2.18 1.84
Total liabilities/tangible net
worth....................... 3.64 3.91 3.43 2.84 2.35 2.00
</TABLE>
In preparing the above financial projections we have made certain
assumptions about our market, growth rates and other factors that may affect the
accuracy of these financial projections. The following sets forth the material
assumptions used in Sunrise's preparation of the above projections and other
relevant information:
- Vendor Climate. Our two largest vendors have stated their respective
goals are to gravitate leases to captive finance subsidiaries with
limited participation of third-party leasing companies. Both have already
formed captive finance subsidiaries. Sunrise anticipates that one or both
of these companies will act upon this goal within the next year. The
forecasts presented above assume that Sunrise reaches its maximum
purchase levels with both companies during fiscal year 2000, with
purchases remaining level in subsequent years due to purchases being
diminished from one vendor, while purchases from the other vendor and/or
new vendors offset the shortfall.
- Largest Vendor. Lease purchase increases coming from longer term, lower
margin, lower credit quality business which its primary leasing company
has turned down. One program is being phased out and replaced with a new
program which has much lower rates, a requirement to notify the lessee at
the end of the initial lease term, and a substantially increased renewal
rate following the initial term resulting in a much lower likelihood of
renewal. This vendor has
58
<PAGE> 64
announced a radically different low cost chip technology to replace its
current equipment configurations. This will further reduce residual
values and substantially lower historical renewal rates.
- Second Largest Vendor. Leases are longer term and result in increasing
the average term of total lease purchases while reducing average lease
rates. In response to increased competition this vendor has been
accelerating product introductions and drastically reducing prices on
existing products which will decrease both residual values as well as end
of term renewals.
- Other Vendors. Sunrise has no experience on residual values or renewal
rates for recently added vendor programs.
- Revenue/Renewal. Base line operating lease revenue entering each year is
held constant for the year. Purchases are added monthly at the new lease
rate. Disposals deducted monthly at the lease rate at the time of the
termination. Higher rate, very short-term leases which renew on a month
to month or three month extension are built into the model. Renewal
revenue from longer term leases is reflected using lower rates.
- Provisions for Losses. Practically all of the growth in vendor lease
purchases are the result of transactions which have either been turned
down by a primary leasing company or are to second or third tier internet
service providers, an inherently low credit segment of the high
technology market. The second largest vendor provides limited recourse on
a portion of the low quality credits in exchange for sharing of renewal
profits. This lower credit quality combined with faster obsolescence has
resulted in a need for greater loss reserves. Forecasted reserves are at
historical percentages of actual losses and are increasing as the
portfolio increases.
- Interest. Increasing debt to fund equipment purchases and higher
interest rates result in lower leasing margins due to increased interest
expense.
59
<PAGE> 65
ADDITIONAL FORECAST ASSUMPTIONS
<TABLE>
<CAPTION>
FISCAL YEARS ENDING MARCH 31,
--------------------------------------------------------------
VENDOR: 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Purchases (000's)......... 115,000 120,000 120,000 120,000 120,000 120,000
Lease Rates (monthly
blended)................ 0.0360 0.0345 0.0335 0.0330 0.0325 0.0320
Debt Rates................ 8.25% 8.25% 8.25% 8.25% 8.25% 8.25%
</TABLE>
Depreciation: Most of the vendor programs utilize 36 months straight-line
depreciation with a ten or fifteen percent salvage value. This salvage value is
amortized over months 37 to 48 on a straight-line basis.
DIRECT/SFR:
- Direct sales force eliminated September 30, 1999.
- A resort and gaming facility continues to make $150,000 per month
payments under a restructured lease and loan.
- No recoveries on previously written down assets of a hotel operation.
- Legal fees to defend lawsuits diminish commencing October 1, 1999.
CORPORATE:
- Sunrise will exercise its option on September 30, 1999 to purchase
630,000 Sunrise shares held by King Management and place such shares in
treasury.
- Fiscal year 2000 operating expenses include $500,000 fees related to the
merger.
THE PROJECTIONS SET FORTH ABOVE SHOULD BE READ TOGETHER WITH THE "SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA" INCLUDED ON PAGE 54 OF THIS PROXY
STATEMENT. THESE PROJECTIONS SHOULD ALSO BE READ TOGETHER WITH OUR HISTORICAL
FINANCIAL STATEMENTS, AND OTHER FINANCIAL INFORMATION, AND THE "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AS SET
FORTH IN OUR ANNUAL REPORT ON FORM 10-K AND QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTER ENDED DECEMBER 31, 1999, EACH OF WHICH IS INCORPORATED BY REFERENCE
INTO THIS PROXY STATEMENT.
60
<PAGE> 66
COMMON STOCK MARKET PRICE AND DIVIDEND INFORMATION
--------------------------------------------------------------------------------
Our common stock is traded on the Nasdaq National Market under the symbol
"SUNL." The table below sets forth the high and low sales prices per share for
each quarterly period for the two most recent fiscal years and for the current
fiscal year to date as reported by Nasdaq. These prices do not include
adjustments for retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
FISCAL YEAR ENDING MARCH 31, 2001
First Quarter (through May 26, 2000)........................ $5.06 $4.25
FISCAL YEAR ENDING MARCH 31, 2000
Fourth Quarter.............................................. $5.81 $4.50
Third Quarter............................................... 5.38 4.75
Second Quarter.............................................. 5.75 4.00
First Quarter............................................... 4.75 3.38
FISCAL YEAR ENDED MARCH 31, 1999
Fourth Quarter.............................................. $3.44 $3.00
Third Quarter............................................... 3.88 2.63
Second Quarter.............................................. 4.38 2.50
First Quarter............................................... 3.88 3.00
</TABLE>
On September 7, 1999, the last day of trading prior to our public
announcement of Peter J. King's proposal to acquire all of our outstanding
shares of Sunrise common stock (other than held by King Management and its
affiliates), the high, low and closing sales prices per share of our common
stock as reported by Nasdaq were $4.25. On January 31, 2000, the last trading
day before the public announcement of the merger agreement, the high, low and
closing sales prices per share of our common stock as reported by Nasdaq were
$5.50, $5.25 and $5.50, respectively. On May 26, 2000, the last trading day
before the printing of this proxy statement, the high, low and closing sales
prices per share of our common stock as reported by Nasdaq were $5.06, $4.75 and
$5.06, respectively. YOU SHOULD OBTAIN CURRENT MARKET PRICE QUOTATIONS FOR
SUNRISE COMMON STOCK IN CONNECTION WITH VOTING YOUR SHARES.
On the record date for the special meeting, there were approximately 66
holders of record of our common stock.
We have never paid a cash dividend on our common stock. Our board of
directors does not anticipate paying cash dividends in the near term. Our bank
line of credit prohibits us from paying dividends without the bank's consent.
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<PAGE> 67
COMMON STOCK PURCHASE INFORMATION
--------------------------------------------------------------------------------
PURCHASES BY SUNRISE
The table below sets forth the purchases by Sunrise of its common stock
since April 1, 1997, including: (1) the type of purchase; (2) the date Sunrise
purchased shares; (3) the number of shares purchased; (4) the price per share
Sunrise paid for the shares and (5) the average purchase price for each
applicable quarterly period since April 1, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF PURCHASE SHARES PRICE AVERAGE PRICE
TRANSACTION DATE PURCHASED PER SHARE PER QUARTER
-------------------- -------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Open Market 10/26/98 1,100 $3.25 $3.88
Open Market 10/27/98 1,100 3.38 3.88
Open Market 10/28/98 1,100 3.44 3.88
Open Market 10/29/98 1,100 3.63 3.88
Open Market 10/30/98 1,100 3.63 3.88
Open Market 11/2/98 1,500 3.57 3.88
Open Market 11/3/98 1,500 3.63 3.88
Open Market 11/5/98 1,000 3.63 3.88
Open Market 11/13/98 9,300 3.78 3.88
Open Market 11/13/98 18,600 3.77 3.88
Open Market 11/13/98 13,400 3.72 3.88
Open Market 11/17/98 9,000 3.80 3.88
Open Market 11/17/98 9,000 3.80 3.88
Open Market 11/23/98 24,000 3.88 3.88
Open Market 11/23/98 10,000 3.94 3.88
Open Market 11/23/98 16,000 3.94 3.88
Open Market 11/23/98 200,000 3.94 3.88
Open Market 11/23/98 10,500 3.81 3.88
Open Market 11/23/98 12,000 3.94 3.88
Open Market 11/23/98 13,000 3.94 3.88
Open Market 11/23/98 38,118 3.90 3.88
Open Market 11/23/98 24,000 3.88 3.88
Open Market 11/24/98 150,000 3.83 3.88
Privately Negotiated 9/30/99 630,000 4.58(1) 4.58
</TABLE>
-------------------------
(1) The price per share includes interest which was paid by Sunrise to King
Management when Sunrise purchased these shares from King Management under an
arrangement between Sunrise and King Management. The closing sale price per
share of Sunrise common stock as reported by Nasdaq on the purchase date was
$5.00.
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<PAGE> 68
PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS OF SUNRISE
The table below sets forth the purchases by each of Sunrise's directors and
executive officers of Sunrise's common stock since April 1, 1997 (or the date
that the individual became an affiliate of Sunrise, if this date is later)
including: (1) the type of purchase; (2) the date the individual purchased
shares; (3) the number of shares he or she purchased; (4) the price per share
the individual paid for the shares and (5) the average purchase price for each
applicable quarterly period since April 1, 1997:
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
TYPE OF PURCHASE SHARES PRICE PRICE
NAME PURCHASE DATE PURCHASED PER SHARE PER QUARTER
---- ----------------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Peter J. King Distribution 5/27/97 155,764(1) $3.25 $3.34
Peter J. King Distribution 5/27/98 276,235(2) 3.50 3.49
Peter J. King Arbitration Award 6/25/97 91,059 3.38 3.34
Donald R. Brattain Open Market 12/16/97 10,000 2.94 2.99
Donald R. Brattain Open Market 5/26/98 10,000 3.38 3.49
Donald R. Brattain Open Market 6/1/98 10,000 3.31 3.49
Thomas R. King Open Market 11/7/97 2,000 3.25 2.99
</TABLE>
-------------------------
(1) This was the first distribution from the 1996 Grantor Retained Annuity Trust
FBO Peter J. King.
(2) This was the second distribution from the 1996 Grantor Retained Annuity
Trust FBO Peter J. King, and 3,116 shares were transferred to King
Management in lieu of legal fees.
63
<PAGE> 69
PURCHASES BY KING MANAGEMENT
The table below sets forth the purchases by King Management of Sunrise's
common stock since April 1, 1997, including: (1) the type of purchase; (2) the
date King Management purchased shares; (3) the number of shares purchased; (4)
the price per share King Management paid for the shares and (5) the average
purchase price for each applicable quarterly period since April 1, 1997:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASE SHARES PRICE PER AVERAGE PRICE
TYPE OF PURCHASE DATE PURCHASED SHARE PER QUARTER
-------------------- -------- --------- --------- -------------
<S> <C> <C> <C> <C>
Open market 9/2/98 30,000 $3.50 $3.50
Privately negotiated 5/28/98 38,818 3.00 3.28
Open market 6/29/98 50,000 3.50 3.28
Open market 3/2/98 120,000 3.02 2.94
Open market 2/23/98 55,000 2.90 2.94
Open market 2/13/98 50,000 2.77 2.94
Open market 2/2/98 30,000 2.94 2.94
Open market 2/2/98 25,000 2.93 2.94
Privately negotiated 3/3/99 210,000 4.40 4.40
Privately negotiated 4/1/99 210,000 4.40 4.40
Privately negotiated 5/3/99 210,000 4.40 4.40
Open market 2/24/00 352,500 4.88 4.88
</TABLE>
64
<PAGE> 70
PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS OF KING MANAGEMENT
The table below sets forth the purchases by each of King Management's
directors and executive officers of Sunrise's common stock since April 1, 1997
(or the date that the individual became an affiliate of King Management, if this
date is later) including: (1) the type of purchase; (2) the date the individual
purchased shares; (3) the number of shares he or she purchased; (4) the price
per share the individual paid for the shares and (5) the average purchase price
for each applicable quarterly period since April 1, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF PURCHASE SHARES PRICE PER AVERAGE PRICE
NAME PURCHASE DATE PURCHASED SHARE PER QUARTER
---- ----------------- -------- ---------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Peter J. King Distribution 5/27/97 155,764(1) $3.25 $3.35
Peter J. King Distribution 5/27/98 276,235(2) 3.50 3.50
Peter J. King Arbitration Award 6/25/97 91,059 3.38 3.35
Stephen D. Higgins, as Arbitration Award 6/25/97 285,759 3.38 3.35
trustee of the William
B. King Trust
Stephen D. Higgins, as Arbitration Award 6/25/97 222,257 3.38 3.35
trustee of the Russell
S. King Trust
</TABLE>
-------------------------
(1) This was the first distribution from the 1996 Grantor Retained Annuity Trust
FBO Peter J. King.
(2) This was the second distribution from the 1996 Grantor Retained Annuity
Trust FBO Peter J. King and Peter J. King transferred 3,116 shares to King
Management in lieu of legal fees.
65
<PAGE> 71
RECENT TRANSACTIONS
Sunrise
Except as set forth in the following table, there have been no transactions
in Sunrise's common stock effected during the past 60 days by Sunrise or any of
Sunrise's directors or executive officers, other than as a result of the merger
agreement and the agreement to facilitate the merger.
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF PURCHASE SHARES PRICE PER
NAME PURCHASE DATE PURCHASED SHARE
---- ----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Peter J. King Open Market 2/24/00 352,500 $4.88
(through King Management)
</TABLE>
King Management
Except as set forth in the following table, there have been no transactions
in Sunrise's common stock effected during the past 60 days by King Management or
any of King Management's directors or executive officers, other than as a result
of the merger agreement and the agreement to facilitate the merger:
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF PURCHASE SHARES PRICE PER
NAME PURCHASE DATE PURCHASED SHARE
---- ----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Peter J. King Open Market 2/24/00 352,500 $4.88
(through King Management)
</TABLE>
66
<PAGE> 72
CURRENT MANAGEMENT OF SUNRISE
--------------------------------------------------------------------------------
Sunrise is a Delaware corporation and is principally engaged in developing
market-oriented vendor programs by creating customized lease and rental programs
for vendors of high technology, telecommunications and other capital equipment,
and providing such vendors with lease financing. Sunrise's principal business
address is 5500 Wayzata Boulevard, Suite 750, Golden Valley, Minnesota 55416.
Neither Sunrise nor any of its current executive officers or directors have,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), nor have they been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of this proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, United States federal or state securities laws or finding
any violation with respect to these laws.
The following sets forth (1) the names, ages and business address of each
of our current directors and executive officers, (2) information regarding their
current positions with Sunrise and their period of service in such positions,
and (3) their business experience for the past five years. All of the
individuals listed below are citizens of the United States.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
PRESENT PRINCIPAL OCCUPATION AND MATERIAL
POSITION(S) WITH BUSINESS ADDRESS OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT
NAME AND AGE SUNRISE AND TELEPHONE NUMBER DURING THE LAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peter J. King Chief Executive 5500 Wayzata Blvd. Mr. King has served as our Chief Executive
(71) Officer Suite 750, Officer since April 1, 1998 and as Chairman
Golden Valley, MN of the Board since June 1997. Mr. King also
Chairman of the 55416 served as Chief Financial Officer from April
Board (612) 593-1904 to June 1998. Mr. King had previously served
as Chairman of the Board from February 1995
to February 1996 and as a director from
February 1995 to July 1996. Mr. King also had
previously served as a member of our Interim
CEO Committee from July 1995 until July 1996.
Mr. King founded International Leasing
Corporation in 1974 and served as its
President until it was merged into Sunrise in
February 1995. Mr. King also currently serves
as Chairman and Chief Executive Officer of
The King Management Corporation. Mr. King is
not related to Thomas R. King, a member of
our board.
-----------------------------------------------------------------------------------------------------------------------
Jeffrey G. Jacobsen Chief Financial 5500 Wayzata Blvd. Mr. Jacobsen has served as our Executive Vice
(51) Officer Suite 725 President and Chief Financial Officer since
Golden Valley, MN June 1998 and as our Secretary since July
Executive Vice 55416 1997. Mr. Jacobsen served as President of The
President (612) 593-1904 King Management Corporation from April 1997
to June 1998 and currently serves as its
Secretary Treasurer. From March 1983 to April 1997, Mr.
