<PAGE> 1
PRELIMINARY COPIES
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
CONSO INTERNATIONAL CORPORATION
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies: Common Stock
2) Aggregate number of securities to which transaction applies:
7,436,500 shares (including shares subject to options
exercisable at less than $9.00 per share.)
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): $9.00 per share of Common Stock, based upon
cash merger consideration per share.
4) Proposed maximum aggregate value of transaction: $66,928,500
5) Total fee paid: $13,385.70
[ ] Fee paid previously paid with written preliminary materials.
<PAGE> 2
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 3
PRELIMINARY COPIES
CONSO INTERNATIONAL CORPORATION
P.O. BOX 326
513 N. DUNCAN BYPASS
UNION, SOUTH CAROLINA 29379
____________, 1999
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of Conso International Corporation, to be held on __________, 1999,
at ______ local time, at Conso's offices at 513 North Duncan Bypass, Union,
South Carolina. A notice of the special meeting, a Proxy Statement and related
information and a proxy card are enclosed. All holders of the outstanding shares
of Conso Common Stock as of _________, 1999 will be entitled to notice of and to
vote at the special meeting.
At the special meeting, you will be asked to consider and to vote on a
proposal to approve and adopt a Merger Agreement dated as of October 5, 1999 by
and among Conso, CIC Acquisition Co. ("Parent") and CIC Acquisition Sub, Inc.
("Acquisition Sub"), a wholly-owned subsidiary of Parent, and the related Plan
of Merger that is included in the Merger Agreement. Pursuant to the Merger
Agreement and the related Plan of Merger, Acquisition Sub will be merged with
and into Conso. If the Merger Agreement is approved and the merger becomes
effective, each outstanding share of Conso Common Stock (other than certain
shares of Common Stock held by myself, J. Cary Findlay, or by shareholders who
perfect their dissenters' rights under South Carolina law) will be converted
into the right to receive $9.00 in cash.
Conso will be the surviving corporation in the merger. In connection
with the merger, 533,378 shares of Conso Common Stock owned by me will be
converted into the right to receive stock in the surviving corporation
representing approximately 19.2% of its total equity. Of the remaining equity
interest, consisting of voting and non-voting stock, approximately 80.2% will be
owned by Parent and less than 1% is expected to be acquired by other members of
Conso management. Therefore, if the merger is consummated, Conso will no longer
be a publicly-held company.
Approval of the merger requires the affirmative vote of the holders of
two-thirds of all outstanding shares of Conso Common Stock. I have agreed to
vote my shares, representing approximately 39.1% of the outstanding shares of
Conso Common Stock, in favor of the merger. I urge you to read the accompanying
Proxy Statement carefully because it sets forth details of the proposed merger
and other important information related to the merger.
CONSO'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
DETERMINED THAT THE MERGER IS ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF
CONSO'S SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN
IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
REVOKE SUCH PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. IF YOUR SHARES ARE HELD IN "STREET NAME" BY YOUR
BROKER OR OTHER NOMINEE, YOU SHOULD BE PROVIDED APPROPRIATE FORMS BY YOUR BROKER
OR OTHER NOMINEE TO INSTRUCT THE BROKER OR NOMINEE TO VOTE YOUR SHARES. YOUR
PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Sincerely,
J. Cary Findlay
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
PRELIMINARY COPIES
CONSO INTERNATIONAL CORPORATION [LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ___________, 1999
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Conso
International Corporation will be held on __________, 1999, at _____ local time,
at Conso's offices at 513 North Duncan Bypass, Union, South Carolina, for the
purpose of considering and acting upon the following matters:
1. To consider and vote upon a proposal to approve and adopt a Merger
Agreement dated as of October 5, 1999 by and among Conso, CIC
Acquisition Co. ("Parent") and CIC Acquisition Sub, Inc. ("Acquisition
Sub"), a wholly-owned subsidiary of Parent, and the related Plan of
Merger that is included in the Merger Agreement. Pursuant to the Merger
Agreement and the related Plan of Merger, Acquisition Sub will be
merged with and into Conso and each outstanding share of Conso Common
Stock (other than certain shares held by J. Cary Findlay or by
shareholders who perfect their dissenters' rights under South Carolina
law) will be converted into the right to receive $9.00 in cash. A copy
of the Merger Agreement and related Plan of Merger is attached as
Appendix A to the accompanying Proxy Statement; and
2. To act upon such other and further business as may properly come before
the special meeting or any adjournment thereof.
The Board of Directors has specified __________, 1999, at the close of
business, as the record date for the purpose of determining the shareholders who
are entitled to receive notice of and to vote at the special meeting.
Please read the Proxy Statement and accompanying materials for a more
complete statement regarding the matters to be acted upon at the special
meeting.
APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF CONSO COMMON STOCK AT THE
SPECIAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
CONSO SHAREHOLDERS ARE ENTITLED TO DISSENT FROM THE MERGER AND RECEIVE
PAYMENT OF THE "FAIR VALUE" OF THEIR SHARES UPON COMPLIANCE WITH THE PROCEDURES
PRESCRIBED BY ARTICLE 13 OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT. SEE
"THE MERGER - DISSENTERS' RIGHTS" IN THE ACCOMPANYING PROXY STATEMENT AND THE
FULL TEXT OF CHAPTER 13 ATTACHED THERETO AS APPENDIX B.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN
IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. IF YOUR SHARES ARE HELD IN "STREET NAME" BY YOUR
BROKER OR OTHER NOMINEE, YOU SHOULD BE PROVIDED APPROPRIATE FORMS BY YOUR BROKER
OR OTHER NOMINEE TO INSTRUCT THE BROKER OR NOMINEE TO VOTE YOUR SHARES. YOUR
PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
J. Cary Findlay
Chairman
Union, South Carolina
___________, 1999
<PAGE> 5
PRELIMINARY COPIES
CONSO INTERNATIONAL CORPORATION
P.O. BOX 326
513 N. DUNCAN BYPASS
UNION, SOUTH CAROLINA 29379
- - - -------------------------------------------------------------------------------
PROXY STATEMENT
RELATING TO A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _________, 1999
- - - -------------------------------------------------------------------------------
This Proxy Statement is being mailed to holders of Common Stock of
Conso International Corporation in connection with the solicitation of proxies
by Conso's Board of Directors for the special meeting of shareholders to be held
on ____________, 1999, at ________ local time, at Conso's offices at 513 North
Duncan Bypass, Union, South Carolina, or at any adjournment thereof. At the
special meeting, Conso's shareholders will consider and vote upon a proposal to
approve and adopt a Merger Agreement dated as of October 5, 1999 among Conso,
CIC Acquisition Co. ("Parent") and CIC Acquisition Sub, Inc. ("Acquisition
Sub"), a wholly-owned subsidiary of Parent, and the related Plan of Merger that
is included in the Merger Agreement.
If the merger is consummated, Acquisition Sub will be merged into Conso
and Conso will be the surviving corporation. The Merger Agreement and related
Plan of Merger provide that each outstanding share of Conso Common Stock (other
than some of the shares held by J. Cary Findlay and shares held by shareholders
who perfect their dissenters' rights under South Carolina law) will be converted
into the right to receive $9.00 in cash. Each outstanding share of the capital
stock of Acquisition Sub will be converted into a comparable share of common or
preferred stock of the surviving corporation in the merger. In addition, 533,378
shares of Conso Common Stock held by J. Cary Findlay will be converted into
shares of common and preferred stock of the surviving corporation.
The merger is not expected to occur unless all the conditions to the
merger are satisfied. One of the conditions is that Parent obtains the financing
necessary to complete the merger in accordance with financing commitments that
Parent has already obtained. Therefore, even if the shareholders approve the
merger and adopt the Merger Agreement and the Plan of Merger, there is no
assurance that the merger will be consummated.
This Proxy Statement is first being sent to shareholders on or about
_____________ , 1999.
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 NOR UPON THE ACCURARY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
1
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.........................................................................4
CAUTIONARY STATEMENT AS TO FORWARD-LOOKING INFORMATION.........................................................6
SUMMARY........................................................................................................7
THE SPECIAL MEETING..........................................................................................7
PURPOSE OF THE MEETING.......................................................................................7
QUORUM AND VOTE REQUIRED.....................................................................................7
THE PARTIES TO THE TRANSACTION...............................................................................7
THE MERGER...................................................................................................8
CERTAIN EFFECTS OF THE MERGER................................................................................9
PROCEDURES FOR EXCHANGE OF CERTIFICATES......................................................................9
RECOMMENDATION OF BOARD OF DIRECTORS.........................................................................9
OPINION OF FINANCIAL ADVISOR.................................................................................9
VOTING OF SHARES OF CERTAIN HOLDERS.........................................................................10
INTERESTS OF CERTAIN PERSONS IN THE MERGER..................................................................10
U.S. FEDERAL INCOME TAX CONSEQUENCES........................................................................10
THE MERGER AGREEMENT........................................................................................10
DISSENTERS' RIGHTS..........................................................................................13
FINANCING OF THE MERGER.....................................................................................13
COMPARATIVE MARKET PRICE DATA AND DIVIDENDS...................................................................14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA...............................................................16
SPECIAL FACTORS...............................................................................................17
BACKGROUND OF THE MERGER....................................................................................17
OPINION OF FINANCIAL ADVISOR................................................................................20
CONSO'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS....................................25
CONSO'S AND J. CARY FINDLAY'S BELIEF AS TO THE FAIRNESS OF THE MERGER.......................................27
PARENT'S AND ACQUISITION SUB'S BELIEF AS TO THE FAIRNESS OF THE MERGER......................................28
CERTAIN EFFECTS OF THE MERGER...............................................................................29
INTERESTS OF CERTAIN PERSONS IN THE MERGER..................................................................29
INDEMNIFICATION AND INSURANCE...............................................................................31
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS..................................31
EFFECT OF THE MERGER ON CONSO STOCK OPTIONS.................................................................33
THE SPECIAL MEETING...........................................................................................33
GENERAL.....................................................................................................33
RECORD DATE AND VOTING......................................................................................33
VOTING AND REVOCATION OF PROXIES............................................................................34
SOLICITATION OF PROXIES.....................................................................................35
THE MERGER....................................................................................................35
EFFECTS OF THE MERGER.......................................................................................35
EFFECTIVE TIME OF THE MERGER................................................................................36
PROCEDURES FOR EXCHANGE OF CERTIFICATES FOR MERGER CONSIDERATION............................................36
PLANS OR PROPOSALS AFTER THE MERGER.........................................................................37
DISSENTERS'RIGHTS...........................................................................................38
ACCOUNTING TREATMENT........................................................................................41
THE MERGER AGREEMENT..........................................................................................41
GENERAL.....................................................................................................41
EFFECTIVE TIME OF THE MERGER................................................................................41
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS................................................................41
REPRESENTATIONS AND WARRANTIES..............................................................................41
CERTAIN COVENANTS AND AGREEMENTS............................................................................42
NO SOLICITATION OF OTHER OFFERS.............................................................................43
</TABLE>
2
<PAGE> 7
<TABLE>
<S> <C>
CONDITIONS TO CONSUMMATION OF THE MERGER....................................................................44
TERMINATION OF THE MERGER AGREEMENT.........................................................................45
TERMINATION FEES; EXPENSES..................................................................................46
AMENDMENTS TO THE MERGER AGREEMENT..........................................................................47
FINANCING OF THE MERGER.......................................................................................47
GENERAL.....................................................................................................47
CREDIT FACILITIES...........................................................................................47
EQUITY INVESTMENTS..........................................................................................47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................49
CERTAIN INFORMATION CONCERNING THE TRANSACTION PARTICIPANTS...................................................51
CONSO.......................................................................................................51
DIRECTORS AND EXECUTIVE OFFICERS OF CONSO...................................................................51
J. CARY FINDLAY.............................................................................................53
PARENT AND ACQUISITION SUB..................................................................................53
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND ACQUISITION SUB..............................................54
SHAREHOLDER PROPOSALS.........................................................................................54
INDEPENDENT PUBLIC ACCOUNTANTS................................................................................54
AVAILABLE INFORMATION.........................................................................................54
INFORMATION INCORPORATED BY REFERENCE.........................................................................55
APPENDICES
APPENDIX A - MERGER AGREEMENT
APPENDIX B - CHAPTER 13 OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT -DISSENTERS' RIGHTS
APPENDIX C - OPINION OF THE ROBINSON-HUMPHREY COMPANY, LLC
</TABLE>
3
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WITH WHOM IS CONSO MERGING?
A: CIC Acquisition Sub, Inc. will merge with and into Conso. CIC
Acquisition Sub, Inc. is a wholly-owned subsidiary of CIC Acquisition
Co., both of which corporations are newly-formed by Citicorp Venture
Capital, Ltd. Conso will be the surviving corporation in the merger. As
a result of the proposed merger, an investor group consisting of Parent
and J. Cary Findlay (the current Chairman of the Board, President and
Chief Executive Officer of Conso), and to include other members of
Conso's management, will own all of Conso's outstanding Common Stock.
See "Certain Information Concerning the Transaction Participants."
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Conso shareholders (other than shareholders who perfect their
dissenters' rights and other than J. Cary Findlay with respect to
533,378 shares of his Conso Common Stock) will be entitled to receive
$9.00 in cash, without interest, for each share of Conso Common Stock
held by them immediately prior to the effective time of the merger. See
"The Merger-Effects of the Merger" and "The Merger Agreement-
Consideration to Be Received by Shareholders."
Q: WHAT IF I HAVE STOCK OPTIONS?
A: Conso has accelerated the vesting provisions of all outstanding options
to purchase Conso Common Stock under Conso's 1993 Employee Stock Option
Plan so that all such options are now fully vested and exercisable. In
addition, Conso has accelerated the expiration date of all outstanding
options to the effective time of the merger (unless such options
otherwise expire prior to that time under their terms). Therefore, if
you hold options, you must exercise your options by the effective date
of the merger or they will expire and terminate. See "The Merger -
Effect of the Merger on Conso Stock Options."
Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE TO APPROVE AND
ADOPT THE MERGER AGREEMENT AND RELATED PLAN OF MERGER?
A: In the opinion of the Board of Directors, the terms and provisions of
the Merger Agreement and related Plan of Merger and the merger are
advisable, fair to and in the best interests of Conso and its
shareholders. To review the background of and reasons for the merger,
see "Special Factors - Background of Merger," "-Conso's Reasons for the
Merger" and "-Recommendation of the Board of Directors."
Q: HOW MANY VOTES ARE REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT?
A: The affirmative vote of the holders of two-thirds of all outstanding
shares of Conso Common Stock as of the record date is required to
approve and adopt the Merger Agreement and the related Plan of Merger.
J. Cary Findlay has agreed to vote shares owned by him, aggregating
approximately 39.1% of the outstanding shares of Conso Common Stock, in
favor of the Merger Agreement. See "The Special Meeting -Record Date
and Voting."
Q: IF I AM A SHAREHOLDER, WHAT DO I NEED TO DO NOW?
A: After you read and consider carefully the information contained in this
Proxy Statement, please complete, sign and date your proxy card and
mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the special meeting.
4
<PAGE> 9
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Shareholders who oppose the merger may dissent from the merger and seek
to receive the statutorily determined "fair value" of their shares by
complying with the procedures of South Carolina law. See "The Merger -
Dissenters' Rights."
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Yes, if you provide instructions to your broker on how to vote. You
should complete, sign, date and return the proxy card or voting
instruction form and otherwise follow the directions provided by your
broker regarding how to instruct your broker to vote your shares.
Q: CAN I CHANGE MY VOTE OR REVOKE MY PROXY AFTER I HAVE MAILED MY SIGNED
PROXY CARD?
A: Yes, you can change your vote at any time before your proxy is voted at
the special meeting. You can do this in one of three ways. First, you
can deliver to Conso a written notice stating that you would like to
revoke your proxy. Second, you can complete and submit a new proxy
card. If you choose either of these methods, you must timely submit
your notice of revocation or your new proxy card to Conso. Third, you
can attend the special meeting and vote in person. Simply attending the
special meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions
received from your broker to change your vote. See "The Special Meeting
- Voting and Revocation of Proxies."
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. Shortly after the merger, you will receive a letter of transmittal
with instructions informing you how to send in your stock certificates
to an exchange agent. See "The Merger - Procedures for Exchange of
Certificates for Merger Consideration."
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as soon as possible. For
the merger to occur, it must be approved by Conso's shareholders. If
shareholder approval is obtained and if all other conditions are
satisfied, the merger is expected to be completed and effective within
a few days after the special meeting.
Q: WHAT ARE THE TAX CONSIDERATIONS OF THE MERGER?
A: The receipt of cash by a shareholder in exchange for Conso Common Stock
surrendered in the merger or upon the exercise of dissenters' rights
will, in each case, constitute a taxable transaction for U.S. federal
income tax purposes and also may be a taxable transaction under state,
local, foreign and other tax laws. In general, a shareholder who
receives cash in exchange for Conso Common Stock in the merger will
recognize gain or loss equal to the difference between $9.00 per share
and such shareholder's adjusted tax basis in the shares exchanged. See
"Special Factors - Certain U.S. Federal Income Tax Consequences of the
Merger to Shareholders." Shareholders are encouraged to consult with
their own tax advisors regarding the tax consequences of the merger.
5
<PAGE> 10
CAUTIONARY STATEMENT AS TO FORWARD-LOOKING INFORMATION
Statements contained or incorporated by reference in this Proxy
Statement as to Conso's outlook for sales, operations, capital expenditures and
other amounts, budgeted amounts and other projections of future financial or
economic performance, and statements of plans and objectives for future
operations are "forward-looking" statements, and are being provided in reliance
upon the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Important factors that could cause actual results or events to
differ materially from those projected, estimated, assumed or anticipated in any
such forward-looking statements include, without limitation: adverse changes in
Conso's relationships with significant customers; general economic conditions in
Conso's markets, including inflation, recession, interest rates and other
economic factors, especially in the United States and the United Kingdom but
also including other areas of the world where Conso markets its products;
changes in consumer fashion preferences for finished products in the home
furnishings market, which may affect the demand for Conso's products; any loss
of the services of Conso's key management personnel; increased competition in
the United States and abroad, both from existing competitors and from any new
entrants in the decorative trimmings business; Conso's ability to successfully
continue its international expansion and to successfully and profitably
integrate into its operations any existing businesses it may acquire; changes in
the cost and availability of raw materials; changes in governmental regulations
applicable to Conso's business; fluctuations in exchange rates relative to the
U.S. dollar for currencies of the United Kingdom and other nations where Conso
does business; casualty to or disruption of production facilities and equipment;
delays and disruptions in the shipment of products and raw materials; disruption
of operations due to strikes or other labor unrest; and other factors that
generally affect the business of manufacturing companies with international
operations.
6
<PAGE> 11
SUMMARY
This summary highlights selected information from this Proxy Statement
and does not contain all of the information that is important to you. To
understand the merger fully, you should read carefully this entire Proxy
Statement (including the information incorporated by reference) and the
appendices.
THE SPECIAL MEETING
The special meeting of shareholders will be held on __________ , 1999,
at ______ local time, at Conso's offices at 513 North Duncan Bypass, Union,
South Carolina. Only holders of record of shares of Conso Common Stock at the
close of business on __________, 1999 are entitled to receive notice of and to
vote at the special meeting. As of _______, 1999, there were approximately ____
holders of record of Conso Common Stock and 7,335,925 shares of Common Stock
outstanding. Each share of Common Stock is entitled to cast one vote at the
special meeting. For additional information regarding the special meeting, see
"The Special Meeting" in the main body of this Proxy Statement.
PURPOSE OF THE MEETING
At the special meeting, shareholders will consider and vote upon a
proposal to approve and adopt the Merger Agreement dated as of October 5, 1999
by and among Conso, Parent and Acquisition Sub, a wholly-owned subsidiary of
Parent, and the related Plan of Merger that is included in the Merger Agreement.
Parent and Acquisition Sub are entities newly formed by Citicorp Venture
Capital, Ltd. ("CVC"), a venture capital and private equity investor, for the
purpose of the acquisition of Conso by an investor group including Parent and J.
Cary Findlay, and to include other members of Conso's management. A copy of the
Merger Agreement and related Plan of Merger is attached as Appendix A to this
Proxy Statement. The Merger Agreement provides for the merger of Acquisition Sub
with and into Conso.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of the holders of a majority of
all outstanding shares of Conso Common Stock at the special meeting is necessary
to constitute a quorum at the meeting. Approval of the Merger Agreement requires
the affirmative vote of the holders of two-thirds of all outstanding shares of
Conso Common Stock. Abstentions and broker non-votes will have the effect of a
vote AGAINST the merger. For additional information regarding the vote required
at the special meeting, see "The Special Meeting -Record Date and Voting."
THE PARTIES TO THE TRANSACTION
Conso. Conso, together with its subsidiaries, is the world's largest
manufacturer of decorative trimmings for the home furnishings industry and,
through its subsidiary, Simplicity Pattern Co. Inc., is a leading producer of
patterns and other instructional material for home sewing of apparel, home
decorating, and crafts. Conso's Products Division, including its British
Trimmings subsidiary in the United Kingdom, produces and sells a full range of
knitted and woven fringes, decorative cords, tasseled accessories, jacquard and
other woven braids, and apparel trims, as well as sewing tapes and supplies.
Conso also distributes decorative window accoutrements and other home
furnishings accessories. Conso markets its products to manufacturers,
distributors and retailers through a worldwide sales force. Manufacturing
facilities are located in the United States, the United Kingdom, Mexico and
India. Conso is a South
7
<PAGE> 12
Carolina corporation. The Common Stock is traded on the Nasdaq National Market
under the symbol "CNSO." Conso's principal executive offices are located at 513
North Duncan Bypass, Union, South Carolina 29379, and the telephone number is
(864) 427-9004. For additional information, see "Certain Information Concerning
the Transaction Participants."
Parent and Acquisition Sub. Parent and Acquisition Sub, a wholly-owned
subsidiary of Parent, have been formed by CVC solely for the purpose of
completing the merger. Acquisition Sub is a South Carolina corporation and
Parent is a Delaware corporation. Neither Parent nor Acquisition Sub has engaged
in any business activity unrelated to the merger. After giving effect to the
merger and the expected purchase by other members of Conso's management of
shares of the surviving corporation at or shortly after the merger, Parent is
expected to own approximately 80.2% of the equity of the surviving corporation,
consisting of both voting and non-voting securities, with the remaining equity
to be owned by J. Cary Findlay (approximately 19.2%) and other members of
Conso's management (less than 1%). See "Financing of the Merger Equity
Investments." CVC is a venture capital and private equity investor and is an
indirect wholly-owned subsidiary of Citigroup Inc., a diversified holding
company whose businesses provide a broad range of financial services to consumer
and corporate customers around the world. The principal executive offices of
Parent and Acquisition Sub are located at the offices of CVC, 399 Park Avenue,
New York, New York 10043, and their telephone number is (212) 559-2754. For
additional information regarding CVC, Parent and Acquisition Sub, see "Certain
Information Concerning the Transaction Participants."
Continued Investment by J. Cary Findlay. In the merger, 533,378 shares
of Conso Common Stock owned by J. Cary Findlay (representing approximately 18.6%
of his total holdings of Conso Common Stock and approximately $4.8 million in
value at $9.00 per share) will be converted into common and preferred stock of
the surviving corporation (representing approximately 19.2% of the outstanding
equity of the surviving corporation). The remainder of Mr. Findlay's shares will
be converted into the right to receive $9.00 per share in cash. Mr. Findlay has
been Chairman of the Board of Directors of Conso since 1986, and has served as
Conso's President and Chief Executive Officer from December 1987 to May 1995 and
from August 1998 until the present. For additional information regarding Mr.
Findlay's interest in the Merger, see "Special Factors - Background of the
Merger" and "-Interests of Certain Persons in the Merger" and "Financing of the
Merger-Equity Investments."
THE MERGER
Under the Merger Agreement and the related Plan of Merger, Acquisition
Sub will merge with and into Conso and the separate corporate existence of
Acquisition Sub will cease. Conso will be the surviving corporation in the
merger. Each outstanding share of Conso Common Stock (other than 533,378 shares
held by Mr. Findlay, which will be converted into shares of the surviving
corporation's common and preferred stock, and shares held by shareholders who
perfect their dissenters' rights under South Carolina law) will be converted
into the right to receive $9.00 in cash, without interest. Dissenting
shareholders will be entitled to receive from the surviving corporation in the
merger a cash payment in the amount of the "fair value" of such shares,
determined in the manner provided in Chapter 13 of the South Carolina Business
Corporation Act. All outstanding options to purchase Conso Common Stock under
Conso's 1993 Employee Stock Option Plan have become fully vested and will expire
if not exercised by the holders by the effective time of the merger. Each
outstanding share of Acquisition Sub will be converted into a share of common or
preferred stock of the surviving corporation in the merger.
8
<PAGE> 13
CERTAIN EFFECTS OF THE MERGER
As a result of the merger, Parent, J. Cary Findlay and, it is expected,
other members of Conso's management will acquire the entire equity interest in
Conso. Therefore, following the merger, the other holders of Conso Common Stock
will no longer have an equity interest in Conso and will no longer share in
Conso's future earnings and growth or in the risks associated with achieving
such earnings and growth. Instead, each other holder of Conso Common Stock at
the effective time of the merger will have the right to receive $9.00 (or, in
the case of dissenting shareholders, the statutorily determined "fair value")
for each share of Common Stock. Conso Common Stock will no longer be traded on
the Nasdaq National Market and the registration of the Common Stock under the
Securities Exchange Act of 1934 will be terminated. After such registration is
terminated, Conso will no longer be required to file periodic reports with the
Securities and Exchange Commission. For additional information regarding the
effects of the merger on Conso and its shareholders, see "Special
Factors-Certain Effects of the Merger" and "The Merger-Effects of the Merger."
PROCEDURES FOR EXCHANGE OF CERTIFICATES
As soon as practicable after the effective time of the merger, Conso as
the surviving corporation will mail a letter of transmittal and instructions for
surrendering stock certificates evidencing shares of Common Stock to each holder
of Common Stock. A shareholder should use the letter of transmittal to exchange
stock certificates for the merger consideration to which such holder is entitled
as a result of the merger. SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS. Shareholders should follow the procedures described in
"The Merger-Procedures for Exchange of Certificates for Merger Consideration."
RECOMMENDATION OF BOARD OF DIRECTORS
Conso's Board of Directors has unanimously determined that the merger
is advisable, fair to and in the best interests of Conso and its shareholders.
To protect against possible conflicts of interest, the Board established a
Special Committee of independent directors to review and evaluate the proposed
merger. The Special Committee, like the full Board, believes that the merger is
advisable, fair to and in the best interests of shareholders, and recommended it
to the full Board. ACCORDINGLY, THE BOARD OF DIRECTORS HAS APPROVED THE MERGER
AGREEMENT AND RELATED PLAN OF MERGER AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND RELATED PLAN OF
MERGER. For a discussion of the material factors considered by the Board of
Directors and the Special Committee in reaching their conclusion and the reasons
why the Board determined that the merger is fair, see "Special Factors-Conso's
Reasons for the Merger" and "-Recommendation of the Board of Directors."
OPINION OF FINANCIAL ADVISOR
The Robinson-Humphrey Company, LLC, Conso's financial advisor, has
delivered its written opinion to Conso's Board of Directors that, as of October
5, 1999, the cash merger consideration of $9.00 per share was fair to Conso's
shareholders from a financial point of view. For a summary of this opinion, see
"Special Factors-Opinion of Financial Advisor." A copy of Robinson-Humphrey's
opinion is attached as Appendix C to this Proxy Statement. Shareholders are
encouraged to read the opinion in its entirety.
9
<PAGE> 14
VOTING OF SHARES OF CERTAIN HOLDERS
J. Cary Findlay has agreed with Acquisition Sub to vote shares owned by
him representing approximately 39.1% of the outstanding shares of Conso Common
Stock in favor of the merger at the special meeting. For additional information
regarding Mr. Findlay's agreements to vote in favor of the merger, see "Special
Factors - Interests of Certain Persons in the Merger." [In addition, each of
Conso's directors and executive officers has indicated that he or she intends to
vote his or her shares of Common Stock in favor of the merger.]
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with
respect to the merger, shareholders should be aware that Mr. Findlay has
interests in the Merger that are different from those of shareholders generally.
Mr. Findlay, who is currently Chairman of the Board, President and Chief
Executive Officer of Conso, will continue to have an equity interest
(approximately 19.2%) in the surviving corporation after the merger. The
ultimate value of this interest could exceed or be less than the $9.00 per share
merger consideration to be received by unaffiliated shareholders in the merger.
For additional information regarding Mr. Findlay's interests in the merger, see
"Special Factors - Background of the Merger," "-Interests of Certain Persons in
the Merger" and "Financing of the Merger - Equity Investments."
U.S. FEDERAL INCOME TAX CONSEQUENCES
The receipt of $9.00 in cash for each share of Common Stock pursuant to
the merger will be a taxable transaction for U.S. federal income tax purposes
under the Internal Revenue Code of 1986, as amended, and also may be a taxable
transaction under applicable state, local, foreign and other tax laws. For U.S.
federal income tax purposes, each of Conso's shareholders generally will realize
taxable gain or loss as a result of the merger measured by the difference, if
any, between the tax basis of each share of Common Stock owned by such
shareholder and $9.00. Shareholders are encouraged to consult with their own tax
advisors regarding the tax consequences of the merger. For additional
information, see "Special Factors-Certain U.S. Federal Income Tax Consequences
of the Merger to Shareholders."
THE MERGER AGREEMENT
The Merger Agreement provides for the terms of the merger, including
representations and warranties of the parties, their obligations to be performed
prior to or in connection with the merger, conditions to consummation of the
merger, limitations on Conso's ability to solicit or consider other offers to
acquire Conso, and provisions for termination and amendment of the Merger
Agreement. See "The Merger Agreement."
Effective Time of the Merger
The merger will become effective upon the filing of Articles of Merger
with the Secretary of State of South Carolina. The filing will occur after all
conditions to the merger contained in the Merger Agreement have been satisfied
or waived. It is anticipated that the merger will be consummated as promptly as
practicable following the special meeting. For additional information regarding
the effective time of the merger, see "The Merger Agreement-General" and
"-Effective Time of the Merger."
10
<PAGE> 15
Conditions to Consummation of the Merger
The consummation of the merger is subject to the satisfaction of
various conditions. These conditions include, among others:
- the approval and adoption of the Merger Agreement and related Plan
of Merger by the holders of at least two-thirds of the outstanding
shares of Conso Common Stock, with the holders of no more than 6% of
the Conso Common Stock having given notice of their intention to
exercise their dissenters' appraisal rights;
- the absence of any adverse proceedings affecting Conso's business
or the ability of any party to perform its obligations under the
Merger Agreement;
- the absence of certain material adverse changes in Conso's
business;
- all representations and warranties made by Conso shall be true and
correct in all material respects as of the effective time of the
merger;
- debt financing for the merger having been funded under existing
commitments; and
- the cancellation, termination or exercise of all outstanding
options to purchase Conso Common Stock.
For additional information regarding the conditions of each party's obligation
to effect the merger, see "The Merger Agreement-Conditions to Consummation of
the Merger" and "-Termination of the Merger Agreement."
No Solicitation of Other Offers
The Merger Agreement provides that neither Conso nor any of its
subsidiaries (nor any of their representatives) will take any action:
- to solicit or encourage the making of any take-over proposal by
another party; or
- to furnish or disclose any information to any person or participate
in any discussions or negotiations as to another take-over proposal.
However, if the failure to take such action would breach the fiduciary
obligations of the Board of Directors, Conso may, in response to an unsolicited
take-over proposal by another party, furnish non-public or confidential
information and participate in discussions or negotiations with respect to any
take-over proposal that is reasonably likely to lead to a transaction that is
more favorable to Conso's shareholders than the merger with Acquisition Sub. For
additional information regarding the agreement not to solicit other offers, see
"The Merger Agreement-No Solicitation of Other Offers."
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the
consummation of the merger, whether before or after approval of the Merger
Agreement by Conso's shareholders:
- by mutual consent of Parent and Conso;
- by Parent or Conso if the merger is not completed on or prior to
January 31, 2000, unless the terminating party has breached the
Merger Agreement;
11
<PAGE> 16
- by Parent or Conso in the event of an uncured breach by the other
party of any representation, warranty, covenant or agreement
contained in the Merger Agreement;
- by Parent or Conso if consummation of the merger is prohibited by
any applicable law;
- by Parent or Conso if shareholder approval is not obtained at the
special meeting;
- by Conso under certain circumstances if it enters into an agreement
for a take-over proposal with another party that is more favorable
to Conso's shareholders from a financial point of view and complies
with the notice and other provisions of the Merger Agreement,
including the payment of a termination fee to Parent;
- by Parent, if Conso or its Board of Directors shall have withdrawn
or modified in a manner materially adverse to Parent or Acquisition
Sub the Board's approval or recommendation of the merger, or if the
Board shall have approved another take-over proposal by another
party, or if Conso has materially breached its obligations regarding
the solicitation of other offers to acquire Conso;
- by Parent or Conso if Robinson-Humphrey shall have withdrawn its
fairness opinion or modified its fairness opinion in a manner adverse
to Parent or Acquisition Sub; or
- by Parent, if certain material adverse changes occur affecting
financial markets in general.
For additional information regarding the ability of the parties to terminate the
Merger Agreement, see "The Merger Agreement-Termination of the Merger
Agreement."
