<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
(AMENDMENT NO. 1)
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Name of Subject Company)
TRANSPORTATION ACQUISITION I CORP.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Bidders)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
479477 10 1
(CUSIP Number of Class of Securities)
THOMAS M. BEGEL
TRANSPORTATION ACQUISITION I CORP.
980 N. MICHIGAN AVENUE, SUITE 1000
CHICAGO, ILLINOIS 60611
TELEPHONE: (312) 280-8844
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
COPY TO:
<TABLE>
<S> <C>
JOSEPH A. COCO, ESQ. DENNIS S. HERSCH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP DAVIS POLK & WARDWELL
FOUR TIMES SQUARE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10017
TELEPHONE: (212) 735-3000 TELEPHONE: (212) 450-4000
FACSIMILE: (212) 735-2000 FACSIMILE: (212) 450-4800
</TABLE>
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$229,346,738 $45,870
</TABLE>
* Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase of all outstanding shares of common stock, par
value $0.01 per share (the "Shares"), of Transportation Technologies
Industries, Inc., a Delaware corporation (the "Company"), at a price of
$21.50 per Share in cash. As of January 28, 2000, there were (1) 10,322,280
Shares issued and outstanding and (2) 636,168 unexercised options to acquire
Shares with an exercise price of less than $21.50 per share under various
employee stock option plans of the Company. Based on the foregoing, the
transaction value is equal to the sum of (1) the product of 10,322,280 Shares
and $21.50 per Share and (2) the product of 636,168 Shares subject to options
to purchase Shares with an exercise price of less than $21.50 per share and
the difference between $21.50 per Share and the exercise price per Share of
such options. The amount of the filing fee, calculated in accordance with
Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the value of the transaction.
/ / Check the box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: Not applicable. Filing party: Not applicable.
Form or registration no.: Not applicable. Date filed: Not applicable.
</TABLE>
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
/X/ third-party tender offer subject to Rule 14d-1.
/X/ issuer tender offer subject to Rule 13e-4.
/X/ going-private transaction subject to Rule 13e-3.
/X/ amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of a tender offer: / /
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule TO (this "Statement") relates to a
joint tender offer by Transportation Acquisition I Corp., a Delaware corporation
("Acquisition"), and Transportation Technologies Industries, Inc., a Delaware
corporation (the "Company"), to purchase all shares of common stock, par value
$0.01 per share (the "Common Stock"), together with the associated preferred
share purchase rights (the "Rights" and, together with the Common Stock, the
"Shares") issued pursuant to the Rights Agreement, dated as of October 5, 1995,
between the Company and BankBoston, N.A., as Rights Agent, of the Company
tendered pursuant to the tender offer at $21.50 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated February 3, 2000 (the "Offer to Purchase"), a
copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which, as
they may be amended or supplemented from time to time, together constitute the
"Offer"). This Statement also constitutes Amendment No. 1 to the Schedule 13D
originally filed by Thomas M. Begel, Timothy A. Masek, Camillo M. Santomero,
III, Kenneth M. Tallering and Andrew M. Weller on December 23, 1999.
The information in the Offer to Purchase, including all schedules and
annexes thereto, is hereby expressly incorporated herein by reference in
response to all the items of this Statement, except as otherwise set forth
below.
ITEM 12. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
(a)(1) Offer to Purchase dated February 3, 2000.
(a)(2) Solicitation/Recommendation Statement on Schedule 14D-9 of the Company, dated February 3, 2000.
(a)(3) Letter of Transmittal.
(a)(4) Notice of Guaranteed Delivery.
(a)(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(8) Summary Advertisement dated February 3, 2000.
(a)(9) Press Release of the Company dated February 3, 2000.
(b) Not applicable.
(c) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included as Annex A of the Offer to Purchase filed
herewith as Exhibit (a)(1)).
(d)(1) Agreement and Plan of Merger, dated as of January 28, 2000, between Transportation Technologies
Industries, Inc. and Transportation Acquisition I Corp. (included as Annex C of the Offer to Purchase
filed herewith as Exhibit (a)(1)).
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as Annex D of the Offer to Purchase filed
herewith as Exhibit (a)(1)).
(g) Not applicable.
(h) Not applicable.
(i)(1) Complaint filed in action entitled PHELPS AND WILLISTON V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
ET AL. (Court of Chancery of New Castle County, Delaware).
(i)(2) Complaint filed in action entitled BRETON V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(3) Complaint filed in action entitled GRENING V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(i)(4) Complaint filed in action entitled GANEM V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
<S> <C>
(i)(5) Complaint filed in action entitled HOGGE V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(6) Complaint filed in action entitled BIERACH V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(7) Complaint filed in action entitled KREOFSKY V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL.
(Circuit Court of Cook County, Illinois).
</TABLE>
3
<PAGE>
SIGNATURES
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certify that the information set forth in this Statement is
true, complete and correct.
<TABLE>
<S> <C> <C>
TRANSPORTATION ACQUISITION I CORP.
By: /s/ KENNETH M. TALLERING
----------------------------------------
Name: Kenneth M. Tallering
Title: Vice President
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
By: /s/ ANDREW M. WELLER
----------------------------------------
Name: Andrew M. Weller
Title: President and
Chief Operating Officer
</TABLE>
Date: February 3, 2000
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certify that the information set forth in this Statement,
insofar as it amends the Statement on Schedule 13D filed on December 23, 1999,
is true, complete and correct.
<TABLE>
<S> <C> <C>
/s/ THOMAS M. BEGEL
------------------------------
Thomas M. Begel
/s/ JAMES D. CIRAR
------------------------------
James D. Cirar
/s/ TIMOTHY A. MASEK
------------------------------
Timothy A. Masek
/s/ DONALD C. MUELLER
------------------------------
Donald C. Mueller
/s/ CAMILLO M. SANTOMERO III
------------------------------
Camillo M. Santomero III
/s/ KENNETH M. TALLERING
------------------------------
Kenneth M. Tallering
/s/ ANDREW M. WELLER
------------------------------
Andrew M. Weller
</TABLE>
Date: February 3, 2000
4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - --------- ---------------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase dated February 3, 2000.
(a)(2) Solicitation/Recommendation Statement on Schedule 14D-9 of the Company, dated February 3, 2000.
(a)(3) Letter of Transmittal.
(a)(4) Notice of Guaranteed Delivery.
(a)(5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(8) Summary Advertisement dated February 3, 2000.
(a)(9) Press Release of the Company dated February 3, 2000.
(b) Not applicable.
(c) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included as Annex A of the Offer to Purchase filed
herewith as Exhibit (a)(1)).
(d)(1) Agreement and Plan of Merger, dated as of January 28, 2000, between Transportation Technologies
Industries, Inc. and Transportation Acquisition I Corp. (included as Annex C of the Offer to Purchase
filed herewith as Exhibit (a)(1)).
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as Annex D of the Offer to Purchase filed
herewith as Exhibit (a)(1)).
(g) Not applicable.
(h) Not applicable.
(i)(1) Complaint filed in action entitled PHELPS AND WILLISTON V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
ET AL. (Court of Chancery of New Castle County, Delaware).
(i)(2) Complaint filed in action entitled BRETON V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(3) Complaint filed in action entitled GRENING V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(4) Complaint filed in action entitled GANEM V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(5) Complaint filed in action entitled HOGGE V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(6) Complaint filed in action entitled BIERACH V. BEGEL ET AL. (Court of Chancery of New Castle County,
Delaware).
(i)(7) Complaint filed in action entitled KREOFSKY V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL.
(Circuit Court of Cook County, Illinois).
</TABLE>
5
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AT
$21.50 NET PER SHARE
BY
TRANSPORTATION ACQUISITION I CORP.
AND BY
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
THIS OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF JANUARY 28, 2000, BETWEEN TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(FORMERLY KNOWN AS JOHNSTOWN AMERICA INDUSTRIES, INC.) (THE "COMPANY") AND
TRANSPORTATION ACQUISITION I CORP. ("ACQUISITION"). THE OFFER IS CONDITIONED
UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES OF COMMON STOCK OF
THE COMPANY WHICH WOULD RESULT IN ACQUISITION OWNING A MAJORITY OF THE SHARES OF
COMMON STOCK OF THE COMPANY OUTSTANDING ON A FULLY DILUTED BASIS AFTER GIVING
EFFECT TO THE REPURCHASE OF SHARES BY THE COMPANY IN THE OFFER, (II) THE DEBT
TENDER OFFER (AS DEFINED BELOW) HAVING BEEN CONSUMMATED AND (III) THE RECEIPT BY
THE COMPANY AND ACQUISITION OF THE PROCEEDS OF FINANCING ON TERMS SATISFACTORY
TO ACQUISITION SUFFICIENT TO PURCHASE THE SHARES PURSUANT TO THE OFFER, TO PAY
THE PER SHARE AMOUNT (AS DEFINED BELOW) IN THE MERGER (AS DEFINED BELOW) AND TO
PAY ALL FEES AND EXPENSES INCURRED BY ACQUISITION AND THE COMPANY IN CONNECTION
WITH THE OFFER AND THE MERGER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD COMPRISED ENTIRELY OF
INDEPENDENT DIRECTORS, (I) HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (II) HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, ARE ADVISABLE, FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN ACQUISITION, THE CONTINUING
STOCKHOLDERS (AS DEFINED BELOW) AND THEIR RESPECTIVE AFFILIATES) AND (III)
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
------------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock") should either (i) complete and sign the enclosed Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed (if required
by Instruction 1 to the Letter of Transmittal), mail or deliver the Letter of
Transmittal (or a facsimile thereof) and any other required documents to the
Depositary (as defined herein) and either deliver the certificates for such
Shares (as defined below) along with the Letter of Transmittal to the Depositary
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in "THE OFFER--Procedures for Tendering Shares" or (ii) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. Any stockholder whose Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee to tender such shares.
ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, OR WHO CANNOT DELIVER ALL REQUIRED DOCUMENTS TO THE DEPOSITARY
PRIOR TO THE EXPIRATION OF THE OFFER, MAY TENDER SUCH SHARES BY FOLLOWING THE
PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN "THE OFFER--PROCEDURES FOR
TENDERING SHARES."
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to MacKenzie Partners, Inc. (the "Information Agent") at its addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
Stockholders may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE INFORMATION AGENT FOR THE OFFER IS:
abcdef
THE DEALER MANAGERS FOR THE OFFER ARE:
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
February 3, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SUMMARY TERM SHEET.......................................... 1
INTRODUCTION................................................ 5
SPECIAL FACTORS............................................. 8
Background of the Transactions............................ 8
Recommendation of the Board of Directors; Fairness of the
Transactions............................................ 10
Opinion of Financial Advisor.............................. 13
Purpose and Structure of the Transactions................. 21
Plans for the Company After the Transactions.............. 21
Interests of Certain Persons in the Transactions.......... 22
The Merger Agreement...................................... 23
Appraisal Rights.......................................... 29
Certain Federal Income Tax Consequences................... 30
Financing of the Transactions............................. 31
Beneficial Ownership of Common Stock...................... 37
Transactions and Arrangements Concerning the Shares....... 39
Certain Effects of the Transactions....................... 39
THE OFFER................................................... 41
Terms of the Offer........................................ 41
Acceptance for Payment and Payment for Shares............. 43
Procedures for Tendering Shares........................... 44
Withdrawal Rights......................................... 46
Price Range of the Shares; Dividends...................... 47
Effect of the Transactions on the Market for the Shares;
Exchange Act Registration; Margin Regulations........... 47
Certain Information Concerning the Company................ 47
Certain Information Concerning Acquisition................ 56
Conditions to the Offer................................... 58
Certain Legal Matters..................................... 61
Fees and Expenses......................................... 63
Miscellaneous............................................. 64
</TABLE>
<TABLE>
<S> <C>
Schedule I --Information Concerning Directors and Executive Officers of
the Company
Schedule II --Information Concerning Directors and Executive Officers of
Acquisition
Annex A --Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Annex B --Historical Financial Information Concerning the Company
Annex C --Agreement and Plan of Merger, dated as of January 28,
2000, between the Company and Acquisition
Annex D --Section 262 of the Delaware General Corporation Law
</TABLE>
i
<PAGE>
SUMMARY TERM SHEET
Acquisition and the Company are offering to purchase all of the outstanding
Common Stock of the Company for $21.50 per share in cash. The following are some
of the questions that you, as a stockholder of the Company, may have and answers
to those questions. The information in this summary is not complete and we urge
you to carefully read the remainder of this Offer to Purchase and the
accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase all of the outstanding Common Stock is being made
jointly by Acquisition and the Company. If the offer is consummated, Acquisition
will purchase no fewer than the first 2,750,000 shares tendered and the Company
will purchase all of the remaining shares tendered.
The Company is a leading manufacturer of components for heavy-duty and
medium-duty trucks and buses and the trucks parts aftermarket. The Company's
product lines include Gunite wheel-end components, Brillion custom iron
castings, Imperial body and chassis components, Bostrom truck and bus seating
systems and Fabco steerable drive axles and gearboxes. The Company is
headquartered in Chicago, Illinois and conducts manufacturing operations in
Alabama, California, Illinois, Indiana, Pennsylvania, Tennessee, Texas,
Virginia, Washington and Wisconsin.
Acquisition was formed by an investor group led by certain members of senior
management of the Company, including Thomas M. Begel, the Company's Chairman and
Chief Executive Officer, and Andrew M. Weller, the Company's President and Chief
Operating Officer, for the purpose of making a tender offer for all of the
Company's Common Stock. Acquisition is not a subsidiary of the Company.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase all of the outstanding Common Stock. Concurrently
with this Offer, the Company is also making tender offers and consent
solicitations with respect to its 11 3/4% Senior Subordinated Notes due 2005 and
11 3/4% Series C Senior Subordinated Notes due 2005. If you own any of these
notes and have not yet received the materials relating to the tender offers and
consent solicitations, please call MacKenzie Partners, Inc., the information
agent for those tender offers, at (212) 929-5500 (call collect) or (800)
322-2885.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $21.50 per share, net to you in cash. If you tender
your shares to us in the Offer, you will not have to pay brokerage fees or
similar expenses.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
We have received commitment letters from financial institutions in which
such financial institutions have committed, subject to certain conditions, to
provide all of the financing necessary to purchase all shares that are tendered
in the Offer.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
Because tendering your shares in the Offer will end your ownership interest
in the Company, including the chance to receive any possible future dividends or
other payments in respect of the Common Stock, the Company's financial condition
may be relevant to your decision whether to tender in the Offer. As such, we
have provided certain historical financial information concerning the Company in
"THE OFFER--Certain Information Concerning the Company" and "Annex B--Historical
Financial Information Concerning the Company" of this Offer to Purchase.
1
<PAGE>
Because the form of payment consists solely of cash and all of the funding
which will be needed has already been arranged, and also because of the lack of
any relevant historical financial information concerning Acquisition, we do not
think the financial condition of Acquisition is relevant to your decision to
tender in the Offer.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on Friday,
March 3, 2000 to decide whether to tender your shares in the Offer. Further, if
you cannot deliver everything that is required in order to make a valid tender
by that time, you may be able to use a guaranteed delivery procedure, which is
described later in this Offer to Purchase.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the Merger Agreement, we can extend the Offer. We
have agreed in the Merger Agreement that we may extend the offer from time to
time until April 30, 2000 if certain conditions to the Offer have not been
satisfied.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform First Union Securities, Inc. (which
is the Depositary for the Offer) of that fact, and will make a public
announcement of the extension, not later than 9:00 a.m., New York City time, on
that day after the day on which the Offer was scheduled to expire.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
We are not obligated to purchase any shares which are validly tendered
unless that number of shares, when added to the shares then owned by
Acquisition, if any, represents at least a majority of the shares of the Common
Stock outstanding on a fully diluted basis after giving effect to the repurchase
of shares by the Company. We are also not obligated to purchase shares which are
validly tendered if the tender offers and consent solicitations relating to the
Company's 11 3/4% Senior Subordinated Notes due 2005 and 11 3/4% Series C Senior
Subordinated Notes due 2005 have not been consummated, or if we do not receive
financing that is sufficient to purchase the shares tendered in the Offer, to
pay for any non-tendered shares in connection with the Merger, and to pay
various fees and expenses incurred in connection with the Offer and the Merger.
Furthermore, we are not obligated to purchase any shares which are validly
tendered if, among other things, there is a material adverse change in the
Company or its business.
HOW DO I TENDER MY SHARES?
To tender your shares, you must deliver the certificates representing your
shares, together with a completed Letter of Transmittal, to BankBoston, N.A. not
later than the time the Offer expires. If your shares are held in street name
(that is, through a broker, dealer or other nominee), the shares can be tendered
by your nominee through The Depository Trust Company. If you cannot get
something that is required to the Depositary by the expiration of the Offer, you
may get a little extra time to do so by having a broker, bank or other fiduciary
who is a member of the Securities Transfer Agent Medallion Program or other
eligible institution to guarantee that the missing items will be received by the
Depositary within three Nasdaq National Market trading days. However, the
Depositary must receive the missing items within that three day trading period.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered shares at any time until the Offer has
expired and, if we have not agreed to accept your shares for payment by April 2,
2000, you can withdraw them at any time after such time until we do accept your
shares for payment.
2
<PAGE>
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the shares.
WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER?
As previously stated, Acquisition was formed for the purpose of making the
Offer. Acquisition was formed by an investor group including certain members of
senior management of the Company, some of whom also hold seats on the Company's
Board of Directors. In order to avoid any actual or potential conflicts of
interest relating to such individuals, the Board appointed a Special Committee
consisting of independent directors who do not have any such relations with
Acquisition to evaluate the terms of the Merger Agreement and advise the full
Board of Directors.
The Board of Directors of the Company, after receiving the unanimous
recommendation of the Special Committee, (i) has approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the proposed
Merger of Acquisition with and into the Company, with the Company as the
surviving corporation, (ii) has determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are
advisable, fair to and in the best interests of the Company's stockholders
(other than Acquisition, the Continuing Stockholders and their respective
affiliates) and (iii) recommends that you tender your shares in the Offer.
WILL THE COMPANY CONTINUE AS A PUBLIC COMPANY?
No. If the Merger takes place, the Company will no longer be publicly owned.
Even if the Merger does not take place, if we purchase all the tendered shares,
there may be so few remaining stockholders and publicly held shares that the
Common Stock will no longer be eligible to be traded through the Nasdaq National
Market or other securities market, there may not be a public trading market for
the Common Stock and the Company may cease making filings with the Securities
and Exchange Commission or otherwise cease being required to comply with SEC
rules relating to publicly held companies.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL OF THE COMPANY'S SHARES ARE
NOT TENDERED IN THE OFFER?
If Acquisition accepts for payment and pays for at least a majority of the
Company's outstanding shares on a fully diluted basis after giving effect to the
repurchase of shares by the Company, Acquisition will be merged with and into
the Company. If that Merger takes place, the Company will become a privately
owned company, and all of the Company's remaining stockholders (other than
Acquisition and certain investors who are providing the financing for the Offer
and Merger) will receive $21.50 per share in cash (or any other higher price per
share which is paid in the Offer).
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
Stockholders not tendering in the Offer will receive in the Merger the same
amount of cash per share which they would have received had they tendered their
shares in the Offer. Therefore, if the Merger takes place, the only difference
to you between tendering your shares and not tendering your shares is that you
will be paid earlier if you tender your shares in the Offer. However, if the
Merger does not take place, the number of stockholders of the Company and the
number of shares of the Company which are still in the hands of the public may
be so small that there will no longer be an active public trading market (or,
possibly, any trading market) for the Common Stock. Also, as described above,
the Company may cease making filings with the SEC or otherwise cease being
required to comply with the SEC rules relating to publicly held companies.
3
<PAGE>
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On February 2, 2000, the last trading day before we announced the
commencement of the Offer and the possible subsequent Merger, the last sale
price of the Common Stock reported on the Nasdaq National Market was $20.56 per
share. We advise you to obtain a recent quotation for the shares of Common Stock
in deciding whether to tender your shares.
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call MacKenzie Partners, Inc. at (212) 929-5500 (call collect) or
(800) 322-2885. MacKenzie Partners, Inc. is acting as the information agent for
the Offer.
4
<PAGE>
To the Holders of Common Stock of
Transportation Technologies Industries, Inc.:
INTRODUCTION
Acquisition and the Company (collectively, the "Purchasers") hereby offer to
purchase all of the outstanding shares of Common Stock, together with the
associated preferred share purchase rights issued pursuant to the Rights
Agreement, dated as of October 4, 1995 (the "Rights Agreement"), between the
Company and BankBoston, N.A., as Rights Agent (the "Rights," and together with
the Common Stock, the "Shares"), at a price of $21.50 per Share, net to the
seller in cash, without interest thereon (such amount, or any greater amount per
Share paid pursuant to the Offer, being referred to herein as the "Per Share
Amount"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which, as amended from
time to time, together constitute the "Offer"). The Offer is a joint tender
offer by Acquisition and the Company to purchase at the Per Share Amount all
Shares tendered pursuant to the Offer, with Acquisition agreeing to pay for and
purchase no fewer than the first 2,750,000 Shares tendered pursuant to the Offer
and the Company agreeing to pay for and purchase all Shares tendered pursuant to
the Offer in excess of the Shares paid for and purchased by Acquisition.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchasers will pay all fees and expenses of First Union National Bank, which is
acting as the depositary (the "Depositary"), MacKenzie Partners, Inc., which is
acting as the information agent (the "Information Agent"), and CIBC World
Markets Corp. and First Union Securities, Inc., which are acting as the dealer
managers (the "Dealer Managers"), incurred in connection with the Offer. See
"THE OFFER--Fees and Expenses."
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 28, 2000 (the "Merger Agreement"), between the Company and
Acquisition. Pursuant to the Merger Agreement, following the completion of the
Offer and the satisfaction or waiver of certain conditions set forth in the
Merger Agreement, Acquisition will be merged with and into the Company (the
"Merger" and, together with the Offer, the "Transactions"), with the Company as
the surviving corporation in the Merger (the "Surviving Corporation"). In the
Merger, each outstanding Share (other than Shares held in the treasury of the
Company, Shares owned by Acquisition or by any Continuing Stockholder (as
defined below), and other than Shares held by stockholders who properly exercise
appraisal rights under the Delaware General Corporation Law (the "DGCL")
("Dissenting Shares")) will be converted into the right to receive the Per Share
Amount.
Pursuant to the Merger Agreement, certain officers and directors of the
Company (and possibly other employees of the Company) will have the right to
retain an equity interest in the Company following the Offer and the Merger.
Such members of management (and other employees) are collectively referred to
herein as the "Continuing Stockholders."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD RESULT IN ACQUISITION OWNING A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS AFTER GIVING EFFECT TO THE REPURCHASE OF
THE SHARES BY THE COMPANY IN THE OFFER (THE "MINIMUM CONDITION"), (II) THE DEBT
TENDER OFFER HAVING BEEN CONSUMMATED AND (III) THE RECEIPT BY THE COMPANY AND
ACQUISITION OF THE PROCEEDS OF FINANCING ON TERMS SATISFACTORY TO ACQUISITION
SUFFICIENT TO PURCHASE THE SHARES PURSUANT TO THE OFFER, TO PAY THE PER SHARE
AMOUNT IN THE MERGER AND TO PAY ALL FEES AND EXPENSES INCURRED BY ACQUISITION
AND THE COMPANY IN CONNECTION WITH THE OFFER AND THE MERGER (THE "FINANCING
5
<PAGE>
CONDITION"). The Offer is also subject to the other conditions set forth in this
Offer to Purchase. See "SPECIAL FACTORS--Financing of the Offer and the Merger"
for a discussion of the financing and "THE OFFER--Conditions to the Offer" which
sets forth in full the conditions of the Offer. For purposes of the Offer, "on a
fully diluted basis" includes, as of any date, those Shares that the Company is
required to issue pursuant to obligations outstanding as of the applicable date
under convertible securities, stock options and otherwise.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), AFTER RECEIVING THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD COMPRISED ENTIRELY
OF INDEPENDENT DIRECTORS (THE "SPECIAL COMMITTEE"), (I) HAS APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, (II) HAS DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE ADVISABLE, FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN ACQUISITION,
THE CONTINUING STOCKHOLDERS AND THEIR RESPECTIVE AFFILIATES) AND (III)
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
As of January 28, 2000, there were 10,322,280 shares of Common Stock
(including restricted stock) issued and outstanding and 660,168 shares subject
to outstanding stock options under the Company's stock option plans. As of
January 28, 2000, there were approximately 106 holders of record of the issued
and outstanding Shares.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, financial advisor to the
Special Committee, has delivered to the Special Committee its opinion, dated as
of January 28, 2000 (the "Financial Advisor Opinion"), to the effect that, as of
such date and based upon and subject to certain assumptions and matters stated
therein, the Per Share Amount is fair, from a financial point of view, to the
stockholders of the Company (other than Acquisition, the Continuing Stockholders
and their affiliates). See "SPECIAL FACTORS--Opinion of Financial Advisor." A
copy of the Financial Advisor Opinion is attached hereto as Annex A.
The Company and Acquisition have entered into commitment letters with (i)
Canadian Imperial Bank of Commerce ("CIBC"), CIBC World Markets Corp. ("CIBC
World Markets"), First Union National Bank ("First Union") and First Union
Securities, Inc. ("First Union Securities" and, together with CIBC, CIBC World
Markets and First Union, the "Credit Facility Parties") pursuant to which the
Credit Facility Parties have committed, subject to the terms and conditions set
forth in their commitment letter, to provide the Company with senior secured
credit facilities in the amount of $300 million, such credit facility to be
comprised of (a) up to $50 million in revolving credit loans, (b) a $100 million
6-year amortizing term loan facility and (c) a $150 million 7-year amortizing
term loan facility, in each case from a syndicate of banks and other lenders
with CIBC World Markets and First Union Securities serving as Co-Lead Arrangers
and Joint Bookrunners, First Union serving as Administrative Agent, and CIBC
serving as Syndication Agent and (ii) CIBC World Markets and First Union
Investors, Inc. (collectively, the "Bridge Lenders"), whereby the Bridge Lenders
have committed, subject to the terms and conditions set forth in their
committment letter, to provide the Company with a $125 million senior
subordinated increasing rate bridge facility. In addition, Acquisition and the
Company have entered into commitment letters with CIBC WMC Inc. ("CIBC WMC"),
Caravelle Investment Fund, L.L.C. ("Caravelle"), Albion Alliance Mezzanine Fund,
L.P. ("Albion I") and Albion Alliance Mezzanine Fund II, L.P. ("Albion II" and,
together with CIBC WMC, Caravelle and Albion I, the "Preferred Investors"),
providing for their purchase of senior preferred stock of Acquisition (which
will become preferred stock of the Surviving Corporation upon consummation of
the Merger) with an aggregate liquidation preference of $70 million. In
connection with the issuance of the preferred stock, at the effective time of
the Merger, the Preferred Investors will receive shares of common stock of the
Surviving Corporation representing 50% of the equity of the Surviving
Corporation on a fully diluted basis. The Continuing Stockholders have committed
to make a $15 million equity
6
<PAGE>
investment in the Surviving Corporation, which may be effected through the
rollover of shares of common stock, options to acquire common stock or
otherwise, and, at the effective time of the Merger, the Continuing Stockholders
will own 50% of the equity of the Surviving Corporation on a fully diluted
basis. See "SPECIAL FACTORS--Financing of the Transactions."
Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
and the Merger by the requisite vote of stockholders of the Company. See
"SPECIAL FACTORS--The Merger Agreement." The affirmative vote of the holders of
a majority of the outstanding Shares is required to approve and adopt the Merger
Agreement and the Merger. Pursuant to the Merger Agreement, Acquisition has
agreed to vote, or cause to be voted, all Shares owned by it or any of its
subsidiaries or affiliates in favor of the adoption of the Merger Agreement and
approval of the Merger. ACCORDINGLY, IF THE MINIMUM CONDITION IS SATISFIED AND
SHARES ARE PURCHASED PURSUANT TO THE OFFER, THE FAVORABLE VOTE TO APPROVE THE
MERGER WILL BE ASSURED.
Following the Merger, the Preferred Investors and the Continuing
Stockholders will own all of the outstanding shares of common stock in the
Surviving Corporation. Accordingly, such stockholders will participate in any
future increase in the equity value of the Company, as well as be subject to the
increased risks of owning shares in a significantly more leveraged company.
In connection with the approval of the Transactions, the Board of the
Company approved the Offer as a "Qualifying Offer" under the Rights Agreement
and authorized an amendment to the Rights Agreement to assure that the Rights
will not be triggered as a result of the Transactions.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ CAREFULLY IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
7
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE TRANSACTIONS
Beginning in late 1998, senior management of the Company (which was then
known as Johnstown America Industries, Inc.), at the direction of the Board of
Directors, began to explore the Company's strategic alternatives, including a
possible sale of all or part of the Company, in order to maximize stockholder
value. In this regard, management, with the assistance of financial advisors,
contacted various third parties to ascertain their interest in considering a
possible transaction or transactions with the Company.
In June 1999, the Company sold its freight car operations to a company
formed by certain former members of senior management of the companies
comprising the freight car operations of the Company and Camillo M.
Santomero III, a director of the Company. The Company sold its freight car
operations in order to reduce the Company's exposure to market cyclicality,
improve its capital structure and permit the Company to focus its efforts on its
heavy-duty truck components business.
Following the sale of the Company's freight car operations, senior
management of the Company continued to explore the Company's strategic
alternatives and contacted additional third parties regarding a possible
transaction involving the Company. However, these discussions did not result in
any specific proposals being made.
In November 1999, members of the Company's senior management, including
Thomas M. Begel, Chairman and Chief Executive Officer of the Company, and
Andrew M. Weller, President and Chief Operating Officer of the Company, began to
explore, on a preliminary basis, the possibility of an acquisition of the
Company's common stock as part of a management buyout transaction. During the
weeks of November 1 and 8, 1999, Mr. Begel and Mr. Weller, together with
Mr. Santomero and Kenneth M. Tallering, Vice President, General Counsel and
Secretary of the Company, met with various financial institutions, including
CIBC World Markets and several other equity and debt financing sources, to
discuss the feasibility of a possible transaction and to ascertain their
interest in financing such transaction. On November 12, 1999, senior management
of the Company determined to pursue discussions with respect to a financing
using CIBC World Markets as its primary financing source.
Following such meetings, senior management of the Company held further
discussions with other debt financing sources, including First Union, to discuss
their possible participation with CIBC World Markets in financing a possible
transaction. In connection with such discussions, representatives of CIBC World
Markets and First Union (collectively, the "Financing Parties") and senior
management of the Company discussed possible transaction structures, financing
for a possible transaction, the terms of management's participation in such a
transaction and the Financing Parties' due diligence review of the Company.
As a result of such discussions, counsel to the Financing Parties
distributed to senior management of the Company and its counsel, Skadden, Arps,
Slate, Meagher & Flom LLP ("Skadden Arps"), draft commitment letters relating to
the financing of a transaction. Thereafter, representatives of the Financing
Parties and senior management of the Company negotiated the terms of the
financing commitment letters. On December 14, 1999, the Financing Parties
delivered to Skadden Arps copies of commitment letters which were executed by
the Financing Parties.
On December 14, 1999, the investor group led by senior management of the
Company delivered a written proposal to the Board of Directors of the Company
proposing an acquisition of the Company's common stock through a joint tender
offer by the Company and Acquisition, a newly formed acquisition vehicle, for
all the outstanding shares of common stock of the Company at a purchase price of
$20.00 per Share in cash. The proposal letter was delivered together with copies
of the commitment letters executed by the Financing Parties and a draft merger
agreement.
8
<PAGE>
At a meeting of the Board of Directors held on December 14, 1999, the Board
discussed the terms of the proposal generally and reviewed the process to be
followed in connection with evaluating the proposal. At this meeting, the Board
appointed a Special Committee of independent directors, consisting of R. Philip
Silver and Francis A. Stroble, to consider the proposal on behalf of the
Company. Following the meeting, a press release was issued by the Company
announcing that the proposal had been received by the Board of Directors and
that the Special Committee had been appointed to consider the proposal.
On December 15, 1999, the Special Committee retained Davis Polk & Wardwell
("Davis Polk") as its legal advisor.
On December 21, 1999, the Special Committee and Davis Polk met with three
investment banking firms in connection with selecting a financial advisor to the
Special Committee. After reviewing the presentations, the Special Committee
decided to retain Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") as its financial advisor.
On January 4, 2000, the Special Committee met with its financial and legal
advisors. Merrill Lynch reported on its review of the Company, including its
discussions with management of the Company. Merrill Lynch also presented its
preliminary financial analysis and evaluation of the Company, which included a
review of projections furnished to Merrill Lynch by the Company. At the
January 4th meeting, the Special Committee requested that Merrill Lynch contact
a number of potential financial and strategic buyers to ascertain whether such
parties would have an interest in pursuing an acquisition of the Company.
On January 24, 2000, the Special Committee met with its financial and legal
advisors. At the request of the Special Committee, Merrill Lynch provided an
overview of its discussions with the potential strategic and financial buyers
that it had contacted. Merrill Lynch informed the Special Committee that it had
received one proposal from a potential buyer to pursue an acquisition of the
Company. The Special Committee reviewed this proposal with its legal and
financial advisors, including the conditions thereto, which included
satisfactory completion of due diligence, a significant period in which to
conduct due diligence and the obtaining of committed financing. The Special
Committee determined that, because this alternative proposal was highly
conditional and less likely to result in a satisfactory transaction on a timely
basis than the proposal by the management investor group, it would in the first
instance seek to negotiate a more satisfactory transaction with the management
investor group.
After discussion of the management investor group's proposal during the
January 24th meeting, Mr. Silver contacted Mr. Begel on behalf of the Special
Committee and informed him that the current management investor group proposal
of $20.00 per Share was insufficient, and requested that the management investor
group increase the per Share offer price. Mr. Silver also requested that the
management investor group revise its proposal by capping certain fees and
expenses in connection with a termination of the proposed transaction and
eliminating certain conditions to the financing commitments.
Following the Special Committee meeting on January 24th, at the request of
the Special Committee, Davis Polk delivered comments on the draft merger
agreement to Skadden Arps.
On January 25, 2000, Skadden Arps, on behalf of the management group,
delivered to Davis Polk a revised proposal letter and a revised draft merger
agreement. The revised proposal reflected an increase in the offer price per
Share to $21.50 and a cap on termination fees and expense reimbursement of
$11 million. The revised proposal also indicated that the financial commitment
letters would be revised to eliminate certain conditions to the closing of the
financing.
On January 26, 2000, the Special Committee met by teleconference with its
financial and legal advisors to review the revised proposal submitted by the
management group. After the meeting, the members of the Special Committee
contacted Mr. Begel with a counterproposal that reflected a higher per share
offer price as well as a lower termination fee payable on a scaled basis
depending on the grounds for termination of the merger agreement.
9
<PAGE>
On January 26, 2000, Skadden Arps, the management investor group, the
Financing Parties and their counsel contacted Davis Polk and Merrill Lynch,
stating that the management investor group's offer price of $21.50 per Share was
its best and final offer. Throughout the day on January 26, 2000, Davis Polk,
Skadden Arps and counsel for the Financing Parties continued to negotiate the
terms of the merger agreement and the conditions contained in the financing
commitment letters.
On January 27, 2000, the Special Committee met by teleconference with its
financial and legal advisors. The Special Committee reviewed a revised
management investor group proposal with respect to termination fees and
expenses. During the meeting, the Special Committee also reviewed the status of
Merrill Lynch's contacts with potential third party acquirors and assessed the
likelihood of other bidders making an offer superior to the management investor
group's offer. Davis Polk, Skadden Arps and counsel for the Financing Parties
continued to meet by teleconference to negotiate the terms of the merger
agreement and the financing commitment letters.
The Special Committee met with Merrill Lynch and Davis Polk by
teleconference throughout the day on January 28, 2000. Between such meetings,
the members of the Special Committee contacted Mr. Begel to discuss certain
conditions to closing contained in the financing commitment letters. At the
final meeting, Davis Polk reported to the Special Committee that it had
satisfactorily concluded negotiation of the remaining issues in the merger
agreement and Merrill Lynch delivered to the Special Committee its oral opinion
(subsequently confirmed in writing) that, as of the date of the opinion and
based upon and subject to the assumptions, factors and limitations set forth
therein, the $21.50 per Share in cash being offered in the Offer and to be
received in the Merger was fair, from a financial point of view, to the
Company's stockholders (other than Acquisition or any Continuing Stockholder).
The Special Committee unanimously determined that the Offer and the Merger and
the terms of the merger agreement are advisable, fair to and in the best
interests of the Company's stockholders (other than Acquisition, the Continuing
Stockholders and their affiliates), and unanimously recommended to the full
Board that it approve the merger agreement and the transactions contemplated
thereby, including the Offer and the Merger.
At a meeting of the full Board held on January 28, 2000 immediately
following the Special Committee meeting, the Board received the recommendation
of the Special Committee and reviewed the terms of the merger agreement and the
reasons for the Special Committee's recommendation. At such meeting, the Board
determined that the merger agreement and the transactions contemplated thereby,
including the Offer and the Merger, are advisable, fair to, and in the best
interests of, the Company's stockholders (other than Acquisition, the Continuing
Stockholders and their affiliates), approved the merger agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
recommended that stockholders of the Company accept the Offer and tender their
shares pursuant to the Offer.
On January 31, 2000, the Company issued a press release announcing the
execution of the Merger Agreement, and on February 3, 2000, Acquisition and the
Company commenced the Offer.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY; FAIRNESS OF THE
TRANSACTIONS
SPECIAL COMMITTEE. In evaluating the Offer and the Merger, the Special
Committee relied upon their knowledge of the business, financial condition and
prospects of the Company as well as the advice of financial and legal advisors.
In determining that the Special Committee would approve and recommend the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, to the full Board, the Special Committee considered a number of factors,
including the following:
(1) MARKET PRICE AND PREMIUM. The Special Committee considered the
historical market prices and recent trading activity of the Common Stock with a
particular emphasis on the relationship between the $21.50 Per Share Amount and
the trading history of the Common Stock. In particular, the Special Committee
noted that the $21.50 Per Share Amount represents a premium of approximately 39%
over the $15.50 per Share closing price on the Nasdaq National Market on
December 13, 1999, the last full trading day before the Company announced that
it had received a proposal from Acquisition.
10
<PAGE>
(2) SPECIAL COMMITTEE FORMATION AND ARM'S-LENGTH NEGOTIATIONS. The Special
Committee considered the fact that the Merger Agreement and the transactions
contemplated thereby were the product of arm's-length negotiations between
Acquisition and the Special Committee (and their respective advisors), none of
whose members were employed by or affiliated with the Company (except in their
capacities as directors) or would have any equity interest in the Company
following the Merger.
(3) OFFER PRICE AND MERGER CONSIDERATION. The Special Committee concluded,
based on its negotiations with Acquisition and with the representatives of the
debt and equity financing sources, that the Offer Price and Per Share Amount
represented the highest price that Acquisition would be willing to pay in
acquiring the Shares. This determination was the result of the Special
Committee's personal participation in the negotiations with Acquisition, as well
as the advice of its advisors, in an attempt to obtain the highest possible
price.
(4) MERRILL LYNCH FAIRNESS OPINION. The Special Committee considered the
financial presentation of Merrill Lynch and Merrill Lynch's oral opinion
delivered at the January 28, 2000 meeting of the Special Committee, subsequently
confirmed in writing, that, as of the date of such opinion and based upon and
subject to the assumptions, factors and limitations set forth therein, the Per
Share Amount was fair, from a financial point of view, to the Company's
stockholders (other than Acquisition or any Continuing Stockholders). A COPY OF
MERRILL LYNCH'S WRITTEN OPINION SETTING FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY MERRILL LYNCH IS ATTACHED
AS ANNEX A TO THIS OFFER TO PURCHASE AND IS INCORPORATED HEREIN BY REFERENCE.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION OF MERRILL LYNCH
CAREFULLY AND IN ITS ENTIRETY (SEE "ANNEX A--OPINION OF MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED").
(5) TRANSACTION STRUCTURE. The Special Committee evaluated the benefits of
the transaction being structured as an immediate cash tender offer for all of
the outstanding Shares, thereby enabling the public stockholders of the Company
the opportunity to obtain cash for all of their Shares at the earliest possible
time and the fact that the per Share consideration to be paid in the Offer and
the Merger is the same.
(6) RECEIPT OF COMMITMENT LETTERS. The Special Committee considered the
fact that Acquisition and the Company had received commitment letters from debt
and equity financing sources to arrange, fund and administer the necessary
financing for the Offer and the Merger, and the Special Committee had reviewed
and negotiated certain terms and conditions of the commitment letters. (See "THE
OFFER--Financing of the Transactions").
(7) RECENT DISCUSSIONS REGARDING A SALE OF THE COMPANY. The Special
Committee considered the discussions that the Company has had with potential
financial and strategic acquirors regarding a possible sale of the Company. The
Special Committee noted the recent efforts of management of the Company to find
a potential purchaser who would be interested in a transaction that would result
in a premium to the stockholders similar to that being offered in this
transaction, as well as the results of Merrill Lynch's work on behalf of the
Special Committee in identifying possible alternative acquirors of the Company.
The Special Committee also noted that the one proposal received by the Special
Committee, other than the proposal by the management investor group, was viewed
to be highly conditional and less likely to result in a satisfactory transaction
on a timely basis than the proposal by the management investor group.
(8) ABILITY TO CONSIDER ALTERNATIVE TRANSACTIONS. The Special Committee
considered the terms of the Merger Agreement including (A) the provision
providing that the Special Committee may, in the exercise of its fiduciary
duties, furnish or provide access to information concerning the Company to, and
engage in discussions and negotiate with, third parties who make a bona fide
unsolicited written acquisition proposal which the Special Committee reasonably
believes is in excess of the per Share consideration to be paid in the Offer and
the Merger, and (B) the ability of the Special Committee, in the exercise of its
fiduciary duty,
11
<PAGE>
to terminate the Merger Agreement on two business days' notice in order to
permit the Company to enter into an alternative transaction with a third party.
(9) HISTORICAL AND PROJECTED FINANCIAL PERFORMANCE AND RELATED RISK AND
UNCERTAINTIES. The Special Committee considered the various financial
projections prepared by the Company's management (see "THE OFFER--Certain
Information Concerning the Company--Certain Projections") as well as financial
projections prepared for the Special Committee by Merrill Lynch. The Special
Committee also noted the cyclical nature of the industry in which the Company
operates, as well as the possible decline in North American heavy duty truck
production, the Company's principal market for its products, over the next
several years.
(10) POSSIBLE DECLINE IN MARKET PRICE OF COMMON STOCK. The Special
Committee considered the possibility that if a merger transaction with the
management investor group were not negotiated and the Company remained as a
publicly owned corporation, it is possible that because of a decline in the
market price of the shares of the Common Stock or the stock market in general,
the price that might be received by the holders of the Shares in the open market
or in a future transaction might be less than the $21.50 per Share price to be
received by stockholders in connection with the Offer and the Merger.
(11) AVAILABILITY OF DISSENTERS' RIGHTS. The Special Committee also
considered the fact that dissenters' rights of appraisal will be available to
the holders of Shares under Delaware law in connection with the Merger.
The Special Committee also considered the potential risks of the Offer and
the Merger, including (1) the fact that as a result of the Offer and the Merger,
the existing stockholders of the Company would be unable to benefit from any
future growth of the Company, (2) the fees and expenses required to be paid by
the Company by the terms of the Merger Agreement upon certain terminations of
the Merger Agreement which, among other things, would make it more costly for
another potential bidder to propose an acquisition of the Company on a basis
that would be superior to that contemplated by the Merger Agreement and (3) the
conditions relating to the obligations of the financing sources under each of
the financing commitment letters to provide the funding necessary to consummate
the Offer and the Merger and to pay related fees and expenses.
BOARD OF DIRECTORS OF THE COMPANY. In reaching its determination to approve
the Merger Agreement and the transactions contemplated thereby, the full Board
considered and relied upon the conclusions and unanimous recommendation of the
Special Committee that the full Board approve the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and the
considerations referred to above as having been taken into account by the
Special Committee, as well as the Board's own familiarity with the Company's
business, financial condition, results of operations and prospects and the
nature of the industry in which the Company operates.
In light of the number and variety of factors that the Special Committee and
the Board considered in connection with their evaluation of the Offer and the
Merger, neither the Special Committee nor the Board found it practicable to
quantify or otherwise assign relative weights to the foregoing factors, and,
accordingly, neither the Special Committee nor the Board did so. In addition,
individual members of the Special Committee and the Board may have given
different weights to different factors. Rather, the Special Committee and the
Board viewed their positions and recommendations as being based on the totality
of the information presented to and considered by it.
The Board believes that the Offer and the Merger are procedurally fair
because, among other things: (i) the Special Committee consisted of independent
directors appointed by the Board to represent the interests of the Company's
stockholders other than Acquisition, the Continuing Stockholders and their
affiliates; (ii) the Special Committee retained and was advised by its own
independent legal counsel who negotiated the Merger Agreement on behalf of the
Special Committee; (iii) the Special Committee retained and was advised by its
own financial advisor, Merrill Lynch, to assist it in evaluating the proposed
12
<PAGE>
transaction and provide it with financial advice; and (iv) the $21.50 per Share
consideration and the other terms and conditions of the Merger Agreement
resulted from active arm's-length bargaining between the Special Committee and
Acquisition and their respective advisors. The Board believes that sufficient
procedural safeguards to ensure fairness of the transaction and to permit the
Special Committee to effectively represent the interests of the holders of the
Common Stock (other than Acquisition, the Continuing Stockholders and their
affiliates) were present, and therefore there was no need to retain any
additional unaffiliated representative to act on behalf of the holders of the
Shares in view of (1) the unaffiliated status of the members of the Special
Committee and the retention by the Special Committee of its own independent
legal counsel and financial advisor and (2) the fact that the Special Committee
is a mechanism well recognized under Delaware law to ensure fairness in
transactions of this type.
Under the Company's certificate of incorporation, a plan of merger requires
the affirmative vote of at least a majority of all outstanding shares entitled
to vote thereon in order to be adopted. The Board and the Special Committee
recognize that the Merger is not structured to require the approval of the
holders of the outstanding Shares held by stockholders other than Acquisition,
the Continuing Stockholders and their affiliates. In addition, the Board and the
Special Committee recognized that if the Offer is consummated, Acquisition and
the Continuing Stockholders will have sufficient voting power to approve the
Merger without the affirmative vote of any other stockholders of the Company.
Consummation of the Offer, however, is conditioned upon, among other things, the
Minimum Condition, which may not be waived without the consent of the Special
Committee. Pursuant to the Merger Agreement, consummation of the Offer is a
condition to the Merger.
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS. Neither the Company nor
Acquisition has made any provisions in connection with the Offer and the Merger
to grant unaffiliated stockholders of the Company access to the Company's
corporate records, or to obtain counsel or appraisal services at the expense of
either the Company or Acquisition.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE UNANIMOUS
RECOMMENDATION OF THE SPECIAL COMMITTEE, (I) HAS APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
(II) HAS DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN ACQUISITION, THE
CONTINUING STOCKHOLDERS AND THEIR AFFILIATES) AND (III) RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
OPINION OF FINANCIAL ADVISOR
The Special Committee retained Merrill Lynch to act as its exclusive
financial advisor in connection with a possible business combination between the
Company and Acquisition or another third party. On January 28, 2000, at a
meeting of the Special Committee, Merrill Lynch orally delivered its opinion to
the Special Committee, subsequently confirmed in a written opinion dated
January 28, 2000, that, as of that date, and based upon and subject to the
various factors, assumptions and limitations set forth in the opinion, the Per
Share Amount was fair from a financial point of view to the holders of Common
Stock, other than Acquisition or any Continuing Stockholder.
THE FULL TEXT OF MERRILL LYNCH'S WRITTEN OPINION IS ATTACHED AS ANNEX A TO
THIS OFFER TO PURCHASE AND IS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE
MERRILL LYNCH OPINION ALSO IS AVAILABLE FOR INSPECTION AND COPYING BY ANY HOLDER
OF COMMON STOCK OR ANY REPRESENTATIVE OF SUCH HOLDER WHO HAS BEEN SO DESIGNATED
IN WRITING, AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY DURING NORMAL
BUSINESS HOURS. STOCKHOLDERS OF THE COMPANY ARE URGED TO, AND SHOULD, READ THE
MERRILL LYNCH OPINION CAREFULLY IN ITS ENTIRETY FOR INFORMATION WITH RESPECT TO
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN BY MERRILL LYNCH IN RENDERING ITS OPINION. THE MERRILL LYNCH
OPINION WAS FOR THE USE
13
<PAGE>
AND BENEFIT OF THE SPECIAL COMMITTEE AND ADDRESSES ONLY THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE PER SHARE AMOUNT TO HOLDERS OF COMMON STOCK,
OTHER THAN ACQUISITION OR ANY CONTINUING STOCKHOLDER. IT DOES NOT EXPRESS ANY
VIEW ON ACQUISITION'S ABILITY TO OBTAIN FINANCING OR THE SOLVENCY OR PRUDENCE OF
THE CAPITAL STRUCTURE OF THE COMPANY OR ACQUISITION FOLLOWING CONSUMMATION OF
THE TRANSACTIONS, NOR DOES IT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY
THE COMPANY TO ENGAGE IN THE TRANSACTIONS. THE MERRILL LYNCH OPINION DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF THE COMPANY AS TO WHETHER THAT
STOCKHOLDER SHOULD (1) TENDER ANY SHARES PURSUANT TO THIS OFFER TO PURCHASE,
(2) VOTE IN FAVOR OF THE MERGER, IF APPLICABLE, OR (3) TAKE ANY OTHER ACTION
WITH RESPECT TO THE TRANSACTIONS. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF THE ANALYSES PERFORMED BY MERRILL LYNCH AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH OPINION.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to the Company that Merrill Lynch deemed relevant;
- 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 senior management of the Company
(including the Continuing Stockholders);
- conducted discussions with members of senior management of the Company
(which included Continuing Stockholders) concerning the matters described
above;
- reviewed the market prices and valuation multiples for shares of Common
Stock and compared them with those of certain publicly traded companies
that Merrill Lynch deemed relevant;
- reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that Merrill Lynch deemed
relevant;
- compared the proposed financial terms of the Transactions with the
financial terms of certain other transactions that Merrill Lynch deemed
relevant;
- participated in certain discussions and negotiations between members of
the Special Committee and its legal advisors, on the one hand, and
Acquisition and its financial and legal advisors, on the other hand;
- reviewed a draft dated January 28, 2000 of the Merger Agreement; and
- reviewed selected other financial studies and analyses and took into
account various other matters as Merrill Lynch deemed necessary, including
Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and did not
assume any responsibility for independently verifying that information or
undertake an independent evaluation or appraisal of any of the Company's assets
or liabilities, nor was Merrill Lynch furnished with any such evaluation or
appraisal. In addition, Merrill Lynch did not assume any obligation to conduct
any physical inspection of the Company's properties or facilities. With respect
to the financial forecast information furnished to or discussed with Merrill
Lynch by the Company (including the Continuing Stockholders), Merrill Lynch
assumed that it had been reasonably prepared and reflected the best currently
available estimates and judgment of the management of the Company (which
included Continuing Stockholders) as to the expected future financial
performance of the Company. Merrill Lynch also assumed that the Merger Agreement
would be substantially similar to the last draft reviewed by it. The Merrill
Lynch opinion was necessarily based upon market, economic and other conditions
as they existed and could be evaluated on, and on the information made available
to Merrill Lynch as of, January 28, 2000.
14
<PAGE>
The following is a brief summary of the material financial analyses
presented by Merrill Lynch to the Special Committee in connection with the
rendering of its opinion.
Certain of these summaries include information presented in tabular format.
To understand fully the financial analyses performed by Merrill Lynch, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses performed by
Merrill Lynch, and considering the data set forth in the tables without
considering the full narrative description, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of those financial analyses.
In performing its analyses, Merrill Lynch used the Projections prepared by
senior management of the Company (which included Continuing Stockholders)
described under "THE OFFER--Certain Information Concerning the Company," namely
the Management Base Case, the Management Downside Case, the Equity Investor Case
and the Equity Investor Lower Truck Build Case. In addition, at the request of
the Special Committee, Merrill Lynch prepared a set of projections reflecting
more conservative assumptions than the Management Downside Case, which is
referred to as the "Conservative Case."
IMPLIED PREMIUM ANALYSIS
Merrill Lynch reviewed the historical trading prices for shares of Common
Stock and compared them with the Per Share Amount. This analysis indicated that
the Per Share Amount represented:
- a premium of 38.7% over the closing market price of Common Stock of $15.50
per share as of the close of business on December 13, 1999, which was the
last closing price prior to the announcement of Acquisition's original
proposal;
- a premium of 56.4% over the closing market price of $13.75 per share as of
the close of business on December 6, 1999, which was the last closing
price one week prior to the announcement;
- a premium of 53.6% over the closing market price of $14.00 per share as of
the close of business on November 15, 1999, which was the last closing
price one month prior to the announcement;
- a premium of 54.4% over the average closing market price of $13.93 per
share for the 30-day period beginning November 15, 1999 and ending
December 13, 1999;
- a premium of 43.4% over the average closing market price of $15.00 per
share for the 180-day period beginning June 14, 1999 and ending
December 13, 1999;
- a premium over the six-month and twelve-month high closing market price of
$19.38 per share as of the close of business on September 20, 1999 for the
six-month and twelve-month periods ending December 13, 1999; and
- a discount below the all time high closing market price of $29.63 per
share as of the close of business on February 15, 1994.
15
<PAGE>
SELECTED PUBLICLY TRADED COMPARABLE COMPANIES ANALYSIS
Merrill Lynch compared certain financial data relating to the Company with
corresponding financial data for the publicly traded companies shown below (the
"Selected Companies") which it deemed relevant:
SELECTED COMPANIES
<TABLE>
<CAPTION>
HEAVY DUTY COMPONENT SUPPLIERS OTHER COMPONENT SUPPLIERS
------------------------------ -------------------------
<S> <C>
- - - Cummins Engine Company Inc. - Amcast Industrial Corp.
- - - Dana Corp. - American Axle & Manufacturing Holding Inc.
- - - Detroit Diesel Corp. - Atchison Casting Corp.
- - - Meritor Automotive Inc. - Hayes Lemmerz International Inc.
- Intermet Corp.
- Mascotech Inc.
- Simpson Industries Inc.
- Superior Industries International Inc.
- Wescast Industries Inc.
</TABLE>
For each of the Selected Companies and the Company, Merrill Lynch calculated
multiples of the following financial metrics (for purposes of this analysis,
"EBITDA" means earnings before interest, taxes, depreciation and amortization,
and "EPS" means earnings per share):
- market capitalization to estimated 1999 EBITDA or, in the case of the
Company, pro forma 1999 EBITDA;
- market capitalization to estimated 2000 EBITDA;
- market price per share of common stock to estimated 1999 EPS or, in the
case of the Company, pro forma 1999 EPS; and
- market price per share of common stock to estimated 2000 EPS.
For purposes of calculating the multiples of market price per share to
estimated 1999 EPS and to estimated 2000 EPS for each of the Selected Companies,
Merrill Lynch used the closing price per share of that company's common stock on
January 27, 1999 and its calendar 1999 and 2000, respectively, estimated EPS, as
reported by First Call Corporation as of January 19, 2000. The multiples of
market capitalization to estimated 1999 EBITDA and to estimated 2000 EBITDA for
each of the Selected Companies were based on estimated 1999 EBITDA and estimated
2000 EBITDA, respectively, obtained from various publicly available Wall Street
equity research reports. The multiples of pro forma 1999 EBITDA and pro forma
1999 EPS for the Company were based on the Company's unaudited consolidated
financial statements for the year ended December 31, 1999, after giving effect
to the acquisitions and divestitures which occurred during 1999. The multiples
of estimated 2000 EBITDA and estimated 2000 EPS for the Company were based upon
the Management Base Case projections.
16
<PAGE>
The following table sets forth information concerning the range and mean of
multiples for the Selected Companies described above, as well as multiples of
the same financial metrics for the Company based on the December 13, 1999
closing price of $15.50 per share and the Per Share Amount:
<TABLE>
<CAPTION>
COMPANY
SELECTED COMPANIES ---------------------
------------------------------ $15.50 $21.50
RANGE MEAN PER SHARE PER SHARE
------------------- -------- --------- ---------
<S> <C> <C> <C> <C>
Market Capitalization to Estimated 1999 EBITDA (or pro
forma 1999 EBITDA in the case of the Company)........... 3.3x - 5.5x 4.4x 4.2x 4.9x
Market Capitalization to Estimated 2000 EBITDA............ 3.2x - 5.3x 4.1x 3.9x 4.6x
Market Price Per Share to Estimated 1999 EPS (or pro forma
1999 EPS in the case of the Company).................... 5.4x - 12.0x 8.1x 7.7x 10.6x
Market Price Per Share to Estimated 2000 EPS.............. 4.8x - 9.7x 7.0x 6.3x 8.7x
</TABLE>
Merrill Lynch then calculated implied equity values per share of Common
Stock (1) by applying multiples of market capitalization to 1999 EBITDA and 2000
EBITDA, respectively, ranging from 4.0x to 5.0x, which were derived from the
foregoing analysis, to the Company's pro forma 1999 EBITDA and to the Company's
estimated 2000 EBITDA based upon (a) the Management Base Case and the Management
Downside Case, which were the same for 2000 and are referred to collectively as
the "Management Cases," (b) the Equity Investor Case and the Equity Investor
Lower Truck Build Case, which were the same for 2000 and are referred to
collectively as the "Equity Investor Cases" and (c) the Conservative Case, and
(2) by (a) applying multiples of market price per share to 1999 EPS, ranging
from 7.0x to 10.0x, which were derived from the foregoing analysis, to the
Company's pro forma 1999 EPS and (b) applying multiples of market price per
share to 2000 EPS ranging from 6.0x to 9.0x, which were derived from the
foregoing analysis, to the Company's estimated 2000 EPS based upon the
Management Cases, the Equity Investor Cases and the Conservative Case.
The following table presents the ranges of implied equity values per share
of Common Stock resulting from this analysis as compared with the Per Share
Amount:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE PER
SHARE
OF COMMON STOCK
----------------------------
LOW HIGH
-------- --------
<S> <C> <C>
EBITDA:
Pro Forma 1999 EBITDA..................................... $13.95 $22.00
Management Cases Estimated 2000 EBITDA.................... 16.15 24.75
Equity Investor Cases Estimated 2000 EBITDA............... 17.60 26.60
Conservative Case Estimated 2000 EBITDA................... 13.05 20.90
EPS:
Pro Forma 1999 EPS........................................ 14.15 20.20
Management Cases Estimated 2000 EPS....................... 14.80 22.20
Equity Investor Cases Estimated 2000 EPS.................. 16.35 24.50
Conservative Case Estimated 2000 EPS...................... 11.30 17.00
Per Share Amount............................................ $21.50
</TABLE>
17
<PAGE>
SELECTED ACQUISITION TRANSACTIONS ANALYSIS
Merrill Lynch reviewed the financial terms of the following selected
acquisition transactions (the "Selected Acquisition Transactions") it deemed
relevant, which terms are publicly available or, in the case of the Selected
Acquisition Transactions made by the Company, provided by the Company:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
Johnstown America Industries, Inc. Bostrom Seating Inc.
Kuhlman Corp. Schwitzer Inc.