Jacobsen served as Vice President of Network
Director Systems Corporation, a computer networking
company.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 73
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
PRESENT PRINCIPAL OCCUPATION AND MATERIAL
POSITION(S) WITH BUSINESS ADDRESS OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT
NAME AND AGE SUNRISE AND TELEPHONE NUMBER DURING THE LAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James C. Teal Corporate 5500 Wayzata Blvd. James C. Teal became our Corporate Controller
(35) Controller Suite 725 in June of 1998, which position was elevated
Golden Valley, MN to executive officer status on June 14, 1999.
55416 Mr. Teal is currently also the Corporate
(612) 593-1904 Controller of The King Management Corporation
and has held that position since 1993. Prior
to joining King Management and Sunrise, Mr.
Teal was Assistant Controller for the Space
Center Company, St. Paul, MN from 1990 to
1993. Mr. Teal is a Certified Public
Accountant and was an auditor for the
Minneapolis office of Arthur Andersen LLP
from 1986 to 1990.
-----------------------------------------------------------------------------------------------------------------------
Donald R. Brattain Director 15500 Wayzata Blvd. Donald R. Brattain has been a member of our
(58) Suite 626 board of directors since 1989. From July 1995
Wayzata, MN to July 1996, Mr. Brattain served as our
55391 interim Chairman of the Board, and from July
(612) 449-4490 1991 to February 1995 he served as our
Chairman of the Board. Mr. Brattain has been
the President of Brattain & Associates, LLC,
an investment company since 1981. He is also
a director of Everest Medical Corporation and
Featherlite Mfg., Inc.
-----------------------------------------------------------------------------------------------------------------------
Thomas R. King Director 1100 International Mr. King served as our Secretary from July
(59) Centre 1991 to July 1997, and as our interim
900 Second Ave. S. Chairman of the Board from February 1996 to
Minneapolis, MN June 1997. Mr. King is an officer and
55402 shareholder of Fredrikson & Byron, P.A., our
(612) 347-7059 legal counsel, and has practiced law for more
than 34 years. Mr. King is also a director of
Datakey, Inc. Mr. King is not related to
Peter J. King.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE> 74
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
--------------------------------------------------------------------------------
The following table provides information as of the record date concerning
the beneficial ownership of our common stock by: (1) each director and executive
officer of Sunrise; (2) all executive officers and directors as a group, and (3)
persons known to Sunrise to be the beneficial owners of more than 5% of our
outstanding common stock as of the record date; and (4) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
NAME (AND ADDRESS OF NUMBER OF SHARES PERCENT
5% HOLDERS) OR IDENTITY OF GROUP BENEFICIALLY OWNED(1) OF CLASS(2)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter J. King 4,735,803(3) 62.7%
5500 Wayzata Boulevard, #725
Minneapolis, MN 55416
--------------------------------------------------------------------------------------------------
The King Management Corporation 753,318(4) 11.4%
5500 Wayzata Boulevard, #750
Minneapolis, MN 55416
--------------------------------------------------------------------------------------------------
Donald R. Brattain 375,300(5) 5.6%
15500 Wayzata Boulevard, #626
Wayzata, MN 55391
--------------------------------------------------------------------------------------------------
Thomas R. King 46,000(6) *
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
--------------------------------------------------------------------------------------------------
Jeffrey G. Jacobsen 79,696(7) *
5500 Wayzata Blvd., Suite 725
Golden Valley, MN 55416
--------------------------------------------------------------------------------------------------
James C. Teal 12,350(8) *
5500 Wayzata Boulevard, Suite 725
Golden Valley, MN 55416
--------------------------------------------------------------------------------------------------
Stephen D. Higgins, Individually 2,889,179(9) 43.5%
and as a Trustee
23785 Strehler Road
Loretto, MN 55357
--------------------------------------------------------------------------------------------------
Dimensional Fund Advisors, Inc. 394,400(10) 5.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
--------------------------------------------------------------------------------------------------
All Current Executive Officers 5,249,149(11) 68.1%
and Directors as a Group (5 persons)
--------------------------------------------------------------------------------------------------
</TABLE>
-------------------------
* less than 1%
(1) Unless otherwise indicated, each person named or included in the group has
sole power to vote and sole power to direct the disposition of all shares
listed as beneficially owned by such person.
(2) Under the rules of the SEC, shares not actually outstanding are deemed to
be beneficially owned by an individual if such individual has the right to
acquire the shares within 60 days. Pursuant to such SEC rules, shares
deemed beneficially owned by virtue of an individual's right to
69
<PAGE> 75
acquire them are also treated as outstanding when calculating the percent
of the class owned by such individual and when determining the percent
owned by any group in which the individual is included.
(3) Represents (i) 3,466,797 shares that are subject to a Stockholder Voting
Trust Agreement dated May 27, 1998, and, unless indicated below, Peter J.
King has the sole power to vote and dispose of these shares, which shares
include (a) 517,158 shares held by Peter J. King directly, (b) 400,818
shares held by King Management, of which Peter J. King is a principal
stockholder, officer and director, (c) 1,286,439 shares held by Stephen D.
Higgins, Trustee, William B. King Stock Trust UA dated November 21, 1989
for the benefit of William B. King, which is referred to in this proxy
statement as the "WBK Trust," and (d) 1,262,382 shares held by Stephen D.
Higgins, Trustee, Russell S. King Stock Trust UA dated November 21, 1989
for the benefit of Russell S. King, which is referred to in this proxy
statement as the "RSK Trust;" (ii) 352,500 shares held by King Management
directly and (iii) 916,506 shares which may be acquired by Peter J. King
within 60 days after the record date upon exercise of outstanding stock
options. Peter J. King does not have dispositive power over the shares held
by the WBK Trust or RSK Trust. Sunrise has relied on information contained
in Schedule 13D (Amendment No. 3) dated February 24, 2000 filed by Peter J.
King with the SEC and information provided by Peter J. King.
(4) Represents (i) 400,818 shares that are subject to a Stockholder Voting
Trust Agreement dated May 27, 1998, pursuant to which Peter J. King has the
sole power to vote these shares and (ii) 352,500 shares held directly by
King Management which Peter J. King has sole power to vote these shares as
Chief Executive Officer of King Management. As CEO of King Management,
Peter J. King has the sole power to dispose of all 753,318 shares.
(5) Includes 30,000 shares which may be acquired by Donald R. Brattain within
60 days after the record date upon exercise of outstanding stock options.
(6) Includes 38,000 shares which may be acquired by Thomas R. King within 60
days after the record date upon exercise of outstanding stock options.
(7) Includes 74,667 shares which may be acquired by Jeffrey G. Jacobsen within
60 days after the record date upon exercise of outstanding stock options.
(8) Includes 9,333 shares which may be acquired by James C. Teal within 60 days
after the record date upon exercise of outstanding stock options.
(9) Represents (i) 2,548,821 shares, of which (a) 1,286,439 shares are held by
Stephen D. Higgins as Trustee of the WBK Trust and (b) 1,262,382 shares
held by Stephen D. Higgins as Trustee of the RSK Trust, all of which shares
are subject to a Stockholder Voting Trust Agreement dated May 27, 1998,
under which Peter J. King has the sole power to vote these shares; (ii)
335,329 shares held by Stephen D. Higgins as Trustee of the WBK Trust, of
which Stephen D. Higgins has sole voting power; and (iii) 5,029 shares held
by Stephen D. Higgins directly, of which he has sole voting power. Stephen
D. Higgins has sole dispositive power over all of the shares described in
this footnote. Sunrise has relied on information contained in Schedule 13D
(Amendment No. 3) dated February 24, 2000 filed by Peter J. King with the
SEC.
(10) Dimensional Fund Advisors Inc. furnishes advice to four investment
companies registered under the Investment Advisors Act of 1940 and serves
as an investment manager to certain other commingled
70
<PAGE> 76
groups of trusts and separate accounts, and in its roles has the sole
voting and dispositive power over 394,400 shares of Sunrise common stock.
(11) Includes 1,068,506 shares of Common Stock which may be acquired within 60
days after the record date upon the exercise of outstanding options.
71
<PAGE> 77
KING MANAGEMENT
--------------------------------------------------------------------------------
King Management is a Minnesota corporation and is principally engaged in
the leasing of computer and other technology equipment, the sale of software and
operating coin operated copiers. King Management's principal business address is
5500 Wayzata Boulevard, Suite 750, Golden Valley, Minnesota 55416. Neither King
Management nor any of its current officers or directors have, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), nor have they been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of this proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, United States federal or state securities laws or finding any
violation with respect to these laws.
The following sets forth (1) the names and business address of each of King
Management's current directors and executive officers, (2) information regarding
their current positions with King Management and their period of service in such
positions, and (3) their business experience for the past five years. All of the
individuals listed below are citizens of the United States.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION AND
POSITION(S) WITH AND TELEPHONE MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME KING MANAGEMENT NUMBER EMPLOYMENT DURING THE LAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peter J. King Chairman of the Board 5500 Wayzata Mr. King currently serves as Chairman and
and Chief Executive Blvd., Suite 750, Chief Executive Officer of King Management.
Officer Golden Valley, Mr. King also serves as Sunrise's Chief
MN 55416 Executive Officer and Chairman of the
(612) 513-3230 Board. Mr. King also served as Chief
Financial Officer of Sunrise from April to
June 1998. Mr. King had previously served
as Chairman of the Board from February 1995
to February 1996 and as a director from
February 1995 to July 1996. Mr. King also
had previously served as a member of
Sunrise's Interim CEO Committee from July
1995 until July 1996. Mr. King founded
International Leasing Corporation in 1974
and served as its President until it was
merged into Sunrise in February 1995. Mr.
King is not related to Thomas R. King.
-----------------------------------------------------------------------------------------------------------------
Stephen D. Higgins Director and Vice 23785 Strehler Mr. Higgins has owned Stephen D. Higgins,
President of Business Road, Loretto, MN LTD since 1978.
Development 55357
(612) 498-7000
-----------------------------------------------------------------------------------------------------------------
William B. King Director 435 Locust, #8, Mr. King has served as President of
San Francisco, CA Equipment Leasing Consultants since 1997.
94118 From 1995 to 1997, Mr. King was Vice
(612) 741-4236 President, National Vendor Programs for
Sunrise.
-----------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE> 78
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION AND
POSITION(S) WITH AND TELEPHONE MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME KING MANAGEMENT NUMBER EMPLOYMENT DURING THE LAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Russell S. King Director and 90 S. Seventh Mr. King has served as Senior Vice
Secretary St., Suite 4500, President at Doherty Funding LLC since
Minneapolis, MN 1997. From 1996 to 1997, Mr. King was Vice
55402 President of Americor. From 1994 to 1996,
(612) 317-2139 he served as a Vice President of King
Management.
-----------------------------------------------------------------------------------------------------------------
Jeffrey G. Director and 5500 Wayzata Mr. Jacobsen served as President of King
Jacobsen Treasurer Blvd., Suite 750, Management from April 1997 to June 1998 and
Golden Valley, currently serves as its Treasurer and as a
MN 55416 director. Mr. Jacobsen has served as
(612) 513-3230 Executive Vice President and Chief
Financial Officer of Sunrise since June
1998 and as Secretary of Sunrise since July
1997. From March 1983 to April 1997, Mr.
Jacobsen served as Vice President of
Network Systems Corporation, a computer
networking company.
-----------------------------------------------------------------------------------------------------------------
James C. Teal Corporate Controller 5500 Wayzata Mr. Teal is currently the Corporate
Assistant Secretary Blvd., Suite 750, Controller and Assistant Secretary of King
Golden Valley, Management and has held these positions
MN 55416 since 1993. Mr. Teal has also served as a
(612) 513-3230 Controller of Sunrise since June 1998,
which position was elevated to executive
officer status on June 14, 1999. Prior to
joining King Management and Sunrise, Mr.
Teal was Assistant Controller for the Space
Center Company, St. Paul, MN from
1990-1993. Mr. Teal is a Certified Public
Accountant and was an auditor for the
Minneapolis office of Arthur Andersen LLP
from 1986 to 1990.
-----------------------------------------------------------------------------------------------------------------
Kenneth J. Preble Director 2000 Power Mr. Preble has served as President at GE
Street, Capital Information Technology Solutions
Suite 1050, since 1995.
Emeryville, CA
94608
(510) 595-2670
-----------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE> 79
RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
Management Agreement. Sunrise, Peter J. King and King Management entered into
an agreement on June 16, 1997, which was amended on June 23, 1998, providing
that Peter J. King or King Management would provide management services to
Sunrise through June 30, 2000. We refer to this agreement as the "management
agreement" in this proxy statement. Under this management agreement, Peter J.
King serves as an employee of Sunrise in the capacity of Chairman of the Board
and Chief Executive Officer until June 30, 2000, at a salary of $200,000 per
year. Under this management agreement, Peter J. King was granted stock options
to purchase an aggregate of 541,506 shares at $3.375 per share. On June 23,
1998, Peter J. King was granted (1) a fully vested seven-year nonqualified stock
option to purchase 250,000 shares at $3.25 per share under Sunrise's 1991 Stock
Option Plan and (2) a seven-year nonqualified cliff vesting stock option to
purchase 400,000 shares at $3.25 per share outside of Sunrise's 1991 Stock
Option Plan. The cliff vesting options vest after six years if Peter J. King
continues to be an employee of Sunrise. Vesting is accelerated if Sunrise's
common stock attains certain agreed closing average stock prices, as reflected
in the Nasdaq Market System, for a period of ten consecutive business days, as
follows: 125,000 shares at $5.00, 125,000 shares of $6.00 and 150,000 shares at
$7.00.
The management agreement also provides that Peter J. King and/or King Management
provide services to Sunrise, including, among others, working with management on
current and prospective vendor relationships, monitoring problem leases and
loans, assisting Sunrise on meeting financing requirements and working with
Sunrise's bankers. Under this management agreement, King Management has provided
Sunrise access to some of its employees, including, among others, Jeffrey G.
Jacobsen, our Chief Financial Officer and a member of our board, and James C.
Teal, our Corporate Controller. These employees expended at least 85% of their
time on Sunrise matters from April 1, 1998 through June 30, 1998, at which time
they became full-time employees of Sunrise. For these services, King Management
was paid $125,000.
Three other employees of King Management continue to provide services to Sunrise
for which King Management is reimbursed. Employees of Sunrise may also provide
services to King Management for which Sunrise is reimbursed. For the fiscal year
ended March 31, 1999, Sunrise paid King Management $53,000 in addition to the
$125,000 discussed above.
On joining Sunrise as full-time employees, Jeffrey G. Jacobsen received ten-year
options to purchase 100,000 shares of Sunrise common stock and James C. Teal
received an option to purchase 10,000 shares of Sunrise common stock. In
addition, options for 17,000 shares were granted to the three other King
Management employees providing services to Sunrise and who remain King
Management employees All of these options have an exercise price of $3.25 per
share.
If the merger is completed, this management agreement will terminate.
Financing Arrangement with King Management. On June 16, 1997, under the
management agreement, Sunrise entered into a financing arrangement with King
Management in which King Management agreed to provide subordinated debt
financing, direct financing and or other financial assistance to Sunrise. Under
the financing arrangement, as amended, for the period from July 1, 1997 through
June 30, 2000, King Management has committed to assist Sunrise in financing its
vendor business including providing subordinated debt to cover any net worth
covenant deficiencies and utilizing its balance sheet and borrowing capacity to
provide funding for approved vendor programs, including making direct loans to
Sunrise. From June 16, 1997 through December 31, 1999, King Management has
provided term note financing to Sunrise totaling $29.8 million, with balances
totaling $5.4
74
<PAGE> 80
million at December 31, 1999. The notes bear interest at prime minus 0.25%
(8.25% at December 31, 1999), and are secured by specific leases and equipment.
In exchange for King Management's commitment to provide financing and services,
Sunrise agreed to allow King Management to participate, as a lessor to the
extent of 25% of certain higher-risk vendor leasing programs and risk pools and
to the extent of 15% of all other vendor leasing programs of Sunrise consummated
during the period from July 1, 1997 through June 30, 2000. From October 1, 1999
through December 31, 1999, King Management purchased leases in the amount of
$12,649,000. Sunrise paid King Management $122,000 in interest with respect to
this financing arrangement from October 1, 1999 through December 31, 1999.
Voting Trust Agreement. Effective as of May 27, 1998, Peter J. King, King
Management, Stephen D. Higgins, as trustee of two trusts for the benefit of
William B. and Russell S. King, Peter J. King's sons, and the Peter J. King 1996
Grantor Retained Annuity Trust, of which Stephen D. Higgins is the sole trustee,
which is referred to in this proxy statement as the "1996 Grantor Trust,"
entered into a voting trust agreement, under which Peter J. King was granted the
sole power to vote the shares of Sunrise common stock deposited into the voting
trust by himself, King Management, the two trusts and the 1996 Grantor Trust,
which is no longer in existence.