Termination Fees; Expenses
The Merger Agreement provides for the payment by Conso of a fee of $2
million to Parent if the Merger Agreement is terminated in certain
circumstances, including the following:
- if Conso or its Board shall have withdrawn or modified in a manner
materially adverse to Parent or Acquisition Sub the Board's approval
or recommendation of the merger, if the Board shall have approved
a take-over proposal by another party, or if Conso has materially
breached its obligations regarding the solicitation of other offers
to acquire Conso;
- if Conso proposes to enter into a agreement providing for a
take-over proposal by another party; or
- if the Merger Agreement is terminated (i) because of a failure to
obtain shareholder approval, (ii) because the merger is not
consummated by January 31, 2000, or (iii) because Robinson-Humphrey
has withdrawn or modified its fairness opinion in a manner adverse to
Parent or Acquisition Sub, and within six months of any such
termination Conso enters into an agreement for, announces or
consummates a transaction whereby Conso merges or sells substantially
all of its assets or stock to another party for consideration in
excess of the consideration offered by Parent and Acquisition Sub.
In addition, if a termination fee is payable by Conso, all costs and
expenses incurred by Parent and Acquisition Sub in connection with the merger
shall be reimbursed by Conso up to a maximum of $1,000,000. There will be no
termination fee if the Merger Agreement is terminated by Conso because
Robinson-Humphrey has withdrawn or modified its fairness opinion, and a
subsequent transaction is not consummated within six months, but in such event
Conso must reimburse Parent's transaction expenses up to a maximum of
$1,000,000.
12
<PAGE> 17
If the Merger Agreement is terminated under any other circumstances,
each party to the Merger Agreement shall bear its own transaction expenses. For
additional information regarding the fees and expenses that must be paid by
Conso under certain circumstances see "The Merger Agreement-Termination Fees;
Expenses."
Amendments to the Merger Agreement
The Merger Agreement may only be amended in writing by each of the
parties thereto. Additional shareholder approval may be required for material
amendments to the Merger Agreement. For additional information regarding the
ability of the parties to amend the Merger Agreement see "The Merger
Agreement-Amendments to the Merger Agreement."
DISSENTERS' RIGHTS
Pursuant to South Carolina law, any holder of Conso Common Stock (i)
who files a proper notice in writing prior to the vote taken at the special
meeting and (ii) whose shares are not voted in favor of the merger shall be
entitled to dissent from the merger and receive "fair value" for his or her
shares under Chapter 13 of the South Carolina Business Corporation Act. A copy
of Chapter 13 is attached as Appendix B to this Proxy Statement. For additional
information regarding the existence and exercise of dissenters' rights, see "The
Merger - Dissenters' Rights."
FINANCING OF THE MERGER
Parent and Acquisition Sub intend to fund payment of the merger
consideration and other payments to be made in connection with the merger
primarily through third party debt financing and equity investments by CVC and
its affiliates. The merger is contingent on such financing being obtained. The
total amount of funds necessary to fund the merger, recapitalize the surviving
corporation, refinance existing indebtedness and pay related transaction
expenses is expected to be approximately $111 million. It is anticipated that
these funds will be available from the following sources:
- equity investments by CVC and its affiliates in Acquisition Sub of
approximately $20 million in cash;
- the conversion of 533,378 shares of Common Stock held by J. Cary
Findlay into equity of the surviving corporation, representing a
value of approximately $4.8 million;
- debt financing pursuant to a $15 million senior subordinated loan,
a $53 million senior secured term loan facility, and a revolving
credit facility of up to $25 million; and
- excess cash held by Conso at the time of the merger, currently
assumed to be approximately $300,000 to $500,000.
For information regarding financing of the merger, see "Financing of the
Merger."
13
<PAGE> 18
COMPARATIVE MARKET PRICE DATA AND DIVIDENDS
Conso's Common Stock is traded on the Nasdaq National Market under the
symbol "CNSO." The following table sets forth the high and low sales price per
share of the Common Stock as reported on the Nasdaq National Market for each
quarterly period for the two most recent fiscal years and for the current fiscal
year to date.
<TABLE>
<CAPTION>
Period High Low
- - - ------- ----- ---
<S> <C> <C>
Fiscal Year Ended June 27, 1998:
First Quarter $14.75 $9.75
Second Quarter $11.13 $7.25
Third Quarter $ 8.50 $7.38
Fourth Quarter $11.00 $8.00
Fiscal Year Ended July 3, 1999:
First Quarter $ 8.56 $5.50
Second Quarter $ 7.25 $5.25
Third Quarter $ 8.63 $5.75
Fourth Quarter $ 6.31 $5.00
Fiscal Year Ending July 1, 2000
First Quarter $ 6.13 $4.25
Second Quarter (through October 15, 1999) $ 8.50 $4.88
</TABLE>
On October 5, 1999, the last full day of trading prior to the
announcement of the execution of the Merger Agreement, the reported high and low
sales prices per share of Common Stock were $5.38 and $4.88, respectively, and
the closing price was $5.06. On __________, 1999, the last full day of trading
prior to the printing of this Proxy Statement, the reported high and low sales
prices per share of Common Stock were $_____ and $_____, respectively, and the
closing price was $_______.
Shareholders are encouraged to obtain current market price quotations
for the Common Stock in connection with voting their shares at the special
meeting.
Other than (1) the agreement by J. Cary Findlay to sell his shares of
Conso Common Stock to Acquisition Sub under certain circumstances pursuant to a
Support Agreement between Mr. Findlay and Acquisition Sub dated October 5, 1999,
and (2) the issuance of shares of Common Stock by Conso pursuant to the exercise
of outstanding employee stock options or in connection with the Conso's Stock
Election Plan for Non-Employee Directors, there have been no transactions in
Conso Common Stock effected during the last 60 days by Conso, Acquisition Sub,
Parent (or any of their respective directors or executive officers), or J. Cary
Findlay.
Since June 29, 1997, there have been no purchases of Conso Common Stock
by Conso, Parent, Acquisition Sub or J. Cary Findlay, except for:
- - - - the acquisition from Conso by Mr. Findlay and his wife, Konstance J. K.
Findlay, jointly, of 78,788 shares of Conso Common Stock on July 1, 1998 in
exchange for real property owned by the Findlays. The number of shares was
based upon the closing price of Conso Common Stock at such date ($8.25 per
share) and a value of $650,000 (the Findlays' cost basis) for the real
property, which was less than its value determined by an independent
appraisal.
14
<PAGE> 19
- - - - Conso's open market purchases during 1998 (the last two quarters of fiscal
1998 and the first two quarters of fiscal 1999) of a total of 248,000
shares of its Common Stock pursuant to a stock repurchase program announced
in November 1997. The fiscal quarters in which such shares were repurchased
and the high, low and average price per share of the shares purchased
during each such quarter are set forth in the following table:
<TABLE>
<CAPTION>
No. of Shares Purchase prices per share
Quarter Ended Repurchased High Low Average
------------- ----------- ---- --- -------
<S> <C> <C> <C> <C>
March 28, 1998 123,000 $8.25 $7.88 $8.04
June 27, 1998 50,000 $8.25 $8.13 $8.19
September 26, 1998 20,000 $8.06 $8.06 $8.06
December 26, 1998 55,000 $6.25 $6.19 $6.22
TOTAL 248,000 $8.25 $6.19 $7.67
</TABLE>
Conso has not paid any cash dividends on its Common Stock since it
became a public company in 1993. In the Merger Agreement, Conso has agreed not
to pay any dividends on its Common Stock prior to the effective time of the
merger.
15
<PAGE> 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth below is certain selected historical consolidated financial
data of Conso and its subsidiaries for the five fiscal years ended July 3, 1999.
The historical financial information was derived from the audited consolidated
financial statements for such fiscal years, and should be read in conjunction
with such financial statements and the other information incorporated by
reference in this Proxy Statement.
Statement of operations data (1):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997 June 27, 1998 July 3, 1999
------------ ------------- ------------- ------------- ------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $59,621 $70,714 $73,447 $71,861 $119,660
Gross margin
20,736 25,432 27,823 25,270 47,283
Income from operations
7,696 9,872 11,518 8,933 13,124
Interest expense, net 870 753 498 609 2,904
Income before income taxes 6,826 9,119 11,020 8,324 $ 10,220
Income taxes (2) 1,287 2,676 3,993 3,292 4,458
Net income $ 5,539 $ 6,443 $ 7,027 $ 5,032 $ 5,762
Net income per share (3)
Basic $ 0.75 $ 0.86 $ 0.94 $ 0.68 $ 0.78
Fully diluted $ 0.75 $ 0.86 $ 0.93 $ 0.67 $ 0.78
Weighted average number of shares
outstanding (3)
Basic 7,425 7,457 7,486 7,447 7,349
Fully diluted 7,425 7,480 7,539 7,440 7,349
Ratio of earnings to fixed charges 12.5x 4.2x
</TABLE>
Balance sheet data (1):
<TABLE>
<CAPTION>
As of
-----------------------------------------------------------------------
July 1, 1995 June 29, 1996 June 28, 1997 June 27, 1998 July 3, 1999
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets $30,723 $33,322 $38,629 $60,624 $ 58,973
Working capital 14,470 19,461 20,973 34,998 38,186
Property and equipment, net 11,443 12,374 16,563 29,761 32,085
Total assets 43,699 47,278 56,559 115,692 113,379
Short-term borrowings 6,991 9,074 10,406 558 385
Long-term debt (including 3,169 2,586 208 44,612 41,908
current portion)
Shareholders' equity $24,124 $30,778 $38,368 $42,090 $47,802
Shareholders' equity per share $ 3.25 $ 4.11 $ 5.12 $ 5.75 $ 6.52
</TABLE>
- - - ----------------------------------------
(1) Balance Sheet data as of June 27, 1998 and July 3, 1999 reflects the assets
and liabilities of Simplicity Capital Corporation ("SCC") and it
subsidiaries. Statement of operation data for the fiscal year ended July 3,
1999 reflects the results of operations of SCC and its subsidiaries for
such period. Conso acquired all of the issued and outstanding capital stock
of SCC on June 19, 1998.
(2) Results of operations for the fiscal year ended July 1, 1995 includes a
gain of $913,000, or 13 cents per share, for a one-time carryforward of
South Carolina Jobs Tax Credits.
16
<PAGE> 21
(3) Reflects the 3-for-2 stock splits in October 1995 and 1996.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In October 1998, a private investment firm which controls certain
operating companies in businesses similar to Conso's approached J. Cary Findlay,
Conso's Chairman, President and Chief Executive Officer and its principal
shareholder, and expressed an interest in investigating and considering a
possible investment in, acquisition of an interest in, or business combination
with Conso. In response to this indication of interest, and with the approval of
Conso's Board of Directors, Conso obtained a confidentiality agreement from this
firm in November 1998, and provided it with certain information in connection
with its investigations.
Thereafter, through early 1999, Mr. Findlay and the private investment
firm had various discussions about a possible transaction. In March 1999, the
private investment firm indicated to Mr. Findlay an interest in pursuing an
acquisition of Conso at a price of $10.00 per share, subject to further due
diligence investigations of Conso and investigation of sources of financing for
such a transaction. The firm inquired whether Mr. Findlay, in his capacity as
Conso's principal shareholder, would be interested in such a transaction at that
price. After further discussion and deliberation, and consultation with counsel
and Conso's Board of Directors, Mr. Findlay responded that he, in his capacity
as a shareholder, would be interested in such a transaction at that price, but
only if it were made available to all of Conso's shareholders and were properly
considered and approved by Conso's Board of Directors through a process that
included independent consideration by Conso's outside directors, the engagement
of a financial advisor to provide an opinion as to the fairness of the
consideration to Conso's shareholders, and a "market check" to reasonably
confirm that the consideration proposed was the best available alternative for
Conso's shareholders. After further discussions, the private investment firm
expressed a willingness to follow the process suggested by Mr. Findlay, provided
that Conso would undertake to reimburse the firm for its expenses incurred in
completing its investigations of Conso and obtaining financing commitments in
the event that such firm made a fully-financed proposal at such price that Conso
did not accept.
Mr. Findlay called a special meeting of the Board of Directors of Conso
to discuss the private investment firm's indication of interest and to develop a
process for responding to it. At the meeting, which was held on April 1, 1999,
the Board established a Special Committee of the Board of Directors, consisting
of three independent directors (John H. Maxheim, James H. Shaw and Sara H.
Bissell) and authorized the Special Committee (a) to consider the private
investment firm's indication of interest and any other proposals and indications
of interest regarding a proposed sale or business combination of Conso that
might be presented to Conso, (b) to provide direction and guidance to management
in proceeding with any negotiations or discussions regarding such a transaction,
(c) to independently determine whether any such transaction would be in the best
interests of Conso and its shareholders and make recommendations to the full
Board of Directors, and (d) to select and engage a financial advisor and
independent legal counsel to advise the Special Committee.
At a meeting held April 16, 1999, the Special Committee selected and
approved the engagement of Moore & Van Allen, PLLC as its special independent
counsel and The Robinson-Humphrey Company, LLC as its financial advisor. As part
of its engagement, Robinson-Humphrey was commissioned to solicit from other
parties interest in a possible acquisition of Conso. The Special Committee also
approved a process whereby the private investment firm that had indicated an
interest in acquiring Conso would continue its due diligence investigations of
Conso and commence efforts to obtain financing for such a transaction while
Conso investigated other alternatives, with Conso's undertaking that if such
firm
17
<PAGE> 22
submitted to Conso not later than June 1, 1999 a fully-financed proposal to
acquire all of Conso's Common Stock at not less than $10.00 per share, but such
proposal were rejected by Conso, then Conso would reimburse up to $500,000 of
such firm's expenses in conducting such investigations and making such
proposals. The private investment firm indicated its acceptance of that process
and commenced its further investigations and its efforts to obtain financing.
Meanwhile, at the direction of the Special Committee, Robinson-Humphrey
commenced on behalf of Conso a process to solicit other proposals or indications
of interest for an acquisition of or business combination with Conso. In the
course of this process, Robinson-Humphrey contacted a total of 90 parties, who
were identified by Conso and Robinson-Humphrey of potentially having an interest
in such a transaction. Of these 90 parties, 25 requested further information,
entered into confidentiality agreements with Conso and were sent a confidential
memorandum prepared by Robinson-Humphrey from information supplied by Conso.
After giving such parties an opportunity to review the confidential memorandum
and obtain further information from Robinson-Humphrey and Conso,
Robinson-Humphrey advised these parties that they should submit written
indications of interest, setting forth their proposed purchase price per share,
to Conso not later than June 4, 1999 for consideration by Conso's Special
Committee.
In late May 1999, the private investment firm that had first expressed
interest in an acquisition of Conso at $10.00 per share advised Conso that it
was unable to arrange acceptable financing for such a transaction and would not
be making a proposal at that price. Conso advised the firm that it was still
proceeding with obtaining acquisition proposals from other parties, and that
such firm was invited to participate in that process and submit a proposal at
its best price. The firm requested and was provided with the information that
had been provided to the other interested parties, but ultimately did not submit
a new proposal by the indicated deadline. The Special Committee was informed of
this development at its meeting held on May 27, 1999, at which it received a
report from Robinson-Humphrey on the status of its efforts to obtain other
proposals to acquire Conso.
As the June 4 deadline for submitting final proposals approached, two
other parties continued to indicate an interest in the acquisition of Conso. One
of such parties was CVC, which indicated that it would submit a written
indication of interest at $9.00 per share. The other party, another private
equity investment firm, submitted a written indication of interest that valued
Conso at a price per share less than $9.00.
On June 4, 1999, CVC submitted a written proposal at $9.00 per share.
Its proposal specifically stated that it was an indication of interest, not an
offer, and that it was subject to additional due diligence, obtaining necessary
financing, and negotiation of a definitive agreement. In connection with its
proposal, CVC requested an exclusivity period to conduct its due diligence
investigations, obtain financing and negotiate a definitive agreement, and
requested that no disclosure be made of its proposal until a definitive
agreement was negotiated, approved and executed.
The Special Committee met on June 4, 1999, considered a report by
Robinson-Humphrey on the results of the solicitation process, and considered the
CVC proposal. The Special Committee authorized Conso to pursue a transaction
with CVC in accordance with its proposal and to agree to an appropriate
exclusivity period in order for CVC to conduct its due diligence investigations
and obtain financing and for Conso and CVC to negotiate a definitive acquisition
agreement to be presented to the Special Committee for its consideration. On
June 9, 1999, Conso and CVC entered into a letter agreement by which Conso
agreed that until July 21, 1999, or earlier termination under certain
circumstances, Conso would not initiate, solicit, entertain, negotiate, accept,
or discuss any other acquisition proposals. Conso retained the right to
terminate the exclusivity period prior to July 21 if its Board of Directors
determined that such termination was necessary to comply with its fiduciary
duties, in which case Conso would be obligated to reimburse CVC for its expenses
up to $275,000. The letter agreement also prohibited public announcement or
disclosure of the merger without mutual consent, except for disclosure
determined to be
18
<PAGE> 23
required by applicable law, and expressly provided that it did not constitute an
agreement in principle or legally binding contract to consummate a transaction
or enter into a definitive agreement.
CVC then commenced its due diligence investigations and its efforts to
obtain financing, and CVC and Conso began the negotiation and preparation of a
definitive agreement that resulted in the Merger Agreement. Those activities
continued through July, August and September 1999 and the exclusivity period was
formally extended once, to August 6, and thereafter informally extended as the
parties continued to pursue the transaction.
In connection with its efforts to obtain financing, CVC requested that
Mr. Findlay retain a portion of his shares as continuing equity in the surviving
corporation. Mr. Findlay had indicated that he would be willing to have all of
his shares acquired upon the same terms as Conso's other shareholders and to
retire as a director and officer of Conso upon completion of the transaction,
but that he would also be willing to have a portion of his shares converted to
equity in the surviving corporation and to continue as a director and officer if
his continued participation would facilitate the transaction. After negotiations
with CVC over the amount of his investment and other matters relating to his
continued involvement with the surviving corporation, Mr. Findlay agreed to
continue as a director and Chief Executive Officer of the surviving corporation
for at least two years and to have 533,378 shares of his Common Stock
(representing approximately 18.6% of his total holdings of Conso Common Stock
and approximately $4.8 million in value at $9.00 per share) converted to equity
in the surviving corporation. Structuring the transaction as a cash merger of
Acquisition Sub into Conso and with a portion of Mr. Findlay's shares being
converted to equity in the surviving corporation was determined to be the most
expedient means of acquiring all of the publicly held shares, as well as most of
Mr. Findlay's shares, for cash, providing for Mr. Findlay's continued equity
investment in the surviving corporation, and having the merger be accounted for
as a recapitalization for financial reporting purposes.
By the first week of October 1999, CVC had completed its due diligence
investigations and had obtained financing commitments for the transaction. The
parties had also completed the negotiation of the definitive Merger Agreement
and related documents. The Special Committee met on October 5, 1999, with
Messrs. Maxheim and Shaw attending; Mrs. Bissell, who was traveling in the Far
East, was unable to attend the meeting, but had previously received written
materials provided to the Special Committee. The other members of the Board of
Directors also attended the meeting in person or by telephone so that they could
hear the presentations to the Special Committee. At that meeting,
Robinson-Humphrey gave a presentation on the process of soliciting proposals to
acquire Conso and its analysis and conclusions as to the fairness of the
consideration offered by CVC, and representatives of Moore & Van Allen, PLLC,
independent counsel to the Special Committee, and Kennedy Covington Lobdell &
Hickman, LLP, Conso's regular general counsel, presented a summary of the Merger
Agreement and related documents and discussed various legal aspects of the
transaction. The Special Committee then met in executive session, considered the
proposed merger, determined that the merger and the proposed terms thereof were
fair to and in the best interests of Conso and its shareholders, and determined
to recommend to the full Board of Directors that the Merger Agreement and
related Plan of Merger be adopted and approved.
The full Board of Directors then met, received the report and
recommendation of the Special Committee, and, by the unanimous vote of the
members participating (that is, all directors other than Mrs. Bissell),
determined that the merger and the proposed terms thereof were fair to and in
the best interests of Conso and its shareholders, adopted and approved the
Merger Agreement and related Plan of Merger, and directed that the Merger
Agreement and related Plan of Merger be submitted to the shareholders of Conso
for their approval, with the recommendation that they be approved.
19
<PAGE> 24
OPINION OF FINANCIAL ADVISOR
The Special Committee selected Robinson-Humphrey to serve as Conso's
financial advisor and authorized Conso to enter into an engagement letter with
Robinson-Humphrey. Robinson-Humphrey was engaged to (i) assist in the
consideration of various strategic alternatives, including a sale of Conso, (ii)
identify opportunities for the sale of Conso, (iii) advise the Company
concerning opportunities for such a sale, whether or not identified by
Robinson-Humphrey, and, (iv) as requested by Conso, participate in negotiations
concerning such a sale. In its engagement letter, Robinson-Humphrey also agreed
that, if requested by the Board of Directors of Conso, it would render a
fairness opinion with respect to a proposed sale of Conso.
Robinson-Humphrey was selected as Conso's financial advisor because of
its previous investment banking relationship with Conso, its familiarity with
Conso and its operations, and its standing as a nationally-recognized investment
banking firm which is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other opinions.
In connection with the Special Committee's consideration of the merger,
Robinson-Humphrey was asked by the Special Committee to render to the Board of
Directors an opinion with respect to the fairness, from a financial point of
view, to Conso's shareholders of the cash merger consideration to be received in
the proposed merger. On October 5, 1999, Robinson-Humphrey delivered its written
opinion to the Special Committee and the Board of Directors to the effect that,
as of such date, the consideration of $9.00 per share of Common Stock
outstanding (other than 533,378 shares owned by J. Cary Findlay) to be received
in the merger was fair to Conso's shareholders from a financial point of view.
Robinson-Humphrey has also delivered its written opinion to Conso's Board of
Directors that on the date of this Proxy Statement, based on the information set
forth therein, the cash merger consideration to be received is fair, from a
financial point of view, to Conso's shareholders.
The full text of Robinson-Humphrey's written opinion is attached as
Appendix C to this Proxy Statement and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Appendix C. Conso's shareholders are urged to read the opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered and qualifications and limitations on the review undertaken
by Robinson-Humphrey in connection with its opinion.
Robinson-Humphrey's opinion is directed only to the cash merger
consideration to be received and does not constitute a recommendation to any
shareholder of Conso regarding how such shareholder should vote in relation to
the merger.
In arriving at its opinion, Robinson-Humphrey, among other things:
- Reviewed the Merger Agreement and certain related documents;
- Analyzed certain audited and unaudited financial statements and
other information of Conso;
- Reviewed and discussed with appropriate management personnel of
Conso, the past and current business activities and financial results
and the financial outlook of Conso;
- Reviewed the historical price and trading activity of the Conso
Common Stock and of the common stock of other textile companies which
Robinson-Humphrey deemed relevant;
- Compared certain financial and stock market data relating to Conso
with similar data of other publicly traded textile companies which
Robinson-Humphrey deemed relevant;
- Reviewed the premiums, prices and multiples paid in certain
comparable acquisition transactions of textile companies and of
merger transactions in general; and
20
<PAGE> 25
- Undertook other studies, analyses and investigations as
Robinson-Humphrey deemed appropriate.
In conducting its analysis and arriving at its opinion,
Robinson-Humphrey assumed and relied upon, without independent verification, the
accuracy and completeness of the information it reviewed for the purposes of the
opinion. Robinson-Humphrey also relied upon the management of Conso with respect
to the reasonableness of the financial forecasts (and the assumptions and bases
underlying such forecasts) provided to Robinson-Humphrey. Robinson-Humphrey did
not make, nor was it furnished with, an independent valuation or appraisal of
the assets or liabilities of Conso.
No limitations were imposed by Conso, the Special Committee or the
Board of Directors on the scope of Robinson-Humphrey's investigation or the
procedures to be followed by Robinson-Humphrey in rendering its opinion. The
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to Robinson-Humphrey as of, the
date of its analysis.
In addressing the fairness, from a financial point of view, of the cash
merger consideration to be received by the shareholders of Conso,
Robinson-Humphrey employed a variety of generally recognized valuation
methodologies and performed those which it believed were most appropriate for
developing its opinion. The preparation of a fairness opinion involves various
determinations of the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances,
and, therefore, such an opinion is not readily susceptible to summary
description. In arriving at its fairness opinion, Robinson-Humphrey did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments about the significance and relevance of each
analysis and factor. None of the analyses performed by Robinson-Humphrey was
assigned a greater significance by Robinson-Humphrey than any other.
Accordingly, Robinson-Humphrey believes that its analyses must be considered as
a whole and that a review of selected portions of such analyses and the factors
considered therein, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying its opinion and any
conclusions reached therein. In its analyses, Robinson-Humphrey made numerous
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond Conso's control. Any
estimates contained in Robinson-Humphrey's analyses are not necessarily
indicative of actual values or predictive of future results or values that may
be significantly more or less favorable than such estimates. Estimates of values
of companies do not purport to be appraisals or necessarily reflect the prices
at which companies or their securities actually may be sold. No public company
utilized as a comparison is identical to Conso and no merger and acquisition
transaction involved companies identical to Conso. An analysis of the results of
such comparisons is not mathematical; rather, it involves complex considerations
and judgements concerning differences in financial and operating characteristics
of the comparable companies and transactions and other factors that could affect
the values of companies to which Conso is being compared. In addition, as
described above, Robinson-Humphrey's opinion and presentation to Conso's Special
Committee and Board of Directors was one of many factors taken into
consideration by Conso's Board of Directors in making its determination to
approve the Merger Agreement and related Plan of Merger.
The following is a brief summary of all material analyses performed by
Robinson-Humphrey in connection with its written opinion delivered to Conso's
Special Committee and Board of Directors on October 5, 1999.
HISTORICAL STOCK PRICE ANALYSIS. Robinson-Humphrey analyzed the prices at which
the Conso Common Stock traded subsequent to Conso's initial public offering on
December 14, 1993 through October 5, 1999. Robinson-Humphrey observed that the
all-time high closing price for the Common Stock was $16.00 on April 2, 1997 and
the all-time low closing price for the Common Stock was $4.55 on December 29,
1993. During the period July 6, 1999 through October 5, 1999, Robinson-Humphrey
observed that 15.4% of the total trading in the shares of Conso were traded in a
price range of $4.45 to $4.70, 26.8% of the shares were traded in a price range
of $4.70 to $5.45, 26.1% of the shares were traded in a price range of $5.45 to
21
<PAGE> 26
$5.70 and 31.7% of the shares were traded in a price range of $5.70 to $6.20.
During the period October 5, 1998 through October 5, 1999, Robinson-Humphrey
observed that 62.9% of the total trading in the shares of Conso Common Stock
were traded in a price range of $4.50 to $6.00, 20.3% of the shares were traded
in a price range of $6.00 to $6.50, 8.7% of the shares were traded in a price
range of $6.50 to $7.00 and 8.1% of the shares were traded in a price range of
$7.00 to $8.00.
Based on the cash merger consideration of $9.00 per share for Conso,
Robinson-Humphrey calculated per share premiums of 77.8%, 77.8% and 58.2% to
Conso's closing prices at one trading day, one week and four weeks prior to the
announcement date of the merger, respectively.
COMPARABLE PUBLIC COMPANIES ANALYSIS. Using publicly available information,
Robinson-Humphrey compared certain financial and operating information and
ratios (described below) for Conso with corresponding financial and operating
information and ratios for a group of other publicly traded textile companies.
The companies included in the comparable public companies analysis were
Burlington Industries, Inc., Collins & Aikman Corp., Cone Mills Corp., Crown
Crafts, Inc., Dan River, Inc., Delta Woodside Industries Inc., Dixie Group,
Inc., Fab Industries, Inc., Guilford Mills, Inc., Pillowtex Corp., Springs
Industries, Inc., Unifi Inc. and WestPoint Stevens, Inc (collectively, "Public
Comparables"). Robinson-Humphrey compared:
- Price of common stock divided by earnings per share ("P/E") ratios
for calendar 1999 (based on information from First Call Earnings
Estimates ("First Call") and Robinson-Humphrey Research Department
Estimates ("Robinson-Humphrey Research"). The calendar 1999 P/E
ratios ranged from 4.9x to 32.2x for the Public Comparables (with an
average of 13.7x), compared to 6.5x for Conso (based on Conso's
fiscal year 1999 earnings ending July 3, 1999, "fiscal 1999"). The
average multiple of 13.7 times Conso's fiscal 1999 earnings implies a
value of $10.74 per share for Conso.
- P/E ratios for calendar 2000 (based on information from First Call
and Robinson-Humphrey Research) which ranged from 3.3x to 13.8x for
the Public Comparables (with an average of 8.8x), compared to 5.1x
for Conso (based on the First Call earnings per share estimate for
fiscal 2000). The average multiple of 8.8 times Conso's fiscal 2000
earnings estimate implies a value of $10.27 per share for Conso.
- The ratio of the stock market price per share to book value per
share (shareholders' equity divided by the number of common shares
outstanding). Market to book ratios ranged from 0.3x to 1.0x for the
Public Comparables (with an average of 0.6x), compared to 0.8x for
Conso. The average multiple of 0.6 times Conso's book value at July
3, 1999 (fiscal 1999 year end) implies a value of $4.03 per share for
Conso.
- The ratio of firm value (stock market equity value plus debt and
preferred stock minus cash and marketable securities) to revenues for
the latest twelve months. The ratios ranged from 0.21x to 1.47x for
the Public Comparables (with an average of 0.62x), compared to 0.65x
for Conso (based on fiscal 1999 revenues). The average multiple of
0.62 times Conso's latest twelve months revenues generates a value of
$4.61 per share.
- The ratio of firm value to latest twelve months earnings before
interest, taxes, depreciation and amortization ("EBITDA"). The ratios
ranged from 4.0x to 8.9x for the Public Comparables (with an average
of 6.2x), compared to 4.5x for Conso. The average multiple of 6.2
times Conso's last twelve months EBITDA implies a value of $8.97 per
share for Conso.
- The ratio of firm value to latest twelve months earnings before
interest and taxes ("EBIT"). The ratios ranged from 7.4x to 13.7x for
the Public Comparables (with an average of 10.0x), compared to 5.9x
for Conso. The average multiple of 10.0 times Conso's last twelve
months EBIT implies a value of $12.39 per share for Conso.
Based on average valuation multiples for the Public Comparables,
Robinson-Humphrey calculated a range of implied equity values from $4.03 per
share to $12.39 per share, with an average implied equity value of $8.50 per
share for Conso.
22
<PAGE> 27
Robinson-Humphrey also calculated a range of implied equity values for
Conso by applying the valuation multiples of a subset of the Public Comparables
with revenues and firm values less than $1.0 billion (collectively, "Limited
Size Public Comparables"). The Limited Size Public Comparables, which have
revenues and firm values more similar to Conso than the other Public
Comparables, consisted of Cone Mills Corp., Crown Crafts, Inc., Dan River, Inc.,
Delta Woodside Industries Inc., Dixie Group, Inc., Fab Industries, Inc., and
Guilford Mills, Inc. Using the Limited Size Public Comparables,
Robinson-Humphrey calculated the following:
- The calendar 1999 P/E ratios ranged from 7.8x to 15.8x (with an
average of 11.2x), compared to 6.5x for Conso (based on Conso's
fiscal 1999 earnings). The average multiple of 11.2 times Conso's
fiscal 1999 earnings implies a value of $8.81 per share for Conso.
- The calendar 2000 P/E ratios ranged from 5.9x to 13.8x (with an
average of 8.9x), compared to 4.6x for Conso. The average multiple of
8.9 times Conso's fiscal 2000 earnings estimate implies a value of
$10.44 per share for Conso.
- Market value to book value ratios ranged from 0.3x to 0.8 (with an
average of 0.6x), compared to 0.8x for Conso. The average multiple of
0.6 times Conso's book value at July 3, 1999 (fiscal 1999 year end)
implies a value of $3.87 per share for Conso.
- The ratios of firm value to latest twelve months revenues ranged
from 0.21x to 0.78x (with an average of 0.47x), compared to 0.65x for
Conso (based on fiscal 1999 revenues). The average multiple of 0.47
times Conso's latest twelve months revenues generates a value of
$2.06 per share for Conso.
- The ratios of firm value to EBITDA ranged from 4.0x to 8.9x (with
an average of 6.3x), compared to 4.5x for Conso. The average multiple
of 6.3 times Conso's last twelve months EBITDA implies a value of
$9.11 per share for Conso.
- The ratios of firm value to latest twelve months EBIT ranged from
8.4x to 11.2x for the Public Comparables (with an average of 9.8x),
compared to 5.9x for Conso. The average multiple of 9.8 times Conso's
last twelve months EBIT implies a value of $12.00 per share for
Conso.
Based upon the average valuation multiples for the Limited Size Public
Comparables, Robinson-Humphrey calculated a range of implied equity values from
$2.06 per share to $12.00 per share, with an average implied equity value of
$7.71 per share for Conso.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Robinson-Humphrey analyzed and
compared the consideration paid in 65 recent mergers and acquisitions involving
textile companies occurring since August 1991 (the "1990s Transactions") and 19
transactions occurring between 1980 and 1990 (the "1980s Transactions").
For each transaction with disclosed consideration and publicly
available financial results on the company acquired, Robinson-Humphrey
calculated firm value as a multiple of last twelve months revenues, as a
multiple of last twelve months EBITDA, and as a multiple of last twelve months
EBIT, with resulting average multiples from the 1990s Transactions of 0.85x,
8.1x, and 10.0x, respectively. The analysis utilizing firm value as a multiple
of last twelve months revenue generates an implied value of $8.35 per share for
Conso. The analysis utilizing firm value as a multiple of last twelve months
EBITDA generates an implied value of $13.36 per share, and the analysis
utilizing firm value as a multiple of last twelve months EBIT generates an
implied value of $12.30 per share for Conso. Robinson-Humphrey also calculated
equity value as a multiple of book value and as a multiple of last twelve months
net income with resulting average multiples of 2.0x and 16.5x, respectively. The
analysis using equity value as a multiple of book value and last twelve months
net income generates an implied value for Conso of $12.92 per share and $12.89
per share, respectively.
