<PAGE>
SCHEDULE 14A
(RULE 14A-10)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
ALAMO GROUP INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
October 21, 1998
Dear Fellow Stockholders:
As you may know, Alamo Group Inc. has entered into a merger agreement that
would result in Alamo becoming a wholly owned subsidiary of WEC Company. WEC is
a wholly owned subsidiary of Woods Equipment Company, and is the vehicle through
which Woods conducts its operations.
If the merger is completed, you will receive $18.50 in cash, without
interest, for each share of Alamo common stock that you own.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR
TO AND IN THE BEST INTERESTS OF STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS
VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
In arriving at its decision to approve and recommend the merger, the Board
of Directors has carefully reviewed and considered the terms and conditions of
the proposed merger, as well as a number of other factors, including the opinion
of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the effect that, as of
the date of such opinion, the merger consideration to be received by Alamo
stockholders pursuant to the merger was fair to such stockholders from a
financial point of view. Such opinion was subsequently reconfirmed as of the
date of the attached proxy statement.
The merger cannot be completed unless the stockholders of Alamo adopt the
merger agreement. We have scheduled a special meeting for our stockholders to
vote on the merger. YOUR VOTE IS VERY IMPORTANT.
You are cordially invited to attend the special meeting. The special meeting
will be held at NationsBank Plaza, 6th Floor, 300 Convent Street, San Antonio,
Texas, at 8:30 a.m. (Central time) on November 18, 1998. Whether or not you plan
to attend the meeting, please take the time to vote by completing and mailing
the enclosed proxy card to us. If you sign, date and mail your proxy card
without indicating how you want to vote, your proxy will be counted as a vote in
favor of the merger. If you fail to return your proxy card, the effect will be a
vote against the merger.
The attached proxy statement provides you with detailed information about
the proposed merger. In addition, you may obtain information about our company
from documents that we have filed with the Securities and Exchange Commission.
We encourage you to read this entire document carefully.
On behalf of the Board of Directors of Alamo, I would like to thank you for
your support over the years.
Sincerely,
[LOGO]
Donald J. Douglass
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
[LOGO]
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
The special meeting of stockholders (together with any postponements or
adjournments thereof, the "Special Meeting") of Alamo Group Inc. (the "Company")
will be held at NationsBank Plaza, 6th Floor, 300 Convent Street, San Antonio,
Texas, 1998 at 8:30 a.m., Central time, on November 18, 1998 for the following
purposes:
1. To consider and act upon a proposal to adopt the Agreement and Plan of
Merger, dated as of August 18, 1998 and amended and restated as of
September 4, 1998 (as so amended and restated, the "Merger Agreement")
among the Company, WEC Company, a Delaware corporation ("WEC"), and AGI
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of WEC ("AGI"), pursuant to which AGI will be merged with and into the
Company (the "Merger") and each share of common stock, par value $.10 per
share, of the Company (the "Common Stock") will be converted into the
right to receive $18.50 in cash.
2. To consider and act upon such other business and matters or proposals as
may properly come before the Special Meeting.
The Board of Directors of the Company has fixed the close of business on
October 5, 1998 as the record date (the "Record Date") for determining the
stockholders having the right to receive notice of and to vote at the Special
Meeting. Only stockholders of record at the close of business on such date are
entitled to notice of and to vote at the Special Meeting. A list of stockholders
entitled to vote at the Special Meeting will be available during usual business
hours at the San Antonio office of the Company, 750 East Mulberry, Suite 401,
San Antonio, Texas, for ten days prior to the Special Meeting, for inspection by
any stockholder of the Company. Only business within the purposes described in
this Notice may be conducted at the Special Meeting.
Adoption of the Merger Agreement requires the affirmative vote of a majority
of the shares of common stock outstanding on the Record Date. As of the Record
Date, there were 9,735,759 shares of Common Stock outstanding, each of which is
entitled to one vote in person or by proxy with respect to each matter to be
voted on by holders of Common Stock at the Special Meeting.
All stockholders are cordially invited to attend the Special Meeting.
By order of the Board of Directors
[LOGO]
Robert H. George
SECRETARY
Seguin, Texas
October 21, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING. A PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR THAT
PURPOSE. IF NO INSTRUCTIONS ARE INDICATED ON YOUR PROXY, YOUR SHARES OF COMMON
STOCK WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER
AGREEMENT. EXECUTION OF A PROXY WILL NOT IN ANY WAY AFFECT A STOCKHOLDER'S RIGHT
TO ATTEND THE SPECIAL MEETING AND VOTE IN PERSON. ANY STOCKHOLDER GIVING A PROXY
HAS THE RIGHT TO REVOKE IT AT ANY TIME, BEFORE IT IS EXERCISED, BY WRITTEN
NOTICE TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C., 88 CHALLENGER ROAD,
RIDGEFIELD PARK, NEW JERSEY 07660. IN ADDITION, STOCKHOLDERS ATTENDING THE
SPECIAL MEETING MAY REVOKE THEIR PROXIES AT ANY TIME BEFORE THEY ARE EXERCISED.
YOU SHOULD NOT SEND STOCK
CERTIFICATES WITH YOUR PROXY CARD.
<PAGE>
[LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Alamo Group Inc. has entered into a merger agreement which would result in
the acquisition of Alamo by WEC Company. Pursuant to the merger agreement among
Alamo, WEC and AGI Acquisition Corp., AGI will merge with and into Alamo, as a
result of which Alamo will become a wholly owned subsidiary of WEC. AGI is a
wholly owned subsidiary of WEC and WEC is a wholly owned subsidiary of Woods
Equipment Company.
If the merger is completed, each share of your Alamo common stock will be
converted into the right to receive $18.50 in cash.
The Alamo Board of Directors, after careful consideration, has unanimously
approved the merger agreement, determined that the merger is fair to and in the
best interests of Alamo stockholders and recommends that you vote FOR adoption
of the merger agreement.
The merger cannot be completed without the approval of Alamo stockholders
holding at least a majority of Alamo's outstanding common stock. We have
scheduled a special meeting for our stockholders to vote on the merger. YOUR
VOTE IS VERY IMPORTANT.
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger. If you fail to return your card, the
effect will be a vote against the merger.
Concurrently with the execution of the merger agreement, WEC entered into
option agreements with Donald J. Douglass (and certain affiliates of Mr.
Douglass) and Capital Southwest Venture Corporation pursuant to which such
stockholders have granted WEC the option under certain circumstances to acquire
shares owned by them that collectively represent approximately 39.5% of the
outstanding shares of Alamo common stock for $18.50 per share and have agreed to
vote such shares for adoption of the merger agreement.
The date, time and place of the meeting is as follows:
Wednesday, November 18, 1998
8:30 a.m. (Central time)
NationsBank Plaza
6(th) Floor
300 Convent Street
San Antonio, Texas
This Proxy Statement provides you with detailed information about the
proposed merger. In addition, you may obtain information about Alamo from
documents that we have filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
Proxy Statement dated October 21, 1998, and first mailed to stockholders on
October 22, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 3
The Companies........................................................... 3
The Special Meeting..................................................... 3
Vote Required........................................................... 3
Record Date; Voting Power............................................... 4
Summary of Transaction.................................................. 4
Recommendation to Stockholders.......................................... 4
Reasons for the Merger.................................................. 4
Effects of the Merger................................................... 4
Interests of Certain Persons in the Merger.............................. 4
Conditions to the Merger................................................ 4
Current State of Financial Markets...................................... 5
No Solicitation by Alamo................................................ 5
Certain Option Agreements to Acquire Shares of Alamo Common Stock....... 5
Regulatory Matters...................................................... 6
Termination of the Merger Agreement..................................... 6
Termination Fees........................................................ 6
Opinion of Financial Advisor............................................ 7
Federal Income Tax Consequences......................................... 7
Appraisal Rights........................................................ 7
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA........................... 8
THE SPECIAL MEETING....................................................... 9
General................................................................. 9
Solicitation, Voting and Revocability of Proxies........................ 9
BACKGROUND OF AND REASONS FOR THE MERGER.................................. 10
Background of the Merger................................................ 10
The Company's Reasons for the Merger; Recommendation of the Board of
Directors............................................................. 15
Opinion of Financial Advisor............................................ 16
Effective Time.......................................................... 19
Interests of Certain Persons in the Merger.............................. 20
Accounting Treatment.................................................... 20
Certain Federal Income Tax Consequences of the Merger................... 20
Regulatory Approvals.................................................... 21
Payment for Shares and Surrender of Stock Certificates.................. 21
Certain Effects of the Merger........................................... 22
Appraisal Rights........................................................ 22
THE MERGER AGREEMENT...................................................... 25
General................................................................. 25
Representations and Warranties.......................................... 25
Conduct of Business Pending the Closing................................. 26
No Solicitation......................................................... 27
Certain Other Covenants................................................. 28
Conditions to Closing................................................... 30
Indemnification......................................................... 32
Termination............................................................. 32
Termination Fees........................................................ 33
OPTION AGREEMENTS......................................................... 34
HISTORICAL MARKET PRICE AND DIVIDEND DATA................................. 36
BENEFICIAL OWNERSHIP OF COMMON STOCK...................................... 37
WHERE YOU CAN FIND MORE INFORMATION....................................... 39
INDEPENDENT AUDITORS...................................................... 39
OTHER MATTERS............................................................. 40
</TABLE>
APPENDIX A--The Merger Agreement
APPENDIX B--Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
APPENDIX C--Section 262 of the Delaware General Corporation Law
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QUESTIONS AND ANSWERS ABOUT THE MERGER
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Q: PLEASE DESCRIBE THE MERGER.
A: In the proposed merger, AGI Acquisition
Corp., a wholly owned subsidiary of WEC
Company, will merge with and into
Alamo. WEC is itself a wholly owned
subsidiary of Woods Equipment Company.
After the merger, Alamo will be a
wholly owned subsidiary of WEC. The
merger requires the approval of the
holders of a majority of the shares of
Alamo common stock outstanding on
October 5, 1998.
Q: WHY IS ALAMO PROPOSING TO MERGE?
A: Alamo believes the merger provides
stockholders with the best means for
maximizing the value of their holdings.
Alamo stockholders will receive $18.50
in cash for each share of Alamo common
stock they own. This represents a
premium of 16% over the closing price
for Alamo common stock on August 17,
1998, the last trading day prior to the
announcement of the execution of the
merger agreement.
Q: WHEN IS THE SPECIAL MEETING?
A: The special meeting will take place on
November 18, 1998. At the meeting,
holders of Alamo common stock will be
asked to adopt the merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering
the information contained in this
document, please fill out and sign your
proxy card. Then mail your signed proxy
card in the enclosed return envelope as
soon as possible so that your shares
may be represented at the special
meeting.
Q: IF MY ALAMO SHARES ARE HELD IN "STREET
NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES ON THE MERGER FOR ME?
A: Your broker will vote your shares of
Alamo common stock for or against the
merger only if you provide instructions
on how to vote. You should follow the
directions provided by your broker
regarding how to instruct your broker
to vote your shares. Without
instructions, your shares of Alamo
common stock will not be voted. SHARES
OF ALAMO COMMON STOCK THAT ARE NOT
VOTED WILL HAVE THE EFFECT OF VOTES
AGAINST THE MERGER.
Q: CAN I CHANGE MY VOTE AFTER I HAVE
MAILED MY SIGNED PROXY CARD?
A: You can change your vote at any time
before your proxy is voted at the
special meeting. You can do this in one
of three ways. First, you can send a
written notice stating that you would
like to revoke your proxy. Second, you
can complete and submit a new proxy
card. If you choose either of these two
methods, you must submit your notice of
revocation or your new proxy card to
ChaseMellon Shareholder Services,
L.L.C. at the address on page 10.
Third, you can attend the special
meeting and vote in person. Simply
attending the meeting, without further
action, will not revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES
NOW?
A: No. After the merger is completed, you
will be sent written instructions for
exchanging your stock certificates.
</TABLE>
1
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<TABLE>
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Q: WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A: We are working towards completing the
merger as quickly as conditions permit.
In addition to stockholder approval,
consummation of the merger is subject
to satisfaction of certain other
conditions, including expiration or
termination of the applicable waiting
period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and
the absence of any condition in the
capital or financial markets generally
which would reasonably be expected to
materially adversely affect the
syndication of leveraged bank credit
facilities or the consummation of high
yield debt offerings (the "Market-out
Condition"). The merger agreement
generally permits each of Alamo, WEC
and AGI to terminate the merger
agreement if the merger is not
completed prior to March 31, 1999,
except that if stockholder approval is
obtained and once all conditions other
than the Market-out Condition are
satisfied, such date would be
accelerated to January 31, 1999.
Q: WILL I RECOGNIZE TAXABLE GAIN OR LOSS
ON THE TRANSACTION?
A: Yes. If the merger is completed, you
will recognize gain or loss for federal
income tax purposes in the amount by
which $18.50 exceeds, or is less than,
your tax basis in your shares of Alamo
common stock. You are urged to consult
your tax advisor to determine your
particular tax consequences.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the
merger, please call Robert George,
Secretary, at (830) 372-9621.
If you would like additional copies of
this Proxy Statement, you should
contact:
ChaseMellon Shareholder Services,
L.L.C.
88 Challenger Road
Ridgefield Park, New Jersey 07660
Phone Number: 1-800-635-9270
</TABLE>
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<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER AND RELATED MATTERS FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE
LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND
THE DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 39. WE HAVE INCLUDED PAGE REFERENCES IN PARENTHESES TO
DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE TOPICS PRESENTED IN THIS
SUMMARY.
THE COMPANIES
ALAMO GROUP INC.
1502 E. Walnut
Seguin, TX 78155
(830) 379-1480
Alamo is a leading manufacturer of high quality, tractor-mounted mowing and
other vegetation maintenance equipment and replacement parts for industrial and
agricultural end-users. Alamo maintains production facilities in the United
States, England and France and sells its products through an extensive network
of dealers worldwide.
WOODS EQUIPMENT COMPANY
6944 Newburg Road
Rockford, Illinois 61108
(815) 381-6000
Woods is a holding company which owns all of the shares of capital stock of
WEC. WEC is the only direct subsidiary of Woods. In August 1998, Woods was
recapitalized by Madison Dearborn Capital Partners II, L.P. and certain members
of Woods' management. As a result of this recapitalization, Madison Dearborn
Capital Partners II, L.P., an investment fund managed by Madison Dearborn
Partners, Inc., a private equity firm based in Chicago, Illinois, acquired
approximately 86% of the shares of capital stock of Woods.
WEC COMPANY
6944 Newburg Road
Rockford, Illinois 61108
(815) 381-6000
WEC, founded in 1947, is a leading manufacturer of attachments for
agricultural, grounds maintenance and construction equipment. Products
manufactured and sold by WEC are used in a broad range of agricultural,
residential, commercial, industrial and government applications and enable
end-users to expand the functionality and versatility of tractors and other
prime movers. WEC markets products under the tradenames
WOODS-REGISTERED TRADEMARK-, GANNON-REGISTERED TRADEMARK-,
ALLOWAY-REGISTERED TRADEMARK- and WAIN-ROY-REGISTERED TRADEMARK- through a
network of approximately 5,500 independent dealers located throughout North
America. WEC is a wholly-owned subsidiary of Woods.
AGI ACQUISITION CORP.
6944 Newburg Road
Rockford, Illinois 61108
(815) 381-6000
WEC organized AGI in August 1998 in order to aid in completion of the
merger. AGI has not conducted any unrelated activities since its organization.
THE SPECIAL MEETING (SEE PAGE 9)
The special meeting will be held at NationsBank Plaza, 6(th) Floor, 300
Convent Street, San Antonio, Texas, at 8:30 a.m. (Central time), on November 18,
1998. At the meeting, stockholders will be asked to adopt the merger agreement.
VOTE REQUIRED (SEE PAGE 9)
The affirmative vote of holders of a majority of the outstanding shares of
Alamo common stock is required to adopt the merger agreement.
Certain stockholders have already agreed to vote shares owned by them that
collectively represent approximately 39.5% of the outstanding shares of Alamo
common stock in favor of adoption of the merger agreement.
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RECORD DATE; VOTING POWER (SEE PAGE 9)
You are entitled to vote at the special meeting if you owned shares of Alamo
common stock as of the close of business (5:00 p.m.), on October 5, 1998, the
record date.
On the record date, there were 9,735,759 shares of Alamo common stock
outstanding and entitled to vote at the special meeting. Stockholders will be
entitled to one vote at the special meeting for each share of Alamo common stock
held on the record date.
SUMMARY OF TRANSACTION (SEE PAGE 9)
Pursuant to the merger agreement, AGI will merge with and into Alamo and
Alamo will continue as the surviving corporation, but as a wholly owned
subsidiary of WEC. As a result of the merger, each outstanding share of Alamo
common stock will be converted into the right to receive $18.50 in cash, without
interest. Stockholders should not send in their stock certificates until
instructed to do so after the merger is completed.
THE MERGER AGREEMENT IS INCLUDED AS APPENDIX A TO THIS PROXY STATEMENT. YOU
ARE ENCOURAGED TO READ THE MERGER AGREEMENT BECAUSE IT IS THE LEGAL DOCUMENT
THAT GOVERNS THE MERGER.
RECOMMENDATION TO STOCKHOLDERS (SEE PAGE 15)
The Board of Directors of Alamo has unanimously approved the merger
agreement and recommends that you vote FOR the proposal to adopt the merger
agreement.
REASONS FOR THE MERGER (SEE PAGE 15)
The Board of Directors of Alamo believes that the merger provides
stockholders with the best means for maximizing the value of their holdings. In
the merger, stockholders will receive $18.50 in cash for each share of Alamo
common stock they own. This represents a premium of 16% over the closing price
for Alamo common stock on August 17, 1998, the last day prior to the
announcement of the execution of the merger agreement.
This and other reasons for approving and recommending the merger identified
by the Board of Directors are explained in greater detail on pages 10 through 13
of this document.
EFFECTS OF THE MERGER (SEE PAGE 22)
Following the merger, Woods, through its subsidiary WEC, will own 100% of
Alamo's outstanding stock and those stockholders who held shares of Alamo common
stock prior to the effective time of the merger will cease to have any ownership
interests in Alamo or rights as a stockholder (other than statutory appraisal
rights, if you have perfected such rights according to Delaware law). You will
no longer benefit from any increase in the value of Alamo or any payment of
dividends on Alamo common stock and will no longer bear the risk of any decrease
in the value of Alamo. As a result of the merger, Alamo common stock will cease
to be traded on the New York Stock Exchange and Alamo will no longer be required
to file periodic reports with the Securities and Exchange Commission.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 20)
A number of officers and directors of Alamo have interests in the merger
that are different from or in addition to your interests. The Board of Directors
of Alamo was aware of these interests and considered them in approving and
adopting the merger and the merger agreement.
CONDITIONS TO THE MERGER (SEE PAGE 30)
Completion of the merger is subject to the satisfaction or (where
permissible) waiver of several conditions, including the following:
- adoption of the merger agreement by the stockholders of Alamo;
- no law having been enacted or injunction having been entered that
effectively prohibits the merger;
- no more than 4% of the outstanding shares having properly exercised
dissenter's rights;
4
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- none of the following having occurred or be continuing:
(a) suspension of trading, or limitation of prices for, securities on
the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market;
(b) declaration of a banking moratorium;
(c) commencement of war, armed hostilities or other international or
national calamity or emergency or a material worsening thereof
involving the United States; or
(d) any condition or change in the capital or financial markets
generally which would reasonably be expected to materially adversely
affect the syndication of leveraged bank credit facilities or the
consummation of high yield debt offerings (the "Market-out
Condition").
- representations and warranties contained in the merger agreement being
true and correct in all material respects as of the closing of the merger;
- receipt of an opinion regarding the solvency of Alamo after giving effect
to the merger.
CURRENT STATE OF FINANCIAL MARKETS (SEE PAGE 12)
During the latter part of September 1998 and through the first half of
October 1998, including pursuant to a letter from WEC to Alamo dated October 16,
1998, Woods informed Alamo that conditions in the financial markets currently
exist that would reasonably be expected to materially adversely affect the
syndication of leveraged bank credit facilities or the consummation of high
yield debt offerings. If current financial market conditions persist, it could
result in the failure of the Market-out Condition to the closing of the merger
summarized above. Woods has also informed Alamo that, in light of general
economic and industry conditions, it is carefully monitoring developments in
Alamo's operations and in the business sectors in which Alamo competes in order
to determine whether any such developments would reasonably be expected to have
a material adverse effect on Alamo or its prospects. If such developments were
to arise, it could result in the failure of the condition to the closing of the
merger summarized above that each of Alamo's representations and warranties in
the merger agreement be true and correct in all material respects as of the
closing.
NO SOLICITATION BY ALAMO (SEE PAGE 27)
Alamo has agreed that it will not initiate any discussions regarding a
business combination involving Alamo and any other party.
CERTAIN OPTION AGREEMENTS TO ACQUIRE SHARES OF ALAMO COMMON STOCK (SEE PAGE 34)
Donald J. Douglass (and certain affiliates of Mr. Douglass) and Capital
Southwest Venture Corporation have entered into option agreements pursuant to
which such stockholders have agreed to vote shares owned by them that
collectively represent approximately 39.5% of the outstanding Alamo common stock
in favor of adoption of the merger agreement and have granted to WEC an option
to buy such shares if, among other things:
- prior to the special meeting, the Alamo Board of Directors withdraws or
modifies or amends in a manner adverse to WEC its approval or
recommendation of the merger; or
- any third party, subject to certain exceptions, acquires 15% or more of
the outstanding shares of Alamo common stock; or
- any third party commences, or announces an intention to commence, a tender
offer and would, if the tender offer is completed, own 15% or more of the
outstanding shares of Alamo common stock; or
- the merger agreement is terminated by Alamo in connection with the
determination of its Board of Directors to
5
<PAGE>
accept a proposal for an alternative transaction to the merger.
REGULATORY MATTERS (SEE PAGE 21)
Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the merger may not be consummated until the applicable waiting
period requirements have been satisfied. Alamo and WEC made the required filings
on September 28, 1998 and expect the waiting period to expire on October 28,
1998 if a second request for information is not made by the Federal Trade
Commission.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 32)
The Boards of Directors of Alamo and WEC can jointly agree to terminate the
merger agreement at any time without completing the merger. The merger agreement
may also be terminated in certain other circumstances, as follows:
Either by Alamo or WEC if:
- the merger has not been completed by March 31, 1999 or such other date as
the parties may have agreed upon, except that if stockholder approval is
obtained and once all conditions other than the Market-out Condition are
satisfied, such date would be accelerated to January 31, 1999 (except that
no party may terminate the merger agreement if its breach is the reason
that the merger has not been completed); or
- any final court order or governmental decree prohibits the merger; or
- the holders of Alamo common stock fail to adopt the merger agreement at
the special meeting.
WEC may terminate the merger agreement:
- if any third party makes a tender offer for, and as a result becomes the
owner of, 50% or more of the outstanding shares of Alamo common stock; or
- if the special meeting is not convened prior to March 31, 1999 and the
failure to convene the special meeting was not the fault of WEC or the
result of any law or court order that prevented Alamo from convening the
special meeting; or
- if, prior to the special meeting, the Alamo Board of Directors withdraws
or modifies or amends in a manner adverse to WEC its approval or
recommendation of the merger; or
- within three days of receiving notice that the Alamo Board of Directors
has determined that its fiduciary obligations require it to discuss an
acquisition offer with a third party.
Alamo may terminate the merger agreement if the Alamo Board of Directors,
under certain circumstances, determines that its fiduciary duties require it to
accept an acquisition offer from a third party.
TERMINATION FEES (SEE PAGE 33)
Alamo must pay a termination fee of $10 million, plus certain expenses, to
WEC:
- if the merger agreement is terminated by Alamo because the Alamo Board of
Directors, under certain circumstances, determines that its fiduciary
obligations require it to accept an acquisition offer from a third party;
or
- if the merger agreement is terminated by WEC because a third party makes a
tender offer for, and as a result becomes the owner of, 50% or more of the
outstanding shares of Alamo common stock; or
- if the merger agreement is terminated by WEC because prior to the special
meeting, the Alamo Board of Directors withdraws or modifies or amends in a
manner adverse to WEC its approval or recommendation of the merger.
6
<PAGE>
Alamo must pay a termination fee of $5 million, plus certain expenses, to
WEC:
- if the merger agreement is terminated because the special meeting is not
convened prior to March 31, 1999 and the failure to convene the special
meeting was not the fault of WEC or the result of any law or court order
which prevented Alamo from convening the special meeting; or
- if, under certain circumstances, the Alamo stockholders fail to adopt the
merger agreement at the special meeting.
Alamo must pay a termination fee of $3 million, plus certain expenses, to
WEC if WEC terminates the merger agreement within three days of receiving notice
that the Alamo Board of Directors has determined that its fiduciary obligations
require it to discuss an acquisition offer with a third party. Alamo must also
pay WEC an additional $7 million if, within twelve (12) months from such
termination, Alamo enters into any agreements regarding any acquisition offer
with any third party (whether or not such acquisition offer was the subject of
the notice which prompted WEC to terminate the merger agreement) or if any third
party otherwise acquires 50% or more of the outstanding shares of Alamo common
stock.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 16)
In deciding to approve the merger agreement, the Alamo Board of Directors
considered the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
its financial advisor, to the effect that, as of the date of the merger
agreement, the consideration to be received by Alamo stockholders pursuant to
the merger was fair to such stockholders from a financial point of view. Such
opinion was subsequently reconfirmed in a written opinion dated as of the date
of this Proxy Statement. This subsequent opinion is included as Appendix B to
this Proxy Statement, and we encourage you to read it.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 20)
Your receipt of cash in exchange for shares of Alamo common stock in
connection with the merger will be a taxable transaction for federal income tax
purposes and also may be a taxable transaction under applicable state, local,
foreign and other tax laws. Please consult your own tax advisor with respect to
the tax consequences of the merger to you, including the applicability and the
effect of federal, state, local, foreign and other tax laws.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR INDIVIDUAL SITUATION. ALAMO STOCKHOLDERS
ARE ENCOURAGED TO REVIEW THE DISCUSSION UNDER "BACKGROUND OF AND REASONS FOR THE
MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER" AND TO CONSULT
THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER.
APPRAISAL RIGHTS (SEE PAGE 22)
Alamo stockholders have the right to exercise appraisal rights under
Delaware law if they comply with the requirements set forth in Section 262 of
the Delaware General Corporation Law. The procedures which you must follow in
order to exercise your appraisal rights are described in this Proxy Statement
and the text of Section 262 of the Delaware General Corporate Law, which is
included as Appendix C to this Proxy Statement, and we encourage you to read it.
7
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1997 are derived from the audited consolidated financial statements of Alamo.
The financial data for the six month periods ended June 30, 1998 and 1997 are
derived from Alamo's unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1998. The data
should be read in conjunction with the consolidated financial statements,
related notes, and other financial information incorporated by reference herein.
