<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
GLOBAL MOTORSPORT GROUP, INC.
---------------
(Name of Subject Company)
GMG ACQUISITION CORP.
STONINGTON ACQUISITION CORP.
---------------
(Bidders)
COMMON STOCK, PAR VALUE $.001 PER SHARE
------------------------
(Title of Class of Securities)
378937106
------------------------
(CUSIP Number of Class of Securities)
ROBERT F. END
GMG ACQUISITION CORP.
C/O STONINGTON PARTNERS, INC.
767 FIFTH AVENUE
48TH FLOOR
NEW YORK, NY 10153
(212) 339-8500
------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
ANDREW R. BROWNSTEIN, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$120,566,141 $24,114
</TABLE>
* For purposes of calculating the filing fee only. Based upon 5,182,973 shares
of Common Stock, par value $.001 per share, of Global Motorsport Group, Inc.
outstanding on November 6, 1998, plus the number of Shares issuable upon the
exercise of all outstanding options and warrants.
** The fee, calculated in accordance with Rule 0-11(d) of the Securities
Exchange Act of 1934, is 1/50th of one percent of the aggregate Transaction
Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and date of its filing.
Amount Previously Paid: None
Form or Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 378937106 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
GMG Acquisition Corp. (Pending)
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
AF, BK
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
1
<PAGE>
CUSIP NO. 378937106 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person S.S.
or I.R.S. Identification No. of Above Person
Stonington Acquisition Corp. (Pending)
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
AF, BK
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
HC
- --------------------------------------------------------------------------------
2
<PAGE>
CUSIP NO. 378937106 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stonington Capital Appreciation 1994 Fund, L.P. 13-3764929
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
OO
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
PN
- --------------------------------------------------------------------------------
3
<PAGE>
CUSIP NO. 378937106 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stonington Partners, L.P. 13-3764889
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
AF
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
PN
- --------------------------------------------------------------------------------
4
<PAGE>
CUSIP NO. 378937106 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stonington Partners, Inc. II 13-3756497
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
AF
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
0
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
/ /
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0.0%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
5
<PAGE>
This Schedule 14D-1 Tender Offer Statement relates to the offer by GMG
Acquisition Corp. (the "Purchaser"), a Delaware corporation and an indirect,
wholly-owned subsidiary of Stonington Acquisition Corp., a Delaware corporation
("Parent"), to purchase all outstanding shares of Common Stock, par value $.001
per share (the "Shares"), of Global Motorsport Group, Inc., a Delaware
corporation (the "Company"), and the associated preferred share purchase rights
(the "Rights") issued pursuant to the Share Purchase Rights Agreement, dated as
of November 13, 1996, between the Company and American Stock Transfer & Trust
Company, as Rights Agent (as the same may be amended, the "Rights Agreement"),
at a purchase price of $19.50 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"), which are annexed to and
filed with this Schedule 14D-1 as Exhibits (a)(1) and (a)(2), respectively. Each
of Parent and the Purchaser have been formed by Stonington Partners, Inc., a
Delaware corporation ("Stonington"), in connection with the Offer and the
transactions contemplated thereby.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Global Motorsport Group, Inc. The
address of the Company's principal executive offices is 16100 Jacqueline Court,
Morgan Hill, California 95037.
(b) Reference is hereby made to the information set forth in the
"Introduction," Section 1 ("Terms of the Offer") and Section 11 ("Purpose of the
Offer; the Merger Agreement; Appraisal Rights; Plans for the Company; the
Rights") of the Offer to Purchase, which is incorporated herein by reference.
(c) Reference is hereby made to the information set forth in Section 6
("Price Range of the Shares; Dividends") of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is being filed on behalf of Parent and the Purchaser
for purposes of the Schedule 14D-1. Reference is hereby made to the information
set forth in the "Introduction," Section 9 ("Certain Information Concerning
Parent, the Purchaser and Stonington"), Schedule I (Certain Information
Concerning the General Partners, Officers and Directors of Stonington,
Stonington II, the Stonington Partnership and the Fund) and Schedule II
(Directors and Executive Officers of Parent and the Purchaser) of the Offer to
Purchase, which is incorporated herein by reference.
(e)-(f) During the last five years, none of Parent, the Purchaser,
Stonington, Stonington Partners, Inc. II, a Delaware corporation, Stonington
Partners, L.P., a Delaware limited partnership, or the Stonington Capital
Appreciation 1994 Fund, L.P., a Delaware limited partnership, or, to the best of
their knowledge, any of the persons listed in Schedule I (Certain Information
Concerning the General Partners, Officers and Directors of Stonington,
Stonington II, the Stonington Partnership and the Fund) or Schedule II
(Directors and Executive Officers of Parent and the Purchaser) of the Offer to
Purchase, which is incorporated herein by reference, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or State securities laws or finding any violation
of such laws.
(g) Reference is hereby made to the information set forth in Schedule I
(Certain Information Concerning the General Partners, Officers and Directors of
Stonington, Stonington II, the Stonington Partnership and the Fund) and Schedule
II (Directors and Executive Officers of Parent and the Purchaser) of the Offer
to Purchase, which is incorporated herein by reference.
6
<PAGE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) Reference is hereby made to the information set forth in the
"Introduction," Section 9 ("Certain Information Concerning Parent, the Purchaser
and Stonington"), Section 10 ("Background of the Offer; Past Contacts with the
Company") and Section 11 ("Purpose of the Offer; the Merger Agreement; Appraisal
Rights; Plans for the Company; the Rights") of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is made to the information set forth in Section 12
("Source and Amount of Funds") of the Offer to Purchase, which is incorporated
herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) Reference is hereby made to the information set forth in the
"Introduction," Section 7 ("Possible Effects of the Offer on the Market for the
Shares; Nasdaq Quotation; Exchange Act Registration; Margin Regulations"),
Section 10 ("Background of the Offer; Past Contacts with the Company"), Section
11 ("Purpose of the Offer; the Merger Agreement; Appraisal Rights; Plans for the
Company; the Rights") and Section 13 ("Dividends and Distributions") of the
Offer to Purchase, which is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) None.
(b) Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT
COMPANY'S SECURITIES.
Reference is hereby made to the information set forth in the "Introduction,"
Section 9 ("Certain Information Concerning Parent, the Purchaser and
Stonington"), Section 10 ("Background of the Offer; Past Contacts with the
Company"), Section 11 ("Purpose of the Offer; the Merger Agreement; Appraisal
Rights; Plans for the Company; the Rights") and Section 15 ("Certain Legal
Matters; Required Regulatory Approvals") of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Reference is hereby made to the information set forth in Section 16
("Certain Fees and Expenses") of the Offer to Purchase, which is incorporated
herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Financial information concerning Parent and the Purchaser is not set forth
in this Schedule 14D-1, because, as indicated in Section 9 ("Certain Information
Concerning Parent, the Purchaser and Stonington") of the Offer to Purchase, no
meaningful information is available.
ITEM 10. ADDITIONAL INFORMATION.
(a) Reference is hereby made to the information set forth in the
"Introduction," Section 10 ("Background of the Offer; Past Contacts with the
Company") and Section 11 ("Purpose of the Offer; the Merger Agreement; Appraisal
Rights; Plans for the Company; the Rights") of the Offer to Purchase, which is
incorporated herein by reference.
7
<PAGE>
(b)-(c) Reference is hereby made to the information set forth in the
"Introduction," Section 11 ("Purpose of the Offer; the Merger Agreement;
Appraisal Rights; Plans for the Company; the Rights") and Section 15 ("Certain
Legal Matters; Required Regulatory Approvals") of the Offer to Purchase, which
is incorporated herein by reference.
(d) Reference is hereby made to the information set forth in Section 7
("Possible Effects of the Offer on the Market for the Shares; Nasdaq Quotation;
Exchange Act Registration; Margin Regulations") of the Offer to Purchase, which
is incorporated herein by reference.
(e) Reference is hereby made to the information set forth in Section 9
("Certain Legal Matters; Required Regulatory Approvals") of the Offer to
Purchase, which is incorporated herein by reference.
(f) Reference is hereby made to the entire texts of the Offer to Purchase
and the related Letter of Transmittal, which are incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(1) -- Offer to Purchase, dated November 16, 1998.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(4) -- Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) -- Text of press release issued by the Company on November 9, 1998.
(a)(8) -- Form of Summary Advertisement dated November 16, 1998.
(b)(1) -- Commitment Letter, dated as of November 8, 1998, from Bankers Trust Company and
NationsBank, N.A.
(c)(1) -- Agreement and Plan of Merger, dated as of November 8, 1998, by and among the
Company, the Purchaser and Parent.
(c)(2) -- Exclusivity Agreement, dated as of October 15, 1998, between the Company and
Stonington Partners, Inc.
(c)(3) -- Confidentiality Agreement, dated as of April 24, 1998, between the Company and
Stonington Partners, Inc.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
8
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: November 16, 1998
STONINGTON ACQUISITION CORP.
By: /s/ ROBERT F. END
------------------------------------------
Name: Robert F. End
Title: President
GMG ACQUISITION CORP.
By: /s/ ROBERT F. END
------------------------------------------
Name: Robert F. End
Title: President
STONINGTON CAPITAL APPRECIATION
1994 FUND, L.P.
By: Stonington Partners, L.P., its general
partner
By: Stonington Partners, Inc. II, its general
partner
By: /s/ BRADLEY J. HOECKER
------------------------------------------
Name: Bradley J. Hoecker
Title: Partner
STONINGTON PARTNERS, L.P.
By: Stonington Partners, Inc. II, its general
partner
By: /s/ BRADLEY J. HOECKER
------------------------------------------
Name: Bradley J. Hoecker
Title: Partner
STONINGTON PARTNERS, INC. II
By: /s/ BRADLEY J. HOECKER
------------------------------------------
Name: Bradley J. Hoecker
Title: Partner
9
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
(a)(1) -- Offer to Purchase, dated November 16, 1998.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(4) -- Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) -- Text of press release issued by the Company on November 9, 1998.
(a)(8) -- Form of Summary Advertisement dated November 16, 1998.
(b)(1) -- Commitment Letter, dated as of November 8, 1998, from Bankers Trust Company and
NationsBank, N.A.
(c)(1) -- Agreement and Plan of Merger, dated as of November 8, 1998, by and among the
Company, the Purchaser and Parent.
(c)(2) -- Exclusivity Agreement, dated as of October 15, 1998, between the Company and
Stonington Partners, Inc.
(c)(3) -- Confidentiality Agreement, dated as of April 24, 1998, between the Company and
Stonington Partners, Inc.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
10
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
STONINGTON ACQUISITION CORP.
AT
$19.50 NET PER SHARE
- ---------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, DECEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER (AS SUCH TERMS ARE DEFINED HEREIN), ARE FAIR TO, ADVISABLE
AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER AND ADOPTED THE MERGER AGREEMENT AND RECOMMENDS ACCEPTANCE OF THE OFFER BY
THE COMPANY'S STOCKHOLDERS.
--------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF
THE COMPANY ON A FULLY DILUTED BASIS BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION DATE FOR THE OFFER, PARENT AND THE PURCHASER
(AS SUCH TERMS ARE DEFINED HEREIN) OBTAINING THE FINANCING SET FORTH IN THE
COMMITMENT LETTER (AS DEFINED HEREIN) AND CERTAIN OTHER CONDITIONS. SEE SECTIONS
12 AND 14.
--------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) either should (a) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares and any other required documents to the Depositary
(as defined herein) or tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3 or (b) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect such
transaction. A stockholder whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager (as such terms are defined herein) at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or the Dealer Manager or from brokers,
dealers, commercial banks, trust companies and other nominees.
--------------------------
The Dealer Manager for the Offer is:
CHASE SECURITIES INC.
NOVEMBER 16, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... 1
1. Terms of the Offer..................................................................................... 2
2. Acceptance for Payment and Payment..................................................................... 4
3. Procedures for Tendering Shares........................................................................ 5
4. Withdrawal Rights...................................................................................... 8
5. Certain Tax Consequences............................................................................... 8
6. Price Range of the Shares; Dividends................................................................... 9
7. Possible Effects of the Offer on the Market for the Shares; Nasdaq Quotation; Exchange Act
Registration; Margin Regulations....................................................................... 10
8. Certain Information Concerning the Company............................................................. 11
9. Certain Information Concerning Parent, the Purchaser and Stonington.................................... 14
10. Background of the Offer; Past Contacts with the Company................................................ 15
11. Purpose of the Offer; the Merger Agreement; Appraisal Rights; Plans for the Company; the Rights........ 18
12. Source and Amount of Funds............................................................................. 27
13. Dividends and Distributions............................................................................ 31
14. Certain Conditions of the Offer........................................................................ 31
15. Certain Legal Matters; Required Regulatory Approvals................................................... 33
16. Certain Fees and Expenses.............................................................................. 36
17. Miscellaneous.......................................................................................... 37
SCHEDULE I: Certain Information Concerning the General Partners, Officers and Directors of Stonington,
Stonington II, the Stonington Partnership and the Fund......................................... I-1
SCHEDULE II: Directors and Executive Officers of Parent and the Purchaser.................................. II-1
</TABLE>
<PAGE>
TO: ALL HOLDERS OF SHARES OF COMMON STOCK OF GLOBAL MOTORSPORT GROUP, INC.:
INTRODUCTION
GMG Acquisition Corp. (the "Purchaser"), a Delaware corporation and a
wholly-owned, indirect subsidiary of Stonington Acquisition Corp., a Delaware
corporation ("Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $.001 per share ("Shares"), of Global Motorsport Group,
Inc., a Delaware corporation (the "Company"), and the associated Preferred Share
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as
of November 13, 1996, between the Company and American Stock Transfer & Trust
Company, as Rights Agent (as the same may be amended, the "Rights Agreement"),
at a purchase price of $19.50 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together, constitute the "Offer"). Unless the context
otherwise requires, all references to Shares will include the associated Rights.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of Chase
Securities Inc., as Dealer Manager (the "Dealer Manager"), ChaseMellon
Shareholder Services, L.L.C., as Depositary (the "Depositary"), and MacKenzie
Partners, Inc., as Information Agent (the "Information Agent"), incurred in
connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") UNANIMOUSLY HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND
ADOPTED THE MERGER AGREEMENT AND RECOMMENDS ACCEPTANCE OF THE OFFER BY THE
COMPANY'S STOCKHOLDERS.
Cleary Gull Reiland & McDevitt, Inc. (the "Financial Advisor") has delivered
to the Company Board a written opinion dated November 8, 1998 to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinion, the $19.50 per Share cash consideration to be received by the
holders of Shares (other than Shares held by Parent or its affiliates, in the
treasury of the Company or by any wholly owned subsidiary of the Company),
pursuant to the Offer and the Merger is fair, from a financial point of view, to
such holders. A copy of the Financial Advisor's written opinion dated November
8, 1998 is included with the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders
concurrently herewith, and stockholders are urged to read such opinion carefully
in its entirety for a description of the assumptions made, matters considered
and limitations of the review undertaken by the Financial Advisor.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF
THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE FOR THE OFFER
(THE "MINIMUM CONDITION"). THE OFFER IS ALSO CONDITIONED UPON PARENT AND THE
PURCHASER OBTAINING THE FINANCING SET FORTH IN THE COMMITMENT LETTER (AS DEFINED
HEREIN). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. THE
OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 14,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). SEE SECTIONS 1, 12, 14, AND 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 8, 1998, by and among the Company, the Purchaser and Parent (the
"Merger Agreement") pursuant to which, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation (the "Surviving Corporation"). In the Merger, each
outstanding Share (other than Shares held by Parent, the Purchaser or any
wholly-owned subsidiary of Parent or the Purchaser or in the treasury of the
Company or by any wholly-owned subsidiary of the Company, which Shares will be
canceled with no payment being made with respect thereto, and other than Shares,
if any, held by stockholders who perfect their appraisal rights under Delaware
law ("Dissenting Shares")) will, by virtue of the Merger and
1
<PAGE>
without any action by the holder thereof, be converted into the right to receive
$19.50 in cash, payable to the holder thereof, without interest thereon (the
"Merger Price"), upon the surrender of the certificate formerly representing
such Share. The Merger Agreement is more fully described in Section 11. Certain
federal income tax consequences of the sale of Shares pursuant to the Offer and
the Merger, as the case may be, are described in Section 5.
If the Minimum Condition and the other conditions to the Offer are satisfied
and the Offer is consummated, the Purchaser will own a sufficient number of
Shares to ensure that the Merger will be approved. Under the Delaware General
Corporation Law (the "GCL"), if, after consummation of the Offer, the Purchaser
owns at least 90% of the Shares then outstanding, the Purchaser will be able to
cause the Merger to occur without a vote of the Company's stockholders. If,
however, after consummation of the Offer, the Purchaser owns less than 90% of
the then outstanding Shares, a vote of the Company's stockholders will be
required under the GCL to approve the Merger, and a significantly longer period
of time will be required to effect the Merger. See Section 11.
The Company has informed the Purchaser that, as of November 6, 1998, there
were 5,182,973 Shares issued and outstanding and 999,906 Shares reserved for
issuance upon the exercise of outstanding stock options granted under the
Company's stock option or similar plans or agreements.
Based on the foregoing and assuming no additional Shares (or warrants,
options or rights exercisable for, or securities convertible into, Shares), have
been issued (other than Shares issued pursuant to such options and rights
referred to above) if the Purchaser were to acquire approximately 3,091,440
Shares pursuant to the Offer, the Minimum Condition would be satisfied.
No appraisal rights are available in connection with the Offer; however,
stockholders may have appraisal rights in connection with the Merger regardless
of whether the Merger is consummated with or without a vote of the Company's
stockholders. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and thereby purchase all
Shares validly tendered on or prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in Section 4, as soon as practicable
after such Expiration Date; PROVIDED that, if all the conditions to the Offer
are satisfied or waived and at least 75% but less than 90% of the outstanding
Shares have been validly tendered and not withdrawn in the Offer, the Purchaser
reserves the right, in its sole discretion, to extend the Offer from time to
time for up to a maximum of ten additional business days in the aggregate for
all such extensions, notwithstanding the prior satisfaction of the conditions to
the Offer. The Offer will remain open until the Expiration Date, unless and
until the Purchaser extends the period of time for which the Offer is open, in
which event the term "Expiration Date" will mean the time and date at which the
Offer, as so extended by the Purchaser, will expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, the obtaining of financing set forth in the Commitment Letter
and the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). See Section 14. If, at any Expiration Date, the conditions to the Offer
described in Section 14 will not have been satisfied or waived and the Merger
Agreement is still in effect, the Purchaser will, and Parent will cause the
Purchaser to, cause the Offer not to expire, subject, however, to Parent's and
the Purchaser's rights of termination under the Merger Agreement. During any
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer and subject to the right of a tendering
2
<PAGE>
stockholder to withdraw such stockholder's Shares. See Section 4. Under no
circumstances will interest be paid on the purchase price for tendered Shares,
whether or not the Offer is extended.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Purchaser expressly reserves the right, in
its sole discretion, at any time or from time to time, to (i) in addition to its
termination rights relating to fulfillment of the Minimum Condition and
expiration or termination of HSR Act waiting periods, terminate the Offer if, at
any time prior to the time of payment for Shares pursuant to the Offer, any of
the other circumstances referred to in Section 14 exist; (ii) waive any
condition; or (iii) except as set forth in the Merger Agreement and discussed
below, otherwise amend the Offer in any respect, in each case, by giving oral or
written notice of such termination, waiver or amendment to the Depositary. In
the Merger Agreement, the Purchaser has agreed that, without the prior written
consent of the Company, it will not (i) impose conditions to the Offer in
addition to the conditions to the Offer described in Section 14, (ii) modify or
amend the conditions to the Offer described in Section 14 or any other term of
the Offer in a manner adverse to the holders of Shares, (iii) reduce the number
of Shares subject to the Offer, (iv) reduce the Merger Price, (v) except as
otherwise provided in the Merger Agreement, extend the Offer, if all of the
conditions to the Offer described in Section 14 are satisfied or waived, or (vi)
change the form of consideration payable in the Offer.
Any such extension, termination or amendment will be followed as promptly as
practicable by public announcement thereof. In the case of an extension, Rule
14e-1(d) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires that the announcement be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14e-1 under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the Offer be promptly disseminated to stockholders in a manner reasonably
designed to inform stockholders of such change), and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act. The rights reserved by the Purchaser
in the preceding paragraph are in addition to the Purchaser's rights pursuant to
Section 14.
If the Purchaser makes a material change in the terms of the Offer, or if
the Purchaser waives a material condition to the Offer, the Purchaser will
extend the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The
minimum period during which an offer must remain open following material changes
in the terms of the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the materiality of the changes. In the Commission's view, an offer
should remain open for a minimum of five business days from the date the
material change is first published, sent or given to stockholders, and, if
material changes are made with respect to information that approaches the
significance of price and the percentage of securities sought, a minimum of ten
business days may be required to allow for adequate dissemination and investor
response. With respect to a change in price, a minimum ten business day period
from the date of such change is generally required under applicable Commission
rules and regulations to allow for adequate dissemination to stockholders.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
As of the date of this Offer to Purchase, the Rights are evidenced by the
certificates representing Shares and do not trade separately. Accordingly, by
tendering a certificate representing Shares, a stockholder is automatically
tendering a similar number of associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate
certificates representing rights
3
<PAGE>
("Rights Certificates") are issued, stockholders will be required to tender one
Right for each Share tendered in order to effect a valid tender of such Share.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares, and will be furnished by the Purchaser to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the securityholder lists or, if applicable, who are listed
as participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment, and
will pay for, all Shares validly tendered and not properly withdrawn (in
accordance with Section 4) prior to the Expiration Date promptly after the
Expiration Date. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply with
applicable law, including the HSR Act. See Sections 1 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
representing such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3; (ii) the
appropriate Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees or an Agent's Message
(as defined herein) in connection with a book-entry transfer; and (iii) any
other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all
cases, upon the terms and subject to the conditions of the Offer, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to validly tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE
PAID BY THE PURCHASER.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Shares deposited by or on behalf of Stockholders promptly
after the termination or withdrawal of the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than are
tendered, Share Certificates representing unpurchased or untendered Shares will
be returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant
4
<PAGE>
to the procedures set forth in Section 3, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right, subject to the provisions of the Merger
Agreement, to assign, in whole or from time to time in part, to one or more of
Parent's subsidiaries or affiliates the right to purchase all or any portion of
the Shares tendered pursuant to the Offer, but no such assignment will relieve
Parent of any liability under the Merger Agreement for any breach of the Merger
Agreement by any such assignee.
3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with any required signature
guarantees or an Agent's Message in connection with a book-entry delivery of
Shares and any other documents required by the Letter of Transmittal must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date and either (i)
Share Certificates representing tendered Shares must be received by the
Depositary or tendered pursuant to the procedure for book-entry transfer set
forth below and Book-Entry Confirmation must be received by the Depositary, in
each case, on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternate, conditional or
contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE
CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to Shares at the Book-Entry Transfer Facility for purposes of the Offer. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account at
a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message in connection with a book-entry transfer, and any other
required documents must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
5
<PAGE>
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date or the procedures for book-entry transfer
cannot be completed on a timely basis, such Shares or Rights may nevertheless be
tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing
all tendered Shares, in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by the Letter
of Transmittal are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the Nasdaq National Market is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or, of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the appropriate Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time, and will depend upon when Share Certificates are
received by the Depositary or Book-Entry Confirmations of such Shares are
received into the Depositary's account at a Book-Entry Transfer Facility.
BACKUP WITHHOLDING. Under the backup federal income tax withholding laws
applicable to certain stockholders (other than certain exempt stockholders,
including, among others, all corporations and certain foreign individuals), the
Depositary may be required to withhold 31% of the amount of any payments made to
such stockholders pursuant to the Offer or the Merger. To prevent backup federal
6
<PAGE>
income tax withholding, each such stockholder must provide the Depositary with
such stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to backup federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Instruction 9 of the Letter of Transmittal.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's agents, attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of this Offer to Purchase. All such
powers of attorney and proxies will be considered irrevocable and coupled with
an interest in the tendered Shares. Such appointment will be effective upon the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Upon such acceptance for payment, all other powers of
attorney and proxies given by such stockholder with respect to such Shares and
such other securities or rights prior to such payment will be revoked, without
further action, and no subsequent powers of attorney and proxies may be given by
such stockholder (and, if given, will not be deemed effective). The designees of
the Purchaser will, with respect to the Shares and such other securities and
rights for which such appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they, in their sole discretion,
may deem proper at any annual or special meeting of the Company's stockholders,
or any adjournment or postponement thereof, or by consent in lieu of any such
meeting or otherwise. In order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or its
designee must be able to exercise full voting rights with respect to such Shares
and other securities, including voting at any meeting of stockholders.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer to the extent
permitted by applicable law and the Merger Agreement or any defect or
irregularity in any tender of Shares of any particular stockholder whether or
not similar defects or irregularities are waived in the case of other
stockholders.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering stockholder's acceptance of the terms and conditions of
the Offer, as well as the tendering stockholder's representation and warranty to
Purchaser that (a) such stockholder has a net long position in such Shares being
tendered within the meaning of Rule 14e-4 under the Exchange Act and (b) the
tender of such Shares complies with Rule 14e-4 under the Exchange Act. It is a
violation of Rule 14e-4 under the Exchange Act for a person, directly or
indirectly, to tender Shares for such person's own account unless, at the time
of tender, the person so tendering (i) has a net long position equal to or
greater than the amount of (x) Shares tendered or (y) other securities
immediately convertible into or exchangeable or exercisable for the Shares
tendered and such person will acquire such Shares for tender by conversion,
exchange or exercise and (ii) will cause such Shares to be delivered in
accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person.
The Purchaser's interpretation of the terms and conditions of the Offer will
be final and binding. No tender of Shares will be deemed to have been validly
made until all defects and irregularities with respect to such tender have been
cured or waived by the Purchaser. None of Parent, the Purchaser or any of their
respective affiliates or assigns, the Depositary, the Information Agent or any
other person or entity will be
7
<PAGE>
under any duty to give any notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after January 15, 1999 (or such later date as may apply in the case
that the Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Shares tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that the tendering stockholder
is entitled to and duly exercises withdrawal rights as described in this Section
4.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will
be deemed not validly tendered for purposes of the Offer, but may be tendered at
any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser or any of their respective affiliates or assigns, the Depositary, the
Information Agent or any other person or entity will be under any duty to give
any notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. CERTAIN TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, each selling stockholder would generally recognize
gain or loss equal to the difference between the amount of cash received and
such stockholder's tax basis for the sold or exchanged Shares. Such gain or loss
will be capital gain or loss (assuming the Shares are held as a capital asset)
and any such capital gain or loss will be long term capital gain if the
stockholder held the Shares for more than one year. In the case of a stockholder
who is an individual, such long term capital gain will generally be subject to
tax at a maximum rate of 20%.
8
<PAGE>
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired Shares pursuant to the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States and foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (such as insurance companies, tax-exempt
entities and regulated investment companies). This discussion does not address
all aspects of federal income taxation that may be relevant to a particular
stockholder in light of such stockholder's personal investment circumstances nor
does it address any aspect of foreign, state, local, estate or gift taxation
that may be applicable to a stockholder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND MERGER,
INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are traded on the Nasdaq National Market under the symbol "CSTM."
The following table sets forth, for the periods indicated, the reported high and
low sale prices for the Shares on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1996
First Quarter.................................................................................. $26 1/4 $22 1/4
Second Quarter................................................................................. $27 7/8 $24
Third Quarter.................................................................................. $27 $17 3/4
Fourth Quarter................................................................................. $21 3/8 $16 1/4
1997
First Quarter.................................................................................. $20 1/4 $11 1/4
Second Quarter................................................................................. $17 1/4 $10 1/2
Third Quarter.................................................................................. $17 1/2 $15
Fourth Quarter................................................................................. $16 1/2 $11 1/2
1998
First Quarter.................................................................................. $19 $11
Second Quarter................................................................................. $22 3/8 $18 1/8
Third Quarter.................................................................................. $21 1/4 $11 1/4
Fourth Quarter (as of November 13, 1998)....................................................... $19 3/4 $10 1/4
</TABLE>
On March 20, 1998, the last full day of trading prior to the filing of the
Golden Cycle 13D, according to publicly available sources, the reported closing
price on the NASDAQ National Market for the Shares was 14 15/16. On November 6,
1998, the last full day of trading prior to the announcement of the execution of
the Merger Agreement, according to publicly available sources, the reported
closing price on the Nasdaq National Market for the Shares was $16 7/8 per
Share. On November 13, 1998, the last full day of trading prior to the
commencement of the Offer, according to publicly available sources, the reported
closing price on the Nasdaq National Market for the Shares was $19 1/16 per
Share. The Company has not declared or paid any dividends on the Shares since
its initial public offering on November 5, 1991.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
9
<PAGE>
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION;
EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. The purchase of
Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly, and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. The Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or marketability of the Shares or whether it
would cause future market prices to be greater or less than the Offer price
therefor.
NASDAQ QUOTATION. The purchase of Shares pursuant to the Offer will reduce
the number of holders of Shares and the number of Shares that might otherwise
trade publicly, and could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the Nasdaq
National Market. According to published guidelines, the Shares would not be
eligible for continued inclusion if the Shares fail to substantially meet, among
other things, the following standards: (i) 200,000 publicly held Shares, (ii)
market value of publicly held Shares of $1 million, and (iii) 400 holders of
Shares or 300 holders of Shares of round lots. If these standards are not met,
the Shares might nevertheless continue to be included in the Nasdaq Small Cap
Market, but if, among other things, the number of holders of Shares falls below
300, or if the number of publicly held Shares falls below 100,000, or if the
aggregate market value of such publicly held Shares falls below $200,000 or if
there are not at least two market makers (one of which may be a market maker
entering a stability bid), Nasdaq Stock Market rules provide that the Shares
would no longer qualify for inclusion in the Nasdaq Stock Market and the Nasdaq
Stock Market would cease to provide any quotations. Shares held, directly or
indirectly, by an officer or director of the Company, or by any beneficial owner
of more than 10% of the Shares, ordinarily will not be considered as being
publicly held for this purpose.
In the event the Shares are no longer eligible for Nasdaq Stock Market
quotation, quotations might still be available from other sources. The extent of
the public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of such Shares remaining at such
time, the interest in maintaining a market in such Shares on the part of
securities firms, the possible termination of registration of such Shares under
the Exchange Act as described below and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for deregistration under the Exchange Act. Registration
of the Shares may be terminated upon application by the Company to the
Commission if the Shares are not listed on a "national securities exchange" and
there are fewer than 300 record holders of Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and the Commission
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) under the Exchange Act and the
requirements of furnishing a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) or 14(c) under the Exchange Act and the
related requirement of an annual report, no longer applicable to the Company. If
the Shares are no longer registered under the Exchange Act, the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions
would no longer be applicable to the Company. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 under the Securities
Act of 1933, as amended, may be impaired or, with respect to certain persons,
eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
stock exchange listing or Nasdaq reporting. The Purchaser believes that the
purchase of the Shares pursuant to the Offer may result in the Shares becoming
eligible for deregistration under the Exchange Act, and it
10
<PAGE>
would be the intention of the Purchaser to cause the Company to make an
application for termination of registration of the Shares as soon as possible
after successful completion of the Offer if the Shares are then eligible for
such termination.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will no longer be eligible for Nasdaq quotation and the registration
of the Shares under the Exchange Act will be terminated following the
consummation of the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which regulations have the effect, among other things,
of allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities ("Purpose Loans").
Depending upon factors such as the number of record holders of the Shares and
the number and market value of publicly held Shares, following the purchase of
Shares pursuant to the Offer, the Shares might no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers. In addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 16100 Jacqueline Court, Morgan Hill, California 95037. The following
description of the Company's business has been taken from, and is qualified in
its entirety by reference to, the Form 10-K filed by the Company for the year
ended January 31, 1998 (the "Form 10-K"):
Global Motorsport Group, Inc. (the "Company" or "Global") is the
largest independent supplier of aftermarket parts and accessories for
Harley-Davidson motorcycles. Global's organization includes Custom
Chrome, Inc. ("Custom Chrome"), an aftermarket supplier of Harley
Davidson motorcycle parts and accessories located in Morgan Hill,
California; Chrome Specialties, Inc. ("Chrome Specialties"), an
aftermarket supplier of Harley Davidson motorcycle parts and accessories
located in Fort Worth, Texas; Custom Chrome Far East, Ltd. ("CCFE"), a
product development, engineering, tooling management and warehouse of
proprietary products for Global, located in Taiwan; Custom Chrome
Europe, Ltd. ("CCE"), a distribution company located in Germany that
specializes in aftermarket accessories for Harley Davidson motorcycles
and other "cruiser" motorcycles; and Custom Chrome Manufacturing, Inc.
d.b.a. Santee Industries ("CCM"), a manufacturer of frames and exhaust
systems and other aftermarket components for Harley Davidson
motorcycles, located in Sylmar, California. The Company distributes its
own products, many of which are offered under registered trademark brand
names such as RevTech, Premium, Dyno Power and C. C. Rider, Motor
Factory, Spare Parts, Jammer Cycle Products, Texas Saddles and Dallas
Leather, as well as products offered by other recognized manufacturers,
such as Dunlop, Champion, Hastings, Accel, S&S, Crane and Russell. The
Company has an integrated approach to the design, manufacture,
importing, marketing and distribution of many of its products. The
Company currently offers approximately 15,000 products primarily to
approximately 4,700 dealers through its two main operating divisions,
Custom Chrome and Chrome Specialties. The Company has experienced
significant growth in net sales over the last three fiscal years,
however the Company has experienced reduced overall gross margins the
past two years primarily as a result of increased price competition in
the marketplace and because an increasing proportion of the new products
being offered by the Company were non-exclusive domestically produced
products which generally carry lower gross margins than the Company's
proprietary and non-U.S. sourced products. The Company's marketing
approach includes its Custom Chrome and Chrome Specialties catalogs, a
national telemarketing program, participation in and sponsorship of
industry trade shows and advertising in magazines focused on the
Harley-Davidson motorcycle market.
11
<PAGE>
The selected financial information of the Company and its consolidated
subsidiaries set forth below has been excerpted and derived from the Form 10-K
and from the Form 10-Q filed by the Company for the six months ended July 31,
1998. More comprehensive financial and other information is included in such
reports (including management's discussion and analysis of financial condition
and results of operations) and in other reports and documents filed by the
Company with the Commission. The financial information set forth below is
qualified in its entirety by reference to such reports and documents filed with
the Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth below.
GLOBAL MOTORSPORT GROUP, INC.
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, YEARS ENDED JANUARY 31,
-------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1998 1997 1996
--------- --------- ---------- ---------- ---------
Sales, net........................................................ $ 90,121 $ 64,004 $ 122,725 $ 108,557 $ 93,906
Cost of Sales..................................................... 56,198 39,836 77,716 64,834 54,779
--------- --------- ---------- ---------- ---------
Gross Profit.................................................... 33,923 24,168 45,009 43,723 39,127
--------- --------- ---------- ---------- ---------
Operating expenses:
Selling, general & administrative............................... 20,625 14,509 33,114 27,039 23,522
Provision for benefits related to employment agreement.......... -- -- 3,127 -- --
Costs associated with unsolicited tender offer.................. 1,708 -- -- -- --
Product development............................................... 665 711 1,407 1,723 1,652
--------- --------- ---------- ---------- ---------
22,998 15,220 37,648 28,762 25,174
--------- --------- ---------- ---------- ---------
Operating income.................................................. 10,925 8,948 7,361 14,961 13,953
Interest expense.................................................. 2,629 872 2,964 1,915 1,637
--------- --------- ---------- ---------- ---------
Income before income taxes...................................... 8,296 8,076 4,397 13,046 12,316
Income taxes...................................................... 3,459 3,209 2,114 5,174 4,395
--------- --------- ---------- ---------- ---------
Net income........................................................ $ 4,837 $ 4,867 $ 2,283 $ 7,872 $ 7,921
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
Net income per share (basic)...................................... $ 0.95 $ 0.96 $ 0.45 $ 1.49 $ 1.57
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
Net income per share (diluted).................................... $ 0.88 $ 0.93 $ 0.44 $ 1.48 $ 1.52
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
Shares used in per share calculation:
Basic........................................................... 5,106 5,117 5,094 5,272 5,048
Diluted......................................................... 5,477 5,224 5,233 5,327 5,209
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
JULY 31, ---------------------
1998 1998 1997
---------- ---------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets................................................................. $ 76,911 $ 88,347 $ 67,474
Property and Equipment, net.................................................... 18,906 18,408 15,802
Other assets................................................................... 34,764 35,327 8,221
Total assets................................................................... 130,581 142,082 91,497
Current liabilities............................................................ 15,729 29,449 14,683
Deferred income taxes.......................................................... 1,283 988 817
Long-term debt and capital lease obligations................................... 48,262 52,302 16,154
Stockholders' equity........................................................... 65,307 59,343 59,843
</TABLE>
12
<PAGE>
The Company is subject to the information and reporting requirements of the
Exchange Act, and, in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning the Company's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and the stock options granted to them), the principal holders of
the Company's securities, any material interests of such persons in transactions
with the Company and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048, and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may be obtained electronically by visiting the Commission's
worldwide web site on the Internet at HTTP://WWW.SEC.GOV. The Shares are traded
on the Nasdaq National Market. Reports, proxy statements and other information
concerning the Company should also be available for inspection at the National
Association of Securities Dealers, Inc., at 1735 K Street, N.W., Washington D.C.
20006.
Although neither Parent nor the Purchaser has any knowledge that any such
information is untrue, neither Parent nor the Purchaser takes any responsibility
for the accuracy or completeness of information contained in this Offer to
Purchase with respect to the Company or any of its subsidiaries or affiliates or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information.
In the course of discussions between representatives of Parent and the
Company (see Section 10), the Company furnished certain projections of future
operating performance to Parent's representatives. These estimates were based on
assumptions which management of the Company believed to be reasonable at the
time. Set forth below is a summary of the projections furnished by the Company
to Parent. The projections for fiscal year 1999 exclude costs associated with
the Golden Cycle offer and related litigation, as these projections were
originally prepared by the Company before such events occurred or were
anticipated. The projections have not been adjusted to reflect the effects of
the Offer or the Merger or the incurrence of indebtedness in connection
therewith. The projections should be read together with the financial statements
of the Company referred to herein.