23
<PAGE> 28
In addition, Robinson-Humphrey calculated firm value as a multiple of
last twelve months revenues, as a multiple of last twelve months EBITDA, and as
a multiple of last twelve months EBIT for the 1980s Transactions, with resulting
average multiples 0.66x, 7.6x, and 12.5x. Using multiples from the 1980s
Transactions, the analysis utilizing firm value as a multiple of last twelve
months revenue generates an implied value of $5.18 per share for Conso. The
analysis utilizing firm value as a multiple of last twelve months EBITDA
generates an implied value of $12.22 per share, and the analysis utilizing firm
value as a multiple of last twelve months EBIT generates an implied Company
value of $16.73 per share. Robinson-Humphrey also calculated equity value as a
multiple of book value and as a multiple of last twelve months net income with
resulting average multiples of 1.5x and 15.1x, respectively. The analysis
utilizing equity value as a multiple of book value and net income generates an
implied Company value of $9.47 per share and $11.79 per share, respectively.
Based upon the average valuation multiples for the 1990s Transactions
and the 1980s Transactions, Robinson-Humphrey calculated a range of implied
equity values from $5.18 per share to $16.73 per share, with an average implied
equity value of $11.52 per share for Conso.
Premiums Analysis. Robinson-Humphrey reviewed purchase price premiums paid for
the stock of selected publicly held companies in 251 acquisitions involving
total consideration of between $50 million and $150 million during the period
from January 1, 1998 to October 1, 1999. This analysis measured the average
purchase price premium paid by acquirors over the prevailing stock market prices
of targets one day prior to the announcement of an offer, one week prior to the
announcement of an offer, and four weeks prior to the announcement of an offer.
The resulting average premiums were: 31.5% one day prior to the announcement of
an offer, 38.4% one week prior to the announcement of an offer and 46.8% four
weeks prior to the announcement of an offer. The resulting median premiums were:
25.5% one day prior to the announcement of an offer, 32.1% one week prior to the
announcement of an offer and 37.9% four weeks prior to the announcement of an
offer. Conso was trading at $5.06 per share one day prior to the announcement of
an offer, $5.06 per share one week prior to the announcement of an offer and
$5.69 four weeks prior to the announcement of an offer. The average premiums
paid in these transactions imply share values for Conso of $6.66, $7.01 and
$8.35, respectively.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted cash
flow analysis using Conso's financial projections for fiscal 2000 through fiscal
2004 to estimate the net present equity value per share for Conso.
Robinson-Humphrey calculated a range of net present values of Conso's free cash
flows (defined as projected earnings before interest after taxes plus
depreciation and amortization, less capital expenditures and any increase in net
working capital) for fiscal 2000 through fiscal 2004 using discount rates
ranging from 14% to 18%. Robinson-Humphrey calculated a range of net present
values of Conso's terminal values using the same range of discount rates and
multiples ranging from 4.0x to 7.0x projected fiscal 2004 EBITDA. The present
values of the free cash flows were then added to the corresponding present
values of the terminal values. After adding Conso's cash and cash equivalents
and deducting Conso's debt as of July 3, 1999, Robinson-Humphrey calculated a
range of net present equity values for Conso of $5.70 per share to $13.02 per
share. Using a mid-point discount rate of 16% and mid-point terminal value
multiple of 5.5x projected fiscal 2004 EBITDA, Robinson-Humphrey calculated a
net present equity value for Conso of $9.09 per share.
In connection with its opinion as of the date of the Proxy Statement,
Robinson-Humphrey confirmed the appropriateness of its reliance on the analyses
used to render its October 5, 1999 report and opinion by performing procedures
to update certain of such analyses and by reviewing the assumptions on which
such analyses were based and the factors considered in connection therewith.
In the ordinary course of Robinson-Humphrey's business,
Robinson-Humphrey actively trades in Conso's Common Stock for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities. In addition, Robinson-Humphrey has
performed
24
<PAGE> 29
investment banking services for Conso in the past, including acting as sole
manager of Conso's secondary public offering of Common Stock during February
1996.
Pursuant to its engagement letter with Robinson-Humphrey, Conso agreed
to pay Robinson-Humphrey a fee of $250,000 upon rendering an opinion as to
whether or not the cash merger consideration to be received by the shareholders
of Conso in the Merger is fair from a financial point of view. If the Merger is
consummated, Conso has agreed to pay Robinson-Humphrey a fee of 1.0% of the
transaction value less any amounts previously paid. Due to its contingent
nature, this compensation arrangement could be viewed as creating a conflict of
interest for Robinson-Humphrey. In addition, Robinson-Humphrey and Citicorp
Venture Capital, Ltd. are both affiliates of the worldwide financial services
firm Citigroup Inc. While each affiliate is independent of the other, this
relationship could be viewed as creating a conflict of interest for
Robinson-Humphrey.
Pursuant to the Robinson-Humphrey Engagement Letter, Conso has agreed
to reimburse Robinson-Humphrey for reasonable expenses incurred by
Robinson-Humphrey, subject to certain limitations, including fees and
disbursements of counsel, and to indemnify Robinson-Humphrey against certain
liabilities in connection with its engagement.
CONSO'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
Conso's Board of Directors has unanimously determined that the merger
is advisable, fair to and in the best interests of Conso and its shareholders,
has approved the Merger Agreement and adopted the related Plan of Merger, and
resolved to recommend that the shareholders vote FOR approval of the Merger
Agreement and the Plan of Merger. The Special Committee of the Board of
Directors was charged with considering and making recommendations to the full
Board of Directors regarding the merger, and it held meetings on April 16, May
27, June 4, and October 5, 1999 to receive advice and presentations from its
financial and legal advisors regarding strategic alternatives available to it to
enhance shareholder value and the conduct and status of the solicitation of
proposals for the acquisition of Conso, and the terms of the proposed merger.
The presentations by Conso's financial and legal advisors described and
explained, among other things, the terms and conditions of the proposed merger
and Merger Agreement as well as the fiduciary duties applicable to the Board in
the evaluation of the merger. The Special Committee, in discussing the merger,
was aware of the special interests of J. Cary Findlay in the transaction and
considered those interests and potential conflicts in making its evaluation. See
"-Interests of Certain Persons in the Merger." The directors who did not serve
on the Special Committee (Mr. Findlay and his wife, Konstance J. K. Findlay,
both officers of Conso, and Antony W. Laughton, the former Managing Director of
Conso's British Trimmings subsidiary) were regularly apprised of the activities
of the Special Committee and the status of the solicitation of potential
purchasers. Those directors also heard the presentations by the legal and
financial advisors at the meeting of the Special Committee held on October 5,
1995 at which the Special Committee, meeting in executive session, determined to
recommend the merger to the full Board of Directors, and participated in the
meeting of the Board of Directors held immediately thereafter at which the full
Board of Directors approved and recommended the merger and adopted and approved
the Merger Agreement and related Plan of Merger.
In reaching its conclusion to adopt and approve the Merger Agreement
and related Plan of Merger and to recommend approval of the Merger Agreement and
Plan of Merger by the shareholders, the Board of Directors considered the
factors described below. The following discussion of the factors considered by
the Board is not intended to be exhaustive but identifies the material factors
considered by the Board.
The Board considered:
(1) The historical market prices and recent trading activity of the
Common Stock and the fact that the merger consideration would enable
shareholders to realize a significant premium over the prices at
25
<PAGE> 30
which the Common Stock has recently traded. The Board also noted that the Common
Stock has not traded at or higher than $9.00 per share since June 1998 and that
the merger consideration represented a substantial premium over the trading
prices of the Common Stock during the most recent fiscal year ended July 3, 1999
and the current fiscal year to date. The Board also considered the relationship
between the merger consideration and Conso's reported earnings and certain other
measures. The Board also considered whether it could be reasonably expected that
market prices for Conso's Common Stock would approach $9.00 per share in the
foreseeable future.
(2) The presentation and analysis of Conso made by Robinson-Humphrey
and its opinion that the cash merger consideration to be received by Conso's
shareholders was fair from a financial point of view to such shareholders. See
"Special Factors-Opinion of Financial Advisor." A copy of Robinson-Humphrey's
opinion, setting forth the assumptions made and matters considered, is attached
as Appendix C to this Proxy Statement and should be read in its entirety.
(3) The conduct of what the Board believes was a thorough canvass of
potential purchasers through Robinson-Humphrey, in which the merger offered the
best opportunity for shareholders to receive a substantial premium for their
Conso Common Stock;
(4) The likelihood of the completion of the merger, the existence of
signed financing commitments, the proposed structure of the transaction and
anticipated closing date, and the perception that CVC is a reputable buyer that
is committed to consummating the transaction.
(5) The terms and conditions of the merger and the Merger Agreement,
including the amount and form of the consideration, as well as the parties'
mutual representations, warranties and covenants, and the conditions to their
respective obligations, and the absence of future obligations of the
shareholders. The Board also considered that the terms and conditions of the
Merger Agreement do not provide for unreasonable termination fees and expense
reimbursement obligations which would have the effect of unreasonably
discouraging competing bids and that, subject to the satisfaction of certain
conditions, the Board would be able to withdraw or modify its recommendation to
the shareholders regarding the merger and enter into an agreement with respect
to a more favorable transaction with a third party, if such a transaction
becomes available prior to the consummation of the merger. See "The Merger
Agreement."
(6) The financial ability and willingness of Parent and Acquisition Sub
to consummate the merger. The Merger Agreement conditions Parent's obligation to
consummate the Merger on obtaining financing for the merger. The Board reviewed,
with the advice of its financial and legal advisors, commitment letters for debt
financing to be provided by Parent's lenders. Based on the foregoing, the Board
did not view as unreasonable the risk that the financing condition of the Merger
Agreement would not be satisfied.
(7) The risks inherent in trying to achieve Conso's long-term strategic
plan in light of the immediate return of value to shareholders reflected in the
merger.
(8) The fact that completion of the merger would preclude shareholders
from having the opportunity to participate in Conso's future growth prospects.
In addition, the Board recognized that J. Cary Findlay will have the opportunity
to benefit from any increases in Conso's value following the merger by reason of
his continuing equity interest in the surviving corporation.
In view of the wide variety of factors considered in connection with
its evaluation of the terms of the merger, the Board of Directors did not find
it practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its conclusions.
Furthermore, the Board of Directors did not evaluate whether or not these
factors were of equal importance. Based on the factors described above, the
Board determined that the merger is in the best interests of Conso's
shareholders and preferable to continuing to operate as a public company with
shareholder value
26
<PAGE> 31
determined primarily by the trading market. Accordingly, the Board has approved
and adopted the Merger Agreement and the related Plan of Merger and resolved to
recommend that shareholders vote for approval of the Merger Agreement and Plan
of Merger.
The Board also considered the procedural aspects of approval of the
merger. The Board understands that Conso's obligation to consummate the merger
is not conditioned upon the favorable vote of a majority of Conso's
disinterested shareholders. Nevertheless, the Board determined that the merger
is procedurally fair because:
- the six-member Board formed a Special Committee of three
independent directors who met separately and received advice from
independent legal counsel;
- the Special Committee recommended the merger and the Merger
Agreement and related Plan of Merger;
- independent counsel to the Special Committee was directly involved
in the negotiation of the principal terms of the Merger Agreement;
- under South Carolina law, approval of the merger will require the
affirmative vote of at least 66 2/3 % of the outstanding Conso Common
Stock, and less than 45% is held by Mr. Findlay and other directors
and officers of Conso, as a group; and
- the $9.00 per share merger consideration and the other terms and
conditions of the merger resulted from active arm's-length bargaining
between representatives of Conso and CVC. Although Mr. Findlay will
continue to have an equity interest in the surviving corporation and
will continue as an officer and director, his interests are
substantially aligned with the other shareholders of Conso since more
than 80% of his holdings of Conso Common Stock, constituting more
than 30% of the outstanding Conso Common Stock, would be converted
into the right to receive $9.00 per share in cash on the same basis
as the other shareholders.
In considering the fairness of the merger, the Board did not consider
Conso's net book value or liquidation value, which are not believed to be
indicative of Conso's value as a going concern. Conso's net book value per share
as of July 3, 1999 was $6.52. This value is substantially below the $9.00 per
share cash merger consideration. The Board further believes that Conso's
liquidation value, which would take into account the appreciated value of
Conso's assets, also would be substantially below the merger consideration.
CONSO'S AND J. CARY FINDLAY'S BELIEF AS TO THE FAIRNESS OF THE MERGER
Conso and J. Cary Findlay have each indicated that they reasonably
believe the merger to be fair to shareholders based upon numerous factors,
including the following:
- the fact that the merger consideration represents a substantial
premium over the market price of the Common Stock on the date
preceding the announcement of a possible transaction and exceeds
recent historical market prices of the Common Stock;
- the recommendation of the Special Committee and the fact that the
Special Committee concluded that the merger is advisable, fair to and
in the best interests of Conso and its shareholders;
- the opinion of Robinson-Humphrey that the cash merger consideration
is fair to shareholders from a financial point of view; and
27
<PAGE> 32
- the fact that the Merger Agreement was extensively negotiated on an
arms-length basis between representatives of Conso and CVC under the
supervision of the Special Committee.
After considering the foregoing, Conso and J. Cary Findlay have each
indicated a belief that the merger is fair to shareholders. In reaching this
determination neither Conso nor Mr. Findlay assigned specific weights to
particular factors, and considered all factors as a whole.
Mr. Findlay did not receive any reports, opinions or appraisals from
any outside party relating to the merger or the fairness of the consideration to
be received by the shareholders other than those he received from
Robinson-Humphrey in his capacity as a director and executive officer of Conso.
See "Special Factors-Interests of Certain Persons in the Merger."
PARENT'S AND ACQUISITION SUB'S BELIEF AS TO THE FAIRNESS OF THE MERGER
Parent and Acquisition Sub did not participate in the deliberations of
the Board of Directors regarding the fairness of the merger to Conso's
shareholders, nor did they receive any advice from Robinson-Humphrey as to the
fairness of the merger. However, the rules of the Securities and Exchange
Commission require each of Parent and Acquisition Sub to express its belief as
to the fairness of the merger to Conso's shareholders. While neither Parent nor
Acquisition Sub has undertaken any evaluation of the merger from the standpoint
of fairness to Conso shareholders, each of them has considered the factors
considered by the Board of Directors. However each of Parent and Acquisition Sub
based its determination of fairness only on the more limited facts and
information available to it pursuant to the auction process. In its analysis,
each of Parent and Acquisition Sub considered certain factors in greater depth,
including the following factors:
- the fact that the merger consideration represented a substantial
premium over the market price of Conso Common Stock on the date
preceding the announcement of a possible transaction and over recent
historical market prices of the Common Stock;
- Conso's auction process in which CVC offered the highest
consideration;
- the arms-length nature of the negotiations with respect to the
merger;
- the terms and conditions of the merger and the Merger Agreement,
including: (i) the amount and form of the consideration, (ii) the
parties' mutual representations, warranties and covenants, and (iii)
the conditions to their respective obligations;
- provisions of the Merger Agreement that limit Conso's ability to
negotiate with any person or entity that makes an unsolicited
take-over proposal but that allow Conso to terminate the Merger
Agreement under certain circumstances in the exercise of the Board of
Directors' fiduciary duties;
- the fact that Conso appointed a Special Committee and that the
merger was approved by the Special Committee; and
- the opinion of Robinson-Humphey that the merger consideration is
fair to Conso's shareholders from a financial point of view.
After considering the foregoing, each of Parent and Acquisition Sub has
indicated that it believes the merger consideration to be fair to Conso's
shareholders from a financial point of view. In reaching its
28
<PAGE> 33
determination as to fairness, neither Parent nor Acquisition Sub assigned
specific weights to particular factors, but rather considered all factors as a
whole.
Neither Parent nor Acquisition Sub considered the net book value of
Conso to be a material factor in determining the fairness of the transaction to
shareholders because net book value on a per share basis is significantly less
than the price offered in the merger or recent historical trading prices of the
Common Stock. Neither Parent nor Acquisition Sub relied on any report, opinion
or appraisal in determining the fairness of the transaction to Conso's
shareholders. However, neither Parent nor Acquisition Sub disagrees with the
conclusion expressed by Robinson-Humphrey in its opinion to the Board of
Directors that the merger consideration is fair to Conso's shareholders from a
financial point of view.
CERTAIN EFFECTS OF THE MERGER
The purpose of the merger is the acquisition of Conso by the investor
group consisting of Parent and J. Cary Findlay, and is expected to include other
members of Conso's management.
As a result of the merger:
- Conso will no longer be a publicly-held company;
- Conso's shares will not be traded on the Nasdaq National Market;
- price quotations will no longer be available for Conso shares;
- Conso will not be subject to the reporting requirements of the
Securities Exchange Act of 1934; and
- because the surviving corporation in the merger will not be a
publicly-held company, costs and expenses associated with Securities
and Exchange Commission compliance and reporting and maintaining
shareholder relations will be reduced or eliminated. Consummation of
the merger will also eliminate any opportunity of Conso's
shareholders to share in any of Conso's future earnings and growth
and any potential to realize greater value for their shares of Common
Stock. The opportunity to hold a continuing equity interest in Conso,
which will be available to J. Cary Findlay, will not be available for
other shareholders. See also "The Merger-Effects of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with
respect to the merger, shareholders should be aware that, in addition to the
matters discussed above, J. Cary Findlay, the Chairman of the Board, President
and Chief Executive Officer of Conso, has interests in the merger in addition to
and different from the interests of shareholders generally. These additional
interests create potential conflicts of interest for J. Cary Findlay.
Shareholders should also be aware that Mr. Findlay's wife, Konstance J. K.
Findlay, is also a director and officer of Conso and may be deemed to have the
same interests as Mr. Findlay.
Equity Investment of J. Cary Findlay
CVC requested that Mr. Findlay retain a portion of his shares as
continuing equity in the surviving corporation. Mr. Findlay had indicated that
he would be willing to have all of his shares acquired upon the same terms as
Conso's other shareholders and to retire as a director and officer of Conso upon
completion of the transaction and an appropriate transition period. However, Mr.
Findlay indicated that he would also
29
<PAGE> 34
be willing to have a portion of his shares converted to equity in the surviving
corporation and to continue as a director and officer if his investment and
continued employment would facilitate the transaction. After negotiations with
CVC concerning the amount of the proposed investment and other matters relating
to his continued involvement with the surviving corporation, Mr. Findlay agreed
to continue as a director and Chief Executive Officer of the surviving
corporation for at least two years and to have 533,378 shares of his Common
Stock (representing approximately 18.6% of his total holdings of Conso Common
Stock and approximately $4.8 million in value at $9.00 per share) converted to
equity in the surviving corporation. The structure of the transaction as a cash
merger of Acquisition Sub into Conso with a portion of Mr. Findlay's shares
being converted to equity in the surviving corporation was determined to be the
most expedient means of acquiring all of the publicly held shares, as well as
most of Mr. Findlay's shares, for cash, providing for Mr. Findlay's continued
equity investment in the surviving corporation, and having the merger be
accounted for as a recapitalization for financial reporting purposes.
Conso's Articles of Incorporation will be amended in connection with
the merger to reclassify the capital stock of the surviving corporation. By
rolling over his shares of Conso Common Stock, Mr. Findlay will receive a
combination of shares of Class A Common Stock (voting), Class C Common Stock
(nonvoting), and Preferred Stock of the surviving corporation.
See "Financing of the Merger--Equity Investments."
Support Agreement
Mr. Findlay and Acquisition Sub have entered into a Support Agreement
dated October 5, 1999, whereby Mr. Findlay has agreed to vote 2,865,725 shares
of Conso Common Stock owned directly by him, representing approximately 39.1% of
the outstanding shares of Conso Common Stock, in favor of the merger at the
special meeting of shareholders. Mr. Findlay has also agreed not to sell or
dispose of such shares and not to vote such shares or take any other action that
would interfere with or prevent the merger with Acquisition Sub. In addition,
Mr. Findlay has agreed not to solicit certain alternative transactions (such as
a sale of Conso to another party). These provisions expressly do not prohibit
Mr. Findlay from taking any action in his capacity as a director or officer of
Conso in compliance with the provisions of the Merger Agreement that relate to
soliciting or responding to proposals for alternative transactions.
The Support Agreement also provides for the grant of an irrevocable
proxy to a representative of Acquisition Sub to vote Mr. Findlay's shares at the
special meeting, as an additional assurance that Mr. Findlay's shares will be
voted in favor of the merger.
In addition, Mr. Findlay, has granted to Acquisition Sub the option to
purchase (exercisable upon written notice from Acquisition Sub and prior to the
termination of the Support Agreement), at a price of $9.00, all 2,865,725 shares
of Mr. Findlay's Conso Common Stock upon certain events, including the
following:
- the making of a takeover proposal by another party;
- the material breach by Conso of its obligations under the Merger
Agreement;
- the modification or withdrawal by Conso's Board of Directors of its
approval or recommendation of the merger;
- the material breach by Mr. Findlay of the terms of the Support
Agreement; or
- the failure of Conso's shareholders to approve the merger at the
special meeting.
However, Acquisition Sub shall not exercise its right to purchase until any
applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act
of 1976 shall have expired or terminated.
30
<PAGE> 35
Other Arrangements with CVC
Mr. Findlay's obligations under the Support Agreement are conditioned
upon the structuring of his continued investment in the surviving corporation in
accordance with arrangements between Mr. Findlay and CVC as to (1) Mr. Findlay's
equity investment as described in this Proxy Statement, (2) the anticipated tax
consequences to Mr. Findlay of his rollover, and (3) the proposed terms of the
Shareholders Agreement and Registration Rights Agreement that the shareholders
of the surviving corporation would expect to enter into effective after the
merger.
The Shareholders Agreement will provide for, among other things,
certain agreements on voting and restrictions on transfer of the stock of the
surviving corporation, drag-along and tag-along rights, put and call rights,
rights to participate in future issuances of stock, and rights of first refusal.
The Registration Rights agreement will provide, subject to limitations, for the
right of Mr. Findlay to demand at least one registration under the Securities
Act of 1933 of his common stock in the surviving corporation if he holds at
least 7 1/2% of the total equity of the surviving corporation after it has
become a public company and completed its initial public offering. The
Registration Rights Agreement will also permit Mr. Findlay to join in other
registrations on a "piggyback" basis.
It is also anticipated that, while he continues to serve as Chairman,
President and Chief Executive Officer of the surviving corporation, Mr. Findlay
would continue to receive his current annual salary of $325,000 and similar
bonus plan. Neither the surviving corporation nor Mr. Findlay is obligated to
continue Mr. Findlays's employment for any specific term.
Interests of Other Conso Officers
Certain members of Conso's management, other than Mr. Findlay, have
been offered the opportunity to acquire shares of the common stock of the
surviving corporation at or shortly after the merger, and it is expected that
such persons will invest approximately $150,000 in such common stock on the same
economic terms as Parent. The purpose of this investment by management is
primarily for senior management to have some financial stake in the surviving
corporation, and not for the purpose of raising additional capital to finance
the merger or the surviving corporation's operations. The equity to be acquired
by those management employees will constitute less than 1% of the total equity
investment in the surviving corporation after giving effect to the merger.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the surviving corporation's Articles
of Incorporation and Bylaws will contain the provisions with respect to
indemnification of directors and officers as currently set forth in Conso's
Articles of Incorporation and Bylaws. In addition, the surviving corporation
will maintain in effect the current directors' and officers' liability insurance
or substantially similar insurance covering those persons who are currently
covered on the date of the Merger Agreement by Conso's directors' and officers'
liability insurance policy for a period of at least six years (provided that the
surviving corporation is not required to pay an annual premium for any such
policy in excess of 200% of the last annual premium paid by Conso prior to the
execution of the Merger Agreement).
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS
The following is a description of certain U.S. federal income tax
consequences of the merger to holders of shares of Conso Common Stock who
dispose of such shares in the merger, who are United States Persons (as defined
below), and who, on the date of disposition, hold such shares as capital assets
(as
31
<PAGE> 36
defined in the Internal Revenue Code of 1986, as amended (the "Code")) (each a
"United States Holder"). This discussion is based on the Code, Treasury
regulations, proposed and final, issued under the Code, and administrative and
judicial interpretations of the Code and regulations, each as in effect and
available on the date of this Proxy Statement all of which are subject to
change, possibly with retroactive effect, and all of which are subject to
differing interpretations. Although Conso will not seek any rulings from the
Internal Revenue Service ("IRS") or an opinion of counsel with respect to the
transactions contemplated hereby, Conso believes that the merger will have the
U.S. federal income tax consequences described below to the United States
Holders.
Conso urges each holder to consult its own tax advisors regarding the
specific U.S. federal, foreign, state and local tax consequences of its
disposition of shares of Conso Common Stock in the merger. Except as
specifically noted otherwise, the following discussion does not address
potential foreign, state, or local tax consequences, nor does it address
taxpayers subject to special treatment under the U.S. federal income tax laws,
such as financial institutions, real estate investment trusts, regulated
investment companies, brokers and dealers or traders in securities or
currencies, persons whose functional currency is not the U.S. dollar, insurance
companies, tax-exempt organizations, S corporations, persons who hold Conso
Common Stock as part of a position in a straddle or as part of a hedging or
conversion transaction, persons who acquired shares of Conso Common Stock
pursuant to an exercise of employee stock options or rights or otherwise as
compensation, persons who hold employee stock options or rights to acquire Conso
Common Stock and taxpayers subject to alternative minimum tax.
A "United States Person" is a beneficial owner of Conso Common Stock,
who for U.S. federal income tax purposes is: (1) a citizen or resident of the
U.S.; (2) a partnership, corporation, limited liability company or other similar
entity created or organized in or under the laws of the U.S. or any state
thereof, including the District of Columbia; (3) an estate if its income is
subject to U.S. federal income taxation regardless of its source; or (4) a trust
if such trust validly has elected to be treated as a United States person for
U.S. federal income tax purposes or if (i) a court within the U.S. is able to
exercise primary supervision over its administration and (ii) one or more United
States persons have the authority to control all of its substantial decisions.
A United States Holder generally will realize gain or loss upon the
surrender of such holder's shares of Conso Common Stock pursuant to the merger
in an amount equal to the difference, if any, between the amount of cash
received and such holder's aggregate adjusted tax basis in the shares of Conso
Common Stock surrendered therefor.
In general, any gain or loss recognized by a United States Holder in
the merger will be eligible for capital gain or loss treatment. Any capital gain
or loss recognized by a United States Holder will be long-term capital gain or
loss if the shares of Conso Common Stock giving rise to such recognized gain or
loss have been held for more than one year; otherwise, such capital gain or loss
will be short term. Subject to limited exceptions, capital losses cannot be
used to offset ordinary income.
Under the U.S. federal backup withholding tax rules, unless an
exemption applies, the Exchange Agent will be required to withhold, and will
withhold, 31% of all cash payments to which a holder of shares of Conso Common
Stock or other payee is entitled pursuant to the Merger Agreement, unless the
shareholder or other payee provides a tax identification number (social security
number, in the case of an individual, or employer identification number, in the
case of other shareholders), certifies that such number
32
<PAGE> 37
is correct, and otherwise complies with such backup withholding tax rules. Each
of Conso's shareholders, and, if applicable, each other payee, should complete
and sign the Substitute Form W-9 which will be included as part of the letter of
transmittal to be returned to the Exchange Agent in order to provide the
information and certification necessary to avoid backup withholding tax, unless
an exemption applies and is established in a manner satisfactory to the Exchange
Agent.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS
FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE
DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE MERGER. EACH HOLDER OF
SHARES OF CONSO COMMON STOCK IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER
(INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE AND LOCAL TAX LAWS).
EFFECT OF THE MERGER ON CONSO STOCK OPTIONS
The Compensation Committee of Conso's Board of Directors has taken
action under the terms of Conso's 1993 Stock Option Plan to (a) cause all
unvested options to purchase Conso Common Stock to vest and become fully
exercisable as of ____________, 1999 and (b) accelerate the expiration dates of
all outstanding stock options so that such options will expire at the effective
time of the merger (or such earlier time as they would otherwise expire by their
terms) if not exercised by the holder. Therefore, all outstanding stock options
will expire and be cancelled if not exercised by the time the merger is
consummated. Holders of Conso stock options should review the terms of their
individual option agreements, including the exercise prices, and make a decision
as to whether to exercise the stock options or allow them to expire. HOLDERS
WISHING TO EXERCISE STOCK OPTIONS SHOULD EXECUTE AND DELIVER A NOTICE OF
EXERCISE TO CONSO IN ACCORDANCE WITH THE TERMS OF THEIR INDIVIDUAL OPTION
AGREEMENT NO LATER THAN THE EFFECTIVE TIME OF THE MERGER, WHICH WILL BE NO
EARLIER THAN THE TIME OF THE SPECIAL MEETING.
As of ________________, 1999, there were outstanding options to
purchase (i) an aggregate of ________________ shares of Conso Common Stock at an
exercise price of less than $9.00 per share and (ii) an aggregate of
_______________ shares of Conso Common Stock at an exercise price of $9.00 per
share or greater.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by Conso's Board of Directors for a special meeting of shareholders
to be held on ________, 1999, at ___ local time, at Conso's executive offices at
513 North Duncan Bypass, Union, South Carolina, or at any adjournment thereof.
At the special meeting, shareholders will consider and vote upon a proposal to
approve and adopt the Merger Agreement dated as of October 5, 1999 among Conso,
Parent, and Acquisition Sub, and the related Plan of Merger that is part of the
Merger Agreement. A copy of the Merger Agreement, including the Plan of Merger,
is attached to this Proxy Statement as Appendix A.
RECORD DATE AND VOTING
The holders of record of Conso Common Stock as of the close of business
on ________, 1999 are entitled to receive notice of and to vote at the special
meeting. On the record date, there were approximately ______ holders of record
of Common Stock and _________ shares of Common Stock
33
<PAGE> 38
outstanding. Each share of Common Stock entitles its holder to one vote
concerning all matters properly coming before the special meeting. Any
shareholder entitled to vote may vote either in person or by duly authorized
proxy. A majority of the shares entitled to vote, represented in person or by
proxy, will constitute a quorum for the transaction of business at the meeting.
Abstentions and broker non-votes (that is, shares held by brokers in street
name, voting on certain matters due to discretionary authority or instructions
from the beneficial owner but not voting on other matters due to lack of
authority to vote on such matters without instructions from the beneficial
owner) are counted for the purpose of establishing a quorum. The Merger
Agreement must be approved by the holders of at least two-thirds of the
outstanding shares of Common Stock. Abstentions and broker non-votes will have
the effect of a vote AGAINST approval of the merger. Votes will be tabulated by
Conso's transfer agent, First Union National Bank.
J. Cary Findlay has agreed with Acquisition Sub to vote shares held
directly by him representing approximately 39.1% of the outstanding shares of
Conso Common Stock in favor of the merger at the special meeting. Accordingly,
the affirmative vote of holders of Common Stock representing more than an
additional 27.6% of the outstanding shares of Common Stock is required for
approval of the merger.
[In addition, each of Conso's directors and executive officers has
indicated to Conso that he or she intends to vote his or her shares of Common
Stock in favor of the merger.] Directors and executive officers as a group
beneficially own approximately 5.6% of the outstanding shares of Conso Common
Stock other than the shares held directly by J. Cary Findlay.
VOTING AND REVOCATION OF PROXIES
All shares of Common Stock represented by properly executed proxies
received prior to or at the special meeting and not revoked will be voted in
accordance with the instructions indicated in such proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT
THE MERGER AGREEMENT AND RELATED PLAN OF MERGER, IN THE DISCRETION OF THE
PERSONS NAMED IN THE PROXY, ON SUCH OTHER MATTERS AS PROPERLY MAY BE PRESENTED
AT THE SPECIAL MEETING.
The shareholder giving the proxy may revoke it by:
- delivering a written notice of revocation to the attention of
Conso's Secretary at Conso's principal office at the address set
forth herein at any time before the commencement of the meeting or
any adjournment thereof;
- attending and voting at the special meeting in person; or
- executing and delivering to Conso's Secretary a proxy bearing a
date and time later than that of the proxy to be revoked.
Revocation of the proxy will not affect any vote previously taken. Attendance at
the meeting will not in itself constitute the revocation of a proxy.
The Board of Directors is not currently aware of any business to be
brought before the special meeting other than that described herein. If,
however, other matters are properly brought before the meeting, or any
adjournments or postponements thereof, the persons appointed as proxies will
have discretionary authority to vote the shares represented by duly executed
proxies in accordance with their discretion and judgment as to Conso's best
interests.
34
<PAGE> 39
SOLICITATION OF PROXIES
Conso will bear the expenses in connection with the solicitation of
proxies. Upon request, Conso will reimburse brokers, dealers and banks, or
their nominees, for reasonable expenses incurred in forwarding copies of proxy
materials to the beneficial owners of shares of Common Stock which such persons
hold of record. Solicitation of proxies will be made principally by mail.
Proxies may also be solicited in person or by telephone by officers and regular
employees of Conso. Such persons will receive no additional compensation for
such services, but will be reimbursed for out-of-pocket expenses.
This Proxy Statement and related materials are first being mailed to
shareholders on or about ___________, 1999.