See "WHERE YOU CAN FIND MORE INFORMATION" on page 39.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
----------------------------------------------------------------------- ----------
JANUARY 1, DECEMBER 31, DECEMBER 30, DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1994 1995 1996 1997 1997
----------- ------------- ------------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............................. $ 88,519 $ 119,643 $ 163,852 $ 183,595 $ 203,092 $ 110,076
Cost of sales.......................... 63,138 86,338 120,648 138,460 149,940 80,771
----------- ------------- ------------- ------------- ------------- ----------
Gross profit........................... 25,381 33,305 43,204 45,135 53,152 29,305
Selling, general and administrative
expenses............................. 13,051 18,133 24,301 29,785 31,026 15,066
----------- ------------- ------------- ------------- ------------- ----------
Income from operations................. 12,330 15,172 18,903 15,350 22,126 14,239
Interest expense....................... (647) (1,777) (2,647) (2,631) (2,262) (1,185)
Interest income........................ 174 322 441 664 523 222
Other income (expense) net............. 368 538 1,082 339 208 (55)
----------- ------------- ------------- ------------- ------------- ----------
Income before taxes.................... 12,225 14,255 17,779 13,722 20,595 13,221
Provision for income taxes............. 4,440 5,089 6,164 4,960 6,995 4,753
----------- ------------- ------------- ------------- ------------- ----------
Net income............................. $ 7,785 $ 9,166 $ 11,615 $ 8,762 $ 13,600 $ 8,468
----------- ------------- ------------- ------------- ------------- ----------
----------- ------------- ------------- ------------- ------------- ----------
Net income per common share:
Basic................................ $ 1.09 $ 1.21 $ 1.36 $ 0.91 $ 1.42 $ 0.88
Diluted.............................. 1.08 1.21 1.35 0.91 1.41 0.88
Average common shares:
Basic................................ 7,159 7,547 8,541 9,585 9,602 9,592
Diluted.............................. 7,193 7,604 8,619 9,641 9,674 9,651
BALANCE SHEET DATA:
(at end of period)
Total assets........................... $ 75,091 $ 99,160 $ 151,571 $ 153,862 $ 156,124 $ $170,107
Total current liabilities.............. 23,510 23,394 22,112 19,752 19,876 29,174
Long-term debt, net of current
maturities........................... 8,920 24,513 37,309 35,299 28,617 36,794
Deferred income taxes.................. 951 1,087 1,445 1,561 1,366 1,580
Stockholders' equity................... 41,710 50,166 90,705 97,250 106,265 102,559
CASH FLOW DATA:
Cash flows provided (used) by:
Operating activities................. (393) 9,801 118 9,627 12,303 4,204
Investing activities................. (9,967) (3,580) (21,790) (2,924) (4,311) (2,312)
Financing activities................. 10,559 (4,925) 21,558 (6,332) (9,275) (1)
OTHER DATA:
Ratio of earnings to fixed charges..... 15.44x 7.79x 6.96x 5.52x 8.76x 10.31x
Book value per share:
Basic................................ $ 5.83 $ 6.65 $ 10.62 $ 10.15 $ 11.07 $ 10.69
Diluted.............................. 5.80 6.60 10.52 10.09 10.98 10.63
<CAPTION>
JUNE 30,
1998
----------
<S> <C>
OPERATING DATA:
Net sales.............................. $ 109,119
Cost of sales.......................... 81,571
----------
Gross profit........................... 27,548
Selling, general and administrative
expenses............................. 15,821
----------
Income from operations................. 11,727
Interest expense....................... (1,454)
Interest income........................ 316
Other income (expense) net............. (219)
----------
Income before taxes.................... 10,370
Provision for income taxes............. 3,972
----------
Net income............................. $ 6,398
----------
----------
Net income per common share:
Basic................................ $ 0.66
Diluted.............................. 0.66
Average common shares:
Basic................................ 9,693
Diluted.............................. 9,718
BALANCE SHEET DATA:
(at end of period)
Total assets........................... $ 174,796
Total current liabilities.............. 26,543
Long-term debt, net of current
maturities........................... 36,023
Deferred income taxes.................. 1,378
Stockholders' equity................... 110,852
CASH FLOW DATA:
Cash flows provided (used) by:
Operating activities................. (3,376)
Investing activities................. (2,322)
Financing activities................. 5,188
OTHER DATA:
Ratio of earnings to fixed charges..... 7.19x
Book value per share:
Basic................................ $ 11.44
Diluted.............................. 11.41
</TABLE>
- ------------------------------
NOTE: Until 1996, Alamo's fiscal year comprised either a 52 or 53 week period
that ended on the Saturday closest to December 31. In 1996, Alamo changed
to a calendar year basis. There are no material differences in the data
presented that result from this change.
8
<PAGE>
THE SPECIAL MEETING
GENERAL
This proxy statement (this "Proxy Statement") is being furnished to holders
("Stockholders") of the common stock, par value $.10 (the "Common Stock"), of
Alamo Group Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company (the "Board") for use at a special
meeting of the Company's Stockholders to be held on Tuesday, November 18, 1998
at 8:30 a.m. (Central time) at NationsBank Plaza, 6(th) Floor, 300 Convent
Street, San Antonio, Texas (together with any adjournments or postponements
thereof, the "Special Meeting"). This Proxy Statement, the enclosed Notice of
Special Meeting of Stockholders and the form of proxy are first being mailed to
Stockholders on or about October 20, 1998.
The purpose of the Special Meeting is (i) to adopt the Agreement and Plan of
Merger, dated as of August 18, 1998 and as amended and restated on September 4,
1998 (as so amended and restated, the "Merger Agreement"), by and among the
Company, WEC Company ("WEC"), a Delaware corporation and a wholly owned
subsidiary of Woods Equipment Company ("Woods"), and AGI Acquisition Corp.
("AGI"), a Delaware corporation and a wholly owned subsidiary of WEC, pursuant
to which (A) AGI will merge with and into the Company (the "Merger"), with the
Company being the surviving corporation (the "Surviving Corporation") and
becoming a wholly owned subsidiary of WEC and (B) all issued and outstanding
shares of Common Stock (except those which are owned by the Company, WEC or
their respective wholly-owned subsidiaries or as to which appraisal rights have
been perfected) will be converted into the right to receive $18.50 in cash,
without interest thereon (the "Merger Consideration"), and (ii) to transact such
other business as may properly come before the Special Meeting.
The Merger is subject to a number of conditions, including the receipt of
required regulatory and Stockholder approvals.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board has fixed the close of business on October 5, 1998 as the record
date for determination of Stockholders entitled to notice of, and to vote at,
the Special Meeting (the "Record Date"). Stockholders as of the Record Date are
entitled to notice of, and to vote at, the Special Meeting. Accordingly, only
holders of record of shares of Common Stock at the close of business on such
date will be entitled to vote at the Special Meeting. Each holder of Common
Stock on the Record Date will be entitled to one vote per share held on all
matters properly presented at the Special Meeting. As of the close of business
on the Record Date, there were 9,735,759 shares of Common Stock outstanding and
entitled to vote at the Special Meeting, held by 211 holders of record. The
presence in person or by proxy at the Special Meeting of Stockholders entitled
to cast a majority of the votes that all Stockholders are entitled to cast shall
constitute a quorum. Adoption of the Merger Agreement requires the approval of
the holders of a majority of the outstanding shares of Common Stock. Abstentions
will be counted for purposes of determining whether a quorum exists at the
Special Meeting, but will have the same effect as votes against adoption of the
Merger Agreement. In addition, under the applicable rules of the New York Stock
Exchange, Inc. (the "NYSE"), brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote such customers' shares with respect to the proposal to
adopt the Merger Agreement in the absence of specific instructions from such
customers ("broker non-votes"). Broker non-votes will also have the same effect
as votes against adopting the Merger Agreement.
Simultaneously with the execution of the Merger Agreement, Donald J.
Douglass, the chairman of the Board and chief executive officer of the Company
(and certain affiliates of Mr. Douglass), and Capital Southwest Venture
Corporation entered into option agreements with WEC and AGI pursuant to which
such Stockholders, among other things, agreed to vote, and granted an
irrevocable proxy in favor of WEC to vote, shares owned by them that
collectively represent approximately 39.5% of the outstanding Common
9
<PAGE>
Stock (i) in favor of adoption of the Merger Agreement and (ii) against any
other merger agreement or takeover proposal. See "OPTION AGREEMENTS."
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR ADOPTION OF THE MERGER
AGREEMENT. The Board does not know of any matters other than those described in
the notice of the Special Meeting that are to come before the Special Meeting.
If the Special Meeting is adjourned for any reason, the adoption of the
Merger Agreement will be considered and voted upon by Stockholders at the
Special Meeting if and when it is reconvened.
The presence of a Stockholder at the Special Meeting will not automatically
revoke such Stockholder's proxy. Any proxy given pursuant to this solicitation
may be revoked by the person giving it by giving written notice of such
revocation to the Secretary of the Company at any time before it is voted, by
delivering to the Company a duly executed, later-dated proxy or by attending the
Special Meeting and voting in person. All written notices of revocation and
other communications with respect to revocation of proxies should be addressed
to ChaseMellon Shareholder Services, L.L.C., 88 Challenger Road, Ridgefield
Park, New Jersey 07660.
The cost of soliciting proxies for the Special Meeting will be borne by the
Company. In addition to the use of the mail, proxies may be solicited personally
or by telephone, telegraph, facsimile or other means of communication by
directors, officers or employees of the Company, who will not be specifically
compensated for such activities, but who may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. The Company will
also request persons, firms and companies holding shares in their names or in
the name of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial owners. The Company
will reimburse such persons for their reasonable expenses incurred in connection
therewith. The Company has retained ChaseMellon Shareholder Services, L.L.C. to
assist in the solicitation of proxies by the Company for a customary fee
(estimated to be approximately $4,500), plus reasonable out-of-pocket expenses.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
At a meeting held on August 18, 1998, the Board determined that the Merger
is fair to and in the best interests of Stockholders, approved the Merger, the
Merger Agreement and the transactions contemplated thereby, declared the Merger
Agreement's advisability and determined to recommend to Stockholders that they
vote for adoption of the Merger Agreement. See "--The Company's Reasons for the
Merger; Recommendation of the Board of Directors." The following discussion sets
forth certain information relating to the background of the Merger.
The Board, as part of its ongoing oversight and planning, has from time to
time considered various financial and other alternatives that might increase the
value of the Company for all its Stockholders. At a regular Board meeting held
on February 19, 1998, Brown & Wood LLP, counsel to the Company, reviewed with
the Board its fiduciary duties in pursuing strategic alternatives. To assist the
Board in exploring strategic alternatives, the Company retained Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") on February 23, 1998 as
its financial advisor. In order to carry out its mandate, Merrill Lynch, with
the assistance of certain members of senior management, began a due diligence
examination of the Company in early March.
At a Board meeting held on April 8, 1998, Merrill Lynch reviewed with the
Board an analysis of various strategic alternatives intended to assist the
Company in maximizing stockholder value. Included in Merrill Lynch's analysis
was a sale of the Company. As part of the discussion of such analysis, Merrill
Lynch outlined for the Board the methodology it would employ to seek potential
acquirers. Merrill Lynch
10
<PAGE>
summarized the process it would follow in collecting and disseminating
information about the business of the Company and identifying potential
acquirers, and then discussed the time frame in which a transaction could
potentially be accomplished and appropriate procedures that the Company should
follow throughout the process. After consideration of the analysis presented and
the strategic alternatives available, the Board concluded that pursuing a sale
of the Company represented the best opportunity for maximizing Stockholder
value.
During the week of May 4, 1998, Merrill Lynch, on behalf of the Company,
began contacting a broad range of potential strategic and financial acquirers
regarding the feasibility of, and their interest in, pursuing a strategic
transaction with the Company. Several parties who expressed preliminary interest
executed confidentiality agreements and were provided with a confidential
descriptive memorandum. Throughout this process, Merrill Lynch remained in
regular contact with senior management concerning the progress of these efforts.
On June 9, 1998, at a special meeting of the Board, Merrill Lynch reviewed
the indications of interest received from interested parties, described the
discussions with each interested party, the potential financial advantages and
disadvantages of each such indication and related matters. Based upon the
information presented, the Board decided to proceed with the next phase of the
process, which included management presentations, facility tours and access to
the Company data room. Among those parties who proceeded to the next phase of
the process was Madison Dearborn Capital Partners II, L.P. ("Madison Dearborn"),
acting on behalf of Woods. On August 4, 1998, pursuant to the final step of the
auction process conducted by Merrill Lynch on behalf of the Company, Madison
Dearborn, on behalf of Woods, submitted a written proposal regarding the
acquisition by Woods through WEC of the outstanding shares of Common Stock at a
price of $18.00 per share of Common Stock. The acquisition proposal submitted on
behalf of Woods was subject, among other matters, to the condition that Madison
Dearborn and Woods complete a recapitalization transaction (which was
subsequently completed on August 7, 1998). Since the Board believed that this
proposal represented the best available means of maximizing shareholder value,
the Board instructed its financial and legal advisors, at a special meeting held
on August 5, 1998, to explore a transaction with Woods. Accordingly, several
telephonic conferences were held during the remainder of that week between
representatives of Woods, their legal counsel, Merrill Lynch and the Company's
legal counsel with respect to the proposed terms of the transaction. Woods
conditioned its proposal on, among other matters, the requirement that Mr.
Douglass (and certain of his affiliates) and Capital Southwest Venture
Corporation (together, the "Option Stockholders") enter into option agreements
(each an "Option Agreement" and together, the "Option Agreements") pursuant to
which the Option Stockholders would grant to Woods or one of its affiliates an
option to acquire the Option Stockholders' shares of Common Stock under certain
circumstances and would agree to vote for the Merger.
At a special meeting of the Board on August 10, 1998, Merrill Lynch
summarized for the Board the details of the discussions that it had had with
representatives of Woods during the previous week. The Board then discussed with
Merrill Lynch and the Company's legal counsel the components of the bid,
including the price and terms of the potential transaction. The Board also took
note of, and discussed with Merrill Lynch, the fact that Woods had very recently
been recapitalized in a transaction involving Madison Dearborn. The Board then
authorized the Company's legal counsel and Merrill Lynch to continue discussions
with respect to the terms of the proposed acquisition by Woods through a merger
with a WEC acquisition vehicle, subject to Woods' agreeing to increase its
proposed price of $18.00 per share. On August 11, after further conversations
with representatives of Merrill Lynch, Woods increased its bid to $18.50 per
share. As a result of further telephone conversations between Merrill Lynch and
the Company's legal counsel with representatives of Woods and its legal counsel,
representatives of the parties convened in New York on Friday, August 14 and
negotiated the definitive terms of the Merger Agreement through Monday, August
17, 1998.
In the afternoon of August 17, 1998, at a special meeting of the Board held
to consider the structure and terms of the proposed transaction, Merrill Lynch
reviewed certain financial analyses with the Board
11
<PAGE>
and delivered its oral opinion (which was subsequently confirmed in writing on
August 18, 1998 and as of the date of this Proxy Statement) as to the fairness,
from a financial point of view, of the consideration to be received by the
Stockholders in the Merger. See "--Opinion of Financial Advisor." The Company's
legal counsel then reviewed with the Board the negotiated terms of the proposed
Merger Agreement and the Option Agreements and again reviewed with the Board its
duties in connection with the transaction. After an extensive discussion, which
at various times included Merrill Lynch and legal counsel, the meeting was
adjourned to allow the individual Board members an opportunity for deliberation.
The next day the Board reconvened and, after further discussion, voted to
approve the Merger and the Merger Agreement and to approve the transactions
contemplated thereby and declared the Merger Agreement's advisability. WEC, AGI
and the Company then executed the Merger Agreement and shortly thereafter
publicly announced the transaction. Concurrently with the execution of the
Merger Agreement, the Option Stockholders, WEC and AGI entered into the Option
Agreements. On September 4, 1998, the parties executed an amended and restated
Merger Agreement to incorporate certain technical and typographical corrections.
During the latter part of September 1998 and through the first half of
October 1998, several conversations occurred between representatives of Woods
and the Company regarding the ability of WEC to secure the financing to fund the
Merger Consideration in view of the current status of the financial markets. On
October 16, 1998, WEC delivered the following letter to the Company:
October 16, 1998
Re: Agreement and Plan of Merger, dated as of August 18,
1998, by and among Alamo Group Inc. (the "Company"),
WEC Company (the "Buyer") and AGI Acquisition Corp.
("Acquisition"), as amended and restated as of
September 4, 1998 (the "Agreement").
Dear Gentlemen:
Thank you for giving WEC Company the opportunity to provide
information relating to the Agreement and the status of the transactions
contemplated thereby for inclusion in the Company's proxy statement.
In response to your request for information and cognizant of the
terms of Sections 4(d)(ii), 6(a) and 6(e) of the Agreement, Buyer
desires to inform Seller that, if the Closing were scheduled to occur as
of October 16, 1998, the condition precedent to Buyer's obligation to
effect the transactions contemplated by the Agreement set forth in
Section 7(c)(vi) of the Agreement would not be satisfied.
In recent meetings with Jim Smith in San Antonio, Texas and Don
Douglass in Denver, Colorado, Paul Wood indicated, and Buyer continues
to believe, that there exists and is continuing a condition in the
credit markets that would reasonably be expected to materially adversely
affect the syndication of leveraged bank credit facilities and the
consummation of high yield offerings.
Although Buyer can not forecast with any assurance the condition of
the credit markets on November 16, 1998 (the target closing date under
the Agreement) or thereafter, Buyer has grave concerns whether existing
adverse conditions in the credit markets will sufficiently improve prior
to January 31, 1999 to enable Buyer to consummate the merger on the
terms contemplated by the Agreement.
Furthermore, Don Douglass, Oran Logan and Jim Smith indicated on a
recent telephone conference with Paul Wood that the Company was behind
its 1998 annual forecast through the end of the month of August and that
its September order rate had been disappointing. Buyer also
12
<PAGE>
notes that events have occurred which have adversely affected the value
of other companies engaged in business lines comparable to those in
which the Company engages, including a significant decline in the stock
prices of such companies and the publication of adverse forecasts of the
prospects of those businesses. Buyer desires to maintain its close
working relationship with the Company's management to continue to
monitor industry conditions, Company prospects, interim financial
results and financial forecasts.
Perhaps reflecting the market's view of the foregoing factors, Buyer
notes that the Company's stock closed on October 15, 1998, at $13.25 per
share, even though the per share merger consideration is $18.50 under
the existing terms of the Agreement.
By providing this information to the Company in connection with its
preparation of its proxy statement, Buyer is not repudiating its
obligations under the Agreement; to the contrary, the management and
directors of Buyer remain hopeful that existing market, industry and
Company conditions will improve sufficiently for Buyer to consummate the
merger. Toward that end, Buyer has worked diligently on preparing its
bank syndication and high-yield debt offering materials and had
conducted numerous drafting sessions that included Credit Suisse First
Boston and has incurred significant expense taking actions required for
closing.
We look forward to maintaining our close cooperation with the
Company's management and directors in working together to address these
issues. As always, we welcome any recommendations or proposals that the
Company or its financial advisors may have regarding these matters that
would improve the prospects for consummating a transaction between our
two companies. In the meantime, Buyer continues apace with its
preparations for the financing, so that, should conditions improve, it
will be prepared to respond.
Very truly yours,
WEC COMPANY
By: /s/ THOMAS R. REUSCHE
--------------------------------------
Thomas R. Reusche
On October 19, 1998, the Company's counsel contacted WEC's counsel to
request clarification as to whether the phrase "management and directors of
[WEC] remain hopeful that existing market, industry and Company conditions will
improve sufficiently for [WEC] to consummate the merger," which appears in the
penultimate paragraph of WEC's October 16 letter, is intended to imply that WEC
viewed existing industry and Company conditions to be such that certain of the
Company's representations in the Merger Agreement were no longer accurate. The
Company's counsel stated that neither the Company nor its financial or legal
advisors had previously been advised that this was WEC's view. In response to
this inquiry, WEC delivered the following letter to the Company in the evening
on October 19, 1998:
October 19, 1998
Re: Agreement and Plan of Merger, dated as of August 18,
1998, by and among Alamo Group Inc. (the "Company"),
WEC Company (the "Buyer") and AGI Acquisition Corp.
("Acquisition"), as amended and restated as of
September 4, 1998 (the "Agreement").
Dear Gentlemen:
Buyer is hereby responding to Brown & Wood LLP's request to Buyer
that it clarify its letter to the Company, dated as of October 16, 1998,
on the question of whether Buyer is asserting that,
13
<PAGE>
if the Closing were scheduled to occur as of October 16, 1998, there has
occurred or arisen any event or events which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect (as defined in the Agreement).
Buyer is cognizant of its obligations under Sections 3(d), 4(d)(ii),
and 6(e) of the Agreement and Buyer notes the Company's obligations
under Sections 2(z), 4(d), 4(e) and 6(e). Buyer also notes that, while
the Company's management has reported to Buyer disappointing trends in
the Company's business (lowering its 1998 forecast for EBITDA) and has
acknowledged to Buyer the publication of adverse forecasts by other
companies in the Company's industry, including the Company's most
significant competitor, the Company has not provided notice to Buyer
under Sections 4(e) and 6(e) that the Company has determined that it
will be in breach of Section 2(f) and therefore will not satisfy the
condition to Closing set forth in Section 7(c)(i).
Similarly, at this time, Buyer only desires to reserve its rights
with respect to recent industry and Company events and trends and, with
reference to Sections 2(f) and 7(c)(i), to express its concern that
events may have taken place or may soon take place that could reasonably
be expected to have a material adverse effect on the business, assets,
financial condition, value, prospects or results of operations of the
Company. While Buyer is not taking a position about whether, if the
Closing were scheduled to occur as of October 16, 1998, the closing
condition in Section 7(c)(i) would be satisfied, Buyer is hereby putting
the Company and its stockholders on notice (pursuant to the requirements
of Sections 3(d) and 4(d)(ii)) that, if current trends do not improve,
Buyer may in the future assert that Section 7(c)(i) is not satisfied
because of these events.
By providing this information to the Company in connection with its
preparation of its proxy statement, Buyer is not repudiating its
obligations under the Agreement; to the contrary, the management and
directors of Buyer remain hopeful that trends and conditions will
improve sufficiently for Buyer to consummate the merger.
We look forward to maintaining our close cooperation with the
Company's management and directors in working together to address these
issues.
Very truly yours,
WEC COMPANY
By: /s/ PAUL R. WOOD
----------------------------------
Paul R. Wood
Its: Chairman
The Company responded by delivering the following letter on October 21, 1998
to WEC:
October 21, 1998
Gentlemen:
We have received your letters dated October 16 and 19, 1998 and are
perplexed by their tone and substance. In particular, your second letter
appears to us to be an attempt to create a record that you apparently
believe will support a position that the condition to closing set forth
in Section 7(c)(i) has not been satisfied in the event you fail to
fulfill your obligations under our merger agreement.
In the third paragraph of your letter of October 19, you express
your "concern that events may have taken place or may soon take place
that could reasonably be expected to have a
14
<PAGE>
material adverse effect on the business, assets, financial condition,
value, prospects or results of operations of the Company." No such
events have taken place. Your letter also states "that, if current
trends do not improve, Buyer may in the future assert that Section
7(c)(i) is not satisfied because of these events." We are unaware of any
"trends" other than those which, as you know, reflect the innate
cyclycality and seasonality of the agricultural sector (one of the
businesses in which the Company operates) and which do not reflect
adversely on the Company's financial and operational soundness and
prospects. In any event, since no such events have taken place, unless
facts or circumstances arise that do not presently exist (which we do
not foresee occurring), we will deem any such assertion by you that
Section 7(c)(i) has not been satisfied to be a breach and repudiation of
your obligations under the merger agreement.
In the fourth paragraph of your letter of October 19, you purport to
disclaim that you are repudiating your obligations under the merger
agreement but go on to say "the directors and management of Buyer remain
hopeful that trends and conditions will improve sufficiently for Buyer
to consummate the merger." In our view, the only conditions that have to
improve are those that bear on your ability to obtain financing for the
transaction and thereby satisfy Section 7(c)(vi) of the merger
agreement.
We will continue, of course, to cooperate with and offer our
continued assistance to you in connection with your efforts to secure
your financing in order to close the merger. We continue to sincerely
believe that the transaction contemplated by the merger agreement
remains a desirable one for all parties and, on that basis, we look
forward to working with you towards a successful closing.
Very truly yours,
ALAMO GROUP INC.
/s/ DONALD J. DOUGLASS
Donald J. Douglass
Chairman
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
AT A SPECIAL MEETING HELD ON AUGUST 18, 1998, THE BOARD DETERMINED THAT THE
MERGER IS FAIR TO AND IN THE BEST INTERESTS OF STOCKHOLDERS, APPROVED THE MERGER
AND THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, DECLARED THE
MERGER AGREEMENT'S ADVISABILITY AND DETERMINED TO RECOMMEND TO STOCKHOLDERS THAT
THEY VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
The decision of the Board to approve the Merger and the Merger Agreement and
to recommend adoption of the Merger Agreement by Stockholders was based on a
number of factors. The following are the material factors considered by the
Board, certain of which factors contained both positive and negative elements:
- the Merger Consideration of $18.50 per share of Common Stock represents a
premium of 16% over the closing price for the Common Stock on the NYSE on
August 17, 1998, the last trading day prior to the announcement of the
Merger;
- information concerning the financial condition and results of operations
of the Company historically and prospectively absent the Merger;
- presentations from, and discussions with, representatives of the Company's
legal counsel and representatives of Merrill Lynch regarding the terms and
conditions of the Merger Agreement;
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- the Merger (i) was agreed to by the Board only after an analysis of
strategic alternatives, (ii) represents the culmination of a thorough
auction process conducted by Merrill Lynch, on behalf of the Board, during
which a large number of potential bidders were contacted over an extended
period of time and (iii) provides, in the Board's judgment, the best means
of maximizing the value of Stockholders' investment in the Company in view
of current industry, economic and market conditions;
- the possibility that if the Merger were not consummated, the price of the
Common Stock could be subject to significant downward pressure as a result
of current industry conditions as well as economic conditions in certain
foreign markets in which the Company operates;
- the Board's view that significant investments in infrastructure
improvements would be required for several years in order to enhance the
Company's operating efficiencies and profitability for the long term;
- the financial analyses presented by Merrill Lynch to the Board on August
17, 1998, including the oral opinion of Merrill Lynch (subsequently
confirmed in written opinions dated as of August 18, 1998 and as of the
date of this Proxy Statement) to the effect that, as of such dates, and
based on the assumptions made, matters considered and limits of review set
forth in such written opinions, the Merger Consideration to be received by
the holders of Common Stock in the Merger was fair from a financial point
of view to such holders, as discussed in "--Opinion of Financial Advisor";
- the terms of the Merger Agreement and the Option Agreements;
- because all of the Merger Consideration is to be paid in cash,
Stockholders will no longer participate in any potential future increases
in the value of the Company and will no longer bear the risk of any
decreases in the value of the Company; and
- the Merger Agreement under certain circumstances permits the Board to
consider additional third-party offers to acquire the Company and permits
the Board to provide information to, and negotiate with, such parties and
to terminate the Merger Agreement, subject to the payment of significant
fees and expenses to WEC.
The foregoing discussion of the factors considered by the Board is not
intended to be exhaustive, but is believed to include all material factors
considered by the Board. In reaching its decision to approve the Merger, the
Board did not quantify or assign any relative weights to the factors considered,
and individual directors may have given different weights to different factors.
OPINION OF FINANCIAL ADVISOR
Merrill Lynch acted as financial advisor to the Company in connection with
the proposed Merger. On August 17, 1998, Merrill Lynch delivered to the Board
its oral opinion, which was subsequently confirmed in written opinions dated as
of August 18, 1998 and as of the date of this Proxy Statement, to the effect
that, as of such dates, and based upon the assumptions made, matters considered
and limits of review set forth in such opinions, the Merger Consideration to be
received by the holders of Common Stock in the Merger was the fair from a
financial point of view to such holders. References herein to the "Merrill Lynch
Opinion" refer to the written opinion of Merrill Lynch dated as of the date of
this Proxy Statement.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT.
EACH HOLDER OF COMMON STOCK IS URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE
MERRILL LYNCH OPINION WAS INTENDED FOR THE USE AND BENEFIT OF THE BOARD, WAS
DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE MERGER
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF COMMON STOCK, DID NOT ADDRESS THE
MERITS OF THE UNDERLYING DECISION BY THE COMPANY TO UNDERTAKE THE MERGER, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE
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MERGER OR ANY TRANSACTION RELATED THERETO. THE MERGER CONSIDERATION WAS
DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN THE COMPANY AND MADISON DEARBORN
AND WAS APPROVED BY THE BOARD. THE SUMMARY OF THE MERRILL LYNCH OPINION SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
In arriving at the Merrill Lynch Opinion, Merrill Lynch among other things:
(i) reviewed certain publicly available business and financial information
relating to the Company which Merrill Lynch deemed to be relevant; (ii) reviewed
certain information, including financial forecasts, relating to the business,
earnings, cash flow, assets, liabilities and prospects of the Company furnished
to Merrill Lynch by the Company; (iii) conducted discussions with members of
senior management of the Company concerning the matters described in clauses (i)
and (ii) above; (iv) reviewed the market prices and valuation multiples for the
Common Stock and compared them with those of certain publicly traded companies
that Merrill Lynch deemed relevant; (v) reviewed the results of operations of
the Company and compared them with those of certain publicly traded companies
that Merrill Lynch deemed relevant; (vi) compared the financial terms of the
Merger with the financial terms of certain other transactions that Merrill Lynch
deemed relevant; (vii) participated in certain discussions and negotiations
among representatives of the Company, Madison Dearborn and WEC and their
financial and legal advisors; (viii) reviewed the Merger Agreement and the
Option Agreements and (ix) reviewed such other financial studies and analyses
and took into account such other matters as Merrill Lynch deemed necessary,
including Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available. Merrill Lynch also did not assume any responsibility for
independently verifying such information or for undertaking an independent
evaluation or appraisal of any of the assets or liabilities of the Company, and
Merrill Lynch was not furnished with any such evaluation or appraisal. In
addition, Merrill Lynch did not assume any obligation to conduct any physical
inspection of the properties or facilities of the Company. With respect to the
financial forecast information furnished to or discussed with Merrill Lynch by
the Company, Merrill Lynch assumed that they had been reasonably prepared and
reflected the best currently available estimates and judgment of the Company's
management as to the expected future financial performance of the Company.
