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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 1)
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Name of Subject Company)
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK,
NO PAR VALUE
(including the associated Preferred Stock purchase rights)
(TITLE OF CLASS OF SECURITIES)
133290106
(CUSIP NUMBER OF CLASS OF SECURITIES)
JOHN S. DAVIS, ESQ.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
11651 PLANO ROAD
DALLAS, TEXAS 75243
(214) 860-5100
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person Filing Statement)
with Copies to:
GUY KERR, ESQ.
VAN M. JOLAS, ESQ.
LOCKE LIDDELL & SAPP LLP
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201
(214) 740-8000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
NAME AND ADDRESS
The name of the subject company is Cameron Ashley Building Products, Inc.,
a Georgia corporation (the "Company"). The address of the principal executive
offices of the Company is 11651 Plano Road, Dallas, Texas 75243, and its
telephone number is (214) 860-5100.
SECURITIES
The title of the class of equity securities to which this
Solicitation/Recommendation Statement (this "Statement") relates is the common
stock, no par value (the "Common Stock"), of the Company, and the associated
Series A Preferred Stock purchase rights (the "Rights" and, together with the
Common Stock, the "Shares") issued pursuant to the Rights Agreement between the
Company and SunTrust Bank, Atlanta, as Rights Agent, dated as of August 19,
1997, as amended by the First Amendment to Rights Agreement dated as of January
17, 2000 and the Second Amendment to Rights Agreement dated as of April 28, 2000
(the "Rights Agreement"). As of May 11, 2000, there were 8,817,405 Shares issued
and outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
NAME AND ADDRESS
The name, business address and business telephone number of the Company,
which is the subject company and the person filing this Statement, are set forth
in Item 1 above.
TENDER OFFER
This Statement relates to the third-party tender offer by CAB Merger Corp.,
a Georgia corporation (the "Purchaser") and an indirect wholly owned subsidiary
of Guardian Industries Corp., a Delaware corporation ("Guardian Industries"), to
purchase all outstanding Shares at a purchase price of $18.35 per Share, net to
the seller in cash (less any required withholding taxes), without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 12, 2000 (the "Offer to Purchase"),
and in the related Letter of Transmittal (the "Letter of Transmittal," which,
together with the Offer to Purchase, as they may be amended or supplemented from
time to time, constitute the "Offer"). The Offer is described in a Tender Offer
Statement on Schedule TO, dated May 12, 2000 (the "Schedule TO"), which was
filed by Parent and the Purchaser with the Securities and Exchange Commission
(the "Commission") on May 12, 2000.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of April 28, 2000 (the "Merger Agreement"), by and among the Purchaser,
Guardian Fiberglass, Inc., a Delaware corporation ("Parent"), and the Company.
Following the consummation of the Offer and the satisfaction or waiver of
certain conditions, the Company will merge with the Purchaser (the "Merger").
The Company will continue as the surviving corporation. In the Merger, each
outstanding Share (other than Shares held in the treasury of the Company or by
any of its wholly owned subsidiaries, or owned by Parent or the Purchaser or
held by shareholders who perfect and do not withdraw or otherwise lose their
dissenters' rights under Georgia law) will be converted into the right to
receive the merger consideration, which will be $18.35 per Share, net to the
seller in cash (less any required withholding taxes), without interest thereon,
or any higher price paid per Share in the Offer. A copy of the Merger Agreement
is filed as Exhibit (e)(1) hereto and is incorporated herein by reference. The
Schedule TO states that the principal executive offices of Guardian Industries,
Parent and the Purchaser are located at 2300 Harmon Road, Auburn Hills, Michigan
48326.
As an inducement to Parent and the Purchaser entering into the Merger
Agreement, in connection with the execution and delivery of the Merger
Agreement, the Purchaser entered into a Tender and Option Agreement, dated as of
April 28, 2000 (the "Tender and Option Agreement"), with certain shareholders of
the Company (the "Tendering Shareholders") who beneficially own 382,574 issued
and outstanding Shares in the aggregate, excluding Shares of underlying stock
options exercisable within 60 days (such Shares held by all such Tendering
Shareholders representing approximately 4.3% of the issued and outstanding
Shares), a copy of which is filed as Exhibit (e)(2) herewith and is incorporated
herein by reference. Pursuant to the
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Tender and Option Agreement, each of the Tendering Shareholders has agreed to
(i) grant the Purchaser an irrevocable option to purchase all of the Shares
owned by such Tendering Shareholder, (ii) tender and, in the event such
irrevocable option is not theretofore exercised, sell the Shares owned by such
Tendering Shareholder in the Offer and (iii) vote the Shares owned by such
Tendering Shareholder in favor of the Merger.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
CONFLICTS OF INTEREST
Certain agreements, arrangements or understandings between the Company or
its affiliates and certain of its directors and executive officers are, except
as noted below, described in the Information Statement pursuant to Section
14(f)-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14f-1 thereunder (the "Information Statement") that is attached as
Annex B to this Statement and is incorporated herein by reference. Except as
described or referred to in this Item 3 or in Annex B attached hereto or as
incorporated by reference herein, to the knowledge of the Company, there exists
on the date hereof no material agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and either (i) the Company, its executive officers, directors or affiliates or
(ii) Parent, the Purchaser or any of their respective executive officers,
directors or affiliates.
The following is a summary of the material terms of the Merger Agreement,
the Tender and Option Agreement and the Confidentiality Agreement (as
hereinafter defined). This summary is not a complete description of the terms
and conditions thereof and is qualified in its entirety by reference to the full
texts thereof, which are incorporated herein by reference and copies of which
are filed as Exhibits (e)(1), (e)(2) and (e)(3) to this Statement. Capitalized
terms used in this summary and not otherwise defined in this Statement shall
have the meanings set forth in the Merger Agreement or the Tender and Option
Agreement.
THE MERGER AGREEMENT
The Offer. The Merger Agreement provides that Parent will cause the
Purchaser to commence the Offer as promptly as practicable, but in no event
later than ten (10) business days after the date of the public announcement of
the execution of the Merger Agreement, and that upon the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, including,
without limitation, the Minimum Condition, the Purchaser will accept for payment
and pay for the Shares tendered as soon as practicable after it is legally
permitted to do so under applicable law. The Merger Agreement further provides
that, without the written consent of the Company, the Purchaser shall not
decrease the Offer Price, decrease the number of Shares sought, change the form
of consideration to be paid in the Offer, increase the Minimum Condition, extend
the Offer or amend or add to the Offer any other offer conditions or amend, add
or waive any other condition of the Offer in any manner adverse to the Company
or the holders of the Shares, except that the Purchaser may, without the consent
of the Company, extend the Offer one or more times, up to July 31, 2000, (i) if
at the then scheduled expiration date of the Offer any of the conditions to the
Purchaser's obligation to accept for payment and pay for shares of Common Stock
shall not be satisfied or waived, (ii) if all conditions to the Purchaser's
obligations to accept payment for the Shares have been satisfied or waived but
less than ninety percent (90%) of the outstanding shares of Common Stock have
been validly tendered and not withdrawn; and (iii) for any period required by
any rule, regulation or interpretation of the Commission or its staff applicable
to the Offer.
For purposes of the Merger Agreement, "Minimum Condition" means that there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of Shares which, together with any Shares beneficially
owned by Parent or the Purchaser, represents at least a majority of the Shares
outstanding, on a fully-diluted basis on the date of purchase, and "on a
fully-diluted basis" means, as of any date, the number of Shares outstanding
plus all the Shares which the Company is then required to issue pursuant to
obligations outstanding at that date under employee stock option or other
benefit plans, outstanding warrants, outstanding options of any kind,
convertible securities, or otherwise (to the extent such options, warrants,
convertible securities or other rights are vested or exercisable).
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The Merger. The Merger Agreement provides that subject to the terms and
conditions thereof, at the effective time of the Merger (the "Effective Time")
the Purchaser will be merged with and into the Company and the separate
corporate existence of the Purchaser will thereupon cease. The Company will be
the successor or the surviving corporation in the Merger (the "Surviving
Corporation") and will continue to be governed by the laws of the State of
Georgia. The separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
The respective obligations of the parties to effect the Merger are subject
to the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions: (a) if required by applicable law, the Merger and the Merger
Agreement shall have been approved and adopted by the affirmative vote of the
shareholders of the Company by the requisite vote; (b) no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any court or governmental entity of
competent jurisdiction which prohibits, restrains, enjoins or restricts the
consummation of the Merger; and there shall be no order or injunction of a court
of competent jurisdiction in effect precluding the consummation of the Merger;
(c) all consents of, filings and registrations with, and notifications to, all
governmental entities required for the consummation of the Merger shall have
been obtained or made and shall be in full force and effect and all waiting
periods required by law for consummation of the Merger shall have expired; (d)
each party to the Merger Agreement shall have obtained any and all consents
required for consummation of the Merger or for the preventing of any default
under any contract or permit of such party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the Company or the Purchaser, as applicable; and (e) the Purchaser
shall have purchased Shares sufficient to meet the Minimum Condition pursuant to
the Offer.