An aggregate of 3,466,797 shares of Sunrise common stock are currently subject
to the voting trust agreement, of which (1) 517,158 shares are held by Peter J.
King directly; (2) 400,818 shares are held by King Management, of which Peter J.
King is the Chief Executive Officer; (3) 1,286,439 shares are held by the trust
for the benefit of William B. King; and (4) 1,262,382 shares are held by the
trust for the benefit of Russell S. King. Under the voting trust agreement, the
1996 Grantor Trust deposited into the voting trust 276,235 shares of common
stock on May 27, 1998. On May 28, 1998, Peter J. King, the two trusts and the
1996 Grantor Trust transferred voting trust certificates representing an
aggregate of 38,818 shares of Sunrise common stock to King Management in
consideration of legal fees paid by King Management in connection with an
arbitration proceeding in June 1997. On May 28, 1998, the 1996 Grantor Trust
transferred voting trust certificates representing 273,119 shares of common
stock to Peter J. King as a distribution of the annuity portion of such trust.
Stephen D. Higgins is the sole trustee of the 1996 Grantor rust and prior to the
creation of the voting trust and the distribution of all of the shares of common
stock held by the 1996 Grantor Trust to Peter J. King, Stephen D. Higgins had
the sole power to vote and dispose of such shares.
Stock Option. In connection with Sunrise's stock repurchase program, a then
five percent stockholder indicated a desire to sell 630,000 shares of Sunrise's
common stock to Sunrise. For more information about Sunrise's stock repurchase
program, see the information under the heading "Public Offerings and Repurchase
of Common Stock" on page 38 of this proxy statement. Sunrise, however, was not
in a position to purchase the shares at the time, and King Management offered to
purchase the shares with the understanding that Sunrise would repurchase the
shares at the same price at which King Management purchased the shares and
reimburse King Management for any commissions, brokerage or consulting fees and
accrued interest incurred. On March 2, 1999, King Management purchased the
shares for $4.35 per share, for an aggregate of $2,740,500. Sunrise and King
Management entered into an option agreement under which Sunrise could purchase
the shares from King Management for $4.35 per share plus reimburse King
Management for $31,500 in commissions and fees, and accrued interest at a rate
of 8% per annum. On September 30, 1999, Sunrise exercised its option and
purchased the 630,000 for an aggregate purchase price of $2,884,000.
Consulting Agreement. On December 31, 1998, Sunrise and William B. King, d.b.a.
Equipment Leasing Consultants, entered into a consulting agreement. William B.
King is the son of Peter J. King and a director of King
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Management. Under this consulting agreement, Equipment Leasing Consultants
performs services for Sunrise's leasing programs primarily with respect to its
second largest vendor. The initial term of this consulting agreement was six
months, and following this initial period it automatically renews for three
month periods until cancelled by either Sunrise or Equipment Leasing
Corporation. Sunrise pays Equipment Leasing Corporation an hourly fee for its
services and reimburses Equipment Leasing Corporation for its normal business
expenses. In addition to standard confidentiality provisions, the consulting
agreement restricts Equipment Leasing Corporation from performing consulting
services which compete with the services it performs for Sunrise unless Sunrise
agrees in writing to allow Equipment Leasing Consultants to perform these
services.
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
If the merger is not completed for any reason, stockholder proposals
intended to be included in our proxy statement and form of proxy in connection
with our 2000 Annual Meeting of Stockholders were required to be submitted in
writing by March 31, 2000 to:
Jeffrey G. Jacobsen
Sunrise International Leasing Corporation
5500 Wayzata Boulevard, Suite 725
Wayzata, Minnesota 55416
Between March 31, 2000 and June 14, 2000, you may make a proposal at our
2000 Annual Meeting of Stockholders; however, we are not required to include
your proposal in our proxy statement and form of proxy. If any stockholder
proposal is submitted after June 14, 2000, the board of directors will be
allowed to use its discretionary voting authority when the proposal is raised at
the 2000 Annual Meeting, without any discussion of the matter in the proxy
statement.
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
The consolidated balance sheets as of March 31, 1999 and March 31, 1998,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the two fiscal years in the period ended
March 31, 1999, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated by reference in
this proxy statement. A representative of Deloitte & Touche LLP will be at the
special meeting to answer questions from stockholders and will have the
opportunity to make a statement.
The financial statements incorporated by reference in this proxy statement
to the extent and for the periods indicated in their reports have been audited
by Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
--------------------------------------------------------------------------------
We file annual, quarterly and current reports, proxy statements, and other
documents with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. The Exchange Act file number for our SEC filings is
0-19516. Our SEC filings made electronically through the SEC's
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EDGAR system are available to the public at the SEC's website at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at the following SEC public reference rooms:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center 7 World Trade Center
450 Fifth Street, N.W. 500 West Madison Street Suite 1300
Washington, D.C. 20549 Chicago, Illinois 60621 New York, New York 10048
</TABLE>
You may obtain information regarding the operation of the SEC's public
reference rooms by calling the SEC at 1-800-SEC-0330.
Sunrise, King Management, Peter J. King, Stephen D. Higgins, as co-trustee
of two trusts established for the benefit of Peter J. King's sons, William B.
and Russell S. King, and Peter J. King, as sole voting trustee under a voting
trust dated May 27, 1998 have filed with the SEC a Rule 13e-3 Transaction
Statement on Schedule 13E-3 with the SEC with respect to the merger. As
permitted by the SEC, this proxy statement omits certain information contained
in the Schedule 13E-3. The Schedule 13E-3, including any amendments and exhibits
filed or incorporated by reference as a part thereof, is available for
inspection or copying as set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
--------------------------------------------------------------------------------
The SEC allows us to "incorporate by reference" certain documents, which
means that we can disclose important information to you by referring you to
those documents. The information in the documents incorporated by reference is
considered to be part of this proxy statement, except to the extent that this
proxy statement updates or supersedes the information. We incorporate by
reference the documents listed below which we have previously filed with the SEC
(SEC file no. 0-19516):
- Our Annual Report on Form 10-K for the fiscal year ended March 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended June 30,
September 30, and December 31, 1999; and
- Our Current Report on Form 8-K dated February 3, 2000.
We also incorporate by reference the information contained in all other
documents we file with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act after the date of this proxy statement and before the date of the
special meeting. The information will be considered part of this proxy statement
from the date the document is filed and will supplement or amend the information
contained in this proxy statement.
We will provide you, at no charge, a copy of the documents we incorporate
by reference in this proxy statement upon your request. TO OBTAIN TIMELY
DELIVERY, REQUESTS FOR COPIES SHOULD BE MADE NO LATER THAN JUNE 21, 2000. To
request a copy of any or all of these documents, you should write or telephone
us at:
Sunrise International Leasing Corporation
5500 Wayzata Boulevard, Suite 725
Golden Valley, Minnesota 55416
Attention: Investor Relations
Telephone: (612) 596-1904
These documents are also included in our SEC filings that are made
electronically through the SEC's EDGAR system and are available to the public at
the SEC's website at http://www.sec.gov.
---------------------------
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You should rely only on the information contained in this proxy statement
or to which we have referred you to vote your shares at the special meeting. We
have not authorized anyone to provide you with information that is different.
BY ORDER OF THE BOARD OF DIRECTORS
[/s/ Jeffrey G. Jacobsen]
Jeffrey G. Jacobsen
Secretary
May 31, 2000
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE KING MANAGEMENT CORPORATION
AND
SUNRISE INTERNATIONAL LEASING CORPORATION
DATED AS OF JANUARY 31, 2000
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<TABLE>
<S> <C> <C> <C>
ARTICLE 1. THE MERGER; CANCELLATION AND CONVERSION OF SECURITIES...........
A-4
1.1. The Merger.................................................. A-4
1.2. The Closing................................................. A-5
1.3. Effective Time.............................................. A-5
1.4. Effects of the Merger....................................... A-5
1.5. Articles of Incorporation of the Surviving Corporation...... A-5
1.6. Bylaws of the Surviving Corporation......................... A-5
1.7. Directors and Officers of the Surviving Corporation......... A-5
1.8. Cancellation and Conversion of Securities................... A-6
1.9. Dissenting Shares........................................... A-6
1.10. Surrender of Securities; Funding of Payments; Stock Transfer
Books....................................................... A-6
1.11. Stock Options............................................... A-8
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-9
2.1. Disclosure Schedule......................................... A-9
2.2. Organization and Qualification.............................. A-9
2.3. Authorization and Enforceability............................ A-10
2.4. Capitalization.............................................. A-10
2.5. SEC Filings and Financial Statements........................ A-11
2.6. Absence of Undisclosed Liabilities.......................... A-12
2.7. Consents and Approvals...................................... A-12
2.8. Compliance with Laws........................................ A-12
2.9. Litigation.................................................. A-13
2.10. Absence of Material Adverse Changes......................... A-13
2.11. Disclosure Documents........................................ A-13
2.12. Merger Filings.............................................. A-14
2.13. Vote Required............................................... A-14
2.14. Company Action.............................................. A-14
2.15. State Takeover Laws......................................... A-14
2.16. Rights Plan................................................. A-14
2.17. Fairness Opinion............................................ A-14
2.18. No Finders.................................................. A-14
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR.................. A-15
3.1. Organization and Qualification.............................. A-15
3.2. Authorization and Enforceability............................ A-15
3.3. Consents and Approvals...................................... A-15
3.4. Disclosure Documents........................................ A-16
3.5. Merger Filings.............................................. A-16
3.6. No Vote Required............................................ A-16
3.7. Financing................................................... A-16
3.8. No Finders.................................................. A-16
ARTICLE 4. COVENANTS....................................................... A-16
4.1. No Solicitation............................................. A-16
4.2. Stockholders Meeting; Proxy Statement....................... A-17
4.3. Access to Information....................................... A-19
4.4. Consents.................................................... A-19
4.5. Expenses.................................................... A-19
4.6. Further Actions............................................. A-19
4.7. Regulatory Approvals........................................ A-19
4.8. Certain Notifications....................................... A-20
</TABLE>
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<TABLE>
<S> <C> <C> <C>
4.9. Officers' and Directors' Indemnification.................... A-20
4.10. Financing................................................... A-20
ARTICLE 5. CLOSING CONDITIONS.............................................. A-21
5.1. Conditions to Obligations of the Acquiror and the Company... A-21
5.2. Conditions to Obligations of the Acquiror................... A-21
5.3. Conditions to Obligations of the Company.................... A-22
ARTICLE 6. TERMINATION AND ABANDONMENT..................................... A-22
6.1. Termination................................................. A-22
6.2. Effect of Termination....................................... A-23
ARTICLE 7. MISCELLANEOUS................................................... A-25
7.1. Amendment and Modification.................................. A-25
7.2. Waiver...................................................... A-25
7.3. Notices..................................................... A-25
7.4. Assignment.................................................. A-26
7.5. Governing Law............................................... A-26
7.6. Counterparts................................................ A-26
7.7. Knowledge................................................... A-26
7.8. Interpretation.............................................. A-26
7.9. Publicity................................................... A-26
7.10. Entire Agreement............................................ A-26
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of January
31, 2000, by and between THE KING MANAGEMENT CORPORATION, a Minnesota
corporation (the "Acquiror"), and SUNRISE INTERNATIONAL LEASING CORPORATION, a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Acquiror and the Company
have both approved and adopted this Agreement and the transactions contemplated
hereby, including the merger of the Company with and into the Acquiror (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of the Company (the "Company Board"), based
upon the recommendation of a special committee of independent directors of the
Company Board (the "Special Committee"), has determined that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and
are fair to and in the best interests of the Company's stockholders (other than
the Acquiror);
WHEREAS, certain persons and entities affiliated with the Acquiror have
entered into an Agreement to Facilitate the Merger (the "Agreement to
Facilitate") pursuant to which they have agreed, among other things, to vote all
of their shares of Company stock in favor of the Merger;
WHEREAS, pursuant to the Agreement to Facilitate, between the date of this
Agreement and prior to the Effective Time of the Merger, the shareholders of the
Acquiror will contribute all of the outstanding shares of common stock of the
Acquiror to a newly-formed Minnesota corporation (the "Parent"), which will
thereafter own all of the outstanding shares of common stock of the Acquiror;
WHEREAS, also pursuant to the Agreement to Facilitate, between the date of
this Agreement and prior to the Effective Time of the Merger, the shareholders
of the Acquiror will contribute all of their shares of Company stock to the
Parent, which will thereafter contribute these shares of Company stock to the
Acquiror; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto intending to be legally bound hereby, agree as follows:
ARTICLE 1.
THE MERGER; CANCELLATION AND CONVERSION OF SECURITIES
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the General Corporation Law of the State
of Delaware ("DGCL") and the Minnesota Business Corporation Act (the "MBCA"), at
the Effective Time (as defined in Section 1.3 hereof), the Company will merge
with and into the Acquiror. As a result of the Merger, the separate corporate
existence of the Company will cease and the Acquiror will continue as the
surviving corporation (the "Surviving Corporation") in accordance with the DGCL
and the MBCA.
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1.2. The Closing. Unless this Agreement will have been terminated and the
transactions herein contemplated will have been abandoned pursuant to Section
6.1 hereof and subject to the satisfaction or waiver of the conditions set forth
in Article 5, the closing of the Merger (the "Closing") will take place at 10:00
a.m., local time, on the day the Merger is approved by the stockholders of the
Company at the Stockholders Meeting (as defined in Section 4.2 hereof), or as
soon thereafter as all conditions to the Closing have been satisfied or waived,
or on such other date and/or at such other time as the Acquiror and the Company
may mutually agree. The date on which the Closing actually occurs is herein
referred to as the "Closing Date." The Closing will take place at the offices of
Oppenheimer Wolff & Donnelly LLP, Plaza VII Building, 45 South Seventh Street,
Minneapolis, Minnesota 55402, or at such other place or in such other manner
(e.g., by telecopy exchange of signature pages with originals to follow by
overnight delivery) as the parties hereto may agree.
1.3. Effective Time. At the Closing, the Company and the Acquiror will
file, or cause to be filed, with the Secretaries of State of the States of
Delaware and Minnesota a certificate or articles of merger or other appropriate
documents (in any such case, the "Certificates of Merger"), substantially in the
form set forth in Exhibit A attached hereto, and executed in accordance with,
the relevant provisions of the DGCL and the MBCA. The parties will take such
other and further actions as may be required by law to make the Merger
effective. The Merger will become effective at the time of such filing or, if
agreed to by the Acquiror and the Company, at such later time or date as is set
forth in the Certificates of Merger (the date and time the Merger becomes
effective being herein referred to as the "Effective Time").
1.4. Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL and the MBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and the
Acquiror will vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and the
Acquiror will become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.5. Articles of Incorporation of the Surviving Corporation. At the
Effective Time, the Articles of Incorporation of the Acquiror, as in effect
immediately prior to the Effective Time, will be the Articles of Incorporation
of the Surviving Corporation until thereafter amended in accordance with
applicable law and the provisions of such Articles of Incorporation.
1.6. Bylaws of the Surviving Corporation. At the Effective Time, the Bylaws
of the Acquiror, as in effect immediately prior to the Effective Time, will be
the Bylaws of the Surviving Corporation until thereafter amended in accordance
with applicable law, the provisions of the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
1.7. Directors and Officers of the Surviving Corporation. The directors and
officers of the Acquiror immediately prior to the Effective Time will be the
directors and officers, respectively, of the Surviving Corporation, in each case
until their respective successors are elected or appointed and qualified.
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1.8. Cancellation and Conversion of Securities. At the Effective Time,
automatically by virtue of the Merger and without any further action on the part
of the Company, the Acquiror, the Surviving Corporation or any holder of any of
the following securities:
(a) Each share of the Company's common stock, par value $.01 per share
("Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock cancelled
pursuant to Section 1.8(b) and Dissenting Shares (as defined in Section 1.9
hereof)) will be cancelled, retired and converted into and become a right
to receive from the Acquiror $5.25 in net cash per share, without any
interest thereon and less any required withholding taxes (the "Merger
Consideration"), upon surrender of the certificate formerly representing
such share of Company Common Stock in the manner provided in Section 1.10.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in treasury of the
Company or is then owned beneficially or of record by the Acquiror or any
direct or indirect subsidiary of the Acquiror or the Company, will be
cancelled and retired without payment of any consideration therefor and
without any conversion thereof.