The Merrill Lynch Opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and upon the
information made available to Merrill Lynch as of, the date of the Merrill Lynch
Opinion.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in connection with the Merrill Lynch opinion
delivered to the Board on August 17, 1998.
HISTORICAL TRADING PERFORMANCE. Merrill Lynch reviewed historical trading
information for the Common Stock. This analysis indicated that for the 52-week
period ended August 14, 1998, the per share closing price of the Common Stock
ranged between $14.88 and $23.69. Merrill Lynch also compared the trading prices
of the Common Stock for the one-year period and the three-year period ended
August 14, 1998 to (i) the S&P 400 MidCap index and (ii) an index comprised of a
group of publicly traded companies engaged primarily in the manufacture of
tractors, mowers and similar farming, earthmoving and industrial equipment,
which companies consisted of AGCO Corp., Allied Products Corp., Case Corp.,
Deere & Co., Gehl Co., Gradall Industries, Inc., JLG Industries, Inc., New
Holland N.V., Omniquip International, Inc. and The Toro Co. (collectively, the
"Alamo Comparable Companies").
ANALYSIS OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES. Using publicly
available information and estimates of future financial results published by
First Call Corporation ("First Call"), Merrill Lynch compared certain financial
and operating information and ratios for Alamo with the corresponding financial
and operating information for the Alamo Comparable Companies. Merrill Lynch's
calculations resulted in the following relevant ranges for the Alamo Comparable
Companies and for the Company as of
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August 14, 1998: A range of equity value as a multiple of last twelve months
("LTM") net income of 3.5x to 11.3x, with a mean of 7.3x and a median of 7.3x
(as compared to the Company at 13.2x); a range of equity value as a multiple of
1998 estimated earnings per share ("EPS") of 4.7x to 14.5x, with a mean of 8.1x
and a median of 7.9x (as compared to the Company at 11.0x); a range of equity
value as a multiple of 1999 estimated EPS of 4.7x to 9.7x, with a mean of 6.9x
and a median of 6.6x (as compared to the Company at 9.4x); a range of enterprise
value as a multiple of LTM sales of 0.3x to 1.5x, with a mean of 0.8x and a
median of 0.7x (as compared to the Company at 1.0x); a range of enterprise value
as a multiple of LTM earnings before interest, taxes, depreciation and
amortization ("EBITDA") of 2.7x to 7.0x, with a mean of 5.3x and a median of
5.4x (as compared to the Company at 7.6x); and a range of enterprise value as a
multiple of LTM earnings before interest and taxes ("EBIT") of 3.2x to 8.2x,
with a mean of 6.2x and a median of 6.6x (as compared to the Company at 9.5x).
Using a range of estimated 1999 EPS multiples of 6.0x to 8.5x and a range of LTM
EBITDA (as of June 30, 1998) multiples of 5.0x to 6.5x, the implied per share
value of the Common Stock was estimated to range from approximately $10 to $15
and $10 to $14, respectively.
COMPARABLE TRANSACTION ANALYSIS. Using available information, Merrill Lynch
reviewed the purchase prices and multiples paid in selected mergers and
acquisition transactions involving companies Merrill Lynch deemed relevant in
evaluating the Merger. These transactions were Woods/Madison Dearborn (August
1998); Ransomes/Textron Inc. (November 1997); Exmark Manufacturing Co./The Toro
Co. (June 1997); Champion Road Machinery/Volvo AB (February 1997); Xaver
Fendt/AGCO Corp. (January 1997); Fermec Holdings/Case Corp. (October 1996);
Market Purchase/New Holland N.V. (June 1996); Iochpe-Maxion/AGCO Corp. (May
1996); Dobson Park Industries/Harnischfeger Industries (September 1995); Clark
Equipment/Ingersoll-Rand Co. (March 1995); VME Group/Volvo AB (March 1995); Joy
Technologies/Harnischfeger Industries (August 1994); Componenta Kilsta/Svedala
(December 1991); and Akermans Verkstad/VME (October 1990) (collectively, the
"Comparable Transactions").
With respect to the Comparable Transactions, Merrill Lynch compared the
transaction value (defined as the offer value plus net debt assumed) of each
acquisition to each of LTM sales, LTM EDITDA and LTM EBIT for the acquired
company. This analysis yielded a range of multiples for transaction value
divided by LTM sales of 0.4x to 1.6x with a mean of 0.9x and a median of 0.8x, a
range of multiples for transaction value divided by LTM EBITDA of 4.6x to 14.1x
with a mean of 7.7x and a median of 7.3x, and a range of multiples for
transaction value divided by LTM EBIT of 5.2x to 18.9x with a mean of 10.2x and
a median of 9.4x. Using a range of LTM EBITDA (as of June 30, 1998) multiples of
7.0x to 8.5x, the implied per share value of the Common Stock was estimated to
range from approximately $15 to $19.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis (I.E., an analysis of the present value of the projected levered
cash flows for the periods indicated using the discount rates indicated) of the
Company based upon projections provided by the Company's management for the
period beginning July 1, 1998 and ending on December 31, 2003, using discount
rates reflecting an equity cost of capital ranging from 10% to 11% and terminal
value multiples of calendar year 2003 EDITDA ranging from 5.0x to 6.5x. Under
this analysis, the implied per share value of the Common Stock was estimated to
range from approximately $15 to $19.
LEVERAGED BUYOUT ANALYSIS. Merrill Lynch performed an analysis of the
theoretical maximum consideration that could be paid in an acquisition of the
Company by a financial buyer, based on management projections and on market and
economic conditions as of August 17, 1998 and considering capital structures
typically employed by financial buyers. In its analysis, Merrill Lynch assumed
that a financial buyer would be subject to the following constraints: (i) a
minimum ratio of 1998 EBITDA to interest expense of 1.7x, (ii) a minimum 5-year
return on equity of approximately 20% to 30%, (iii) a maximum bank debt
repayment period of 7 years, (iv) a minimum equity investment of 25% and (v) a
2003 EBITDA terminal multiple range of 7.0x to 8.0x. This analysis resulted in a
theoretical maximum consideration per
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share of Common Stock that could be paid by a financial buyer in an acquisition
transaction that was estimated to range from approximately $16.00 to $18.50.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch in arriving at the Merrill Lynch
opinions. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial or summary description. Merrill Lynch
believes that its analysis must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all such factors and analyses, could create a misleading view of the processes
underlying the Merrill Lynch opinions. Merrill Lynch did not assign relative
weights to any of its analyses in preparing the Merrill Lynch opinions. The
matters considered by Merrill Lynch in its analyses were based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's and Merrill Lynch's control and involve the
application of complex methodologies and educated judgment. Any estimates
contained in the analyses performed by Merrill Lynch are not necessarily
indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
No public company utilized as a comparison is identical to the Company, and
none of the Comparable Transactions utilized as a comparison is identical to the
proposed Merger. In addition, the multiples of market value to estimated 1998
and projected 1999 EPS for the Alamo Comparable Companies are based on
projections prepared by research analysts using only publicly available
information. Such estimates may or may not prove to be accurate. An analysis of
publicly traded comparable companies and comparable business combinations is not
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the comparable
companies and other factors that could affect the public trading value of the
comparable companies or the company to which they are being compared.
The Board retained Merrill Lynch on the basis of its experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm which, as a part of its investment banking business, regularly is
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Merrill Lynch has, in the past,
provided financing services to an affiliate of Madison Dearborn and may continue
to do so, and has received, and may continue to receive, fees for the rendering
of such services. In addition, in the ordinary course of its business, Merrill
Lynch may actively trade the equity securities of the Company for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
Pursuant to the engagement letter, dated as of February 23, 1998, between
the Company and Merrill Lynch, the Company has agreed to pay Merrill Lynch, upon
consummation of the Merger, a fee of $3,000,000. The Company has also agreed to
reimburse Merrill Lynch for the expenses reasonably incurred by it in connection
with its engagement (including reasonable fees and disbursements of legal
counsel) and to indemnify Merrill Lynch and its affiliates from and against
certain liabilities, including liabilities under the federal securities laws,
arising out of its engagement.
EFFECTIVE TIME
The Merger will be effective as of the date and time of filing of a
Certificate of Merger with the Secretary of State of the State of Delaware (the
"Effective Time") in accordance with the Delaware General Corporation Law (the
"DGCL").
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Board, Stockholders should be
aware that certain members of the Board and certain executive officers of the
Company have certain interests in the Merger that are in addition to the
interests of the Stockholders generally and which may present such directors and
officers with potential conflicts of interest in connection with the
transactions. The Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
SEVERANCE AGREEMENTS. The Company has entered into severance agreements
(the "Severance Agreements") with certain of its officers and employees (not
including Mr. Douglass or Oran Logan, president and chief operating officer of
the Company). The Severance Agreements provide for the payment to such
beneficiaries of amounts not to exceed 1.5 times the employee's annual base
salary upon termination. Aggregate payments to be paid under the Severance
Agreements to these persons, if all such persons were terminated after the
Merger, would be approximately $2.23 million.
STOCK OPTION PLANS. Certain of the Company's officers, including Mr.
Douglass, are participants in the Company's stock option plans, including the
1993 Non-Qualified Stock Option Plan and the 1994 Incentive Stock Option Plan
(together, the "Stock Option Plans"). The Stock Option Plans provide for the
issuance of 71,200 shares of Common Stock in the aggregate, at exercise prices
ranging from $11.50 to $18.75. Additionally, pursuant to a Warrant Agreement
dated November 25, 1991, Capital Southwest Venture Corporation has a warrant to
purchase 62,500 shares of Common Stock at an exercise price of $16.00 per share.
Pursuant to the Merger Agreement, at the Effective Time, each then outstanding
warrant to purchase shares of Common Stock and each then outstanding option to
purchase shares of Common Stock granted under any employee stock option or
compensation plan or other arrangement with the Company shall be cancelled and,
in exchange therefor, the holder thereof shall be entitled to receive a cash
payment from the Company in an amount equal to the amount, if any, by which the
Merger Consideration exceeds the per share exercise price of such warrant or
option, multiplied by the number of shares of Common Stock then subject to such
warrant or option.
SHARE OWNERSHIP. As of the Record Date, executive officers and directors of
the Company owned of record or beneficially an aggregate of 1,617,149 shares of
Common Stock, including 96,600 shares subject to options and warrants.
ACCOUNTING TREATMENT
It is anticipated that Woods will account for the Merger as a "purchase," as
such term is used under generally accepted accounting principles, for accounting
and financial reporting purposes. Accordingly, a determination of the fair value
of the Company's assets and liabilities will be made by Woods in order to
allocate the purchase price to the assets acquired and the liabilities assumed.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of certain federal income tax consequences of the
Merger to Stockholders who receive the Merger Consideration. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury Regulations (including Proposed Regulations and Temporary Regulations)
promulgated thereunder, official pronouncements and judicial decisions, all as
in effect on the date hereof and all of which are subject to change, possibly
with retroactive effect. This summary does not purport to discuss all tax
consequences of the Merger to all Stockholders. In particular, the summary does
not discuss the tax consequences of the Merger to any Stockholder that is
subject to special tax rules, such as any Stockholder that is an insurance
company, tax-exempt organization, financial institution, foreign person or
broker dealer or who has acquired his, her or its shares upon the exercise of
options or otherwise as compensation.
The receipt of cash by a Stockholder in exchange for shares of Common Stock
pursuant to the Merger Agreement will be a taxable transaction for federal
income tax purposes and may also be a taxable
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transaction under applicable state, local, foreign or other tax laws. In
general, a Stockholder will recognize a gain or loss equal to the difference, if
any, between the amount of cash received for his, her or its stock in the Merger
(i.e., $18.50 per share) and the Stockholder's adjusted tax basis in such stock.
A Stockholder will recognize such gain or loss as of the Effective Time. In
general, such gain or loss will be a capital gain or loss, provided the Common
Stock is a capital asset in the hands of the holder at the Effective Time, and
will be long-term capital gain or loss if the shares of Common Stock have been
held for more than one year, or short-term capital gain or loss if the shares of
Common Stock have been held for one year or less.
BACKUP WITHHOLDING. The Company or the Paying Agent (as hereinafter defined
under "--Payment for Shares and Surrender of Stock Certificates") will be
required to withhold 31% of the gross proceeds payable to a Stockholder or other
payee pursuant to the Merger Agreement unless the Stockholder or payee provides,
in a properly completed substitute Form W-9 included with the transmittal letter
(see "--Payment for Shares and Surrender of Stock Certificates"), the
Stockholder's taxpayer identification number and certifies under penalties of
perjury that such number is correct and that the Stockholder is not subject to
backup withholding, unless an exemption applies under applicable law and
regulations. Therefore, unless such an exemption exists and is demonstrated in a
manner satisfactory to the Company or the Paying Agent, in accordance with the
instructions that will accompany the substitute Form W-9, each Stockholder
should complete and sign the substitute Form W-9 that will be made available to
the Stockholder with the transmittal letter, so as to provide the information
and certification necessary to avoid backup withholding.
EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR WITH
RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN THE
STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES AND WITH RESPECT TO THE STATE, LOCAL OR
OTHER INCOME TAX CONSEQUENCES OF THE MERGER. FURTHER, ANY STOCKHOLDER WHO IS A
CITIZEN OF A COUNTRY OTHER THAN THE UNITED STATES SHOULD CONSULT THE
STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX TREATMENT IN SUCH COUNTRY
OF THE MERGER AND WITH RESPECT TO THE QUESTION OF WHETHER THE TAX CONSEQUENCES
DESCRIBED ABOVE MAY BE ALTERED BY REASON OF THE PROVISIONS OF THE UNITED STATES
INTERNAL REVENUE CODE APPLICABLE TO FOREIGN PERSONS OR THE PROVISIONS OF ANY TAX
TREATY APPLICABLE TO THE STOCKHOLDER.
REGULATORY APPROVALS
Transactions such as those contemplated by the Merger Agreement are reviewed
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), by the Antitrust Division of the United States Department of Justice
(the "DOJ") and the Federal Trade Commission (the "FTC") to determine whether
they comply with applicable antitrust laws. Under the provisions of the HSR Act,
the Merger may not be consummated until such time as the applicable waiting
period requirements of the HSR Act have expired or been terminated. Each of the
Company and WEC filed notification reports with the DOJ and the FTC under the
HSR Act on September 28, 1998 and expect the waiting period to expire at
midnight on October 28, 1998 if a second request for information is not made by
the FTC.
At any time before or after the Effective Time, the DOJ, the FTC or a
private person or entity could seek, under applicable federal or state antitrust
laws, among other things, to enjoin the Merger or to cause the divestiture of
certain assets of the Company or WEC. There is no assurance that a challenge to
the Merger will not be made or that, if such a challenge is made, the Company
and WEC will prevail.
Except for approvals described in this Proxy Statement, neither the Company
nor WEC is aware of any other significant government or regulatory approvals
required as a condition to the consummation of the transactions contemplated by
the Merger Agreement.
PAYMENT FOR SHARES AND SURRENDER OF STOCK CERTIFICATES
As a result of the Merger, holders of certificates formerly evidencing
shares of Common Stock will cease to have any equity interest in the Company.
Promptly after the Effective Time, the Company will
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furnish each record holder of shares of Common Stock a transmittal letter
containing instructions with respect to the surrender of certificates previously
representing shares of Common Stock. The transmittal letter will set forth the
procedure for surrendering such certificates for exchange to ChaseMellon
Shareholder Services, L.L.C., as the paying agent (the "Paying Agent"). After
the Effective Time and until surrendered, each stock certificate which
represented shares of Common Stock (other than shares held by the Company, WEC
or their respective wholly-owned subsidiaries and Stockholders who perfect their
statutory appraisal rights under the DGCL) will evidence only the right to
receive the Merger Consideration for each share of Common Stock represented by
such certificate. In order to receive the Merger Consideration, each former
Stockholder will be required, following the Effective Time, to surrender such
Stockholder's stock certificate(s), together with a duly executed and properly
completed transmittal letter (and any other required documents), to the Paying
Agent. Thereafter, the Stockholder will receive as promptly as practicable in
exchange therefor cash in an amount equal to the product of the number of shares
of Common Stock formerly represented by such Stockholder's certificate(s) and
$18.50. No interest will be paid on the cash payable upon the surrender of such
certificate(s).
After the Effective Time, there will be no transfer of shares of Common
Stock on the stock transfer books of the Company. After the Effective Time,
certificates theretofor representing shares of Common Stock presented for any
reason will be cancelled and exchanged for the Merger Consideration pursuant to
the terms of the Merger Agreement.
No transfer taxes will be payable in connection with any such payment for
shares of Common Stock, except that if the check for such payment is to be
delivered to a person other than the person in whose name the certificates
surrendered are registered, the amount of any transfer taxes shall be deducted
from such payment unless such person can establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Paying Agent nor the Company will
be liable to any holder of stock certificates for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Except as otherwise indicated in the immediately preceding paragraph, the
Company will pay all charges and expenses, including those of the Paying Agent,
in connection with the exchange of stock certificates for the Merger
Consideration.
CERTAIN EFFECTS OF THE MERGER
Following the Merger, Woods, through its wholly owned subsidiary WEC, will
own 100% of the Surviving Corporation's outstanding capital stock and those
Stockholders who held shares of Common Stock prior to the Merger (the "Existing
Stockholders") will cease to have any ownership interests in the Company or
rights as Stockholders. The Existing Stockholders will no longer benefit from
any increases in the value of the Company or any payment of dividends on the
Common Stock and will no longer bear the risk of any decreases in value of the
Company.
As a result of the Merger, the Common Stock will cease to be traded on the
NYSE and the Company will no longer be required to file periodic reports with
the Securities and Exchange Commission (the "SEC").
APPRAISAL RIGHTS
Holders of record of Common Stock who properly demand appraisal of their
shares and who otherwise comply with the applicable statutory procedures
summarized herein will be entitled to appraisal rights under Section 262 of the
DGCL in connection with the Merger. The following discussion is not a complete
statement of the law pertaining to appraisal rights under the DGCL and is
qualified in its entirety by reference to the full text of Section 262 which is
reprinted in its entirety as Appendix C to this Proxy Statement.
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger will be entitled to have their shares of Common Stock appraised by the
Delaware Court of Chancery (the "Court") and to receive payment in cash of the
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"fair value" of such shares, EXCLUSIVE OF ANY ELEMENT OF VALUE ARISING FROM THE
ACCOMPLISHMENT OR EXPECTATION OF THE MERGER, together with a fair rate of
interest, as determined by the Court. A person having a beneficial interest in
shares of Common Stock held of the record in the name of another person, such as
a broker or nominee, must act promptly to cause the record holder to properly
follow the steps summarized below and to perfect their appraisal rights in a
timely manner.
Under Section 262, where a merger agreement is submitted for adoption at a
meeting of stockholders, as in the case of the Special Meeting, not less than 20
days prior to such meeting, the company must notify each of the holders of
shares of capital stock at the close of business on the record date for such
meeting that such appraisal rights are available and include in each such notice
a copy of Section 262. This Proxy Statement constitutes such notice and the
applicable statutory provision of the DGCL is attached to this Proxy Statement
as Appendix C. Any Stockholder who wishes to exercise appraisal rights should
review the following discussion and Appendix C carefully because the failure to
timely and properly comply with the procedures specified in Section 262 will
result in the loss of appraisal rights under the DGCL.
A Stockholder wishing to exercise appraisal rights must deliver to the
Company, before the taking of the vote on the adoption of the Merger Agreement
at the Special Meeting, a written demand for appraisal of such holder's shares
of Common Stock and such shares must not be voted in favor of adoption of the
Merger Agreement. A holder of shares wishing to exercise such holder's appraisal
rights must be the record holder of the shares on the date the written demand
for appraisal is made and must continue to hold the shares of record through the
Effective Time Date. Accordingly, a holder of shares who is the record holder of
shares on the date the written demand for appraisal is made, but who thereafter
transfers such shares prior to the consummation of the Merger, will lose any
right to appraisal in respect of such shares. A holder of shares who votes
against adoption of the Merger Agreement will not be deemed to have satisfied
the notice requirement with respect to appraisal rights merely by so voting. A
written demand for appraisal must be made which is in addition to and separate
from any proxy or vote abstaining from or against adoption of the Merger
Agreement.
Only a holder of record shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal must be made in writing and executed by or on
behalf of the holder of record, fully and correctly, as the holder's name
appears on the stock certificates.
If shares of Common Stock are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of the demand for appraisal
should be made in that capacity, and if the shares of Common Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all joint owners. An authorized
agent, including one for two or more joint owners, may execute the demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for such owner or owners. A record holder
such as a broker who holds shares of Common Stock as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares of
Common Stock held for one or more beneficial owners while not exercising such
rights with respect to the shares of Common Stock held for other beneficial
owners; in such case, the written demand should set forth the number of shares
of Common Stock for which appraisal is sought and the number of shares of Common
Stock held in the name of the record owner. When no number of shares is
expressly mentioned, the demand will be presumed to cover all shares held in the
name of the record owner. Stockholders who hold their shares of Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such nominee. All written
demands for appraisal of shares of Common Stock should be delivered to Alamo
Group Inc., 1502 E. Walnut, Seguin, TX 78155, Attention: Secretary, and must be
received before the taking of the vote on the adoption of the Merger Agreement
at the Special Meeting.
Within 10 days after the Effective Time, the Company, as the Surviving
Corporation, must send a notice as to the effectiveness of the Merger to each
person who has satisfied the appropriate provisions of
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Section 262. Within 120 days after the Effective Time, but not thereafter, the
Surviving Corporation or any Stockholder who has satisfied the foregoing
conditions and is otherwise entitled to appraisal rights under Section 262, may
file a petition in the Court demanding a determination of the fair value of the
shares of Common Stock held by all such Stockholders. If no such petition is
filed, appraisal rights will be lost for all Stockholders who had previously
demanded appraisal of their shares of Common Stock. Stockholders seeking to
exercise appraisal rights should assume that the Surviving Corporation will not
file a petition with respect to the appraisal of the value of shares of Common
Stock and that the Surviving Corporation will not initiate any negotiations with
respect to the "fair value" of shares of Common Stock. Accordingly, Stockholders
who wish to exercise their appraisal rights should regard it as their obligation
to take all steps necessary to perfect their appraisal rights in the manner
prescribed in Section 262.
Within 120 days after the Effective Time, any Stockholder who has complied
with the provisions of Section 262 will be entitled, upon written request, to
receive from the Surviving Corporation a statement setting forth the aggregate
number of shares of Common Stock not voted in favor of adoption of the Merger
Agreement and with respect to which demands for appraisal were received by the
Company, and the number of holders of such shares of Common Stock. Such
statement must be mailed within ten days after the written request therefor has
been received by the Surviving Corporation or within ten days after expiration
of the time for delivery of demands for appraisal under Section 262, whichever
is later.
If a petition for appraisal is timely filed, after a hearing on such
petition, the Court will determine the holders of shares of Common Stock
entitled to appraisal rights and will appraise the "fair value" of the shares of
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value of such shares.
Stockholders considering seeking appraisal should be aware that the fair value
of their shares of Common Stock as determined under Section 262 could be more
than, the same as or less than the value of the Merger Consideration that they
would otherwise receive if they did not seek appraisal of their shares of Common
Stock and that investment banking opinions as to fairness from a financial point
of view are not necessarily opinions as to fair value under Section 262. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community are
otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of Common Stock have been appraised. The costs of the action may be
determined by the Court and charged against the parties as the Court deems
equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including without limitation, reasonable attorneys' fees and the fees
and expenses of experts utilized in the appraisal proceeding, be charged pro
rata against the value of all of the shares entitled to appraisal.
Any Stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote his or her
shares of Common Stock for any purpose nor, after the Effective Time, be
entitled to the payment of dividends or other distributions thereon.
If no petition for an appraisal is filed within the time provided, or if a
Stockholder delivers to the Surviving Corporation a written withdrawal of his or
her demand for an appraisal and an acceptance of the Merger, within 60 days
after the Effective Time or with the written approval of the Surviving
Corporation thereafter, then the right of such Stockholder to an appraisal will
cease and such Stockholder shall be entitled to receive the Merger
Consideration, without interest, as if he or she had not demanded appraisal of
his or her shares of Common Stock. However, no appraisal proceeding pending in
the Court will be dismissed as to any Stockholder without the approval of the
Court, which approval may be conditioned on such terms as the Court deems just.
STOCKHOLDERS DESIRING TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD STRICTLY
COMPLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL. FAILURE TO
FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL
RIGHTS UNDER SECTION 262 OF THE DGCL.
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THE MERGER AGREEMENT
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE MERGER
AGREEMENT, WHICH DESCRIBES ALL MATERIAL TERMS AND PROVISIONS THEREOF, IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OTHER INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT INCLUDING THE APPENDICES HERETO AND THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT
(EXCLUDING THE SCHEDULES THERETO) IS SET FORTH IN APPENDIX A TO THIS PROXY
STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE AND REFERENCE IS MADE THERETO
FOR A COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER.
GENERAL
The Merger Agreement provides that, following approval by Stockholders and
the satisfaction or waiver of the other conditions to the Merger, the Merger
will be effected by the merger of AGI, a newly formed subsidiary of WEC, with
and into the Company, in which the Company will be the surviving corporation and
will be wholly owned by WEC.
At the Effective Time, each share of Common Stock (other than shares of
Common Stock held by the Company, WEC or their respective wholly-owned
subsidiaries or any Stockholders who perfect their statutory appraisal rights
under the DGCL) will by virtue of the Merger, and without any action on the part
of the holder thereof, be converted solely into the right to receive $18.50 in
cash without interest.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes representations and warranties by the Company
regarding the following: (i) the authorization, execution and delivery of the
Merger Agreement; (ii) the validity, enforceability and binding nature of the
Merger Agreement; (iii) the noncontravention (except as specified) of any
charter or by-law of the Company or any of its Subsidiaries, of any contract,
commitment, agreement or arrangement, of any judgment, order, decree, law or
statute by reason of the execution and delivery of the Merger Agreement or
consummation of the Merger by the Company; (iv) the absence of the need (except
as specified) for any consents, approvals, permits or authorizations to be
obtained by the Company to consummate the Merger; (v) the organization, valid
existence and good standing of the Company and its Subsidiaries; (vi) the
ownership of the capital stock of the Subsidiaries; (vii) the capital stock of
the Company; (viii) compliance with SEC reporting requirements and the accuracy
of information contained in such reports; (ix) the absence of undisclosed
liabilities; (x) the absence of certain changes or events which, individually or
in the aggregate would personally be expected to have a material adverse effect
on the business, assets, financial condition, value, prospects or results of
operations of the Company or its subsidiaries taken as a whole (a "Material
Adverse Effect"); (xi) pending or threatened litigation; (xii) payment of taxes
and other tax matters; (xiii) employee benefit matters; (xiv) employee
relations; (xv) certain contracts and commitments; (xvi) environmental matters,
(xvii) compliance with laws; (xviii) the inapplicability of certain
"anti-takeover" statutes; (xix) the required vote of the Stockholders necessary
to adopt the Merger Agreement; (xx) the receipt by the Company of the opinion of
Merrill Lynch; (xxi) broker's and finder's fees owing in connection with the
Merger; (xxii) ownership of personal property; (xxiii) product warranty; (xiv)
insurance; (xxv) suppliers and dealers; (xxvi) leased and owned property;
(xxvii) intellectual property; (xxvii) transactions between the Company and
certain affiliated parties; (xxix) the absence of unlawful political
contributions; and (xxx) the accuracy of certain information set forth in this
Proxy Statement.
The Merger Agreement includes representations and warranties by WEC and AGI
regarding the following: (i) the validity, enforceability and binding nature of
the Merger Agreement; (ii) the organization, valid existence and good standing
of WEC and AGI; (iii) the noncontravention (except as specified) of any charter
or by-law of WEC or AGI, or any contract, commitment, agreement or arrangement,
of any judgment, order, decree, law or statute by reason of the execution and
delivery of the Merger Agreement or consummation of the Merger by WEC or AGI;
(iv) the absence of the need (except as specified) for any
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consents, approvals, permits or authorizations to be obtained by WEC or AGI to
consummate the Merger; (v) the accuracy of certain information to be supplied in
connection with the preparation of this Proxy Statement; (vi) the delivery of
letters relating to the financing of the transactions contemplated by the Merger
Agreement; (vii) the solvency of the Surviving Corporation; (viii) broker's and
finder's fees owing in connection with the Merger; (ix) the status of AGI; and
(x) the lack of ownership by WEC and AGI of any shares of Common Stock.