THE MERGER
The following information describes certain material aspects of the
merger. This description does not purport to be complete and is qualified in
its entirety by reference to the appendices hereto, including the Merger
Agreement, which, along with the related Plan of Merger, is attached to this
Proxy Statement as Appendix A and is incorporated herein by reference. All
shareholders are urged to read Appendix A in its entirety. See also "The Merger
Agreement."
The Board of Directors has approved the merger, approved and adopted
the Merger Agreement and the related Plan of Merger, and determined the merger
and the Merger Agreement and Plan of Merger to be advisable, fair to and in the
best interests of shareholders, and has recommended approval of the Merger
Agreement and Plan of Merger by the shareholders. See "Special Factors--Conso's
Reasons for the Merger; Recommendation of the Board of Directors."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE MERGER AGREEMENT AND THE PLAN OF MERGER.
EFFECTS OF THE MERGER
The Merger Agreement and the Plan of Merger provide for the merger of
Acquisition Sub with and into Conso. Upon consummation of the merger:
- Acquisition Sub will merge with and into Conso and the separate
corporate existence of Acquisition Sub will cease;
- Conso will be the surviving corporation in the merger;
- Parent and J. Cary Findlay will become the only shareholders of
Conso (except that other members of Conso's management are expected to
acquire shares of the surviving corporation at or shortly after the
merger);
- each share of Conso Common Stock outstanding immediately prior to
the effective time of the merger (other than 533,378 shares held by J.
Cary Findlay and shares held by shareholders who perfect their
dissenters' rights under South Carolina law) will be converted into
the right to receive $9.00 in cash, without interest;
- each share of Acquisition Sub stock will be converted into shares of
stock of the surviving corporation; and
35
<PAGE> 40
- 533,378 shares of Conso Common Stock held by J. Cary Findlay will be
converted into stock of the surviving corporation.
See "Financing of the Merger-Equity Investments" for a detailed
description of the recapitalization of stock of the surviving corporation in
the merger.
After the effective time of the merger, each certificate previously
representing shares of Conso Common Stock (other than the shares held by J.
Cary Findlay that will be converted into stock of the surviving corporation)
will represent only the right to receive the cash merger consideration (or, in
the case of dissenting shareholders, the statutorily determined "fair value" of
such shares). For a description of the procedures for exchanging certificates
representing shares of Conso Common Stock, see "The Merger-Procedures for
Exchange of Certificates for Merger Consideration."
Shareholders who validly exercise dissenters' rights will be entitled
to receive from the surviving corporation in the merger a cash payment in the
amount of the "fair value" of such shares, determined in the manner provided
under South Carolina law. However, after the effective time of the merger such
shares will not represent any interest in the surviving corporation other than
the right to receive such cash payment. See "The Merger-Dissenters' Rights."
As a result of the merger, Conso will no longer be a publicly-held
company. Conso's current shareholders (other than J. Cary Findlay) will no
longer have any interest in and will not be shareholders of the surviving
corporation, and therefore will not participate in Conso's future earnings and
growth. Instead, each of the shareholders will have the right to receive the
cash merger consideration (or, in the case of any dissenters, the "fair value"
of their shares as determined under South Carolina law).
EFFECTIVE TIME OF THE MERGER
If the Merger Agreement is adopted by the shareholders at the special
meeting and the other conditions to the merger are satisfied (or waived to the
extent permitted), the merger will be consummated and become effective as soon
as practicable thereafter at the time Articles of Merger are duly executed and
properly filed with the Secretary of State of South Carolina. It is currently
anticipated that, if the merger is approved at the special meeting, the
effective time of the merger will be within a few days after the special
meeting, and could be as early as immediately after the special meeting. It is
not anticipated that any material condition to the merger will be waived.
The Merger Agreement may be terminated and the merger abandoned prior
to the effective time of the merger by either party in certain circumstances,
whether before or after the adoption of the Merger Agreement by the
shareholders. See "The Merger Agreement-Termination of the Merger Agreement."
PROCEDURES FOR EXCHANGE OF CERTIFICATES FOR MERGER CONSIDERATION
[First Union National Bank] has been designated as Exchange Agent for
purposes of exchanging stock certificates and making the cash payments
contemplated by the Merger Agreement. Parent will deposit in trust with the
Exchange Agent cash in United States dollars in an aggregate amount equal to
the product of (i) the number of shares of Common Stock outstanding immediately
prior to the effective time of the Merger (other than 533,378 shares held by J.
Cary Findlay and shares held by dissenting shareholders) and (ii) $9.00. The
Exchange Agent will, pursuant to irrevocable instructions, deliver to the
holders of shares of Common Stock their respective portions of the merger
consideration according to the procedure summarized below.
36
<PAGE> 41
At the close of business on the day of the effective time of the
merger, Conso's stock ledger with respect to Common Stock will be closed.
As soon as practicable after the effective time of the merger, the
surviving corporation will cause the Exchange Agent to mail to each holder of a
certificate evidencing shares of Common Stock (other than certain shares held
by Mr. Findlay and dissenting shareholders) a letter of transmittal advising
such holder of the effectiveness of the merger and the procedure for
surrendering to the Exchange Agent such certificate or certificates in exchange
for the merger consideration. Upon the surrender for cancellation to the
Exchange Agent of such certificates, together with a duly executed and
completed letter of transmittal and any other documents required by the letter
of transmittal, the Exchange Agent will promptly pay to the holder the merger
consideration deliverable in respect of such certificates. Until so
surrendered, each certificate will be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the cash merger
consideration to which the holder is entitled. No interest will be paid or
accrued in respect of such cash payments.
If the merger consideration (or any portion thereof) is to be
delivered to a person other than the person in whose name the certificates
surrendered are registered, it will be a condition to the payment of the merger
consideration that (i) such certificates be properly endorsed for transfer or
accompanied by appropriate stock powers, (ii) such transfer otherwise be proper
and (iii) the person requesting such transfer pay to the Exchange Agent any
applicable transfer taxes or present evidence that such taxes have been paid or
are not required to be paid.
SHAREHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the effective time of the merger, each certificate previously
representing shares of Conso Common Stock will represent only the right to
receive the merger consideration therefor (or, in the case of dissenting
shareholders, the statutorily determined "fair value" of such shares).
Promptly following the date which is 270 days after the effective time
of the merger, the Exchange Agent will return to the surviving corporation all
cash, certificates and other instruments in its possession that constitute any
portion of the merger consideration, and the Exchange Agent's duties as such
will terminate. Thereafter, each holder of a Conso certificate may surrender
such certificate to the surviving corporation and (subject to applicable
abandoned property, escheat and similar laws) receive in exchange therefor the
merger consideration, without interest; however, such certificate holder will
have no greater rights against the surviving corporation than may be accorded
to general creditors under applicable law. Notwithstanding the foregoing,
neither Conso nor Parent will be liable to a holder of shares of Common Stock
for any merger consideration delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
PLANS OR PROPOSALS AFTER THE MERGER
Following the merger, the shares of Common Stock will no longer be
publicly traded on the Nasdaq National Market and the registration of the
Common Stock under the Securities Exchange Act of 1934 will be terminated.
Except as set forth herein, it is expected that Conso and its subsidiaries will
continue to engage in business activities on a basis substantially consistent
with current operations. Following the merger, Parent, J. Cary Findlay and
other members of Conso management who acquire stock in the surviving
corporation, as the only shareholders of Conso, will have the opportunity to
benefit from any of Conso's earnings and growth, and will bear the risk of any
decrease in Conso's value.
In connection with the merger, Conso's Articles of Incorporation will
be amended to reclassify the Conso Common Stock in order to permit the issuance
of different classes of common stock, as well as
37
<PAGE> 42
preferred stock, of the surviving corporation. The capitalization of Conso
following the merger is expected to be as set forth in "Financing of the
Merger-Equity Investments." Other than this recapitalization, neither Parent,
J. Cary Findlay nor any of Parent's directors, executive officers or
controlling affiliates has any present plans that relate to or would result in
an extraordinary corporate transaction such as a merger, reorganization or
liquidation involving Conso or any of its subsidiaries, or a sale or other
transfer of a material amount of the assets of Conso or any of its subsidiaries
or any other significant changes in Conso's corporate structure or business.
Parent and Mr. Findlay, however, will continue to evaluate the business and
operations of Conso after the merger and make such changes as are deemed
appropriate.
The Plan of Merger provides that the Articles of Incorporation of
Conso, as amended by the Plan of Merger, shall continue to be the Articles of
Incorporation of the surviving corporation after the effective time of the
merger until amended in accordance with applicable law. In addition, the Bylaws
of Conso in effect immediately prior to the merger shall continue to be the
Bylaws of the surviving corporation after the effective time of the merger
until amended in accordance with applicable law.
The Plan of Merger also provides that the directors of Acquisition Sub
and the officers of Conso will be the directors and officers, respectively, of
the surviving corporation until their successors are duly elected and
qualified, or until their earlier death, removal or resignation in accordance
with the Bylaws of the surviving corporation and applicable law.
For a list and description of Acquisition Sub's directors, see
"Certain Information Concerning the Transaction Participants - Parent and
Acquisition Sub."
For a list and description of Conso's officers, see "Certain
Information Concerning the Transaction Participants - Directors and Executive
Officers of Conso."
DISSENTERS' RIGHTS
Under South Carolina law, holders of Conso Common Stock who do not
vote in favor of the Merger Agreement and who comply with certain notice
requirements and other procedures will have the right to dissent and to be paid
cash for the "fair value" of their shares. "Fair value" is defined as the value
of the shares of Conso common stock, excluding any appreciation and
depreciation in anticipation of the merger unless exclusion would be
inequitable. The value of the shares is to be determined by techniques that are
accepted generally in the financial community. Such "fair value" as finally
determined under such procedures may be more or less than the consideration to
be received by other Conso shareholders under the terms of the Merger
Agreement. Failure to follow such procedures precisely may result in loss of
dissenters' rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO DISSENTERS' RIGHTS UNDER SOUTH CAROLINA LAW AND IS QUALIFIED IN
ITS ENTIRETY BY THE FULL TEXT OF CHAPTER 13 OF THE SOUTH CAROLINA BUSINESS
CORPORATION ACT, WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX B TO THIS PROXY
STATEMENT AND INCORPORATED HEREIN BY REFERENCE.
A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies Conso in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter shall be determined as if the shares
as to which he dissents and his other shares were registered in the names of
different shareholders. A beneficial owner may assert dissenters' rights as to
shares held on his behalf only if he dissents with respect to all shares of
which he is the beneficial holder or over which he has power to direct the
vote. A beneficial owner asserting dissenters' rights to shares held on his
behalf shall notify Conso in writing of the name and address of the record
holder of the shares, if known to him.
38
<PAGE> 43
Shares of Common Stock held by dissenting holders will not be
converted into the right to receive the cash consideration as set forth in the
Plan of Merger and after the effective time of the merger will represent only
the right to receive such consideration as is determined to be due such
dissenting holders pursuant to South Carolina law. Common Stock outstanding
immediately prior to the merger and held by a shareholder who withdraws such
shareholder's demand for dissenters' rights or fails to perfect such rights
will be deemed to be converted at the effective time of the merger into the
right to receive $9.00 per share in cash without interest.
A holder of shares of Common Stock wishing to exercise dissenters'
rights must: (a) give to Conso, before the vote on the Merger Agreement is
taken, written notice of the holder's intent to demand payment for his shares
if the merger is consummated and (b) must not vote his shares in favor of the
merger. If the Merger Agreement is approved by holders of the requisite number
of outstanding shares of Common Stock, Conso will, no later than 10 days
following the consummation of the merger, mail a written dissenters' notice to
all shareholders who gave the aforementioned notice of intent to demand
payment. Such dissenters' notice will: (a) state where the payment demand must
be sent and where certificates for certificated shares must be deposited; (b)
inform holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received; (c) supply a form for
demanding payment that includes the date of the first announcement to news
media or to shareholders of the terms of the merger and requires that the
dissenting shareholder certify whether or not he (or the beneficial holder if
he is a nominee) acquired beneficial ownership of the shares before that date;
(d) set a date by which Conso must receive the payment demand, which date may
not be fewer than 30 nor more than 60 days after the date on which the
dissenters' notice is sent and set a date by which certificates for
certificated shares must be deposited, which may not be earlier than twenty
days after the demand date; and (e) be accompanied by a copy of Chapter 13 of
the South Carolina Business Corporation Act. To exercise his dissenters'
rights, a shareholder sent a dissenters' notice must demand payment, certify
whether he (or the beneficial shareholder on whose behalf he is asserting
dissenters' rights) acquired beneficial ownership of the shares before the date
set forth in the dissenters' notice and deposit his share certificates in
accordance with the terms of the notice. A shareholder failing to do so will
not be entitled to payment for his shares under applicable law. A shareholder
who demands payment and deposits his share certificates in accordance with the
terms of the notice will retain all other rights of a shareholder until
consummation of the merger. All notices, demands, and other communications
directed to the Conso in connection with the appraisal process should be sent
to Conso at Post Office Box 326, 513 North Duncan Bypass, Union, South
Carolina, 29379, Attention: Secretary.
Upon receipt of a payment demand by a shareholder made in compliance
with the above-described procedures, Conso will pay such shareholder the amount
Conso estimates to be the value of his shares, plus interest accrued to the
date of payment. The payment will be accompanied by: (a) Conso's balance sheet
as of the most recent fiscal year end, an income statement and a statement of
changes in shareholders' equity for that year and the latest available interim
financial statements; (b) a statement of Conso's estimate of the fair value of
the shares and an explanation of how the fair value was calculated; (c) an
explanation of how the interest was calculated; (d) a statement of the
dissenter's right to demand payment if he is dissatisfied with Conso's offer,
if Conso fails to make immediate payment or if Conso, having failed to
consummate the merger, fails to return deposited share certificates or release
the transfer restrictions imposed on uncertificated shares within 60 days after
the date set for demanding payment; and (e) a copy of Chapter 13.
With respect to shares not yet owned by the dissenting shareholder (or
beneficially owned if he is a nominee) as of the date of the first announcement
to news media or to shareholders of the terms of the merger, Conso may elect to
withhold payment otherwise due to the dissenting shareholder, unless the
dissenting shareholder acquired ownership of such shares by operation of law
after such announcement. To the extent Conso elects to withhold payment for any
such after-acquired shares, after the merger, Conso shall estimate the fair
value of such shares, plus accrued interest, and pay that amount to each
dissenter
39
<PAGE> 44
who agrees to accept it in full satisfaction of his demand. Conso shall send
with its offer a statement of its estimate of the fair value of the shares, an
explanation of how the fair value and interest were calculated, and a statement
of the dissenter's right to demand additional payment if he is dissatisfied
with Conso's offer, if Conso fails to offer payment within 60 days after the
date set for demanding payment, or if Conso, having failed to consummate the
merger, fails to return deposited share certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date set
for demanding payment.
If: (a) a dissenter believes that the amount offered by Conso is less
than the fair value of his shares, or that the interest due is incorrectly
calculated; (b) Conso fails to make immediate payment to a dissenter or to
offer payment within 60 days after the date set for demanding payment (with
respect to after-acquired shares) or (c) Conso, having failed to consummate the
merger, fails to return deposited stock certificates to a dissenter or release
the transfer restrictions imposed on uncertificated shares within 60 days after
the date set for demanding payment, the dissenter may notify Conso in writing
of his own estimate of the fair value of his shares and amount of interest due
and demand payment of his estimate or (with respect to after-acquired shares)
reject Conso's offer and demand payment of the fair value of his shares and
interest due. A dissenter will waive his right to demand payment as described
in this paragraph unless he notifies Conso of his demand in writing within 30
days after Conso made or offered payment for his shares.
If a demand for payment as described above remains unsettled, Conso
will commence a proceeding within 60 days after the date of his payment demand
and petition the court to determine the fair value of the shares and accrued
interest. Conso shall commence any such proceeding in the circuit court of
Union County, South Carolina. If Conso does not commence a proceeding within
the 60 day period, it will pay each dissenter whose demand remains unsettled
the amount demanded.
Conso shall make all dissenters whose demands remain unsettled parties
to the proceeding and serve each dissenter with a copy of the petition. Each
dissenter made a party to the proceeding by the court will be entitled to
judgement for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by Conso. The court may
appoint one or more appraisers to receive evidence and recommend decision on
the question of fair value. Parties to the proceeding are entitled to the same
discovery rights as parties in other civil proceedings.
The court shall determine all costs of an appraisal proceeding
described above, including the compensation and expenses of appointed
appraisers. The court will assess the costs against Conso, except that the
court may assess costs against some or all of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment. With
respect to the fees and expenses of counsel and experts for the parties to the
proceeding, the court may assess such costs against: (a) Conso and in favor of
any or all dissenters if it finds that Conso did not substantially comply with
the above described procedures or (b) either Conso or a dissenter or in favor
of either or any other party, if it finds that the party against whom such
costs are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the dissenters' rights provided under South Carolina law. In
addition, if the court finds that the services of counsel to any dissenter were
of substantial benefit to other dissenters similarly situated and that the
costs of such services should not be assessed against Conso, the court may
award to such counsel reasonable fees to be paid out of the amounts to the
dissenters who were benefited. In a proceeding commenced by dissenters to
enforce any liability of Conso in the event Conso fails to commence an
appraisal proceeding within the 60 day period, the court shall assess the costs
of the proceeding and the fees and expenses of the dissenters' counsel against
Conso.
ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE SOUTH CAROLINA STATUTORY
PROCEDURE SET FORTH IN APPENDIX B TO THIS PROXY STATEMENT WILL FORFEIT HIS OR
HER RIGHTS OF DISSENT AND WILL RECEIVE THE CASH MERGER CONSIDERATION IN
EXCHANGE FOR HIS OR HER SHARES.
40
<PAGE> 45
ACCOUNTING TREATMENT
The merger will be accounted for as a recapitalization of Conso for
financial accounting purposes. Accordingly, the historical basis of Conso's
assets and liabilities will not be affected by the merger and the transactions
contemplated thereby.
THE MERGER AGREEMENT
The following discussion of the Merger Agreement is qualified in its
entirety by reference to the complete text of the Merger Agreement, which,
along with the related Plan of Merger, is included with this Proxy Statement as
Appendix A and is incorporated herein by reference.
GENERAL
The Merger Agreement and the Plan of Merger provide for the merger of
Acquisition Sub with and into Conso. Conso will be the surviving corporation in
the merger.
EFFECTIVE TIME OF THE MERGER
If the Merger Agreement and related Plan of Merger are approved by
Conso's shareholders and the other conditions to the merger are satisfied (or
waived to the extent permitted), the merger will be consummated and become
effective at the time Articles of Merger are duly executed and properly filed
with the Secretary of State of South Carolina.
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS
Each share of Conso Common Stock then issued and outstanding (other
than 533,378 shares held by J. Cary Findlay, which will be converted into stock
in the surviving corporation and shares held by dissenting shareholders) will
be converted into the right to receive an amount in cash equal to $9.00,
without interest.
Shareholders who dissent from the merger pursuant to South Carolina
law will be entitled to receive the statutorily determined "fair value" for
their shares. See "The Merger--Dissenters' Rights."
In no event will holders of Common Stock be entitled to receive
payment of any interest on the cash merger consideration to be distributed to
them in connection with the Merger.
REPRESENTATIONS AND WARRANTIES
Conso has made various representations and warranties in the Merger
Agreement relating to: (a) corporate organization and existence; (b) authority
and enforceability; (c) capitalization; (d) subsidiaries; (e) consents and
non-contravention; (f) governmental authorization; (g) Securities and Exchange
Commission filings; (h) accuracy of the Proxy Statement, the Schedule 13E-3
filed with the Securities and Exchange Commission with respect to the merger,
and related materials; (i) absence of certain material changes; (j) litigation
and absence of undisclosed liabilities; (k) environmental matters; (l)
compliance with laws; (m) taxes; (n) employee benefits; (o) intellectual
property; (p) year 2000 compliance; (q) title to assets and property; (r)
inapplicability of statutory takeover provisions; (s) change in control
provisions; (t)
41
<PAGE> 46
Board of Directors recommendations; (u) the opinion of Robinson-Humphrey, its
financial advisor; and (v) brokers and finders.
Parent and Acquisition Sub have also made various representations and
warranties in the Merger Agreement relating to: (a) corporate organization and
existence; (b) authority and enforceability; (c) consents and
non-contravention; (d) governmental authorization; (e) accuracy of the
information contained in filings of required documents with the Securities and
Exchange Commission; (f) financing; and (g) litigation.
CERTAIN COVENANTS AND AGREEMENTS
Conso has agreed that it will, and will cause each of its subsidiaries
to, conduct its business and operations only according to its ordinary course
of business consistent with past practice and will use commercially reasonable
efforts to preserve intact its business organization and relationships with
third parties and to keep available the services of its officers and employees.
Conso has also agreed that, except as expressly contemplated by the
Merger Agreement or consented to in writing by Parent, until the effective time
of the merger, it will not and will not permit any of its subsidiaries to:
- amend its Articles of Incorporation or Bylaws or issue or authorize
the issuance of any securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock;
- (a) split, combine or reclassify any of its capital stock; (b)
declare, pay or set aside for payment any dividends or other
distribution in respect of its capital stock, or (c) purchase, redeem
or otherwise acquire any shares of its capital stock or any rights,
warrants or options to acquire any such shares (other than outstanding
employee stock options);
- issue, sell, pledge or deliver, or agree or commit to issue, sell or
deliver any of its capital stock or any securities convertible into or
exercisable or exchangeable for shares of its capital stock (except
for the issuance of shares of Common Stock upon the exercise of
outstanding employee stock options);
- incur any material liability or obligation (including any
indebtedness for borrowed money or any guaranty therefor of any other
person) other than in the ordinary course of business;
- acquire, dispose of, mortgage, license, abandon or encumber any
material assets or properties, or amend or terminate any material
lease, except in the ordinary course of business;
- acquire any business or any corporation, partnership, joint venture
or other business organization or division thereof that would be
material to Conso's consolidated financial position;
- sell or otherwise dispose of any assets that are material to Conso's
consolidated financial condition;
- except in the ordinary course of business, grant or agree to grant
to any employee any increase in wages or bonus, severance, profit
sharing, retirement, deferred compensation, insurance or other
compensation or benefits, or amend any existing stock option plans
(except that Conso's 1993 Stock Option Plan may be amended to vest all
outstanding stock options and accelerate the expiration dates of all
outstanding stock options);
42
<PAGE> 47
- merge or consolidate with any other entity in any transaction;
- enter into or amend any employment, consulting, severance or similar
agreement with any individual other than in the ordinary course of
business;
- make any material change in its cash management or accounting
policies except as required by generally accepted accounting
principles;
- cancel, terminate, amend, modify or waive any of the terms of any
pre-existing confidentiality or standstill agreement;
- authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an
agreement with respect to, any merger, consolidation or business
combination (other than the merger with Acquisition Sub) or any
acquisition of a material amount of assets or securities; or
- commit or agree to take any of the foregoing actions.
Until the effective time of the merger, Conso has also agreed to
provide Parent and its accountants, counsel, financing sources and other
representatives, full access during normal business hours to all of Conso's
properties, books and records, and employees. However, neither Conso nor any
subsidiary shall be required to disclose information or provide access where
such disclosure or access would impose an unreasonable burden on Conso, violate
the rights of any of its customers, jeopardize any attorney-client privilege or
violate applicable law. Appropriate substitute disclosure arrangements will be
made in such a case. Parent and Acquisition Sub have agreed to use reasonable
best efforts to keep such information confidential and not to use it in a
manner detrimental to Conso. In addition to the requirements under the Merger
Agreement, CVC is party to a Confidentiality Agreement dated May 5, 1999, and
each of Parent and Acquisition Sub have agreed to be bound by the terms of such
agreement to the same extent as if it were a signatory to such agreement.
Conso has also agreed to notify Parent of any shareholder litigation
against Conso and its directors relating to the transactions contemplated by
the Merger Agreement and will consult with Parent prior to entering into any
settlement of such litigation.
In connection with the Merger Agreement, Conso, Parent and Acquisition
Sub have agreed to use their commercially reasonable efforts to take all
actions necessary or advisable so that the transactions contemplated by the
Merger Agreement may be completed, including using commercially reasonable
efforts to obtain all necessary waivers, consents and approvals, and to effect
all necessary registrations and filings under applicable law.
NO SOLICITATION OF OTHER OFFERS
The Merger Agreement provides that neither Conso nor any of its
subsidiaries (nor any of their representatives) will take any action:
- to solicit or encourage the making of any take-over proposal by
another party; or
- to furnish or disclose any information to any person or participate
in any discussions or negotiations as to another take-over proposal.
However, to the extent that the failure to take such action would breach the
fiduciary obligations of Conso's Board of Directors, Conso may, in response to
an unsolicited take-over proposal by another party,
43
<PAGE> 48
furnish non-public or confidential information and participate in discussions
or negotiations with respect to any take-over proposal that is reasonably
likely to lead to a transaction that is more favorable to Conso's shareholders
from a financial point of view than the merger with Acquisition Sub.
In addition, the Merger Agreement provides that Conso may not enter
into any agreement with respect to another take-over proposal or any agreement
or understanding that would prevent it from consummating the merger with
Acquisition Sub, unless the Board of Directors receives a fairness opinion from
Robinson-Humphrey with respect to the transaction and determines (upon the
recommendation of a majority of the Special Committee) in good faith after
consultation with its legal and financial advisors that:
- such transaction is more favorable from a financial point of view to
shareholders than the transactions contemplated by the Merger
Agreement and is in the best interests of shareholders;
- such transaction is not subject to any greater material contingency
than the transactions contemplated by the Merger Agreement; and
- failure to approve the other take-over proposal would constitute a
breach of the Board of Directors' fiduciary duties to shareholders
under applicable law.
If Conso enters into a superior take-over proposal as described above, it must
pay to Parent applicable termination fees and expenses as provided by the
Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of Conso, Parent and Acquisition Sub to
effect the merger are subject to the satisfaction of various conditions, most
of which may be waived by a specified party or parties. None of the parties has
any present intention to waive any material conditions.
The obligations of Conso to effect the merger are subject to the
following conditions:
- all representations and warranties made by Parent and Acquisition
Sub shall be true and correct in all material respects as of the
effective time of the merger;
- Parent and Acquisition Sub shall have performed in all material
respects their obligations and agreements contained in the Merger
Agreement;
- Conso shall have received certification dated the effective date of
the merger from authorized officers of Parent and Acquisition Sub that
all representations and warranties are true and correct, and that all
covenants and agreements have been performed;
- Conso's shareholders shall have duly approved and adopted the Merger
Agreement and Plan of Merger;
- there shall be no adverse proceedings affecting the business of
Conso or the ability of any party to perform its obligations under the
Merger Agreement; and
- any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or terminated.
The obligations of Parent and Acquisition Sub to consummate the merger
are subject to the following conditions:
44
<PAGE> 49
- all representations and warranties made by Conso shall be true and
correct in all material respects as of the effective time of the
merger;
- Conso shall have performed in all material respects its obligations
and agreements contained in the Merger Agreement;
- Parent and Acquisition Sub shall have received certification dated
the effective date of the merger from an authorized officer of Conso
that all representations and warranties are true and correct, and that
all covenants and agreements have been performed;
- Conso's shareholders shall have duly approved and adopted the Merger
Agreement, and the holders of not more than 6% of the outstanding
shares of Common Stock shall have given Conso written notice of their
intent to exercise dissenters' rights;
- there shall be no adverse proceedings affecting the business of
Conso or the ability of any party to perform its obligations under the
Merger Agreement;
- all outstanding options to acquire Conso's Common Stock shall have
been exercised or cancelled;
- Parent shall have received the financing necessary to consummate the
merger; and
- any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or terminated.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the
effective time of the merger, whether before or after approval of the Merger
Agreement by Conso's shareholders:
- by mutual consent of Parent and Conso;
- by Parent or Conso if the merger is not completed on or prior to
January 31, 2000, unless the terminating party has breached the Merger
Agreement;
- by Parent or Conso in the event of an uncured breach by the other
party of any representation, warranty, covenant or agreement contained
in the Merger Agreement;
- by Parent or Conso if consummation of the merger is prohibited by
any applicable law;
- by Parent or Conso if shareholder approval is not obtained at the
special meeting;
- by Conso under certain circumstances if it enters into an agreement
for a take-over proposal with another party that is more favorable to
Conso shareholders from a financial point of view and complies with
the notice and other provisions of the Merger Agreement, including the
payment of a termination fee to Parent;
- by Parent, if Conso or its Board of Directors shall have withdrawn
or modified in a manner materially adverse to Parent or Acquisition
Sub the Board's approval or recommendation of the merger, or if the
Board shall have approved another take-over proposal by another party,
or if
45
<PAGE> 50
Conso has materially breached its obligations regarding the
solicitation of other offers to acquire Conso;
- by Parent or Conso if Robinson-Humphrey shall have withdrawn its
fairness opinion or modified its fairness opinion in a manner adverse
to Parent or Acquisition Sub; or
- by Parent, if certain material adverse changes occur affecting
financial markets in general.
TERMINATION FEES; EXPENSES
The Merger Agreement provides for the payment of a fee of $2 million
to Parent if the Merger Agreement is terminated in certain circumstances,
including the following:
- if Conso or its Board shall have withdrawn or modified in a manner
materially adverse to Parent or Acquisition Sub the Board's approval
or recommendation of the merger, or if the Board shall have approved a
take-over proposal by another party, or if Conso has materially
breached its obligations regarding the solicitation of other offers to
acquire Conso;
- if Conso proposes to enter into a agreement providing for a
take-over proposal by another party;
- if the Merger Agreement is terminated (i) because of a failure to
obtain shareholder approval, (ii) because the merger is not
consummated by January 31, 2000, or (iii) because Robinson-Humphrey
has withdrawn or modified its fairness opinion in a manner adverse to
Parent or Acquisition Sub, and within six months of any such
termination Conso enters in to an agreement for, announces or
consummates a transaction whereby Conso merges or sells substantially
all of its assets or stock to another party for consideration in
excess of the consideration offered by Parent and Acquisition Sub; or
In addition, if a termination fee is payable by Conso, all costs and
expenses incurred by Parent and Acquisition Sub in connection with the merger
shall be reimbursed by Conso up to a maximum of $1,000,000.
There will be no termination fee if the Merger Agreement is terminated
by Conso because Robinson-Humphrey has withdrawn or modified its fairness
opinion and a subsequent transaction is not consummated within six months but
in such event Conso must reimburse Parent's transaction expenses up to a
maximum of $1,000,000.
If the Merger Agreement is terminated under any other circumstances,
each party to the merger Agreement shall bear its own transaction expenses.
The following is an estimate of the costs and expenses expected to be
incurred in connection with the merger:
<TABLE>
<S> <C>
Financial Advisor Fees and Expenses $ _________
Debt Financing Fees _________
Legal, Accounting and Filing Fees, Printing and Mailing Costs and Other Expenses _________
Miscellaneous _________
Total $ _________
</TABLE>
46
<PAGE> 51
The surviving corporation in the merger will pay all of these costs out of the
proceeds of the financing. If the merger does not occur, each party will bear
its own expenses, subject to the obligation of Conso to reimburse up to
$1,000,000 of Parent's expenses under the circumstances described above. Conso
estimates that the expenses it has incurred or will incur prior to the merger
in connection with its engagement of Robinson-Humphrey, the solicitation of
proposals from prospective purchasers, the negotiation and preparation of the
Merger Agreement, and calling, soliciting proxies for and conducting the
special meeting will total approximately $___________________.
AMENDMENTS TO THE MERGER AGREEMENT
The Merger Agreement may only be amended in writing by each of the
parties thereto, at any time prior to the consummation of the merger, by action
taken by their respective Boards of Directors. After approval of the Merger
Agreement by Conso's shareholders, no amendment to the Merger Agreement which
by law requires further approval of the shareholders may be made without
further shareholder approval.
FINANCING OF THE MERGER
GENERAL
Parent and Acquisition Sub intend to fund payment of the merger
consideration and other payments to be made in connection with the merger
primarily through third party debt financing and equity investments by CVC. The
merger is contingent on such financing being obtained. The total amount of
funds necessary to fund the merger, recapitalize the surviving corporation,
refinance existing indebtedness and pay related transaction expenses is
expected to be approximately $111 million. It is anticipated that these funds
will be available from the following sources:
- equity investments by CVC and its affiliates in Acquisition Sub of
approximately $20 million in cash;
- the conversion of 533,378 shares of Common Stock held by J. Cary
Findlay into equity of the surviving corporation, representing a value
of approximately $4.8 million;
- debt financing pursuant to a $15 million senior subordinated loan, a
$53 million senior secured term loan facility, and a revolving credit
facility of up to $25 million; and
- excess cash held by Conso at the time of the merger, currently
assumed to be approximately $300,000 to $500,000.
CREDIT FACILITIES
Acquisition Sub has obtained commitments for credit facilities totaling
$93 million to provide financing for the merger and for the surviving
corporation's operations after the merger. The credit facilities consist of a
$25 million revolving credit facility, a $25 million term loan facility ("Term
Loan A"), a $28 million term loan facility ("Term Loan B"), and $15 million in
subordinated debt. The revolving credit and term loan facilities (the "Senior
Credit Facilities") have been committed by SunTrust Banks, Atlanta and the
subordinated debt has been committed by SunTrust Banks, Inc. Upon completion of
the merger, Conso will assume Acquisition Sub's obligations under these credit
facilities, and Conso's existing borrowings will be repaid with a portion of the
proceeds of the new credit facilities. While SunTrust Bank, Atlanta and SunTrust
Banks, Inc. have provided commitments for the entire amount of the credit
facilities, they have stated their intention to syndicate the credit facilities
among other lending institutions through their affiliate, SunTrust Equitable
Securities.