Dana Corp. Hayes-Dana Inc.
Johnstown America Industries, Inc. Truck Components Inc.
Eaton Corp. Capco Automotive Products Corp.
Dana Corp. Clark-Hurth Components Co.
Dana Corp. Eaton Corp.--Axle & Brake Division
Eaton Corp. Dana Corp.--Worldwide Clutch Business
Kohlberg Kravis Roberts & Co. Accuride Corp.
Borg-Warner Automotive Inc. Kuhlman Corp.
Johnstown America Industries, Inc. Imperial Group Inc.
Johnstown America Industries, Inc. EMI Company
Kelso & Co. Citation Corp.
Transportation Technologies Industries, Inc. Clark Engineering & Manufacturing Inc.
Transportation Technologies Industries, Inc. BMC of Virginia, Inc.
</TABLE>
For each of the Selected Acquisition Transactions, Merrill Lynch calculated
multiples of transaction value to EBITDA and EBIT (for purposes of this
analysis, "EBIT" means earnings before interest and taxes), respectively, of the
acquired company for a twelve-month period preceding or overlapping the date of
the acquisition announcement. For purposes of this analysis, transaction value
was calculated as the total consideration offered for the acquired company,
including amounts paid for common equity, the net cost of "in-the-money"
options, plus the liquidation value of preferred equity and the value of debt
and minority interests less cash and marketable securities.
This analysis indicated that:
- total transaction value as a multiple of EBITDA for the Selected
Acquisition Transactions ranged from 3.4x to 8.1x, with a mean of 5.8x;
and total transaction value as a multiple of EBITDA for the Selected
Acquisition Transactions made by the Company ranged from 3.4x to 5.0x,
with a mean of 4.6x; and
- total transaction value as a multiple of EBIT for the Selected Acquisition
Transactions ranged from 5.1x to 14.0x, with a mean of 8.2x; and total
transaction value as a multiple of EBIT for the Selected Acquisition
Transactions made by the Company ranged from 5.1x to 6.2x, with a mean of
5.6x.
Merrill Lynch then calculated implied equity values per share of Common
Stock (1) by applying multiples of total transaction value to EBITDA ranging
from 4.5x to 6.0x, which were derived from the foregoing analysis, to the
Company's pro forma 1999 EBITDA and (2) by applying multiples of total
transaction value to EBIT ranging from 5.0x to 8.2x to the Company's pro forma
1999 EBIT.
18
<PAGE>
The following table presents the ranges of implied equity values per share
of Common Stock, including the mean of the Selected Acquisition Transactions and
the mean of the Selected Acquisition Transactions made by the Company, resulting
from this analysis as compared with the Per Share Amount:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE PER SHARE
OF COMMON STOCK
-----------------------------------------
OVERALL COMPANY
LOW HIGH MEAN MEAN
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Pro Forma 1999 EBITDA...................................... $18.00 $30.05 $28.45 $18.80
Pro Forma 1999 EBIT........................................ 10.75 29.35 29.35 14.25
Per Share Amount........................................... $21.50
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Merrill Lynch performed a discounted cash flow analysis of the projected
after-tax unlevered free cash flows of the Company based upon each of the four
projection cases described under "THE OFFER--Certain Information Concerning the
Company" and the Conservative Case for fiscal years 2000 through 2004.
Using these forecasts, Merrill Lynch calculated implied equity values per
share of Common Stock by applying discount rates ranging from 10.0% to 12.0% per
year, determined by analyzing the weighted average cost of capital for selected
publicly traded heavy-duty truck component companies, and terminal value
multiples of average EBITDA for 2000 through 2004 ranging from 4.5x to 5.5x,
determined by analyzing the trading characteristics of the common stock of the
Selected Companies and the multiples paid in the Selected Acquisition
Transactions.
The following table presents the ranges of implied equity values per share
of Common Stock resulting from this analysis as compared with the Per Share
Amount:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
PER SHARE OF
COMMON STOCK
----------------------------
LOW HIGH
-------- --------
<S> <C> <C>
Management Base Case...................................... $17.70 $26.15
Management Downside Case.................................. 14.60 22.25
Equity Investor Case...................................... 22.70 32.20
Equity Investor Lower Truck Build Case.................... 19.45 28.15
Conservative Case......................................... 12.60 19.70
Per Share Amount.......................................... $21.50
</TABLE>
LEVERAGED BUYOUT ANALYSIS
Using the four projection cases described under "THE OFFER--Certain
Information Concerning the Company" and the Conservative Case for fiscal years
2000 through 2004, Merrill Lynch performed a leveraged buyout analysis to
determine the potential maximum price per share, under current market
conditions, that a leveraged buyout purchaser, such as Acquisition, could
theoretically pay for the Company. In performing this analysis, Merrill Lynch
assumed that (1) acquisition financing could be obtained in the high yield and
bank finance market in an amount not to exceed 5.0x pro forma 1999 EBITDA,
(2) a minimum internal rate of return from 25% to 35% on equity invested over a
four- to five-year period would be required and (3) a leveraged buyout purchaser
would realize value upon a liquidity event based on a multiple of price per
share to EPS of not less than 11x EPS.
19
<PAGE>
The following table presents the ranges of prices per share of Common Stock
resulting from this analysis as compared with the Per Share Amount:
<TABLE>
<CAPTION>
IMPLIED PRICE PER SHARE
OF COMPANY COMMON STOCK
----------------------------------
LOW HIGH
-------------- --------
<S> <C> <C>
Management Base Case........................................ $ 18.00 $24.00
Management Downside Case.................................... < 10.00 16.50
Equity Investor Case........................................ 25.00 29.00
Equity Investor Lower Truck Build Case...................... 17.00 24.00
Conservative Case........................................... < 10.00 16.50
Per Share Amount............................................ $21.50
</TABLE>
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selected portions of the analyses or of the summaries set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying the Merrill Lynch opinion. In arriving at its
fairness determination, Merrill Lynch considered the results of all such
analyses and did not attribute any particular weight to any factor or analysis
considered by it; Merrill Lynch made its determination as to fairness on the
basis of its experience and professional judgment after considering the results
of all such analyses. No company or transaction used in the above analyses as a
comparison is directly comparable to the Company or the Transactions. Analyses
based upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, Merrill Lynch or any other
person assumes responsibility if future results are materially different from
those forecast. As described above, the Merrill Lynch opinion was among many
factors taken into consideration by the Special Committee in making its
determination to recommend the Transactions.
Merrill Lynch is an internationally recognized investment banking and
advisory firm. As part of its investment banking business, Merrill Lynch is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Special Committee selected
Merrill Lynch to act as its financial advisor in connection with the
Transactions based on Merrill Lynch's qualifications, expertise and reputation.
In the ordinary course of Merrill Lynch's business, it may actively trade
shares of Company Common Stock and other securities of the Company, for its own
account and the accounts of its customers and, accordingly, may at any time hold
a long or short position in these securities.
Pursuant to an engagement letter dated January 11, 2000 between the Company
and Merrill Lynch, the Company agreed to pay Merrill Lynch a fee for providing
financial advisory services to the Special Committee in connection with the
Transactions, including rendering the opinion described above, which is
contingent on the consummation of the Transactions. In addition, the Company has
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses
incurred in connection with its engagement, including fees and disbursements of
its legal counsel, and to indemnify Merrill Lynch and its affiliates against
certain losses, claims, damages, liabilities and expenses related to or arising
out of the performance by Merrill Lynch of services under its engagement.
20
<PAGE>
PURPOSE AND STRUCTURE OF THE TRANSACTIONS
The purpose of the Transactions is for the Continuing Stockholders and the
Preferred Investors to acquire control of, and the entire equity interests in,
the Company in a transaction in which the holders of Shares (other than
Acquisition and the Continuing Stockholders) would be entitled to receive in
exchange for their equity interest in the Company cash in the amount of $21.50
per Share. Such acquisition is structured as a joint tender offer by Acquisition
and the Company to purchase at the Per Share Amount all Shares validly tendered
and not withdrawn pursuant to the Offer, with Acquisition agreeing to pay for
and purchase no fewer than the first 2,750,000 Shares tendered pursuant to the
Offer in excess of the Shares paid for and purchased by Acquisition. In
addition, in accordance with the Merger Agreement, concurrently with the
commencement of the Offer, the Company is commencing tender offers and consent
solicitations for all of its outstanding 11 3/4% Senior Subordinated Notes due
2005 and 11 3/4% Series C Senior Subordinated Notes due 2005 (the "Debt Tender
Offer").
As described above, the Board has approved the Merger and the Merger
Agreement in accordance with the DGCL and rendered inapplicable the restrictions
on mergers contained in Section 203 of the DGCL. The Board will be required to
submit the Merger Agreement to the Company's stockholders for adoption at a
stockholders' meeting convened for that purpose in accordance with the DGCL.
Under the Company's certificate of incorporation, the Merger Agreement must be
adopted by the affirmative vote of holders of a majority of the outstanding
shares of Common Stock. Pursuant to the Merger Agreement, the Company has agreed
to convene a meeting of its stockholders, if necessary, as soon as practicable
following the consummation of the Offer for the purpose of adopting the Merger
Agreement and to include in any proxy or information statement required for such
meeting the recommendation of the Board that the Company's stockholders vote in
favor of the adoption of the Merger Agreement. IF THE MINIMUM CONDITION IS
SATISFIED AND THE SHARES ARE PURCHASED IN THE OFFER, THE FAVORABLE VOTE TO
APPROVE THE MERGER IS ASSURED.
PLANS FOR THE COMPANY AFTER THE TRANSACTIONS
Pursuant to the Merger Agreement, upon completion of the Offer, the Company
and Acquisition intend to effect the Merger in accordance with the Merger
Agreement. See "SPECIAL FACTORS--The Merger Agreement." Following the Effective
Time, the directors of Acquisition immediately prior to the Effective Time shall
be the initial directors of the Surviving Corporation and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation. It is currently expected that the business and operations
of the Surviving Corporation will be continued substantially as they are
currently being conducted by the Company and its subsidiaries. Except as
otherwise indicated in this Offer to Purchase, none of Acquisition, the
Continuing Stockholders or the Preferred Investors has any present plans or
proposals involving the Company or its subsidiaries which relate to or would
result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation, or a sale or transfer of a material amount of
assets, or any material change in the Company's present dividend policy,
indebtedness or capitalization, or any other material change in the Company's
corporate structure or business. However, the Surviving Corporation's management
will review proposals or may propose the acquisition or disposition of assets or
other changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy that it considers to be in the
best interests of the Surviving Corporation and its stockholders. Management
may, from time to time, evaluate and review the Company's businesses, operations
and properties and make such changes as are deemed appropriate.
Upon consummation of the Merger, the Company will become a privately held
corporation. Accordingly, stockholders (other than Acquisition and the
Continuing Stockholders with respect to their Retained Shares (as defined
below)) will not have the opportunity to participate in the earnings and growth
of the Surviving Corporation after the consummation of the Transactions and will
not have any right to vote on corporate matters. Similarly, such stockholders
will not face the risk of losses generated by the Surviving
21
<PAGE>
Corporation's operations or any decrease in the value of the Surviving
Corporation after the consummation of the Merger.
Following the consummation of the Merger, the Shares will no longer be
quoted on the Nasdaq National Market ("Nasdaq"). In addition, the registration
of the Shares under the Exchange Act will be terminated. Accordingly, following
the consummation of the Merger, there will be no publicly-traded Shares
outstanding. See "THE OFFER--Effect of the Transactions on the Market for the
Shares; Exchange Act Registration; Margin Regulations." It is expected that, if
Shares are not accepted for payment by the Purchasers pursuant to the Offer and
the Transactions are not consummated, the Company's current management, under
the general direction of the Board, will continue to manage the Company as an
ongoing business.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
RETAINED INTEREST OF CONTINUING STOCKHOLDERS. Pursuant to the Merger
Agreement, upon the consummation of the Merger, certain Shares held by the
Continuing Stockholders prior to the consummation of the Merger will be
converted into the right to retain shares of common stock, par value $0.01 per
share, of the Surviving Corporation (each, a "Retained Share") and certain
options held by Continuing Stockholders will represent options to acquire shares
of Surviving Corporation common stock, in each case as agreed to by Acquisition
and the Continuing Stockholders. See "SPECIAL FACTORS--The Merger Agreement."
Such retention of a continuing interest in the equity of the Company pursuant to
the Merger Agreement may present the Continuing Stockholders with actual,
potential or the appearance of potential conflicts of interest in connection
with the Transactions. In considering the recommendation of the Special
Committee and the Board with respect to the Transactions, stockholders should be
aware of such interests. The Special Committee and the Board were aware of such
interests and considered them along with other matters described under "SPECIAL
FACTORS--Recommendation of the Board of Directors; Fairness of the
Transactions."
TREATMENT OF STOCK OPTIONS/RESTRICTED STOCK. The Merger Agreement provides
that at the Effective Time, unless otherwise agreed to by the holder thereof,
each option to purchase Shares granted under any of the Company's stock option
plans or under any other plan or arrangement ("Options"), other than Options
which are to be retained by Continuing Stockholders, will be cancelled and each
holder of such Option shall receive an amount in cash in respect thereof equal
to the product of (i) the excess, if any, of the Per Share Amount over the per
Share exercise price of the Options in question and (ii) the number of Shares
subject to such Options. In addition, the Merger Agreement provides that the
consummation of the Merger will constitute a "Change in Control" for purposes of
the shares of restricted stock of the Company granted to certain of the
Continuing Stockholders.
STOCKHOLDERS' AGREEMENT. At the Effective Time of the Merger, the Company,
the Continuing Stockholders and the Preferred Investors will enter into a
Stockholders' Agreement (the "Stockholders' Agreement"). It is expected that the
Stockholders' Agreement will provide the Continuing Stockholders and the
Preferred Investors (in their capacity as common stockholders of the Surviving
Corporation) with the right to designate directors to the Board of Directors of
the Surviving Corporation, provide the Preferred Investors with certain consent
rights to significant corporate actions, and provide for customary "tag-along"
rights, "drag-along" rights, rights of first refusal and registration rights.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of its
subsidiaries as provided in the Company's certificate of incorporation, by-laws
or indemnification agreements with respect to matters occurring prior to the
consummation of the Merger will survive the Merger for a period of not less than
six years after the Effective Time. In addition, Acquisition is required to
maintain for not less than six years from the consummation of the Merger the
22
<PAGE>
current directors' and officers' liability insurance policies maintained by the
Company and its subsidiaries. See "SPECIAL FACTORS--The Merger Agreement."
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
MERGER AGREEMENT, WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
IS ATTACHED HERETO AS ANNEX C. CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THE
FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.
THE OFFER. The Merger Agreement provides that the Purchasers will commence
the Offer as promptly as practicable, but in no event later than the fifth
business day following the public announcement of the execution of the Merger
Agreement, and that, upon the terms and subject to the prior satisfaction of the
conditions to each Purchaser's obligation to consummate the Offer, the
Purchasers will purchase all Shares validly tendered pursuant to the Offer. The
Merger Agreement provides that each Purchaser will make all determinations with
respect to the terms and conditions (including, without limitation, with respect
to the satisfaction or waiver of conditions) applicable to its obligation to
consummate the Offer, provided that each such Purchaser will not (i) decrease
the Per Share Amount or decrease the number of Shares sought to be purchased by
it, (ii) change the form of consideration payable by it pursuant to the Offer
(other than by adding consideration), (iii) amend or waive the Minimum Condition
or impose any additional conditions on its obligation to consummate the Offer,
(iv) amend any other term or condition of its obligation to consummate the Offer
in any manner adverse to the holders of the Shares or (v) extend the expiration
date of the Offer beyond April 30, 2000, in each case without the prior written
consent of the other Purchaser. Notwithstanding the foregoing, Acquisition may
in its sole discretion (and, at the direction of Acquisition, the Company shall)
extend the Offer from time to time until April 30, 2000 if, and to the extent
that, at the initial Expiration Date (as defined herein), or any extension
thereof, any of the conditions to the obligations of the Purchasers to
consummate the Offer have not been satisfied or waived (other than the Minimum
Condition, as to which Acquisition may extend the Offer up to 10 business days).
In addition, the Merger Agreement provides that Acquisition may, in its sole
discretion (and, at the direction of Acquisition, the Company shall) increase
the Per Share Amount and extend the Offer to the extent required by law in
connection with such increase.
The Merger Agreement also provides that, subject to the terms and conditions
provided therein, the Company and Acquisition will each use their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, and to assist and cooperate with the other parties to the Merger
Agreement in doing, all things necessary, proper or advisable under applicable
laws and regulations to consummate the Offer.
OPTION TO PURCHASE ADDITIONAL SHARES. Pursuant to the Merger Agreement, the
Company has granted Acquisition an irrevocable option (the "Acquisition Option")
to purchase up to that number of newly issued Shares (the "Option Shares") equal
to the number of Shares, that when added to the number of Shares owned by
Acquisition and its affiliates immediately following consummation of the Offer,
shall constitute 90% of the Shares then outstanding on a fully diluted basis
(after giving effect to the issuance of the Option Shares) for a consideration
per Option Share equal to the Per Share Amount. The Merger Agreement also
provides that the Acquisition Option may be exercised by Acquisition at any time
at or after the acceptance for payment by Acquisition of Shares pursuant to the
Offer, PROVIDED, HOWEVER, that the number of Option Shares shall not exceed
19.9% of Shares outstanding on the date of the Merger Agreement.
THE MERGER. The Merger Agreement provides that at the Effective Time,
Acquisition will be merged with and into the Company in accordance with the
DGCL. As a result of the Merger, the separate corporate existence of Acquisition
will cease, and the Company will be the Surviving Corporation.
23
<PAGE>
The Merger Agreement provides that at the Effective Time, each issued and
outstanding share of Common Stock other than (i) Shares held in the Company's
treasury, (ii) Shares held directly or indirectly by Acquisition or by a
Continuing Stockholder and (iii) Dissenting Shares, will be converted into the
right to receive, upon the surrender of the certificate formerly representing
such Share, the Per Share Amount. The Merger Agreement also provides that each
Share held in the Company's treasury will be cancelled without any conversion
thereof and no payment shall be made with respect thereto. Each Share held by a
Continuing Stockholder shall be converted into the right to receive one Retained
Share, as agreed to by Acquisition and the Continuing Stockholder.
OPTIONS. The Merger Agreement provides that, unless otherwise agreed to by
the holder thereof, the Company shall take all actions necessary and appropriate
to provide that, except as set forth below, upon the Effective Time, each
outstanding option and related rights to purchase shares of Common Stock or
other similar interest (collectively, the "Company Options") granted under any
of the Company's stock option plans or under any other plan or arrangement (the
"Company Option Plans"), whether or not then exercisable or vested, will be
cancelled and, in exchange therefor, each holder of such Company Option will
receive an amount in cash in respect thereof, if any, equal to the product of
(i) the excess, if any, of the Per Share Amount over the per Share exercise
price thereof and (ii) the number of shares of Company Common Stock subject
thereto (such payment to be net of applicable withholding taxes).
Notwithstanding the foregoing, at the Effective Time, to the extent agreed to by
Acquisition and the holder thereof, certain Company Options held by the
Continuing Stockholders, whether or not then exercisable or vested
(collectively, the "Retained Options"), will, as of the Effective Time, continue
to represent options to acquire shares of Surviving Corporation Common Stock.
THE BOARD. The Merger Agreement provides that promptly after the purchase
of and payment for Shares by Acquisition pursuant to the Offer and satisfaction
of the Minimum Condition, Acquisition will be entitled to designate for election
to the Board such number of persons as will cause a majority of directors of the
Company to consist of persons designated by Acquisition (the "Acquisition
Directors"). In furtherance thereof, the Company shall promptly, at the
Company's election, either increase the size of the Board or take such other
actions as may be necessary so as to include on, and cause to be elected to the
Board, the Acquisition Directors.
Following the election or appointment of the Acquisition Directors and prior
to the Effective Time, any amendment or termination of the Merger Agreement,
extension of the time for the performance of any of the obligations or other
acts of Acquisition, any waiver of any of the Company's rights under the Merger
Agreement, any action in connection with the Merger Agreement required to be
taken by the Board of Directors of the Company, any amendment to the Company's
certificate of incorporation, by-laws or the Rights Agreement, or any action
that would be reasonably likely to adversely affect the interests of the
stockholders of the Company (other than Acquisition, the Continuing Stockholders
or their respective affiliates) in any material respect, will require the
concurrence of a majority of directors of the Company then in office who are
neither designated by Acquisition nor employees of the Company.
24
<PAGE>
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Acquisition with respect to,
among other things, corporate organization, subsidiaries, capitalization,
authority to enter into the Merger Agreement, non-contravention, compliance with
applicable laws, filings with the Securities and Exchange Commission (the
"Commission"), financial statements, the absence of certain changes or events,
litigation, the accuracy of disclosures to be included in the proxy statement
and tender offer documents, brokers' fees, receipt of the Financial Advisor
Opinion, the applicability of state takeover statutes and the Rights Agreement.
Acquisition has made customary representations and warranties to the Company
with respect to, among other things, corporate organization, authority to enter
into the Merger Agreement and the transactions contemplated thereby, corporate
organization, capitalization, non-contravention, the accuracy of disclosures to
be included in the proxy statement and tender offer documents, brokers' fees,
sufficient funds and the absence of prior operations.
Certain representations and warranties in the Merger Agreement are qualified
as to "materiality" or "Material Adverse Effect." For purposes of the Merger
Agreement and this Offer to Purchase, when used in connection with the Company
or any of its subsidiaries, a "Material Adverse Effect" means any fact, event,
change or effect having, or which could reasonably be expected to have, a
material adverse effect on the business, properties, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole,
other than any facts, events, changes or effects that are applicable to or arise
on account of (i) any changes in economic, regulatory or political conditions
generally, (ii) the Merger Agreement or the transactions contemplated thereby,
(iii) the industry of the Company generally and (iv) the effect of the public
announcement of the transactions contemplated by the Merger Agreement.
CONDITIONS TO THE MERGER. The respective obligations of Acquisition, on the
one hand, and the Company, on the other hand, to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions: (i) the Company and Acquisition shall have accepted for payment and
paid for all Shares validly tendered pursuant to the Offer and not withdrawn;
PROVIDED, HOWEVER, that neither the Company nor Acquisition may invoke this
condition if it shall have been the cause of the failure to purchase Shares so
tendered and not withdrawn in violation of the terms of the Merger Agreement or
the Offer; (ii) the Merger Agreement shall have been approved and adopted by the
requisite vote of the Company's stockholders, if required by the Company's
organizational documents and the DGCL; (iii) all applicable waiting periods
under the HSR Act shall have expired or been terminated; and (iv) no statute,
rule, regulation, order, decree or injunction shall have been enacted or issued
by any governmental authority which prohibits or restricts the consummation of
the Merger, PROVIDED that the parties shall use their reasonable best efforts to
have any such order, decree or injunction vacated.
INTERIM OPERATIONS. The Merger Agreement provides that after the date of
the Merger Agreement and prior to the purchase of Shares pursuant to the Offer,
subject to certain exceptions, the Company and its subsidiaries will each
conduct their respective operations in the ordinary course of business
consistent with past practice. Prior to the Effective Time, none of the Company
(acting through the Special Committee) or any of its subsidiaries will, directly
or indirectly, without the prior written consent of Acquisition:
(a) amend its certificate of incorporation, by-laws (or similar documents)
or amend the Rights Agreement or redeem the rights issued thereunder;
(b) authorize for issuance, issue or agree to issue any shares of capital
stock of any class or any other securities, other than pursuant to any
employee benefit plan, option plan or agreement as in effect as of the
date hereof, or amend any of the terms of any such securities or
agreements outstanding as of the date of the Merger Agreement;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution in respect of its
capital stock, or redeem or otherwise acquire any of its securities or
any securities of its subsidiaries;
25
<PAGE>
(d) except in the ordinary course of business, (i) incur or assume any
indebtedness for borrowed money; (ii) assume, guarantee or otherwise
become liable or responsible for the obligations of any other person
except wholly owned subsidiaries of the Company; or (iii) make any loans,
capital contributions to, or investments in, any other person (other than
to wholly owned subsidiaries of the Company);
(e) except in the ordinary course of business, enter into, adopt or (except
as may be required by law) amend or terminate any employment, severance
or other employee benefit agreement, trust or other arrangement for the
benefit of any director, officer or employee, or increase the
compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any plan and arrangement as in effect as
of the date of the Merger Agreement;
(f) except in the ordinary course of business and except pursuant to any
agreements or arrangements in effect on the date of the Merger Agreement,
acquire, sell, lease or dispose of any material amount of assets;
(g) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) enter into any contract or agreement other than in
the ordinary course of business; (iii) authorize any expenditures not
contemplated by the Company's business plan provided to Acquisition prior
to the date hereof which individually is in excess of $1,000,000 or in
the aggregate are in excess of $5,000,000; or (iv) enter into or amend
any contract, agreement, commitment or arrangement with respect to any of
the matters set forth in this paragraph;
(h) except in the ordinary course of business, pay, discharge or satisfy any
claims, liabilities or obligations, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries; or
(i) take, or agree to take, any of the foregoing actions or any action which
would make any of the representations or warranties of the Company
contained in the Merger Agreement untrue or incorrect.
STOCKHOLDERS' MEETING. If required by applicable law to consummate the
Merger, as soon as practicable following the consummation of the Offer, the
Company, acting though the Board, shall, in accordance with applicable law: (a)
duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Stockholders' Meeting") as soon as practicable for the
purpose of considering and taking action upon the Merger Agreement and approving
the Merger; (b) prepare and file with the Commission a preliminary proxy or
information statement relating to the Merger and the Merger Agreement and use
its reasonable best efforts to obtain and furnish the information required by
the Commission to be included in the Proxy Statement (as defined below) and,
after consultation with Acquisition, to respond promptly to any comments made by
the Commission with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement (the "Proxy Statement") to
be mailed to its stockholders; and (c) subject to its fiduciary obligations
under applicable law as advised by special counsel to the Special Committee,
include in the Proxy Statement the recommendation of the Special Committee and
the Board that stockholders of the Company vote in favor of the adoption of the
Merger Agreement.
NO SOLICITATION. Pursuant to the Merger Agreement, the Company has agreed
that it will not, and will not authorize or permit any of its subsidiaries or
any of its or subsidiaries' officers, directors, employees or agents to,
directly or indirectly, solicit, encourage, participate in or initiate
discussions or negotiations with, or provide any information to, any person,
entity or group (other than Acquisition or any of its affiliates or
representatives) concerning any merger, consolidation, tender offer, exchange
offer, sale of all or substantially all of the Company's assets, sale of shares
of capital stock or similar business combination transaction involving the
Company or any principal operating or business unit of the
26
<PAGE>
Company or its subsidiaries (an "Acquisition Proposal"). Upon execution of the
Merger Agreement, the Company agreed to immediately cease any discussions or
negotiations relating to an Acquisition Proposal and to seek to have returned to
the Company any confidential information provided in such discussions or
negotiations. Notwithstanding the foregoing, if the Company or the Special
Committee receives a bona fide unsolicited, written Acquisition Proposal after
the date of the Merger Agreement from any person or entity at a price per Share
which the Special Committee reasonably concludes, based on the advice of its
financial advisor, is in excess of the Per Share Amount, and if the Special
Committee reasonably concludes, based upon the advice of its financial advisor
and outside legal counsel, that the person or entity delivering such Acquisition
Proposal is reasonably capable of consummating such Acquisition Proposal (based
upon, among other things, the availability of financing and the degree of
certainty of obtaining financing, the expectation of receipt of required
antitrust and other regulatory approvals and the identity and background of such
person), then the Company or the Special Committee may, directly or indirectly,
provide access to or furnish or cause to be furnished information concerning the
Company's business, properties or assets to such person or entity pursuant to an
appropriate confidentiality agreement and the Company or the Special Committee
may participate in and engage in discussions and negotiations with such person
or entity regarding such Acquisition Proposal if the Special Committee
concludes, based upon the advice of its outside legal counsel, that it is
required to take such action in order to comply with its fiduciary duties under
applicable law. In the event that, after the Company has received an unsolicited
written Acquisition Proposal (without breaching its obligations under the
foregoing sentence) prior to the consummation of the Offer, the Special
Committee determines, in good faith and based upon the advice of its financial
advisor and legal counsel, that it is required to take such action in order to
comply with its fiduciary duties under applicable law, the Special Committee may
do any or all of the following: (x) withdraw or modify the Board's approval or
recommendation of this Agreement, the Offer or the Merger, and disclose to the
Company's stockholders a position contemplated by Rule 14e-2(a) under the
Exchange Act or otherwise make disclosure to them, (y) approve or recommend an
Acquisition Proposal and (z) terminate this Agreement, PROVIDED, HOWEVER, that
(A) prior to taking any of the foregoing actions, the Company shall have paid
Acquisition the amounts payable under the Merger Agreement and (B) prior to
taking the action described in clause (z) above, the Special Committee shall
have given Acquisition at least two business days' notice (which shall be in
writing) that the Special Committee intends to terminate this Agreement and the
Special Committee shall have provided Acquisition a reasonable opportunity to
respond to such Acquisition Proposal.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of its
subsidiaries as provided in the Company's certificate of incorporation or
by-laws or pursuant to other agreements, or the certificate of incorporation,
by-laws or similar documents of any of the Company's subsidiaries with respect
to matters occurring prior to the Effective Time will survive the Merger and
will continue for a period of not less than six years after the date hereof.
Acquisition will cause to be maintained for not less than six years from the
consummation of the Merger the current directors' and officers' liability
insurance policies maintained by the Company and its subsidiaries; provided that
Acquisition may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous with respect to
matters occurring prior to the Effective Time to the extent available.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
Stockholders' Approval is obtained:
(a) By mutual written consent of the Company (acting through the Special
Committee) and Acquisition.
27
<PAGE>
(b) By either the Company (acting through the Special Committee) or
Acquisition:
(1) if Shares shall not have been purchased pursuant to the Offer on or
prior to April 30, 2000; PROVIDED, HOWEVER, that the right to
terminate the Merger Agreement under this paragraph shall not be
available to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the
failure to purchase Shares pursuant to the Offer on or prior to such
date; or
(2) if any governmental authority shall have issued an order, decree or
ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such order, decree or ruling shall have
become final and nonappealable.
(c) By the Company (acting through the Special Committee) prior to the
purchase of Shares pursuant to the Offer, as provided above in "No
Solicitation;" PROVIDED that in order for the termination of the Merger
Agreement pursuant to this paragraph to be deemed effective, the Company
shall have complied with all provisions summarized above in "No
Solicitation," including the notice provisions therein, and with the
applicable requirements summarized below in "Fees and Expenses."
(d) By the Company (acting through the Special Committee):
(1) in the event that the Offer expires or is terminated in accordance
with its terms without any Shares being purchased thereunder,
provided that the failure of the Company to fulfill any obligation
under the Merger Agreement has not been the cause of, or resulted in,
the failure to purchase Shares pursuant to the Offer; or
(2) if there shall have been a breach or failure to perform on the part
of Acquisition of any of its representations, warranties, covenants
or agreements contained herein, except where such breach or failure
to perform does not impair the ability of Acquisition to consummate
the Offer or the Merger in any material respect or where such breach
or failure to perform has been cured prior to March 1, 2000 (or such
later date upon which the Offer shall expire).
(e) By Acquisition:
(1) if the Special Committee (A) shall withdraw, modify or change its
recommendation so that it is not in favor of the Merger Agreement,
the Offer or the Merger or shall have resolved to do any of the
foregoing, (B) shall have recommended or resolved to recommend to the
Company's stockholders an Acquisition Proposal, or (C) shall have
terminated the Merger Agreement as provided above in "No
Solicitation;"
(2) if the Company shall have breached any of its obligations outlined
above in "No Solicitation;"
(3) in the event that the Offer expires or is terminated in accordance
with its terms without any Shares being purchased thereunder,
PROVIDED that the failure of Acquisition to fulfill any obligation
hereunder has not been the cause of, or resulted in the failure to
purchase Shares pursuant to the Offer; or
(4) if there shall have been a breach or failure to perform on the part
of the Company of any of its representations, warranties, covenants
or agreements contained herein, except where such breach or failure
to perform does not have a Material Adverse Effect or where such
breach or failure to perform has been cured prior to March 1, 2000
(or such later date upon which the Offer shall expire).
FEES AND EXPENSES. Pursuant to the Merger Agreement, upon a termination of
the Merger Agreement by the Company pursuant to paragraph (c) under
"Termination" or by Acquisition pursuant to
28
<PAGE>
paragraph (e)(1), (e)(2) or (e)(4) under "Termination," the Company shall pay to
Acquisition (by wire transfer of immediately available funds), within two
business days following such termination, documented out-of-pocket fees and
expenses up to $11,000,000 actually incurred in connection with the Merger
Agreement and the transactions contemplated thereby. In addition, the Company is
required to pay to Acquisition the fees and expenses set forth in the
immediately preceding sentence if the Merger Agreement is terminated (i) by the
Company pursuant to paragraph (b)(1) or (d)(1) under "Termination" above if the
Offer expires or is terminated without any Shares being purchased thereunder
solely as a result of the Minimum Condition failing to be satisfied by the
expiration date of the Offer or (ii) by Acquisition pursuant to paragraph (b)(1)
or (e)(3) under "Termination" above if the Offer expires or is terminated
without any Shares being purchased thereunder solely as a result of the Minimum
Condition failing to be satisfied by the expiration date of the Offer, and
within 180 days after such a termination, the Company enters into a definitive
agreement with respect to, and thereafter consummates, an Acquisition Proposal.
Upon a termination of the Merger Agreement by the Company pursuant to
paragraph (b)(1) or (d)(1) under "Termination" above or by Acquisition pursuant
to paragraph (b)(1) under "Termination" above (in each case other than as a
result of a failure to satisfy the condition set forth in paragraph (b) under
"Conditions to the Offer" below), the Company shall pay to Acquisition its
documented out-of-pocket fees and expenses up to $8,000,000. Upon a termination
of the Merger Agreement by the Company pursuant to paragraph (b)(2), by
Acquisition pursuant to paragraph (b)(2) or by Acquisition as a result of a
failure of the condition set forth in paragraph (b) or (e) under "Conditions to
the Offer" below, the Company shall pay to Acquisition documented out-of-pocket
fees and expenses up to $4,000,000 (excluding commitment fees and financial
advisory fees under commitment letters).
Notwithstanding the foregoing, the Company will not be required to make any
payment to Acquisition if (i) Acquisition was in material breach of its
obligations under the Merger Agreement or (ii) the termination is the result of
a breach of the terms of the financing of the Transactions by the financing
sources thereunder. Acquisition further agreed that no amounts payable purusant
to the Merger Agreement would be paid to any person that is a director or
officer of the Company or Acquisition.
APPRAISAL RIGHTS
Holders of Shares do not have appraisal rights in connection with the Offer.
However, if the Merger is consummated, holders of Shares at the Effective Time
who do not vote in favor of the adoption of the Merger Agreement will have the
right under the DGCL to dissent and demand appraisal of, and receive payment in
cash of the fair value of, their Shares outstanding immediately prior to the
Effective Time in accordance with Section 262 of the DGCL.
Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash. Any such judicial determination of the fair value of the Shares
could be based upon factors other than or in addition to the price per Share to
be paid in the Offer and the Merger and the market value of the Shares.
Stockholders should recognize that the value so determined could be higher or
lower than the price per Share to be paid pursuant to the Offer or the Per Share
Amount.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
WEINBERGER V. UOP, INC. and RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the
remedy ordinarily available to minority stockholders in a cash-out merger is the
right to appraisal described above. However, damages or injunctive relief may be
available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
29
<PAGE>
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE
DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE
UNDER THE DGCL. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. A COPY OF SECTION 262 OF THE
DGCL IS ATTACHED HERETO AS ANNEX D AND THE FOREGOING SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO ANNEX D.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the Offer and the Merger relevant to a beneficial holder of
Shares whose Shares are tendered and accepted for payment pursuant to the Offer
or whose Shares are converted to cash in the Merger (a "Holder"). This
discussion is for general information only and does not purport to consider all
aspects of federal income taxation that may be relevant to Holders. The
discussion is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations promulgated thereunder, judicial
decisions and administrative rulings, all as in effect as of the date hereof and
all of which are subject to change, possibly with retroactive effect. The
following does not address the federal income tax consequences to all categories
of Holders that may be subject to special rules (E.G., the Continuing
Stockholders, Holders which acquired their Shares pursuant to the exercise of
employee stock options or other compensation, insurance companies, partnerships,
tax-exempt organizations, Holders which are neither citizens nor residents of
the United States, or which are foreign corporations or foreign estates or
trusts as to the United States, dealers in securities and Holders which have
acquired the Shares as part of a straddle, hedge, conversion transaction or
other integrated investment), nor does it address the federal income tax
consequences to Holders which do not hold the Shares as "capital assets" within
the meaning of Section 1221 of the Code (generally, property held for
investment).
EACH HOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE RECEIPT OF CASH FOR ITS SHARES PURSUANT TO THE OFFER
OR THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign income and other tax laws.
For federal income tax purposes, a Holder which sells Shares pursuant to the
Offer or receives cash in exchange for Shares pursuant to the Merger will
generally recognize capital gain or loss equal to the difference, if any,
between the amount of cash received and the Holder's adjusted tax basis in the
Shares sold pursuant to the Offer or surrendered for cash pursuant to the
Merger. Gain or loss will be determined separately for each block of Shares
(I.E., Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or surrendered for cash pursuant to the Merger. Such
capital gain or loss will be long-term capital gain or loss if the Holder has
held the Shares for more than one year at the time of the consummation of the
Offer or the Merger, as the case may be. For federal income tax purposes, net
capital gain recognized by an individual Holder (or an estate or certain trusts)
upon a disposition of a Share that has been held for more than one year
generally will be subject to a maximum tax rate of 20% or, in the case of a
Share that has been held for one year or less, will be subject to tax at
ordinary income rates. Certain limitations apply to the use of capital losses.
Notwithstanding the foregoing, all or a portion of the cash received in
exchange for Shares pursuant to the Offer or the Merger by a Holder which is
deemed to own common stock of the Company pursuant to the constructive ownership
rules of Section 318 of the Code as a result of having certain relationships
with any of the Continuing Stockholders or the Preferred Investors following
consummation of the Merger may be taxable to such Holder as a dividend. Holders
should consult their tax advisors regarding the possible application to them of
the constructive ownership rules.
30
<PAGE>
FINANCING OF THE TRANSACTIONS
The Purchasers estimate that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger and
to pay all related costs and expenses will be approximately $465.2 million. See
"THE OFFER--Fees and Expenses." Acquisition and the Company expect to obtain the
financing from borrowings under the facilities and equity investments described
below. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE FINANCING
CONDITION.
Acquisition and the Company have received commitments for senior secured
financing, senior subordinated financing and preferred equity financing, which
will be sufficient to consummate the Offer and the Merger and to pay related
costs and expenses.
SENIOR CREDIT FACILITIES.
Pursuant to a commitment letter, dated as of January 28, 2000 (the "Senior
Commitment Letter"), CIBC, CIBC World Markets, First Union and First Union
Securities, CIBC and First Union (collectively, the "Senior Agents") have
committed to provide the Company with senior secured credit facilities (the
"Senior Credit Facilities") in the aggregate amount of $300 million and CIBC
World Markets and First Union Securities have agreed to arrange and syndicate
the Senior Credit Facilities to a group of financial institutions (collectively,
and together with the Senior Agents, the "Senior Lenders").
The Senior Credit Facilities will be comprised of (i) $50 million of
revolving credit facilities (the "Revolving Credit Facility"), (ii) a $100
million 6-year amortizing term loan facility (the "A Term Loan") and (iii) a
$150 million 7-year amortizing term loan facility (the "B Term Loan" and, with
the A Term Loan, the "Term Loans").
The Term Loans may only be incurred upon the consummation of the Offer, may
only be used to directly or indirectly finance the Transactions and the costs,
fees and expenses associated therewith, and will have a maturity of six years
(in the case of A Term Loans) or seven years (in the case of B Term Loans). The
Term Loans are to be repaid on a quarterly basis, and to the extent repaid, Term
Loans may not be reborrowed.
The Revolving Credit Facility will have a term of five years and may be used
for working capital support and other general corporate purposes of the Company
and its subsidiaries, except that no more than $10 million may be borrowed in
connection with the consummation of the Offer. The Revolving Credit Facility
will be made available to the Company in the form of revolving credit loans (the
"Revolving Loans") with sublimits available thereunder for letters of credit and
swingline loans.
INTEREST RATES AND FEES. For the first six months following the closing of
the Senior Credit Facilities (the "Senior Credit Facilities Effective Date"),
the Revolving Loans and the A Term Loans will bear interest at a rate PER ANNUM
equal to, at the Company's election, (i) the applicable LIBOR rate, plus a
margin equal to 3.00%, or (ii) the higher of (a) First Union's publicly
announced base rate, and (b) the federal funds effective rate plus 0.5% (such
higher rate, the "Base Rate"), plus a margin of 1.75%. The B Term Loans will at
all times bear interest as a rate PER ANNUM equal to, at the Company's election,
(i) the applicable LIBOR rate, plus a margin equal to 3.50%, or (ii) the Base
Rate, plus a margin equal to 2.25%.
Following the six month anniversary of the Senior Credit Facilities
Effective Date, the Revolving Loans and the A Term Loans will bear interest at a
fluctuating rate PER ANNUM equal to, at the Company's election (i) the
applicable LIBOR rate, plus a margin ranging from 2.00% to 3.00%, based on the
Company's leverage ratio, or (ii) the Base Rate, plus a margin ranging from
0.75% to 1.75%, based on the Company's leverage ratio.
The Company and Acquisition have agreed to pay certain fees in connection
with the Senior Credit Facilities, including, without limitation, (i)
arrangement fees, (ii) agency fees and (iii) commitment fees. The commitment
fees will accrue on the unutilized total commitments under the Senior Credit
Facilities at a PER ANNUM rate of 0.50%.
31
<PAGE>
SCHEDULED AMORTIZATION. The A Term Loans will amortize quarterly over six
years, with total annual amortization to be $10 million initially, and
increasing pursuant to a schedule up to $25 million total amortization in the
final year of the A Term Loans. The B Term Loans will amortize quarterly over
seven years, with total annual amortization to be $1.5 million over the first
six years and $141 million total amortization in the final year of the B Term
Loans.
MANDATORY PREPAYMENTS. Subject to exceptions to be agreed upon, mandatory
repayments of the Term Loans (and after all Term Loans have been repaid in full,
mandatory reductions to the commitments under the Revolving Credit Facility)
will be required to be made with (i) 75% of all excess cash flow, which
percentage will be reduced to 50% whenever the leverage ratio of the Company is
less than 3.0x (ii) 100% of net permitted new debt issuances, (iii) 100% of net
permitted asset sales proceeds (subject to certain exceptions to be negotiated,
including a reinvestment allowance) and (iv) 75% of any net new equity issuance
proceeds.
CONDITIONS PRECEDENT TO CLOSING OF SENIOR CREDIT FACILITIES. The
availability of the Senior Credit Facilities will be subject to the satisfaction
of conditions precedent typical for this type of facility, including, without
limitation, the following: (i) all of the conditions precedent to the
consummation of the Offer shall have been satisfied in all material respects and
all documentation; (ii) Acquisition and the Company shall have accepted for
payment not less than 75% of the Shares in the Offer; (iii) the Company and its
domestic subsidiaries shall have executed definitive documentation relating to
the Senior Credit Facilities and the transactions contemplated thereby;
(iv) the Company shall have received the proceeds of the Bridge Facility or,
alternatively, the New Senior Subordinated Notes and the proceeds of the
issuance of the Preferred Stock (all such terms as defined below); (v) the
Continuing Stockholders shall have rolled over and/or otherwise invested in $15
million of common equity of the Company, including shares of common stock and
options to acquire common stock, in connection with the Transactions, not less
than $10 million of which shall have been rolled over by Thomas M. Begel,
Camillo M. Santomero III, Andrew M. Weller and James D. Cirar, on terms and
conditions reasonably satisfactory to CIBC and First Union; (vi) CIBC and First
Union shall be reasonably satisfied that the consolidated capital structure of
the Company after giving effect to the Transactions will be consistent in all
material respects with certain projections; (vii) all necessary governmental and
material third party approvals in connection with the Senior Credit Facilities
and the Transactions (other than the Merger) shall have been obtained and remain
in effect, subject to exceptions based on materiality standards; (viii) there
shall not have occurred any material adverse change in the consolidated
financial condition of the Company and its subsidiaries from the historical
financial information provided to the Senior Lenders; and (ix) First Union shall
be reasonably satisfied that the consolidated EBITDA of the Company on a pro
forma basis giving effect to acquisitions completed during 1999 and the sale of
the Company's freight car operations, for the latest four quarters for which
such information is available shall be equal to at least $87.5 million.
GUARANTY. All obligations of the Company under the Senior Credit Facilities
will be unconditionally guaranteed by each of Company's existing and future
domestic subsidiaries (collectively, the "Guarantors").
SECURITY. The obligations of the Company and the Guarantors in respect of
the Senior Credit Facilities will be secured by a first priority perfected
security interest (subject to certain permitted liens to be agreed upon) in (i)
100% of the capital stock of each Guarantor and 65% of the capital stock of each
direct foreign subsidiary of the Company and (ii) all other available assets of
the Company and each Guarantor, other than exceptions customary for transactions
of this type.
FINANCIAL COVENANTS. The Senior Credit Facilities will contain financial
covenants customary for transactions of this type to be negotiated.
OTHER COVENANTS. The Senior Credit Facilities will contain covenants
typical for such types of facilities to be negotiated. Such covenants could be
expected to include the following: (i) restrictions on indebtedness and liens,
(ii) restrictions on mergers, acquisitions and dispositions of assets,
(iii) restrictions
32
<PAGE>
on investments, (iv) restrictions on dividends and other restricted payments,
(v) restrictions on transactions with affiliates, (vi) a negative pledge,
(viii) restrictions on certain amendments, (ix) restrictions on capital
expenditures and (x) other covenants, including affirmative covenants to be
agreed upon. The Senior Credit Facilities will also contain environmental
covenants requiring the Company to complete environmental investigations on
specified real property owned by the Company and to undertake such remediation
activities as agreed to with the Senior Lenders.
EVENTS OF DEFAULT. The Senior Credit Facilities will contain events of
default typical for these types of facilities to be negotiated. Such events of
default could be expected to include the following: (i) non-payment of amounts
under the Senior Credit Facilities, (ii) material misrepresentations, (iii)
covenant defaults, (iv) cross-defaults to other indebtedness, (v) judgment
defaults, (vi) bankruptcy and (vii) a change of control of the Company, in each
case, subject to grace periods, exceptions and thresholds to be agreed upon.
BRIDGE FACILITY.
Pursuant to a letter dated January 28, 2000 (the "Bridge Commitment
Letter"), CIBC World Markets and First Union Investors, Inc. (collectively, the
"Bridge Lenders") have committed to provide the Company with a $125 million
senior subordinated increasing rate bridge facility (the "Bridge Facility").
Notwithstanding the availability of the Bridge Facility, the Company is
considering an offering of senior subordinated notes (the "New Senior
Subordinated Notes") in connection with the consummation of the Offer. In the
event such an offering of New Senior Subordinated Notes is consummated, the
Company will not utilize the Bridge Facility and the commitments in respect
thereof will be terminated. The New Senior Subordinated Notes are described
below under the heading "Possible Senior Subordinated Notes Offering." If
utilized (in lieu of an offering of the New Senior Subordinated Notes), the
Bridge Facility may be used to finance the Transactions, to refinance existing
indebtedness of the Company and to pay any fees and expenses incurred therewith.
The Bridge Facility will mature and must be repaid in full on the earlier of
(a) the one year anniversary of the funding date of the Bridge Facility
(the"Bridge Facility Funding Date") and (b) the closing date of the subsequent
issuance of the New Senior Subordinated Notes or any other financing undertaken
to repay the Bridge Facility, PROVIDED, HOWEVER, that under certain conditions,
the maturity date of the Bridge Facility may be extended to the eighth
anniversary of the funding date of the Bridge Facility.
33
<PAGE>
INTEREST RATES AND FEES. Interest on the Bridge Facility will be payable
semi-annually, in arrears, at an interest rate determined as follows:
<TABLE>
<CAPTION>
DAYS AFTER BRIDGE FACILITY INTEREST RATE IS THE
FUNDING DATE GREATER OF:
-------------------------- --------------------
<S> <C>
0-90 12.50% and LIBOR + 6.50%
91-180 13.25% and LIBOR + 7.25%
181-270 14.00% and LIBOR + 8.00%
271-360 14.75% and LIBOR + 8.75%
Thereafter 15.00% and LIBOR + 9.00%
</TABLE>
Interest on the Bridge Facility will be subject to a maximum annual interest
rate of 18%, with any interest in excess of 15% payable in-kind at the Company's
option. The Company and Acquisition have also agreed to pay certain fees in
connection with the Bridge Facility, including, without limitation, (i) funding
fees, (ii) commitment fees and (iii) fees in connection with an issuance of
securities to refinance the Bridge Facility.
If the Company shall have failed to issue the New Senior Subordinated Notes
or obtain other financing to repay the Bridge Facility within one year after the
Bridge Facility Funding Date, the maturity of the Bridge Facility will be
extended to the eighth anniversary of the Bridge Facility Funding Date subject
to the conditions that there exist no (a) bankruptcy or insolvency proceeding
with respect to the Company or any significant subsidiary, (b) payment default
in respect of the Bridge Facility and (c) no payment default at maturity (or
acceleration of the maturity) of other indebtedness, individually or in the
aggregate, in excess of $5 million. At any time following the one year
anniversary of the Bridge Facility Funding Date, the Bridge Lenders may require
that the Company exchange the Bridge Facility for long-term notes which shall
bear interest at the rate then borne by the Bridge Facility, and which shall
have similar terms and conditions to high yield debt securities issued for cash
in the then prevailing market conditions.
OPTIONAL REPAYMENTS. At the Company's option, the Bridge Facility may be
repaid, in whole or in part, at a redemption price (expressed as a percentage of
the amount of the Bridge Facility outstanding at the time of such optional
repayment, such amount herein referred to as the "Bridge Facility Repayment
Percentage"), together with accrued and unpaid interest, if any, to the date of
any such repayment. From the Bridge Facility Funding Date to 180 days after the
Bridge Facility Funding Date, the Bridge Facility Repayment Percentage shall be
100%. From 181 days after the Bridge Facility Funding Date to 270 days after the
Bridge Facility Funding Date, the Bridge Facility Repayment Percentage shall be
102%. Thereafter, the Bridge Facility Repayment Percentage shall be 103%.
MANDATORY REPAYMENTS/CHANGE IN CONTROL. To the extent that such proceeds
are not used to repay the Senior Credit Facilities, mandatory repayment of the
Bridge Facility, plus accrued interest and any other amounts payable under the
Bridge Facility, must be made with the net proceeds of any sales of debt
securities or equity securities in a public offering or private placement by the
Company or any of its domestic subsidiaries. In addition, upon a change in
control of the Company, the Company will be required to make an offer to repay
the Bridge Facility, plus accrued interest and any other amounts payable under
the Bridge Facility, at 101% of the total amount outstanding.
CONDITIONS PRECEDENT TO CLOSING OF BRIDGE FACILITY. The availability of the
Bridge Facility will be subject to the satisfaction of conditions precedent
typical for this type of facility, including, without limitation, the following:
(i) all of the conditions precedent to the consummation of the Offer shall have
been satisfied in all material respects; (ii) Acquisition and the Company shall
have accepted for payment not less than 75% of the Shares in the Offer; (iii)
the Company and the Bridge Lenders shall have entered into definitive
documentation relating to the Bridge Facility and the transactions contemplated
thereby; (iv) the Company shall have received the proceeds of the issuance of
the Preferred Stock and the portion of the Senior Credit Facilities to be funded
on the Bridge Facility Funding Date; (v) the Continuing Stockholders shall
34
<PAGE>
have rolled over and/or otherwise invested in $15 million of common equity of
the Company, including shares of common stock and options to acquire common
stock, in connection with the Transactions, not less than $10 million of which
shall have been rolled over by Thomas M. Begel, Camillo M. Santomero III,
Andrew M. Weller and James D. Cirar, on terms and conditions reasonably
satisfactory to the Bridge Lenders; (vi) the Bridge Lenders shall be reasonably
satisfied that the consolidated capital structure of the Company will be
consistent in all material respects with certain projections; (vii) all
necessary governmental and material third party approvals in connection with the
Bridge Facility and the Transactions (other than the Merger) shall have been
obtained and remain in effect, subject to exceptions based on materiality
standards; (viii) there shall not have occurred any material adverse change in
the consolidated financial condition of the Company and its subsidiaries from
the historical financial information provided to the Bridge Lenders; and (ix)
the Bridge Lenders shall be reasonably satisfied that the consolidated EBITDA of
the Company, on a pro forma basis giving effect to acquisitions completed during
1999 and the sale of the Company's freight car operations, for the latest four
quarters for which such information is available shall be equal to at least
$87.5 million.
OTHER COVENANTS. The Bridge Facility will contain covenants typical for
such types of facilities, including, without limitation, (i) restrictions on the
incurrence of indebtedness and other senior subordinated indebtedness, (ii)
restrictions on mergers, acquisitions and dispositions of assets, (iii)
restrictions on sale-leaseback transactions, (iv) restrictions on dividends, (v)
restrictions on transactions with affiliates and formation of subsidiaries, (vi)
restrictions on investments, (vii) maintenance of existence and properties,
(viii) restrictions on liens and other encumbrances, (ix) financial reporting
requirements, and (x) compliance with laws.
EVENTS OF DEFAULT. The Bridge Facility will contain events of default
typical for these types of facilities (subject in each case to mutually
agreeable grace periods and materiality thresholds), including, without
limitation, (i) non-payment of amounts under the Bridge Facility, (ii) material
misrepresentations, (iii) covenant defaults, (iv) cross-acceleration provisions
with respect to other indebtedness, (v) judgment defaults and (vi) bankruptcy.
WARRANTS. On the Bridge Facility Funding Date, the Company shall place into
escrow detachable warrants (the "Warrants") exercisable for 15% of the fully
diluted common stock of the Company, subject to customary anti-dilution
provisions, at an exercise price of $.01 per share. The Bridge Lenders will
receive Warrants from escrow if the Bridge Facility remains outstanding for (x)
180 days following the Bridge Facility Funding Date, for 5% of the fully diluted
common stock of the Company, (y) 270 days following the Bridge Facility Funding
Date, for an additional 5% of the fully diluted common stock of the Company, and
(z) 360 days following the Bridge Facility Funding Date, for an additional 5% of
the fully diluted common stock of the Company. Any Warrants remaining in escrow
at the time the Bridge Facility is repaid shall be released to the Company for
cancellation.
POSSIBLE SENIOR SUBORDINATED NOTES OFFERING. The Company is considering
conducting an offering of New Senior Subordinated Notes, the proceeds of which
may be used to finance the Transactions, refinance existing indebtedness of the
Company and pay any fees and expenses incurred therewith. In the event that the
Company issues New Senior Subordinated Notes on or prior to the closing of the
Offer, the Company will not enter into, or draw upon, the Bridge Facility. In
the event that the New Senior Subordinated Notes are not issued on or prior to
the closing of the Offer and the Company has utilized the Bridge Facility, the
Company may thereafter conduct an offering of the New Senior Subordinated Notes,
the proceeds of which (in whole or in part) would be used to repay the Bridge
Facility in full.
PREFERRED STOCK FINANCING. Pursuant to a commitment letter, dated as of
January 28, 2000, the Preferred Investors have committed to purchase senior
preferred stock of Acquisition (which will become preferred stock of the
Surviving Corporation upon consummation of the Merger)(the "Preferred Stock").
In connection with their purchase of the Preferred Stock, at the effective time
of the Merger, the Preferred Investors will receive shares of common stock of
the Surviving Corporation representing 50% of the shares
35
<PAGE>
of common stock of the Surviving Corporation on a fully diluted basis. Certain
Continuing Stockholders may sell shares of common stock held by them to the
Preferred Investors prior to the consummation of the Offer at the Per Share
Amount, which shares may be used by the Preferred Investors as part of the
consideration (valued at the Per Share Amount) for the Preferred Stock. The
proceeds from the issuance of the Preferred Stock may be used to finance the
Transactions, to refinance existing indebtedness of the Company and to pay any
fees and expenses incurred therewith.
DIVIDENDS. Dividends on the Preferred Stock will be payable quarterly in
arrears at the rate of 14.5% per annum, compounded quarterly. On any dividend
payment date occurring prior to the fifth anniversary from the date of issuance
of the Preferred Stock, dividends may be paid, at the Company's option, in cash
or may be added to the liquidation value of the Preferred Stock. From and after
the fifth anniversary of the issuance of the Preferred Stock, dividends will be
payable only in cash. In the event that any dividend after the fifth anniversary
is not paid in full in cash or in the event of certain other events described
under "Voting" below, the dividend rate on the Preferred Stock will increase by
2.0% until such dividend is paid or such event is cured.
OPTIONAL REDEMPTION. At the Company's option, the Preferred Stock will be
redeemeable, in whole or in part, at the following percentages of the
liquidation preference thereof commencing on the dates indicated below:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
- - ------ ----------
<S> <C>
Issue Date--Second Anniversary.............................. 114.500%
Third Anniversary........................................... 112.083%
Fourth Anniversary.......................................... 109.667%
Fifth Anniversary........................................... 107.250%
Sixth Anniversary........................................... 104.833%
Seventh Anniversary......................................... 102.417%
Eighth Anniversary.......................................... 100.000%
</TABLE>
MANDATORY REPAYMENTS/CHANGE IN CONTROL. The Company is required to make an
offer to redeem all of the Preferred Stock upon the occurrence of a Change in
Control (to be defined) at 101.0% of the aggregate liquidation preference to the
date of purchase.
CONDITIONS PRECEDENT TO PREFERRED STOCK ISSUANCE. The obligations of the
Preferred Investors to purchase the Preferred Stock will be subject to the
satisfaction of conditions precedent typical for this type of commitment,
including, without limitation, the following: (i) all of the conditions
precedent to the consummation of the Offer shall have been satisfied in all
material respects; (ii) Acquisition and the Company shall have accepted for
payment not less than 75% of the Shares in the Offer; (iii) the Company shall
have received the proceeds of the Senior Credit Facility and either the Bridge
Facility or the New Senior Subordinated Notes; (iv) the Continuing Stockholders
shall have rolled over and/or otherwise invested in $15 million of common equity
of the Company, including shares of common stock and options to acquire common
stock, in connection with the Transactions, not less than $10 million of which
shall have been rolled over by Thomas M. Begel, Camillo M. Santomero III, Andrew
M. Weller and James D. Cirar, on terms and conditions reasonably satisfactory to
the Preferred Investors; (v) the Preferred Investors shall be reasonably
satisfied that the consolidated capital structure of the Company will be
consistent in all material respects with certain projections; (vi) all necessary
governmental and material third party approvals in connection with the Senior
Credit Facility and the Transactions (other than the Merger) shall have been
obtained and remain in effect; (vii) there shall not have occurred any material
adverse change in the consolidated financial condition of the Company and its
subsidiaries from the historical financial information provided to the Preferred
Investors; and (viii) the Preferred Investors shall be reasonably satisfied that
the consolidated EBITDA of the Company, on a pro forma basis giving effect to
acquisitions
36
<PAGE>
completed during 1999 and the sale of the Company's freight car operations, for
the latest four quarter period for which such information is available shall be
equal to at least $87.5 million.