13
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
PROJECTED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PERCENTAGE FIGURES)
<TABLE>
<CAPTION>
YEARS ENDING JANUARY, 31
PRO FORMA ----------------------------------------------------------
1998 1999 2000 2001 2002 2003
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Revenues................................ $ 145,894 $ 159,346 $ 176,993 $ 196,641 $ 218,518 $ 242,883
REVENUE GROWTH.......................... 2.5% 9.2% 11.1% 11.1% 11.1% 11.2%
Gross Profit............................ $ 52,957 $ 60,608 $ 70,902 $ 78,816 $ 87,632 $ 97,454
GROSS PROFIT MARGIN..................... 36.3% 38.0% 40.1% 40.1% 40.1% 40.1%
SG&A.................................... $ 34,870 $ 36,750 $ 40,609 $ 44,109 $ 47,947 $ 51,993
SG&A GROWTH............................. -0.7% 5.4% 10.5% 8.6% 8.7% 8.4%
SG&A/SALES.............................. 23.9% 23.1% 22.9% 22.4% 21.9% 21.4%
EBITDA.................................. $ 18,087 $ 23,858 $ 30,293 $ 34,707 $ 39,685 $ 45,461
EBITDA GROWTH........................... -12.5% 31.9% 27.0% 14.6% 14.3% 14.6%
EBITDA MARGIN........................... 12.4% 15.0% 17.1% 17.7% 18.2% 18.7%
Capital Expenditures.................... $ 4,055 $ 3,726 $ 1,700 $ 1,700 $ 1,700 $ 1,700
Depreciation............................ $ 2,383 $ 2,617 $ 2,864 $ 3,018 $ 3,173 $ 3,328
</TABLE>
THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS, AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THEY WERE
PROVIDED TO PARENT. NONE OF PARENT, THE PURCHASER, THE COMPANY, THE FINANCIAL
ADVISOR, THE DEPOSITARY OR THE DEALER MANAGER ASSUMES ANY RESPONSIBILITY FOR THE
ACCURACY OF THESE PROJECTIONS. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE
PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS, ALL MADE BY MANAGEMENT OF
THE COMPANY, RELATING TO THE BUSINESS OF THE COMPANY WHICH MAY NOT BE REALIZED,
AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH
ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE
SHOWN. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN
INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THE FINANCIAL
ADVISOR CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF
FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF
PARENT, THE PURCHASER, THE COMPANY, THE FINANCIAL ADVISOR, THE DEPOSITARY OR THE
DEALER MANAGER HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING
THE INFORMATION CONTAINED IN THE PROJECTIONS.
9. CERTAIN INFORMATION CONCERNING PARENT, THE PURCHASER AND STONINGTON.
PARENT AND THE PURCHASER. Parent and the Purchaser are newly formed
Delaware corporations whose principal offices are at c/o Stonington Partners,
Inc., 767 Fifth Avenue, 48th Floor, New York, NY 10153. Stonington Partners,
Inc. ("Stonington") organized Parent and the Purchaser on behalf of Stonington
Capital Appreciation 1994 Fund, L.P., a Delaware limited partnership (the
"Fund"), solely for the purpose of consummating the Offer and the Merger and
carrying out related transactions. Parent indirectly owns all of the outstanding
capital stock of the Purchaser, and all of the outstanding capital stock of
Parent is owned by the Fund. Neither Parent nor Purchaser is expected to have
any significant assets or liabilities other than those arising in connection
with the Offer and the Merger, or to engage in any business activities other
than those incident to its formation, the Offer and the Merger and the financing
of the Offer and the Merger, until the Merger becomes effective. Accordingly, no
meaningful financial information regarding the Purchaser or Parent is available.
14
<PAGE>
STONINGTON. Formed in 1993, Stonington is a private equity investment firm
that manages the Fund on behalf of public and corporate pension funds, private
endowments and other financial institutions. The Fund was formed with $1 billion
of institutional capital to finance investments in industrial and other
companies. Stonington Partners, L.P., a Delaware limited partnership (the
"Stonington Partnership"), serves as the general partner of the Fund. The
Stonington Partnership is principally engaged in the business of serving as
general partner of the Fund. Stonington Partners, Inc. II, a Delaware
corporation ("Stonington II"), serves as the general partner of the Stonington
Partnership. Stonington II is principally engaged in the business of acting as
the general partner of the Stonington Partnership. The principal office of each
of Stonington, Stonington II, the Stonington Partnership and the Fund is located
at 767 Fifth Avenue, 48th Floor, New York, NY 10153.
In a number of its prior acquisitions, Stonington has offered equity
ownership opportunities to key officials of the companies the Fund has acquired
and to an institutional investor that is an affiliate of a limited partner of
the Fund, and, likewise, intends to offer such institutional investor and
certain key officials of the Company an opportunity to acquire a minority
portion of the equity interest in the Parent. While discussions regarding this
have not yet been held, to the extent officials of the Company and the
institutional investor are given the opportunity to, and do, invest in the
equity of Parent, the equity ownership of Fund will be reduced.
Except as set forth elsewhere in this Offer to Purchase or Schedule I
hereto: (i) none of the Purchaser, Parent, Stonington, Stonington II, the
Stonington Partnership or the Fund (collectively, the "Stonington Entities")
and, to the knowledge of the Stonington Entities, none of the persons listed in
Schedule I or Schedule II hereto or any associate or majority owned subsidiary
of any of the foregoing, beneficially owns or has a right to acquire any Shares
or any other equity securities of the Company; (ii) neither the Stonington
Entities nor, to the knowledge of the Stonington Entities, any of the persons or
entities referred to in clause (i) above has effected any transaction in the
Shares or any other equity securities of the Company during the past 60 days;
(iii) neither the Stonington Entities nor, to the knowledge of the Stonington
Entities, any of the persons listed in clause (i) above has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations); (iv) since February 1, 1995, there have
been no transactions which would require reporting under the rules and
regulations of the Commission between the Stonington Entities or any of their
respective subsidiaries or, to the knowledge of the Stonington Entities, any of
the persons listed in clause (i) above, on the one hand, and the Company or any
of its executive officers, directors or affiliates, on the other hand; and (v)
since February 1, 1995, there have been no contacts, negotiations or
transactions between the Stonington Entities or any of their respective
subsidiaries or, to the knowledge of the Stonington Entities, any of the persons
listed in clause (i) above, on the one hand, and the Company or any of its
subsidiaries or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
None of the Stonington Entities had any relationship with the Company prior
to the commencement of the discussion that led to the execution of the Merger
Agreement. See Section 10. Each of the Stonington Entities disclaims that it is
an "affiliate" of the Company within the meaning of Rule 13e-3 under the
Exchange Act.
10. BACKGROUND OF THE OFFER; PAST CONTACTS WITH THE COMPANY.
On March 23, 1998, Golden Cycle, L.L.C. ("Golden Cycle") filed a Schedule
13D with the Commission disclosing its ownership of approximately 10% of the
Common Stock. On the same day, the Company received a written proposal from
Golden Cycle, L.L.C. ("Golden Cycle") for a business combination between Golden
Cycle and the Company. On April 7, 1998, Golden Cycle commenced a tender offer
for all of the Shares at $18 per share in cash. Concluding that Golden Cycle's
offer did not represent fair value for the Company, the Company Board asked
management to explore other alternatives for increasing shareholder value,
including a sale of the Company.
15
<PAGE>
In April of 1998, a representative of the Financial Advisor contacted
Stonington to inquire as to Stonington's interest in pursuing a transaction with
the Company. The Financial Advisor's representative stated that following the
execution of customary confidentiality and standstill agreements with the
Company, Stonington could have access to certain non-public information
concerning the Company to enable Stonington to more fully evaluate the Company.
After initiating a review of certain publicly available information concerning
the Company, Stonington contacted representatives of the Financial Advisor to
inform them that Stonington would be interested in reviewing non-public
information about the Company.
On April 24, 1998, Stonington entered into a confidentiality and standstill
agreement with the Company (the "Confidentiality Agreement"). Pursuant to the
Confidentiality Agreement, Stonington agreed to treat as confidential certain
information provided to it by or on behalf of the Company, and agreed, for a
period of two years, not to propose or conduct any transaction with the Company,
its subsidiaries or its stockholders without the consent of the Company Board.
On April 27, 1998, Stonington received certain non-public information about the
Company. Thereafter, representatives of Stonington requested additional
information concerning the Company and had a series of telephone conversations
with representatives of the Financial Advisor. The Company held formal
management presentations concerning its operations and financial condition
between May 12, 1998 and May 18, 1998 which were not attended by Stonington.
Discussions between Stonington and the Company ceased in May of 1998, and
the Company announced on May 22, 1998, that it had signed a letter of intent
with Fremont Partners, Inc., a private investment group ("Fremont"). The letter
contemplated an acquisition of the Company in a leveraged recapitalization
transaction which contemplated a cash offer by the Company for 93% of the
outstanding Shares at $23 per share following which, and following an equity
investment by Fremont, the Company's existing stockholders other than Fremont
and certain management stockholders would own approximately 10.3% of the
outstanding shares following consummation of the transaction. On June 28, 1998,
Fremont and the Company entered into a definitive merger agreement with the per
share price lowered to $21.75 and the termination fee reduced from $5.0 million
to $3.5 million. Due to Fremont's inability to obtain financing and following
the Company's rejection of a revised offer by Fremont to consummate the
transaction at a price per share of $18.25 as inadequate and not in the best
interests of the Company's stockholders, Fremont and the Company terminated the
proposed merger on September 25, 1998.
On September 28, 1998, representatives of the Financial Advisor contacted
Stonington to inquire whether Stonington would again be interested in pursuing a
transaction with the Company at a price level above the value that Fremont had
proposed before the Fremont merger agreement was terminated. Stonington
indicated its willingness to do so, and on October 7, 1998, representatives of
Stonington attended a Company management presentation in San Jose, California.
At the management presentations, representatives of Stonington met with certain
directors and officers of the Company. Thereafter, representatives of Stonington
requested additional non-public information concerning the Company, and had a
series of telephone conversations with senior and operating management and
representatives of the Financial Advisor.
On October 15, 1998, Stonington indicated its willingness to devote
substantial resources to evaluating the Company (including retaining outside
advisors and involving financing sources in the due diligence process) in an
effort to negotiate the terms of a potential transaction, but stated its desire
that the Company negotiate exclusively with Stonington with regards to a
transaction. On October 15, 1998, after communicating a preliminary indication
of a $19 per share price subject to due diligence and the receipt of financing
commitments, Stonington entered into an exclusivity agreement (the "Exclusivity
Agreement") with the Company. The Exclusivity Agreement provided that the
Company would deal solely with Stonington until November 15, 1998, subject to
early termination on October 30, 1998 at the option of the Company, and not
announce or engage in any merger, consolidation, recapitalization or other
extraordinary transaction during that time period in consideration for
Stonington's investment of time and effort to pursue a transaction. The
Exclusivity Agreement specifically provided the Company Board with the right to
take any action required by their fiduciary duties with respect to any party
that made a public acquisition proposal or as otherwise required by law. At the
time of the execution of the Exclusivity Agreement, Stonington was aware that
the Company's lawyers had, in connection with Golden Cycle's offer, previously
delivered a letter on October 5, 1998 on the Company's behalf to Golden Cycle.
In the letter, the
16
<PAGE>
Company's lawyer stated that potential buyers, including Golden Cycle, after
signing a confidentiality agreement, could receive a confidential offering
memorandum prepared in conjunction with management and the Financial Advisor and
that in addition to the offering memorandum, Golden Cycle would be provided with
updated financial results and projections. The Company also noted that based on
any revised acceptable proposal and satisfactory evidence of financing, it would
give Golden Cycle, its lenders, and advisors access to the Company's senior
management team and data room to further revise its bid and continue due
diligence.
From October 15 to November 6, 1998, Stonington, its advisors and its
financing sources conducted extensive due diligence with respect to the Company.
In connection with their review, Stonington and its advisors engaged in various
discussions regarding the business, strategies and prospects of the Company,
visited facilities, interviewed Company personnel, spoke with suppliers and
customers and performed an analysis of the market in which the Company operates.
On October 27, 1998 Golden Cycle issued a press release indicating its
intention to solicit consents from stockholders of the Company in order to
replace the Company Board with its nominees. Golden Cycle announced its
intention to follow a successful consent solicitation with a leveraged
recapitalization of the Company, whereby the Company would tender for
approximately 99% of the Shares not owned by Golden Cycle at $19 per share in
cash and following the transaction the public shareholders would continue to own
approximately 8% of the Company and Golden Cycle would own the balance. On
October 29, 1998, the Company issued a press release indicating that it was
continuing to explore alternative transactions in order to maximize shareholder
value. In addition, the Company noted that contrary to Golden Cycle's assertions
that the Company had refused to permit it to conduct meaningful due diligence,
the Company had previously sent the letter dated October 5, 1998 to Golden Cycle
as discussed above.
During the week of November 2, 1998, Stonington, the Company and their
respective advisors commenced negotiations of the material terms of a definitive
merger agreement, including representations and warranties, covenants and
conditions to the Offer and Merger, but excluding the price term. Stonington
made clear that any bid it made would have a "no solicitation" clause and a
termination fee payable upon certain events relating to alternative acquisition
proposals. In particular, Stonington noted that the Company had agreed to a $3.5
million termination fee in such circumstances in connection with the Fremont
merger agreement and that the Company had agreed to pay Fremont $1 million for
expense reimbursement if the Fremont merger agreement was terminated for any
reason. The Company stated that its willingness to grant a termination fee of
any amount would be a function of the price offered, the other terms of the
transaction and the alternatives available to the Company. The Company also
stated that it would not agree to reimburse Stonington for its expenses if the
reason for terminating the merger agreement was solely the failure of Parent and
the Purchaser to meet the financing condition.
On November 6, 1998 Stonington indicated to the Financial Advisor that
discussions with its financing sources were proceeding well and that it expected
to have received by Sunday, November 8, definitive bank commitment letters and
to be in position to make an all cash acquisition proposal to the Company, if
the Company Board would consider it at that time. Representatives of the Company
informed Stonington on November 6 that the Company Board would schedule a
meeting for the late afternoon of November 8 on the expectation that it would
receive an offer with financing commitments in place to acquire all the Shares
in a cash tender offer at a price higher than that proposed by Golden Cycle. On
November 8, 1998, Stonington verbally communicated to the Financial Advisor a
proposal to acquire the Company for $19.25 per share in cash, with a $3.5
million termination fee and a $1.0 million expense reimbursement provision.
Later that day the Financial Advisor informed Stonington that the Company sought
to increase the per share price above $19.25 and to reduce the amount of the
termination fee. That afternoon, Stonington proposed $19.50 per share in cash,
with a $3.0 million termination fee and a $1.0 million expense reimbursement
provision that would not be applicable if the sole reason for termination was
failure to obtain financing. Stonington conditioned this revised offer on the
Company Board's acceptance of the new terms that same night. After
deliberations, the Company Board agreed to Stonington's proposal, and later that
evening, the parties entered into and executed the Merger Agreement. The Company
announced the signing of the Merger Agreement before the opening of markets on
November 9, 1998.
17
<PAGE>
11. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; APPRAISAL RIGHTS; PLANS FOR THE
COMPANY; THE RIGHTS.
(A) PURPOSE
The purpose of the Offer and the Merger is to acquire control of, and the
entire equity interest in, the Company in a leveraged buyout. The Offer, as the
first step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. The purpose of the Merger is to acquire all
capital stock of the Company not purchased pursuant to the Offer or otherwise.
As a result of the Offer and Merger, the Company will become a wholly owned
subsidiary of Parent.
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger Agreement,
which is incorporated by reference and copies or forms of which have been filed
with the Commission as exhibits to the Schedule 14D-1. The Merger Agreement may
be examined and copies may be obtained at the places set forth in Section 8.
Defined terms used herein and not defined herein shall have the respective
meanings assigned to those terms in the Merger Agreement.
(B) THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer, and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer, as set forth in Section 14, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement
provides that, without the prior written consent of the Company, the Purchaser
will not (i) impose additional conditions to the Offer, (ii) modify or amend the
conditions to the Offer or any other term of the Offer in a manner adverse to
the holders of Shares pursuant to the Offer, (iii) reduce the number of Shares
subject to the Offer, (iv) reduce the amount offered per Share, (v) except as
provided in the following sentence, extend the Offer, if all of the conditions
to the Offer are satisfied or waived, or (vi) change the form of consideration
payable in the Offer. Notwithstanding the foregoing, the Purchaser may, without
the consent of the Company, extend the Offer at any time, and from time to time,
(i) if at the then scheduled Expiration Date of the Offer, any of the conditions
to Purchaser's obligation to accept for payment and pay for all Shares shall not
have been satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the Commission or its staff applicable
to the Offer; or (iii) if all conditions to the Offer are satisfied or waived
but the number of Shares tendered is at least equal to 75%, but less than 90%,
of the then outstanding number of Shares, for an aggregate period of not more
than 10 business days (for all such extensions) beyond the latest Expiration
Date that would be permitted under clause (i) or (ii) of this sentence.
RECOMMENDATION. The Company has represented to Parent in the Merger
Agreement that the Company Board, at a meeting duly called and held, has (i)
determined by unanimous vote of its directors that the Offer and the Merger are
fair to, advisable and in the best interests of the Company and its
stockholders, (ii) approved the Offer and adopted the Merger Agreement in
accordance with the GCL, (iii) resolved to recommend acceptance of the Offer and
approval of the Merger Agreement by the Company's stockholders, and (iv) taken
all other action necessary to render Section 203 of the GCL and the Rights
inapplicable to the Offer and the Merger; PROVIDED, HOWEVER, that such
recommendation and approval may be withdrawn, modified or amended to the extent
that the Company Board determines in good faith and on a reasonable basis, after
consultation with its outside counsel, that such action is required in the
exercise of the Company Board's fiduciary duties under applicable law. The
Company has further represented that, prior to the execution of the Merger
Agreement, the Financial Advisor delivered to the Company Board its written
opinion, to the effect that, as of the date of the Merger Agreement, the
consideration to be received by the holders of the Shares (other than Shares
held by Parent or its affiliates, in the treasury of the Company or by any
wholly-owned subsidiary of the Company) pursuant to the Offer and the Merger is
fair to such holders from a financial point of view.
DIRECTORS. The Merger Agreement provides that, subject to compliance with
applicable law, promptly upon the payment by the Purchaser for Shares pursuant
to the Offer, and from time to time thereafter, Parent is entitled to designate
such number of directors, rounded up to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (determined after giving effect to the directors so elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its affiliates bears to the total number of
Shares then outstanding. The Company will, upon request of Parent, promptly take
all
18
<PAGE>
actions necessary to cause Parent's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors; PROVIDED,
HOWEVER, that prior to the time the Merger becomes effective (the "Effective
Time"), the Company Board will always have at least two members who are neither
officers, directors, shareholders or designees of the Purchaser or any of its
affiliates ("Purchaser Insiders"). If the number of directors who are not
Purchaser Insiders is reduced below two prior to the Effective Time, the
remaining director who is not a Purchaser Insider will be entitled to designate
a person to fill such vacancy who is not a Purchaser Insider and who will be a
director not deemed to be a Purchaser Insider for all purposes of the Merger
Agreement.
Following the election or appointment of Parent's designees pursuant to the
preceding paragraph and prior to the Effective Time, any amendment or
termination of the Merger Agreement by the Company, any extension by the Company
of the time for performance of any of the obligations or other acts of Parent or
the Purchaser or waiver of any of the Company's rights thereunder will require
the concurrence of a majority of the directors of the Company then in office who
are not Purchaser Insiders (or in the case where there are two or fewer
directors who are not Purchaser Insiders, the concurrence of one director who is
not a Purchaser Insider) if such amendment, termination, extension or waiver
would have an adverse effect on the minority stockholders of the Company.
THE MERGER. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
The Company has agreed pursuant to the Merger Agreement that, if required by
applicable law in order to consummate the Merger, it will (i) convene a special
meeting of its stockholders as soon as practicable following the acceptance for
payment of and payment for Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the Merger Agreement; (ii) prepare
and file with the Commission a preliminary proxy statement relating to the
Merger Agreement, and use its reasonable best efforts (x) to obtain and furnish
the information required to be included by the Commission in the Proxy Statement
and, after consultation with Parent, to respond as soon as practicable to any
comments made by the Commission with respect to the preliminary proxy statement
and to cause a definitive proxy statement (the "Proxy Statement") to be mailed
to its stockholders and (y) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by its stockholders; and (iii) include in the
Proxy Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval and adoption of the Merger and the Merger
Agreement. Parent has agreed in the Merger Agreement that it will vote, or cause
to be voted, all of the Shares then owned by it, the Purchaser or any of its
other subsidiaries in favor of the approval of the Merger and the Merger
Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if the Purchaser acquires at least 90% of the outstanding Shares of the Company
pursuant to the Offer, the parties to the Merger Agreement will take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for the Shares by
the Purchaser pursuant to the Offer without a meeting of the stockholders of the
Company, in accordance with Section 253 of the GCL.
CHARTER, BY-LAWS, DIRECTORS AND OFFICERS. The Certificate of Incorporation
of the Purchaser, as in effect immediately prior to the Effective Time, will be
the Certificate of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the provisions thereof and of the Merger Agreement
and applicable law. The By-Laws of the Purchaser in effect at the time of the
Effective Time will be the By-Laws of the Surviving Corporation until amended,
subject to the provisions of the Merger Agreement which provide that all rights
to indemnification now existing in favor of directors and officers of the
Company and its subsidiaries as provided in their respective charters or By-Laws
will survive the Merger and continue in full force and effect and which provide
that the policies of the directors' and officers' liability and fiduciary
insurance most recently maintained by the Company (or a substitute policy that
is no less advantageous to the beneficiaries thereof) will survive and continue
in effect for not less than six years thereafter. Subject to applicable law, the
directors of the Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and will hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal, and the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation.
19
<PAGE>
CONVERSION OF SECURITIES. By virtue of the Merger and without any action on
the part of the holders thereof, at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than (i) any Shares
held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or the
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, will be canceled and retired and will cease to exist
with no payment being made with respect thereto and (ii) Dissenting Shares) will
be canceled and retired and will be converted into the right to receive Merger
Price, upon surrender of the certificate formerly representing such Share. At
the Effective Time, each share of common stock of the Purchaser, par value $.01
per share, issued and outstanding immediately prior to the Effective Time will,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
The Merger Agreement provides that, prior to the consummation of the Offer,
the Company Board (or, if appropriate, any committee thereof) will adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Stock Options") (other than options outstanding under the
Company's 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"
and such options being referred to as the "Purchase Plan Options")) granted
under any other stock option or similar plan or agreement of the Company (such
other stock option or similar plans or agreements together with the Employee
Stock Purchase Plan being collectively referred to herein as the "Stock Plans").
Such cancellation will occur without any payment therefor except as otherwise
discussed in this Section 11. Immediately prior to the Effective Time, all Stock
Options (whether vested or unvested) will, unless otherwise agreed by Parent and
the holder of such Stock Option, be cancelled (and to the extent exercisable
shall no longer be exercisable) and will entitle each holder thereof, in
cancellation and settlement therefor, to a payment, if any, in cash by the
Company (less any applicable withholding taxes), as soon as practicable
following the Effective Time, equal to the product of (i) the total number of
Shares subject to such Stock Option and (ii) the excess, if any, of the Merger
Price over the exercise price per Share subject to such Stock Option (the "Cash
Payments").
The Company will take all actions necessary to ensure that (i) the Offering
Period (as defined in the Employee Stock Purchase Plan) applicable to each
outstanding Purchase Plan Option is shortened so as to have a New Purchase Date
(as defined in the Employee Stock Purchase Plan) that occurs before the date on
which the Effective Time occurs; (ii) no new Offering Period or Purchase Period
(each as defined in the Employee Stock Purchase Plan) shall begin from and after
the date of the Merger Agreement; and (iii) no holder of a Purchase Plan Option
is permitted to increase his or her rate of contributions under the Employee
Stock Purchase Plan from and after the date of the Merger Agreement.
The Company will further take all actions necessary to provide that, as of
the Effective Time, (i) each of the Stock Plans will be terminated, (ii) the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any of its subsidiaries will be deleted, and (iii) no holder of Stock Options or
Purchase Plan Options (collectively "Options") will have any right to receive
any shares of capital stock of the Company or Surviving Corporation upon their
exercise.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to the Parent and the
Purchaser with respect to, among other matters, its organization and
qualification, capitalization, authority, required filings, public filings,
consents and approvals, financial statements, litigation, consents and
approvals, no defaults or undisclosed liabilities, information to be included in
the Proxy Statement, compliance with law, employee benefit matters, the absence
of any material adverse effects on the Company, environmental matters,
intellectual property, material contracts, opinion of financial advisor, tax
status, condition of assets, product liability, relationships with customers and
suppliers and Year 2000 matters. Parent and the Purchaser have made customary
representations and warranties to the Company with respect to, among other
matters, its organization, authority, consents and approvals, required filings
and financing.
20
<PAGE>
COVENANTS. The Merger Agreement obligates the Company and its subsidiaries,
from the date of the Merger Agreement until such time when a majority of the
Company's Board is designated or elected by the Purchaser or its respective
affiliates, to conduct their operations only in the ordinary course of business
consistent with past practice. The Merger Agreement also contains specific
restrictive covenants as to certain impermissible activities of the Company
prior to such time when a majority of the Company's Board is designated or
elected by the Purchaser or its respective affiliates, which provide that the
Company will not (and will not permit any of its subsidiaries to) take certain
actions without the prior written consent of Parent, including, among other
things, amendments to its certificate of incorporation or by-laws, issuances or
sales of its securities, changes in capital structure, dividends and other
distributions, repurchases or redemptions of securities, entrance into or
assumption of certain additional indebtedness, increases in compensation or
adoption of new benefit plans, material acquisitions or dispositions, changes in
the Company's accounting principles or practices, settlement or compromise of
any tax liability, discharge or satisfaction of certain claims, liabilities and
obligations, and certain other material events or transactions.
NO SOLICITATION. The Merger Agreement requires the Company, its affiliates
and their respective officers, directors, employees, representatives and agents
to immediately cease any existing discussions or negotiations, if any, with any
parties with respect to any acquisition or exchange of all or any material
portion of the assets of, or any equity interest in, the Company or any of its
subsidiaries or any recapitalization, business combination or similar
transaction with the Company or any of its subsidiaries. It further provides
that neither the Company nor any of its subsidiaries will, directly or
indirectly, through any officer, director, employee, agent or otherwise,
solicit, initiate, facilitate or encourage the submission of any proposal or
offer from any person relating to any acquisition or purchase of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its subsidiaries or any recapitalization, business combination or similar
transaction (an "Acquisition Transaction") with the Company or any of its
subsidiaries (any communication with respect to an Acquisition Transaction being
an "Acquisition Proposal") or participate in any negotiations regarding, or
furnish or disclose to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage any effort or attempt by any other person to do or seek any of the
foregoing or enter into any agreement, arrangement or understanding requiring it
to abandon, terminate or fail to consummate the Merger or any other transactions
contemplated in the Merger Agreement; PROVIDED, HOWEVER, that the Company may
furnish information to, and negotiate or otherwise engage in discussions with,
any party who delivers a BONA FIDE written Acquisition Proposal which was not
solicited or encouraged after the date of the Merger Agreement if the Company
Board by majority vote determines in good faith (i) after consultation with and
receipt of advice from its outside legal counsel, that failing to take such
action is reasonably determined to constitute a breach of the fiduciary duties
of the Company Board under applicable law, (ii) after consultation with and
receipt of written advice from the Financial Advisor or another nationally
recognized investment banking firm, that such proposal is more favorable to the
Company's stockholders from a financial point of view than the transactions
contemplated hereby (including any adjustment to the terms and conditions
proposed by the Purchaser in response to such Acquisition Proposal), (iii) that
sufficient commitments have been obtained with respect to such Acquisition
Proposal that the Company Board reasonably expects a transaction pursuant to
such Acquisition Proposal could be consummated and (iv) that such Acquisition
Proposal is not subject to any regulatory approvals that could reasonably be
expected to prevent or materially delay consummation. As a precondition to
furnishing nonpublic Company information to any party that makes an Acquisition
Proposal, the Company will enter into a confidentiality agreement with such
party, which confidentiality agreement will have terms and conditions that will
be no less favorable to the Company than the terms and provisions contained in
the Confidentiality Agreement.
The Company also agreed to promptly advise the Purchaser of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to an Acquisition Proposal (including the material terms
thereof and the identity of the other party or parties involved) and furnish to
the Purchaser
21
<PAGE>
within 48 hours of such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of any such written proposal. Pursuant to the Merger Agreement,
the Company will promptly provide to the Purchaser any material non-public
information regarding the Company provided to any other party, which information
was not previously provided to the Purchaser. In addition, the Company agreed to
promptly advise the Purchaser, in writing, if the Company Board will make any
determination as to any Acquisition Proposal as contemplated by the first
sentence of the preceding paragraph. The Company agrees that it shall keep the
Purchaser informed, on a current basis, of the status of and developments
relating to any Acquisition Proposal, including the results of any substantive
discussions or negotiations. Notwithstanding the foregoing, the Company will be
permitted to take such actions as may be required to comply with Rule 14e-2 of
the Exchange Act.
ACCESS TO INFORMATION. The Merger Agreement provides that, until the
Effective Time, the Company will give the Purchaser, its representatives and
persons providing or committed to providing the Purchaser with financing for the
contemplated transaction reasonable access to all employees, plants, offices,
warehouses and other facilities and properties and to all books and records of
the Company and its subsidiaries, will permit the Purchaser to make such
inspections as the Purchaser reasonably requests, and will cause the Company's
officers and those of its subsidiaries to furnish the Purchaser with such
financial and operating data and other information with respect to business and
properties as the Purchaser reasonably requests.
EFFORTS. Subject to the terms and conditions provided in the Merger
Agreement, the Company and the Purchaser will use their respective reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable under any applicable laws to
consummate and make effective the transaction contemplated hereby as promptly as
practicable.
The Company agreed to use its reasonable best efforts to assist the
Purchaser in connection with structuring or obtaining any financing in
connection with consummation of the transactions contemplated in the Merger
Agreement, and the Purchaser will use its reasonable best efforts to obtain such
financing.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company and
the Purchaser will consult with each other before issuing any press release or
otherwise making any public statement with respect to transactions contemplated
by the Merger Agreement, and will not issue any such press release or make any
such public statement prior to such consultation, unless required by applicable
law or any listing agreement with a securities exchange or the Nasdaq National
Stock Market.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the Merger
Agreement, the Purchaser agreed that all rights to indemnification or
exculpation existing as of the date of the Merger Agreement in favor of the
directors, officers, employees and agents of the Company and its subsidiaries as
provided in their respective certificates of incorporation or by-laws or
otherwise in effect as of the date of the Merger Agreement with respect to
matters occurring prior to the consummation of the last to occur of any of the
transactions contemplated in the Merger Agreement will survive such consummation
and will continue in full force and effect. To the maximum extent permitted by
the GCL, such indemnification will be mandatory rather than permissive, and the
Company or the Surviving Corporation, as the case may be, will advance expenses
in connection with such indemnification.
The Purchaser further agreed to cause the Company or the Surviving
Corporation, as the case may be, to maintain in effect for not less than six
years from the consummation of the last to occur of any of the transactions
contemplated in the Merger Agreement, the policies of the directors' and
officers' liability and fiduciary insurance most recently maintained by the
Company (PROVIDED that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the beneficiaries thereof so long as such substitution
does not result in gaps or lapses in coverage) with respect to matters occurring
prior to the consummation of the last to occur of any of the transactions
contemplated in the Merger Agreement to the extent available, PROVIDED that in
no event will the Company or the Surviving Corporation, as the case may be, be
required to expend more than an amount per year equal to 150% of the current
annual premiums paid by the Company (the "Premium
22
<PAGE>
Amount") to maintain or procure insurance coverage pursuant to the Merger
Agreement, and PROVIDED, FURTHER, that, if the Surviving Corporation is unable
to obtain such insurance the Surviving Corporation will obtain as much
comparable insurance as is available for the Premium Amount per year.
Pursuant to the Merger Agreement, the Company agreed to indemnify and hold
harmless the Purchaser and its affiliates (as defined in the Securities Act),
successors, assigns, and the agents (including, without limitation, financing
sources and their affiliates) and employees of any of them (collectively, the
"Purchaser Indemnified Parties") from and against any and all costs, expenses,
losses, damages and liabilities (including, without limitation, reasonable
attorneys' fees and expenses) suffered by any of the Purchaser Indemnified
Parties (other than with respect to (i) a claim arising directly from the gross
negligence or willful misconduct of a Purchaser Indemnified Party or (ii) a
claim of breach by the Purchaser of this Agreement or any confidentiality with
the Company to which the Purchaser is a party) to the extent resulting from,
arising out of, or incurred with respect to, any litigation, legal action,
arbitration proceeding, material demand, material claim or investigation against
any of the Purchaser Indemnified Parties in connection with the Purchaser's
proposal to acquire Shares as set forth in the Merger Agreement, or in
connection with any Acquisition Proposal relating to the Purchaser or any
circumstances related thereto.
EMPLOYEE BENEFIT ARRANGEMENTS. The Company agreed that it will not take any
action which could prevent or impede the termination of the Stock Plans and any
other plans, program or arrangements providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any subsidiary
of the Company, in each case, effective prior to the Effective Time. The Company
also agreed to take all necessary action to (i) ensure that none of the Parent,
Company or any of their respective subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements that would entitle any
Person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof as of the Effective Time and (ii) obtain all necessary consents
such that the holders of Options will have no rights other than the rights of
the holders of Options to receive the Cash Payment, if any, in cancellation and
settlement thereof.
NOTIFICATION OF CERTAIN MATTERS. Parent and the Company have agreed to
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (B) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the Merger Agreement in
any material respect; PROVIDED, HOWEVER, that no such notification will affect
the representations or warranties of any party or the conditions to the
obligations of any party. Each of the Company, Parent and the Purchaser is also
required to give prompt notice to the other parties of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by the
Merger Agreement.
RIGHTS AGREEMENT. Except as contemplated by the Merger Agreement, the
Company agreed that it would not (i) redeem the Rights, (ii) amend the Rights
Agreement or (iii) take any action which would allow any Person (as defined in
the Rights Agreement) other than Parent or the Purchaser to acquire beneficial
ownership of 15% or more of the Shares without causing a Distribution Date or a
Triggering Event (as such terms are defined in the Rights Agreement) to occur.
STATE TAKEOVER LAWS. The Merger Agreement provides that the Company will,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, of any
state takeover law.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger Agreement,
the respective obligations of Parent, the Purchaser and the Company to
consummate the Merger are subject to the
23
<PAGE>
satisfaction, at or before the Effective Time, of each of the following
conditions: (i) the stockholders of the Company will have duly approved the
transactions contemplated by the Merger Agreement by the requisite vote; (ii)
the Purchaser will have accepted for payment and paid for Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement; (iii) the
consummation of the Merger will not be restrained, enjoined or prohibited by any
order, judgment, decree, injunction or ruling of a court of competent
jurisdiction or any Governmental Entity, and there will not be any statute, rule
or regulation enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity which prevents the consummation of the Merger or has the
effect of making the purchase of Shares illegal; and (iv) any waiting period
(and any extension thereof) under the HSR Act applicable to the Merger will have
expired or terminated.
TERMINATION. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval and adoption of the Merger Agreement by the
stockholders of the Company (with any termination by Parent also being an
effective termination by the Purchaser):
(a) by the mutual written consent duly authorized by the Company (by
action of the Company Board) and Parent;
(b) by Parent or the Company if (i) any court or other Governmental
Entity will have issued an order, decree, or ruling (which order, decree or
ruling the parties thereto will use their best efforts to lift) or taken any
other final action restraining, enjoining or otherwise prohibiting the Offer
or the Merger and such order, decree, ruling or other action will have
become final and nonappealable, or (ii) the Effective Time will not have
occurred on or before the date which is six months from the date of the
Merger Agreement; PROVIDED, HOWEVER, that the right to terminate the Merger
Agreement will not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date;
(c) by Parent upon an occurrence or circumstance which would result in a
failure to satisfy any of the conditions set forth in Section 14 the
Purchaser will have (i) failed to commence the Offer by the fifth business
day from the date of the Merger Agreement, (ii) terminated the Offer without
having accepted any Shares for payment thereunder, or (iii) failed to pay
for Shares pursuant to the Offer by the date which is four months from the
date hereof, unless, in each case, such failure to commence the Offer or pay
for Shares (whether before or after termination of the Offer) will have been
caused by or resulted from a material breach of any of Parent's or
Purchaser's representations, warranties or covenants, which breach cannot be
or has not been cured within thirty (30) days following receipt of written
notice of such breach;
(d) by the Company if (i) due to an occurrence or circumstance which
would result in a failure to satisfy any of the conditions set forth in
Section 14 the Purchaser will have (A) failed to commence the Offer by the
fifth business day from the date of the Merger Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder, or (C)
failed to pay for Shares pursuant to the Offer by the date which is four
months from the date of the Merger Agreement, unless, in each case, such
failure to commence the Offer or pay for Shares (whether before or after
termination of the Offer) will have been caused by or resulted from a
material breach of any of the Company's
representations, warranties, or covenants, or (ii) prior to the purchase of
Shares pursuant to the Offer, a corporation, partnership, person or other
entity or group will have made a BONA FIDE Acquisition Proposal that the
Company Board by majority vote in good faith determines (A) after
consultation with and receipt of advice from its outside legal counsel, that
failing to take such action is reasonably determined to constitute a breach
of fiduciary duties of the Company Board under applicable law, and (B) after
consultation with and receipt of written advise from the Financial Advisor
or another nationally recognized investment banking firm, that such proposal
is more favorable to the Company's stockholders from a financial point of
view than the Offer and the Merger (including any adjustment to the terms
and condition proposed by Purchaser in response to such BONA FIDE
Acquisition Proposal).