Company Board of Directors. The Merger Agreement provides that promptly
upon the purchase of and acceptance for payment for any Shares (including,
without limitation, all Shares subject to the Tender and Option Agreement) by
the Purchaser or any affiliate of the Purchaser pursuant to the Offer or the
Tender and Option Agreement which represents the Minimum Condition, the
Purchaser shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as is equal to
the product of the total number of directors then serving on such Board (after
giving effect to the directors designated by the Purchaser) multiplied by the
ratio of the aggregate number of Shares beneficially owned by the Purchaser and
any of its affiliates to the total number of Shares then outstanding. The
Company is required, upon request of the Purchaser, to take all action necessary
to cause the Purchaser's designees to be elected or appointed to the Company's
Board of Directors, including, without limitation, increasing the size of the
Company's Board of Directors or, at the Company's election, securing the
resignations of such number of its incumbent directors as is necessary to enable
the Purchaser's designees to be so elected or appointed to the Company's Board
of Directors, and shall cause the Purchaser's designees to be so elected or
appointed. At such time, the Company also is required to cause persons
designated by the Purchaser to constitute the same percentage (rounded up to the
next whole number) as is on the Company's Board of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar body) of
each subsidiary of the Company and (iii) each committee (or similar body) of
each such board. In the event that the Purchaser's designees are elected to the
Board of Directors of the Company, until the Effective Time, the Company's Board
of Directors shall have at least two directors who were directors of the Company
on April 28, 2000 (the "Company Directors"). In the event that the Purchaser's
designees are elected to the Board, after the acceptance for payment of shares
of Common Stock pursuant to the Offer and prior to the Effective Time, the
affirmative vote of the Company Directors shall be required to (a) amend or
terminate the Merger Agreement by the Company, (b) exercise or waive any of the
Company's rights, benefits or remedies under the Merger Agreement, (c) extend
the time for performance of the Purchaser's obligations under the Merger
Agreement or (d) take any other action by the Company's Board of Directors in
connection with the Merger Agreement. The Merger Agreement further provides that
the Company shall promptly take all actions required pursuant to Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder, including mailing to
the shareholders as part of the Schedule 14D-9 the information required by such
Section 14(f) and Rule 14f-1, as is necessary to enable the Purchaser's
designees to be elected to the Company's Board of Directors.
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At the Effective Time, the then directors of the Purchaser will be the
initial directors of the Company, as the Surviving Corporation, each to hold
office in accordance with the Restated Articles and the Bylaws of the Company,
as the Surviving Corporation, until each such director's successor is duly
elected or appointed and qualified.
Company Stock Options and Warrants. At or immediately prior to the
Effective Time, each outstanding stock option to purchase Shares granted under
any stock option plan, compensation plan or arrangement of the Company or
outstanding warrant to purchase Shares shall be canceled and the holder of each
such option or warrant (whether or not then vested or exercisable) shall be paid
by the Company promptly after the Effective Time for each such option or warrant
an amount equal to the product of (a) the excess, if any, of the merger
consideration ($18.35 per Share) over the applicable exercise price per Share
and (b) the number of Shares each holder could have purchased (assuming full
vesting and exercisability of such option or warrant) had such holder exercised
such option or warrant in full immediately prior to the Effective Time.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, (i) as soon as
reasonably practicable following the acceptance for payment and purchase of
Shares sufficient to meet the Minimum Condition by the Purchaser pursuant to the
Offer, duly call, give notice of, convene and hold a special meeting of its
shareholders (the "Special Meeting"), for the purpose of considering and taking
action upon the approval of the Merger and the approval and adoption of the
Merger Agreement; (ii) prepare and file with the Commission a preliminary proxy
or information statement relating to the Merger and the Merger Agreement and use
its best efforts to obtain and furnish the information required to be included
by the Company in the Company Proxy Statement (as defined below) and, after
consultation with the Purchaser, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement (the "Company Proxy
Statement") to be mailed to its shareholders at the earliest practicable time;
(iii) use its reasonable efforts to obtain the necessary approvals of the Merger
and the Merger Agreement by its shareholders; (iv) incorporate into the Company
Proxy Statement written information provided by Parent concerning Parent and the
Purchaser required to be included in the Company Proxy Statement; and (v)
include in the Company Proxy Statement the recommendation of the Company's Board
of Directors that the shareholders of the Company vote in favor of the approval
of the Merger and the approval and adoption of the Merger Agreement. The
Purchaser agreed that it shall, and shall cause any permitted assignee to, vote
all Shares then owned by it which are entitled to vote in favor of the approval
of the Merger and the approval and adoption of the Merger Agreement.
The Merger Agreement provides that in the event that the Purchaser or any
permitted assignee of the Purchaser acquires at least 90% of the outstanding
Shares, the parties will, subject to the conditions of the Merger Agreement,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without approval of the
Company's shareholders in accordance with the Georgia Business Corporation Code
(the "GBCC").
Interim Operations. In the Merger Agreement, the Company agreed that,
except as otherwise expressly provided, the Company will not, and will not
permit its subsidiaries to, without the prior written consent of Parent:
(i) amend or propose to amend the charter, bylaws or other
governing instruments of the Company or any of its subsidiaries;
(ii) authorize for issuance, issue, sell, deliver, or agree or
commit to issue, sell or deliver, dispose of, encumber or pledge (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or
any securities, except as disclosed in the disclosure schedules to the
Merger Agreement or as required by agreements with the Company's employees
under the Company's benefit plans as in effect as of the date of the Merger
Agreement, or amend any of the terms of any such securities or agreements
outstanding as of the date of the Merger Agreement, except as specifically
contemplated by the Merger Agreement;
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(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities, except
intercompany cash dividends in the ordinary course of business;
(iv) (a) incur or assume any long-term or short-term debt or issue
any debt securities, except for borrowings under existing lines of credit
in the ordinary course of business and in amounts not in excess of an
aggregate of $1,000,000 (on a consolidated basis); (b) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except
in the ordinary course of business consistent with past practice and in
amounts not material to the Company and its subsidiaries, taken as a whole,
and except for obligations of wholly-owned subsidiaries of the Company to
the Company or to other wholly-owned subsidiaries of the Company; (c) make
any loans, advances or capital contributions to, or investments in, any
other person (other than to wholly-owned subsidiaries of the Company or
customary advances to employees in the ordinary course of business
consistent with past practice for reasonable business expenses not to
exceed an aggregate amount of $5,000 outstanding to any employee at any
time) or make any change in its existing borrowing or lending arrangements
for or on behalf of any such person, whether pursuant to a benefit plan of
the Company or otherwise; (d) pledge or otherwise encumber shares of
capital stock of the Company or any of its subsidiaries; or (e) mortgage or
pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon;
(v) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its subsidiaries;
(vi) (a) make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants
(other than general increases in wages to employees in the ordinary course
consistent with past practice or other increases in each such instance as
disclosed in the disclosure schedules to the Merger Agreement) or to
persons providing management services; (b) pay any severance or termination
cost or any bonus other than pursuant to written contracts in effect on the
date of the Merger Agreement or disclosed in the disclosure schedules to
the Merger Agreement) or enter into or amend any severance agreements with
officers of the Company or any subsidiary; (c) make any loans to any of its
officers, directors, employees, affiliates, agents or consultants (other
than customary advances to employees in the ordinary course of business
consistent with past practice for reasonable business expenses not to
exceed an aggregate amount of $5,000 outstanding to any employee at any
time); (d) adopt, amend or terminate any new or existing benefit plan
(other than as required by applicable law); (e) permit a new option period
to commence under the Company's employee stock purchase plan after the
Special Meeting; or (f) make any expenditures for business entertainment
purposes for any single event or occasion in excess of $1,000;
(vii) acquire, sell, transfer, lease, encumber or dispose of any
assets outside the ordinary course of business or any assets which in the
aggregate are material to the Company and its subsidiaries, taken as a
whole, or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice which would be material to
the Company and its subsidiaries, taken as a whole;
(viii) except as may be required as a result of a change in law or in
United States generally accepted accounting principles, change any of the
tax or accounting principles or practices used by it or make any material
tax election or amend any tax return previously filed or settle any
material audit;
(ix) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business;
(x) (a) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (b) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice
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which would be material to the Company and its subsidiaries, taken as a
whole; (c) authorize any new capital expenditure or expenditures which,
individually, is in excess of $25,000 or, in the aggregate, are in excess
of $50,000; (d) make any capital expenditure or expenditures which,
individually, is in excess of $25,000 or, in the aggregate, are in excess
of $50,000, provided, however, that no capital expenditures shall be made
(I) to implement any information technology projects, (II) for
transportation equipment, or (III) in respect of Field Marketing &
Management, Inc.; (e) take any action whatsoever to implement or install
the JD Edwards Software Program at any location at which the JD Edwards
Software Program is not currently installed; or (f) enter into or amend any
contract, agreement, commitment or arrangement providing for the taking of
any action that would be prohibited under the Merger Agreement;
(xi) discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities fully reflected or reserved against in, or
contemplated by, the consolidated October 31, 1999 audited financial
statements (or the notes thereto) of the Company and its subsidiaries or
incurred in the ordinary course of business consistent with past practice;
(xii) permit any insurance policy naming the Company as a beneficiary
or a loss payable payee to be canceled or terminated without notice to
Parent, unless the Company shall have obtained a comparable replacement
policy;
(xiii) enter into or amend any employment contract between the Company
or any subsidiary and any person having a base salary thereunder in excess
of $100,000 per year (unless such amendment is required by law) that the
Company or any subsidiary does not have the unconditional right to
terminate without liability (other than liability for services already
rendered), at any time on or after the Effective Time;
(xiv) commence or settle any litigation other than in accordance
with past practice and, with respect to any settlement, for an amount
greater than $100,000;
(xv) enter into, modify, amend or terminate any material contract
(including any standstill agreement, loan contract with an unpaid balance
exceeding $100,000 or any of the agreements referred to in Section 5.10 of
the Merger Agreement) or waive, release, compromise or assign any material
rights or claims, except for modifications, in the ordinary course of
business and consistent with past practice, to quantities specified in
purchase orders;
(xvi) take any action that would adversely affect the ability of any
party to the Merger Agreement to perform its covenants and agreements under
the Merger Agreement;
(xvii) take any action that would cause an event of default under any
material contract;
(xviii) cause (or permit to exist) any circumstances that would result
in a material adverse effect to the Company; or
(xix) take, or agree in writing or otherwise to take, any of the
actions described above or any action which would make any of the
representations or warranties of the Company contained in the Merger
Agreement untrue or incorrect as of the date when made.