VOTING. The Preferred Stock will be non-voting, except as otherwise
required by law. Upon the occurrence of (after reasonable and customary cure
periods), (i) payment defaults (in the case of dividend payments, any failure to
pay three or more quarterly dividend payments after the fifth anniversary of
issuance), (ii) covenant defaults, (iii) judgments and (iv) cross-acceleration
and failure to pay at final maturity other indebtedness aggregating $5 million
or more, the holders of the Preferred Stock will be entitled to appoint to the
Board of Directors of the Company the lesser of two additional directors or 20%
of the Company's Board of Directors.
RESTRICTIVE PROVISIONS. The certificate of designation setting forth the
terms of the Preferred Stock will contain customary affirmative and negative
covenants, including without limitation, restrictions on the ability of the
Company to incur additional indebtedness, pay dividends, repurchase or redeem
capital stock, make certain other restricted payments and investments, impose
restrictions on the ability of the Company's subsidiaries to pay dividends or
make certain payments to the Company, create liens, enter into transactions with
affiliates, sell assets, issue capital stock, merge, consolidate or transfer all
or substantially all of their respective assets, enter into sale and leaseback
transactions and enter into businesses not reasonably related to the business of
the Company and its subsidiaries on the date of issuance.
RANKING. The Preferred Stock will rank senior to all other outstanding
classes of capital stock of the Company. The certificate of designation for the
Preferred Stock will prohibit the issuance of any senior or parity equity
securities without the consent of holders of a majority of the outstanding
shares of Preferred Stock.
REGISTRATION RIGHTS. It is expected that the Company will grant the holders
of the Preferred Stock with customary registration rights, including, without
limitation, the right to require the Company to effect a registered exchange
offer to be filed within 60 days of the earlier of the one-year anniversary of
the issuance of the Preferred Stock and the consummation of the issuance of the
Permanent Notes, to be declared effective 180 days after filing and to be
consummated within 30 days after being declared effective or, if not permitted
by applicable law, to effect a shelf registration on comparable terms.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information, based on reports filed by such
persons with the Commission, with respect to ownership of the shares of Common
Stock held by the directors and executive officers
37
<PAGE>
of the Company, and with respect to ownership by persons believed by the Company
to be the beneficial owners of more than 5% of its outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF OUTSTANDING
NAME COMMON STOCK COMMON STOCK
- - ---- ------------------- ----------------------
<S> <C> <C>
Dimensional Fund Advisors Inc. (1)...................... 632,200 6.1%
Thomas M. Begel (2)..................................... 404,402 3.9%
James D. Cirar (3)...................................... 135,398 1.3%
Fred D. Culbreath....................................... 106,756 *
Joseph A. Hicks......................................... 49,984 *
Robert L. Jackson (4)................................... 15,105 *
Timothy A. Masek (5).................................... 43,428 *
John D. McClain......................................... 0 --
Donald C. Mueller (6)................................... 7,142 *
Camillo M. Santomero III (7)............................ 173,000 1.7%
R. Philip Silver (8).................................... 20,000 *
Francis A. Stroble (8).................................. 22,000 *
Kenneth M. Tallering (9)................................ 62,096 *
Andrew M. Weller (10)................................... 151,933 1.5%
John C. Wilkinson (11).................................. 30,000 *
Brent Williams (12)..................................... 7,500 *
Directors and Executive Officers as a group (15
persons) (13)......................................... 1,228,744 11.9%
</TABLE>
- - ------------------------
* Less than 1%.
(1) The number of shares beneficially held by Dimensional Fund Advisors Inc. is
based upon the Schedule 13G filed by Dimensional Fund Advisors Inc. on
February 12, 1999. The address of Dimensional Fund Advisors Inc. is 12999
Ocean Avenue, Santa Monica, CA 90401.
(2) Includes 50,000 shares of common stock subject to currently exercisable
options, 3,390 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(3) Includes 100,000 shares of common stock subject to currently exercisable
options and 13,398 shares of common stock held in a self-directed IRA.
(4) Includes 13,333 shares of common stock subject to currently exercisable
options and 1,772 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(5) Includes 18,800 shares of common stock subject to currently exercisable
options, 2,228 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(6) Includes 6,667 shares of common stock subject to currently exercisable
options and 475 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(7) Mr. Santomero is a private investor and Senior Consultant to Chase Capital
Partners (formerly Chemical Venture Partners), which beneficially owns
shares of common stock, but Mr. Santomero disclaims beneficial ownership of
such shares. Mr. Santomero, however, has an interest in a pool of
securities, including shares of common stock of the Company, acquired by
Chemical Equity Associates at the time he was a General Partner of Chemical
Venture Partners (now Chase Capital Partners). Mr. Santomero holds options
to purchase 23,000 shares of common stock, of which 20,000 are currently
exercisable.
(8) Messrs. Silver and Stroble each hold options to purchase 23,000 shares of
common stock, of which 20,000 are currently exercisable.
38
<PAGE>
(9) Includes 37,500 shares of common stock subject to currently exercisable
options, 3,796 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(10) Includes 105,000 shares of common stock subject to currently exercisable
options, 3,433 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(11) Includes 30,000 shares of restricted common stock.
(12) Includes 7,500 shares of common stock subject to currently exercisable
options.
(13) Includes 398,800 shares of common stock subject to currently exercisable
options, 15,694 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999 and 128,000 shares of restricted common stock.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
To the Company's and Acquisition's knowledge, no transactions in the Shares,
other than ordinary course purchases under the Company's 401(k) savings plan,
have been effected during the past 60 days by the Company or its executive
officers, directors, affiliates or subsidiaries, or by Acquisition or its
executive officers, directors, affiliates or subsidiaries.
Since the commencement of the Company's second full fiscal year preceding
the date of this Offer to Purchase, no purchases of Shares were made by the
Company or Acquisition.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the Company's knowledge, any of its affiliates, directors or executive officers
or any person controlling the Company, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to, or in connection with, the Offer with respect to any securities
of the Company (including, without limitation, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations). Except as described in this Offer to
Purchase, since the second full fiscal year preceding the date of this Offer to
Purchase, no contracts or negotiations concerning a merger, consolidation, or
acquisition, a tender offer for or other acquisition of any securities of the
Company, an election of directors of the Company, or a sale or other transfer of
a material amount of assets of the Company, has been entered into or has
occurred between any affiliates of the Company or between the Company or any of
its affiliates and any unaffiliated person. Except as described in this Offer to
Purchase, since the third full fiscal year preceding the date of this Offer to
Purchase, the Company has not made any underwritten public offering of the
Shares that was (i) registered under the Securities Act of 1933 or (ii) exempt
from registration under the Securities Act of 1933 pursuant to Regulation A
thereunder.
To the best of the Company's knowledge, after reasonable inquiry, none of
the directors or executive officers of the Company, other than R. Phillip Silver
and Francis A. Stroble, intend to tender Shares held by them pursuant to the
Offer.
CERTAIN EFFECTS OF THE TRANSACTIONS
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will reduce
the number of holders of Shares and could adversely affect the liquidity and
market value of the remaining Shares held by the public.
NASDAQ NATIONAL MARKET LISTING. Depending upon the number of Shares
purchased pursuant to the Offer, the Shares may no longer meet the requirements
of the National Association of Securities Dealers for continued inclusion on the
Nasdaq National Market, which requires that an issuer either (i) have at
39
<PAGE>
least 750,000 publicly held shares, held by at least 400 round lot stockholders,
with a market value of at least $5,000,000, have at least two market makers,
have net tangible assets of at least $4 million, and have a minimum bid price of
$1 or (ii) have at least 1,100,000 publicly held shares, held by at least 400
round lot stockholders, with a market value of at least $15,000,000, have a
minimum bid price of $5, have at least 4 market makers and have either (A) a
market capitalization of at least $50,000,000 or (B) total assets and revenues
each of at least $50,000,000.
If the Nasdaq National Market were to cease to publish quotations for the
Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported by
other sources. The extent of the public market for such Shares and the
availability of such quotations would depend, however, upon such factors as the
number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether it would cause future market prices to
be greater or lesser than the Per Share Amount.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a) and the requirements of Rule 13e-3 with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act may be impaired or eliminated.
IF THE NASDAQ LISTING AND THE EXCHANGE ACT REGISTRATION OF THE SHARES ARE
NOT TERMINATED PRIOR TO THE MERGER, THEN THE LISTING OF THE SHARES ON THE NASDAQ
AND THE REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED
FOLLOWING THE CONSUMMATION OF THE MERGER.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System, which
status has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve System and
therefore could no longer be used as collateral for loans made by brokers.
40
<PAGE>
THE OFFER
TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), Acquisition and the Company will purchase Shares
validly tendered prior to the Expiration Date (as defined below) and not
properly withdrawn in accordance with "THE OFFER--Withdrawal Rights." The term
"Expiration Date" shall mean 12:00 midnight, New York City time, on Friday,
March 3, 2000, unless and until Acquisition, in its sole discretion, in
accordance with the terms of the Merger Agreement, shall have directed the
Company to extend the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Company at the direction of Acquisition in its
sole discretion, shall expire. Pursuant to the Merger Agreement, if any
conditions to the Purchasers' obligations to accept for payment and pay for
Shares pursuant to the Offer are not satisfied on the scheduled Expiration Date,
Acquisition may, in its sole discretion (and, at the direction of Acquisition,
the Company shall), extend the Offer for additional periods until April 30, 2000
(except as to the Minimum Condition, as to which Acquisition may extend the
Offer for up to 10 business days).
Acquisition's obligation to consummate the Offer is conditioned upon, among
other things, satisfaction of the Minimum Condition and the Company's and
Acquisition's obtaining the proceeds of the Financing in order to comply with
the Financing Condition. If any such condition is not satisfied or if any or all
of the other events set forth in "THE OFFER--Conditions of the Offer" shall have
occurred or shall be determined by Acquisition to have occurred prior to the
Expiration Date, Acquisition expressly reserves the right, subject to the terms
of the Merger Agreement and compliance with the rules and regulations of the
Exchange Act, to (i) decline to purchase any Shares tendered in the Offer and
terminate the Offer and return all tendered Shares to the tendering
stockholders, (ii) waive any or all conditions to the Offer and, to the extent
permitted by applicable law, purchase all Shares validly tendered, (iii) extend
the Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain all Shares which have been tendered during the period or
periods for which the Offer is extended, or (iv) subject to the next paragraph,
amend the Offer. If any of the events set forth in "THE OFFER--Conditions of the
Offer" shall have occurred or shall be determined by the Company to have
occurred prior to the Expiration Date, the Company expressly reserves the right,
subject to the terms of the Merger Agreement and compliance with the rules and
regulations of the Exchange Act, to (i) decline to purchase any Shares tendered
in the Offer and terminate the Offer and return all tendered Shares to the
tendering stockholders or (ii) waive any or all conditions to the Offer and, to
the extent permitted by applicable law, purchase all Shares validly tendered.
The Merger Agreement provides that Acquisition will not, without the prior
written consent of the Company (acting through the Special Committee),
(i) decrease the Per Share Amount or the number of Shares sought by it in the
Offer, (ii) change the form of consideration to be paid by it in the Offer,
(iii) amend or waive the Minimum Condition or impose any additional conditions
on its obligation to consummate the Offer, (iv) amend any other term of the
Offer in any manner adverse to the holders of the Shares or (v) extend the
expiration date of the Offer beyond April 30, 2000, PROVIDED, HOWEVER, that the
Offer may be extended in connection with an increase in the Per Share Amount by
Acquisition to the extent required by law in connection with such increase so as
to comply with applicable rules and regulations of the Commission. The Merger
Agreement further provides that the Company will not, without the prior written
consent of Acquisition, (i) decrease the Per Share Amount or the number of
Shares sought by it in the Offer, (ii) change the form of consideration to be
paid by it in the Offer, (iii) amend or waive the Minimum Condition or impose
any additional conditions on its obligation to consummate the Offer, (iv) amend
any other term of the Offer in any manner adverse to Acquisition or (v) extend
the expiration date of the Offer beyond April 30, 2000.
Subject to the applicable regulations of the Commission, the Purchasers
expressly reserve the right, subject to the terms of the Merger Agreement, in
their sole discretion, at any time and from time to time,
41
<PAGE>
(i) to delay acceptance for payment of, or, regardless of whether such Shares
were theretofore accepted for payment, payment for, any Shares pending receipt
of any regulatory approval specified in "THE OFFER--Conditions to the Offer" or
in order to comply in whole or in part with any other applicable law, (ii) to
terminate the Offer and not accept for payment any Shares if any of the
conditions to the Offer have not been satisfied or upon the occurrence of any of
the events specified in "THE OFFER--Conditions to the Offer" and (iii) to waive
any condition or otherwise amend the Offer in any respect by giving oral or
written notice of such delay, termination, waiver or amendment to the Depositary
and by making a public announcement thereof.
The Merger Agreement requires the Purchasers to accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied or waived on the Expiration Date.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, with such announcement
in the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date in
accordance with Rules 13e-4(e), 14d-4(c), 14d-6(d) and 14e-1(d) under the
Exchange Act. Without limiting the obligation of the Purchasers under such Rules
or the manner in which the Purchasers may choose to make any public
announcement, the Purchasers currently intend to make announcements by issuing a
press release to the Dow Jones News Service.
If the Purchasers are delayed in their payment for the Shares or are unable
to pay for Shares pursuant to the Offer for any reason, then, without prejudice
to the Purchasers' rights under the Offer, the Depositary may retain tendered
Shares on behalf of the Purchasers, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to withdrawal rights as
described in "THE OFFER--Withdrawal Rights." However, the ability of the
Purchasers to delay the payment for Shares which the Purchasers have accepted
for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by, or on behalf of, holders of securities promptly after the termination or
withdrawal of the Offer.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer or waive a material condition of the Offer
(including a waiver of the Minimum Condition), the Purchasers will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 13e-3(e), 13e-4(e), 14d-4(c), 14d-6(d) and 14e-1 promulgated under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated its view that an offer must remain open for a
minimum period of time following a material change in the terms of the Offer and
that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five business days from the date a material
change is first published or sent or given to security holders and that, if
material changes are made with respect to information not materially less
significant than the offer price and the number of shares being sought, a
minimum of 10 business days may be required to allow for adequate dissemination
to stockholders and investor response. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1 promulgated under the
Exchange Act. The requirement to extend the Offer will not apply to the extent
that the number of business days remaining between the occurrence of the change
and the then-scheduled Expiration Date equals or exceeds the minimum extension
period that would be required because of such amendment. If, prior to the
Expiration Date, the Purchasers increase the consideration offered to holders of
Shares pursuant to the Offer, such increased consideration will be paid to all
holders whose Shares are purchased in the Offer whether or not such Shares were
tendered prior to such increase.
42
<PAGE>
If requested by Acquisition, the Company will promptly provide Acquisition
with the Company's stockholder list and security position listings for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase,
the related Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares whose names appear on the Company's stockholder list
and will be furnished to brokers, dealers, commercial banks, trust companies or
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchasers will purchase, by accepting for payment, and will pay
for, as soon as practicable after the Expiration Date, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn in accordance
with "THE OFFER--Withdrawal Rights." Subject to applicable rules of the
Commission and the Merger Agreement, the Purchasers expressly reserve the right,
in Acquisition's sole discretion, to delay acceptance for payment of, or payment
for, Shares in order to comply in whole or in part with any applicable law. See
"THE OFFER--Conditions to the Offer."
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares or a timely Book Entry Confirmation (as defined below)
with respect thereto, (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined below),
and (iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchasers will be deemed to have accepted
for payment and thereby purchased Shares properly tendered to the Purchasers and
not withdrawn, if, as and when the Purchasers give oral or written notice to the
Depositary of the Purchasers' acceptance of such Shares for payment pursuant to
the Offer. In all cases, payment for Shares accepted pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payments from the Purchasers and transmitting payments to tendering
stockholders.
If any tendered Shares are not accepted for payment pursuant to the Offer
for any reason, or if certificates submitted represent more Shares than are
tendered, certificates for Shares not purchased or tendered will be returned to
the tendering stockholder without expense to the tendering stockholder, or such
other person as the tendering stockholder shall specify in the Letter of
Transmittal, as promptly as practicable following the expiration, termination or
withdrawal of the Offer. In the case of Shares tendered by book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility (as defined
below) pursuant to the procedures set forth in "THE OFFER--Procedures for
Tendering Shares," such Shares will be credited to such account maintained at
the Book-Entry Transfer Facility as the tendering stockholder shall specify in
the Letter of Transmittal, as promptly as practicable following the expiration,
termination or withdrawal of the Offer. If no such instructions are given with
respect to Shares delivered by book-entry transfer, any such Shares not tendered
or not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated in the Letter of Transmittal as the account from
which such Shares were delivered.
If, prior to the Expiration Date, the Purchasers increase the consideration
to be paid per Share pursuant to the Offer, the Purchasers will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.
Acquisition reserves the right to transfer or assign, in whole at any time
or in part from time to time, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve Acquisition of its obligations
under the Offer
43
<PAGE>
and will in no way prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
PROCEDURES FOR TENDERING SHARES.
VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal or facsimile thereof,
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date. In
addition, either (i) the certificates evidencing tendered Shares along with the
Letter of Transmittal must be received by the Depositary or Shares must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a Book-Entry Confirmation (as defined below) must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the tendering stockholder
must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE
CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Shares may be effected
through book-entry transfer into the Depositary's account at the Book-Entry
Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined below), and any other required documents must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
confirmation of a book-entry transfer of Shares into the Depositary's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation"), which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Shares
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Purchasers may enforce such agreement against
such participant.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), unless the Shares tendered thereby are
tendered (i) by a registered holder who has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of an Eligible Institution.
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment or not tendered
are to be returned to a person other than the registered holder of the
certificates
44
<PAGE>
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as described
above. See Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such Shares may nevertheless be
tendered if all of the following conditions are met:
(i) the tender is made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Depositary receives a properly
completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchasers herewith; and
(iii) in the case of a guarantee of Shares, the certificates for (or a
Book-Entry Confirmation with respect to) such Shares, in proper form
for transfer, together with a properly completed and duly executed
Letter of Transmittal or facsimile thereof, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents, are received by the
Depositary within three Nasdaq trading days after the date of execution
of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
BINDING AGREEMENT. The Purchasers' acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchasers upon the terms and subject to the
conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchasers, in their sole discretion, which determination will
be final and binding. The Purchasers reserve the absolute right to reject any or
all tenders of any Shares determined by it not to be in proper form or if the
acceptance for payment of, or payment for, such Shares may, in the opinion of
counsel for Acquisition or the Company, be unlawful. The Purchasers also reserve
the absolute right, in their sole discretion, subject to the provisions of the
Merger Agreement, to waive any conditions of the Offer or any defect or
irregularity in any tender of Shares, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived.
Subject to the terms of the Merger Agreement, the Purchasers' interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding. None of the Purchasers,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
APPOINTMENT. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering stockholder
irrevocably appoints, with respect to the Shares purchased by Acquisition,
designees of Acquisition as such stockholder's attorneys-in-fact and proxies in
the manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered thereby and accepted for payment by Acquisition and with
respect to any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect of such purchased Shares
(collectively, "Distributions"). All such proxies will
45
<PAGE>
be considered coupled with an interest in the tendered Shares. Such appointment
will be effective if, when, and only to the extent that Acquisition accepts such
Shares for payment pursuant to the Offer. All such powers of attorney and
proxies will be irrevocable and will be deemed granted in consideration of the
acceptance for payment by Acquisition of Shares tendered in accordance with the
terms of the Offer. Upon such acceptance for payment, all prior powers of
attorney, proxies and consents given by such stockholder with respect to such
Shares (and any and all Distributions) will, without further action, be revoked
and no subsequent powers of attorney, proxies, consents or revocations may be
given by such stockholder (and, if given, will not be deemed effective). The
designees of Acquisition will, with respect to the Shares purchased by
Acquisition, thereby be empowered to exercise all voting and other rights of
such stockholder as they in their sole discretion deem proper at any annual,
special adjourned or postponed meeting of the Company's stockholders, by written
consent or otherwise and Acquisition reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon Acquisition's
acceptance for payment of such Shares, Acquisition must be able to exercise full
voting, consent and other rights with respect to such Shares (and any and all
Distributions).
BACKUP WITHHOLDING. To prevent backup federal income tax withholding with
respect to payment of the purchase price of Shares purchased pursuant to the
Offer, a tendering stockholder, or its assignee (in either case, the "Payee"),
must provide the Depositary with such stockholder's correct taxpayer
identification number and certify that such stockholder is not subject to backup
federal income tax withholding by completing and signing the Substitute
Form W-9 provided in the Letter of Transmittal. If backup withholding applies
with respect to a stockholder, the Depositary is required to withhold and
deposit with the Internal Revenue Service 31% of any payments made to such
stockholder. Certain stockholders (including all corporations and certain
foreign individuals) are exempt from backup withholding. In order for a foreign
stockholder to qualify as an exempt recipient, the stockholder must submit an
IRS Form W-8, signed under penalties of perjury, attesting to the stockholder's
exempt status. See Instruction 10 to the Letter of Transmittal.
WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment and paid for by the Purchasers pursuant to the
Offer, may also be withdrawn at any time after April 2, 2000, or at such later
time as may apply if the Offer is extended.
If the Purchasers extend the Offer, are delayed in their acceptance for
payment of, or payment for, Shares or are unable to accept for payment or pay
for Shares pursuant to the Offer for any reason, then, without prejudice to the
Purchasers' rights under the Offer, the Depositary may, nevertheless, on behalf
of the Purchasers, retain tendered Shares, and such Shares may not be withdrawn
except to the extent tendering stockholders are entitled to exercise, and duly
exercise, withdrawal rights as described in "THE OFFER--Withdrawal Rights." Any
such delay will be by an extension of the Offer to the extent required by law.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF SHARES BE PAID BY
THE PURCHASERS, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
PAYMENT.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If the certificates for the Shares to be withdrawn have been delivered
or otherwise identified to the Depositary, then, prior to the physical release
of such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered for the
account of an Eligible Institution, the signatures on the notice of withdrawal
must be guaranteed by an Eligible Institution. If Shares have been tendered
pursuant to the procedures for book-entry transfer as set forth in "THE
OFFER--Procedures for Tendering Shares," any
46
<PAGE>
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Any Shares properly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in "THE OFFER--Procedures for
Tendering Shares" at any time prior to the Expiration Date.
PRICE RANGE OF THE SHARES; DIVIDENDS.
The Shares are listed and traded on the Nasdaq under the symbol "TTII." The
following table sets forth, for the quarters indicated, the high and low closing
sales prices per Share as reported on the Dow Jones News Service. The Company
has never paid any dividends on the Common Stock, and expects for the
foreseeable future to retain all of its earnings from operations for use in
expanding and developing its business.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998:
First Quarter ended March 31, 1998........................ $17.75 $ 9.13
Second Quarter ended June 30, 1998........................ 19.15 12.75
Third Quarter ended September 30, 1998.................... 19.94 10.25
Fourth Quarter ended December 31, 1998.................... 16.75 10.00
1999:
First Quarter ended March 31, 1999........................ $17.50 $12.75
Second Quarter ended June 30, 1999........................ 19.25 12.50
Third Quarter ended September 30, 1999.................... 19.75 12.63
Fourth Quarter ended December 31, 1999.................... 18.94 12.75
2000:
First Quarter ending March 31, 2000....................... $20.56 $17.00
(through February 2, 2000)
</TABLE>
On December 13, 1999, the last full trading day prior to public announcement
that the Company had received a proposal from the investor group with respect to
a possible acquisition of the Company, the reported closing price on the Nasdaq
was $15.50 per Share. On January 28, 2000, the last full trading day prior to
the public announcement of the execution of the Merger Agreement, the reported
closing price on the Nasdaq was $17.81 per Share. On February 2, 2000, the last
full trading day prior to the commencement of the Offer, the reported closing
price per Share on the Nasdaq was $20.56. STOCKHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.
Under the terms of the Merger Agreement, the Company is not permitted to
declare or pay dividends with respect to the Shares without the prior written
consent of Acquisition, and Acquisition does not intend to consent to any such
declaration or payment.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
could adversely affect the liquidity and market value of the remaining Shares
held by the public and have other consequences with respect to Nasdaq listing,
Exchange Act registration and availability of margin credit. See "SPECIAL
FACTORS--Certain Effects of the Transactions."
CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Historical
Financial Information," has been furnished by the Company or has been taken from
or based upon publicly available documents and records on file with
47
<PAGE>
the Commission and other public sources. None of Acquisition, the Information
Agent or the Dealer Managers assumes responsibility for the accuracy or
completeness of the information concerning the Company contained in such
documents and records or for any failure by the Company to disclose events which
may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Acquisition or the Information Agent.
The Company is a Delaware corporation with its principal executive offices
located at 980 N. Michigan Avenue, Suite 1000, Chicago, Illinois, 60611. The
Company is a leading manufacturer of components for heavy-duty and medium-duty
trucks and buses and the trucks parts aftermarket. The Company's product lines
include Gunite wheel-end components, Brillion custom iron castings, Imperial
body and chassis components, Bostrom truck and bus seating systems and Fabco
steerable drive axles and gearboxes. The Company has manufacturing operations in
Alabama, California, Illinois, Indiana, Pennsylvania, Tennessee, Texas,
Virginia, Washington and Wisconsin.
During the last five years, neither the Company nor, to the best knowledge
of the Company, any of the persons listed on Schedule I hereto, have been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Certain information concerning the directors and executive officers of the
Company is set forth in Schedule I hereto.
AVAILABLE INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and is required to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interests of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a website on the Internet at http://www.sec.gov
that contains reports, proxy statements and other information relating to the
Company which have been filed via the Commission's EDGAR System.
SELECTED HISTORICAL FINANCIAL INFORMATION. Set forth below is certain
summary consolidated financial information with respect to the Company and its
subsidiaries excerpted or derived from the audited financial statements
contained in the Company's Current Report on Form 8-K, dated August 12, 1999,
and the unaudited financial statements included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999, each as filed with
the Commission pursuant to the Exchange Act.
More comprehensive financial information and other information is included
in such reports and in other documents filed by the Company with the Commission,
the following summary is qualified in its entirety by reference to such reports
and other documents and all of the financial information and related notes
contained therein. Such reports, documents and financial information may be
inspected and copies may be obtained from the Commission in the manner set forth
above.
48
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED ------------------------
SEPTEMBER 30, 1999 1998 1997
------------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................. $392,728 $433,563 $415,866
Costs of sales........................................ 313,308 343,852 329,678
-------- -------- --------
Gross profit.......................................... 79,420 89,711 86,188
Selling, general and administrative expenses.......... 32,308 38,434 35,719
Amortization expense.................................. 5,629 6,773 6,798
Pension termination gain.............................. -- (1,688) --
Reduction of environmental reserves................... -- -- (14,300)
-------- -------- --------
Operating income...................................... 41,483 46,192 57,971
Interest income....................................... (1,102) (1,558) (439)
Interest expense...................................... 20,490 28,704 29,986
Income from continuing operating before income taxes
and extraordinary items............................. 22,095 19,046 28,424
Provision for income taxes............................ 10,101 10,853 12,881
-------- -------- --------
Income from continuing operations before extraordinary
items............................................... 11,994 8,193 15,543
Income (loss) from discontinued operations (less
applicable income tax (benefit) provision of $18,080
for the year ended December 31, 1998 and ($3,370)
for the year ended December 31, 1997)............... 22,728 30,808 (6,069)
Gain on sale of discontinued operations, net of income
taxes............................................... 29,817 -- --
Income (loss) before extraordinary items.............. 64,539 39,001 9,474
Extraordinary item, net of income..................... (2,505) (1,146) (2,008)
Net income (loss) and comprehensive Income............ 62,034 37,855 7,466
Basic earnings per share:
Income (loss) from continued operations before
extraordinary item.................................. $ 1.20 $ 0.83 $ 1.59
Income (loss) from discontinued operations............ 5.24 3.13 (0.62)
-------- -------- --------
Net income per share.................................. $ 6.19 $ 3.85 $ 0.76
Basic weighted average common shares outstanding...... 10,027 9,838 9,761
Diluted earnings per share:
Income (loss) from continued operations before
extraordinary item.................................. $ 1.17 $ 0.81 $ 1.58
Income (loss) from discontinued operations 5.15 3.04 (0.62)
Extraordinary item.................................... (0.24) (0.11) (0.20)
-------- -------- --------
Net income per share.................................. $ 6.08 $ 3.74 $ 0.76
Diluted weighted average equivalent shares
outstanding......................................... 10,210 10,122 9,856
Book value per share.................................. 17.29 10.94 7.28
Ratio of earnings to fixed charges.................... 2.1 1.7 2.0
</TABLE>
49
<PAGE>
CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ ----------------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................... $ 13,478 $ 33,382 $ 27,884
Accounts receivable, net.................... 74,035 55,550 54,722
Inventories................................. 39,045 29,566 30,992
Deferred income tax assets.................. 12,399 13,688 13,521
Prepaid expenses and other current assets... 5,812 2,643 2,776
Net assets of discontinued operations....... -- 37,555 26,848
Total current assets........................ 144,769 172,384 156,673
Property, plant and equipment, net.......... 123,947 82,402 84,043
Deferred financing costs and other, net..... 5,833 8,809 12,555
Intangible assets, net...................... 261,279 229,408 233,760
-------- -------- --------
Total assets................................ $535,828 $493,003 $487,101
LIABILITIES STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable............................ $ 33,097 $ 19,601 $ 22,250
Accrued payroll and employee benefits....... -- 19,281 16,932
Other current liabilities................... -- 32,381 27,337
Accrued income taxes on discontinued
operations................................ 7,757 -- --
Accrued expenses and other payables......... 48,292 -- --
Current maturities of long-term debt and
capital leases............................ 1,930 9,039 3,520
-------- -------- --------
Total current liabilities................... 91,076 80,302 70,039
Long-term debt and capital lease, less
current maturities........................ 22,179 49,186 91,603
Senior subordinated notes................... 180,824 182,338 182,691
Deferred income tax liabilities............. 29,987 34,571 36,373
Other long-term liabilities................. 35,263 35,889 35,375
Total liabilities........................... $359,329 $382,286 $416,081
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.01, 20,000
shares authorized, none outstanding....... -- -- --
Common Stock, par value $0.01, 201,000
shares authorized, 10,282, 9,990 and 9,768
shares issued at September 30, 1999 and
December 31, 1998 and 1997,
respectively.............................. 103 99 98
Paid-in capital............................. 62,627 56,892 55,066
Unearned compensation....................... (2,007) -- --
Retained earnings........................... 115,776 53,741 15,886
Employee receivables for stock purchases.... -- (15) (30)
Total stockholders' equity.................. 176,499 110,717 71,020
Total liabilities and stockholders'
equity.................................... $535,828 $493,003 $487,101
</TABLE>
50
<PAGE>
SUBSEQUENT EVENT. On January 26, 2000, the Company announced that revenues
for the year ended December 31, 1999 were $541.5 million, compared to
$433.6 million in 1998. The increase in revenues was due to businesses acquired
in 1999, and a 24 percent increase in revenues at Bostrom Seating, partially
offset by a 6 percent reduction in revenues at Brillion Iron Works. Income from
continuing operations, before extraordinary items, more than doubled in 1999
from the prior year, to $17.2 million, or $1.67 per diluted share, compared to
$8.2 million, or $0.81 per diluted share in 1998. The higher income resulted
from the increased revenues and lower interest expense due to lower debt levels.
Net income for 1999 was $67.3 million, or $6.50 per diluted share, up from
$37.9 million, or $3.74 per diluted share a year ago. Net income for 1999
included after-tax income of $22.7 million from the divested freight car
operations; a $29.8 million after-tax gain on the sale of the freight car
operations; and after-tax extraordinary charges of $2.5 million from the
non-cash write-off of deferred financing costs in connection with prepayments of
senior debt. Net income for 1998 included after-tax income of $30.8 million from
the divested freight car operations; a one-time after-tax gain of $1.0 million
from the settlement of a former pension plan; and an after-tax extraordinary
charge of $1.1 million from the non-cash write-off of deferred financing costs
in connection with the prepayment of senior debt. In 1999 and 1998 were impacted
by two separate unrelated labor strikes at Gunite Corporation with after-tax
costs of $1.4 million and $1.0 million, respectively.
Revenues for the fourth quarter of 1999 were $148.8 million, up from
$105.0 million in the year-earlier period due primarily to the businesses
acquired during 1999. Net income in the fourth quarter of 1999 was
$5.2 million, or $0.50 per diluted share, compared to $9.8 million, or $0.97 per
diluted share in the same period of 1998. Fourth quarter 1998 net income
included after-tax income of $7.8 million from discontinued operations.
Excluding extraordinary and non-recurring items and income from operations,
earnings before interest, taxes, depreciation and amortization ("EBITDA") were
$21.0 million in the fourth quarter of 1999, compared to $14.2 million a year
earlier. For 1999 and 1998, EBITDA was $81.5 million and $64.5 million,
respectively.
During 1999, the Company completed three strategic acquisitions of
heavy-duty truck component businesses, the acquisition of an additional foundry
to supplement its wheel-end component capacity and the sale of its freight car
operations.
At December 31, 1999, the Company had $8.8 million of cash on hand compared
to $13.5 million at September 30, 1999. During the quarter, the Company used
$11.1 million of cash to acquire BMC of Virginia and $0.5 million of cash to
reduce outstanding debt. Debt to total capitalization stood at 53 percent at
quarter-end versus 70 percent a year ago.
51
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 (A) 1998 (A) 1999 (A) 1998 (A)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................... $148,815 $105,038 $541,543 $433,563
Cost of sales....................................... 116,403 82,861 429,711 343,852
-------- -------- -------- --------
Gross profit........................................ 32,412 22,177 111,832 89,711
Operating expense (income):
Selling, general and administrative................. 14,796 9,905 47,104 38,434
Amortization........................................ 2,162 1,693 7,792 6,773
Pension termination gain............................ -- -- -- (1,688)
-------- -------- -------- --------
Operating income.................................... 15,454 10,579 56,936 46,192
Interest expense, net............................... 5,863 6,340 25,251 27,146
-------- -------- -------- --------
Income before income taxes, extraordinary items and
discontinued operations........................... 9,591 4,239 31,685 19,046
Income taxes........................................ 4,348 2,226 14,449 10,853
-------- -------- -------- --------
Income before income taxes, extraordinary items and
discontinued operations........................... 5,243 2,013 17,236 8,193
Extraordinary items, net of taxes................... -- -- (2,505) (1,146)
Discontinued operations:
Income, net of taxes.............................. -- 7,827 22,728 30,808
Gain on sale, net of taxes........................ -- -- 29,817 --
-------- -------- -------- --------
Net Income and comprehensive income................. $ 5,243 $ 9,840 $ 67,276 $ 37,855
======== ======== ======== ========
Diluted weighted average equivalent shares
outstanding....................................... 10,451 10,187 10,348 10,122
======== ======== ======== ========
Diluted earnings per share before extraordinary
items and discontinued operations................. $ 0.50 $ 0.20 $ 1.67 $ 0.81
======== ======== ======== ========
Diluted earnings per share.......................... $ 0.50 $ 0.97 $ 6.50 $ 3.74
======== ======== ======== ========
</TABLE>
- - ------------------------
(A) Restated to reflect discontinued operations
52
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998(A)
------------ ------------
<S> <C> <C>
Assets:
Cash and cash equivalents................................... $ 8,799 $ 33,382
Accounts receivable, net.................................... 61,053 55,550
Inventories................................................. 44,930 29,566
Prepaid expenses and other.................................. 21,004 16,331
Net assets of discontinued operations....................... -- 37,555
Total current assets........................................ 135,786 172,384
Property, plant and equipment, net.......................... 129,999 82,402
Excess costs over assets acquired and other intangible
assets, net and other..................................... 269,596 238,217
-------- --------
Total assets................................................ $535,381 $493,003
======== ========
Liabilities and Shareholders' Equity:
Accounts payable............................................ $ 26,574 $ 19,601
Accrued expenses and other payables......................... 53,461 51,662
Current maturities of long-term debt and capital lease...... 1,936 9,039
-------- --------
Total current liabilities................................... 81,971 80,302
Long term debt and captial lease............................ 21,695 49,186
Senior subordinated notes................................... 180,735 182,338
Deferred income tax liabilities............................. 34,677 34,571
Other long-term liabilities................................. 33,628 35,889
-------- --------
Total long-term liabilities................................. 270,735 301,984
Stockholders' equity........................................ 182,675 110,717
-------- --------
Total liabilities and stockholders' equity.................. $535,381 $493,003
======== ========
</TABLE>
- - ------------------------
(A) Restated to reflect discontinued operations
53
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, (A)
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................. $ 67,276 $ 37,855
Deduct income from discontinued operations.................. 22,728 30,808
--------- ---------
Income from continuing operations........................... 44,548 7,047
Net gain on sale of the discontinued operations............. (29,817) --
Depreciation................................................ 13,609 10,579
Amortization................................................ 9,229 9,032
Deferred income taxes....................................... (753) 3,023
Pension termination gain.................................... -- (1,688)
Extraordinary items, net of taxes........................... 2,505 1,146
Accrued post retirement benefits............................ 1,594 1,558
--------- ---------
40,915 30,697
Change in operating assets and liabilities.................. (5,120) 1,906
--------- ---------
Net cash provided by operating activities................... 35,795 32,603
--------- ---------
Cash Flows from Investing Activities:
Proceeds from the sale of the rail car businesses........... 101,348 --
Cash paid for acquisitions.................................. (97,383) --
Capital expenditures........................................ (16,447) (8,941)
--------- ---------
Net cash used by investing activities....................... (12,482) (8,941)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from the issuance of long-term debt................ 103,100 --
Payments of term loans and capital leases................... (137,694) (36,899)
Retirement of subordinated notes............................ (1,250) --
Deferred financing costs.................................... (2,059) 521
Other....................................................... 1,255 141
--------- ---------
Net cash used by financing activities....................... (36,648) (36,237)
Net decrease in cash from continuing operations............. (13,335) (12,575)
Cash (used) provided by discontinued operations............. (11,248) 18,073
Cash and cash equivalents, beginning of period.............. 33,382 27,884
Cash and cash equivalents, end of period.................... $ 8,799 $ 33,382
========= =========
</TABLE>
- - ------------------------
(A) Restated to reflect discontinued operations
54
<PAGE>
CERTAIN PROJECTIONS. Certain sets of projections (collectively, the
"Projections") of the Company's future operating performance were prepared by
senior management of the Company and provided to potential financing sources in
connection with management's efforts to develop a proposal to acquire the
Company. Copies of such Projections were, in turn, provided by management to the
Special Committee in connection with its review and evaluation of management's
proposal to acquire the Company and the ensuing negotiations of the Merger
Agreement. The Company does not as a matter of course make public forecasts as
to future operations.
PROJECTIONS OF THIS TYPE ARE BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC, INDUSTRY AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY
OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE PROJECTED. IN ADDITION,
THE PROJECTIONS WERE PREPARED BY THE COMPANY NOT WITH A VIEW TO PUBLIC
DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND FORECASTS. THE INCLUSION OF THIS INFORMATION SHOULD
NOT BE REGARDED AS AN INDICATION THAT THE SPECIAL COMMITTEE OR ITS ADVISORS OR
ANYONE WHO RECEIVED THIS INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF
FUTURE OPERATING RESULTS AND THIS INFORMATION SHOULD NOT BE RELIED UPON AS SUCH.
THE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE
BUSINESSES OF THE COMPANY WHICH, ALTHOUGH CONSIDERED REASONABLE BY THE COMPANY,
MAY NOT BE REALIZED, AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. NONE OF THE
PURCHASERS, THE COMPANY, THE SPECIAL COMMITTEE OR ANY OTHER PARTY ASSUMES
RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOLLOWING PROJECTIONS.
The Projections depend in large part on the number of heavy-duty trucks
built in a given year, and in particular the number of North American Class 8
trucks built. The North American Class 8 truck build rate has historically been
cyclical. The Company, having analyzed previous cycles, determined to use the
following Class 8 North American truck build assumptions in the Projections.
<TABLE>
<CAPTION>
ASSUMED NORTH AMERICAN CLASS 8 TRUCKS BUILT
----------------------------------------------------
MANAGEMENT DOWNSIDE CASE
MANAGEMENT BASE CASE AND EQUITY INVESTOR LOWER
YEAR AND EQUITY INVESTOR CASE TRUCK BUILD CASE
- - ---- ------------------------ -------------------------
<S> <C> <C>
2000............................. 292,597 292,597
2001............................. 264,184 264,184
2002............................. 264,184 203,950
2003............................. 307,378 263,096
2004............................. 358,710 334,796
</TABLE>
The Projections include four cases, two of which were prepared using
assumptions regarding revenues and margins that management would normally use in
its internal budgeting process (referred to herein as the "Management Base Case"
and the "Management Downside Case") and two of which were prepared using
assumptions regarding revenues and margins that are more optimistic than
management of the Company would normally use in its internal budgeting process
(referred to herein as the "Equity Investor Case" and the "Equity Investor Lower
Truck Build Case"). They are set forth below:
55
<PAGE>
MANAGEMENT BASE CASE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
(DOLLAR AMOUNTS ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $625.7 $611.8 $622.9 $680.9 $740.7
Gross Profit........................ 127.1 119.6 120.2 138.1 154.8
Gross Profit %...................... 20.3 19.5 19.3 20.3 20.9
EBITDA.............................. 94.0 86.2 86.3 103.1 118.8
EBITDA Margin %..................... 15.0 14.1 13.9 15.1 16.0
</TABLE>
MANAGEMENT DOWNSIDE CASE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
(DOLLAR AMOUNTS ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $625.7 $610.4 $548.4 $627.5 $708.1
Gross Profit........................ 127.1 119.0 92.8 120.6 145.9
Gross Profit %...................... 20.3 19.5 16.9 19.2 20.6
EBITDA.............................. 94.0 85.6 60.6 87.1 111.3
EBITDA Margin %..................... 15.0 14.0 11.0 13.9 15.7
</TABLE>
EQUITY INVESTOR CASE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
(DOLLAR AMOUNTS ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $638.9 $640.7 $655.0 $722.5 $794.8
Gross Profit........................ 131.3 129.2 131.4 154.8 175.3
Gross Profit %...................... 20.5 30.2 20.1 21.4 22.1
EBITDA.............................. 98.1 95.7 97.4 119.5 138.9
EBITDA Margin %..................... 15.3 14.9 14.9 16.5 17.5
</TABLE>
EQUITY INVESTOR LOWER TRUCK BUILD CASE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
(DOLLAR AMOUNTS ARE IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $638.9 $640.7 $575.9 $666.6 $768.3
Gross Profit........................ 131.3 129.2 102.6 135.6 167.8
Gross Profit %...................... 20.5 20.2 17.8 20.3 21.8
EBITDA.............................. 98.1 95.7 70.3 101.9 132.8
EBITDA Margin %..................... 15.3 14.9 12.2 15.3 17.3
</TABLE>
The Company does not intend to update or otherwise revise the foregoing
projections to reflect circumstances existing after the date the projections
were prepared or to reflect the occurrence of unanticipated events.
CERTAIN INFORMATION CONCERNING ACQUISITION.
Acquisition is a Delaware corporation organized in connection with the Offer
and the Merger and has not carried on any significant activities other than in
connection with the Offer and the Merger. Until immediately prior to the time
Acquisition purchases Shares pursuant to the Offer, it is not anticipated that
56
<PAGE>
Acquisition will have any significant assets or liabilities or engage in any
significant activities other than those incident to its formation and
capitalization and the transactions contemplated by the Offer and the Merger.
The principal offices of Acquisition are located at 980 N. Michigan Avenue,
Suite 1000, Chicago, Illinois 60611. The telephone number of Acquisition at such
location is (312) 280-8844.
Except as set forth in this Offer to Purchase, neither Acquisition nor, to
the best knowledge of Acquisition, any of the persons listed on Schedule II, or
any associate or majority owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any Shares, and neither Acquisition nor, to the
best of knowledge of Acquisition, any of the persons or entities referred to
above, or any of the respective executive officers, directors or subsidiaries of
any of the foregoing, has effected any transaction in the Shares during the past
60 days.
Except as set forth in this Offer to Purchase, Acquisition has no contracts,
arrangements, understandings or relationships with any other person with respect
to any securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies.
Except as set forth in this Offer to Purchase, none of Acquisition, any of
its affiliates, or, to the best knowledge of Acquisition, any of the persons
listed on Schedule II, has had, since the second fiscal year preceding the date
of this Offer to Purchase, any business relationships or transactions with the
Company or any of its executive officers, directors or affiliates that would be
required to be reported under the rules of the Commission. Except as set forth
in this Offer to Purchase, since the second fiscal year preceding the date of
this Offer to Purchase there have been no contacts, negotiations or transactions
between Acquisition, any of its affiliates or, to the best knowledge of
Acquisition, any of the persons listed on Schedule II, and the Company or its
affiliates concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
During the last five years, neither Acquisition nor, to the best knowledge
of Acquisition, any of the persons listed on Schedule II hereto, have been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Certain information concerning the directors and executive officers of the
Company is set forth in Schedule II hereto.
AVAILABLE INFORMATION. Acquisition is a privately-held company and is
generally not subject to the informational filing requirements of the Exchange
Act, and is generally not required to file reports, proxy statements and other
information with the Commission relating to its businesses, financial condition
and other matters. However, pursuant to Rule 14d-3 under the Exchange Act,
Acquisition filed with the Commission the Schedule TO, together with exhibits,
including this Offer to Purchase and the Merger Agreement, which provides
certain additional information with respect to the Offer. The Schedule TO and
any amendments thereto, including exhibits, should be available for inspection
and copies should be obtainable at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
information should also be obtainable (i) by mail, upon payment of the
Commission's customary charges, by writing to the Commission's principal office
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York, NY
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and (ii) by accessing the Commission's website on the Internet at
http://www.sec.gov.
57
<PAGE>
CONDITIONS TO THE OFFER.
CONDITIONS TO ACQUISITION'S OBLIGATION TO CONSUMMATE THE OFFER. All
determinations with respect to the satisfaction or waiver of the following
conditions to Acquisition's obligation to consummate the Offer will be made by
Acquisition. Notwithstanding any other provision of the Offer, subject to the
provisions of the Merger Agreement, Acquisition shall not be required to accept
for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to the
obligation of Acquisition to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares pursuant to the
Offer, and Acquisition may delay its acceptance for payment of or, subject to
the restriction referred to above, its payment for, any tendered Shares, and
Acquisition may amend or terminate the Offer and not accept, if Acquisition
shall not be required to accept for payment, or pay for, and may delay the
acceptance for payment of, or the payment of, any tendered Shares, if (i) any
applicable waiting period under the HSR Act has not expired or been terminated,
(ii) Acquisition and the Company shall not have received the proceeds of
financing on terms satisfactory to Acquisition sufficient to purchase the Shares
pursuant to the Offer, to pay the Per Share Amount in the Merger and to pay all
related fees and expenses in connection with the Offer and the Merger,
(iii) there shall not have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of Shares which would result in Acquisition
owning a majority of the Shares outstanding on a fully diluted basis after
giving effect to the repurchase of Shares by the Company pursuant to the Offer
(the "Minimum Condition"), (iv) the Debt Tender Offer shall not have been
consummated or (v) at any time on or after the date of the Merger Agreement, and
at or before the time of acceptance for payment of any such Shares, any of the
following events shall occur:
(a) any Material Adverse Effect shall have occurred; or
(b) there shall have occurred and be continuing (1) any general suspension
of trading in, or limitation on prices for, securities on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
which lasts for three consecutive trading days, (2) a declaration of a
banking moratorium or any general suspension of payments in respect of
banks in the United States that regularly participate in the U.S. market
in loans to large corporations (whether or not mandatory), (3) a
commencement of a war, armed hostilities or other national or
international crisis directly or indirectly involving the United States
that has a material adverse effect on financial markets in the United
States, (4) any material limitation (whether or not mandatory) by any
governmental authority on, the extension of credit by banks or other
lending institutions in the United States that regularly participate in
the U.S. market in loans to large corporations, (5) from the date of the
Agreement through the date of termination or expiration of the Offer a
decline of at least 25 percent in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 index or (6) in the case
of situations described in clause (3) or (4) existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(c) any person, entity or group, other than Acquisition or the Company, any
of its affiliates, or any group of which any of them is a member, shall
have (i) acquired beneficial ownership of 20 percent or more of the
Shares, whether through acquisition of stock, the formation of an entity
or group, the grant of an option or a right, or otherwise (other than for
bona fide arbitrage purposes) or (ii) entered into a definitive agreement
or an agreement in principle with the Company with respect to a tender
offer or exchange offer for any Shares or a merger, consolidation or
other business combination with or involving the Company;
(d) the representations and warranties of the Company set forth in the
Merger Agreement which are not qualified by "materiality" or "Material
Adverse Effect" shall not be true and accurate in all material respects,
and the representations and warranties that are qualified by
"materiality" or "Material Adverse Effect" shall not be true and accurate
in all respects, in each case as of the date of consummation of the Offer
as though made on or as of such date (except for those
58
<PAGE>
representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which
need only be true and accurate as of such date or with respect to such
period), or the Company shall have breached or failed to perform or
comply in any material respect with any obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it;
PROVIDED, HOWEVER, that such breach or failure to perform is incapable of
being cured or has not been cured prior to March 1, 2000 (or such later
date upon which the Offer shall expire);
(e) there shall have been any action or position taken, or any statute,
rule, regulation, judgment, order or injunction promulgated, enacted,
entered or enforced by any Governmental Authority which could reasonably
be expected to (1) make the acceptance for payment of, or the payment
for, some or all of the Shares illegal or otherwise prohibited, or
materially restrict or delay consummation of the Offer, (2) impose
limitations on the ability of Acquisition to acquire or hold or to
exercise effectively all rights of ownership of the Shares, including,
without limitation, the right to vote any Shares purchased by either of
them on all matters properly presented to the stockholders of the
Company, or (3) prohibit or impose any material limitation on
Acquisition's ownership or operation of all or a material portion of the
assets or business of the Company or any of its respective subsidiaries
or affiliates;
(f) the Company or Acquisition shall have failed to receive any or all
governmental or third party consents and approvals to consummate the
Offer which, if not received, would have a Material Adverse Effect;
(g) the Board of Directors of the Company shall have publicly (including by
amendment of its Schedule 14D-9) withdrawn or modified in any material
respect its recommendation of the Offer or shall have resolved to do so;
or
(h) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Acquisition, in such case and regardless of
the circumstances (including any action or inaction by Acquisition) giving rise
to any such condition makes it inadvisable to proceed with such acceptance for
payment or payments.
The foregoing conditions are for the sole benefit of Acquisition and may be
asserted by Acquisition regardless of the circumstance giving rise to such
condition and may be waived by Acquisition, in whole or in part at any time and
from time to time, in its sole discretion. The failure by Acquisition at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
CONDITIONS TO THE COMPANY'S OBLIGATION TO CONSUMMATE THE OFFER. All
determinations with respect to the satisfaction or waiver of the following
conditions to the Company's obligation to consummate the Offer will be made by
the Company. Notwithstanding any other provision of the Offer, subject to the
provisions of the Merger Agreement, the Company shall not be required to accept
for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to the
obligation of the Company to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares pursuant to the
Offer, and the Company may delay its acceptance for payment of or, subject to
the restriction referred to above, its payment for, any tendered Shares, and the
Company may amend or terminate the Offer and not accept, if the Company shall
not be required to accept for payment, or pay for, and may delay the acceptance
for payment of, or the payment of, any tendered Shares, if (i) any applicable
waiting period under the HSR Act has not expired or been terminated,
(ii) Acquisition and the Company shall not have obtained the proceeds of
financing on terms satisfactory to enable the purchase of Shares pursuant to the
Offer and pay fees and expenses of the Offer and the Merger, (iii) there are
validly tendered and not withdrawn prior to the expiration of the Offer a fewer
number of Shares than such number that satisfies the Minimum Condition,
(iv) the Debt Tender
59
<PAGE>
Offer shall not have been consummated or (v) at any time on or afer the date of
the Merger Agreement, and at or before the time of acceptance for payment of
Shares, any of the following events shall occur:
(a) the representations and warranties of Acquisition set forth in the
Merger Agreement which are not qualified by "materiality" or "Material
Adverse Effect" shall not be true and accurate in all material respects,
and the representations and warranties that are qualified by
"materiality" or "Material Adverse Effect" shall not be true and accurate
in all respects, in each case as of the date of consummation of the Offer
as though made on or as of such date (except for those representations
and warranties that address matters only as of a particular date or only
with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period), or Acquisition
shall have breached or failed to perform or comply in any material
respect with any obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it, PROVIDED, HOWEVER, that
such breach or failure to perform is incapable of being cured or has not
been cured prior to March 1, 2000 (or such later date upon which the
Offer shall expire);
(b) there shall have been any action or position taken, or any statute,
rule, regulation, judgment, order or injunction promulgated, enacted,
entered, enforced or any other action or position shall have been taken,
proposed or threatened by any Governmental Authority which could
reasonably be expected to make the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise prohibited,
or materially restrict or delay consummation of the Offer;
(c) the Company or Acquisition shall have failed to receive any or all
governmental or third party consents and approvals to consummate the
Offer which, if not received, would have a Material Adverse Effect;
(d) the Merger Agreement shall have terminated in accordance with its terms;
or
(e) Acquisition's portion of the Offer shall not have been consummated at
the same time as the Company's portion of the Offer;
which, in the reasonable judgment of the Company, in such case and regardless of
the circumstances (including any action or inaction by the Company) giving rise
to such condition makes it inadvisable to proceed with such acceptance for
payment or payments.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstance giving rise to such
condition and may be waived by the Company, in whole or in part at any time and
from time to time, in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
60
<PAGE>
CERTAIN LEGAL MATTERS.
GENERAL. Except as described in this section, the Purchasers are not aware
of any license or regulatory permit that appears to be material to the business
of the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by the Purchasers pursuant to the Offer,
the Merger or otherwise or any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required prior to the acquisition of Shares by the Purchasers pursuant
to the Offer, the Merger or otherwise. Should any such approval or other action
be required, the Purchasers presently contemplate that such approval or other
action will be sought, except as described below under "State Antitakeover
Statutes." While, except as otherwise described in this Offer to Purchase, the
Purchasers do not presently intend to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Purchasers' businesses or that certain parts of the
Purchasers' businesses might not have to be disposed of, or other substantial
conditions complied with, in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, the Purchasers could decline to accept for payment, or
pay for, any Shares tendered. See "THE OFFER--Conditions to the Offer" for
certain conditions to the Offer, including conditions with respect to
governmental actions.
STATE ANTITAKEOVER STATUTES. Section 203 of the DGCL, in general, prohibits
a Delaware corporation, such as the Company, from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers) with an
"Interested Stockholder" (defined generally as a person that is the beneficial
owner of 15% or more of the outstanding voting stock of the subject corporation)
for a period of three years following the date that such person became an
Interested Stockholder unless, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The provisions of Section 203 of
the DGCL are not applicable to any of the transactions contemplated by the
Merger Agreement, since the Merger Agreement and the transactions contemplated
thereby were approved by the Board prior to the execution thereof.
A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In EDGAR V. MITE CORP.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquirer from
voting on the affairs of a target corporation without the prior approval of the
remaining stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders in
the state and were incorporated there.
The Purchasers do not believe that the antitakeover laws and regulations of
any state other than the State of Delaware will by their terms apply to the
Offer, and, except as set forth above with respect to Section 203 of the DGCL,
the Purchasers have not attempted to comply with any state antitakeover statute
or regulation. The Purchasers reserve the right to challenge the applicability
or validity of any state law purportedly applicable to the Offer and nothing in
this Offer to Purchase or any action taken in connection with the Offer is
intended as a waiver of such right. If it is asserted that any state
antitakeover statute is applicable to the Offer and an appropriate court does
not determine that it is inapplicable or invalid as
61
<PAGE>
applied to the Offer, the Purchasers might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and the Purchasers might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer or may be delayed in consummating the Offer. In
such case, the Purchasers may not be obligated to accept for payment, or pay
for, any Shares tendered pursuant to the Offer.
ANTITRUST. Under HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the FTC and the
Antitrust Department of the Department of Justice (the "DOJ") and certain
waiting period requirements have been satisfied.
In the event that a filing is required to be made under the HSR Act and the
rules promulgated thereunder by the FTC, the Purchasers expect to promptly file
a Notification and Report Form with respect to the Offer under the HSR Act. The
waiting period under the HSR Act with respect to the Offer will expire at 11:59
p.m., New York City time, on the fifteenth day after the date on which the
Purchasers' forms are filed, unless early termination of the waiting period is
granted. However, the DOJ or the FTC may extend the waiting period by requesting
additional information or documentary material from the Purchasers. If such a
request is made, such waiting period will expire at 11:59 p.m., New York City
time, on the tenth day after substantial compliance by the Purchasers with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Acquisition.
In practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the DOJ or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. If a filing
under the HSR Act is required, the Purchasers will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period requirements
imposed by the HSR Act with respect to the Offer have been satisfied.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as Acquisition's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
Acquisition's acquisition of Shares, the DOJ or the FTC could take such action
under the Antitrust Laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise seeking divestiture of Shares acquired by Acquisition or
divestiture of substantial assets of Acquisition or its subsidiaries. Private
parties, as well as state governments, may also bring legal action under the
Antitrust Laws under certain circumstances.
Although the Purchasers believe that the acquisition of the Shares pursuant
to the Offer would not violate the Antitrust Laws, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made or, if such
a challenge is made, what the outcome will be. See "THE OFFER--Conditions to the
Offer" for certain conditions to Offer, including conditions with respect to
litigation and certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
CERTAIN LITIGATION. At various times between December 14 and 17, 1999, six
purported class action complaints, captioned WILLIAM PHELPS AND LAWTON WILLISTON
V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL., AMY F. BRETAN V. THOMAS
M. BEGEL ET AL., BILL GANEM V. THOMAS M. BEGEL ET AL., RUTH GRENING V. THOMAS M.
BEGEL ET AL., E. CLAIBURNE HOGGE V. THOMAS M. BEGEL ET AL. AND KIRK BEIRACH V.
THOMAS M. BEGEL ET AL., were filed in the Court of Chancery of the State of
Delaware in and for New Castle County against the Company
62
<PAGE>
and its directors. On or about January 10, 2000, an additional purported class
action complaint, captioned WILLIAM KREOFSKY V. TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC. ET AL., was filed in the Circuit Court of Cook County of the
State of Illinois against the Company and its directors. The foregoing actions
purport to be brought on behalf of all public stockholders of the Company in
connection with the initial proposal made by Acquisition to acquire the Company
at a price per share of $20. The actions allege, among other things, that the
price per share price offered by Acquisition is unfair and inadequate to the
Company's public stockholders and that the individual defendants have breached
their fiduciary duties. The complaints seek as relief, among other things,
preliminary and permanent injunctive relief enjoining the proposed transaction
and monetary damages in an unspecified amount. The defendants believe that they
have meritorious defenses to these actions and intend to vigorously defend
themselves.
FEES AND EXPENSES.
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby will be paid by the party incurring such fees
and expenses, except that the Company will pay for all fees and expenses
relating to the filing, printing and mailing of the documents in connection with
the Offer, the Schedule 14D-9 and the proxy statement.