The following is a summary of some of the principal terms of the credit
facilities as set forth in the written commitments.
Security
The Senior Credit Facilities will be secured by a first priority
security interest in or pledge of all of the existing and after-acquired assets
of Conso and its subsidiaries, subject to certain limitations to avoid adverse
tax consequences to Conso. The subordinated debt will be unsecured and will be
subordinated to the Senior Credit Facilities and any other senior debt.
Interest
Borrowings under the Senior Credit facilities will bear interest at a
floating rate per annum based upon an applicable margin above SunTrust Bank,
Atlanta's prime rate (payable monthly) or, if elected by Conso, above the LIBOR
rate for a specified period (payable at the and of the applicable LIBOR period
of 1, 2, 3 or 6 months). The applicable margins will depend upon certain
financial ratios, and may range from 2% to 4% above LIBOR and from 0.5% to 2.5%
above the prime rate. The subordinated debt will bear interest at 12% per annum.
Repayment
Principal of the term loans will amortize quarterly on a specified
schedule beginning in June 2000, with Term Loan A maturing on December 31, 2004
and Term Loan B maturing on December 31, 2006. The revolving credit facility
matures on December 31, 2004. The subordinated debt matures eight years after
the merger. The Senior Credit Facilities may be prepaid by Conso at its option
at any time without penalty, subject to customary restrictions during LIBOR
periods. The subordinated debt may be redeemed by Conso at any time at par, plus
a redemption premium reducing from 3% to 0% over the first 49 months. The Senior
Credit Facilities are subject to mandatory prepayment in certain events,
including receipt by Conso of proceeds from certain asset dispositions and sales
of securities and from a portion of its cash flow in excess of certain levels.
Parent and Acquisition Sub expect that borrowings under the credit
facilities will be repaid in the ordinary course of business from Conso's
operations.
Warrants
In connection with funding the subordinated debt, SunTrust Banks, Inc.
will receive warrants to purchase 10% of Conso's common and preferred stock on a
fully-diluted basis, exercisable after 15 months following the merger. The
warrants are subject to reduction upon early repayment of the subordinated debt.
SunTrust Banks Inc. will have registration rights and other customary rights
with respect to the shares underlying the warrants, and will be subject to
certain transfer restrictions.
Other Terms
The credit facilities will be subject to other customary terms,
including representations and warranties, reporting requirements, acceleration
upon events of default, and, in the case of the Senior Credit Facility,
affirmative and negative covenants including compliance with financial ratios
and restrictions on additional indebtedness, liens, asset sales and capital
expenditures.
Conditions to Funding
The funding by SunTrust Bank, Atlanta under the senior credit
facilities will be subject to customary conditions to closing, including:
o Execution and delivery of definitive documentation and such
instruments, certificates, opinions and other deliveries as
the lenders shall reasonably request;
o Evidence that a minimum of $25 million of equity has been
invested in the borrower, including a minimum of $20 million
by Parent and $4.8 million by J. Cary Findlay on terms and
conditions satisfactory to SunTrust Bank, Atlanta and SunTrust
Equitable Securities;
o Evidence that a minimum of $15 million in subordinated debt
has been invested in the borrower by SunTrust Banks, Inc.;
o Evidence, satisfactory to SunTrust Bank, Atlanta and SunTrust
Equitable Securities, that Conso's adjusted EBITDA for the
most recently reported twelve-month period ending no more than
60 days prior to the closing is greater than or equal to $18.4
million; and
o Unused revolving credit availability at closing (determined by
the current borrowing base less initial funding of the
revolving credit at closing) of no less than $4 million.
The funding of the subordinated debt by SunTrust Banks, Inc. is also subject to
customary closing conditions, including:
o amendment of any agreements currently prohibiting payment of
interest to subordinated debt except if in default;
o negotiation and execution of a mutually satisfactory purchase
agreement, registration rights agreement and related
documentation;
o an aggregate minimum equity investment of $20 million in the
borrower by Parent and $4.8 million by J. Cary Findlay under
terms reasonable acceptable to SunTrust Banks, Inc. (such
terms to include a maximum of $23 million of preferred stock
with a 12% dividend rate and conversion rights acceptable to
purchasers);
o the absence of any material adverse change;
o completion of due diligence, including evidence of a minimum
adjusted EBITDA for Conso for the most recent reported
twelve-month period ending prior to closing (but no more than
60 days before closing) of at least $18.4 million;
o execution of an intercreditor agreement with senior lenders;
and
o evidence that all conditions precedent to the merger, other
than the funding of the credit facilities, have been
satisfied.
EQUITY INVESTMENTS
General
In the merger, the outstanding shares of Acquisition Sub stock
(representing an equity investment by CVC and its affiliates of approximately
$20 million through Parent) and 533,378 shares of Conso Common Stock held by J.
Cary Findlay (representing a value of approximately $4.8 million at $9.00 per
share) will be
47
<PAGE> 52
converted into shares of common and preferred stock of Conso as the surviving
corporation. Parent currently owns all the stock of Acquisition Sub. Thus,
following the merger, Mr. Findlay and Parent will own all of the outstanding
shares of the capital stock of Conso as the surviving corporation.
With respect to the remaining 2,332,347 shares of Conso Common Stock
owned by Mr. Findlay that are not converted into shares of the surviving
corporation in the merger, Mr. Findlay will, like other Conso shareholders,
receive cash in the amount of $9.00 per share.
To achieve this result, and to create a capital structure more
reflective of a closely-held company, the Plan of Merger contains an amendment
to Conso's Articles of Incorporation, effective upon the merger, which will
have the effect of reclassifying the capital stock of the surviving
corporation. Upon the effectiveness of the merger, Conso will be authorized to
issue 60,000,000 shares of capital stock, divided into two classes: (a)
50,000,000 shares of Common Stock, of which 20,000,000 shares shall be
designated as "Class A Common Stock," 15,000,000 shares will be designated as
"Class B Common Stock" and 15,000,000 shares will be designated as "Class C
Common Stock," and (b) 10,000,000 shares of Preferred Stock, of which 250,000
shares will be designated as "Series A Preferred Stock," and with the Board of
Directors authorized, to the extent permitted by applicable law, to create
additional series of Preferred Stock and determine the rights, privileges,
qualifications, limitations and restrictions of each such additional series.
The Class A Common Stock will have voting rights, while the Class B
Common Stock and Class C Common Stock will have no voting rights except as
otherwise required by law. Shares of Class A Common Stock will be freely
convertible into shares of Class B Common Stock on a one-for-one basis, and
vice-versa. No conversions shall be permitted with respect to Class C Common
Stock. The Series A Preferred Stock will have no voting rights except as
otherwise required by law, but will be entitled to preferred dividends, when,
as and if declared by the Board of Directors, accruing at the rate of 12% per
annum. The Series A Preferred Stock will have a liquidation preference equal to
$100 per share, plus accrued and unpaid dividends, and will be subject to
redemption at the option of the corporation at any time after 20 years after
the effective time of the merger at an amount per share equal to their
liquidation value, plus accrued and unpaid dividends.
After giving effect to the conversion in the merger of the capital
stock of Acquisition Sub and the 533,378 shares of Conso Common Stock held by
Mr. Findlay into shares of the Class A Common Stock, Class B Common Stock,
Class C Common Stock and Series A Preferred Stock of the surviving corporation,
and the expected acquisition by other members of Conso management of 150,000
shares of Class A Common Stock at $1.00 per share at or shortly after the
effective time of the merger, the total equity interests in the surviving
corporation are expected to be held approximately 80.2% by Parent, 19.2% by Mr.
Findlay, and less than 1% by other Conso management. Those equity interests are
expected to be allocated among the different classes of the surviving
corporation's capital stock as follows:
<TABLE>
<CAPTION>
Parent J. Cary Findlay Other Management
------ --------------- ----------------
Class of Stock Shares % of Class Shares % of Class Shares % of Class
- - - -------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Class A Common 299,000 49.8% 151,000 25.2% 150,000 25.0%
Class B Common 1,202,580 100% -0- -0- -0- -0-
Class C Common -0- -0- 197,420 100% -0- -0-
Series A Preferred 185,480 80.6% 44,520 19.4% -0- -0-
</TABLE>
SunTrust, lender to the surviving corporation, or one of its
affiliates, will also receive warrants to purchase shares of common stock of
the surviving corporation up to 10% of the outstanding shares of common stock
in connection with its $15.0 million subordinated loan, and the foregoing table
does not reflect the dilution to the other shareholders that would occur if
such option is exercised.
48
<PAGE> 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of ________, 1999, information as
to the beneficial ownership of Conso Common Stock by (1) each person known by
Conso to have beneficial ownership of more than 5% of the Common Stock (based
on reports filed with the Securities and Exchange Commission), (2) each person
serving as a director or executive officer of Conso, and (3) all of the
directors and executive officers as group:
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NATURE OF BENEFICIAL PERCENTAGE OF COMMON
BENEFICIAL OWNER OWNERSHIP(1) STOCK OUTSTANDING
-------------------------------- -------------------- --------------------
<S> <C> <C>
Five Percent Holders
J. Cary Findlay 3,076,033(2) 41.9%
P.O. Box 326
513 N. Duncan Bypass
Union, SC 29379
FMR Corp. 748,050(3) 10.2%
82 Devonshire Street
Boston, MA 02109
Royce & Associates, Inc. 791,475(4) 10.8%
1414 Avenue of the Americas
New York, NY 10019
IDS Diversified Equity Income Fund 407,250(5) 5.6%
IDS Tower 10
Minneapolis, MN 55440
Directors and Executive Officers
Sara H. Bissell 2,078 (6)
Konstance J. K. Findlay 222,448(7) 3.0%
Antony W. Laughton 54,525(8) (6)
John H. Maxheim 11,494 (6)
James H. Shaw 2,500 (6)
C.V. Balakrishnan 90,875(10) 1.2%
John M. Davis 0 (6)
Judith Raymond Hudjandreas 1,000(11) (6)
</TABLE>
49
<PAGE> 54
<TABLE>
<S> <C> <C>
Louis S. Oltman 2,300(11) (6)
Frank J. Rizzo 1,000(11) (6)
William M. Stewart 12,150(12) (6)
Richard A. Zonin 533(13) (6)
Directors and executive 3,278,621 (9) [____]%
officers as a group
(13 persons)
</TABLE>
- - - ------------------
(1) Unless otherwise indicated, each shareholder has sole voting and sole
investment power with respect to all shares beneficially owned. Share
amounts are rounded to the nearest whole share.
(2) Includes 68,500 shares held by the Findlay Charitable Foundation, of
which Mr. Findlay is a director and officer, and 63,020 shares held by
the Findlay-Conso Education Foundation, of which Mr. Findlay is a
director and officer. Also includes 78,788 shares that Mr. Findlay
holds jointly with his wife, Konstance J. K. Findlay who is Senior
Vice President - Business Development of Conso. Excludes 1,940 shares
and options to purchase 10,200 shares held by Mr. Findlay's wife
individually, as to which shares Mr. Findlay disclaims beneficial
ownership.
(3) The information concerning beneficial ownership set forth above and in
this note is derived from an Amendment No. 3 to Schedule 13G dated
February 1, 1999. FMR Corp. may be deemed to have sole dispositive
power with respect to all of such shares because its wholly-owned
subsidiary, Fidelity Management & Research Company ("Fidelity"), acts
as investment adviser to the Fidelity Low-Priced Stock Fund (the
"Fund"). The Schedule 13G reported that (a) the Fund owned all of such
shares, (b) Edward C. Johnson III, FMR Corp. through its control of
Fidelity, and the Fund each has sole dispositive power with respect to
such shares, (c) the Board of Trustees of the Fund has sole voting
power with respect to such shares, (d) neither Mr. Johnson, FMR nor
Fidelity has voting power with respect to such shares and (e) through
ownership of FMR and a shareholders' agreement, members of Mr.
Johnson's family and trusts for their benefit may be deemed to form a
controlling group with respect to FMR.
(4) The information concerning beneficial ownership set forth above and in
this note is derived from an Amendment No. 2 to Schedule 13G dated
March 11, 1999. Royce & Associates, Inc. ("RAI"), Royce Management
Company ("RMC") and Charles M. Royce, as a group, are the beneficial
owners of 791,475 shares of Conso Common Stock. Mr. Royce may be
deemed to be a controlling person of RMC and RAI and to have sole
voting and dispositive power with respect to all shares owned by them.
Mr. Royce does not own any shares other than through RAI and RMC, and
disclaims beneficial ownership of the shares held by RAI and RMC.
(5) The information concerning beneficial ownership set forth and in this
note is derived from an Amendment No. 1 to Schedule 13G dated August
31, 1995. American Express Financial Corporation, a registered
investment adviser, has reported that such shares are held by IDS
Diversified Equity Income Fund, an investment company advised by it.
American Express Financial Corporation is a subsidiary of American
Express Company, which disclaims beneficial ownership of all such
shares.
50
<PAGE> 55
(6) Less than 1%.
(7) Includes 10,200 shares subject to options, 68,500 shares held by the
Findlay Charitable Foundation, of which Ms. Findlay is a director and
officer, and 63,020 shares held by the Findlay-Conso Education, of
which Ms. Findlay is a director and officer. Also includes 78,788
shares that Ms. Findlay holds jointly with her husband, J. Cary
Findlay. Excludes 2,865,725 shares held by Ms. Findlay's husband, as
to which shares Ms. Findlay disclaims beneficial ownership.
(8) Includes 42,750 shares held for the benefit of Mr. Laughton's
children, of which Mr. Laughton and his wife are trustees, 5,250
shares subject to options that are presently exercisable or
exercisable within 60 days.
(9) Includes an aggregate of ________ shares subject to employee stock
options that are presently exercisable or exercisable within 60 days.
(10) Includes an aggregate of 10,200 shares subject to options. Also
includes 27,000 shares held by Mr. Balakrishnan's wife individually,
as to which shares Mr. Balakrishnan disclaims beneficial ownership.
(11) Includes an aggregate of 1,000 shares subject to options.
(12) Includes an aggregate of 11,925 shares subject to options.
(13) Includes an aggregate of 533 shares subject to options.
CERTAIN INFORMATION CONCERNING THE TRANSACTION PARTICIPANTS
CONSO
Conso, together with its subsidiaries, is the world's largest
manufacturer of decorative trimmings for the home furnishings industry and,
through its subsidiary, Simplicity Pattern Co. Inc., is a leading producer of
patterns and other instructional material for home sewing of apparel, home
decorating, and crafts. Conso's Products Division, including its British
Trimmings subsidiary, produces and sells a full range of knitted and woven
fringes, decorative cords, tasseled accessories, jacquard and other woven
braids, and apparel trims, as well as sewing tapes and supplies. Conso also
distributes decorative window accoutrements and other home furnishings
accessories. Conso markets its products to manufacturers, distributors and
retailers through a worldwide sales force. Manufacturing facilities are located
in the United States, the United Kingdom, Mexico and India. Conso is a South
Carolina corporation. Conso's Common Stock is traded on the Nasdaq National
Market under the symbol "CNSO." Conso's principal executive offices are located
at 513 North Duncan Bypass, Union, South Carolina 29379, and the telephone
number is (864) 427-9004.
DIRECTORS AND EXECUTIVE OFFICERS OF CONSO
Directors
The Board of Directors of Conso currently consists of six directors.
Set forth below is certain information regarding the directors of Conso,
including business or residence address, citizenship, present principal
occupation and information regarding other material occupations, positions,
offices or employment held during the last five years.
51
<PAGE> 56
<TABLE>
<CAPTION>
NAME AND ADDRESS CITIZENSHIP EMPLOYMENT INFORMATION
---------------- ----------- ----------------------
<S> <C> <C>
J. Cary Findlay United States Chairman of the Board since 1986. President
P.O. Box 326 and Chief Executive Officer of Conso from
513 N. Duncan Bypass December 1987 to May 1995 and since August
Union, SC 29379 1998.
Antony W. Laughton United Kingdom Consultant to British Trimmings Limited, a
Lamaload Rd, Rainow, wholly-owned subsidiary of Conso, since
Macclesfield October 1997; Managing Director of British
Cheshire SK10 5XP, Trimmings from 1974 to September 1997.
England
John H. Maxheim United States Chairman, President and Chief Executive
1915 Rexford Road Officer and Director of Piedmont Natural Gas
Charlotte, NC 28211 Company (a utility company) since 1984.
James H. Shaw United States Retired; Chairman of Consolidated Ivey's
405 Beachside Place (department store chain) from 1986 to 1989;
Amelia Island, FL 32034 Chief Executive Officer of Consolidated
Ivey's from 1986 to 1988; Director of The
Cato Corporation (apparel retailer).
Konstance J. K. Findlay United States Senior Vice President -- Business Development
P.O. Box 326 of Conso since May 1995; Vice President--
513 N. Duncan Bypass International Sales of Conso from January
Union, SC 29379 1993 to May 1995.
Sara H. Bissell United States President of Treasures Unlimited, Inc.
2526 Richardson Road (retail shop selling custom linens, antiques
Charlotte, NC 28211 and gifts) since 1983.
</TABLE>
Executive Officers
In addition to J. Cary Findlay and Konstance J. K. Findlay, who are
both directors and executive officers of Conso and about whom information is
set forth above under "Directors", Conso has 12 other executive officers. Set
forth below is certain information about each of these executive officers,
including business address, citizenship, present principal occupation and
information regarding other material occupations, positions, offices or
employment held during the last five years.
<TABLE>
<CAPTION>
NAME AND ADDRESS CITIZENSHIP EMPLOYMENT INFORMATION
---------------- ----------- ----------------------
<S> <C> <C>
C.V. Balakrishnan United Kingdom Managing Director of British Trimmings since
P.O. Box 46 August 1998; Co-Managing Director of British
Coronation Street Trimmings from October 1997 to August 1998;
Stockport, Cheshire SK5 7PJ, Chief Operating Officer of British Trimmings
England from 1983 to September 1997.
</TABLE>
52
<PAGE> 57
<TABLE>
<S> <C> <C>
John M. Davis United States Chief Accounting Officer of Conso since
P.O. Box 326 August 1999 and Corporate Controller of
513 N. Duncan Bypass Conso since October 1998; Corporate Account
Union, SC 29379 Manager for Salant Corporation, a men's
apparel company, from July 1993 to October
1998.
Judith Raymond United States Senior Vice President--Pattern Products of
Hadjandreas Conso since August 1998; Senior Vice
2 Park Avenue, 12th Floor President--Products of Simplicity Capital
New York, NY 10016 Corporation from 1985 to August 1998.
Louis S. Oltman United States Senior Vice President--Sales and Marketing of
2 Park Avenue, 12th Floor Conso since August 1998; Senior Vice
New York, NY 10016 President - Sales of Simplicity from 1991 to
August 1998.
Frank J. Rizzo United States Senior Vice President of Conso and Chief
2 Park Avenue, 12th Floor Operating Officer of Simplicity since August
New York, NY 10016 1998; Senior Vice President and Chief
Financial Officer of Simplicity from 1991 to
August 1998.
William M. Stewart United States Senior Vice President and Chief Operating
P.O. Box 326 Officer--Products of Conso since August 1998;
513 N. Duncan Bypass Co-Manager of Simplicity from October 1997
Union, SC 29379 to August 1998; Vice President-Manufacturing
of Conso from July 1988 to September 1997.
Richard A. Zonin United States Senior Vice President and Chief Financial
P.O. Box 326 Officer of Conso since February 1999, Vice
513 North Duncan Bypass President of Finance of Simplicity from 1991
Union, SC 29379 to January 1999.
</TABLE>
The officers of Conso immediately prior to the consummation of the
merger will be the officers of the surviving corporation immediately following
the merger.
J. CARY FINDLAY
Information as to J. Cary Findlay, Conso's Chairman, President and
Chief Executive Officer, is set forth above under "Directors and Executive
Officers of Conso."
PARENT AND ACQUISITION SUB
Parent has been formed by CVC solely for the purpose of holding shares
of Acquisition Sub following the merger, and Acquisition Sub, a wholly owned
subsidiary of Parent, has been formed by CVC solely for the purpose of
completing the merger. Parent is expected to own approximately 80.2% of the
equity of the surviving corporation, consisting of both voting and nonvoting
securities, with the remaining equity to be held by J. Cary Findlay
53
<PAGE> 58
and other members of Conso management. See "Financing of the Merger - Equity
Investments." Neither Parent nor Acquistion Sub has engaged in any business
activity unrelated to the merger. Neither Parent, Acquisition Sub nor any of
their respective directors, officers or affiliates currently own any shares of
Conso Common Stock, except for their beneficial interest in 2,865,725 shares
held by J. Cary Findlay which Acquisition Sub has the right to acquire or vote
under the Support Agreement between Acquisition Sub and Mr. Findlay. See
"Special Factors - Interests of Certain Persons in the Merger - Support
Agreement." The principal executive offices of Parent and Acquisition Sub are
located at 339 Park Avenue, New York, New York 10043 and their telephone number
is (212) 559-2759.
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND ACQUISITION SUB
The directors and officers of Acquisition Sub as of the date hereof are
M. Saleem Muqaddam, Sole Director, President and Secretary and Michael T.
Bradley, Vice President. The directors and officers of Parent as of the date
hereof are M. Saleem Muqaddam, Sole Director, President and Secretary and
Michael T. Bradley, Vice President. Set forth below is certain information
regarding these directors and officers, including business or residence address,
citizenship, present principal occupation and information regarding other
material occupations, positions, offices or employment held during the last five
years.
Name and Address Citizenship Employment Information
- - - ---------------- ----------- ----------------------
M. Saleem Muqaddam United States Sole Director of Acquisition Sub and
399 Park Avenue Parent; President and Secretary of
New York, New York 10043 Acquisition Sub and Parent; Vice
President of CVC
Michael T. Bradley United States Vice President of Acquisition Sub
399 Park Avenue and Parent; Vice President of CVC
New York, New York 10043
The directors and executive officers of Acquisition Sub immediately
prior to the completion of the merger will be the directors of the surviving
corporation immediately following the merger.
SHAREHOLDER PROPOSALS
Conso had called an annual meeting of its shareholders to be held
November 9, 1999, but indefinitely postponed such meeting when it entered into
the Merger Agreement and does not expect to call such meeting if the merger is
approved at the special meeting. Due to the contemplated consummation of the
merger, Conso also does not currently expect to hold a 2000 annual meeting of
shareholders because, following the merger, Conso will not be a publicly-held
company. In the event the merger is not consummated for any reason, Conso must
receive proposals of shareholders intended to be presented at the 2000 annual
meeting of shareholders at its principal executive offices a reasonable time
before Conso begins to print and mail its proxy materials for such meeting if
such proposals are to be included in the proxy statement and form of proxy
relating to the 2000 annual meeting of shareholders. The persons named as
proxies in the proxy statement and form of proxy for such meeting will have
discretionary voting authority with respect to all shares represented by
proxies held by them at the 2000 annual meeting for any matters raised at that
meeting about which Conso does not receive notice a reasonable time before it
begins to print and mail its proxy materials for such annual meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of Conso and its subsidiaries as of
July 3, 1999 and June 27, 1998 and the consolidated statements of operations,
statements of shareholders' equity and statements of cash flows for the fiscal
years ended July 3, 1999, June 27, 1998 and June 28, 1997, appearing in Conso's
Annual Report on Form 10-K for the fiscal year ended July 3, 1999, have been
audited by Deloitte & Touche, LLP, independent public accountants, as set forth
in its report included therein. A copy of the Form 10-K is being provided to
Conso shareholders as an enclosure to this Proxy Statement and is incorporated
herein by reference. A representative of Deloitte & Touche, LLP is expected to
be present at the special meeting and will have the opportunity to make a
statement if he or she desires to do so and is expected to be available to
respond to appropriate questions.
AVAILABLE INFORMATION
Conso is subject to the informational reporting requirements of the
Securities and Exchange Act of 1934 and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information can
be inspected and copies made at the Public Reference Room of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Securities and Exchange Commission's regional
54
<PAGE> 59
offices at 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Securities and Exchange Commission at its Washington address at
prescribed rates. In addition, the Securities and Exchange Commission maintains
a World Wide Web site on the internet at http://www.sec.gov that contains
reports, proxy statements, and other information regarding registrants that
file electronically with the Commission, including Conso.
Conso, Acquisition Sub, Parent, and J. Cary Findlay have filed a
Schedule 13E-3 with the Securities and Exchange Commission with respect to the
merger. As permitted by the Securities and Exchange Commission, this Proxy
Statement omits certain information contained in the Schedule 13E-3. The
Schedule 13E-3, including any amendments and exhibits filed or incorporated by
reference as a part thereof, is available for inspection or copying as set
forth above. Statements contained in this Proxy Statement or in any document
incorporated herein by reference regarding the contents of any contract or
other document are not necessarily complete and each such statement is
qualified in its entirety by reference to such contract or other document filed
as an exhibit with the Securities and Exchange Commission.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING.
CONSO HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT
IS DATED _________, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
THE MAILING OF THIS DOCUMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO
THE CONTRARY.
INFORMATION INCORPORATED BY REFERENCE
Conso's Annual Report on Form 10-K for the fiscal year ended July 3,
1999, as filed with the Securities and Exchange Commission on September __,
1999, is being provided to each shareholder of Conso as an enclosure with this
Proxy Statement. Such form 10-K and Conso's Current Report on Form 8-K dated
October 8, 1999 are hereby incorporated by reference in this Proxy Statement.
___________, 1999 By order of the Board of Directors
J. Cary Findlay
Chairman
55
<PAGE> 60
APPENDIX A
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is made and entered into as of
the 5th day of October, 1999, by and among CIC Acquisition Co., a Delaware
corporation ("Parent"), CIC Acquisition Sub, Inc., a South Carolina corporation
("Acquisition Sub"), and Conso International Corporation, a South Carolina
corporation (the "Company").
STATEMENT OF PURPOSE
The parties hereto desire to effect the statutory merger of Acquisition
Sub with and into the Company (the "Merger") on the terms and conditions set
forth herein and in the Plan of Merger attached hereto as Exhibit A (the "Plan
of Merger") pursuant to which, among other things, all of the issued and
outstanding shares of common stock of the Company ("Company Common Stock"),
other than (a) 533,378 shares of Company Common Stock owned by J. Cary Findlay
(the "Retained Shares") and (b) Dissenting Shares (as defined in the Plan of
Merger), will be exchanged for and converted into the right to receive $9.00 per
share in cash in the manner provided herein and in the Plan of Merger. The
purpose of this Agreement is to set forth the terms and conditions upon which
the Merger shall be effected.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Merger. Subject to all of the terms and conditions of this
Agreement, the parties hereby agree that the Merger shall be effected at the
Effective Time (as hereinafter defined) in accordance with the Plan of Merger
and the South Carolina Business Corporation Act (the "SCBCA"). The "Effective
Time" means the time at which appropriate articles of merger, including the Plan
of Merger, shall have been filed for immediate effectiveness with the Secretary
of State of South Carolina in the manner prescribed by the SCBCA. Upon the
Effective Time, the separate existence of Acquisition Sub shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation").
Section 1.2 Closing. Subject to the provisions of Article V hereof, the
closing of the transactions contemplated hereby to effect the Merger (the
"Closing") shall be held at the offices of Kennedy Covington Lobdell & Hickman,
L.L.P., 100 North Tryon Street, Suite 4200, Charlotte, North Carolina 28202 or
at such other location as the Company and the Parent may mutually agree,
beginning at 10:00 a.m. on the business day next following the date of the
meeting of the shareholders of the Company described in Section 4.4 hereof (the
date of such meeting is hereinafter referred to as the "Meeting Date"). If all
of the conditions set forth in Sections 5.1 and 5.2 hereof shall have not been
met or waived on the business day next following the Meeting Date, the Closing
shall be held (a) on the first business day thereafter on which all such
conditions shall have been met or waived or (b) on such other date as the
Company and Parent may mutually agree. Each of the parties hereto covenants and
agrees to use its commercially reasonable efforts to cause all of the conditions
to Closing set forth in Sections 5.1 and 5.2 hereof to be satisfied on or before
<PAGE> 61
the business day next following the Meeting Date. At the Closing, subject to the
satisfaction or waiver of the conditions therefor, the parties hereto shall
cause the Merger to be effected by filing appropriate articles of merger,
including the Plan of Merger, with the Secretary of State of South Carolina,
whereupon the Closing shall be completed at the Effective Time. For purposes of
this Agreement, a "business day" is any day other than (a) a Saturday or Sunday,
(b) a day on which the office of the Secretary of State of South Carolina is
closed for official business, (c) a day on which the Exchange Agent (as defined
in the Plan of Merger) is closed for business of the type to be conducted by it
pursuant hereto, or (d) a day on which commercial banks located in New York, New
York are closed for commercial banking business.
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 33-11-106 of the SCBCA.
Section 1.4 Exchange Agent; Funding.
(a) Exchange Agent. Parent and the Company covenant and agree to use
their commercially reasonable efforts to designate and engage an Exchange Agent
sufficiently in advance of the Effective Time so that the exchange of cash for
shares of Company Common Stock to be effected pursuant to the Plan of Merger can
be commenced as soon as possible after the Effective Time. Such Exchange Agent
shall be a bank or trust company mutually acceptable to Parent and the Company,
it being agreed that First Union National Bank, the Company's transfer agent, is
mutually acceptable.
(b) Funding. Subject to the terms and conditions of this Agreement,
Parent shall cause (i) there to be available to the Exchange Agent, at or prior
to the Effective Time, for purposes of the conversion and exchange of shares of
Company Common Stock in the Merger, the aggregate amount of cash to be delivered
to the shareholders of the Company pursuant to the Plan of Merger (the "Merger
Consideration") and (ii) Acquisition Sub to take such other actions as shall be
necessary for it to consummate the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and covenants and agrees
with, Parent and Acquisition Sub that:
Section 2.1 Corporate Organization and Capitalization.
(a) Organization and Good Standing. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
South Carolina, with full corporate power and authority to conduct its business
as it is now being conducted and to own, lease and operate its assets.
(b) Charter Documents and Bylaws. The copies of the Company's Articles
of Incorporation and Bylaws heretofore provided to Parent are true and complete
as of the date hereof.
2
<PAGE> 62
(c) Foreign Qualification. The Company is duly licensed or qualified as
a foreign corporation to do business in each jurisdiction set forth in Section
2.1(c) of the Company Disclosure Document (as defined below) which constitutes
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified could not be reasonably expected to have a material adverse effect
on the business, assets or condition (financial or otherwise) of the Company
taken as a whole, or on the ability of the Company to effect the Merger and
perform its other obligations hereunder (a "Company Material Adverse Effect").
"Company Disclosure Document" means the document delivered by the Company to the
Purchaser at or prior to the date hereof containing certain disclosures by the
Company pursuant to this Agreement.
Section 2.2 Authority. The Company has full corporate power to enter
into this Agreement, and all other instruments and documents to be executed and
delivered by it in connection herewith, and to carry out its obligations
hereunder and thereunder. Subject only to approval of the Plan of Merger by the
Company's shareholders, the Company's execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all requisite corporate action on its part, and this
Agreement constitutes, and all agreements and other instruments or documents to
be executed and delivered by it hereunder will constitute, the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms.
Section 2.3 Capitalization. The authorized capital stock of the Company
consists solely of 60,000,000 shares divided into two classes: (a) 50,000,000
shares of Company Common Stock, of which 7,335,925 shares are issued and
outstanding as of the date hereof, and (b) 10,000,000 shares of Preferred Stock,
none of which are issued and outstanding. All of such issued and outstanding
shares of Company Common Stock are validly issued, fully paid and nonassessable
and are not subject to, nor were they issued in violation of, any preemptive
rights. There are no outstanding stock appreciation rights, phantom equity or
similar rights, agreements, arrangements or commitments based upon the book
value, income or other attribute of the Company nor are there any outstanding
options, warrants, conversion rights, subscription rights or other obligations
of the Company to issue any of its capital stock in the future or any securities
convertible into, exchangeable or exercisable for, or otherwise evidencing a
right to acquire any shares of the Company other than options to purchase
Company Common Stock pursuant to the Company's 1993 Stock Option Plan, of which
options to purchase an aggregate of 168,575 shares are outstanding on the date
hereof (the "Outstanding Employee Stock Options") and which are set forth in
Section 2.3 of the Company Disclosure Document. All shares issuable upon
exercise of Outstanding Employee Stock Options have been duly authorized and
will be validly issued, full paid and non-assessable and not be subject to any
preemptive rights.
Section 2.4 Subsidiaries. Section 2.4 of the Company Disclosure
Document sets forth the name, jurisdiction of incorporation, total
capitalization and number of shares of outstanding capital stock of each class
owned, directly or indirectly, by the Company of each corporation of which the
Company owns, directly or indirectly, a majority of the outstanding capital
stock (individually, a "Subsidiary" and, collectively, the "Subsidiaries"). All
of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable. Except as set forth in Section 2.4
of the Company Disclosure Document, all such
3
<PAGE> 63
shares owned, directly or indirectly through another Subsidiary, by the Company
are owned by the Company beneficially and of record, free and clear of all
liens, pledges, encumbrances or restrictions of any kind (other than
restrictions imposed by applicable securities laws or created pursuant to the
Company's existing senior credit facility). Except as set forth in Section 2.4
of the Company Disclosure Document, the Company has no outstanding options,
warrants, stock appreciation rights, phantom stock or stock equivalents or other
rights to purchase or acquire any capital stock of any Subsidiary, there are no
irrevocable proxies with respect to such shares, and there are no contracts,
commitments, understandings, arrangements or restrictions by which any
Subsidiary or the Company is bound to issue additional shares of the capital
stock of a Subsidiary. Except for the Subsidiaries, and as otherwise disclosed
in Section 2.4 of the Company Disclosure Document, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity interest in any business. Each
Subsidiary is duly organized and validly existing in good standing under the
laws of the jurisdiction of its organization, with full power and authority to
conduct its business as it is now being conducted and to own, lease and operate
its assets. Each Subsidiary is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified could not be reasonably expected to have a Company Material Adverse
Effect.