24
<PAGE>
The Merger Agreement provides that such termination described in clause (ii)
of this subparagraph will not be effective until payment of the Termination
Fee;
(e) by Parent prior to the purchase of Shares pursuant to the Offer, if
(i) there will have been a material breach of any of the Company's
representations, warranties or covenants that cannot be or has not been
cured within 30 days following receipt of written notice of such breach,
(ii) the Company Board will have withdrawn, modified, or changed (including
by amendment of the Schedule 14D-9) its recommendation or approval in
respect of the Merger Agreement or the Offer in a manner adverse to
Purchaser, or will have adopted any resolution to effect any of the
foregoing, (iii) the Company Board will have recommended any proposal other
than the Merger Agreement in respect of an Acquisition Proposal, (iv) the
Company will have exercised a right with respect to an Acquisition Proposal
referenced in the Merger Agreement and will, directly or through its
representatives, continue discussions with any third party concerning an
Acquisition Proposal for more than 10 business days after the date of
receipt of such Acquisition Proposal, (v) an Acquisition Proposal that is
publicly disclosed and that contains a proposal as to price (without regard
to whether such proposal specifies a specific price or a range of potential
prices) will have been commenced, publicly proposed or communicated to the
Company, and the Company will not have rejected such proposal within 10
business days of the earlier to occur of (A) the Company's receipt of such
Acquisition Proposal and (B) the date such Acquisition Proposal first
becomes publicly disclosed, (vi) any person or group (as defined in Section
13(d)(3) of the Exchange Act) other than Purchaser or any of its
subsidiaries or affiliates will have become the beneficial owner of more
than 15% of the outstanding Shares (either on a primary or a fully diluted
basis); PROVIDED, HOWEVER, that this provision will not apply to any person
that owns more than 15% of the outstanding Shares on the date hereof;
PROVIDED, FURTHER, that such person does not increase its beneficial
ownership beyond the number of Shares such person beneficially owns on the
date hereof, or (vii) the Minimum Condition will not have been satisfied by
the initially scheduled expiration date of the Offer and on or prior to such
date an entity or group (other than Purchaser) will have made and not
withdrawn a proposal with respect to an Acquisition Proposal; or
(f) by the Company if there will have been a material breach of any of
Purchaser's or Parent's representations, warranties or covenants which
breach cannot be or has not been cured within 30 days of the receipt of
written notice thereof.
FEES AND EXPENSES. The Merger Agreement provides that in the event that (i)
Parent terminates the Merger Agreement pursuant to paragraphs (e)(i), (vi) or
(vii) of "Termination" as described above and within twelve months following the
date of any such termination the Company enters into a definite agreement or
agreement in principle with respect to an Acquisition Proposal with a third
party or an Acquisition Proposal with respect to the Company is consummated; or
(ii) the Parent terminates the Merger Agreement pursuant to subparagraphs
(e)(ii), (iii), (iv) or (v) of "Termination" as described above; or (iii) the
Company desires to terminate the Merger Agreement pursuant to paragraph (d)(ii)
of "Termination" as described above, then the Company is required to pay to
Parent, (A) within one business day following the execution and delivery of such
agreement in the case of clause (i) of this sentence, (B) within one (1)
business day of such termination, in the case of clause (ii) of this sentence,
or (C) immediately prior to such termination, in the case of clause (iii) of
this sentence, a termination fee in cash, of $3,000,000 (the "Termination Fee").
The Merger Agreement provides that the Company in no event will be obligated to
pay more than one such Termination Fee with respect to all such agreements and
occurrences and such termination.
The Company has also agreed that upon the termination of the Merger
Agreement for any reason prior to the purchase of Shares by the Purchaser
pursuant to the Offer (other than termination (i) by the Company pursuant to
paragraph (f) of "Termination" as described above; or (ii) by the Parent
pursuant to subparagraph (c) of "Termination" as described above solely as a
result of the failure to satisfy the condition set forth in subparagraph (h) of
Section 14, at a time when there is no breach of any of the Company's
representations, warranties or obligations set forth herein and all of the other
conditions set
25
<PAGE>
forth in Section 14 are satisfied) the Company will reimburse Parent, Purchaser
and their respective affiliates for all actual documented out-of-pocket fees and
expenses, not to exceed $1,000,000, actually and reasonably incurred by any of
them or on their behalf in connection with the Offer and the Merger and the
consummation of all transactions contemplated by the Merger Agreement
(including, without limitation, fees payable to financing sources, investment
bankers, counsel to any of the foregoing and accountants).
AMENDMENT. Subject to applicable law, the Merger Agreement may be amended
by action taken by the Company, Parent and the Purchaser at any time before or
after approval of the Merger by the stockholders of the Company (if required by
applicable law) but, after any such approval, no amendment will be made which
requires the approval of such stockholders under applicable law without such
approval. The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of the parties thereto.
EXTENSION; WAIVER. At any time prior to the Effective Time, any party to
the Merger Agreement may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained therein or in any
document, certificate or writing delivered pursuant thereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
in the Merger Agreement. Any agreement on the part of any party thereto to any
such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of either party thereto to
assert any of its rights hereunder will not constitute a waiver of such rights.
(C) APPRAISAL RIGHTS.
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of the Company who have not
tendered their Shares will have certain rights under the GCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of, their
Shares. Stockholders who perfect such rights by complying with the procedures
set forth in Section 262 of the GCL ("Section 262") will have the fair value of
their Shares (exclusive of any element of value arising from the accomplishment
or expectation of the Merger) determined by the Delaware Court of Chancery and
will be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
WEINBERGER v. UOP, INC., the Delaware Supreme court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The WEINBERGER court also noted that under Section 262,
fair value is to be determined "exclusive of any element of value arising from
the accomplishment of exception of the merger." In CEDE & CO. v. TECHNICOLOR,
INC., however, the Delaware Supreme Court stated that, in the context of a
two-step cash merger, "to the extent that value has been added following a
change in majority control before cash-out, it is still value attributable to
the going concern," to be included in the appraisal process. As a consequence,
the fair value determined in any appraisal proceeding could be more or less than
the consideration to be paid in the Offer and the Merger.
Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares. Parent
intends, however, to cause the Surviving Corporation to argue in an appraisal
proceeding that, for purposes of such proceeding, the fair value of each Share
is less than the price paid in the Merger. In this regard, stockholders should
be aware that opinions of investment banking firms as to the fairness from a
financial point of view (including the Financial Advisor's opinion described
herein) are not necessarily opinions as to "fair value" under Section 262.
26
<PAGE>
THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE
TO THE APPLICABLE PROVISIONS OF THE GCL.
(D) PLANS FOR THE COMPANY.
Except as otherwise set forth in this Offer to Purchase, it is expected
that, initially following the Merger, the Surviving Corporation will continue
the business and operations of the Company substantially as they are currently
being conducted. Except as indicated in this Offer to Purchase, Parent does not
have any present plans or proposals which relate to or would result in any
material change in the Company's capitalization or dividend policy or the
composition of the Company's Board or the Company's management. Stonington, the
Fund and their affiliates regularly consider, and engage in discussion
concerning, potential investments in businesses, including businesses that may
be competitive with or complimentary to the business of the Company. There are
currently no agreements with respect to an investment in any such business.
However, Stonington and the Fund may consider a merger, consolidation or other
extraordinary transaction involving the Company in connection with any such
investment.
(E) THE RIGHTS.
According to the Company's Current Report on Form 8-K dated November 13,
1996 (together with subsequent filings relating to the Rights Agreement, the
"Company 8-K"), on November 13, 1996, the Company declared a dividend
distribution of one Right for each outstanding Share, which entitles the
registered holder to purchase from the Company one one-thousandth of a share of
a Series A Participating Preferred Stock, par value $0.001 per share, of the
Company (the "Preferred Stock") at an exercise price of $80.00 per one
one-thousandth of a share of Preferred Stock (the "Exercise Price"), subject to
adjustment.
The Rights Agreement provides that in the event that a person becomes the
beneficial owner of 15% or more of the outstanding Shares, each holder of a
Right can receive upon exercise that number of Shares (or other securities) of
the Company having at the time of such transaction a market value equal to two
times the Exercise Price. In the event that (i) the Company consolidates with,
or merges with and into, any other individual, firm, corporation or other entity
(a "Person"); (ii) any Person consolidates with, or merges with and into, the
Company and the Company is the continuing or surviving corporation, all or part
of the Shares are changed into or exchanged for stock or other securities of any
other person (or of the Company); or (iii) the Company sells 50% or more of the
assets or earning power of the Company and its subsidiaries (taken as a whole),
then each holder of a Right can receive common stock of the acquiring company
having a value equal to two times the Exercise Price. As a condition of the
Offer and pursuant to the Merger Agreement, the Company has taken all actions
necessary to make the Rights inapplicable to the Offer and the Merger.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company 8-K and
the text of the Rights Agreement as set forth as an exhibit to Form 8-A dated
December 11, 1996 which was filed with the Commission, copies of which may be
obtained in the manner set forth in Section 8. The Company has agreed to take
all actions necessary to render the rights inapplicable to the Offer and the
Merger.
STOCKHOLDERS ARE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE
TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. IF THE DISTRIBUTION
DATE (AS DEFINED IN THE RIGHTS AGREEMENT) DOES NOT OCCUR PRIOR TO THE EXPIRATION
DATE, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS.
SEE SECTIONS 1 AND 3.
12. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all Shares
and to cancel all of the Options pursuant to the Offer and the Merger and to pay
related fees and expenses is expected to be in an aggregate amount of
approximately $120.8 million. In addition, the total amount of funds needed by
the Company to repurchase or refinance its existing indebtedness is expected to
be in the aggregate amount of approximately $53 million. Consummation of the
Offer is conditioned on the obtaining of financing.
27
<PAGE>
FACILITIES AND THE USE OF PROCEEDS. The Purchaser expects to obtain debt
and equity financing in an aggregate amount of approximately $200 million to
fund the Offer, the Merger and the related fees and expenses, to refinance
substantially all of the indebtedness of the Company and to provide for the
working capital requirements of the Surviving Corporation. The Fund will
contribute $80 million to Parent as an equity contribution, and the lenders will
provide $120 million in credit to Holdings II, Inc., a newly formed Delaware
corporation that is a wholly owned subsidiary of Parent ("Holdings II"). The
funds necessary to purchase the Company's stock will be provided to the
Purchaser by way of an equity capital contribution from Parent (indirectly
through Holdings II) and Holdings II will loan to the Company the funds
necessary to refinance its existing indebtedness (the notes evidencing such loan
hereinafter the "Intercompany Notes"). Following consummation of the Merger,
Holdings II will be merged with and into the Surviving Corporation with the
effect that Surviving Corporation will assume the obligations of both the
Purchaser and Holdings II under the credit facility.
Pursuant to a Commitment Letter dated November 8, 1998 (the "Commitment
Letter"), each of Bankers Trust Company ("BTCo") and NationsBank, N.A.
("NationsBank") has committed to provide, severally but not jointly, $60 million
of the senior credit facility described below, which aggregate to $120 million.
The senior credit facility will consist of a tranche A term loan of up to $55
million and a tranche B term loan of up to $15 million (collectively the "Term
Loan Facility") and a revolving credit facility of up to $50 million, including
a sublimit in an amount to be agreed upon for letters of credit (the "Revolving
Credit Facility," and together with the Term Loan Facility, the "Credit
Facility"). NationsBanc Montgomery Securities, L.L.C. will act as syndication
agent for the lenders.
MATURITY; COMMITMENT REDUCTION; AMORTIZATION. The lenders' commitments to
lend the tranche A term loans and the tranche B term loans will terminate
immediately upon consummation of the Tender Offer. The tranche A term loans have
a final maturity date of five and one-half years after the date of the initial
funding under the Credit Facility (the "Closing Date"). Certain quarterly
amortization will be required. The tranche B term loans have a final maturity
date of seven years after the Closing Date. Quarterly amortization will be
required in aggregate annual amounts equal to 1% of the original principal
amount of the tranche B Term Loans for the first six years after the Closing
Date and the remaining balance will be amortized in equal quarterly installments
during the seventh year. The Revolving Credit Facility has a final maturity date
of five and one-half years after the Closing Date.
INTEREST. All amounts outstanding under the Credit Facility will bear
interest, at the Borrower's option, as follows: (1) with respect to the tranche
A term loans and the loans made under the Revolving Credit Facility, at the
reserve adjusted eurodollar rate or the base rate plus, in each case, a margin
which will initially be 3.00% and 2.00% per annum, respectively, for the
six-month period following the Closing Date and which will thereafter be based
on the ratio (the "Leverage Ratio") of consolidated total debt to consolidated
EBITDA of the Borrower and its subsidiaries to be determined; and (2) with
respect to the tranche B term loans, at the reserve adjusted eurodollar rate or
the base rate plus, in each case, a margin equal to 3.50% and 2.50% per annum.
Loans outstanding under the swingline facility will bear interest at the rate
applicable base rate loans under the Revolving Credit Facility minus the
commitment fee percentage in respect of the Revolving Credit Facility, and such
outstanding loans will not constitute usage of the Revolving Credit Facility for
purposes of calculating the commitment fee. After the occurrence and during the
continuation of an event of default, interest will accrue at a rate equal to the
rate on loans bearing interest at the rate determined by reference to the base
rate plus an additional two percentage points (2.00%) per annum and will be
payable on demand.
Within 90 days after the Closing Date, the Borrower will obtain certain
interest rate protection, pursuant to interest rate swaps, caps or other similar
arrangements satisfactory to the administrative agent.
GUARANTEES; SECURITY. The Credit Facilities will be guaranteed by Parent,
which guarantee will be secured by a pledge of the stock of the Borrower. Upon
consummation of the Merger, the Credit Facility will also be guaranteed by all
direct and indirect domestic subsidiaries of the Borrower. The Credit Facility
28
<PAGE>
will be secured on a first priority perfected lien basis by Parent's pledge of
the stock of Holdings II and by Holdings II's pledge of the stock of the
Purchaser and the Intercompany Notes. The Intercompany Notes between Holdings II
and the Company will be secured by all existing and after-acquired personal
property of the Company on a first priority perfected lien basis and such
security interest in favor of Holdings II will be assigned by Holdings II to
BTCo on behalf of the lenders. Upon consummation of the Merger and assumption of
the Credit Facility by the Company, all extensions of credit to the Borrower and
all guaranties of subsidiaries of the Borrower will be secured by all existing
and after-acquired personal property of the Borrower and the subsidiary
guarantors, including a pledge of 100% of the stock of all domestic subsidiaries
of the Borrower and 65% of the stock of all foreign subsidiaries of Borrower.
Upon consummation of the Merger and assumption of the Credit Facility by the
Company, the Credit Facilities will also be secured by first priority liens on
all existing and after-acquired real property fee interests and all leasehold
interests of the Borrower and the subsidiary guarantors, subject to exceptions
to be agreed upon. There will be a negative pledge on all assets of Parent, the
Borrower and its subsidiaries, subject to exceptions to be agreed upon.
REPAYMENTS. Voluntary prepayment and commitment reductions may be made in
whole or in part without premium or penalty (eurodollar loans prepayable only on
the last days of related interest periods or if the Borrower pays all breakage
costs) and the lenders' commitments relative thereto reduced or terminated upon
such notice and in such amounts as may be agreed upon. Voluntary prepayments of
the Term Loan Facility will be applied ratably to the tranche A term loans and
the tranche B term loans and will be applied on a PRO RATA basis to the
scheduled installments thereof.
With respect to mandatory prepayments and commitment reductions, following
consummation of the Merger, the Borrower will prepay the loans and/or the
commitments under the Revolving Credit Facility will be reduced (subject to
certain basket amounts to be agreed upon) in amounts equal to: (1) 100% of the
net after-tax proceeds of the sale or other disposition of any property or
assets of Parent, the Borrower or any of its subsidiaries (including insurance
and condemnation proceeds), other than (a) net cash proceeds of sales or other
dispositions of inventory in the ordinary course of business and (b) certain
other exceptions to be negotiated, in each case payable no later than the first
business day following the date of receipt; (2) 75% of the net cash proceeds
received from the issuance of equity securities of Parent, the Borrower or any
of its subsidiaries, in each case payable no later than the first business day
following the date of receipt; (3) 100% of the net cash proceeds received from
certain issuances of debt securities by Parent, the Borrower or any of its
subsidiaries, in each case payable no later than the first business day
following the date of receipt; and (4) 75% of excess cash flow for each fiscal
year, payable within 90 days after the end of the applicable fiscal year.
All such amounts will be applied to first the prepayment of the Term Loan
Facility and thereafter to the prepayment of the Revolving Credit Facility and
the reduction of the commitments thereunder and all such mandatory prepayments
of the Term Loan Facility will be applied ratably to the tranche A term loans
and to the tranche B term loans; PROVIDED that, during the first six months
following the Closing Date the first $25.0 million in cash proceeds from the
issuance of subordinated debt securities (the "Permitted Mezzanine Financing")
will be applied as follows: (a) $5.0 million to the prepayment of the tranche A
term loans and (b) $20.0 million to redeem a portion of the Fund's equity
investment. Mandatory prepayments of the Term Loan Facility made pursuant to the
preceding sentence will be applied PRO RATA to the remaining scheduled
installments of the Term Loan Facility. All other mandatory repayments will be
applied to the remaining scheduled installments of the Term Loan Facility in a
manner to be determined. Notwithstanding the foregoing, in the case of any
mandatory prepayment to be applied to the tranche B term loans, the Borrower may
elect to offer the holders thereof the opportunity to waive the right to receive
the amount of such mandatory prepayment. In the event any such holders elect to
waive such right, 100% of the amount that would otherwise have been applied as a
mandatory prepayment of the tranche B Term Loans of such holders will be applied
to the prepayment of the tranche A term loans.
29
<PAGE>
CONDITIONS. The Commitment Letter refers to customary conditions precedent
to the initial funding of the Credit Facility, which will include, without
limitation, the preparation of definitive financing documentation; the existence
of satisfactory corporate, capital and ownership structures of Parent, the
Company, and their respective subsidiaries as well as a satisfactory acquisition
structure and documentation thereof; the existence of certain minimum equity
capitalization and related items; consummation of the tender offer; discharge of
existing indebtedness; obtaining certain approvals and agreements; meeting
certain maximum transaction fees and expenses; grants of certain security
interests; presentation of certain financial statements; no material adverse
change in the business, operation, properties, assets, liabilities, condition or
prospects of the Company since January 31, 1998; the absence of specified
material adverse changes in the financial and capital markets, or in the
business, operation, properties, assets, liabilities, condition (financial or
otherwise) or prospects of Parent, the Company and their respective
subsidiaries; and the results of the remaining legal, tax, regulatory and
environmental investigations being reasonably satisfactory in all material
respects to the Agents. The conditions to all borrowings will include
requirements relating to prior written notice of borrowing, the accuracy of
representations and warranties, and the absence of any default or potential
event of default, and will otherwise be customary and appropriate for financings
of this type.
REPRESENTATIONS AND WARRANTIES. The Commitment Letter refers to certain
customary representations and warranties, including without limitation due
organization and authorization, enforceability, financial condition, no material
adverse changes, title to properties, liens, litigation, payment of taxes, no
material adverse agreements, compliance with laws, employee benefit liabilities,
environmental liabilities, perfection and priority of liens securing the Credit
Facility, full disclosure, Year 2000 compliance and the accuracy of all
representations and warranties in the Merger Agreement and other documents
relating to the acquisition.
COVENANTS. The Commitment Letter also provides for certain customary
affirmative covenants, including but not limited to covenants to deliver
appraisals, title insurance and environmental reports relating to the real
property securing the Credit Facilities and a solvency opinion from an
independent valuation consultant or appraiser, and negative covenants, including
but not limited to limitations on other indebtedness, liens, investments,
guarantees, restricted junior payments, dividends (PROVIDED that, after the
mandatory prepayments of the Credit Facility described above have been made, up
to $20.0 million in proceeds of a Permitted Mezzanine Financing may be used to
redeem the Borrower's common stock, redemptions and payments on subordinated
debt), mergers and acquisitions, sales of assets, leases, transactions with
affiliates, conduct of business, Year 2000 compliance and other provisions
customary and appropriate for financings of this type, including exceptions and
baskets to be manually agreed upon. Notwithstanding the foregoing, prior to the
Merger, the Credit Facility will not (i) prohibit the sale or other disposition
of the Shares held by the Purchaser for cash at the fair value thereof so long
as the proceeds are held as cash or approved cash equivalents and (ii) prohibit
the creation or existence of any lien or encumbrance on or with respect to the
Shares. Financial covenants will include a minimum interest coverage test, a
maximum leverage test, a minimum EBITDA test and a maximum capital expenditure
test. Parent will agree to cause the Merger to occur as soon as practicable but
in any event within 120 days after the consummation of the Offer pursuant to the
definitive acquisition documents, including in the event that not less than 90%
of the Shares are tendered in the Offer, causing a "short-form" merger to occur
promptly following the payment for the Shares purchased in the Offer.
EVENTS OF DEFAULT. The Commitment Letter provides for customary and
appropriate events of default (subject to customary and appropriate grace
periods), including without limitation failure to make payments when due,
defaults under other agreements or instruments of indebtedness, noncompliance
with covenants, breaches of representations and warranties, bankruptcy,
judgments in excess of specified amounts, invalidity of guaranties, impairment
of security interests in collateral, and changes of control.
30
<PAGE>
INDEMNIFICATION; EXPENSES; FEES. In connection with the Commitment Letter,
Stonington, as the management company of the Fund, agreed to pay the reasonable
costs and expenses arising in connection with the Commitment Letter, the
financing agreements, and the syndication of the Credit Facility. As the
management company of the Fund, Stonington further agreed to indemnify each of
the arrangers, the lenders, and each director, officer, employee, agent,
attorney and affiliate thereof against certain liabilities, except in cases of
gross negligence or willful misconduct by such indemnified person or entity.
Stonington's indemnification obligation will terminate upon execution of the
definitive financing documentation. The Purchaser agreed to pay BTCo,
NationsBank, BT Alex.Brown Incorporated and NationsBanc Montgomery Securities,
L.L.C., as the case may be, financing, commitment, annual and other fees
customary for commitments of the types described herein. The Purchaser has also
agreed to pay to BTCo and NationsBank a termination fee payable under certain
circumstances if the Merger Agreement is terminated.
The foregoing summary of the Commitment Letter is qualified in its entirety
by reference to the text of the Commitment Letter which has been filed as an
exhibit to the Schedule 14D-1 and is incorporated herein by reference.
Because the financing is still under review, Parent may alter one or more of
the financing mechanism described above and may issue its equity securities
(including common and preferred stock) to other parties, including one or more
parties to the financing, and may issue additional subordinated or senior debt.
Parent expects the financing will be repaid from a combination of cash flow
from operations of the Company and future financings.
13. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that, without the prior written consent of the
Purchaser and except as otherwise expressly provided in the Merger Agreement,
the Company will not, and will not permit any of its subsidiaries to, prior to
the time persons designated or elected by the Purchaser or any of the respective
affiliates will constitute a majority of the Board, (i) issue, reissue or sell,
or authorize the issuance, reissuance or sale of (A) additional shares of
capital stock of any class, or securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any convertible securities
or capital stock, other than the issuance of Shares (and the related Rights), in
accordance with the terms of the instruments governing such issuance on the date
of the Merger Agreement, pursuant to the exercise or conversion of Options
outstanding on the date of the Agreement, or (B) any other securities in respect
of, in lieu of, or in substitution for, the Shares or any other capital stock of
any class outstanding on the date of the Agreement; (ii) make any other changes
in its capital structure; or (iii) split, combine or reclassify any shares of
its capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, or redeem or otherwise acquire any of its securities or any
securities of its subsidiaries.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser will not be
required to accept for payment or pay for, and may delay the acceptance for
payment of, or the payment for, any Shares, and may terminate or, subject to the
terms of the Merger Agreement, amend the Offer, if (i) there will not be validly
tendered and not properly withdrawn prior to the Expiration Date, as it may be
extended in accordance with the Offer that number of Shares which represents at
least a majority of the total number of outstanding Shares on a fully diluted
basis on the date of purchase (not taking into account the Rights) (the "Minimum
Condition"), (ii) any applicable waiting period under the HSR Act will not have
expired or been terminated prior to the expiration of the Offer, or (iii) at any
time on or after the date of the Merger Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
31
<PAGE>
(a) there will be threatened or pending any action, suit or proceeding
or any statute, rule, regulation, judgment, order or injunction proposed,
sought, promulgated, enacted, entered, enforced or deemed applicable to the
Offer, or any other action will have been taken, proposed or threatened, by
any Governmental Entity or by any court of competent jurisdiction, other
than the routine application to the Offer, the Merger or other subsequent
business combination of waiting periods under the HSR Act, (i) seeking to
prohibit or impose any material limitations on Parent's or Purchaser's
ownership or operation (or that of any of their respective subsidiaries or
affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent or the Purchaser or their
respective subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent or the
Purchaser and their respective subsidiaries, in each case, taken as a whole,
(ii) seeking to make the acceptance for payment of, or the payment for, some
or all of the Shares illegal or otherwise prohibiting, restricting or
significantly delaying consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company or the Purchaser any
damages that are material in relation to the Company and its subsidiaries as
taken as a whole, (iii) seeking to impose material limitations on the
ability of the Purchaser, or render the Purchaser unable, to acquire or hold
or to exercise effectively all rights of ownership of the Shares, including,
without limitation, the right to vote any Shares purchased by the Purchaser
on all matters properly presented to the stockholders of the Company, or
effectively to control in any material respect the business, assets or
operations of the Company, its subsidiaries or the Purchaser or any of their
respective affiliates, (iv) seeking to impose circumstances under which the
purchase or payment for some or all of the Shares pursuant to the Offer and
Merger could have a material adverse affect on the Purchaser, or (v) which
otherwise is reasonably likely to have a material adverse effect on the
Company; or
(b) there will have occurred any change that constitutes a Company
Material Adverse Effect (as defined in the Merger Agreement); or
(c) there will have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, Inc.
or The Nasdaq Stock Market for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) the
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States (whether or not mandatory), (iii) the
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory), by any U.S. governmental authority or
agency, likely to materially adversely affect, the extension of credit by
banks or other financial institutions, (v) a change in general financial,
bank or capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans, (vi) from the date of the Merger Agreement through the date
of termination or expiration of the Offer, a decline of at least 15% in the
Standard & Poor's 500 Index, or (vii) in the case of any of the foregoing,
existing at the date of the execution of the Merger Agreement, a material
acceleration or worsening thereof; or
(d) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent or the Purchaser,
any of their respective affiliates, or any group of which any of them is a
member will have acquired beneficial ownership of more than 15% of the
outstanding Shares or will have entered into a definitive agreement or an
agreement in principle with the Company with respect to an Acquisition
Transaction involving the Company or any of its subsidiaries; or
(e) the Merger Agreement will have been terminated in accordance with
its terms; or
32
<PAGE>
(f) (i) the Company Board will have withdrawn, changed or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, the Merger
Agreement or the Merger or will have recommended an Acquisition Proposal, or
will have adopted any resolution to effect any of the foregoing, (ii) the
Company Board will have recommended any proposal other than the Merger
Agreement in respect of an Acquisition Proposal, (iii) the Company will have
exercised a right with respect to an Acquisition Proposal referenced in the
Merger Agreement and will have, directly or through its representatives,
continued discussions with any third party concerning an Acquisition
Proposal for more than ten (10) business days after the date of receipt of
such Acquisition Proposal, or (iv) an Acquisition Proposal that is publicly
disclosed and that contains a proposal as to price (without regard to
whether such proposal specifies a specific price or a range of potential
prices) will have been commenced, publicly proposed or communicated to the
Company and the Company will not have rejected such proposal within ten (10)
business days of the earlier to occur of (A) the Company's receipt of such
Acquisition Proposal and (B) the date such Acquisition Proposal first
becomes publicly disclosed; or
(g) all consents, permits and approvals of Governmental Entities and
other persons set forth in Section 4.6 of the Company Disclosure Schedule
and identified with an asterisk will not have been obtained with no material
adverse conditions attached and no material expense imposed on the Company
or any of its subsidiaries; or
(h) the Purchaser and Parent will not have obtained the financing set
forth in the Commitment Letter unless the failure to obtain such financing
is due to Purchaser's or Parent's failure to perform any obligation required
thereunder; or
(i) the Purchaser will have not entered into satisfactory arrangements
with senior management of the Company with respect to their continued
employment in the Company; or
(j) (i) the representations and warranties made by the Company in the
Merger Agreement will not have been true and correct in all material
respects when made or will have ceased to be true and correct in all
material respects as of the Expiration Date as if made as of such date, or
(ii) as of the Expiration Date the Company will not in all material respects
have performed its material obligations and agreements and complied with its
material covenants to be performed and complied with by it under the Merger
Agreement.
The Conditions to the Offer set forth above are for the sole benefit of the
Purchaser. The Company will not assert failure of, or waive, any such condition
without the prior written consent of the Purchaser. If the Purchaser elects to
waive any such condition to the Offer, the Company will cooperate and comply
with such election.
The Purchaser acknowledges that the Commission believes that (i) if the
Purchaser is delayed in accepting the Shares it must either extend the Offer or
terminate the Offer and promptly return the Shares, and (ii) the circumstances
in which a delay in payment is permitted are limited and do not include
unsatisfied conditions of the Offer, except with respect to most required
regulatory approvals.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
GENERAL. Except as set forth in this Offer to Purchase, based on its review
of publicly available filings by the Company with the Commission, neither Parent
nor the Purchaser is aware of any licenses or regulatory permits that appear to
be material to the business of the Company and its subsidiaries, taken as a
whole, and that might be adversely affected by the Purchaser's acquisition of
Shares (and the indirect acquisition of the stock of the Company's subsidiaries)
as contemplated herein, or any filings, approvals or other actions by or with
any domestic, foreign or supranational governmental authority or administrative
or regulatory agency that would be required for the acquisition or ownership of
the Shares (or the indirect acquisition of the stock of the Company's
subsidiaries) by the Purchaser pursuant to the Offer as
33
<PAGE>
contemplated herein. Should any such approval or other action be required, it is
presently contemplated that such approval or action would be sought except as
described below under "State Takeover Laws." Should any such approval or other
action be required, there can be no assurance that any such approval or action
would be obtained without substantial conditions or that adverse consequences
might not result to the Company's or its subsidiaries' businesses, or that
certain parts of the Company's, Parent's, the Purchaser's or any of their
respective subsidiaries' businesses might not have to be disposed of or held
separate or other substantial conditions complied with in order to obtain such
approval or action or in the event that such approvals were not obtained or such
actions were not taken. The Purchaser's obligation to purchase and pay for
Shares is subject to certain conditions, including conditions with respect to
litigation and governmental actions. See Introduction and Section 14.
STATE TAKEOVER LAWS. A number of states (including Delaware where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Merger, the
Purchaser believes that such laws conflict with federal law and constitute an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in EDGAR v. MITE CORP., invalidated on constitutional grounds
the Illinois Business Takeovers Statute, which as a matter of state securities
law made takeovers of corporations meeting certain requirements more difficult.
The reasoning in such decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS CORP. v. DYNAMICS CORP. OF AMERICA,
the Supreme Court of the United States held that the State of Indiana could as a
matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, in TLX ACQUISITION CORP. v. TELEX
CORP., a Federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in TYSON FOODS, INC. v. MCREYNOLDS, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a Federal district court in Florida held, in GRAND
METROPOLITAN PLC v. BUTTERWORTH, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
Section 203 of the DGCL prevents certain "business combinations" with an
"interested stockholder" (generally, any person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock) for a period of
three years following the time such person became an interested stockholder,
unless, among other things, prior to the time the interested stockholder became
such, the board of directors of the corporation approved either the business
combination or the transaction in which the interested stockholder became such.
The Company Board has unanimously approved the Offer, the Merger and the Merger
Agreement and the transactions contemplated thereby for the purposes of Section
203 of GCL.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger although, pursuant to the Merger
Agreement, the Company has represented that the Company Board has taken
appropriate action to render Section 203 of the GCL inapplicable to the Offer,
the Merger and the transactions contemplated by the Merger Agreement. The
Purchaser reserves the right to challenge the validity or applicability of any
state law allegedly applicable to the Offer or the Merger, and nothing in this
Offer to Purchase nor any action taken in connection herewith is intended as a
waiver of that right. In the event that it is asserted that one or more takeover
statutes apply to the Offer or the Merger, and it is not determined by an
appropriate court that such statute or statutes do not apply or are
34
<PAGE>
invalid as applied to the Offer or the Merger, as applicable, the Purchaser may
be required to file certain documents with, or receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or purchase Shares tendered pursuant to the Offer or be delayed in
continuing or consummating the Offer. In such case, the Purchaser may not be
obligated to accept for purchase, or pay for, any Shares tendered. See Section
14.
UNITED STATES ANTITRUST APPROVALS. Under the HSR Act, and the rules and
regulations that have been promulgated thereunder by the United States Federal
Trade Commission (the "FTC"), certain acquisition transactions may not be
consummated until certain information and documentary material has been
furnished for review by the FTC and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and certain waiting period
requirements have been satisfied. The acquisition of Shares pursuant to the
Offer and the Merger is subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer and the Merger,
the purchase of Shares pursuant to the Offer and the Merger may not be
consummated until the expiration of a 15-calendar-day waiting period following
the filing of certain required information and documentary material with respect
to the Offer with the FTC and the Antitrust Division, unless such waiting period
is earlier terminated by the FTC and the Antitrust Division. The Fund filed a
Premerger Notification and Report Form with the FTC and the Antitrust Division
in connection with the purchase of Shares pursuant to the Offer and the Merger
under the HSR Act on November 13, 1998, and the required waiting period with
respect to the Offer and the Merger would expire at 12:00 a.m., New York City
time, on November 28, 1998, unless earlier terminated by the FTC or the
Antitrust Division or the Fund receives a request for additional information or
documentary material prior thereto. If, within such 15-calendar-day waiting
period either the FTC or the Antitrust Division were to request additional
information or documentary material from the Fund, the waiting period with
respect to the Offer and the Merger would be extended for an additional period
of 10 calendar days following the date of substantial compliance with such
request by the Fund. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the rules promulgated under
the HSR Act. Thereafter, the waiting period could be extended only by court
order or with the consent of Parent. The additional 10-calendar-day waiting
period may be terminated sooner by the FTC or the Antitrust Division. Although
the Company is required to file certain information and documentary material
with the FTC and the Antitrust Division in connection with the Offer, neither
the Company's failure to make such filings nor a request made to the Company
from the FTC or the Antitrust Division for additional information or documentary
material will extend the waiting period with respect to the purchase of Shares
pursuant to the Offer and the Merger.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Merger. At any time before or after the
Purchaser's purchase of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer and the Merger, the divestiture of Shares purchased pursuant to the
Offer or the divestiture of substantial assets of Parent, the Purchaser, the
Company or any of their respective subsidiaries or affiliates. Private parties
as well as state attorneys general may also bring legal actions under the
antitrust laws under certain circumstances. See Section 14.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Merger should not violate
the applicable antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer and the Merger on antitrust grounds will not be made, or,
if such challenge is made, what the result will be. See Section 14.
FOREIGN APPROVALS. According to publicly available information, the Company
conducts business in a number of other foreign countries and jurisdictions. In
connection with the acquisition of the Shares pursuant to the Offer or the
Merger, the laws of certain of those foreign countries and jurisdictions may
35
<PAGE>
require the filing of information with, or the obtaining of the approval or
consent of, governmental authorities in such countries and jurisdictions. The
governments in such countries and jurisdictions might attempt to impose
additional conditions on the Company's operations conducted in such countries
and jurisdictions as a result of the acquisition of the Shares pursuant to the
Offer or the Merger. If such approvals or consents are found to be required the
parties intend to make the appropriate filings and applications. In the event
such a filing or application is made for the requisite foreign approvals or
consents, there can be no assurance that such approvals or consents will be
granted and, if such approvals or consents are received, there can be no
assurance as to the date of such approvals or consents. In addition, there can
be no assurance that the Purchaser will be able to cause the Company or its
subsidiaries to satisfy or comply with such laws or that compliance or
noncompliance will not have adverse consequences for the Company or any
subsidiary after purchase of the Shares pursuant to the Offer or the Merger.
"GOING PRIVATE" RULE. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger. Rule 13e-3
under the Exchange Act requires, among other things, that certain financial
information concerning the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to the consummation of the
transaction. Parent, however, believes that Rule 13e-3 under the Exchange Act
will not be applicable to the Merger because of the following exemptions. Rule
13e-3 would not apply if (i) the Shares are deregistered under the Exchange Act
prior to the Merger or other business combination or (ii) the Merger or other
business combination is consummated within one year after the purchase of the
Shares pursuant to the Offer and the amount paid per Share in the Merger or
other business combination is at least equal to the amount paid per Share in the
Offer.
LITIGATION On April 7, 1998, Golden Cycle filed a complaint in Delaware
Chancery Court against the Company and each member of its Board of Directors,
alleging interference with corporate franchise, breach of fiduciary duty and
fraud. The action, as subsequently amended, alleges various actions or inactions
relating to the Golden Cycle offer and its consent solicitation and seeks, inter
alia, redemption of the Rights, injunctive relief and unspecified damages. On
April 9, 1998, Golden Cycle filed a motion seeking, among other things,
preliminary injunctive relief. A hearing on Golden Cycle's motion for
preliminary injunctive relief was held on May 8, 1998 and, on May 20, 1998, the
Chancery Court issued an order denying Golden Cycle's request in all respects.
Although the Chancery Court denied Golden Cycle's request for preliminary
injunctive relief, that order was not a final judgment on Golden Cycle's claims.
On November 12, 1998, Golden Cycle filed a notice of motion for preliminary
injunction in the Delaware Court of Chancery seeking, among other things,
invalidation of any termination fee and expense reimbursement provisions in the
Merger Agreement, redemption of the Rights, and an order requiring the Company
to exempt Golden Cycle from Section 203 of the DGCL. On that same day, Golden
Cycle also filed a notice of motion for partial summary judgment seeking
invalidation of the record date of November 10, 1998, set by the Board with
respect to Golden Cycle's consent solicitation to remove the Board and replace
it with nominees committed to facilitate the Golden Cycle proposal. Each of
Parent and the Purchaser has learned that Golden Cycle intends to amend its
complaint to add Purchaser, Parent and/ or Stonington as parties to the
litigation, and to seek injunctive relief against Parent, Purchaser and/or
Stonington with respect to the fee and expense reimbursement provisions in the
Merger Agreement. The Delaware Chancery Court has scheduled a hearing on Golden
Cycle's motion on December 7, 1998.