The Purchasers have retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials to the beneficial owners of shares. The Information Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the federal securities laws.
The Purchasers have engaged CIBC World Markets and First Union Securities to
act as the Dealer Managers in connection with the Offer as well as the Debt
Tender Offer. The Purchasers have agreed to reimburse the Dealer Managers for
all reasonable out-of-pocket fees, expenses and costs, including reasonable fees
and expenses of legal counsel, and to indemnify the Dealer Managers and certain
related persons against certain liabilities and expenses in connection with the
Offer and the Debt Tender Offer, including certain liabilities under the federal
securities laws.
The Purchasers have retained First Union National Bank as the Depositary.
The Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws.
Estimated fees and expenses to be incurred by the Purchasers in connection
with the Transactions are as follows:
<TABLE>
<S> <C>
Financing Fees.............................................. $19,075,000
Special Committee's Financial Advisor's Fees................ 2,825,000
Legal, Accounting and Other Professional Fees............... 3,850,000
Printing, Proxy Solicitation and Mailing Costs.............. 500,000
Special Committee Fees...................................... 50,000
Filing Fees................................................. 45,870
Miscellaneous............................................... 154,130
Total..................................................... $26,500,000
</TABLE>
Except as set forth above, the Purchasers will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial
63
<PAGE>
banks and trust companies will, upon request only, be reimbursed by the
Purchasers for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
MISCELLANEOUS
The Purchasers are not aware of any jurisdiction in which the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Purchasers become aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, the Purchasers will make a good faith effort to comply with any such
state statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, the Purchasers cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of the
Purchasers by one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASERS NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchasers have filed with the Commission a Tender Offer Statement on
Schedule TO and the Company has filed with the Commission a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits
in each case, pursuant to Regulation M-A and Rule 14d-9, respectively, under the
Exchange Act, furnishing certain additional information with respect to the
Offer. Such Schedules and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the same manner set
forth in "THE OFFER--Certain Information Concerning the Company" and "THE
OFFER--Certain Information Concerning Acquisition" of this Offer to Purchase
(except that such material will not be available at the regional offices of the
Commission).
TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC.
TRANSPORTATION ACQUISITION I CORP.
February 3, 2000
64
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table
sets forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of the Company. Unless otherwise indicated, each
such person is a citizen of the United States and the business address of each
such person is c/o Transportation Technologies Industries, Inc., 980 N. Michigan
Avenue, Suite 1000, Chicago, Illinois 60611.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Thomas M. Begel............... Chairman of the Board and Chief Executive Officer. He served
as President from October 1991 to January 2000. He is also
Chairman of, and a partner in, TMB Industries, and a
director of Silgan Holdings, Inc.
Andrew M. Weller.............. Director; President and Chief Operating Officer. He is also
Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company, and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
James D. Cirar................ President and Chief Executive Officer of Gunite Corporation
since January 2000. He was Chairman of Johnstown America
Corporation and Freight Car Services, Inc. from September
1998 to June 1999 and Senior Vice President of the Company
from July 1997 to June 1999. From September 1995 to August
1998, he was President and Chief Executive Officer of
Johnstown America Corporation and from March 1998 to August
1998 he was President and Chief Executive Officer of Freight
Car Services, Inc. Prior to September 1995, he was the Plant
Manager of the Truck and Bus Assembly Group of General
Motors Corporation.
Fred D. Culbreath............. Chairman of Imperial Group, L.P. He has held various other
titles with Imperial Group, L.P. since being one of its
primary founders in 1962.
Joseph A. Hicks............... Chief Executive Officer of Imperial Group, L.P. He served as
President of Imperial Group, L.P. from January 1995 to
November 1997 and, prior thereto, he was President of Eagle
Associates, a private management firm.
Robert L. Jackson............. President and Chief Executive Officer of Bostrom Seating,
Inc. From August 1996 to January 2000, he was Executive Vice
President of Bostrom Seating, Inc. Prior thereto, he held
various positions with Bethlehem Steel Corporation.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Timothy A. Masek.............. Executive Vice President--Sales and Marketing. He served as
Vice President--Corporate Development from December 1995 to
January 2000 and President of Bostrom Seating, Inc. from
June 1996 to January 2000. Prior thereto, he performed
marketing and corporate functions for the Company.
John D. McClain............... President of Brillion Iron Works, Inc.
Donald C. Mueller............. Vice President and Treasurer. Prior to July 1998, he held
various financial positions with Fisher Scientific
International.
R. Phillip Silver............. Director. In addition, he is currently Co-Chief Executive
Officer of Silgan Holdings, Inc., and has been either
Chairman of the Board or President and a Director of Silgan
Holdings, Inc. since 1988.
Francis A. Stroble............ Director. From 1982 to 1994, he was the Senior Vice
President and Chief Financial Officer of Monsanto Company.
He is also a Director of Merchantile Bancorporation, Inc.
Camillo M. Santomero III...... Director. He has been a private investor and a Senior
Consultant to Chase Capital Partners (formerly Chemical
Venture Partners) since January 1992. In addition, from
October 1988 to January 1992, he was a General Partner of
Chase Capital Partners.
Allen L. Sunderland........... President of Fabco Automotive Corporation since
December 1999. He joined Fabco Automotive Corporation in
1995 as Vice President of Sales and Engineering.
Kenneth M. Tallering.......... Vice President, General Counsel and Secretary. Prior to
November 1995, he was an attorney with the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP.
John C. Wilkinson............. President and Chief Operating Officer of Imperial Group,
L.P. Prior to November 1997, he was General Manager of
Imperial Group, L.P.
Brent Williams................ Controller. He has served in various financial capacities at
TCI and Gunite Corporation for the past five years.
</TABLE>
I-2
<PAGE>
SCHEDULE II
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE
OFFICERS OF ACQUISITION
1. DIRECTORS AND EXECUTIVE OFFICERS OF ACQUISITION. The following table
sets forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of the
sole director and each executive officer of Acquisition. Unless otherwise
indicated, each such person is a citizen of the United States and the business
address of each such person is c/o Transportation Technologies Industries, Inc.,
980 N. Michigan Avenue, Suite 1000, Chicago, Illinois 60611.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Thomas M. Begel............... Chairman of the Board and President of Acquisition. Mr.
Begel also serves as Chairman of the Board and Chief
Executive Officer of the Company. He served as President of
the Company from October 1991 to January 2000. He is also
Chairman of, and a partner in, TMB Industries, and a
director of Silgan Holdings, Inc.
Andrew M. Weller.............. Vice President, Chief Financial Officer and Treasurer of
Acquisition. Mr. Weller also serves as Director, President
and Chief Operating Officer of the Company. He is also
Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company, and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
Kenneth M. Tallering.......... Vice President, General Counsel and Secretary of
Acquisition. Mr. Tallering also serves as Vice President,
General Counsel and Secretary of the Company. Prior to
November 1995, he was an attorney with the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP.
</TABLE>
II-1
<PAGE>
ANNEX A
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
[LOGO]
January 28, 2000
Special Committee of the Board of Directors
Transportation Technologies Industries, Inc.
990 North Michigan Avenue
Suite 1000
Chicago, IL 60611
Members of the Special Committee:
Transportation Technologies Industries, Inc. (the "Company"), and
Transportation Acquisition I Corp. (the "Acquiror"), propose to enter into the
Agreement and Plan of Merger dated as of January 28, 2000 (the "Agreement")
pursuant to which (i) the Acquiror would commence a tender offer and the Company
would commence a tender offer (collectively, the "Tender Offer") for all
outstanding shares of the Company's common stock, par value $0.01 per share (the
"Company Shares") for $21.50 per share, net to the seller in cash (the
"Consideration"), and (ii) Acquiror would be merged with the Company in a merger
(the "Merger"), at which time each Company Share, other than Company Shares held
in treasury, held by the Acquiror or by a Participant (as defined in the
Agreement), would be converted into the right to receive the Consideration. The
Tender Offer and the Merger, taken together, are referred to as the
"Transaction".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares in the Transaction pursuant to the
Agreement is fair from a financial point of view to such holders, other than the
Acquiror or any Participant.
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
(which includes Participants) concerning the matters described in clauses
1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be
relevant;
<PAGE>
(7) Participated in certain discussions and negotiations between members of
the special committee of the board of directors of the Company (the
"Special Committee") and its legal advisors on the one hand, and the
Acquiror and its financial and legal advisors, on the other hand; and
(8) Reviewed a draft dated January 28, 2000 of the Agreement.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. 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 prepared and reflect the best currently
available estimates and judgment of members of management of the Company (which
includes Participants) as to the expected future financial performance of the
Company. We have also assumed that the final form of the Agreement will be
substantially similar to the draft reviewed by us dated January 28, 2000.
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 Special Committee in connection
with the Transaction and will receive a fee from the Company for our services,
which is contingent upon the consummation of the Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. In the ordinary course of our business, we may actively trade the
Company Shares and other securities of the Company for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Special Committee. This
opinion relates to the fairness, from a financial point of view, of the
Consideration. This opinion does not constitute an opinion, nor do we assume any
responsibility, with respect to (i) the ability of the Acquiror to obtain
financing, or (ii) the solvency or prudence of the capital structure of the
Company or the Acquiror following the consummation of the Tender Offer or the
Merger. This opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any shareholder as to whether such shareholder should tender
any Company Shares pursuant to the Tender Offer, vote in favor of the Merger, or
take any action with respect to the Transaction.
On the basis of and 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
Company Shares in the Transaction pursuant to the Agreement is fair from a
financial point of view to the holders of such shares, other than the Acquiror
or any Participant.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
/s/ MERRILL LYNCH, PIERCE, FENNER &
SMITH
INCORPORATED
A-2
<PAGE>
ANNEX B
HISTORICAL FINANCIAL INFORMATION CONCERNING THE COMPANY
<TABLE>
<S> <C>
Audited Consolidated Financial Statements of Transportation
Technologies Industries, Inc. and its Subsidiaries
(December 31, 1998, restated on August 12, 1999)
Report of Independent Public Accountants.................. B-2
Consolidated Statements of Income......................... B-3
Consolidated Balance Sheets............................... B-4
Consolidated Statements of Cash Flows..................... B-5
Notes to Condensed Consolidated Financial Statements...... B-6
Unaudited Consolidated Financial Statements of
Transportation Technologies Industries, Inc. and its
Subsidiaries (September 30, 1999)
Consolidated Balance Sheets............................... B-33
Consolidated Statements of Income......................... B-34
Consolidated Statements of Cash Flows..................... B-35
Notes to Condensed Consolidated Financial Statements...... B-36
</TABLE>
B-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheets of Transportation
Technologies Industries, Inc. (formerly Johnstown America Industries, Inc.) and
Subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Transportation
Technologies Industries, Inc. and Subsidiaries as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 15, 1999
B-2
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................... $433,563 $415,866 $361,825
Cost of sales............................................... 343,852 329,678 288,756
-------- -------- --------
Gross profit................................................ 89,711 86,188 73,069
Selling, general and administrative expense................. 38,434 35,719 33,857
Amortization expense........................................ 6,773 6,798 6,970
Pension termination gain.................................... (1,688) -- --
Reduction of environmental reserves......................... -- (14,300) --
-------- -------- --------
Operating income............................................ 46,192 57,971 32,242
Interest income............................................. (1,558) (439) (481)
Interest expense............................................ 28,704 29,986 31,984
-------- -------- --------
Income from continuing operations before income taxes and
extraordinary item........................................ 19,046 28,424 739
Provision for income taxes.................................. 10,853 12,881 2,116
-------- -------- --------
Income (loss) from continuing operations before
extraordinary item........................................ 8,193 15,543 (1,377)
Income (loss) from discontinued operations (less applicable
income tax (benefit) provision of $18,080 ($3,370) and
($2,192), respectively)................................... 30,808 (6,069) (3,994)
-------- -------- --------
Income (loss) before extraordinary item..................... 39,001 9,474 (5,371)
Extraordinary item, net of income taxes..................... (1,146) (2,008) --
-------- -------- --------
Net income (loss) and comprehensive income (loss)........... $ 37,855 $ 7,466 $ (5,371)
======== ======== ========
Basic earnings per share:
Income (loss) from continuing operations before
extraordinary item...................................... $ 0.83 $ 1.59 $ (0.15)
Income (loss) from discontinued operations................ 3.13 (0.62) (0.40)
Extraordinary item........................................ (0.11) (0.21) --
-------- -------- --------
Net income (loss) per share............................... $ 3.85 $ 0.76 $ (0.55)
======== ======== ========
Basic weighted average shares outstanding................. 9,838 9,761 9,790
======== ======== ========
Diluted earnings per share:
Income (loss) from continuing operations before
extraordinary item...................................... $ 0.81 $ 1.58 $ (0.14)
Income (loss) from discontinued operations................ 3.04 (0.62) (0.41)
Extraordinary item........................................ (0.11) (0.20) --
-------- -------- --------
Net income (loss) per share............................... $ 3.74 $ 0.76 $ (0.55)
======== ======== ========
Diluted weighted average equivalents and shares
outstanding............................................. 10,122 9,856 9,794
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
B-3
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------
1998 1997
--------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS:
Cash and cash equivalents................................... $ 33,382 $ 27,884
Accounts receivable, net.................................... 55,550 54,722
Inventories................................................. 29,566 30,992
Deferred income tax assets.................................. 13,688 13,521
Prepaid expenses and other current assets................... 2,643 2,776
Net assets of discontinued operations....................... 37,555 --
-------- --------
Total current assets........................................ 172,384 129,895
Property, plant and equipment, net.......................... 82,402 84,043
Deferred financing costs and other, net..................... 8,809 12,555
Intangible assets, net...................................... 229,408 233,760
Net assets of discontinued operations....................... -- 26,848
-------- --------
Total assets................................................ $493,003 $487,101
======== ========
LIABILITIES:
Accounts payable............................................ $ 19,601 $ 22,250
Accrued payroll and employee benefits....................... 19,281 16,932
Other current liabilities................................... 32,381 27,337
Current maturities of long-term debt and capital lease...... 9,039 3,520
-------- --------
Total current liabilities................................... 80,302 70,039
Long-term debt and capital lease, less current maturities... 49,186 91,603
Senior subordinated notes................................... 182,338 182,691
Deferred income tax liabilities............................. 34,571 36,373
Other long-term liabilities................................. 35,889 35,375
-------- --------
Total liabilities........................................... 382,286 416,081
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, par $.01, 20,000 shares authorized, none
outstanding............................................... -- --
Common stock, par $.01, 201,000 shares authorized, 9,900 and
9,768
Issued and outstanding as of December 31, 1998 and 1997,
respectively............................................ 99 98
Paid-in capital........................................... 56,892 55,066
Retained earnings......................................... 53,741 15,886
Employee receivables for stock purchase................... (15) (30)
-------- --------
Total shareholders' equity................................ 110,717 71,020
-------- --------
Total liabilities and shareholders' equity................ $493,003 $487,101
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the balance sheets.
B-4
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................... $ 37,855 $ 7,466 $ (5,371)
(Income) loss from discontinued operations.................. (30,808) 6,069 3,994
-------- -------- --------
Income (loss) from continuing operations.................... 7,047 13,535 (1,377)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities--Depreciation............ 10,579 10,318 10,309
Amortization................................................ 9,032 9,810 10,816
Deferred income tax expense (benefit)....................... 3,023 5,451 (180)
Provision for postretirement benefits....................... 1,558 1,266 918
Pension termination gain.................................... (1,688) -- --
Reduction of environmental reserves......................... -- (14,300) --
Extraordinary item, net of income tax....................... 1,146 2,008 --
Change in continuing operating assets and liabilities:
Accounts receivable....................................... (828) (9,128) 4,470
Inventories............................................... 1,425 (2,046) 2,982
Prepaid expenses and other current assets................. 507 (359) 9,460
Accounts payable.......................................... (2,649) 2,664 5,676
Accrued payroll and employee benefits..................... 558 408 (2,429)
Other assets and liabilities.............................. 2,893 7,991 (5,938)
-------- -------- --------
Cash provided by continuing operations.................... 32,603 27,618 34,707
INVESTING ACTIVITIES:
Capital expenditures........................................ (8,941) (6,636) (11,730)
Change in restricted cash and other......................... 141 53 128
-------- -------- --------
Cash used in continuing operations........................ (8,800) (6,583) (11,602)
FINANCING ACTIVITIES:
Payments of term loans and capital lease.................... (36,899) (90,170) (16,812)
Issuance of long-term debt.................................. -- 82,823 --
Payment of deferred financing costs and other............... 521 (3,102) (747)
-------- -------- --------
Cash used in continuing operations........................ (36,378) (10,449) (17,559)
-------- -------- --------
Net change in cash and cash equivalents from continuing
operations................................................ (12,575) 10,586 5,546
Net cash (provided to) received from discontinued
operation................................................. 18,073 (1,007) (584)
Cash and cash equivalents, beginning of year................ 27,884 18,305 13,343
-------- -------- --------
Cash and cash equivalents, end of year.................... $ 33,382 $ 27,884 $ 18,305
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
B-5
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Effective June 14, 1999, the name of the Company was changed from Johnstown
America Industries, Inc. to Transportation Technologies Industries, Inc., a
Delaware company (the Company).
The Company has historically had two operating segments within the
transportation industry: truck components, a leading manufacturer of wheel end
components, seating, steerable drive axles, gearboxes and other castings for the
heavy-duty truck industry; and freight cars, a leading manufacturer and lessor
of new and rebuilt freight cars used for hauling coal, intermodal containers,
highway trailers, automobiles, agricultural and mining products.
On October 28, 1991, the Company through its wholly owned subsidiary
Johnstown America Corporation, (JAC), consummated the purchase of the former
Freight Car Division of Bethlehem Steel Corporation. In 1994, the Company began
leasing new and used freight cars through its JAIX Leasing Company (JAIX
Leasing) subsidiary. The Company completed the acquisition of Truck
Components Inc. (TCI) and its subsidiaries (Gunite Corporation, Brillion Iron
Works, Inc. and Fabco Automotive Corporation) on August 23, 1995, and Bostrom
Seating, Inc. (Bostrom) on January 13, 1995. Operations commenced on October 2,
1995, at the Freight Car Services, Inc. (FCS) facility. In April and May of
1999, the Company made two additional truck component acquisitions, Imperial
Group and EMI, respectively (see Note 17).
On June 3, 1999, the Company completed the sale of its freight car
operations comprised of three wholly owned subsidiaries--JAC, FCS, and JAIX
Leasing to Rabbit Hill Holdings, Inc. (the Buyer). The Company received
consideration consisting of approximately $103.9 million in cash, contingent
additional consideration of $20 million and a 20 percent equity interest in the
Buyer. In addition, the Buyer assumed substantially all of the liabilities of
the freight car operations, including $14.4 million of debt. The 20 percent
equity interest in the Buyer is comprised of common and preferred stock, some of
which is non-voting. Further, the Company's rights with respect to voting and
transferability of its equity interest are limited and, in particular, the
Company granted a proxy to vote its equity interest to another shareholder of
Buyer under certain circumstances. The sale resulted in an estimated pretax gain
of $46.8 million after consideration of estimated transaction costs of
$4.2 million and a related pension curtailment loss of $0.3 million. The
after-tax gain on the disposition of the railcar business of $29.8 million was
recorded in the Company's results for the second quarter of 1999. Approximately
$2.5 million of additional gain was deferred due to the Company's continuing
interest in the Railcar Business. Proceeds from the $20.0 million contingent
additional consideration will be recorded as a gain, if and when collected. Also
as a result of the sale, approximately $80.0 million of senior bank debt was
paid subsequent to the acquisition which resulted in the after-tax write off of
$2.2 million of unamortized deferred financing costs.
Revenues of the Railcar Business in 1998, 1997 and 1996 were
$532.2 million, $234.3 million and $198.1 million, respectively. Net assets of
discontinued operations as of December 31, 1997 included $12.1 million net
current liabilities and 38.9 million net long-term assets. Included within the
income (loss) from discontinued operations is an allocation of consolidated
interest which is not attributable to other operations of the Company. The
interest included was $2.1 million, $3.3 million and $1.4 million in 1998, 1997
and 1996, respectively.
The accompanying consolidated financial statements have been recast to
reflect the Railcar Business as a discontinued operation. For historical
business segment reporting purposes, the Company's financial data related to its
Railcar Business was previously reported as the segment, "Freight Car."
B-6
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of the following significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in the accompanying consolidated financial
statements.
CASH EQUIVALENTS
The Company considers all short-term investments with original maturities of
three months or less when acquired to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of 26% and
25% of the Company's inventories as of December 31, 1998 and 1997, respectively,
was determined on the first-in, first-out (FIFO) method, with the cost of the
remaining inventories, representing certain inventories in the truck components
segment, determined on the last-in, first-out method (LIFO). Had all inventories
been determined on the FIFO method at December 31, 1998 and 1997, the reported
value of such inventories would have been increased by $1.1 million and
$0.7 million, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line method by making
periodic charges to income over the estimated useful lives of the assets, which
are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 10-40 years
Machinery and equipment..................................... 3-12 years
</TABLE>
Property, plant and equipment under capital leases are amortized over the
shorter of the estimated useful life of the asset or the term of the lease.
Maintenance and repairs are charged to expense as incurred, while major
replacements and improvements are capitalized. The cost and accumulated
depreciation of items sold or retired are removed from the property accounts and
any gain or loss is recorded currently in the consolidated statements of income.
RESEARCH AND DEVELOPMENT
Costs associated with research and development are expensed as incurred.
INTANGIBLE ASSETS
The excess of purchase costs over amounts allocated to identifiable assets
and liabilities of businesses acquired (goodwill) is amortized on the
straight-line method over 40 years. Should events or circumstances occur
subsequent to the acquisition of a business which bring into question the
realizable value or impairment of the related goodwill, the Company will
evaluate the remaining useful life and balance of
B-7
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
goodwill, and should an impairment be identified, a loss would be recognized to
the extent that the carrying value exceeds the fair value. The Company's
principle considerations in determining impairment include the strategic benefit
to the Company of the particular business as measured by undiscounted current
and expected future operating cash flows of that particular business.
Other intangible assets, except pension assets, are amortized on the
straight-line method over their estimated useful lives, which are as follows:
<TABLE>
<S> <C>
Trademarks.................................................. 40 years
Technologies................................................ 13-40 years
Patents..................................................... 8 years
</TABLE>
ENVIRONMENTAL RESERVES
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, and will incur additional
capital and operating costs in the future to comply with currently existing laws
and regulations, new regulatory requirements arising from recently enacted
statutes and possible new statutory enactments. In addition to environmental
laws that regulate the Company's ongoing operations, the Company is also subject
to environmental remediation liability. It is the Company's policy to provide
and accrue for the estimated cost of environmental matters, on a nondiscounted
basis, when it is probable that a liability has been incurred and the amount of
the liability can be reasonably estimated. Such provisions and accruals exclude
claims for recoveries from insurance carriers or other third parties.
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities"
was issued in October 1996 and adopted by the Company with minimal impact in
1997. This SOP provides authoritative guidance on specific accounting issues
that are present in the recognition, measurement and disclosure of environmental
remediation liabilities.
INCOME TAXES
The Company provides for deferred income taxes on differences that arise
when items are reported for financial statement purposes in years different from
those for income tax reporting purposes in conformance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
REVENUE RECOGNITION
Revenue from the continuing operations is recognized when the products are
shipped.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
B-8
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income" was issued in July 1997. This
new pronouncement establishes standards for reporting and display of
comprehensive income and its components. There were no other comprehensive
income items to report other than net income for 1998, 1997 and 1996.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way that the
chief operating decision maker organizes segments within the company for making
operating decisions and assessing performance. The Company's continuing
operations comprise a single reporting segment
SFAS No. 132, "Employers' Disclosure about Pensions and other Postretirement
Benefits" was issued in February 1998 and was adopted by the Company during
1998. This new pronouncement requires the Company to standardize disclosure for
pension and other postretirement benefits. See Note 7.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
was issued in June 1998 and must be adopted by the Company by the year 2000.
This new pronouncement will require the Company to record derivatives on the
balance sheet as assets or liabilities, measured at fair value and gains or
losses resulting from the changes in the values of those derivatives to be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The Company is evaluating the standard and does not expect
it to have a material impact on the financial results or condition of the
Company because the use of derivatives at the Company is not significant.
SOP 98-5, "Reporting on Costs of Start-Up Activities" was issued in
April 1998 and was adopted by the Company in late 1998. The new pronouncement
requires that companies expense the costs of start-up activities as those costs
are incurred. Previously, such costs could have been capitalized and amortized
and any such unamortized capitalized costs must be expensed upon adoption of the
new standard. The adoption of this standard did not have a material impact on
the Company's financial position or results of operations.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform to
current year presentation.
NOTE 3. DETAIL OF CERTAIN ASSETS AND LIABILITIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year...................... $ 2,244 $ 1,883 $1,690
Provision for doubtful accounts................... 673 1,854 331
Net write-offs.................................... (1,188) (1,493) (138)
------- ------- ------
Balance at end of year............................ $ 1,729 $ 2,244 $1,883
======= ======= ======
</TABLE>
B-9
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DETAIL OF CERTAIN ASSETS AND LIABILITIES (CONTINUED)
INVENTORIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and purchased components.................... $ 8,575 $ 9,723
Work in progress and finished goods....................... 20,991 21,269
------- -------
Inventories............................................... $29,566 $30,992
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ 3,254 $ 2,962
Buildings and improvements.............................. 19,831 18,872
Machinery and equipment................................. 88,728 82,142
Construction in progress................................ 4,841 3,941
-------- --------
116,654 107,917
Accumulated depreciation................................ 34,252 23,874
-------- --------
Property, plant and equipment, net...................... $ 82,402 $ 84,043
======== ========
</TABLE>
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
NET BALANCE
AS OF DECEMBER 31,
ORIGINAL ACCUMULATED -------------------
COST AMORTIZATION 1998 1997
-------- ------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Excess cost over net assets acquired.............. $196,813 $16,848 $179,965 $184,885
Trademarks........................................ 26,988 2,326 24,662 25,360
Technologies...................................... 20,722 2,735 17,987 18,807
Patents........................................... 5,878 1,505 4,373 4,708
Pension asset..................................... 2,421 -- 2,421 --
-------- ------- -------- --------
Intangible assets................................. $252,822 $23,414 $229,408 $233,760
======== ======= ======== ========
</TABLE>
B-10
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DETAIL OF CERTAIN ASSETS AND LIABILITIES (CONTINUED)
OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued interest.......................................... $ 8,489 $ 9,011
Accrued workers' compensation............................. 2,626 2074
Current portion of postretirement and pension benefit
reserves................................................ 3,000 3655
Accrued warranty.......................................... 818 667
Other..................................................... 17,448 11,930
------- -------
Other current liabilities................................. $32,381 $27,337
======= =======
</TABLE>
OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Postretirement and pension benefit reserves............... $20,985 $19,962
Environmental reserves.................................... 9,904 10,402
Other..................................................... 5,000 5,011
------- -------
Other long-term liabilities............................... $35,889 $35,375
======= =======
</TABLE>
NOTE 4. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED EMPLOYEE
STOCK CAPITAL EARNINGS RECEIVABLES TOTAL
-------- -------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance--December 31, 1995................... $98 $55,015 $13,791 $(30) $ 68,874
Options exercised............................ -- 34 -- -- 34
Net loss for year............................ -- -- (5,371) -- (5,371)
--- ------- ------- ---- --------
Balance--December 31, 1996................... 98 55,049 8,420 (30) 63,537
Options exercised............................ -- 17 -- -- 17
Net income for year.......................... -- -- 7,466 -- 7,466
--- ------- ------- ---- --------
Balance--December 31, 1997................... 98 55,066 15,886 (30) 71,020
Collection of employee receivables........... -- -- -- 15 15
Options exercised............................ 1 1,512 -- -- 1,513
Common stock issued.......................... -- 314 -- -- 314
Net income for year.......................... -- -- 37,855 -- 37,855
--- ------- ------- ---- --------
Balance--December 31, 1998................... $99 $56,892 $53,741 $(15) $110,717
=== ======= ======= ==== ========
</TABLE>
B-11
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. SHAREHOLDERS' EQUITY (CONTINUED)
COMMON AND PREFERRED STOCK
The Company authorized 200,000,000 shares of Common Stock (voting),
1,000,000 shares of Class B Common Stock (non-voting) and 20,000,000 shares of
preferred stock. No Class B Common Stock or preferred stock has been issued.
In October 1995, the Board of Directors of the Company adopted a Shareholder
Rights Plan and declared a dividend of one right ("Right") for each outstanding
share of the Company's common stock held by shareholders of record on
October 16, 1995. When exercisable, each Right entitles shareholders of record
to purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $32.00, subject to certain
adjustments. The Company authorized 20,000 shares of such stock pursuant to this
plan. The Rights will become exercisable, and will trade separately from the
common stock, only if a person or group acquires 15% or more of the Company's
outstanding common stock or commences a tender or exchange offer that would
result in that person or group owning 15% or more of the Company's outstanding
common stock. Subsequently, upon the occurrence of certain events, holders of
Rights will be entitled to purchase common stock of the Company or a third-party
acquiror at an amount equal to twice the Right's exercise price. Until the
Rights become exercisable, they may be redeemed at the Company's option at a
price of one cent per Right. The Rights expire on October 4, 2005.
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit line..................................... $ -- $ --
Tranche B term loan....................................... 56,632 93,340
Capital lease............................................. 1,593 1,783
------- -------
Total debt................................................ 58,225 95,123
Current maturities........................................ (9,039) (3,520)
------- -------
Long-term debt............................................ $49,186 $91,603
======= =======
</TABLE>
Maturities of long-term debt, before the bank refinancing described below,
was as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
------------------
(IN THOUSANDS)
<S> <C>
1999........................................................ $ 9,039
2000........................................................ 8,274
2001........................................................ 11,632
2002........................................................ 14,888
2003........................................................ 13,734
Thereafter.................................................. 658
</TABLE>
B-12
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. LONG-TERM DEBT (CONTINUED)
SENIOR BANK FACILITIES
The Company entered into a credit facility (Senior Bank Facilities) on
August 23, 1995. The revolving credit line portion of the Senior Bank Facilities
provided for up to $75 million of outstanding borrowings and letters of credit,
limited by the level of eligible accounts receivable and inventories. As of
December 31, 1998, availability under the revolving credit line, after
consideration of outstanding letters of credit of $14.1 million, was
$60.9 million.
At the Company's election, interest rates per annum for the revolving credit
line were fluctuating rates of interest measured by reference to either (a) an
adjusted London inter-bank offered rate (LIBOR) plus a borrowing margin or
(b) an alternate base rate (ABR) plus a borrowing margin. Such borrowing margins
ranged between 1.50% and 2.50% for LIBOR loans and between 0.50% and 1.50% for
ABR loans, fluctuating within each range in 0.25% increments based on the
Company achieving certain financial results. Interest rates per annum applicable
to Tranche B term loan were either (a) LIBOR plus a margin of 3.00% or (b) ABR
plus 2.00%. Additionally, various fees related to unused commitments, letters of
credit and administration of the facility were incurred by the Company. As of
December 31, 1998 and 1997, the weighted average interest rate of all
outstanding loans under the Senior Bank Facilities was 8.84% and 9.01%,
respectively. Borrowings under the Senior Bank Facilities were guaranteed by
each of the Company's subsidiaries other than JAIX Leasing (the Guarantor
Subsidiaries) and were secured by the assets and stock of the Company and its
Guarantor Subsidiaries. During 1998, the Company prepaid $35 million of the
Tranche B loan and during 1997, the Company retired the Tranche A loan in
conjunction with the issuance of debt described in Note 6. As a result of these
prepayments, the Company recorded extraordinary charges, net of income taxes, of
$1.1 million and $2.0 million in 1998 and 1997, respectively, representing the
non-cash writeoff of related unamortized deferred financing costs. The revolving
credit line was scheduled to mature on March 31, 2002 and the Tranche B Term
Loan was scheduled to mature on March 31, 2003.
The Senior Bank Facilities contained various financial covenants including
capital expenditure limitations, maximum leverage ratio, interest coverage
ratio, and minimum net worth. It also restricted the Company from paying
dividends, repurchasing common stock and making other distributions in certain
circumstances.
On April 29, 1999, the then outstanding balance of the Tranche B term loan
was repaid and the facility was terminated in connection with the new Senior
Bank Credit Facility entered into in conjunction with a subsequent acquisition
(see Note 17).
OTHER
During 1997, the Company entered into various interest rate contracts to fix
a portion of the cost of its variable rate Senior Bank Facilities. These
contracts limit the effect of market fluctuations on the interest cost of
floating rate debt. The notional principal amounts outstanding covering the
current period on the interest rate contracts were $25 million and $75 million
as of December 31, 1998 and 1997, respectively. The fixed rates of interest on
these contracts were 6.14% as of December 31, 1998 and ranged from 5.98% to
6.32% as of December 31, 1997. The remaining contract matures in August 2000.
The impact of fixed versus variable interest rates is recorded as incurred, as a
component of interest expense. Costs associated with obtaining the Senior Bank
Facilities, the Senior Subordinated Notes described in Note 6 and other
indebtedness aggregated to $8.7 million as of December 31, 1998. Such costs are
amortized over the term
B-13
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. LONG-TERM DEBT (CONTINUED)
of the related debt. Amortization of deferred financing costs amounted to
$1.9 million, $2.2 million and $3.2 million for the years ended December 31,
1998, 1997, and 1996, respectively. As of December 31, 1998 and 1997,
accumulated amortization of such costs was $4.3 million and $4.0 million,
respectively. Additional deferred financing costs were incurred and some were
written off when the Senior Bank Facilities were refinanced (see Note 17).
NOTE 6. SENIOR SUBORDINATED NOTES
In conjunction with the acquisition of TCI, the Company issued $100 million
of Senior Subordinated Notes which are due August 15, 2005. In 1997, the Company
issued $80 million of additional notes due August 15, 2005 (collectively, the
Notes) with substantially identical terms to the already outstanding notes at a
$3.6 million premium, for an effective rate of 10.8%. These Notes have an
interest rate of 11.75% per annum and are guaranteed on a unsecured, senior
subordinated joint and several basis by each of the Guarantor Subsidiaries.
Pursuant to the settlement of separate interest rate contracts in effect when
each portion of the Notes was issued, the Company realized a $0.8 million loss
and a $2.6 million gain upon the 1997 and 1995 issuances, respectively. The gain
and the loss are being amortized as an offset to interest expense over the term
of the Notes. The Notes have customary covenants including restrictions on
incurrence of additional indebtedness, payment of dividends and redemption of
capital stock. The Notes are subordinated to all indebtedness under the Senior
Bank Facilities and cross-default provisions do exist. Except in certain limited
circumstances, the Notes are not subject to optional redemption by the Company
prior to August 15, 2000, and thereafter are subject to optional redemption by
the Company at declining redemption premiums. Upon the occurrence of a change in
control (as defined), the Company is required to offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof plus accrued interest.
The Company's future operating performance and ability to service or
refinance the Notes and to extend or refinance its bank credit facilities will
be subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control.
NOTE 7. EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
Certain of the Company's subsidiaries have qualified, defined benefit plans
covering substantially all of their employees. Company contributions to the
plans were made based upon the minimum amounts required under the Employee
Retirement Income Security Act. The plans' assets are held by independent
trustees and consist primarily of equity and fixed income securities.
Following the acquisition of TCI, a certain TCI plan was frozen and was
replaced with a defined contribution plan. The Company, after consideration of
previously unrecognized amounts, recognized a $1.7 million non-cash gain on the
termination of the plan in 1998.
B-14
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
POSTRETIREMENT BENEFITS
The Company provides health care benefits for certain salaried and hourly
retired employees. Employees may become eligible for health care benefits if
they retire after attaining specified age and service requirements. These
benefits are subject to deductibles, co-payment provisions and other
limitations.
The Company does not offer any other significant postretirement benefits.
The following table sets forth the plans' funded status:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------- -----------------------
AS OF DECEMBER 31,
-----------------------------------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year............. $ 12,165 $ 9,997 $ 14,647 $ 14,275
Service cost........................................ 418 325 425 365
Interest cost....................................... 620 674 1,135 1,081
Plan amendment...................................... 878 -- -- --
Actuarial loss...................................... 217 587 1,873 (200)
Settlement gain..................................... (1,688) -- -- --
Benefits paid....................................... (4,943) (318) (1,301) (874)
--------- --------- -------- --------
Benefit obligation at end of year................... $ 7,667 $ 11,265 $ 16,779 $ 14,647
========= ========= ======== ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year...... $ 8,220 $ 6,571 $ -- $ --
Actual return on plan assets........................ 675 1,197 -- --
Employer contribution............................... 1,938 768 -- --
Benefits paid....................................... (4,943) (318) -- --
--------- --------- -------- --------
Fair value of plan assets at end of year............ $ 5,890 $ 8,218 $ -- $ --
========= ========= ======== ========
Benefit obligation in excess of plan assets......... $ (1,777) $ (3,047) $(16,779) $(14,647)
Unrecognized net gain............................... (272) (647) 1,279 (560)
Unrecognized prior service cost..................... 686 -- -- --
--------- --------- -------- --------
Net amount recognized............................... $ (1,363) $ (3,694) $(15,482) $(15,207)
========= ========= ======== ========
RECOGNIZED IN BALANCE SHEET
Accrued benefit obligation.......................... $ (1,777) $ (3,694) $(15,482) $(15,207)
Intangible asset.................................... 414 -- -- --
--------- --------- -------- --------
Net amount recognized............................... $ (1,363) $ (3,694) $(15,482) $(15,207)
========= ========= ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate....................................... 6.75% 7.00% 6.85% 7.10%
Expected return on plan assets...................... 9.00% 9.00% -- --
Rate of compensation increase....................... 3.00-4.00% 3.00-4.00% -- --
</TABLE>
B-15
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS (CONTINUED)
For measurement purposes, a 7.50% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998 decreasing gradually
to an ultimate rate of 4.25% by the year 2004.
The Company recognized a minimum pension liability for underfunded plans.
The minimum liability is equal to the excess of the accumulated benefit
obligation over the fair market value of plan assets. A corresponding amount is
recognized as an intangible asset. In addition to the above, the Company
retained certain pension and related postretirement obligations of the Railcar
Business aggregating to $6.7 million (with a $2.0 million intangible asset) as
of the Railcar Business sales date.
COMPONENTS OF NET PERIODIC BENEFIT COST
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------ ------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service cost........................................ $ 418 $ 325 $ 473 $ 425 $ 365 $ 854
Interest cost....................................... 620 674 623 1,135 1,081 1,340
Expected return on plan assets...................... (605) (2,433) (483) -- -- --
Amortization of unrecognized gains and losses....... -- 1,807 (27) 16 -- (183)
Amortization of unrecognized prior service cost... 31 14 -- -- -- --
----- ------- ----- ------ ------ ------
Net periodic benefit cost......................... $ 464 $ 387 $ 586 $1,576 $1,446 $2,011
===== ======= ===== ====== ====== ======
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------------
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Effect on total of service and interest cost...... $ 304 $ (257)
Effect on postretirement benefit obligation....... 2,705 (2,341)
</TABLE>
DEFINED CONTRIBUTION PLANS
Certain of the Company's subsidiaries also maintain qualified, defined
contribution plans which provide benefits to their employees based on employee
contributions, years of service, employee earnings or certain subsidiary
earnings, with discretionary contributions allowed. Expenses relating to these
plans, excluding the Railcar Business were $3.1 million, $2.9 million and $2.8
million for the years 1998, 1997 and 1996, respectively.
B-16
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES
The provision for income taxes from continuing operations before
extraordinary item includes current and deferred components as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current taxes:
Federal..................................................... $ 5,054 $ 6,172 $2,120
State....................................................... 2,776 1,258 176
------- ------- ------
7,830 7,430 2,296
------- ------- ------
Deferred taxes.............................................. 3,023 5,451 (180)
------- ------- ------
Provision for income taxes from continuing operations before
extraordinary item........................................ $10,853 $12,881 $2,116
======= ======= ======
</TABLE>
The provision (benefit) for income taxes before extraordinary item differs
from the amounts computed by applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes at federal statutory rate.............. 35.0% 35.0% 34.0%
State income taxes, net of federal benefit.......... 10.3 5.2 20.9
Nondeductible amortization expense.................. 9.0 6.1 231.8
Other, net.......................................... 2.7 (1.0) 0.1
---- ---- -----
Effective income tax rate........................... 57.0% 45.3% 286.4%
==== ==== =====
</TABLE>
B-17
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES (CONTINUED)
Components of deferred tax benefits (obligations) consist of the following
and include components related to the Railcar Business because the Company
retained such balances upon the Railcar Business sale:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
1998 1997
---------------------- ----------------------
BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS
-------- ----------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Postretirement and pension benefit reserves.......... $12,458 $ -- $12,042 $ --
Environmental reserve................................ 4,155 -- 4,388 --
Accrued workers' compensation reserve................ 1,862 -- 1,721 --
Warranty reserve..................................... 2,924 -- 1,500 --
Alternative minimum tax credit carryforward.......... -- -- 2,110 --
Property, plant and equipment........................ -- (26,487) -- (27,674)
Trademarks and technologies.......................... -- (18,339) -- (19,061)
Inventories.......................................... -- (2,412) -- (2,818)
Other................................................ 8,375 (3,419) 7,487 (2,547)
------- -------- ------- --------
Deferred tax benefits (obligations).................. $29,774 $(50,657) $29,248 $(52,100)
======= ======== ======= ========
</TABLE>
In the consolidated balance sheets, these deferred benefits and deferred
obligations are classified as deferred income tax assets or deferred income tax
liabilities, based on the classification of the related liability or asset for
financial reporting. A deferred tax asset or liability that is not related to an
asset or liability for financial reporting, including deferred tax assets
related to carry forwards, are classified according to the expected reversal
date of the temporary difference as of the end of the year. Tax credit carry
forwards primarily consist of alternative minimum taxes, which can be carried
forward indefinitely, and certain state tax net operating losses which all
relate to the Railcar Business subject to various limitations which expire, if
unused, in 1999 through 2007 under the current tax laws. A valuation allowance
of $1.0 million and $0.3 million as of December 31, 1998 and 1997, has been
recorded to offset these state tax credit carry forwards. As of December 31,
1998 and 1997, no other valuation allowances are deemed necessary as management
expects to realize all other deferred benefits as future tax deductions.
NOTE 9. STOCK OPTION PLANS
The Company maintains a Stock Option Plan (the Option Plan) for management
and nonaffiliated directors of the Company and has reserved 989,000 shares of
common stock for issuance under such plan. Options are granted to management at
the discretion of the Company's directors and pursuant to an option program for
nonaffiliated Company directors. Options granted under the Option Plan generally
have an exercise price equal to the closing market value of the Company's common
stock as of the date of
B-18
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. STOCK OPTION PLANS (CONTINUED)
grant, and become exercisable under various vesting periods of up to three
years. Certain information regarding stock options issued by the Company is
summarized below:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------- ----------------------
WTD. AVG. WTD. AVG.
SHARES EXER. PRICE SHARES EXER. PRICE
-------- ----------- -------- -----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995........................................ 583 $11.79 277 $11.18
Issued................................................... 178 4.82
Exercised................................................ (14) 2.50
Canceled................................................. (74) 12.17
---- ------ --- ------
December 31, 1996........................................ 673 10.10 472 10.82
Issued................................................... 209 6.54
Exercised................................................ (10) 2.79
Canceled................................................. (50) 15.40
---- ------ --- ------
December 31, 1997........................................ 822 8.94 651 9.74
Issued................................................... 72 15.35
Exercised................................................ (102) 6.57
---- ------ --- ------
December 31, 1998........................................ 792 $ 9.79 670 $ 9.62
==== ====== === ======
</TABLE>
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------- ----------------------
AS OF DECEMBER 31,1998 WTD. AVG WTD. AVG. WTD. AVG.
RANGE OF EXERCISE PRICES SHARES REMAINING YEARS EXER. PRICE SHARES EXER. PRICE
- - ------------------------ -------- --------------- ----------- -------- -----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 2.50--$11.13 543 7.42 $6.41 469 $6.25
12.13-- 25.63 249 6.71 17.18 201 17.47
</TABLE>
The Company measures compensation cost under the intrinsic value based
method. Had compensation expense been determined under the fair value based
method pro forma net income and diluted earnings per share would have been as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Pro forma net income (loss)........................... $37.7 $ 6.9 $ (6.1)
Pro forma diluted earnings (loss) per share........... 3.73 0.70 (0.62)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes pricing model assuming an expected life of 10 years, a zero
dividend yield and the following weighted average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Risk free interest rate............................. 5.3% 6.3% 7.1%
Volatility rate..................................... 60.9% 64.9% 56.6%
</TABLE>
B-19
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. ENVIRONMENTAL MATTERS
The Company is subject to comprehensive and frequently changing federal,
state and local environmental laws and regulations, and will incur additional
capital and operating costs in the future to comply with currently existing laws
and regulations, new regulatory requirements arising from recently enacted
statutes and possible new statutory enactments. In addition to environmental
laws that regulate the Company's subsidiaries' ongoing operations, the
subsidiaries also are subject to environmental remediation liability. Under the
federal Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and analogous state laws, the Company's subsidiaries may be liable as a
result of the release or threatened release of hazardous substances into the
environment. The Company's subsidiaries are currently involved in several
matters relating to the investigation and/or remediation of locations where the
subsidiaries have arranged for the disposal of foundry and other wastes.
Such matters include five situations in which the Company, through certain
of its truck components segment businesses and their predecessors, have been
named or are believed to be Potentially Responsible Parties (PRPs) in the
contamination of the sites. Additionally, environmental remediation may be
required at two of the truck components segment facilities at which soil and
groundwater contamination has been identified.
The Company believes that it has valid claims for contractual
indemnification against prior owners for certain of the investigatory and
remedial costs at each of the above mentioned sites. As a result of a private
party settlement of certain pending litigation with a prior owner of Gunite, TCI
and Gunite will not be responsible (through a contractual undertaking by the
former owner) for certain liabilities and costs resulting from Gunite's waste
disposal prior to the acquisition of Gunite by TCI in September 1987 at certain
of such sites. The Company has been notified, however, by certain other
contractual indemnitors that they will not honor future claims for
indemnification. Accordingly, the Company is litigating indemnification claims
and there is no assurance that even if successful in any such claims, any
judgments against the indemnitors will ultimately be recoverable. In addition,
the Company believes it is likely that it has incurred some liability at various
sites for activities and disposal following acquisition which would not in any
event be covered by indemnification by prior owners.
As of December 31, 1998, the Company has a $10.7 million environmental
reserve. This reserve is based on current cost estimates and does not reduce
estimated expenditures to net present value. The Company currently anticipates
spending approximately $0.8 million per year in 1999 through 2003 for monitoring
the various environmental sites associated with the environmental reserve,
including attorney and consultant costs for strategic planning and negotiations
with regulators and other PRPs, and payment of remedial investigation costs.
These sites are generally in the early investigatory stages of the remediation
process and thus it is anticipated that significant cash payments for
remediation will not be incurred for at least several years. After the
evaluation and investigation period, the investigation and remediation costs
will likely increase because the actual remediation of the various environmental
sites associated with the environmental reserve will likely be under way. Any
cash expenditures required by the Company or its subsidiaries to comply with
applicable environmental laws and/or to pay for any remediation efforts will not
be reduced or otherwise affected by the existence of the environmental reserve.
Due to the early stage of investigation of many of the sites and potential
remediations referred to above, there are significant uncertainties as to waste
quantities involved, the extent and timing of the remediation which will be
required, the range of acceptable solutions, costs of remediation and the number
of PRPs contributing to such costs. Based on all of the information presently
available to it, the Company believes that the environmental reserve will be
adequate to cover its future costs related to the sites associated with the
B-20
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. ENVIRONMENTAL MATTERS (CONTINUED)
environmental reserve, and that any additional costs will not have a material
adverse effect on the financial condition or results of operations of the
Company. However, the discovery of additional sites, the modification of
existing laws or regulations, the imposition of joint and several liability
under CERCLA or the uncertainties referred to above could result in such a
material adverse effect.
NOTE 11. CONTINGENCIES
The Company is involved in certain threatened and pending legal proceedings
including workers' compensation claims arising out of the conduct of its
businesses. In the opinion of management, the ultimate outcome of such legal
proceedings will not have a material adverse effect on the financial position or
results of operations of the Company.
Additionally, the Company is involved in various warranty and repair claims
with its customers as a normal course of business. In the opinion of management,
accrued warranty costs relating to these obligations are adequate.
NOTE 12. COMMITMENTS
The Company leases certain real property and equipment under long-term
leases expiring at various dates through 2032. The leases generally contain
specific renewal or purchase options at the then fair market value.
Future minimum lease payments excluding those payments related to the
Railcar Business at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING LEASES
------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
1999........................................................ $ 395 $ 4,888
2000........................................................ 395 2,579
2001........................................................ 395 1,742
2002........................................................ 281 1,192
2003........................................................ 125 819
Thereafter.................................................. 2,003 2,215
------ -------
Total minimum lease payments................................ 3,594 $13,435
Less: Amount representing interest.......................... 2,001
------
Present value of minimum lease payments..................... 1,593
Less: Current portion of obligation under capital lease..... 212
------
Noncurrent obligation under capital lease................... $1,381
======
</TABLE>
While the Company is liable for maintenance, insurance and similar costs
under most of its leases, such costs are not included in the future minimum
lease payments.
The Company assumed the capital lease in its acquisition of TCI. The related
asset balance of $1.9 million is included as a component of buildings and
improvements. Accumulated depreciation of this asset was $0.4 million and $0.3
million as of December 31, 1998 and 1997, respectively.
B-21
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. COMMITMENTS (CONTINUED)
Total rental expense, of continuing operations, for the years 1998, 1997 and
1996 amounted to $3.6 million, $3.2 million and $0.7 million, respectively.
NOTE 13. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1998
Total revenue............................................... $113.8 $109.0 $105.7 $105.0
Gross profit................................................ 22.9 21.9 22.7 22.2
Income from continuing operations after extraordinary
item...................................................... 1.0 1.9 2.3 2.4
Net income.................................................. 14.0 6.2 8.0 9.7
Diluted earnings per share.................................. 1.40 0.61 0.78 0.96
1997
Total revenue............................................... $101.4 $109.3 $102.7 $102.5
Gross profit................................................ 20.5 21.7 21.3 22.7
Income from continuing operations after extraordinary
item...................................................... 1.5 1.5 8.2 1.8
Net income (loss)........................................... (1.9) (0.5) 8.1 1.8
Diluted earnings (loss) per share........................... (0.19) (0.05) 0.83 0.18
</TABLE>
NOTE 14. GUARANTOR SUBSIDIARIES
The Notes are fully and unconditionally guaranteed on an unsecured, senior
subordinated, joint and several basis by each of the Guarantor Subsidiaries. The
following condensed consolidating financial data illustrate the composition of
the Parent Company, Guarantor Subsidiaries, and JAIX Leasing. Separate complete
financial statements of the respective Guarantors Subsidiaries would not provide
additional information which would be useful in assessing the financial
composition of the Guarantor Subsidiaries and thus are not presented.
As described in Note 1, the Company sold its Railcar Business effective
June 3, 1999. The non- guarantor subsidiary, JAIX Leasing, along with two
guarantor subsidiaries JAC and FCS, were part of the Railcar Business. The
operations of the Railcar Business have been reflected as discontinued
operations in the accompanying consolidated financial statements for all years
presented: however, the following data, for clarity, has not been restated.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are, therefore, reflected in the Parent Company's
investment accounts and earnings. The principal elimination entries eliminate
the Parent Company's investment in subsidiaries and intercompany balances and
transactions.
B-22
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 47.4 $(13.5) $ 5.2 $ -- $ 39.1
Accounts receivable, net................. -- 81.3 0.4 -- 81.7
Inventories.............................. -- 66.7 -- -- 66.7
Prepaid expenses and other............... 3.1 12.0 1.1 -- 16.2
------ ------ ----- ------- ------
Total current assets..................... 50.5 146.5 6.7 -- 203.7
Property, plant and equipment, net....... 2.4 114.4 18.2 (0.3) 134.7
Other assets............................. 168.1 238.5 0.3 (160.9) 246.0
------ ------ ----- ------- ------
Total assets............................. $221.0 $499.4 $25.2 $(161.2) $584.4
====== ====== ===== ======= ======
Accounts payable......................... $ -- $ 65.4 $ 0.2 $ -- $ 65.6
Other current liabilities................ (16.0) 93.9 2.4 -- 80.3
------ ------ ----- ------- ------
Total current liabilities................ (16.0) 159.3 2.6 -- 145.9
Noncurrent liabilities................... -- 78.8 3.5 -- 82.3
Long-term debt, less current maturities
and intercompany advances
(receivables).......................... 126.3 110.5 8.7 -- 245.5
Total shareholders' equity............... 110.7 150.8 10.4 (161.2) 110.7
------ ------ ----- ------- ------
Total liabilities and shareholders'
equity................................. $221.0 $499.4 $25.2 $(161.2) $584.4
====== ====== ===== ======= ======
</TABLE>
B-23
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Total revenue............................ $ -- $957.8 $ 8.3 $ -- $966.1
Cost of sales............................ -- 821.0 4.9 -- 825.9
------ ------ ----- ------ ------
Gross profit............................. -- 136.8 3.4 -- 140.2
Selling, general, administrative and
amortization expenses.................. 1.2 59.5 0.9 -- 61.6
Gain on sale of leased freight cars...... -- -- (1.2) -- (1.2)
Patent lawsuit settlement................ -- (1.7) -- -- (1.7)
Pension termination gain................. -- (16.8) -- -- (16.8)
------ ------ ----- ------ ------
Operating income (loss).................. (1.2) 95.8 3.7 -- 98.3
Interest expense, net.................... 12.6 16.9 0.9 -- 30.4
Equity (earnings) of subsidiaries........ (47.4) -- -- 47.4 --
Provision (benefit) for income taxes..... (5.4) 33.2 1.1 -- 28.9
------ ------ ----- ------ ------
Net income (loss) before extraordinary
item................................... 39.0 45.7 1.7 (47.4) 39.0
Extraordinary item, net of tax........... (1.1) -- -- -- (1.1)
------ ------ ----- ------ ------
Net income (loss)........................ $ 37.9 $ 45.7 $ 1.7 $(47.4) $ 37.9
====== ====== ===== ====== ======
</TABLE>
B-24
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash flows from (used for) operating
activities............................. $(29.6) $ 82.4 $ 3.9 $ -- $ 56.7
------ ------ ------ ---- ------
Cash flows from (used for) investing
activities:
Capital expenditures..................... (0.1) (11.4) -- -- (11.5)
Leasing business asset additions......... -- -- (4.9) -- (4.9)
Proceeds from sale of leased assets...... -- -- 24.3 -- 24.3
Changes in restricted cash/other......... 0.2 (0.1) -- -- 0.1
------ ------ ------ ---- ------
Cash flows from (used for) investing
activities............................. 0.1 (11.5) 19.4 -- 8.0
------ ------ ------ ---- ------
Cash flows from (used for) financing
activities:
Payments of term loans and capital
lease.................................. (36.7) (0.2) -- -- (36.9)
Net payments of JAIX Leasing debt........ -- -- (20.0) -- (20.0)
Intercompany advances.................... 88.0 (88.0) -- -- --
Payment of deferred financing costs and
other.................................. 0.5 -- (0.1) -- 0.4
------ ------ ------ ---- ------
Cash flows from (used for) financing
activities............................. 51.8 (88.2) (20.1) -- (56.5)
Net increase (decrease) in cash and cash
equivalents............................ 22.3 (17.3) 3.2 -- 8.2
------ ------ ------ ---- ------
Cash and cash equivalents, beginning of
year................................... 25.1 3.8 2.0 -- 30.9
------ ------ ------ ---- ------
Cash and cash equivalents, end of year... $ 47.4 $(13.5) $ 5.2 $ -- $ 39.1
====== ====== ====== ==== ======
</TABLE>
B-25
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 25.1 $ 3.8 $ 2.0 $ -- $ 30.9
Accounts receivable, net................. -- 60.5 -- -- 60.5
Inventories.............................. -- 58.7 -- -- 58.7
Prepaid expenses and other............... 2.6 13.9 1.0 -- 17.5
------ ------ ----- ------- ------
Total current assets..................... 27.7 136.9 3.0 -- 167.6
Property, plant and equipment, net....... 2.6 117.3 36.9 (0.3) 156.5
Other assets............................. 124.7 242.8 0.8 (113.6) 254.7
------ ------ ----- ------- ------
Total assets............................. $155.0 $497.0 $40.7 $(113.9) $578.8
====== ====== ===== ======= ======
Accounts payable......................... $ 0.5 $ 54.7 $ -- $ -- $ 55.2
Other current liabilities................ 2.7 60.2 0.5 -- 63.4
------ ------ ----- ------- ------
Total current liabilities................ 3.2 114.9 0.5 -- 118.6
Noncurrent liabilities................... -- 78.2 3.5 -- 81.7
Long-term debt, less current maturities
and intercompany advances
(receivables).......................... 80.8 198.8 27.9 -- 307.5
Total shareholders' equity............... 71.0 105.1 8.8 (113.9) 71.0
------ ------ ----- ------- ------
Total liabilities and shareholders'
equity................................. $155.0 $497.0 $40.7 $(113.9) $578.8
====== ====== ===== ======= ======
</TABLE>
B-26
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Total revenue............................ $ -- $642.8 $ 7.6 $ -- $650.4
Cost of sales............................ -- 552.4 4.0 -- 556.4
------ ------ ----- ------ ------
Gross profit............................. -- 90.4 3.6 -- 94.0
Selling, general, administrative and
amortization expenses.................. 1.1 53.5 0.1 -- 54.7
Gain on sale of leased freight cars...... -- -- (0.8) -- (0.8)
Reduction of environmental reserves...... -- (14.3) -- -- (14.3)
------ ------ ----- ------ ------
Operating income (loss).................. (1.1) 51.2 4.3 -- 54.4
Interest expense, net.................... 12.3 20.9 2.2 -- 35.4
Equity (earnings) of subsidiaries........ (17.6) -- -- 17.6 --
Provision (benefit) for income taxes..... (5.3) 14.2 0.6 -- 9.5
------ ------ ----- ------ ------
Net income (loss) before extraordinary
item................................... 9.5 16.1 1.5 (17.6) 9.5
Extraordinary item, net of tax........... (2.0) -- -- -- (2.0)
------ ------ ----- ------ ------
Net income (loss)........................ $ 7.5 $ 16.1 $ 1.5 $(17.6) $ 7.5
====== ====== ===== ====== ======
</TABLE>
B-27
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash flows from (used for) operating
activities............................. $ (5.2) $ 29.5 $ 2.4 $ -- $ 26.7
------ ------ ------ ---- ------
Cash flows from (used for) investing
activities:
Capital expenditures..................... (0.1) (8.2) -- -- (8.3)
Leasing business asset additions......... -- -- (27.6) -- (27.6)
Proceeds from sale of leased assets...... 3.1 -- 7.1 -- 10.2
Changes in restricted cash/other......... -- 0.6 -- -- 0.6
------ ------ ------ ---- ------
Cash flows from (used for) investing
activities............................. 3.0 (7.6) (20.5) -- (25.1)
------ ------ ------ ---- ------
Cash flows from (used for) financing
activities:
Issuance of long-term debt............... 82.8 -- -- -- 82.8
Payments of term loans and capital
lease.................................. (90.0) (0.1) -- -- (90.1)
Net proceeds from JAIX Leasing debt...... -- -- 15.6 -- 15.6
Intercompany advances.................... 19.4 (19.4) -- -- --
Payment of deferred financing costs and
other.................................. (3.0) -- (0.5) -- (3.5)
------ ------ ------ ---- ------
Cash flows from (used for) financing
activities............................. 9.2 (19.5) 15.1 -- 4.8
Net increase (decrease) in cash and cash
equivalents............................ 7.0 2.4 (3.0) -- 6.4
------ ------ ------ ---- ------
Cash and cash equivalents, beginning of
year................................... 18.1 1.4 5.0 -- 24.5
------ ------ ------ ---- ------
Cash and cash equivalents, end of year... $ 25.1 $ 3.8 $ 2.0 $ -- $ 30.9
====== ====== ====== ==== ======
</TABLE>
B-28
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Total revenue............................ $ -- $555.6 $ 4.4 $ -- $560.0
Cost of sales............................ -- 472.1 2.1 -- 474.2
----- ------ ----- ----- ------
Gross profit............................. -- 83.5 2.3 -- 85.8
Selling, general, administrative and
amortization expenses.................. 1.2 55.6 -- -- 56.8
Gain on sale of leased freight cars...... -- -- (1.4) -- (1.4)
----- ------ ----- ----- ------
Operating income (loss).................. (1.2) 27.9 3.7 -- 30.4
Interest expense, net.................... 11.4 21.7 2.7 -- 35.8
Equity (earnings) of subsidiaries........ (2.0) -- -- 2.0 --
Provision (benefit) for income taxes..... (5.2) 4.8 0.4 -- --
----- ------ ----- ----- ------
Net income (loss)........................ $(5.4) $ 1.4 $ 0.6 $(2.0) $ (5.4)
===== ====== ===== ===== ======
</TABLE>
B-29
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------
PARENT GUARANTOR JAIX
COMPANY SUBSIDIARIES LEASING ELIMINATIONS CONSOLIDATED
-------- ------------ -------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash flows from (used for) operating
activities............................. $ (5.0) $ 40.1 $ 1.3 $ -- $ 36.4
------ ------ ------ ----- ------
Cash flows from (used for) investing
activities:
Capital expenditures..................... (0.2) (9.7) -- -- (9.9)
Leasing business asset additions......... (4.9) 0.3 (0.8) -- (5.4)
Proceeds from sale of leased freight
cars................................... -- -- 18.1 -- 18.1
Changes in restricted cash/other......... -- 0.8 -- -- 0.8
------ ------ ------ ----- ------
Cash flows from (used for) investing
activities............................. (5.1) (8.6) 17.3 -- 3.6
------ ------ ------ ----- ------
Cash flows from (used for) financing
activities:
Payments of term loans and capital
lease.................................. (16.6) (0.2) -- -- (16.8)
Net payments of JAIX Leasing debt........ -- -- (8.8) -- (8.8)
Intercompany advances.................... 27.1 (23.7) (3.4) -- --
Dividends received/ (paid)............... 1.6 -- (1.6) -- --
Payment of deferred financing costs...... (0.8) -- (0.7) -- (1.5)
------ ------ ------ ----- ------
Cash flows from (used for) financing
activities............................. 11.3 (23.9) (14.5) -- (27.1)
Net increase in cash and cash
equivalents............................ 1.2 7.6 4.1 -- 12.9
------ ------ ------ ----- ------
Cash and cash equivalents, beginning of
year................................... 16.9 (6.2) 0.9 -- 11.6
------ ------ ------ ----- ------
Cash and cash equivalents, end of year... $ 18.1 $ 1.4 $ 5.0 $ -- $ 24.5
====== ====== ====== ===== ======
</TABLE>
B-30
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on borrowing rates currently available to the Company for borrowings
with similar terms and maturities, the fair value of the Company's total debt
was approximately $248.5 million and $291.6 million as of December 31, 1998 and
1997, respectively. No quoted market value is available except for the Notes
which had a market value of approximately $190 million and $196 million as of
December 31, 1998, and 1997, respectively. Outstanding interest rate contracts,
based on current market pricing models, have an estimated discounted fair market
value of negative $0.4 million and negative $0.2 million as of December 31, 1998
and 1997, respectively. All other financial instruments of the continuing
Company have fair market values which approximate carrying value as of
December 31, 1998 and 1997.