(c) Each share of any other class of capital stock of the Company
(other than Company Common Stock) will be cancelled and retired without
payment of any consideration therefor and without any conversion thereof.
1.9. Dissenting Shares. Notwithstanding any provision of this Agreement to
the contrary, any shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time that are held by a stockholder who has
not voted in favor of the Merger and has properly exercised and perfected such
holder's demand for appraisal rights in accordance with Section 262 of the DGCL
(the "Dissenting Shares") and as of the Effective Time has neither effectively
withdrawn nor lost such holder's right to such appraisal will not be converted
into the right to receive the Merger Consideration, but will become entitled to
the right to receive such consideration as may be determined to be due to the
holder of such Dissenting Shares pursuant to the DGCL; provided, however, that
any holder of Dissenting Shares who fails to perfect or who effectively
withdraws or loses such rights of appraisal under the DGCL will forfeit the
right to appraisal of such shares, and such shares of Company Common Stock will
no longer be Dissenting Shares and will be deemed to have been converted into
the right to receive, at the Effective Time, the Merger Consideration set forth
in Section 1.8(a) hereof. The Company will give the Acquiror (i) prompt written
notice of any demands for appraisal, withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by the Company, and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company will not, except with the
prior written consent of the Acquiror, voluntarily make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
1.10. Surrender of Securities; Funding of Payments; Stock Transfer Books.
(a) Prior to the Effective Time, the Acquiror will appoint the
Company's stock transfer agent, or such other bank or trust company as the
Acquiror may choose to appoint, to act as paying agent (the "Paying
Agent"), for the purpose of exchanging certificates that immediately prior
to the Effective Time represented outstanding shares of Company Common
Stock ("Company Certificates") for the Merger
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<PAGE> 90
Consideration. When and as needed, the Surviving Corporation will make
available to the Paying Agent sufficient funds to make the payments
pursuant to Section 1.8 hereof to holders of shares of Company Common Stock
that are issued and outstanding immediately prior to the Effective Time
(such amounts being hereinafter referred to as the "Exchange Fund"), and to
make the appropriate cash payments, if any, to holders of Dissenting
Shares. The Paying Agent will invest the Exchange Fund as the Acquiror
directs; provided, however, that substantially all such investments will be
in direct obligations of the United States of America, obligations for
which the full faith and credit of the United States of America is pledged
to provide for the payment of all principal and interest, commercial paper
obligations receiving the highest rating from either Moody's Investors
Services, Inc. or Standard & Poor's Corporation, or certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $10 billion. The Exchange Fund will not be
used for any other purpose, except as provided in this Agreement.
(b) The Acquiror agrees that, promptly after the Effective Time, the
Acquiror will cause the Paying Agent to mail to each holder of record
(other than the Company, the Acquiror or any direct or indirect subsidiary
of the Acquiror or the Company) of Company Certificates a form letter of
transmittal for use in effecting the surrender of the Company Certificates
in exchange for payment of the Merger Consideration.
(c) Upon the surrender to the Paying Agent of each such Company
Certificate formerly representing shares of Company Common Stock, together
with a duly completed and executed letter of transmittal, the Paying Agent
will pay to the holders of such Company Certificates the Merger
Consideration for each share of Company Common Stock formerly represented
by such Company Certificate, less any amounts required to be held pursuant
to applicable tax laws, and the Company Certificate(s) so surrendered will
be cancelled. In the event of a transfer of ownership of Company Common
Stock that is not registered in the transfer records of the Company, it
will be a condition to the payment of the Merger Consideration that the
Company Certificate(s) so surrendered will be properly endorsed or be
otherwise in proper form for transfer and that such transferee will (i) pay
to the Paying Agent any transfer or other taxes required, or (ii) establish
to the satisfaction of the Paying Agent that such tax has been paid or is
not payable.
(d) At the Effective Time, the stock transfer books of the Company
will be closed and after the Effective Time, there will be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Company Certificates representing such shares are presented to the
Surviving Corporation, they will be cancelled and exchanged as provided in
Section 1.8 hereof. As of the Effective Time, the holders of Company
Certificates representing shares of Company Stock will cease to have any
rights as stockholders of the Company, except such rights, if any, as they
may have pursuant to the DGCL. Except as provided above, until such Company
Certificates are surrendered for exchange, each such Company Certificate
will, after the Effective Time, represent for all purposes only the right
to receive the Merger Consideration, without interest and subject to any
required withholding of taxes.
(e) In the event any Company Certificates will have been lost, stolen
or destroyed, the Paying Agent will issue in exchange for such lost, stolen
or destroyed
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Company Certificates, upon the making of an affidavit of that fact by the
holder thereof, such Merger Consideration as may be required pursuant to
this Section 1.10; provided, however, that the Acquiror may, in its
discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Company Certificate to deliver
a bond in such sum as the Acquiror may direct as indemnity against any
claim that may be made against the Acquiror or the Paying Agent with
respect to such Company Certificate alleged to have been lost, stolen or
destroyed.
(f) After the Effective Time, no dividends, interest or other
distributions will be paid to the holder of any unsurrendered Company
Certificates.
(g) At any time following six months after the Effective Time, the
Surviving Corporation will be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent and not
disbursed to holders of shares of Company Common Stock, and thereafter such
holders will be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Company Certificates, without any interest thereon. None
of the Surviving Corporation, the Acquiror or the Paying Agent will be
liable to any holder of a share of Company Common Stock for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
1.11. Stock Options.
(a) Prior to the Effective Time, the Board of Directors of the Company
(or, if appropriate, any committee thereof) will adopt appropriate
resolutions and use its best efforts to take all other actions necessary to
provide for the cancellation, effective at the Effective Time, of all the
outstanding stock options to purchase Company Common Stock (the "Options")
granted under the Company's 1991 Stock Option Plan, as amended (the "Option
Plan"). The Company will use its best efforts to ensure that each such
Option, whether or not then vested or exercisable, will at the Effective
Time no longer be exercisable for the purchase of shares of Company Common
Stock. Each holder of an Option which is vested at the Effective Time,
however, in cancellation and settlement thereof, shall have the right to
receive from the Surviving Corporation a cash payment (less any applicable
withholding taxes) in the aggregate amount equal to the product of (i) the
number of shares of Company Common Stock into which such Option would have
been exercisable at the Effective Time if such Option had not been
cancelled and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share for the shares of Company Common Stock subject to
such Option as expressly stated in the applicable stock option agreement or
other agreement, without any interest thereon (the "Option Consideration").
The Company will take such other actions as are necessary to fully advise
holders of Options of their rights under this Agreement and the Options, to
facilitate their timely exercise of such rights and to effectuate the
provisions of this Section 1.11. Prior to the Effective Time, the Acquiror
and the Company will establish a procedure to effect the surrender of
Options in exchange for the Option Consideration to which the holder of an
Option will be entitled under this Section 1.11, and, upon surrender of
such Option, the Surviving Corporation will pay to the holder thereof in
cash the amount of the Option Consideration, if any, to which such holder
will be entitled thereunder. Other than as expressly set forth in this
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Section 1.11, no holder of an Option will have from and after the Effective
Time any other rights in respect thereof other than to receive payment for
his or her Options equal to the Option Consideration, and the Company will
take all necessary actions to terminate effective as of the Effective Time
the Company's stock option plans, agreements and similar arrangements.
(b) Prior to the Effective Time, the Board of Directors of the Company
(or, if appropriate, any committee thereof) will adopt appropriate
resolutions and use its best efforts to take all other actions necessary to
provide for the cancellation, effective at the Effective Time, of all
outstanding stock options to purchase Company Common Stock not granted
under the Option Plan (the "Non-Plan Options"). The Company will use its
best efforts to ensure that each such Non-Plan Option, whether or not then
vested or exercisable, will at the Effective Time no longer be exercisable
and will terminate and be cancelled. Other than as expressly set forth in
this Section 1.11, no holder of a Non-Plan Option will have from and after
the Effective Time any other rights in respect thereof, and the Company
will take all necessary actions to terminate effective as of the Effective
Time the Company's stock option agreements and similar arrangements with
respect to the Non-Plan Options.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule referred to in Section 2.1
hereof, the Company represents and warrants to the Acquiror as of the date
hereof as follows:
2.1. Disclosure Schedule. The Company has heretofore delivered to the
Acquiror a disclosure schedule (the "Disclosure Schedule") which is divided into
sections which correspond to the sections of this Article 2. The Disclosure
Schedule is true, accurate and complete in all material respects. Any item,
information or facts set forth in the Disclosure Schedule will be deemed
adequate to disclose an exception to a representation and warranty unless a
reasonable person would not understand the exception taken from the item,
information or facts provided; provided, however, the mere listing (or inclusion
of a copy) of a document or other item will not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). In addition, any item, information or facts disclosed in one
subsection of the Disclosure Schedule will be deemed to be disclosed in all
other applicable subsections of the Disclosure Schedule; provided, that such
item, information or fact has been initially disclosed in such a manner that a
reasonable person could infer that the inclusion of such information in such
additional subsection would be warranted.
2.2. Organization and Qualification. To the Company's knowledge, the
Company and each subsidiary of the Company (referred to herein as a
"Subsidiary") is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. To the Company's
knowledge, the Company and each Subsidiary is duly qualified and in good
standing to do business in each jurisdiction in which the property owned,
leased, or operated by it or the nature of the business conducted by it makes
such qualification necessary and where the failure to qualify could reasonably
be expected to have a Company Material Adverse Effect (as defined below).
"Company Material Adverse Effect"
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means any effect, change or event that, individually or in the aggregate with
all similar effects, changes or events, is or would be material and adverse: (i)
either before or immediately after the Effective Time, to the business,
properties, liabilities, results of operation, or financial condition of the
Company and its Subsidiaries, considered as a whole; (ii) to the ability of the
Acquiror or the Surviving Corporation to conduct such business, as presently
conducted, immediately following the Effective Time; or (iii) to the Company's
ability to perform any of its obligations under this Agreement or which
threatens or is or would reasonably be expected to impede the Company's ability
to consummate the Merger. The Company has heretofore delivered to the Acquiror
complete and accurate copies of the Certificate of Incorporation and Bylaws of
the Company and each Subsidiary, as currently in effect. Except to the extent
specifically disclosed on the Disclosure Schedule, or any entity in which the
Company owns, directly or indirectly, an equity interest of less than 1% of the
fair market value of such entity's outstanding equity securities, to the
Company's knowledge, neither the Company nor any Subsidiary, directly or
indirectly, owns or controls or has any capital, equity, partnership,
participation or other ownership interest in any corporation, partnership, joint
venture or other business association or entity.
2.3. Authorization and Enforceability. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to obtaining the necessary approval of its stockholders, the requisite corporate
power and authority to consummate the transactions contemplated hereby and to
file and distribute the Proxy Statement (as defined in Section 4.2 hereof). The
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Company Board, no other corporate proceedings on the part of the
Company (other than stockholder approval) or any Subsidiary are necessary to
authorize this Agreement and, subject to obtaining the approval of the Company's
stockholders, no other corporate action on the part of the Company or any
Subsidiary is necessary to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and rules of law governing specific
performance, injunctive relief or other equitable remedies.
2.4. Capitalization. The authorized capital stock of the Company consists
of (i) 17,500,000 shares of Company Common Stock, of which 6,636,253 shares are
issued and outstanding as of January 24, 2000 and (ii) 2,500,000 shares of
undesignated preferred stock, par value $.01 per share, none of which are issued
or outstanding. All issued and outstanding shares of capital stock of each
Subsidiary are owned, beneficially and of record, by the Company, free and clear
of any pledge, security interest, encumbrance, lien, claim or charge of any kind
("Lien"). All issued and outstanding shares of Company Common Stock have been
validly issued, are fully paid and nonassessable and have not been issued in
violation of and are not currently subject to any preemptive rights. Except as
set forth on the Disclosure Schedule, there are not, to the Company's knowledge,
any outstanding or authorized subscriptions, options, warrants, calls, rights,
convertible securities, commitments, restrictions, arrangements or any other
agreements of any character to which the Company or any Subsidiary is a party
that, directly or indirectly, (i) obligate the Company or any Subsidiary to
issue any shares of capital stock or any securities convertible into, or
exercisable or exchangeable for, or evidencing the right to
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subscribe for, any shares of capital stock, (ii) call for or relate to the sale,
pledge, transfer or other disposition or encumbrance by the Company or any
Subsidiary of any shares of its capital stock, or (iii) relate to the voting or
control of such capital stock. To the Company's knowledge, the Disclosure
Schedule sets forth a complete and accurate list of all stock options, warrants
and other rights to acquire Company Common Stock or any other shares of capital
stock of the Company, including the name of the holder, the date of grant,
acquisition price, expiration date, number of shares, exercisability schedule
and, in the case of options, the type of option under the Internal Revenue Code
of 1986, as amended. To the Company's knowledge, the Disclosure Schedule also
sets forth the contractual restrictions to which any shares of Company Common
Stock issued pursuant to the Option Plan or other option arrangements are
currently subject and also sets forth the restrictions to which such shares will
be subject immediately after the Effective Time, other than as set forth in the
Option Plan or stock option agreements thereunder. No consent of holders or
participants under the Option Plan or other stock option agreements is required
to carry out the provisions of Section 1.11 hereof. All actions, if any,
required on the part of the Company under the Option Plan to allow for the
treatment of Options as is provided in Section 1.11 hereof, has been, or prior
to the Closing will be, validly taken by the Company. All actions, if any,
required on the part of the Company to allow for the treatment of Non-Plan
Options as is provided in Section 1.11 hereof, has been, or prior to the Closing
will be, validly taken by the Company.
2.5. SEC Filings and Financial Statements. To the Company's knowledge, the
Company has filed all forms, reports, registration statements and documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") since January 1, 1996 (such forms, reports, registration statements and
documents, together with any amendments thereto, are referred to as the "Company
SEC Filings"). As of their respective dates, the Company SEC Filings, to the
Company's knowledge, (i) complied as to form in all material respects with the
applicable requirements of the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act") and the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), as the case may be, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The audited financial statements and
unaudited interim financial statements included or incorporated by reference in
the Company SEC Filings, including but not limited to the Company's audited
financial statements at and for the fiscal year ended March 31, 1999 (the
"Company 1999 Financials"), to the Company's knowledge (i) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto), subject, in the case of unaudited interim financial statements,
to the absence of notes and to year-end adjustments, (ii) complied as of their
respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly presented the consolidated financial position of the
Company as of the dates thereof and the income, cash flows and changes in
stockholders' equity for the periods involved. To the Company's knowledge, the
statements of earnings included in the audited or unaudited interim financial
statements in the Company SEC Filings do not contain any items of special or
nonrecurring income or any other income not earned in the ordinary course of
business, except as expressly specified in the applicable statement of
operations or notes thereto. The Company has also previously delivered to the
Acquiror complete and accurate copies of all statements on Schedule 13D and
Schedule 13G known to the Company to have been filed with the SEC
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since January 1, 1996, with respect to the capital stock of the Company. Since
January 1, 1996, the Company has filed in a timely manner all reports required
to be filed by it pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
2.6. Absence of Undisclosed Liabilities. Except to the extent specifically
disclosed on the Disclosure Schedule or otherwise to the Company's knowledge,
neither the Company nor any Subsidiary has any liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise) which would have a
Company Material Adverse Effect, except (a) liabilities or obligations that are
accrued or reserved against in the audited consolidated balance sheet of the
Company as of March 31, 1999 contained in the Company 1999 Financials (the
"Company Audited Balance Sheet") or in the unaudited consolidated balance sheet
of the Company as of September 30, 1999 contained in the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1999 (the
"Company Interim Balance Sheet"), and (b) liabilities or obligations disclosed
in this Agreement.