No Solicitation. In the Merger Agreement, the Company has agreed that the
Company and its subsidiaries will not, directly or indirectly, through any
officer, director, agent or otherwise, solicit, initiate or knowingly encourage
the submission of any proposal or offer from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) a substantial portion of the assets of, or a substantial equity
interest in, the Company or any of its subsidiaries or any recapitalization,
business combination or similar transaction with the Company or any of its
subsidiaries (any such proposal or offer being an "Acquisition Proposal") or
participate in any negotiations regarding, or furnish to any other person any
non-public information with respect to, or take any other action to knowingly
facilitate the making of an Acquisition Proposal. Notwithstanding the foregoing,
(a) the Company may engage in discussions or negotiations with a third party who
seeks to initiate such discussions or negotiations and may furnish such
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third party information concerning the Company and its subsidiaries, in each
case only in response to a request for such information or access which was not
solicited, initiated or knowingly encouraged by the Company or any of its
affiliates, (b) the Company's Board of Directors or the Special Committee may
take and disclose to the Company's shareholders a position contemplated by Rule
l4e-2 promulgated under the Exchange Act and (c) following receipt of an
Acquisition Proposal from a third party, the Company's Board of Directors or the
Special Committee may withdraw or modify its recommendation with respect to the
Merger, but in each case referred to in the foregoing clauses only to the extent
that the Company's Board of Directors or the Special Committee shall conclude in
good faith after consultation with legal counsel that the failure to take such
action could reasonably be determined to be a breach of the Company's Board of
Directors' or the Special Committee's fiduciary obligations to the Company's
shareholders under applicable law.
In connection with any party's Acquisition Proposal, the Company is
required to enter into an appropriate confidentiality agreement with such party.
The Company is required to immediately cease all existing activities,
discussions and negotiations with any parties conducted prior to the date of the
Merger Agreement with respect to any Acquisition Proposal. From and after the
execution of the Merger Agreement, the Company is required to promptly notify
the Purchaser of the receipt of any Acquisition Proposal, and, in any such
notice to the Purchaser, shall indicate in reasonable detail the material terms
thereof and the identity of the other party or parties involved.
Directors' and Officers' Indemnification. For a period of six and one-half
(6 1/2) years after the Effective Time, Parent agreed that all rights to
indemnification or exculpation now existing in favor of the present and former
directors, officers, employees, and agents of the Company and its subsidiaries
with respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect and shall not be amended,
repealed, or otherwise modified in any manner that will adversely affect the
rights of such individuals. After the Effective Time, Parent and the Surviving
Corporation agreed, to the fullest extent that a Georgia corporation may now or
thereafter legally indemnify its own officers and directors, to indemnify and
hold harmless, each present director or officer of the Company and each
subsidiary (collectively, the "Indemnified Parties") against all costs and
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether asserted or commencing before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer or director occurring before or at the Effective Time
(including, without limitation, the Merger and all actions taken in
contemplation of, or to effect the Merger), for a period of six and one-half
(6 1/2) years after the date of the Merger Agreement.
The Surviving Corporation is required to maintain the Company's existing
officers' and directors' liability and fiduciary insurance policies for a period
of five years after the Effective Time; provided, that the Surviving Corporation
may substitute therefor policies of substantially similar coverage and amounts
containing terms not materially less favorable to such former directors or
officers; provided, further, that if the Company's existing directors' liability
insurance expires, is terminated or canceled during such period, the Surviving
Corporation will use its reasonable efforts to obtain substantially similar
insurance; provided, however, that in no event shall the Surviving Corporation
be required to pay aggregate annual premiums for insurance in excess of 200% of
the current annual premiums paid by the Company (the "Premium Amount"). In the
event that, but for the last proviso of the immediately preceding sentence, the
Surviving Corporation would be required to expend more than the Premium Amount,
the Surviving Corporation would nonetheless be required to purchase the maximum
amount of such insurance obtainable by payment of the Premium Amount.
In the event that the Surviving Corporation or Parent or any of their
respective successors or assigns after the Effective Time (i) consolidates with
or merges with any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, the parties agreed
that then, and in each case, proper provision will be made so that the
successors and assigns of the Surviving Corporation or Parent, as the case may
be, will assume the obligations with respect to indemnification set forth in
Section 5.6 of the Merger Agreement. The Company is required to request prior to
the Effective Time general releases from all directors and former directors (who
were directors at any time after October 31, 1997) and officers of the Company
and its subsidiaries, releasing
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<PAGE> 9
Parent, the Company and its subsidiaries and their officers, directors,
employees and agents of any claim that they or any of them may have against
Parent, the Company or its subsidiaries (and their officers, directors, employee
and agents), exclusive of employment compensation obligations or obligations
arising under Section 5.6 of the Merger Agreement.
Rights Agreement. In the Merger Agreement, the Company agreed to take all
necessary action (including, if required, redeeming all of the outstanding
Rights or amending or terminating the Rights Agreement) so that (i) entering
into the Merger Agreement and consummation of the Merger do not and will not
result in any person becoming able to exercise any Rights under the Rights
Agreement or enabling or requiring the Rights to be separated from the shares of
Common Stock to which they are attached or to be triggered or to become
exercisable and (ii) no Rights are outstanding at the Effective Time.
Change of Control Agreements. The Company has change of control agreements
with certain employees of the Company that provide certain benefits upon (i)
consummation of the Merger and/or (ii) a termination of employment of such
employee following the Effective Time. In the Merger Agreement, Parent agreed to
take all appropriate steps necessary to give reasonable advance notice prior to
the acceptance for payment and payment for the Shares tendered in the Offer of
its then present intention to continue employment, or not to continue
employment, to each such employee; provided, however, that such expression of
present intention by Parent will not create any rights in favor of any such
employee and will not constitute a binding commitment of Parent.
Termination; Fees. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
approval and adoption of the Merger Agreement and the Merger by the shareholders
of the Company, by mutual written consent of the Boards of Directors of Parent,
the Purchaser and the Company, and also in the following circumstances:
(a) by Parent or the Company if (i) any court or governmental entity
of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement (including the denial of
any consent of a governmental entity required for consummation of the
Merger) and such order, decree, ruling or other action is or shall have
become final and nonappealable or (ii) if Shares shall not have been
purchased pursuant to the Offer on or prior to October 31, 2000; provided,
however, that the right to terminate the Merger Agreement under such
provision shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted
in, the failure of the Purchaser to purchase the Shares pursuant to the
Offer on or before such date; or
(b) by Parent if neither Parent nor the Purchaser is in material
breach of the Merger Agreement and either (i) prior to the purchase of the
Shares pursuant to the Offer, the Company's Board of Directors shall have
withdrawn, modified, failed to reaffirm or changed (including by amendment
of the Company's Schedule 14D-9) its recommendation or approval in respect
of the Offer, the Merger Agreement or the Merger, or shall have adopted any
resolution to effect the foregoing, or shall have affirmed, recommended or
authorized entering into any other Acquisition Proposal; or (ii) prior to
the purchase of the Shares pursuant to the Offer, it shall have been
publicly disclosed, or Parent shall have learned, that any person, entity
or "group" (as that term is defined in Section 13(d)(3) of the Exchange
Act), other than the Purchaser or its affiliates or any group of which any
of them is a member, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than
14.9% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right, or warrant,
conditional or otherwise, to acquire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or
(c) by Parent if, prior to the purchase of the Shares pursuant to the
Offer, there shall have been a breach of the Company's representation set
forth in Section 3.2(a) of the Merger Agreement (relating to the
capitalization of the Company) or covenant set forth in Section 5.1(c) of
the Merger Agreement (relating to capital stock) or a material breach of
any of the Company's other representations, warranties
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<PAGE> 10
or covenants which breach cannot be or has not been cured within ten (10)
days following receipt of written notice of such breach; or
(d) by the Company if, prior to the purchase of Shares sufficient to
meet the Minimum Condition pursuant to the Offer, there shall have been a
material breach of any of the Purchaser's representations, warranties or
covenants which breach cannot be or has not been cured within ten (10) days
of the receipt of written notice thereof; or
(e) by Parent if, due to an event that if occurring after the
commencement of the Offer, would result in a failure to satisfy any of the
conditions set forth in Annex B of the Merger Agreement, the Purchaser
shall have failed to commence the Offer on or prior to the tenth (10th)
business day after the public announcement of the Merger Agreement (the
"Offer Deadline"); provided that Parent may not terminate the Merger
Agreement pursuant to such provision if Parent or the Purchaser (x) is in
material breach of the Merger Agreement or (y) has not exercised such right
by the close of business on or before the tenth (10th) business day
following the Offer Deadline; or
(f) by the Company if, prior to the purchase of Shares sufficient to
meet the Minimum Condition by the Purchaser pursuant to the Offer, a person
or group (other than Parent or any of its affiliates) shall have made a
bona fide Acquisition Proposal that the Company's Board of Directors or the
Special Committee determines in good faith that failing to accept or
recommend to the Company's shareholders such Acquisition Proposal could
reasonably be determined to constitute a breach of the fiduciary duties of
the Company's Board of Directors or the Special Committee to the Company's
shareholders under applicable law after consultation with (i) a nationally
recognized investment banking firm regarding the financial superiority of
the Acquisition Proposal and (ii) legal counsel; provided that termination
under such provision shall not be effective until payment of the fee
required by Section 7.3 of the Merger Agreement; or
(g) by Parent if the Purchaser shall have terminated the Offer, or the
Offer shall have expired without the Purchaser purchasing any Shares
thereunder; provided that Parent may not terminate the Merger Agreement
pursuant to such provision if (x) the Purchaser has failed to purchase
Shares in the Offer in violation of the material terms thereof or (y) the
Purchaser has not exercised such right by the close of business on or
before the fifth (5th) business day following the termination or expiration
of the Offer in accordance with its terms; or
(h) by the Company if the Purchaser or any of its affiliates shall
have failed to commence the Offer on or prior to the Offer Deadline other
than due to an event that if occurring after the commencement of the Offer,
would result in a failure to satisfy any of the conditions set forth in
Annex B of the Merger Agreement; provided, that the Company may not
terminate the Merger Agreement pursuant to this provision if the Company is
in material breach of the Merger Agreement.