16. CERTAIN FEES AND EXPENSES.
Chase Securities Inc. has been retained as the Dealer Manager. The Parent
and Purchaser will pay the Dealer Manager reasonable and customary compensation
for its services in connection with the Offer, will reimburse the Dealer Manager
for its reasonable out-of-pocket expenses in connection therewith and will
36
<PAGE>
indemnify the Dealer Manager against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Stonington is acting as financial adviser to Parent and Purchaser in
connection with the Offer and the Merger. It has been Stonington's practice to
be paid fees and to be reimbursed for expenses following consummation of the
applicable transaction and it is expected that following consummation of the
Offer and the Merger, Stonington will receive a fee from the Company not in
excess of $2 million plus reimbursement of expenses in connection with the Offer
and the Merger.
MacKenzie Partners, Inc. has been retained by the Purchaser to act as
Information Agent and ChaseMellon Shareholder Services, L.L.C. to as the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and personal interview
and may request brokers, dealers and other nominee stockholders to forward
material relating to the Offer to beneficial owners of Shares. The Purchaser
will pay the Information Agent and the Depositary reasonable and customary
compensation for all such services, reimburse the Information Agent and
Depositary for reasonable out-of-pocket expenses in connection therewith, and
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including certain liabilities under the
federal securities laws.
Except as set forth above, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by Parent or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
Parent and the Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. Such Schedule 14D-1
and any amendments thereto, including exhibits, may be examined and copies may
be obtained from the office of the Commission in the same manner as described in
Section 8 with respect to information concerning the Company, except that copies
will not be available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer shall under any circumstances create any implication that there has
been no change in the affairs of Parent, the Purchaser, the Company or any of
their respective subsidiaries since the date as of which information is
furnished or the date of this Offer to Purchase.
GMG ACQUISITION CORP.
November 16, 1998
37
<PAGE>
SCHEDULE I
CERTAIN INFORMATION CONCERNING THE GENERAL PARTNERS, OFFICERS AND
DIRECTORS OF STONINGTON, STONINGTON II, THE STONINGTON PARTNERSHIP AND THE FUND.
Set forth below is the name, age, present principal occupation or employment
and five-year employment history of each general partner, executive officer,
director and principal shareholder of Stonington Partners, Inc., Stonington
Partners, Inc. II, Stonington Partners, L.P. and Stonington Capital Appreciation
1994 Fund, L.P. The principal business address of each person listed below is at
c/o Stonington Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, NY 10153.
Unless otherwise indicated, all persons and entities listed below are citizens
of the United States.
1. STONINGTON PARTNERS, INC. AND STONINGTON PARTNERS, INC. II
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY AGE
- ------------------------------ --------------------------------------------------------------------------- ---
<S> <C> <C>
Alexis P. Michas.............. Managing Partner & Director of Stonington Partners, Inc. and Stonington 40
Partners, Inc. II since 1993; Investment banker with Merrill Lynch & Co.
from 1984 to 1994. Mr. Michas is also a director of the following companies
with publicly registered securities: Blue Bird Corporation, Borg-Warner
Automotive, Inc., Borg-Warner Security Corporation, Dictaphone Corporation,
Goss Graphic Systems, Inc. and Packard BioScience Company. Mr. Michas is
also a director of the following private companies: Amerifoods Inc.,
Columbia National, Inc., HK Systems, Inc., and Amstar Property Rights
Holding, L.L.C.
James J. Burke, Jr............ Partner & Director of Stonington Partners, Inc. and Stonington Partners, 46
Inc. II since 1993; Investment banker with Merrill Lynch & Co. from 1979 to
1994. Mr. Burke is also a director of the following companies with publicly
registered securities: AnnTaylor Stores Corporation, Borg-Warner Security
Corporation, Education Management Corporation, Pathmark Stores, Inc.,
Supermarkets General Holdings Corporation, and United Artists Theatre
Circuit Inc. and is a director of Amstar Property Rights Holding, L.L.C., a
private company.
Robert F. End................. Partner & Director of Stonington Partners, Inc. and Stonington Partners, 43
Inc. II since 1993; Investment banker with Merrill Lynch & Co. from 1986 to
1994. Mr. End is also a director of the following companies with publicly
registered securities: Goss Graphic Systems, Inc., Packard BioScience
Company and United Artists Theatre Circuit Inc. Mr. End is also a director
of the following private companies: HK Systems, Inc. and Mandarin Partners,
L.L.C.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY AGE
- ------------------------------ --------------------------------------------------------------------------- ---
<S> <C> <C>
Albert J. Fitzgibbons......... Partner & Director of Stonington Partners, Inc. and Stonington Partners, 53
Inc. II since 1993; Investment banker with Merrill Lynch & Co. from 1978 to
1994. Mr. Fitzgibbons is also a director of the following companies with
publicly registered securities: Borg-Warner Security Corporation,
Dictaphone Corporation, Merisel, Inc., U.S. Foodservice and United Artists
Theatre Circuit Inc. He is also a director of the following private
companies: Amerifoods, Inc. and Amstar Property Rights Holding, L.L.C.
Bradley J. Hoecker............ Partner & Director of Stonington Partners, Inc. and Stonington Partners, 36
Inc. II since 1997; Principal of Stonington Partners, Inc. from 1993 to
1997; Investment banker with Merrill Lynch & Co. from 1989 to 1994. Mr.
Hoecker is also a director of the following companies with publicly
registered securities: Packard BioScience Company and Merisel, Inc. He is
also a director of Amerifoods Inc., a private corporation.
Stephen M. McLean............. Partner & Director of Stonington Partners, Inc. and Stonington Partners, 40
Inc. II since 1993; Investment banker with Merrill Lynch & Co. from 1980 to
1994. Mr. McLean is also director of the following companies with publicly
registered securities: CMI Industries, Inc., Dictaphone Corporation,
Merisel, Inc., Packard BioScience Company, Pathmark Stores, Inc. and
Supermarkets General Holdings Corporation. He also serves as a director of
the following private companies: Gemini Industries, Inc. and Mandarin
Partners, L.L.C.
Stephen E. Hoey............... Vice President, Treasurer and Chief Financial Officer of Stonington 39
Partners, Inc. and Stonington Partners, Inc. II since 1994; Financial
Officer of General Atlantic from 1987 to 1994.
Judith A. Witterschein........ Vice President, Secretary and Corporate Counsel of Stonington Partners, 45
Inc. and Stonington Partners, Inc. II since 1994; Attorney with Merrill
Lynch & Co. from 1983 to 1994.
</TABLE>
2. STONINGTON PARTNERS, L.P.
No officers or directors. Stonington Partners, Inc. II is the general
partner.
3. STONINGTON CAPITAL APPRECIATION 1994 FUND, L.P.
No officers or directors. Stonington Partners, L.P. is the general partner.
I-2
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name,
age, present principal occupation or employment and five-year employment history
of each director and executive officer of Parent. Each person listed below has
his or her principal business address at c/o Stonington Partners, Inc., 767
Fifth Avenue, 48th Floor, New York, NY 10153. Unless otherwise indicated, all
persons listed below are citizens of the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME OFFICE HELD IN PARENT 5-YEAR EMPLOYMENT HISTORY AGE
- ----------------------- ------------------------------ -------------------------------------------------- ---
<S> <C> <C> <C>
Robert F. End President See description on Schedule I-1.
Robert J. Mylod, Jr. Vice President & Treasurer Principal of Stonington since January 1996; 32
Associate of Stonington from 1993 to 1995. Mr.
Mylod was also an associate of Merrill Lynch
Capital Partners, Inc. from 1993 to 1994 and an
analyst of Merrill Lynch Capital Partners from
1989 to 1992. Mr. Mylod is a director of the
following companies with publicly registered
securities: Goss Graphic Systems, Inc. and
Pathmark Stores, Inc.
John A. Bartholdson Vice President & Secretary Associate of Stonington since May 1997. Mr. 28
Bartholdson was also an analyst of Stonington from
1994 to 1995 and an analyst of Merrill Lynch
Capital Partners, Inc. from 1992 to 1994.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. Unless otherwise
indicated below, all information concerning each person listed below is the same
as shown above.
<TABLE>
<CAPTION>
NAME OFFICE HELD IN THE PURCHASER PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
- ----------------------- ------------------------------ --------------------------------------------------------
<S> <C> <C>
5-YEAR EMPLOYMENT HISTORY; AGE
--------------------------------------------------------
Robert F. End President Same as above.
Robert J. Mylod, Jr. Vice President & Treasurer Same as above.
John A. Bartholdson Vice President & Secretary Same as above.
</TABLE>
II-1
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND: BY MAIL: BY OVERNIGHT COURIER:
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
120 Broadway-13th Floor Post Office Box 3301 85 Challenger Road
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NJ 07660
</TABLE>
FACSIMILE FOR ELIGIBLE INSTITUTIONS:
201-296-4293
TO CONFIRM FAX ONLY:
201-296-4860
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number set forth below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below and will
be furnished promptly at the Purchaser's expense. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, New York 10010
CALL COLLECT (212) 929-5500
or
CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
270 Park Avenue
New York, NY 10017
(212) 270-5896 (Call Collect)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 16, 1998
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
STONINGTON ACQUISITION CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT COURIER:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
120 Broadway-13th Floor Post Office Box 3301 85 Challenger Road
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NJ 07660
FACSIMILE FOR ELIGIBLE
INSTITUTIONS:
(201) 296-4293
TO CONFIRM FAX ONLY:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This Letter of Transmittal is to be completed by stockholders either if
certificates for Shares (as defined in the Offer to Purchase dated November 16,
1998 (the "Offer to Purchase")) are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders of
Shares are to be made by book-entry transfer to an account maintained by
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at The Depository
Trust Company ("DTC") (the "Book-Entry Transfer Facility"), pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Stockholders who
tender Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders."
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date (as defined in the Offer to Purchase) or who cannot complete
the procedures for book-entry transfer on a timely basis must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Name of Book-Entry Transfer Facility: ______________________________________
Account Number: _________________ Transaction Code Number: ________________
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK,
EXACTLY AS NAME(S) APPEAR ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S) TENDERED) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER OF
SHARES REPRESENTED
SHARE BY NUMBER
CERTIFICATE SHARE OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
TOTAL SHARES
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated it will be assumed that all Shares represented by Share Certificates delivered to the
Depositary are being tendered. See Instruction 4.
</TABLE>
Ladies and Gentlemen:
The undersigned hereby tenders to GMG Acquisition Corp. (the "Purchaser"), a
Delaware corporation and an indirect, wholly-owned subsidiary of Stonington
Acquisition Corp., a Delaware corporation ("Parent"), the above described shares
of Common Stock, par value $.001 per share (the "Shares"), of Global Motorsport
Group, Inc., a Delaware corporation (the "Company"), and the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 13, 1996, between the Company and American Stock
Transfer & Trust Company, as Rights Agent (as the same may be amended, the
"Rights Agreement"), pursuant to the Purchaser's offer to purchase all
outstanding Shares at a price of $19.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer"). Unless the context otherwise requires, all references to Shares shall
include the associated Rights. The undersigned understands that the Purchaser
reserves the right to transfer or assign, in whole or from time to time in part,
to one or more of its direct or indirect subsidiaries or affiliates the right to
purchase all or any portion of the Shares tendered pursuant to the Offer. As
used herein, the term "Purchaser" shall, if applicable, include any such
subsidiary and affiliate.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered hereby in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby and any and all dividends on
the Shares (including, without limitation, the issuance of additional Shares
pursuant to a stock dividend or stock split, the issuance of other securities,
the issuance of rights for the purchase of any securities, or any cash dividends
that are declared or paid by the Company on or after the date of the Offer to
Purchase and are payable or distributable to stockholders of record on a date
prior to the transfer into the name of the Purchaser or its nominees or
transferees on the Company's stock transfer records of the Shares purchased
pursuant to the Offer (collectively, "Distributions")), and constitutes and
irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact
and proxy of the undersigned to the full extent of the undersigned's rights with
respect to such Shares (and Distributions) with full power of substitution (such
power of attorney and proxy being deemed to be irrevocable and coupled with an
interest), to (a) deliver Share Certificates (and Distributions), or transfer
ownership of such Shares on the account books maintained by the Book-Entry
Transfer Facility, together in either such case with all accompanying evidences
of transfer and authenticity, to or upon the order of the Purchaser upon receipt
by the Depositary, as the undersigned's agent, of the purchase price, (b)
present such Shares (and Distributions) for transfer on the books of the Company
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and Distributions), all in accordance with the terms
of the Offer.
<PAGE>
The undersigned hereby irrevocably appoints designees of the Purchaser as
such stockholder's agents, attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of the Offer to Purchase. All such
powers of attorney and proxies will be considered irrevocable and coupled with
an interest in the tendered Shares. Such appointment will be effective upon the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Upon such acceptance for payment, all other powers of
attorney and proxies given by such stockholder with respect to such Shares and
such other securities or rights prior to such payment will be revoked, without
further action, and no subsequent powers of attorney and proxies may be given by
such stockholder (and, if given, will not be deemed effective). The designees of
the Purchaser will, with respect to the Shares and such other securities and
rights for which such appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion may
deem proper at any annual or special meeting of the Company's stockholders, or
any adjournment or postponement thereof, or by consent in lieu of any such
meeting or otherwise. The undersigned understands that in order for Shares to be
deemed validly tendered, immediately upon the acceptance for payment of such
Shares, the Purchaser or its designee must be able to exercise full voting
rights with respect to such Shares and other securities, including voting at any
meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and Distributions), that the undersigned own(s) the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that such tender of
Shares complies with Rule 14e-4 under the Exchange Act and that when the same
are accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents reasonably deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and Distributions). In addition, the undersigned shall
promptly remit and transfer to the Depositary for the account of the Purchaser
any and all other Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer and, pending such
remittance or appropriate assurance thereof, the Purchaser shall be entitled to
all rights and privileges as owner of such Distributions and may withhold the
entire purchase price or deduct from the purchase price of Shares tendered
hereby the amount or value thereof, as determined by the Purchaser in its sole
discretion.
All authority herein conferred or herein agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Tenders of Shares pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment
pursuant to the Offer, may also be withdrawn at any time after January 15, 1999
(or such later date as may apply in the case that the Offer is extended). See
Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Shares by book-entry transfer may request that any Shares not accepted
for payment be returned by crediting such account maintained at such Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the "Special Payment Instructions" to
transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of such Shares.
<PAGE>
<TABLE>
<S> <C> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates To be completed ONLY if Share Certificates
not tendered or not purchased and/or the not tendered or not purchased and/or the
check for the purchase price of Shares check for the purchase price of Shares
purchased are to be issued in the name of purchased are to be sent to someone other
someone other than the undersigned, or if than the undersigned, or to the undersigned
Shares tendered by book-entry transfer which at an address other than that shown on the
are not purchased are to be returned by front cover.
credit to an account maintained at a
Book-Entry Transfer Facility other than that
designated on the front cover.
Issue check and/or certificates to: Mail check and/or certificate to:
Name Name
(Please Print) (Please Print)
Address Address
(Include Zip Code) (Include Zip Code)
(Tax Payer Identification or Social Security (Tax Payer Identification or Social Security
No.) No.)
(See Substitute Form W-9)
/ / Credit unpurchased Shares tendered by
book-entry transfer to the Book-Entry
Transfer Facility account set forth
below:
(Account Number)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT -- SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9)
________________________________________________________________________
________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
Dated: ____________________________________ , ____________
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on the Share Certificate(s) or on a security position listing
or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
representative capacity, please provide the necessary information. See
Instruction 5.)
Name(s): _______________________________________________________________
________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _________________________________________________
Address: _______________________________________________________________
________________________________________________________________________
________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ( )___________________________________
Tax Identification or
Social Security Nos.: __________________________________________________
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: __________________________________________________
Name (Please print): ___________________________________________________
Name of Firm: __________________________________________________________
Address: _______________________________________________________________
________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ________________________________________
Dated: ____________________________________, 199__
------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder(s) has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on the
inside front cover hereof or (ii) if such Shares are tendered for the account of
a firm that is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program (an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message is utilized, if tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth in
Section 3 of the Offer to Purchase. Share Certificates, or timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the
Depositary's account at a Book-Entry Transfer Facility, as well as this Letter
of Transmittal (or a facsimile hereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message in the case of a
book-entry delivery, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date. Stockholders whose Share Certificates
are not immediately available or who cannot deliver their Share Certificates and
all other required documents to the Depositary prior to the Expiration Date or
who cannot complete the procedures for delivery by book-entry transfer on a
timely basis may tender their Shares by properly completing and duly executing a
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by the Purchaser, must be received by the Depositary on or
prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Shares, in proper form for transfer
together with a properly completed and duly executed Letter of Transmittal (or a
facsimile hereof), with any required signature guarantees (or, in the case of a
book-entry delivery, an Agent's Message) and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery.
A "trading day" is any day on which Nasdaq National Market is open for business.
If Share Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or facsimile hereof) must
accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal or facsimile hereof, waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in the
box entitled "Number of Shares Tendered." In such case, new certificate(s) for
the remainder of the Shares that were evidenced by your old certificate(s) will
be sent to you, unless otherwise provided in the appropriate box marked "Special
Payment Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner(s) appear(s) on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If payment of the purchase price is to be made to, or if certificates for
Shares not tendered or purchased are to be registered in the name of, any person
other than the registered holder(s), or if tendered certificates are registered
in the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s) or such person) payable on account of the transfer to such
person will be deducted from the purchase price received by such person(s)
pursuant to this Offer (i.e., such purchase price will be reduced) unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for unpurchased Shares are to be returned
to, a person other than the person(s) signing this Letter of Transmittal or if a
check is to be sent and/or such certificates are to be returned to someone other
than the person(s) signing this Letter of Transmittal or to an address other
than that shown on the front cover hereof, the appropriate boxes on this Letter
of Transmittal should be completed. Book-Entry Stockholders may request that
Shares not purchased be credited to such account maintained at such Book-Entry
Transfer Facility as such Book-Entry Stockholder may designate hereon. If no
such instructions are given, such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above. See
Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at its addresses set forth below.
Requests for additional copies of the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty, and payments that are made to such
stockholder or other payee with respect to Shares purchased pursuant to the
Offer may be subject to 31% backup withholding.
<PAGE>
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
In order for a foreign individual to qualify as an exempt recipient, it must
submit a Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Depositary. See
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing a Substitute Form W-9 certifying (i) that the TIN provided on
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and
(ii) that (a) such stockholder is exempt from backup withholding, (b) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (c) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN but has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below. Notwithstanding that the box in Part 3 is
checked and the Certificate of Awaiting Taxpayer Identification Number is
completed, the Depositary will withhold 31% of all payments made prior to the
time a properly certified TIN is provided to the Depositary.
The stockholder is required to give the Depositary the TIN of the holder of
the Shares. If the Shares are held in more than one name or are not held in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
10. LOST, DESTROYED, MUTILATED, OR STOLEN CERTIFICATES. If any
certificate(s) representing Shares has been lost, destroyed, mutilated, or
stolen, the stockholder should promptly notify the Depositary. The stockholder
will then be instructed as to the steps that must be taken in order to replace
the certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, mutilated, or destroyed
certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- Please provide your PART 3 -- Social Security Number
FORM W-9 name and address in this Part 1 or Employer Identification
Department of the Treasury and TIN in Part 3 and certify Number:
Internal Revenue Service by signing and dating below. -----------------------
Name:------------------------ Awaiting TIN / /
Address:
------------------------
------------------------
------------------------
-----------------------------------------------------------------
PART 2 -- CERTIFICATIONS -- Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be issued
to me and have checked the box in Part 3) and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, (b) I have not been
Payer's Request for Taxpayer notified by the Internal Revenue Service (the "IRS") that I am
Identification Number ("TIN") subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
- ---------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) of Part 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification from the IRS that you are no
longer subject to backup withholding, do not cross out such item (2).
Signature: ------------------------------------------------------------- Date:--------
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE
FORM W-9.
<PAGE>
------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
Signature: -------------------------------------- Date: ------------, 199--
- --------------------------------------------------------------------------------
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF
THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER
NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND: BY MAIL: BY OVERNIGHT CARRIER:
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
120 Broadway-13th Floor Post Office Box 3301 85 Challenger Road
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NJ 07660
FACSIMILE FOR ELIGIBLE
INSTITUTIONS:
(201) 296-4293
TO CONFIRM FAX ONLY:
(201) 296-4860
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
CALL COLLECT (212) 929-5500
OR
CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
(212) 270-5896 (Call Collect)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
STONINGTON ACQUISITION CORP.
AT
$19.50 NET PER SHARE IN CASH
----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
November 16, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by GMG Acquisition Corp., a Delaware corporation (the
"Purchaser"), and Stonington Acquisition Corp., a Delaware corporation
("Parent"), to act as Dealer Manager in connection with the Purchaser's offer to
purchase all outstanding shares of Common Stock, par value $.001 per share (the
"Shares"), of Global Motorsport Group, Inc., a Delaware corporation (the
"Company"), and the associated preferred share purchase rights at a purchase
price of $19.50 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 16, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"), in each case enclosed
herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED
BASIS BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION
DATE FOR THE OFFER. THE OFFER IS ALSO CONDITIONED UPON PARENT AND THE PURCHASER
OBTAINING THE FINANCING SET FORTH IN THE COMMITMENT LETTER (AS DEFINED IN THE
OFFER TO PURCHASE). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS
CONTAINED IN THE OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 12, 14
AND 15 OF THE OFFER TO PURCHASE.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated November 16, 1998.
2. The Letter of Transmittal for your use to tender Shares and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
<PAGE>
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates for Shares ("Share Certificates") and all other
required documents are not immediately available or cannot be delivered to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase) or if the procedure
for book-entry transfer cannot be completed by the Expiration Date.
5. A letter to stockholders from the Chairman of the Company
accompanied by the Company's Solicitation/Recommendation Statement on
Schedule 14D-9.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 14, 1998,
UNLESS THE OFFER IS EXTENDED.
In order to accept the Offer, a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), together with any required signature
guarantees or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry delivery of Shares and any other documents required
by the Letter of Transmittal must be received by the Depositary and Share
Certificates representing the tendered Shares must be received by the Depositary
or tendered pursuant to the procedure for book-entry transfer as set forth in
the Offer to Purchase and Book-Entry Confirmation (as defined in the Offer to
Purchase) must be received by the Depositary.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and MacKenzie
Partners, Inc., the Information Agent, as described in Section 16 of the Offer
to Purchase) for soliciting tenders of Shares pursuant to the Offer. The
Purchaser will, however, upon request, reimburse you for customary clerical and
mailing expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Purchaser will pay or cause to be paid any stock transfer
taxes payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained from, the
undersigned.
Very truly yours,
CHASE SECURITIES INC.
as Dealer Manager
270 Park Avenue
New York, New York 10017
(212) 270-5896
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
STONINGTON ACQUISITION CORP.
AT
$19.50 NET PER SHARE IN CASH
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
November 16, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated November
16, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by GMG Acquisition Corp.,
a Delaware corporation (the "Purchaser") and an indirect, wholly-owned
subsidiary of Stonington Acquisition Corp., a Delaware corporation, to purchase
all outstanding shares of Common Stock, par value $.001 per share (the
"Shares"), of Global Motorsport Group, Inc., a Delaware corporation (the
"Company"), and the associated preferred share purchase rights (the "Rights"),
at a purchase price of $19.50 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal enclosed herewith.
Unless the context otherwise requires, all references to Shares shall include
the associated Rights. Holders of Shares whose certificates for such Shares (the
"Share Certificates") are not immediately available, or who cannot deliver their
Share Certificates and all other required documents to ChaseMellon Shareholder
Services, L.L.C., as depositary (the "Depositary"), on or prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
<PAGE>
Please note the following:
1. The tender price is $19.50 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
2. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED
THAT THE OFFER AND THE MERGER (AS DEFINED IN THE OFFER TO PURCHASE), ARE
FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S STOCKHOLDERS.
3. The Offer is being made for all outstanding Shares.
4. The Offer is conditioned upon, among other things, Shares
representing at least a majority of the total number of outstanding Shares
on a fully diluted basis being validly tendered and not properly withdrawn
prior to the expiration date for the Offer. The Offer is also conditioned
upon Parent and the Purchaser obtaining the financing set forth in the
Commitment Letter (as defined in the Offer to Purchase). The Offer is also
subject to other terms and conditions contained in the Offer to Purchase.
See the Introduction and Sections 1, 12, 14 and 15 of the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
6. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Monday, December 14, 1998, unless the Offer is extended.
7. Payment for Shares purchased pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of (a) Share
Certificates or timely confirmation of the book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase), in connection with a book-entry transfer, and (c) any other
documents required by the Letter of Transmittal. Accordingly, payment might
not be made to all tendering stockholders at the same time and will depend
upon when Share Certificates are received by the Depositary or Book-Entry
Transfer Facility Confirmations of such shares are received into
Depositary's account at the Book-Entry Transfer Facility.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth on the back page of this letter. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified on the back page of this letter. An envelope to return your
instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE
ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
STONINGTON ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated November 16, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer") in connection with the offer by GMG Acquisition Corp., a Delaware
corporation (the "Purchaser") and an indirect wholly-owned subsidiary of
Stonington Acquisition Corp., a Delaware corporation, to purchase all
outstanding shares of Common Stock, par value $.001 per share (the "Shares"), of
Global Motorsport Group, Inc., a Delaware corporation, and the associated
preferred share purchase rights, at a purchase price of $19.50 per Share, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to Be Tendered: ______ Shares*
- --------------------------------------------------------------------------------
SIGN BELOW
Account Number: _______________________ Signature(s):_______________________
Dated: ________________________, 199__
_____________________________________________________________________________
PLEASE TYPE OR PRINT NAME(S)
_____________________________________________________________________________
PLEASE TYPE OR PRINT ADDRESS(ES) HERE
_____________________________________________________________________________
AREA CODE AND TELEPHONE NUMBER
_____________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- -----------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that you instruct us to
tender all Shares held by us for your account.
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
TO
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
STONINGTON ACQUISITION CORP.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates ("Share
Certificates") representing shares of Common Stock, par value $.001 per share
(the "Shares"), of Global Motorsport Group, Inc., a Delaware corporation (the
"Company"), and the associated Rights (as defined in the Offer to Purchase) are
not immediately available, if time will not permit all required documents to
reach ChaseMellon Shareholder Services, L.L.C. (the "Depositary") on or prior to
the Expiration Date (as defined in the Offer to Purchase) or if the procedures
for delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission or mail to the Depositary. See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT CARRIER:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
120 Broadway-13(th) Floor Post Office Box 3301 85 Challenger Road
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NJ 07660
FACSIMILE FOR ELIGIBLE
INSTITUTIONS:
(201) 296-4293
TO CONFIRM FAX ONLY:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to GMG Acquisition Corp., a Delaware
corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of
Stonington Acquisition Corp., a Delaware corporation ("Parent"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated November
16, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together constitute the "Offer"), receipt of each of which is hereby
acknowledged, the number of Shares (including the associated preferred share
purchase rights) indicated below pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: Name(s) of Record Holder(s):
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
(Please Print)
Certificate Nos. (if available): Address(es):
--------------------------------------------
- -------------------------------------------- --------------------------------------------
(Zip Code)
Check box if Shares will be tendered by book-
entry transfer (including through DTC's Area Code and Tel. No.:
ATOP): --------------------------------------------
/ / The Depository Trust Company Signature(s):
--------------------------------------------
--------------------------------------------
Account Number: Dated:-------------------------------, 199--
- --------------------------------------------
</TABLE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby guarantees to deliver to
the Depositary at one of its addresses set forth above either the certificates
representing all tendered Shares, in proper form for transfer, a Book-Entry
Confirmation (as defined in the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of book-entry delivery of
Shares, an Agent's Message (as defined in the Offer to Purchase), and any other
documents required by the Letter of Transmittal within three trading days after
the date of execution of this Notice of Guaranteed Delivery. A "trading day" is
any day on which The Nasdaq National Market is open for business.
<TABLE>
<S> <C>
- ------------------------------------------------------- -------------------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ------------------------------------------------------- -------------------------------------------------------
ADDRESS TITLE
- -------------------------------------------------------
ZIP CODE Name: --------------------------------------------
PLEASE PRINT
Area Code and Tel. No.: ------------------------------- Dated: ------------------------------------, 199--
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU)
TO GIVE THE PAYER. -- Social security numbers have nine digits separated by two
hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
GIVE THE SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual
on the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Sole proprietorship The owner(3)
- -------------------------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF --
<S> <C> <C>
- -------------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or The legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
- -------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your social security number
or your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME LISTED, THE NUMBER
WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
- -------------------------------------------------------------
OBTAINING A NUMBER
If you don't have a taxpayer identification number, obtain Form SS-5,
Application for a Social Security Card, at the local Social Security
Administration office, or Form SS-4, Application for Employer Identification
Number, by calling 1 (800) TAX-FORM, and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
PAYEES SPECIFICALLY EXEMPTED FROM WITHHOLDING INCLUDE:
- - An organization exempt from tax under Section 501(a), an individual retirement
account (IRA), or a custodial account under Section 403(b)(7), if the account
satisfies the requirements of Section 401(f)(2).
- - The United States or a state thereof, the District of Columbia, a possession
of the United States, or a political subdivision or wholly-owned agency or
instrumentality of any one or more of the foregoing.
- - An international organization or agency or instrumentality thereof.
- - A foreign government and any political subdivision, agency or instrumentality
thereof.
PAYEES THAT MAY BE EXEMPT FROM BACKUP WITHHOLDING INCLUDE:
- - A corporation.
- - A financial institution.
- - A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a).
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A middleman known in the investment community as a nominee or who is listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
- - A foreign central bank of issue.
PAYMENTS OF DIVIDENDS AND PATRONAGE DIVIDENDS GENERALLY EXEMPT FROM BACKUP
WITHHOLDING INCLUDE:
- - Payments to nonresident aliens subject to withholding under Section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
PAYMENTS OF INTEREST GENERALLY EXEMPT FROM BACKUP WITHHOLDING INCLUDE:
- - Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- - Payments described in Section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
CERTAIN PAYMENTS, OTHER THAN PAYMENTS OF INTEREST, DIVIDENDS, AND PATRONAGE
DIVIDENDS, THAT ARE EXEMPT FROM INFORMATION REPORTING ARE ALSO EXEMPT FROM
BACKUP WITHHOLDING. FOR DETAILS, SEE SECTIONS 6041, 6041A, 6042, 6044, 6045,
6049, 6050A AND 6050N AND THE REGULATIONS THEREUNDER.
EXEMPT PAYEES SHOULD COMPLETE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT"
IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE. -- Section 6109 requires you to provide your correct
taxpayer identification number to payers who must report the payments to the
IRS. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your return and may also provide this information to various
government agencies for tax enforcement or litigation purposes. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE>
Exhibit (a)(7)
Contacts:
James J. Kelly
Global Motorsport Group, Inc.
(408) 778-2271
or
Daniel Burch or Grace Protos
MacKenzie Partners, Inc.
(212) 929-5748 / (212) 929-5802
FOR IMMEDIATE RELEASE:
GLOBAL MOTORSPORT GROUP ENTERS INTO DEFINITIVE
MERGER AGREEMENT WITH STONINGTON PARTNERS;
$19.50 Tender Offer for All Common Shares to Begin by November 16, 1998
Morgan Hill, CA - November 9, 1998 - Global Motorsport Group, Inc. (formerly,
Custom Chrome, Inc.) (NASDAQ:CSTM) announced today that it has entered into a
definitive merger agreement whereby Global will be acquired by an entity
controlled by Stonington Partners for $19.50 in cash per share.
The transaction will take the form of a tender offer by an affiliate of
Stonington for all outstanding shares at $19.50 in cash net per share followed
by a cash merger for the remaining shares at the same price. The tender offer is
subject to customary terms and conditions, including at least a majority of the
shares being tendered and the obtaining of sufficient financing by the
purchaser. The tender offer is expected to commence no later than November 16,
1998. The purchaser has received commitments from Bankers Trust Company and
NationsBank N.A. to provide bank facilities aggregating $120 million to fund the
purchase of shares, refinance the Company's outstanding debt and provide working
capital. Stonington intends to invest $80 million in the equity of the
purchaser.
Global's Board has unanimously approved the transaction and has received a
fairness opinion from Global's financial advisor, Cleary Gull Reiland &
McDevitt, Inc.
Robert F. End, a partner of Stonington, stated, "We are very pleased to have the
opportunity to invest in Global Motorsport. The Company has established a very
successful franchise in the motorcycle aftermarket parts business. Our objective
is to continue to grow this business in order to provide even better service to
its customers."
Joseph F. Keenan, Chairman of Global's Board, stated, "I am very pleased with
this agreement, which I believe is in the best interest of all of our
stockholders. Our association with Stonington
<PAGE>
Partners will also allow the Company to expand on its position as the number one
supplier of Harley-Davidson aftermarket parts."
Stonington Partners, Inc. is a private equity investment firm that manages a $1
billion fund of institutional capital on behalf of public and corporate pension
funds, private endowments and other financial institutions. The principals of
Stonington Partners have been organizing investments of this nature for over
fifteen years, having closed an aggregate of 48 transactions with total
consideration of over $22 billion.
Global Motorsport Group was founded in 1970 and it is the parent organization
for an international group of motorcycle after market providers that focus their
business on Harley-Davidson motorcycles sold worldwide. Global's organization
includes Custom Chrome, the leading aftermarket supplier of Harley-Davidson
motorcycle parts and accessories; Chrome Specialties, an aftermarket supplier of
Harley-Davidson motorcycle parts and accessories located in Fort Worth, Texas;
Custom Chrome Far East, a product development, engineering, tooling management
and warehouse of proprietary products for Global, located in Taiwan; Custom
Chrome Europe, a distribution company located in Germany that specializes in
aftermarket accessories for Harley-Davidson motorcycles and other "cruiser"
motorcycles, and Santee Industries, a manufacturer of frames and exhaust systems
and other aftermarket components for Harley-Davidson motorcycles, located in
California.
2
<PAGE>
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer is made solely by the Offer to
Purchase, dated November 16, 1998, and the related Letter of Transmittal,
and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of)
holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other
laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to
be made on behalf of GMG Acquisition Corp.
by one or more registered brokers or
dealers that are licensed under
the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
GLOBAL MOTORSPORT GROUP, INC.
BY
GMG ACQUISITION CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
STONINGTON ACQUISITION CORP.
AT
$19.50 NET PER SHARE IN CASH
GMG Acquisition Corp. (the "Purchaser"), a Delaware corporation and an
indirect wholly-owned subsidiary of Stonington Acquisition Corp., a Delaware
corporation ("Parent"), is offering to purchase all outstanding shares of
Common Stock, par value $.001 per share (the "Shares"), of Global Motorsport
Group, Inc., a Delaware corporation (the "Company"), and the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 13, 1996, between the Company and American
Stock Transfer & Trust Company, as Rights Agent (as the same may be amended,
the "Rights Agreement"), at a purchase price of $19.50 per Share (and
associated Right), net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 16, 1998 (the "Offer to Purchase"), and in the related Letter
of Transmittal (which together constitute the "Offer"). Unless the context
otherwise requires, all references to Shares herein and in the Offer to
Purchase shall include the associated Rights.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of November 8, 1998, by and among the Company, the Purchaser and
Parent (the "Merger Agreement") pursuant to which, following the consummation
of the Offer and the satisfaction of certain conditions, the Purchaser will
be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation. On the effective date of the Merger,
each outstanding Share (other than any Shares held
-1-
<PAGE>
by Parent, the Purchaser, any wholly-owned subsidiary of Parent or the
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary
of the Company, which shares will be canceled with no payment being made with
respect thereto and other than Shares, if any, held by stockholders who
perfect their appraisal rights under Delaware law) will, by virtue of the
Merger and without any action by the holder thereof, be converted into the
right to receive an amount equal to $19.50 in cash (without interest).
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER
AGREEMENT AND RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S
STOCKHOLDERS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED
BASIS BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION DATE FOR THE OFFER, PARENT AND THE PURCHASER OBTAINING THE
FINANCING SET FORTH IN THE COMMITMENT LETTER (AS DEFINED IN THE OFFER TO
PURCHASE) AND CERTAIN OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION AND
SECTIONS 1, 12, 14 AND 15 OF THE OFFER TO PURCHASE.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to ChaseMellon
Shareholder Service, L.L.C., as depositary (the "Depositary") of the
Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to validly tendering stockholders. Under
no circumstances will interest on the purchase price for Shares be paid by
the Purchaser. In all cases, payment for Shares purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates representing Shares (the "Share Certificates") for such Shares
or timely confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
or an Agent's Message (as defined in the Offer to Purchase) in connection
with a book-entry transfer and (iii) any other documents required by the
Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion
(subject to the terms and conditions of the Merger Agreement), at any time
and from time to time, to extend the period during which the Offer is open
for any reason, including the existence of any of the conditions specified in
Section 14 of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary. Any such extension will be followed as promptly
as practicable by public announcement thereof, and such
-2-
<PAGE>
announcement will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date (as defined
below).
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment as
provided in the Offer to Purchase, may also be withdrawn at any time after
January 15, 1999 (or such later date as may apply in the case that the Offer
is extended). The term "Expiration Date" means 12:00 midnight, New York City
time, on Monday, December 14, 1998, unless and until the Purchaser, subject
to the terms of the Merger Agreement, shall have further extended the period
of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the time and date at which the Offer, as so extended by the
Purchaser, shall expire. In order for a withdrawal to be effective, a written
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer
to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn, and (if Share Certificates have been tendered) the name of the
registered holder of the Shares as set forth in the Share Certificate, if
different from that of the person who tendered such Shares. If Share
Certificates have been delivered or otherwise identified to the Depositary,
then prior to the physical release of such certificates, the tendering
stockholder must submit the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by a firm that is a bank, broker,
dealer, credit union, savings association or other entity which is a member
in good standing of the Securities Transfer Agents Medallion Program (an
"Eligible Institution"), except in the case of Shares tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares, in which case a notice of withdrawal will be effective
if delivered to the Depositary by any method of delivery described in this
paragraph. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Purchaser, in its
sole discretion, whose determination shall be final and binding. Any Shares
properly withdrawn will be deemed not validly tendered for purposes of the
Offer, but may be tendered at any subsequent time prior to the Expiration
Date by following any of the procedures described in Section 3 of the Offer
to Purchase.