2.7. Consents and Approvals. Except for (i) any applicable requirements of
the Securities Act, the Exchange Act, state securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder (the "HSR Act"), (ii) approval by the Company's stockholders, (iii)
the filing and recordation of appropriate merger documents as required by the
DGCL and the MBCA, (iv) compliance with Section 262 of the DGCL regarding
appraisal rights, and (v) any items disclosed on the Disclosure Schedule, the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated hereby will not: (a) violate any provision of the
Certificate of Incorporation or Bylaws of the Company or any Subsidiary; (b)
violate any statute, rule, regulation, order or decree of any federal, state,
local or foreign body or authority (including without limitation any
non-governmental self-regulatory agency) by which the Company or any Subsidiary
or any of their respective properties or assets may be bound; (c) require any
filing with or permit, consent or approval of any federal, state, local or
foreign public body or authority (including without limitation any
non-governmental self-regulatory agency); or (d) result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, result in the loss of any material benefit under, or give rise to
any right of termination, cancellation, increased payments or acceleration
under, or result in the creation of any Lien (as defined in Section 2.4 hereof)
on any of the properties or assets of the Company or any Subsidiary under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which it or
any of its properties or assets may be bound, except, (x) in the cases of
clauses (b) or (c), where such violation, failure to make any such filing or
failure to obtain such permit, consent or approval, would not prevent or delay
consummation of the Merger or otherwise prevent the Company from performing its
obligations under this Agreement and would not have a Company Material Adverse
Effect, and (y) in the case of clause (d), for any such violations, breaches,
defaults or other occurrences that would not prevent or delay consummation of
any of the transactions contemplated hereby in any material respect or otherwise
prevent the Company from performing its obligations under this Agreement in any
material respect and would not have a Company Material Adverse Effect.
2.8. Compliance with Laws. Except to the extent specifically disclosed on
the Disclosure Schedule or otherwise to the Company's knowledge and except for
those
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violations of the law which the officers of the Company should have reasonably
been expected to know in the course of discharging their duties as officers of
the Company, all activities of the Company and each Subsidiary have been and are
currently being, conducted, to the Company's knowledge, in compliance with all
applicable federal, state, local and foreign laws, ordinances, regulations,
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, orders and other similar items of any
court or other governmental entity (including without limitation any
non-governmental self-regulatory agency), the failure to comply with which could
reasonably be expected to have a Company Material Adverse Effect.
2.9. Litigation. Except to the extent specifically disclosed on the
Disclosure Schedule, no investigation or review by any federal, state, local or
foreign body or authority (including without limitation any non-governmental
self-regulatory agency) with respect to the Company or any Subsidiary, to the
Company's knowledge, is pending or threatened, nor has any such body or
authority (including without limitation any non-governmental self-regulatory
agency) indicated to the Company or any Subsidiary an intention to conduct the
same. Except to the extent specifically disclosed on the Disclosure Schedule,
there are no claims, actions, suits or proceedings by any private party that, to
the Company's knowledge, could reasonably be expected to involve individually an
amount in excess of $50,000 or collectively an aggregate amount in excess of
$100,000, or by any governmental body or authority (including without limitation
any non-governmental self-regulatory agency), against or affecting the Company
or any Subsidiary, pending or threatened at law or in equity, or before any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality and to the Company's knowledge there is
no basis for any such investigation, review, claim, action, suit or proceedings.
2.10. Absence of Material Adverse Changes. Except to the extent
specifically disclosed in the Disclosure Schedule, since March 31, 1999 there
has not been any (a) change or circumstance with a Company Material Adverse
Effect; (b) damage, destruction or loss, whether or not covered by insurance,
that could reasonably be expected to have a Company Material Adverse Effect; (c)
change by the Company or any Subsidiary in accounting methods or principles used
for financial reporting purposes, except as required by a change in generally
accepted accounting principles and concurred with by the Company's independent
public accountants; or (d) agreement, whether in writing or otherwise, to take
any action described or referenced in this Section 2.10.
2.11. Disclosure Documents. The Proxy Statement and the Schedule 13E-3 (as
defined in Section 4.2 hereof) and any amendments or supplements thereto, will
comply in all material respects with all applicable laws, regulations and
requirements, including the requirements of the Exchange Act. None of the
information relating to the Company included or incorporated by reference in (A)
the Proxy Statement, at the date such Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting, or (B) the
Schedule 13E-3, at the time of filing with the SEC (and at any time such Proxy
Statement or Schedule 13E-3 is amended or supplemented), will, to the Company's
knowledge, 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 are made, not
misleading. Notwithstanding the foregoing provisions of this Section 2.11, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Proxy Statement or the Schedule 13E-3
based on information supplied in
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writing by the Acquiror or any of its representatives specifically for inclusion
or incorporation by reference therein.
2.12. Merger Filings. The information as to the Company and the
Subsidiaries or any of their affiliates or stockholders included in the
Company's filing, or submitted to the Acquiror for inclusion in its filing, if
any, required to be submitted under the HSR Act will be true, correct and
complete in all material respects and will comply in all material respects with
the applicable requirements of the HSR Act and the rules and regulations issued
by the Federal Trade Commission pursuant thereto.
2.13. Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock (the "Required Company Vote") is
the only vote of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement and the transactions contemplated
hereby.
2.14. Company Action. As of the date hereof, the Company Board, based upon
the recommendation of the Special Committee, at a meeting thereof duly called
and held has (i) approved the Merger and approved and adopted and declared
advisable this Agreement and the transactions contemplated hereby, including the
Merger, (ii) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to and in the best interests of the
Company's stockholders (other than the Acquiror), and (iii) resolved to declare
advisable and recommend approval of this Agreement and the transactions
contemplated hereby, including the Merger, by the Company's stockholders.
2.15. State Takeover Laws. The Company Board has taken all action necessary
to exempt the transactions contemplated by this Agreement, including without
limitation the Merger, from the operation of any applicable "fair price,"
"moratorium," "control share acquisition," "business combination" or any other
applicable anti-takeover statute or similar statute enacted under the state or
federal laws of the United States or similar statute or regulation.
2.16. Rights Plan. The Company has not entered into, and the Company Board
has not adopted or authorized the adoption of, a stockholder rights plan or
similar agreement.
2.17. Fairness Opinion. As of the date hereof, the Special Committee has
received the written opinion of U.S. Bancorp Piper Jaffray Inc., financial
advisor to the Special Committee, dated as of the date hereof, to the effect
that, subject to the qualifications and limitations stated therein, the
consideration to be received by the holders of shares of Company Common Stock
(other than the Acquiror) in the Merger is fair to such holders from a financial
point of view. The Special Committee has furnished an accurate and complete copy
of such written opinion to the Acquiror.
2.18. No Finders. Except for the engagement letter between the Company and
U.S. Bancorp Piper Jaffray Inc., dated September 15, 1999, a copy of which has
been provided to the Acquiror prior to the date of this Agreement, pursuant to
which the only fees payable by the Company are $125,000 paid as of the date
hereof and $425,000 payable upon the Closing of the Merger, no act of the
Company or any Subsidiary has given or will give rise to any claim against any
of the parties hereto for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated herein.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as of the date hereof
as follows:
3.1. Organization and Qualification. The Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Acquiror is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary and where the
failure to qualify could reasonably be expected to have an Acquiror Material
Adverse Effect (as defined below). "Acquiror Material Adverse Effect" means any
effect, change or event that, individually or in the aggregate with all similar
effects, changes or events, is or would be material and adverse: (i) either
before or immediately after the Effective Time, to the business, properties,
liabilities, results of operation or financial condition of the Acquiror and its
subsidiaries, considered as a whole, or (ii) to the Acquiror's ability to
perform any of its obligations under this Agreement or which threatens or is or
would reasonably be expected to impede the Acquiror's ability to consummate the
Merger.
3.2. Authorization and Enforceability. The Acquiror has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Acquiror and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board of Directors of the Acquiror and will be duly and validly authorized and
approved by the Parent as the sole shareholder of the Acquiror and no other
corporate proceedings on the part of the Acquiror or the Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Acquiror
and constitutes the valid and binding obligation of the Acquiror, enforceable
against the Acquiror in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and rules of law
governing specific performance, injunctive relief or other equitable remedies.
3.3. Consents and Approvals. Except for (i) any applicable requirements of
the Securities Act, the Exchange Act, state securities laws and the HSR Act,
(ii) the filing and recordation of appropriate merger documents as required by
the DGCL and the MBCA, and (iii) compliance with Section 262 of the DGCL
regarding appraisal rights of the Company's stockholders, the execution and
delivery of this Agreement by the Acquiror and the consummation of the
transactions contemplated hereby will not: (a) violate any provision of the
Articles of Incorporation or Bylaws of the Acquiror; (b) violate any statute,
rule, regulation, order or decree of any public body or authority (including
without limitation any non-governmental self-regulatory agency) by which the
Acquiror or any of its subsidiaries or any of their respective properties or
assets may be bound; (c) require any filing with or permit, consent or approval
of any public body or authority (including without limitation any
non-governmental self-regulatory agency); or (d) result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, result in the loss of any material benefit under, or give rise to
any right of termination, cancellation, increased payments or acceleration
under, or result in the
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creation of any Lien on any of the properties or assets of the Acquiror or its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which the Acquiror or any of its subsidiaries is a
party, or by which any of them or any of their respective properties or assets
may be bound, except (x) in the cases of clauses (b) or (c), where such
violation, failure to make any such filing or failure to obtain such permit,
consent or approval, would not prevent or delay consummation of this Merger or
otherwise prevent the Acquiror from performing its obligations under the
Agreement and would not have an Acquiror Material Adverse Effect, and (y) in the
case of clause (d), for any such violations, breaches, defaults or other
occurrences that would not prevent or delay consummation of any of the
transaction contemplated hereby in any material respect, or otherwise prevent
the Acquiror from performing its obligations under this Agreement in any
material respect and would not have an Acquiror Material Adverse Effect.
3.4. Disclosure Documents. None of the information supplied or to be
supplied by the Acquiror or its affiliates in writing specifically for inclusion
or incorporation by reference in (A) the Proxy Statement, at the date such Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, or (B) the Schedule 13E-3, at the time of filing with the
SEC (and at any time such Proxy Statement or Schedule 13E-3 is amended or
supplemented), will 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 are
made, not misleading.
3.5. Merger Filings. The information as to the Acquiror and the Parent or
any of their affiliates or stockholders included in the Acquiror's filing, or
submitted to the Company for inclusion in its filing, if any, required to be
submitted under the HSR Act will be true, correct and complete in all material
respects and will comply in all material respects with the applicable
requirements of the HSR Act and the rules and regulations issued by the Federal
Trade Commission pursuant thereto.
3.6. No Vote Required. No vote of the holders of the outstanding shares of
common stock of either the Acquiror or the Parent is necessary to approve this
Agreement and the transactions contemplated hereby other than those obtained by
the Acquiror and the Parent as of the date hereof.
3.7. Financing. The Acquiror has cash on hand or reasonably expects to
receive commitments to provide, in the aggregate, monies sufficient to fund the
consummation of the transactions contemplated by this Agreement, including the
Merger and satisfy all other costs and expenses arising in connection therewith
(the "Financing").
3.8. No Finders. No act of the Acquiror or the Parent has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee or other like payment in connection with the
transactions contemplated herein, except for those fees owed to Greene Holcomb &
Fisher LLC.
ARTICLE 4.
COVENANTS
4.1. No Solicitation. Neither the Company, its Subsidiaries, nor any of
their respective officers, directors, employees, financial advisors, counsel,
representatives, agents
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or affiliates will, directly or indirectly, encourage, solicit, initiate or,
except to the extent provided below, participate in any way in discussions or
negotiations with, or provide any confidential information regarding the Company
or any Subsidiary to, any Third Party (as defined below) concerning or in
connection with any tender offer (including a self-tender offer), exchange
offer, merger, sale of substantial assets outside the ordinary course of
business, sale of securities or similar transactions involving the Company or
any Subsidiary or division of the Company (each, an "Acquisition Proposal");
except that nothing contained in this Section 4.1 or in any other provision of
this Agreement will prohibit the Company or the Company Board from: (i) taking
and disclosing to the Company's stockholders a position contemplated by Rules
14d-9 and 14e-2 promulgated under the Exchange Act; or (ii) making such
disclosure to the Company's stockholders as, in the reasonable judgment of the
Company Board with the advice of outside counsel, is required under applicable
law. For purposes of this Agreement, "Third Party" will mean any corporation,
partnership, person or other entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act) other than the Acquiror or any affiliate of the Acquiror
and their respective directors, officers, employees, representatives and agents.
Notwithstanding the foregoing, the Company may furnish confidential information
regarding the Company to and enter into discussions or negotiations with any
Third Party if and only if: (x) such Third Party, has on an unsolicited basis,
submitted a bona fide written Acquisition Proposal; (y) the Company Board
determines in good faith, based on, among other things, the legal advice of the
Company's outside counsel, that its fiduciary duties require the Company Board
to take such action; and (z) the Company and such Third Party enter into a
confidentiality agreement with standard terms and provisions. Subject to the
provisions of Section 6.1 hereof, the Company may approve, accept and recommend
an Acquisition Proposal if and only if: (1) the Company Board determines in good
faith, based on, among other things, advice of its legal counsel that its
fiduciary duties require the Company Board to take such action; (2) the Company
Board determines, after consultation with its financial advisors, that the
Acquisition Proposal would result in a transaction more favorable to the
Company's stockholders from a financial point of view than the transaction
contemplated by this Agreement (such Acquisition Proposal satisfying the
immediately preceding clauses (1) and (2)) is referred to hereinafter as an
"Approved Offer"); (3) the Company promptly notifies the Acquiror of the Company
Board's determination that an Acquisition Proposal constitutes an Approved
Offer; and (4) the Acquiror does not make, within three (3) business days of the
Acquiror's receiving such notice, an offer which the Company Board, after
consultation with its financial advisors, determines is superior to such
Approved Offer. The Company will promptly notify the Acquiror of the receipt and
the terms of any Acquisition Proposal that it may receive, including the
identity of the offeror, and will keep the Acquiror reasonably informed of the
status of any such Acquisition Proposal. The Company Board acknowledges that the
agreements contained in this Section 4.1 are derived from and based upon its
opinion that the Merger is fair and in the best interests of the Company and its
stockholders (other than the Acquiror). Nothing contained in this Section 4.1
will relieve any party from fulfilling its obligations under Article 6.
4.2. Stockholders Meeting; Proxy Statement.
(a) The Company will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Stockholders Meeting") for the purpose of adopting
this Agreement and the transactions contemplated hereby, including the
Merger, by obtaining the Required Company Vote. Subject to the Company
Board's fiduciary duties, the Company
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Board, based upon the recommendation of the Special Committee, will declare
the advisability of, and recommend to its stockholders the approval and
adoption of, this Agreement and the transactions contemplated hereby,
including the Merger, will include such recommendation in the Proxy
Statement and will take all lawful action to solicit such approval and
adoption.
(b) As soon as reasonably practicable following the date of this
Agreement, the Company and the Acquiror will jointly prepare, and the
Company will file with the SEC, a proxy statement and a form of proxy in
connection with the Stockholders Meeting (such proxy statement, together
with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to the Company's stockholders, being the "Proxy
Statement") and a Rule 13E-3 Transaction Statement (the "Schedule 13E-3").
The Acquiror will cooperate with the Company in connection with the
preparation and filing with the SEC of the Proxy Statement and the Schedule
13E-3, including without limitation furnishing the Company upon request
with any and all information regarding the Acquiror, the Parent or their
respective affiliates, the plans of such persons for the Surviving
Corporation after the Effective Time, and all other matters and information
as may be required to be set forth therein under the Exchange Act. The
Company will use reasonable best efforts to respond to the comments of the
SEC concerning the Proxy Statement or the Schedule 13E-3 as promptly as
practicable and to mail the definitive Proxy Statement to its stockholders
as soon as practicable. The Company will pay the filing fees for the Proxy
Statement and the Schedule 13E-3. The Acquiror will be given a reasonable
opportunity to review and approve all filings with the SEC and all mailings
to the Company's stockholders in connection with the Merger prior to the
filing or mailing thereof. The Company and the Acquiror each agree to
correct any information provided by such party for use in the Proxy
Statement or the Schedule 13E-3 that becomes false or misleading. The
Company will cause the fairness opinion of U.S. Bancorp Piper Jaffray
referred to in Section 2.17 to be included as an exhibit to the Proxy
Statement and the Schedule 13E-3.
(c) Each party will notify the other party promptly of (i) the receipt
of any notices, comments or other communications from the SEC, and (ii) any
requests by the SEC for amendments or supplements to the Proxy Statement or
the Schedule 13E-3 or for additional information, and will promptly provide
the other party with copies of all correspondence between such party or its
representatives on the one hand and the SEC or members of its staff on the
other hand with respect to the Proxy Statement or the Schedule 13E-3.