CONDUCT OF BUSINESS PENDING THE CLOSING
The Company has agreed that, prior to the closing of the Merger (the
"Closing"), the Company and its Subsidiaries shall conduct their respective
businesses in the ordinary course in substantially the same manner as conducted
prior to the execution of the Merger Agreement; (ii) make all reasonable best
efforts consistent with past practices to preserve their relationships with
customers, suppliers and others with whom such entity deals; (iii) perform and
maintain all their respective physical properties in good repair and operating
condition, subject only to ordinary wear and tear, in each case in accordance
with past practices; and (iv) continue capital expenditure programs as disclosed
to WEC in all material respects. The Company has further agreed that, prior to
the Closing, except as consented to by WEC in writing (which consent shall not
be unreasonably withheld) or as expressly provided for in the Merger Agreement,
neither the Company or any of its Subsidiaries shall:
(i) amend their certificate of incorporation or by-laws or similar
documents;
(ii) declare or pay any dividend or make any other distribution to their
Stockholders whether or not upon or in respect of any shares of their
capital stock other than regular quarterly dividends not to exceed
$0.11 per share of common stock for any quarter;
(iii) redeem or otherwise acquire any shares of their capital stock or issue
any capital stock or any option, warrant or right relating thereto or
any securities convertible into or exchangeable for any shares of
capital stock;
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets that
are material, individually or in the aggregate, to the Company and its
Subsidiaries taken as a whole;
(v) sell, lease or otherwise dispose of any of their material assets, except
in the ordinary course of business or as contemplated by the capital
expenditure programs referred to in the Merger Agreement;
(vi) enter into, amend, modify or supplement in a manner materially adverse
to the Company, any agreement, contract or other arrangement to which
the Company or its Subsidiaries or any of their properties or assets
are bound which has an aggregate future liability or receivable to any
person in excess of $300,000 or is not terminable by the Company or one
of its Subsidiaries, as the case may be, by notice of not more than 60
days for an aggregate cost of less than $100,000;
(vii) incur any obligation to make any payments that become due as a result
of a change in control of the Company or, other than in the ordinary
course of business, incur any indebtedness or other obligations or
liabilities;
(viii) enter into any employment agreements in the United States, enter into
new severance agreements, retention, bonus or similar agreements or
amend any plans or increase the rates of compensation payable or to
become payable to any officer, employee, agent or consultant of the
Company or any of its Subsidiaries, except as required by law or except
in accordance with the Company's or any Subsidiary's existing
compensation policies or the existing terms of contracts entered into
prior to the date of the Merger Agreement;
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(ix) change any accounting or tax principle or practice of the Company,
including but not limited to any change in the nature or method of any
calculation of any reserve of any kind, except as may be required by
generally accepted accounting principles or by law;
(x) accelerate the collection of accounts receivables or delay the payment
of payables or other liabilities as compared to past practice or fail to
maintain inventory in the ordinary course of business consistent with
past practice;
(xi) enter into any amendments, extensions or other modifications with
respect to any leases for real property that would result in the
assumption of any material additional liability, or that would
reasonably be expected to have a Material Adverse Effect;
(xii) effect any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares or any stock dividend
on the Common Stock;
(xiii) make any loans to employees in excess of $1,000 individually and
$50,000 in the aggregate; or
(xiv) agree, whether in writing or otherwise, to do any of the foregoing.
The term "Subsidiary" means each corporation or entity of which a majority
of the voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by the Company.
NO SOLICITATION
The Company has agreed it will not, and will not permit its Subsidiaries or
any of their respective directors, officers, agent or other intermediaries to,
directly or indirectly: (A) solicit, initiate or encourage, directly or
indirectly, any inquiries with respect to, or the making or implementation of
any offer or proposal for, a merger, consolidation, recapitalization,
liquidation or other business combination involving the Company or any of its
Subsidiaries or the acquisition or purchase of 50% or more of any class of
equity securities of the Company or any of its Subsidiaries, or any tender offer
(including self tenders) or exchange offer that if consummated would result in
any person or entity (other than an affiliate of WEC) beneficially owning 50% or
more of any class of equity securities of the Company or any of its
Subsidiaries, or a substantial portion of the assets of the Company or any of
its Subsidiaries, other than the Merger (an "Acquisition Proposal") or (B)
engage in discussions or negotiations (other than to disclose the terms of those
provisions of the Merger Agreement relating to solicitation of other
transactions) with, or disclose any nonpublic information relating to the
Company or its Subsidiaries or afford access to employees, auditors, agents,
properties, books or records of the Company or its Subsidiaries to, any Person
that has made, or has indicated its interest in making, an Acquisition Proposal
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal, provided, however, that, subject to the payment of a fee
of $3,000,000 plus certain specified expenses in the event WEC elects to
terminate the Merger Agreement within three business days following receipt of a
Determination Notice (as hereinafter defined), the Board shall be entitled,
notwithstanding anything to the contrary in the Merger Agreement, to furnish
information to or enter into discussions or negotiations with any person or
entity that makes an unsolicited Acquisition Proposal, commencing three business
days after delivery of a written notice to WEC that it intends to furnish such
information or enter into such discussions or negotiations (a "Determination
Notice") if the Board has determined in good faith by the date on which the
Determination Notice is given (i) after consultation with and based upon the
advice of a nationally recognized investment banking firm, that the Acquisition
Proposal represents a financially superior transaction for Stockholders when
compared to the Merger; (ii) that such Acquisition Proposal is reasonably
capable of being consummated in a timely manner and for which financing is
reasonably likely to be available; (iii) that the approval and adoption of the
Merger Agreement by Stockholders is not likely to be obtained due to such
pending Acquisition Proposal; and (iv) after consultation with outside legal
counsel, that failure to provide such information or enter into such discussions
or negotiations would present a reasonably substantial risk of a breach of the
fiduciary duties of the Board under applicable law; and
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provided further that, subject to the consideration of a Counter Offer
(described below) and upon the payment to WEC of the Termination Fee (described
below) and termination of the Merger Agreement, the Board will be entitled to
cause the Company to enter into any agreements regarding such Acquisition
Proposal (a "Company Acquisition Agreement"). However, nothing contained in such
provision in the Merger Agreement will prohibit the Company or the Board from
taking and publicly disclosing to the Stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") or other applicable law or from making any public disclosure
required under its fiduciary duties.
The Company has agreed to promptly notify WEC if any information is
requested from the Company or any negotiations or discussions are sought to be
initiated with the Company, and will promptly communicate to WEC and AGI the
terms of any Acquisition Proposal or related inquiry and the identity of the
party making such Acquisition Proposal or related inquiry which it may receive
in respect of any such transaction, including, in the case of written proposals
or inquiries, furnishing WEC and AGI with a copy of such written proposal or
inquiry.
The Company has further agreed that, prior to recommending an Acquisition
Proposal or entering into any Company Acquisition Agreement or withdrawing,
amending or modifying its recommendation of the Merger Agreement and the Merger
(it being understood that the Company taking no position or remaining neutral
with respect to a tender or exchange offer from a third party (a "Neutral
Statement"), or making a recommendation in favor of such a tender or exchange
offer, in a filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act will constitute an adverse modification of its approval or
recommendation of the Merger, unless, in the case of a Neutral Statement only,
contemporaneously with the filing of such Neutral Statement the Company publicly
confirms that it continues to recommend approval of the Merger and continues to
actively support the Merger thereafter), the Company will (A) notify WEC in
writing that it intends to approve, recommend or accept such an Acquisition
Proposal or enter into a Company Acquisition Agreement or withdraw, amend or
modify its recommendation of the Merger, and (B) attach the most current version
of any such Acquisition Proposal or Company Acquisition Agreement to such
notice.
The Company has further agreed that WEC will have the opportunity, within
three business days after receipt of the Company's written notification of its
intention to accept such Acquisition Proposal or to enter into such Company
Acquisition Agreement or to withdraw, amend or modify its recommendation of the
Merger, to make an offer relating to the acquisition of the Company (a "Counter
Offer"). Unless the Board determines, in good faith after consultation with its
outside legal counsel and financial advisors, that such Counter Offer is not at
least as favorable to Stockholders, taking into account such factors (including,
without limitation, the consideration (both as to amount and form) offered in,
and the other terms and conditions of, the Counter Offer and such other
Acquisition Proposal or Company Acquisition Agreement) as and to the extent it
deems relevant, the Company will not accept such other Acquisition Proposal or
Company Acquisition Agreement, but will accept the Counter Offer.
The Company has agreed that it will not enter into a Company Acquisition
Agreement until at least the fourth business day after it has provided to WEC
notice of its intention to approve, recommend or accept an Acquisition Proposal
or enter into a Company Acquisition Agreement or withdraw, amend or modify its
recommendation of the Merger and has terminated the Merger Agreement.
CERTAIN OTHER COVENANTS
The Company has agreed as follows: (i) to give WEC and AGI and their
counsel, financial advisors, financing sources and their respective counsel,
auditors and other authorized representatives (collectively, "WEC's and AGI's
Representatives") reasonable access during normal business hours to the offices,
properties, books and records of the Company and its Subsidiaries; (ii) to
furnish to WEC's and AGI's Representatives such financial, legal, technical,
personnel and operating data and other information as
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such persons may reasonably request; (iii) to instruct the Company's employees,
counsel, auditors and financial advisors to cooperate with WEC and AGI in their
preparation of any rating agency presentation materials, private placement
prospectus or offering memorandum, syndication book or similar marketing
materials ("Financing Materials") in connection with a high yield capital
markets transaction to sell securities of WEC (or its subsidiaries) or obtain a
leveraged bank credit facility to finance the Merger Consideration and in their
investigation of the business of the Company and its Subsidiaries, including by
furnishing copies of data or information pertaining to the business of the
Company and its Subsidiaries for purposes of due diligence or for inclusion in
any Financing Materials in connection with a high yield capital markets
transaction to sell securities of WEC (or its subsidiaries) or obtain a
leveraged bank credit facility to finance the Merger Consideration; (iv) to duly
call, give notice of, convene and hold the Special Meeting as promptly as
practicable and to submit the Merger Agreement and such other matters as may in
the reasonable judgment of the Company be appropriate in order to consummate the
transactions contemplated by the Merger Agreement to the Stockholders for
consideration at the Special Meeting; (v) to prepare and file with the SEC this
Proxy Statement; (vi) to cause its officers to confer on a regular basis with
one or more representatives of WEC to report material operational matters and to
report the general status of on-going operations; and (vii) to notify WEC of any
material adverse change in the financial position, earnings or business of the
Company or any of its Subsidiaries prior to the Closing, and any unexpected
emergency or other unanticipated change in the business of the Company or any of
its Subsidiaries and of any governmental complaints, investigations or hearings
or adjudicatory proceedings (or communications indicating that the same are
contemplated) and to keep WEC fully informed of such events.
WEC and AGI have agreed: (i) to abide by the terms of the existing
confidentiality agreement with the Company, except as specified; (ii)
immediately after the Closing, to cause the Company and its Subsidiaries to
continue the employment, on substantially the same terms and conditions, and
with benefits that in the aggregate are at least as valuable, as in effect
immediately prior to the Closing, of all employees of the Company and its
Subsidiaries employed at the Closing Date except that there will not exist a
continuing obligation after the Closing and no contracts of employment will be
deemed to have been created; (iii) to recognize service by the Company's or its
Subsidiaries' employees or former employees or their dependents or
beneficiaries; (iv) that any employment loss within the meaning of the Worker
Adjustment Retraining Notification Act of 1988, as amended (the "WARN Act"),
suffered by any employee of the Company or its Subsidiaries immediately upon or
within 90 days following the Closing Date, will have been caused by WEC's
decision not to continue the employment of such employee, and not by the sale of
the Company and its Subsidiaries; and (v) that WEC will be responsible for
giving any notices required by the WARN Act, that WEC is liable to any employee
who does not receive notice under, and who suffers an employment loss (as
defined in the WARN Act) because of a "plant closing" or "mass layoff," as
defined therein, occurring on or after the Closing.
The Company, WEC and AGI have each agreed: (i) subject to the terms and
conditions of the Merger Agreement, to use its reasonable best efforts
consistent with applicable legal requirements and the terms of the Merger
Agreement to cause the Closing to occur as soon as practicable, including
cooperating in filing any necessary applications, reports or other documents
with, giving any notices to, and seeking any permits, approvals, authorizations
and consents from, all federal, state, local or foreign governments, or any
courts of competent jurisdiction, administrative agencies or commissions or
other governmental authorities or instrumentalities, domestic or foreign, or
other regulatory or self-regulatory bodies or associations (each a "Governmental
Entity") and all third parties as may be required for the purpose of enabling
such party to consummate the transactions contemplated by the Merger Agreement,
and in seeking necessary consultation with and prompt favorable action by any
such governmental entity or third party; (ii) to file as promptly as
practicable, with the FTC and the DOJ the notification and report form, if any,
required for the transactions contemplated by the Merger Agreement and any
supplemental information requested in connection therewith pursuant to the HSR
Act and any such notification and report form and supplemental information will
be in substantial compliance with the requirements of the HSR Act;
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(iii) when reasonably requested by the other, to execute and deliver, or cause
to be executed and delivered, all such documents and instruments and to take, or
cause to be taken, all such further acts or other actions as the other may deem
reasonably necessary or desirable to consummate the transactions contemplated by
the Merger Agreement; and (iv) give written notice upon becoming aware of any
event which would cause or constitute a material breach of any of the
representations, warranties or covenants of such party contained or referred to
in the Merger Agreement or that would cause any of the conditions to such
party's own obligations to close to become incapable of being performed.
CONDITIONS TO CLOSING
The respective obligations of each of the Company and WEC to effect the
Merger are subject to the following conditions: (i) no statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order shall have been enacted, entered,
promulgated, enforced or issued by any Governmental Entity preventing the Merger
or any of the other transactions contemplated by the Merger Agreement; (ii) the
waiting or notice period under the HSR Act or other antitrust or competition
laws, if applicable to the Merger, shall have expired or been terminated; and
(iii) the Merger Agreement shall have been adopted by the Stockholders as
required by the DGCL and the Company's Certificate of Incorporation and By-Laws.
THE COMPANY'S OBLIGATIONS. The obligations of the Company to effect the
Merger are subject to the following additional conditions:
(i) the representations and warranties of WEC and AGI made in the Merger
Agreement qualified as to materiality will be true and correct, and
those not so qualified will be true and correct in all material
respects, as of the date of the Merger Agreement and as of the time of
the Closing as though made as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties qualified as to
materiality will be true and correct, and those not so qualified will be
true and correct in all material respects, on and as of such earlier
date). WEC and AGI each shall have duly performed, complied with and
satisfied in all material respects all covenants, agreements and
conditions required by the Merger Agreement to be performed, complied
with or satisfied by them by the time of the Closing;
(ii) there shall not be pending, threatened or in effect any injunction,
writ, preliminary restraining order or any order of any nature issued
by a court or governmental agency of competent jurisdiction directing
that the transactions contemplated by the Merger Agreement not be
consummated as so provided or any statute, rule or regulation enacted
or promulgated that makes consummation of the transactions contemplated
illegal;
(iii) the Company shall have received an opinion from Houlihan Lokey Howard &
Zukin or such other firm acceptable to the Company to the effect that,
at and immediately after the Effective Time, and after giving effect to
the Merger (and any changes in the Surviving Corporation's assets and
liabilities as a result thereof), (A) on a pro forma basis, the sum of
the Company's debts is less than the fair value of its assets or the
present fair saleable value of its assets will be greater than the
amount required to pay its probable liabilities on its debts as they
mature, (B) the capital remaining in the Company after the transaction
would not be unreasonably small for the business in which the Company
is engaged and (C) the Company would be able to pay its debts as they
mature;
(iv) all consents, authorizations, orders and approvals of (or filings or
registrations with) any Governmental Entity or third parties required
in connection with the execution, delivery and performance of the
Merger Agreement by WEC or AGI shall have been obtained or made, except
for filings to effectuate the Merger and any documents required to be
filed after the Effective Time, and except for such consents,
authorizations, orders and approvals that if not
30
<PAGE>
obtained or made would not materially and adversely effect the ability
of WEC or AGI to consummate the transactions contemplated by the Merger
Agreement; and
(v) WEC will have delivered to the Company a certificate dated as of the
date of the Closing and signed by an officer of WEC and an officer of
AGI confirming the satisfaction of the conditions set forth in clauses
(i) and (iv).
WEC'S AND AGI'S OBLIGATIONS. The obligations of WEC and AGI to effect the
Merger will be subject to the following additional conditions:
(i) the representations and warranties of the Company made in the Merger
Agreement qualified as to materiality will be true and correct, and
those not so qualified will be true and correct in all material
respects, as of the date of the Merger Agreement and as of the time of
the Closing as though made as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties qualified as to
materiality will be true and correct, and those not so qualified will be
true and correct in all material respects, on and as of such earlier
date). The Company shall have duly performed, complied with and
satisfied in all material respects all covenants, agreements and
conditions required by the Merger Agreement to be performed, complied
with or satisfied by the Company by the time of the Closing;
(ii) there shall not be pending, threatened or in effect any injunction,
writ, preliminary restraining order or any order of any nature issued
by a court or governmental agency of competent jurisdiction directing
that the transactions contemplated by the Merger Agreement not be
consummated as so provided or any statute, rule or regulation enacted
or promulgated that makes consummation of the transactions contemplated
by the Merger Agreement illegal;
(iii) there shall be no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company that would
reasonably be expected to have a material adverse effect on the
business, assets, financial condition, value, prospects or results of
operations of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect");
(iv) no more than four percent (4.0%) of the shares of Common Stock
outstanding immediately prior to the Effective Time shall be held by
Stockholders who have not voted for the Merger Agreement and who are
entitled by the DGCL to appraisal rights and who have properly demanded
in writing appraisal for such shares in accordance with Section 262 of
the DGCL;
(v) all consents, authorizations, orders and approvals of (or filings or
registrations with) any federal, state, local or foreign government or
any court of competent jurisdiction, administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
or other regulatory or self-regulatory body or association or third
parties required in connection with the execution, delivery and
performance of the Merger Agreement by the Company shall have been
obtained or made, except for filings to effectuate the Merger and any
other documents required to be filed after the Effective Time, and
except for such consents, authorizations, orders and approvals that, if
not obtained or made, would not in the aggregate have a Material Adverse
Effect;
(vi) there will not exist or be continuing (A) any general suspension of
trading, or limitation on prices for, securities on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market,
(B) the declaration of a banking moratorium or any suspension of
payments in respect of the banks in the United States, (C) the
commencement of a war, armed hostilities or other international or
national calamity or emergency or a material escalation or worsening
thereof directly involving the United States, or (D) any condition or
material adverse change in the financial or capital markets generally
that, based on the written advice of Credit Suisse First Boston
addressed to WEC (a copy of which WEC will promptly provide to the
Company), would
31
<PAGE>
reasonably be expected to materially adversely affect the syndication
of leveraged bank credit facilities or the consummation of high yield
offerings, as the case may be;
(vii) the Company will have received the opinion of Brown & Wood LLP, counsel
to the Company, to the effect that the Company has the corporate power
and authority to execute and deliver the Merger Agreement and to
consummate the Merger, all requisite approvals of the Merger Agreement
by the Company's Stockholders have been obtained and, assuming due
authorization and approval of the Merger Agreement by WEC and AGI, that
upon the filing of a certificate of merger with the Secretary of State
of the State of Delaware, the Merger will be effective; and
(viii) the Company will have delivered to WEC a certificate dated the Closing
Date and signed by an officer of the Company confirming the
satisfaction of the conditions set forth in clauses (i), (iii), (iv)
and (v).
INDEMNIFICATION
WEC and the Company have agreed: (i) that all rights to indemnification and
all limitations on liability existing in favor of any individual who on or prior
to the Effective Time was an officer or director of the Company and any of its
Subsidiaries (an "Indemnitee") as provided in the Company's Certificate of
Incorporation, Company's Bylaws or an agreement between an Indemnitee and the
Company or a Subsidiary of the Company as in effect as of the date hereof will
survive the Merger and continue in full force and effect in respect of acts or
omissions occurring on or prior to the Effective Time; (ii) for a period of six
years after the Effective Time the Surviving Corporation will, to the fullest
extent permitted by law, (A) indemnify and hold harmless the Indemnitees against
all losses, expenses (including, without limitation, attorneys' fees and the
cost of any investigation or preparation incurred in connection thereof),
claims, damages, liabilities, judgments or amounts paid in settlement
(collectively, "Costs") in respect to any threatened, pending or contemplated
claim, action, suit or proceeding, whether criminal, civil, administrative or
investigative, arising out of acts or omissions occurring on or prior to the
Effective Time relating to their acts or omissions as a director or officer of
the Company or any Subsidiary (including, without limitation, in respect of acts
or omissions in connection with the Merger Agreement and the Merger) (an
"Indemnifiable Claim") and (B) advance to such Indemnitees all expenses incurred
in connection with any Indemnifiable Claim; and (iii) for a period of six years
after the Effective Time, the Surviving Corporation will provide officers and
directors liability insurance in respect of acts or omissions occurring prior to
the Effective Time covering each such person currently covered by the Company's
officers' and directors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of the policy in effect on the
date of the Merger Agreement; provided, however, that in no event will Surviving
Corporation be required to expend more than an amount per year equal to 200% of
current annual premiums paid by the Company for such insurance coverage (the
"Maximum Amount") to maintain or procure insurance coverage pursuant hereto;
provided, further, that if the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount, the
Surviving Corporation will maintain or procure, for such six year period, the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Amount.
WEC and the Company have further agreed that the Surviving Corporation shall
advance all Costs to any Indemnitee incurred by enforcing the indemnity or other
obligations provided for in the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Closing Date:
(i) by the mutual written consent of the Company, WEC and AGI;
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<PAGE>
(ii) by either the Company or WEC if the Closing does not occur on or prior
to March 31, 1999 (the "Outside Termination Date") (other than due to
the failure of the party seeking to terminate the Merger Agreement to
perform its obligations required to be performed as a condition to
Closing); provided, however, that in the event all conditions to
closing have been satisfied or waived other than the condition
described in clause (vi) set forth under "--Conditions To
Closing--WEC's and AGI's Obligations" above, the Outside Termination
Date will be deemed to be the later of (A) January 31, 1999 or (B) 60
days after the first day on which all of the conditions other than the
condition described in clause (vi) set forth under "--Conditions To
Closing--WEC's and AGI's Obligations" above, will have been satisfied
or waived, but in no event later than March 31, 1999;
(iii) by either the Company or WEC if any Governmental Entity, will have
issued a judgment, order or decree or taken any other action
permanently enjoining, restraining or otherwise prohibiting any of the
transactions contemplated by the Merger Agreement, and such judgment,
order or decree or other action will have become final and
nonappealable;
(iv) by the Company, if the Board determines to accept an Acquisition
Proposal;
(v) by WEC, if (A) any other entity, person or group consummates a tender
offer pursuant to which such person, entity or group becomes the
beneficial owner of 50% or more of the then outstanding shares of Common
Stock, (B) the Special Meeting has not been convened prior to the day
before the Outside Termination Date and the failure to convene the
Special Meeting was not (x) the fault of WEC or (y) as a result of any
statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Governmental
Entity that has the effect of preventing the Company from calling,
convening or holding the Special Meeting or (C) prior to the vote of
Stockholders, the Board of Directors shall have withdrawn or modified or
amended in any respect adverse to WEC its approval or recommendation of
the Merger (it being understood that the Company making a Neutral
Statement with respect to, or making a recommendation in favor of a
tender or exchange offer from a third party, in a filing made pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act will
constitute an adverse modification of its approval or recommendation of
the Merger, unless, in the case of a Neutral Statement only,
contemporaneously with the filing of such Neutral Statement the Company
publicly confirms that it continues to recommend approval of the Merger
and continues to actively support the Merger thereafter);
(vi) by WEC or the Company, if the Stockholders fail to adopt the Merger
Agreement at the Special Meeting; or
(vii) by WEC, at any time during the three business days immediately
following receipt of a Determination Notice, provided that WEC has
cured by the time of such termination any material breach of its
representations, warranties, covenants or agreements with respect to
which the Company has given written notice to WEC at least five
business days prior to the first date on which a proposal or inquiry is
first submitted to the Company, any of its Subsidiaries or any of their
respective directors, officers or employees with respect to a potential
Acquisition Proposal.
TERMINATION FEES
The Company has agreed to pay WEC a break-up fee (a "Termination Fee") as
follows: (A) $10 million in the case of termination pursuant to clauses (iv),
(v)(A) or (v)(C) set forth under "--Termination" above; (B) $5 million in the
case of termination pursuant to clauses (v)(B) or (vi) set forth under
"--Termination" above (provided, that in the case of termination pursuant to
clause (vi) set forth under "--Termination" above, at the time of the Special
Meeting an Acquisition Proposal shall have been publicly announced and not
withdrawn, terminated or lapsed); and (C) $3 million in the case of
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<PAGE>
termination pursuant to clause (vii) set forth under "--Termination" above, and
if within twelve (12) months after termination pursuant to clause (vii) set
forth under "--Termination" above the Company enters into any written Company
Acquisition Agreement (whether or not such Company Acquisition Agreement is
related to the Acquisition Proposal which had been received at the time of the
termination of the Merger Agreement) or any third party (other than an affiliate
of WEC) acquires 50% or more of the then outstanding shares of Common Stock,
then the Company will immediately prior to entering into such Company
Acquisition Agreement pay WEC $7,000,000. In addition to any Termination Fee,
the Company will pay WEC for any documented out-of-pocket expenses incurred by
WEC relating to comfort letter, real property, surveys and title policies
obtained by the Company at the request of WEC.
OPTION AGREEMENTS
As an inducement and condition to the willingness of WEC to enter into the
Merger Agreement, the Option Stockholders entered into the Option Agreements
with respect to shares owned by them that collectively represent approximately
39.5% of the outstanding shares of common stock.
Each Option Stockholder has agreed, at any meeting of Stockholders called
during the term of the Option Agreements, to be present, to appear at such
meeting or otherwise cause such Option Stockholder's shares (the "Option
Shares") of Common Stock to be counted as present for purposes of establishing a
quorum and to vote such shares (i) in favor of the Merger, (ii) against any
proposal or agreement that would impede, interfere with or prevent the Merger,
including any other extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company and a third party or any
other proposal of a third party to acquire the Company and (iii) if requested by
WEC, in favor of any resolution the purpose of which is to cause the Merger, the
Merger Agreement and the transactions contemplated thereby to be consummated and
which does not relate to the election of directors.
Additionally, each Option Stockholder has irrevocably granted to, and
appointed, WEC and any nominee thereof, its proxy to vote the Option Shares at
any meeting of Stockholders (i) in favor of the Merger and (ii) against any
proposal or agreement that would impede, interfere with or prevent the Merger,
including any other extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company and a third party or any
other proposal of a third party to acquire the Company.
Pursuant to each Option Agreement, each of the Option Stockholders granted
to WEC an irrevocable option to purchase all of the Option Shares covered by
such Option Agreement, at the price of $18.50 per share, upon the occurrence of
any of the following conditions:
(i) the Company (or the Board or any committee thereof) recommends,
approves, authorizes, proposes or files a Schedule 14D-9 not opposing,
or publicly announces its intention to enter into, any Acquisition
Transaction (other than with WEC, AGI or any of their affiliates), or
resolves to do any of the foregoing;
(ii) the Board or any committee thereof withdraws, modifies or amends in any
manner adverse to WEC or AGI its authorization, approval or
recommendation to the Stockholders with respect to the Merger or the
Merger Agreement, or resolves to do any of the foregoing;
(iii) any person, entity or "group" (as that term is used in Section 13(d) of
the Exchange Act) (other than the Option Stockholders and their
respective affiliates and other than WEC, AGI or any of their
affiliates and other than persons, entities or groups that are
permitted to report their ownership of shares of Common Stock with the
SEC on Schedule 13G) becomes the beneficial owner (as defined in Rule
13d-3 promulgated under the Exchange Act) of 15% or more of the then
outstanding Common Stock;
(iv) any person, other than WEC, AGI or any of its affiliates, commences or
announces an intention to commence a bona fide tender offer or exchange
offer for any shares of Common Stock, the
34
<PAGE>
consummation of which would result in "beneficial ownership" (as
defined in the Exchange Act) by such third party (together with all
such third party's affiliates and "associates" (as defined in the
Exchange Act)) of 15% or more of the then outstanding voting equity of
the Company (either on a primary or a fully diluted basis); or
(v) the Merger Agreement is terminated by the Company in connection with the
determination of the Board to accept an Acquisition Proposal.