If the Merger Agreement is terminated by Parent pursuant to Section 7.1(d)
of the Merger Agreement, if the Merger is not consummated as a result of the
failure of the Company to satisfy any of the conditions set forth in Section
6.1(c) of the Merger Agreement, or if the Merger Agreement is terminated by
Parent pursuant to Section 7.1(c)(i) of the Merger Agreement or the Company
pursuant to Section 7.1(g) of the Merger Agreement, then the Company is required
to promptly pay Parent the sum of (A) $1 million, plus (B) all the out-of-pocket
costs and expenses of Parent, including costs of counsel, investment bankers,
actuaries and accountants, up to but not exceeding an additional $2 million in
the aggregate.
If no payment is due under the preceding paragraph and the Merger Agreement
is terminated or the Merger is not consummated, then the Company is required to
promptly pay Parent all the out-of-pocket costs and expenses of Parent,
including costs of counsel, investment bankers, actuaries and accountants, up to
but not exceeding $2 million in the aggregate, unless (i) the Agreement is
terminated pursuant to Section 7.1(a) or 7.1(e) of the Merger Agreement, or (ii)
the Merger is not consummated because the conditions set forth in Section 6.1(b)
of the Merger Agreement are not satisfied.
If, after the date of the Merger Agreement and within twelve (12) months
following (a) any termination of the Merger Agreement (i) by Parent pursuant to
Section 7.1(c) or 7.1(d) of the Merger Agreement, or
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<PAGE> 11
(ii) by the Company pursuant to Section 7.1(g) of the Merger Agreement, or (b)
the failure to consummate the Merger by reason of any failure of the Company to
satisfy the conditions enumerated in Section 6.1(c) of the Merger Agreement, any
third party shall acquire, merge with, combine with, purchase a significant
amount of assets of (including a significant amount of assets of, or the stock
of, any subsidiary of the Company), or engage in any other business combination
with, or purchase any equity securities involving an acquisition of 20% or more
of the voting stock of, the Company on terms that are financially superior to
those of the Offer, or enter into any letter of intent or agreement to do any of
the foregoing (collectively, a "Superior Business Combination"), such third
party that is a party to the Superior Business Combination shall pay to Parent,
(A) upon execution of such letter of intent or agreement relating to such
Superior Business Combination, the sum of (i) $1 million, which amount
represents the best estimate by the parties to the Merger Agreement of the value
of the management time, overhead, opportunity costs and other unallocated costs
of Parent incurred by or on behalf of Parent in connection with the Merger
Agreement and the Offer which cannot be calculated with certainty, plus (ii) all
the out-of-pocket costs and expenses of Parent, including costs of counsel,
investment bankers, actuaries and accountants, up to but not exceeding an
additional $2 million in the aggregate and (B) upon the consummation of any
Superior Business Combination that occurs within the later of 24 months from the
date of the Merger Agreement or 12 months from the date of such letter of intent
or agreement, an amount in cash equal to the product of $8 million and the
percentage of the Company assets or equity securities acquired in the Superior
Business Combination, which sum represents additional compensation for Parent's
loss (including expenses) as a result of the Merger Agreement not being
consummated. The amounts owed under the preceding clauses (A) and (B) shall be
reduced by any amounts previously paid to Parent pursuant to the other
provisions of Section 7.3 of the Merger Agreement. In no event will the
aggregate amount paid to Parent pursuant to all provisions of Section 7.3 of the
Merger Agreement exceed $8 million. In the event such third party refuses to pay
such amounts within ten days of demand therefor by Parent, the amounts will be
an obligation of the Company and will be paid by the Company promptly upon
notice to the Company by Parent.
Representations and Warranties. The Company has made customary
representations and warranties to Parent with respect to, among other things,
its organization and qualification, subsidiaries, capitalization, authority,
consents and approvals, violations, the Company's reports filed with the
Commission, financial statements, undisclosed liabilities, certain changes,
taxes, litigation, employee benefit plans, environmental liability, compliance
with applicable laws, material contracts, patents, trademarks, trade names,
copyrights and registrations, labor matters, real property, information
supplied, and the Company Proxy Statement.
Dividends and Distributions; Changes in Stock. As described above, the
Merger Agreement provides that prior to the time the directors of the Purchaser
have been elected to the Board of Directors of the Company, the Company will not
(i) authorize for issuance, issue, sell, deliver, or agree or commit to issue,
sell or deliver, dispose of, encumber or pledge (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class of any securities, except as disclosed
pursuant to the Merger Agreement or as required by agreements with the Company's
employees under the Company's benefit plans as in effect as of the date of the
Merger Agreement, or amend any of the terms of any such securities or agreements
outstanding as of the date of the Merger Agreement, except as specifically
contemplated by the Merger Agreement; or (ii) split, combine or reclassify any
shares of its capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of its
securities, except intercompany cash dividends in the ordinary course of
business (or enter into any agreements, arrangements, plans or understandings
with respect to any of the foregoing).
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), the Purchaser will not be required to
accept for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer as to
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<PAGE> 12
any Shares not then paid for, if (i) the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
has not expired or terminated, (ii) the Minimum Condition has not been satisfied
or waived, or (iii) if at any time on or after April 28, 2000, and before the
time for payment for Shares, any of the following events shall exist:
(a) any domestic or foreign federal, state or local governmental,
regulatory or administrative agency or authority or legislative body or
commission shall have instituted any action, proceeding, application, claim
or suit, or shall have promulgated, entered, enforced, enacted, proposed,
issued or made applicable to the Offer or the Merger any statute, rule,
regulation, judgment, order or injunction which directly or indirectly (i)
challenges, seeks to make illegal, prohibits or makes illegal, or imposes
any material limitations on, Parent's or the Purchaser's ownership or
operation (or that of any of their respective subsidiaries or affiliates)
of all or a material portion of the businesses or assets of Parent or the
Purchaser, taken as a whole, or of the Company or its subsidiaries, taken
as a whole, or compels Parent or the Purchaser or their affiliates to
dispose of or hold separate any material portion of the business or assets
of the Company or its subsidiaries, taken as a whole, (ii) challenges,
seeks to make illegal, prohibits or makes illegal the acceptance for
payment, payment for or purchase of Shares or the consummation of the Offer
or the Merger, (iii) restricts the ability of the Purchaser, or renders the
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (iv) imposes material limitations on the ability of Parent or
the Purchaser to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it
on all matters presented to the Company's shareholders, (v) seeks to obtain
or obtains material damages as a result of the transactions contemplated by
the Offer or the Merger or (vi) seeks to require divestiture by Parent or
the Purchaser or any of their subsidiaries or affiliates of any Shares, and
in the case of (v) or (vi) above, is likely to have a material adverse
effect on the Company, provided that the Purchaser shall have used
reasonable efforts to cause any such judgment, order or injunction to be
vacated or lifted;
(b) the Company shall have breached its representations and
warranties, or failed to perform or comply with any of its covenants and
agreements contained in the Merger Agreement, which breach or failure shall
have a material adverse effect;
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) (i) it shall have been publicly disclosed or Parent shall have
otherwise learned that any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of more than 14.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted an option,
right or warrant, conditional or otherwise, to acquire beneficial ownership
of more than 14.9% of any class or series of capital stock of the Company
(including the Shares); or (ii) any person or group shall have entered into
a definitive agreement or agreement in principle with the Company with
respect to an Acquisition Proposal or other business combination with the
Company; or
(e) the Company's Board of Directors shall have withdrawn, modified,
failed to reaffirm or changed (including by amendment of the Schedule
14D-9) its approval or recommendation of the Offer, the Merger Agreement or
the Merger in a manner adverse to Parent or the Purchaser or shall have
adopted any resolution to effect the foregoing, or shall have affirmed,
recommended or authorized entering into any other Acquisition Proposal,
which in the judgment of the Purchaser, in any such case, and regardless of the
circumstances (including any action or inaction by Parent or the Purchaser other
than a material breach of the Merger Agreement by Parent or the Purchaser)
giving rise to such condition, makes it inadvisable to proceed with the Offer or
with such acceptance for payment or payments.