NOTE 16. SUPPLEMENTAL CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for:
Interest......................................... $30,038 $27,906 $29,144
Income taxes..................................... 28,914 952 1,382
</TABLE>
NOTE 17. SUBSEQUENT EVENTS
Effective April 29, 1999, the Company acquired the assets of Imperial
Group, Inc. (Imperial). Imperial is a leading Tier I and Tier II supplier of
body and chassis components for heavy-duty Class 8 truck manufacturers and
transit bus manufacturers. The purchase price for Imperial was approximately
$60.1 million consisting of $57.4 million in cash and 156,740 shares of the
Company's common stock. The acquisition was accounted for under the purchase
method of accounting. The acquisition is subject to a future working capital
adjustment. The purchase price is also subject to a contingent ear out of up to
$4.0 million, based on the results of Imperial's Washington plant for the
24 months ended April 2000. The Company also incurred transaction costs of
$0.7 million and issued 36,500 shares of restricted stock to two Imperial
employees valued at $0.6 million, which vest ratably over three years if
employment continues.
In conjunction with the acquisition of Imperial, the Company, on
April 29,1999 entered into a new Senior Bank Credit Facility. The new facility
is comprised of a $50 million Term A Loan, a $50 million Term B Loan and an
undrawn $75 million Revolving Credit Facility. Proceeds were used to finance the
Imperial acquisition, to refinance the Company's outstanding senior bank debt of
$36.6 million (resulting in an extraordinary non-cash after tax charge of
$1.7 million), and for working capital and other general corporate purposes. The
Company incurred and deferred $2.2 million of costs in obtaining the new
financing which will be deferred and amortized over the term of the related debt
(5-6 years).
At the Company's election, interest rates per annum on the new Term A loan
and the new Revolving Credit Facility are fluctuating rates of interest measured
by reference to either (a) an adjusted London inter-bank offered rate (LIBOR)
plus a borrowing margin or (b) an alternate base rate (ABR) plus a borrowing
margin. Such borrowing margins range between 1.50% and 2.50% for LIBOR loans and
between 0.50% and 1.50% for ABR loans, fluctuating within each range in 0.25%
increments based on the Company achieving certain financial results. Interest
rates per annum applicable to the Term B loan are either (a) LIBOR plus a margin
of 2.75% or (b) ABR plus a margin of 1.75%. Additionally, various fees related
to unused commitments, letters of credit and administration of the facility are
incurred by the Company. Borrowings under the new Senior Bank Credit Facility
are guaranteed by each of the Company's
B-31
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. SUBSEQUENT EVENTS (CONTINUED)
subsidiaries other than JAIX Leasing (the Guarantor Subsidiaries) and are
secured by the assets and stock of the Company and its Guarantor Subsidiaries.
The Term A Loan and the Revolving Credit Facility mature on April 29, 2004 and
the Term B Loan matures on April 29, 2005.
The new Senior Bank Credit Facility contains various financial covenants
including capital expenditure limitations, minimum leverage and interest
coverage ratios, and minimum net worth. The agreement also restricts the Company
from paying dividends and making other distributions in certain circumstances,
and limits the ability to repurchase common stock and prepay the Senior
Subordinated Notes.
On April 1, 1999, the Company, through its wholly owned subsidiary, Bostrom
Seating, Inc., issued Industrial Revenue Bonds for $3.1 million which bear
interest at a variable rate (3.35% as of April 1, 1999) and can be redeemed by
the Company at any time. The bonds are secured by a letter of credit issued by
the Company. The bonds have no amortization and mature in 2014. The bonds are
also subject to a weekly "put" provision by the holders of the bonds. In the
event that any or all of the bonds are put to the Company under this provision,
the Company would either refinance such bonds with additional borrowings under
the new Revolving Credit Facility or use available cash on hand.
Effective May 17, 1999, the Company acquired certain assets and liabilities
of EMI Company (EMI), an iron foundry and machining company located in Erie,
Pennsylvania. The Company paid $16.5 million in cash for property, plant and
equipment and $2.2 million for working capital. The acquisition was accounted
for under the purchase method of accounting.
B-32
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 13,478 $ 33,382
Accounts receivable, net.................................. 74,035 55,550
Inventories............................................... 39,045 29,566
Deferred income tax assets................................ 12,399 13,688
Prepaid expenses and other current assets................. 5,812 2,643
Net assets of discontinued operations..................... -- 37,555
-------- --------
Total current assets.................................... 144,769 172,384
Property, plant and equipment, net........................ 123,947 82,402
Deferred financing costs and other, net................... 5,833 8,809
Intangible assets, net.................................... 261,279 229,408
-------- --------
Total assets.......................................... $535,828 $493,003
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 33,097 $ 19,601
Accrued expenses and other payables....................... 48,292 51,662
Accrued income taxes on discontinued operations........... 7,757 --
Current maturities of long-term debt and capital lease.... 1,930 9,039
-------- --------
Total current liabilities............................... 91,076 80,302
Long-term debt and capital lease, less current maturities... 22,179 49,186
Senior subordinated notes................................... 180,824 182,338
Deferred income tax liabilities............................. 29,987 34,571
Other long-term liabilities................................. 35,263 35,889
Shareholders' Equity:
Preferred stock, par $.01, 20,000 shares authorized, none
outstanding............................................. -- --
Common stock, par $.01, 201,000 shares authorized, 10,282
and 9,900 issued and outstanding as of September 30,
1999 and December 31, 1998, respectively................ 103 99
Paid-in capital........................................... 62,627 56,892
Unearned compensation..................................... (2,007) --
Retained earnings......................................... 115,776 53,741
Employee receivables for stock purchases.................. -- (15)
-------- --------
Total shareholders' equity.............................. 176,499 110,717
-------- --------
Total liabilities and shareholders' equity............ $535,828 $493,003
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-33
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................... $141,057 $105,694 $392,728 $328,525
Cost of sales....................................... 114,586 82,957 313,308 260,991
-------- -------- -------- --------
Gross profit...................................... 26,471 22,737 79,420 67,534
Selling, general and administrative expenses........ 11,229 8,773 32,308 28,529
Amortization expense................................ 2,022 1,689 5,629 5,080
Pension termination gain............................ -- -- -- (1,688)
-------- -------- -------- --------
Operating income.................................. 13,220 12,275 41,483 35,613
Interest income..................................... (448) (341) (1,102) (806)
Interest expense.................................... 6,197 7,017 20,490 21,612
-------- -------- -------- --------
Income before income taxes, extraordinary items and
discontinued operations........................... 7,471 5,599 22,095 14,807
Provision for income taxes.......................... 3,352 2,856 10,101 8,627
-------- -------- -------- --------
Net income before extraordinary items and
discontinued operations........................... 4,119 2,743 11,994 6,180
Extraordinary items, net of income taxes............ -- (399) (2,505) (984)
Discontinued operations:
Income, net of income taxes....................... -- 5,640 22,728 22,982
Gain on sale, net of income taxes................. -- -- 29,817 --
-------- -------- -------- --------
Net income and comprehensive income................. $ 4,119 $ 7,984 $ 62,034 $ 28,178
======== ======== ======== ========
Basic earnings per share:
Income before extraordinary items and discontinued
operations........................................ $ 0.41 $ 0.28 $ 1.20 $ 0.63
Extraordinary items................................. -- (0.04) (0.25) (0.10)
Income from discontinued operations................. -- 0.57 5.24 2.34
-------- -------- -------- --------
Net income per share................................ $ 0.41 $ 0.81 $ 6.19 $ 2.87
======== ======== ======== ========
Basic weighted average common shares outstanding.... $ 10,121 $ 9,873 $ 10,027 $ 9,818
======== ======== ======== ========
Diluted earnings per share:
Income before extraordinary items and discontinued
operations........................................ $ 0.40 $ 0.27 $ 1.17 $ 0.61
Extraordinary items................................. -- (0.04) (0.24) (0.10)
Income from discontinued operations................. -- 0.55 5.15 2.27
-------- -------- -------- --------
Net income per share................................ $ 0.40 $ 0.78 $ 6.08 $ 2.78
======== ======== ======== ========
Diluted weighted average equivalent shares
outstanding....................................... $ 10,292 $ 10,187 $ 10,210 $ 10,138
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-34
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 62,034 $ 28,178
Deduct income from discontinued operations................ 22,728 22,982
Income from continuing operations......................... 39,306 5,196
Adjustments to reconcile net income to net cash provided by
operating activities:
Net gain on sale of discontinued operations............... (29,817) --
Depreciation.............................................. 10,293 8,216
Amortization--other....................................... 6,435 5,915
Amortization--deferred financing costs.................... 512 1,136
Deferred income taxes..................................... (937) 897
Pension termination gain.................................. -- (1,688)
Extraordinary items, net of income taxes.................. 2,505 984
Provisions for postretirement benefits.................... 1,224 1,189
Changes in operating assets and liabilities:
Accounts receivable, net.................................. (2,992) (8,229)
Inventories............................................... 706 2,467
Accounts payable.......................................... 692 (1,392)
Accrued interest expense.................................. (5,770) (5,897)
Accrued income taxes on discontinued operations........... (2,597) --
Other assets and liabilities.............................. 5,004 7,274
--------- --------
Net cash provided by operating activities................... 24,564 16,068
--------- --------
INVESTING ACTIVITIES:
Proceeds from the sale of discontinued operations......... 101,348 --
Cash paid for acquisitions, net of cash acquired.......... (86,331) --
Capital expenditures...................................... (11,748) (6,351)
--------- --------
Net cash provided by (used for) investing activities........ 3,269 (6,351)
--------- --------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt.............. 103,100 --
Payment of term loans and capital leases.................. (137,216) (26,852)
Retirement of subordinated notes.......................... (1,250) --
Payment of deferred financing costs....................... (2,056) --
Other..................................................... 933 1,138
--------- --------
Net cash provided by (used) for financing activities...... (36,489) (25,714)
--------- --------
Net decrease in cash and cash equivalents from continuing
operations................................................ (8,656) (15,997)
Net cash provided by discontinued operations................ (11,248) 17,737
CASH AND CASH EQUIVALENTS,
beginning of period....................................... 33,382 27,884
--------- --------
CASH AND CASH EQUIVALENTS,
end of period............................................. $ 13,478 $ 29,624
========= ========
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Cash paid for interest...................................... $ 25,119 $ 29,120
Cash paid for income taxes.................................. $ 35,324 $ 19,626
</TABLE>
See accompanying notes to condensed consolidated financial statements.
B-35
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial statements presented herein and these notes are unaudited.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the registrant believes that all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included by reference in the registrant's Form 10-K for the year ended
December 31, 1998 and Form 8-K dated August 12, 1999.
On June 3, 1999, the Company completed the sale of its freight car
businesses (the Railcar Businesses), which for historic business segment
reporting purposes were previously reported as the "Freight Car" segment. The
financial statements herein have been recast for periods prior to the sale to
reflect the Railcar Businesses as a discontinued operation. Revenues of the
Railcar Businesses for the three months ended September 30, 1998 were
$137.1 million and for the nine months ended September 30, 1999 and 1998 were
$315.6 million and $383.6 million, respectively.
Effective June 14, 1999, the name of the Company was changed from "Johnstown
America Industries, Inc." to "Transportation Technologies Industries, Inc." The
condensed consolidated financial statements include the accounts of
Transportation Technologies Industries, Inc. and its wholly owned subsidiaries.
All significant intercompany transactions and accounts have been eliminated.
Certain reclassifications have been made to prior amounts to conform to current
period presentation.
NOTE 2. ACQUISITIONS
CLARK ENGINEERING & MANUFACTURING ACQUISITION
On September 30, 1999, the Company's Imperial Group subsidiary acquired
certain assets and liabilities of Clark Engineering & Manufacturing, Inc.
(Clark), a manufacturer of a broad range of metal parts and accessories for the
class 8 truck industry with annual revenues of about $6.0 million. Clark will
become a part of the Company's Imperial Texas Fabricating Division. The Company
used cash on-hand of $8.5 million to fund the acquisition. The acquisition was
accounted for under the purchase method of accounting.
BMC OF VIRGINIA, INC. ACQUISITION
On October 21, 1999, the Company announced that its Imperial Group
subsidiary acquired certain assets and liabilities of BMC of Virginia, Inc.
(BMC-VA). The company is a leading supplier of components to Volvo, whose North
American assembly operations are located adjacent to BMC-VA facilities. BMC-VA
manufactures, warehouses, assembles and sequences components for Volvo and
Freightliner and has annual revenues of approximately $11.0 million. The Company
used cash on hand of $11.0 million to fund the acquisition. The acquisition will
be accounted for under the purchase method of accounting.
B-36
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 3. INVENTORIES
Inventories of the Company consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 19998
------------- ------------
<S> <C> <C>
Raw materials and purchased components.............. $12,314 $ 8,575
Work-in-progress and finished goods................. 26,731 20,991
------- -------
$39,045 $29,566
======= =======
</TABLE>
NOTE 4. DEBT
Long-term debt of the Company consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 19998
------------- ------------
<S> <C> <C>
Revolving loan...................................... $ -- $ --
Tranche A term loan................................. 9,600 56,632
Tranche B term loan................................. 9,975 --
------- -------
Total senior bank facilities...................... 19,575 56,632
Industrial revenue bond............................. 3,100 --
Capital lease....................................... 1,434 1,593
------- -------
Total debt........................................ 24,109 58,225
Less:
Current maturities.................................. 1,930 9,039
------- -------
Long-term debt...................................... $22,179 $49,186
======= =======
</TABLE>
The Company entered into a new credit facility (Senior Credit Facility) on
April 29, 1999, in conjunction with the acquisition of Imperial Group. The
revolving credit line portion of the Senior Credit Facility provides for up to
$75 million of outstanding borrowings and letters of credit. As of
September 30, 1999, availability under the revolving credit line, after
consideration of outstanding letters of credit of $7.5 million, was
$67.5 million.
At the Company's election, interest rates per annum on the Term A Loan and
the revolving credit line are fluctuating rates of interest measured by
reference to either (a) an adjusted London inter-bank offered rate (LIBOR) plus
a borrowing margin or (b) an alternate base rate (ABR) plus a borrowing margin.
Such borrowing margins range between 1.50% and 2.50% for LIBOR loans and between
0.50% and 1.50% for ABR loans, fluctuating within each range in 0.25% increments
based on the Company achieving certain financial results. Interest rates per
annum applicable to the Term B Loan are either (a) LIBOR plus a margin of 2.75%
or (b) ABR plus a margin of 1.75%. The weighted average interest rate of all
outstanding loans under the Senior Credit Facility was 8.5% at September 30,
1999. Additionally, various fees related to unused commitments, letters of
credit and administration of the facility are incurred by the Company.
Borrowings under the Senior Credit Facility are guaranteed by each of the
Company's subsidiaries (the Guarantor Subsidiaries) and are secured by the
assets and stock of the Company and its Guarantor
B-37
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 4. DEBT (CONTINUED)
Subsidiaries. The Term A Loan and the revolving credit line mature on April 29,
2004 and the Term B Loan matures on April 29, 2005.
The Senior Credit Facility contains various financial covenants including
capital expenditure limitations, minimum leverage and interest coverage ratios,
and minimum net worth. The agreement also restricts the Company from paying
dividends and making other distributions in certain circumstances, and limits
the ability to repurchase common stock and prepay the Senior Subordinated Notes.
INDUSTRIAL REVENUE BOND
On April 1 1999, the Company, through its wholly owned subsidiary, Bostrom
Seating, Inc., issued Industrial Revenue Bonds for $3.1 million which bear
interest at a variable rate (4.15% as of September 30, 1999) and can be redeemed
by the Company at any time. The bonds are secured by a letter of credit issued
by the Company. The bonds have no amortization and mature in 2014. The bonds are
also subject to a weekly "put" provision by the holders of the bonds. In the
event that any or all of the bonds are put to the Company under this provision,
the Company would either refinance such bonds with additional borrowings under
the new revolving credit line or use available cash on hand.
INTEREST RATE CONTRACTS
The Company has entered into an interest rate contract to fix a portion of
the cost of its variable rate bank debt. This contract limits the effect of
market fluctuations on the interest cost of floating rate debt. The notional
principal amounts outstanding on the interest rate contract covering the current
period is $15.0 million at a 6.14% fixed rate of interest plus the applicable
borrowing margin. The contract matures in August 2000.
NOTE 5. SENIOR SUBORDINATED NOTES
In 1995, the Company issued $100 million of Senior Subordinated Notes which
are due August 15, 2005. In 1997, the Company issued $80 million of additional
notes due August 15, 2005 (collectively, the Notes) with substantially identical
terms to the already outstanding notes at a $3.6 million premium, for an
effective rate of 10.8%. These Notes have an interest rate of 11.75% per annum
and are guaranteed on an unsecured, senior subordinated joint and several basis
by each of the Company's subsidiaries. Pursuant to the settlement of separate
interest rate contracts in effect when each portion of the Notes was issued, the
Company realized a $0.8 million loss and a $2.6 million gain upon the 1997 and
1995 issuances, respectively. The gain and the loss are being amortized as an
offset to interest expense over the term of the Notes. The Notes have customary
restrictive covenants including restrictions on incurrence of additional
indebtedness, payment of dividends and redemption of capital stock. The Notes
are subordinated to all indebtedness under the Senior Credit Facility and
cross-default provisions do exist. Except in certain limited circumstances, the
Notes are not subject to optional redemption by the Company prior to August 15,
2000, and thereafter are subject to optional redemption by the Company at
declining redemption premiums. Upon the occurrence of a change in control (as
defined), the Company is required to offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof plus accrued interest. In August,
1999 the company repurchased and retired Notes with a face value of
$1.25 million.
B-38
<PAGE>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 5. SENIOR SUBORDINATED NOTES (CONTINUED)
The Company's future operating performance and ability to service or
refinance the Notes and to extend or refinance the senior bank debt will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control.
NOTE 6. ENVIRONMENTAL MATTERS
The Company's subsidiaries are currently involved in several matters
relating to the investigation and/or remediation of locations where the
subsidiaries have arranged for the disposal of foundry and other wastes. Such
matters include five situations in which the Company, through its TCI
subsidiaries and their predecessors, have been named or are believed to be
potentially responsible parties ("PRP") in the contamination of the sites. With
respect to claims involving Gunite Corporation ("Gunite"), TCI and Gunite in
September 1997 entered into a private-party settlement (the "Settlement") of
certain pending litigation with a prior owner of Gunite, pursuant to which each
of TCI and Gunite and the prior owner withdrew their claims against the other.
As a result of the Settlement, TCI and Gunite will not be responsible for
liabilities and costs related to certain alleged contamination of Gunite's
facilities and at certain off-site properties to the extent arising out of
operations of Gunite prior to the acquisition of Gunite by TCI in
September 1987. As of September 30, 1999, based on all of the information
currently available to the Company, the Company has an environmental reserve of
$10.4 million which management believes is adequate to cover future
expenditures. This reserve is based on current cost estimates and does not
reduce estimated expenditures to net present value, although the Company's
subsidiaries are not likely to incur costs for most of the reserved matters
until several years in the future. Any cash expenditures required by the Company
or its subsidiaries to comply with applicable environmental laws and/or to pay
for any remediation efforts will not be reduced or otherwise affected by the
existence of the environmental reserve. Due to the early stage of investigation
of many of the sites and potential remediations referred to above, there are
significant uncertainties as to waste quantities involved, the extent and timing
of the remediation which will be required, the range of acceptable solutions,
costs of remediation and the number of potentially responsible parties
contributing to such costs. Based on all of the information presently available,
the Company believes that the environmental reserve will be adequate to cover
its future costs related to the sites associated with the environmental reserve,
and that any additional costs will not have a material adverse effect on the
financial condition or results of operations of the Company. However, the
discovery of additional sites, the modification of existing laws or regulations,
the imposition of joint and several liability or the uncertainties referred to
above could result in such a material adverse effect.
B-39
<PAGE>
ANNEX C
AGREEMENT AND PLAN OF MERGER
BETWEEN
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AND
TRANSPORTATION ACQUISITION I CORP.
DATED AS OF JANUARY 28, 2000
C-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I
THE OFFER
Section 1.01 The Offer................................................... C-5
Section 1.02 Company Actions............................................. C-7
Section 1.03 Boards of Directors; Committees; Section 14(f).............. C-8
Section 1.04 Option to Acquire Additional Shares......................... C-8
ARTICLE II
THE MERGER
Section 2.01 The Merger.................................................. C-9
Section 2.02 Closing..................................................... C-9
Section 2.03 Effective Time.............................................. C-9
Section 2.04 Effects of the Merger....................................... C-9
Section 2.05 Certificate of Incorporation and By-Laws.................... C-9
Section 2.06 Directors................................................... C-9
Section 2.07 Officers.................................................... C-9
Section 2.08 Stockholders Meeting........................................ C-10
Section 2.09 Merger Without Meeting of Stockholders...................... C-10
ARTICLE III
CONVERSION OF SECURITIES
Section 3.01 Conversion of Shares........................................ C-10
Section 3.02 Company Options............................................. C-11
Section 3.03 Dissenting Shares........................................... C-11
Section 3.04 Exchange of Shares.......................................... C-12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01 Organization and Qualification; Subsidiaries................ C-13
Section 4.02 Capitalization of the Company............................... C-14
Section 4.03 Authorization............................................... C-14
Section 4.04 Non-Contravention........................................... C-14
Section 4.05 Compliance with Applicable Laws............................. C-15
Section 4.06 SEC Reports................................................. C-15
Section 4.07 Absence of Certain Changes.................................. C-15
Section 4.08 Litigation.................................................. C-15
Section 4.09 Company Information......................................... C-15
Section 4.10 Brokers and Finders......................................... C-16
Section 4.11 Opinion of Financial Advisor................................ C-16
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
Section 4.12 Takeover Statutes........................................... C-16
Section 4.13 Rights Agreement............................................ C-16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Section 5.01 Organization................................................ C-16
Section 5.02 Capitalization.............................................. C-16
Section 5.03 Authorization............................................... C-16
Section 5.04 Proxy Statement; Schedule 14D-9; Schedule TO................ C-17
Section 5.05 Financing................................................... C-17
Section 5.06 No Prior Activities. ....................................... C-17
Section 5.07 Brokers and Finders......................................... C-17
Section 5.08 Governmental Approvals. .................................... C-17
Section 5.09 Non-Contravention........................................... C-18
Section 5.10 Calculation of EBITDA....................................... C-18
ARTICLE VI
COVENANTS
Section 6.01 Conduct of Business of the Company.......................... C-18
Section 6.02 No Solicitation............................................. C-19
Section 6.03 Access to Information. ..................................... C-20
Section 6.04 Reasonable Best Efforts..................................... C-20
Section 6.05 Consents. .................................................. C-21
Section 6.06 Public Announcements. ...................................... C-21
Section 6.07 Indemnification and Insurance............................... C-21
Section 6.08 Notification of Certain Matters. ........................... C-21
Section 6.09 Matters Relating to the Commitment Letters. ................ C-21
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.01 Conditions to Each Party's Obligation to Effect the
Merger. .................................................. C-22
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.01 Termination................................................. C-22
Section 8.02 Effect of Termination....................................... C-23
Section 8.03 Fees and Expenses........................................... C-23
Section 8.04 Amendment................................................... C-24
Section 8.05 Extension; Waiver........................................... C-25
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS
Section 9.01 Nonsurvival of Representations and Warranties............... C-25
Section 9.02 Entire Agreement; Assignment................................ C-25
Section 9.03 Validity.................................................... C-25
Section 9.04 Notices..................................................... C-25
Section 9.05 Governing Law............................................... C-26
Section 9.06 Descriptive Headings........................................ C-26
Section 9.07 Parties in Interest......................................... C-26
Section 9.08 Counterparts................................................ C-26
Section 9.09 Specific Performance........................................ C-26
</TABLE>
C-4
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 28,
2000, between TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC., a Delaware
corporation (the "Company"), and TRANSPORTATION ACQUISITION I CORP., a Delaware
corporation ("Acquisition").
WHEREAS, the Boards of Directors of the Company and Acquisition have
determined that it is advisable and in the best interests of their respective
stockholders for Acquisition to acquire the Company upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, Acquisition has agreed to
commence a tender offer (the "Purchaser Offer") to purchase for cash shares of
common stock, par value $0.01 per share, of the Company, together with the
associated rights attached thereto (the "Rights") issued pursuant to the Rights
Agreement, dated as of October 4, 1995 (the "Rights Agreement"), between the
Company and BancBoston State Street Investor Services, L.P., as Rights Agent
(collectively, the "Shares"), at a price of $21.50 per Share, net to the seller
in cash (such price, or such higher price per Share as may be paid in the Offer,
being referred to herein as the "Per Share Amount"), upon the terms and subject
to the conditions of this Agreement and the Purchaser Offer;
WHEREAS, the Company has agreed to simultaneously make an offer to acquire
Shares (the "Company Offer," and together with the Purchaser Offer, the "Offer")
for the Per Share Amount, upon the terms and subject to the conditions of this
Agreement and the Company Offer;
WHEREAS, the Purchaser Offer and the Company Offer shall together be an
offer to acquire all of the issued and outstanding Shares;
WHEREAS, the Board of Directors of the Company (the "Board"), acting upon
the unanimous recommendation of a special committee of the Board comprised
entirely of independent directors (the "Special Committee"), and the Board of
Directors of Acquisition have each approved the making of the Offer, and the
Board has determined to recommend that stockholders of the Company tender their
Shares pursuant to the Offer;
WHEREAS, it is further proposed that following the consummation of the
Offer, Acquisition will merge with and into the Company (the "Merger") in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, the Board of Directors of the Company (the "Board"), acting upon
the unanimous recommendation of the Special Committee, (i) has determined that
the Merger is advisable and in the best interests of the Company and its
stockholders (other than Acquisition, the Participants (as defined below) and
their respective affiliates), (ii) has approved the Merger, the Offer, this
Agreement and the other transactions contemplated hereby and (iii) recommends
that the Company's stockholders approve this Agreement and the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
THE OFFER
Section 1.01 THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 and none of the events set forth
in Annex A or Annex B hereto shall have occurred or be existing, as promptly as
practicable, but in no event later than five business days following the public
announcement of the execution of this Agreement, Acquisition and the Company
shall jointly commence the Offer. Upon the terms and subject to the prior
satisfaction or waiver of the conditions of
C-5
<PAGE>
the Offer, Acquisition and the Company shall accept for payment and pay for
Shares which have been validly tendered and not withdrawn as soon as practicable
after the expiration of the Offer.
(b) The obligations of Acquisition to accept for payment any Shares tendered
shall be subject to the satisfaction of only those conditions set forth in Annex
A hereto and the obligation of the Company to accept for payment any Shares
tendered shall be subject to the satisfaction of only those conditions set forth
in Annex B hereto.
(c) Subject to the requirements of applicable law, Acquisition may waive the
conditions set forth in Annex A in its sole discretion; PROVIDED, HOWEVER, that
without the prior written consent of the Company, Acquisition will not
(i) decrease the Per Share Amount or the number of Shares sought in the
Purchaser Offer, (ii) change the form of consideration to be paid in the
Purchaser Offer, (iii) amend or waive the Minimum Condition (as defined Annex A
hereto) or impose any additional conditions on the Purchaser Offer other than
the conditions set forth in Annex A, (iv) amend any other term of the Purchaser
Offer in any manner adverse to the holders of Shares or (v) extend the
expiration date of the Purchaser Offer beyond April 30, 2000.
(d) Subject to the requirements of applicable law, the Company may waive the
conditions set forth in Annex B in its sole discretion; PROVIDED, HOWEVER, that
without prior written consent of Acquisition, the Company will not (i) decrease
the Per Share Amount or the number of Shares sought in the Company Offer,
(ii) change the form of consideration to be paid in the Company Offer,
(iii) amend or waive the Minimum Condition or impose any additional conditions
on the Company Offer other than the conditions set forth in Annex B, (iv) amend
any other term of the Company Offer in any manner adverse to Acquisition or
(v) extend the expiration date of the Company Offer beyond April 30, 2000.
(e) Notwithstanding the foregoing, but subject in all events to
Section 8.01, Acquisition may, without the consent of the Company, extend the
Purchaser Offer at any time, and from time to time (and at the direction of
Acquisition, the Company shall accordingly extend the Company Offer), (i) if at
the then scheduled expiration date of the Offer any of the conditions to the
obligations of Acquisition and the Company to accept Shares for payment (other
than the Minimum Condition, as to which Acquisition may extend the Purchaser
Offer up to 10 business days) shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived; or (ii) for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or its staff applicable to the Offer.
(f) Notwithstanding the foregoing, Acquisition may, without the consent of
the Company (and at the direction of Acquisition and provided that the
representation set forth in Section 5.05 shall remain true and correct, the
Company shall), increase the Per Share Amount and extend the Offer to the extent
required by applicable law in connection with any such increase.
(g) As soon as practicable following the commencement of the Offer, the
Company shall commence a tender offer and consent solicitation for all of its
outstanding 11.75% Senior Subordinated Notes due 2005 and 11.75% Series C Senior
Subordinated Notes due 2005 (the "Debt Tender Offer"). The Debt Tender Offer
shall be made by means of an offer to purchase and consent solicitation on the
terms set forth in Annex C to this Agreement.
(h) As soon as practicable on the date the Offer is commenced, with respect
to the Offer (i) the parties hereto, together with such other persons as shall
be required to be included as parties to such filing, shall file with the
Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule TO (together with any amendments and supplements thereto and including
the exhibits thereto, the "Schedule TO"). The Schedule TO shall contain or
incorporate by reference an offer to purchase and a form of letter of
transmittal and any other documents related to the Offer (the Schedule TO, the
offer to purchase and such other documents, together with any amendments and
supplements thereto, are collectively referred to herein as the "Offer
Documents"). The Offer Documents shall comply in all
C-6
<PAGE>
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company or Acquisition with respect to information supplied by the
other party in writing for inclusion in the Offer Documents. Each of the parties
hereto shall take all steps necessary to cause the Offer Documents to be filed
with the SEC and to be disseminated to the Company's stockholders, in each case
as and to the extent required by applicable federal securities laws. Each of the
parties hereto shall promptly correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and shall take all steps necessary
to cause the Offer Documents, as so corrected, to be filed with the SEC and to
be disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Each of the parties hereto and
its counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents before they are filed with the SEC. In addition, each of the
parties hereto shall provide to the other party and its counsel in writing any
comments or other communications that such party or its counsel may receive from
time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments or other communications.
Section 1.02 COMPANY ACTIONS. (a) The Company hereby approves of and
consents to the Offer and represents that its Board, at a meeting duly called
and held and acting on the unanimous recommendation of the Special Committee,
has (i) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are advisable and in the best interests of
the Company's stockholders (other than Acquisition, the Participants or their
respective Affiliates), (ii) duly approved the adoption of this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, which
approval satisfies in full the requirements of prior approval contained in
Section 203(a)(1) of the DGCL, (iii) resolved to recommend that the stockholders
of the Company accept the Offer, tender their Shares thereunder and approve this
Agreement and the Merger PROVIDED, HOWEVER, that such recommendation may be
withdrawn or modified to the extent that the Special Committee determines in
good faith that such action is required in order to comply with its fiduciary
duties after receiving advice to such effect from its special counsel and
(iv) resolved to amend the Rights Agreement as contemplated herein.
(b) As soon as practicable on the date the Offer is commenced, the Company
shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") containing the recommendation described in
Section 1.02(a)(iii) of this Agreement and to disseminate the Schedule 14D-9 to
the Company's stockholders, together with the Offer Documents, promptly after
the commencement of the Offer. Each of the parties hereto agrees to promptly
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material respect
and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. Acquisition shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 before it is filed with
the SEC. In addition, the Company shall provide Acquisition and its counsel in
writing with any comments or other communications that the Company or its
counsel may receive from time to time from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments or other
communications.
(c) In connection with the Offer, if requested by Acquisition, the Company
shall promptly furnish Acquisition with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date, and shall
furnish Acquisition with such additional information and such other assistance
as Acquisition or its agents
C-7
<PAGE>
may reasonably request in communicating the Offer to the record and beneficial
holders of Shares. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Acquisition and their affiliates
and agents shall hold in confidence the information contained in any of such
labels, listings and files, shall use such information only in connection with
the Offer and the Merger, and, if this Agreement is terminated, shall, upon
request of the Company, deliver or cause to be delivered to the Company all
copies of such information and any extracts or summaries of such information
then in their possession.
Section 1.03 BOARDS OF DIRECTORS; COMMITTEES;
SECTION 14(F). (a) Promptly after the purchase of and payment pursuant to the
Offer of such number of Shares that satisfies the Minimum Condition, Acquisition
shall be entitled to designate for election to the Board such number of persons
as will cause a majority of directors of the Company to consist of persons
designated by Acquisition, and the Company shall, upon written request by
Acquisition, promptly, at the Company's election, either increase the size of
the Board or take such other actions as may be necessary so as to include on,
and cause to be elected to the Board, the individual or individuals designated
by Acquisition.
(b) The Company's obligations to appoint designees to the Board shall be
subject to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.03 and shall include in
the Schedule 14D-9 mailed to the Company's stockholders promptly after the
commencement of the Offer such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill its obligations under this Section 1.03. Acquisition will supply to the
Company and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
(c) Following the election or appointment of Acquisition's designees
pursuant to this Section 1.03 and prior to the Effective Time (as hereinafter
defined), any amendment or termination of this Agreement, extension of the time
for the performance of any of the obligations or other acts of Acquisition,
waiver of any of the Company's rights hereunder, action in connection with this
Agreement required to be taken by the Board of Directors of the Company,
amendment to the Company's Certificate of Incorporation, Bylaws or Rights
Agreement, or action that would be reasonably likely to adversely affect the
interests of stockholders of the Company (other than Acquisition, the
Participants or their respective affiliates) in any material respect, shall
require the concurrence of a majority of the directors of the Company then in
office who are neither designated by Acquisition nor employees of the Company.
Section 1.04 OPTION TO ACQUIRE ADDITIONAL SHARES. (a) The Company hereby
grants to Acquisition an irrevocable option (the "Option") to purchase up to
that number of newly issued Shares (the "Option Shares") equal to the number of
Shares, that when added to the number Shares owned by Purchaser and its
affiliates immediately following consummation of the Offer, shall constitute 90%
of the Shares then outstanding on a fully diluted basis (giving effect to the
issuance of the Option Shares) for a consideration per Option Share equal to the
Per Share Amount; PROVIDED, HOWEVER, that the number of Option Shares shall not
exceed that number equal to 19.9% of the Shares outstanding on the date of this
Agreement.
(b) The Option may be exercised by Acquisition at any time at or after the
acceptance for payment by Acquisition of Shares pursuant to the Offer in
accordance with the terms of this Agreement. In the event Acquisition wishes to
exercise the Option, Acquisition shall give written notice (the "Notice") of its
exercise of the Option specifying the number of Shares that are or will be owned
by Acquisition and its affiliates immediately following consummation of the
Offer and a place and a time (which may be concurrent with the consummation of
the Offer) for the closing of such purchase. The Company shall, as soon as
possible following receipt of the Notice, deliver written notice to Acquisition
specifying the number of Option Shares.
C-8
<PAGE>
(c) At the closing of the purchase of the Option Shares, (i) the Company
will deliver to Acquisition a certificate or certificates representing the
number of Option Shares so purchased and (ii) Acquisition will make payment to
the Company of the aggregate price for the Option Shares being purchased, as
stated in the Notice, by check or wire transfer in an amount equal to the
product of (x) the Per Share Amount and (y) the total number of Option Shares
delivered at the closing. The Company shall pay all expenses, and any and all
United States Federal, state and 1ocal taxes and other charges, that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 1.04.
ARTICLE II
THE MERGER
Section 2.01 THE MERGER. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and the DGCL, Acquisition shall be
merged with and into the Company. Following the Merger, the Company shall
continue as the surviving corporation (the "Surviving Corporation") and the
separate corporate existence of Acquisition shall cease.
Section 2.02 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP at 4 Times
Square, New York, New York at 10:00 a.m., local time, on a date to be specified
by the parties hereto, which shall be no later than the second business day
after satisfaction or waiver of all of the conditions set forth in Article VII
hereof (the "Closing Date"), unless another date or place is agreed to in
writing by the parties thereto.
Section 2.03 EFFECTIVE TIME. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VII hereof, the parties hereto
shall cause the Merger to become effective by the filing with the Secretary of
State of Delaware of a certificate of merger or other appropriate documents
executed in accordance with the relevant provisions of the DGCL, and shall take
all such other and further actions as may be required by applicable law to make
the Merger effective. The date and time when the Merger shall become effective
is herein referred to as the "Effective Time."
Section 2.04 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.05 CERTIFICATE OF INCORPORATION AND BY-LAWS. At the Effective
Time, (i) the certificate of incorporation of the Company shall be amended and
restated in its entirety to read in the form of the certificate of incorporation
of Acquisition as in effect immediately prior to the Effective Time and such
amended and restated certificate of incorporation shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
therein or by applicable law and (ii) the by-laws of the Company shall be
amended and restated in their entirety to read in the form of the by-laws of
Acquisition as in effect immediately prior to the Effective Time, and such
amended and restated by-laws shall be the by-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
Section 2.06 DIRECTORS. The directors of Acquisition immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and shall hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation from the Effective Time until their
respective successors are duly elected or appointed and qualified.
Section 2.07 OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation from the Effective Time until their
respective successors are duly elected and appointed and qualified.
C-9
<PAGE>
Section 2.08 STOCKHOLDERS MEETING. If required by applicable law to
consummate the Merger, the Company, acting through its Board, shall, in
accordance with and to the extent permitted by applicable law:
(a) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Stockholders Meeting") as soon as practicable following
the expiration or termination of the Offer for the purpose of considering
and taking action upon this Agreement;
(b) subject to its fiduciary duties under applicable law as advised by
special counsel to the Special Committee, include in the Proxy Statement (as
defined herein) the recommendation of the Special Committee and the Board
that stockholders of the Company vote in favor of the approval and adoption
of this Agreement and the Merger; and
(c) prepare and file with the SEC a preliminary proxy or information
statement relating to this Agreement and the Merger and use its reasonable
best efforts to obtain and furnish the information required to be included
by it in the Proxy Statement and, after consultation with Acquisition,
respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement or information statement and cause a definitive
proxy or information statement relating to this Agreement and the Merger
(the "Proxy Statement") to be mailed to its stockholders at the earliest
practicable time following the expiration or termination of the Offer.
Acquisition shall provide the Company with the information concerning it and
the transactions contemplated by the Commitment Letters required to be included
in the Proxy Statement and shall promptly correct any information provided by it
to the Company for use in the Proxy Statement if and to the extent that it shall
have become false or misleading in any material respect. At the Stockholders
Meeting, Acquisition will vote, or cause to be voted, all Shares owned by it in
favor of this Agreement and the transactions contemplated hereby.
Section 2.09 MERGER WITHOUT MEETING OF STOCKHOLDERS. In the event that
Acquisition or any of its subsidiaries shall acquire at least 90 percent of the
outstanding Shares pursuant to the Offer or otherwise, each of the parties
hereto shall take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without the
Stockholders Meeting, in accordance with Section 253 of the DGCL.
ARTICLE III
CONVERSION OF SECURITIES
Section 3.01 CONVERSION OF SHARES. (a) At the Effective Time, each Share
issued and outstanding immediately prior to the Effective Time (other than
(i) Shares held in the Company's treasury, (ii) Shares held, directly or
indirectly, by Acquisition, or by a Participant and (iii) Dissenting Shares (as
defined in Section 3.03(a)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive, upon the surrender of the certificate formerly representing such Share,
cash in an amount equal to the Per Share Amount. The Per Share Amount shall not
accrue interest.
(b) Each Share held in the treasury of the Company and each Share held by
Acquisition or any wholly owned subsidiary of Acquisition immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled, retired and cease to exist without any
conversion thereof and no payment shall be made with respect thereto. Each Share
held by a Participant shall be converted into the right to retain one fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation (a "Retained Share") or the right to receive the Per Share
Amount, as agreed to between the Participant and Acquisition. For purposes of
this Agreement, a "Participant" shall mean any individual designated as a
Participant by Acquisition prior to the Effective Time. The Company acknowledges
that the consummation of the Merger shall constitute a "Change in Control" for
purposes of the shares of restricted stock of the Company granted to the
Participants and that such Shares shall be treated as Shares for purposes of
this Agreement.
C-10
<PAGE>
(c) Each Share to be converted into the right to receive either the Per
Share Amount pursuant to Section 3.01(a) hereof or the Retained Shares pursuant
to Section 3.01(b) hereof, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Per Share Amount or
the Retained Shares, as the case may be, therefor upon the surrender of such
certificate in accordance with Section 3.04 hereof.
(d) Each share of Acquisition common stock, par value $0.01 per share,
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into a Retained Share. Each share of Acquisition preferred stock, par
value $0.01 per share, issued and outstanding immediately prior to the Effective
Time shall by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to one share of preferred stock, par
value $0.01 per share, of the Surviving Corporation.
Section 3.02 COMPANY OPTIONS. (a) Except as provided in Section 3.02(b)
hereof and unless otherwise agreed to by the holder of an outstanding option to
purchase Shares or other similar interest (collectively, the "Options") granted
under any of the Company's stock option plans or under any other plan or
arrangement (the "Option Plans"), the Company shall take all actions necessary
and appropriate to provide that, upon the Effective Time, each Option, whether
or not then exercisable or vested, shall be cancelled and, in exchange therefor,
each holder of such Option shall receive an amount in cash in respect thereof,
if any, equal to the product of (i) the excess, if any, of the Per Share Amount
over the per Share exercise price thereof and (ii) the number of Shares subject
thereto (such payment to be net of applicable withholding taxes). The Company
shall take all such steps as may be required to cause the transactions
contemplated by this Section 3.02 and any other dispositions of its equity
securities (including derivative securities) in connection with this Agreement
by each individual who is a director or officer of the Company, to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Meagher & Flom LLP.
(b) Notwithstanding the foregoing, at the Effective Time, to the extent
agreed to by Acquisition and the applicable holder thereof, each outstanding
Option held by a Participant, whether or not then exercisable or vested
(collectively, the "Retained Options"), shall, as of the Effective Time,
continue to represent an option to acquire shares of common stock of the
Surviving Corporation on the terms agreed to by Acquisition and such
Participant.
(c) Prior to the Effective Time, the Company shall amend the terms of its
Option Plans as is necessary to give effect to the provisions of this
Section 3.02.
Section 3.03 DISSENTING SHARES. (a) Notwithstanding anything in this
Agreement to the contrary, each Share which is issued and outstanding
immediately prior to the Effective Time and which is held by a stockholder who
has properly exercised appraisal rights with respect thereto in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Per Share Amount,
but such stockholders shall be entitled to receive payment of the appraised
value of such Shares in accordance with the provisions of Section 262 of the
DGCL, except that any Dissenting Shares held by a stockholder who shall
thereafter withdraw such demand for appraisal of such Shares or lose the right
to such payment as provided in Section 262 of the DGCL shall thereupon be deemed
to have been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Per Share Amount, without any interest
thereon.
(b) The Company shall give Acquisition (i) prompt notice of any written
demands under Section 262 of the DGCL with respect to any Shares, any withdrawal
of any such demand, and any other instruments served pursuant to Section 262 of
the DGCL and received by the Company and (ii) the right to participate in all
negotiations and proceedings with respect to any demands under Section 262 of
the DGCL with respect to any shares of capital stock of the Company. The Company
shall cooperate with Acquisition
C-11
<PAGE>
concerning, and shall not, except with the prior written consent of Acquisition,
voluntarily make any payment with respect to, or offer to settle or settle, any
such demands.
Section 3.04 EXCHANGE OF SHARES. (a) Prior to the Effective Time,
Acquisition shall designate a bank or trust company reasonably acceptable to the
Special Committee to act as paying agent (the "Paying Agent") for purposes of
making cash payments contemplated hereby. As soon as practicable following the
Effective Time, Acquisition shall deposit or cause to be deposited with the
Paying Agent the funds necessary to make the payments contemplated by
Section 3.01(a) (the "Payment Fund"). The Payment Fund shall be invested by the
Paying Agent as directed by the Surviving Corporation; provided that such
investment shall be invested in obligations of or guaranteed by the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Service,
respectively, or in certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $500 million.
(b) The Payment Fund shall not be used for any other purpose except as
otherwise agreed to by Acquisition and the Company. Promptly following the date
which is twelve months after the Effective Time, the Paying Agent shall return
to the Surviving Corporation all cash, certificates and other instruments in its
possession that constitute any portion of the Payment Fund, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a Certificate shall
be entitled to look to the Surviving Corporation (subject to applicable
abandoned property, escheat and similar laws) only as general creditors thereof
with respect to the Per Share Amount payable upon due surrender of their
Certificates, without interest thereon. Notwithstanding anything to the contrary
in this Section 3.04, none of the Paying Agent, Acquisition or the Surviving
Corporation shall be liable to a holder of a Certificate formerly representing
Shares for any amount properly paid to a public official pursuant to any
applicable property, escheat or similar law.
(c) Promptly (but in any event no later than five business days) after the
Effective Time, the Paying Agent shall mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented Shares, other than holders of certificates formerly representing
Shares which shall become entitled to receive Retained Shares pursuant to
Section 3.01(b) hereof and certificates representing Dissenting Shares (such
certificates, other than those representing Shares to be converted into the
right to receive Retained Shares pursuant to Section 3.01(b) hereof and
Dissenting Shares are collectively referred to herein as the "Certificates"), a
form of letter of transmittal (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates to the Paying Agent) and instructions for use in effecting the
surrendering to the Paying Agent of such Certificates for exchange into the Per
Share Amount. Upon surrender of a Certificate to the Paying Agent together with
a duly executed letter of transmittal and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Per Share Amount payable in respect of each Share represented thereby and such
Certificate shall forthwith be cancelled. If payment is to be made to a person
other than the person in whose name a Certificate so surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the Certificate
so surrendered or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. From and after the Effective Time, the
holders of Certificates evidencing ownership of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged as provided in this Article III.
C-12
<PAGE>
(e) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed, the Paying Agent shall issue in
exchange for such lost, stolen or destroyed certificate the Per Share Amount
deliverable in respect thereof as determined in accordance with this
Article III. When authorizing such payment of the Per Share Amount in exchange
therefor, the person to whom the Per Share Amount is paid shall, if requested by
the Surviving Corporation, give the Surviving Corporation a bond in such
reasonable sum as it may direct or to otherwise indemnify the Surviving
Corporation in a manner reasonably satisfactory to it against any claim that may
be made with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(f) If so specified in the Offer Documents, Acquisition, the Company, the
Surviving Corporation and the Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable to a holder of Shares pursuant
to the Offer or Merger such amounts as Acquisition, the Company, the Surviving
Corporation and the Paying Agent are required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code") or any provision of state, local or foreign tax law. To
the extent amounts are so withheld by Acquisition, the Company, the Surviving
Corporation or the Paying Agent, the withheld amounts (i) shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which the deduction and withholding was made, and (ii) shall be
promptly paid over to the applicable taxing authority.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed in the SEC Reports (as defined) or as set
forth in the disclosure schedule delivered to Acquisition on the date hereof
(the "Disclosure Schedule"), the Company represents and warrants to Acquisition
as follows:
Section 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not in the aggregate have a Material Adverse Effect (as
hereinafter defined). The Company and each of its subsidiaries is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities make such qualification necessary, except for failures to be
so qualified or in good standing which would not, individually or in the
aggregate, have a Material Adverse Effect and would not impair the ability of
the Company to perform its obligations hereunder in any material respect. When
used in connection with the Company or any of its subsidiaries, the term
"Material Adverse Effect" means any fact, event, change or effect having, or
which could reasonably be expected to have, a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole; PROVIDED, HOWEVER, that facts,
events, changes or effects that are applicable to or arise on account of
(i) any changes in economic, regulatory or political conditions generally,
(ii) this Agreement or the transactions contemplated hereby, (iii) the industry
of the Company generally or (iv) the effect of the public announcement of the
transactions contemplated hereby, shall be excluded from the definition of
"Material Adverse Effect" and from any determination as to whether a Material
Adverse Effect has occurred or may occur. Section 4.01 of the Disclosure
Schedule sets forth the name, jurisdiction of incorporation and percentages of
outstanding capital stock owned, directly or indirectly, by the Company, with
respect to each corporation of which the Company owns, directly or indirectly, a
majority of the outstanding capital stock. Except as disclosed in Section 4.01
of the Disclosure Schedule, all of the outstanding shares of capital stock of
each of the Company's subsidiaries have been validly issued and are fully paid
and nonassessable and are owned,
C-13
<PAGE>
directly or indirectly, by the Company, free and clear of any liens, pledges,
security interests, claims, preemptive rights or other encumbrances
(collectively, "Liens").
Section 4.02 CAPITALIZATION OF THE COMPANY. The authorized capital stock
of the Company consists of 201,000,000 Shares of which, as of the date hereof,
10,322,280 Shares are issued and outstanding, and 20,000,000 shares of preferred
stock, par value $0.01 per share, of which, as of the date hereof, no shares are
issued and outstanding. As of the date hereof, 660,168 Shares are subject to
outstanding Options, and no Shares were subject to issuance pursuant to the
Company's 401(k) savings plans. All of the outstanding Shares have been validly
issued, fully paid and nonassessable. Except as set forth above or pursuant to
the exercise of outstanding Options and except for Rights under the Rights
Agreement, there are outstanding (i) no shares of capital stock of the Company,
(ii) no securities of the Company convertible into or exchangeable for shares of
capital stock of the Company and (iii) no options or other rights to acquire
from the Company or any of its subsidiaries, and no other obligation of the
Company or any of its subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, the Company. There are no outstanding obligations of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company. Following the Merger, none of the Company or any
of its subsidiaries will have any obligation to issue, transfer or sell any
shares of its capital stock or other securities of the Company or any of its
subsidiaries pursuant to any employee benefit plan or otherwise.
Section 4.03 AUTHORIZATION. The Company has all requisite corporate power
and authority to execute and deliver this Agreement and, subject to any required
vote of the stockholders of the Company as described in Sections 2.08 and 2.09
hereof, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated (other than, with respect to
the Merger, the approval of this Agreement by the holders of a majority of the
then outstanding Shares, if so required). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Acquisition, constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
Section 4.04 NON-CONTRAVENTION. Except for (a) filings, if required,
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (b) filings required in connection with or in compliance with
the Securities Act (as defined), the Exchange Act and the DGCL, (c) applicable
requirements under corporation or "blue sky" laws of various states,
(d) matters specifically described in this Agreement and (e) the matters
described in Section 4.04 of the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby shall (i) violate any
provision of the certificate of incorporation or by-laws of the Company or any
of its subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under, or give rise
to any right of termination, cancellation or acceleration of any obligation
under, or result in the creation of any Lien upon any property or asset of the
Company or any of its subsidiaries under, any provision of any material note,
bond, indenture, mortgage, lease, contract, agreement, instrument, license or
other obligation to which the Company or any of its subsidiaries is a party or
by which any of them or their properties or assets may be bound, (iii) violate
any law, rule, regulation, judgment, injunction, order or decree applicable to
the Company or any of its subsidiaries or any of their properties or assets, or
(iv) require any filing or registration with, notification to, or authorization,
consent or approval of, any court, legislative, executive or regulatory
authority or agency (each, a "Governmental Authority"), except in the case of
the foregoing clauses (ii), (iii) or (iv) for such violations, breaches or
defaults which, or filings, registrations, notifications,
C-14
<PAGE>
authorizations, consents or approvals the failure of which to obtain would not
have a Material Adverse Effect.
Section 4.05 COMPLIANCE WITH APPLICABLE LAWS. The Company and its
subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Authority, and neither the
Company nor any of its subsidiaries has received notification of any asserted
present or past failure to so comply, except where such failure to be in
compliance would not have a Material Adverse Effect. No investigation, review,
inquiry or proceeding by any Governmental Authority with respect to the Company
or its subsidiaries is, to the knowledge of the Company, pending or threatened,
except those, the outcome of which would not have a Material Adverse Effect. The
Company and its material subsidiaries hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental Authorities
which are necessary for the operation of their respective businesses (the
"Permits"), except where the failure to hold any such Permits would not have a
Material Adverse Effect. The Company and its subsidiaries are in compliance with
the terms of the Permits, except where such failure to be in compliance would
not have a Material Adverse Effect.
Section 4.06 SEC REPORTS. The Company has filed all forms, reports and
documents with the SEC since January 1, 1998 required to be filed by it under
the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act (collectively, the "SEC Reports"). As of their respective filing dates, none
of the SEC Reports or the amendments thereto contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company contained
in the SEC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise stated in such financial statements) and present
fairly in all material respects the consolidated financial position of the
Company and its subsidiaries as of the respective dates thereof and their
consolidated results of their operations and cash flows for the respective
periods or as of the respective dates set forth therein (subject to normal
year-end adjustments in the case of any unaudited interim financial statements).
Section 4.07 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Section 4.07 of the Disclosure Schedule or as set forth or otherwise reflected
in the SEC Reports or as contemplated by this Agreement, since December 31,
1999, neither the Company nor any of its subsidiaries has (a) taken any of the
actions set forth in Section 6.01, (b) suffered any Material Adverse Effect or
(c) entered into any transaction, or conducted its business or operations, other
than in the ordinary course of business consistent with past practice.
Section 4.08 LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of the Company, threatened, against the Company or any of
its subsidiaries, by or before any court or Governmental Authority that would
have, or could reasonably be expected to have, a Material Adverse Effect.
Section 4.09 COMPANY INFORMATION. None of the information supplied or to
be supplied by the Company, or any of its officers, directors, employees,
representatives or agents, for inclusion or incorporation by reference in the
Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any
amendments or supplements thereto, shall, at the respective times the Offer
Documents and the Schedule 14D-9 are filed with the SEC or first published, sent
or given to the Company's stockholders, or, in the case of the Proxy Statement,
at the date the Proxy Statement is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each of the Schedule 14D-9 and the Proxy Statement shall
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder. Notwithstanding the foregoing, the
Company does not make any representation or warranty with respect to the
information that has been supplied by Acquisition or its officers, directors,
C-15
<PAGE>
employees, representatives or agents for inclusion or incorporation by reference
in any of the foregoing documents.
Section 4.10 BROKERS AND FINDERS. No broker, finder or investment banker
(other than Edward L. Thomas and Robert P. Frisch (or any entity controlled by
them) and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a true and correct
copy of whose engagement agreement has been provided to Acquisition) is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 4.11 OPINION OF FINANCIAL ADVISOR. The Special Committee has
received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
financial advisor to the Special Committee, to the effect that, as of the date
of such opinion, the Per Share Amount to be received in the Offer and the Merger
is fair to the holders of Shares (other than Acquisition, the Participants or
their affiliates) from a financial point of view.
Section 4.12 TAKEOVER STATUTES. The Board (acting upon the unanimous
recommendation of the Special Committee) has unanimously approved the terms of
this Agreement and the consummation of the Offer, the Merger and the other
transactions contemplated hereby, and such approval constitutes approval of this
Agreement and the transactions contemplated hereby by the Board under
Section 203 of the DGCL and represents all the action necessary to ensure that
such Section 203 does not apply to Acquisition or the Participants in connection
with the Offer, the Merger and the other transactions contemplated hereby.