Furthermore, each Option Stockholder has agreed (subject, in the case of Mr.
Douglass, to certain limited exceptions), not to (a) offer to sell, pledge or
otherwise dispose of or transfer any interest in or encumber with any lien any
of the Option Shares; (b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Option Shares or
any interest therein; (c) grant any proxy, power-of-attorney or other
authorization or consent with respect to the Option Shares (it being understood
that, upon termination of the Merger Agreement, each Option Stockholder may
grant a proxy with respect to the Option Shares if such proxy is, by its terms,
immediately revocable upon the Closing); (d) deposit the Option Shares into a
voting trust or enter into a voting agreement or arrangement with respect to the
Option Shares; or (e) take any other action with respect to the Option Shares
that would in any way restrict, limit or interfere with the performance of its
obligations under the Option Agreements.
Pursuant to the terms of the Option Agreements, each Option Stockholder has
agreed, in its capacity as a Stockholder (i) that neither such Option
Stockholder nor its affiliates, representative or agents will (and if the Option
Stockholder is a corporation, partnership, trust or other entity, such Option
Stockholder will cause its officers, directors, partners, and employees,
representatives and agents, including but not limited to investment bankers,
attorneys and accountants, not to) directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with or provide any
information to, any corporation, partnership, person or entity or group (other
than WEC, AGI or any of their respective affiliates or representatives)
concerning any Acquisition Proposal, (ii) to cease immediately any existing
activities discussions or negotiations with any parties conducted prior to the
execution of the Option Agreements with respect to any Acquisition Proposal, and
(iii) to communicate promptly to WEC, to the same extent as is required by the
Company pursuant to Section 4(c) of the Merger Agreement, the terms, and other
information concerning any proposal, discussion, negotiation, of inquiry and the
identity of the party making such proposal or inquiry which the Option
Stockholder may receive in respect of any such Acquisition Proposal.
Each Option Agreement will terminate upon the earlier of (a) the termination
of the Merger Agreement, (b) the purchase of all the Option Shares covered by
such Option Agreement pursuant to the terms of the Option Agreements, (c) the
first anniversary of the execution of the Option Agreements or (d) the Effective
Time. However, the option to purchase the Option Shares and the prohibition on
granting any proxy with respect to the Option Shares will not terminate upon
termination of the Merger Agreement but will survive for sixty days thereafter
if the Merger Agreement is terminated due to the occurrence of the following
conditions:
(i) if the Board determines its fiduciary obligations require it to accept
an acquisition offer from a third party; or
(ii) if any third party makes a tender offer for, and as a result becomes
the owner, of 50% or more of the outstanding shares of Common Stock; or
(iii) if the Special Meeting is not convened prior to March 31, 1999 and the
failure to convene the Special Meeting was not the fault of WEC or the
result of any law or court order that prevented the Company from
convening the Special Meeting; or
(iv) if, prior to the Special Meeting, the Alamo Board of Directors
withdraws or modifies or amends in a manner adverse to WEC its approval
or recommendation of the merger; or
(v) the Stockholders fail to adopt the Merger Agreement at the Special
Meeting and at the time of the Special Meeting an Acquisition Proposal
shall have been publicly announced and not withdrawn, terminated or
lapsed.
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<PAGE>
HISTORICAL MARKET PRICE AND DIVIDEND DATA
Shares of Common Stock are listed for trading on the NYSE under the symbol
"ALG." The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the Common Stock as quoted on the NYSE. As
of the Record Date, the Company had 211 holders of record of Common Stock. The
closing market price for Common Stock on August 17, 1998, the last trading day
prior to the announcement of the proposed Merger, was $16.00. On October 20,
1998, the latest practicable trading day prior to the date of this Proxy
Statement, the closing market price for the Common Stock was $13 1/8. At the
Effective Time, shares of Common Stock will cease to be traded on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter............................................................................... $18 1/2 $15 7/8
Second Quarter.............................................................................. 19 7/8 17 3/8
Third Quarter............................................................................... 18 1/4 13 3/4
Fourth Quarter.............................................................................. 17 1/2 14 3/8
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................................................... $18 $15 3/8
Second Quarter.............................................................................. 20 7/8 13 1/2
Third Quarter............................................................................... 23 3/4 18 11/16
Fourth Quarter.............................................................................. 23 1/4 19 5/8
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................................................... $21 7/8 $15 3/8
Second Quarter.............................................................................. 19 14 1/2
Third Quarter............................................................................... 19 3/4 13 1/2
Fourth Quarter (through October 20, 1998)................................................... 13 15/16 10 5/8
</TABLE>
DIVIDENDS
The Company has paid cash dividends on the outstanding Common Stock since
its initial public offering of such stock in March 1993. Dividends are paid
quarterly. The following table sets forth dividends in respect of the Common
Stock paid in each of the last two years and to date in the current year.
<TABLE>
<CAPTION>
DOLLARS PER SHARE
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1996................................................................. $ .10 $ .10 $ .10 $ .10
1997................................................................. .10 .10 .10 .10
1998................................................................. .10 .11 .11 .11(1)
</TABLE>
- ------------------------
(1) Payable November 3, 1998
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Listed in the following table are the only beneficial owners that the
Company is aware of as of August 31, 1998, unless otherwise noted below, of more
than five percent of the Company's outstanding Common Stock. In addition, this
table includes the outstanding voting securities beneficially owned by directors
and executive officers of the Company and the number of shares owned by
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF COMMON STOCK
BENEFICIAL OWNER OF COMMON STOCK OWNERSHIP(1) OUTSTANDING(2)
- ---------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
WEC Company..................................................... 3,847,395(3) 39.5%
Capital Southwest Venture Corporation........................... 2,722,500(4) 27.7%
Donald J. Douglass.............................................. 1,282,640(5) 13.0%
T. Rowe Price Associates, Inc................................... 752,400(6) 7.7%
Tweedy, Browne Company LLC...................................... 574,770(7) 5.8%
Oran F. Logan................................................... 262,329 2.7%
Joseph C. Graf.................................................. 100 *
O.S. Simpson, Jr................................................ 25,280(8) *
William R. Thomas............................................... --(9) *
James B. Skaggs................................................. 100 *
David H. Morris................................................. -- *
Jim A. Smith.................................................... 12,000(10) *
Robert H. George................................................ 14,250(11) *
Geoffrey Davies................................................. 750 *
Ian Burden...................................................... 6,400(12) *
John C. Moon.................................................... 9,100
All directors and executive officers as a group (14 persons).... 1,617,149 16.4%
</TABLE>
- ------------------------
* less than 1% of common stock outstanding
(1) In each case the beneficial owner has sole voting and investment power,
except as otherwise noted herein.
(2) The calculation of percent of Common Stock outstanding is based on the
number of shares of Common Stock outstanding as of August 31, 1998:
9,735,759 shares, plus 34,100 shares subject to options exercisable within
60 days, plus 62,500 shares subject to exercisable warrants.
(3) Based on a Schedule 13D dated August 18, 1998 relating to the shares of
Common Stock that are the subject of the Option Agreements in which Madison
Dearborn, Madison Dearborn Partners II L.P., Madison Dearborn Partners,
Inc., AGI, WEC and Woods reported that each had sole voting power over none
of such shares, shared voting power over all of such shares, sole
dispositive power over none of such shares and shared dispositive power over
all of such shares. Madison Dearborn, Madison Dearborn Partners II, L.P.,
Madison Dearborn Partners, Inc., AGI, WEC and Woods each disclaim beneficial
ownership of all such shares.
(4) Includes warrants held by Capital Southwest Corporation, the parent
corporation of Capital Southwest Venture Corporation, to purchase 62,500
shares of Common Stock at $16.00 per share that are presently exercisable
and will expire on January 3, 2000. Mr. Thomas, a director of the Company,
serves as Chairman of the Board and President of both Capital Southwest
Venture Corporation and Capital Southwest Corporation and shares voting and
investment power with respect to the shares of Common Stock owned by Capital
Southwest Venture Corporation. Mr. Thomas, personally, disclaims beneficial
ownership of these shares. Capital Southwest Venture Corporation has entered
into an Option Agreement. See "OPTION AGREEMENTS." Pursuant to such Option
Agreement, Capital
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<PAGE>
Southwest Venture Corporation has agreed to vote, and has granted to WEC an
irrevocable proxy to vote, such shares of Common Stock in favor of adoption
of the Merger Agreement at any meeting of Stockholders during the term of
such Option Agreement.
(5) Includes 20,000 shares subject to options exercisable within 60 days.
Includes 65,145 shares owned by The Douglass Foundation, a non-profit
organization of which Mr. Douglass is the President; 89,420 shares in the
Douglass Charitable Remainder Unitrust, of which Mr. Douglass is trustee;
63,100 shares owned by Helen D. Douglass, Mr. Douglass' wife. Approximately
350,000 shares, which are not included in the table, are held by various
other members of Mr. Douglass' family and Mr. Douglass disclaims beneficial
ownership of these shares. Mr. Douglass, Mrs. Douglass and the Douglass
Charitable Remainder Unitrust each have entered into Option Agreements. See
"OPTION AGREEMENTS". Pursuant to such Option Agreements, Mr. Douglass, Mrs.
Douglass and The Douglass Charitable Remainder Unitrust have each agreed to
vote, and have granted to WEC an irrevocable proxy to vote, their respective
shares of Common Stock in favor of adoption of the Merger Agreement at any
special meeting of Stockholders during the term of such Option Agreements.
(6) Based on a Schedule 13G dated February 12, 1998, in which T. Rowe Price
Associates, Inc. reported that as of December 31, 1997, it or T. Rowe Price
Small Cap Value Fund, Inc. had shared voting power over none of such shares,
sole voting power over 752,400 of such shares, and sole dispositive power
over 823,900 of such shares. T. Rowe Price Associates, Inc. and T. Rowe
Price Small Cap Value Fund, Inc. disclaim beneficial ownership of all such
shares.
(7) Based on a Schedule 13D dated August 5, 1998 in which (i) Tweedy, Browne
Company LLC reported that it had shared voting power over none of such
shares, sole voting power over 545,880 of such shares, and sole dispositive
power over 550,870 of such shares, (ii) TBK Partners, L.P. reported that it
had shared voting power over none of such shares, sole voting power over
7,500 of such shares, and dispositive power over 7,500 of such shares, and
(iii) Vanderbilt Partners, L.P. reported that it had shared voting power
over none of such shares, sole voting power over 16,400 of such shares and
sole dispositive power over 16,400 of such shares.
(8) Excludes 13,916 shares owned by Mr. Simpson's wife. Mr. Simpson disclaims
beneficial ownership of these shares.
(9) See footnote 4, above.
(10) Includes 6,000 shares subject to options exercisable within 60 days.
(11) Includes 1,800 shares subject to options exercisable within 60 days.
(12) Includes 4,800 shares subject to options exercisable within 60 days.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that the Company files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our
public filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Web site maintained by the SEC
at "HTTP://WWW.SEC.GOV." Reports, proxy statements and other information
concerning us also may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Proxy Statement, except
for any information superseded by information contained directly in this Proxy
Statement. This Proxy Statement incorporates by reference the documents set
forth below that we have previously filed with the SEC. These documents contain
important information about the Company and its financial condition.
<TABLE>
<CAPTION>
ALAMO GROUP INC. SEC FILINGS (FILE NO. 0-21220) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Proxy Statement on Schedule 14A for 1998 Annual Meeting Filed April 2, 1998
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarter ended March 31, 1998, Quarter Ended June 30,
1998
Current Reports on Form 8-K Filed August 20, 1998
</TABLE>
We incorporate by reference additional documents that we may file with the
SEC between the date of this Proxy Statement and the date of the Special
Meeting. These include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any
proxy statements.
Documents incorporated by reference can be obtained from us or the SEC or
the SEC's Internet World Wide Web site described above. Documents incorporated
by reference are available from the Company without charge, excluding all
exhibits unless specifically incorporated by reference as an exhibit to this
Proxy Statement.
You should rely only on the information contained or incorporated by
reference in this Proxy Statement to vote your shares at the Special Meeting. We
have not authorized anyone to provide you with information that is different
from what is contained or incorporated by reference in this Proxy Statement.
This Proxy Statement is dated October 21, 1998. You should not assume that the
information contained in the Proxy Statement is accurate as of any date other
than that date and the mailing of this Proxy Statement to Stockholders shall not
create any implication to the contrary.
INDEPENDENT AUDITORS
Ernst & Young LLP serves as the Company's independent auditors. A
representative of Ernst & Young LLP will be at the Special Meeting to answer
questions, as appropriate, by Stockholders and will have the opportunity to make
a statement if so desired.
39
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matter to be acted upon at the
Special Meeting. However, if any other matters are properly brought before the
Special Meeting, the persons named in the accompanying form of proxy will vote
thereon in accordance with their best judgment, unless such authority is
withheld.
BY ORDER OF THE BOARD OF DIRECTORS
ALAMO GROUP INC.
Seguin, Texas
October 21, 1998
40
<PAGE>
APPENDIX A
THE MERGER AGREEMENT
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
ALAMO GROUP INC.,
WEC COMPANY
and
AGI ACQUISITION CORP.
------------------------
Dated as of September 4, 1998
------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I. Merger................................................................................ A-1
Section 1(a) The Merger............................................................................ A-1
(b) Effective Time........................................................................ A-1
(c) Effects of the Merger................................................................. A-1
(d) Certificate of Incorporation and By-Laws.............................................. A-1
(e) Directors and Officers................................................................ A-1
(f) Conversion of Shares.................................................................. A-2
(g) Conversion of Acquisition Common Stock................................................ A-2
(h) Warrants and Employee Stock Options................................................... A-2
(i) Dissenting Shares..................................................................... A-2
(j) Payment for Shares.................................................................... A-2
(k) Stock Transfer Books.................................................................. A-3
(l) Closing............................................................................... A-3
ARTICLE II. Representations and Warranties of the Company......................................... A-4
Section 2(a) Authority............................................................................. A-4
(b) No Conflicts; Consents................................................................ A-4
(c) Organization and Standing............................................................. A-4
(d) Capital Stock of the Company.......................................................... A-5
(e) SEC Reports and Financial Statements.................................................. A-5
(f) Absence of Certain Changes or Events.................................................. A-6
(g) Litigation............................................................................ A-6
(h) Taxes................................................................................. A-7
(i) Benefit Plans......................................................................... A-8
(j) Employee Relations.................................................................... A-9
(k) Certain Contracts and Arrangements.................................................... A-9
(l) Environmental Matters................................................................. A-9
(m) Compliance with Laws.................................................................. A-10
(n) Takeover Statutes..................................................................... A-11
(o) Vote Required......................................................................... A-11
(p) Opinion of Financial Advisors......................................................... A-11
(q) Brokers, Finders, etc................................................................. A-11
(r) Tangible Property..................................................................... A-11
(s) Product Warranty...................................................................... A-11
(t) Insurance............................................................................. A-11
(u) Suppliers and Dealers................................................................. A-11
(v) Real Property......................................................................... A-12
(w) Intellectual Property................................................................. A-13
(x) Affiliated Transactions............................................................... A-13
(y) Contributions......................................................................... A-14
(z) Proxy Statement....................................................................... A-14
(aa) No Other Representations or Warranties................................................ A-14
ARTICLE III. Representations and Warranties of Buyer and Acquisition............................... A-14
Section 3(a) Organization and Standing............................................................. A-14
(b) Authority............................................................................. A-14
(c) No Conflicts; Consents................................................................ A-14
(d) Information Supplied.................................................................. A-15
(e) Financial Ability to Perform.......................................................... A-15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
(f) Surviving Corporation after the Merger................................................ A-15
(g) Brokers, Finders, etc................................................................. A-15
(h) Acquisition's Operations.............................................................. A-15
(i) No Shares Owned....................................................................... A-15
(j) No Other Representations or Warranties................................................ A-15
ARTICLE IV. Covenants of the Company.............................................................. A-15
Section 4(a) Access................................................................................ A-15
(b) Ordinary Conduct...................................................................... A-16
(c) Other Transactions.................................................................... A-17
(d) Company Special Meeting; Preparation of the Proxy Statement........................... A-19
(e) Interim Operating Reporting........................................................... A-19
ARTICLE V. Covenants of Buyer and Acquisition.................................................... A-20
Section 5(a) Confidentiality....................................................................... A-20
(b) Employees and Employee Benefit Plans.................................................. A-20
(c) WARN Act.............................................................................. A-20
(d) Indemnification....................................................................... A-20
(e) Indemnification Costs................................................................. A-21
ARTICLE VI. Mutual Covenants...................................................................... A-21
Section 6(a) Consummation of the Transactions...................................................... A-21
(b) Publicity............................................................................. A-22
(c) Antitrust Notification................................................................ A-22
(d) Further Assurances.................................................................... A-22
(e) Notice of Breach...................................................................... A-22
ARTICLE VII. Conditions to Closing................................................................. A-23
Section 7(a) Each Party's Obligations.............................................................. A-23
(b) The Company's Obligations............................................................. A-23
(c) Buyer's and Acquisition's Obligations................................................. A-24
(d) Frustration of Closing Conditions..................................................... A-25
ARTICLE VIII. Termination........................................................................... A-25
Section 8(a) Termination Events.................................................................... A-25
(b) Termination Notice.................................................................... A-26
(c) Termination Fees...................................................................... A-26
(d) Effects of Termination................................................................ A-26
ARTICLE IX. Nonsurvival of Representations, Warranties and Agreements............................. A-27
ARTICLE X. Expenses.............................................................................. A-27
ARTICLE XI. Miscellaneous......................................................................... A-27
Section 11(a) No Third-Party Beneficiaries.......................................................... A-27
(b) Amendment or Waiver................................................................... A-27
(c) Headings.............................................................................. A-27
(d) Counterparts.......................................................................... A-27
(e) Interpretation........................................................................ A-27
(f) Assignment............................................................................ A-28
(g) Notices............................................................................... A-28
(h) Entire Agreement...................................................................... A-28
(i) Severability.......................................................................... A-29
(j) Schedules............................................................................. A-29
(k) Governing Law......................................................................... A-29
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
DISCLOSURE SCHEDULES................................................................. S-1
SCHEDULE 2(b) No Conflicts; Consents (Company's)...................... S-2
SCHEDULE 2(c) Subsidiaries............................................ S-3
SCHEDULE 2(d) Capital Stock of the Company............................ S-5
SCHEDULE 2(e) SEC Reports and Financial Statements.................... S-6
SCHEDULE 2(f) Absence of Certain Changes or Events.................... S-7
SCHEDULE 2(g) Litigation.............................................. S-8
SCHEDULE 2(h) Taxes................................................... S-11
SCHEDULE 2(i) Benefit Plans........................................... S-12
SCHEDULE 2(j) Employee Relations...................................... S-16
SCHEDULE 2(k) Certain Contracts and Arrangements...................... S-17
SCHEDULE 2(l)(ii)(A) Environmental Laws...................................... S-18
SCHEDULE 2(l)(ii)(B) Environmental Claims.................................... S-19
SCHEDULE 2(l)(ii)(C) Potential Environmental Claims.......................... S-20
SCHEDULE 2(m) Compliance with Laws.................................... S-21
SCHEDULE 2(s) Product Warranty........................................ S-22
SCHEDULE 2(t) Insurance............................................... S-23
SCHEDULE 2(u)(i) Suppliers............................................... S-24
SCHEDULE 2(u)(ii) Dealers................................................. S-25
SCHEDULE 2(v)(i) Owned Real Property..................................... S-26
SCHEDULE 2(v)(ii) Leased Real Property.................................... S-27
SCHEDULE 2(w) Intellectual Property................................... S-28
SCHEDULE 2(x) Affiliated Transactions................................. S-29
SCHEDULE 3(c) No Conflicts; Consents (Buyer's and Acquisition's)...... S-30
SCHEDULE 4(b) Ordinary Conduct........................................ S-31
</TABLE>
iii
<PAGE>
TABLE OF DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
Acquisition.......................................................................................... preamble
Acquisition Common Stock............................................................................. 1(g)
Acquisition Proposal................................................................................. 4(c)
Agreement............................................................................................ preamble
Affected Persons..................................................................................... 2(i)
Affiliated Group..................................................................................... 2(h)
Applicable Break-Up Fee.............................................................................. 8(c)
Audit................................................................................................ 2(h)
Benefit Plans........................................................................................ 2(i)
Board................................................................................................ 2(a)
Buyer................................................................................................ preamble
Buyer's and Acquisition's Representatives............................................................ 4(a)
Certificates......................................................................................... 1(j)
Cleanup.............................................................................................. 2(l)
Closing.............................................................................................. 1(l)
Closing Date......................................................................................... 1(l)
Code................................................................................................. 2(h)
Company.............................................................................................. preamble
Company Acquisition Agreement........................................................................ 4(c)
Company Balance Sheet................................................................................ 2(r)
Company Common Stock................................................................................. preamble
Company SEC Reports.................................................................................. 2(e)
Company's Intellectual Property Rights............................................................... 2(w)
Company Special Meeting.............................................................................. 4(d)
Costs................................................................................................ 5(d)
Counter Offer........................................................................................ 4(c)
Delaware Law......................................................................................... preamble
Determination........................................................................................ 4(c)
Determination Notice................................................................................. 4(c)
Dissenting Shares.................................................................................... 1(i)
DOJ.................................................................................................. 6(c)
Effective Time....................................................................................... 1(b)
Environmental Claim.................................................................................. 2(l)
Environmental Laws................................................................................... 2(l)
ERISA................................................................................................ 2(i)
Exchange Act......................................................................................... 2(e)
Financing Materials.................................................................................. 4(a)
FTC.................................................................................................. 6(c)
GAAP................................................................................................. 2(e)
Governmental Entity.................................................................................. 2(b)
Hazardous Materials.................................................................................. 2(l)
HSR Act.............................................................................................. 2(b)
Indemnifiable Claim.................................................................................. 5(d)
Indemnitees.......................................................................................... 5(d)
Intellectual Property Rights......................................................................... 2(w)
IRS.................................................................................................. 2(h)
Leased Real Property................................................................................. 2(v)
Leases............................................................................................... 2(v)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Material Adverse Effect.............................................................................. 2(b)
<S> <C>
Material Contracts................................................................................... 2(k)
Maximum Amount....................................................................................... 5(d)
Merger............................................................................................... preamble
Merger Consideration................................................................................. 1(f)
Merrill Lynch........................................................................................ 2(p)
Neutral Statement.................................................................................... 4(c)
Option............................................................................................... 1(h)
Option Agreement..................................................................................... preamble
Option Settlement Amount............................................................................. 1(h)
Outside Termination Date............................................................................. 8(a)
Owned Real Property.................................................................................. 2(v)
Paying Agent......................................................................................... 1(j)
Payment Fund......................................................................................... 1(j)
Permitted Encumbrances............................................................................... 2(v)
Person............................................................................................... 2(g)
Pre-Closing Tax Period............................................................................... 2(h)
Proxy Statement...................................................................................... 2(z)
Real Property........................................................................................ 2(v)
Release.............................................................................................. 2(l)
SEC.................................................................................................. 2(b)
Securities Act....................................................................................... 2(e)
Shares............................................................................................... 1(f)
Subsidiary........................................................................................... 2(c)
Surviving Corporation................................................................................ 1(a)
Tax or Taxes......................................................................................... 2(h)
Tax Return........................................................................................... 2(h)
Treasury Regulations................................................................................. 2(h)
WARN Act............................................................................................. 2(j)
Warrant.............................................................................................. 1(h)
Warrant Settlement................................................................................... 1(h)
</TABLE>
v
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (including the exhibits
and schedules attached hereto, the "Agreement"), dated as of September 4, 1998,
by and among Alamo Group Inc., a Delaware corporation (the "Company"), WEC
Company, a Delaware corporation ("Buyer"), and AGI Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Buyer ("Acquisition").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Buyer, Acquisition and the
Company have each approved the acquisition of the Company by Buyer, through the
merger of Acquisition with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement, and in accordance
with the General Corporation Law of the State of Delaware (the "Delaware Law"),
whereby each issued and outstanding share of common stock, par value $0.10 per
share, of the Company (the "Company Common Stock") (other than shares owned
directly or indirectly by Buyer, any wholly-owned subsidiary of Buyer,
Acquisition, the Company or any wholly owned Subsidiary (as defined in Section
2(c) hereof) immediately prior to the Effective Time (as defined in Section 1(b)
hereof) and other than Dissenting Shares (as defined in Section 1(i) hereof))
will be converted into the right to receive the Merger Consideration (as defined
in Section 1(f)(i) hereof) in accordance with the provisions of Article I of
this Agreement;
WHEREAS, Buyer, Acquisition and certain stockholders have entered into an
option agreement, dated as of the date hereof (each, an "Option Agreement"),
providing Buyer with an option to purchase certain shares of Company Common
Stock and, under certain circumstances, obligating each of the stockholders that
are parties thereto to vote for approval of the Merger and this Agreement at the
Company Special Meeting (as defined hereinafter);
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions hereinafter set forth, and intending to be
legally bound hereby, Buyer, Acquisition and the Company hereby agree as
follows:
ARTICLE I. MERGER.
Section 1 (a) THE MERGER. Upon the terms and subject to the conditions
hereof and in accordance with the relevant provisions of the Delaware Law, at
the Effective Time (as defined hereinafter) Acquisition and the Company will
consummate the Merger, pursuant to which: (i) Acquisition shall be merged with
and into the Company; (ii) the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue its corporate
existence under the Delaware Law; and (iii) the separate corporate existence of
Acquisition shall cease.
(b) EFFECTIVE TIME. The Merger shall be consummated by filing with the
Secretary of State of the State of Delaware a certificate of merger or such
other document or documents as may be permitted or required pursuant to the
relevant provisions of the Delaware Law (the time of such filing being the
"Effective Time").
(c) EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 259 of the Delaware Law.
(d) CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation of the Company at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and the By-Laws of Acquisition at
the Effective Time shall be the By-Laws of the Surviving Corporation, in each
case until modified in accordance with applicable law.
(e) DIRECTORS AND OFFICERS. The directors of Acquisition at the Effective
Time shall be the directors of the Surviving Corporation until their successors
are duly elected and qualified and the officers of the Company at the Effective
Time shall be the officers of the Surviving Corporation until replaced in
accordance with the By-Laws of the Surviving Corporation.
<PAGE>
(f) CONVERSION OF SHARES.
(i) At the Effective Time, each share of Company Common Stock then
issued and outstanding (the "Shares") (other than Shares owned by the
Company, any wholly-owned Subsidiary, Buyer, Acquisition or any wholly owned
subsidiary of Buyer and Dissenting Shares as defined in Section 1(j) below)
shall, by virtue of the Merger and without any action on the part of the
holders thereof, be converted into the right to receive $18.50 net in cash
(the "Merger Consideration"), payable to the holder thereof, without
interest, upon surrender of the certificate formerly representing such Share
as provided in Section 1(k) hereof.
(ii) At the Effective Time, each Share owned by the Company, any
wholly-owned Subsidiary, Buyer, Acquisition or any wholly owned subsidiary
of Buyer shall, by virtue of the Merger and without any action on the part
of the holder thereof, be cancelled and retired and shall cease to exist
without any payment therefor.
(g) CONVERSION OF ACQUISITION COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
each issued and outstanding share of common stock, par value $0.01 per share, of
Acquisition ("Acquisition Common Stock") issued and outstanding shall be
converted into and exchanged for one share of common stock of the Surviving
Corporation.
(h) WARRANTS AND EMPLOYEE STOCK OPTIONS. At the Effective Time, each then
outstanding warrant (a "Warrant") to purchase shares of Company Common Stock and
each then outstanding option (an "Option") to purchase shares of Company Common
Stock heretofore granted under any employee stock option or compensation plan or
other arrangement with the Company shall be cancelled and in exchange therefore,
the holder thereof shall receive a cash payment from the Company in an amount
equal to the amount, if any, by which the Merger Consideration exceeds the per
share exercise price of such Warrant or Option, multiplied by the number of
shares of Company Common Stock then subject to such Warrant or Option, as the
case may be (the "Warrant Settlement Amount" or the "Option Settlement Amount",
as the case may be), but subject to all required tax withholdings by the
Company. The obligation of the Surviving Corporation to pay the Warrant
Settlement Amount or the Option Settlement Amount to any holder of an Option or
Warrant shall be subject to such holder executing an agreement acknowledging
cancellation of such holder's Option or Warrant and all rights thereunder in
exchange for the appropriate Option Settlement Amount or Warrant Settlement
Amount.