The information required to be disclosed pursuant to Rule
14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase, and
is incorporated herein by reference.
The Company is providing the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the
Offer to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and, if required,
-3-
<PAGE>
other relevant materials will be mailed to record holders of Shares and will
be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is
made with respect to the Offer.
Questions and requests for assistance may be directed to the
MacKenzie Partners, Inc. as Information Agent (the "Information Agent") at
the address and telephone number listed below. Additional copies of the Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be obtained at the Purchaser's expense from the
Information Agent or from brokers, dealers, commercial banks and trust
companies. Neither Parent nor the Purchaser will pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500
(Call Collect)
or CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
(212) 270-5896 (Call Collect)
November 16, 1998
-4-
<PAGE>
November 8, 1998
Stonington Acquisition Corp.
c/o Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Mr. Robert F. End
Mr. Robert J. Mylod
Re: Credit Facilities for Acquisition of Global Motorsport
Group, Inc.
Ladies and Gentlemen:
You have advised us that Stonington Partners Inc. ("Stonington"),
on behalf of Stonington Capital Appreciation 1994 Fund L.P. (the "Fund";
together with Stonington, the "New Investor Group") has formed Stonington
Acquisition Corp., a newly-formed Delaware corporation ("Holdings"), for the
purpose of acquiring (the "Acquisition") all of the outstanding capital stock
(the "Shares") of Global Motorsport Group, Inc. ("GMG"). We understand that the
Acquisition will be accomplished pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") among Holdings, GMG Acquisition Corp., newly-formed
Delaware corporation and an indirect wholly-owned subsidiary of Holdings
("Acquisition Co."), and GMG through a cash tender offer (the "Tender Offer") by
Acquisition Co. for up to 100% of the Shares at a price of 19.50 per Share
followed by a merger of Acquisition Co. with and into GMG in which any Shares
not tendered prior to such merger will be cancelled in exchange for a cash
consideration equal to the Tender Offer price per Share and such merger to be
immediately followed by a merger of Intermediate Holdings Inc., a Delaware
corporation to be formed by Holdings and to be a direct wholly-owned subsidiary
of Holdings ("Intermediate Holdings"), with and into GMG (such back-to-back
mergers are collectively referred to herein as the "Merger"). We further
understand that the Tender Offer will be conditioned on, among other things, the
tender and purchase of at least that number of Shares required to permit
Acquisition Co. to cause the Merger to occur (the "Minimum Shares"). Upon
consummation of the Merger, GMG will be controlled, through Holdings, by the New
Investor Group. As used herein, "Borrower" shall refer to Intermediate Holdings
prior to the consummation of the Merger and to GMG upon consummation of the
Merger.
Each of Bankers Trust Company ("BTCo") and NationsBank, NA ("NB")
is pleased to confirm its commitment to provide, severally but not jointly,
$60.0 million of the up to $120.0 million of senior bank credit facilities
described below. Such senior bank credit facilities will consist of a tranche A
term loan of up to $55.0 million and a tranche B term loan of up to $15.0
million (collectively, the "Term Loan Facility") and a Revolving Credit Facility
of up to $50.0 million, including a sublimit for letters of credit in an amount
to be agreed upon (the "Revolving Credit Facility"; together with the Term Loan
Facility, the "Credit Facilities"). BT
<PAGE>
Alex Brown Incorporated, an affiliate of BTCo, and NationsBanc Montgomery
Securities LLC, an affiliate of NB, will act as sole co-arrangers (collectively,
the "Arrangers") to arrange for other banks, financial institutions and other
"accredited investors" (as defined in SEC regulations; each such bank, financial
institution and accredited investor, including BTCo and NB, being a "Lender"
and, collectively, the "Lenders") to provide a portion of the Credit Facilities.
BTCo will act as administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and NationsBanc Montgomery Securities LLC will act as
syndication agent for the Lenders (in such capacity, the "Syndication Agent";
and together with the Administrative Agent, the "Agents"). Certain of the terms
of the Credit Facilities are set forth in the Summary of Terms attached hereto
as Annex A (the "Term Sheet"). You hereby agree that no other agents, co-agents
or arrangers will be appointed, no other titles will be awarded and no
compensation (other than as expressly set forth in the Term Sheet and
accompanying fee letter) will be paid in connection with the Credit Facilities
unless you and we shall so agree. You also agree that the Arrangers shall be
entitled, after consultation with you, to change the terms and conditions,
pricing and structure of the Credit Facilities if the Arrangers determine that
such changes are advisable to insure the successful syndication of the Credit
Facilities; provided that the total amount of the Credit Facilities remains
unchanged.
We understand that the proceeds from the Term Loan Facility,
together with up to (i) $23.8 million in borrowings under the Revolving Credit
Facility, and (ii) not less than $80.0 million in cash common equity
contributions (the "Equity Contribution"), which contributions may include up to
$25.0 million in cash proceeds from the issuance of senior equity securities,
which securities shall be in form and substance satisfactory to Agents, provided
by the New Investor Group through Holdings or otherwise, will be used to pay the
consideration for the Shares (including to retire outstanding stock options)
pursuant to the Tender Offer and the Merger in an aggregate amount of
approximately $108.3 million, to refinance existing indebtedness in the
aggregate amount of approximately $53.0 million and expenses arising in
connection therewith in an amount not to exceed $12.5 million. The foregoing
transactions, including the Acquisition, the Tender Offer and the Merger, are
referred to herein as the "Transactions". Upon consummation of the Tender Offer,
none of the existing indebtedness of GMG and its subsidiaries will remain
outstanding, except for up to $2.5 million in mortgage indebtedness (and related
liens) and capital leases, in each case with terms and conditions satisfactory
to the Agents. You have further advised us that upon consummation of the Tender
Offer, the Revolving Credit Facility will also be used to provide for the
working capital requirements and for such other corporate purposes of GMG and
its subsidiaries as may be agreed upon.
We have reviewed certain historical and pro forma financial
statements of GMG arid its subsidiaries and have met with representatives of GMG
and with members of the proposed management of GMG regarding the transactions
contemplated hereby, and we are pleased to advise you that the results of our
due diligence investigation of GMG and its subsidiaries to date are
satisfactory. Each Agent's commitment is subject to there being no information
relating to conditions or events not previously disclosed to us or relating to
new information or additional developments concerning conditions or events
previously disclosed to us which we believe may have a material adverse effect
on the business, operations, properties,
2
<PAGE>
assets, liabilities, conditions (financial or otherwise) or prospects of
Holdings, GMG and their respective subsidiaries. In addition, each Agent's
commitment is subject to the accuracy and completeness of the Information and
the Projections described in the immediately succeeding paragraph and the
satisfaction of the conditions to be set forth in the definitive documentation
relating to the Credit Facilities, including without limitation those conditions
set forth in the Term Sheet. In the event that any of the conditions to the
initial funding of the Credit Facilities are not met, Agents may, in their sole
discretion, suggest alternative financing amounts or structures that ensure
adequate protection for the Lenders or decline to participate in the proposed
financing.
You hereby represent that, based on your review and analysis, to
your knowledge (a) all information, other than Projections (as defined below),
which has been or is hereafter made available to the Arrangers, the Agents or
the other Lenders by the New Investor Group or GMG or any of their respective
representatives in connection with the transactions contemplated hereby (the
"Information") has been reviewed and analyzed by you in connection with the
performance of your own due diligence and, as supplemented as contemplated by
the next sentence, is (or will be, in the case of information made available
after the date hereof) complete and correct in all material respects and does
not (or will not, as the case may be) contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements were or are made, and (b) all financial projections concerning
Holdings, GMG and their respective subsidiaries that have been or are hereafter
made available to the Arrangers, the Agents or the other Lenders by the New
Investor Group, GMG or any of their respective representatives in connection
with the transactions contemplated hereby (the "Projections") have been (or will
be, in the case of Projections made available after the date hereof) prepared in
good faith based upon reasonable assumptions. You agree to supplement the
Information and the Projections from time to time until the closing date so that
the representation and warranty in the preceding sentence is correct on the
closing date. In arranging and syndicating the Credit Facilities, the Arrangers
will be using and relying on the Information and the Projections without
independent verification thereof. The representations and covenants contained in
this paragraph shall remain effective until a definitive financing agreement is
executed and thereafter the disclosure representations contained herein shall be
superseded by those contained in such definitive financing agreement.
Stonington, as the management company of the Fund, hereby agrees
to pay the reasonable costs and expenses (including the reasonable fees and
expenses of counsel to the Agents, reasonable professional fees of consultants
and other experts and reasonable out-of-pocket expenses of the Arrangers and the
Agents, including without limitation syndication expenses) arising in connection
with the preparation, execution and delivery of this letter and the definitive
financing agreements and the syndication of the Credit Facilities. Stonington,
as the management company of the Firm, hereby further agrees to indemnify and
bold harmless each of the Arrangers, the Lenders (including BTCo and NB) and
each director, officer, employee, agent, attorney and affiliate thereof (each an
"indemnified person") from and against any losses, claims, damages, liabilities
or other expenses to which the Arrangers or a Lender or such indemnified persons
may become subject, insofar as such losses, claims, damages, liabilities (or
actions or
3
<PAGE>
other proceedings commenced or threatened in respect thereof) or other expenses
arise out of or in any way relate to or result from the actions of the New
Investor Group, GMG or any of their respective affiliates in connection with any
of the Transactions, any of the statements contained in this letter or relating
to the extension of the financing contemplated by this letter, or any use or
intended use of the proceeds of any of the loans and other extensions of credit
contemplated by this letter, and to reimburse each of the Arrangers, the Lenders
and each indemnified person for any reasonable legal or other expenses incurred
in connection with investigating defending or participating in any such
investigation litigation or other proceeding (whether or not any such
investigation, litigation or other proceeding involves claims made between the
new Investor Group or any third party and the Arrangers, such Lender or any such
indemnified person, and whether or not the Arrangers, such Lender or any such
indemnified person is a party to any investigation, litigation or proceeding out
of which any such expenses arise); provided, however, that the indemnity
contained herein shall not apply to the extent that such losses, claims,
damages, liabilities or other expenses result from the gross negligence or
willful misconduct of the Arrangers, such Lender or indemnified person. The
obligations to indemnify each Arranger, each Lender and such indemnified persons
and to pay such legal and other expenses shall remain effective until the
initial finding under a definitive financing agreement and thereafter the
indemnification and expense reimbursement obligations contained herein shall be
superseded by those contained in such definitive financing agreement. None of
the Arrangers, the Agents or any other Lender shall be responsible or liable to
any other party or any other person for consequential damages which may be
alleged as a result of this letter. The foregoing provisions of this paragraph
shall be in addition to any rights that the Arrangers, the Agents, any Lender or
any indemnified person may have at common law or otherwise.
In connection with the services to be provided hereunder by the
Agents, the Agents may employ the services of their respective affiliates. The
Agents may share with such affiliates and such affiliates may share with the
Agents, any information concerning holdings GMG and their respective affiliates;
provided that the Agents and such affiliates agree to hold any non-public
information confidential in accordance with their respective customary policies
relating to non-public information. Any such affiliate so employed (and its
directors, officers, employees, agents, attorneys and affiliates) shall be
entitled to all of the benefits afforded to the Agents hereunder.
You further acknowledge that the Agents and their respective
affiliates may be providing or proposing to provide debt financing, equity
capital or other services (including financial advisory services) to other
companies in respect of which you or your affiliates may have conflicting
interests regarding the transactions described herein and otherwise. The Agents
and their respective affiliates will not use confidential information obtained
from you or any of your affiliates by virtue of the transactions contemplated by
this letter or their other relationships with you and your affiliates in
connection with the performance by the Agents or their respective affiliates of
service for such other companies, and the Agents and their respective affiliates
will not finish any such information to such other companies. You also
acknowledge that the Agents have no obligation to use any confidential
information obtained from such other companies in connection with the
transactions contemplated by this letter, or to furnish any such confidential
information to you or any of your affiliates.
4
<PAGE>
This letter is confidential and shall not be disclosed by you to
any person other than your accountants, attorneys and, to the extent approved by
the Agents, other advisors, and to GMG and its accountants and attorneys and, to
the extent approved by the Agents, other advisors, and then only on a
confidential basis and in connection with the Acquisition and the related
transactions contemplated herein. Notwithstanding the immediately preceding
sentence, after your acceptance of this letter, you may disclose the terms and
conditions of this letter and the Term Sheet (i) in filings with the SEC and
other regulatory authorities and any stock exchange, (ii) in proxy and other
materials disseminated to stockholders and other purchasers of securities of
GMG, and (iii) in capital call materials disseminated to investors of the Fund.
Additionally, you may make such disclosures of this letter as are required by
law, regulation or judicial process or as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation;
provided that you will use your best efforts to notify us of any such disclosure
prior to making such disclosure.
Our offer will terminate at 5:00 PM (EST) on November 17, 1998,
unless on or before that date you sign and return an enclosed counterpart of
this letter together with an executed copy of the accompanying letter concerning
certain fee arrangements. The Credit Facilities referred to herein shall in no
event be available unless the Tender Offer described herein has been consummated
on or prior to January 31, 1999.
This letter agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. This letter
agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument.
[Remainder of page left intentionally blank]
5
<PAGE>
This letter agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. This letter
agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument.
Very truly yours,
BANKERS TRUST COMPANY
By: /s/ Victoria T. Page
------------------------
Title: Managing Director
---------------------
NATIONSBANK, N.A.
By: /s/ Elizabeth R. Borow
-----------------------
Title: Managing Director
--------------------
S-1
<PAGE>
AGREED AND ACCEPTED
this 8th day of November, 1998
STONINGTON ACQUISITION CORP.
By: /s/ Robert F. End
--------------------
Title: President
-----------------
STONINGTON PARTNERS INC.,
on behalf of STONINGTON CAPITAL APPRECIATION 1994 FUND, L.P.,
with respect to Stonington Acquisition Corp.'s and its subsidiaries' obligations
to pay costs and expenses and their respective indemnity and other obligations
set forth in this financing letter and the related fee letter only.
By: /s/ Robert F. End
-------------------
Title: Partner
----------------
S-2
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
SUMMARY OF TERMS
CREDIT FACILITIES
The following summarizes selected terms of the senior bank credit
facilities to be utilized in connection with the proposed acquisition (the
"Acquisition") of Global Motorsport Group, Inc. ("GMG") and its subsidiaries by
Stonington Partners, Inc. ("Stonington"), on behalf of Stonington Capital
Appreciation 1994 Fund, L.P. (the "Fund"), through GMG Acquisition Corp.
("Acquisition Co."), a Delaware corporation and an indirect wholly-owned
subsidiary of Stonington Acquisition Corp. ("Holdings"), a Delaware corporation
formed by Stonington. This Summary of Terms is intended merely as an outline of
certain of the material terms of such senior bank credit facilities. It does not
include descriptions of all of the terms, conditions and other provisions that
are to be contained in the definitive documentation relating to such senior bank
credit facilities and it is not intended to limit the scope of discussion and
negotiation of any matters not inconsistent with the specific matters set forth
herein. All terms defined in the financing letter to which this Summary of Terms
is attached and not otherwise defined herein shall have the same meanings when
used herein.
I. THE CREDIT FACILITIES
Borrower: Intermediate Holdings, Inc., a Delaware corporation
("Intermediate Holdings") to be formed by Holdings as a
direct wholly-owned subsidiary of Holdings; upon
consummation of the merger Acquisition Co. and GMG, and
the immediately subsequent merger between intermediate
holdings and GMG (such back-to-back mergers hereinafter
referred to collectively as the "Merger"), the
obligations of Intermediate Holdings will be assumed by
GMG and all subsequent extensions of credit will be
incurred by GMG (and any references to "Borrower" shall
be to (i) Intermediate Holdings prior to the Merger and
(ii) thereafter, GMG as the surviving corporation in the
Merger).
Arrangers: BT Alex. Brown incorporated and NationsBanc Montgomery
Securities LLC, as sole arrangers (in such capacity, the
"Arrangers").
Lenders: Bankers Trust Company ("BTCo"), NationsBank, N.A. ("NB")
and a syndicate of banks, financial institutions and
other accredited investors (the "Lenders").
Administrative Agent BTCo (in such capacity, the "Administrative Agent").
for the Lenders:
Syndication Agent for NationsBanc Montgomery Securities LLC (in such capacity,
the Lenders: the "Syndication Agent"; and together with the
Administrative Agent, the "Agents").
S-1
<PAGE>
Type and Amount: The Credit Facilities shall consist of the
Term Loan Facility and the Revolving Credit Facility.
Term Loan Facility. The Term Loan Facility will consist
of Tranche A Term Loans and the Tranche B Term Loans.
The Lenders' commitment to lend the Tranche A Term Loans
and the Tranche B Term Loans will terminate immediately
upon consummation of the Tender Offer.
Tranche A Term Loans. The Tranche A Term Loans will have
a final maturity date of five and one-half years after
the date of the initial funding under the Credit
Facilities (the "Closing Date") and be in an original
principal amount of up to $55.0 million. Quarterly
amortization will be required in aggregate annual
amounts as follows:
<TABLE>
<CAPTION>
Year Aggregate Amortization
----------------------
(in millions)
<S> <C>
1 $0
2 10
3 10
4 10
5 15
5-1/2 10
---
$55
</TABLE>
Tranche B Term Loans. The Tranche B Term Loans will have
a final maturity date of seven years after the Closing
Date and be in an original principal amount of up to
$15.0 million. Quarterly amortization will be required
in aggregate annual amounts equal to 1% of the original
principal amount of the Tranche B Term Loans for the
first six years after the Closing Date and the remaining
balance will be amortized in equal quarterly
installments during the seventh year.
Revolving Credit Facility. The Revolving Credit Facility
will have a final maturity date of five and one-half
years after the Closing Date and be in an original
amount of up to $50.0 million under which revolving
loans may be made and including a sublimit under which
letters of credit may be issued up to an amount to be
agreed upon. A portion on of the Revolving Credit
Facility in an amount to be agreed upon shall be made
available as a swingline facility.
Use of Proceeds: The proceeds of the Term Loan Facility and up to $23.8
million of the Revolving Credit Facility, together with
the cash proceeds of not less than $80.0 million in
common equity contributions (the "Equity Contribution"),
which proceeds may include up to $25.0 million in cash
proceeds from the issuance of senior equity securities,
which securities shall be in form and substance
satisfactory to Agents (the "Senior Equity
S-2
<PAGE>
Securities"), provided by Stonington and the Fund
(collectively, the "New Investor Group") through
Holdings or otherwise, shall be made available and shall
be used as follows:
1. to pay the consideration for all of the outstanding
shares (including to retire all outstanding stock
option, other than any such stock options that are
rolled over) of GMG in an aggregate amount of
approximately $108.3 million pursuant to the Tender
Offer and the Merger;
2. to repay all existing indebtedness of GMG and its
subsidiaries under their existing credit agreement
(the "Existing Credit Agreement") under which there
is outstanding approximately $53.0 million; and
3. to pay fees and expenses in connection with the
Transactions in an aggregate amount not to exceed
$12.5 million.
After the date of the consummation of the Tender Offer,
the Revolving Credit Facility will also be available to
provide for the working capital requirements and such
other general corporate purposes of GMG and its
subsidiaries as may be agreed upon and, subject to a
sublimit to be agreed upon, to issue standby letters of
credit to support workers' compensation contingencies
and for other corporate purposes to be agreed upon. To
the extent that advances under the Revolving Credit
Facility are made available by the Borrower to its
direct or indirect subsidiaries, such intercompany
borrowings shall be evidenced by promissory notes
subordinated in right of repayment to the Credit
Facilities (the "Intercompany Notes").
Guarantors: The Credit Facilities will be guaranteed by Holdings.
Upon consummation of the Merger, the Credit Facilities
will also be guaranteed by all direct and indirect
domestic subsidiaries of the Borrower.
Security: The Credit Facilities will be secured on a
first-priority perfected lien basis by Holdings' pledge
of the stock of Intermediate Holdings and by
Intermediate Holdings' pledge of the stock of
Acquisition Co. and the Intercompany Notes. The
Intercompany Note between Intermediate Holdings and GMG
will be secured by all existing and after-acquired
personal property of GMG on a first priority perfected
lien basis and such security interest in favor of
Intermediate Holdings will be assigned by Intermediate
Holdings to the Administrative Agent on behalf of the
Lenders.
S-3
<PAGE>
Upon consummation of the Merger and assumption of the
Credit Facilities by GMG, all extensions of credit to
the Borrower and all guaranties of subsidiaries of the
Borrower will be secured by all existing and
after-acquired personal property of the Borrower and the
subsidiary guarantors, including a pledge of 100% of the
stock of all domestic subsidiaries of the Borrower and
65% of the stock of all foreign subsidiaries of
Borrower.
Upon consummation of the Merger and assumption of the
Credit Facilities by GMG, the Credit Facilities shall
also be secured by first priority liens on all existing
and after-acquired real property fee interests and all
leasehold interests of the Borrower and the subsidiary
guarantors, subject to exceptions to be agreed upon.
To effect such liens securing the Credit Facilities,
Holdings, the Borrower, GMG and the subsidiary
guarantors shall execute and deliver to the
Administrative Agent all security agreements, pledge
agreements, financing statements, deeds of trust,
mortgages, collateral access agreements and other
documents and instruments as are necessary to grant a
first priority perfected security interest in and lien
upon all such property of Holdings, the Borrower, GMG
and the subsidiary guarantors, subject to customary
permitted liens to be agreed upon.
The guaranty of Holdings will be secured by a pledge of
the stock of the Borrower.
Negative pledge on all assets of Holdings, the Borrower
and its subsidiaries, subject to exceptions to be agreed
upon.
Interest Rates: All amounts outstanding under the Credit Facilities
shall bear interest, at the Borrower's option, as
follows:
A. With respect to the Tranche A Term Loans and the
loans made under the Revolving Credit Facility, at the
reserve adjusted EuroDollar Rate or the Base Rate plus,
in each case, a margin which shall initially be 3.00%
and 2.00% per annum, respectively, for the six-month
period following the Closing Date and which shall
thereafter be based on the ratio (the "Leverage Ratio")
of consolidated total debt to consolidated EBITDA (to be
defined) of the Borrower and its subsidiaries to be
determined; and
B. With respect to the Tranche B Term Loans, at the
reserve adjusted EuroDollar Rate or the Base Rate plus,
in each case, a margin equal to 3.50% and 2.50% per
annum.
S-4
<PAGE>
Loans outstanding under the swingline facility shall
bear interest at the rate applicable Base Rate Loans
under the Revolving Credit Facility minus the commitment
fee percentage in respect of the Revolving Credit
Facility, and such outstanding loans shall not
constitute usage of the Revolving Credit Facility for
purposes of calculating the commitment fee.
As used herein, the terms "Base Rate" and "reserve
adjusted EuroDollar Rate" shall have meanings customary
and appropriate for financings of this type, and the
basis for calculating accrued interest and the interest
periods for loans bearing interest at the reserve
adjusted EuroDollar Rate ("EuroDollar Loans") shall be
customary and appropriate for financings of this type.
After the occurrence and during the continuation of an
event of default, interest shall accrue at a rate equal
to the rate on loans bearing interest at the rate
determined by reference to the Base Rate ("Base Rate
Loans") plus an additional two percentage points (2.00%)
per annum and shall be payable on demand.
Interest Payments: Quarterly for Base Rate Loans; on the last day of
selected interest periods (which shall be 1, 2, 3 and 6
months) for EuroDollar Loans (and at the end of every
three months, in the case of interest periods of longer
than three months); and upon prepayment, in each case
payable in arrears and computed on the basis of a
360-day year.
Interest Rate Within 90 days after the Closing Date, the Borrower will
Protection: obtain interest rate protection, pursuant to interest
rate swaps, caps or other similar arrangements
satisfactory to the Agents, against increases in
interest rates with respect to a notional amount equal
to not less than 50% of the aggregate amount of loans
outstanding under the Term Loan Facility as of the
Closing Date, such arrangements to remain in effect for
a period of not less than two years after the Closing
Date.
Borrowing Base: Availability of loans and letters of credit under the
Revolving Credit Facility will be limited to an amount
equal to the lesser of (I) the aggregate commitments of
the Lenders under the Revolving Credit Facility and (II)
a borrowing base equal to the sum of (i) 85% of eligible
receivables of GMG and its subsidiaries and (ii) 50% of
eligible inventory of GMG and its subsidiaries valued at
the lesser of cost or fair market value.
Letter of Credit Fee: The letter of credit fee shall be a percentage equal to
the applicable margin for EuroDollar Loans under the
Revolving Credit Facility, which shall be shared by all
Lenders, and an additional 0.25% per annum, which shall
be retained by the Lender issuing the letter of credit,
in each case based upon the applicable percentage
multiplied by the amount
S-5
<PAGE>
available from time to time for drawing under such
letter of credit.
Commitment For the first six-month period following the Closing
Fees: Date, commitment fees on the daily average unused
portion of the Revolving Credit Facility shall accrue
from the Closing Date at a rate equal to 0.50% per
annum. Thereafter, the commitment fee percentage shall
be based on a grid to be determined based on the
Borrower's Leverage Ratio. Commitment fees shall be
computed on the basis of a 360-day year and payable
quarterly in arrears and upon the maturity or
termination of the Revolving Credit Facility.
Voluntary The Credit Facilities may be prepaid in whole or in part
Prepayments and without premium or penalty (EuroDollar Loans prepayable
Commitment only on the last days of related interest periods or if
Reductions: the Borrower pays all breakage costs) and the Lenders'
commitments relative thereto reduced or terminated upon
such notice and in such amounts as may be agreed upon.
Voluntary prepayments of the Term Loan Facility shall be
applied ratably to the Tranche A Term Loans and the
Tranche B Term Loans and shall be applied on a pro rata
basis to the scheduled installments thereof.
Mandatory Following consummation of the Merger, the Borrower shall
Prepayments and prepay the loans and/or the commitments under the
Commitment Revolving Credit Facility shall be reduced (subject to
Reductions: certain basket amounts to be agreed upon) in amounts
equal to:
Asset Sales Proceeds: 100% of the net after-tax cash
proceeds of the sale or other disposition of any
property or assets of Holdings, the Borrower or any of
its subsidiaries (including insurance and condemnation
proceeds), other than (a) net cash proceeds of sales or
other dispositions of inventory in the ordinary course
of business and (b) certain other exceptions to be
negotiated, in each case payable no later than the first
business day following the date of receipt;
Proceeds of Equity Offerings: 75% of the net cash
proceeds received from the issuance of equity securities
of Holdings, the Borrower or any of its subsidiaries, in
each case payable no later than the first business day
following the date of receipt;
Proceeds of Debt Issuances: subject to the provisions
set forth below, 100% of the net cash proceeds received
from certain issuances of debt securities by Holdings,
the Borrower or any of its subsidiaries, in each case
payable no later than the first business day following
the date of receipt; and
Excess Cash Flow: 75% of excess cash flow (to be
defined) for each fiscal year, payable within 90 days
after the end of the applicable fiscal
S-6
<PAGE>
year.
All such amounts shall be applied to first the
prepayment of the Term Loan Facility and thereafter to
the prepayment of the Revolving Credit Facility and the
reduction of the commitments thereunder and all such
mandatory prepayments of the Term Loan Facility shall be
applied ratably to the Tranche A Term Loans and to the
Tranche B Term Loans; provided that during the first six
months following the Closing Date the first $25.0
million in cash proceeds from the issuance of
subordinated debt securities, the terms of which
securities shall be satisfactory in form and substance
to the Agents and Requisite Lenders (the "Permitted
Mezzanine Financing"), shall be applied as follows: (a)
$5.0 million to the prepayment of the Tranche A Term
Loans; and (b) $20.0 million to redeem the Senior Equity
Securities. Mandatory prepayments of the Term Loan
Facility made pursuant to the preceding sentence shall
be applied pro rata to the remaining scheduled
installments of the Term Loan Facility. All other
mandatory repayments shall be applied to the remaining
scheduled installments of the Term Loan Facility in a
manner to be determined.
Notwithstanding the foregoing, in the case of any
mandatory prepayment to be applied to the Tranche B Term
Loans, the Borrower may elect to offer the holders
thereof the opportunity to waive the right to receive
the amount of such mandatory prepayment. In the event
any such holders elect to waive such right, 100% of the
amount that would otherwise have been applied as a
mandatory prepayment of the Tranche B Term Loans of such
holders shall be applied to the prepayment of the
Tranche A Term Loans.
Representations and Customary and appropriate, including without limitation
Warranties: due organization and authorization, enforceability,
financial condition, no material adverse changes, title
to properties, liens, litigation, payment of taxes, no
material adverse agreements, compliance with laws,
employee benefit liabilities, environmental liabilities,
perfection and priority of liens securing the Credit
Facilities, full disclosure, year 2000 compliance and
the accuracy of all representations and warranties in
the Definitive Acquisition Documents (as defined below
under the heading "Acquisition Structure and
Documentation").
Covenants: Customary and appropriate affirmative covenants,
including but not limited to covenants to deliver
appraisals, title insurance and environmental reports
relating to the real property securing the Credit
Facilities and a solvency opinion from an independent
valuation consultant or appraiser, and negative
covenants, including but not limited to limitations on
other indebtedness, liens, investments,
S-7
<PAGE>
guarantees, restricted junior payments (dividends
provided that after the mandatory prepayments of the
Credit Facilities described in "Mandatory Prepayments
and Commitment Reductions" above have been made, up to
$20.0 million in proceeds of a Permitted Mezzanine
Financing may be used to redeem the Senior Equity
Securities, redemptions and payments on subordinated
debt), mergers and acquisitions, sales of assets,
leases, transactions with affiliates, conduct of
business, year 2000 compliance and other provisions
customary and appropriate for financings of this type,
including exceptions and baskets to be mutually agreed
upon. Notwithstanding the foregoing, prior to the
Merger, the Credit Facilities will not (i) prohibit the
sale or other disposition of the Shares held by
Acquisition Co. for cash at the fair value thereof so
long as the proceeds are held as cash or approved cash
equivalents and (ii) prohibit the creation or existence
of any lien or encumbrance on or with respect to the
Shares. Financial covenants will include a minimum
interest coverage test, a maximum leverage test, a
minimum EBITDA (to be defined) test, and a maximum
capital expenditure test. Holdings shall agree to cause
the Merger to occur as soon as practicable but in any
event within 120 days after the consummation of the
Tender Offer pursuant to the Definitive Acquisition
Documents, including in the event that not less than 90%
of the Shares are tendered in the Tender Offer, causing
a "short-form" merger to occur promptly following the
payment for the Shares purchased in the Tender Offer.
Events of Default: Customary and appropriate (subject to customary and
appropriate grace periods), including without limitation
failure to make payments when due, defaults under other
agreements or instruments of indebtedness, noncompliance
with covenants, breaches of representations and
warranties, bankruptcy, judgments in excess of specified
amounts, invalidity of guaranties, impairment of
security interests in collateral, and "changes of
control" (to be defined in a mutually agreed upon
manner).
II. CONDITIONS TO LOANS
Certain Conditions Conditions precedent to the initial funding of the
Precedent to Initial Credit Facilities will include, without limitation, the
Funding: following:
1. Satisfactory Documentation. The definitive
documentation evidencing the Credit Facilities (the
"Definitive Financing Documents") shall be prepared
by counsel to the Agents and shall be in form and
substance satisfactory to the Agents and the
Lenders.
S-8
<PAGE>
2. Corporate Structure, Management, etc. The
corporate, capital and ownership structure and
senior management of Holdings, GMG and their
respective subsidiaries shall be satisfactory to
the Agents and the Lenders in all respects.
3. Acquisition Structure and Documentation. The
definitive documentation (including the Merger
Agreement) relating to the Acquisition (including
the Tender Offer and the Merger) (such
documentation being the "Definitive Acquisition
Documents") shall not have been amended,
supplemented, waived or otherwise modified in any
material respect after the date of the financing
letter among Holdings, BTCo and NB without the
prior written consent of the Agents; and the
Definitive Acquisition Documents shall be in full
force and effect as of the Closing Date.
4. Equity Capitalization. On or prior to the Closing
Date, Acquisition Co. shall have received not less
than $80.0 million from the Equity Contribution,
which may include up to $25.0 million in cash
proceeds from the issuance of the Senior Equity
Securities, contributed by the New Investor Group
through Holdings or otherwise. All equity
securities of Holdings and the Borrower shall have
terms and conditions satisfactory to the Agents and
the Lenders. Upon consummation of the Acquisition,
the New Investor Group shall, directly or
indirectly, control the Borrower and its
subsidiaries.
5. Consummation of Tender Offer. On the Closing Date,
Acquisition Co. shall have acquired not less than
the Minimum Shares pursuant to the Tender Offer and
all other aspects of the Tender Offer shall have
been consummated pursuant to the Definitive
Acquisition Documents, no provision of which shall
have been amended, supplemented, waived or
otherwise modified in any material respect without
the prior written consent of the Agents. The Tender
Offer and the financing thereof shall be
consummated in compliance with all applicable laws
and regulations (including, without limitation,
Regulation U of the Board of Governors of the
Federal Reserve System).
6. Discharge of Existing Debt. All of the outstanding
existing indebtedness of GMG and its subsidiaries
under the Existing Credit Agreement shall have been
repaid in full, all commitments relating thereto
shall have been terminated, and all liens and
security interests related thereto shall have been
terminated or released and no existing indebtedness
of GMG and its subsidiaries shall remain
outstanding, except for up to $2.5
S-9
<PAGE>
million with respect to mortgage indebtedness
(including any related liens) and capital leases,
in each case with terms and conditions satisfactory
to the Agents.
7. Certain Approvals and Agreements. All governmental
and third party approvals necessary or advisable in
connection with the Acquisition, the financings
contemplated thereby and the continuing operations
of the business of GMG and its subsidiaries shall
have been obtained and be in full force and effect,
and all applicable waiting periods shall have
expired without any action being taken or
threatened by any competent authority which would
restrain, prevent or otherwise impose adverse
conditions on the Acquisition or the financing
thereof.
8. Transaction Expenses. The Agents shall have
received satisfactory evidence that the fees and
expenses to be incurred in connection with the
Acquisition and the related transactions will not
exceed $12.5 million in the aggregate.
9. Security. The Administrative Agent, for the benefit
of the Lenders, shall have been granted or
arrangements have been made and all necessary
documents and instruments have been delivered to
grant to the Administrative Agent a perfected
security interest in all assets to the extent
described above wider the "The Credit Facilities
Security".
10. Financial Statements. The Lenders shall have
received (i) audited financial statements of GMG
and its subsidiaries for the fiscal years ended
January 31, 1998, 1997 and 1996, (ii) unaudited
financial statements of GMG and its subsidiaries
for the fiscal periods most recently ended prior to
the Closing Date (including without limitation
monthly financial statements for any such period of
less than three months, (iii) a pro forma balance
sheet of Holdings, GMG and its subsidiaries as of
the Closing Date after giving effect to the
Acquisition and the transactions contemplated
hereby, and (iv) projected financial statements
(including balance sheets and statements of
operations, stockholders' equity and cash flows)
of Holdings, GMG and its subsidiaries for the
seven-year period after the Closing Date, all of
the foregoing to be in form and substance
satisfactory to the Agents and the Lenders.
11. No Material Adverse Change. Since January 31, 1998,
there shall have occurred no material adverse
change in the business, operations, properties,
assets, liabilities, condition (financial or
S-10
<PAGE>
otherwise) or prospects of GMG and its
subsidiaries, taken as a whole.
12. No Disruption of Financial and Capital Markets.
There shall have been no material adverse change
after the date hereof in the syndication markets
for credit facilities similar in nature to the
Credit Facilities, and there shall not have
occurred and be continuing a material disruption of
or material adverse change in the financial,
banking or capital markets that would have an
adverse effect on such syndication market, in each
case as determined by the Agents in their sole
discretion.
13. Additional Information. There shall have been no
information relating to conditions or events not
previously disclosed to the Agents or relating to
new information or additional developments
concerning conditions or events previously
disclosed to the Agents which may have a material
adverse effect on the business, operations,
properties, assets, liabilities, condition
(financial or otherwise) or prospects of Holdings,
GMG and their respective subsidiaries. The results
of the Agents' remaining legal, tax, regulatory and
environmental investigations with respect to GMG
and its subsidiaries, the Acquisition and the other
transactions contemplated hereby shall be
reasonably satisfactory in all material respects to
the Agents.
14. Customary Closing Documents. All documents required
to be delivered under Definitive Financing
Documents, including customary legal opinions,
financial condition certificates, corporate
records, documents from public officials and
officers' certificates, shall have been delivered.
Conditions to All The conditions to all borrowings will include
Borrowings: requirements relating to prior written notice of
borrowing, the accuracy of representations and
warranties, and the absence of any default or potential
event of default, and will otherwise be customary and
appropriate for financings of this type.
III. MISCELLANEOUS
Syndication: A syndicate of financial institutions will be arranged
by the Arrangers as promptly as practicable, BTCo and
its affiliates will act as sole and exclusive
Administrative Agent, collateral agent and co-arranger
for the Credit Facilities, NB and its affiliates will
act as sole and exclusive Syndication Agent and
co-arranger for the Credit Facilities, Stonington and
GMG shall cooperate with the Agents and the Arrangers in
the syndication of the Credit Facilities (such
cooperation to include, without
S-11
<PAGE>
limitation, participating in meetings with the Lenders
and assisting in the preparation of a Confidential
Information Memorandum and other materials to be used in
connection with such syndication) and shall provide and
cause their respective advisors to provide all
information reasonably deemed necessary by the Arrangers
to successfully complete such syndication. Stonington
and GMG also agree to coordinate any other financings by
Holdings, GMG or any of their respective affiliates with
the Arrangers' primary syndication efforts relating to
the Credit Facilities. Stonington's and GMG's assistance
in connection with the syndication of the Credit
Facilities will also include, if the Arrangers request,
reallocating, in a mutually acceptable manner, amounts
between the Tranche A Term Loans and the Tranche B Term
Loans (and adjusting the amortization thereof in a
manner mutually acceptable), if, in the Arrangers'
judgment (after consultation with Stonington and GMG),
such a reallocation would result in a more successful
syndication; provided that the aggregate
principal amount of the Credit Facilities will not be
reduced below the amount contained in the commitment
letter to which this Summary of Terms is attached.