Section 2.5 No Conflicts. The Company's execution and delivery of this
Agreement and performance of its obligations hereunder, including effecting the
Merger, do not and will not: (a) contravene or conflict with the Company's
Articles of Incorporation or Bylaws; (b) conflict with, violate or result in any
default under any mortgage, indenture, agreement, instrument or other contract
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their property is bound, other than
the agreements relating to indebtedness of the Company and its Subsidiaries
described in Section 2.5 of the Company Disclosure Document; (c) assuming
compliance with the matters referred to in Section 2.6 hereof, violate any
judgment, order, decree, law, statute, regulation or other judicial or
governmental restriction to which the Company or any of its Subsidiaries is
subject; or (d) assuming compliance with the matters referred to in Section 2.6
hereof, require the consent of, or any prior filing with or notice to, any
governmental authority; except for any occurrences or results referred to in
clauses (b), (c) and (d) of this Section 2.5 which could not be reasonably
expected to have a Company Material Adverse Effect.
Section 2.6 Governmental Authorization. The Company's execution and
delivery of this Agreement and performance of its obligations hereunder,
including its effecting the Merger, require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than (a)
the filing of articles of merger in accordance with the SCBCA, and (b)
compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), except where the failure of any such
action to be taken or filing to be made could not be reasonably expected to have
a Company Material Adverse Effect.
Section 2.7 Commission Filings. The Company has heretofore made
available to Parent true and complete copies of all (a) annual reports on Form
10-K and quarterly reports on Form 10-Q, (b) proxy statements relating to all of
the Company's meetings of shareholders (whether annual
4
<PAGE> 64
or special) held or scheduled to be held and (c) each other statement, report,
schedule or document filed by the Company with the Securities and Exchange
Commission (the "Commission"), in each case since June 29, 1996, which are all
reports required to be filed by the Company with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act from such date through the date hereof
(collectively, the "Commission Filings"). The Commission Filings did not (as of
their respective filing dates, effective dates (with respect to registration
statements) or mailing dates (with respect to proxy statements)) and, taken as a
whole (giving effect to the updating or superceding of information in any such
Commission Filings by information in subsequent Commission Filings), do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Since
the date of the Company's initial public offering, the Company has complied in
all material respects with Commission filing obligations under the Exchange Act.
The Company's consolidated balance sheets and the notes thereto as of July 3,
1999, June 27, 1998 and June 28, 1997, and the Company's consolidated statements
of operations, cash flows, and shareholders' equity for the fiscal years ended
July 3, 1999, June 27, 1998 and June 28, 1997, included in the Commission
Filings fairly present, for the Company and its consolidated Subsidiaries on a
consolidated basis, their financial position as of the dates thereof and the
results of their operations, cash flows, and changes in shareholders' equity for
such periods in accordance with generally accepted accounting principles applied
on a consistent basis (except as stated in such financial statements) and such
financial statements complied as of their respective dates in all material
respects with applicable rules and regulations of the Commission. Each such
Commission Filing complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as applicable. The Company shall hereafter send to Parent, simultaneously with
their being filed with the Commission, any and all annual, quarterly or current
reports required to be filed under Section 13 or 15(d) of the Exchange Act
subsequent to the date hereof, and all such reports will be filed timely and
conform to the disclosure standards set forth above in this Section 2.7.
Section 2.8 Proxy Statement; Schedule 13E-3. Other than the information
in the Definitive Proxy Statement (as defined in Section 4.4) and the Schedule
13E-3 (as defined in Section 4.4) as to Parent and Acquisition Sub provided by
them, the Definitive Proxy Statement and the Schedule 13E-3 will not as of their
dates and as of 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 to make the statements made therein, in light of the circumstances in
which they were made, not misleading. The information supplied or to be supplied
in writing by or on behalf of the Company for inclusion in the Preliminary Proxy
Statement (as defined in Section 4.4 hereof), the Definitive Proxy Statement and
the Schedule 13E-3 will comply as to form and substance in all material respects
with the requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty regarding information furnished by
Parent or Acquisition Sub for inclusion in the Preliminary Proxy Statement, or
any amendment or supplement thereto, the Definitive Proxy Statement, or any
amendment or supplement thereto, or the Schedule 13E-3, or any amendment or
supplement thereto.
Section 2.9 Absence of Certain Changes. Except as contemplated hereby
or as set forth in Section 2.9 of the Company Disclosure Document, since July 3,
1999, the Company has conducted its business in all material respects in the
ordinary course consistent with past practices and there
5
<PAGE> 65
has not been (i) any material adverse change in the financial condition,
properties, business or results of operation of the Company taken as a whole;
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company; or (iii) any
changes by the Company in accounting principles, practices or methods.
Section 2.10 Litigation; No Undisclosed Liabilities.
(a) Litigation. Except as disclosed in the Commission Filings, there
are no claims, actions, suits or other proceedings pending against the Company
or any of its Subsidiaries before any court, agency or other judicial,
administrative or other governmental body or arbitrator, as to which there is a
reasonable likelihood of an adverse determination and which, if adversely
determined, could be reasonably expected to have a Company Material Adverse
Effect.
(b) No Undisclosed Liabilities. Except (i) as disclosed or reflected in
the consolidated audited financial statements of the Company as of and for the
fiscal year ended July 3, 1999 and (ii) for liabilities and obligations (1)
incurred in the ordinary course of business and consistent with past practice or
(2) pursuant to the terms of this Agreement, neither the Company nor any of its
Subsidiaries has incurred any material liabilities that are required by
generally accepted accounting principles to be disclosed on a balance sheet and
none of which are the type arising out of or in connection with any tort, breach
of contract, breach of warranty, infringement claim or warranty.
Section 2.11 Environmental.
(a) Compliance. The Company and its Subsidiaries have materially
complied and are in material compliance with all applicable material
Environmental and Safety Requirements (as hereinafter defined). "Environmental
and Safety Requirements" means all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations and all common law in
each case concerning public health and safety, worker health and safety, and
pollution or protection of the environment (including all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release or threatened Release (whether onsite or offsite), control, or cleanup
of any Hazardous Substances). "Release" has the meaning set forth in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"). "Hazardous Substance" shall mean anything that is a
"hazardous substance" pursuant to CERCLA, anything that is "solid waste" or
"hazardous waste" pursuant to the Federal Resource Conservation and Recovery
Act, anything that is a "pollutant" pursuant to the Federal Water Pollution
Control Act, anything that is a "hazardous chemical" pursuant to the Federal
Occupational Safety and Health Act, anything that is a "pesticide" pursuant to
the Federal Insecticide, Fungicide, and Rodenticide Act, any petroleum product
or byproduct, asbestos, polychlorinated biphenyl, noise or radiation. Neither
the Company nor any of its Subsidiaries has received any oral or written notice,
report or information regarding any violations of, or any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or corrective,
investigatory or remedial obligations arising under, Environmental and Safety
Requirements that relate to the Company or its Subsidiaries or any of their
current or former properties or facilities that could reasonably be expected to
result in a Company Material Adverse Effect.
6
<PAGE> 66
(b) Permits, Licenses, Etc. Each of the Company and its Subsidiaries
has obtained and has materially complied with, and is currently in material
compliance with, all material permits, licenses and other authorizations that
may be required pursuant to any Environmental and Safety Requirements for the
occupancy of its properties or facilities or the operation of its business.
(c) No Releases. Neither the Company nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including any hazardous
substance) or owned, occupied or operated any facility or property in a manner
that has given or could reasonably be expected to give rise to any material
liabilities (including any material liability for response costs, corrective
action costs, personal injury, natural resource damages, property damage or
attorneys fees or any investigative, corrective or remedial obligations)
pursuant to CERCLA or any other Environmental and Safety Requirements.
Section 2.12 Compliance with Law.
(a) Conduct of Business. The Company and its Subsidiaries have
conducted their business so as to materially comply with, and are in material
compliance with, all material federal, state, local or foreign laws, statutes,
regulations, rules and other requirements of any governmental authority
applicable to the conduct their business or orders promulgated or judgments
entered by any federal, state, local or foreign court or governmental entity or
instrumentality, including all applicable material laws in respect of the
environment, health, or work conditions. The Company has not received any claim
or notice that it is in violation of any of the aforementioned statutes,
regulations, rules or other requirements in such a manner that could be
reasonably expected to result in any material liabilities to the Company or any
of its Subsidiaries.
(b) Licenses. The Company and its Subsidiaries have all permits,
certificates, licenses, franchises, federal, state, local or foreign
governmental approvals and other authorizations required in connection with the
operation of their business, except for those the absence of which could not be
reasonably expected to have a Company Material Adverse Effect.
Section 2.13 Taxes.
(a) Tax Returns. All Tax Returns required to be filed on or prior to
the Effective Time by the Company and its Subsidiaries with all taxing
authorities have been or prior to the Effective Time will have been filed,
except where the failure to do so could not reasonably be expected to have a
Company Material Adverse Effect. All such Tax Returns are or will be correct and
complete in all material respects. The Company and its Subsidiaries have paid or
made provision for all Taxes shown as due on such returns, and for all other
Taxes the nonpayment of which could reasonably be expected to have a Company
Material Adverse Effect.
(b) Withholding. Each of the Company and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party, except where the failure to withhold or pay
any such Taxes could not reasonably be expected to have a Company Material
Adverse Effect.
7
<PAGE> 67
(c) Availability of Federal Income Tax Return. The Company has made
available to the Parent complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by any of the Company and its Subsidiaries since December 31, 1993.
(d) No Waiver. Except as set forth in Section 2.13(d) of the Company
Disclosure Document, none of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) Other Matters. None of the Company and its Subsidiaries has filed a
consent under Code ss.341(f) concerning collapsible corporations. None of the
Company and its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code ss.280G.
None of the Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). None of the Company and
its Subsidiaries is a party to any Tax allocation or sharing agreement. None of
the Company and its Subsidiaries (i) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (ii) has any Liability for the Taxes of any
Person (other than any of the Company and its Subsidiaries) under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(f) Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Section 2.14 Employee Benefits.
(a) Benefit Plan. Section 2.14 of the Company Disclosure Document sets
forth a list of all material bonus, pension, profit sharing, deferred
compensation, retirement, hospitalization,
8
<PAGE> 68
medical or dental reimbursement, severance pay, vacation pay, disability, death
benefit, insurance, and other similar plans, programs or arrangements pursuant
to which the Company or its Subsidiaries provides benefits to its employees
(including all "welfare plans" within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) ("the
Benefit Plans").
(b) No Defined Benefit Plans, Etc. Except as described in Section 2.14
of the Company Disclosure Document, neither the Company nor any of its
Subsidiaries maintains, contributes to, or has any material liability or
potential material liability under (or with respect to) any "defined benefit
plan" (as defined in Section 3(35) of ERISA), or any "multiemployer plan" (as
defined in Section 3(37) of ERISA). Except as described in Section 2.14 of the
Company Disclosure Document, there are no material pending or threatened
actions, suits, investigations or claims with respect to any Benefit Plan other
than routine claims for benefits.
(c) Compliance, Qualification. All of the Benefit Plans and the
administration thereof comply in all material respects with the requirements of
ERISA (if applicable) and all other material laws and regulations applicable
thereto and neither the Company nor any of its Subsidiaries has received any
notice from any governmental authority of any material failure to so comply
which failure has not been cured. Each Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has received a determination from the
Internal Revenue Service that such Plan is so qualified, and nothing has
occurred since the date of such determination that could materially and
adversely affect the qualified status of such Plan.
(d) Other Matters. None of the Company, its Subsidiaries, or any other
"disqualified person" (within the meaning of Section 4975 of the Code) or any
"party in interest" (within the meaning of Section 3(14) of ERISA), has engaged
in any "prohibited transaction" (within the meaning of Section 4975 of the Code
or Section 406 of ERISA) with respect to any of the Benefit Plans that could
subject any of the Benefit Plans, the Company or any of its Subsidiaries, or any
officer, director or employee of any of the foregoing to a material penalty or
tax under Section 502(i) of ERISA of Section 4975 of the Code.
(e) Reports and Returns. All material reports and returns with respect
to the Benefit Plans required to be filed with any governmental authority have
been timely filed.
(f) Certain Documents. With respect to each Benefit Plan, the Company
has delivered or made available to Parent true, complete and correct copies of
(to the extent applicable): (i) all material documents pursuant to which the
Benefit Plan is maintained, funded and administered (including the plan and
trust documents, any amendments thereto, the summary plan descriptions, and any
insurance contracts or service provider agreements); (ii) the three most recent
annual reports (Form 5500 series) filed with the Internal Revenue Service (with
applicable attachments); (iii) the most recent determination letter received
form the Internal Revenue Service; and (iv) all actuarial reports or statements
of funded status for the three most recent plan years.
Section 2.15 Intellectual Property Rights. The Company and each of its
Subsidiaries owns and possesses all right, title and interest in and to, or has
a valid and enforceable license to use, all material Intellectual Property
Rights (as defined below) necessary for the operation of its business as
currently conducted. There are no third party claims contesting the validity,
9
<PAGE> 69
enforceability, use or ownership of any of the Intellectual Property Rights
owned or used by the Company or any Subsidiary, or alleging infringement or
misappropriation, which, if adversely determined, could reasonably be expected
to result in a material liability or a Company Material Adverse Effect. All of
the material Intellectual Property Rights owned or used by the Company or any
Subsidiary as of the date hereof will be owned or available for use by the
Company or such Subsidiary on substantially the same terms immediately
subsequent to the Closing. The Company and each Subsidiary have taken all action
that they have reasonably deemed to be necessary to maintain and protect their
material Intellectual Property Rights. For the purposes of this Agreement,
"Intellectual Property Rights" means all patents, patent applications and patent
disclosures; all inventions (whether or not patentable and whether or not
reduced to practice); all trademarks, service marks, trade dress, trade names,
corporate names and all the goodwill associated therewith; all registered and
unregistered copyrights; all registrations, applications and renewals for any of
the foregoing; and all trade secrets, confidential information, know-how,
research information, specifications, proposals, technical and computer data,
documentation and software, financial business and marketing plans, customer and
supplier lists and related information, marketing materials and all other
proprietary rights.
Section 2.16 Year 2000 Compliance. The Company and each of its
Subsidiaries have conducted an inventory and assessment of the hardware,
software and embedded microcontrollers in noncomputer equipment (the "Computer
Systems") used by the Company and its Subsidiaries in their business, in order
to determine which parts of the Computer Systems are not yet Year 2000 Compliant
(as defined below) and to estimate the cost of rendering such Computer Systems
Year 2000 Compliant prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down or produce incorrect calculations or otherwise
malfunction without becoming totally inoperable. The Company does not expect to
suffer a Company Material Adverse Effect by reason of its failure to be Year
2000 Compliant with respect to its Computer Systems. For purposes of this
Agreement, "Year 2000 Compliant" means that all of the Computer Systems
correctly recognize, manipulate and process (including calculating, comparing
and sequencing) date information relating to dates on or after January 1, 2000,
including leap year calculations, and that the operation and functionality of
such Computer Systems will not be adversely affected by the advent of the year
2000 or any manipulation of data featuring date information relating to dates
before, on or after January 1, 2000.
Section 2.17 Real Property.
(a) Owned Real Property. Section 2.17(a) of the Company Disclosure
Document sets forth the address and description of each material parcel of real
property owned by the Company or any of its Subsidiaries (the "Owned Real
Property"). With respect to each parcel of Owned Real Property, the Company has
good and marketable fee simple title to such parcel, free and clear of all liens
and encumbrances, except Permitted Encumbrances (as defined in subsection (c)
below). Section 2.17(a) of the Company Disclosure Document sets forth a list of
all material leases, licenses, concessions or other agreements pursuant to which
the Company or any of its Subsidiaries has granted the right of use or occupancy
to any third party with respect to any parcel of Owned Real Property (including
all amendments, extensions, renewals, guaranties and other agreements with
respect thereto) (the "Owned Real Property Leases"), and the Company has
delivered or made available to Parent a true and complete copy of each such
lease or other document.
10
<PAGE> 70
(b) Leased Real Property. Section 2.17(b) of the Company Disclosure
Document sets forth the address of each material parcel of real property leased,
subleased or otherwise owned by a third party and used or occupied by the
Company or any of its Subsidiaries (the "Leased Real Property"; and together
with the Owned Real Property, the "Real Property") and a list of all leases,
subleases, licenses, concessions or other agreements (including all amendments,
extensions, renewals, guaranties and other agreements with respect thereto) (the
"Leases") for each parcel of Leased Real Property. The Company has delivered or
made available to Parent a true and complete copy of each Lease. Except as set
forth in Section 2.17(b) of the Company Disclosure Document and for other
events, facts or circumstances that could not reasonably be expected to result
in a Company Material Adverse Effect, with respect to each of the Leases: (i)
such Lease is legal, valid, binding, enforceable and in full force and effect;
(ii) the consummation of the Merger does not require the consent of any other
party to such Lease, will not result in a breach of or default under such Lease,
or otherwise cause such Lease to cease to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the Closing; (iii) the
Company is not in breach or default under such Lease, and no event has occurred
or circumstance exists which, with the delivery of notice, the passage of time
or both, would constitute such a breach or default or permit the termination,
modification or acceleration of rent under such Lease; and (iv) neither the
Company nor any of its Subsidiaries has assigned, subleased, mortgaged, deeded
in trust or otherwise transferred or encumbered such Lease or any interest
therein.
(c) Permitted Encumbrances. The term "Permitted Encumbrances" shall
mean with respect to each parcel of Real Property: (a) real estate taxes,
assessments and other governmental levies, fees or charges imposed with respect
to such parcel which are not due and payable as of the Closing Date; (b)
mechanics and similar statutory liens for labor, materials or supplies provided
with respect to such parcel incurred in the ordinary course of business for
amounts which are not delinquent and which would not, individually or in the
aggregate, have a Company Material Adverse Effect; (c) zoning, building and
other land use laws imposed by any governmental authority having jurisdiction
over such parcel which are not violated in any material respect by the current
use or occupancy of such parcel or the operation of the Company or any of its
Subsidiaries thereon; (d) Owned Real Property Leases; and (e) easements,
covenants, conditions, restrictions, liens, encumbrances and other matters
affecting title to such parcel which (i) secure indebtedness reflected in the
Company's financial statements included in the Commission Filings or (ii) do not
materially impair the use or value of such parcel in the operation of the
Company's business.
Section 2.18 Takeover Provisions Inapplicable. The provisions of
Article 1 "Control Share Acquisitions," of Chapter 2, Title 35, of the 1976
South Carolina Code (S.C. Code ss.ss. 35-2-101 et seq.) and Article 2, "Business
Combinations," of Chapter 2, Title 35, of the 1976 South Carolina Code (S.C.
Code ss.ss. 35-2-201 et seq.) are not applicable to the transactions
contemplated hereby.
Section 2.19 Change of Control Provisions. Except as described in
Section 2.19 of the Company Disclosure Document, none of (a) the arrangements,
agreements or understandings to which the Company or any of its Subsidiaries is
a party with any of their employees or affiliates or (b) the Company's or any of
its Subsidiary's employee benefit plans, programs or
11
<PAGE> 71
arrangements contains any provision that would become operative as the result of
a change of control of the Company or that will become operative as a result of
the Merger or any other transactions contemplated by this Agreement.
Section 2.20 Board Recommendation. As of the date hereof, the Board of
Directors of the Company has recommended that the shareholders of the Company
approve the Plan of Merger and this Agreement.
Section 2.21 Fairness Opinion. The Company has received the written
opinion (the "Fairness Opinion") of The Robinson-Humphrey Company, LLC,
satisfactory in form and substance to the Company, to the effect that the
consideration to be received by the shareholders of the Company pursuant to the
merger is fair to them from a financial point of view.
Section 2.22 No Brokers. Except for The Robinson-Humphrey Company, LLC,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Company who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub, jointly and severally, hereby represent and
warrant to, and covenant and agree with, the Company that:
Section 3.1 Corporate Organization and Good Standing. Parent is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware. Acquisition Sub is a corporation duly organized and
validly existing in good standing under the laws of the State of South Carolina.
Parent and Acquisition Sub have full corporate power and authority to conduct
their businesses as they are now being conducted and to own, lease and operate
their assets.
Section 3.2 Authority. Parent and Acquisition Sub have full corporate
power to enter into this Agreement, and all other instruments and documents to
be executed and delivered by either of them in connection herewith, and to carry
out their obligations hereunder and thereunder. Parent's and Acquisition Sub's
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on either of their parts, and this Agreement constitutes, and
all agreements and other instruments or documents to be executed and delivered
by each of them hereunder will constitute, their legal, valid and binding
obligations of the Parent and Acquisition Sub enforceable against Parent and
Acquisition Sub in accordance with their terms.
Section 3.3 No Conflicts. Parent's and Acquisition Sub's execution and
delivery of this Agreement and performance of their obligations hereunder,
including Acquisition Sub's effecting the Merger, do not and will not: (a)
contravene or conflict with their respective Articles of Incorporation or
Bylaws; (b) conflict with, violate or result in a default under any material
mortgage, indenture, agreement, instrument or other contract to which either of
them is a party or by
12
<PAGE> 72
which either of them or their property is bound; (c) assuming compliance with
the matters referred to in Section 3.4 hereof, violate any judgment, order,
decree, law, statute, regulation or other judicial or governmental restriction
to which either of them is subject; or (d) assuming compliance with the matters
referred to in Section 3.4 hereof, require the consent of, or any prior filing
with or notice to, any governmental authority; except for any occurrences or
results referred to in clauses (b), (c) or (d) which would not have or
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of Parent
and its subsidiaries taken as a whole, or on the ability of Parent and
Acquisition Sub to effect the Merger and perform their other obligations
hereunder (a "Parent Material Adverse Effect").
Section 3.4 Governmental Authorization. Parent's and Acquisition Sub's
execution and delivery of this Agreement and performance of their obligations
hereunder, including Acquisition Sub's effecting the Merger, require no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of articles of merger in accordance with the
SCBCA, and (b) compliance with the applicable requirements of the HSR Act,
except where the failure of any such action to be taken or filing to be made
would not have or reasonably be expected to have a Parent Material Adverse
Effect.
Section 3.5 Proxy Statement; Schedule 13E-3. The information as to
Parent and Acquisition Sub to be contained in the Definitive Proxy Statement to
be provided to the Company's shareholders in connection with their voting on the
Plan of Merger and in the Schedule 13E-3 (provided such information and the
presentation thereof shall have been approved by Parent) will not as of their
dates and as of 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 to make the statements made therein, in light of the circumstances in
which they were made, not misleading. The information supplied or to be supplied
in writing by or on behalf of Parent and Acquisition Sub for inclusion in the
Preliminary Proxy Statement, the Definitive Proxy Statement and the Schedule
13E-3 will comply as to form and substance in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder. Notwithstanding the foregoing, Parent and Acquisition Sub
make no representation or warranty regarding information furnished by the
Company for inclusion in the Preliminary Proxy Statement, or any amendment or
supplement thereto, the Definitive Proxy Statement, or any amendment or
supplement thereto, or the Schedule 13E-3, or any amendment or supplement
thereto.
Section 3.6 Financing. Parent and Acquisition Sub have previously
delivered to the Company a true and correct copy of the letters evidencing the
interest of SunTrust Equitable Securities Corporation, SunTrust Bank, Atlanta
and SunTrust Banks, Inc. in providing financing for the Merger. The letters
evidencing such financing commitments have been executed by Parent and are in
full force and effect.
Section 3.7 Litigation. There are no claims, actions, suits or
proceedings pending against Parent or Acquisition Sub before any court, agency
or other judicial, administrative or other governmental body or arbitrator, as
to which there is a reasonable likelihood of an adverse determination and which,
if adversely determined, could reasonably be expected to have a Parent Material
Adverse Effect.
13
<PAGE> 73
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS
Section 4.1 Acquisition Proposals.
(a) Non-Solicitation. From the date hereof through the Effective Time
or earlier termination of this Agreement, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, nor shall any of them authorize or
permit any officer, director, employee, financial advisor, counsel, agent or
other representative to: (i) solicit, encourage or initiate submission of
proposals or offers from any corporation, person or other entity or group
relating to any acquisition or purchase of all or a material amount of the
assets of, or any securities of, or any merger, share exchange, consolidation or
business combination with, the Company or any of its Subsidiaries (a "Take-over
Proposal"), or (ii) with respect to any effort or attempt by any corporation,
person or other entity or group to do or seek any of the foregoing, except as
required by legal process, furnish to any corporation, person or other entity or
group any non-public or confidential information with respect to the Company and
its Subsidiaries or their businesses or participate in any discussion or
negotiation as to the matters described in clause (i); provided, however, if the
Company receives a Take-over Proposal that is unsolicited or that did not
otherwise result from a breach of this Section 4.1(a), the Company may furnish
non-public or confidential information to the corporation, person, entity or
group that made such Take-over Proposal and may participate in negotiations
regarding such Take-over Proposal if the Board of Directors of the Company
determines, after consulting with legal advisors, that (A) failure to do so
would be reasonably likely to constitute a breach of its fiduciary duties to the
Company's shareholders under applicable law and (B) such Take-over Proposal is
reasonably likely to lead to a Superior Take-over Proposal.
(b) Superior Take-Over Proposal. The Company shall not enter into any
agreement with respect to any Take-over Proposal or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by this Agreement
unless the Company's Board of Directors:
(i) determines (which determination shall be made by the
recommendation or approval of a majority of any Special Committee
formed to consider a Take-over Proposal and by the approval of a
majority of the Board of Directors) in good faith after consultation
with (and receiving such written advice and opinions as it deems
appropriate from) its financial and legal advisors that:
(A) such transaction (1) is more favorable to the
shareholders of the Company from a financial point of view
than the transactions contemplated by this Agreement
(including any adjustment to the terms and conditions of such
transaction proposed in writing by Parent in response to such
Take-over Proposal), (2) is not subject to any greater
material contingency (considering all of the conditions
relating to such Take-over Proposal in their entirety) than
those set forth in Section 5.1 of this Agreement (considered
in their entirety) (provided that the other party to such
transaction has also reasonably demonstrated its ability to
overcome or address all the contingencies contained in its
Take-over Proposal
14
<PAGE> 74
(including any approval required under the HSR Act)) and (3)
is in the best interest of the shareholders of the Company,
and
(B) failure to approve such Take-over Proposal would
constitute a breach of its fiduciary duties to the Company's
shareholders under applicable law; and
(ii) receives an opinion of The Robinson-Humphrey Company, LLC
(or any other nationally recognized investment banking firm) to the
effect that the consideration to be received by the shareholders of the
Company in connection with such Take-over Proposal is fair to them from
a financial point of view (any such transaction satisfying clauses (i)
and (ii) is referred to as a "Superior Take-over Proposal");
provided, that the Company shall at the time of or prior to entering into such
agreement have complied with the provisions of Section 5.3(g) hereof, including
the payment to Parent of the Termination Fee provided for in Section 5.4.
(c) Notice. The Company agrees to (i) promptly notify Parent if the
Company, or any of its officers, directors, representatives or agents receives
any indication of interest, request for information or offer in respect of a
Take-over Proposal, (ii) communicate to Parent in reasonable detail the material
terms of any such indication, request or proposal, and (iii) in the event that
the Company receives any Superior Take-over Proposal, give Parent a reasonable
opportunity to present a counterproposal.
Section 4.2 Conduct of the Company. From the date hereof through the
Effective Time, unless Parent shall otherwise consent in writing and except as
otherwise contemplated by this Agreement, the Company and its Subsidiaries shall
conduct their operations only in the ordinary course of business (provided,
however, that the Company may take appropriate actions and may incur costs and
expenses (including those referred to in Section 2.22 hereof) in connection with
the preparation for, and consummation of, the transactions contemplated hereby),
and the Company and its Subsidiaries shall use their commercially reasonable
efforts to preserve intact their business organization and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, without the prior written consent of Parent the
Company will not, and will not permit any of its Subsidiaries to:
(a) amend its Articles of Incorporation or Bylaws or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its outstanding capital stock;
(b) (i) split, combine or reclassify any shares of its capital
stock, (ii) declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock, or (iii) directly or
indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock or any rights, warrants or options to acquire any such
shares (other than Outstanding Employee Stock Options set forth in
Section 2.3 of the Company Disclosure Document);
15
<PAGE> 75
(c) issue, sell, pledge or deliver or agree or commit to
issue, sell or deliver any of its capital stock or any securities
convertible into or exercisable or exchangeable for shares of its
capital stock; provided, however, the Company may issue shares of
Company Common Stock upon the exercise of Outstanding Employee Stock
Options set forth in Section 2.3 of the Company Disclosure Document;
(d) incur any material liability or obligation (including any
indebtedness for borrowed money or any guaranty of any such
indebtedness of any other person) other than in the ordinary course of
business;
(e) except as set forth in Section 4.2(e) of the Company
Disclosure Document, acquire any material assets or properties or
dispose of, mortgage, license, abandon or encumber any material assets
or properties (tangible or intangible) or amend or terminate any Lease
that is material to the Company's operations, other than in the
ordinary course of business;
(f) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof (or any interest therein) that would be material to the
Company's consolidated financial condition;
(g) sell or otherwise dispose of any assets that are material
to the Company's consolidated financial condition;
(h) grant or agree to grant to any employee any increase in
wages or bonus, severance, profit sharing, retirement, deferred
compensation, insurance or other compensation or benefits, or establish
any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing employee stock option plans, except (i) for
increases and other changes in the ordinary course of business and (ii)
the Company's 1993 Stock Option Plan may be amended to (1) cause
unvested stock options to vest and (2) accelerate the expiration dates
of outstanding stock options;
(i) merge, amalgamate or consolidate with any other entity in
any transaction;
(j) enter into or amend any employment, consulting, severance
or similar agreement with any individual, except in the ordinary course
of business;
(k) change its cash management or accounting policies in any
material respect, except as required by generally accepted accounting
principles;
(l) cancel, terminate, amend, modify or waive any of the terms
of any confidentiality or standstill agreement executed with respect to
the Company by any other party prior to the date of this Agreement;
(m) except as contemplated by Section 4.1 hereof or as set
forth in Section 4.2(e) of the Company Disclosure Document, authorize,
recommend, propose or announce an intention to authorize, recommend or
propose, or enter into an agreement in principle or an agreement with
respect to, any merger, consolidation or business
16
<PAGE> 76
combination (other than the Merger), any acquisition or disposition of
a material amount of assets or securities (including, without
limitation, the assets or securities of any Subsidiary and other than
inventory in the ordinary course); or
(n) commit or agree to take any of the foregoing actions.
Section 4.3 Access to Information; Confidentiality. The Company
covenants and agrees to afford to Parent and to cause its Subsidiaries to afford
to Parent, and its accountants, counsel, financing sources and other
representatives, full access, during normal business hours from the date hereof
until the Effective Time, to all properties, premises, books, contracts,
records, financial and operating data, projections, forecasts, business plans,
strategic plans, management, personnel, accountants, representatives, and other
information relating to the Company and its Subsidiaries. Notwithstanding the
foregoing, neither the Company nor any of its Subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would impose an unreasonable burden on the Company, any Subsidiary or any
employee of the Company or any such Subsidiary or would violate or prejudice the
rights of the customers of the Company or any Subsidiary, jeopardize any
attorney-client privilege or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. In the event of termination of this Agreement, Parent,
Acquisition Sub and the Company will deliver to the appropriate party all
documents, work papers and other material so obtained before or after the
execution hereof and will not themselves use, directly or indirectly, any
information so obtained or otherwise obtained from the Company, Parent or
Acquisition Sub hereunder, or in connection herewith, and will use their
reasonable best efforts to have all such information kept confidential and not
used in any way detrimental to the Company, Parent or Acquisition Sub. The
Company agrees to cause its and its Subsidiaries' officers, employees,
consultants, agents, accountants and attorneys to cooperate with the Parent,
Acquisition Sub and their accountants, counsel, financing sources and other
representatives in connection with such investigation of the Company and its
Subsidiaries, including the preparation by Parent, Acquisition Sub and their
financing sources of any offering memorandum or related documents. No
investigation by the Parent or Acquisition Sub heretofore or hereafter made
shall modify or otherwise affect any representations and warranties of the
Company, which shall survive any such investigation in accordance with the terms
of this Agreement, or the conditions to the obligation of the Parent and
Acquisition Sub to consummate the transactions contemplated hereby. The
obligations of Parent and Acquisition Sub under this Section 4.3 are in addition
to and not in limitation of the obligations of Citicorp Venture Capital, Ltd.
under its letter agreement dated May 5, 1999 with The Robinson-Humphrey Company,
LLC as financial advisor to, and on behalf of the Company (the "Confidentiality
Agreement"), and each of Parent and Acquisition Sub hereby agrees to be bound by
the terms of the Confidentiality Agreement to the same extent as though it were
a signatory thereto.
Section 4.4 Approval by the Company's Shareholders; Proxy Statement.