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<PAGE> 13
TENDER AND OPTION AGREEMENT
Tender of Shares. The Purchaser and the Tendering Shareholders have entered
into the Tender and Option Agreement. Upon the terms and subject to the
conditions of such agreement, the Tendering Shareholders have severally agreed
(i) to validly tender or cause the record owner of any Shares to tender all
Shares beneficially owned by each Tendering Shareholder pursuant to the Offer,
not later than the fifth business day after commencement of the Offer or, with
respect to any Shares acquired directly or indirectly, or otherwise beneficially
owned, by any of the Tendering Shareholders in any capacity after April 28,
2000, and prior to the termination of the Tender and Option Agreement, whether
upon the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of a purchase, dividend,
distribution, gift, bequest, inheritance or as a successor-in-interest in any
capacity (including a fiduciary capacity) or otherwise ("After-Acquired
Shares"), within one business day following the acquisition thereof, (ii) not to
withdraw any Shares so tendered without the prior written consent of the
Purchaser except upon receipt of notice from the Purchaser that it is exercising
the Option to acquire the Shares and (iii) to withdraw all Shares tendered in
the Offer immediately upon receipt of notice from the Purchaser that it is
exercising the Option in order that the Purchaser may acquire such Shares. The
Tendering Shareholders have agreed that the Purchaser's obligation to accept for
payment and pay for the Shares in the Offer is subject to the terms and
conditions of the Offer.
Option to Purchase. In order to induce the Purchaser to enter into the
Merger Agreement, the Tendering Shareholders have granted to the Purchaser an
irrevocable option, exercisable in whole but not in part (the "Option") to
purchase all of the Shares beneficially owned by such Tendering Shareholders
(the "Option Shares") at a purchase price per Share equal to $18.35. Pursuant to
the Tender and Option Agreement, the Purchaser's Option will terminate in the
event the Merger Agreement is terminated under any circumstances other than
(i) by Parent, if neither Parent nor the Purchaser is in material
breach of the Agreement and either (a) prior to the purchase of Shares, the
Board of Directors of the Company withdrew, modified, failed to reaffirm or
changed (including by amendment of the Company's Schedule 14D-9) its
approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have adopted any resolution to effect the foregoing or shall have
affirmed, recommended or authorized entering into any other Acquisition
Proposal; or (b) prior to the purchase of Shares pursuant to the Offer, the
Company publicly disclosed, or Parent learned, that any person, entity or
"group" (as that term is defined in Section 13(d)(3) of the Exchange Act),
other than Parent or its affiliates or any group of which any of them is a
member, will have acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of more than 14.9% of any
class or series of capital stock of the Company (including the Shares),
through the acquisition of stock, the formation of a group or otherwise, or
shall have been granted an option, right, or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 14.9% of any class
or series of capital stock of the Company (including the Shares); or
(ii) by Parent if, prior to the purchase of Shares pursuant to the
Offer, there is (a) a breach of the Company's representation set forth in
Section 3.2(a) of the Merger Agreement (relating to the capitalization of
the Company) or covenant set forth in Section 5.1(c) of the Merger
Agreement (relating to capital stock); or (b) a material breach of any of
the Company's other representations, warranties or covenants which breach
cannot be or has not been cured within ten (10) days following receipt of
notice of such breach; or
(iii) by Parent if, due to an event that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions to the Offer, the Purchaser failed to commence the Offer on or
prior to the Offer Deadline (as defined in the Merger Agreement), provided
that neither Parent nor the Purchaser is in material breach of the Merger
Agreement and has exercised such right by the close of business on or
before the tenth (10th) business day following the Offer Deadline; or
(iv) by the Company, if, prior to the purchase of Shares sufficient
to meet the Minimum Condition by Parent pursuant to the Offer, a person or
group (other than Parent or any of its affiliates)
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<PAGE> 14
shall have made a bona fide Acquisition Proposal that the Board of
Directors of the Company or the Special Committee determines in good faith
that failing to accept or recommend to the Company's shareholders such
Acquisition Proposal could reasonably be determined to constitute a breach
of the fiduciary duties of the Board of Directors of the Company or the
Special Committee to the Company's shareholders under applicable law after
consultation with: (a) a nationally recognized investment banking firm
regarding the financial superiority of the Acquisition Proposal and (b)
legal counsel; provided that such termination shall not be effective until
payment of the fee required by Section 7.3 of the Merger Agreement.
In the event of termination of the Option, or termination of the Merger
Agreement under any circumstances other than those described above, the Option
will continue for a period of 90 days thereafter so long as (i) all applicable
waiting periods under the HSR Act required for the purchase of the Option Shares
upon such exercise shall have expired or been terminated and (ii) there is not
then in effect any preliminary or final injunction or other order issued by any
court or governmental, administrative or regulatory agency or authority or
legislative body or commission prohibiting the exercise of the Option.
If, within twelve (12) months following the exercise of the Option by the
Purchaser, the Purchaser, directly or indirectly, sells, transfers or otherwise
disposes of any or all of the Shares acquired upon exercise of the Option or the
Offer to a third party (or realizes cash proceeds in respect of such Shares as a
result of a distribution to shareholders of the Company following the sale of
substantially all of the Company's assets) in connection with a transaction
whereby the third party is acquiring the entire equity interest in the Company
pursuant to a merger, tender offer, exchange offer, sale of assets, sale of
shares or a similar business transaction (a "Subsequent Sale") at a per Share
price in excess of $18.35 (the "Subsequent Sale Price"), then the Purchaser will
pay to each Tendering Shareholder, within five (5) days of receipt of payment by
the Purchaser, an amount equal to such Tendering Shareholder's pro rata share of
fifty percent (50%) of the excess of the Subsequent Sale Price over $18.35,
multiplied by the number of Shares sold in the Subsequent Sale.
Assignment of Dividends and Other Distributions. The Tendering Shareholders
have assigned to the Purchaser any and all dividends and other distributions
that may be declared, set aside or paid by the Company with respect to the
Tendering Shareholders' Shares during the term of the Tender and Option
Agreement.
Voting. Each Tendering Shareholder has agreed that (for so long as the
Merger Agreement is in effect), at any meeting of the holders of Shares, however
called, or in connection with any written consent of the holders of Shares, he
will vote (or cause to be voted) his Shares (a) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Merger
Agreement and the Tender and Option Agreement and any actions required in
furtherance thereof; (b) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or the Tender
and Option Agreement; and (c) except as otherwise agreed to in writing in
advance by the Purchaser, against any of the following actions or agreements
(other than the Merger Agreement or the transactions contemplated thereby): (i)
any action or agreement that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or attempt to discourage or adversely
affect the Merger, the Offer and the transactions contemplated by the Tender and
Option Agreement and the Merger Agreement; (ii) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its subsidiaries; (iii) a sale, lease or transfer of a
material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (iv) any change in the management or the Company's Board of
Directors, except as contemplated by the Merger Agreement; (v) any change in the
present capitalization or dividend policy of the Company; (vi) any amendment of
the Company's articles of incorporation or bylaws; or (vii) any other material
change in the Company's corporate structure or business. Notwithstanding
anything to the contrary contained in the Tender and Option Agreement, each
Tendering Shareholder who is also a member of the Board of Directors of the
Company will be free to act in his or her capacity as a member of the
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<PAGE> 15
Company's Board of Directors and to discharge his or her fiduciary duty as such.
Each Tendering Shareholder agreed, at the request of the Purchaser, to execute
and deliver to the Purchaser an irrevocable proxy.
Representations and Warranties and Certain Covenants. In connection with
the Tender and Option Agreement, each Tendering Shareholder has made certain
representations, warranties and covenants, including, without limitation, with
respect to ownership of Shares, the Tendering Shareholder's power and authority
to enter into and perform his obligations under the Tender and Option Agreement,
the receipt of requisite governmental consents and approvals, absence of
conflicts, absence of liens and encumbrances on and in respect of the Tendering
Shareholder's Shares, finder's fees, reliance by the Purchaser, confidentiality,
and the solicitation of acquisition proposals.
Restriction on Transfer, Proxies and Non-Interference; Stop Transfer
Order. In connection with the Tender and Option Agreement, each Tendering
Shareholder agreed, while the Tender and Option Agreement is in effect and
except as specifically contemplated therein, not to (i) offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any Shares or any interest therein, (ii) grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares or (iii) take any action that would
make any representation or warranty of any Tendering Shareholder untrue or
incorrect or have the effect of preventing or disabling any Tendering
Shareholder from performing his or her obligations under the Tender and Option
Agreement. In furtherance of the Tender and Option Agreement, concurrently with
the execution of the Tender and Option Agreement, the Tendering Shareholders
authorized the Company to notify the Company's transfer agent that there is a
stop transfer order with respect to all of the Existing Shares (as defined in
the Tender and Option Agreement) and any additional Shares of Common Stock
acquired by any Tendering Shareholder after the execution date and that the
Tender and Option Agreement places limits on the voting and transfer of such
shares.