The Lenders may assign all or, in an amount of not less
than $5.0 million (or such lesser amount as may
constitute the assigning Lender's entire commitment),
any part of their shares of the Credit Facilities to
their affiliates, to other Lenders, or to one or more
banks or other entities that are eligible assignees (to
be defined in the Definitive Financing Documents) which
are acceptable to Stonington and the Agents) such
consent not to be unreasonably withheld, and upon such
assignment any such affiliate, bank or entity shall
become a Lender for all purposes of the Definitive
Financing Documents; provided that assignments made to
affiliates and other Lenders shall not be subject to the
$5.0 million minimum assignment requirement. The Lenders
will have the right to sell participations, subject to
customary limitations on voting rights, in their shares
of the Credit Facilities.
Requisite Lenders: Requisite Lenders shall mean Lenders holding in the
aggregate more than 50% of the commitments under the
Credit Facilities.
Taxes, Reserve All payments are to be made free and clear of any
Requirements present or future taxes (other than franchise taxes and
& Indemnities: taxes on overall net income), imposts, assessments,
withholdings, or other deductions whatsoever. Foreign
Lenders shall furnish to the Administrative Agent (for
delivery to the Borrower) appropriate certificates or
other evidence of exemption from U.S. federal income tax
withholding.
The Borrower and its subsidiaries shall indemnify the
Lenders against all increased costs of capital resulting
from reserve requirements or
S-12
<PAGE>
otherwise imposed in each case subject to customary
increased costs, capital adequacy and similar
provisions.
Governing Law and The Borrower and its subsidiaries will submit to the
Jurisdiction: nonexclusive jurisdiction and venue of the federal and
state courts of the State of New York and will waive any
right to trial by jury. New York law shall govern the
Definitive Financing Documents.
Agents' Counsel: O'Melveny & Myers LLP.
S-13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
STONINGTON ACQUISITION CORP.,
GMG ACQUISITION CORP.
and
GLOBAL MOTORSPORT GROUP, INC.
dated as of
November 8, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE OFFER
SECTION 1.1. The Offer...................................................................... 2
SECTION 1.2. Company Actions................................................................ 3
SECTION 1.3. Directors...................................................................... 4
ARTICLE II
THE MERGER
SECTION 2.1. The Merger..................................................................... 5
SECTION 2.2. Effective Time................................................................. 5
SECTION 2.3. Effects of the Merger.......................................................... 5
SECTION 2.4. Certificate of Incorporation and By-Laws of the Surviving Corporation.......... 6
SECTION 2.5. Directors...................................................................... 6
SECTION 2.6. Officers....................................................................... 6
SECTION 2.7. Conversion of Common Shares.................................................... 6
SECTION 2.8. Conversion of Purchaser Common Stock........................................... 6
SECTION 2.9. Options; Stock Plans........................................................... 7
SECTION 2.10. Stockholders' Meeting.......................................................... 8
SECTION 2.11 Merger without Meeting of Stockholders......................................... 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.1. Dissenting Shares.............................................................. 8
SECTION 3.2. Payment for Common Shares...................................................... 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Organization and Qualification; Subsidiaries...................................10
SECTION 4.2. Capitalization of the Company and its Subsidiaries.............................11
SECTION 4.3. Authority Relative to This Agreement; Consents and Approvals...................13
SECTION 4.4. SEC Reports; Financial Statements..............................................13
SECTION 4.5. Proxy Statement; Offer Documents...............................................14
SECTION 4.6. Consents and Approvals; No Violations..........................................15
SECTION 4.7. No Default.....................................................................15
SECTION 4.8. No Undisclosed Liabilities.....................................................15
SECTION 4.9. Litigation.....................................................................16
SECTION 4.10. Compliance with Applicable Law.................................................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 4.11. Employee Benefit Matters.......................................................16
SECTION 4.12. Environmental Laws and Regulations.............................................19
SECTION 4.13. Rights Agreement...............................................................20
SECTION 4.14. Brokers........................................................................20
SECTION 4.15. Absence of Certain Changes.....................................................20
SECTION 4.16. Taxes..........................................................................20
SECTION 4.17. Intellectual Property..........................................................22
SECTION 4.18. Labor Matters..................................................................23
SECTION 4.19. Opinions of Financial Advisors.................................................24
SECTION 4.20. Real Property and Lease........................................................24
SECTION 4.21. Material Contracts.............................................................25
SECTION 4.22. Certain Business Practices.....................................................26
SECTION 4.23. Product Liability..............................................................27
SECTION 4.24. Suppliers and Customers........................................................27
SECTION 4.25. Accounts Receivable; Inventory.................................................27
SECTION 4.26. Insurance......................................................................28
SECTION 4.27. Title and Condition of Properties..............................................28
SECTION 4.28. Information in Financing Documents.............................................28
SECTION 4.29. Section 2115...................................................................29
SECTION 4.30. Affiliated Transactions........................................................29
SECTION 4.31. Full Disclosure................................................................29
SECTION 4.32. Year 2000......................................................................29
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
SECTION 5.1. Organization...................................................................30
SECTION 5.2. Authority Relative to This Agreement...........................................30
SECTION 5.3. Consents and Approvals; No Violations..........................................30
SECTION 5.4. Proxy Statement; Schedule 14D-9................................................31
SECTION 5.5. Financing......................................................................31
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of the Company.............................................31
SECTION 6.2. Acquisition Proposals..........................................................34
SECTION 6.3. Access to Information..........................................................35
SECTION 6.4. Additional Agreements; Reasonable Efforts......................................36
SECTION 6.5. Consents.......................................................................37
SECTION 6.6. Public Announcements...........................................................37
SECTION 6.7. Indemnification................................................................37
SECTION 6.8. Financial Statements...........................................................38
SECTION 6.9. Employee Benefit Arrangements..................................................38
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 6.10. Notification of Certain Matters................................................38
SECTION 6.11. Rights Agreement...............................................................39
SECTION 6.12. State Takeover Laws............................................................39
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions.....................................................................39
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. Termination....................................................................40
SECTION 8.2. Effect of Termination..........................................................41
SECTION 8.3. Fees and Expenses..............................................................42
SECTION 8.4. Amendment......................................................................43
SECTION 8.5. Waiver.........................................................................43
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Nonsurvival of Representations and Warranties..................................43
SECTION 9.2. Entire Agreement; Assignment...................................................43
SECTION 9.3. Validity.......................................................................43
SECTION 9.4. Notices........................................................................43
SECTION 9.5. Governing Law..................................................................44
SECTION 9.6. Descriptive Headings...........................................................45
SECTION 9.7. Parties in Interest............................................................45
SECTION 9.8. Counterparts...................................................................45
ANNEX I Conditions to the Offer
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
8, 1998, by and among Stonington Acquisition Corp. ("Parent"), GMG Acquisition
Corp., a Delaware corporation and a direct or indirect wholly owned subsidiary
of Parent (the "Purchaser"), and Global Motorsport Group, Inc., a Delaware
corporation formerly known as Custom Chrome, Inc. (the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to
commence a tender offer (the "Offer") to purchase all of the outstanding shares
of the Company's common stock, par value $.001 per share ("Common Shares"),
including the associated preferred share purchase rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of November 13, 1996, by and between
the Company and American Stock Transfer and Trust Company, as Rights Agent (the
"Rights Agreement"), at a price per Share of $19.50 net to the seller in cash
(the "Offer Price");
WHEREAS, the Board of Directors of the Company (the "Company Board")
has (i) approved the Offer and (ii) adopted, deemed advisable and approved this
Agreement, and is recommending that the Company's stockholders accept the Offer,
tender their Common Shares to the Purchaser and approve this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the merger of the Purchaser with and into the Company as
set forth below (the "Merger") in accordance with the General Corporation Law of
Delaware (the "GCL") and upon the terms and subject to the conditions set forth
in this Agreement, whereby each of the issued and outstanding Common Shares not
owned directly or indirectly by Parent, the Purchaser or the Company will be
converted into the right to receive $19.50 in cash;
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and none of the events set forth in Annex I
hereto (the "Tender Offer Conditions") shall have occurred, as promptly as
practicable but in no event later than the fifth business day from the date of
this Agreement, the Purchaser shall, and Parent shall cause the Purchaser to,
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act")) an offer to purchase all outstanding Common Shares at the
Offer Price and shall file all necessary documents with the Securities and
Exchange Commission (the "SEC") in connection with the Offer (the "Offer
Documents"). The obligation of the Purchaser to accept for payment or pay for
any Common Shares tendered pursuant thereto will be subject only to the
satisfaction of the Tender Offer Conditions.
(b) Without the prior written consent of the Company, the Purchaser
shall not (i) impose conditions to the Offer in addition to the Tender Offer
Conditions, (ii) modify or amend the Tender Offer Conditions or any other term
of the Offer in a manner adverse to the holders of Common Shares, (iii) reduce
the number of Common Shares subject to the Offer, (iv) reduce the Offer Price,
(v) except as provided in the following sentence, extend the Offer, if all of
the Tender Offer Conditions are satisfied or waived, or (vi) change the form of
consideration payable in the Offer. Notwithstanding the foregoing, the Purchaser
may, without the consent of the Company, extend the Offer at any time, and from
time to time, (i) if at the then-scheduled expiration date of the Offer any of
the conditions to the Purchaser's obligation to accept for payment and pay for
all Common Shares shall not have been satisfied or waived; (ii) for any period
required by any rule, regulation, interpretation or position of the SEC or its
staff applicable to the Offer; or (iii) if all Tender Offer Conditions are
satisfied or waived but the number of Common Shares tendered is at least equal
to 75%, but less than 90%, of the then-outstanding number of Common Shares, for
an aggregate period of not more than 10 business days (for all such extensions)
beyond the latest expiration date that would be permitted under clause (i) or
(ii) of this sentence. So long as this Agreement is in effect, the Offer has
been commenced and the Tender Offer Conditions have not been satisfied or
waived, the Purchaser shall, and Parent shall cause the Purchaser to, cause the
Offer not to expire, subject, however, to the Purchaser's and Parent's rights of
termination under this Agreement. Parent and the Purchaser shall comply with the
obligations respecting prompt payment pursuant to Rule 14e-1(c) under the
Exchange Act.
(c) Parent and the Purchaser represent that the Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws, and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except
that no representation is
2
<PAGE>
made by Parent or the Purchaser with respect to information supplied by the
Company in writing for inclusion in the Offer Documents. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, agrees to
promptly correct any information provided by it for use in the Offer Documents
if and to the extent that it shall have become false or misleading in any
material respect and the Purchaser further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to stockholders of the Company, in each case, as and to the extent
required by applicable federal securities laws.
SECTION 1.2. Company Actions.
(a) The Company shall file with the SEC and mail to the holders of
Common Shares, on the date of the filing by Parent and the Purchaser of the
Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9")
reflecting the recommendation of the Company Board that holders of Common Shares
tender their Common Shares pursuant to the Offer, and shall disseminate the
Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The
Schedule 14D-9 will set forth, and the Company hereby represents that the
Company Board, at a meeting duly called and held, has (i) determined by
unanimous vote of its directors that the Offer and the Merger are fair to,
advisable and in the best interests of the Company and its stockholders, (ii)
approved the Offer and adopted this Agreement in accordance with the GCL, (iii)
resolved to recommend acceptance of the Offer and approval of this Agreement by
the Company's stockholders, and (iv) taken all action necessary to render
Section 203 of the GCL and the Rights inapplicable to the Offer and the Merger;
provided, however, that such recommendation and approval may be withdrawn,
modified or amended to the extent that the Company Board determines in good
faith and on a reasonable basis, after consultation with its outside counsel,
that such action is required in the exercise of the Company Board's fiduciary
duties under applicable law. The Company further represents that, prior to the
execution hereof, Cleary Gull Reiland & McDevitt, Inc., the Company's financial
advisor (the "Financial Advisor"), has delivered to the Company Board its
written opinion (the "Fairness Opinion"), to the effect that, as of the date of
this Agreement, the consideration to be received by the holders of Common Shares
(other than Common Shares held by Parent or any of its affiliates, in the
treasury of the Company or by any wholly-owned subsidiary of the Company)
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view. The Company further represents and warrants that it has been
authorized by the Financial Advisor to permit, subject to prior review and
consent by the Financial Advisor (such consent not to be unreasonably withheld),
the inclusion of such opinion (or a reference thereto) in the Offer Documents
and in the Schedule 14D-9. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations of the Company Board described in this
Section 1.2(a).
(b) The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws, and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information
3
<PAGE>
supplied by Parent or the Purchaser in writing for inclusion in the Schedule
14D-9. Each of the Company, on the one hand, and Parent and the Purchaser, on
the other hand, agree promptly to correct any information provided by either of
them for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to the holders of Common Shares, in each case, as and to
the extent required by applicable federal securities law.
(c) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listing containing the names and
addresses of the record holders of Common Shares as of the most recent
practicable date and shall furnish the Purchaser with such additional
information (including, but not limited to, updated lists of holders of Common
Shares and their addresses, mailing labels and lists of security positions and
non-objecting beneficial owner lists) and such other assistance as the Purchaser
or its agents may reasonably request in communicating the Offer to the Company's
record and beneficial stockholders. Subject to the requirements of applicable
law, and except for such steps as are appropriate to disseminate the Offer
Documents and any other documents necessary to consummate the Merger, Parent,
the Purchaser and their affiliates, associates, agents and advisors shall use
the information contained in any such labels, listings and files only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated, will deliver to the Company all copies of such information then in
their possession.
SECTION 1.3. Directors.
(a) Subject to compliance with applicable law, promptly upon the
payment by the Purchaser for Common Shares pursuant to the Offer, and from time
to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of the total number of directors on the Company Board (determined
after giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Common Shares
beneficially owned by Parent or its affiliates bears to the total number of
Common Shares then outstanding, and the Company shall, upon request of Parent,
promptly take all actions necessary to cause Parent's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors; provided, however, that, prior to the Effective Time (as
defined herein), the Company Board shall always have at least two members who
are neither officers, directors or designees of the Purchaser or any of its
affiliates ("Purchaser Insiders"). If the number of directors who are not
Purchaser Insiders is reduced below two prior to the Effective Time, the
remaining director who is not a Purchaser Insider shall be entitled to designate
a person to fill such vacancy who is not a Purchaser Insider and who shall be a
director not deemed to be a Purchaser Insider for all purposes of this
Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The Company shall promptly take all actions required pursuant
to such Section and Rule in order
4
<PAGE>
to fulfill its obligations under this Section 1.3, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Parent will supply any information with
respect to itself, and its officers, directors and affiliates required by such
Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 1.3 and prior to the Effective Time, any amendment or
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or the Purchaser or waiver of any of the Company's rights hereunder will require
the concurrence of a majority of the directors of the Company then in office who
are not Purchaser Insiders (or, in the case where there are two or fewer
directors who are not Purchaser Insiders, the concurrence of one director who is
not a Purchaser Insider) if such amendment, termination, extension or waiver
would have an adverse effect on the minority stockholders of the Company.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the GCL, at the Effective Time, the Purchaser
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation"). Parent may, upon
notice to the Company, modify the structure of the Merger if Parent determines
it advisable to do so because of tax or other considerations, and the Company
shall promptly enter into any amendment to this Agreement necessary or desirable
to accomplish such structure modification, provided that no such amendment shall
reduce the Merger Price.
SECTION 2.2. Effective Time As soon as practicable after the
satisfaction of the conditions set forth in Sections 7.1(a) and 7.1(b), but
subject to Sections 7.1(c) and 7.1(d), the Company shall execute, in the manner
required by the GCL, and deliver to the Secretary of State of the State of
Delaware a duly executed and verified certificate of merger, and the parties
shall take such other and further actions as may be required by law to make the
Merger effective. The time the Merger becomes effective in accordance with
applicable law is referred to as the "Effective Time." Prior to the filing
referred to in this Section 2.2, a closing will be held at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019
(or such other place as the parties may agree) for the purpose of confirming all
of the foregoing.
SECTION 2.3. Effects of the Merger. The Merger shall have the effects
set forth in the GCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and the Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the
5
<PAGE>
Company and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 2.4. Certificate of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Certificate of Incorporation of the Purchaser as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 6.7, the By-Laws of the
Purchaser in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation until amended in accordance with the provisions thereof and
applicable law.
SECTION 2.5. Directors. Subject to applicable law, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 2.6. Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 2.7. Conversion of Common Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto and (ii) Dissenting Shares (as defined herein)), shall by virtue
of the Merger be cancelled and retired and shall be converted into the right to
receive pursuant to Section 3.2 $19.50 in cash (the "Merger Price"), payable to
the holder thereof, without interest thereon, upon surrender of the certificate
formerly representing such Common Share.
SECTION 2.8. Conversion of Purchaser Common Stock. The Purchaser has
outstanding 1,000 shares of common stock, par value $.01 per share, all of which
shares are entitled to vote with respect to approval and adoption of this
Agreement. At the Effective Time, each share of common stock, par value $.01 per
share, of the Purchaser issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
6
<PAGE>
SECTION 2.9. Options; Stock Plans.
(a) Prior to the consummation of the Offer, the Company Board (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide for the cancellation, effective at the
Effective Time (the "Option Cancellation Time"), of all the outstanding stock
options (the "Stock Options") (other than options outstanding under the
Company's 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"
and such options being referred to as the "Purchase Plan Options")) heretofore
granted under any other stock option or similar plan or agreement of the Company
(such other stock option or similar plans or agreements together with the
Employee Stock Purchase Plan being collectively referred to herein as the "Stock
Plans"). Such cancellation shall occur without any payment therefor except as
otherwise provided in this Section 2.9. At the Option Cancellation Time, all
Stock Options (whether vested or unvested) which are listed in Section 2.9 of
the Company Disclosure Schedule (as defined herein) shall, unless otherwise
agreed to by Parent and the holder of such Stock Option, be cancelled (and to
the extent formerly so exercisable shall no longer be exercisable) and shall
entitle each holder thereof, in cancellation and settlement therefor, to a
payment, if any, in cash by the Company (less any applicable withholding taxes),
at the Effective Time, equal to the product of (i) the total number of Common
Shares subject to such Stock Option (whether vested or unvested) and (ii) the
excess, if any, of the Merger Price over the exercise price per Common Share
subject to such Stock Option (the "Cash Payments").
(b) The Company shall take all actions necessary to ensure that: (i)
the Offering Period (as defined in the Employee Stock Purchase Plan) applicable
to each outstanding Purchase Plan Option is shortened so as to have a New
Purchase Date (as defined in the Employee Stock Purchase Plan) that occurs
before the date on which the Option Cancellation Time occurs; (ii) no new
Offering Period or Purchase Period (each as defined in the Employee Stock
Purchase Plan) shall begin from and after the date hereof; and (iii) no holder
of a Purchase Plan Option is permitted to increase his or her rate of
contributions under the Employee Stock Purchase Plan from and after the date
hereof.
(c) The Company shall take all actions necessary to provide that,
effective as of the Option Cancellation Time, (i) each of the Stock Plans shall
be terminated, (ii) the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its Subsidiaries shall be deleted, and
(iii) no holder of Stock Options or Purchase Plan Options (collectively
"Options") will have any right to receive any shares of capital stock of the
Company or, if applicable, the Surviving Corporation, upon exercise of any
Option.
(d) Except with respect to Stock Options granted under the Company's
1997 Stock Plan and the Company's 1997 Director Option Plan, the Company has the
power and authority under the terms of each of the applicable Stock Plans to
accomplish each of the matters set forth in this Section 2.9 without the consent
of any Option holder. The Company will obtain the consent of each holder of
Stock Options issued under the Company's 1997 Stock Plan and the Company's 1997
Director Option Plan.
7
<PAGE>
SECTION 2.10. Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Special Meeting") to be held as soon as
practicable following the acceptance for purchase of and payment for
Common Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use reasonable best efforts (A) to
obtain and furnish the information required to be included by the SEC
in the Proxy Statement (as defined herein) and, after consultation with
Parent, to respond as soon as practicable any comments made by the SEC
with respect to the preliminary proxy statement and cause a definitive
proxy statement (the "Proxy Statement") to be mailed to its
stockholders at the earliest practicable date following expiration or
termination of the Offer, and (B) to obtain the necessary approvals of
the Merger and adoption of this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval and adoption of the Merger and of this Agreement (except as
set forth in the proviso to Section 1.2(a)) and the Fairness Opinion.
(b) Parent agrees that it will vote, or cause to be voted, all Common
Shares then owned by it, the Purchaser or any of its other subsidiaries in favor
of the approval of the Merger and of this Agreement.
SECTION 2.11. Merger without Meeting of Stockholders. Notwithstanding
Section 2.10, in the event that the Purchaser shall acquire at least 90% of the
outstanding Common Shares pursuant to the Offer, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the acceptance for payment of and payment
for Common Shares by the Purchaser pursuant to the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.1. Dissenting Shares. Notwithstanding Section 2.7, Common
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded and perfected the right, if any, for appraisal for such Common
Shares in accordance with Section 262 of the GCL ("Dissenting Shares") shall not
be converted into the right to receive the Merger Price, unless such holder
fails to perfect or withdraws or otherwise loses such holder's right to
8
<PAGE>
appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such Common Shares shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Price. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Common Shares, and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, or
otherwise negotiate, any such demands.
SECTION 3.2. Payment for Common Shares.
(a) Prior to the Effective Time, the Purchaser shall designate a bank
or trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Price in respect of
certificates that, prior to the Effective Time, represented Common Shares (the
"Certificates") entitled to payment of the Merger Price pursuant to Section 2.7.
At the Effective Time, Parent or the Purchaser shall deposit, or cause to be
deposited, in trust with the Paying Agent the aggregate Merger Price to which
holders of Common Shares shall be entitled at the Effective Time pursuant to
Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates a form of letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, together with a duly executed letter of transmittal and any other
required documents, the Paying Agent shall, as soon as practicable, pay the
holder of such Certificate the Merger Price multiplied by the number of Common
Shares formerly represented by such Certificate, in consideration therefor, and
such Certificate shall forthwith be cancelled. Until so surrendered, each such
Certificate (other than Certificates representing Common Shares held by Parent
or the Purchaser, any wholly owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly owned subsidiary of the Company or
Dissenting Shares) shall represent solely the right to receive the aggregate
Merger Price relating thereto. No interest or dividends shall be paid or accrued
on the Merger Price. If the Merger Price (or any portion thereof) is to be
delivered to any person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition to such right to receive such
Merger Price that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer, that the signatures on the Certificate
shall be properly guaranteed, and that the person surrendering such Common
Shares shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of the Merger Price to a person other than the registered
holder of the Certificate surrendered, or shall establish to the satisfaction of
the Paying Agent that such taxes have been paid or are not applicable. In the
event any Certificate shall have been lost, stolen or destroyed, the Paying
Agent shall be required to pay the full Merger Price in respect of any Common
Shares represented by such Certificate; however, Parent may require the owner of
such lost, stolen or destroyed Certificate to execute and deliver to the Paying
Agent a form of affidavit claiming such Certificate to be lost, stolen or
destroyed in form and substance reasonably satisfactory to Parent, and the
posting
9
<PAGE>
by such owner of a bond in such amount as Parent may determine is reasonably
necessary as indemnity against any claim that may be made against Parent or the
Paying Agent.
(c) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Paying Agent's duties shall terminate. Thereafter,
each holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration therefor the aggregate Merger Price relating
thereto, without any interest or dividends thereon. Notwithstanding the
foregoing, none of Parent, the Purchaser, the Company or the Paying Agent shall
be liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered immediately prior to such date on
which any payment pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity (as defined herein), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent, they shall be surrendered and cancelled in return for the payment of the
aggregate Merger Price relating thereto, as provided in this Article III.
(e) From and after the Effective Time, the holders of Certificates
evidencing ownership of Common Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Common Shares
except as otherwise provided herein or by applicable law. Such holders shall
have no rights, after the Effective Time, with respect to such Common Shares
except to surrender such Certificates in exchange for cash pursuant to this
Agreement or to perfect any rights of appraisal as a holder of Dissenting Shares
that such holders may have pursuant to Section 262 of the GCL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to the Purchaser prior to
the execution of this Agreement setting forth specific exceptions to the
Company's and its Subsidiaries' representations and warranties set forth herein
(the "Company Disclosure Schedule"), the Company hereby represents and warrants
to Purchaser as follows:
SECTION 4.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and
10
<PAGE>
has all requisite corporate or other power, authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals, would not, individually or in the aggregate, have a
Company Material Adverse Effect (as defined below). The Company has heretofore
delivered to the Purchaser accurate and complete copies of the Certificate of
Incorporation and By-Laws, as currently in effect, of the Company and each of
its Subsidiaries. As used in this Agreement, "Subsidiary" shall mean, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated or domestic or foreign to the United States of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding such partnerships where such party or any Subsidiary of such party do
not have a majority of the voting interest in such partnership) or (ii) at least
a majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries. The
term "Company Material Adverse Effect" means any event, change in or effect on
the business of the Company or its Subsidiaries, taken as a whole, that is or
can reasonably be expected to be materially adverse to (i) the business,
operations, properties (including intangible properties), condition (financial
or otherwise), assets, liabilities, or prospects of the Company and its
Subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate
the transactions contemplated hereby or to perform its obligations under this
Agreement. Section 4.1(a) of the Company Disclosure Schedule sets forth a
complete list of the Company's Subsidiaries.
(b) Each of the Company and its Subsidiaries is duly qualified or
licensed 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 or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in aggregate, have a Company Material
Adverse Effect.
(c) Except as set forth in Section 4.1(c) of the Company Disclosure
Schedule, the Company does not own (i) any equity interest in any corporation or
other entity, or (ii) marketable securities where the Company's equity interest
in any entity exceeds 5% of the outstanding equity of such entity on the date
hereof.
SECTION 4.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of: 20,000,000
shares of Common Stock and 1,000,000 shares of preferred stock, par value $.001
per share ("Preferred Stock"). As of November 6, 1998, 5,182,973 Common Shares
were issued and outstanding and no shares of the Preferred Stock were
outstanding. All Common Shares have been validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of November 6, 1998, a total of
999,906 Common Shares are reserved for issuance pursuant to outstanding Options
under the Stock Plans, of which (i) 65,320 Common Shares are reserved for
issuance pursuant to outstanding Stock Options under the Company's 1991 Stock
Option Plan, (ii) 475,032 Common Shares
11
<PAGE>
are reserved for issuance pursuant to outstanding Stock Options under the
Company's 1995 Stock Option Plan, (iii) 454,554 Common Shares are reserved for
issuance pursuant to outstanding Stock Options under the Company's 1997 Stock
Option Plan, (iv) 5,000 Common Shares are reserved for issuance pursuant to
outstanding Stock Options under the Company's 1997 Director Plan, and (v)
assuming that the Option Cancellation Time were to occur on or about November 6,
1999, approximately 1,900 Common Shares would have been issuable upon the
exercise of Purchase Plan Options under the Employee Stock Purchase Plan at a
price of $12.86 per Common Share. Since November 6, 1998, no shares of the
Company's capital stock have been issued other than pursuant to Options already
in existence on such date and no Options have been granted. Except as set forth
above and except for the Rights to, among other things, purchase Series A
Participating Preferred Stock issued pursuant to the Rights Agreement, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or any of its Subsidiaries, and no obligations of the Company or any of
its Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or any of its Subsidiaries or other similar rights (collectively,
"Company Securities"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of the Company, is owned by the Company, directly
or indirectly, free and clear of any Lien (as defined herein) or any other
limitation or restriction (including any restriction on the right to vote or
sell the same, except as may be provided as a matter of law). All such shares
have been validly issued, fully paid and nonassessable, and have been issued
free of preemptive rights. There are no securities of the Company or any of its
Subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from the Company or any of its Subsidiaries, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or other
ownership interests in, or any other securities of, any Subsidiary of the
Company. There are no outstanding contractual obligations of the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any Subsidiary of the
Company. For purposes of this Agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any option, claim, mortgage, lien,
pledge, charge, security interest or encumbrance or restrictions of any kind in
respect of such asset.
(c) The Common Shares and the Rights constitute the only class of
equity securities of the Company or any of its Subsidiaries registered or
required to be registered under the Exchange Act.
(d) There are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries.
12
<PAGE>
(e) Other than as set forth on Section 4.2(e) of the Company Disclosure
Schedule, there is no outstanding material Indebtedness (as defined herein) of
the Company or any of its Subsidiaries. Except as set forth in Section 4.2(e) of
the Company Disclosure Schedule, no such Indebtedness of the Company or its
Subsidiaries contains any restriction upon (i) the prepayment of such
Indebtedness, (ii) the incurrence of Indebtedness by the Company or its
Subsidiaries, respectively, or (iii) the ability of the Company or its
Subsidiaries to grant any Liens on its properties or assets. For purposes of
this Agreement, "Indebtedness" shall include (i) all indebtedness for borrowed
money or for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices, but excluding operating leases),
(ii) any other indebtedness which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations under financing leases, (iv) all
obligations in respect of acceptances issued or created, (v) all liabilities
secured by any Lien on any property, and (vi) all guarantee obligations.
SECTION 4.3. Authority Relative to This Agreement; Consents and
Approvals.
(a) The Company has all the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof (subject to obtaining
the necessary approval and adoption of this Agreement and the Merger by the
stockholders of the Company). The execution, delivery and performance of this
Agreement by the Company and the consummation by them of the transactions
contemplated hereby have been duly and validly authorized by the Company Board,
and, except for obtaining the approval of the Company's stockholders, no other
corporate action or corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming due and valid authorization, execution and delivery by each of the
Purchaser and Parent, constitutes a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) The Company Board has duly and validly approved, and taken all
corporate actions required to be taken by it for the consummation of, the
transactions contemplated hereby, including, but not limited to, all actions
required to satisfy the provisions of Section 203(a)(1) of the GCL regarding
business combinations with "interested stockholders."
SECTION 4.4. SEC Reports; Financial Statements.
(a) Since January 1, 1995 the Company has filed with the SEC all forms,
reports, schedules, statements and other documents required to be filed by it
with the SEC pursuant to the Securities Act of 1933, as amended (including the
rules and regulations promulgated thereunder the "Securities Act") and the
Exchange Act (any such documents filed prior to the
13
<PAGE>
date hereof and the Preliminary Offering Memorandum dated, July 22, 1998,
relating to the issuance of Senior Notes and Senior Discount Notes of the
Company (except with respect to information relating to Fremont or the
transactions contemplated by the Amended and Restated Agreement and Plan of
Merger, dated as of June 28, 1998, by and among Fremont, GMS Acquisition Corp.
and the Company) (the "Offering Memorandum") being collectively, the "Company
SEC Documents"). The Company SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed, or in the
case of registration statements on their respective effective dates, and, in the
case of the Offering Memorandum, on July 22, 1998, (i) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and (ii) did not at the time filed (or, in the case of
registration statements, at the time of effectiveness and, in the case of the
Offering Memorandum, on July 22, 1998), 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 made therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is required to file any form, report or other document with the SEC. The
financial statements included in the Company SEC Documents (the "Financial
Statements") (i) have been prepared from, and are in accordance with, the books
and records of the Company and its Subsidiaries, (ii) complied in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (iii) have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and (iv) fairly present the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Company and its Subsidiaries
as of the times and for the periods referred to therein, except that any such
Financial Statements that are unaudited, interim financial statements are
subject to normal and recurring year-end adjustments.
(b) The Company has heretofore delivered to the Purchaser, in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the three fiscal years ended January 31, 1996, 1997 and
1998, (ii) all definitive proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since January 1, 1995, and (iii)
all other reports (other than Quarterly Reports on Form 10-Q) or registration
statements filed by the Company with the SEC since January 1, 1995.
(c) The Company has heretofore furnished the Purchaser with a complete
and correct copy of any amendments or modifications, which have not yet been
filed by the Company with the SEC, to all agreements, documents or other
instruments which previously had been filed by the Company and are currently in
effect.
SECTION 4.5. Proxy Statement; Offer Documents. The Proxy Statement will
comply in all material respects with applicable federal securities laws, except
that no representation is made by the Company with respect to information
supplied by Parent for inclusion in the Proxy Statement. None of the information
supplied by the Company in writing for inclusion in the Offer Documents or
provided by the Company in the Schedule 14D-9 will, at the respective times that
the Offer Documents and the Schedule 14D-9 are filed with the SEC and are first
published
14
<PAGE>
or sent or given to holders of Common Shares, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.6. Consents and Approvals; No Violations. No filing with or
notice to, and no permit, authorization, consent or approval of, any court or
tribunal or administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is required on the part of the Company or any of its
Subsidiaries for the execution, delivery and performance by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
hereby, except (i) in connection with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) pursuant to the applicable requirements of the Exchange Act, (iii)
the filing and, if applicable, recordation of the certificate of merger pursuant
to the DGCL, or (iv) where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not have
a Company Material Adverse Effect. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (A) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or
By-Laws (or similar governing documents) of the Company or of any its
Subsidiaries, (B) except as set forth in Section 4.6 of the Company Disclosure
Schedule, result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, other than breaches or defaults
under loan agreements resulting from the existence of Indebtedness on the part
of the Purchaser, or (C) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its Subsidiaries
or any of their respective properties or assets, except in the case of (B) or
(C) for violations, breaches or defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 4.7. No Default. None of the Company or any of its Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its Certificate of Incorporation or By-laws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their respective properties or assets, except
in the case of clause (ii) or (iii) of this sentence for violations, breaches or
defaults that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 4.8. No Undisclosed Liabilities. Except as set forth in the
Company's unaudited consolidated balance sheet (or the notes thereto) dated as
of July 31, 1998 contained in the Company's Form 10-Q for the three-month period
ending on July 31, 1998, since July 31, 1998, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations
15
<PAGE>
of any nature, whether or not accrued, contingent or otherwise, that have, or
would reasonably be expected to have, a Company Material Adverse Effect or that
would be required by GAAP to be reflected or reserved against on a consolidated
balance sheet, or in the notes thereto, of the Company and its Subsidiaries
prepared in accordance with GAAP consistent with past practices, other than in
the ordinary course of business and consistent with past practices. Section 4.8
of the Company Disclosure Schedule sets forth the amount of principal and unpaid
interest outstanding under each instrument evidencing indebtedness of the
Company and its Subsidiaries which will accelerate or become due or result in a
right of redemption or repurchase on the part of the holder of such indebtedness
(with or without due notice or lapse of time) as a result of this Agreement, the
Merger or the other transactions contemplated hereby or thereby.
SECTION 4.9. Litigation. Except as set forth in Section 4.9 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against,
affecting or involving the Company or any of its Subsidiaries or any of their
respective properties or assets before any Governmental Entity. Except as
disclosed in Section 4.9 of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries is subject to any outstanding order, writ,
injunction or decree. Reserves reflected on the Financial Statements are
adequate for all litigation set forth in Section 4.9 of the Company Disclosure
Schedule.
SECTION 4.10. Compliance with Applicable Law. Except as set forth in
Section 4.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
Company Permits which would not, individually or in the aggregate, have a
Company Material Adverse Effect. Except as set forth in Section 4.10 of the
Company Disclosure Schedule, the Company and its Subsidiaries are in compliance
with the terms of the Company Permits, except where the failure so to comply
would not have a Company Material Adverse Effect. Except as set forth in Section
4.10 of the Company Disclosure Schedule, the businesses of the Company and its
Subsidiaries are not being, and have not been, conducted in violation of any
law, ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 4.10 with respect to
Environmental Laws (as defined herein) and except for violations or possible
violations which individually or in the aggregate will not have a Company
Material Adverse Effect. Except as set forth in Section 4.10 of the Company
Disclosure Schedule, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the best
knowledge of the Company, threatened nor, to the best knowledge of the Company,
has any Governmental Entity indicated an intention to conduct the same.
SECTION 4.11. Employee Benefit Matters.
(a) All employee benefit plans and other incentive, compensation or
benefit plans, programs, contracts and arrangements covering any current or
former employee or director of the Company or any Subsidiary are listed in
Section 4.11 of the Company Disclosure Schedule ("Company Benefit Plans"). True
and complete copies of the following items with respect to
16
<PAGE>
all Company Benefit Plans have been provided to the Purchaser : (i) each
writing constituting a part of such Company Benefit Plan, including without
limitation all plan documents, employee communications, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii)
the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); (iv) the most recent annual financial report, if any; (v)
the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service (the "IRS") or
comparable determination from any foreign taxing authority, if any. Except as
specifically provided in the foregoing documents delivered to Purchaser,
there are no amendments to any Company Benefit Plan that have been adopted or
approved nor has the Company or any of its Subsidiaries undertaken to make
any such amendments or to adopt or approve any new Company Benefit Plan.