(a) Shareholders' Meeting. The Company shall cause a meeting of its
shareholders (the "Shareholders' Meeting") to be duly called and held as soon as
reasonably practicable after the date hereof for the purpose of considering and
acting upon approval of the Plan of Merger and all actions contemplated hereby
which require approval and adoption by the Company's shareholders. The
17
<PAGE> 77
Company will, through its Board of Directors, recommend to its shareholders
approval of the Plan of Merger and shall take all lawful action necessary to
obtain such approval.
(b) SEC Filings. In connection with the Shareholders' Meeting, the
Company will, as promptly as practicable after the date hereof, prepare and
file, and Parent will cooperate with the Company in the preparation and filing
of, a preliminary proxy statement relating to the transactions contemplated by
this Agreement (the "Preliminary Proxy Statement") and a Transaction Statement
on Schedule 13E-3 (the "Schedule 13E-3") with the Commission and will use its
commercially reasonable efforts to respond to any comments of the Commission and
to cause the definitive proxy statement (the "Definitive Proxy Statement") to be
mailed to the Company's shareholders and filed with the Commission, in each case
as soon as reasonably practicable. The Preliminary Proxy Statement, the
Definitive Proxy Statement and the Schedule 13E-3 shall contain such information
or statements regarding the Company, Parent, Acquisition Sub, this Agreement and
the transactions contemplated hereby as Parent shall reasonably request,
including any such information to be provided in response to any request or
comment by the Commission. Each party to this Agreement will notify the other
parties promptly of the receipt of the comments of the Commission, if any, and
of any request by the Commission for amendments or supplements to the
Preliminary Proxy Statement, the Definitive Proxy Statement or the Schedule
13E-3 or for additional information, and will supply the others with copies of
all correspondence between such party or its representatives, on the one hand,
and the Commission or members of its staff, on the other hand, with respect to
the Preliminary Proxy Statement, the Definitive Proxy Statement, the Schedule
13E-3 or the Merger. If at any time prior to the Shareholders' Meeting, any
event should occur relating to the Company or any of the Subsidiaries which
should be set forth in an amendment of, or a supplement to, the Definitive Proxy
Statement or the Schedule 13E-3, the Company will promptly inform Parent. If at
any time prior to the Shareholders' Meeting, any event should occur relating to
Parent or Acquisition Sub or any of their respective affiliates, or relating to
the plans of any such persons for the Surviving Corporation after the Effective
Time of the Merger, or relating to the financing commitments described in
Section 3.6, that should be set forth in an amendment of, or a supplement to,
the Definitive Proxy Statement or the Schedule 13E-3, the Company, with the
reasonable cooperation and at the expense of Parent, will, upon learning of such
event, promptly prepare, file and, if required, mail any such amendment or
supplement to the Company's shareholders; provided that (i) prior to such filing
or mailing the Company shall consult with Parent with respect to such amendment
or supplement and shall afford Parent reasonable opportunity to comment thereon
and (ii) if the events or circumstances giving rise to the need to prepare such
amendment or supplement constituted a material breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement, the
costs and expenses related to the preparation, filing and mailing of such
amendment or supplement shall be borne by the Company. Parent will furnish to
the Company the information relating to Parent and Acquisition Sub, their
respective affiliates and the plans of such persons for the Surviving
Corporation after the Effective Time of the Merger, and relating to the
financing commitments described in Section 3.6, to the extent required to be set
forth in the Preliminary Proxy Statement, the Definitive Proxy Statement or the
Schedule 13E-3 under the Exchange Act and the rules and regulations of the
Commission thereunder. The Definitive Proxy Statement will not contain any
information or statement that Parent reasonably believes to be materially
adverse to the Company's ability to obtain the approval of the Company's
shareholders of the Merger and the consummation of the transactions contemplated
hereby, except to the extent required by
18
<PAGE> 78
applicable law or the Commission's rules and regulations. The Company will use
its commercially reasonable efforts to cause the Definitive Proxy Statement to
contain the written opinion of The Robinson-Humphrey Company, LLC to the effect
that the Merger Consideration is fair to the shareholders of the Company from a
financial point of view.
Section 4.5 Expenses. Except as provided in Section 5.4, all costs and
expenses incurred by a party in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses; provided, however, that in no event shall any costs and expenses
incurred by any party hereto reduce the consideration to be received by the
shareholders of the Company in exchange for their shares of Company Common Stock
as provided in the Plan of Merger.
Section 4.6 Certain Filings, Consents and Arrangements.
(a) HSR Act. Parent and the Company shall use their commercially
reasonable efforts to cause Notification and Report Forms under the HSR Act to
be filed with the Federal Trade Commission and the Antitrust Division of the
Department of Justice as soon as reasonably practicable after the execution of
this Agreement. Parent and the Company shall cooperate and consult with each
other with respect to the preparation of the Notification and Report Forms and
any other submissions, including but not limited to responses to written or oral
comments or requests for additional information or documenting material by the
Federal Trade Commission or the Antitrust Division of the Department of Justice,
required to be made pursuant to the HSR Act in connection with the transactions
contemplated hereby. Parent shall pay the filing fee associated with such
filings.
(b) Other Filings, Consents and Arrangements. Parent, Acquisition Sub
and the Company shall cooperate with one another (i) in promptly determining
whether any other filings are required to be made or other consents, approvals,
permits or authorizations are required to be obtained under any other federal,
state or foreign law or regulation and (ii) in promptly making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such consents, approvals, permits or authorizations.
Section 4.7 Notification of Certain Events. Each party covenants and
agrees to give prompt written notice to the others of (a) the occurrence (or
non-occurrence) of any event the occurrence (or non-occurrence) of which would
be likely to cause (i) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect or (ii) any
covenant, agreement or condition contained in this Agreement not to be complied
with or satisfied in all material respects (in each case, if any such
representation or warranty or covenant or agreement is already qualified by
materiality or by reference to a Company Material Adverse Effect, then in all
respects) or (b) any material failure by it to comply or satisfy any covenant,
agreement or condition contained in this Agreement.
Section 4.8 Public or Shareholder Communications. From and after the
date of this Agreement, except as Parent and the Company may otherwise agree,
Parent, Acquisition Sub and the Company shall not issue any press release with
respect to this Agreement or the transactions contemplated hereby unless such
party believes in good faith based on advise of counsel that such action is
required by applicable law (including the rules and regulations of the
Commission) or
19
<PAGE> 79
obligations pursuant to stock exchanges and the Nasdaq National Market. In such
case, the party making such release shall use its reasonable best efforts to
consult with the other parties, provide the other parties with reasonable
opportunity to comment on the form, substance and timing of, and use its
reasonable best efforts to agree upon the text of, any press release, before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any federal or state governmental or regulatory agency with respect thereto.
Section 4.9 Indemnification and Insurance.
(a) Articles of Incorporation and Bylaws. Parent and Acquisition Sub
agree to cause the Articles of Incorporation and Bylaws of the Surviving
Corporation to contain the provisions with respect to exculpation and
indemnification of directors of the Company set forth in the Articles of
Incorporation and Bylaws of the Company on the date of this Agreement, which
provisions shall not be amended for a period of six years after the Effective
Time (unless such amendment is required by law and except for amendments that do
not adversely affect the rights of the current directors of the Company
thereunder).
(b) Indemnification. (i) From and after the Effective Time, Parent and
the Surviving Corporation shall each indemnify, defend and hold harmless, to the
fullest extent permitted by the SCBCA, each person who was an officer, director,
employee or agent of the Company at any time on or prior to the Effective Time
(an "Indemnified Party") against any loss, damage, liability, cost or expense
incurred by such Indemnified Party in connection with any claim, action, suit,
proceeding or investigation ("Claim") which is based on or arises out of, in
whole or in part, the actions, conduct or omissions of such Indemnified Party at
or prior to the Effective Time in his or her capacity as such officer, director,
employee or agent, or in any other capacity in which he or she is serving at the
request of the Company (including serving as a trustee or administrator of any
employee benefit plan of the Company or any of its Subsidiaries). Without
limiting the generality of the preceding sentence, in the event any Indemnified
Party becomes involved in any Claim, after the Effective Time, Parent shall, and
shall cause the Surviving Corporation to, periodically advance to such
Indemnified Party its legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith) to the fullest
extent permitted by the SCBCA, subject to the providing by such Indemnified
Party of an undertaking to reimburse all amounts so advanced in the event of a
final and non-appealable determination by a court of competent jurisdiction that
such Indemnified Party is not entitled thereto.
(ii) The Indemnified Party shall control the defense of any
Claim with counsel selected by the Indemnified Party, which counsel shall be
reasonably acceptable to Parent, provided, that Parent and the Surviving
Corporation shall be permitted to participate in the defense of such Claim at
their own expense, and provided, further, that if any D&O Insurance (as defined
in paragraph (c) of this Section 4.10) in effect at the time shall require the
insurance company to control such defense in order to obtain the full benefits
of such insurance and such provision is consistent with the provisions of the
Company's D&O Insurance existing as of the date of this Agreement, then the
provisions of such policy shall govern. Neither Parent nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent, which consent shall not be withheld unreasonably.
20
<PAGE> 80
(c) Insurance. For a period of not less than six years after the
Effective Time, Parent shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance ("D&O Insurance)
maintained by the Company, or substitute policies providing at least the same
coverage and amounts and containing terms and conditions which are not less
advantageous in any material respect, in each case with respect to claims
arising from facts or events which occurred at or prior to the Effective Time;
provided, that Parent and the Surviving Corporation shall not be required to pay
in the aggregate an annual premium for D&O Insurance in excess of 200% of the
last annual premium paid prior to the date hereof, but in each case, shall
purchase the maximum amount of coverage as is reasonably available for such
amount.
(d) Beneficiaries. This Section 4.10 is intended to be for the benefit
of, and shall be enforceable by, the Indemnified Parties and their heirs and
personal representatives and shall be binding upon Parent, the Company and the
Surviving Corporation and their respective successors and assigns.
Section 4.10 Dissenters' Rights. The Company shall not settle or
compromise prior to the Effective Time any claim of a shareholder in respect of
such shareholder's dissenters' rights pursuant to Chapter 13 of the SCBCA in
connection with the Merger without the prior written consent of Parent.
Section 4.11 Termination or Exercise of Stock Options; Accelerated
Vesting. Prior to the Effective Time, the Company will take appropriate action
so that, at the Effective Time, all of the Outstanding Employee Stock Options
and any other plans, programs or arrangements providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any Subsidiary shall have been exercised, shall have expired, or shall have been
terminated in exchange for or in consideration of cash in an amount not in
excess of the amount by which the Merger Consideration exceeds the exercise
price for such underlying shares. The Company shall take all action reasonably
necessary to ensure that following the Effective Time no participant in the
Company's 1993 Stock Option Plan or in any other plans, programs or arrangements
shall have any right thereunder to acquire or participate in changes in value of
equity securities of the Company, the Surviving Corporation, Acquisition Sub or
any of their respective subsidiaries after, and to terminate such plans
effective as of, the Effective Time. Notwithstanding the foregoing, the terms of
all such Outstanding Employee Stock Options may be amended to cause all unvested
stock options to become vested prior to the Effective Time.
Section 4.12 Fairness Opinion. The Company agrees that it will use its
commercially reasonable efforts to assist The Robinson-Humphrey Company, L.L.C.
in updating or confirming its fairness opinion prior to each of (a) the date the
Company mails the Proxy Statement to its shareholders, (b) the Meeting Date and
(c) the Closing.
Section 4.13 Shareholder Litigation. The Company shall notify Parent of
any shareholder litigation against the Company and its directors relating to the
transactions contemplated by this Agreement and shall consult with Parent prior
to entering into any settlement of such litigation.
Section 4.14 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its commercially
reasonable efforts to take promptly, or cause to be taken, all actions and to do
promptly, or cause to be done, all things necessary, proper or
21
<PAGE> 81
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and to cooperate with each other
in connection with the foregoing, including using its commercially reasonable
efforts to (i) obtain all necessary waivers, consents and approvals and
effecting all necessary registrations and filings under any federal or foreign
law or regulation (including, but not limited to, filings under the HSR Act),
(ii) obtain all necessary waivers, consents and approvals from other parties to
material agreements, leases and other contracts or other agreements subject,
however, to any required vote of the shareholders of the Company and (iii) cause
there to be delivered at the Closing such certificates, assurances and documents
as are reasonable and customary in transactions of this type. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and/or directors
of Parent, Acquisition Sub and the Company shall take such necessary action.
Section 4.15 Financing. Parent and Acquisition Sub shall, and shall
cause their respective officers, directors, employees, affiliates and
representatives to, use their commercially reasonable efforts to arrange as
promptly as practicable and (subject only to the simultaneous consummation of
the transactions contemplated hereby on the terms and conditions set forth
herein) complete the financings contemplated by the financing commitments
described in Section 3.6. Parent and Acquisition Sub shall use their reasonable
best efforts to notify the Company if Parent or Acquisition Sub becomes aware of
any fact, occurrence or event that it reasonably believes would be likely to
prevent Parent from completing financing arrangements for the Merger.
ARTICLE V
CONDITIONS TO THE MERGER; TERMINATION
Section 5.1 Conditions to Obligations of Parent and Acquisition Sub.
The obligations of Parent and Acquisition Sub to complete the Closing and effect
the Merger are contingent upon the fulfillment of each of the following
conditions at or before the Effective Time, except to the extent that Parent
may, in its sole and absolute discretion, waive any one or more thereof in whole
or in part:
(a) Representations and Warranties. All of the representations and
warranties made by the Company herein shall be true and correct in all material
respects (or if such representation or warranty is already qualified by
materiality or by reference to a Company Material Adverse Effect, then in all
respects) as of the date of this Agreement and as of the Effective Time as
though made at and as of the Effective Time.
(b) Obligations and Agreements. The Company shall have performed in all
material respects its obligations and agreements contained herein to be
performed prior to or at the Effective Time.
(c) Bringdown Certificate. Parent and Acquisition Sub shall have
received a certificate from an authorized officer of the Company, dated as of
the date of the Closing, to the effect that the conditions set forth in Sections
5.1(a) and 5.1(b) have been satisfied.
22
<PAGE> 82
(d) Approval of the Company's Shareholders; Dissent. The Plan of Merger
shall have been duly approved by the shareholders of the Company in accordance
with Section 33-11-103 of the SCBCA, and Parent shall have received evidence, in
form and substance reasonably satisfactory to it, that the holders of no more
than 6% of the outstanding shares of Company Common Stock, in the aggregate
calculated on a fully-diluted basis immediately prior to the Effective Time,
shall have given the Company written notice pursuant to Section 33-13-210 of the
SCBCA of their intent to exercise dissenters' rights with respect to such shares
in connection with the Merger.
(e) HSR Act. Any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated.
(f) No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced, no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this
Agreement, or any of the principals, officers or directors of any of them, (i)
which seeks to restrain, prevent or change the transactions contemplated hereby
or questioning the validity or legality of any of such transactions or seeking
damages in connection with any of such transactions or (ii) which if adversely
determined could reasonably be expected to have a material adverse effect on the
business, assets or condition (financial or otherwise) of the Surviving
Corporation taken as a whole, or on the ability of any party to this Agreement
to perform any of its material obligations hereunder.
(g) Financing. Parent shall have received the cash proceeds of debt
financing in an amount necessary to satisfy its obligations hereunder (including
payment of the aggregate Merger Consideration) and pay all fees and expenses in
connection herewith on terms and conditions satisfactory to it. Parent
acknowledges that receipt of the cash proceeds of debt financing from parties
satisfactory to it in an amount not less than and on substantially the same
terms and conditions (including with respect to availability) as set forth in
the debt financing commitments described in Section 3.6 (without giving effect
to any "market-flex" language contained therein) shall satisfy this condition;
provided, that such amount is sufficient to satisfy its obligations arising
hereunder and repay all other outstanding funded debt of the Company and its
Subsidiaries on a consolidated basis.
(h) Options. All outstanding options to acquire the Company Common
Stock shall have been exercised or cancelled.
Section 5.2 Conditions to the Company's Obligations. The obligations of
the Company to complete the Closing and effect the Merger are contingent upon
the fulfillment of each of the following conditions at or before the Effective
Time, except to the extent that the Company may, in its sole and absolute
discretion, waive any one or more thereof in whole or in part:
(a) Representations and Warranties. All of the representations and
warranties made by Parent and Acquisition Sub herein shall be true and correct
in all material respects (or if such representation and warranty is already
qualified by materiality or by reference to a Parent Material Adverse Effect,
then in all respects) as of the date of this Agreement and as of the Effective
Time as though made at and as of the Effective Time.
23
<PAGE> 83
(b) Obligations and Agreements. Parent and Acquisition Sub shall have
performed in all material respects their obligations and agreements contained
herein to be performed prior to or at the Effective Time.
(c) Bringdown Certificate. The Company shall have received a
certificate from authorized officers of the Parent and Acquisition Sub, dated as
of the date of the Closing, to the effect that the conditions set forth in
Sections 5.2(a) and 5.2(b) have been satisfied.
(d) Approval of the Company's Shareholders. The Plan of Merger shall
have been duly approved by the shareholders of the Company in accordance with
Section 33-11-103 of the SCBCA.
(e) HSR Act. Any applicable waiting period under the HSR Act relating
to the Merger shall have expired.
(f) No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced, no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this
Agreement, or any of the principals, officers or directors of any of them,
seeking to restrain, prevent or change the transactions contemplated hereunder
or questioning the validity or legality of any of such transactions or seeking
damages in connection with any of such transactions.
Section 5.3 Termination and Abandonment. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, notwithstanding prior approval by the Company's shareholders, by the
following parties under the following circumstances:
(a) by Parent or the Company by their mutual consent; or
(b) by Parent or the Company, if the Effective Time shall not have
occurred on or before January 31, 2000 (provided that the right to terminate
this Agreement under this clause shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement has been the
cause or resulted in the failure to consummate the Merger by such date); or
(c) by Parent, if there has been a material breach by the Company of
any covenant, agreement, representation or warranty contained in this Agreement
which has rendered the satisfaction of any condition to the obligations of
Parent and Acquisition Sub impossible and such breach has not been waived by
Parent or cured in all material respects within 10 days; or
(d) by the Company, if there has been a material breach by Parent or
Acquisition Sub of any covenant, agreement, representation or warranty contained
in this Agreement which has rendered the satisfaction of any condition to the
obligations of the Company impossible and such breach has not been waived by the
Company or cured in all material respects within 10 days; or
(e) by Parent or the Company, if there shall be any applicable domestic
law, rule or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any
24
<PAGE> 84
judgment, injunction order or decree of a court of competent jurisdiction shall
restrain or prohibit the consummation of the Merger, and such judgment,
injunction, order or decree shall become final and nonappealable; or
(f) by Parent or the Company, if the Plan of Merger fails to receive
the requisite vote for approval and adoption at the Shareholders' Meeting; or
(g) by the Company, if the Company proposes to enter into an agreement
providing for a Superior Take-over Proposal which satisfies all of the terms of
the definition thereof; provided, that, any such termination shall not be
effective unless (i) the Company has provided Parent written notice (the
"Termination Intention Notice") that it intends to terminate this Agreement
pursuant to this Section 5.3(g), which notice shall also identify the Superior
Take-over Proposal then determined to be more favorable and the parties thereof
and include, at the Company's option, either a copy of the acquisition agreement
or other similar agreement for such Superior Take-over Proposal in substantially
the form to be entered into or a summary thereof, (ii) at least two (2) full
business days after the Company has delivered the Termination Intention Notice,
the Company delivers to Parent and Acquisition Sub a written notice (the
"Termination Notice") of termination of this Agreement pursuant to this Section
5.3(g), and (iii) upon delivery of Termination Notice, the Company pays the
Termination Fee as provided in Section 5.4 through delivery to Parent of a check
or wire transfer of immediately available funds to such account as is designated
by Parent; or
(h) by Parent, if (i) the Board of Directors of the Company shall have
withdrawn or modified, in a manner adverse to Parent or Acquisition Sub, the
approval or recommendation by the Board of Directors of this Agreement, (ii) if
the Board of Directors of the Company shall have approved another Take-over
Proposal, or (iii) the Company shall have materially breached any provision of
Section 4.1; or
(i) by the Company or Parent, if The Robinson-Humphrey Company, LLC
shall have withdrawn its Fairness Opinion or modified its Fairness Opinion in a
manner adverse to Parent or Acquisition Sub, including with respect to the
adequacy of the Merger Consideration; or
(j) by Parent, if there shall have occurred and continue to be in
existence (i) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, the American Stock Exchange or in the
Nasdaq National Market System, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or not
mandatory), (iii) any limitation by any United States governmental authority or
agency that has a material adverse effect generally on the extension of credit
by banks or other financial institutions, (iv) commencement of a war or armed
hostilities or other national or international crises directly or indirectly
involving the United States which war, hostility or crisis is reasonably likely
to have a Company Material Adverse Effect or materially and adversely affect the
ability of the Company to perform its obligations hereunder or to consummate the
Merger or to materially and adversely affect Parent's ability to obtain the
financing referred to Sections 5.1(g), or (v) in the case of any of the events
described in (i) through (iv) above existing as of the date hereof, a material
acceleration or worsening thereof.
Section 5.4 Effect of Termination.
25
<PAGE> 85
(a) In the event of any such termination and abandonment pursuant to
Section 5.3, neither party shall have any further obligation hereunder except as
expressly provided in Sections 4.3, 4.5 and 4.8 and Article VI hereof, and
neither party shall have any liability to the others by reason of such
termination or abandonment except as provided in this Section 5.4. The election
of a party to terminate this Agreement and abandon the Merger shall be pursuant
to action of its Board of Directors. In the event of the termination of this
Agreement by Parent pursuant to Section 5.3(c), or by the Company pursuant to
Section 5.3(d), and the material breach giving rise to such right of termination
was a willful breach, then the breaching party shall be liable to the
terminating party for the actual damages resulting from such breach.
(b) In the event of the termination of this Agreement by the Company
pursuant to Section 5.3(g) or by Parent pursuant Section 5.3(h), then the
Company shall pay to Parent a termination fee equal to $2,000,000 (the
"Termination Fee") and Parent and Acquisition Sub shall be entitled to
reimbursement by the Company for their out-of-pocket expenses actually incurred
in connection with the negotiation, execution, delivery and performance of this
Agreement and the financing including, without limitation, any and all fees and
expenses payable to attorneys, consultants, advisors and financing sources, and
their respective representatives, agents and counsel, whether incurred prior to
or after the date hereof ("Transaction Expenses"); provided, however, in no
event shall the Company be obligated, pursuant to any provision of this Section
5.4, to reimburse Parent and Acquisition Sub for any Transaction Expenses in
excess of $1,000,000. In addition, if this Agreement is terminated by the
Company pursuant to Section 5.3(i), the Parent and Acquisition Sub shall be
entitled to reimbursement by the Company for Transaction Expenses (subject to
the same limitations as contained in the preceding sentence). The Termination
Fee shall be payable on the date this Agreement is terminated pursuant to
Section 5.3(g) or 5.3(h) and any such required reimbursement of Transaction
Expenses shall take place concurrently with the termination of this Agreement
upon delivery by Parent to the Company of a certificate of an officer of Parent
setting forth in reasonable detail the true and correct amount of costs and
expenses (whether paid or payable) incurred by Parent or Acquisition Sub in
connection with the transactions contemplated by this Agreement.
(c) In the event that (i) this Agreement is terminated by either Parent
or the Company pursuant to Section 5.3(b) or (f) and (ii) within six months of
such termination, the Company enters into any definitive agreement with respect
to or publicly announces or consummates a merger, share exchange, consolidation,
business combination, sale of substantially all of the Company's assets or
direct or indirect acquisition or purchase of a material amount of Company
Common Stock which involves aggregate consideration payable to the Company or
the Company's shareholders greater than or equal to the aggregate consideration
which would otherwise be received by the shareholders of the Company pursuant to
this Agreement (a "Subsequent Transaction"), the Company shall be required to
pay the Termination Fee and reimburse Transaction Expenses (subject to the
limitations contained in subsection (b) above) upon the closing of such
Subsequent Transaction. Finally, in the event that (i) this Agreement is
terminated by the Company pursuant to Section 5.3(i), and (ii) within six months
the Company enters into a definitive agreement with respect to or publicly
announces or consummates a Subsequent Transaction, Parent and Acquisition Sub
shall be entitled to the Termination Fee (but not any additional Transaction
Expenses) upon the closing of such Subsequent Transaction.
26
<PAGE> 86
(d) Payment of the Termination Fee and reimbursement of Transaction
Expenses pursuant to this Section 5.4 shall be Parent and Acquisition Sub's sole
and exclusive legal remedy in connection with any termination of this Agreement.
Any payment of the Termination Fee shall be accompanied by a written
acknowledgement from the Company and any other party that the Company has
entered into a definitive agreement with regard to a Subsequent Transaction or
Takeover Proposal that the Company and such other party have irrevocably waived
any right to contest any such payment.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Entire Agreement. This Agreement (including the Exhibits
hereto) contains the final, complete and exclusive statement of the agreement
between the parties with respect to the transactions contemplated herein and all
prior or contemporaneous written or oral agreements with respect to the subject
matter hereof are merged herein.
Section 6.2 No Survival. None of the representations, warranties,
covenants and agreements in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, except for those
covenants and agreements contained herein or therein which by their terms apply
in whole or in part after the Effective Time.
Section 6.3 Amendments. This Agreement may be amended by the parties
hereto, at any time prior to the Effective Time, by action taken by their
respective Boards of Directors; provided, however, that, after approval of the
Plan of Merger by the shareholders of the Company, no amendment, which under
applicable law may not be made without the approval of such shareholders, may be
made without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties hereto.
Section 6.4 Assignment. Except as expressly permitted by the terms
hereof, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the proper
written consent of the other parties. Parent and Acquisition Sub may assign all
of its rights or obligations under this Agreement to a direct or indirect
wholly-owned subsidiary of Acquisition Sub, provided that any such assignment
will have no material adverse tax or other effects on the Company and will have
no adverse tax or other effects on the holders of the Company's shares, and
provided further that if such assignment takes place, Parent and Acquisition Sub
shall continue to be liable to the Company for all obligations under this
Agreement and for any default in performance by the assignee.
Section 6.5 Interpretation. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof', "herein" and "hereunder" and words of similar
import when used in this
27
<PAGE> 87
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns.
Section 6.6 Benefits and Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns (with the provisions of Section 4.9 inuring to
the benefit of the Indemnified Parties referred to therein). Except as otherwise
expressly provided in this Agreement (including Section 4.9), nothing contained
herein is intended or shall be construed to confer on any person other than the
parties hereto any rights or benefits hereunder.
Section 6.7 Notices. Any notice to be given to a party in connection
with this Agreement shall be in writing addressed to such party at the address
set forth below ("Notice Address"), with a copy thereof addressed to such
party's counsel, as indicated, to be given at the same time and in the same
manner as the notice to the party, which Notice Address may be changed from time
to time by such addressee by notice thereof to each of the other addressees as
herein provided. Any such notice shall be deemed effectively given to a party
upon the first to occur of (a) the third business day following the date on
which it is mailed to such party by first class registered or certified United
States mail, postage prepaid, addressed to such party at such party's Notice
Address, or (b) the date on which it is actually delivered to such party's
Notice Address properly addressed to such party (whether delivered by mail,
courier, facsimile transmission, or otherwise) if such date is a business day
and such delivery is made prior to 5:00 p.m, local time at such address, on such
business day, or if the date of such delivery is not a business day or such
delivery is made after 5:00 p.m., on the next business day following the date of
delivery, or (c) when it is actually received by the representative of such
party specified in such party's Notice Address. Transmission by facsimile shall
be confirmed by telephone to the addressee at the time of transmission.
Notice Address of the Company:
Conso International Corporation
513 N. Duncan ByPass
P. O. Box 326
Union, South Carolina 29379
Telephone: 864/427-9004
Telecopy: 864/427-8820
Attention: J. Cary Findlay
with a copy to (which shall not constitute notice to
the Company):
28
<PAGE> 88
Kennedy Covington Lobdell & Hickman, L.L.P
Bank of America Corporate Center, Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Telephone: 704/331-7400
Telecopy: 704/331-7598
Attention: J. Norfleet Pruden, III
Notice Address of Parent or Acquisition Sub:
CIC Acquisition Co.
CIC Acquisition Sub, Inc.
c/o Citicorp Venture Capital, Ltd.
339 Park Avenue
New York, New York 10043
Telephone: 212/559-2759
Telecopy: 212/888-2940
Attention: M. Saleem Muqaddam
with a copy to (which shall not constitute notice to
Parent or Acquisition Sub):
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telephone: 212/ 446-4800
Telecopy: 212/ 446-4900
Attention: Kirk A. Radke
Section 6.8 Time Of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence. Whenever the
last day for the exercise of any privilege or the discharge of any duty
hereunder shall fall upon any day which is not a business day, the party having
such privilege or duty may exercise such privilege or discharge such duty on the
next succeeding business day.
Section 6.9 Waiver of Jury Trial. Each of the parties hereto waives to
the fullest extent permitted by law any right it may have to trial by jury in
respect of any claim, demand, action or cause of action based on, or arising out
of, under or in connection with this Agreement, or any course of conduct, course
of dealing, verbal or written statement or action of any party hereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise. The parties to this Agreement each hereby agrees that any
such claim, demand, action or cause of action shall be decided by court trial
without a jury and that the parties to this Agreement may file an original
counterpart of a copy of this Agreement with any court as evidence of the
consent of the parties hereto to the waiver of their right to trial by jury.
29
<PAGE> 89
Section 6.10 Captions. The captions herein are for convenience of
reference only and shall not be construed as a part of this Agreement.
Section 6.11 Governing Law. This Agreement shall be construed,
interpreted, enforced and governed by and under the laws of the State of South
Carolina without regard to its rules of conflicts of laws.
Section 6.12 Exhibits. All of the Exhibits hereto referred to in this
Agreement are hereby incorporated herein by reference and shall be deemed and
construed to be a part of this Agreement for all purposes.
Section 6.13 Severability. The invalidity or unenforceability of any
one or more phrases, sentences, clauses or provisions of this Agreement shall
not affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
Section 6.14 Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument.
* * *
30
<PAGE> 90
IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have each
caused this Agreement to be duly executed by their duly authorized officers
under seal as of the day and year first above written.
CIC ACQUISITION CO.
[CORPORATE SEAL]
By: /s/ Michael T. Bradley
--------------------------------------
ATTEST: Name: Michael T. Bradley
Title: Vice President
/s/ M. Saleem Muqaddam
- - - ------------------------------
Name: M. Saleem Muqaddam
Title: President and Secretary
CIC ACQUISITION SUB, INC.
[CORPORATE SEAL]
By: /s/ Michael T. Bradley
-------------------------------------
ATTEST: Name: Michael T. Bradley
Title: Vice President
/s/ M. Saleem Muqaddam
- - - ------------------------------
Name: M. Saleem Muqaddam
Title: President and Secretary
CONSO INTERNATIONAL CORPORATION
[CORPORATE SEAL]
By: /s/ J. Cary Findlay
--------------------------------------
ATTEST: J. Cary Findlay
Chairman of the Board,
President and Chief Executive Officer
/s/ Konstance J.K. Findlay
- - - ------------------------------
Konstance J.K. Findlay
Secretary
31
<PAGE> 91
EXHIBITS
Exhibit Description
------- -----------
A Plan of Merger
<PAGE> 92
EXHIBIT A
PLAN OF MERGER
OF
CIC ACQUISITION SUB, INC.
WITH AND INTO
CONSO INTERNATIONAL CORPORATION
This Plan of Merger sets forth the terms and conditions upon which, at
the Effective Time (as hereinafter defined), CIC Acquisition Sub, Inc. shall be
merged with and into Conso International Corporation:
1. Constituent Corporations; Surviving Corporation. The constituent
corporations party to this Plan of Merger (the "Constituent Corporations") are
Conso International Corporation, a South Carolina corporation (the "Company"),
and CIC Acquisition Sub, Inc., a South Carolina corporation ("Acquisition Sub").
Acquisition Sub shall be merged with and into the Company (the "Merger"), and
the Company shall be the surviving corporation in the Merger (the "Surviving
Corporation"), with its corporate name continuing to be "Conso International
Corporation."
2. Effective Time. The Merger shall become effective at the time
appropriate articles of merger, including this Plan of Merger, are filed with
the Secretary of State of South Carolina (the "Effective Time").
3. Terms and Conditions of Merger; Abandonment. The Merger shall be
effected in accordance with the terms and conditions set forth in this Plan of
Merger. The Merger may be abandoned at any time prior to the Effective Time in
the event that the Merger Agreement, dated as of October __, 1999 (the "Merger
Agreement"), by and among the Constituent Corporations and CIC Acquisition Co.,
a Delaware corporation ("Parent"), shall be terminated. The obligations of the
Constituent Corporations to cause articles of merger to be filed to effect the
Merger are subject to the satisfaction or waiver of the conditions to the
closing under the Merger Agreement.
4. Effect of Merger.
(a) As of the Effective Time, Acquisition Sub will be merged with and
into the Company with the effects set forth in Section 33-11-106 of the South
Carolina Business Corporation Act, and the separate corporate existence of
Acquisition Sub shall cease and the corporate existence of the Company shall
continue as the Surviving Corporation.
(b) As of the Effective Time, the Articles of Incorporation of the
Company shall be amended to cause Section 3 thereof to be amended and restated
in its entirety to read as set forth on Schedule I attached hereto. The Articles
of Incorporation of the Company, as so amended, shall continue to be the
Articles of Incorporation of the Surviving Corporation after the Effective Time
until they may be thereafter duly amended in accordance with applicable law
(subject, however, to the provisions of Section 4.9(a) of the Merger Agreement).