(i) DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by a stockholder who has not voted such Shares
in favor of the Merger and who is entitled by the Delaware Law to appraisal
rights, and who shall have properly demanded in writing appraisal for such
Shares in accordance with Section 262 of the Delaware Law (collectively, the
"Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration unless and until such holder shall have failed to perfect
or shall have effectively withdrawn or lost his rights to appraisal and payment
under the Delaware Law. Stockholders who have perfected their rights under
Section 262 of the Delaware Law shall be entitled to receive payment of the
appraised value of such Shares in accordance with Section 262 of the Delaware
Law, except that if any such holder shall have so failed to perfect or shall
have effectively withdrawn or lost such right, such holder's Shares shall
thereupon be deemed to have been converted into the right to receive, as of the
Effective Time, the Merger Consideration without any interest thereon. Prior to
the Effective Time, the Company shall not, except with the prior written consent
of Buyer, make any payment with respect to, or settle or offer to settle, any
such demands.
(j) PAYMENT FOR SHARES.
(i) PAYING AGENT. Immediately prior to the Effective Time, Buyer
shall, pursuant to an agreement with a paying agent (the "Paying Agent"),
deposit, or cause to be deposited, with or for the account of the Paying
Agent in trust for the benefit of the holders of Shares (other than Shares
to be
A-2
<PAGE>
cancelled pursuant to Section 1(f)(ii) and any Dissenting Shares) for
exchange through the Paying Agent in accordance with this Article 1, cash in
the aggregate amount required to be exchanged for Shares pursuant to Section
1(f) (the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration out of the Payment Fund to
holders of Shares in accordance with Section 1(j)(ii) below. The Payment
Fund shall not be used for any other purposes. The Paying Agent shall invest
funds in the Payment Fund only in short-term securities issued or guaranteed
by the United States government or certificates of deposit of commercial
banks that have consolidated total assets of not less than $5,000,000,000
and are "well capitalized" within the meaning of the applicable federal bank
regulations. Any interest or other income earned on the investment of funds
in the Payment Fund shall be for the account of and payable to Buyer.
(ii) PAYMENT PROCEDURE. Promptly after the Effective Time, Buyer will
cause the Paying Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time evidenced
outstanding Shares (other than Shares to be cancelled pursuant to Section
1(f)(ii) and any Dissenting Shares) ("Certificates"), (A) a notice of the
effectiveness of the Merger, (B) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such customary form and have such other
provisions as Buyer may specify in accordance with the terms of this
Agreement) and (C) instructions to effect the surrender of the Certificates
in exchange for the Merger Consideration. Upon surrender of a Certificate
for cancellation to the Paying Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for
each Share formerly represented by such Certificate, less any required tax
withholdings, and the Certificate so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this Section 1(k), from and
after the Effective Time each Certificate shall be deemed to evidence only
the right to receive, upon surrender thereof, the Merger Consideration. In
no event will interest be paid or accrued on the Merger Consideration
payable upon the surrender of Certificates.
(iii) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund
that remains undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to the Surviving Corporation upon demand,
and any holders of Certificates who have not theretofore complied with this
Section 1 shall thereafter look, subject to Section 1(j)(iv), only to the
Surviving Corporation for the Merger Consideration to which they are
entitled pursuant to this Article I.
(iv) ABANDONED PROPERTY LAWS. Neither the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a Certificate for any cash
from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to two years after the Effective Time
(or immediately prior to such earlier date on which any Merger Consideration
payable to the holder of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 2(b))
any such Merger Consideration in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(k) STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of Shares thereafter on the records of the Company. After the
Effective Time, any Certificates presented to the Paying Agent, or the Surviving
Corporation for any reason, shall be cancelled and exchanged for the Merger
Consideration as provided hereby.
(l) CLOSING. Upon the terms and subject to the conditions hereof, the
closing of the Merger (the "Closing") shall take place at (i) the offices of
Brown & Wood LLP, One World Trade Center, New York,
A-3
<PAGE>
New York 10048 at 10:00 a.m., local time, on November 16, 1998, or (ii) such
other place and/or time and/or on such other date as the Company and the Buyer
may agree or as may be necessary to permit the fulfillment or waiver of the
conditions herein (in case of either clause (i) or (ii), the "Closing Date").
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Buyer and Acquisition as follows:
Section 2 (a) AUTHORITY. The Company has the corporate power and authority
to execute this Agreement and consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, and the performance by the Company
of its obligations hereunder, have been duly authorized by the Board of
Directors of the Company (the "Board") and, except for adoption of this
Agreement by the stockholders of the Company as provided in Section 4(d) hereof,
no further corporate action is necessary on the part of the Company. This
Agreement has been duly executed and delivered by the Company and, assuming the
due execution and delivery by the other parties hereto, constitutes a valid and
binding obligation of the Company, enforceable against it in accordance with its
terms.
(b) NO CONFLICTS; CONSENTS. Except as set forth on Schedule 2(b), neither
the execution and delivery of this Agreement by the Company nor the consummation
of the transactions contemplated hereby will conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under any provision of (i) the
respective certificates of incorporation or by-laws of the Company or any
Subsidiary (as such term is defined in Section 2(c) below), (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which the Company or any Subsidiary is a party or by
which any of them or any of their respective properties or assets is bound or
(iii) any judgment, order or decree, or statute, law, ordinance, rule or
regulation, applicable to the Company or any Subsidiary or any of their
respective properties or assets, in each case except for any such conflict,
violation, default or right which would not reasonably be expected to have a
material adverse effect on the business, assets, financial condition, value,
prospects or results of operations of the Company and its Subsidiaries taken as
a whole (a "Material Adverse Effect"). No consent, approval, license, permit,
order or authorization of, or registration, declaration or filing with, any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, or other regulatory or
self-regulatory body or association (a "Governmental Entity") is required to be
obtained or made by the Company or any Subsidiary in connection with the
consummation of the transactions contemplated hereby other than (U) the filing
of a certificate of merger pursuant to the relevant provisions of Delaware Law,
(V) filings with the Securities and Exchange Commission (the "SEC") and the
state securities or "blue sky" commission or similar body in each state where
such filing may be necessary, (W) compliance with and filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or other applicable antitrust or competition laws, (X) as set forth on
Schedule 2(b), (Y) as become applicable solely as a result of the specific
regulatory status of Buyer or Acquisition and their affiliates and (Z) those the
failure of which to make or obtain would not reasonably be expected to have a
Material Adverse Effect.
(c) ORGANIZATION AND STANDING. Each of the Company and its Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of the Company and its
Subsidiaries has all requisite corporate power and authority to carry on its
respective businesses as presently conducted and to own, lease and operate its
respective properties and assets as currently owned, leased and operated, and
each is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it, or where
the nature of the business conducted by it, make such qualification necessary,
except where the failure to so qualify or be in good standing would not
reasonably be expected to have a Material Adverse Effect. Each of the Company
and its Subsidiaries is in possession of all licenses, permits and
authorizations legally necessary for the Company or any Subsidiary to own, lease
and operate its properties or to carry on its business as it is now
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being conducted, except for those which the failure to possess would not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company. The term "Subsidiary" means each corporation or
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by the Company. As of the
date hereof, the only direct or indirect Subsidiaries are those set forth on
Schedule 2(c) hereto. Except as set forth on Schedule 2(c), neither the Company
nor any Subsidiary, directly or indirectly, beneficially owns any equity
interest in any Person which is not a Subsidiary of the Company. Schedule 2(c)
sets forth a complete and accurate list of all of the issued and outstanding
shares of capital stock of each Subsidiary, and except as set forth on Schedule
2(c), all such shares are owned by the Company or another Subsidiary free and
clear of all liens, claims, security interests or other encumbrances, and all
such shares have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 2(c), there are no (i)
outstanding warrants, options, rights, agreements, convertible or exchangeable
securities or other commitments (A) pursuant to which any Subsidiary is or may
become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of any Subsidiary or the Company or (B) that
give any person the right to receive any benefits or rights similar to any
rights enjoyed by or accruing to the holders of shares of any Subsidiary or (ii)
voting trusts, voting agreements, stockholders agreements or similar
arrangements relating to any shares of capital stock or other securities of any
Subsidiary of which any Subsidiary has knowledge.
(d) CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock, of which
9,735,759 shares of Company Common Stock, constituting the Shares, are duly
authorized, validly issued and outstanding, and fully paid and nonassessable.
Except for the Shares, there are no other shares of capital stock of the Company
outstanding. None of the Shares have been issued in violation of, or are subject
to, any purchase option, call, right of first refusal or preemptive,
subscription or similar right under any provision of applicable law, the
Certificate of Incorporation or By-laws of the Company or any agreement,
contract or instrument to which the Company is a party or by which it or any of
its properties or assets is bound. Except as set forth on Schedule 2(d), there
are (i) no outstanding warrants, options, rights, agreements, convertible or
exchangeable securities or other commitments (other than this Agreement) (A)
pursuant to which the Company is or may become obligated to issue, sell,
purchase, return or redeem any shares of capital stock or other securities of
the Company or any Subsidiary or (B) that give any person the right to receive
any benefits or rights similar to any rights enjoyed by or accruing to the
holders of Shares of the Company or (ii) voting trusts, voting agreements,
stockholders agreements or similar arrangements relating to the Shares of which
the Company has knowledge.
(e) SEC REPORTS AND FINANCIAL STATEMENTS. Except as set forth on Schedule
2(e), each form, report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since December 31, 1996, which
include all the documents (other than preliminary material) that the Company was
required to file with the SEC since such date (the "Company SEC Reports"), as of
their respective dates, complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports. None of the Company SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company's Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q filed by the Company with the SEC since
December 31, 1994 comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles as in effect from time to time in the United States
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q under the Securities Act) and fairly
present, in all material respects, the consolidated
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financial position of the Company and the Subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended, subject in the case of interim financial statements to normal
year-end adjustments and except that the interim financial statements do not
contain all of the footnote disclosures required by GAAP. Except as set forth on
Schedule 2(e), neither the Company nor any Subsidiary has any liabilities or
obligations, whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due (including, without
limitation, any earn-out, installment or contingent payment obligation arising
out of any acquisition by the Company or any Subsidiary of any interest in any
business (or any portion thereof)), except (i) as disclosed in the Company SEC
Reports filed after December 31, 1997 and prior to the date hereof, (ii) as
incurred in connection with the transactions contemplated or as provided by this
Agreement, (iii) as incurred after December 31, 1997 in the ordinary course of
business and consistent with past practices in manner and amount, or (iv) except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has delivered to Buyer true and complete
copies of all agreements and instruments that evidence or otherwise govern the
Company's indebtedness set forth on Schedule 2(e) or reflected in the most
recent balance sheet included in financial statements contained in the Company
SEC Reports.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997, except
as contemplated hereby and except as disclosed in the Company SEC Reports filed
after December 31, 1997 and prior to the date hereof, the Company and each
Subsidiary have conducted their respective businesses only in the ordinary
course, consistent with past practice, and there has not occurred or arisen any
event or events which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or which would reasonably be expected
to prevent or delay in any material respect the consummation of any of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as set forth on Schedule 2(f) hereto or in the Company SEC
Reports filed prior to the date hereof, since December 31, 1997, neither the
Company nor any Subsidiary has: (i) issued any notes, bonds or other debt
securities or any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or other equity
securities; (ii) borrowed any amount or incurred or become subject to any
material liabilities, except liabilities incurred in the ordinary course of
business; (iii) paid any material obligation or liability, other than
liabilities paid in the ordinary course of business; (iv) other than the
quarterly dividend declared on July 2, 1998 and paid on August 4, 1998 for the
second quarter of the Company's 1998 fiscal year, declared or made any payment
or distribution of cash or other property to its stockholders with respect to
its capital stock or other equity securities or purchased or redeemed any shares
of its capital stock or other equity securities (including, without limitation,
any warrants, options or other rights to acquire its capital stock or other
equity securities); (v) sold, assigned or transferred any of its material
tangible assets, except in the ordinary course of business, (vi) sold, assigned
or transferred any patents or patent applications, trademarks, service marks,
trade names, corporate names, copyrights or copyright registrations, trade
secrets or other intangible assets, or disclosed any proprietary confidential
information to any Person (other than in circumstances in which the Company has
imposed confidentiality restrictions); (vii) waived any rights entitling the
Company to receive consideration in excess of $50,000, whether or not in the
ordinary course of business or suffered any loss in excess of $100,000 that
would constitute an extraordinary loss under GAAP; (viii) made any commitments
for capital expenditures in excess of $400,000 in the aggregate; (ix) made any
loans or advances to, guarantees for the benefit of, or any Investments in, any
Persons (other than its Subsidiaries) in excess of $200,000 in the aggregate; or
(x) entered into any written agreement to do any of the foregoing. For purposes
of this Agreement, "Person" shall mean any individual, corporation, partnership,
limited liability, company, joint venture, Governmental Entity or any other
entity.
(g) LITIGATION. Except as disclosed on Schedule 2(g), there is no suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary that, individually or in the
aggregate, would reasonably be expected to (i) have a Material Adverse Effect or
(ii) prevent, delay or burden in any material respect the Company's performance
of its obligations under,
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or consummation of the transactions contemplated by, this Agreement. There is
not any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any Subsidiary which has had or
would reasonably be expected to have a Material Adverse Effect.
(h) TAXES.
(i) For purposes of this Agreement, (A) "Tax" or "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding,
social security, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, including estimated taxes,
imposed by the United States or any other taxing authority (domestic or
foreign), whether computed on a separate, consolidated, unitary, combined or
any other basis and such term shall include any interest, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to
any such taxes, charges, fees, levies or other assessments; (B) "Tax Return"
shall mean any return, report or other document or information required to
be supplied to a taxing authority in connection with Taxes, including any
schedule or attachment thereto; (C) "IRS" shall mean the United States
Internal Revenue Service; (D) "Treasury Regulations" shall mean the Treasury
Regulations promulgated under the Code; (E) "Pre-Closing Tax Period" shall
mean all taxable periods ending on or before the Closing Date and the
portion ending on the Closing Date of any taxable period that includes (but
does not end on) such day; (F) "Audit" shall mean any audit, assessment of
Taxes, reassessment of Taxes, or other examination by any taxing authority
or any judicial or administrative proceedings or appeal of such proceedings;
(G) "Code" shall mean the Internal Revenue Code of 1986, as amended; and (H)
"Affiliated Group" shall mean any affiliated group within the meaning of
Section 1504 of the Code or any similar group defined under a similar or
corresponding provision of state, local or foreign Tax law.
(ii) The Company and its Subsidiaries are each "C" corporations as
defined in the Code.
(iii) In the last five years, the only jurisdictions where the Company
and its Subsidiaries have filed any income Tax Returns are with the Federal
government of the United States and with the States of California, Georgia,
Illinois, Iowa, Kansas, Oklahoma, Pennsylvania and Tennessee and in the
following foreign jurisdictions: the United Kingdom, France and the
Netherlands.
(iv) Except as set forth on Schedule 2(h), (A) the Company and each
Subsidiary have duly filed (taking into account any allowable extensions)
with the appropriate Governmental Entities all Tax Returns required to be
filed on or prior to the date hereof, and such Tax Returns are true, correct
and complete in all material respects, (B) the Company and each Subsidiary
has duly paid all Taxes due and owing and the unpaid Taxes of the Company
and each Subsidiary have been properly accrued in accordance with GAAP and
do not exceed the reserve for Tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and
Tax income) set forth or included in the most recent balance sheet of the
Company and each Subsidiary, respectively, (C) there are no liens for Taxes
upon the Shares or the assets of the Company or any Subsidiary, except for
statutory liens for current Taxes not yet due, (D) the Company and each
Subsidiary have complied with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes; and have, within the time
and the manner prescribed by law, withheld from and paid over to the proper
Governmental Entities all amounts required to be so withheld and paid over
under applicable laws, (E) no Audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or Tax
Returns of the Company or any Subsidiary, and neither the Company nor any
Subsidiary have received notice of any pending Audits or proceedings, (F)
there are no outstanding written requests, agreements, consents or waivers
to extend the statutory period of limitations applicable to the assessment
of any Taxes or deficiencies against the Company or any Subsidiary, (G)
neither the Company nor any Subsidiary is a party to any agreement providing
for the allocation or sharing of Taxes, and (H) no power of attorney has
been executed by the Company or any Subsidiary with respect to any matter
relating to Taxes which is currently in force, (I) neither the
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Company nor any Subsidiary has been a member of an Affiliated Group (other
than one of which the Company was the common parent) or filed or been
included in a combined, consolidated or unitary Tax Return, other than one
filed by the Company, (J) neither the Company nor any Subsidiary is liable
for any unpaid Taxes of an Affiliated Group of which it was a member prior
to the Closing Date, (K) neither the Company nor any Subsidiary has made any
payments, and is not and will not become obligated to make any payments,
that will be non-deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign Tax law), (L) neither
Company nor any Subsidiary will be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of (1)
any change in method of accounting for a taxable period ending on or prior
to the Closing Date, (2) any closing agreement described in Section 7121 of
the Code (or any corresponding provision of state, local or foreign income
Tax law), (3) any deferred intercompany gain or any excess loss account
described in Treasury Regulations under Section 1502 of the Code (or any
corresponding or similar provision or administrative rule of federal, state,
local or foreign Tax law) arising prior to the Closing Date, or (4) any
installment sale made prior to the Closing Date, and (M) no claim has ever
been made by a taxing authority in a jurisdiction where the Company or any
Subsidiary does not file Tax Returns that the Company or any Subsidiary, as
the case may be, is or may be subject to Taxes assessed by such jurisdiction
(i) BENEFIT PLANS. Set forth on Schedule 2(i) is a list of each bonus,
deferred compensation, pension, profit-sharing, retirement, stock purchase or
stock option, hospitalization or other medical, life or other insurance plan
relating to the Company's and any Subsidiary's businesses, including any policy,
plan, program or agreement that provides for the payment of severance benefits,
salary continuation, salary in lieu of notice or similar benefits (collectively,
the "Benefit Plans"), maintained, sponsored or obligated to be contributed to by
the Company or any Subsidiary or under which the Company or any Subsidiary has
any present or future material obligations or material liability on behalf of
the Company's or any Subsidiary's employees or former employees or their
dependents or beneficiaries (collectively, the "Affected Persons"). To the
knowledge of the Company, the Benefit Plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Company
are in compliance with the presently applicable provisions of ERISA and the Code
and any other applicable law, in all material respects. For purposes of this
paragraph 2(i), Subsidiaries shall include any entity that together with the
Company is treated as a single employer for purposes of Section 414 of the Code.
All contributions made or required to be made under any Benefit Plan meet
the requirements for deductibility under the Code, and all contributions that
are required but have not been made as of the date hereof and as of the Closing
Date have been properly recorded on the books of the Company or its
Subsidiaries, as the case may be, to the extent required under GAAP.
No Benefit Plan is a "multiemployer plan" (as defined in Section 4001(a)(3)
of ERISA, and no Benefit Plan is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) subject to Title IV of ERISA. No event has occurred
with respect to the Company or any Subsidiary in connection with which the
Company or any Subsidiary could be subject to any material liability or lien
with respect to any Benefit Plan under ERISA, the Code or any other applicable
law.
Except as described in Schedule 2(i), neither the Company nor any Subsidiary
is or will be obligated under any circumstance to pay any separation, severance,
termination or similar benefit as a result of any transaction contemplated by
this Agreement, solely as a result of a change in control or ownership within
the meaning of Section 280G of the Code, or for any other reason.
Except as described in Schedule 2(i), neither the Company nor any Subsidiary
has any obligation or otherwise to provide health or life insurance benefits to
former employees of the Company or Subsidiary or any other person, except as
specifically required by Part 6 of Subtitle B of Title I of ERISA.
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With respect to each Benefit Plan, the Company has provided the Buyer with
true, complete and correct copies of (to the extent applicable) (i) the most
recent annual report (Form 5500 series) filed with the IRS (with applicable
attachments), (ii) the most recent financial statement, (iii) the most recent
summary plan description provided to participants, and (iv) the most recent
determination letter received from the IRS. There are no pending or threatened
actions, suits, investigations or claims with respect to any Benefit Plan (other
than routine claims for benefits).
(j) EMPLOYEE RELATIONS. Except as set forth on Schedule 2(j), (i) no
employee related complaint, inquiry or investigation against the Company or any
Subsidiary is pending before the National Labor Relations Board; (ii) there is
no labor strike, dispute, slowdown or stoppage pending or, to the best of the
Company's knowledge, threatened against or involving the Company or any
Subsidiary; (iii) no employee grievance which would reasonably be expected to
have a Material Adverse Effect is pending and no claim therefor has been
asserted; (iv) no collective bargaining agreement is currently being negotiated
by the Company or any Subsidiary and no union organizing or decertification
efforts are underway or threatened; and (v) neither the Company nor any
Subsidiary has experienced any material labor dispute during the last three
years. Any notice required under any law or collective bargaining agreement has
been given, and all bargaining obligations with any employee representative have
been satisfied. Neither the Company nor any Subsidiary has implemented any plant
closing or mass layoff of employees as those terms are defined in the Worker
Adjustment Retraining and Notification Act of 1988, as amended ("WARN Act"), 29
U.S.C. SectionSection 2101 et seq., or any similar state or local law or
regulation, and no layoffs that could implicate such laws or regulations will be
implemented before Closing without advance notification to Buyer.
(k) CERTAIN CONTRACTS AND ARRANGEMENTS. Schedule 2(k) lists each contract
which is required by its terms to result in the payment or receipt by the
Company or any Subsidiary of more than $100,000 per year or $250,000 in the
aggregate over the term of the contract (collectively, "Material Contracts"), to
which the Company or any Subsidiary is a party, except for contracts which have
been filed and are publicly available prior to the date of this Agreement as
exhibits to any Company SEC Report. Except as set forth in Schedule 2(k), each
Material Contract by which the Company or any Subsidiary is bound is in full
force and effect and is a legal, valid and binding obligation of the Company or
the Subsidiary which is party thereto, enforceable against such party, subject,
as to the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium (whether general or specific) and similar law as relating
to creditors' rights generally, and general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law), as of
the date hereof, and neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any other party thereto, is in breach of, or default
under, any such Material Contract or agreement, and no event has occurred that
with notice or passage of time or both would constitute such a breach or default
thereunder by the Company or any Subsidiary, or, to the knowledge of the
Company, any other party thereto, except for such failures to be in full force
and effect and such breaches and defaults which, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(l) ENVIRONMENTAL MATTERS.
(i) (A) "Cleanup" means all actions required to: (1) cleanup, remove,
treat or remediate Hazardous Materials (as defined hereinafter) in the
indoor or outdoor environment; (2) prevent the Release (as defined
hereinafter) of Hazardous Materials so that they do not migrate, endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; (3) perform preremedial studies and investigations and
postremedial monitoring and care; or (4) respond to any governmental
requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal, treatment
or remediation of Hazardous Materials in the indoor or outdoor environment.
(A) "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including, without limitation, potential liability for
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investigatory costs, Cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (1) the presence or Release of
any Hazardous Materials at any location, whether or not owned or operated by
the Company or any Subsidiary or (2) circumstances forming the basis of any
violation of any Environmental Law (as defined hereinafter).
(B) "Environmental Laws" means all federal, state, local and foreign
laws and regulations, including principles of common law nuisance, relating
to worker health and safety, pollution or protection of the environment,
including, without limitation, laws relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or handling of
Hazardous Materials.
(C) "Hazardous Materials" means all materials, substances or wastes with
respect to which liabilities or standards of conduct are imposed, or which
are regulated under, any Environmental Law.
(D) "Release" means any release, spill or emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into
the environment (including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
(ii) (A) Except as set forth in Schedule 2(l)(ii)(A), the Company and
its Subsidiaries have complied in all material respects and are in
compliance in all material respects with all applicable Environmental Laws
(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). Except as set forth in Schedule
2(l)(ii)(A), since January 1, 1996 and prior to the date of this Agreement,
neither the Company nor any Subsidiary has received any communication
(written or oral), whether from a Governmental Entity, citizens, group,
employee or otherwise, alleging that the Company or any of its Subsidiaries
is not in such compliance.
(A) Except as set forth in Schedule 2(l)(ii)(B), there is no
Environmental Claim pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries or, to the knowledge of the
Company, against any Person whose material 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.
(B) Except as set forth in Schedule 2(l)(ii)(C), with respect to each
parcel of Owned Real Property there are no present or, for the period prior
to the date hereof during which the Company or any Subsidiary was the owner
of such parcel of Owned Real Property, past actions, activities,
circumstances, conditions, events or incidents or, to the knowledge of the
Company, at any time prior to the Company's or a Subsidiary's ownership of
such parcel of Owned Real Property, past actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the Release
or presence of any Hazardous Material, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to
the knowledge of the Company, against any person whose material 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.
(C) The Company agrees to cooperate with Buyer to effect the transfers
of or otherwise obtain any permits or other governmental authorizations
under Environmental Laws that will be required to permit Buyer to conduct
the business as conducted by the Company and its Subsidiaries immediately
prior to the Closing Date.
(m) COMPLIANCE WITH LAWS. Except as set forth on Schedule 2(m), the
Company and its Subsidiaries have complied with and are currently in compliance
with all statutes, laws, regulations and ordinances
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applicable to the conduct of their businesses, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect and no
suit, action, investigation, proceeding, claim or notice has been filed or
commenced (or to the knowledge of the Company is threatened) alleging any
failure to so comply; it being understood that nothing in this representation
addresses any compliance issue that is related to any Environmental Law.
(n) TAKEOVER STATUTES. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States applicable to the Company is
applicable to the Merger (including, without limitation, Section 203 of the
Delaware Law).
(o) VOTE REQUIRED. The affirmative vote of a majority of the outstanding
Shares is the only vote of holders of capital stock of the Company required to
adopt this Agreement.
(p) OPINION OF FINANCIAL ADVISORS. The Company has received the opinion or
advice of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
on August 18, 1998 to the effect that, as of such date, the consideration to be
received by holders of shares of Company Common Stock (other than Buyer or any
affiliate thereof) pursuant to the Merger is fair from a financial point of view
to such holders.
(q) BROKERS, FINDERS, ETC. Except as set forth in the Merrill Lynch
Engagement Letter dated February 23, 1998, a true and correct copy of which was
provided to Buyer prior to the date hereof, the Company is not subject to any
valid claim of any broker, investment banker, finder or other intermediary in
connection with the transactions contemplated by this Agreement.
(r) TANGIBLE PROPERTY. The Company and each Subsidiary have good title to,
or a valid leasehold interest in, the tangible personal properties and assets
used by them or shown on the most recent balance sheet of the Company included
in the Company SEC Reports (the "Company Balance Sheet") or acquired after the
date thereof (except those sold or otherwise disposed of for fair value since
March 30, 1998 in the ordinary course of business), which are free and clear of
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (i) mechanic's, materialmen's and similar liens arising or incurred
in the ordinary course of business, (ii) purchase money liens and encumbrances
identified and reflected on the Company Balance Sheet, and (iii) mortgages,
pledges, liens, encumbrances, charges or other security interests that do not,
individually or in the aggregate, materially adversely affect the current use of
such property or asset.
(s) PRODUCT WARRANTY. Except as set forth in Schedule 2(s), all products
manufactured, distributed or sold by the Company and each Subsidiary prior to
the Closing Date with respect to which any contractual warranty period has not
expired have been manufactured, distributed or sold, as applicable, in
conformity in all material respects with all applicable contractual commitments
and all express or implied warranties.
(t) INSURANCE. Schedule 2(t) sets forth an accurate and complete list of
each insurance policy to which the Company or any Subsidiary is a party, a named
insured or otherwise the beneficiary of coverage. All of such insurance policies
are legal, valid, binding and enforceable and in full force and effect and the
Company and each such Subsidiary are not in breach or default with respect to
their obligations under such insurance policies.