Except as set forth in Section 4.11(a) of the Company Disclosure Schedule,
each Company Benefit Plan has been maintained and administered in all
material respects in compliance with its terms and with all applicable laws
including, but not limited to ERISA, and the Internal Revenue Code of 1986,
as amended (the "Code"), to the extent applicable thereto. There is not now,
nor do any circumstances exist that could give rise to, any requirement for
the posting of security with respect to a Company Benefit Plan or the
imposition of any lien on the assets of the Company or any of its
Subsidiaries. No prohibited transaction has occurred with respect to any
Company Benefit Plan. Each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined by the IRS to be so
qualified, and no event has occurred that could reasonably be expected to
adversely affect the qualified status of such Company Benefit Plan. Except as
set forth in Section 4.11(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has incurred any liability or penalty
under Section 4975 of the Code or Section 502(i) of ERISA. Except as set
forth in Section 4.11(a) of the Company Disclosure Schedule, there are no
pending, nor has the Company or any of its Subsidiaries received notice of
any threatened, claims against or otherwise involving any of the Company
Benefit Plans. No Company Benefit Plan is under audit or investigation by the
IRS, the Department of Labor or the Pension Benefit Guaranty Corporation,
and, no such audit or investigation is pending or threatened. All material
contributions or other payments required to be made as of the date of this
Agreement to or pursuant to the Company Benefit Plans have been made or
accrued for in the Financial Statements. Neither the Company nor any
Subsidiary, nor any ERISA Affiliate (as defined herein) of the Company or any
Subsidiary, has at any time contributed to, or been required to contribute
to, any "pension plan" (as defined in Section 3(2) of ERISA) that is subject
to Section 302 or Title IV of ERISA or Section 412 of the Code, including,
without limitation, any "multi-employer plan" (as defined in Sections 3(37)
and 4001(a)(3) of ERISA). Neither the Company nor any Subsidiary, nor any
ERISA Affiliate of the Company or any Subsidiary, has any liability as a
result of a failure to comply with the continuation coverage requirements of
section 601 et seq. of ERISA and Section 4980B of the Code ERISA, which
liability has not been satisfied in full. "ERISA Affiliate" means, with
respect to any entity, trade or business, any other entity, trade or business
that is a member of a group described in Section 414(b), (c), (m) or (o) of
the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade
or business, or that is a member of the same "controlled group" as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
17
<PAGE>
(b) Except as set forth in Section 4.11(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or upon
the occurrence of any additional or subsequent events) (i) constitute an event
under any Company Benefit Plan, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former employee, officer or director of
the Company or any Subsidiary, or (ii) result in the triggering or imposition of
any restrictions or limitations on the right of the Company or the Purchaser to
amend or terminate any Company Benefit Plan and receive the full amount of any
excess assets remaining or resulting from such amendment or termination, subject
to applicable taxes. No payment or benefit which will or may be made by the
Company, any of its Subsidiaries, the Purchaser or any of their respective
affiliates with respect to any employee, officer or director of the Company or
its Subsidiaries will be characterized as an "excess parachute payment," within
the meaning of Section 280G(b)(1) of the Code, and no amount of any such payment
or benefit will fail to be deductible by the Company by reason of Section 162(m)
of the Code.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries (i) maintains or
contributes to any Company Benefit Plan which provides, or has any liability to
provide, life insurance, medical, severance or other employee welfare benefits
to any employee upon his or her retirement or termination of employment, except
as may be required by Section 4980B of the Code; or (ii) has ever represented,
promised or contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) that such employee(s) would be provided
with life insurance, medical, severance or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
Section 4980B of the Code. All amounts of deferred compensation benefits under
any Company Benefit Plan have been properly accrued on the financial statements
of the Company and its Subsidiaries.
(d) With respect to each Company Benefit Plan which is an "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA, except as set
forth in Section 4.11(d) of the Company Disclosure Schedule, all material claims
incurred (including claims incurred but not reported) by employees thereunder
for which the Company is, or will become, liable are (i) insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss with
respect to such claims; or (ii) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims. Each such Company Benefit Plan complies with all
requirements for exclusion from the gross income of participants pursuant to
Sections 104 and 105 of the Code. No Company Benefit Plan or trust associated
with a Company Benefit Plan is intended to meet the requirements of Section
501(c)(9) of the Code.
(e) No Company Benefit Plan is (i) maintained outside the United States
primarily for the benefit of persons substantially all of whom are nonresident
aliens with respect to the United States, or (ii) subject to the laws of any
jurisdiction outside the United States.
18
<PAGE>
(f) All liabilities of the Company and its Subsidiaries under
nonqualified deferred compensation plans have been accrued on the Financial
Statements and the total fair market value of the assets of the related grantor
trusts available to pay such liabilities are at least equal to the aggregate
amount of such liabilities. With respect to each former employee of the Company
and its Subsidiaries, Section 4.11(f) of the Company Disclosure Schedule sets
forth all amounts and benefits that are owed to such former employee by the
Company and its Subsidiaries pursuant to any employment, severance, consulting,
or other individual agreement.
SECTION 4.12. Environmental Laws and Regulations.
(a) Except as set forth in Section 4.12(a)(i) of the Company Disclosure
Schedule, (i) the Company and each of its Subsidiaries is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or emissions, discharges, releases, disposal, or handling of any
pollutants or toxic or hazardous substances, wastes or materials (including,
without limitation, petroleum, and petroleum products, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon or lead or
lead-based paints or materials (collectively, "Environmental Laws"), except for
non-compliance that, individually or in the aggregate, would not have a Company
Material Adverse Effect, which compliance includes, but is not limited to, the
possession by the Company and its Subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof; (ii) neither the Company nor
any of its Subsidiaries has received notice of, or is the subject of, any
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") including, without limitation, relating to any
subcontractor of the Company or for the business, or relating in any way to any
prior facilities, locations, or business of the Company or any of its
Subsidiaries; and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to result in any liability under any
Environmental Law, prevent or interfere with any such compliance thereunder in
the future, including, without limitation, relating to any subcontractor of the
Company or for the business, or relating in any way to any prior facilities,
locations or business of the Company or any of its Subsidiaries. There are no
permits or other governmental authorizations held by the Company or required for
the Company's business that are required to be transferred or reissued, or that
are otherwise prohibited from being transferred or reissued, pursuant to any
Environmental Laws as a result of the transactions contemplated hereby. The
Company has provided to the Purchaser all environmental assessments, reports,
data, results of investigations, or compliance or other environmental audits
conducted by or for the Company, or otherwise relating to the Company's or any
Subsidiary's business or properties (owned, leased or operated). There are no
matters identified in any such materials which individually or in the aggregate,
could have a Company Material Adverse Effect.
(b) Except as set forth in Section 4.12(b) of the Company Disclosure
Schedule, there are no Environmental Claims which individually or in the
aggregate would have a Company Material Adverse Effect that are pending or, to
the best knowledge of the Company, threatened against the Company or any of its
Subsidiaries or, to the best knowledge of the Company,
19
<PAGE>
against any person or entity whose liability for any Environmental Claim the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law including, without limitation, relating to
any subcontractor of the Company or for the business, or relating in any way to
any prior facilities, locations or business of the Company or any of its
Subsidiaries.
SECTION 4.13. Rights Agreement. The Company has taken all necessary
action so that none of the execution of this Agreement, the making of the Offer,
the acquisition of Common Shares pursuant to the Offer or the consummation of
the Merger will (i) cause the Rights to become exercisable, (ii) cause the
Purchaser or any of its affiliates to become an Acquiring Person (as such term
is defined in the Rights Agreement) or (iii) give rise to a Distribution Date or
a Triggering Event (each as defined in the Rights Agreement). The Company has
furnished to the Purchaser true and complete copies of all amendments to the
Rights Agreement that fulfill the requirements of this Section 4.13 and such
amendments are in full force and effect.
SECTION 4.14. Brokers. No broker, finder or investment banker (other
than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to the Purchaser) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company.
The fees to which the Financial Advisor shall be entitled to in connection with
the transactions contemplated hereby shall be $2,300,000, of which $400,000 has
already been paid to the Financial Advisor prior to the date hereof. Except as
set forth in Section 4.14 of the Company Disclosure Schedule no material legal,
accounting, consulting or other fees and expenses are payable by or on behalf of
the Company or any of its Subsidiaries in connection with this Agreement or
relating to any transaction contemplated or proposed by Fremont or Golden Cycle
involving the Company or any of its Subsidiaries.
SECTION 4.15. Absence of Certain Changes. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, since January 31, 1998, the
Company and each of its Subsidiaries have conducted its businesses only in the
ordinary course of business and consistent with past practice and (i) there has
not been any Company Material Adverse Effect and (ii) the Company has not taken
any of the actions set forth in paragraphs (a) through (m) of Section 6.1.
SECTION 4.16. Taxes.
(a) Each of the Company and its Subsidiaries have timely filed (or have
had timely filed on their behalf) or will timely file or cause to be timely
filed all Tax Returns required by applicable law to be filed by any of them
prior to or as of the Effective Time. All such Tax Returns and amendments
thereto are or will be true, complete and correct in all respects. The most
recent financial statements contained in the Company SEC Documents provide an
adequate accrual for the payment of Taxes for the periods covered by such
reports.
(b) Each of the Company and its Subsidiaries have paid (or have had
paid on their behalf), or, where payment is not yet due, have established an
adequate accrual on the books and records of the Company and its Subsidiaries
for the payment of, all Taxes due with respect to any period (or portion
thereof) ending on or prior to the date of the Merger.
20
<PAGE>
(c) Except as set forth in Section 4.16(c) of the Company Disclosure
Schedule, no audit by a Tax authority is pending or threatened with respect to
any Tax Returns filed by, or Taxes due from, the Company or its Subsidiaries. No
issue has been raised by a Tax authority in any audit of the Company or any of
its Subsidiaries that if raised with respect to any other period not so audited
could be expected to result in a proposed deficiency for any period not so
audited. No deficiency or adjustment for any Taxes has been threatened,
proposed, asserted or assessed against the Company or its Subsidiaries. There
are no Liens for Taxes upon the assets of the Company or its Subsidiaries,
except Liens for current Taxes not yet due for which adequate reserves have been
established in accordance with GAAP. The federal income Tax Returns of the
Company and each of its Subsidiaries consolidated in such returns have been
examined by and settled with the IRS for all years through 1994. The Company has
made available to Parent true and complete copies of all federal, state, local
and foreign income Tax Returns, and state and local property and sales Tax
Returns and any other Tax Returns filed by the Company or any of its
Subsidiaries for any of the taxable periods that remains open, as of the date
hereof, for examination or assessment of Tax.
(d) Neither the Company nor any of its Subsidiaries has given or been
requested to give any waiver of statutes of limitations relating to the payment
of any Taxes or have executed powers of attorney with respect to any Tax
matters, which will be outstanding as of the Effective Time.
(e) Neither the Company nor any of its Subsidiaries is a party to, or
is bound by, any Tax sharing, Tax indemnity, cost sharing, or similar agreement
or policy relating to Taxes.
(f) None of the Company or any of its Subsidiaries has made an election
under Section 341(f) of the Code.
(g) Neither the Company nor any Subsidiary has any liability for Taxes
of any person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any comparable provision of state, local or
foreign law).
(h) The net operating loss carryforwards ("NOLs") of Tom's Motorcycle
Products GmbH as of December 31, 1997 equal the amounts set forth on Section
4.16(h) of the Company Disclosure Schedule, and, except for limitations that may
apply by reason of the Merger, such NOLs are not subject to limitation.
(i) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, use, transfer, license,
payroll, withholding, export, import, customs, capital stock and franchise taxes
or duties, imposed by the United States or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. For purposes of this Agreement, the term "Tax Return"
means any report, return or other information or document required to be
supplied to a Tax authority in connection with Taxes.
21
<PAGE>
SECTION 4.17. Intellectual Property.
(a) The Company owns or has the right to use all intellectual property
rights used in the conduct of its business, including, without limitation, all
patents and patent applications, trademarks, trademark registrations and
applications, copyrights and copyright registrations and applications, computer
programs, technology, know-how, trade secrets, proprietary processes and
formulae (collectively, the "Intellectual Property"), free and clear of all
Liens. The Company or one of its Subsidiaries is listed in the records of the
appropriate United States, state or foreign agency as the sole owner of record
for all applications, registrations or patents included in the Intellectual
Property, and all of the foregoing are listed on Section 4.17(a) of the
Disclosure Schedule and are validly subsisting.
(b) Section 4.17(b) of the Disclosure Schedule sets forth a list of all
license agreements under which the Company or any of its Subsidiaries has
granted or received the right to use any Intellectual Property, and the Company
is not in default under any such license.
(c) Except as set forth in Section 4.17(c) of the Disclosure Schedule,
no person has a right to receive a royalty or similar payment in respect of any
item of Intellectual Property pursuant to any contractual arrangements entered
into by the Company or otherwise. No former or present employees, officers or
directors of the Company hold any right, title or interest, directly or
indirectly, in whole or in part, in or to any Intellectual Property.
(d) No trade secret, know-how or any other confidential information
relating to the Company has been disclosed or authorized to be disclosed to any
third party, other than pursuant to a non-disclosure agreement that fully
protects the Company's proprietary interest in and to such confidential
information.
(e) The Company has taken or caused to be taken all reasonable steps to
obtain and retain valid and enforceable rights in all Intellectual Property
owned thereby, including, but not limited to, the submission of all necessary
filings in accordance with the legal and administrative requirements of the
appropriate jurisdictions. The conduct of the business of the Company does not
violate or infringe upon any intellectual property right of any third party,
and, except as set forth in Section 4.17(e) of the Company Disclosure Schedule,
there is no pending or threatened opposition, interference, re-examination,
cancellation, claim of invalidity or other legal or governmental proceeding in
any jurisdiction involving any of the Intellectual Property. There are no claims
or suits pending or, to the best knowledge of the Company, threatened, and the
Company has received no notice of any claim or suit (i) alleging that the
conduct of the Company's business infringes upon or constitutes the unauthorized
use of the proprietary rights of any third party or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual Property. To the
best knowledge of the Company, no Intellectual Property of the Company is being
violated or infringed upon by any third party. Except as set forth in Section
4.17(e) of the Disclosure Schedule, there are no settlements, consents,
judgments, orders or other agreements which restrict the Company's rights to use
any Intellectual Property.
22
<PAGE>
SECTION 4.18. Labor Matters.
(a) (i) There is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the knowledge of the Company, threatened against
or affecting the Company, and, during the past five years from the date of this
Agreement there has not been any such action, (ii) the Company is not a party to
or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company, (iii) none of
the employees of the Company is represented by any labor organization and the
Company does not have any knowledge of any union organizing activities among the
employees of the Company within the past five years, (iv) there are no written
personnel policies, rules or procedures applicable to employees of the Company,
other than those set forth on Section 4.18(a) of the Company Disclosure
Schedule, true and correct copies of which have heretofore been delivered to the
Purchaser, (v) the Company is, and has at all times been, in compliance, in all
material respects, with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and is not engaged in any unfair labor practices
as defined in the National Labor Relations Act or other applicable laws, except
for such non-compliance which has not had and would not reasonably be expected
to have a Company Material Adverse Effect, (vi) there is no unfair labor
practice charge or complaint against the Company pending or, to the knowledge of
the Company, threatened before the National Labor Relations Board or any similar
state or foreign agency, (vii) there is no material pending grievance arising
out of any collective bargaining agreement or other grievance procedure, (viii)
to the knowledge of the Company, no charges with respect to or relating to the
Company are pending before the Equal Employment Opportunity Commission or any
other Governmental Entity responsible for the prevention of unlawful employment
practices, (ix) the Company has not received notice of the intent of any
federal, state, local or foreign Governmental Entity responsible for the
enforcement of labor or employment laws to conduct an investigation with respect
to or relating to the Company and no such investigation is in progress, and (x)
there are no complaints, lawsuits or other proceedings pending or, to the
knowledge of the Company, threatened in any forum by or on behalf of any present
or former employee of the Company, any applicant for employment or classes of
the foregoing alleging breach by the Company or its Subsidiaries of any express
or implied contract or employment, any laws governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship, which, if determined adversely to
the Company, could reasonably be expected to have a Company Material Adverse
Effect.
(b) Except as set forth in Section 4.18(b) of the Company Disclosure
Schedule, since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), (i) the Company has not effectuated a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company, (ii) there has not occurred a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of the Company; nor has the
Company been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign law or regulation, and
23
<PAGE>
(iii) none of the Company's employees has suffered an "employment loss" (as
defined in the WARN Act) during the six-month period prior to the date of this
Agreement.
SECTION 4.19. Opinions of Financial Advisors. The Financial Advisor has
delivered its written opinion, dated the date of this Agreement, to the Company
Board to the effect that, as of such date, the consideration to be received in
the Offer and the Merger by the holders of Common Shares (other than the
Purchaser and its affiliates) is fair from a financial point of view to such
holders, and such opinion has not been withdrawn or modified prior to
consummation of the Offer or prior to the Effective Time, a copy of which
opinion has been delivered to the Purchaser.
SECTION 4.20. Real Property and Lease.
(a) Section 4.20(a) of the Company Disclosure Schedule sets forth a
complete list of all real property owned by the Company or its Subsidiaries (the
"Real Property"). Except as set forth in Section 4.20(a) of the Company
Disclosure Schedule, the Company or its Subsidiaries has good and marketable
title to the Real Property, free and clear of all Liens. Copies of (i) all
deeds, title insurance policies and surveys of the Real Property and (ii) all
documents evidencing all material Liens upon the Real Property have been
furnished to the Purchaser. Except for the matters disclosed in Section 4.20 of
the Company Disclosure Schedule, there are no proceedings, claims, disputes or,
to the Company's knowledge, conditions affecting any Real Property that might
curtail or interfere with the use of such property, nor is an action of eminent
domain pending or to the knowledge of the Company threatened for all or any
portion of the Real Property. Except as disclosed in Section 4.20(a) of the
Company Disclosure Schedule, the Company is not a party to any lease, assignment
or similar arrangement under which the Company is a lessor, assignor or
otherwise makes available for use by any third party any portion of the Real
Property.
(b) The Company has not during the preceding 12 months received any
notice of or other writing referring to any requirements or recommendations by
any insurance company that has issued a policy covering any part of the Real
Property or by any board of fire underwriters or other body exercising similar
functions, requiring or recommending any repairs or work to be done on any part
of the Real Property. The plumbing, electrical, heating, air conditioning,
ventilating and all other structural or material mechanical systems in the
buildings upon the Real Property are in good working order and working
condition, so as to be adequate for the operation of the business of the Company
as heretofore conducted, and the roof, basement and foundation walls of all
buildings on the Real Property are free of leaks and other material defects,
except for any matter otherwise covered by this sentence which does not have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Each of the Company and its Subsidiaries has obtained all
appropriate licenses, permits, easements and rights of way, including proofs of
dedication, required to use and operate the Real Property in the manner in which
the Real Property is currently being used and operated, except for such
licenses, permits or rights of way the failure of which to have obtained does
not have, individually or in the aggregate, a Company Material Adverse Effect.
24
<PAGE>
(d) The Company has not received notification that the Company or any
of its Subsidiaries is in violation in any material respect of any applicable
building, zoning, anti-pollution, health or other law, ordinance or regulation
in respect of the Real Property or structures or their operations thereon and,
to the Company's knowledge, no such violation exists.
SECTION 4.21. Material Contracts.
(a) Except for contracts filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended January 31, 1998, Section 4.21(a) of the
Company Disclosure Schedule sets forth each of the following contracts and
agreements (including, without limitation, oral arrangements to the extent
legally binding) of the Company and each of its Subsidiaries (such contracts and
agreements, together with all contracts and agreements set forth in Section
4.17(b) of the Company Disclosure Schedule, "Material Contracts"):
(i) each contract, agreement and other arrangement for the
purchase of inventory, spare parts, other materials or personal
property with any supplier or for the furnishing of services to the
Company and each of its Subsidiaries or otherwise related to the
businesses of the Company and each of its Subsidiaries under the terms
of which the Company or any of its Subsidiaries: (A) is likely to pay
or otherwise give consideration of more than $50,000 in the aggregate
during the calendar year ended December 31, 1998 or (B) is likely to
pay or otherwise give consideration of more than $100,000 in the
aggregate over the remaining term of such contract;
(ii) each contract, agreement and other arrangement for the sale
of inventory or other personal property or for the furnishing of
services by the Company or any of its Subsidiaries which: (A) is likely
to involve consideration of more than $50,000 in the aggregate during
the calendar year ended December 31, 1998 or (B) is likely to involve
consideration of more than $100,000 in the aggregate over the remaining
term of the contract;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts, and agreements to
which the Company or any of its Subsidiaries is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Company or any of its Subsidiaries is a party and which are not
cancellable without penalty or further payment in excess of $50,000 and
without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of the
Company or any of its Subsidiaries or to any direct or indirect
guaranty by the Company or any of its Subsidiaries of Indebtedness of
any other person;
(vi) all contracts, agreements, commitments, written
understandings or other arrangements with any Governmental Entity to
which the Company or any of its Subsidiaries is a party (other than
arrangements entered into in the ordinary course of
25
<PAGE>
business with hospitals or other medical facilities owned or operated
by any such Governmental Entity);
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or any of its Subsidiaries to compete in any
line of business or with any person or in any geographic area or during
any period of time;
(viii) all employment, compensation, termination or severance
agreements or other obligations to which the Company or any of its
Subsidiaries is a party; and
(ix) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company and
its Subsidiaries, taken as a whole, or the conduct of the business of
the Company and its Subsidiaries, taken as a whole, or the absence of
which would, in the aggregate, have a Company Material Adverse Effect.
(b) Each Material Contract: (i) is legal, valid and binding on the
Company or its respective Subsidiary party thereto and, to the knowledge of the
Company, the other parties thereto, and is in full force and effect and (ii)
upon consummation of the Offer and/or the Merger, except to the extent that any
consents set forth in Section 4.6 of the Company Disclosure Schedule are not
obtained or notice is not given, shall continue in full force and effect without
penalty, acceleration, termination, repurchase right or other adverse
consequence. Neither the Company nor any of its Subsidiaries is in breach of, or
default under, any Material Contract.
(c) No other party to any Material Contract is, to the knowledge of the
Company, in material breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting any
person any preferential right to purchase any of the properties or assets of the
Company or any of its Subsidiaries.
SECTION 4.22. Certain Business Practices. Neither the Company nor any
of its Subsidiaries nor any of their respective directors, officers, agents,
representatives or employees (in their capacity as directors, officers, agents,
representatives or employees) has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) directly or indirectly, paid or delivered any fee,
commission or other sum of money or item of property, however characterized, to
any finder, agent or other party acting on behalf of or under the auspices of a
governmental official, or party acting on behalf of or under the auspices of a
governmental official or Governmental Entity, in the United States or any other
country, which is in any manner related to the business or operations of the
Company or any of its Subsidiaries, that was illegal under any federal, state or
local laws of the United States or any other country having jurisdiction; or (c)
made any payment to any customer or supplier of the Company or any of its
Subsidiaries or any officer, director, partner, employee or agent of any such
customer or supplier for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee or agent for the
unlawful rebating of charges, or engaged in any other unlawful reciprocal
practice, or made any other unlawful payment or given
26
<PAGE>
any other unlawful consideration to any such customer or supplier or any such
officer, director, partner, employee or agent, in respect of the business of the
Company and its Subsidiaries.
SECTION 4.23. Product Liability.
(a) Except as set forth in Section 4.23(a) of the Company Disclosure
Schedule, there are not presently pending, or, to the knowledge of the Company,
threatened, any civil, criminal or administrative actions, suits, demands,
claims, hearings, notices of violation, investigations, proceedings or demand
letters relating to any alleged hazard or alleged defect in design, manufacture,
materials or workmanship, including any failure to warn or alleged breach of
express or implied warranty or representation, relating to any product
manufactured, distributed or sold by or on behalf of the Company and its
Subsidiaries. Within the last five years, none of the Company or its insurers
has made any payment to or settlement with any third party relating, or with
respect to, any of the foregoing in excess of $300,000.
(b) All products are sold or licensed by the Company and its
Subsidiaries pursuant to their respective disclaimer of warranties, express or
implied of merchantability and fitness for a particular purpose.
(c) Section 4.23(c) of the Company Disclosure Schedule sets forth a
true and complete list of (i) all products manufactured, marketed or sold by the
Company or any of its Subsidiaries that have been recalled or withdrawn (whether
voluntarily or otherwise) at any time during the past four years and (ii) all
proceedings (whether completed or pending) at any time during the past three
years seeking the recall, withdrawal, suspension or seizure of any product sold
by the Company or any of its Subsidiaries.
SECTION 4.24. Suppliers and Customers. Since January 1, 1998, no
material licensor, vendor, supplier, licensee or customer of the Company or any
of its Subsidiaries has canceled or otherwise modified (in a manner materially
adverse to the Company) its relationship with the Company or its Subsidiaries
and, to the Company's knowledge, (i) no such person has notified the Company of
its intention to do so, and (ii) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
SECTION 4.25. Accounts Receivable; Inventory.
(a) Subject to any reserves set forth in the consolidated balance sheet
of the Company included in the Company's Annual Report on Form 10-K for the year
ended January 31, 1998 as filed with the SEC prior to the date of this Agreement
(the "Company Balance Sheet"), the accounts receivable shown in the Company
Balance Sheet arose in the ordinary course of business, were not, as of the date
of the Company Balance Sheet, subject to any material discount, contingency,
claim of offset or recoupment or counterclaim, and represented, as of the date
of the Company Balance Sheet, bona fide claims against debtors for sales,
leases, licenses and other charges. All accounts receivable of the Company and
its Subsidiaries arising after the date of the Company Balance Sheet through the
date of this Agreement arose in the ordinary course of business and, as of the
date of this Agreement, are not subject to any material discount, contingency,
claim of offset or recoupment or counterclaim, except for normal reserves
27
<PAGE>
consistent with past practice. The amount carried for doubtful accounts and
allowances disclosed in the Company Balance Sheet is believed by the Company as
of the date of this Agreement to be sufficient to provide for any losses which
may be sustained or realization of the accounts receivable shown in the Company
Balance Sheet.
(b) As of the date of the Company Balance Sheet, the inventories shown
on the Company Balance Sheet consisted in all material respects of items of a
quantity and quality usable or saleable in the ordinary course of business. All
of such inventories were acquired in the ordinary course of business and, as of
the date of this Agreement, have been replenished in all material respects in
the ordinary course of business consistent with past practices. All such
inventories are valued on the Company Balance Sheet in accordance with GAAP,
applied on a basis consistent with the Company's past practices, and provision
has been made or reserves have been established on the Company Balance Sheet, in
each case, in an amount believed by the Company as of the date of this Agreement
to be adequate, for all slow-moving, obsolete or unusable inventories.
SECTION 4.26. Insurance. Section 4.26 of the Company Disclosure
Schedule lists the Company's material insurance policies. There is no material
claim pending under any of the Company's or any of its Subsidiary's policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policies.
SECTION 4.27. Title and Condition of Properties. Except as set forth in
Section 4.27 of the Company Disclosure Schedule, the Company and its
Subsidiaries own good and marketable title, free and clear of all Liens, to all
of the personal property and assets shown on the Company Balance Sheet or
acquired after January 31, 1998, except for (i) assets which have been disposed
of to nonaffiliated third parties since January 31, 1998 in the ordinary course
of business consistent with past practice, (ii) Liens reflected in the Company
Balance Sheet, (iii) Liens or imperfections of title which are not, individually
or in the aggregate, material in character, amount or extent and which do not
materially detract from the value or materially interfere with the present or
presently contemplated use of the assets subject thereto or affected thereby,
and (iv) Liens for current Taxes not yet due and payable. The properties and
assets, including the equipment, supplies and other consumables, owned, leased
or used by the Company and its Subsidiaries in the operation of their respective
business are in good operating condition and repair, ordinary wear and tear
excepted, are reasonably suitable for the purposes for which they are used, are
reasonably adequate and sufficient for the Company's and its Subsidiaries'
current operations and are directly related to the business of the Company and
its Subsidiaries.
SECTION 4.28. Information in Financing Documents. None of the
information supplied or to be supplied by the Company for the purpose of
inclusion or incorporation by reference in any syndication and other materials
to be delivered to potential financing sources in connection with the
transactions contemplated hereby (the "Financing Documents") will, at the date
28
<PAGE>
delivered, contain any untrue statement of material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
SECTION 4.29. Section 2115. The Company is not subject to the
provisions of Section 2115 of the General Corporation Law of the State of
California, as amended.
SECTION 4.30. Affiliated Transactions. Neither the Company nor any of
its Subsidiaries nor any of their respective officers, directors, employees or
affiliates (nor any individual related by blood, marriage or adoption to any
such individual) is a party to any agreement, contract, commitment, transaction
or understanding with or binding upon the Company or any of its Subsidiaries or
any of their respective assets or has engaged in any transaction with any of the
foregoing within the last 12 months, except for customary payments to employees,
officers or directors in the ordinary course of business consistent with past
practice for services rendered in their capacity as employees, officers or
directors.
SECTION 4.31. Full Disclosure. No representation or warranty by the
Company in this Agreement and no statement by the Company in any document
referred to herein (including the Schedules hereto) contains, as of the date
hereof, or will contain, as of the date given or delivered, any untrue
statements of a material fact or omits to state any material fact necessary, in
order to make the statement made herein or therein, in light of the
circumstances under which they were made, not misleading
SECTION 4.32. Year 2000. All Information Systems and Equipment are in
all material respects either Year 2000 Compliant or any reprogramming,
remediation, or any other corrective action, including the internal testing of
all such Information Systems and Equipment, will be completed in all material
respects by January 1, 1999. Further, to the extent that such
reprogramming/remediation and testing action is required, the cost thereof, as
well as the cost of the reasonably foreseeable consequences of failure to become
Year 2000 Compliant, to the Company and its Subsidiaries (including, without
limitation, reprogramming errors and the failure of other systems or equipment)
will not result in a Company Material Adverse Effect.
Year 2000 Compliant means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release and exchange
date data, and shall in all material respects continue to function in the same
manner as it performs today and shall not otherwise materially impair the
accuracy or functionality of Information Systems and Equipment.
Information Systems and Equipment means all computer hardware, firmware
and software, as well as other information processing systems, or any equipment
containing embedded microchips, whether directly owned, licensed, leased,
operated or otherwise controlled by the Company or any of its Subsidiaries,
including through third-party service providers, and which,
29
<PAGE>
in whole or in part, are used, operated, relied upon, or integral to, the
Company's or any of its Subsidiaries' conduct of their business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
SECTION 5.1. Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware 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, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not in the aggregate have a
Purchaser Material Adverse Effect (as defined below) on the Purchaser or Parent.
When used in connection with the Purchaser or Parent, the term "Purchaser
Material Adverse Effect" means any change or effect that is materially adverse
to the ability of each of Parent to consummate the transactions contemplated
hereby or to perform its obligations under this Agreement.
SECTION 5.2. Authority Relative to This Agreement. Each of Parent and
the Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of each of Parent and the Purchaser, and no other corporate
proceedings on the part of each of Parent and the Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and the Purchaser and, assuming due and valid authorization, execution
and delivery by the Company, constitutes a valid, legal and binding agreement of
each of Parent and the Purchaser, enforceable against each of Parent and the
Purchaser in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 5.3. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and the filing and recordation of a
certificate of merger as required by the GCL, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by each of Parent and the Purchaser of
this Agreement or the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Purchaser Material Adverse Effect.
30
<PAGE>
Neither the execution, delivery and performance of this Agreement by each of
Parent and the Purchaser nor the consummation by each of Parent and the
Purchaser of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or By-Laws (or similar governing documents) of Parent, the
Purchaser or any of their respective Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent, the Purchaser or any of their
respective Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, the
Purchaser or any of their respective Subsidiaries or any of their respective
properties or assets, except in the case of clauses (ii) or (iii) for
violations, breaches or defaults which would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
SECTION 5.4. Proxy Statement; Schedule 14D-9. None of the information
supplied by Parent or the Purchaser in writing for inclusion in the Proxy
Statement or the Schedule 14D-9 will, at the respective times that the Proxy
Statement and the Schedule 14D-9 are filed with the SEC and are first published
or sent or given to holders of Common Shares, and in the case of the Proxy
Statement, at the time that it or any amendment or supplement thereto is mailed
to the Company's stockholders, at the time of the Special Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.5. Financing. The Purchaser has or will have sufficient funds
available to purchase all of the Common Shares outstanding on a fully diluted
basis. The Purchaser has delivered to the Company true and correct copies of
commitment letters (the "Financing Letters"), which letters have not been
modified or withdrawn.
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of the Company. Except (i) as
expressly contemplated by this Agreement, (ii) as agreed in writing by the
Purchaser, or (iii) for the consummation of the financing of the transactions
contemplated hereby pursuant to and in accordance with the terms of the
Financing Documents, during the period from the date hereof to the time persons
designated or elected by the Purchaser or any of its respective affiliates shall
constitute a majority of the Company Board, neither the Company nor any of its
Subsidiaries will conduct its operations otherwise than in the ordinary course
of business consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the time persons designated or elected by the Purchaser or any of the
respective affiliates shall constitute a majority of the Board, the Company will
not, nor will it permit its Subsidiaries, without the prior written consent of
the Purchaser, to:
31
<PAGE>
(a) amend or propose to amend its Certificate of Incorporation or
By-Laws or the Rights Agreement;
(b) (i) issue, reissue or sell, or authorize the issuance, reissuance
or sale of (A) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Common Shares (and the related Rights), in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
or conversion of Options outstanding on the date hereof, or (B) any other
securities in respect of, in lieu of, or in substitution for, Common Shares or
any other capital stock of any class outstanding on the date hereof or (ii) make
any other changes in its capital structure;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any of its securities or any securities of its
Subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business consistent with past practice and in amounts not
material to the Company and its Subsidiaries taken as a whole; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business consistent with past practice and in amounts not
material to the Company and its Subsidiaries, taken as a whole, and except for
obligations of wholly owned Subsidiaries of the Company to the Company or to
other wholly owned Subsidiaries of the Company; (iii) make any loans, advances
or capital contributions to, or investments in, any other person (other than to
wholly owned Subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past practice and
in amounts not material to the maker of such loan or advance) or make any change
in its existing borrowing or lending arrangements for or on behalf of any such
person, whether pursuant to an employee benefit plan or otherwise; (iv) pledge
or otherwise encumber shares of capital stock of the Company or any of its
Subsidiaries; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or any
of its Subsidiaries;
(f) increase in any manner the compensation or fringe benefits payable
or to become payable of any director, officer or, employee, except, in the case
of employees, only for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, or pay or
award any benefit not required by any existing plan or arrangement to any
officer, director or employee (including, without limitation, the granting of
stock options, stock appreciation rights, shares of restricted stock or
performance units pursuant to the Stock Plans or otherwise),
32
<PAGE>
or grant any severance or termination pay to any officer, director or other
employee of the Company or any of its Subsidiaries (other than as required by
existing agreements or policies in Section 6.01 of the Company Disclosure
Schedule), or enter into any employment or severance agreement with any
director, officer or other employee of the Company or any of its Subsidiaries or
establish, adopt, enter into, amend, or waive any performance or vesting
criteria under any plan for the benefit or welfare of any current or former
directors, officers or employees of the Company or its Subsidiaries or their
beneficiaries or dependents (any of the foregoing being an "Employee Benefit
Arrangement"), except, in each case, to the extent required by applicable law or
regulation;
(g) acquire, sell, transfer, lease, encumber or dispose of any assets
outside the ordinary course of business consistent with past practice or any
assets which in the aggregate are material to the Company and its Subsidiaries
taken as a whole, or enter into any commitment or transaction outside the
ordinary course of business consistent with past practice which would be
material to the Company and its Subsidiaries taken as a whole;
(h) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business consistent
with past practice;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice which would be material to the Company and its Subsidiaries taken as a
whole; (iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $50,000 or, in the aggregate, are in excess of
$100,000; or (iv) enter into or amend any contract, agreement, commitment or
arrangement providing for the taking of any action that would be prohibited
hereunder;
(k) make any Tax election (unless required by law), settle or
compromise any Tax liability of the Company or any of its Subsidiaries or any
pending or threatened suit, action or claim relating to any potential or actual
Tax liability of the Company or any of its Subsidiaries, change any method of
accounting for Tax purposes or file (other than in a manner consistent with past
practice) any Tax Return;
(l) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
Subsidiaries or incurred in the ordinary course of business consistent with past
practice;
(m) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to the Purchaser
except in the ordinary course
33
<PAGE>
of business and consistent with past practice unless the Company shall have
obtained a comparable replacement policy;
(n) settle or compromise any pending or threatened suit, action or
claim (i) relating to the transactions contemplated hereby, (ii) involving
Fremont Acquisition Company III, LLC and/or any of its affiliates ("Fremont")
and the Company and/or any of its affiliates, (iii) involving Golden Cycle, LLC
and/or any of its affiliates ("Golden Cycle") and the Company and/or any of its
affiliates, or (iv) any other pending or threatened material suit, action or
claim other than in the ordinary course of business;
(o) enter into any agreement of a nature that would be required to be
filed as an exhibit to Form 10-K under the Exchange Act;
(p) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.1(a) through 6.1(o) or any action which would make any
of the representations or warranties of the Company contained in this Agreement
untrue or incorrect as of the date when made or would result in any of the
Tender Offer Conditions not being satisfied.
SECTION 6.2. Acquisition Proposals. The Company, its affiliates and
their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any acquisition or exchange of
all or any material portion of the assets of, or any equity interest in, the
Company or any of its Subsidiaries or any recapitalization, business combination
or similar transaction with the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries shall, directly or indirectly, through any
officer, director, employee, agent or otherwise, solicit, initiate, facilitate
or encourage the submission of any proposal or offer from any Person (as defined
below) relating to any acquisition or purchase of all or any material portion of
the assets of, or any equity interest in, the Company or any of its Subsidiaries
or any recapitalization, business combination or similar transaction (an
"Acquisition Transaction") with the Company or any of its Subsidiaries (any
communication with respect to an Acquisition Transaction being an "Acquisition
Proposal") or participate in any negotiations regarding, or furnish or disclose
to any other Person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate or encourage any effort or
attempt by any other Person to do or seek any of the foregoing or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated hereby this
Agreement; provided, however, that the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a bona
fide written Acquisition Proposal which was not solicited or encouraged after
the date of this Agreement if the Company Board by majority vote determines in
good faith (i) after consultation with and receipt of advice from its outside
legal counsel, that failing to take such action is reasonably determined to
constitute a breach of the fiduciary duties of the Company Board under
applicable law, (ii) after consultation with and receipt of written advice from
the Financial Advisor or another nationally recognized investment banking firm,
that such proposal is more favorable to the Company's stockholders from a
financial point of view than the transactions contemplated hereby (including any
adjustment to the terms and conditions proposed by the Purchaser in response
34
<PAGE>
to such Acquisition Proposal), (iii) that sufficient commitments have been
obtained with respect to such Acquisition Proposal that the Company Board
reasonably expects a transaction pursuant to such Acquisition Proposal could be
consummated and (iv) that such Acquisition Proposal is not subject to any
regulatory approvals that could reasonably be expected to prevent or materially
delay consummation. As a precondition to furnishing nonpublic Company
information to any party that makes an Acquisition Proposal, the Company will
enter into a confidentiality agreement with such party, which confidentiality
agreement shall have terms and conditions that will be no less favorable to the
Company than the terms and provisions contained in that certain Confidentiality
Agreement by and between Stonington Partners, Inc. and the Company dated April
24, 1998. From and after the execution of this Agreement, the Company shall
promptly advise the Purchaser of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations, or proposals relating to an Acquisition
Proposal (including the material terms thereof and the identity of the other
party or parties involved) and furnish to the Purchaser within 48 hours of such
receipt an accurate description of all material terms (including any changes or
adjustments to such terms as a result of negotiations or otherwise) of any such
written proposal. The Company shall promptly provide to the Purchaser any
material non-public information regarding the Company provided to any other
party, which information was not previously provided to the Purchaser. In
addition, the Company shall promptly advise the Purchaser, in writing, if the
Company Board shall make any determination as to any Acquisition Proposal as
contemplated by the proviso to the first sentence of this Section 6.2. The
Company agrees that it shall keep the Purchaser informed, on a current basis, of
the status of and developments relating to any Acquisition Proposal, including
the results of any substantive discussions or negotiations. Notwithstanding the
foregoing, the Company shall be permitted to take such actions as may be
required to comply with Rule 14e-2 of the Exchange Act. "Person" means a natural
person, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Entity or other entity or organization.