Section 4.13 RIGHTS AGREEMENT. The Company has taken all actions necessary
to render the Rights issued pursuant to the terms of the Rights Agreement
inapplicable to the Offer, the Merger, this Agreement and the other transactions
contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION
Acquisition represents and warrants to the Company as follows:
Section 5.01 ORGANIZATION. Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power and authority would not impair the ability of Acquisition to perform its
obligations hereunder in any material respect.
Section 5.02 CAPITALIZATION. The authorized capital stock of Acquisition
consists of 1,000 shares of common stock, par value $0.01 per share, and 200,000
shares of preferred stock, par value $0.01 per share, of which, as of the date
hereof, 100 shares of common stock are issued and outstanding. All the issued
and outstanding shares of capital stock of Acquisition are validly issued, fully
paid and nonassessable and free of preemptive rights.
Section 5.03 AUTHORIZATION. Acquisition has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Acquisition and by the
stockholders of Acquisition and no other corporate proceedings on the part of
Acquisition are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Acquisition and, assuming the due authorization,
execution and delivery hereof by the Company, constitutes a valid and binding
agreement of Acquisition enforceable against Acquisition in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency and
similar laws affecting creditor's rights and remedies generally.
C-16
<PAGE>
Section 5.04 PROXY STATEMENT; SCHEDULE 14D-9; SCHEDULE TO. None of the
information supplied or to be supplied by Acquisition, or any of its officers,
directors, employees, representatives or agents, for inclusion or incorporation
by reference in the Proxy Statement, the Schedule 14D-9 or the Offer Documents,
including any amendments or supplements thereto, will, at the respective times
that the Proxy Statement, the Schedule 14D-9 and the Offer Documents, or any
amendments or supplements thereto, are filed with the SEC or first published,
sent or given to the Company's stockholders or, in the case of the Proxy
Statement or the Schedule TO, at the date first mailed to the Company's
stockholders or at the time of the Stockholders Meeting or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Schedule TO shall comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 5.05 FINANCING. Acquisition has received and furnished to the
Company true and complete copies of (i) the senior secured credit facility
commitment letter and fee letter, each dated January 28, 2000, among Canadian
Imperial Bank of Commerce, CIBC World Markets Corp., First Union National Bank,
First Union Securities, Inc., Acquisition and the Company, (ii) the senior
subordinated increasing note bridge facility commitment letter, fee letter and
indemnity letter, each dated January 28, 2000, among CIBC World Markets Corp.,
First Union Investors, Inc., Acquisition and the Company, (iii) the engagement
letter, dated January 28, 2000, among CIBC World Markets Corp., First Union
Securities, Inc., Acquisition and the Company, (iv) the senior preferred stock
commitment letter and indemnity letter, each dated January 28, 2000, among
Caravelle Investment Fund, L.L.C., CIBC WMC Inc., Albion Alliance Mezzanine
Fund, L.P., Albion Alliance Mezzanine Fund II, L.P., Acquisition and the
Company, and (v) the financial advisory engagement letter, dated January 28,
2000, among CIBC World Markets Corp., Acquisition and the Company (collectively,
the "Commitment Letters"), relating to the financing (the "Financing") of the
Offer and the Merger. The Commitment Letters provide, subject to the terms and
conditions set forth therein, for financing in an amount sufficient to purchase
and pay for the Shares tendered in the Offer, pay the Per Share Amount and to
pay all fees and expenses in connection with the Offer, Merger and the
transactions contemplated hereby. Each of the Commitment Letters is in full
force and effect and, since their respective dates, none of the Commitment
Letters has been withdrawn, amended or terminated in any manner adverse to the
Company. Acquisition has taken all actions required to cause the Commitment
Letters to be effective, and each of the Commitment Letters is a valid and
binding commitment of Acquisition. As of the date hereof, Acquisition is not
aware of any fact, circumstances or condition that is reasonably likely to
result in any of the conditions set forth in the Commitment Letters not being
satisfied.
Section 5.06 NO PRIOR ACTIVITIES. Except for the obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the financing
of the transactions contemplated hereby, Acquisition has not incurred any
obligations or liabilities nor engaged in any business or activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person or entity.
Section 5.07 BROKERS AND FINDERS. No broker, finder or investment banker
(other than CIBC World Markets Corp. and First Union Investors, Inc., a true and
correct copy of whose engagement agreement has been provided to the Company), is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by and on
behalf of Acquisition.
Section 5.08 GOVERNMENTAL APPROVALS. Other than the HSR Act, the
Securities Act and the Exchange Act, no notices, reports or other filings are
required to be made by Acquisition with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Acquisition or
from, any Governmental Authority in connection with the execution and delivery
of this Agreement by
C-17
<PAGE>
Acquisition and the consummation by Acquisition of the transactions contemplated
hereby, the failure to make or obtain any or all of which would prevent,
materially hinder or materially burden the transactions contemplated hereby.
Section 5.09 NON-CONTRAVENTION. Except for the matters set forth in
Section 5.08, neither the execution, delivery and performance of this Agreement
by Acquisition nor the consummation by Acquisition of the transactions
contemplated hereby shall (i) violate any provision of the certificate of
incorporation or by-laws of Acquisition, (ii) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
under, or give rise to any right of termination, cancellation or acceleration of
any obligation under, or result in the creation of any Lien upon any property or
asset of Acquisition under, any provisions of any material note, bond, mortgage,
lease, contract, agreement, instrument, license or other obligation to which
Acquisition or its properties or assets may be bound, (iii) violate any law,
rule, regulation, judgment, injunction, order or decree applicable to
Acquisition or any of its properties or assets or (iv) require any filing or
registration with, notification to, or authorization, consent or approval from,
any Governmental Authority, except in the cases of clauses (ii), (iii) or
(iv) for such violations, breaches or defaults which, or filings, registrations,
notifications, authorizations, consents or approvals the failure or which to
obtain would not impair the ability of Acquisition to perform its obligations
hereunder in any material respect.
Section 5.10 CALCULATION OF EBITDA. Section 5.10 of the Disclosure
Schedule sets forth a true and correct calculation of the Company's consolidated
EBITDA (as defined in the Commitment Letters) for the year ended December 31,
1999 (after giving effect to the sale of the Company's rail car division). As of
December 31, 1999, the condition set forth in the Commitment Letters relating to
the Company's consolidated EBITDA being equal to or exceeding $87.5 million was
satisfied.
ARTICLE VI
COVENANTS
Section 6.01 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement during the period from the date hereof to the Effective Time, the
Company and its subsidiaries will each conduct their respective operations in
the ordinary course of business consistent with past practice. Without limiting
the generality of the foregoing, except as otherwise expressly provided in this
Agreement or in the Disclosure Schedule, prior to the Effective Time, none of
the Company (acting through the Special Committee) or any of its subsidiaries
will, directly or indirectly, without the prior written consent of Acquisition:
(a) amend its certificate of incorporation, by-laws (or similar
documents) or amend the Rights Agreement or redeem the rights issued
thereunder;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
shares of capital stock of any class or any other securities, other than
pursuant to any employee benefit plan, option plan or agreement as in effect
as of the date hereof, or amend any of the terms of any such securities or
agreements outstanding as of the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities or any
securities of its subsidiaries;
(d) except in the ordinary course of business, (i) incur or assume any
indebtedness for borrowed money; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly owned
subsidiaries of
C-18
<PAGE>
the Company; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person (other than to wholly owned subsidiaries
of the Company);
(e) except in the ordinary course of business, enter into, adopt or
(except as may be required by law) amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreement, trust, plan, fund or other arrangement for the benefit or welfare
of any director, officer or employee, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock options or
performance units);
(f) except in the ordinary course of business and except pursuant to any
agreements or arrangements in effect on the date hereof, acquire, sell,
lease or dispose of any material amount of assets;
(g) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) enter into any contract or agreement other than in
the ordinary course of business; (iii) authorize any expenditures not
contemplated by the Company's business plan provided to Acquisition prior to
the date hereof which individually is in excess of $1,000,000 or in the
aggregate are in excess of $5,000,000; or (iv) enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.01(i);
(h) except in the ordinary course of business, pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its subsidiaries; or
(i) take, or agree to take, any of the foregoing actions or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect as of the date when made or
as of a future date.
Section 6.02 NO SOLICITATION. The Company shall not, and shall not
authorize or permit any of its subsidiaries or any of its or subsidiaries'
officers, directors, employees or agents to, directly or indirectly, solicit,
encourage, participate in or initiate discussions or negotiations with, or
provide any information to, any person, entity or group (other than Acquisition
or any of its affiliates or representatives) concerning any merger,
consolidation, tender offer, exchange offer, sale of all or substantially all of
the Company's assets, sale of shares of capital stock or similar business
combination transaction involving the Company or any principal operating or
business unit of the Company or its subsidiaries (an "Acquisition Proposal").
Upon the execution of this Agreement, the Company shall immediately cease any
discussions or negotiations with any person, entity or group (other than
Acquisition or any of its affiliates or representatives) in connection with an
Acquisition Proposal that are continuing as of the date hereof and shall seek to
have returned to the Company any confidential information provided in any such
discussions or negotiations. Notwithstanding the foregoing, if the Company or
the Special Committee receives a bona fide unsolicited, written Acquisition
Proposal after the date hereof from any person or entity at a price per Share
which the Special Committee reasonably concludes, based on the advice of its
financial advisor or special counsel, is in excess of the Per Share Amount, and
if the Special Committee reasonably concludes, based upon the advice of its
financial advisor and outside legal counsel, that the person or entity
delivering such Acquisition Proposal is reasonably capable of consummating such
Acquisition Proposal (based upon, among other things, the availability of
financing and the degree of certainty of obtaining financing, the expectation of
receipt of required antitrust and other regulatory approvals and the identity
and background of such person), then the Company or the Special Committee may,
directly or indirectly, provide access to or furnish or cause to be furnished
information concerning the Company's business, properties or assets to such
person or entity pursuant to an appropriate confidentiality agreement and the
Company or
C-19
<PAGE>
the Special Committee may participate in and engage in discussions and
negotiations with such person or entity regarding such Acquisition Proposal if
the Special Committee concludes, based upon the advice of its outside legal
counsel, that it is required to take such actions in order to comply with its
fiduciary duties under applicable law. In the event that, after the Company has
received an unsolicited written Acquisition Proposal (without breaching its
obligations under the foregoing sentence) prior to the consummation of the
Offer, the Special Committee determines, in good faith and based upon the advice
of its financial advisor and legal counsel, that it is required to take such
action in order to comply with its fiduciary duties under applicable law, the
Special Committee may do any or all of the following: (x) withdraw or modify the
Board's approval or recommendation of this Agreement, the Offer or the Merger,
and disclose to the Company's stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or otherwise make disclosure to
them, (y) approve or recommend an Acquisition Proposal and (z) terminate this
Agreement, PROVIDED, HOWEVER, that (A) prior to taking any of the foregoing
actions, the Company shall have paid Acquisition the amounts payable pursuant to
Section 8.03 hereof and (B) prior to taking the action described in clause (z)
above, the Special Committee shall have given Acquisition at least two business
days' notice (which shall be in writing) that the Special Committee intends to
terminate this Agreement and provided Acquisition with a reasonable opportunity
to respond to any such Acquisition Proposal.
Section 6.03 ACCESS TO INFORMATION. (a) Between the date hereof and the
Effective Time and subject to applicable law, the Company will give Acquisition
and its authorized representatives access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Acquisition to make such inspections as
Acquisition may require and will cause the Company's officers and those of its
subsidiaries to furnish Acquisition with such financial and operating data and
other information with respect to the business and properties of the Company and
any of its subsidiaries as Acquisition may from time to time reasonably request.
(b) Acquisition will hold, and will cause its consultants and advisors to
hold, in confidence, unless compelled to disclose by judicial or administrative
process, after notice to and consultation with the Company or by other
requirements of law after notice to and consultation with the Company, all
documents and information concerning the Company and any of its subsidiaries
furnished to Acquisition in connection with the transactions contemplated hereby
(except to the extent that such information can be shown to have been
(i) previously known by Acquisition or its affiliates on a non-confidential
basis, (ii) in the public domain through no fault of Acquisition, or
(iii) later acquired by Acquisition from other sources which it did not
reasonably believe to be subject to confidentiality obligations) and will not
release or disclose such information to any other person, except that
Acquisition may release or disclose such information to its auditors, attorneys,
financial and other advisors and other consultants and to such persons with whom
contacts are made or discussions are held concerning this Agreement or the
transactions contemplated hereby (it being understood that such persons shall be
informed by Acquisition of the confidential nature of such information and shall
be directed to treat such information confidentially). If the transactions
contemplated hereby are not consummated, such confidentiality shall be
maintained except under the circumstances described under (i), (ii) or (iii) of
this Section 6.03(b).
Section 6.04 REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein provided, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, and to assist and cooperate with the other parties hereto in doing, all
things necessary, proper or advisable under applicable laws and regulations to
ensure that the conditions set forth in Article VII hereof are satisfied and to
consummate and make effective, in the most expeditious manner practicable the
transactions contemplated hereby including, without limitation, cooperation in
the preparation and filing of the Offer Documents, the Schedule 14D-9, the
Schedule TO, the Proxy Statement and any amendments thereto and the execution of
any additional instruments necessary to consummate the transactions contemplated
hereby. In case at any time after the Effective Time any further action is
C-20
<PAGE>
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party hereto shall take all such necessary action
as may be reasonably requested by the other party.
Section 6.05 CONSENTS. Each of the parties hereto shall use its reasonable
best efforts to obtain any consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated
hereby.
Section 6.06 PUBLIC ANNOUNCEMENTS. Acquisition and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement including, without limitation, the Offer and the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or any listing
agreement with or rules applicable to the Nasdaq Stock Market.
Section 6.07 INDEMNIFICATION AND INSURANCE. (a) Acquisition agrees that
all rights to indemnification existing in favor of the present or former
directors, officers, employees, fiduciaries and agents of the Company or any of
its subsidiaries as provided in the Company's Restated Certificate of
Incorporation or By-Laws or pursuant to other agreements, or the certificate of
incorporation, by-laws or similar documents of any of the Company's subsidiaries
as in effect as of the date hereof with respect to matters occurring prior to
the Effective Time shall survive the Merger and shall continue in full force and
effect for a period of not less than six years after the date hereof.
Acquisition shall cause to be maintained in effect for not less than six years
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company and its subsidiaries; provided
that Acquisition may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous with respect to
matters occurring prior to the Effective Time to the extent available.
(b) In the event that any action, suit, proceeding or investigation relating
hereto or to the transactions contemplated hereby is commenced, whether before
or after the Effective Time, the parties hereto agree to cooperate in good faith
and use their reasonable best efforts to defend vigorously against and respond
thereto.
(c) This Section 6.07, which shall survive any termination of this Agreement
pursuant to Section 8.01 and the consummation of the Merger at the Effective
Time and shall continue without limit, is intended to benefit the Company, the
Surviving Corporation, and any person or entity indemnified hereunder (whether
or not parties to this Agreement).
(d) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 6.07.
Section 6.08 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Acquisition, and Acquisition shall give prompt notice to the
Company, of (i) the occurrence, or nonoccurrence, of any event the occurrence,
or nonoccurrence, of which would be likely to cause any representation or
warranty contained herein to be untrue or inaccurate in any material respect at
or prior to the Effective Time and (ii) any material failure of the Company or
Acquisition, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.09 MATTERS RELATING TO THE COMMITMENT LETTERS. (a) Acquisition
shall be primarily responsible for any negotiations with respect to any
definitive agreements regarding the Financing (the "Definitive Financing
Agreements"); PROVIDED, HOWEVER, that (i) the Company shall have received prior
notice of, and shall be kept reasonably informed of the ongoing status of, any
such negotiations, (ii) the Company shall take all such actions as are
reasonably requested by Acquisition in connection with any such negotiations,
C-21
<PAGE>
and (iii) Acquisition shall conduct any such negotiations reasonably and in good
faith. Acquisition shall use its commercially reasonable efforts to close the
Financing on terms consistent with those set forth in the Commitment Letters and
to execute and deliver the Definitive Financing Agreements on or before the
expiration of the Offer. Acquisition shall use its commercially reasonable
efforts to satisfy on or before the expiration of the Offer all requirements of
the Definitive Financing Agreements which are conditions to closing the
transactions constituting the Financing and to drawing the cash proceeds
thereunder.
(b) Following receipt by either the Company or any of its affiliates, on the
one hand, or Acquisition or any of its affiliates, on the other hand, of any
written or oral communications to the effect that any financing source under any
of the Commitment Letters is contemplating not providing the Financing or is
terminating or canceling or modifying in any material respect any of the
Commitment Letters, or that the Financing is unlikely to be obtained, the
Company or Acquisition, as the case may be, shall immediately communicate such
event to the other party and provide such other party with a true and complete
copy of any of such written communication.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party hereto to effect the Merger is
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the Company's stockholders, if required by the Company's
organizational documents and the DGCL;
(b) no statute, rule, regulation, executive order, decree, or injunction
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Merger; PROVIDED, HOWEVER, that the parties hereto shall use their
reasonable best efforts to have any such order, decree or injunction
vacated;
(c) any waiting period applicable to the Offer or the Merger under the
HSR Act shall have terminated or expired; and
(d) the Company and Acquisition shall have accepted for payment and paid
for all shares validly tendered pursuant to the Offer and not withdrawn;
PROVIDED, HOWEVER, that neither the Company nor Acquisition shall be
entitled to invoke this condition, if it shall have been the cause of the
failure to purchase shares so tendered and not withdrawn in violation of the
of the terms hereof or the Offer.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.01 TERMINATION. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after the approval thereof by the Company's stockholders:
(a) By mutual written consent of the Company (acting through the Special
Committee) and Acquisition.
(b) By either the Company (acting through the Special Committee), on the
one hand, or Acquisition, on the other hand:
(i) if Shares shall not have been purchased pursuant to the Offer on
or prior to April 30, 2000; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 8.01(b)(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure to purchase
Shares pursuant to the Offer on or prior to such date; or
C-22
<PAGE>
(ii) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such order, decree or ruling shall have become
final and nonappealable.
(c) By the Company (acting through the Special Committee) prior to the
purchase of Shares pursuant to the Offer, as provided in Section 6.02
hereof; PROVIDED that in order for the termination of this Agreement
pursuant to this Section 8.01(c) to be deemed effective, the Company shall
have complied with all provisions of Section 6.02 hereof, including the
notice provisions therein, and with the applicable requirements of
Section 8.03 hereof.
(d) By the Company (acting through the Special Committee):
(i) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder,
provided that the failure of the Company to fulfill any obligation under
this Agreement has not been the cause of, or resulted in, the failure to
purchase Shares pursuant to the Offer; or
(ii) if there shall have been a breach or failure to perform on the
part of Acquisition of any of its representations, warranties, covenants
or agreements contained herein, except where such breach or failure to
perform does not impair the ability of Acquisition to consummate the
Offer or the Merger in any material respect or where such breach or
failure to perform has been cured prior to March 1, 2000 (or such later
date upon which the Offer shall expire).
(e) By Acquisition:
(i) if the Special Committee (A) shall withdraw, modify or change its
recommendation so that it is not in favor of this Agreement, the Offer or
the Merger or shall have resolved to do any of the foregoing, (B) shall
have recommended or resolved to recommend to the Company's stockholders
an Acquisition Proposal, or (C) shall have terminated this Agreement as
provided in Section 6.02 hereof;
(ii) if the Company shall have breached any of its obligations under
Section 6.02 hereof;
(iii) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder,
provided that the failure of Acquisition to fulfill any obligation
hereunder has not been the cause of, or resulted in the failure to
purchase Shares pursuant to the Offer; or
(iv) if there shall have been a breach or failure to perform on the
part of the Company of any of its representations, warranties, covenants
or agreements contained herein, except where such breach or failure to
perform does not have a Material Adverse Effect or where such breach or
failure to perform has been cured prior to March 1, 2000 (or such later
date upon which the Offer shall expire).
Section 8.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its directors, officers or stockholders, other than the
provisions of this Section 8.02 and Sections 6.03(b), 6.07 and 8.03 and
Article IX. Nothing contained in this Section 8.02 shall relieve any party from
liability for any willful breach of this Agreement.
Section 8.03 FEES AND EXPENSES. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with the Agreement, shall
be paid by the party incurring such cost or expense; PROVIDED, HOWEVER, that all
costs and expenses related to the filing, printing and mailing of the Offer
Documents, the Schedule 14D-9 and the Proxy Statement shall be borne by the
Company.
C-23
<PAGE>
(b) Upon a termination of this Agreement by the Company pursuant to
Section 8.01(c) or by Acquisition pursuant to Section 8.01(e)(i),
8.01(e)(ii) or 8.01(e)(iv), the Company shall pay to Acquisition (by wire
transfer of immediately available funds), within two business days following
such termination, documented out-of-pocket fees and expenses up to $11,000,000
actually incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses in
connection with the Commitment Letters and the Financing), it being understood
that such payments shall be in lieu of any and all payments which the Company
may be required to make under the Commitment Letters. In addition, the Company
shall pay to Acquisition (by wire transfer of immediately available funds) the
fees and expenses set forth in the immediately preceding sentence if this
Agreement is terminated (i) by the Company pursuant to Section 8.01(b)(i) or
8.01(d)(i) if the Offer expires or is terminated without any Shares being
purchased thereunder solely as a result of the Minimum Condition failing to be
satisfied by the expiration date of the Offer as it may have been extended or
(ii) by Acquisition pursuant to Section 8.01(b)(i) or 8.01(e)(iii) if the Offer
expires or is terminated without any Shares being purchased thereunder solely as
a result of the Minimum Condition failing to be satisfied by the expiration date
of the Offer as it may have been extended, and within 180 days after such a
termination, the Company enters into a definitive agreement with respect to, and
thereafter consummates, an Acquisition Proposal.
(c) Upon a termination of this Agreement by the Company pursuant to
Section 8.01(b)(i) or 8.01(d)(i) or by Acquisition pursuant to
Section 8.01(b)(i) (in each case other than as a result of a failure to satisfy
the condition set forth in paragraph (b) of Annex A (which shall be governed by
Section 8.03(d)) and other than under the circumstances set forth in Sections
8.03(b) and 8.03(d)), the Company shall pay to Acquisition (by wire transfer of
immediately available funds), within two business days following such
termination, documented out-of-pocket fees and expenses up to $8,000,000
actually incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses in
connection with the Commitment Letters and the Financing), it being understood
that such payments shall be in lieu of any and all payments which the Company
may be required to make under the Commitment Letters.
(d) Upon a termination of this Agreement by the Company pursuant to
Section 8.01(b)(ii), by Acquisition pursuant to Section 8.01(b)(ii) or by
Acquisition as a result of a failure of the condition set forth in
paragraph (b) or (e) of Annex A to have been satisfied, the Company shall pay to
Acquisition (by wire transfer of immediately available funds), within two
business days following such termination, documented out-of-pocket fees and
expenses up to $4,000,000 actually incurred in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, the
fees and expenses in connection with the Commitment Letters and the Financing,
but excluding commitment fees and financial advisory fees under the Commitment
Letters), it being understood that such payments shall be in lieu of any and all
payments which the Company may be required to make under the Commitment Letters.
(e) Notwithstanding anything else in this Section 8.03 to the contrary, the
Company shall not be required to make any payment pursuant to this Section 8.03
if (i) immediately prior to the termination of this Agreement, Acquisition was
in material breach of its obligations under this Agreement or (ii) the
termination is the result of a breach of the terms of the Financing by the
financing sources thereunder. Acquisition hereby covenants and agrees that no
amounts payable purusant to this Section 8.03 shall be paid to any person that
is a director or officer of the Company or Acquisition as of the date hereof.
Section 8.04 AMENDMENT. Subject to Section 1.03(c), this Agreement and the
Plan of Merger may be amended by action taken by the Company and Acquisition at
any time before or after adoption of the Merger by the Company's stockholders
but, after any such approval, no amendment shall be made which decreases the Per
Share Amount or which adversely affects the rights of the Company's stockholders
hereunder without the approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of the parties.
C-24
<PAGE>
Section 8.05 EXTENSION; WAIVER. Subject to Section 1.03(c), at any time
prior to the Effective Time, either the Company (acting through the Special
Committee), on the one hand, or Acquisition, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
Section 9.02 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise,
PROVIDED that Acquisition may assign its rights and obligations to purchase
Shares pursuant to the Offer to any subsidiary of Acquisition, but no such
assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
Section 9.03 VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 9.04 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram or telex, or by registered or certified mail (postage prepaid, return
receipt requested), to the respective parties as follows:
if to Acquisition:
Transportation Acquisition I Corp.
980 North Michigan Avenue
Chicago, Illinois 60611
Attention: Thomas M. Begel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Joseph A. Coco, Esq.
if to the Company:
Transportation Technologies Industries, Inc.
980 North Michigan Avenue
Chicago, Illinois 60611
Attention: Special Committee
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis Hersch, Esq.
C-25
<PAGE>
or to such other address as the person to whom notice is given may have
previously, furnished to the others in writing in the manner set forth above.
Section 9.05 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.06 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 9.07 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Sections 6.07(d) and 9.02(b),
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 9.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.09 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC.
By: /s/ Andrew M. Weller______________
Name: Andrew M. Weller
Title: President and Chief
Operating Officer
TRANSPORTATION ACQUISITION I CORP.
By: /s/ Kenneth M. Tallering__________
Name: Kenneth M. Tallering
Title: Vice President
C-26
<PAGE>
ANNEX A
CONDITIONS TO THE PURCHASER OFFER
Notwithstanding any other provision of the Purchaser Offer, but subject to
the provisions of the Agreement to which this Annex A is attached (terms used
herein and not otherwise defined having the meanings ascribed to such terms in
such Agreement), Acquisition shall not be required to accept for payment, or,
subject to any applicable rules and regulations of the SEC, including
Rule 14e-1(c) promulgated under the Exchange Act, pay for, and, subject to any
applicable rules and regulations of the SEC, may delay the acceptance for
payment of, or the payment of, any tendered Shares, if (i) any applicable
waiting period under the HSR Act has not expired or been terminated,
(ii) Acquisition and the Company shall not have obtained the proceeds of
financing on terms satisfactory to Acquisition to enable the purchase of Shares
pursuant to the Offer, to pay the Per Share Amount in the Merger and to pay fees
and expenses of the Offer and the Merger, (iii) there are validly tendered and
not withdrawn prior to the expiration of the Offer a fewer number of Shares than
that number of Shares which, when added to the Shares beneficially owned by
Acquisition on the date Shares are accepted for payment, represents at least a
majority of the Shares outstanding on a fully-diluted basis (after giving effect
to the conversion or exercise of all outstanding options, warrants and other
rights and securities exercisable or convertible into Shares, whether or not
exercised or converted at the time of determination) on the date Shares are
accepted for payment (the "Minimum Condition"), (iv) the Debt Tender shall not
have been consummated or (v) at any time on or after the date of the Agreement,
and at or before the time of acceptance for payment of Shares, any of the
following events shall occur:
(a) any Material Adverse Effect shall have occurred; or
(b) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
which lasts for three consecutive trading days, (2) a declaration of a
banking moratorium or any general suspension of payments in respect of banks
in the United States that regularly participate in the U.S. market in loans
to large corporations (whether or not mandatory), (3) a commencement of a
war, armed hostilities or other national or international crisis directly or
indirectly involving the United States that has a material adverse effect on
financial markets in the United States, (4) any material limitation (whether
or not mandatory) by any governmental authority on, the extension of credit
by banks or other lending institutions in the United States that regularly
participate in the U.S. market in loans to large corporations, (5) from the
date of the Agreement through the date of termination or expiration of the
Offer a decline of at least 25 percent in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 index or (6) in the case of
situations described in clause (3) or (4) existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof; or
(c) any person, entity or group, other than Acquisition or the Company,
any of its affiliates, or any group of which any of them is a member, shall
have (i) acquired beneficial ownership of 20 percent or more of the Shares,
whether through acquisition of stock, the formation of an entity or group,
the grant of an option or a right, or otherwise (other than for bona fide
arbitrage purposes), or (ii) entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company;
(d) the representations and warranties of the Company set forth in the
Agreement which are not qualified by "materiality" or "Material Adverse
Effect" shall not be true and accurate in all material respects, and the
representations and warranties that are qualified by "materiality" or
"Material Adverse Effect" shall not be true and accurate in all respects, in
each case as of the date of consummation of the Offer as though made on or
as of such date (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific
C-27
<PAGE>
period of time which need only be true and accurate as of such date or with
respect to such period), or the Company shall have breached or failed to
perform or comply in any material respect with any obligation, agreement or
covenant required by the Agreement to be performed or complied with by it;
PROVIDED, HOWEVER, that such breach or failure to perform is incapable of
being cured or has not been cured prior to March 1, 2000 (or such later date
upon which the Offer shall expire).
(e) there shall have been any action or position taken, or any statute,
rule, regulation, judgment, order or injunction promulgated, enacted,
entered or enforced by any Governmental Authority, which could reasonably be
expected to (1) make the acceptance for payment of, or the payment for, some
or all of the Shares illegal or otherwise prohibited, or materially restrict
or delay consummation of the Offer, (2) impose limitations on the ability of
Acquisition to acquire or hold or to exercise effectively all rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares purchased by it on all matters properly presented to the
stockholders of the Company, or (3) prohibit or impose any material
limitation on Acquisition's ownership or operation of all or a material
portion of the assets or business of the Company or any of its respective
subsidiaries or affiliates; or
(f) the Company or Acquisition shall have failed to receive any or all
governmental or third party consents and approvals to consummate the Offer
which, if not received, would have a Material Adverse Effect;
(g) the Board of Directors of the Company shall have publicly (including
by amendment of its Schedule 14D-9) withdrawn or modified in any material
respect its recommendation of the Offer or shall have resolved to do so; or
(h) the Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Acquisition, in such case and regardless of
the circumstances (including any action or inaction by Acquisition) giving rise
to any such condition makes it inadvisable to proceed with such acceptance for
payment or payments.
The foregoing conditions are for the sole benefit of Acquisition and may be
asserted by Acquisition regardless of the circumstance giving rise to such
condition and may be waived by Acquisition, in whole or in part at any time and
from time to time, in its sole discretion. The failure by Acquisition at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
C-28
<PAGE>
ANNEX B
CONDITIONS TO THE COMPANY OFFER
Notwithstanding any other provision of the Company Offer, but subject to the
provisions of the Agreement to which this Annex B is attached (terms used herein
and not otherwise defined having the meanings ascribed to such terms in such
Agreement), the Company shall not be required to accept for payment, or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Exchange Act, pay for, and, subject to any applicable
rules and regulations of the SEC, may delay the acceptance for payment of, or
the payment of, any tendered Shares, if (i) any applicable waiting period under
the HSR Act has not expired or been terminated, (ii) Acquisition and the Company
shall not have obtained the proceeds of financing on terms satisfactory to
enable the purchase of Shares pursuant to the Offer and pay fees and expenses of
the Offer and the Merger, (iii) there are validly tendered and not withdrawn
prior to the expiration of the Offer a fewer number of Shares than such number
that satisfies the Minimum Condition, (iv) the Debt Tender shall not have been
consummated or (v) at any time on or afer the date of the Agreement, and at or
before the time of acceptance for payment of Shares, any of the following events
shall occur:
(a) the representations and warranties of Acquisition set forth in the
Agreement which are not qualified by "materiality" or "material" shall not
be true and accurate in all material respects, and the representations and
warranties that are qualified by "materiality" or "material" shall not be
true and accurate in all respects, in each case as of the date of
consummation of the Offer as though made on or as of such date (except for
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and accurate as of such date or with respect to such period),
or Acquisition shall have breached or failed to perform or comply in any
material respect with any obligation, agreement or covenant required by the
Agreement to be performed or complied with by it, PROVIDED, HOWEVER, that
such breach or failure to perform is incapable of being cured or has not
been cured prior to March 1, 2000 (or such later date upon which the Offer
shall expire);
(b) there shall have been any action or position taken, or any statute,
rule, regulation, judgment, order or injunction promulgated, enacted,
entered, enforced or any other action or position shall have been taken,
proposed or threatened by any Governmental Authority which could reasonably
be expected to make the acceptance for payment of, or the payment for, some
or all of the Shares illegal or otherwise prohibited, or materially restrict
or delay consummation of the Offer;
(c) the Company or Acquisition shall have failed to receive any or all
governmental or third party consents and approvals to consummate the Offer
which, if not received, would have a Material Adverse Effect;
(d) the Agreement shall have terminated in accordance with its terms; or
(e) the Purchaser Offer shall not have been consummated at the same time
as the Company Offer;
which, in the reasonable judgment of the Company, in such case and regardless of
the circumstances (including any action or inaction by he Company) giving rise
to such condition makes it inadvisable to proceed with such acceptance for
payment or payments.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstance giving rise to such
condition and may be waived by the Company, in whole or in part at any time and
from time to time, in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
C-29
<PAGE>
ANNEX C
DEBT TENDER OFFER TERMS AND CONDITIONS
<TABLE>
<S> <C>
Securities Subject to Offers 11.75% Senior Subordinated Notes due 2005
11.75% Series C Senior Subordinated Notes due 2005
Total Consideration for the Offer and The total consideration (the "Total Consideration") for each
the Solicitation $1,000 principal amount of the Notes tendered pursuant to
the Offer will equal the present value on the payment date
of $1,058.75 (the amount payable on August 15, 2000, the
first date on which the Notes are redeemable (the "Earliest
Redemption Date")) and all remaining interest payments
payable up to and including the Earliest Redemption Date on
the second business day before the scheduled expiration
date, plus 50 basis points. The Total Consideration is
comprised of the Tender Offer Consideration and the Consent
Payment.
Tender Offer Consideration: Total Consideration minus the Consent Payment.
Consent Payment: A Consent Payment in cash equal to $25.00 per $1,000
principal amount of Notes for which consents have been
validly delivered.
Conditions to the Offers The Offers shall be conditioned upon:
(i) the execution by the trustee of supplemental indentures
implementing the proposed amendments to the indentures
following receipt of the requisite consents to the proposed
amendments from not less than a majority in aggregate
principal amount of the outstanding Notes of each series,
(ii) there having been validly tendered (and not withdrawn)
prior to the expiration date not less than a majority in
aggregate principal amount of the notes of each series
outstanding,
(iii) the consummation of the Offer (as defined in the
Merger Agreement),
(iv) receipt by the Company of the proceeds of financing in
an amount sufficient to pay for the debt tender offers and
the consent payment on terms acceptable to the Company, and
(v) there shall not have been any action or position taken,
or any statute, rule, regulation, judgment, order or
injunction promulgated, enacted, entered, enforced or any
other action or position taken by any Governmental Authority
which could reasonably be expected (in the sole judgment of
Acquisition) to make the acceptance for payment of, or the
payment for, some or all of the Notes or the consummation of
the consent solicitations, illegal or otherwise prohibited,
or materially restrict or delay consummation of the debt
tender offers and consent solicitations.
(vi) there shall not have occurred or be likely to occur any
event affecting the business or financial affairs of the
Company that, in the sole judgment of Acquisition, would or
might prohibit, prevent, restrict or delay consummation of
the debt tender offers or the consent solicitations in any
material respect;
</TABLE>
C-30
<PAGE>
<TABLE>
<S> <C>
(vii) the trustee under either of the Indentures shall not
have objected in any respect to or taken action that could
reasonably be expected, in the sole judgment of Acquisition,
to adversely affect in any material respect the consummation
of the debt tender offers or consent solicitations or the
Company's ability to effect any of the proposed amendments
to the Indentures or shall have taken any action that
challenges the validity or effectiveness of the procedures
used by the Company in soliciting the Consents (including
the form thereof) or in the making of the debt tender offers
or consent solicitations or the acceptance of, or payment
for, the Notes or the consents; or
(viii) there shall not have occurred and be continuing (1)
any general suspension of trading in, or limitation on
prices for, securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market which
lasts for three consecutive trading days, (2) a declaration
of a banking moratorium or any general suspension of
payments in respect of banks in the United States that
regularly participate in the U.S. market in loans to large
corporations (whether or not mandatory), (3) a commencement
of a war, armed hostilities or other national or
international crisis directly or indirectly involving the
United States that has a material adverse effect on
financial markets in the United States, (4) any material
limitation (whether or not mandatory) by any governmental
authority on, the extension of credit by banks or other
lending institutions in the United States that regularly
participate in the U.S. market in loans to large
corporations, (5) from the date of the Agreement through the
date of termination or expiration of the Offer a decline of
at least 25 percent in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 index or (6)
in the case of situations described in clause (3) or (4)
existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof.
</TABLE>
C-31
<PAGE>
ANNEX D
EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE RELATING TO THE RIGHTS
OF DISSENTING STOCKHOLDERS
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 Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g)), Section 252, Section 254, Section 257, Section 258,
Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
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.
D-1
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to 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 Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
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 twenty 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
D-2
<PAGE>
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 stockholder entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given; provided that, if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw 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 one 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,
D-3
<PAGE>
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.
(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.
D-4
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at the applicable address set forth below:
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY MAIL OR HAND: BY FACSIMILE TRANSMISSION:
Corporate Trust--Reorganization (for Eligible Institutions only)
Department (704-590-7628)
1525 W.W.T. Harris Boulevard, 3C3 CONFIRM BY TELEPHONE:
Charlotte, North Carolina 28288-1153 (704-590-7408)
<S> <C>
BY MAIL OR HAND: BY REGISTERED, CERTIFIED OR OVERNIGHT DELIVERY:
Corporate Trust--Reorganization Corporate Trust--Reorganization
Department Department
1525 W.W.T. Harris Boulevard, 3C3 1525 W.W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent at the
address and telephone number set forth below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free: (800) 322-2885
THE DEALER MANAGERS FOR THE OFFER ARE:
<TABLE>
<S> <C>
[LOGO] [LOGO]
425 Lexington Avenue One First Union Center
New York, New York 10017 301 South College Street
Charlotte, North Carolina 28288
</TABLE>
<PAGE>
Transportation Technologies Industries
February 3, 2000
Dear Stockholder:
On behalf of the Board of Directors of Transportation Technologies
Industries, Inc. (the "Company"), I am pleased to inform you that the Company
has entered into an Agreement and Plan of Merger, dated as of January 28, 2000
(the "Merger Agreement"), with Transportation Acquisition I Corp.
("Acquisition"), a company formed by an investor group led by members of senior
management of the Company, including myself and Andrew M. Weller, our President
and Chief Operating Officer. The Merger Agreement provides for the acquisition
of the Company by the management investor group.
Acquisition and the Company today have commenced a joint cash tender offer
(the "Offer") for all outstanding shares of common stock, including the
associated preferred share purchase rights, of the Company (the "Shares") at a
price of $21.50 per Share, net to the seller in cash, without interest.
Following the successful completion of the Offer, upon the terms and subject
to the conditions contained in the Merger Agreement, Acquisition will be merged
with and into the Company (the "Merger"), with the Company as the surviving
corporation. At the effective time of the Merger, each remaining issued and
outstanding Share (other than shares owned by Acquisition and members of the
management investor group) will be converted into the right to receive $21.50 in
cash, subject to dissenters' rights.
YOUR BOARD OF DIRECTORS, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS COMPRISED ENTIRELY OF INDEPENDENT
DIRECTORS (THE "SPECIAL COMMITTEE"), HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, HAS
DETERMINED THAT THE TERMS OF THE MERGER AND THE OFFER ARE ADVISABLE, FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN ACQUISITION AND
MEMBERS OF THE MANAGEMENT INVESTOR GROUP), AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at their recommendations, the Special Committee and the Board of
Directors gave careful consideration to the factors described in the enclosed
Offer to Purchase, which is incorporated by reference in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9, each of which is being
filed today with the Securities and Exchange Commission. Among the factors
considered was the written opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the Special Committee's financial advisor, that subject to the
assumptions, factors and limitations set forth in the opinion, the $21.50 per
Share in cash consideration to be paid in the Offer and the Merger is fair to
the holders of common stock (other than Acquisition and the management investor
group) from a financial point of view. Additional information with respect to
the Special Committee's and the Board's recommendations and the background of
the transaction is contained in the enclosed Offer to Purchase.
In addition to the Offer to Purchase and the Schedule 14D-9, enclosed are
various related materials relating to the Offer, including a Letter of
Transmittal to be used for tendering Shares in the Offer if you are the record
holder of Shares. The Offer to Purchase and the related materials set forth the
terms and conditions for the Offer and provide instructions on how to tender
your Shares. If you need assistance with the tendering of your Shares, please
contact the information agent for the Offer, MacKenzie Partners, Inc., at its
address or telephone number appearing on the back cover of the Offer to
Purchase. WE URGE YOU TO READ AND CONSIDER THE ENCLOSED MATERIALS CAREFULLY
BEFORE MAKING YOUR DECISION WITH RESPECT TO TENDERING YOUR SHARES PURSUANT TO
THE OFFER.
Very truly yours,
/s/ Thomas M. Begel
Thomas M. Begel
Chairman and
Chief Executive Officer
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Name of Subject Company)
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
479477101
(CUSIP Number of Class of Securities)
THOMAS M. BEGEL
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
980 N. MICHIGAN AVENUE, SUITE 1000
CHICAGO, ILLINOIS 60611
(312) 280-8844
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of the Person(s) Filing
Statement)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOSEPH A. COCO, ESQ. DENNIS S. HERSCH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP DAVIS POLK & WARDWELL
FOUR TIMES SQUARE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10017
TELEPHONE: (212) 735-3000 TELEPHONE: (212) 450-4000
TELECOPIER: (212) 735-2000 TELECOPIER: (212) 450-4800
</TABLE>
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is Transportation
Technologies Industries, Inc., a Delaware corporation (together with its
subsidiaries, where applicable, the "Company"). The address of the principal
executive offices of the Company is 980 North Michigan Avenue, Suite 1000,
Chicago, Illinois 60611. The telephone number of the principal executive offices
of the Company is (312) 280-8844. The title of the class of equity securities to
which this Schedule 14D-9 relates is common stock, par value $0.01 per share,
including the associated preferred share purchase rights.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
(a) SUBJECT COMPANY INFORMATION. The name, address and telephone number of
the Company, which is the person filing the Schedule 14D-9, are set forth in
Item 1 above.
(b) IDENTITY AND BACKGROUND OF FILING PERSON. This Statement relates to a
joint tender offer by Transportation Acquisition I Corp., a Delaware corporation
("Acquisition"), and the Company disclosed in a tender offer statement on
Schedule TO (the "Schedule TO") dated February 3, 2000, to purchase all
outstanding shares of common stock, including the associated preferred share
purchase rights, of the Company (the "Shares") at a price of $21.50 per Share,
net to the seller in cash, without interest (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase dated
February 3, 2000 (the "Offer to Purchase"), a copy of which is attached as
Exhibit (a)(1) hereto, and the related Letter of Transmittal, a copy of which is
attached as Exhibit (a)(2) hereto (which, as may be amended from time to time,
together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 28, 2000 (the "Merger Agreement"), between the Company and Acquisition.
The Merger Agreement provides that, among other things, as promptly as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction or waiver, where appropriate, of other conditions set forth in the
Merger Agreement, Acquisition will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Company"). A copy of the Merger Agreement is attached hereto as
Exhibit (e)(1) and is incorporated by reference herein.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
For a description of certain contracts, agreements, arrangements or
understandings and any actual or potential conflicts of interests between the
Company or its affiliates and (1) the Company's executive officers, directors or
affiliates, or (2) Acquisition or its respective executive officers, directors
or affiliates, see "SPECIAL FACTORS--The Merger Agreement; Interests of Certain
Persons in the Transactions" in the Offer to Purchase, which is incorporated by
reference herein, and the Information Statement which is attached in Schedule I
to this Schedule 14D-9 and incorporated by reference herein.
A summary of the material provisions of the Merger Agreement is included in
"SPECIAL FACTORS--The Merger Agreement" in the Offer to Purchase, which is
incorporated by reference herein. The summary of the Merger Agreement contained
in the Offer to Purchase is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Exhibit (e)(1) and is
incorporated by reference herein.
In connection with the Merger Agreement, the Company and Acquisition have
entered into commitment letters providing for senior secured financing, senior
subordinated financing and preferred equity financing (the "Financing"). The
Financing will be used to consummate the Offer and the Merger and to pay related
fees and expenses. A summary of the material provisions of the Financing is
included in "SPECIAL FACTORS--Financing of the Transactions" in the Offer to
Purchase, which is incorporated by reference herein.
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting held on
January 28, 2000, the Company's Board of Directors, after receiving the
unanimous recommendation of a special committee of the Board of Directors
comprised entirely of independent directors (the "Special Committee"), approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and determined that the transactions contemplated by the
Merger Agreement, including the Offer and the Merger, are advisable, fair to and
in the best interests of the Company's stockholders (other than Acquisition,
members of the management investor group and their affiliates).
The Company's Board of Directors recommends that the stockholders accept the
Offer and tender their Shares pursuant to the Offer.
A letter to the stockholders communicating the Board of Directors'
recommendation and a press release announcing the commencement of the Offer are
filed herewith as Exhibits (a)(3) and (a)(4), respectively, and are incorporated
by reference herein.
(b) REASONS. The information set forth in "SPECIAL FACTORS--Background of
the Transactions; Recommendation of the Board of Directors; Fairness of the
Transactions" in the Offer to Purchase, which is incorporated by reference
herein, sets forth the reasons for the Board of Directors' position. Merrill
Lynch, Pierce, Fenner & Smith Incorporated, financial advisor to the Special
Committee ("Merrill Lynch"), has delivered to the Special Committee its opinion,
dated as of January 28, 2000, to the effect that, as of such date and based upon
and subject to certain assumptions and matters stated therein, the Offer Price
is fair, from a financial point of view, to the stockholders of the Company
(other than Acquisition, the members of the management investor group and their
affiliates). A copy of the Merrill Lynch opinion is attached hereto as
Exhibit (e)(2) and incorporated by reference herein.
(c) INTENT TO TENDER. To the Company's knowledge after reasonable inquiry,
Mr. R. Philip Silver and Mr. Francis A. Stroble, directors of the Company,
currently intend to tender their shares pursuant to the Offer. To the Company's
knowledge after reasonable inquiry, no other executive officer, director,
affiliate or subsidiary of the Company currently intends to tender his shares
pursuant to the Offer.
Pursuant to the Merger Agreement, certain members of the Company's
management (and possibly other employees of the Company) will have the right to
retain an equity interest in the Company following the Offer and the Merger.
Such members of management (and other employees) are collectively referred to
herein as the "Continuing Stockholders." For a further description of the
Continuing Stockholders' retained interests, see "SPECIAL FACTORS--The Merger
Agreement; Interests of Certain Persons in the Transactions; Retained Interest
of Continuing Stockholders" in the Offer to Purchase, which is incorporated by
reference herein.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
Pursuant to the terms of an engagement letter, dated as of January 11, 2000,
the Special Committee engaged Merrill Lynch to act as its financial advisor in
connection with various possible transactions, including transactions
contemplated by the Merger Agreement (a "Business Combination"). As part of its
role as financial advisor, Merrill Lynch delivered a fairness opinion to the
Special Committee. Pursuant to the engagement letter, Merrill Lynch will receive
from the Company an aggregate financial advisory fee, contingent upon the
closing of a Business Combination, equal to $2,000,000 plus 5% of the aggregate
purchase price in excess of $20.00 per share paid in such Business Combination.
The Company has also agreed to reimburse Merrill Lynch for reasonable
out-of-pocket expenses, including, without limitation, the reasonable fees and
disbursements of its legal counsel, and to indemnify Merrill Lynch and related
parties against certain liabilities, including liabilities under the federal
securities laws arising out of Merrill Lynch's engagement.
2
<PAGE>
The Company and Acquisition have retained MacKenzie Partners, Inc. to act as
the information agent (the "Information Agent") in connection with the Offer.
The Information Agent may contact holders of Shares by mail, telephone,
facsimile, telegraph and personal interviews and may request brokers, dealers
and other nominee stockholders to forward materials to the beneficial owners of
Shares. The Information Agent will receive reasonable and customary compensation
for its services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
The Company and Acquisition have engaged CIBC World Markets Corp. and First
Union Securities, Inc. to act as the dealer managers (the "Dealer Managers") in
connection with the Offer. The Company and Acquisition have agreed to reimburse
the Dealer Managers for all reasonable out-of-pocket fees, expenses and costs,
including reasonable fees and expenses of legal counsel, and to indemnify the
Dealer Managers and certain related persons against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person or class of persons to
make solicitations or recommendations on its behalf with respect to the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
To the Company's knowledge, no transactions in the Shares, other than
ordinary course purchases under the Company's 401(k) savings plan, have been
effected during the past 60 days by the Company or its executive officers,
directors, affiliates or subsidiaries, or by Acquisition or its executive
officers, directors, affiliates or subsidiaries.
ITEM 7. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to a tender offer or other acquisition of the Company's securities by the
Company, any subsidiary of the Company or any other person.
(b) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to, or would result in, (i) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary of the
Company, (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company, or (iii) any material change in the
present dividend rate or policy, or indebtedness or capitalization of the
Company.
(c) Except as indicated in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the matters referred
to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION
(a) INFORMATION PROVIDED PURSUANT TO RULE 14F-1 UNDER THE EXCHANGE ACT. The
Information Statement attached as Schedule I to this Schedule 14D-9 is being
furnished to the Company's stockholders in connection with the designation by
Acquisition of persons to the Board other than at a meeting of the Company's
stockholders, and such information is incorporated by reference herein.
(b) CERTAIN LITIGATION. At various times between December 14 and 17, 1999,
six purported class action complaints, captioned WILLIAM PHELPS AND LAWTON
WILLISTON V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL., AMY F. BRETAN
V. THOMAS M. BEGEL ET AL., BILL GANEM V. THOMAS M. BEGEL ET AL., RUTH GRENING V.
THOMAS M. BEGEL ET AL., E. CLAIBURNE HOGGE V. THOMAS M. BEGEL ET AL. AND KIRK
BEIRACH V. THOMAS M. BEGEL ET AL., were filed in the Court of Chancery of the
State of Delaware in and for New Castle County against the Company
3
<PAGE>
and its directors. On or about January 10, 2000, an additional purported class
action complaint, captioned WILLIAM KREOFSKY V. TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC. ET AL., was filed in the Circuit Court of Cook County of the
State of Illinois against the Company and its directors. The foregoing actions
purport to be brought on behalf of all public stockholders of the Company in
connection with the initial proposal made by Acquisition to acquire the Company
at a price per share of $20. The actions allege, among other things, that the
price per share price offered by Acquisition is unfair and inadequate to the
Company's public stockholders and that the individual defendants have breached
their fiduciary duties. The complaints seek as relief, among other things,
preliminary and permanent injunctive relief enjoining the proposed transaction
and monetary damages in an unspecified amount. The defendants believe that they
have meritorious defenses to these actions and intend to vigorously defend
themselves.
(c) The information contained in all of the Exhibits referred to in Item 9
below is incorporated by reference herein.
ITEM 9. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
(a)(1) Offer to Purchase dated February 3, 2000 (incorporated
herein by reference to Exhibit (a)(1) to the Schedule TO).
(a)(2) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(2) to the Schedule TO).
(a)(3) Form of Letter to Stockholders of the Company dated
February 3, 2000.
(a)(4) Press Release of the Company dated February 3, 2000.
(e)(1) Agreement and Plan of Merger, dated as of January 28, 2000,
between Transportation Technologies Industries, Inc. and
Transportation Acquisition I Corp.
(e)(2) Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included
as Schedule II hereto).
(g) Not applicable.
(i)(1) Complaint filed in action entitled PHELPS AND WILLISTON V.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL. (Court
of Chancery of New Castle County, Delaware) (incorporated
herein by reference to Exhibit (i)(1) to the Schedule TO).
(i)(2) Complaint filed in action entitled BRETON V. BEGEL ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(2) to the
Schedule TO).
(i)(3) Complaint filed in action entitled GRENING V. BEGEL ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(3) to the
Schedule TO).
(i)(4) Complaint filed in action entitled GANEM V. BEGEL ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(4) to the
Schedule TO).
(i)(5) Complaint filed in action entitled HOGGE V. BEGEL ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(5) to the
Schedule TO).
(i)(6) Complaint filed in action entitled BIERACH V. BEGEL ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(6) to the
Schedule TO).
(i)(7) Complaint filed in action entitled KREOFSKY V.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL. (Circuit
Court of Cook County, Illinois) (incorporated herein by
reference to Exhibit (i)(7) to the Schedule TO).
</TABLE>
4
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: February 3, 2000
<TABLE>
<S> <C> <C>
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
By: /s/ ANDREW M. WELLER
-----------------------------------------
Name: Andrew M. Weller
Title: President and Chief Operating
Officer
</TABLE>
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- - ----------------------
<C> <S>
(a)(3) Form of Letter to Stockholders of the Company dated
February 3, 2000.
(a)(4) Press Release of the Company dated February 3, 2000.
(e)(1) Agreement and Plan of Merger, dated as of January 28, 2000,
between Transportation Technologies Industries, Inc. and
Transportation Acquisition I Corp.
(e)(2) Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included
as Schedule II hereto).
</TABLE>
6
<PAGE>
SCHEDULE I
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
980 N. MICHIGAN AVENUE, SUITE 1000
CHICAGO, ILLINOIS 60611
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This information statement (the "Information Statement") is being mailed on
or about February 3, 2000 as part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") to holders of record of shares of
common stock, par value $0.01 per share, of Transportation Technologies
Industries, Inc. (the "Company"). You are receiving this Information Statement
in connection with the possible election of persons designated by Transportation
Acquisition I Corp. ("Acquisition") to a majority of the seats on the Board of
Directors of the Company (the "Board" or the "Board of Directors") other than at
a meeting of the stockholders of the Company. Such election would occur pursuant
to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
January 28, 2000, between Acquisition and the Company. The Merger Agreement is
more fully described under Item 3 of the Schedule 14D-9, of which this
Schedule I is a part. Capitalized terms used and not defined in this Schedule I
have the meanings assigned to them in the Schedule 14D-9.
Pursuant to the Merger Agreement, Acquisition and the Company commenced a
joint cash tender offer (the "Offer") for all outstanding shares of common
stock, including the associated preferred share purchase rights, of the Company
(the "Shares") at a price of $21.50 per Share, net to the seller in cash,
without interest, on February 3, 2000. The Offer currently is scheduled to
expire at 12:00 Midnight, New York City time, on March 3, 2000, at which time,
if the Offer is not extended and all conditions to the Offer have been satisfied
or waived, Acquisition and the Company will be obligated to purchase all Shares
validly tendered pursuant to the Offer and not withdrawn.
If the Merger Agreement is terminated or if Acquisition does not accept
Shares tendered for payment, then Acquisition will not have any right to
designate directors for election to the Board of Directors.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and Rule 14f-1 promulgated
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action.
THE ACQUISITION DESIGNEES
Effective upon the acceptance for payment pursuant to the Offer of a number
of Shares that satisfies the Minimum Condition (as defined in the Merger
Agreement), Acquisition shall be entitled to designate for election to the Board
such number of persons as will cause a majority of directors of the Company to
consist of persons designated by Acquisition, and the Company shall, upon
written request by Acquisition, promptly, at the Company's election, either
increase the size of the Board or take such other actions as may be necessary so
as to include on, and cause to be elected to the Board, the individual or
individuals designated by Acquisition.
The Company's obligations to appoint Acquisition's designees to the Board of
Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1
promulgated thereunder. The Company shall
I-1
<PAGE>
promptly take all actions, as Section 14(f) and Rule 14f-1 require, in order to
fulfill its obligations under the Merger Agreement. Acquisition has supplied to
the Company in writing information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Following the election or appointment of Acquisition's designees pursuant to
the Merger Agreement and prior to the Effective Time, any amendment or
termination of the Merger Agreement, extension of the time for the performance
of any of the obligations or other acts of Acquisition, waiver of any of the
Company's rights under the Merger Agreement, action in connection with the
Merger Agreement required to be taken by the Board of Directors of the Company,
amendment to the Company's Certificate of Incorporation, Bylaws or Rights
Agreement, or actions that would be reasonably likely to adversely affect the
interests of stockholders of the Company (other than Acquisition, the Continuing
Stockholders or their respective affiliates) in any material respect, shall
require the concurrence of a majority of the directors of the Company then in
office who are neither designated by Acquisition nor employees of the Company.
Pursuant to the provisions of the Merger Agreement described in the
Schedule 14D-9, Acquisition may designate from among the persons identified
below the persons to be elected to the Board of Directors (the "Acquisition
Designees"). It is expected that the Acquisition Designees will assume office
promptly upon the acceptance for payment pursuant to the Offer of a number of
Shares that satisfies the Minimum Condition, which the Company expects will be
promptly thereafter, and that they will thereafter constitute at least a
majority of the Board of Directors. Acquisition has informed the Company that
each of the Acquisition Designees has consented to act as a director, if so
designated.
Set forth in the table below are the name and principal occupation or
employment and five year employment history for each of the persons who may be
designated by Acquisition as the Acquisition Designees.
DIRECTOR DESIGNEES OF TRANSPORTATION ACQUISITION I CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- ------------------------------------------------------------
<S> <C>
Thomas M. Begel............... Chairman of the Board and President of Acquisition. Mr.
Begel also serves as Chairman of the Board and Chief
Executive Officer of the Company. He is also Chairman of,
and a partner in, TMB Industries, and a director of Silgan
Holdings, Inc.
Camillo M. Santomero III...... Mr. Santomero serves as a Director of the Company. From
January 1992 to the present, Mr. Santomero has been a
private investor and a Senior Consultant to Chase Capital
Partners (formerly Chemical Venture Partners). From October
1988 to January 1992, he was a General Partner of Chase
Capital Partners.
Andrew M. Weller.............. Vice President, Chief Financial Officer and Treasurer of
Acquisition. Mr. Weller also serves as Director, Vice
President and Chief Operating Officer of the Company. He is
also Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
</TABLE>
I-2
<PAGE>
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares constitute the only class of voting securities of the Company.
The holders of common stock are entitled to one vote per Share. As of
January 28, 2000, there were 10,322,280 shares of common stock (including
restricted stock) issued and outstanding and 660,168 Shares subject to
outstanding stock options under the Company's stock option plans. Currently, the
Board consists of five members. The Board is divided into three classes and each
director serves a term of three years and until his successor is duly elected
and qualified or until his earlier death, resignation or removal.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for the
past five years, of each director and executive officer of the Company. Unless
otherwise indicated, each such person is a citizen of the United States and the
business address of each such person is c/o Transportation Technologies
Industries, Inc., 980 N. Michigan Avenue, Suite 1000, Chicago, Illinois 60611.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- ------------------------------------------------------------
<S> <C>
Thomas M. Begel............... Chairman of the Board and Chief Executive Officer. He served
as President from October 1991 to January 2000. He is also
Chairman of, and a partner in, TMB Industries, and a
director of Silgan Holdings, Inc.
Andrew M. Weller.............. Director, President and Chief Operating Officer. He is also
Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company, and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
James D. Cirar................ President and Chief Executive Officer of Gunite Corporation
since January 2000. He was Chairman of Johnstown America
Corporation and Freight Car Services, Inc. from September
1998 to June 1999 and Senior Vice President of the Company
from July 1997 to June 1999. From September 1995 to August
1998, he was President and Chief Executive Officer of
Johnstown America Corporation and from March 1998 to August
1998 he was President and Chief Executive Officer of Freight
Car Services, Inc. Prior to September 1995, he was the Plant
Manager of the Truck and Bus Assembly Group of General
Motors Corporation.