Additional Shares. Each Tendering Shareholder further agreed, at the
request of the Purchaser, to exercise, exchange or convert his or her Rights
into shares of Company Common Stock, so as to constitute After-Acquired Shares
under the Tender and Option Agreement. In order to facilitate the exercise at
the request of the Purchaser of any such Right, the Purchaser agreed to loan to
any requesting Tendering Shareholder funds sufficient to allow such Tendering
Shareholder to exercise the Right. Such loan is not to be interest bearing and,
at the Purchaser's option, is to be secured by a pledge of the shares of Company
Common Stock acquired upon exercise of such Right. Each Tendering Shareholder
agreed to promptly notify the Purchaser in writing of the number of
After-Acquired Shares that may be acquired by such Tendering Shareholder, if
any, after the date of the Tender Option Agreement.
CONFIDENTIALITY AGREEMENT
Guardian Industries and the Company entered into a confidentiality
agreement on February 10, 2000 (the "Confidentiality Agreement"). The
Confidentiality Agreement addressed the "Evaluation Material," which is
comprised of all information provided to Guardian Industries except (i)
information already in the possession of Guardian Industries, provided that the
information is not known to Guardian Industries to be subject to another
confidentiality agreement or similar arrangement; (ii) information that becomes
publicly available other than as a result of disclosure by Guardian Industries
or certain representatives of Guardian Industries and (iii) information that is
available to Guardian Industries on a non-confidential basis from a source other
than the Company or certain affiliates of the Company, provided that the source
is not known by Guardian Industries to be bound by a confidentiality agreement.
Guardian Industries and the Company agreed that the Evaluation Material
would be used solely for the purpose of evaluating a possible transaction with
the Company and that Guardian Industries would keep the Evaluation Material
confidential, disclosing it only to certain representatives of Guardian
Industries. Unless the Company discloses the existence of an offer by Guardian
Industries or indicates an intention to pursue another offer that is not
financially superior to an offer of Guardian Industries, Guardian Industries and
its
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affiliates agreed not to disclose that any discussions or negotiations were in
progress between Guardian Industries and the Company and agreed not to disclose
the details of any such discussions.
Guardian Industries further agreed with the Company that Guardian
Industries would not, unless requested in writing by the Company or unless the
Company announced its intention to pursue an offer or transaction that is not
financially superior to that of Guardian Industries': (i) propose, or state a
willingness to propose, a transaction with the Company or any holders of the
Company's securities, or (ii) acquire or assist, advise or encourage any person
to acquire, directly or indirectly, control of the Company or a portion of the
Company's securities in excess of 4.9% or any of the Company's businesses or
assets for a period of two years from February 10, 2000. This period would be
reduced to one year from February 10, 2000 if the Company terminates all
discussions with third parties for a change of control transaction and does not
pursue a transaction with any party as contemplated by the Confidentiality
Agreement.
If, after February 10, 2000, the Company enters into another
confidentiality agreement with a third party in connection with a proposed
change of control transaction between the Company and such third party and such
a confidentiality agreement contains restrictions different from the
restrictions of the Confidentiality Agreement, the Company is required to notify
Guardian Industries and Guardian Industries will have the option to amend the
Confidentiality Agreement to include such different terms.
Guardian Industries acknowledged that neither the Company nor its
representatives or advisors made any representations or warranties regarding the
accuracy or completeness of the Evaluation Material and that neither the Company
nor its representatives or advisors will have any liability to Guardian
Industries resulting from the use of the Evaluation Material.
In the event Guardian Industries does not proceed with a transaction with
the Company within a reasonable time, Guardian Industries agreed to promptly
redeliver all written Evaluation Materials and any other written material
containing or reflecting any information in the Evaluation Material to the
Company and agreed that neither Guardian Industries nor its representatives or
advisors would retain any copies, extracts or other reproductions in whole or in
part of such written material relating to the Evaluation Materials.
Guardian Industries agreed to indemnify and hold harmless the Company and
certain of its representatives from any damages or other losses or expenses
resulting from the disclosure or use of the Evaluation Material by Guardian
Industries or its representatives contrary to the terms of the Confidentiality
Agreement.
THE CBP MERGER AGREEMENT
The terms of the CBP Merger Agreement (as hereinafter defined) are similar
to those of the Merger Agreement, other than provisions relating to the Offer,
the cash consideration per Share, the possible designation by the Purchaser of
certain persons to the Company's Board of Directors, the amount of the
termination fee, the provisions of certain of the covenants to be maintained by
the Company and that the transaction with CBP Holdings, Inc. was subject to the
receipt of financing. In connection with the execution of the Merger Agreement
with Parent and the Purchaser, the Company terminated the CBP Merger Agreement
on April 28, 2000.
Under the CBP Merger Agreement, termination of the CBP Merger Agreement and
the execution of a letter of intent or agreement relating to any superior
business combination, including the Merger Agreement with Parent and the
Purchaser, requires the payment to CBP Holdings, Inc. by the third party that is
a party to the superior business combination of certain amounts that, upon the
consummation of any superior business combination, will total $5 million. In the
event the third party refuses to timely pay such amounts, the amounts will be an
obligation of the Company and will be paid by the Company promptly upon notice
to the Company by CBP Holdings, Inc.
In accordance with the Dallas County Court's order, neither the Company nor
Parent or the Purchaser has paid any part of the $5 million termination fee
under the CBP Merger Agreement, but they may be required to do so if the
temporary restraining order is not extended.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION
Recommendation of the Special Committee. At a meeting held on April 27,
2000, the Special Committee (as hereinafter defined) (i) unanimously determined
that each of the Offer and the Merger, both as contemplated by the Merger
Agreement, is fair to and in the best interests of the shareholders of the
Company (other than Parent and its affiliates); (ii) unanimously approved, and
recommended that the Board of Directors approve the Merger Agreement and all
transactions contemplated thereby, enter into the Merger Agreement and proceed
with and consummate the Offer, the Merger and all other transactions
contemplated by the Merger Agreement; and (iii) recommended that the Board of
Directors recommend acceptance of the Offer and, if necessary, approval and
adoption of the Merger Agreement and approval of the Merger by the shareholders
of the Company.
Recommendation of the Board of Directors. At a meeting held on April 28,
2000, after hearing the Special Committee's recommendation, the Board of
Directors, by unanimous vote of all directors and based on, among other things,
the recommendation of the Special Committee, (i) determined that the Offer and
the Merger are fair to, and in the best interests of, the shareholders of the
Company (other than Parent and its affiliates); (ii) approved the Merger
Agreement and the transactions contemplated by the Merger Agreement, including,
without limitation, any purchase of Shares by means of the Merger Agreement, the
Offer, the Merger or the Tender and Option Agreement; and (iii) recommended that
the Company's shareholders accept the Offer, tender their Shares thereunder to
the Purchaser and approve and adopt the Merger Agreement and approve the Merger.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF
NECESSARY, APPROVE AND ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER.
BACKGROUND
The Company, at various times over the past several years, has considered
various strategic alternatives for the Company to maximize shareholder value,
including the possible sale of the Company. From time to time during this
period, the Company has been contacted by, and has initiated contact with, a
number of entities to explore various transactions involving a possible change
of control. While none of these contacts (other than those described below)
resulted in a definitive agreement, the Company's Board of Directors has
considered whether a combination with any of these entities would be
strategically advantageous to the Company and in the best interests of its
shareholders and has considered other strategic alternatives available to the
Company.
On August 24, 1999, the Company's Board of Directors adopted resolutions
authorizing management of the Company to engage a financial advisor to explore
strategic alternatives for the Company to maximize shareholder value. Subsequent
to August 24, 1999, the management of the Company reported to the Company's
Board of Directors that, prior to engaging a financial advisor for the Company,
the management had been presented with several indications of interest on the
part of third parties to possibly acquire all of the issued and outstanding
Shares. Subsequent to such report to the Company's Board of Directors, the
management of the Company engaged in various preliminary discussions with
several parties about a possible transaction with the Company, including
transactions potentially involving affiliates of the Company.
In early October 1999, the Company's Board of Directors appointed J.
Veronica Biggins and Lawrence P. Klamon to serve as a special committee of
outside directors (the "Special Committee") for the purpose of considering,
evaluating and making recommendations to the full board on strategic
alternatives available to the Company to maximize shareholder value. The Special
Committee selected Mr. Klamon as its chairman and engaged the investment banking
firm of Credit Suisse First Boston Corporation ("Credit Suisse First Boston") as
its financial advisor and the law firm of Locke Liddell & Sapp LLP as its
outside legal advisor to assist in this process. From October 1999 through early
January 2000, the Special Committee received and pursued indications of interest
from various parties about possible transactions involving the sale of the
Company. Among the parties that indicated a serious interest in pursuing a
transaction with the Company
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were CGW Southeast Partners IV, L.P., an investment fund affiliated with several
directors of the Company ("CGW"), and Citicorp Venture Capital, Ltd., a
subsidiary of Citigroup Inc. ("Citicorp Venture Capital"). On December 4, 1999,
the Company agreed to reimburse CGW for certain expenses in connection with its
preparation of an offer. Although CGW and Citicorp Venture Capital initially
proposed separate transactions for consideration by the Special Committee, the
parties ultimately joined together with senior management of the Company to form
an investment group (the "Investment Group") that offered to acquire all of the
outstanding Shares at $15.10 per Share. Credit Suisse First Boston rendered an
opinion to the Special Committee and the Board of Directors of the Company dated
January 17, 2000, to the effect that, as of the date of the opinion and based
upon and subject to the matters described in the opinion, the merger
consideration provided for in the CBP Merger Agreement (as hereinafter defined)
was fair, from a financial point of view, to the holders of the Company's Common
Stock, other than CBP Holdings, Inc. and its affiliates. In connection with its
engagement, Credit Suisse First Boston was not requested to, and did not,
solicit third-party indications of interest in the possible acquisition of all
or a part of the Company. No other limitations were imposed on Credit Suisse
First Boston with respect to the investigations made or procedures followed in
rendering its opinion.