SECTION 6.3. Access to Information.
(a) Between the date hereof and the consummation of the Offer and/or
Effective Time, as the case may be, the Company will give the Purchaser and its
authorized representatives and Persons providing or committed to provide the
Purchaser with financing for the transactions contemplated hereby and their
representatives, reasonable access to all employees, plants, offices, warehouses
and other facilities and properties and to all books and records of the Company
and its Subsidiaries, will permit the Purchaser to make such inspections
(including any physical inspections or soil or groundwater investigations) as
Purchaser reasonably request and will cause the Company's officers and those of
its Subsidiaries to furnish the Purchaser with such financial and operating data
and other information with respect to the business and properties of the Company
and any of its Subsidiaries as the Purchaser may from time to time reasonably
request, provided that, in each case, such access will be subject to the
continuing obligations of the parties under the Confidentiality Agreement by and
between Stonington Partners, Inc. and the Company dated April 24, 1998, which
agreement shall survive until termination pursuant to the terms thereof. The
Company shall furnish promptly to Parent and the Purchaser a copy of each
report, schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of federal or state
or foreign securities laws.
35
<PAGE>
(b) Prior to the consummation of the Offer, the Company and its
accountants, counsel, agents and other representatives shall cooperate with the
Purchaser by providing information about the Company which is necessary for the
Purchaser and its accountants, agents, counsel and other representatives to
prepare the Financing Documents and such other documents and other reasonable
requests with respect to such documents. Notwithstanding anything in this
Agreement to the contrary, the Purchaser may disclose, or cause its
representatives to disclose, and at the request of the Purchaser, the Company
shall disclose information concerning the Company and its Subsidiaries, and
their respective businesses, assets and properties, and the transactions
contemplated hereby, in the Financing Documents and to prospective financing
sources in connection with the transactions contemplated hereby.
SECTION 6.4. Additional Agreements; Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this Agreement, the
Purchaser and the Company agree to use its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under any applicable laws to consummate and make
effective the transactions contemplated hereby as promptly as practicable
including, but not limited to, (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated hereby and the taking of such actions as are necessary to obtain
any requisite approvals, consents, orders, exemptions or waivers by any third
party or Governmental Entity, (ii) the preparation of any Financing Documents
requested by the Purchaser and (iii) the satisfaction of the other parties'
conditions to the consummation of the Offer or the Merger. In addition, no party
hereto shall take any action after the date hereof that would reasonably be
expected to materially delay the obtaining of, or result in not obtaining, any
permission, approval or consent from any Governmental Entity necessary to be
obtained prior to the consummation of the Offer or the Merger.
(b) Each party shall promptly consult with the other parties hereto
with respect to, provide any necessary information with respect to and provide
the other (or its counsel) copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby. Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated hereby. If any party hereto or affiliate thereof receives a request
for additional information or documentary material from any such Governmental
Entity with respect to the transactions contemplated hereby, then such party
will endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request. To the extent that transfers of Company Permits
are required as a result of execution of this Agreement or consummation of the
transactions contemplated hereby, the Company shall use its best efforts to
effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require the Purchaser to (i) enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring the
Purchaser to hold separate or divest, or to restrict the dominion or control of
the Purchaser or any of its affiliates over, any of the assets,
36
<PAGE>
properties of businesses of the Purchaser, its affiliates or the Company, in
each case, as in existence on the date hereof, or (ii) defend against any
litigation brought by any Governmental Entity seeking to prevent the
consummation of the transactions contemplated hereby.
(d) The Company agrees to use its reasonable best efforts to assist the
Purchaser in connection with structuring or obtaining any financing in
connection with consummation of the transactions contemplated hereby, and the
Purchaser shall use its reasonable best efforts to obtain such financing.
SECTION 6.5. Consents. The Purchaser and the Company each will use all
reasonable efforts to obtain consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the transactions
contemplated hereby.
SECTION 6.6. Public Announcements. The Purchaser and the Company, as
the case may be, will consult with one another before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated hereby, including, without limitation, the Offer and the Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange or The Nasdaq Stock Market, as determined by the Purchaser or the
Company, as the case may be.
SECTION 6.7. Indemnification.
(a) The Purchaser agrees that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries as provided in their respective
Certificates of Incorporation or By-Laws or otherwise in effect as of the date
hereof with respect to matters occurring prior to the consummation of the last
to occur of any of the transactions contemplated hereby shall survive such
consummation and shall continue in full force and effect. To the maximum extent
permitted by the GCL, such indemnification shall be mandatory rather than
permissive, and the Company or the Surviving Corporation, as the case may be,
shall advance expenses in connection with such indemnification.
(b) The Purchaser shall cause the Company or the Surviving Corporation,
as the case may be, to maintain in effect for not less than six (6) years from
the consummation of the last to occur of any of the transactions contemplated
hereby, the policies of the directors' and officers' liability and fiduciary
insurance most recently maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the consummation
of the last to occur of any of the Transactions contemplated hereby to the
extent available, provided that in no event shall the Company or the Surviving
Corporation, as the case may be, be required to expend more than an amount per
year equal to 150% of the current annual premiums paid by the Company (the
"Premium Amount") to maintain or procure insurance coverage pursuant hereto, and
provided, further, that, if the Surviving Corporation
37
<PAGE>
is unable to obtain the insurance called for by this Section 6.7(b), the
Surviving Corporation will obtain as much comparable insurance as is available
for the Premium Amount per year.
(c) The Company agrees to indemnify and hold harmless the Purchaser and
its affiliates (as defined in the Securities Act), successors, assigns, and the
agents (including, without limitation, financing sources and their affiliates)
and employees of any of them (collectively, the "Purchaser Indemnified Parties")
from and against any and all costs, expenses, losses, damages and liabilities
(including, without limitation, reasonable attorneys' fees and expenses)
suffered by any of the Purchaser Indemnified Parties (other than with respect to
(i) a claim arising directly from the gross negligence or willful misconduct of
a Purchaser Indemnified Party or (ii) a claim of breach by the Purchaser of this
Agreement or any confidentiality with the Company to which the Purchaser is a
party) to the extent resulting from, arising out of, or incurred with respect
to, any litigation, legal action, arbitration proceeding, material demand,
material claim or investigation against any of the Purchaser Indemnified Parties
in connection with the Purchaser's proposal to acquire Common Shares as set
forth in this Agreement, or in connection with any Acquisition Proposal relating
to the Purchaser or any circumstances related thereto.
SECTION 6.8. Financial Statements. The Company shall promptly prepare
at the end of each month and promptly deliver to the Purchaser upon completion
the balance sheet, income statement and statement of cash flows prepared in
accordance with GAAP of the Company for each month ended between the date of
this Agreement and the consummation of the Offer or the Effective Time, as the
case may be. The Company shall promptly prepare all reasonably requested
financial statements required to be included in the Financing Documents.
SECTION 6.9. Employee Benefit Arrangements. The Company will not take
any action which could prevent or impede the termination of the Stock Plans and
any other plans, programs or arrangements providing for the issuance or grant of
any other interest in respect of the capital stock of the Company or any
Subsidiary of the Company in each case effective prior to the Effective Time.
The Company will take all necessary action to (i) ensure that none of Parent,
the Company or any of their respective Subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
Person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof as of the Effective Time and (ii) obtain all necessary consents
so that after the Effective Time, holders of Options will have no rights other
than the rights of the holders of Options to receive the Cash Payment, if any,
in cancellation and settlement thereof.
SECTION 6.10. Notification of Certain Matters. The Purchaser and the
Company shall promptly notify each other of (i) the occurrence or non-occurrence
of any fact or event which would be reasonably likely (A) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (B) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied in any material respect and (ii)
any failure of the Company or Purchaser, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; provided, however, that no
38
<PAGE>
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder. Each of the Company,
Parent and the Purchaser shall give prompt notice to the other parties hereof of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated hereby by this Agreement.
SECTION 6.11. Rights Agreement. Except as contemplated hereby, the
Company covenants and agrees that it will not (i) redeem the Rights, (ii) amend
the Rights Agreement or (iii) take any action which would allow any Person (as
defined in the Rights Agreement) other than Parent or the Purchaser to acquire
beneficial ownership of 15% or more of the Common Shares without causing a
Distribution Date or a Triggering Event (as such terms are defined in the Rights
Agreement) to occur.
SECTION 6.12. State Takeover Laws. The Company shall, upon the request
of the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated
hereby by this Agreement, including the Offer and the Merger, of any state
takeover law.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have
duly approved the transactions contemplated hereby by this Agreement by the
requisite vote.
(b) Purchase of Common Shares. The Purchaser shall have accepted for
payment and paid for Common Shares pursuant to the Offer in accordance with the
terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall not
be restrained, enjoined or prohibited by any order, judgment, decree, injunction
or ruling of a court of competent jurisdiction or any Governmental Entity, and
there shall not have been any statute, rule or regulation enacted, promulgated
or deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the purchase of Common
Shares illegal.
(d) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or terminated.
39
<PAGE>
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the
Offer and the Merger may be abandoned at any time prior to the Effective Time
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of the Company (with any
termination by Parent also being an effective termination by the Purchaser):
(a) by mutual written consent duly authorized by the Company (by action
of the Company Board) and the Parent;
(b) by Parent or the Company if (i) any court or other Governmental
Entity of competent jurisdiction shall have issued a final order, decree or
ruling (which order, decree or ruling the parties hereto shall use their best
efforts to lift) or taken any other final action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable; or (ii) the
Effective Time shall not have occurred on or before the date which is six months
from the date hereof; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(c) by Parent upon an occurrence or circumstance which would result in
a failure to satisfy any of the Tender Offer Conditions, the Purchaser shall
have (i) failed to commence the Offer within the time period prescribed in
Section 1.1(a), (ii) terminated the Offer without having accepted any Common
Shares for payment thereunder, or (iii) failed to pay for Common Shares pursuant
to the Offer by the date which is four months from the date hereof, unless, in
each case, such failure to commence the Offer or pay for Common Shares (whether
before or after termination of the Offer) shall have been caused by or resulted
from a material breach of any of Parent's or the Purchaser's representations,
warranties or covenants, which breach cannot be or has not been cured within
thirty (30) days following receipt of written notice of such breach;
(d) by the Company if (i) due to an occurrence or circumstance which
would result in a failure to satisfy any of the Tender Offer Conditions, the
Purchaser shall have (A) failed to commence the Offer within the time period
prescribed in Section 1.1(a), (B) terminated the Offer without having accepted
any Common Shares for payment or (C) failed to pay for Common Shares pursuant to
the Offer by the date which is four months from the date hereof, unless, in each
case, such failure to commence the Offer or pay for Common Shares (whether
before or after termination of the Offer) shall have been caused by or resulted
from a material breach of any of the Company's representations, warranties or
covenants, or (ii) prior to the purchase of Common Shares pursuant to the Offer,
a corporation, partnership, person or other entity or group shall have made a
bona fide Acquisition Proposal that the Company Board by majority vote in good
faith determines (A) after consultation with and receipt of advice from its
outside legal counsel, that failing to take such action is reasonably determined
to constitute a breach of the fiduciary
40
<PAGE>
duties of the Company Board under applicable law, and (B) after consultation
with and receipt of written advice from the Financial Advisor or another
nationally recognized investment banking firm, that such proposal is more
favorable to the Company's stockholders from a financial point of view than the
Offer and the Merger (including any adjustment to the terms and conditions
proposed by Purchaser in response to such bona fide Acquisition Proposal),
provided that such termination under this clause (ii) shall not be effective
until payment of the fee required by Section 8.3(a);
(e) by Parent prior to the purchase of Common Shares pursuant to the
Offer, if (i) there shall have been a material breach of any of the Company's
representations, warranties or covenants, which breach cannot be or has not been
cured within 30 days following receipt of written notice of such breach, (ii)
the Company Board shall withdraw, modify, or change (including by amendment of
the Schedule 14D-9) its recommendation or approval in respect of this Agreement
or the Offer in a manner adverse to Purchaser, or shall have adopted any
resolution to effect any of the foregoing, (iii) the Company Board shall have
recommended any proposal other than this Agreement in respect of an Acquisition
Proposal, (iv) the Company shall have exercised a right with respect to an
Acquisition Proposal referenced in Section 6.2 and shall, directly or through
its representatives, continue discussions with any third party concerning an
Acquisition Proposal for more than 10 business days after the date of receipt of
such Acquisition Proposal, (v) an Acquisition Proposal that is publicly
disclosed and that contains a proposal as to price (without regard to whether
such proposal specifies a specific price or a range of potential prices) shall
have been commenced, publicly proposed or communicated to the Company and the
Company shall not have rejected such proposal within 10 business days of the
earlier to occur of (A) the Company's receipt of such Acquisition Proposal and
(B) the date such Acquisition Proposal first becomes publicly disclosed, (vi)
any Person or group (as defined in Section 13(d)(3) of the Exchange Act) other
than Purchaser or any of its subsidiaries or affiliates shall have become the
beneficial owner of more than 15% of the outstanding Common Shares (either on a
primary or a fully diluted basis); provided, however, that this provision shall
not apply to any Person that owns more than 15% of the outstanding Common Shares
on the date hereof; provided, further, that such Person does not increase its
beneficial ownership beyond the number of Shares such Person beneficially owns
on the date hereof, or (vii) the Minimum Condition (as defined in Annex I) shall
not have been satisfied by the initially scheduled expiration date of the Offer
and on or prior to such date an entity or group (other than Purchaser) shall
have made and not withdrawn a proposal with respect to an Acquisition Proposal;
or
(f) by the Company if there shall have been a material breach of any of
Purchaser's or Parent's representations, warranties or covenants which breach
cannot be or has not been cured within 30 days of the receipt of written notice
thereof.
SECTION 8.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
41
<PAGE>
than the provisions of this Section 8.2 and Sections 9.3 and 8.3. Nothing
contained in this Section 8.2 shall relieve any party from liability for any
breach of this Agreement.
SECTION 8.3. Fees and Expenses.
(a) In the event that (i) Parent shall have terminated this Agreement
pursuant to Sections 8.1(e)(i), (vi) or (vii) and within twelve (12) months
following the date of any such termination the Company shall have entered into a
definitive agreement or agreement in principle with respect to an Acquisition
Proposal with a third party or an Acquisition Proposal with respect to the
Company shall have been consummated; or (ii) the Parent shall have terminated
this Agreement pursuant to Sections 8.1(e)(ii), (iii), (iv) or (v); or (iii) the
Company desires to terminate this Agreement pursuant to Section 8.1(d)(ii), then
the Company shall pay to Parent, (A) within one (1) business day following the
execution and delivery of such agreement, in the case of clause (i) of this
Section 8.3(a) or (B) within one (1) business day of such termination, in the
case of clause (ii) of this Section 8.3(a), or (C) immediately prior to such
termination, in the case of clause (iii) of this Section 8.3(a), a termination
fee in cash, of $3,000,000 (the "Termination Fee"), provided, however, that the
Company in no event shall be obligated to pay more than one such Termination Fee
with respect to all such agreements and occurrences and such termination.
(b) Upon the termination of this Agreement for any reason prior to the
purchase of Common Shares by the Purchaser pursuant to the Offer (other than
termination (i) by the Company pursuant to Section 8.1(f) or (ii) by the Parent
pursuant to Section 8.1(c) solely as a result of the failure to satisfy the
condition set forth in paragraph (h) of Annex I at a time when there is no
breach of any of the Company's representations, warranties or obligations set
forth herein and all of the other conditions set forth in Annex I are satisfied)
the Company shall reimburse Parent, the Purchaser and their respective
affiliates (not later than one (1) business day after submission of statements
therefore) for all actual documented out-of-pocket fees and expenses, not to
exceed $1,000,000, actually and reasonably incurred by any of them or on their
behalf in connection with the Offer and the Merger and the consummation of all
transactions contemplated by this Agreement (including, without limitation, fees
payable to financing sources, investment bankers, counsel to any of the
foregoing, and accountants). The Purchaser has provided the Company with an
estimate of the amount of such fees and expenses and, if the Purchaser shall
have submitted a request for reimbursement hereunder, will provide the Company
in due course with invoices or other reasonable evidence of such expenses upon
request. The Company shall in any event pay the amount requested (not to exceed
$1,000,000) within one (1) business day of such request, subject to the
Company's right to demand a return of any portion as to which invoices are not
received in due course.
(c) Upon the consummation of the Offer, all costs and expenses incurred
by each party hereto in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, fees and disbursements of
counsel, financial advisors and accountants) shall be paid by the Company or the
Company shall promptly reimburse such party, as the case may be.
42
<PAGE>
(d) Except as specifically provided in this Section 8.3 each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4. Amendment. Subject to applicable law, this Agreement may
be amended by action taken by the Company, Parent and the Purchaser at any time
before or after approval of the Merger by the stockholders of the Company (if
required by applicable law) but, after any such approval, no amendment shall be
made which requires the approval of such stockholders under applicable law
without such approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
SECTION 8.5. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
consummation of the last to occur of any of the transactions contemplated
hereby.
SECTION 9.2. Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (ii) shall not be assigned by operation of law or
otherwise; provided, however, that the Purchaser may assign any or all of its
rights and obligations under this Agreement to any Subsidiary or affiliate of
the Purchaser, but no such assignment shall relieve the Purchaser of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 9.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, such provision shall be enforced to the maximum extent
permissible in the circumstances, and the remainder of this Agreement, and the
application of such provision to other persons or circumstances, shall not be
affected thereby, and to such end, the provisions of this Agreement are agreed
to be severable.
SECTION 9.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business
43
<PAGE>
hours by hand, by Federal Express, United Parcel Service or other nationally
recognized overnight commercial delivery service, or by facsimile notice,
confirmation of receipt received, addressed as follows, or to such other address
as may be hereafter notified by the respective parties hereto:
(a) If to Parent or the Purchaser:
GMG Acquisition Corp.
c/o Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert F. End
Facsimile Number: 212-339-8585
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Facsimile Number: 212-403-2223
(b) If to the Company:
Global Motorsport Group, Inc.
16100 Jacqueline Court
Morgan Hill, CA 95037
Attention: James J. Kelly, Jr.
Facsimile Number: (408) 778-7001
With a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, CA 92614
Attention: Thomas D. Magill, Esq.
Facsimile Number: (949) 475-4648
SECTION 9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof. The parties hereto hereby agree
and consent to be subject to the exclusive jurisdiction of the federal and state
courts in the State of Delaware in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by law, (i) any
objection that it may now or hereafter have to laying venue of any suit, action
or proceeding brought in such courts, and (ii)
44
<PAGE>
any claim that any suit, action or proceeding brought in such courts has been
brought in an inconvenient forum.
SECTION 9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 6.7 and 8.2, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
45
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
STONINGTON ACQUISITION CORP.
By: /s/ Robert F. End
----------------------------
Name: Robert F. End
Title: President
GMG ACQUISITION CORP.
By: /s/ Robert F. End
----------------------------
Name: Robert F. End
Title: President
GLOBAL MOTORSPORT GROUP, INC.
By: /s/ Joseph F. Keenan
----------------------------
Name: Joseph F. Keenan
Title: Chairman
46
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX I IS
ATTACHED.
Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment or pay for, and may delay the acceptance
for payment of, or the payment for, any Common Shares, and may terminate or,
subject to the terms of the Merger Agreement, amend the Offer, if (i) there
shall not be validly tendered and not properly withdrawn prior to the expiration
date for the Offer, as it may be extended in accordance with the Offer (the
"Expiration Date") that number of Common Shares which represents at least a
majority of the total number of outstanding Common Shares on a fully diluted
basis on the date of purchase (not taking into account the Rights) (the "Minimum
Condition"), (ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer, or (iii) at any
time on or after the date of the Merger Agreement and prior to the acceptance
for payment of Common Shares, any of the following conditions exist:
(a) there shall be threatened or pending any action, suit or proceeding
or any statute, rule, regulation, judgment, order or injunction
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the Offer, or any other action shall have been taken,
proposed or threatened, by any Governmental Entity or by any court of
competent jurisdiction, other than the routine application to the
Offer, the Merger or other subsequent business combination of waiting
periods under the HSR Act, (i) seeking to prohibit or impose any
material limitations on Parent's or the Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or
affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent
or the Purchaser and their respective Subsidiaries, in each case taken
as a whole, (ii) seeking to make the acceptance for payment of, or the
payment for, some or all of the Common Shares illegal or otherwise
prohibiting, restricting or significantly delaying consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, or seeking to obtain from the
Company or the Purchaser any damages that are material in relation to
the Company and its Subsidiaries as taken as a whole, (iii) seeking to
impose material limitations on the ability of the Purchaser, or render
the Purchaser unable, to acquire or hold or to exercise effectively all
rights of ownership of the Common Shares, including, without
limitation, the right to vote any Common Shares purchased by the
Purchaser on all matters properly presented to the stockholders of the
Company, or effectively to control in any material respect the
business, assets or operations of the Company, its Subsidiaries or the
Purchaser or any of their respective affiliates, (iv) seeking to impose
circumstances under which the purchase or payment
<PAGE>
for some or all of the Common Shares pursuant to the Offer and Merger
could have a Purchaser Material Adverse Effect, or (v) which otherwise
is reasonably likely to have a Company Material Adverse Effect; or
(b) there shall have occurred any change that constitutes a Company
Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange,
Inc. or The Nasdaq Stock Market for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market
conditions), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or
not mandatory), by any U.S. governmental authority or agency, likely to
materially adversely affect, the extension of credit by banks or other
financial institutions, (v) a change in general financial, bank or
capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit
or syndicate loans, (vi) from the date of the Merger Agreement through
the date of termination or expiration of the Offer, a decline of at
least 15% in the Standard & Poor' 500 Index, or (vii) in the case of
any of the foregoing, existing at the date of the execution of the
Merger Agreement, a material acceleration or worsening thereof; or
(d) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent or the
Purchaser, any of their respective affiliates, or any group of which
any of them is a member shall have acquired beneficial ownership of
more than 15% of the outstanding Common Shares or shall have entered
into a definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Transaction involving the
Company or any of its Subsidiaries; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) (i) the Company Board shall have withdrawn, changed or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to
the Purchaser or Parent its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have recommended an
Acquisition Proposal, or shall have adopted any resolution to effect
any of the foregoing, (ii) the Company Board shall have recommended any
proposal other than this Agreement in respect of an Acquisition
Proposal, (iii) the Company shall have exercised a right with respect
to an Acquisition Proposal referenced in Section 6.2 and shall have,
directly or through its representatives, continued discussions with any
third party concerning an Acquisition Proposal
I-2
<PAGE>
for more than ten (10) business days after the date of receipt of such
Acquisition Proposal, or (iv) an Acquisition Proposal that is publicly
disclosed and that contains a proposal as to price (without regard to
whether such proposal specifies a specific price or a range of
potential prices) shall have been commenced, publicly proposed or
communicated to the Company and the Company shall not have rejected
such proposal within ten (10) business days of the earlier to occur of
(A) the Company's receipt of such Acquisition Proposal and (B) the date
such Acquisition Proposal first becomes publicly disclosed; or
(g) all consents, permits and approvals of Governmental Entities and
other persons set forth in Section 4.6 of the Company Disclosure
Schedule and identified with an asterisk shall not have been obtained
with no material adverse conditions attached and no material expense
imposed on the Company or any of its Subsidiaries; or
(h) the Purchaser and Parent shall not have obtained the financing set
forth in the Financing Letters unless the failure to obtain such
financing is due to the Purchaser's or Parent's failure to perform any
obligation required thereunder; or
(i) the Purchaser shall have not entered into satisfactory arrangements
with senior management of the Company with respect to their continued
employment in the Company; or
(j) (i) the representations and warranties made by the Company in the
Merger Agreement shall not have been true and correct in all material
respects when made or shall have ceased to be true and correct in all
material respects as of the Expiration Date as if made as of such date,
or (ii) as of the Expiration Date the Company shall not in all material
respects have performed its material obligations and agreements and
complied with its material covenants to be performed and complied with
by it under the Merger Agreement.
The parties acknowledge that the Conditions to the Offer set forth
above in this Annex I are for the sole benefit of the Purchaser, that the
Company shall not assert failure of, or waive, any such condition without the
prior written consent of the Purchaser and that if the Purchaser elects to waive
any such condition to the Offer, the Company shall cooperate and comply with
such election.
I-3
<PAGE>
Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
212-339-8500
Fax: 212-339-8585
STONINGTON PARTNERS
October 15, 1998
BY FACSIMILE
PERSONAL AND CONFIDENTIAL
Global Motorsport Group, Inc.
c/o Mr. David Prokupek
Cleary Gull Reiland & McDevitt, Inc.
100 East Wisconsin Avenue
Milwaukee, WI 53202
Dear Mr. Prokupek:
We are interested in pursuing a transaction (a "Transaction") whereby
an entity formed by us would acquire, on behalf of Stonington Capital
Appreciation 1994 Fund, L.P., Global Motorsport Group, Inc. ("Global") as a
transaction value in excess of the tender offer currently outstanding by Golden
Cycle L.L.C. As an inducement to our willingness to commit the energy and
resources to pursue a Transaction, Global agrees to the terms of this letter.
Global agrees to deal exclusively with us, and cooperate with us, with
respect to the Transaction from the date hereof until November 15, 1998 and not
to announce or engage in any extraordinary transaction during such time period.
Global further agrees that from the date hereof until November 15,
1998, neither it nor any of its subsidiaries, officers, directors, or the
directors and officers of its subsidiaries, nor any of its other affiliates
shall, and each of them shall cause its and its subsidiaries' employees, agents
and representatives (including, without limitation, any investment banking,
legal or accounting firm retained by Global or any of its subsidiaries and any
individual member or employee of the foregoing) not to (a) initiate, solicit or
seek, directly or indirectly, any inquiries or the making or implementation of
any proposal or offer (including, without limitation, any proposal or offer to
its stockholders) with respect to a merger, acquisition, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or a substantial portion of the assets or any equity
securities of, Global or any of its subsidiaries (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"), or (b) engage in
any negotiations concerning, or provide any confidential information or data to,
or
<PAGE>
STONINGTON PARTNERS
have any discussions with any persons relating to an Acquisition Proposal, or
(c) otherwise cooperate in any effort or attempt to make, implement or accept an
Acquisition Proposal. Global will immediately terminate any discussions with any
third parties with respect to any Acquisition Proposal.
Each party agrees that this agreement and our pursuit of a Transaction
will be kept confidential and not disclosed to any person other than an
employee, director, advisor or financing source to such party that agrees to
maintain the confidentiality of this Agreement.
Each party shall bear its own expenses with respect to the matters
contemplated hereby.
Nothing contained in this letter shall preclude the Board of Directors
of Global from taking any action that in the opinion of its counsel is required
by (a) their fiduciary duties with respect to any party that has made a public
Acquisition Proposal or (b) a court of appropriate jurisdiction in a proceeding
involving Global; provided that in any such case to the extent practical Global
shall advise us in advance of such action and of the circumstances giving rise
to it. In addition, nothing contained herein shall preclude Global and its
officers, directors and advisors from continuing to negotiate credit facilities
with financial institutions, part of the proceeds of which may be used to
repurchase shares of Global; provided that such negotiations are not publicly
announced and no new credit facilities are finalized; and further provided
Global shall discuss with us in good faith postponing any bank syndicate
meetings.
The second and third paragraphs of this letter agreement may be
terminated by either Global or us at any time after October 30, 1998.
This letter is not intended to create a binding obligation on either
Global or us to effect a Transaction, but is otherwise binding in accordance
with its terms. This letter may be signed in counterparts.
<PAGE>
STONINGTON PARTNERS
We are pleased to have the opportunity to work with you on this matter.
Very truly yours,
STONINGTON PARTNERS, INC.
By: /s/ Robert F. End
---------------------------
Robert F. End
Partner
Agreed to and accepted as
of the date above written:
GLOBAL MOTORSPORT GROUP, INC.
By: /s/ Joseph F. Keenan
------------------------------
Joseph F. Keenan
Chairman
<PAGE>
April 24, 1998
PRIVATE AND CONFIDENTIAL
Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Robert F. End
THIS MUTUAL CONFIDENTIALITY AGREEMENT is by and between Global
Motorsport Group, Inc., a Delaware corporation ("Global") and Stonington
Partners, Inc. (the "Company"). References herein to Global or the Company shall
refer to Global and the Company and their respective subsidiaries or affiliates
controlled by Global or the Company.
WHEREAS, Global and the Company desire to disclose to each other
certain confidential and proprietary information relating to their respective
businesses for the purpose of facilitating discussion of a potential business
transaction; and
WHEREAS, both parties acknowledge the need to protect the
confidentiality of such information.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:
1. As used herein the term "Confidential Information" shall mean any
and all data and information relating to the business of the disclosing party
that is disclosed to the other party pursuant to this Agreement. Confidential
Information shall not include information that: (a) is now, or hereafter
becomes, through no act or failure to act on the part of the receiving party,
generally known or available to the public; (b) is rightfully known by the
receiving party at the time of receiving such information; (c) is furnished to
others by the disclosing party without restriction on disclosure; (d) is
hereafter rightfully furnished to the receiving party by a third party without
any breach of any confidentiality obligation to the other party to the knowledge
of receiving party; (e) is independently developed by the receiving party
without any breach of this Agreement; or (f) is required to be disclosed by the
<PAGE>
Stonington Partners, Inc.
April 24, 1998
Page 2
receiving party by judicial action after all reasonably available legal remedies
to maintain the confidentiality of such information have been exhausted.
Confidential Information may include information disclosed to Global or the
Company by a third party, including Global's financial advisor, and information
disclosed to the receiving party that is confidential information of an
affiliate of the disclosing party. Confidential Information also includes the
fact that discussions are or negotiations are taking place concerning a
potential transaction and any of the terms, conditions or other facts with
respect to any such potential transaction.
Both Global and the Company further acknowledge that certain of the Confidential
Information may be "Insider Information" with respect to one or more of the
involved parties. Both Global and the Company are therefore subject to Rule
10b-5 under the Securities Exchange Act of 1934 with respect to such
information. Disclosing certain non-public information to any other person or
trading in the stock of any company described in the Confidential Information
while this information remains non-public may be a violation of the Rule and
could subject Global or the Company to the penalties provided under the Act.
2. Each party hereto may use the other party's Confidential Information
only for purposes of analyzing and discussing the proposed transaction. Each
party further agrees that the Confidential Information will not be used to
enhance, better, develop, perfect or improve any products now produced by the
receiving party or to be produced by the receiving party in the future, whether
or not such products are competitive with those products by the disclosing party
as of the date hereof. Each party further agrees not to engage in any reverse
engineering of the Confidential Information. Each party shall use the same care
and discretion, but in no event less that reasonable care and discretion, to
prevent disclosure, publication, or dissemination of the other party's
Confidential Information as it employs with similar information of its own.
Disclosure by each party hereto of the Confidential Information of the other
party may be made only to employees, agents, advisors, financing sources or
independent contractors (such agents, advisors, financing sources or independent
contractors (collectively, "Representatives") of the receiving party who are
directly involved in consideration of the proposed transaction that is the
subject of this Agreement, and who have a specific need to know such
information, and have obligated themselves to hold such Confidential Information
in trust and confidence or otherwise to comply with the terms of this Agreement.
Global and the Company agree to diligently monitor each such person and, upon
request by the other party hereto, to promptly furnish to the requesting party a
list of the receiving party's Representatives having had access to such
Confidential Information.
3. Within ten (10) days following the receipt of a written request
referencing this Agreement from either party hereto, the other party will
deliver to the requesting party all materials relating to the Confidential
Information received from the
2
<PAGE>
Stonington Partners, Inc.
April 24, 1998
Page 3
requesting party. At the same time, the other party also agrees to destroy
its work product which relates to the Confidential Information.
4. The Company agrees that for a period of two years from the date of
this letter agreement, neither the Company nor any of its affiliates will,
unless invited (on an unsolicited basis) by the Board of Directors of Global in
writing: (i) acquire, offer or propose to acquire, or agree or seek to acquire,
directly or indirectly, by purchase or otherwise, more than 2% of any
outstanding class of voting securities or direct or indirect rights or options
to acquire any securities of Global or any subsidiary thereof, or of any
successor to or person in control of Global, or any assets of Global or any
subsidiary or division thereof or of any such successor or controlling person;
(ii) enter into or agree, offer, propose or seek to enter into, or otherwise be
involved in or part of, directly or indirectly, any acquisition transaction or
other business combination relating to all or part of Global or its subsidiaries
or any acquisition transaction for all or part of the assets of Global or any
subsidiary of Global or any of its respective business; (iii) make, or in any
way participate in, directly or indirectly, any "solicitation" of "proxies" (as
such terms are used in the rules of the Securities and Exchange Commission) to
vote, or seek to advise or influence any person or entity with respect to the
voting of, any voting securities of Global; (iv) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) with respect to any voting securities of Global
or any of its subsidiaries; (v) seek or propose, alone or in concert with
others, to influence or control Global's management or policies; (vi) directly
or indirectly enter into any discussions, negotiations, arrangements or
understandings with any other person with respect to any of the foregoing
activities or propose any of such activities to any other person; (vii) advise,
assist, encourage, act as a financing source for or otherwise invest in any
other person in connection with any of the foregoing activities or (viii)
disclose any intention, plan or arrangement inconsistent with any of the
foregoing. The Company also agrees that, during the two-year period referred to
in the preceding sentence, neither the Company nor any of its affiliates will:
(i) request Global or its advisors, directly or indirectly, to (1) amend or
waive any provision of this paragraph (including this sentence); or (ii) take
any initiative with respect to Global or any of its subsidiaries which could
require Global to make a public announcement regarding (1) such initiative, (2)
any of the activities referred to in the preceding sentence, (3) the possibility
of a transaction or (4) the possibility of the Company or any other person
acquiring control of Global, whether by means of a business combination or
otherwise. The provisions of this paragraph shall not apply to Representatives
of the Company that are not affiliates of the Company.
5. Each party hereby acknowledges and agrees that in the event of any
breach of this Agreement by the other party, including, without limitation, the
actual or threatened disclosure of a disclosing party's Confidential Information
without the express prior written consent of the disclosing party, the
disclosing party will suffer irreparable harm
3
<PAGE>
Stonington Partners, Inc.
April 24, 1998
Page 4
and injury and no remedy at law will afford it adequate protection against or
appropriate compensation for, such injury. Accordingly, each party hereby agrees
that in any such event the other party shall be entitled to specific performance
of a receiving party's obligations under this Agreement, as well as such further
injunctive relief or other remedies available at law or in equity as may be
granted by a court competent jurisdiction. A receiving party agrees to reimburse
a disclosing party for all costs and expenses (including attorneys' fees)
incurred by the disclosing party in successfully enforcing the receiving party's
obligations under this Agreement.
6. This Agreement will continue in full force and effect for so long as
the parties continue to exchange Confidential Information and for a period of
one year thereafter. Both Global and the Company agree that as long as the
parties continue to exchange Confidential Information and for a period of two
years thereafter neither party will, without the prior written consent of the
other party, directly or indirectly, solicit to hire or hire (or cause or seek
to cause to leave the employ of the other party): (i) any officer employed by
the other party; (ii) any other employee employed by the other party with whom
the "hiring" party has contact with or who (or whose performance) became known
to that party in connection with the process contemplated by this Agreement. It
is understood that the provisions of this paragraph will not prohibit either
party from hiring any such person who comes to their attention as the result of
generalized searches for employees, through media advertisements, employment
firms or otherwise, that are not focused on persons employed in connection with
the operation of the other party.
7. Both parties understand and acknowledge that neither parties to this
Agreement nor any officers, directors, employees, representatives or agents of
either party is making any representation or warranty, express or implied, as to
the accuracy or completeness of the Confidential Information and neither party
to this Agreement nor any officers, directors, employees, representatives or
agents of either party will have any liability to the other party or any other
person resulting from either party use of the Confidential Information. Only
those representations or warranties that are made in a definitive agreement
regarding a transaction (a "Definitive Agreement") when, as, and if executed,
and subject to such limitations and restrictions as may be specified in such
Definitive Agreement, will have any legal effect. The term "Definitive
Agreement" does not include an executed letter of intent or any other
preliminary written agreement, nor does it include any written or oral
acceptance of any offer or bid on either parties part.
8. Each party hereby acknowledges that the other party may now market
or have under development products or services that are competitive with
products or services now offered or that may in the future be offered by the
other party, and the parties' communications hereunder will not serve to impair
the right of either party in independently develop, make, use, procure, or
market products or services now or in the future that may be
4
<PAGE>
Stonington Partners, Inc.
April 24, 1998
Page 5
competitive with those offered by the other, nor require either party to
disclose any planning or other information to the other, so long as such actions
are not in breach of this Agreement.
9. This Agreement and the rights and obligations of the parties under
this Agreement may be assigned only upon the prior written approval of the
parties hereto. The rights and obligations of the parties hereto will inure to
the benefit of, will be binding upon, and will be enforceable by the parties
hereto and their respective stockholders and permitted successors and assigns.
10. No modifications of this Agreement or waiver of any of its terms
will be effective unless set forth in writing signed by the party against whom
it is sought to be entered.
11. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
Very truly yours,
Global Motorsport Group, Inc.
By: CLEARLY GULL REILAND & McDEVITT INC., its agent
By: \s\David P. Prokupek
------------------------------
David P. Prokupek
Chief Executive Officer
Accepted and agreed as of the
date first above written.
By: \s\ Judith A. Witterschein
-----------------------------------------
Name: Judith A. Witterschein
------------------------------------
Title: Vice President & Corporate Counsel
-----------------------------------
5