(d) If, at any time prior to the Stockholders Meeting, any event
should occur relating to the Company or its Subsidiaries which should be
set forth in an amendment of, or a supplement to, the Proxy Statement or
the Schedule 13E-3, the Company will promptly inform the Acquiror. If, at
any time prior to the Stockholders Meeting, any event should occur relating
to the Acquiror or the Parent or relating to the plans of the Acquiror for
the Surviving Corporation after the Effective Time, which should be set
forth in an amendment of, or a supplement to, the Proxy Statement or the
Schedule 13E-3, the Acquiror will promptly inform the Company. In any such
case, the Company or the Acquiror, as the case may be, with the cooperation
of the other party, will, upon learning of such event, promptly prepare,
file and, if required, mail such amendment or supplement to the Company's
stockholders;
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provided that, prior to such filing or mailing, the parties will approve
the form and content of such amendment or supplement.
(e) The Company will cause Norwest Bank Minnesota, N.A., the Company's
transfer agent, to make stock transfer records available to the extent
reasonably necessary to effectuate the intent of this Agreement.
4.3. Access to Information. The Company will afford to the Acquiror, and to
the Acquiror's accountants, officers, directors, employees, counsel and other
representatives, full access, from the date hereof through the Effective Time,
to all of its and its Subsidiaries' properties, books, contracts, commitments
and records, and, during such period, the Company will furnish promptly to the
Acquiror all information concerning the Company's and its Subsidiaries'
businesses, prospects, properties, liabilities, results of operations, financial
condition, officers, employees, distributors, customers, suppliers and others
having dealings with the Company as the Acquiror may reasonably request.
4.4. Consents. The Company will, at its cost and expense, use all
reasonable best efforts to obtain all approvals and consents of all third
parties necessary on the part of the Company or its Subsidiaries to consummate
the transactions contemplated hereby. The Acquiror agrees to cooperate with the
Company in connection with obtaining such approvals and consents. The Acquiror
will, at its cost and expense, use all reasonable efforts to obtain all
approvals and consents of all third parties necessary on the part of the
Acquiror to consummate the transactions contemplated hereby. The Company agrees
to cooperate with the Acquiror in connection with obtaining such approvals and
consents.
4.5. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses,
except (i) the Company and the Acquiror will share equally the cost of the
filing fees required under the HSR Act; (ii) the Company will pay all costs and
expenses incurred in connection with the printing, filing and mailing to
stockholders of the Proxy Statement and the solicitation of stockholder
approvals; and (iii) as otherwise provided in Section 6.2.
4.6. Further Actions. Subject to the terms and conditions herein provided
and without being required to waive any conditions herein (whether absolute,
discretionary or otherwise), each of the parties hereto agrees to use all
commercially 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 to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement will take all such necessary action.
4.7. Regulatory Approvals. The Company and the Acquiror will take all
reasonable action as may be necessary under federal or state securities laws or
the HSR Act applicable to or necessary for, and will file as soon as reasonably
practicable and, if appropriate, use all reasonable efforts to have declared
effective or approved all documents and notifications with the SEC and other
governmental or regulatory bodies that they deem necessary or appropriate for,
the consummation of the Merger and the transactions contemplated hereby, and
each party will give the other information reasonably requested by such other
party pertaining to it and its subsidiaries and affiliates to enable such other
party to take such actions. Notwithstanding the foregoing or anything herein to
the contrary, the Acquiror will not be required to make arrangements for or to
effect the
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cessation, sale or other disposition of particular assets or categories of
assets or businesses of the Acquiror, the Company, or any of their affiliates.
4.8. Certain Notifications. From time to time prior to the Effective Time
within five days of the end of each calendar month, the Company will provide
written notice to the Acquiror of any matter which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or which is necessary to correct any
information in the Disclosure Schedule which has been rendered inaccurate
thereby, or (b) would constitute a breach of any covenant contained in this
Agreement. For purposes of determining the accuracy of the representations and
warranties of the Company contained in Article 2 of this Agreement in order to
determine the fulfillment of the conditions set forth in Section 5.2(a) and to
determine whether a breach has occurred for purposes of Section 5.2(b) or
pursuant to Section 6.1(g) hereof, the Disclosure Schedule delivered by Company
in accordance with Section 2.1 will be deemed to include only the information
contained therein when delivered in accordance with Section 2.1 and will be
deemed to exclude any information contained in any subsequent notifications
hereunder.
4.9. Officers' and Directors' Indemnification. The Surviving Corporation
agrees that it will provide to the directors and officers of the Company
indemnification to the fullest extent provided by its Articles of Incorporation
and Bylaws with respect to matters occurring prior to the Effective Time,
including without limitation the authorization of this Agreement and the
transactions contemplated hereby until the six year anniversary date of the
Effective Time (or, in case of matters occurring prior to the Effective Time
giving rise to claims that are made prior to but which have not been resolved by
the sixth anniversary of the Effective Time, until such matters are finally
resolved). The Surviving Corporation will obtain and maintain in effect for not
less than three years after the Effective Date, the current directors' and
officers' liability insurance policies maintained by the Company (provided that
the Surviving Corporation may substitute therefore a policy or policies of at
least the same coverage containing similar terms and conditions so long as no
lapse in coverage occurs as a result of such substitution); provided that in no
event will Surviving Company be required to expend more than 150% of the current
annual premiums paid by the Company for such coverage (the "Maximum Premium");
and provided further that if the Surviving Corporation is unable to obtain the
amount of insurance required by this Section 4.9 for such aggregate premium, the
Surviving Corporation will obtain as much insurance as can be obtained for an
annual premium not in excess of the Maximum Premium.
4.10. Financing. The Acquiror will use its reasonable best efforts (i) to
consummate the Financing or such other financing as will be mutually and
reasonably satisfactory to the Company and the Acquiror on or before the Closing
Date and (ii) to execute and deliver definitive agreements with respect to the
Financing or such other financing as will be mutually and reasonably
satisfactory to the Company and the Acquiror (the "Definitive Financing
Agreements") on or before the Closing Date. The Company will use its reasonable
best efforts to assist and cooperate with the Acquiror to satisfy on or before
the Closing Date all of the conditions to closing the transactions constituting
the Financing which are applicable to the Company.
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ARTICLE 5.
CLOSING CONDITIONS
5.1. Conditions to Obligations of the Acquiror and the Company. The
respective obligations of each party to consummate the Merger and to consummate
the other transactions contemplated by this Agreement to occur on the Closing
Date will be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any or all of which may be waived, in whole or in part, to
the extent permitted by applicable law:
(a) Neither the Acquiror nor the Company are subject to any final
order, decree or injunction of a court of competent jurisdiction within the
United States that (i) prevents or materially delays the consummation of
the Merger, or (ii) would impose any material limitation on the ability of
the Acquiror effectively to exercise full rights of ownership of the
Company or the assets or business of the Company.
(b) The waiting periods applicable to the consummation of the Merger
under the HSR Act has expired or terminated.
5.2. Conditions to Obligations of the Acquiror. The obligation of the
Acquiror to consummate the Merger will be subject to the fulfillment at or prior
to the Closing of the following additional conditions:
(a) Each representation and warranty of the Company contained in this
Agreement is true and correct on the date hereof and on the Closing Date as
though such representations and warranties were made on such date (except
those representations and warranties that address matters only as of a
particular date will remain true and correct as of such date), except for
any inaccuracies that have not had, and would not have, a Company Material
Adverse Effect. For purposes of this Section 5.2(a), all representations
and warranties contained in Article 2 qualified by Company Material Adverse
Effect will not be deemed so qualified.
(b) The Company has performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement
to be performed or complied with by it on or prior to the Closing;
provided, however, that the obligation of the Acquiror to consummate the
Merger will not be subject to the satisfaction of this condition if the
reason that the Company has not performed or complied in all material
respect with a particular agreement, obligation or condition is the result
of the action or inaction by the officers of the Company that constitutes a
breach of any such agreement, obligation or condition.
(c) The Company has obtained all permits, authorizations, consents and
approvals required on its part to perform its obligations under, and
consummate the transactions contemplated by, this Agreement, in form and
substance reasonably satisfactory to the Acquiror, and the Acquiror has
received evidence reasonably satisfactory to it of the receipt of such
permits, authorizations, consents and approvals.
(d) The funding of the financing under the Definitive Financing
Agreements has occurred or the Acquiror will otherwise have immediate
access to sufficient funds under any other commitment acceptable to the
Acquiror to enable performance of the obligations of the Acquiror under
this Agreement.
(e) Holders of no more than 5% of the outstanding Company Common Stock
have exercised appraisal rights.
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5.3. Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger will be subject to the fulfillment at or prior
to the Closing of the following additional conditions:
(a) The approval of the stockholders of the Company referred to in
Section 4.2 hereof has been obtained, in accordance with the DGCL and the
Company's Certificate of Incorporation and Bylaws.
(b) Each representation and warranty of the Acquiror contained in this
Agreement is true and correct on the date of this Agreement and on the
Closing Date as though such representations and warranties were made on
such date (except those representations and warranties that address matters
only as of a particular date will remain true and correct as of such date),
except for any inaccuracies that have not had, and would not have, an
Acquiror Material Adverse Effect. For purposes of this Section 5.3(b), all
representations and warranties contained in Article 3 qualified by Acquiror
Material Adverse Effect will not be deemed so qualified.
(c) The Acquiror has performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement
to be performed or complied with by the Acquiror on or prior to the
Closing.
ARTICLE 6.
TERMINATION AND ABANDONMENT
6.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of the Acquiror and the Board of Directors of the Company;
(b) by either the Acquiror or the Company if the Merger has not been
consummated on or before the date that is nine months after the date
hereof; provided, however, that the terminating party has not breached in
any material respect its obligations under this Agreement in any manner
that was the proximate cause of, or resulted in, the failure to consummate
the Merger by such date and provided further, however, that, if a request
for additional information is received from the U.S. Federal Trade
Commission (the "FTC") or Department of Justice ("DOJ") pursuant to the HSR
Act, such date will be extended to the 90th day following acknowledgment by
the FTC, or DOJ, as applicable, that the Acquiror and the Company have
complied with such request, but in any event not later than six months from
the date hereof;
(c) by either the Acquiror or the Company if a court of competent
jurisdiction or an administrative, governmental or regulatory body has
issued a final nonappealable order, decree or ruling, or taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by either the Acquiror or the Company if, at the Stockholders
Meeting, the Required Company Vote is not obtained, except that the right
to terminate this Agreement under this Section 6.1(d) will not be available
to any party whose failure to perform any material obligation under this
Agreement has been the proximate cause of, or resulted in, the failure to
obtain the Required Company Vote;
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(e) by the Acquiror if (i) Company has breached its obligations under
Section 4.1 hereof in any material respect, (ii) the Company Board has
recommended, approved, accepted or entered into an agreement (other than a
confidentiality agreement) regarding an Acquisition Proposal or an Approved
Offer, (iii) the Company Board has withdrawn or modified in a manner
adverse to the Acquiror its recommendation of the Merger, (iv) a tender
offer or exchange offer for 15% or more of the outstanding shares of
Company Common Stock is commenced, and the Company Board, within 10
business days after such tender offer or exchange offer is so commenced,
either fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders or takes no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders; or
(v) the Company has failed to mail the Proxy Statement to its stockholders
within 10 days after being cleared by the SEC, failed to include in the
Proxy Statement the Company Board's recommendation of the Merger or the
fairness opinion of Piper Jaffray referred to in Section 2.17 hereof or has
postponed or, without having obtained the Required Company Vote, adjourned
the Stockholders Meeting (unless such failure to mail, postponement or
adjournment, as the case may be, was necessitated by applicable law);
(f) by the Company if (i) it is not in material breach of its
obligations under this Agreement, (ii) the Company Board has approved,
accepted or recommended an Approved Offer in accordance with Section 4.1
hereof and (iii) the Company has paid to the Acquiror the fee required by
Section 6.2 hereof to be paid to the Acquiror in the manner provided
therein;
(g) by the Acquiror if (i) the Acquiror is not in material breach of
its obligations under this Agreement and (ii) there has been a material
breach by the Company of any of its representations, warranties or
obligations under this Agreement such that the conditions in Article 5
hereof will not be satisfied, and the breach is not curable or, if curable,
is not cured by the Company within 10 calendar days after receipt by the
Company of written notice from the Acquiror of such breach;
(h) by the Company if (i) the Company is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach
by the Acquiror of any of its representations, warranties or obligations
under this Agreement such that the conditions in Article 5 hereof will not
be satisfied, and the breach is not curable or, if curable, is not cured by
the Acquiror within 10 calendar days after receipt by the Acquiror of
written notice from the Company of such breach; or
(i) by the Acquiror, if the holders of more than 5% of the outstanding
Company Common Stock exercise appraisal rights.
6.2. Effect of Termination.
(a) In recognition of the time, efforts and expenses expended and
incurred by the Acquiror with respect to the Company and the opportunity
that the acquisition of the Company presents to the Acquiror, if:
(i) this Agreement is terminated pursuant to Sections 6.1(e)(i),
(ii) or (iii) above, then the Company will pay to the Acquiror a fee in
the amount of One Million Dollars ($1,000,000) (the "Fee"), payable upon
such date of termination;
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(ii) this Agreement is terminated pursuant to Section 6.1(e)(iv)
above, then the Company will pay to the Acquiror the Fee upon, and only
upon: (A) the entering into of an agreement (except for a
confidentiality agreement) providing for an Acquisition Proposal or an
Approved Offer, or (B) the date a Third Party acquires 50% or more of
the Company's outstanding shares of Company Common Stock in a tender or
exchange offer, if such agreement is entered into or if such acquisition
occurs within 12 months of the termination of this Agreement;
(iii) this Agreement is terminated pursuant to Section 6.1(e)(v)
above, then the Company will pay to the Acquiror the Fee upon, and only
upon the entering into of an agreement (except for a confidentiality
agreement) providing for an Acquisition Proposal or an Approved Offer,
if such agreement is entered into or if such acquisition occurs within
12 months of the termination of this Agreement; or
(iv) this Agreement is terminated pursuant to Section 6.1(f) above,
then the Company will pay to the Acquiror the Fee, payable upon such
date of termination.
The Fee, if payable pursuant to subsections (i), (ii), (iii) or (iv) above,
will be paid by wire transfer of immediately available funds to an account
designated by the Acquiror for such purpose. The Company acknowledges that
the agreements contained in this Section 6.2 are an integral part of the
transactions contemplated by this Agreement and are not a penalty, and
that, without these agreements, the Acquiror would not enter into this
Agreement. If the Company fails to pay promptly, the Fee due pursuant to
this Section 6.2, the Company will also pay to the Acquiror the Acquiror's
costs and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of the
unpaid Fee under this section, accruing from its due date, at an interest
rate per annum equal to five percentage points in excess of the prime
commercial lending rate quoted by Norwest Bank Minnesota, N.A. Any change
in the interest rate hereunder resulting from a change in such prime rate
will be effective at the beginning of the day of such change in such prime
rate.
(b) Except as provided in the next sentence of this paragraph, in the
event of the termination of this Agreement pursuant to any paragraph of
Section 6.1 hereof, the obligations of the parties to consummate the Merger
will expire, and none of the parties will have any further obligations
under this Agreement except pursuant to Sections 4.3, 4.5 and 6.2(a)
hereof, which sections will survive termination of this Agreement. In the
event of the termination of this Agreement pursuant to any paragraph of
Section 6.1 hereof that is caused by a breach of a party, the party whose
breach was the basis for the termination will not be relieved from any
liability for its breach or its obligations pursuant to this Section 6.2,
and the other party will have no further obligations under this Agreement
except as provided in Sections 4.2 and 4.5 and Article 7 hereof.
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ARTICLE 7.
MISCELLANEOUS
7.1. Amendment and Modification. Subject to applicable law, this Agreement
may be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
7.2. Waiver. At any time prior to the Effective Time, any party hereto may
(i) extend the time for the performance of any obligation or other act of any
other party hereto, (ii) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein;
provided, however, that, if the Company seeks to make such extension or waiver
as provided in (i), (ii) or (iii) above, it must first obtain the approval of
the Special Committee. Any such extension or waiver will be valid if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
7.3. Notices. All notices and other communications hereunder will be in
writing and will be deemed given when delivered personally by commercial courier
service or otherwise, or by telecopier, or three days after such notice is
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as will be
specified by like notice):
(a) if to the Acquiror, to it at:
5500 Wayzata Boulevard, Suite 750
Minneapolis, MN 55416
Attention: Peter J. King
with a copy (which will not constitute notice) to:
Oppenheimer Wolff & Donnelly LLP
Plaza VII Building, Suite 3400
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce A. Machmeier, Esq.
Fax: (612) 607-7100
(b) If to the Company, to it at:
Sunrise International Leasing Corporation
5500 Wayzata Boulevard, Suite 750
Minneapolis, MN 55416
Attention: Chief Financial Officer
Fax: (612) 593-9630
with a copy to:
Fredrikson & Byron P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Thomas R. King, Esq.