(u) SUPPLIERS AND DEALERS. Schedule 2(u)(i) lists the Company's and its
Subsidiaries' 25 largest vendors by the Company's consolidated purchase volume
for the fiscal year ended December 31, 1997 and the six-months ended June 30,
1998. Neither the Company nor any Subsidiary has received any notice that any
such vendor intends to terminate or materially reduce its business with the
Company and any Subsidiary and except as set forth on Schedule 2(u)(i) no such
vendor has terminated or materially reduced its business with the Company and
its Subsidiaries since January 1, 1997. Schedule 2(u)(ii) lists the Company's
and Subsidiary's 25 largest dealers by the Company's consolidated sales volume
for the fiscal year ended December 31, 1997 and the six-months ended June 30,
1998. Neither the Company nor any Subsidiary has received any notice that any
such dealer intends to terminate or materially reduce its
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business with the Company and any Subsidiary since January 1, 1997. Schedule
2(u)(ii) contains correct and complete current forms of standard dealer
agreements for the Company and each Subsidiary.
(v) REAL PROPERTY.
(i) OWNED REAL PROPERTY. Schedule 2(v)(i) sets forth a true and
complete list of each parcel of Owned Real Property. The Company has
delivered to Buyer a true and complete copy of all existing title insurance
policies and surveys for each parcel of Owned Real Property. Except as set
forth in Schedule 2(v)(i), with respect to each parcel of Owned Real
Property: (A) the Company or a Subsidiary (as the case may be) has good and
marketable fee simple title to such parcel, which shall be free and clear of
all liens and encumbrances as of the Closing Date, except for Permitted
Encumbrances; (B) there are no leases, subleases, licenses, concessions or
other agreements granting to any person the right to use or occupy such
parcel or any portion thereof; (C) other than the right of Buyer pursuant to
this Agreement, there are no outstanding options, rights of first offer or
rights of first refusal to purchase such parcel or any portion thereof or
interest therein; and (D) neither the Company nor any Subsidiary is a party
to purchase any additional real property. The term "Owned Real Property"
means all land and other buildings, fixtures and other improvements located
thereon, and all easements and other rights with respect thereto, owned by
the Company or any Subsidiary.
The term "Permitted Encumbrances" means with respect to each parcel of
Real Property: (a) liens for current taxes or other governmental
assessments, fees or other charges not yet due and payable, or the amount or
validity of which is being contested by Seller in good faith by appropriate
proceedings; (b) mechanics and similar liens arising or incurred in the
ordinary course of business and which would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect; (c)
zoning, building and other land use and similar laws or regulations imposed
by any governmental authority having jurisdiction over such parcel which are
not violated by the current use of such parcel in the operation of the
Company's business; (d) easements, covenants, conditions, restrictions and
other similar title matters affecting title to such parcel which would not
materially impair the use of such parcel in the operation of the Company's
business; and (e) survey defects to the extent that such defects would not
materially impair the use of such parcel in the operation of the Company's
business.
(ii) LEASED REAL PROPERTY. Schedule 2(v)(ii) sets forth a true and
complete list of all leases and sub-leases of the Company (the "Leases") for
each parcel of Leased Real Property. The Company has delivered to Buyer a
true and complete copy of each written lease (including all amendments,
extensions, renewals, guarantees and other documents with respect thereto).
Except as set forth in Schedule 2(v)(ii), with respect to each of the
Leases: (A) the Lease is in full force and effect and is the legal, valid
and binding obligation of the Company, enforceable against it in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium (whether general or
specific) and similar laws relating to creditors' rights generally, and
general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law)); (B) the Merger will not result
in a breach of or default under the Lease, (C) the Company or Subsidiary (as
the case may be) is not in breach or default under the Lease, and no event
has occurred or circumstance exists which, with the delivery of notice,
passage of time or both, would constitute such a breach or default under the
Lease, other than any such breaches or defaults which would not,
individually or in the aggregate, reasonably be expected to have Material
Adverse Effect; and (D) the Company or any Subsidiary (as the case may be)
has not assigned, subleased, mortgaged, deeded in trust or otherwise
transferred or encumbered the Lease or any interest therein. The term
"Leased Real Property" means all land, buildings, and other real property
which the Company or any Subsidiary has the right to use or occupy pursuant
to any leasehold, subleasehold, license, concession or other similar real
property interest held by the Company or such Subsidiary.
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(iii) REAL PROPERTY USED IN THE BUSINESS. The Owned Real Property and
Leased Real Property (together with all leasehold improvements thereon)
(collectively, the "Real Property") include all of the real property used by
the Company in the operation of the Business.
(iv) CONDEMNATION. There are no condemnation, expropriation or other
eminent domain proceedings, pending or, to the knowledge of the Company,
threatened, affecting any Real Property or any portion thereof.
(w) INTELLECTUAL PROPERTY. The term "Intellectual Property Rights" shall
mean all of the following: (i) patents, patent applications, patent disclosures
and inventions; (ii) trademarks, service marks, trade dress, trade names and
corporate names and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; (v) trade
secrets, confidential information and know-how; and (vi) computer software.
Schedule 2(w) sets forth a complete and correct list of all of the following
that are owned or used by the Company or any Subsidiary: (X) patented or
registered Intellectual Property Rights and pending patent applications or other
applications for registrations of Intellectual Property Rights; (Y) computer
software (other than commercially available software purchased or licensed by
the Company or any Subsidiary for a cost less than $10,000); and (Z) all other
material Intellectual Property Rights (including but not limited to unregistered
trademarks, but excluding copyrights). Schedule 2(w) also sets forth a complete
and correct list of all licenses or similar agreements covering Intellectual
Property Rights to which the Company or any of its Subsidiaries is a party and
the Company has provided to Buyer a complete and correct copy of each such
license or similar agreements.
Except as set forth on Schedule 2(w): (u) the Company and each Subsidiary
own and possess all right, title and interest in and to, or have a valid and
enforceable right to use, free and clear of all liens, licenses, security
interests, encumbrances or any other restrictions (including but not limited to
any injunction, judgment, order, decree or ruling issued by a Governmental
Entity), all of the Intellectual Property Rights set forth on Schedule 2(w)
(collectively, the "Company's Intellectual Property Rights"); (v) no claim by
any third party contesting the validity, enforceability, use or ownership of any
of the Company's Intellectual Property Rights has been made, is currently
outstanding or, to the knowledge of the Company, is threatened other than such
claims that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Company; (w) no loss or expiration of
any of the Company's Intellectual Property Rights is pending or, to the
knowledge of the Company, threatened or reasonably foreseeable, except for
patents expiring at the end of their statutory terms (and not as a result of any
act or omission by the Company or any Subsidiary); (x) to the knowledge of the
Company, no third party has infringed or misappropriated any of the Company's
Intellectual Property Rights; (y) neither the Company nor any Subsidiary (i) to
the knowledge of the Company, has infringed, misappropriated or otherwise
conflicted with, and the operation of their respective businesses does not
infringe, misappropriate or otherwise conflict with, any Intellectual Property
Rights of any third party, or (ii) has received any notices regarding any of the
foregoing (including but not limited to any demand to license any Intellectual
Property Rights); (z) neither the Company nor any Subsidiary has agreed to
indemnify any third party for or against any interference, infringement,
misappropriation or other conflict with respect to any Intellectual Property
Rights; and (aa) the Closing of the Merger will not adversely affect the
Company's ability to use the Company's Intellectual Property Rights on
substantially the same basis as the Company and each Subsidiary owned or used
the Company's Intellectual Property Rights immediately prior to the Closing.
(x) AFFILIATED TRANSACTIONS. Set forth in Schedule 2(x) is a list of all
arrangements, agreements and contracts entered into by the Company or any
Subsidiary with any Person who is an officer, director or affiliate (as defined
in Section 11(e) hereof) of the Company or any of its Subsidiaries, any relative
of any of the foregoing or any entity of which any of the foregoing is an
affiliate. Correct and complete copies of such documents have previously been
made available to Buyer.
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(y) CONTRIBUTIONS. Neither the Company, nor any director or officer of the
Company, has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity or made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds. Neither the Company, nor any director or officer
of the Company, has, in the course of his actions for, or on behalf of, the
Company violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, or unlawful rebate,
payoff, influence payment, kickback or other unlawful payment.
(z) PROXY STATEMENT. The information (other than any and all information
supplied or to be supplied by Buyer or its affiliates for inclusion or
incorporation by reference in the proxy statement referred to hereinafter) set
forth in the proxy statement to be distributed in connection with the Company
Special Meeting (as hereinafter defined) to vote upon this Agreement (together
with all amendments and supplements thereto, the "Proxy Statement") will not at
the date mailed to stockholders 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 the light of the circumstances under
which they were made, not misleading.
(aa) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article II, neither the Company
nor any other person makes any other express or implied representation or
warranty on behalf of the Company.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER AND
ACQUISITION. Buyer and Acquisition hereby, jointly and severally, represent and
warrant to the Company as follows:
Section 3 (a) ORGANIZATION AND STANDING. Buyer and Acquisition are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) AUTHORITY. Buyer and Acquisition have all requisite corporate power
and authority to execute this Agreement and consummate the transactions
contemplated hereby. The execution and delivery of the Agreement and the
performance by Buyer and Acquisition of their respective obligations hereunder
have been duly authorized by all necessary action on the part of each of Buyer
and Acquisition. This Agreement has been duly executed and delivered by each of
Buyer and Acquisition and, assuming the due execution and delivery hereof by the
other parties hereto, constitutes a valid and binding obligation of each of
Buyer and Acquisition, enforceable against each of Buyer and Acquisition in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium (whether general
or specific) and similar laws relating to creditors' rights generally, and
general principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law)).
(c) NO CONFLICTS; CONSENTS. Except as set forth on Schedule 3(c), neither
the execution and delivery of this Agreement by Buyer and Acquisition, nor the
consummation of the transactions contemplated hereby will conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under any
provision of (i) the respective certificate of incorporation or by-laws of Buyer
or Acquisition, (ii) any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which Buyer or
Acquisition is a party or by which any of them or any of their respective
properties or assets is bound or (iii) any material judgment, order or decree,
or statute, law, ordinance, rule or regulation, applicable to the Buyer or
Acquisition or any of their respective properties or assets, in each case except
for any such conflict, violation, default or right which would not reasonably be
expected to have a material adverse effect on the business, assets, financial
condition, or results of operations of Buyer and its subsidiaries (including
Acquisition) taken as a whole. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by Buyer or Acquisition or in
connection with the consummation of the transactions contemplated hereby other
than (U) Uniform Commercial Code filings,
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recordations and other filings required in connection with the granting of
security interests, (V) the filing of a certificate of merger or such other
document or documents as permitted pursuant to the relevant provisions of
Delaware Law, (W) filings with the SEC and the state securities or "blue sky"
commission or similar body in each state where such filing may be necessary, (X)
compliance with and filings under the HSR Act and other applicable antitrust and
competition laws, (Y) as set forth on Schedule 3(c) and (Z) for those the
failure of which to make or obtain would effect the ability of the Buyer or
Acquisition to consummate the transactions contemplated hereby.
(d) INFORMATION SUPPLIED. The information supplied or to be supplied by
Buyer or its affiliates for inclusion or incorporation by reference in the Proxy
Statement distributed in connection with the Company Special Meeting to vote
upon this Agreement will not at the date mailed to stockholders, 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
the light of the circumstances under which they were made, not misleading.
(e) FINANCIAL ABILITY TO PERFORM. Buyer and Acquisition have delivered to
the Company a true and complete copy of the letters obtained by Buyer and
Acquisition from Credit Suisse First Boston to provide debt financing for the
transactions contemplated hereby. Madison Dearborn Capital Partners II, L.P. has
agreed with Buyer to provide $58,500,000 of equity financing for the
transactions contemplated hereby.
(f) SURVIVING CORPORATION AFTER THE MERGER. At and immediately after the
Effective Time, (after giving effect to the Merger and any changes in the
Surviving Corporation's assets and liabilities as a result thereof), the
Surviving Corporation will have adequate working capital and will not (i) be
insolvent (either because its financial condition is such that the sum of its
debts is greater than the fair value of its assets or because the present fair
saleable value of its assets will be less than the amount required to pay its
probable liabilities on its debts as they mature), (ii) have unreasonably small
capital with which to engage in its business or (iii) have incurred or plan to
incur debts beyond its ability to pay as they mature.
(g) BROKERS, FINDERS, ETC. Except for Credit Suisse First Boston and
Madison Dearborn Partners, Inc., the Buyer is not subject to any valid claim of
any broker, investment banker, finder or other intermediary in connection with
the transactions contemplated by this Agreement.
(h) ACQUISITION'S OPERATIONS. Acquisition was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement and has
not engaged in any business activities other than in connection with the
transactions contemplated hereby.
(i) NO SHARES OWNED. As of the date hereof, neither Buyer, Acquisition nor
any of their affiliates owns any Shares.
(j) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties contained in this Article III, neither Buyer, Acquisition nor any
other Person makes any other express or implied representation or warranty on
behalf of Buyer or Acquisition.
ARTICLE IV. COVENANTS OF THE COMPANY. The Company covenants and agrees
with Buyer and Acquisition as follows:
Section 4 (a) ACCESS. Upon reasonable advance notice, between the date
hereof and the Effective Time, the Company shall (i) give Buyer and Acquisition
and their counsel, financial advisors, financing sources and their respective
counsel, auditors and other authorized representatives (collectively, "Buyer's
and Acquisition's Representatives") reasonable access (as defined hereafter)
during normal business hours to the offices, properties, books and records of
the Company and its Subsidiaries, (ii) furnish to Buyer's and Acquisition's
Representatives such financial, legal, technical, personnel and operating data
and other information as such Persons may reasonably request and (iii) instruct
the Company's employees, counsel, auditors and financial advisors to cooperate
with Buyer and Acquisition in their preparation of any rating agency
presentation materials, private placement prospectus or offering memorandum,
syndication book
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or similar marketing materials ("Financing Materials") in connection with a high
yield capital markets transaction to sell securities of Buyer (or its
subsidiaries) or obtain a leveraged bank credit facility to finance the Merger
Consideration and in their investigation of the business of the Company and its
Subsidiaries, including by furnishing copies of data or information pertaining
to the business of the Company and its Subsidiaries for purposes of due
diligence or for inclusion in any Financing Materials in connection with a high
yield capital markets transaction to sell securities of Buyer (or its
subsidiaries) or obtain a leveraged bank credit facility to finance the Merger
Consideration; PROVIDED THAT all requests for information, to visit plants or
facilities or to interview the Company's employees or agents should be directed
to and coordinated with the chief financial officer of the Company or such
person or persons as he shall designate; and PROVIDED FURTHER that any
information and documents received by Buyer, Acquisition or Buyer's and
Acquisition's Representatives (whether furnished before or after the date of
this Agreement) shall be held in strict confidence in accordance with Section
5(a) hereof, it being understood that the Company shall not unreasonably
withhold its consent for Buyer or Acquisition to use in presentations or include
in its Financing Materials information that is customarily used or disclosed in
Financing Materials used in the placement of high yield capital markets
offerings and the syndication of leveraged bank credit facilities.
Notwithstanding anything to the contrary in this Agreement, neither the Company
nor any of its Subsidiaries shall be required to disclose any information to
Buyer, Acquisition or Buyer's and Acquisition's Representatives if doing so
would violate any agreement, law, rule or regulation to which the Company or any
of its Subsidiaries is a party or to which the Company or any of its
Subsidiaries is subject (it being understood that the Company shall notify Buyer
of any such restriction). The Company shall, at the expense of Buyer, obtain
such comfort letters, surveys and title policies as Buyer may request in
connection with its efforts to sell securities of Buyer or obtain a credit
facility to finance the Merger Consideration.
(b) ORDINARY CONDUCT. Except as otherwise permitted by the terms of this
Agreement, from the date hereof to the Closing, the Company and its Subsidiaries
shall conduct their respective businesses in the ordinary course in
substantially the same manner as presently conducted and shall make all
reasonable best efforts consistent with past practices to preserve its
relationships with customers, suppliers and others with whom such entity deals,
perform and enforce their respective agreements and obligations, maintain all of
their respective physical properties in good repair and operating condition,
subject only to ordinary wear and tear, in each case in accordance with past
practices, and continue capital expenditure programs as heretofore disclosed to
Buyer in all material respects. Except as set forth on Schedule 4(b) or
otherwise permitted by the terms of this Agreement, from the date hereof until
the Closing, neither the Company nor any of its Subsidiaries shall do any of the
following without the written consent of the Buyer (which consent will not be
unreasonably withheld):
(i) amend their certificate of incorporation or by-laws or similar
documents;
(ii) declare or pay any dividend or make any other distribution to their
stockholders whether or not upon or in respect of any shares of their
capital stock other than regular quarterly dividends not to exceed $0.11 per
share of Common Stock for any quarter;
(iii) redeem or otherwise acquire any shares of their capital stock or
issue any capital stock or any option, warrant or right relating thereto or
any securities convertible into or exchangeable for any shares of capital
stock;
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire any assets that are material,
individually or in the aggregate, to the Company and its Subsidiaries taken
as a whole;
(v) sell, lease, mortgage, pledge or create or permit to be created any
security interest or other encumbrance on, or otherwise dispose of, any of
its material assets, other than in the ordinary course of business or as
contemplated by the capital expenditure programs referred to herein;
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(vi) enter into, or amend, modify or supplement in a manner materially
adverse to the Company, any agreement, contract or other arrangement (or
series of related agreements, contracts or other arrangements) to which the
Company or its Subsidiaries is a party or by which they or any of their
properties or assets are bound which has an aggregate future liability or
receivable to or from any person in excess of $300,000 or is not terminable
by the Company or one of its Subsidiaries, as the case may be, by notice of
not more than 60 days for an aggregate cost of less than $100,000; or
(vii) incur any obligation to make any payments that become due as a
result of a change in control of the Company or, other than in the ordinary
course of business, incur any indebtedness or other obligations or
liabilities;
(viii) enter into any employment agreements in the United States, enter
into new severance agreements, retention, bonus or similar agreements or
amend any plans or increase the rates of compensation payable or to become
payable to any officer, employee, agent or consultant of the Company or any
of its Subsidiaries, except as required by law or except in accordance with
existing compensation policies or the existing terms of contracts entered
into prior to the date of this Agreement, which policies and contracts are
set forth on Schedule 4(b)(viii);
(ix) change any accounting or Tax principle or practice of the Company,
including but not limited to any change in the nature or method of
calculation of any reserve of any kind, except as may be required by GAAP or
by law;
(x) accelerate the collection of accounts receivables or delay the
payment of payables or other liabilities as compared to past practice or
fail to maintain inventory in the ordinary course of business consistent
with past practice;
(xi) enter into any amendments, extensions or other modifications with
respect to any of the Leases that would result in the assumption of any
material additional liability by, or that would be reasonably expected to
have a Material Adverse Effect on the operation of, the Company or its
Subsidiaries; PROVIDED, that, in the case of any extension, the Company
shall consult with Buyer in advance of such extension (it being understood
that Buyer's consent is not required in connection with any such extension);
(xii) effect any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares or any stock dividend on the
Company Common Stock;
(xiii) make any loans to employees in excess of $1,000 individually and
$50,000 in the aggregate; or
(xiv) agree, whether in writing or otherwise, to do any of the foregoing.
(c) OTHER TRANSACTIONS.
(i) Prior to the Effective Time, neither the Company nor any Subsidiary
(whether directly or indirectly through its officers, directors, employees,
investment bankers, attorneys, accountants, advisors, agents or other
intermediaries) may: (A) solicit, initiate or encourage, directly or
indirectly, any inquiries with respect to, or the making or implementation
of any Acquisition Proposal (as defined hereinafter) or (B) engage in
discussions or negotiations (other than to disclose the terms of this
Section 4(c) of this Agreement) with, or disclose any nonpublic information
relating to the Company or its Subsidiaries or afford access to employees,
auditors, agents, properties, books or records of the Company or its
Subsidiaries to, any Person that has made, or has indicated its interest in
making, an Acquisition Proposal or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; PROVIDED, HOWEVER,
that, subject to compliance with Section 8(c)(ii), the Board shall be
entitled, notwithstanding anything to the contrary in this Agreement, to
furnish information to or enter into discussions or negotiations with any
person or entity that makes an unsolicited Acquisition Proposal, commencing
three business days after delivery of a written notice to Buyer that it
intends to furnish such information or enter into such discussions or
negotiations (a "Determination
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Notice") if the Board has determined in good faith (the "Determination") by
the date on which the Determination Notice is given (A) after consultation
with and based upon the advice of a nationally recognized investment banking
firm, that the Acquisition Proposal represents a financially superior
transaction for the stockholders of the Company when compared to the Merger,
(B) that such Acquisition Proposal is reasonably capable of being
consummated in a timely manner and for which financing is reasonably likely
to be available, (C) that the approval and adoption of this Agreement by
holders of Common Stock is not likely to be obtained due to such pending
Acquisition Proposal, and (D) after consultation with outside legal counsel,
that failure to provide such information or enter into such discussions or
negotiations would present a reasonably substantial risk of a breach of the
fiduciary duties of the Board under applicable law; and PROVIDED FURTHER
that, subject to Section 4(c)(ii) and upon the payment to Buyer of the
amount required by Section 8(c)(i) and termination of this Agreement
pursuant to Section 8(a)(iv), the Board shall be entitled to cause the
Company to enter into any agreements regarding such Acquisition Proposal (a
"Company Acquisition Agreement"). The Company shall promptly notify Buyer
and Acquisition if any information is requested from it or any negotiations
or discussions are sought to be initiated with the Company and shall
promptly communicate to Buyer and Acquisition the terms of any Acquisition
Proposal or related inquiry and the identity of the party making such
Acquisition Proposal or related inquiry which it may receive in respect of
any such transaction, including, in the case of written proposals or
inquiries, furnishing Buyer and Acquisition with a copy of such written
proposal or inquiry. For purposes of this Agreement, "Acquisition Proposal"
means any offer or proposal for a merger, consolidation, recapitalization,
liquidation or other business combination involving the Company or any of
its Subsidiaries or the acquisition or purchase of 50% or more of any class
of equity securities of the Company or any of its Subsidiaries, or any
tender offer (including self tenders) or exchange offer that if consummated
would result in any person or entity (other than an affiliate of Buyer)
beneficially owning 50% or more of any class of equity securities of the
Company or any of its Subsidiaries, or a substantial portion of the assets
of, the Company or any of its Subsidiaries, other than the Merger. However,
nothing contained in this Section 4(c) shall prohibit the Company or the
Board from taking and publicly disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
other applicable law or from making any public disclosure required under its
fiduciary duties.
(ii) Prior to recommending an Acquisition Proposal or entering into a
Company Acquisition Agreement or withdrawing, amending or modifying its
recommendation of this Agreement and the Merger (it being understood that
the Company taking no position or remaining neutral with respect to a tender
or exchange offer from a third party (a "Neutral Statement"), or making a
recommendation in favor of such a tender or exchange offer, in a filing made
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act
shall constitute an adverse modification of its approval or recommendation
of the Merger, unless, in the case of a Neutral Statement only,
contemporaneously with the filing of such Neutral Statement the Company
publicly confirms that it continues to recommend approval of the Merger and
continues to actively support the Merger thereafter), the Company shall (A)
notify Buyer in writing that it intends to approve, recommend or accept such
an Acquisition Proposal or enter into a Company Acquisition Agreement or
withdraw, amend or modify its recommendation of the Merger, and (B) attach
the most current version of any such Acquisition Proposal or Company
Acquisition Agreement to such notice. Buyer shall have the opportunity,
within three business days after receipt of the Company's written
notification of its intention to accept such Acquisition Proposal or to
enter into such Company Acquisition Agreement or to withdraw, amend or
modify its recommendation of the Merger, to make an offer relating to the
acquisition of the Company (a "Counter Offer"). Unless the Board of
Directors of the Company determines, in good faith after consultation with
its outside legal counsel and financial advisors, that such Counter Offer is
not at least as favorable to the shareholders of the Company, taking into
account such factors
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(including, without limitation, the consideration (both as to amount and
form) offered in, and the other terms and conditions of, the Counter Offer
and such other Acquisition Proposal or Company Acquisition Agreement) as and
to the extent it deems relevant, the Company shall not accept such other
Acquisition Proposal or Company Acquisition Agreement, but shall accept the
Counter Offer. The Company agrees that it will not enter into a Company
Acquisition Agreement referred to in clause (A) above until at least the
fourth business day after it has provided the notice to Buyer required
hereby and shall have terminated this Agreement pursuant to Section
8(a)(iv).
(d) COMPANY SPECIAL MEETING; PREPARATION OF THE PROXY STATEMENT.
(i) The Company shall, in accordance with applicable law and the
Certificate of Incorporation and the Company Bylaws, duly call, give notice
of, convene and hold a special meeting of its stockholders (the "Company
Special Meeting") as promptly as practicable after the date hereof and
submit this Agreement to the stockholders of the Company for adoption and
such other matters as may in the reasonable judgment of the Company be
appropriate in order to consummate the transactions contemplated by this
Agreement for consideration at the Company Special Meeting. In the event the
Stock Option (as defined in the Option Agreement) under any of the Option
Agreements becomes exercisable in accordance with the terms of such
agreements, the Company may, and at the request of Buyer shall, adjourn the
Company Special Meeting for a period not to exceed sixty (60) days from the
date such Stock Options first become exercisable. The Board shall recommend
approval and adoption of this Agreement and the Merger by the Company's
stockholders; PROVIDED that the Board may withdraw, modify or change such
recommendation, subject to compliance with clauses (A) through (C) inclusive
of Section 4(c)(i) in the event such withdrawal, modification or change
results from a pending Acquisition Proposal, if it has determined in good
faith, after consultation with outside legal counsel, that the failure to
withdraw, modify or change such recommendation would present a reasonably
substantial risk of a breach of the fiduciary duties of the Board under
applicable law.
(ii) As soon as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Proxy Statement. Buyer shall
cooperate with the Company in connection with the preparation of the Proxy
Statement, including furnishing to the Company all information regarding
Buyer and its affiliates as may be required to be disclosed therein. The
Company will use its reasonable best efforts to cause the Proxy Statement to
be mailed to the Company's stockholders as promptly as practicable after the
date hereof. No filing of, or amendment or supplement to, the Proxy
Statement will be made by the Company without providing Buyer the
opportunity to review and comment thereon and to approve the same, PROVIDED
that such approvals shall not be unreasonably withheld. The Company will
advise Buyer, promptly after it receives notice thereof, of any request by
the SEC for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. If at
any time prior to the Effective Time any information relating to the Company
or Buyer, or any of their respective affiliates, officers or directors,
should be discovered by the Company or Buyer which should be set forth in an
amendment or supplement to the Proxy Statement, so that the Proxy Statement
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall
be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company.
(e) INTERIM OPERATING REPORTING. During the period from the date of this
Agreement to the Closing, the Company shall cause its officers to confer on a
regular basis with one or more representatives of Buyer to report material
operational matters and to report the general status of on-going operations. The
Company shall notify Buyer of any material adverse change in the financial
position, earnings or business of the Company or any of its Subsidiaries after
the date hereof and prior to the Closing, and any
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unexpected emergency or other unanticipated change in the business of the
Company or any of its Subsidiaries and of any governmental complaints,
investigations or hearings or adjudicatory proceedings (or communications
indicating that the same are contemplated) and shall keep Buyer fully informed
of such events and, to the extent legally permitted, permit its representatives
to participate in all discussion relating thereto.
ARTICLE V. COVENANTS OF BUYER AND ACQUISITION. Buyer and Acquisition
covenant and agree, jointly and severally, with the Company as follows:
Section 5 (a) CONFIDENTIALITY. Except to the extent that any of the
provisions of the Confidentiality Agreement are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and supersede
such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive any
termination of this Agreement.
(b) EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(i) Immediately after the Closing, Buyer shall cause the Company and its
Subsidiaries to continue the employment, on substantially the same terms and
conditions, and with benefits that in the aggregate are at least as
valuable, as in effect immediately prior to the Closing, of all employees of
the Company and its Subsidiaries employed at the Closing Date.
Notwithstanding anything to the contrary, the preceding sentence shall not
impose a continuing obligation after the Closing and no contracts of
employment shall be deemed to have been created pursuant to this Section
5(b)(i).
(ii) Service by Affected Persons with the Company or its Subsidiaries
shall be recognized by Buyer under each benefit plan or arrangement
established, maintained or contributed to by Buyer, the Company or its
Subsidiaries after the Closing for the benefit of any Affected Persons.
(c) WARN ACT. Buyer acknowledges and agrees that any employment loss
within the meaning of the WARN Act suffered by any employee of the Company or
its Subsidiaries immediately upon or within 90 days following the Closing Date,
shall have been caused by the Buyer's decision not to continue the employment of
such employee, and not by the sale of the Company and its Subsidiaries. Buyer
further acknowledges and agrees that it shall be responsible for giving any
notices required by the WARN Act, that it is liable to any employee who does not
receive notice under, and who suffers an "employment loss" (as defined in the
WARN Act) because of a "plant closing" or "mass layoff," as defined therein,
occurring on or after the Closing Date. For purposes of this Agreement, the
Closing Date is and shall be the same as the "effective date" of the sale within
the meaning of the WARN Act.