<PAGE> 93
(c) The Bylaws of the Company as in effect immediately prior to the
Effective Time shall continue to be the Bylaws of the Surviving Corporation
after the Effective Time until they may be thereafter duly amended in accordance
with applicable law.
(d) The directors of Acquisition Sub and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified, or until their earlier death, removal or
resignation, in accordance with the Bylaws of the Surviving Corporation and
applicable law.
(e) The manner and basis of converting and exchanging the shares of the
Constituent Corporations is set forth in Section 5 hereof.
5. Conversion of Shares. At the Effective Time:
(a) All of the shares of Common Stock of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than Retained Shares (as defined in subsection (b) below), Acquisition Sub
Shares (as defined in subsection (c) below) and Dissenting Shares (as defined in
Section 6(h))), shall be automatically converted into the right to receive a
cash amount equal to $9.00 per share, without interest thereon (the "Per Share
Amount").
(b) 533,378 shares of Common Stock of the Company held by J. Cary
Findlay (the "Retained Shares") shall be automatically converted into an
aggregate of 151,000 shares of Class A Common Stock, 197,420 shares of Class C
Common Stock and 44,519.8 shares of Series A Preferred Stock of the Surviving
Corporation. The Retained Shares, in the aggregate, at the Effective Time will
evidence ownership of the shares of Class A Common Stock, Class C Common Stock
and Series A Preferred Stock of the Surviving Corporation into which they are so
converted and the certificates representing the Retained Shares shall be
exchanged for certificates representing the appropriate number of shares of
Class A Common Stock, Class C Common Stock and Series A Preferred Stock of the
Surviving Corporation.
(c) all of the issued and outstanding shares of Company Common Stock
held by Acquisition Sub ("Acquisition Sub Shares") shall be canceled and shall
cease to exist.
(d) Each of the 299,000 shares of Class A Common Stock of Acquisition
Sub ("Class A Acquisition Sub Common Stock") issued and outstanding immediately
prior to the Effective Time shall be automatically converted into one share of
Class A Common Stock of the Surviving Corporation; each of the 1,202,580 shares
of Class B Common Stock of Acquisition Sub ("Class B Acquisition Sub Common
Stock") issued and outstanding immediately prior the Effective Time shall be
automatically converted into one share of Class B Common Stock of the Surviving
Corporation; and each of the 185,480.2 shares of Series A Preferred Stock of
Acquisition Sub (together with Class A Acquisition Sub Common Stock and Class B
Acquisition Sub Common Stock, "Acquisition Sub Stock") issued and outstanding
immediately prior the Effective Time shall be automatically converted into one
share of Series A Preferred Stock of the Surviving Corporation. Each certificate
evidencing ownership of any such shares of Acquisition Sub Stock shall, at the
Effective Time, evidence ownership of the same number of shares of the Class A
Common Stock,
2
<PAGE> 94
Class B Common Stock and Series A Preferred Stock of the Surviving Corporation,
as applicable, without any requirement for any exchange of certificates or
further action.
(e) Each share of capital stock of the Surviving Corporation issued
upon conversion of the Retained Shares or shares of Acquisition Sub Stock shall
be validly issued, fully paid and nonassessable upon such conversion.
6. Exchange of Certificates and Cash.
(a) Deposit of Merger Consideration. Immediately prior to the Effective
Time, Parent shall deposit, or cause to be deposited, with or for the account of
a bank or trust company mutually designated by the Parent and the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock (other than any Retained Shares, Acquisition Sub Shares or Dissenting
Shares) for exchange in accordance with this Section 6, cash in the aggregate
amount required to be exchanged for all outstanding shares of Company Common
Stock (including for this purpose Dissenting Shares, but excluding Retained
Shares and Acquisition Sub Shares) pursuant to Section 5 hereof (the "Merger
Consideration"). The Exchange Agent shall, pursuant to irrevocable instructions,
hold the Merger Consideration pending remittance thereof to holders of shares of
Company Common Stock (or, with respect to Dissenting Shares, to the Surviving
Corporation) in accordance with this Section 6. The Merger Consideration shall
not be used for any other purpose. The Exchange Agent shall invest the Merger
Consideration, as directed by the Surviving Corporation, in (i) direct
obligations of the United States of America, (ii) obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, (iii) commercial paper rated the highest
quality by either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, (iv) bank deposits, certificates of deposit, bank repurchase
agreements or acceptances of commercial banks with capital exceeding $100
million, or (v) mutual funds investing solely in the types of investments
described in clauses (i) through (iv). In the event that any such investments
reduce the Merger Consideration to an amount which is less than that required to
be exchanged for all shares of Company Common Stock (including for this purpose
Dissenting Shares) pursuant to Section 5 hereof which have not theretofore been
exchanged, the Surviving Corporation shall, upon written notice thereof from the
Exchange Agent, promptly make up any such shortfall. Any interest, dividends or
other income earned on the investment of the Merger Consideration while held by
the Exchange Agent shall be for the account of the Surviving Corporation.
(b) Surrender of Certificates; Payment of Merger Consideration. As soon
as reasonably practicable after the Effective Time, the Surviving Corporation
will instruct the Exchange Agent to mail to each holder of record, as of
immediately prior to the Effective Time, of the outstanding shares of Company
Common Stock (other than Retained Shares, Acquisition Sub Shares and Dissenting
Shares) (a) a letter of transmittal (which shall specify that delivery of a
holder's certificates representing shares of Company Common Stock
("Certificates") shall be effected only upon proper delivery of Certificates to
the Exchange Agent) and (b) instructions to effect the surrender of such
holder's Certificates in exchange for the cash such holder is entitled to
receive hereunder, each in a form approved jointly by the Company and Parent
prior to the Effective Time. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with the duly
3
<PAGE> 95
executed letter of transmittal, the holder of record of such Certificate shall
be entitled to receive in exchange therefor cash in an amount equal to the Per
Share Amount multiplied by the number of shares of Company Common Stock
evidenced by the Certificate less any required withholding of U.S. Federal
income taxes. No interest from the Effective Time will be accrued or paid on any
cash payable upon surrender of Certificates. In the event of a transfer of
ownership of any shares of Company Common Stock which is not registered in the
transfer records of the Company, it shall be a condition of payment of cash to
the transferee that the Certificate surrendered shall be properly endorsed or
otherwise in proper form for transfer, that the signatures on the Certificate or
any related stock power shall be properly guaranteed and that the Person
requesting such payment either pay any transfer or other taxes or present
evidence that any applicable stock transfer taxes have been paid.
(c) Lost, Stolen or Destroyed Certificates. 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 and, if required by the Surviving Corporation, the posting
by such person of a bond in such amount as the Surviving Corporation may
reasonably direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the cash deliverable in respect
thereof pursuant to Section 5 hereof.
(d) Cancellation and Retirement of Common Stock. As of the Effective
Time, all certificates representing shares of Company Common Stock, other than
certificates representing Dissenting Shares, issued and outstanding immediately
prior to the Effective Time, shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration upon surrender of such certificate in accordance with Section
6(b).
(e) Termination of Deposit with the Exchange Agent. Any portion of the
Merger Consideration deposited with the Exchange Agent which remains
undistributed to the holders of shares of Company Common Stock for 270 days
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any holders of shares of Company Common Stock who have not
theretofore complied with this Section 6 shall thereafter look only to the
Surviving Corporation as general creditors for the Merger Consideration to which
they are entitled pursuant to this Section 6. Neither Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any cash from the Merger Consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(f) Withholding Rights. The Surviving Corporation, Parent or
Acquisition Sub shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Company Common
Stock such amounts (each a "Withholding Amount") as the Surviving Corporation,
Parent or Acquisition Sub is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended, or
any provision of state, local or foreign tax law. To the extent that amounts are
required by law to be and are so withheld by the Surviving Corporation, Parent
or Acquisition
4
<PAGE> 96
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder in respect of which such deduction and
withholding was made.
(g) Closing of Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
(h) Dissenting Shares. Notwithstanding any other provision of the
Merger Agreement, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by a holder of shares
of Company Common Stock who shall have (i) duly given written notice to the
Company, prior to the taking of the vote by the Company's shareholders on
approval of this Plan of Merger, of such holder's intent to dissent from the
Merger and demand payment of the "fair value" of such shares in accordance with
Chapter 13 of the South Carolina Business Corporation Act (the "Dissenters'
Rights Provisions"), (ii) not voted such shares in favor of the Merger (other
than a vote by proxy that does not disqualify such holder under the Dissenters'
Rights Provisions), and (iii) not withdrawn, waived or otherwise lost or
forfeited such holder's dissenter's rights under the Dissenters' Rights
Provisions prior to the Effective Time (collectively, the "Dissenting Shares"),
shall not be converted into or represent the right to receive any part of the
Merger Consideration. Such Dissenting Shares shall instead be converted into the
right to receive from the Surviving Corporation payment of the "fair value"
thereof in accordance with the Dissenters' Rights Provisions. All Dissenting
Shares held by holders who after the Effective Time shall have failed to perfect
or who effectively shall have withdrawn, waived or otherwise lost or forfeited
their dissenters' rights under such Dissenters' Rights Provisions shall
thereupon be deemed to have been converted into and to become exchangeable, as
of the Effective Time, for the right to receive, without any interest or
dividend thereon, the appropriate part of the Merger Consideration, upon
surrender, in the manner provided in this Section 6, of the Certificate or
Certificates that formerly evidenced such shares of Company Common Stock. Upon
application by the Surviving Corporation to the Exchange Agent therefor,
accompanied by the Certificate or Certificates formerly evidencing Dissenting
Shares and a certificate of the Surviving Corporation to the effect that there
has been paid, or will be paid contemporaneously with the remittance to the
Surviving Corporation of the Merger Consideration otherwise allocable to such
Dissenting Shares, the amount to which the holder thereof is entitled, or has
agreed with the Surviving Corporation to receive, as payment for such Dissenting
Shares pursuant to the exercise of such holder's dissenters' rights, then the
Exchange Agent shall remit to the Surviving Corporation that part of the Merger
Consideration otherwise (but for the exercise of such dissenters' rights)
allocable to such Dissenting Shares. In such event, remittance to the Surviving
Corporation shall be a full acquittance of the Exchange Agent with respect
thereto, and, to the extent such payment was not previously made, the holder of
such Dissenting Shares shall look only to the Surviving Corporation for the
payment to which such holder is entitled with respect to such Dissenting Shares.
5
<PAGE> 97
SCHEDULE I
3. The Corporation is authorized to issue 60,000,000 shares of capital
stock, divided into two classes: (a) 50,000,000 shares of Common Stock, of which
20,000,000 shares shall be designated as "Class A Common Stock," 15,000,000
shares shall be designated as "Class B Common Stock" and 15,000,000 shares shall
be designated as "Class C Common Stock," and (b) 10,000,000 shares of Preferred
Stock.
3.1 Common Stock. The relative rights, privileges, qualifications,
limitations and restrictions of the Class A Common Stock, Class B Common Stock
and Class C Common Stock are as set forth in this Section 3.1. As used herein,
the term "Common Stock" shall collectively mean Class A Common Stock, Class B
Common Stock and Class C Common Stock. Except as otherwise provided herein or as
otherwise required by applicable law, all shares of Common Stock shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions.
(a) Voting Rights. The holders of Class A Common Stock shall have the
general right to vote for all purposes, including the election of directors, as
provided by law. Each holder of Class A Common Stock shall be entitled at all
elections of directors to as many votes as shall equal the number of votes which
such holder would be entitled to cast for the election of directors with respect
to his shares of Class A Common Stock multiplied by the number of directors to
be elected, and such holder may cast all of such votes for a single director or
may distribute them among the number to be voted for, or for any two or more of
them, as he may see fit, and to one vote for each share upon all other matters.
Except as otherwise required by law, the holders of Class B Common Stock and
Class C Common Stock shall have no voting rights.
(b) Dividends. Holders of Common Stock will be entitled to receive
ratably such dividends as may be declared by the Board of Directors, provided,
that if dividends are declared that are payable in shares of Common Stock,
dividends will be declared that are payable at the same rate on each class of
Common Stock and the dividends payable to holders of Class A Common Stock will
be payable in shares of Class A Common Stock, the dividends payable to holders
of Class B Common Stock will be payable in shares of Class B Common Stock and
the dividends payable to the holders of Class C Common Stock will be payable in
shares of Class C Common Stock.
(c) Liquidation. Subject to the provisions of any series of Preferred
Stock, the holders of the Common Stock shall be entitled to participate ratably
on a per share basis in all distributions to the holders of Common Stock in any
liquidation, dissolution or winding up of the Corporation.
(d) Conversion of Common Stock
(i) Right to Convert. Each record holder of Class A Common
Stock will be entitled to convert any or all of such holder's Class A Common
Stock into the same number of shares of Class B Common Stock and each record
holder of Class B Common Stock will be entitled to convert any or all of such
holder's Class B Common Stock into the same number of shares of Class A Common
Stock; provided, however, that at the time of conversion of shares of Class B
Common Stock into shares of Class A Common Stock, such holder determines, in its
sole
<PAGE> 98
discretion, that it would be permitted, pursuant to applicable law, to hold the
total number of shares of Class A Common Stock which such holder would hold
after giving effect to such conversion; provided, further, that the
determination of a holder of Class B Common Stock that such holder is permitted,
pursuant to applicable law, to convert Class B Common Stock into Class A Common
Stock pursuant to this Section 3.1(d)(i) shall be final and binding upon the
Corporation. Record holders of Class C Common Stock will not be entitled to
convert any shares of Class C Common Stock into shares of Class A Common Stock
or Class B Common Stock and record holders of Class A Common Stock and Class B
Common Stock will not be entitled to convert any shares of Class A Common Stock
or Class B Common Stock into shares of Class C Common Stock.
(ii) Surrender of Certificates. Each conversion of shares of a
class of Common Stock into shares of another class of Common Stock permitted
pursuant to Section 3.1(d)(i) will be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such shares stating the number
of shares that such holder desires to convert into the other class. Such
conversion will be deemed to have been effected as of the close of business on
the date on which such certificate or certificates have been surrendered and
such notice has been received by the Corporation, and at such time the rights of
any such holder with respect to the converted class of Common Stock will cease
and the person or persons in whose name or names the certificate or certificates
for shares of the other class of Common Stock are to be issued upon such
conversion will be deemed to have become the holder or holders of record of the
shares of such other class of Common Stock represented thereby.
(iii) Issuance of Certificates. Promptly after such surrender
and the receipt by the Corporation of the written notice from the holder
hereinbefore referred to, the Corporation will issue and deliver in accordance
with the surrendering holder's instructions the certificate or certificates for
the other class of Common Stock issuable upon such conversion and a certificate
representing any shares of Common Stock which were represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but which were not converted. The issuance of certificates for the
other class of Common Stock upon conversion will be made without charge to the
holder or holders of such shares for any issuance tax (except stock transfer
taxes) in respect thereof or other cost incurred by the Corporation in
connection with such conversion.
(iv) Reservation of Shares for Conversion. So long as any
shares of Class A Common Stock or Class B Common Stock are outstanding, the
Corporation will at all times reserve and keep available out of its authorized
but unissued shares of Class A Common Stock and Class B Common Stock the number
of shares sufficient for issuance upon conversion of all outstanding shares of
the other class of Common Stock.
(e) Transfers. The Corporation will not close its books against the
transfer of any share of Class A Common Stock or Class B Common Stock, or of any
share of Common Stock issued or issuable upon conversion of shares of any other
class Common Stock, in any manner that would interfere with the timely
conversion of such shares of Common Stock.
2
<PAGE> 99
(f) Subdivision and Combination of Shares. If the Corporation in any
manner subdivides or combines the outstanding shares of any class of Common
Stock, the outstanding shares of all other classes of Common Stock will be
proportionately subdivided or combined.
(g) Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock. Upon the surrender of
any certificate representing shares of any class of Common Stock at such place,
the Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of such class represented by the surrendered certificate and the
Corporation shall forthwith cancel such surrendered certificates. Each such new
certificate shall be registered in such name and shall represent such number of
shares of such class as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
(h) Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (it being understood that an affidavit of the registered holder
will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of any class of
Common Stock, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
(i) Notices. All notices referred to herein shall be in writing, and
shall be delivered by registered or certified mail, return receipt requested,
postage prepaid, and shall be deemed to have been given when so mailed (i) to
the Corporation at its principal executive offices and (ii) to any stockholder
at such holder's address as it appears in the stock records of the Corporation
(unless otherwise specified in a written notice to the Corporation by such
holder).
(j) Action by Written Consent. Any action required to be taken at any
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken and bearing the dates
of signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than a majority of
the shares entitled to vote, or, if greater, not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
(k) Amendment and Waiver. No amendment or waiver of any provision of
this Section 3 shall be effective without the prior consent of the holders of a
majority of the then
3
<PAGE> 100
outstanding shares of Common Stock voting as a single class. For purposes of
votes on amendments and waivers to this Section 3, each share of Common Stock
shall be entitled to one vote. No amendment directly to any terms or provisions
of any class of Common Stock that adversely affects such class of Common Stock
vis-a-vis any other class of Common Stock shall be effective without the prior
consent of the holders of a majority of the then outstanding shares of such
class of Common Stock (it being understood that the issuance of preferred stock
shall not be deemed to adversely affect the Common Stock).
3.2 Preferred Stock. The Board of Directors of the Corporation is
authorized, to the fullest extent permitted by applicable law, to determine the
rights, privileges, qualifications, limitations and restrictions of the
Preferred Stock or to create one or more series of the Preferred Stock and
determine the rights, privileges, qualifications, limitations and restrictions
of each such series, all as the Board of Directors may from time to time
determine.
3.3 Series A Preferred Stock. A total of 250,000 of the authorized
shares of Preferred Stock are hereby designated as "Series A Preferred Stock."
The following is a statement of the relative rights, privileges, qualifications,
limitations and restrictions with respect to the Series A Preferred Stock.
Except as otherwise provided in this Section 3.3 or as otherwise required by
applicable law, all shares of Series A Preferred Stock shall be identical in all
respects and shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and restrictions.
(a) Dividends.
(i) General Obligation. When and as declared by the Board of
Directors and to the extent permitted under the South Carolina Business
Corporation Act, the Corporation shall pay preferential dividends to the holders
of the Series A Preferred Stock as provided in this Section 3.3(a). Except as
otherwise provided herein, dividends on each Series A Preferred Share shall
accrue on a daily basis at the rate of 12% per annum (the "Series A Dividend
Rate") on the Liquidation Value thereof, from and including the date of issuance
of such Series A Preferred Share to and including the date on which the
Liquidation Value of such Series A Preferred Share (plus all accrued,
accumulated and unpaid dividends thereon) is paid in full. Such dividends shall
accrue whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
Series A Preferred Share shall be deemed to be its "date of issuance" regardless
of the number of times transfer of such Series A Preferred Share is made on the
stock records maintained by or for the Corporation and regardless of the number
of certificates which may be issued to evidence such Series A Preferred Share.
(ii) Series A Preferred Dividend Reference Dates. To the
extent not paid on each January 31 and July 31 of each year beginning January
31, 2000 the "Series A Preferred Dividend Reference Dates"), all dividends which
have accrued on each Series A Preferred Share outstanding during the six-month
period (or other period in the case of the initial Series A Preferred Dividend
Reference Date) ending upon each such Series A Preferred Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to
4
<PAGE> 101
such Series A Preferred Share until paid and shall continue to accumulate
dividends thereon at the Series A Dividend Rate.
(iii) Distribution of Partial Dividend Payments. If at any
time the Corporation pays less than the total amount of dividends then accrued
with respect to the Series A Preferred Stock, such payment shall be distributed
ratably among the holders of the Series A Preferred Stock based upon the number
of Series A Preferred Shares held by each such holder.
(iv) Priority of Series A Preferred Stock. Subject to the
terms of any other series of Preferred Stock, so long as any Series A Preferred
Stock remains outstanding, neither the Corporation nor any Subsidiary shall
declare or pay any cash dividends or make any cash distributions with respect to
or redeem, purchase or otherwise acquire for cash, directly or indirectly, any
Junior Securities, if at the time of or immediately after any such redemption,
purchase, acquisition, dividend or distribution the Corporation has failed to
pay the full amount of dividends accrued on the Series A Preferred Stock or the
Corporation has failed to make any redemption of the Series A Preferred Stock
required hereunder.
(v) Liquidation. Subject to the terms of any other series of
Preferred Stock, upon any liquidation, dissolution or winding up of the
Corporation, the holders of the Series A Preferred Stock shall be entitled to be
paid, before any distribution or payment is made upon any Junior Securities, an
amount in cash equal to the aggregate Liquidation Value (plus all accrued,
accumulated and unpaid dividends) of all such Series A Preferred Shares held by
such holder, and the holders of Series A Preferred Stock shall not be entitled
to any further payment. If upon any such liquidation, dissolution or winding up
of the Corporation, the Corporation's assets to be distributed among the holders
of the Series A Preferred Stock are insufficient to permit payment to such
holders of the aggregate amount which they are entitled to be paid, then the
entire assets to be distributed shall be distributed ratably among such holders
based upon the aggregate Liquidation Value (plus all accrued, accumulated and
unpaid dividends) of the Series A Preferred Stock held by each such holder.
Neither the consolidation or merger of the Corporation into or with any other
entity or entities, nor the sale or transfer by the Corporation of all or any
part of its assets, nor the reduction of the capital stock of the Corporation,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 2.
(b) Redemptions.
(i) Optional Redemptions. The Corporation may, at any time
after 20 years after the first date of issuance of any shares of Series A
Preferred Stock, redeem all or any portion of the Series A Preferred Stock then
outstanding at a price per Series A Preferred Share equal to the Liquidation
Value thereof (plus all accumulated and accrued and unpaid but not yet
accumulate dividends thereon); provided, that all optional redemptions pursuant
to this Section 3.3(b) are made pro rata among the holders of Series A Preferred
Stock based upon the aggregate Liquidation Value (plus all accrued, accumulated
and unpaid dividends thereon) of such Series A Preferred Stock held by each such
holder.
5
<PAGE> 102
(ii) Redemption Price. For each Series A Preferred Share which
is to be redeemed, the Corporation shall be obligated on the Redemption Date to
pay to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Preferred Share) an amount
in immediately available funds equal to the Liquidation Value thereof (plus all
accrued, accumulated and unpaid dividends, thereon). If the Corporation's funds
which are legally available for redemption of Series A Preferred Shares on any
Redemption Date are insufficient to redeem the total number of Series A
Preferred Shares to be redeemed on such date, those funds which are legally
available shall be used to redeem the maximum possible number of Series A
Preferred Shares pro rata among the holders of the Series A Preferred Shares to
be redeemed based upon the aggregate Liquidation Value (plus all accrued,
accumulated and unpaid dividends thereon) of such Series A Preferred Shares held
by each such holder, and other Series A Preferred Shares not so redeemed shall
remain issued and outstanding until redeemed in accordance with the terms
thereof. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of Series A Preferred Shares, such funds
shall immediately be used to redeem the balance of the Series A Preferred Shares
which the Corporation has become obligated to redeem on any Redemption Date
which it has not redeemed.
(iii) Notice of Redemption. The Corporation shall mail written
notice of each redemption of Series A Preferred Stock to each record holder not
more than thirty (30) nor less than ten (10) days prior to the date on which
such redemption is to be made. Upon mailing any notice of redemption, the
Corporation shall become obligated to redeem the total number of Series A
Preferred Shares specified in such notice at the time of redemption specified
therein. In case fewer than the total number of Series A Preferred Shares
represented by any certificate are redeemed, a new certificate representing the
number of unredeemed Series A Preferred Shares shall be issued to the holder
thereof without cost to such holder within three business days after surrender
of the certificate representing the redeemed Series A Preferred Shares.
(iv) Determination of the Number of Each Holder's Series A
Preferred Shares to be Redeemed. Except as otherwise provided herein, the number
of Series A Preferred Shares of Preferred Stock to be redeemed from each holder
thereof in redemptions hereunder shall be the number of Series A Preferred
Shares determined by multiplying the total number of Series A Preferred Shares
to be redeemed times a fraction, the numerator of which shall be the total
number of Series A Preferred Shares then held by such holder and the denominator
of which shall be the total number of shares of Series A Preferred Stock then
outstanding.
(v) Dividends After Redemption Date. No Series A Preferred
Share is entitled to any dividends accruing after the date on which the
Liquidation Value of such Series A Preferred Share (plus all accrued,
accumulated and unpaid dividends thereon) is paid in full to the holder thereof.
On such date all rights of the holder of such Series A Preferred Share shall
cease, and such Series A Preferred Share shall not be deemed to be outstanding.
(vi) Redeemed or Otherwise Acquired Preferred Shares. Any
Series A Preferred Shares which are redeemed or otherwise acquired by the
Corporation shall be canceled and shall not be reissued, sold or transferred.
6
<PAGE> 103
(vii) Other Redemptions or Acquisitions. So long as any shares
of Series A Preferred Stock remain outstanding, the Corporation shall not
redeem, purchase or otherwise acquire any Junior Securities; provided, that the
Corporation may purchase Junior Securities from present or former employees
pursuant to written contracts with such employees.
(c) Voting Rights. The shares of Series A Preferred Stock shall not
have any voting rights attaching to them, except as required by applicable law.
(d) Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Series A Preferred Stock.
Upon the surrender of any certificate representing Series A Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Series A Preferred Shares represented by the surrendered
certificate. Each such new certificates shall be registered in such name and
shall represent such number of Series A Preferred Shares as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Series A
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such Series A Preferred Stock represented by
the surrendered certificate.
(e) Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series A Preferred Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series A Preferred Shares represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on the
Series A Preferred Stock represented by such new certificate from the date to
which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
(f) Definitions. The following definitions apply to this Section C
only.
"Junior Securities" means any of the Corporation's equity
securities other than Series A Preferred Stock and any other series of Preferred
Stock having a right or preference equal with or senior to the Series A
Preferred Stock.
"Liquidation Value" of any share of Series A Preferred Stock
shall be an amount equal to $100.00 per share.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated
7
<PAGE> 104
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Redemption Date" as to any Series A Preferred Share means the
date specified in the notice of any redemption.
"Subsidiary" means with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity or which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled directly or indirectly, by any person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
persons shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business entity gains
or losses or shall be or control the managing director or general partner of
such partnership, association or other business entity.
(g) Amendment and Waiver. No amendment, modification or waiver shall be
binding or effective with respect to any provision of Section 3.3 without the
prior written consent of the holders of Series A Preferred Stock representing
more than fifty percent (50%) of the aggregate Liquidation Value (plus all
accumulated and accrued and unpaid but not yet accumulated dividends thereon) of
such Series A Preferred stock then outstanding.
(h) Notices. Except as otherwise expressly provided, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested, postage prepaid and shall be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
8
<PAGE> 105
APPENDIX B
PROVISIONS OF THE CODE OF LAWS OF SOUTH CAROLINA ANNOTATED
RELATING TO DISSENTERS' APPRAISAL RIGHTS
CHAPTER 13
ARTICLE 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SS. 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Section 33-13-102 and who exercises that right when and in the
manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. The value of the shares is to be determined by
techniques that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
SS. 33-13-102. RIGHT TO DISSENT.
(A) A shareholder is entitled to dissent from, and obtain payment of the fair
value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a party (i)
if shareholder approval is required for the merger by Section 33-11-103 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
Section 33-11-104 or 33-11-108 or if the corporation is a parent that is merged
with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares are to be acquired, if the shareholder is
entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale must be distributed to the shareholders within one
year after the date of sale;
<PAGE> 106
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any matter, or to
cumulate votes, other than a limitation by dilution through issuance of shares
or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
Section 33-6-104; or
(5) in the case of corporations which are not public corporations, the
approval of a control share acquisition under Article 1 of Chapter 2 of Title
35;
(6) any corporate action to the extent the articles of incorporation, bylaws,
or a resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
(B) Notwithstanding subsection (A), no dissenters' rights under this section
are available for shares of any class or series of shares which, at the record
date fixed to determine shareholders entitled to receive notice of a vote at the
meeting of shareholders to act upon the agreement of merger or exchange, were
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.
SS. 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if he dissents with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
shall notify the corporation in writing of the name and address of the record
shareholder of the shares, if known to him.
ARTICLE 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SS. 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 33-13-102
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 33-13-220.
<PAGE> 107
SS. 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) must give to the corporation before the
vote is taken written notice of his intent to demand payment for his shares if
the proposed action is effectuated and (2) must not vote his shares in favor of
the proposed action. A vote in favor of the proposed action cast by the holder
of a proxy solicited by the corporation shall not disqualify a shareholder from
demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this chapter.
SS. 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days after the
corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates for
certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of the
shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he or, if he is a nominee asserting dissenters' rights on
behalf of a beneficial shareholder, the beneficial shareholder acquired
beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment demand,
which may not be fewer than thirty nor more than sixty days after the date the
subsection (a) notice is delivered and set a date by which certificates for
certificated shares must be deposited, which may not be earlier than twenty days
after the demand date; and
(5) be accompanied by a copy of this chapter.
SS. 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section 33-13-220
must demand payment, certify whether he (or the beneficial shareholder on whose
behalf he is asserting dissenters' rights) acquired beneficial ownership of the
shares before the date set forth in the dissenters' notice pursuant to Section
33-13-220(b)(3), and deposit his certificates in accordance with the terms of
the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements
that he demand payment and deposit his share certificates where required, each
by the date set in the dissenters' notice, is not entitled to payment for his
shares under this chapter.
<PAGE> 108
SS. 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section
33-13-260.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.
SS. 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the shares
and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional payment under
Section 33-13-280; and
(5) a copy of this chapter.
SS. 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
SS. 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section 33-13-250
from a dissenter as to any shares of which he (or the beneficial owner on whose
behalf he is asserting dissenters' rights) was not the beneficial owner on the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action,
unless the beneficial ownership of the shares devolved upon him by operation of
law from a person who was the beneficial owner on the date of the first
announcement.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after taking the proposed corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
<PAGE> 109
SS. 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due and demand payment of
his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer under Section 33-13-270 and demand payment of the fair value
of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
offered under Section 33-13-270 is less than the fair value of his shares or
that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to offer
payment under Section 33-13-270 within sixty days after the date set for
demanding payment; or
(3) corporation, having failed to take the proposed action, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within sixty days after the date set for demanding
payment.
(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
ARTICLE 3. JUDICIAL APPRAISAL OF SHARES
SS. 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of the
county where the corporation's principal office (or, if none in this State, its
registered office) is located. If the corporation is a foreign corporation
without a registered office in this State, it shall commence the proceeding in
the county in this State where the principal office (or, if none in this State,
the registered office) of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount, if any, by which the court finds the fair value of his shares, plus
interest, exceeds the amount paid by the corporation.
SS. 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section 33-13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
<PAGE> 110
(b) The court also may assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not comply substantially with the requirements
of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under
Section 33-13-300(a) of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
corporation and in favor of the dissenters.
<PAGE> 111
APPENDIX C
THE ROBINSON-HUMPHREY COMPANY LLC
October 5, 1999
Board of Directors
Conso International Corporation
513 North Duncan By-Pass
Post Office Box 326
Union, South Carolina 29379
Ladies and Gentlemen:
We understand that Conso International Corporation (the "Company")
proposes to enter into a Merger Agreement (the "Merger Agreement") by and among
CIC Acquisition Co., CIC Acquisition Sub, Inc. and the Company. Pursuant to the
Merger Agreement, each share of Company common stock issued and outstanding
immediately prior to the effective time of the merger, other than 533,378 shares
of Company Common Stock owned by J. Cary Findlay, will be exchanged for and
converted into the right to receive $9.00 per share in cash (the "Merger
Consideration"). The terms and conditions of the Proposed Transaction are set
forth in more detail in the Merger Agreement dated October 5, 1999.
We have been requested by the Special Committee of the Board of
Directors of the Company to render our opinion with respect to the fairness,
from a financial point of view, to the Company's stockholders of the Merger
Consideration.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement dated October 4, 1999, (2) publicly available information concerning
the Company which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (4) a trading history of the
Company's Common Stock from December 1993 to the present and a comparison of
that trading history with those of other companies which we deemed relevant, (5)
a comparison of the historical financial results and present financial condition
of the Company with those of other companies which we deemed relevant, (6) a
comparison of the financial terms of the Proposed Transaction with the financial
terms of certain other recent transactions which we deemed relevant, and (7)
certain historical data relating to acquisitions of publicly traded companies,
including percentage premiums paid in such acquisitions. We have also had
discussions with the management of the Company concerning its business,
operations, assets, present condition and future prospects and undertook such
other studies, analyses and investigations as we deemed appropriate.
<PAGE> 112
Board of Directors
Conso International Corporation
October 5, 1999
- - - -------------------------------
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections provided by
the Company, we have assumed that such projections have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company. Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Special Committee of the
Board of Directors of the Company in connection with the Proposed Transaction
and will receive a fee for our services which is in part contingent upon the
consummation of the Proposed Transaction. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of the rendering of this
opinion. We have also performed various investment banking services for the
Company in the past, and have received customary fees for such services. In the
ordinary course of our business, we actively trade in the common stock of the
Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of
the date hereof that, from a financial point of view, the Merger Consideration
to be received in the Proposed Transaction is fair to the stockholders of the
Company.
Very truly yours,
/s/ The Robinson-Humphrey Company, LLC
THE ROBINSON-HUMPHREY COMPANY, LLC