Fax: (612) 347-7077
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7.4. Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that the Acquiror may assign its rights and obligations under the Agreement to
the Parent, nor is this Agreement intended to confer upon any other person
except the parties hereto any rights or remedies hereunder, except that Section
4.9 of this Agreement will inure to the benefit of the persons identified
therein.
7.5. Governing Law. This Agreement will be construed in accordance with and
governed by the law of the State of Minnesota, except that, insofar as the
procedures of the Merger are subject to the law of the State of Delaware because
the Company is incorporated in Delaware are concerned, the law of the State of
Delaware will apply.
7.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
7.7. Knowledge. As used in this Agreement, the term "to the Company's
knowledge" or words to similar effect will mean the actual knowledge of the
executive officers of the Company.
7.8. Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and will
not affect the meaning or interpretation of this Agreement. This Agreement will
be construed without regard to any presumption or other rule requiring the
resolution of any ambiguity regarding the interpretation or construction hereof
against the party causing this Agreement to be drafted.
7.9. Publicity. Upon execution of this Agreement by the Acquiror and the
Company, the parties will jointly issue a press release, as agreed upon by them.
The parties intend that all future statements or communications to the public or
press regarding this Agreement or the Merger will be mutually agreed upon by
them and neither party will, without such mutual agreement or the prior consent
of the other, issue any statement or communication to the public or to the press
regarding this Agreement, or any of the terms, conditions or other matters with
respect to this Agreement, except as required by law or the rules of The Nasdaq
Stock Market ("Nasdaq") and then only (a) upon the advice of such party's legal
counsel; (b) to the extent required by law or the rules of Nasdaq; and (c)
following prior notice to the other party and an opportunity for the other party
to discuss with the disclosing party (which notice will include a copy of the
proposed statement or communication to be issued to the press or public). The
foregoing will not restrict the Acquiror's or the Company's communications with
their employees or customers in the ordinary course of business.
7.10. Entire Agreement. This Agreement, including the exhibits and
schedules hereto, embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and the understandings between the parties with
respect to such subject matter. No discussions regarding or exchange of drafts
or comments in connection with the transactions contemplated herein will
constitute an agreement among the parties hereto. Any agreement
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<PAGE> 110
among the parties will exist only when the parties have fully executed and
delivered this Agreement.
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<PAGE> 111
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE KING MANAGEMENT CORPORATION
By /s/ PETER J. KING
------------------------------------
Its: Chief Executive Officer
-----------------------------------
SUNRISE INTERNATIONAL LEASING
CORPORATION
By /s/ JEFFREY JACOBSEN
------------------------------------
Executive Vice President and
Its: Chief Financial Officer
-----------------------------------
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AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 (this "Amendment") dated as of May 25, 2000 to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of January 31,
2000 is by and between THE KING MANAGEMENT CORPORATION, a Minnesota corporation
(the "Acquiror"), and SUNRISE INTERNATIONAL LEASING CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, the Acquiror and the Company entered into the Merger Agreement on
January 31, 2000; and
WHEREAS, the Company and the Acquiror desire to amend the Merger Agreement
to require the proposed Merger to be approved by the affirmative vote of a
majority of the outstanding shares of Sunrise common stock held by Sunrise's
stockholders (other than the Acquiror and its shareholders, which include Peter
J. King and Stephen D. Higgins, as trustee under six trusts established for the
benefit of Peter J. King's two sons, Russell S. and William B. King) present and
entitled to vote in person or by proxy at the special meeting.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto intending to be legally bound hereby, agree as follows:
1. Section 2.13 of the Merger Agreement shall be amended in its entirety to
state as follows:
2.13 Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock and the affirmative vote
of the holders of a majority of the outstanding shares of Company Common
Stock held by Sunrise's stockholders (other than the Acquiror and its
shareholders, which include Peter J. King and Stephen D. Higgins, as
trustee under six trusts established for the benefit of Peter J. King's two
sons, Russell S. and William B. King) present and entitled to vote in
person or by proxy at the Stockholders' Meeting (as hereinafter defined)
(the "Required Company Votes") are the only votes of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
2. Section 4.2(a) of the Merger Agreement shall be amended in its entirety
to state as follows:
(a) The Company will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Stockholders Meeting") for the purpose of adopting
this Agreement and the transactions contemplated hereby, including the
Merger, by obtaining the Required Company Votes. Subject to the Company
Board's fiduciary duties, the Company Board, based upon the recommendation
of the Special Committee, will declare the advisability of, and recommend
to its stockholders the approval and adoption of, this Agreement and the
transactions contemplated hereby, including the Merger, will include such
recommendation in the Proxy Statement and will take all lawful action to
solicit such approval and adoption.
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<PAGE> 113
3. Section 6.1(d) of the Merger Agreement shall be amended in its entirety
to state as follows:
(d) by either the Acquiror or the Company if, at the Stockholders
Meeting, the Required Company Votes are not obtained, except that the right
to terminate this Agreement under this Section 6.1(d) will not be available
to any party whose failure to perform any material obligation under this
Agreement has been the proximate cause of, or resulted in, the failure to
obtain the Required Company Votes;
4. Section 6.1(e) of the Merger Agreement shall be amended in its entirety
to state as follows:
(e) by the Acquiror if (i) Company has breached its obligations under
Section 4.1 hereof in any material respect, (ii) the Company Board has
recommended, approved, accepted or entered into an agreement (other than a
confidentiality agreement) regarding an Acquisition Proposal or an Approved
Offer, (iii) the Company Board has withdrawn or modified in a manner
adverse to the Acquiror its recommendation of the Merger, (iv) a tender
offer or exchange offer for 15% or more of the outstanding shares of
Company Common Stock is commenced, and the Company Board, within 10
business days after such tender offer or exchange offer is so commenced,
either fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders or takes no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders; or
(v) the Company has failed to mail the Proxy Statement to its stockholders
within 10 days after being cleared by the SEC, failed to include in the
Proxy Statement the Company Board's recommendation of the Merger or the
fairness opinion of Piper Jaffray referred to in Section 2.17 hereof or has
postponed or, without having obtained the Required Company Votes, adjourned
the Stockholders Meeting (unless such failure to mail, postponement or
adjournment, as the case may be, was necessitated by applicable law);
5. Except as amended hereby the Merger Agreement shall continue in full
force and effect.
6. All references in the Merger Agreement to "this Agreement" or words of
like import shall be deemed to mean the Merger Agreement as amended hereby.
7. Capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Merger Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
THE KING MANAGEMENT CORPORATION
By /s/ PETER J. KING
------------------------------------
Its: Chief Executive Officer
-----------------------------------
SUNRISE INTERNATIONAL LEASING
CORPORATION
By /s/ JEFFREY JACOBSEN
------------------------------------
Executive Vice President and
Its: Chief Financial Officer
-----------------------------------
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APPENDIX B
AGREEMENT TO FACILITATE MERGER
THIS AGREEMENT TO FACILITATE MERGER (this "Agreement") is dated as of
January 31, 2000, by and among THE KING MANAGEMENT CORPORATION, a Minnesota
corporation ("King Management"), PETER J. KING ("King"), STEPHEN D. HIGGINS
("Higgins"), as trustee under each of the WILLIAM B. KING STOCK TRUST UA DATED
NOVEMBER 21, 1989 FOR THE BENEFIT OF WILLIAM B. KING (the "WBK Trust") and the
RUSSELL S. KING STOCK TRUST UA DATED NOVEMBER 11, 1989 FOR THE BENEFIT OF
RUSSELL S. KING (the "RSK Trust") (King Management, King, Higgins, the WBK Trust
and the RSK Trust are collectively referred to as the "Sunrise Shareholders" and
each individually as a "Sunrise Shareholder"), and STEPHEN D. HIGGINS, as sole
trustee under each of the SEPARATE TRUST FOR THE BENEFIT OF WILLIAM B. KING UA
DATED APRIL 28, 1995 (the "WBK Separate Trust"), the SEPARATE TRUST FOR THE
BENEFIT OF RUSSELL S. KING UA DATED APRIL 28, 1995 (the "RSK Separate Trust"),
the GST TRUST FOR THE BENEFIT OF WILLIAM B. KING UA DATED APRIL 28, 1995 (the
"WBK GST Trust") and the GST TRUST FOR THE BENEFIT OF RUSSELL S. KING UA DATED
APRIL 28, 1995 (the "RSK GST Trust") (the Sunrise Shareholders and the WBK
Separate Trust, the RSK Separate Trust, the WBK GST Trust and the RSK GST Trust
are collectively referred to as the "Shareholders"and each individually as a
"Shareholder").
A. The Sunrise Shareholders are the legal or beneficial owners of
approximately 3,802,126 shares, representing approximately 57.3%, of the common
stock, par value $.01 per share ("Sunrise Common Stock"), of Sunrise
International Leasing Corporation, a Delaware corporation ("Sunrise"), and
options to acquire an aggregate of 916,506 shares of Sunrise Common Stock held
by King which are fully exercisable ("Sunrise Options").
B. King Management and Sunrise intend to enter into an Agreement and Plan
of Merger ("Merger Agreement") of even date herewith pursuant to which Sunrise
will merge with and into King Management (the "Merger") upon the terms and
subject to the conditions set forth in the Merger Agreement, and as a result, at
the effective time of the Merger all of the outstanding shares of Sunrise Common
Stock held by the shareholders of Sunrise (other than King Management or any of
its direct or indirect subsidiaries) will convert into the right to receive
$5.25 per share.
C. Prior to the Effective Time of the Merger, the Shareholders desire to
reorganize their common stock ownership of Sunrise and King Management pursuant
to the terms and subject to the conditions set forth in this Agreement in order
to (i) create a new holding company that would hold all of the outstanding
common stock of King Management, and (ii) in the case of all of the Sunrise
Shareholders (other than King Management) eliminate their Sunrise Common Stock
ownership and options to acquire shares of Sunrise Common Stock (the
"Reorganization").
D. It is understood and acknowledged by the Shareholders that the execution
of the Merger Agreement by Sunrise and King Management is being done in
reliance, in part, upon the prior or contemporaneous execution and delivery of
this Agreement, that both Sunrise and King Management will incur substantial
expenses proceeding towards consummation of the Merger as contemplated by the
Merger Agreement, and that such
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expenses will be undertaken, in part, in reliance upon and as a result of the
agreements and undertakings of the Shareholders set forth herein.
E. Capitalized terms used herein and not defined will have the meanings
ascribed thereto in the Merger Agreement.
In consideration of the foregoing, and in order to induce King Management
to execute the Merger Agreement and to proceed as contemplated by the Merger
Agreement toward the consummation of the Merger, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. Reorganization. Between the date hereof and the Effective Time of the
Merger (the "Reorganization Period"), each Shareholder agrees to perform, or to
take any and all actions necessary to ensure the performance of, all of the
actions set forth in this Section 1 in order to accomplish the Reorganization;
provided, however, that if the Merger Agreement terminates in accordance with
its terms prior to the completion of the actions set forth in this Section 1,
the Shareholders will have no further obligation to comply with this Section 1
and all actions taken by any of the Shareholders prior to such termination will
be null and void or will be reversed to the extent reasonably practicable and
necessary:
(a) Formation of the Parent. The Shareholders will cause to be formed
a new Minnesota corporation (the "Parent"). The Parent will initially have
1,000,000 common shares authorized ("Parent Common Stock").
(b) Contribution of King Management Shares to the Parent. Following
the completion of the formation of the Parent, the Shareholders (other than
King Management) will contribute all of their outstanding shares of common
stock of King Management (the "KM Common Stock") owned by such Shareholders
to the Parent in exchange for an equal number of shares of Parent Common
Stock. As a result of this exchange, the Parent will be owned by the
Shareholders (other than King Management) in proportion to their respective
ownership in King Management and all of the outstanding shares of common
stock of King Management will be owned one hundred percent (100%) by the
Parent, such that King Management will become a wholly-owned subsidiary of
the Parent.
(c) Contribution of Sunrise Shares to King Management. Simultaneously
with the completion of the formation of the Parent and the contribution of
KM Common Stock thereto, the Sunrise Shareholders (other than King
Management) will contribute all of their outstanding shares of Sunrise
Common Stock owned by such Sunrise Shareholders to the Parent in exchange
for shares of Parent Common Stock. The number of shares of Parent Common
Stock issued to such Sunrise Shareholders in exchange for their respective
contributions of shares of Sunrise Common Stock will be based on the
relative values of the shares of Sunrise Common Stock and Parent Common
Stock at that time, as determined in good faith by the Board of Directors
of the Parent. Thereafter, the Parent will contribute all of the shares of
Sunrise Common Stock received from such Sunrise Shareholders to King
Management.
(d) Sunrise Options. Any outstanding vested options to purchase shares
of Sunrise Common Stock granted under the Sunrise 1991 Stock Option Plan
(the "Option Plan") and held by any of the Sunrise Shareholders at the
Effective Time of the Merger will be cancelled upon the Effective Time of
the Merger as provided in the Merger Agreement, and such Sunrise
Shareholders will be entitled to receive, in cancellation and settlement
thereof, the Option Consideration pursuant to the terms of
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the Merger Agreement. Any outstanding vested options to purchase shares of
Sunrise Common Stock that were not granted under the Option Plan (the
"Non-Plan Options") and are held by any of the Sunrise Shareholders at the
Effective Time of the Merger will be cancelled upon the Effective Time of
the Merger as provided in the Merger Agreement, and such Sunrise
Shareholders will be entitled to receive, in cancellation and settlement
thereof, options to purchase shares of Parent Common Stock (the "Parent
Options") under the same terms and conditions as the Non-Plan Options. The
number of shares of Parent Common Stock and the exercise price per share
for each Parent Option will be determined based on the relative values of
the shares of Sunrise Common Stock and Parent Common Stock at the Effective
Time of the Merger, as determined in good faith by the Board of Directors
of the Parent.
(e) No Right to Receive Merger Consideration. As a result of the
actions performed pursuant to Sections 1(c) and (d) above, the Sunrise
Shareholders at the Effective Time of the Merger will have no share
ownership, or right to receive any shares of capital stock, of Sunrise, and
will therefore have no right to receive any Merger Consideration paid
pursuant to the terms of the Merger Agreement.
(f) Appointment of Proxy. The Shareholders hereby irrevocably appoint
Peter J. King, during the Reorganization Period, as proxy for and on behalf
of the Shareholders to perform the matters in the manner contemplated by
this Section 1.
2. Vote in Favor of Merger. During the period commencing on the date hereof
and terminating upon the earlier of the Effective Time of the Merger and the
termination of the Merger Agreement in accordance with its terms, each Sunrise
Shareholder, in his, her or its capacity as a shareholder of Sunrise or as a
representative with the authority to vote shares of Sunrise Common Stock, agrees
to vote (or cause to be voted) (a) all shares of Sunrise Common Stock presently
owned by such Sunrise Shareholder or for which such Sunrise Shareholder has
voting power, (b) all shares of Sunrise Common Stock issued upon the exercise of
Sunrise Options from and after the date of this Agreement, and (c) all shares of
Sunrise Common Stock with respect to which such Sunrise Shareholder acquires
ownership or voting power (whether by purchase or otherwise) from and after the
date of this Agreement, at any meeting of the shareholders of the Sunrise (or
any adjournment thereof), and in any action by written consent of the
shareholders of Sunrise, (i) in favor of the approval, consent, and ratification
of the Merger Agreement, the Merger and the transactions contemplated thereby,
and (ii) against any Acquisition Proposal, any amendment of the Sunrise's
Certificate of Incorporation or Bylaws or other proposal or transaction
involving Sunrise which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement and any
action that would result in any breach of a representation, warranty covenant or
agreement of the Sunrise Shareholders or Sunrise under the Merger Agreement. To
the extent inconsistent with the foregoing provisions of this Section 2, each
Sunrise Shareholder hereby revokes any and all prior powers of attorney, proxies
and consents given by such Sunrise Shareholder with respect to any shares of
Sunrise Common Stock that such Sunrise Shareholder owns or has the right to
vote. Nothing in this Agreement will be deemed to restrict or limit each Sunrise
Shareholder's right to act in his, her or its capacity as an officer or director
of Sunrise consistent with his, her or its fiduciary obligations in such
capacity as permitted under the Merger Agreement.
3. Appraisal Rights. In connection with the Merger, to the extent permitted
by law, each Sunrise Shareholder agrees to waive and not exercise any rights to
appraisal such
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Sunrise Shareholder may have with respect to any shares of Sunrise Common Stock
owned (of record or beneficially) by the Sunrise Shareholder pursuant to Section
262 of the Delaware General Corporation Law.