(d) INDEMNIFICATION.
(i) Buyer and the Company agree that all rights to indemnification and
all limitations on liability existing in favor of any Indemnitee (as defined
hereinafter) as provided in the Company's Certificate of Incorporation,
Company's Bylaws or an agreement between an Indemnitee and the Company or a
Subsidiary of the Company as in effect as of the date hereof shall survive
the Merger and continue in full force and effect in respect of acts or
omissions occurring on or prior to the Effective Time (including in respect
of acts or omissions in connection with this Agreement or the Merger).
(ii) In addition to the other rights provided for in this Section 5(d)
and not in limitation thereof, for a period of six years after the Effective
Time the Surviving Corporation shall, to the fullest extent permitted by
law, (A) indemnify and hold harmless the individuals who on or prior to the
Effective Time were officers or directors of the Company and any of its
Subsidiaries (the "Indemnitees") against all losses, expenses (including,
without limitation, attorneys' fees and the cost of any investigation or
preparation incurred in connection thereof), claims, damages, liabilities,
judgments or amounts paid in settlement (collectively, "Costs") in respect
to any threatened, pending or contemplated claim, action, suit or
proceeding, whether criminal, civil, administrative or investigative,
arising out of acts or
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omissions occurring on or prior to the Effective Time relating to their acts
or omissions as a director or officer of the Company or any Subsidiary
(including, without limitation, in respect of acts or omissions in
connection with this Agreement and the Merger) (an "Indemnifiable Claim")
and (B) advance to such Indemnitees all expenses incurred in connection with
any Indemnifiable Claim. In the event any Indemnifiable Claim is asserted or
made within such six year period, all rights to indemnification and
advancement of expenses in respect of any such Indemnifiable Claim shall
continue until such Indemnifiable Claim is disposed of or all judgments,
orders, decrees or other rulings in connection with such Indemnifiable Claim
are fully satisfied. To the extent required by law, such advancement of
expenses shall be subject to delivery of an undertaking to reimburse the
Surviving Corporation if it is ultimately determined that an Indemnitee is
not entitled to indemnification.
(iii) For a period of six years after the Effective Time, the Surviving
Corporation shall provide officers and directors liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering
each such person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no
less favorable than those of the policy in effect on the date hereof;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be
required to expend more than an amount per year equal to 200% of current
annual premiums paid by the Company for such insurance (the "Maximum
Amount") to maintain or procure insurance coverage pursuant hereto;
PROVIDED, FURTHER, that if the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount, the
Surviving Corporation shall maintain or procure, for such six year period,
the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount.
(iv) Notwithstanding any other provision hereof, the obligations of the
Surviving Corporation contained in this Section 5(d) shall be binding upon
the successors and assigns of the Surviving Corporation. In the event the
Surviving Corporation or any of its successors or assigns (A) consolidates
with or merges into any other person or entity or (B) transfers all or
substantially all of its properties or assets to any person or entity, then,
and in each case, proper provision shall be made so that successors and
assigns of the Surviving Corporation, as the case may be, honor the
indemnification obligations set forth in this Section 5(d).
(v) The obligations of the Surviving Corporation under this Section 5(d)
shall not be terminated or modified in such a manner as to adversely affect
any Indemnitee to whom this Section 5(d) applies without the consent of such
affected Indemnitee (it being expressly agreed that the Indemnitees to whom
this Section 5(d) applies shall be third party beneficiaries of this Section
5(d)).
(e) INDEMNIFICATION COSTS. The Surviving Corporation shall advance all
Costs to any Indemnitee incurred by enforcing the indemnity or other obligations
provided for in this Section 5(d).
ARTICLE VI. MUTUAL COVENANTS.
Section 6 (a) CONSUMMATION OF THE TRANSACTIONS. Subject to the terms and
conditions of this Agreement, each party hereto shall use its reasonable best
efforts consistent with applicable legal requirements and the terms of this
Agreement to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby and to cause the Closing to occur as soon as
practicable, including obtaining all permits, approvals, authorizations and
consents of all third parties necessary or desirable for the purpose of enabling
such party to consummate the transactions contemplated by this Agreement. The
Company and its Subsidiaries and each of their respective directors, officers
and representatives shall cooperate (and shall cause their respective Agents to
cooperate) with Buyer, and Buyer shall cooperate (and shall cause its Agents to
cooperate) with the Company and its Subsidiaries in filing any necessary
applications, reports or other documents, including the proxy materials, with,
giving any notices to, and seeking any consents from, all Governmental Entities
and all third parties as such party may be required to deliver in connection
with
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the consummation of the transactions contemplated by this Agreement and the
performance by the Surviving Corporation and its subsidiaries of their
businesses after such consummation, and in seeking necessary consultation with
and prompt favorable action by any such Governmental Entity or third party.
(b) PUBLICITY. The first press release made upon execution and delivery of
this Agreement shall be a joint press release agreed upon by Buyer and Company.
The parties hereto agree that, from the date of the execution and delivery of
this Agreement through the Closing, no public release or announcement concerning
the transactions contemplated hereby after the initial joint press release shall
be issued by any party hereto without the prior consent of (i) Buyer in the case
of a release or an announcement by the Company or any of its Subsidiaries or
(ii) the Company in the case of a release or an announcement by Buyer or
Acquisition (in each case which consent shall not be unreasonably withheld),
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange, in which case
the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance. After the date hereof, the parties hereto shall not make any
comments or statements with respect to the transactions contemplated hereby to
any third party (including, without limitation, members of the news media,
securities analysts and employees of the Company, any of its Subsidiaries, or
Buyer or any of its subsidiaries) without the prior consent of Buyer, on the one
hand, or the Company, on the other hand, as the case may be, PROVIDED, HOWEVER,
that nothing in this Section 6(b) shall limit Buyer's ability to distribute
private placement offering memoranda in connection with a transaction to sell
securities of Buyer to finance the Merger Consideration and engage in standard
marketing activities and to participate in investor presentations with respect
to such transactions.
(c) ANTITRUST NOTIFICATION. The Company shall, and Buyer shall, as
promptly as practicable, file with the United States Federal Trade Commission
(the "FTC") and the United States Department of Justice (the "DOJ") and other
Government Entities the notification and report form, if any, required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act or other applicable antitrust or
competition laws. Any such notification and report form and supplemental
information shall be in substantial compliance with the requirements of the HSR
Act. The Company shall furnish to Buyer, and Buyer shall furnish to the Company,
such necessary information and reasonable assistance as may be requested in
connection with the preparation of any filing or submission which is necessary
under the HSR Act. The Company shall keep Buyer reasonably informed, and Buyer
shall keep the Company reasonably informed, of the status of any communications
with, and any inquiries or requests for additional information from, the FTC and
the DOJ and shall comply promptly with any such inquiry or request.
(d) FURTHER ASSURANCES. From time to time, as and when reasonably
requested by another party hereto, a party hereto shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further acts or other actions as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof.
(e) NOTICE OF BREACH. The Company shall promptly give written notice to
Buyer, and Buyer shall promptly give written notice to the Company upon becoming
aware of any event which would cause or constitute a material breach of any of
the representations, warranties or covenants of such party contained or referred
to in this Agreement or that would cause any of the conditions to such party's
own obligations to Close to become incapable of being performed.
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ARTICLE VII. CONDITIONS TO CLOSING.
Section 7 (a) EACH PARTY'S OBLIGATIONS. The respective obligations of each
party hereto to effect the Merger is subject to the satisfaction or waiver as of
the Closing of the following conditions:
(i) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order shall
have been enacted, entered, promulgated, enforced or issued by any
Governmental Entity preventing the Merger or any of the other transactions
contemplated by this Agreement;
(ii) The waiting or notice period under the HSR Act or other applicable
antitrust or competition laws, if applicable to the Merger, shall have
expired or been terminated; and
(iii) This Agreement and the Merger shall have been approved and adopted
by the stockholders of the Company as required by the Delaware Law and the
Company's Certificate of Incorporation and By-Laws.
(b) THE COMPANY'S OBLIGATIONS. The obligation of the Company to effect the
transactions contemplated hereby is subject to the satisfaction (or waiver by
the Company) as of the Closing of the following additional conditions:
(i) ACCURACY OF REPRESENTATIONS AND WARRANTIES, COMPLIANCE WITH
COVENANTS. The representations and warranties of Buyer and Acquisition made
in this Agreement qualified as to materiality shall be true and correct, and
those not so qualified shall be true and correct in all material respects,
as of the date hereof and as of the time of the Closing as though made as of
such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, on and
as of such earlier date). Buyer and Acquisition each shall have duly
performed, complied with and satisfied in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed, complied with or satisfied by them by the time of the Closing.
(ii) INJUNCTION. There shall not be pending, threatened or in effect
any injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental agency of competent jurisdiction
directing that the transactions contemplated hereby not be consummated as so
provided or any statute, rule or regulation enacted or promulgated that
makes consummation of the transactions contemplated hereby illegal.
(iii) SOLVENCY OPINION. The Company shall have received an opinion
from Houlihan Lokey, Howard & Zukin or such other firm acceptable to the
Company to the effect that, at and immediately after the Effective Time, and
after giving effect to the Merger (and any changes in the Surviving
Corporation's assets and liabilities as a result thereof), (A) on a pro
forma basis, the sum of the Company's debts is less than the fair value of
its assets or the present fair saleable value of its assets will be greater
than the amount required to pay its probable liabilities on its debts as
they mature, (B) the capital remaining in the Company after the transaction
would not be unreasonably small for the business in which the Company is
engaged and (C) the Company would be able to pay its debts as they mature.
(iv) CONSENTS, APPROVALS. All consents, authorizations, orders and
approvals of (or filings or registrations with) any Governmental Entity or
third parties required in connection with the execution, delivery and
performance of this Agreement by Buyer or Acquisition shall have been
obtained or made, except for filings to effectuate the Merger and any
documents required to be filed after the Effective Time, and except for such
consents, authorizations, orders and approvals that if not obtained or made
would not materially and adversely effect the ability of Buyer or
Acquisition to consummate the transactions contemplated hereby.
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(v) OFFICER'S CERTIFICATE. Buyer shall have delivered to the Company a
certificate dated the Closing Date and signed by an officer of Buyer and an
officer of Acquisition confirming the satisfaction of the conditions set
forth in clauses (i) and (iv) above.
(c) BUYER'S AND ACQUISITION'S OBLIGATIONS. The obligations of Buyer and
Acquisition to effect the transactions contemplated hereby is subject to the
satisfaction (or waiver by Buyer and Acquisition) as of the Closing of the
following additional conditions:
(i) ACCURACY OF REPRESENTATIONS AND WARRANTIES, COMPLIANCE WITH
COVENANTS. The representations and warranties of the Company made in this
Agreement qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of
the date hereof and as of the time of the Closing as though made as of such
time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of
such earlier date). The Company shall have duly performed, complied with and
satisfied in all material respects all covenants, agreements and conditions
required by this Agreement to be performed, complied with or satisfied by
the Company by the time of the Closing.
(ii) INJUNCTIONS. There shall not be pending, threatened or in effect
any injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental agency of competent jurisdiction
directing that the transactions contemplated hereby not be consummated as so
provided or any statute, rule or regulation enacted or promulgated that
makes consummation of the transactions contemplated hereby illegal.
(iii) NO LITIGATION. There shall be no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against the Company
that would reasonably be expected to have a Material Adverse Effect.
(iv) DISSENTING SHARES. No more than four percent (4.0%) of the shares
of Common Stock outstanding immediately prior to the Effective Time shall be
Dissenting Shares.
(v) CONSENTS, APPROVALS. All consents, authorizations, orders and
approvals of (or filings or registrations with) any Governmental Entity or
third parties required in connection with the execution, delivery and
performance of this Agreement by the Company shall have been obtained or
made, except for filings to effectuate the Merger and any other documents
required to be filed after the Effective Time, and except for such consents,
authorizations, orders and approvals that, if not obtained or made, would
not in the aggregate have a Material Adverse Effect.
(vi) MARKET CONDITION. There shall not exist or be continuing (A) any
general suspension of trading, or limitation on prices for, securities on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ
National Market, (B) the declaration of a banking moratorium or any
suspension of payments in respect of the banks in the United States, (C) the
commencement of a war, armed hostilities or other international or national
calamity or emergency or a material escalation or worsening thereof directly
involving the United States, or (D) any condition or material adverse change
in the financial or capital markets generally which, based on the written
advice of Credit Suisse First Boston addressed to Buyer (a copy of which
Buyer shall promptly provide to the Company), would reasonably be expected
to materially adversely affect the syndication of leveraged bank credit
facilities or the consummation of high yield offerings, as the case may be.
(vii) OPINION. The Company shall have received the opinion of Brown &
Wood LLP, counsel to the Company, to the effect that the Company has the
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger, all requisite approvals of and the adoption of this
Agreement by the Company's stockholders have been obtained and, assuming due
authorization
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and approval of the Agreement by Buyer and Acquisition, that upon the filing
of a certificate of merger with the Secretary of State of the State of
Delaware, the Merger will be effective.
(viii) OFFICER'S CERTIFICATE. The Company shall have delivered to
Buyer a certificate dated the Closing Date and signed by an officer of the
Company confirming the satisfaction of the conditions set forth in clauses
(i), (iii), (iv) and (v) above.
(d) FRUSTRATION OF CLOSING CONDITIONS. No party to this Agreement may rely
on the failure of any condition set forth in Article 7 if such failure was
caused by such party's failure to act in good faith or to use its reasonable
best efforts to cause the Closing to occur.
ARTICLE VIII. TERMINATION.
Section 8 (a) TERMINATION EVENTS. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) by mutual written consent of the parties hereto;
(ii) by Buyer or the Company, if the Closing does not occur on or prior
to March 31, 1999 (the "Outside Termination Date"); PROVIDED, HOWEVER, that
in the event all conditions to closing have been satisfied or waived other
than Section 7(c)(vi), the Outside Termination Date shall be deemed to be
the later of (A) January 31, 1999 or (B) 60 days after the first day on
which all of the conditions other than Section 7(c)(vi) shall have been
satisfied or waived, but in no event later than March 31, 1999, PROVIDED,
FURTHER, that the right to terminate this Agreement pursuant to this Section
8(a)(ii) shall not be available to any party hereto, if the failure of such
party to perform any of its covenants, agreements or obligations under this
Agreement resulted in the Closing to not have occurred on or prior to such
date;
(iii) by Buyer or the Company, if any Governmental Entity shall have
issued a judgment, order or decree or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger or any of the
other transactions contemplated by this Agreement, and such judgment, order
or decree or other action shall have become final and nonappealable;
(iv) by the Company, if the Board of Directors of the Company determines
to accept an Acquisition Proposal in accordance with Section 4(c);
(v) by Buyer, if (A) any other entity, person or group consummates a
tender offer pursuant to which such person, entity or group becomes the
beneficial owner of 50% or more of the then outstanding shares of Company
Common Stock, (B) the Company Special Meeting has not been convened prior to
the day before the Outside Termination Date and the failure to convene the
Company Special Meeting was not (x) the fault of Buyer or (y) as a result of
any statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Governmental Entity
that has the effect of preventing the Company from calling, convening or
holding the Company Special Meeting or (C) prior to the vote of the
Company's stockholders, the Board of Directors of the Company shall have
withdrawn or modified or amended in any respect adverse to Buyer its
approval or recommendation of the Merger (it being understood that the
Company making a Neutral Statement with respect to, or making a
recommendation in favor of a tender or exchange offer from a third party, in
a filing made pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act shall constitute an adverse modification of its approval or
recommendation of the Merger, unless, in the case of a Neutral Statement
only, contemporaneously with the filing of such Neutral Statement the
Company publicly confirms that it continues to recommend approval of the
Merger and continues to actively support the Merger thereafter);
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(vi) by Buyer or the Company, if the stockholders of the Company fail to
adopt this Agreement at the Company Special Meeting; or
(vii) by Buyer, at any time during the three business days immediately
following receipt of a Determination Notice, PROVIDED that Buyer has cured
by the time of such termination any material breach of its representations,
warranties, covenants or agreements with respect to which the Company has
given written notice to Buyer at least five business days prior to the first
date on which a proposal or inquiry is first submitted to the Company, any
of its Subsidiaries or any of their respective directors, officers or
employees with respect to a potential Acquisition Proposal.
(b) TERMINATION NOTICE. In the event of any termination pursuant to this
Article 8, written notice thereof setting forth the reasons therefore shall
forthwith be given to the other parties and the transactions contemplated by
this Agreement shall be terminated, without further action by any party (other
than the payments contemplated by Section 8(c)). If the transactions
contemplated by this Agreement are terminated as provided herein: (i) Buyer
shall return all documents and other materials received from the Company and its
Subsidiaries relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Company; and (ii) all
confidential information received by Buyer with respect to the business of the
Company and its Subsidiaries shall be treated in accordance with Section 5(a)
hereof, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
(c) TERMINATION FEES.
(i) If this Agreement shall have been terminated pursuant to Section
8(a)(iv), 8(a)(v) or 8(a)(vi) (PROVIDED, that in the case of termination
pursuant to Section 8(a)(vi), at the time of the Company Special Meeting an
Acquisition Proposal shall have been publicly announced and not withdrawn,
terminated or lapsed), then the Company shall promptly, but in no event
later than two business days after the termination of this Agreement (or, in
the event of a termination pursuant to Section 8a(iv), on the date of
termination), pay Buyer an amount equal to the Applicable Break-Up Fee (as
defined hereinafter). The Applicable Break-Up Fee shall be $10,000,000 in
the case of termination pursuant to Section 8(a)(iv), 8(a)(v)(A) or
8(a)(v)(C) and $5,000,000 in the case of Section 8(a)(v)(B) or 8(a)(vi),
plus in each case the documented out-of-pocket expenses incurred by Buyer
pursuant to the last sentence of Section 4(a). Payment of the Applicable
Break-Up Fee shall be made under this clause (i), as directed by Buyer, by
wire transfer in immediately available funds promptly, but in no event later
than two (2) business days following such termination (PROVIDED, that in the
case of termination pursuant to Section 8(a)(iv), such payment shall be made
on the same day as termination).
(ii) If the Agreement is terminated pursuant to Section 8(a)(vii), the
Company shall pay Buyer $3,000,000, plus the documented out-of-pocket
expenses incurred by Buyer pursuant to the last sentence of Section 4(a) no
later than two (2) business days following such termination and if within
twelve (12) months thereafter the Company enters into any written Company
Acquisition Agreement (whether or not such Company Acquisition Agreement is
related to the Acquisition Proposal which had been received at the time of
the termination of this Agreement) or any third party (other than an
affiliate of Buyer) acquires 50% or more of the then outstanding shares of
Common Stock, then the Company shall immediately prior to entering into such
Company Acquisition Agreement pay Buyer $7,000,000 (which, together with the
prior $3,000,000, shall constitute an "Applicable Break-Up Fee"). Only one
fee in an amount not to exceed the amount of the Applicable Break-Up Fee
shall be payable pursuant to this Section 8(c). The payment of the
Applicable Break-Up Fee shall be compensation and liquidated damages for the
loss suffered by Buyer as the result of the failure of the Merger to be
consummated and to avoid difficulty of determining damages under the
circumstances.
(d) EFFECTS OF TERMINATION. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article 8,
this Agreement shall become void and of no further
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force or effect, except for the provisions of (i) 5(a) relating to the
obligation of the Buyer to keep confidential certain information and data
obtained by them, (ii) Section 6(b) relating to publicity, (iii) this Article
VIII, (iv) Article X relating to certain expenses and (v) Article XI. Nothing in
this Article VIII shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement (with
respect to which a claim shall survive) or to impair the right of any party to
compel specific performance by any other party of its obligations under this
Agreement. Buyer agrees that neither the Company nor its directors, officers,
employees, representatives or agents, nor any person or entity who shall make an
Acquisition Proposal shall be deemed, by reason of the making of such proposal
or any actions taken in connection with it (PROVIDED that such person or entity
making such Acquisition Proposal does not take any action that results in a
violation of this Agreement, including, without limitation, Section 4(c)) to
have tortiously or otherwise wrongfully interfered with or caused a breach of
this Agreement, or other agreements, instruments and documents executed in
connection herewith, or the rights of Buyer or any of its affiliates hereunder.
ARTICLE IX. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall not survive beyond the Effective
Time. Notwithstanding the foregoing, this Article IX shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time.
ARTICLE X. EXPENSES. Whether or not the transactions contemplated hereby
are consummated, and except as otherwise specifically provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs or expenses.
ARTICLE XI. MISCELLANEOUS.
Section 11 (a) NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided
in Section 5(d) the provisions of which are for the benefit of, and enforceable
by, the persons referred to therein, this Agreement is for the sole benefit of
the parties hereto and their permitted assigns, and nothing herein expressed or
implied shall give or be construed to give to any person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
(b) AMENDMENT OR WAIVER. No amendment, modification or waiver in respect
of this Agreement shall be effective unless it shall be in writing and signed by
the parties hereto.
(c) HEADINGS. The headings contained in this Agreement, or in any exhibit
or schedule hereto and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
(e) INTERPRETATION. References in this Agreement to "reasonable best
efforts" shall not require a Person obligated to use its reasonable best efforts
to incur out-of-pocket expenses or indebtedness or, except as expressly provided
herein, to institute litigation. References herein to the "knowledge of the
Company" shall mean the actual knowledge of the officers (as such term is
defined in Rule 3b-2 promulgated under the Exchange Act) of the Company.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
The phrase "made available" when used in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
terms "affiliate(s)" and "associates" shall have the meaning set forth in Rule
12b-2 promulgated under the Exchange Act.
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<PAGE>
(f) ASSIGNMENT. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any party hereto (including by
operation of law in connection with a merger, or sale of substantially all the
assets, or any dissolution, of any party hereto) without the prior written
consent of the other parties hereto; PROVIDED, HOWEVER, that Buyer or
Acquisition may assign its rights hereunder to an affiliate of Buyer without the
prior written consent of any party hereto; PROVIDED FURTHER, HOWEVER, that no
assignment shall limit or affect the assignor's obligations hereunder. Any
attempted assignment in violation of this Section 11(f) shall be void.
(g) NOTICES. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent by
telecopy or sent, postage prepaid, by registered, certified or express mail or
overnight courier service and shall be deemed given when so delivered by hand,
or telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
if to the Company,
Alamo Group Inc.
750 East Mulberry Street
Suite 401
San Antonio, Texas 78212
Telecopy No: (210) 738-3185
Attention: Chief Executive Officer
with a copy to:
Brown & Wood LLP
One World Trade Center
58th Floor
New York, New York 10048
Telecopy No.: (212) 839-5599
Attention: Joseph W. Armbrust, Esq.
if to the Buyer,
WEC Company
c/o Madison Dearborn Partners, Inc.
Three First National Plaza
Suite 3800
Chicago, IL 60602
Telecopy No: (312) 895-1156
Attention: Thomas R. Reusche or Paul R. Wood
with copies to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Telecopy No: (312) 861-2200
Attention: Michael H. Kerr, P.C.
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
(h) ENTIRE AGREEMENT. This Agreement, including the schedules hereto, and
the Confidentiality Agreement contain the entire agreement and understanding
between the parties hereto with respect to the
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<PAGE>
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter. The parties hereto shall not be liable or bound
to any other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein or in
the Confidentiality Agreement.
(i) SEVERABILITY. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability.
(j) SCHEDULES. The inclusion of any matter in any schedule to this
Agreement shall be deemed to be an inclusion for all purposes of this Agreement,
to the extent such disclosure is sufficient to identify the section to which
such disclosure is responsive, but inclusion therein shall expressly not be
deemed to constitute an admission by the Sellers, or otherwise imply, that any
such matter is material or creates a measure for materiality for the purposes of
this Agreement.
(k) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
<TABLE>
<S> <C> <C> <C>
ALAMO GROUP INC.,
A Delaware Corporation
By: /s/ DONALD J. DOUGLASS
-------------------------
Name: Donald J. Douglass
Title: Chairman and Chief
Executive Officer
AGI ACQUISITION CORP., WEC COMPANY,
a Delaware corporation a Delaware corporation
By: /s/ THOMAS J. LAIRD By: /s/ THOMAS J. LAIRD
------------------------- -------------------------
Name: Thomas J. Laird Name: Thomas J. Laird
Title: President Title: President
</TABLE>
A-29
<PAGE>
APPENDIX B
OPINION OF MERRILL LYNCH, PIERCE
FENNER & SMITH INCORPORATED
<PAGE>
[LOGO]
October 21, 1998
Board of Directors
Alamo Group Inc.
1502 East Walnut
Seguin, Texas 78155
Members of the Board of Directors:
Alamo Group Inc. (the "Company"), WEC Company (the "Acquiror") and AGI
Acquisition Corp., a newly formed, wholly-owned subsidiary of the Acquiror (the
"Acquisition Sub"), have entered into an Agreement and Plan of Merger, dated as
of August 18, 1998 (as amended and restated as of September 4, 1998, the
"Agreement"), pursuant to which the Acquisition Sub will be merged with the
Company in a merger (the "Merger") in which each outstanding share of the
Company's common stock, par value $0.10 per share (the "Shares"), will be
converted into the right to receive $18.50 in cash (the "Consideration").
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Shares pursuant to the Merger is fair from a financial
point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning the matters described in clauses 1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Shares and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the financial terms of the Merger with the financial terms of
certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the Agreement and the four Option Agreements entered into by
Acquiror, Acquisition Sub and four stockholders; and
(9) Reviewed such other financial studies and analyses and took into account
such other matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
<PAGE>
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that they have been reasonably and reflect the best
currency available estimates and judgment of the Company's management as to the
expected future financial performance of the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided financing services to an
affiliate of the Acquiror and may continue to do so. We have received, and may
continue to receive, fees for the rendering of such services. In addition, in
the ordinary course of our business, we may actively trade the Shares for our
own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
On the basis of any subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the holders of the
Shares pursuant to the Merger is fair from a financial point of view to the
holders of such Shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-2
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
<PAGE>
SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
262 APPRAISAL RIGHTS.--(a) any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder "means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its
<PAGE>
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
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<PAGE>
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
C-3
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 120, L.
'97, eff. 7-1-77.)
C-4
<PAGE>
ALAMO GROUP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ALAMO GROUP, INC.
The undersigned hereby appoints Donald J. Douglass, Oran F. Logan and
Robert H. George, or any one of them, proxies with full power of substitution
to vote at the Special Meeting of Stockholders of Alamo Group Inc. to be held
at 8:30 A.M. on the 6th Floor of the NationsBank Plaza, 300 Convent Street,
San Antonio, Texas, on Wednesday, November 18, 1998, and any adjournments or
postponements thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders and the Proxy Statement (with all enclosures and attachments)
dated October 21, 1998. The undersigned ratifies all that the proxies or any
of them or their substitutes may lawfully do or cause to be done by virtue
hereof and revokes all former proxies.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
Please mark
When properly executed, this proxy will be voted in the your vote as /X/
manner directed below. If no direction is made, it will be provided in
voted FOR proposals (1) and (2) below. this example
PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED
AS OF AUGUST 18, 1998 AND AS AMENDED AND RESTATED AS OF
SEPTEMBER 4, 1998 (AS SO AMENDED AND RESTATED, THE 'MERGER
AGREEMENT'), BETWEEN THE COMPANY, WEC COMPANY, A DELAWARE FOR AGAINST ABSTAIN
CORPORATION ('WEC') AND AGI ACQUISITION CORP., A DELAWARE / / / / / /
CORPORATION ('AGI'), PURSUANT TO WHICH AGI WILL BE MERGED
WITH AND INTO THE COMPANY (THE 'MERGER'), WITH THE COMPANY
BEING THE SURVIVING CORPORATION.
IN THE DISCRETION OF THE PROXY HOLDER, UPON ALL MATTERS
PRESENTED AT THE SPECIAL MEETING BUT WHICH WERE NOT KNOWN
TO THE BOARD OF DIRECTORS AT A REASONABLE TIME BEFORE THE FOR AGAINST ABSTAIN
SOLICITATION OF THIS PROXY AND UPON SUCH OTHER BUSINESS AS / / / / / /
MAY PROPERLY COME BEFORE THE SPECIAL MEETING, INCLUDING ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