On January 17, 2000, the Special Committee recommended to the full board of
the Company that this offer by the Investment Group be accepted and later that
day the Board of Directors approved and the Company entered into a merger
agreement (the "CBP Merger Agreement") with CBP Holdings, Inc., the entity
formed by the Investment Group. The transaction was publicly announced on
January 18, 2000. The CBP Merger Agreement, among other things, was conditioned
on receipt of financing, contained a nonsolicitation provision and provided for
the payment to CBP Holdings, Inc. of $5 million in expense reimbursement and
break-up fees if the CBP Merger Agreement was thereafter terminated for various
reasons, including termination following receipt of a superior offer to acquire
the Company.
On January 21, 2000, representatives of Guardian Industries notified the
Special Committee's financial advisor that Guardian Industries was interested in
making a competing bid for the Company. On February 1, 2000, Guardian Industries
sent the Special Committee a letter offering to acquire all of the outstanding
Shares for $17.00 per Share and requesting an opportunity to meet. On February
7, 2000, the Company and Guardian Industries executed a confidentiality
agreement and meetings were held in Atlanta and Dallas between representatives
of the Company, the Special Committee, Credit Suisse First Boston and Guardian
Industries. On February 10, 2000, Guardian Industries and the Company executed a
revised confidentiality agreement and on February 11, 2000, the Company and
Guardian Industries separately announced publicly Guardian Industries' proposal
to acquire all of the outstanding Shares. Over the course of the next several
weeks, Guardian Industries' representatives and advisors conducted a due
diligence examination of the Company.
On February 10, 2000, Bradco Supply Corporation and Barry Segal
(collectively, the "Bradco Group") jointly filed a Schedule 13D with the
Commission to report that they had together purchased approximately 444,900
Shares (approximately 5.13% of the then outstanding Shares). The Bradco Group
stated that they believed the Investment Group's proposed acquisition price of
$15.10 per Share to be inadequate and that they were seeking to purchase
approximately 60% of the outstanding Shares at $16.25 per Share in the open
market or in privately negotiated transactions. They further indicated their
intent to merge Bradco's operations into the Company and work with the Company's
management to grow the combined companies. The Bradco Group subsequently filed
an amended Schedule 13D on February 16, 2000, to report an increase in ownership
by 104,500 Shares, to 549,400 Shares (approximately 6.33% of the then
outstanding Shares).
The Special Committee subsequently notified the Bradco Group that it was
considering Guardian Industries' proposal and, in light of its superior terms,
did not believe that further consideration of the Bradco Group's proposal was
warranted at that time. On February 18, 2000, the Bradco Group further amended
their Schedule 13D filing to report that they had no further interest in
pursuing a transaction with the Company and that they intended to hold their
Shares for investment purposes.
On January 28, 2000, a purported shareholder class action lawsuit was filed
in Fulton County, Georgia against the Company and its directors in connection
with the CBP Merger Agreement. Subsequently, the Special Committee was notified
that additional suits had been filed both in Fulton County, Georgia and Dallas
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County, Texas. Each suit was purportedly filed on behalf of the Company's
shareholders and contained allegations challenging the adequacy and fairness of
the CBP Merger Agreement. By letter dated February 23, 2000, the Investment
Group notified the Company of the Investment Group's waiver, for a period of ten
days from the date of the letter, of the nonsolicitation provision of the CBP
Merger Agreement. On February 24, 2000, a temporary restraining order was issued
by the Dallas County Court that temporarily restrained the Company and its
directors from abiding by the nonsolicitation provision and the termination fee
payment provisions of the CBP Merger Agreement and from triggering the Rights
Agreement with respect to any potential bidders who offer $15.10 per Share or
more for all of the outstanding Shares. During the next several weeks while
Guardian Industries was conducting its due diligence examination, the Special
Committee's financial advisor and the Company's senior management contacted
various third parties to determine whether there was any other interest in
pursuing a transaction with the Company on terms more favorable to shareholders
than those proposed to date by CBP Holdings, Inc. or Guardian Industries. The
Special Committee received no proposals during this period from any third party
other than CBP Holdings, Inc. and Guardian Industries.
Prior to the completion of Guardian Industries' due diligence examination,
CBP Holdings, Inc. advised the Special Committee that it was increasing its
offer to acquire all of the Shares to $18.25 per Share and that it had obtained
a financing commitment for up to $30 million in additional funds from Owens
Corning, a significant supplier to the Company, to support the increased price.
On March 20, 2000, Guardian Industries was advised of this development. On March
26, 2000, the Special Committee met and reviewed the situation, and concluded
that it was advisable to recommend that the Company accept the revised proposal
from CBP Holdings, Inc. On March 27, 2000, the Board of Directors approved the
revised proposal and executed an amendment to the CBP Merger Agreement which
increased the merger price to $18.25 per Share.
Thereafter, Guardian Industries advised representatives of the Special
Committee that Guardian Industries remained interested in acquiring the Company
and additional discussions were had between representatives of Guardian
Industries and the Special Committee and their advisors. On April 3, 2000,
Guardian Industries delivered to the Special Committee a letter offering to
acquire all of the outstanding Shares for $18.50 per Share through a cash tender
offer followed by a merger and without any financing condition. The Special
Committee met on April 7, 2000 to consider Guardian Industries' offer which by
its terms expired at 5:00 p.m. on that date. On the same date, prior to the
Special Committee meeting, CBP Holdings, Inc. delivered a letter to the Special
Committee indicating that it intended to increase its offer to $19.00 per Share
and that it was obtaining revised financing commitment letters in order to
permit it to so increase its offer. Prior to the Special Committee meeting,
representatives of the Special Committee informed representatives of Guardian
Industries of this development and gave Guardian Industries the opportunity to
increase its offer or extend its expiration date, which it declined to do. At
its meeting later that day, the Special Committee reviewed and discussed the
status of the competing bids. Shortly after the meeting, representatives of the
Special Committee contacted representatives of Guardian Industries and indicated
that, if Guardian Industries were willing to offer $19.50 per Share and sign an
agreement promptly, the Special Committee was prepared to recommend acceptance
to the Company's board. On April 10, 2000, Guardian Industries representatives
responded to the Special Committee's proposal by indicating that Guardian
Industries was not prepared to offer $19.50 per Share and that Guardian
Industries would wait for further developments. The Special Committee then asked
both Guardian Industries and CBP Holdings, Inc. to submit their best and final
offers on or before April 13, 2000. On April 13, 2000, Guardian Industries
tendered a letter to counsel for the Special Committee while CBP Holdings, Inc.
notified the committee that it needed an additional day before submitting its
best and final offer. The Special Committee extended the deadline one day to
April 14, 2000. On April 14, 2000, CBP Holdings, Inc. delivered a letter to the
Special Committee offering to purchase all of the outstanding Shares for $19.50
per Share and Guardian Industries delivered a letter to the Special Committee
offering to purchase all the outstanding Shares for $18.50 per Share. The offer
from CBP Holdings, Inc. was subject to a financing condition while Guardian
Industries' offer was not.
On April 17, 2000, the Special Committee met to consider the respective
offers. Shortly before the meeting, Guardian Industries delivered a letter to
the Special Committee withdrawing its $18.50 per Share offer and, during the
Special Committee meeting, counsel to CBP Holdings, Inc. contacted the Special
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<PAGE> 20
Committee and requested that no action on CBP Holdings Inc.'s offer be taken
before contacting representatives of CBP Holdings, Inc. As a result, the Special
Committee adjourned its meeting. Later that day, representatives of the Special
Committee contacted representatives of CBP Holdings, Inc. who informed them that
CBP Holdings Inc.'s $19.50 per Share offer was being withdrawn, but that the
amended CBP Merger Agreement to pay $18.25 per Share remained in effect. After
these developments, representatives of the Special Committee contacted
representatives of Guardian Industries to explain what had happened and
requested that Guardian Industries reconsider the withdrawal of its $18.50 per
Share offer. During the following week, various conversations were held between
representatives of the Special Committee and CBP Holdings, Inc. and between
representatives of Guardian Industries and the Special Committee.
On April 27, 2000, Guardian Industries delivered a letter to the Special
Committee proposing to acquire all of the outstanding Shares for $18.35 per
Share and additionally proposing to increase the expense reimbursement and
break-up fee provision in the proposed Guardian Industries agreement from $5
million to $8 million. After receiving Guardian Industries' proposal, the
Special Committee met later that night to review and consider the situation and,
after discussion and receipt of an oral fairness opinion (which was later
confirmed in writing) from Credit Suisse First Boston, concluded to approve the
Guardian Industries proposal and recommend its acceptance by the full board of
the Company. On April 28, 2000, the full board of the Company met to receive the
recommendation of the Special Committee, and after review and discussion,
unanimously approved Guardian Industries' current proposal. Later that day, the
Merger Agreement was signed by the Company, Parent and the Purchaser and the CBP
Merger Agreement was terminated. On May 1, 2000, the transaction was publicly
announced. In accordance with the Dallas County Court's order, neither the
Company nor Parent or the Purchaser has paid any part of the $5 million
termination fee under the CBP Merger Agreement, but they may be required to do
so if the temporary restraining order is not extended.