Fred D. Culbreath............. Chairman of Imperial Group, L.P. He has held various other
titles with Imperial Group, L.P. since being one of its
primary founders in 1962.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- ------------------------------------------------------------
<S> <C>
Joseph A. Hicks............... Chief Executive Officer of Imperial Group, L.P. He served as
President of Imperial Group, L.P. from January 1995 to
November 1997 and, prior thereto, he was President of Eagle
Associates, a private management firm.
Robert L. Jackson............. President and Chief Executive Officer of Bostrom Seating,
Inc. From August 1996 to January 2000, he was Executive Vice
President of Bostrom Seating, Inc. Prior thereto, he held
various positions with Bethlehem Steel Corporation.
Timothy A. Masek.............. Executive Vice President--Sales and Marketing. He served as
Vice President--Corporate Development from December 1995 to
January 2000 and President of Bostrom Seating, Inc. from
June 1996 to January 2000. Prior thereto, he performed
marketing and corporate functions for the Company.
John D. McClain............... President of Brillion Iron Works, Inc.
Donald C. Mueller............. Vice President and Treasurer. Prior to July 1998, he held
various financial positions with Fisher Scientific
International.
R. Philip Silver.............. Director. In addition, he is currently Co-Chief Executive
Officer of Silgan Holdings, Inc., and has been either
Chairman of the Board or President and a Director of Silgan
Holdings, Inc. since 1988.
Francis A. Stroble............ Director. From 1982 to 1994, he was the Senior Vice
President and Chief Financial Officer of Monsanto Company.
He is also a Director of Mercantile Bancorporation, Inc.
Camillo M. Santomero III...... Director. He has been a private investor and a Senior
Consultant to Chase Capital Partners (formerly Chemical
Venture Partners) since January 1992. In addition, from
October 1988 to January 1992, he was a General Partner of
Chase Capital Partners.
Allen L. Sunderland........... President of Fabco Automotive Corporation since
December 1999. He joined Fabco Automotive Corporation in
1995 as Vice President of Sales and Engineering.
Kenneth M. Tallering.......... Vice President, General Counsel and Secretary. Prior to
November 1995, he was an attorney with the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP.
John C. Wilkinson............. President and Chief Operating Officer of Imperial Group,
L.P. Prior to November 1997, he was General Manager of
Imperial Group, L.P.
Brent Williams................ Controller. He has served in various financial capacities at
TCI and Gunite Corporation for the past five years.
</TABLE>
I-4
<PAGE>
COMMITTEES OF THE COMPANY BOARD; MEETINGS
The Company has a Compensation Committee, an Audit Committee and an
Executive Committee.
The Compensation Committee, comprised of Messrs. Begel and Santomero,
reviews and makes recommendations to the Board of Directors regarding salaries,
compensation and benefits of executive officers and key employees of the
Company, and grants options to purchase shares of Common Stock.
The Audit Committee, which is comprised of Messrs. Silver and Stroble,
reviews the internal and external financial reporting of the Company, reviews
the scope of the independent audit and considers comments by the auditors
regarding internal controls and accounting procedures, and management's response
to these comments.
The Executive Committee, which is comprised of Messrs. Begel and Weller,
exercises the powers of the Board of Directors during intervals between Board
meetings and acts as an advisory body to the Board by reviewing various matters
prior to their submission to the Board.
During 1999, the Board of Directors met four times. Each director attended
75% or more of the meetings. The Compensation Committee held one meeting in
1999, which was attended by both of the committee members. The Audit Committee
held two meetings in 1999, each of which were attended by both of the committee
members. The Executive Committee held no meetings during 1999. The Board of
Directors does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
The directors of the Company receive a retainer of $20,000 per annum in
addition to an attendance fee of $500 for each committee meeting attended, and
reasonable expenses in connection with each Board or committee meeting attended.
Board members who are also employees of the Company do not receive directors'
fees. In addition, options to purchase 5,000 shares of Common Stock are granted
to each new non-employee director upon such director's initial election and
qualification for the Board. On the date of each annual meeting of shareholders
subsequent to a director's initial election and qualification for the Board,
each continuing non-employee director will be granted additional options to
purchase 3,000 shares of Common Stock.
I-5
<PAGE>
SECURITY OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information, based on reports filed by such
persons with the Commission, with respect to ownership of the shares of Common
Stock held by the directors and executive officers of the Company, and with
respect to ownership by persons believed by the Company to be the beneficial
owners of more than 5% of its outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF OUTSTANDING
NAME COMMON STOCK COMMON STOCK
- - ---- ------------------- ----------------------
<S> <C> <C>
Dimensional Fund Advisors Inc. (1)...................... 632,200 6.1%
Thomas M. Begel (2)..................................... 404,402 3.9%
James D. Cirar (3)...................................... 135,398 1.3%
Fred D. Culbreath....................................... 106,756 *
Joseph A. Hicks......................................... 49,984 *
Robert L. Jackson (4)................................... 15,105 *
Timothy A. Masek (5).................................... 43,428 *
John D. McClain......................................... 0 --
Donald C. Mueller (6)................................... 7,142 *
Camillo M. Santomero III (7)............................ 173,000 1.7%
R. Philip Silver (8).................................... 20,000 *
Francis A. Stroble (8).................................. 22,000 *
Kenneth M. Tallering (9)................................ 62,096 *
Andrew M. Weller (10)................................... 151,933 1.5%
John C. Wilkinson (11).................................. 30,000 *
Brent Williams (12)..................................... 7,500 *
Directors and Executive Officers as a group (15
persons) (13)......................................... 1,228,744 11.9%
</TABLE>
- - ------------------------
* Less than 1%.
(1) The number of shares beneficially held by Dimensional Fund Advisors Inc. is
based upon the Schedule 13G filed by Dimensional Fund Advisors Inc. on
February 12, 1999. The address of Dimensional Fund Advisors Inc. is 12999
Ocean Avenue, Santa Monica, CA 90401.
(2) Includes 50,000 shares of common stock subject to currently exercisable
options, 3,390 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(3) Includes 100,000 shares of common stock subject to currently exercisable
options and 13,398 shares of common stock held in a self-directed IRA.
(4) Includes 13,333 shares of common stock subject to currently exercisable
options and 1,772 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(5) Includes 18,800 shares of common stock subject to currently exercisable
options, 2,228 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(6) Includes 6,667 shares of common stock subject to currently exercisable
options and 475 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(7) Mr. Santomero is a private investor and Senior Consultant to Chase Capital
Partners (formerly Chemical Venture Partners), which beneficially owns
shares of common stock, but Mr. Santomero disclaims beneficial ownership of
such shares. Mr. Santomero, however, has an interest in a pool of
securities, including shares of common stock of the Company, acquired by
Chemical Equity Associates
I-6
<PAGE>
at the time he was a General Partner of Chemical Venture Partners (now Chase
Capital Partners). Mr. Santomero holds options to purchase 23,000 shares of
common stock, of which 20,000 are currently exercisable.
(8) Messrs. Silver and Stroble each hold options to purchase 23,000 shares of
common stock, of which 20,000 are currently exercisable.
(9) Includes 37,500 shares of common stock subject to currently exercisable
options, 3,796 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(10) Includes 105,000 shares of common stock subject to currently exercisable
options, 3,433 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(11) Includes 30,000 shares of restricted common stock.
(12) Includes 7,500 shares of common stock subject to currently exercisable
options.
(13) Includes 398,800 shares of common stock subject to currently exercisable
options, 15,694 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999 and 128,000 shares of restricted common stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act and regulations of the Commission thereunder
require the Company's officers and directors and persons who own more than ten
percent of the Company's Common Stock, as well as certain affiliates of such
persons, to file initial reports of ownership and changes in ownership with the
Commission. Officers, directors and persons owning more than ten percent of the
Company's Common Stock are additionally required to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it and written representations that no other
reports were required for those persons, the Company believes that all filing
requirements applicable to its officers, directors and owners of more than ten
percent of the Company's Common Stock have been made as required with respect to
fiscal year 1999.
I-7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for
services in all capacities to the Company for 1999, 1998 and 1997 of (i) the
Chief Executive Officer of the Company and (ii) the Company's four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as executive officers as of December 31, 1999 (the "Named Officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- ------------------------
FISCAL OTHER ANNUAL RESTRICTED OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) STOCK($)(3) SARS(#)(4) COMPENSATION(5)
- - --------------------------- -------- -------- ---------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Begel......... 1999 $750,000 $1,250,000 $113,112 $473,844 -- $241,964
Chairman of the Board and 1998 350,000 750,000 -- -- -- 221,004
Chief Executive Officer 1997 300,000 350,000 -- -- 25,000 222,066
Thomas W. Cook.......... 1999 $350,000 $ 470,702 -- -- -- $ 8,621
Former Senior Vice 1998 300,000 485,608 -- -- -- 8,647
President and President 1997 275,016 457,900 -- -- 25,000 8,092
and Chief Executive
Officer of Truck
Components Inc.
Donald C. Mueller....... 1999 $160,000 $ 220,000 -- -- 10,000 $ 17,135
Vice President and Chief 1998 70,000 70,000 -- -- 20,000 2,950
Financial Officer
Kenneth M. Tallering.... 1999 $200,000 $ 750,000 -- $313,219 -- $ 16,272
Vice President, General 1998 150,000 200,000 -- -- -- 15,861
Counsel and Secretary 1997 125,000 75,000 -- -- 10,000 11,386
Andrew M. Weller........ 1999 $500,000 $1,000,000 -- $473,844 -- $ 87,257
President, Chief 1998 300,000 500,000 -- -- -- 74,032
Operating Officer and 1997 260,000 350,000 -- -- 25,000 58,211
Director
</TABLE>
- - ------------------------
(1) In 1999, includes bonus of $500,000 to Messrs. Begel, Weller and Tallering
and $50,000 to Mr. Mueller following consummation of the sale of the
Company's freight car operations and includes bonus of $20,000 to Mr.
Mueller following relocation of his residence. For Messrs. Begel and Cook
includes a portion of 1998 bonus voluntarily deferred by them under the
Company's Deferred Compensation Plan and for Messrs. Cook and McClain
includes a portion of 1997 bonus voluntarily deferred by them under the
Company's Deferred Compensation Plan. The Deferred Compensation Plan was
terminated in 1999.
(2) For the reimbursement of travel, club dues and other expenses to Mr. Begel.
The value of the perquisites received by Mr. Begel in 1997 and 1998 and by
the other Named Officers in each year was below the threshold requiring
disclosure thereof.
(3) On February 1, 1999, Messrs. Begel and Weller were issued 29,500 shares of
restricted common stock and Mr. Tallering was issued 19,500 shares of
restricted common stock. All such restricted stock vests
I-8
<PAGE>
on the third anniversary of the date of grant, or earlier in certain
circumstances such as a change in control. The value of such restricted
stock for Messrs. Begel, Weller and Tallering was $473,844, $473,844 and
$313,219, respectively, as of February 1, 1999 and $532,844, $532,844 and
$352,219, respectively, as of December 31, 1999.
(4) The options granted to Messrs. Begel, Cook, Tallering and Weller in 1997 are
vested. One-third of the options granted to Mr. Mueller in 1998 are vested.
(5) 1999 includes the following amounts: for Mr. Begel, $235,964 for life
insurance and supplemental pension premium and $6,000 Company contribution
to the Company's 401(k) plan; for Mr. Cook, $621 for life insurance premium
and $8,000 Company profit sharing contribution; for Mr. Mueller, $11,135 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; for Mr. Tallering, $10,272 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; and for Mr. Weller, $81,257 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan. 1998 includes the following
amounts: for Mr. Begel, $215,004 for life insurance and supplemental pension
premium and $6,000 Company contribution to the Company's 401(k) plan; for
Mr. Cook, $647 for life insurance premium and $8,000 Company profit sharing
contribution; for Mr. Mueller, $150 for life insurance and $2,800 Company
contribution to the Company's 401(k) Plan; for Mr. Tallering, $9,861 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; and for Mr. Weller, $68,032 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan. 1997 includes the following
amounts: for Mr. Begel, $216,066 for life insurance and supplemental pension
premium and $6,000 Company contribution to the Company's 401(k) plan; for
Mr. Cook, $592 for life insurance premium and $7,500 Company profit sharing
contribution; for Mr. Tallering, $5,386 for life insurance and supplemental
pension premium and $6,000 Company contribution to the Company's 401(k)
plan; and for Mr. Weller, $52,211 for life insurance and supplemental
pension premium and $6,000 Company contribution to the Company's 401(k)
plan. Each executive's right to receive their respective supplemental
pensions upon termination of employment are generally subject to a
three-year cliff vesting requirement (other than in the event of termination
of employment due to a change in control). In the event any such person is
not entitled to receive his supplemental pension, the value of such pension
funds would revert to the Company.
OPTION GRANTS
During the 1999 fiscal year, options were not granted to the Named Officers,
except that Mr. Mueller was granted 10,000 options with an exercise price of
$17.50, which options would have a potential realizable value of $110,057 based
on a 5% appreciation during the option term and $278,905 based on a 10%
appreciation during the option term.
OPTION EXERCISES
The table below sets forth information with respect to the value of options
held by the Named Officers as of December 31, 1999.
I-9
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND OPTION VALUE AS OF DECEMBER 31,
1999
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Begel................ -- -- 50,000 -- $ 362,550 --
Thomas W. Cook................. -- -- 100,000 -- 1,165,625 --
Donald C. Mueller.............. -- -- 6,667 23,333 30,418 $66,457
Kenneth M. Tallering........... -- -- 37,500 -- 382,964 --
Andrew M. Weller............... -- -- 105,000 -- 454,363 --
</TABLE>
PENSION PLANS
The Company, maintains a tax-qualified defined benefit pension plan in which
Messrs. Begel, Mueller, Tallering and Weller are eligible to participate.
Benefits under the plan are based primarily upon the participant's average
monthly earnings and his years of continuous service. Benefits under the plan
are not subject to reduction for social security benefits but are reduced by
certain other amounts received under certain public pension programs, and
certain disability and severance payments. The following table sets forth the
benefits payable under the plan at age 65 on a straight line annuity basis for
participants with the indicated levels of compensation and service.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF CONTINUOUS SERVICE
---------------------------------------------------------------
AVERAGE EARNINGS 15 20 25 30 35 40
- - ---------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 75,000..................... $15,390 $20,520 $25,650 $30,780 $35,910 $41,816
100,000..................... 21,296 28,395 35,494 42,592 49,691 57,566
125,000..................... 27,202 36,270 45,337 54,405 63,472 73,316
150,000..................... 33,109 44,145 55,181 66,217 77,254 89,066
200,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
250,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
300,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
</TABLE>
The compensation and years of service under the plan for Messrs. Begel,
Mueller, Tallering and Weller are as follows.
<TABLE>
<CAPTION>
HIGHEST FIVE-YEAR
AVERAGE ANNUAL
COMPENSATION YEARS OF SERVICE
----------------- ----------------
<S> <C> <C>
Thomas M. Begel................................. $720,000 6.25
Donald C. Mueller............................... 185,000 1.50
Kenneth M. Tallering............................ 345,000 4.16
Andrew M. Weller................................ 479,400 5.33
</TABLE>
Mr. Cook was eligible to participate in a tax-qualified defined benefit plan
formerly maintained by a subsidiary of Truck Components Inc. ("TCI") (the
"Pension Plan"). The Pension Plan provided a pension benefit at normal
retirement age of 65, based on average monthly pay through December 31, 1991, or
if service is less than five years, the average monthly earnings of the years
worked up to December 31, 1991, and credited service for the years and months
employed by TCI and its subsidiaries up to August 31, 1995. The salary component
for persons hired subsequent to December 31, 1991, was the participant's initial
monthly salary at employment date. At age 65, based on Mr. Cook's covered
compensation and years of service of $150,000 and 4.6 years, respectively, he
would have been entitled to receive an annual pension of
I-10
<PAGE>
$9,080 under the Pension Plan. The Pension Plan was terminated during 1998 and
Mr. Cook rolled his allocated pension proceeds into an individual retirement
account. Mr. Cook also participates in the Gunite Corporation Salaried Employees
Profit Sharing Plan pursuant to which Gunite Corporation, a subsidiary of the
Company, contributes 5% of Mr. Cook's gross earnings up to a maximum
contribution of $8,000.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company is a party to substantially identical employment contracts with
Messrs. Begel, Mueller, Tallering and Weller which became effective on July 1,
1999 and continue for a rolling three-year period (a rolling two-year period for
Mr. Mueller) unless terminated as provided in the agreement. Pursuant to their
respective agreements, each will receive annual base salaries, plus bonuses as
determined by the Board of Directors. Each of these agreements contains
customary employment terms and provides that upon termination of employment by
the Company other than for "Cause" or by the employee for "Good Reason" (each as
defined in the agreements) during the term, the Company will pay a severance
payment to the employee, in addition to other benefits, equal to three times
(two times for Mr. Mueller) the sum of (i) the employee's base salary as of his
date of termination and (ii) the greatest of (w) the employee's guaranteed
bonus, if any, for the year during which the termination occurs, (x) the
employee's target bonus, if any, for the year during which the termination
occurs, (y) the employee's bonus received with respect to the year immediately
preceding the date of termination and (z) the employee's average bonus received
during the three years immediately preceding the date of termination, plus
certain additional amounts.
In connection with the Company's acquisition of TCI in August 1995, the
Company assumed the existing employment agreement between TCI and Mr. Cook. Such
agreement was terminated as of January 11, 2000 upon Mr. Cook's retirement.
Pursuant to the termination, Mr. Cook will receive one year's salary, plus a
bonus equal to Mr. Cook's average bonus for 1998 and 1999.
The Company is a party to employment contracts with certain other officers
and key employees generally with two or three year terms.
COMPENSATION COMMITTEE REPORT
Under the supervision of the Compensation Committee of the Board of
Directors (the "Committee"), the Company has attempted to develop and implement
compensation policies, plans and programs which seek to enhance the
profitability of the Company and to maximize shareholder value by closely
aligning the financial interests of the Company's executive officers with those
of its shareholders. The Committee is currently comprised of Messrs. Begel and
Santomero.
The Company's general compensation philosophy, which is determined by the
Committee, is to offer compensation so as to enable the Company to attract and
retain talented and experienced executive officers who are able to assist the
Company in accomplishing its strategic and performance goals and to allow such
executive officers to participate in the increase in value of the Company upon
attaining such goals. Such compensation consists of salary, performance-based
bonus and stock options/restricted stock. In determining the salary, bonus and
stock option/restricted stock awards for the Company's executive officers, the
Committee takes into account the overall performance of the Company as well as
its subjective determination of the contribution of each executive officer to
that performance. The Committee does not limit its evaluation of Company
performance to any particular performance measure, nor does it apply any
specific formula in relating Company performance to salary, bonus or stock
option/restricted stock award levels.
Four of the five Named Officers are parties to employment agreements with
the Company, which are described herein in the section entitled "Employment and
Severance Agreements." The Committee believes that the compensation offered
pursuant to such agreements is consistent with the Company's compensation
philosophy. In 1999, Mr. Begel's salary was $750,000 and, given the Company's
significant
I-11
<PAGE>
improvement in results of operations and financial condition during 1999,
received a $750,000 bonus for 1999. He also received a bonus of $500,000
following completion of the successful sale of the Company's freight car
operations. Mr. Begel's economic interests are further aligned with the
shareholders of the Company due to his significant ownership interest in the
Company (see "Principal Shareholders and Security Ownership of Management").
The Committee has not developed a formal policy on the rules regarding
deductability of executive compensation because the Company's compensation of
its executive officers is considerably less than the applicable threshholds, but
rather will make such determinations as appropriate.
I-12
<PAGE>
SCHEDULE II
[Merrill Lynch Letterhead]
January 28, 2000
Special Committee of the Board of Directors
Transportation Technologies Industries, Inc.
990 North Michigan Avenue
Suite 1000
Chicago, IL 60611
Members of the Special Committee:
Transportation Technologies Industries, Inc. (the "Company"), and
Transportation Acquisition I Corp. (the "Acquiror"), propose to enter into the
Agreement and Plan of Merger dated as of January 28, 2000 (the "Agreement")
pursuant to which (i) the Acquiror would commence a tender offer and the Company
would commence a tender offer (collectively, the "Tender Offer") for all
outstanding shares of the Company's common stock, par value $0.01 per share (the
"Company Shares") for $21.50 per share, net to the seller in cash (the
"Consideration"), and (ii) Acquiror would be merged with the Company in a merger
(the "Merger"), at which time each Company Share, other than Company Shares held
in treasury, held by the Acquiror or by a Participant (as defined in the
Agreement), would be converted into the right to receive the Consideration. The
Tender Offer and the Merger, taken together, are referred to as the
"Transaction".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares in the Transaction pursuant to the
Agreement is fair from a financial point of view to such holders, other than the
Acquiror or any Participant.
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 (which includes Participants) concerning the matters described in
clauses 1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them
with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations between members
of the special committee of the board of directors of the Company (the
"Special Committee") and its legal advisors on the one hand, and the
Acquiror and its financial and legal advisors, on the other hand; and
(8) Reviewed a draft dated January 28, 2000 of the Agreement.
II-1
<PAGE>
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. 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 prepared and reflect the best currently
available estimates and judgment of members of management of the Company (which
includes Participants) as to the expected future financial performance of the
Company. We have also assumed that the final form of the Agreement will be
substantially similar to the draft reviewed by us dated January 28, 2000.
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 Special Committee in connection
with the Transaction and will receive a fee from the Company for our services,
which is contingent upon the consummation of the Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. In the ordinary course of our business, we may actively trade the
Company Shares and other securities of the Company for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Special Committee. This
opinion relates to the fairness, from a financial point of view, of the
Consideration. This opinion does not constitute an opinion, nor do we assume any
responsibility, with respect to (i) the ability of the Acquiror to obtain
financing, or (ii) the solvency or prudence of the capital structure of the
Company or the Acquiror following the consummation of the Tender Offer or the
Merger. This opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any shareholder as to whether such shareholder should tender
any Company Shares pursuant to the Tender Offer, vote in favor of the Merger, or
take any action with respect to the Transaction.
On the basis of and 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
Company Shares in the Transaction pursuant to the Agreement is fair from a
financial point of view to the holders of such shares, other than the Acquiror
or any Participant.
<TABLE>
<S> <C>
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
/s/ Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
</TABLE>
II-2
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AT $21.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 3, 2000
OF
TRANSPORTATION ACQUISITION I CORP.
AND
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
The Letter of Transmittal, certificates for Shares (as defined below) and
any other required documents should be sent or delivered by each stockholder of
the Company or such stockholder's broker, dealer, commercial bank or other
nominee to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY MAIL OR HAND: BY FACSIMILE TRANSMISSION:
Corporate Trust--Reorganization Department (for Eligible Institutions only)
1525 W.W.T. Harris Boulevard, 3C3 (704-590-7628)
Charlotte, North Carolina 28288-1153 CONFIRM BY TELEPHONE:
(704-590-7408)
<S> <C>
BY MAIL OR HAND: BY REGISTERED, CERTIFIED OR OVERNIGHT DELIVERY:
Corporate Trust--Reorganization Department Corporate Trust--Reorganization Department
1525 W.W.T. Harris Boulevard, 3C3 1525 W.W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THE INSTRUCTIONS
CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of
Transportation Technologies Industries, Inc. (formerly known as Johnstown
America Industries, Inc.) either if certificates are to be forwarded herewith
or, unless an Agent's Message (as defined in the section captioned "THE
OFFER--Procedures for Tendering Shares" of the Offer to Purchase) is utilized,
if delivery is to be made by book-entry transfer to an account maintained by the
Depositary at the Book-Entry Transfer Facility (as defined in and pursuant to
the procedures set forth in the section captioned "THE OFFER--Procedures for
Tendering Shares" of the Offer to Purchase). Stockholders who deliver Shares by
book-entry transfer are referred to herein as "Book-Entry Stockholders" and
other stockholders who deliver Shares are referred to herein as "Certificate
Stockholders."
<PAGE>
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in the section captioned "THE OFFER--Procedures for Tendering Shares" of
the Offer to Purchase) with respect to, their Shares and all other documents
required hereby to the Depositary prior to the Expiration Date (as defined in
the section captioned "THE OFFER--Terms of The Offer" of the Offer to Purchase)
must tender their Shares pursuant to the guaranteed delivery procedures set
forth in the section captioned "THE OFFER--Procedures for Tendering Shares" of
the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivered by Book-Entry Transfer, check box: / /
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
DESCRIPTION OF SHARES TENDERED
<TABLE>
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK,
EXACTLY AS NAME(S)
APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
TOTAL NUMBER OF
SHARES
REPRESENTED BY
SHARE CERTIFICATE SHARE NUMBER OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
TOTAL SHARES
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares represented
by each Share certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
SIGNATURES MUST BE PROVIDED AT THE END OF THIS LETTER OF TRANSMITTAL. PLEASE
READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to Transportation Acquisition I Corp., a
Delaware corporation ("Acquisition"), and Transportation Technologies
Industries, Inc., a Delaware corporation (the "Company" and, together with
Acquisition, the "Purchasers"), all of the above-referenced shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company, together
with the associated preferred share purchase rights (the "Rights" and, together
with the Common Stock, the "Shares"), at a purchase price of $21.50 per Share,
net to the seller in cash, without interest thereon (such amount, or any greater
amount per Share paid pursuant to the Offer, being referred to herein as the
"Offer Price"), upon terms and subject to the conditions set forth in the Offer
to Purchase dated February 3, 2000 and in this Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer"). The
Offer is a joint tender offer by Acquisition and by the Company to purchase at
the Offer Price all Shares tendered pursuant to the Offer, with Acquisition
agreeing to pay for and purchase no fewer than the first 2,750,000 Shares
tendered pursuant to the Offer and the Company agreeing to pay for and purchase
all Shares tendered pursuant to the Offer in excess of the Shares paid for and
purchased by Acquisition. The undersigned understands that the Purchasers
reserve the right to transfer or assign, in whole at any time, or in part from
time to time, to one or more of their affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve the Purchasers of their obligations under the
Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
The Company has distributed one Right for each outstanding Share pursuant to
the Rights Agreement (as defined in the Offer to Purchase). The Rights are
currently evidenced by and trade with certificates evidencing the Common Stock.
Any tender of Shares will include a tender of the associated Rights. The Company
has taken such action so as to make the Rights Agreement inapplicable to the
Offer, the Merger, the Merger Agreement and the other transactions contemplated
thereby.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 28, 2000 (the "Merger Agreement"), between the Company and
Acquisition.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchasers all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect thereof on or after the date
of the Merger Agreement (collectively, "Distributions")) and irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any and all
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
certificates for such Shares (and any and all Distributions), or transfer
ownership of such Shares (and any and all Distributions) on the account books
maintained by the Book-Entry Transfer Facility, together, in any such case, with
all accompanying evidences of transfer and authenticity, to or upon the order of
the Purchasers, (ii) present such Shares (and any and all Distributions) for
transfer on the books of the Company, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
and all Distributions), all in accordance with the terms of the Offer.
<PAGE>
By executing this Letter of Transmittal, the undersigned irrevocably
appoints Thomas M. Begel, Kenneth M. Tallering and Andrew M. Weller, in their
respective capacities as officers of Acquisition, as the attorneys-in-fact and
proxies of the undersigned, each with full power of substitution and
resubstitution, to vote at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof or otherwise in such
manner as each such attorney-in-fact and proxy or his substitute shall in his
sole discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney-in-fact and proxy or his substitute
shall in his sole discretion deem proper with respect to, and to otherwise act
as each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, all of the Shares (and any and all
Distributions) tendered hereby and accepted for payment by the Purchasers. This
appointment will be effective if, when, and only to the extent that, the
Purchasers accept such Shares for payment pursuant to the Offer. This power of
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the Offer.
Such acceptance for payment shall, without further action, revoke any prior
powers of attorney and proxies granted by the undersigned at any time with
respect to such Shares (and any and all Distributions), and no subsequent powers
of attorney, proxies, consents or revocations may be given by the undersigned
with respect thereto (and, if given, will not be deemed effective). The
Purchasers reserve the right to require that, in order for Shares (or other
Distributions) to be deemed validly tendered, immediately upon the Purchasers'
acceptance for payment of such Shares, the Purchasers must be able to exercise
full voting, consent and other rights with respect to such Shares (and any and
all Distributions), including voting at any meeting of the Company's
stockholders, provided that such requirement shall not apply to Shares purchased
by the Company with respect to any record date for the determination of
stockholders entitled to vote which is set after the date of purchase of Shares
by the Company.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that the undersigned owns the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the
tendered Shares complies with Rule 14e-4 under the Exchange Act, and that when
the same are accepted for payment by the Purchasers, the Purchasers will acquire
good, marketable and unencumbered title thereto and to all Distributions, free
and clear of all liens, restrictions, charges and encumbrances and the same will
not be subject to any adverse claims. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Depositary or the
Purchasers to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions. In addition, the
undersigned shall remit and transfer promptly to the Depositary for the account
of the Purchasers all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer of appropriate assurance thereof, the Purchasers shall
be entitled to all rights and privileges as owner of each such Distribution and
may withhold the entire purchase price of the Shares tendered hereby or deduct
from such purchase price, the amount of value of such Distribution as determined
by the Purchasers in their sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
<PAGE>
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in the section of the Offer to Purchase
captioned "THE OFFER--Procedures for Tendering Shares" and the instructions
hereto will constitute a binding agreement between the undersigned and the
Purchasers upon the terms and subject to the conditions of the Offer (and if the
Offer is extended or amended, the terms or conditions of any such extension or
amendment). Without limiting the foregoing, if the price to be paid in the Offer
is amended in accordance with the Merger Agreement, the price to be paid to the
undersigned will be the amended price notwithstanding the fact that a different
price is stated in this Letter of Transmittal. The undersigned recognizes that
under certain circumstances set forth in the Offer to Purchase, the Purchasers
may not be required to accept for payment any of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return any
certificates for Shares not tendered or accepted for payment in the name(s) of
the registered holder(s) appearing above under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of all Shares purchased and/or
return any certificates for Shares not tendered or not accepted for payment (and
any accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing above under "Description of Shares Tendered." In the event
that the boxes entitled "Special Payment Instructions" and "Special Delivery
Instructions" are both completed, please issue the check for the purchase price
of all Shares purchased and/or return any certificates evidencing Shares not
tendered or not accepted for payment (and any accompanying documents, as
appropriate) in the name(s) of, and deliver such check and/or return any such
certificates (and any accompanying documents, as appropriate) to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered herewith by book-entry
transfer that are not accepted for payment by crediting the account at the
Book-Entry Transfer Facility designated above. The undersigned recognizes that
the Purchasers have no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder
thereof if the Purchasers do not accept for payment any of the Shares so
tendered.
<PAGE>
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
---------------------
- - -------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
accepted for payment is to be issued in the name of someone other than the
undersigned, if certificates for Shares not tendered or not accepted for
payment are to be issued in the name of someone other than the undersigned
or if Shares tendered hereby and delivered by book-entry transfer that are
not accepted for payment are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue check and/or Share certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
Credit Shares delivered by book-entry transfer and not purchased to the
Book-Entry Transfer Facility account.
____________________________________________________________________________
(ACCOUNT NUMBER)
- - ------------------------------------------------------
- - ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment is to be sent to someone other than the undersigned or
to the undersigned at an address other than that shown under "Description of
Shares Tendered."
Mail check and/or Share certificates to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
- - -----------------------------------------------------
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
________________________________________
________________________________________________________________________________
(Signature(s) of Stockholder(s))
Dated: _________________________________________________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s) ________________________________________________________________________
(Please Print)
Name of Firm ___________________________________________________________________
Capacity (full title) __________________________________________________________
(see Instruction 5)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Taxpayer Identification or Social Security Number ______________________________
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ___________________________________________________________
Name(s) ________________________________________________________________________
(Please Print)
Title __________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), unless
(i) this Letter of Transmittal is signed by the registered holder(s) of Shares
(which term, for the purposes of this document, shall include any participant in
a Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Shares) tendered hereby and such holder(s) has (have) not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on this Letter of Transmittal or
(ii) such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if certificates evidencing Shares ("Share Certificates") are to be
forwarded herewith or if a tender of Shares is to be made pursuant to the
procedures for delivery by book-entry transfer set forth in the section
captioned "THE OFFER--Procedures for Tendering Shares" of the Offer to Purchase.
Share Certificates evidencing all physically tendered Shares, or confirmation
("Book-Entry Confirmation") of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares delivered by book-entry as
well as a properly completed and duly executed Letter of Transmittal, must be
received by the Depositary, at one of the addresses set forth herein prior to
the Expiration Date (as defined in the Offer to Purchase). If Share Certificates
are forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who cannot
deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in the section entitled "THE
OFFER--Procedures For Tendering Shares" of the Offer to Purchase. Pursuant to
such procedure, (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchasers, must be received
by the Depositary (as provided in (iii) below) prior to the Expiration Date and
(iii) the Share Certificates evidencing all physically tendered Shares (or
Book-Entry Confirmation with respect to such Shares), as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three Nasdaq
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided in the section captioned "THE OFFER--Procedures for Tendering
Shares" of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE
SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. All
tendering stockholders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive any notice of the acceptance of their Shares
for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares tendered should be listed on a separate signed schedule and attached
hereto.
<PAGE>
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by the Share
Certificate submitted are to be tendered, fill in the number of Shares which are
to be tendered in the box entitled "Number of Shares Tendered." In such case,
new Share Certificate(s) evidencing the remainder of the Shares that were
evidenced by the old Share Certificate(s) will be sent to the registered holder,
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by the
Share Certificates delivered to the Depositary will be deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration, enlargement
or any change whatsoever. If any of the Shares tendered hereby are held of
record by two or more persons, all such persons must sign this Letter of
Transmittal.
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by Share Certificates listed and transmitted hereby, no
endorsements of Share Certificates or separate stock powers are required unless
payment is to be made to or Share Certificates evidencing Shares not tendered or
purchased are to be issued in the name of a person other than the registered
holder(s), in which case the Share Certificate(s) evidencing the Shares tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder or holders appear on the Share Certificate(s). Signatures
on such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificates or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchasers of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchasers will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Shares to them or their order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if Share
Certificates evidencing Shares not tendered or purchased are to be registered in
the name of, any person other than the registered holder(s), or if Share
Certificates evidencing tendered shares are registered in the name of the person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s) or such other
person) payable on account of the transfer to such person will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent and/or any Share Certificates
are to be returned to someone other than the signer above, or to the signer
above but at an address other than that shown in the box entitled "Description
of Shares Tendered" above, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering Shares by book-entry transfer may
request that Shares not purchased be credited to such account maintained at any
of the Book-Entry Transfer Facilities as such stockholder may designate under
"Special Delivery Instructions." If no such instructions are given, any such
Share not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to, or additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent at the telephone number and address set forth below.
Stockholders may also contact their broker, dealer, commercial bank or trust
company.
9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase and subject to the terms of the Merger Agreement, the Purchasers
reserve the right in their sole discretion to waive in whole or in part at any
time or from time to time any of the specified conditions of the Offer or any
defect or irregularity in tender with regard to any Shares tendered.
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or employer identification number, on
Substitute Form W-9, which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, whether he or she is subject to
backup withholding of federal income tax. If a tendering stockholder is subject
to backup withholding, he or she must cross out item (2) of the Certification
Box on Substitute Form W-9. Failure to provide the information on Substitute
Form W-9 may subject the tendering stockholder to 31% federal income tax
withholding on the payment of the purchase price. If the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied
For" is written in Part I, the Depositary will be required to withhold 31% of
all payments made for surrendered shares except that if the Depositary is
provided with a TIN within 60 days, the amount of such withholding will be
refunded to the tendering stockholder.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY
TRANSFER, TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER
REQUIRED DOCUMENTS OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE
EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder surrendering certificates must,
unless an exemption applies, provide the Depositary (as payer) with his correct
TIN on Substitute Form W-9 included in this Letter of Transmittal. If the
stockholder is an individual, his TIN is his social security number. If the
correct TIN is not provided, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service and payments of cash to the stockholder
(or other payee) may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. In
order for an exempt foreign stockholder to avoid backup withholding, that person
should complete, sign and submit a Form W-8, Certificate of Foreign Status,
signed under penalties of perjury, attesting to his exempt status. A Form W-8
can be obtained from the Depositary. Exempt stockholders, other than foreign
stockholders, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 and sign, date and return the Substitute Form W-9 to the
Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to payee. Backup withholding is not an additional tax. Rather,
the federal income tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder,
the stockholder is required to notify the Depositary of his correct TIN (or the
TIN of any other payee) by completing the Substitute Form W-9 included in this
Letter of Transmittal certifying (1) that the TIN provided on the Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and that
(2) the stockholder is not subject to backup withholding because (i) the
stockholder has not been notified by the Internal Revenue Service that the
stockholder is subject to backup withholding as a result of a failure to report
all interest and dividends or (ii) the Internal Revenue Service has notified the
stockholder that the stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record owner of
the Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he or she
should write "Applied For" in the space provided for the TIN in Part I, sign and
date the Substitute Form W-9 and sign and date the Certificate of Awaiting
Taxpayer Identification Number, which appears in a separate box below the
Substitute Form W-9. If "Applied For" is written in Part I, the Depositary will
be required to withhold 31% of all payments made for surrendered Shares except
that if the Depositary is provided with a TIN within 60 days, the amount of such
withholding will be refunded to the tendering stockholder.
<PAGE>
PAYER: FIRST UNION NATIONAL BANK
<TABLE>
<C> <S> <C>
- - ---------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE ------------------------------
FORM W-9 PROVIDE YOUR TIN IN Social Security Number
Department of the Treasury THE BOX AT RIGHT AND OR
Internal Revenue Service CERTIFY BY SIGNING -----------------------------
AND DATING BELOW Employer Identification Number
(If awaiting TIN write "Applied For")
------------------------------------------------------------------
PART II--For payees NOT subject to backup withholding, see the
enclosed Guidelines for Certification of Taxpayer Identification
Payer's Request for Taxpayer Number on Substitute Form W-9 and complete as instructed therein.
Identification Number (TIN) CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding because either (a) I am
exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I
am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on
your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in
the enclosed Guidelines.)
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATES REQUIRED TO
AVOID BACKUP WITHHOLDING
SIGNATURE
-------------------------------------------------------------------------------------------------------------- DATE
--------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31%
OF ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I
OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a Taxpayer Identification Number to the Depositary by
the time of payment, 31% of all reportable payments made to me thereafter will
be withheld, but that such amounts will be refunded to me if I provide a
certified Taxpayer Identification Number to the Depositary within sixty
(60) days.
<TABLE>
<S> <C>
- - --------------------------------------------- ---------------------------------------------
Signature Date
</TABLE>
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Managers:
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free: (800) 322-2885
THE DEALER MANAGERS FOR THE OFFER ARE:
<TABLE>
<S> <C>
[LOGO] bc
425 Lexington Avenue One First Union Center
New York, New York 10017 301 South College Street
Charlotte, North Carolina 28288
</TABLE>
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
TO
TRANSPORTATION ACQUISITION I CORP.,
AND
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Not to Be Used for Signature Guarantees)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $0.01 per share (the "Common
Stock"), together with the associated preferred share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares"), of Transportation
Technologies Industries, Inc., a Delaware corporation, are not immediately
available, if the procedure for book-entry transfer cannot be completed prior to
the Expiration Date (as defined in the Offer to Purchase), or if time will not
permit all required documents to reach the Depositary prior to the Expiration
Date. Such form may be delivered by hand, transmitted by facsimile transmission
or mailed to the Depositary. See the section captioned "THE OFFER--Procedures
for Tendering Shares" of the Offer to Purchase.
The Depositary of the Offer is:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
BY MAIL OR HAND: BY FACSIMILE TRANSMISSION:
Corporate Trust--Reorganization (for Eligible Institutions only)
Department (704-590-7628)
1525 W.W.T. Harris Boulevard, 3C3 CONFIRM BY TELEPHONE:
Charlotte, North Carolina 28288-1153 (704-590-7408)
<S> <C>
BY MAIL OR HAND: BY REGISTERED, CERTIFIED OR OVERNIGHT DELIVERY:
Corporate Trust--Reorganization Corporate Trust--Reorganization
Department Department
1525 W.W.T. Harris Boulevard, 3C3 1525 W.W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile number other
than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Transportation Acquisition I Corp., a
Delaware corporation, and Transportation Technologies Industries, Inc., a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated February 3, 2000 (the "Offer to Purchase") and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
number of Shares set forth below pursuant to the guaranteed delivery procedures
set forth in the section captioned "THE OFFER--Procedures for Tendering Shares"
of the Offer to Purchase.
- - -------------------------------------------
Number of Shares:___________________________________________________________
Share Certificate Numbers (if available)
____________________________________________________________________________
____________________________________________________________________________
Check box if Shares will be tendered by book-entry transfer: / /
Account number:_____________________________________________________________
Dated:______________________________________________________________________
- - -------------------------------------------
- - -------------------------------------------
Name(s) of Record Holder(s):
____________________________________________________________________________
____________________________________________________________________________
Please Type or Print
Address(es):________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Zip Code
Area Code and Telephone Number:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Signature(s)
Dated:______________________________________________________________________
- - ------------------------------------------
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), hereby
guarantees to deliver to the Depositary either the certificates representing the
Shares tendered hereby in proper form for transfer, or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company, in each case with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, within three Nasdaq trading days after the date of execution
hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for the Shares to the Depositary within the time period shown
herein. Failure to do so could result in a financial loss to such Eligible
Institution.
<TABLE>
<S> <C>
Name of Firm:
Address: Authorized Signature
Name:
Zip Code Please Type or Print
Area Code
and Telephone Number: Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT TO THE DEPOSITARY
TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AT
$21.50 NET PER SHARE
BY
TRANSPORTATION ACQUISITION I CORP.
AND BY
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
February 3, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by Transportation Acquisition I Corp., a Delaware
corporation ("Acquisition"), and Transportation Technologies Industries, Inc., a
Delaware corporation (the "Company" and, together with Acquisition, the
"Purchasers"), to act as Information Agent in connection with the Purchasers'
offer to purchase all of the outstanding shares of common stock, par value $0.01
per share (the "Common Stock"), of the Company, together with the associated
preferred share purchase rights (the "Rights" and, together with the Common
Stock, the "Shares"), at a purchase price of $21.50 per Share, net to the seller
in cash, without interest thereon (such amount, or any greater amount per Share
paid pursuant to the Offer, being referred to herein as the "Offer Price"), upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
February 3, 2000 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer") enclosed herewith. The Offer is a joint tender offer by
Acquisition and the Company to purchase at the Offer Price all Shares tendered
pursuant to the Offer, with Acquisition agreeing to pay for and purchase no
fewer than the first 2,750,000 Shares tendered pursuant to the Offer and the
Company agreeing to pay for and purchase all Shares tendered pursuant to the
Offer in excess of the Shares paid for and purchased by Acquisition. Please
furnish copies of the enclosed materials to those of your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which would result in Acquisition owning a
majority of the outstanding Shares on a fully-diluted basis after giving effect
to the repurchase of Shares by the Company in the Offer. The Offer is also
subject to other conditions set forth in the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated February 3, 2000;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to First Union National Bank, the Depositary for the Offer
(the "Depositary"), or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date (as defined in the Offer
to Purchase);
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with
regard to the Offer;
<PAGE>
5. A letter to stockholders of the Company from the Company, together
with a Solicitation/ Recommendation Statement on Schedule 14D-9 dated
February 3, 2000, which has been filed by the Company with the
Securities and Exchange Commission;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchasers will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if the Purchasers give oral or written notice to the
Depositary of the Purchasers' acceptance of such Shares for payment pursuant to
the Offer. Payment for Shares purchased pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in the section of the Offer to Purchase captioned "THE
OFFER--Procedures for Tendering Shares," (ii) a properly completed and duly
executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message (as defined in the Offer to Purchase)
in connection with a book-entry transfer and (iii) all other documents required
by the Letter of Transmittal.
The Purchasers will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent, the Depositary and the Dealer
Managers as described in the Offer to Purchase) for soliciting tenders of Shares
pursuant to the Offer. The Purchasers will, however, upon request, reimburse
brokers, dealers, commercial banks and trust companies for customary mailing and
handling costs incurred by them in forwarding the enclosed materials to their
customers.
The Purchasers will pay or cause to be paid all stock transfer taxes
applicable to their purchase of Shares pursuant to the Offer, subject to
Instruction 6 of the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in the section of the Offer to Purchase captioned "THE
OFFER--Procedures for Tendering Shares."
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the Dealer Managers at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
MacKenzie Partners
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU THE AGENT
OF THE PURCHASERS, THE INFORMATION AGENT, THE DEPOSITARY, THE DEALER MANAGERS OR
ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AT
$21.50 NET PER SHARE
BY
TRANSPORTATION ACQUISITION I CORP.
AND BY
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
February 3, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated February 3,
2000 and the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the "Offer") in connection with
the offer by Transportation Acquisition I Corp. ("Acquisition"), a newly formed
Delaware corporation, and Transportation Technologies Industries, Inc., a
Delaware corporation (the "Company" and, together with Acquisition, the
"Purchasers"), to purchase all of the outstanding shares of common stock, par
value $0.01 per share (the "Common Stock"), of the Company, together with the
associated preferred share purchase rights (the "Rights" and, together with the
Common Stock, the "Shares"), at a purchase price of $21.50 per Share, net to the
seller in cash, without interest thereon (such amount, or any greater amount per
Share paid pursuant to the Offer, being referred to herein as the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer.
The Offer is a joint tender offer by Acquisition and the Company to purchase at
the Offer Price all Shares tendered pursuant to the Offer, with Acquisition
agreeing to pay for and purchase no fewer than the first 2,750,000 Shares
tendered pursuant to the Offer and the Company agreeing to pay for and purchase
all Shares tendered pursuant to the Offer in excess of the Shares paid for and
purchased by Acquisition. We are the holder of record of Shares held for your
account. A tender of such Shares can be made only by us as the holder of record
and pursuant to your instructions. The enclosed Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The Offer Price is $21.50 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company, acting upon the unanimous
recommendation of the Special Committee (as defined in the Offer to
Purchase), has approved the Merger Agreement (as defined in the Offer
to Purchase) and the transactions contemplated thereby, including the
Offer and the Merger (each, as defined in the Offer to Purchase), has
determined that the Offer and the Merger are advisable, fair to, and
in the best interests of, the Company's stockholders (other than
Acquisition, the Continuing Stockholders (as defined in the Offer to
Purchase) and their respective affiliates) and recommends that
stockholders accept the Offer and tender their Shares pursuant to the
Offer.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, March 3, 2000, unless the Offer is
extended.
<PAGE>
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as
defined in the Offer to Purchase) that number of Shares which would
result in Acquisition owning a majority of the outstanding Shares on
a fully-diluted basis after giving effect to the repurchase of Shares
by the Company in the Offer. The Offer is also subject to other
conditions set forth in the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to the
Purchasers pursuant to the Offer will be paid by the Purchasers,
except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Except as disclosed in the Offer to Purchase, the Purchasers are not aware
of any state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Purchasers by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the opposite side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares will
be tendered unless otherwise specified on the opposite side of this letter. Your
instructions should be forwarded to us in sufficient time to permit us to submit
a tender on your behalf prior to the expiration of the Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated February 3, 2000 (the "Offer to Purchase") and the related
Letter of Transmittal in connection with the Offer by Transportation Acquisition
I Corp. ("Acquisition"), a Delaware corporation, and Transportation Technologies
Industries, Inc., a Delaware corporation (the "Company", and together with
Acquisition, the "Purchasers"), to purchase all of the outstanding shares of
common stock, par value $0.01 per share (the "Common Stock"), of the Company,
together with the associated preferred share purchase rights (the "Rights" and,
together with the Common Stock, the "Shares"), at a purchase price of $21.50 per
Share, net to the seller in cash, without interest thereon (such amount, or any
greater amount per Share paid pursuant to the Offer, being referred to herein as
the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer and the related Letter of Transmittal.
Number of Shares to be Tendered: ___ Shares*
Dated: _______________
----------------------------------
----------------------------------
Signature(s)
----------------------------------
Print Name(s)
----------------------------------
----------------------------------
Print Address(es)
----------------------------------
Area Code and Telephone Number(s)
----------------------------------
Tax Identification or Social
Security Number(s)
- - ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- - ---------------------------------------------------
<S> <C> <C>
GIVE THE SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- - ---------------------------------------------------
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a) The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee);
b) So-called trust The actual owner(1)
account that is not
a legal or valid
trust under State
law
- - ---------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- - ---------------------------------------------------
<S> <C> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable The organization
or educational
organization account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments.
</TABLE>
- - ---------------------------------------------
- - ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter business or
"doing business as" name. You may use either your SSN or EIN (if you have
one).
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDINGS
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign corporations.
- Payments to nonresident aliens subject to withholding under Section 1441.
Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: you may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding.
FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM. SIGN AND DATE THE FORM AND RETURN IT TO
THE PAYER. IF YOU ARE NOT A NON-RESIDENT OR FOREIGN ENTITY NOT SUBJECT TO BACKUP
WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE
OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file a tax return. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
Unless otherwise noted herein, all references to section numbers or
regulations are references to the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
<PAGE>
Exhibit 99(a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated February
3, 2000 and the related Letter of Transmittal, and is being made to all holders
of Shares. The Purchasers are not aware of any state where the making of the
Offer is prohibited by administrative or judicial action pursuant to any valid
state statute. If the Purchasers become aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, the Purchasers shall make a good faith effort to comply with such
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Purchasers cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) holders of Shares in such state.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
AT$21.50 NET PER SHARE
BY
TRANSPORTATION ACQUISITION I CORP.
AND TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
Transportation Acquisition I Corp., a Delaware corporation
("Acquisition"), and Transportation Technologies Industries, Inc. (formerly
known as Johnstown America Industries, Inc.), a Delaware corporation (the
"Company" and, together with Acquisition, the "Purchasers"), are jointly
offering to purchase all of the outstanding shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock"), together with the
associated preferred share purchase rights issued pursuant to a Rights Agreement
dated as of October 4, 1995, as amended, between the Company and BankBoston,
N.A., as Rights Agent (the "Rights" and, together with the Common Stock, the
"Shares"), at a price of $21.50 per Share, net to the seller in cash, without
interest (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated February 3, 2000 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer"). The Offer is a joint third party
tender offer by Acquisition and a self-tender offer by the Company to purchase
at the Offer Price all Shares tendered pursuant to the Offer, with Acquisition
agreeing to pay for and purchase no fewer than the first 2,750,000 Shares
tendered pursuant to the Offer and the Company agreeing to pay for and purchase
all Shares tendered pursuant to the Offer in excess of the Shares paid for and
purchased by Acquisition. Following the consummation of the Offer, the
Purchasers intend to effect the Merger (as defined below) as described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, MARCH 3, 2000, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which would result in Acquisition owning a majority of the
Shares outstanding on a fully diluted basis after giving effect to the
repurchase of Shares by the Company in the Offer, (ii) the Debt Tender Offer (as
defined in the Offer to Purchase) having been consummated and (iii) the receipt
by the Company and Acquisition of the proceeds of financing on terms
satisfactory to Acquisition sufficient to purchase the Shares pursuant to the
Offer, to pay the Per Share Amount (as defined below) in the Merger (as defined
below) and to pay all fees and expenses incurred by Acquisition and the Company
in connection with the Offer and the Merger.
The Offer is also subject to other terms and conditions set forth in
the Offer to Purchase. The Offer is being made pursuant to an Agreement and Plan
of Merger, dated as of January 28, 2000 (the "Merger Agreement"), between the
Company and Acquisition. The Merger Agreement provides, among other things, that
following the completion of the Offer and the satisfaction or waiver, if
permissible, of all conditions set forth in the Merger Agreement and in
accordance with the General Corporation Law of the State of Delaware,
Acquisition will be merged with and into the Company (the "Merger"), with the
Company as the surviving corporation. In the Merger, each outstanding Share
(other than (i) Shares held in the Company's treasury, (ii) Shares held by
Acquisition or by a Participant (as defined in the Merger Agreement) and (iii)
Dissenting Shares (as defined in the Merger Agreement) will be converted into
the right to receive the Offer Price or any higher price per Share paid in the
Offer, without interest thereon (the "Per Share Amount").
The Board of Directors of the Company, after receiving the unanimous
recommendation of a Special Committee of the Board comprised entirely of
independent directors, (i) has approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, (ii) has
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are advisable, fair to and in the best
interests of the Company's stockholders (other than Acquisition, the
Participants and their respective affiliates) and (iii) recommends that the
Company's stockholders accept the Offer and tender their Shares pursuant to the
Offer.
Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by the Purchasers pursuant to the Offer. Stockholders who hold their
Shares through a bank or a broker should check with such institution as to
whether it charges any service fees. The Purchasers will pay the expenses of
First Union National Bank, which is acting as depositary (in such capacity, the
"Depositary"), MacKenzie Partners, Inc., which is acting as the information
agent (in such capacity, the "Information Agent"), and CIBC World Markets Corp.
and First Union Securities, Inc., who are acting as dealer managers (in such
capacity, the "Dealer Managers") in connection with the Offer.
For purposes of the Offer, the Purchasers will be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered and not
withdrawn if, as and when the Purchasers give oral or written notice to the
Depositary of their acceptance for payment of such Shares. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchasers and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchasers, regardless of any delay in making such payment. In all cases,
payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares or a timely
confirmation of a book-entry transfer of such Shares into the Depositary?s
account at one of the Book-Entry Transfer Facilities (as defined in the Offer to
Purchase) pursuant to the procedures set forth in the Offer to Purchase, (ii)
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent' Message (as defined in the Offer to Purchase) and
(iii) any other documents required by the Letter of Transmittal.
The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, March 3, 2000, unless and until the Purchasers (in accordance
with the terms of the Merger Agreement) shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchasers, shall expire. Subject to the applicable rules and regulations of the
Securities and Exchange Commission and to applicable law, Acquisition expressly
reserves the right, in its sole discretion (subject to the terms and conditions
of the Merger Agreement), at any time and from time to time, to extend the
period of time during which the Offer is open, including the occurrence of any
of the events specified in the section "THE OFFER -- Certain Conditions to the
Offer" of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary; provided, however, that Acquisition may not extend
the Offer beyond April 30, 2000 without the consent of the Company. Any such
extension will be followed by public announcement thereof no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering stockholder to withdraw such stockholder' Shares. Without
limiting the manner in which the Purchasers may choose to make any public
announcement, the Purchasers will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a press
release to the Dow Jones News Service or otherwise as may be required by
applicable law.
Tenders of Shares made pursuant to the Offer are irrevocable except
that such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment pursuant to the Offer, may also be
withdrawn at any time after April 2, 2000 or at such later time as may apply if
the Offer is extended. For a withdrawal to be effective, a written, telegraphic
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth in the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If certificates evidencing such Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in the Offer to Purchase), unless such Shares have been tendered for the account
of an Eligible Institution. If Shares have been tendered pursuant to the
procedures for book-entry transfer as set forth in the section "THE OFFER --
Procedures for Tendering Shares" of the Offer to Purchase, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility' procedures. However,
withdrawn Shares may be re-tendered by again following one of the procedures
described in the section "THE OFFER--Procedures for Tendering Shares" of the
Offer to Purchase at any time prior to the Expiration Date. All questions as to
the form and validity (including time of receipt) of any notice of withdrawal
will be determined by Acquisition, in its sole discretion, whose determination
will be final and binding.
The information required to be disclosed by Rule 13e- 3(e)(1), Rule
13e-4(d)(1) and Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
The Offer to Purchase, the related Letter of Transmittal and other
relevant documents will be mailed to record holders of Shares whose names appear
on the Company' stockholder lists and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance or copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer documents may be
directed to the Information Agent or the Dealer Managers. No fees or commissions
will be paid to brokers, dealers or other persons (other than the Information
Agent and the Dealer Managers) for soliciting tenders of Shares pursuant to the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
THE DEALER MANAGERS FOR THE OFFER ARE:
[CIBC World Markets Logo] [First Union Securities Logo]
425 Lexington Avenue One First Union Center
New York, New York 10017 301 South College Street
Charlotte, North Carolina 28288
February 3, 2000
<PAGE>
Exhibit 99(a)(9)
TRANSPORTATION TECHNOLOGIES ANNOUNCES
COMMENCEMENT OF TENDER OFFERS
CHICAGO, ILLINOIS, February 3, 2000 - Transportation Technologies
Industries, Inc. (NASDAQ: TTII) announced today the commencement of a joint
tender offer by the Company and Transportation Acquisition I Corp., a company
formed by an investor group led by members of the Company's senior management,
including Thomas M. Begel, its Chairman and Chief Executive Officer, and Andrew
M. Weller, its President and Chief Operating Officer, to purchase for $21.50 per
share in cash all of the outstanding shares of Transportation Technologies'
common stock. The tender offer is being made pursuant to definitive tender offer
materials that will be distributed to the Company's stockholders and filed with
the Securities and Exchange Commission.
The tender offer is expected to remain open until March 3, 2000, unless
extended, and will be followed by a merger under which those shares not tendered
will be converted into the right to receive the same $21.50 per share in cash.
The closing of the tender offer is conditioned on the funding of the committed
financing, the tender of a sufficient number of shares to give Transportation
Acquisition I Corp. ownership of at least a majority of the fully diluted
outstanding shares of the Company after giving effect to the repurchase of
shares by the Company in the offer, the agreement of the holders of the
Company's outstanding 11-3/4% notes to either sell their notes to the Company or
consent to certain amendments to the indentures for such notes and other
conditions.
Concurrently with the joint tender offer for the Company's common
stock, the Company commenced offers to purchase and consent solicitations
with respect to both its 11-3/4% Senior Subordinated Notes due 2005 and its
11-3/4% Series C Senior Subordinated Notes due 2005. The closing of the note
tender offers are conditioned on the tender of at least a majority in
outstanding principal amount of each series of notes outstanding, the
execution by the trustees of each series of notes outstanding of supplemental
indentures implementing certain amendments to the notes, the consummation of
the tender offer for the shares of the Company's common stock, the funding of
the committed financing and other conditions. These note tender offers and
consent solicitations are being made pursuant to tender offer and consent
solicitation materials that will be distributed to the Company's note holders.
<PAGE>
Transportation Technologies Industries, Inc. is a Delaware corporation
with its principal executive offices located at 980 N. Michigan Avenue, Suite
1000, Chicago, Illinois, 60611. The Company is a leading manufacturer of
components for heavy-duty and medium-duty trucks and buses and the trucks parts
aftermarket. The Company's product lines include Gunite wheel-end components,
Brillion custom iron castings, Imperial body and chassis components, Bostrom
truck and bus seating systems and Fabco steerable drive axles and gearboxes. The
Company has manufacturing operations in Alabama, California, Illinois, Indiana,
Pennsylvania, Tennessee, Texas, Virginia, Washington and Wisconsin.
CERTAIN STATEMENTS MADE IN THIS RELEASE ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS AND PERFORMANCE TO
DIFFER MATERIALLY FROM ANY EXPECTED FUTURE RESULTS OR PERFOR MANCE, EXPRESSED OR
IMPLIED, BY THE FORWARD-LOOKING STATEMENTS. TRANSPORTATION TECHNOLOGIES ASSUMES
NO RESPONSIBILITY TO UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN.