4. No Sale of Sunrise or KM Common Stock. Except as otherwise provided in
Section 1 of this Agreement, during the period commencing on the date hereof and
terminating upon the earlier of the Effective Time of the Merger or the
termination of the Merger Agreement in accordance with its terms, each
Shareholder agrees not to make any sales, gifts, transfers, pledges, or other
dispositions of Sunrise Common Stock (including any shares of Sunrise Common
Stock issued upon the exercise of Sunrise Options) or KM Common Stock, deposit
any Sunrise Common Stock (including any shares of Sunrise Common Stock issued
upon the exercise of Sunrise Options) or KM Common Stock into a voting trust or
enter into any voting agreement or arrangement with respect thereto, or enter
into any contract, option or other arrangement or undertaking with respect to
the direct or indirect acquisition, sale, assignment transfer or other
disposition of Sunrise Common Stock (including any shares of Sunrise Common
Stock issued upon the exercise of Sunrise Options) or KM Common Stock, without
first making any such transferee, assignee or pledgee fully aware of the
obligations under this Agreement and obtaining such transferee's or pledgee's
written agreement to comply with the terms hereof.
5. Representations and Warranties of Shareholders. Each Shareholder
represents and warrants to each other that such Shareholder has the legal
capacity to enter into and perform all of such Shareholder's obligations under
this Agreement without the consent or approval of any other person. If this
Agreement is being executed in a representative or fiduciary capacity, the
person signing this Agreement has the full power and authority to enter into and
perform such agreement. Each Shareholder is the sole, true, lawful and
beneficial or record owner of the number of Sunrise Common Stock and Sunrise
Options, as applicable, set forth next to such Shareholder's name on the
signature page hereof and there are no restrictions on such Shareholder's voting
rights or rights to disposition pertaining thereto. None of the Shareholders'
shares of Sunrise Common Stock (including any shares of Sunrise Common Stock
issued upon the exercise of Sunrise Options) or KM Common Stock are subject to
any voting trust or other agreement (other than this Agreement, the Voting Trust
Agreement dated as of May 27, 1998 among the Sunrise Shareholders and the Voting
Trust Agreement dated as of March 1, 1996 among the Shareholders) or arrangement
with respect to the voting of such shares. The execution, delivery, and
performance of this Agreement by each Shareholder will not violate any other
agreement to which such Shareholder is a party, including, without limitation,
any voting agreement, shareholders agreement, or voting trust. This Agreement
has been duly executed and delivered by each Shareholder and constitutes a
legal, valid, and binding agreement of such Shareholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws, now or hereafter in effect.
6. Miscellaneous.
(a) Successors and Assigns; Benefit. This Agreement will be binding
upon any permitted purchasers, donees, pledgees, and other transferees of
Sunrise Common Stock legally or beneficially owned by Shareholder. Nothing
in this Agreement, expressed or implied, will be construed to give any
person other than the parties hereto any legal or equitable right, remedy,
or claim under or by reason of this Agreement or any provision contained
herein, except that Sunrise will be a third-party beneficiary of Section 2
of this Agreement.
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(b) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement is not
performed according to the terms hereof and that the parties will be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
(c) Enforceability. If any provision of this Agreement will be invalid
or unenforceable under applicable law, such provisions will be ineffective
only to the extent of such invalidity or unenforceability, without in any
way affecting the remaining provisions of this Agreement.
(d) Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of
which together will constitute one and the same document.
(f) Further Assurances. Consistent with or subject to the fiduciary
duty of the Shareholder in his, her or its capacity as a director of
Sunrise, each Shareholder will execute and deliver such additional
documents and take such further action as may be necessary or desirable to
consummate the transactions contemplated by this Agreement.
(g) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Minnesota (without giving effect
to the principles of conflicts of laws thereof) applicable to contracts
made and to be performed therein.
(h) Jurisdiction and Venue. The parties agree that any proceeding
relating to this Agreement will be brought in a court of Minnesota. Each of
the parties consents to personal jurisdiction in any such action brought in
any such Minnesota court, consents to service of process by registered mail
made upon such party and such party's agent, and waives any objection to
venue in any such Minnesota court or to any claim that any such Minnesota
court is an inconvenient forum.
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The Shareholders have caused this Agreement to Facilitate Merger to be
executed as of the date and year first above written.
<TABLE>
<S> <C>
400,818 shares of Sunrise Common Stock THE KING MANAGEMENT CORPORATION
By: /s/ PETER J. KING
----------------------------------------
Peter J. King
Chief Executive Officer
517,158 shares of Sunrise Common Stock /s/ PETER J. KING
8,361.3762 shares of KM Common Stock ----------------------------------------
916,506 of Sunrise Options Peter J. King
1,621,768 shares of Sunrise Common Stock THE WILLIAM B. KING STOCK TRUST UA
3,119.7611 shares of KM Common Stock DATED NOVEMBER 21, 1989 FOR THE BENEFIT
OF WILLIAM B. KING
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Co-Trustee
/s/ WILLIAM B. KING
----------------------------------------
William B. King
Co-Trustee
1,262,382 shares of Sunrise Common Stock THE RUSSELL S. KING STOCK TRUST UA DATED
3,759.8142 shares of KM Common Stock NOVEMBER 11, 1989 FOR THE BENEFIT OF
RUSSELL S. KING
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Co-Trustee
/s/ RUSSELL S. KING
----------------------------------------
Russell S. King
Co-Trustee
1,195.01985 shares of KM Common Stock THE SEPARATE TRUST FOR THE BENEFIT OF
WILLIAM B. KING UA DATED APRIL 28, 1995
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Trustee
</TABLE>
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<PAGE> 121
<TABLE>
<S> <C>
554.96675 shares of KM Common Stock THE SEPARATE TRUST FOR THE BENEFIT OF
RUSSELL S. KING UA DATED APRIL 28, 1995
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Trustee
136.7839 shares of KM Common Stock THE GST TRUST FOR THE BENEFIT OF WILLIAM
B. KING UA DATED APRIL 28, 1995
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Trustee
136.7839 shares of KM Common Stock THE GST TRUST FOR THE BENEFIT OF RUSSELL
S. KING UA DATED APRIL 28, 1995
/s/ STEPHEN D. HIGGINS
----------------------------------------
Stephen D. Higgins
Trustee
17,264.5059 shares of KM Common Stock VOTING TRUST UA DATED MARCH 1, 1996
/s/ PETER J. KING
----------------------------------------
Peter J. King
Sole Voting Trustee
3,466,797 shares of Sunrise Common Stock VOTING TRUST UA DATED MAY 27, 1998
/s/ PETER J. KING
----------------------------------------
Peter J. King
Sole Voting Trustee
</TABLE>
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APPENDIX C
May 11, 2000
Special Committee of the Board of Directors
Sunrise International Leasing Corporation
550 Wayzata Boulevard, Suite 725
Golden Valley, MN 55416
Members of the Special Committee:
You have requested our opinion (the "Opinion") as to the fairness, from a
financial point of view, to the stockholders of Sunrise International Leasing
Corporation ("Sunrise" or the "Company"), other than The King Management
Corporation and its officers, directors and affiliates, of the consideration to
be received in connection with a proposed merger (the "Merger") of the Company
with and into The King Management Corporation (the "Acquiror"). It is our
understanding that the Acquiror and the Company have entered into an Agreement
and Plan of Merger dated January 31, 2000 (the "Merger Agreement"), pursuant to
which, among other things, each share of Sunrise common stock will be converted
into the right to receive $5.25 in cash (the "Merger Consideration") upon
consummation of the Merger.
U.S. Bancorp Piper Jaffray Inc. ("U.S. Bancorp Piper Jaffray"), as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
underwriting and secondary distributions of securities, private placements and
valuations for estate, corporate and other purposes. We have received certain
fees in connection with rendering our Opinion which are not contingent upon the
consummation of the Merger. U.S. Bancorp Piper Jaffray will also receive a fee
for advising the Special Committee of the Board of Directors in connection with
the Merger which is contingent upon the consummation of the Merger. The Company
has also agreed to indemnify us against certain liabilities in connection with
our services.
In arriving at our Opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) the Merger Agreement, (ii) certain publicly
available financial, operating and business information related to the Company,
(iii) certain internal financial information of the Company prepared for
financial planning purposes and furnished by the Company's management, (iv) to
the extent publicly available, financial terms of certain acquisition
transactions involving companies operating in industries deemed similar to that
in which the Company operates, (v) certain valuation and other financial
information on selected public companies deemed comparable to the Company, and
(vi) certain publicly available financial and securities data for the Company's
common stock. In addition, we had discussions with members of the Company's
management concerning the financial condition, current operating results and
business outlook for the Company.
We have, with your consent, relied upon and assumed the accuracy,
completeness and fairness of the financial statements and other information
provided to us by the Company or otherwise made available to us, and have not
assumed responsibility for the independent verification of such information.
With respect to the financial statement data and other internal financial
information (including projected financial planning data) provided to
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U.S. Bancorp Piper Jaffray in connection with its review of the financial
aspects of the proposed Merger, we have relied upon the assurances from the
Chief Financial Officer of the Company and his staff that such information has
been prepared on a reasonable basis, and, with respect to projected financial
planning data, reflects the best currently available estimates, and that they
are not aware of any information or facts that would make the information
provided to us incomplete or misleading.
In arriving at our Opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement. We have not been
requested to perform, and have not performed, any appraisals or valuations of
any specific assets or liabilities of the Company, and have not been furnished
with any such appraisals or valuations. In addition, we express no opinion
regarding the liquidation value of any entity.
This Opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this Opinion.
This Opinion is directed to the Special Committee of the Board of Directors
of the Company and is not intended to be and does not constitute a
recommendation to any stockholder with respect to the Merger. We were not
requested to opine as to, and this Opinion does not address, the basic business
decision to proceed with or effect the Merger or to compare the Merger to, or
consider, alternative transactions that may have been available to the Company.
This Opinion shall not be published or otherwise used, nor shall any public
references to us be made, without or prior written approval, except as expressly
contemplated in the engagement letter dated September 15, 1999 between the
Company and U.S. Bancorp Piper Jaffray.
Based upon and subject to the foregoing and based upon such other factors
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the stockholders of Sunrise International
Leasing Corporation other than The King Management Corporation and its officers,
directors and affiliates is fair to such stockholders from a financial point of
view.
Sincerely,
/s/ U.S. Bancorp Piper Jaffray Inc.
U.S. BANCORP PIPER JAFFRAY INC.
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January 27, 2000
Special Committee of the Board of Directors
Sunrise International Leasing Corporation
550 Wayzata Boulevard, Suite 725
Golden Valley, MN 55416
Members of the Special Committee:
You have requested our opinion (the "Opinion") as to the fairness, from a
financial point of view, to the stockholders of Sunrise International Leasing
Corporation ("Sunrise" or the "Company"), other than The King Management
Corporation and its officers, directors and affiliates, of the consideration to
be received in connection with a proposed merger (the "Merger") of the Company
with and into The King Management Corporation (the "Acquiror"). It is our
understanding that the Acquiror and the Company will enter into an Agreement and
Plan of Merger (the "Merger Agreement") to be dated on or about January 31,
2000, pursuant to which, among other things, each share of Sunrise common stock
will be converted into the right to receive $5.25 in cash (the "Merger
Consideration") upon consummation of the Merger.
U.S. Bancorp Piper Jaffray Inc. ("U.S. Bancorp Piper Jaffray"), as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
underwriting and secondary distributions of securities, private placements and
valuations for estate, corporate and other purposes. We will receive a fee for
rendering this Opinion which is not contingent upon the consummation of the
Merger. The Company has also agreed to indemnify us against certain liabilities
in connection with our services.
In arriving at our Opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) a draft of the Merger Agreement dated January
24, 2000, (ii) certain publicly available financial, operating and business
information related to the Company, (iii) certain internal financial information
of the Company prepared for financial planning purposes and furnished by the
Company's management, (iv) to the extent publicly available, financial terms of
certain acquisition transactions involving companies operating in industries
deemed similar to that in which the Company operates, (v) certain valuation and
other financial information on selected public companies deemed comparable to
the Company, and (vi) certain publicly available financial and securities data
for the Company's common stock. In addition, we had discussions with members of
the Company's management concerning the financial condition, current operating
results and business outlook for the Company.
We have, with your consent, relied upon and assumed the accuracy,
completeness and fairness of the financial statements and other information
provided to us by the Company or otherwise made available to us, and have not
assumed responsibility for the independent verification of such information.
With respect to the financial statement data and other internal financial
information (including projected financial planning data) provided to U.S.
Bancorp Piper Jaffray in connection with its review of the financial aspects of
the proposed Merger, we have relied upon the assurances from the Chief Financial
Officer of the Company and his staff that such information has been prepared on
a reasonable basis,
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and, with respect to projected financial planning data, reflects the best
currently available estimates, and that they are not aware of any information or
facts that would make the information provided to us incomplete or misleading.
In arriving at our Opinion, we have assumed that the Merger will be
consummated on the terms described in the draft of the Merger Agreement dated
January 24, 2000. We were advised by Tom King, a member of the Special Committee
of the Board of Directors, that Section 1.11 of the Merger Agreement dealing
with the treatment of stock options has been revised to make it clear that only
vested options would receive the spread between the per share Merger
Consideration and the exercise price of such options. We have not been requested
to perform, and have not performed, any appraisals or valuations of any specific
assets or liabilities of the Company, and have not been furnished with any such
appraisals or valuations. In addition, we express no opinion regarding the
liquidation value of any entity.
This Opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this Opinion.
This Opinion is directed to the Special Committee of the Board of Directors
of the Company and is not intended to be and does not constitute a
recommendation to any stockholder with respect to the Merger. We were not
requested to opine as to, and this Opinion does not address, the basic business
decision to proceed with or effect the Merger or to compare the Merger to, or
consider, alternative transactions that may have been available to the Company.
This Opinion shall not be published or otherwise used, nor shall any public
references to us be made, without or prior written approval, except as expressly
contemplated in the engagement letter dated September 15, 1999 between the
Company and U.S. Bancorp Piper Jaffray.
Based upon and subject to the foregoing and based upon such other factors
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the stockholders of Sunrise International
Leasing Corporation other than The King Management Corporation and its officers,
directors and affiliates is fair to such stockholders from a financial point of
view.
Sincerely,
/s/ U.S. Bancorp Piper Jaffray Inc.
U.S. BANCORP PIPER JAFFRAY INC.
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APPENDIX D
Section 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
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c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal
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rights. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall
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be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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SUNRISE INTERNATIONAL LEASING CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE SPECIAL MEETING
ON WEDNESDAY, JUNE 28, 2000, 10:00 A.M.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
This Proxy is solicited on behalf of the Board of Directors. The
undersigned stockholder hereby appoints Peter J. King and Jeffrey G.
Jacobsen, and each of them, as Proxies, each with the power to
appoint his substitute, and hereby authorizes each of them to
represent and to vote, as designated below, all the shares of common
stock of Sunrise International Leasing Corporation held of record by
the undersigned stockholder on May 25, 2000, at the Special Meeting
of Stockholders to be held on June 28, 2000 or any adjournment
thereof.
<TABLE>
<S> <C> <C>
1. Approval of the Agreement and Plan of [ ] FOR [ ] AGAINST
Merger dated as of January 31, 2000
between Sunrise International Leasing
Corporation and The King Management
Corporation, as amended.
2. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
<S> <C>
1. Approval of the Agreement and Plan of [ ] ABSTAIN
Merger dated as of January 31, 2000
between Sunrise International Leasing
Corporation and The King Management
Corporation, as amended.
2. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
</TABLE>
<PAGE> 132
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE PROPOSAL SET FORTH IN ITEM
1 ON THE REVERSE SIDE.
Address Change? Mark Box [ ]
Indicate changes below:
Date:
______________________________________________ ,
2000
------------------------------
------------------------------
SIGNATURE(S) IN BOX
PLEASE SIGN EXACTLY AS
YOUR NAME(S) APPEAR ON
THE REVERSE SIDE OF THIS
PROXY. IF HELD IN JOINT
TENANCY, ALL PERSONS MUST
SIGN. TRUSTEES,
ADMINISTRATORS, ETC.,
SHOULD INCLUDE TITLE AND
AUTHORITY. CORPORATIONS
SHOULD PROVIDE FULL NAME
OF CORPORATION AND TITLE
OF AUTHORIZED OFFICER
SIGNING THE PROXY.