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION
OF AN OFFER TO SELL SHARES OF THE COMPANY. TRANSPORTATION ACQUISITION I CORP.
AND THE COMPANY HAVE FILED A TENDER OFFER STATEMENT WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION AND THE COMPANY HAS FILED A SOLICITATION/RECOMMENDATION
STATEMENT WITH RESPECT TO THE OFFER. THE TENDER OFFER STATEMENT (INCLUDING AN
OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS)
AND THE SOLICITATION/RECOMMENDATION STATEMENT CONTAIN IMPORTANT INFORMATION
WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER. THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN
OTHER OFFER DOCUMENTS, AS WELL AS THE SOLICITATION/RECOMMENDATION STATEMENT,
WILL BE MADE AVAILABLE TO ALL STOCKHOLDERS OF THE COMPANY, AT NO EXPENSE TO
THEM. THE TENDER OFFER STATEMENT (INCLUDING THE OFFER TO PURCHASE, THE RELATED
LETTER OF TRANSMITTAL AND ALL OTHER OFFER DOCUMENTS FILED WITH THE COMMISSION)
AND THE SOLICITATION/RECOMMENDATION STATEMENT ARE ALSO AVAILABLE AT NO CHARGE AT
THE COMMISSION'S WEBSITE AT WWW.SEC.GOV.
2
<PAGE>
Exhibit 99(i)(1)
IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - x
:
WILLIAM PHELPS and LAWTON :
WILLISTON, on behalf of :
themselves and all others :
similarly situated, :
:
Plaintiffs, : C.A. No. [17664 NC]
:
-against- :
:
TRANSPORTATION TECHNOLOGIES :
INDUSTRIES, INC., THOMAS M. BEGEL, :
ANDREW M. WELLER, R. PHILIP :
SILVER, FRANCIS A. STROBLE, and :
CAMILLO SANTOMERO, :
:
Defendants. :
- - - - - - - - - - - - - - - - - - - - x
CLASS ACTION COMPLAINT
1. Plaintiffs, by their attorneys, allege upon information and
belief, except as to paragraph 1 which plaintiffs allege upon knowledge, as
follows:
2. Plaintiffs are and were, at all times relevant to this
action, stockholders of defendant Transportation Technologies, Inc. ("TTI" or
the "Company").
3. Plaintiffs bring this action on behalf of themselves and
all other stockholders of defendant TTI who are similarly situated, to enjoin a
<PAGE>
contemplated acquisition transaction of TTI of alternatively, to seek
rescission or rescissory damages in the event the aforesaid transaction is
consummated. Plaintiffs allege that they and the other members of the class are
entitled to such relief because the proposed transaction and the acts of
defendants in connection therewith, as alleged herein, constitute self dealing,
deception, unfair dealing, overreaching and a breach of the fiduciary duties
owed to TTI stockholders by defendants. The proposed transaction which would
freeze out plaintiffs and the other members of the class is being undertaken
primarily to permit certain management participants in the transac tion to
acquire the business of TTI from plaintiffs and the other class members at an
inadequate price and to permit said participants to maintain and continue
certain highly beneficial financial relationships with the Company.
4. Defendant TTI is a corporation duly organized and existing
under the laws of the state of Delaware, with its principal offices located at
980 North Michigan Avenue, Suite 1000, Chicago, Illinois 606111. As of November
11, 1999, there were approximately 10.3 million shares of TTI common stock
outstand ing. Defendant TTI manufactures components for heavy-duty and
medium-duty trucks and buses and the trucks part aftermarket.
5. Defendant Thomas M. Begel ("Begel"), at all times relevant
hereto, was the Chairman, Chief Executive Officer, and a director of the
Company.
2
<PAGE>
6. Defendant Andrew M. Weller, at all times relevant hereto,
was an Executive Vice President, Chief Financial Officer and a director of the
Company.
7. Defendants Francis A. Stroble, R. Philip Silver and Camillo
Santomero were and still are directors of TTI.
8. Each of the individual defendants as officers and directors
of TTI have a fiduciary relationship and responsibility to plaintiffs and the
other common public stockholders of TTI and owe to plaintiffs and the other
class mem bers the highest obligations of good faith, loyalty, fair dealing, due
care and candor.
CLASS ACTION ALLEGATIONS
9. Plaintiffs bring this action pursuant to Rule 23 of the
Rules of the Court of Chancery on behalf of themselves and all other
stockholders of the Company (except defendants and any person, firm, trust,
corporation, or other entity related to or affiliated with any defendant), who
are or will be adversely affected by the conduct of the defendants as more fully
described herein (the "Class").
10. This action is properly maintainable as a class action for
the following reasons:
(a) The Class is so numerous that joinder of all
members is impracticable. As of November 11, 1999, TTI had approximately 10.3
million shares of common stock outstanding. The Company stock is traded on the
NASDAQ National Market System;
3
<PAGE>
(b) The members of the Class are scattered throughout
the United States and are so numerous as to make it impracticable to bring them
all before this Court;
(c) There are questions of law and fact which are
common to the Class and which predominate over questions affection any
individual Class member. The common questions include, INTER ALIA, the
following:
(1) whether defendants are breaching their
fidu ciary duties owed by them to plaintiffs and members of the class and/or
have aided and abetted in such breach, by virtue of their participation and/or
acquiescence and by their other conduct complained of herein;
(2) whether defendants are breaching their
fidu ciary obligations to plaintiffs and members of the class by failing and
refusing to attempt in good faith to maximize stockholder value;
(3) whether defendants have wrongfully
failed and refused to seek a purchaser of TTI and/or any and all of its various
assets or divisions at the best price obtainable; and
(4) whether plaintiffs and the other members
of the Class will be irreparably damaged by defendants' wrongful conduct alleged
herein and if so, what is the proper remedy and/or measure of damages;
4
<PAGE>
(d) The claims of plaintiffs are typical of
the claims of the Class in that all members of the Class will be damaged by
defendants' actions;
(e) Plaintiffs are committed to prosecuting
this action and have retained competent counsel experienced in litigation of
this mature. Plaintiffs are adequate representatives of the Class;
(f) The prosecution of separate actions by
individual members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class;
(g) Defendants have acted or refused to act
on grounds generally applicable to the Class, thereby making appropriate
injunctive relief and/or corresponding declaratory relief with respect to the
Class as a whole.
CLAIM FOR RELIEF
11. On December 14, 1999, TTI announced that an investor group
led by defendants Begel and Weller (the "Buyout Group") had offered to buy all
of the outstanding shares of TTI for $20 per share in cash. As reported, the
Buyout Group has received executed commitment letters from financial
institutions provid ing for the necessary financing.
12. The purpose of the proposed acquisition transaction is to
enable the Buyout Group to acquire the shares of TTI they do not already own and
5
<PAGE>
TTI's valuable assets for the benefit of the Buyout Group at the expense of
TTI's public stockholders.
13. By virtue of the acts and conduct alleged herein,
defendants are carrying out a preconceived plan to eliminate the public common
stockholders of TTI in order to appropriate for themselves the benefits of the
ownership of the Company, including its potential and continuing growth and
value. Defendants, both individually and as part of a common plan and scheme,
have taken and are continu ing to take such actions in total disregard for the
respective duties to plaintiff and the class. As a result of the proposed
transaction, the TTI public stockholders will be wrongfully deprived of their
investment in TTI and all of its present and continuing profitability and
growth.
14. Defendants' knowledge and economic power and that of the
investing public is unequal because TTI's management, including members of the
Buyout Group, controls the business and corporate affairs of TTI and is in
possession of material non-public information concerning the Company's assets,
businesses and future prospects. This discrepancy makes it grossly and
inherently unfair for the Buyout Group to obtain ownership of TTI from its
public stockholders at the unfair and grossly inadequate price offered herein.
15. The transaction price is not the result of arm's length
negotia tion and is not based upon any independent evaluation of the current
value of TTI's
6
<PAGE>
common stock, assets or business, but was fixed arbitrarily by the Buyout Group
as part of their unlawful plan and scheme to obtain the entire ownership of the
Company's asset and businesses at the lowest possible price.
16. Defendants have not considered adequately or encouraged
other possible purchases of and offers for the assets of TTI or its stock in a
manner designed to obtain the highest possible price for TTI's public
stockholders, but rather have placed their own interests before those of the
public stockholders, contrary to their fiduciary duties.
17. Defendants have clear and material conflicts of interest
and are acting to better the interests of the Buyout Group at the expense of
TTI's public stockholders. The Buyout Group is intent on acquiring the Company's
assets and business at [a] time when the Company is experiencing increasing
growth and success.
18. As a result of the actions of the defendants, plaintiffs
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of TTI's assets
and businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their shares of TTI's common stock.
19. Plaintiffs seek preliminary and permanent injunctive
relief and declaratory relief preventing defendants from inequitably and
unlawfully depriving
7
<PAGE>
plaintiffs and the Class of their right to realize a full and fair value for
their stock at a substantial premium over the market price, and to compel
defendants to carry out their fiduciary duties to maximize shareholder value.
20. As a result of the foregoing, plaintiffs and the other
members of the Class will be irreparably harmed in that they will not receive
their fair portion of the value of TTI's assets and business and will be
prevented from obtaining the real value of their equity ownership of the
Company. Unless enjoined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiffs and the other members of the Class and will
consummate the sale of TTI at an inadequate and unfair price, or upon
inequitable terms, all to the irreparable harm of plaintiffs and the other
members of the Class.
21. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs pray for judgment and relief as follows:
A. Ordering that this action may be maintained as a class
action and certifying plaintiffs as the Class representatives;
B. Declaring that defendants have breached their fiduciary and
other duties to plaintiffs and the other members of the Class;
C. Entering an order requiring defendants to take the steps
set forth hereinabove;
8
<PAGE>
D. Preliminarily and permanently enjoining the defendants and
their counsel, agents, employees and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing the proposed
transaction;
E. In the event the proposed transaction is consummated,
rescinding it and setting it aside;
F. Awarding compensatory damages against defendants individu
ally and severally in an amount to be determined at trial, together with
prejudgment interest at the maximum rate allowable by law;
G. Awarding costs and disbursements, including plaintiffs'
counsel's fees and experts' fees; and
9
<PAGE>
H. Granting such other and further relief as the Court may
deem just and proper.
Dated: December 14, 1999
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: ______________________________
919 North Market Street
Mellon Bank Center, Suite 1401
Wilmington, Delaware 19801
(302) 656-4433
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
SHALOV STONE & BONNER
276 Fifth Avenue
Suite 704
New York, New York 10001
10
<PAGE>
Exhibit 99(i)(2)
IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - -x
AMY F. BRETON,
:
Plaintiff, Civil Action No. [17667 NC]
:
-against-
:
THOMAS S. BEGEL, R. PHILIP SILVER,
FRANCIS A. STROBLE, CAMILLO :
SANTOMERO, ANDREW M. WELLER, and
TRANSPORTATION TECHNOLOGIES :
INDUSTRIES, INC.,
:
Defendants.
- - - - - - - - - - - - - - - - - - - - - -x
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for
paragraph 2 hereof, which is alleged upon knowledge, as follows:
1. Plaintiff brings this action pursuant to Rule 23 of the
Rules of the Court of Chancery on her behalf and as a class action on behalf of
all persons, other than defendants and those in privity with them, who own the
common stock of Transportation Technologies Industries, Inc. ("Transportation
Technologies" or the "Company").
<PAGE>
2. Plaintiff has been the owner of the common stock of the
Company since prior to the transportation herein complained of and continuously
to date.
3. Transportation Technologies is a corporation duly organized
and existing under the laws of the State of Delaware. The Company is a leading
manufacturer of components for heavy duty and medium duty tracks and buses and
the truck parts aftermarket. The Company maintains its principal offices at 980
North Michigan Avenue, Chicago, Illinois.
4. Defendant Thomas H. Begel ("Begel") is Chairman of the
Board, President and Chief Executive Officer of the Company and owns or controls
4.61% of the Company's outstanding common stock.
5. Defendant Andrew M. Weller is an Executive Vice President,
Chief Financial Officer and a Director of the Company.
6. Defendants R. Philip Silver, Francis A. Stroble and Camillo
Santomero are Directors of the Company.
7. The individual defendants, by reason of their corporate
directorships and executive positions, stand in a fiduciary position relative to
the Company's public shareholders, whose fiduciary duties, at all times relevant
herein, required them to exercise their best judgment, and to act in a prudent
manner, and in the best interest of the Company's shareholders. Said defendants
owed the public
2
<PAGE>
shareholders of Transportation Technologies the highest duty of good faith, fair
dealing, due care, loyalty, and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on her own behalf and as a
class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on
behalf of all security holders of the Company (except the defendants herein and
any person, firm, trust, corporation, or other entity related to or affiliated
with any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
9. This action is properly maintainable as a class action.
10. The class is so numerous that joinder of all members is
impracticable. As of March 17, 1999, there were approximately 10,025, 754 shares
of Transportation Technologies common stock outstanding, owned by shareholders
throughout the country.
11. There are questions of law and fact which are common to
the class including the following: (a) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the members
of the class; (b) whether defendants are pursuing a scheme and course of
business designed to eliminate the public securities holders of Transportation
Technologies in violation of the laws of the State of Delaware in order to
enrich themselves at the expense and
3
<PAGE>
to the detriment of the plaintiff and the other public stockholders who are
members of the class; (c) whether the said proposed acquisition, hereinafter
described, consti tutes a breach of the duty of fair dealing with respect to the
plaintiff and the other members of the class; and (d) whether the class is
entitled to injunctive relief or damages as a result of the wrongful conduct
committed by defendants.
12. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
13. Defendants have acted in a manner which affects plaintiff
and all members of the class, thereby making appropriate injunctive relief
and/or corre sponding declaratory relief with respect to the class as a whole.
14. The prosecution of separate actions by individual members
of the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would, as a practical manner, be dispositive of the
interests of other members or substantially impair or impede their ability to
protect their interests.
4
<PAGE>
SUBSTANTIVE ALLEGATIONS
15. On December 14, 1999, the Company announced that it had
received a proposal from an investor group which includes defendants Begel and
Weller (hereinafter collectively, the "Begel Group") whereby the Begel Group
will purchase all of the Company's outstanding common stock held by the public
for $20 per share. The Begel Group announced that it had received commitment
letters from financial institutions for all of the necessary debt and equity
financing for the proposed acquisition.
16. The proposed transaction represents an improper attempt to
eliminate the public shareholders of Transportation Technologies to permit defen
dants to retain for themselves Transportation Technologies' valuable business
and assets. Indeed, the Company's shares have traded at $19.75 as recently as
September 1999. Defendants are attempting to take advantage of a temporary
decline in Transportation Technologies' stock price to buy the Company at an
inadequate price.
17. The price of $20 per share to be paid to the class members
is unconscionable, unfair and inadequate consideration because, among other
things: (a) the intrinsic value of the stock of Transportation Technologies is
materially in excess of $20 per share, giving due consideration to the
possibilities of growth and profitability of Transportation Technologies in
light of its business, earnings and earnings power, present and future; (b) the
$20 per share price is inadequate and
5
<PAGE>
offers an inadequate premium to the pubic stockholders of Transportation
Technolo gies; and (c) the $20 per share price is not the result of arm's length
negotiations but was fixed arbitrarily by Begel Group to "cap" the market price
of Transportation Technologies stock, as part of a plan for defendants to obtain
complete ownership of Transportation Technologies assets and business at the
lowest possible price.
18. The proposed bid serves no legitimate business purpose of
Transportation Technologies but rather is an attempt by defendants to unfairly
benefit themselves from the transaction at the expense of Transportation
Technolo gies' public stockholders. The proposed plan will, for a grossly
inadequate consider ation, deny plaintiff and the other members of the class
their right to share propor tionately in the future success of Transportation
Technologies and its valuable assets, while permitting Begel Group to recap huge
benefits from the transaction.
19. By reason of the foregoing, the individual defendants have
violated their fiduciary duties to Transportation Technologies and the remaining
stockholders of Transportation Technologies by agreeing to the transaction on
the terms presently proposed.
20. Plaintiff and the class have suffered and will suffer
irreparable damage unless defendants are enjoined from breaching their fiduciary
duties and from carrying out the aforesaid plan and scheme.
6
<PAGE>
21. Plaintiff and the other members of the class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment against the defendants
jointly and severally, as follows:
A. declaring this action to be a class action and
certifying plaintiff as class representative;
B. enjoining, preliminarily and permanently, Begel
Group's offer for acquisition of the Transportation
Technologies stock owned by plaintiff and the other
members of the class under the terms presently
proposed;
C. to the extent, if any, that the transaction or
transactions com plained of are consummated prior to
the entry of this Court's final judgment, rescinding
such transaction or transactions, and granting, INTER
ALIA, rescissory damages;
D. directing the defendants pay to plaintiff and the
other members of the class all damages caused to them
and account for all profits and any special benefits
obtained as a result of their unlawful conduct;
7
<PAGE>
E. awarding the plaintiff the costs and disbursements of
this action, including a reasonably allowance for the
fees and expenses of plaintiff's attorneys and
experts, and
F. granting plaintiff and the other members of the class
such other and further relief as may be just and
proper.
Dated: December 14, 1999
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: __________________________
919 North Market Street
Mellon Bank Center, Suite 1401
Wilmington, Delaware 19801
(302) 656-4433
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ, LLP
10 East 40th Street New York, New York 10016
(212) 779-1414
8
<PAGE>
Exhibit 99(i)(3)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - - -x
RUTH GRENING,
on behalf of herself and all :
others similarly situated, Civil Action No. 17668NC
:
Plaintiff,
:
-against- CLASS ACTION COMPLAINT
:
THOMAS M. BEGEL, ANDREW M.
WELLER, CAMILLO SANTOMERO, R. :
PHILIP SILVER, and FRANCIS A. STROBLE,
TRANSPORTATION TECHNOLOGIES :
INDUSTRIES, INC.,
:
Defendants.
- - - - - - - - - - - - - - - - - - - - - - -x
Plaintiff, by her attorneys, alleges upon personal knowledge
as to her own acts and upon information and belief as to all other matters, as
follows:
NATURE OF THE ACTION
1. Plaintiff brings this action individually and as a class
action on behalf of all persons, other than defendants, who own the securities
of Transportation Technologies Industries, Inc. ("Transportation Technologies"
or the "Company") and who are similarly situated (the "Class"), for injunctive
and other relief. Plaintiff seeks injunctive relief herein, INTER ALIA, to
enjoin the implementation of a transaction whereby a management-led investor
group would buy all of the outstanding publicly-held shares of Transportation
Technologies in a transaction valued at approximately $200 million.
Alternatively, in the event that the proposed transaction is
<PAGE>
implemented, plaintiff seeks to recover damages caused by the breach of
fiduciary duties owed by the defendants.
2. The offer is being advanced through unfair procedures and
the consider ation offered is an unfair price and does not constitute a
maximization of stockholder value for the public shareholders. The proposed
price is designed to benefit members of management to the detriment of the
Company's public stockholders.
3. Further, defendants have breached their fiduciary duties
owed to Transpor tation Technologies' public stockholders to take all necessary
steps to ensure that the stockhold ers will receive the maximum value realizable
for their shares in any acquisition of the Company's assets. In the context of
this action, the Board must take all reasonable steps to assure the maximization
of stockholder value, including the implementation of a bidding mechanism to
foster a fair auction of the Company to the highest bidder or the exploration of
strategic alterna tives which will return greater or equivalent value to the
plaintiff and the Class.
THE PARTIES
4. Plaintiff is and, at all relevant times, has been the owner
of shares of Transportation Technologies common stock.
5. Defendant Transportation Technologies, Inc.
("Transportation Technologies" or the "Company") is a corporation organized
under the laws of Delaware with its principal executive offices located at 980
North Michigan Avenue, Suit 1000, Chicago, IL 60611. Transportation
Technologies, through its subsidiaries, is the leading manufacturer of
components for trucks and buses. Transportation Technologies has approximately
10 million shares of
2
<PAGE>
common stock outstanding and hundreds of stockholders of record. Transportation
Technologies' stock trades over NASDAQ National Market System.
6. Defendant Thomas M. Begel ("Begel") is, and was at all
relevant times, Chief Executive Officer, President, and Chairman of the Board of
Transportation Technologies. As of March 17, 1999, Begel held approximately
4.61% of the Company's outstanding stock.
7. Defendant Andrew M. Weller ("Weller") is, and was at all
relevant times, the Chief Financial Officer, Executive Vice President, and a
Director of Transportation Technol ogies. As of March 17, 1999, Weller held
approximately 1.36% of the Company's outstanding stock.
8. Defendant Camillo Santomero is, and was at all relevant
times, a Director of Transportation Technologies.
9. Defendant R. Philip Silver is, and was at all relevant
times, a Director of Transportation Technologies.
10. Defendant Francis A. Stroble is, and was at all relevant
times, a Director of Transportation Technologies.
11. The individuals described in paragraphs 6 through 10 are
referred to as the Individual Defendants.
12. Because of their positions as officers/directors, the
Individual Defendants owe fiduciary duties of loyalty and due care to plaintiff
and the other members of the Class.
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action on her own behalf and as a
class action, on behalf of all stockholders of the Company, except defendants
herein and any person, firm, trust,
3
<PAGE>
corporation, or other entity related to or affiliated with any of the
defendants, or any of the Company's principal stockholders, who will be
threatened with injury arising from defendants' actions as is described more
fully below.
14. This action is properly maintainable as a class action.
15. The Class is so numerous that joinder of all members is
impracticable. The Company has approximately 10 million shares of common stock.
There are hundreds of record and beneficial stockholders.
16. There are questions of law and fact common to the Class
including, INTER ALIA, whether:
(a) defendants have breached and will continue to
breach their fiduciary and other common law duties owed by them to plaintiff and
the members of the Class; and
(b) plaintiff and the other members of the Class
would be irreparably damaged by the wrongs complained of herein.
17. Plaintiff is committed to prosecuting the action and has
retained competent counsel experienced in litigation of this nature. Plaintiff's
claims are typical of the claims of the other members of the Class and plaintiff
has the same interests as the other members of the Class. Plaintiff is an
adequate representatives of the Class.
18. The prosecution of separate actions by individual members
of the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter
4
<PAGE>
be dispositive of the interests of the other members not parties to the
adjudications or substan tially impair or impede their ability to protect their
interests.
19. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ALLEGATIONS
20. On December 13, 1999, the BUSINESS WIRE reported that
Transportation Technologies had received a definitive offer to be acquired in a
management-led buyout by a group that included defendants Begel and Weller.
21. The buyout group specifically proposed to acquire all of
the publicly-held stock not already controlled by members of that group for a
price of $20.00 per share in cash.
22. The management-led takeover was announced on the heels of
Transporta tion Technologies reporting strong revenue and operating earnings for
the third quarter of 1999 as a result of increased revenues and successful
reduction of interest expense. Begel had recently outlined the Company's plans
for continued acquisition in the heavy duty truck component business stating
that "Transportation Technologies is now positioned as one of the largest
suppliers to the medium and heavy duty truck industry."
23. The buyout group now seeks to take advantage of
Transportation Technologies' future growth and capture such value for itself to
the detriment of the Company's public shareholders at a price which is wholly
inadequate.
24. Defendants have breached their fiduciary obligations to
Transportation Technologies' stockholders to maximize shareholder value.
5
<PAGE>
25. Because the investor group includes members of management,
the buyout group was in a position to, and in fact did, dictate the terms of the
proposed transaction.
26. The proposed transaction is grossly unfair, inadequate and
provides value to Transportation Technologies' stockholders substantially below
the fair or inherent value of the Company. Taking into account Transportation
Technologies' asset value, liquidation value, its expected growth, the strength
of its business, revenues, cash flow, and earnings power, the intrinsic value of
the equity of Transportation Technologies is materially greater than the
consideration contemplated by the proposed transaction price.
27. The proposed transaction is wrongful, unfair, and harmful
to Transporta tion Technologies' public stockholders, and will deny them their
right to share proportionately in the true value of Transportation Technologies'
valuable assets, profitable business, and future growth in profits and earnings,
while usurping the same for the benefit of the investor group.
28. As a result of defendants' action, plaintiff and the Class
have been and will be damaged by the breaches of fiduciary duty and, therefore,
plaintiff and the Class will not receive the fair value of Transportation
Technologies' assets and businesses.
29. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class, and will succeed
in their plan to exclude plaintiff and the Class from the fair proportionate
share of Transportation Technologies' valuable assets and businesses, all to the
irreparable harm of the Class.
30. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
6
<PAGE>
(a) declaring that this lawsuit is properly
maintainable as a class action and certifying plaintiff as a representative of
the Class;
(b) declaring that the defendants and each of them
have committed a gross abuse of trust and have breached their fiduciary duties
to plaintiff and the other members of the Class;
(c) preliminarily and permanently enjoining
defendants and their counsel, agents, employees, and all persons acting under,
in concert with, or for them, from proceeding with or implementing the
transaction;
(d) in the event the proposed transaction is
consummated, rescinding it and setting it aside;
(e) awarding compensatory damages against defendants,
jointly and severally, in an amount to be determined at trial, together with
prejudgment interest at the maximum rate allowable by law;
(f) awarding plaintiff and the Class their costs and
disbursements and reasonable allowances for plaintiff's counsel and experts'
fees and expenses; and
7
<PAGE>
(g) granting such other and further relief as may be
just and proper.
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.
By: ________________________________________
Norman M. Monhait
Suite 1401, Mellon Bank Center
919 Market Street
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
488 Madison Avenue
New York, New York 10022
(212) 935-7400
December 14, 1999
8
<PAGE>
Exhibit 99(i)(4)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - -x
BILL GANEM,
:
Plaintiff, Civil Action No.
:
-against-
:
THOMAS S. BEGEL, ANDREW M.
WELLER, R. PHILIP SILVER, FRANCIS A. : CLASS ACTION COMPLAINT
STROBLE, CAMILLO SANTOMERO, and
TRANSPORTATION TECHNOLOGIES :
INDUSTRIES, INC.,
:
Defendants.
- - - - - - - - - - - - - - - - - - - - - - x
Plaintiff, by his attorneys, alleges the following upon
information and belief, except for those allegations which pertain to plaintiff,
which allegations are based upon personal knowledge:
1. This action arises out of an unlawful scheme and plan by a
group, led by Thomas S. Begel, Chairman of the Board of Directors and Chief
Executive Officer of Transportation Technologies Industries, Incorporated
("TTII" or the "Company"), Andrew M. Weller, TTII's Executive Vice President and
Chief Financial Officer, and other senior members of TTII's management
(hereinafter referred to collectively as the "TTII Management Buyout Group" or
the "Management Group") to acquire the remaining public shares of TTII in a
going-private transaction for grossly inadequate
<PAGE>
consideration and in breach of defendants' fiduciary duties. Plaintiff alleges
that he and the other public stockholders of TTII common stock are entitled to
enjoin the proposed transaction, or alternatively, recover damages in the event
the transaction is consummated.
THE PARTIES
2. Plaintiff is and at all relevant times was the owner of
TTII common stock.
3. Defendant TTII is a corporation organized and existing
under the laws of the State of Delaware with its principal executive offices
located at 980 North Michigan Avenue, Suite 1000, Chicago, IL 60611. TTII
manufactures components for heavy-duty and medium-duty trucks and buses.
4. Defendant Thomas M. Begel ("Begel") is and was at all times
relevant hereto, Chairman of the Board of Directors and Chief Executive Officer
of the Company. Begel owns approximately 4% of the Company's common stock.
5. Defendant Andrew M. Weller ("Weller") is TTII's Executive
Vice President and Chief Financial Officer and a director of the Company.
6. Defendants Francis A. Stroble, R. Philip Silver, and
Camillo Santomero are directors of the Company.
7. The foregoing individual defendants (collectively the
"Individual Defendants") as officers and/or directors of the Company, and/or as
significant sharehold-
2
<PAGE>
ers of the Company owe fiduciary duties of good faith, loyalty, fair dealing,
due care, and candor to plaintiff and the other members of the Class (as defined
below).
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action pursuant to Rule 23 of the
Rules of this Court, on behalf of himself and all other stockholders of the
Company and their succes sors in interest, who are or will be threatened with
injury arising from defendants' actions (the "Class"). Excluded from the Class
are the defendants herein, members of their immediate families, any subsidiary,
firm, trust, corporation, or other entity related to or affiliated with any of
the defendants.
9. This action is properly maintainable as a class action for
the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. While the exact number of Class members is unknown to
plaintiff at this time and can only be ascertained through appropriate
discovery, there are approximately 10.29 million shares of TTII's common stock
outstanding, held by hundreds of sharehold ers of record. The holders of these
shares are believed to be geographically dispersed throughout the United States.
TTII common stock is listed and actively traded on the NASDAQ National Market
System.;
(b) there are questions of law and fact which are
common to members of the Class, including, INTER ALIA, the following:
3
<PAGE>
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit the TTII Management Buyout
Group at the expense of the members of the Class;
(ii) whether the Individual Defendants, as
directors and/or officers of the Company and/or as significant shareholders of
the Company, have breached their fiduciary duties owed to plaintiff and the
other members of the Class, including their duties of entire fairness, loyalty,
due care, and candor;
(iii) whether defendants have disclosed all
material facts in connection with the challenged transaction; and
(iv) whether plaintiff and the other members
of the Class would be irreparably damaged were defendants not enjoined from the
conduct described herein;
(c) the claims of plaintiff are typical of the claims
of the other members of the Class and plaintiff has no interest that is adverse
or antagonistic to the interests of the Class;
(d) the plaintiff is committed to prosecuting this
action and has retained counsel competent and experienced in litigation of this
nature. Plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
4
<PAGE>
10. The prosecution of separate actions by individual members
of the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
11. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ALLEGATIONS
12. On December 14, 1999, TTII announced that Begel, Weller,
and other members of senior management of the Company had proposed to acquire
the remaining public shares of TTII that they did not already own, for $20 per
share in cash (the "Buyout Transaction"). The Buyout Group has secured financing
for this deal through numerous financial institutions which have provided them
with executed commitment letters providing for all the debt necessary to finance
the transaction.
13. The purpose of the Buyout Transaction is to enable the
TTII Management Buyout Group to acquire one hundred percent (100%) equity
ownership of TTII and its valuable assets for its own benefit at the expense of
TTII's public stockhold
5
<PAGE>
ers who will be deprived of their equity investment and the benefits thereof
including, among other things, the expected growth in the Company's
profitability.
14. The Buyout Transaction is the product of unfair dealing,
and the price of $20 per share to be paid to Class members is unfair and
inadequate because, among other things:
(a) the announcement of the proposed Buyout
Transaction was made when the Company was poised for significant future growth
and earnings. Analysts covering the stock give it very favorable ratings,
including a "buy" rating from Friedman, Billings, and a "strong buy" rating from
U.S. Bancorp - Piper Jaffrey;
(b) the TTII Management Buyout Group timed the
announcement of the Buyout Transaction to place an artificial lid or cap on the
market price for TTII's stock to enable itself to acquire the stock at the
lowest possible price;
(c) Although the Buyout Price of $20 per share
represents a premium over the market price on the day prior to the announcement
of the Buyout Transaction, this is not reflective of the Company's true market
value, considering that as recently as September 1999 the Company's stock was
trading at nearly the $20 per share Buyout Price.
15. By reason of defendants' positions with TTII, defendants
are in possession of non-public information concerning the financial condition
and prospects of TTII, and especially the true value and expected increased
future value of TTII and its
6
<PAGE>
assets, which they have not disclosed to TTII's public stockholders. Such
undisclosed information is of critical importance to Class members in evaluating
the transaction.
16. While the TTII Management Buyout Group is intent on paying
the lowest buyout price to Class members, the defendants are duty-bound to
maximize shareholder value. The defendants have clear and material conflicts of
interest and are acting to better the interests of the Management Group at the
expense of the TTII public shareholders.
17. The proposed Buyout Transaction is wrongful, unfair and
harmful to TTII's public stockholders, and represents an effort by the TTII
Management Buyout Group to aggrandize their own financial position and interests
at the expense of and to the detriment of Class members. The Buyout Transaction
is an attempt to deny plaintiff and the other members of the Class their right
to share proportionately in the true value of TTII's valuable assets and future
growth in profits, earnings and dividends, while usurping the same for the
benefit of the Management Group on unfair and inadequate terms.
18. Defendants have breached and are breaching their fiduciary
duties to the members of the Class in that they have failed to disclose the
material non-public information in their possession as to the value of TTII's
assets, the full extent of the future earnings potential of TTII and its
expected increase in profitability.
7
<PAGE>
19. As a result of defendants' unlawful actions, plaintiff and
the other members of the Class will be damaged in that they will not receive
their fair portion of the value of TTII's assets and business and will be
prevented from obtaining the real value of their equity ownership of the
Company.
20. Unless the proposed Buyout Transaction is enjoined by the
Court, defendants will continue to breach their fiduciary duties owed to the
plaintiff and the members of the Class, will not engage in arm's-length
negotiations on the terms of the transaction, and will consummate and close the
transaction complained of and succeed in their plan described above, all to the
irreparable harm of the members of the Class.
21. Plaintiff and the other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class action
and certifying plaintiff as the representative of the Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, including the duties of
care, loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as described herein;
8
<PAGE>
(d) in the event the Buyout Transaction is
consummated, rescinding the Buyout Transaction effected by defendants or
awarding rescissory damages to the Class;
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all damages suffered and
to be suffered by them as the result of the acts and transactions alleged
herein;
(f) awarding plaintiff the costs and disbursements of
the action including allowances for plaintiff's reasonable attorneys' and
experts' fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
Dated: December 15, 1999
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/
----------------------------
Suite 1401, Mellon Bank Center
PO Box 1070
Wilmington, Delaware 19899
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER LLP
845 Third Avenue
New York, New York 10022
(212) 759-4600
9
<PAGE>
Exhibit 99(i)(5)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - -x
E. CLAIBURNE HOGGE,
: Civil Action No. 17679
Plaintiff,
:
-against-
: CLASS ACTION COMPLAINT
THOMAS M. BEGEL, R. PHILIP SILVER,
FRANCIS A. STROBLE, CAMILLO :
S ANTOMERO, ANDREW M. WELLER, and
TRANSPORTATION TECHNOLOGIES, INC., :
Defendants. :
- - - - - - - - - - - - - - - - - - - -x
Plaintiff, by his attorneys, Rosenthal, Monhait, Gross &
Goddess, P.A., for his complaint against defendants, alleges upon information
and belief, except for paragraph 2 hereof, which is alleged upon knowledge, as
follows:
1. Plaintiff brings this action pursuant to Rule 23 of the
Rules of the Court of Chancery on his behalf and as a class action on behalf of
all persons, other than defendants and those in privity with them, who own the
common stock of Transportation Technologies Industries, Inc. ("Transportation
Technologies" or the "Company").
2. Plaintiff has been the owner of the common stock of the
Company since prior to the transaction herein complained of and continuously to
date.
3. Transportation Technologies is a corporation duly organized
and existing under the laws of the State of Delaware. The Company is a leading
manufacturer of components
<PAGE>
for heavy duty and medium duty trucks and buses and the truck parts aftermarket.
The Company maintains its principal offices at 980 North Michigan Avenue,
Chicago, Illinois.
4. Defendant Thomas M. Begel ("Begel") is Chairman of the
Board, President and Chief Executive Officer of the Company and owns or controls
4.61% of the Company's outstanding common stock.
5. Defendant Andrew M. Weller ("Weller") is an Executive Vice
President, Chief Financial Officer and a Director of the Company.
6. Defendants R. Philip Silver, Francis A. Stroble and Camillo
Santomero are Directors of the Company.
7. The individual defendants, by reason of their corporate
directorships and executive positions, stand in a fiduciary position relative to
the Company's public shareholders, whose fiduciary duties, at all times relevant
herein, required them to exercise their best judgment, and to act in a prudent
manner, and in the best interest of the Company's shareholders. Said defendants
owed the public shareholders of Transportation Technologies the highest duty of
good faith, fair dealing, due care, loyalty, and full, candid and adequate
disclosure.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf and as a
class action, pursuant to Court of Chancery Rule 23, on behalf of all security
holders of the Company (except the defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants) and their successors in interest, who are or will be threatened with
injury arising from defendants' actions as more fully described herein.
2
<PAGE>
9. This action is properly maintainable as a class action.
10. The class is so numerous that joinder of all members is
impracticable. As of March 17, 1999, there were approximately 10,025,754 shares
of Transportation Technologies common stock outstanding, owned by shareholders
throughout the country.
11. There are questions of law and fact which are common to
the class and which predominate over questions affecting any individual class
member. The common questions include, inter alia, the following: (a) whether
defendants have breached their fiduciary and other common law duties owed by
them to plaintiff and the members of the class; (b) whether defendants are
pursuing a scheme and course of business designed to eliminate the public
securities holders of Transportation Technologies in violation of the laws of
the State of Delaware in order to enrich themselves at the expense and to the
detriment of the plaintiff and the other public stockholders who are members of
the class; (c) whether the said proposed acquisi tion, hereinafter described,
constitutes a breach of the duty of fair dealing with respect to the plaintiff
and the other members of the class; and (d) whether the class is entitled to
injunctive relief or damages as a result of the wrongful conduct committed by
defendants.
12. Plaintiff is committed to prosecuting this action and has
retained compe tent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class. A class action is superior to
any other type of adjudication of this controversy.
3
<PAGE>
13. Dependants have acted in a manner which affects plaintiff
and all members of the class, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the class as a whole.
14. The prosecution of separate actions by individual members
of the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would, as a practical matter, be dispositive of the
interests of other members or substantially impair or impede their ability to
protect their interests.
SUBSTANTIVE ALLEGATIONS
15. On December 14, 1999, the Company announced that it had
received a proposal from an investor group which includes dependants Begel and
Weller (hereinafter collectively the "Begel Group") whereby the Begel Group will
purchase all of the Company's outstanding common stock held by the public for
$20 per share. The Begel Group announced that it had received commitment letters
from financial institutions for all of the necessary debt and equity financing
for the proposed acquisition.
16. The proposed transaction represents an improper attempt to
eliminate the public shareholders of Transportation Technologies to permit
defendants to retain for themselves Transportation Technologies's valuable
business and assets. Indeed, the Company's shares have traded at $19.75 as
recently as September 1999. Dependants are attempting to take advantage of a
temporary decline in Transportation Technologies's stock price to buy the
Company at an inadequate price.
4
<PAGE>
17. The price of $20 per share to be paid to the class members
is unconsciona ble, unfair and inadequate consideration because, among other
things: (a) the intrinsic value of the stock of Transportation Technologies is
materially in excess of $20 per share, giving due consideration to the
possibilities of growth and profitability of Transportation Technologies in
light of its business, earnings and earnings power, present and future; (b) the
$20 per share price is inadequate and offers an inadequate premium to the public
stockholders of Transportation Technologies; and (c) the $20 per share price is
not the result of arm's length negotiations but was fixed arbitrarily by Begel
Group to "cap" the market price of Transportation Technologies stock, as part of
a plan for defendants to obtain complete ownership of Transportation Technolo
gies assets and business at the lowest possible price.
18. The proposed bid serves no legitimate business purpose of
Transportation Technologies but rather is an attempt by defendants to unfairly
benefit themselves from the transaction at the expense of Transportation
Technologies's public stockholders. The proposed plan will, for a grossly
inadequate consideration, deny plaintiff and the other members of the class
their right to share proportionately in the future success of Transportation
Technologies and its valuable assets, while permitting Begel Group to reap huge
benefits from the transaction.
19. By reason of the foregoing, the individual defendants have
violated their fiduciary duties to Transportation Technologies and the remaining
stockholders of Transportation Technologies by agreeing to the transaction on
the terms presently proposed.
20. Plaintiff and the class have suffered and will suffer
irreparable damage unless defendants are enjoined from breaching their fiduciary
duties and from carrying out the aforesaid plan and scheme.
5
<PAGE>
21. Plaintiff and the other members of the class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment against the defendants
jointly and severally, as follows:
A. declaring this action to be a class action
and certifying plaintiff as class
representative;
B. enjoining, preliminarily and permanently,
Begel Group's offer for acquisition of the
Transportation Technologies stock owned by
plaintiff and the other members of the class
under the terms pres ently proposed;
C. to the extent, if any, that the transaction
or transactions complained of are
consummated prior to the entry of this
Court's final judg ment, rescinding such
transaction or transactions, and granting,
inter alia, rescissory damages;
D. directing that defendants pay to plaintiff
and the other members of the class all
damages caused to them and account for all
profits and any special benefits obtained as
a result of their unlawful conduct;
E. awarding the plaintiff the costs and
disbursements of this action, including a
reasonable allowance for the fees and
expenses of plaintiff's attorneys and
experts, and
F. granting plaintiff and the other members of
the class such other and further relief as
may be just and proper.
6
<PAGE>
Dated: December 16, 1999
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: __________________________
P.O. Box 1070
919 N. Market Street
Suite 1401
Mellon Bank Center
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
SCHIFFRIN & BARROWAY, LLP
Suite 400
Three Bala Plaza East
Bala Cynwyd, PA 19004
(610) 667-7706
LAW OFFICES OF ALFRED G. YATES, JR.
& ASSOCIATES,
519 Allegheny Building
429 Forbes Avenue
Pittsburgh, PA 15219
(412) 391-5164
7
<PAGE>
Exhibit 99(i)(6)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - - - - -x
KIRK BIERACH,
:
Plaintiff, Civil Action No. 17685
:
-against-
:
THOMAS M. BEGEL, PHILIP SILVER,
FRANCIS A. STROBLE, CAMILLO :
BYNET SEMECH Ltd.
S ANTOMERO, ANDREW M. WELLER, and CLASS ACTION COMPLAINT
TRANSPORTATION TECHNOLOGIES :
INDUSTRIES, INC.,
:
Defendants.
- - - - - - - - - - - - - - - - - - - - - -x
Plaintiff, by his attorneys, Rosenthal, Monhait, Gross &
Goddess, P.A., for his complaint against defendants, alleges upon information
and belief, except for paragraph 2 hereof, which is alleged upon knowledge, as
follows:
1. Plaintiff brings this action pursuant to Rule 23 of the
Rules of the Court of Chancery on his behalf and as a class action on behalf of
all persons, other than defendants and those in privity with them, who own the
common stock of Transportation Technologies Industries, Inc. ("Transportation
Technologies" or the "Company").
2. Plaintiff has been the owner of the common stock of the
Company since prior to the transaction herein complained of and continuously to
date.
<PAGE>
3. Transportation Technologies is a corporation duly organized
and existing under the laws of the State of Delaware. The Company is a leading
manufacturer of components for heavy duty and medium duty trucks and buses and
the truck parts aftermarket. The Company maintains its principal offices at 980
North Michigan Avenue, Chicago, Illinois.
4. Defendant Thomas H. Begel ("Begel") is Chairman of the
Board, President and Chief Executive Officer of the Company and owns or controls
4.61% of the Company's outstanding common stock.
5. Defendant Andrew M. Weller ("Weller") is an Executive Vice
President, Chief Financial Officer and a Director of the Company.
6. Defendants R. Philip Silver, Francis A. Stroble and Camillo
Santomero are Directors of the Company.
7. The individual defendants, by reason of their corporate
directorships and executive positions, stand in a fiduciary position relative to
the Company's public shareholders, whose fiduciary duties, at all times relevant
herein, required them to exercise their best judgment, and to act in a prudent
manner, and in the best interest of the Company's shareholders. Said defendants
owed the public shareholders of Transportation Technologies the highest duty of
good faith, fair dealing, due care, loyalty, and full, candid and adequate
disclosure.
2
<PAGE>
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf and as a
class action, pursuant to Court of Chancery Rule 23, on behalf of all security
holders of the Company (except the defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants) and their successors in interest, who are or will be threatened with
injury arising from defendants' actions as more fully described herein.
9. This action is properly maintainable as a class action.
10. The class is so numerous that joinder of all members is
impracticable. As of March 17, 1999, there were approximately 10,025,754 shares
of Transportation Technologies common stock outstanding, owned by shareholders
throughout the country.
11. There are questions of law and fact which are common to
the class and which predominate over questions affecting any individual class
member. The common questions include, INTER ALIA, the following: (a) whether
defendants have breached their fiduciary and other common law duties owed by
them to plaintiff and the members of the class; (b) whether defendants are
pursuing a scheme and course of business designed to eliminate the public
securities holders of Transportation Technolo gies in violation of the laws of
the State of Delaware in order to enrich themselves at the expense and to the
detriment of the plaintiff and the other public stockholders who are members of
the class; (c) whether the said proposed acquisition,
3
<PAGE>
hereinafter described, constitutes a breach of the duty of fair dealing with
respect to the plaintiff and the other members of the class; and (d) whether the
class is entitled to injunctive relief or damages as a result of the wrongful
conduct committed by defendants.
12. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class. A class action is superior to
any other type of adjudication of this controversy.
13. Defendants have acted in a manner which affects plaintiff
and all members of the class, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the class as a whole.
14. The prosecution of separate actions by individual members
of the class would create a risk of inconsistent or varying adjudications with
respect to individ ual members of the class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the class which would, as a practicable matter, be dispositive of the
interests of other members or substantially impair or impede their ability to
protect their interests.
SUBSTANTIVE ALLEGATIONS
15. On December 14, 1999, the Company announced that it had
received a proposal from an investor group which includes defendants Begel and
Weller
4
<PAGE>
(hereinafter collectively, the "Begel Group") whereby the Begel Group will
purchase all of the Company's outstanding common stock held by the public for
$20 per share. The Begel Group announced that it had received commitment letters
from financial institutions for all of the necessary debt and equity financing
for the proposed acquisition.
16. The proposed transaction represents an improper attempt to
eliminate the public shareholders of Transportation Technologies' to permit
defendants to retain for themselves Transportation Technologies valuable
business and assets. Indeed, the Company's shares have traded at $19.75 as
recently as September 1999. Defendants are attempting to take advantage of a
temporary decline in Transportation Technologies' stock price to buy the Company
at an inadequate price.
17. The price of $20 per share to be paid to the class members
is uncon scionable, unfair and inadequate consideration because, among other
things: (a) the intrinsic value of the stock of Transportation Technologies is
materially in excess of $20 per share, giving due consideration to the
possibilities of growth and profitability of Transportation Technologies in
light of its business, earnings and earnings power, present and future; (b) the
$20 per share price is inadequate and offers an inadequate premium to the public
stockholders of Transportation Technologies' and (c) the $20 per share price is
not the result of arm's length negotiations but was fixed arbitrarily by Begel
Group to "cap" the market price of Transportation Technologies' stock, as part
of a plan for
5
<PAGE>
defendants to obtain complete ownership of Transportation Technologies' assets
and business at the lowest possible price.
18. The proposed bid serves no legitimate business purpose of
Transpor tation Technologies but rather is an attempt by defendants to unfairly
benefit themselves from the transaction at the expense of Transportation
Technologies' public stockholders. The proposed plan will, for a grossly
inadequate consideration, deny plaintiff and the other members of the class
their right to share proportionately in the future success of Transportation
Technologies and its valuable assets, while permitting Begel Group to reap huge
benefits from the transaction.
19. By reason of the foregoing, the individual defendants have
violated their fiduciary duties to Transportation Technologies and the remaining
stockholders of Transportation Technologies by agreeing to the transaction on
the terms presently proposed.
20. Plaintiff and the class have suffered and will suffer
irreparable damage unless defendants are enjoined from breaching their fiduciary
duties and from carrying out the aforesaid plan and scheme.
21. Plaintiff and the other members of the class have no
adequate remedy at law.
WHEREFORE, plaintiff demands judgment against the defendants
jointly and severally, as follows:
6
<PAGE>
A. declaring this action to be a class
action and certify ing plaintiff as
class representative;
B. enjoining, preliminarily and
permanently, Begel Group's offer for
acquisition of the Transportation
Technologies stock owned by
plaintiff and the other members of
the class under the terms presently
proposed;
C. to the extent, if any, that the
transaction or transac tions
complained of are consummated prior
to the entry of this Court's final
judgment, rescinding such
transaction or transactions, and
granting, INTER ALIA, rescissory
damages;
D. directing that defendants pay to
plaintiff and the other members of
the class all damages caused to them
and account for all profits and any
special benefits obtained as a
result of their unlawful conduct;
E. awarding the plaintiff the costs and
disbursements of this action,
including a reasonable allowance for
7
<PAGE>
the fees and expenses of plaintiff's
attorneys and experts, and
F. granting plaintiff and the other
members of the class such other and
further relief as may be just and
proper.
Dated: December 17, 1999
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/_________________________
P.O. Box 1070
919 N. Market Street
Suite 1401
Mellon Bank Center
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND, LABATON, RUDOFF
& SUCHAROW, LLP
100 Park Avenue
New York, NY 19917
(212) 907-0700
SHEPHERD & GELLER
7200 W. Camino Real
Suite 203
Boca Raton, FL 33433
(561) 750-3000
8
<PAGE>
Exhibit 99(i)(7)
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
WILLIAM KREOFSKY, On Behalf of Himself ) Case No. ___________
and All Others Similarly Situated, )
)
Plaintiff, )
)
vs. )
) CLASS ACTION COMPLAINT
TRANSPORTATION TECHNOLOGIES, ) FOR BREACH OF FIDUCIARY
INC., THOMAS M. BEGEL, ANDREW M. ) DUTY
WELLER, FRANCES A. STOBLE, R. PHILIP )
SILVER, CAMILLO SANTOMERO, )
)
Defendants. ) JURY TRIAL DEMANDED
Plaintiff, William Kreofsky, by and through his attorneys, alleges upon
personal knowledge as to his own acts and upon information and belief as to all
other matters, as follows:
NATURE OF THE ACTION
1. This is a shareholder class action on behalf of the public
shareholders of Defendant Transportation Technologies, Inc., ("TTII" or the
"Company") against TTII and its Board. Plaintiff seeks to enjoin defendants'
breach of fiduciary duties and self-dealing arising out of a management-led
proposed buyout of TTII by an insider investor group led by defendants Thomas
Begel ("Begel") and Andrew Weller ("Weller").
<PAGE>
PARTIES
2. Plaintiff William Kreofsky is a citizen of Minnesota and has been an
owner of TTII common stock at all times relevant hereto.
3. Defendant TTII is a Delaware corporation with its principal
executive offices and place of business located at 980 N. Michigan Avenue, Suite
1000, Chicago, IL. TTII is a manufacturer of wheel-end components, body and
chassis components, seating, steerable drive axles, and gearboxes for the
heavy-duty truck industry and other castings for the heavy-duty truck industry
and various industrial markets.
4. Each of the following defendants (collectively referred to as the
"Individual Defendants") are members of TTII's Board of Directors ("Board").
a. Defendant Begel is the Chairman, President, and the Chief
Executive Officer of the Company.
b. Defendant Weller is Executive Vice President and Chief
Financial Officer for the Company, and he also serves as a director.
c. Defendant Francis A. Sroble is a director.
d. Defendant R. Philip Silver is a director.
e. Defendant Camillo Santomero is a director.
JURISDICTION AND VENUE
5. The claims asserted herein arise solely under state statutory and
common law. This Court has jurisdiction over this cause of action.
2
<PAGE>
6. This Court has jurisdiction over each of the defendants as each of
the defendants conducts business in, resides in, is a citizen of, and/or
maintains operations in this County.
7. Venue is proper in this Court because certain defendants are
residents of this County and defendants' wrongful acts arose in and emanated
from this County.
FACTUAL ALLEGATIONS
8. On December 14, 1999, TTII publicly announced that an investor
group, led by Begel and Weller, had made a proposal to acquire all of the
outstanding common shares of TTII common stock for $20 cash per share.
9. The offer to purchase the Company's outstanding common stock at $20
is a bargain basement price, and extremely undervalues the shires owned by the
Class.
10. The proposed sale was not the result of an adequate independent
market check and is in violation of the fiduciary duties owed to the TTII
shareholders by the defendants.
FIDUCIARY DUTIES OF TTII'S DIRECTORS AND OFFICERS
11. The Individual Defendants, as officers and/or directors of TTII,
have a fiduciary duty to plaintiff and the other public shareholders of TTII. As
fiduciaries, the Individual Defendants owe plaintiff and the other members of
the Class the utmost obligations of good faith, loyalty, independence, honesty,
fair dealing, due care, diligence and full, candid and adequate disclosure.
3
<PAGE>
12. The Individual Defendants have an affirmative fiduciary obligation
at all times and in all transactions affecting TTII and its shareholders to act
in good faith, with reasonable care, and in the best interest of TTII and its
shareholders.
13. In accordance with Ms/her duties of loyalty and good faith, a
Director or Officer must not:
a. Participate in any transaction where the Director or
Officer receives or is entitled to receive a personal financial benefit not
equally shared by the shareholders of the corporation; and/or
b. Unjustly enrich themselves at the expense or to the
detriment of a corpora tion's shareholders.
14. In this case, where Directors of a publicly traded corporation have
undertaken a transaction that will result in a change in corporate control, the
Directors have an affirmative fiduciary obligation to obtain the highest value
reasonably available for the corporation's shareholders. To comply with these
duties, the Directors may not take any action that:
a. Contractually prohibits them from complying with theft
fiduciary duties;
b. Will otherwise adversely affect their duty to search and
secure the best value for the corporation's shareholders;
c. Adversely affects the value provided to the corporation's
shareholders; and/or
4
<PAGE>
d. Will discourage or inhibit alternative offers to purchase
control of the corporation or its assets.
15. The management led buyout of the Company inures solely to the
personal benefit of defendants Begel and Weller, as intended by the Individual
Defendants, and to the detriment of the plaintiff and the Class because too
little is being paid for their shares.
16. Because the Individual Defendants have breached their duties in
connection with the sale-of-control, the burden of proving the entire fairness
of the sale-of-control, including all aspects of its negotiation, structure and
price, is placed upon the Individual Defendants.
17. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
a. Undertake an appropriate and independent evaluation of
TTII's net worth as a strategic investment candidate;
b. Actively evaluate any proposed transaction and engage in a
meaningful auction with third parties in an attempt to obtain the best value for
TTII's public shareholders;
c. Act independently so that the interests of TTII's public
shareholders will be protected; and
d. Adequately ensure that defendants do not subvert the
interests of TTII's public shareholders because of conflicts of interest that
may exist between the Individual Defendants' own interests and their fiduciary
obligation to maximize shareholder value or, if
5
<PAGE>
such conflicts exist, to ensure that all conflicts are resolved in the best
interests of TTII's public shareholders.
18. Plaintiff and the other members of the Class have been and will be
injured if this sale takes place in that they will not receive their fair
proportion of the value of TTII's assets and business, their holdings will be
severely diluted, and they have been prevented from obtaining fair and adequate
consideration for their shares of TTII common stock.
19. The consideration to be paid to TTII in the proposed
sale-of-control is unconscio nable, unfair and grossly inadequate because, among
other things:
a. The intrinsic value of control of TTII is materially in
excess of the amount offered in the sale-of-control, giving due consideration to
the anticipated operating results, cash flow and profitability of the Company;
and
b. The consideration to be received by TTII is not the result
of an appropriate evaluation of the value of TTII because the Individual
Defendants have not taken reasonable steps to accurately ascertain TTII's value
through an adequate market check.
20. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and may consummate the
proposed sale-of-control which will exclude the Class from its fair share of
TTII's valuable assets and businesses, and/or benefit the Individual Defendants
in an unfair manner all to the irreparable harm of plaintiff and the Class.
21. Plaintiff and the Class have no adequate remedy at law.
6
<PAGE>
CLASS ACTION ALLEGATIONS
22. Plaintiff brings this action as a class action, pursuant to 735
ILCS 5/2-801 et seq. of the Illinois Rules of Civil Procedure, on behalf of
himself and all other stockholders of TTII common stock, and their successors in
interest, except defendants named herein and any person, firm, trust,
corporation or other entity related to or affiliated with any of the defendants
(the "Class").
23. This action is properly maintainable as a class action.
24. The Class of stockholders is so numerous that joinder of all
members is impracti cable. TTII has approximately 10.3 million shares of common
stock outstanding. There are thousands of stockholders of record who are located
throughout the United States.
25. There are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual Class member. The
common questions include, but are not limited to, whether, in connection with
the proposed sale-of-control:
a. The Individual Defendants have breached their fiduciary
duty to maximize shareholder value for the benefit of plaintiff and the other
members of the Class;
b. The sale-of-control consideration is unfair and inadequate;
c. Defendants have breached their fiduciary duty of undivided
loyalty with respect to plaintiff and the other members of the Class;
d. Defendants have breached their fiduciary duty of
independence with respect to plaintiff and the other members of the Class;
7
<PAGE>
e. The Individual Defendants are engaging in self-dealing;
f. Defendants have breached their fiduciary duty of due care
with respect to plaintiff and the other members of the Class;
g. The Individual Defendants have been unjustly enriched;
h. Defendants have breached any of their other fiduciary
duties owed to plaintiff and the other members of the Class, including the
duties of good faith, diligence, honesty, fair dealing and hull, candid and
adequate disclosure; and
i. Plaintiff and the other members of the Class would be
irreparably damaged were the transactions complained of herein consummated.
26. Plaintiff's claims are typical of the claims of the other members
of the Class and plaintiff does not have any interests adverse to the Class.
27. The plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
plaintiff is an adequate representative of the Class.
28. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of' the Class which would establish incompatible standards
of conduct for the party opposing the Class.
29. The plaintiff anticipates that there will be no difficulty in the
management of this litigation as a class action.
8
<PAGE>
30. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
Because of the size of the individual Class members' claims, few, if any, Class
members could afford to seek legal redress individually for the wrongs
complained of herein, Absent a class action, the Class members will continue to
suffer damage and TTII's violations of law will proceed without remedy.
PRAYER FOR RELIEF
WHEREFORE, plaintiff demands preliminary and permanent equitable
relief, including injunctive relief: in his favor and in favor of the Class and
against defendants as follows:
1. Declaring that this action is properly maintainable as a class
action and certifying plaintiff as Class representative;
2. Declaring and decreeing that the sale-of-control transaction was
entered into in breach of the fiduciary duties of defendants and is therefore
unlawful and unenforceable;
3. Preliminarily and permanently enjoining defendants, their counsel,
agents, employees and all persons acting in concert with them from consummating
the sale-of-control;
4. Directing the Individual Defendants to exercise their fiduciary
duties to obtain a transaction which is in the best interests of shareholders;
5. Rescinding, to the extent already implemented, the proposed
sale-of-control or any of the terms thereof;
6. Awarding plaintiff the costs and disbursements of this action,
including reason able attorneys' and experts' fees; and
9
<PAGE>
7. Granting such other and further relief as this Court may deem just
and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED this ____ day of January, 2000.
Respectfully submitted,
WILLIAM KREOFSKY, On Behalf of Himself
and All Others Similarly Situated,
______________________________________
Michael J. Freed
Carol V. Gilden
MUCH SHELIST FREED DENENBERG
AMENT & RUBENSTEIN, P.C.
200 LaSalle Street
Suite 2100
Chicago, IL 60601
Phone: 312/346-3100
Atty. No.: 80580
Steven E. Cauley
Scott E. Poynter
Gina M. Cothern
LAW OFFICES OF STEVEN E.
CAULEY, P.A.
2200 N. Rodney Parham Rd.
Cypress Plaza, Suite 218
Little Rock, AR 72212
Phone: 501/312-8500
Attorneys for Plaintiff
10