REASONS FOR THE RECOMMENDATION
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of the
Shares accept the Offer and tender their Shares pursuant to the Offer, the
Special Committee and the Board of Directors has considered a number of factors
including:
(i) the financial condition, results of operations, cash flows,
business and prospects of the Company, including the consequences of the
Company's remaining independent;
(ii) the fact that the structure of the transaction proposed by
Guardian Industries should result in a rapid consummation of the
transaction;
(iii) the fact that no other party has submitted to the Special
Committee a proposal as attractive as the transaction proposed by Guardian
Industries, either as to price or as to other terms and conditions, that
has not been withdrawn;
(iv) the fact that in view of the discussions held with various
parties and the number and identity of parties contacted, the Special
Committee and its financial advisor believed it was unlikely that in the
near term any other party would propose an acquisition or strategic
business combination that would be more favorable to the Company and its
shareholders than the Offer and the Merger or that would be as certain to
be consummated within the same timeframe as the Offer and the Merger;
(v) the opinion of Credit Suisse First Boston, dated April 28, 2000,
to the Special Committee, to the effect that, as of such date and based
upon and subject to the matters described in the opinion, the $18.35 cash
consideration to be paid for the Shares in the Offer and the Merger
pursuant to the Merger Agreement was fair, from a financial point of view,
to the holders of the Common Stock (other than Parent and its affiliates).
The full text of Credit Suisse First Boston's written opinion dated April
28, 2000, which sets forth the assumptions made, procedures followed,
matters considered and limitations on the review undertaken by Credit
Suisse First Boston, is attached hereto as Annex A and is filed herewith as
Exhibit (a)(2) and incorporated herein by reference. Credit Suisse First
Boston's opinion is directed only to the fairness, from a financial point
of view, of the $18.35 per Share cash consideration to be paid for the
Shares in the Offer and the Merger pursuant to the Merger Agreement to the
holders of the Common Stock (other than Parent and its affiliates) and is
not intended to constitute, and does not constitute, a recommendation as to
whether any shareholder should tender Shares pursuant to the Offer,
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<PAGE> 21
vote in favor of the Merger or as to any other matter relating to the Offer
or the Merger. HOLDERS OF THE SHARES ARE URGED TO READ SUCH OPINION
CAREFULLY;
(vi) the historical market prices, price to earnings ratios, recent
trading activity and trading range of the Shares, including that the Offer
Price represents a premium of approximately 64% over the closing price of
the Shares on the New York Stock Exchange on January 14, 2000, the last
full trading day prior to the Board of Directors approval of the CBP Merger
Agreement;
(vii) valuations based on premiums paid in comparable acquisition
transactions and discounted cash flow analysis of the Company's business;
(viii) the extensive arms-length negotiations between the Special
Committee and its advisors on behalf of the Company and Guardian Industries
leading to the belief of the Board of Directors that $18.35 per Share
represented the highest price per Share that could be negotiated with
Guardian Industries;
(ix) the history and progress of the Special Committee's or Credit
Suisse First Boston's discussions with other parties regarding a
transaction for some or all of the Common Stock and the fact that none of
such parties made an offer to the Special Committee or Credit Suisse First
Boston as attractive as the transaction proposed by Guardian Industries,
either as to price or as to other terms and conditions;
(x) that the Offer and the Merger provide for a prompt cash tender
offer for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's shareholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
(xi) the fact that the Purchaser's obligations under the Offer are not
subject to any financing condition, and the representation of Parent and
the Purchaser that they have sufficient funds available to them to
consummate the Offer and the Merger;
(xii) the limited ability of Parent and the Purchaser to terminate the
Offer or the Merger Agreement;
(xiii) the fact that, pursuant to the Merger Agreement, the Company
and its representatives have a limited ability to (a) furnish to a third
party who has submitted an unsolicited acquisition proposal information
concerning the Company's business, properties or assets and (b) participate
in discussions or negotiations with such a third party concerning an
unsolicited acquisition proposal;
(xiv) the fact that, pursuant to the Merger Agreement, the Special
Committee or the Board of Directors has the right to terminate the Merger
Agreement if, prior to the purchase of Shares by the Purchaser, the Company
has received an Acquisition Proposal and the Special Committee or the Board
of Directors has determined in good faith, after consultation with a
nationally recognized investment banking firm regarding the financial
superiority of the Acquisition Proposal and legal counsel, that failing to
accept or recommend to the Company's shareholders such Acquisition Proposal
could reasonably be determined to constitute a breach of its fiduciary
duties under applicable law;
(xv) the circumstances upon which the $8 million termination fee
becomes payable by the Company to Parent;
(xvi) the conditions to the Offer;
(xvii) the other provisions of the Offer and the Merger Agreement;
(xviii) the terms and conditions of the Tender and Option Agreement;
(xix) the consents and approvals required to consummate the Merger and
the favorable prospects for receiving all such consents and approvals; and
(xx) that, while the Offer gives the Company's shareholders the
opportunity to realize a premium over the price at which the Shares had
recently traded, the consummation of the Offer and the Merger
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<PAGE> 22
would eliminate the opportunity for shareholders to participate in any
future growth and profits of the Company.
The foregoing discussion of information and factors considered and given
weight by the Special Committee and the Board of Directors is not intended to be
exhaustive, but is believed to include all of the material factors considered by
the Special Committee and the Board of Directors. In view of the variety of
factors considered in connection with their evaluation of the Offer and the
Merger, neither the Special Committee nor the Board of Directors found it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching their determinations and
recommendations. In addition, individual members of the Special Committee and
the Board of Directors may have given different weights to different factors.
INTENT TO TENDER
To the best knowledge of the Company, after making reasonable inquiry,
certain of the Company's executive officers, directors, affiliates and
subsidiaries currently intend to tender all Shares held of record or
beneficially owned by them pursuant to the Offer or to vote in favor of the
Merger. These shareholders, who together own approximately 4.3% of the issued
and outstanding Shares, have entered into the Tender and Option Agreement with
the Purchaser pursuant to which they have agreed to (i) grant the Purchaser an
irrevocable option to purchase all of the Shares owned by them, (ii) tender and,
in the event such irrevocable option is not theretofore exercised, sell the
Shares owned by them in the Offer and (iii) vote the Shares owned by them in
favor of the Merger.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to the terms of an engagement letter dated as of December 23,
1998, as amended, the Company engaged Credit Suisse First Boston to act as
financial advisor to the Special Committee of the Board of Directors of the
Company. As part of its role as financial advisor, Credit Suisse First Boston
delivered a fairness opinion to the Special Committee in connection with the
Offer and the Merger. Pursuant to the engagement letter, Credit Suisse First
Boston received or will receive from the Company: (i) a financial advisory fee
of $200,000, which is creditable against the opinion fee; (ii) a fee for
delivery of its fairness opinion of $850,000, which is creditable against the
transaction fee; and (iii) if the Offer and the Merger are consummated, a
transaction fee equal to 1% of the aggregate consideration. The Company also has
agreed to reimburse Credit Suisse First Boston for reasonable out-of-pocket
expenses, including the fees and expenses of legal counsel, and to indemnify
Credit Suisse First Boston and related parties against certain liabilities
arising out of Credit Suisse First Boston's engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to the Company unrelated to the Offer and the Merger. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the equity securities of the Company for their own account and
for the accounts of customers and, accordingly, may at any time hold long or
short positions in such securities.
Except as disclosed herein and in the Offer to Purchase, neither the
Company nor any person acting on its behalf has employed, retained or
compensated, or currently intends to employ, retain or compensate, any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer or the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
On April 28, 2000, Ronald R. Ross individually granted to the Purchaser an
irrevocable option to purchase 66,944 Shares at an exercise price of $18.35 per
Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, Walter J. Muratori individually granted to the Purchaser
an irrevocable option to purchase 137,502 Shares at an exercise price of $18.35
per Share pursuant to the terms of the Tender and Option Agreement.
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<PAGE> 23
On April 28, 2000, Garold E. Swan individually granted to the Purchaser an
irrevocable option to purchase 6,717 Shares at an exercise price of $18.35 per
Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, C. Steven Gaffney individually granted to the Purchaser
an irrevocable option to purchase 109,462 Shares at an exercise price of $18.35
per Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, John S. Davis individually granted to the Purchaser an
irrevocable option to purchase 560 Shares at an exercise price of $18.35 per
Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, Thomas R. Miller individually granted to the Purchaser
an irrevocable option to purchase 805 Shares at an exercise price of $18.35 per
Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, J. Veronica Biggins individually granted to the
Purchaser an irrevocable option to purchase 2,000 Shares at an exercise price of
$18.35 per Share pursuant to the terms of the Tender and Option Agreement.
On April 28, 2000, Alan K. Swift individually granted to the Purchaser an
irrevocable option to purchase 4,500 Shares at an exercise price of $18.35 per
Share pursuant to the terms of the Tender and Option Agreement.
On March 31, 2000, Ronald R. Ross acquired 334 Shares at a price of $14.662
per Share under the Company's 1995 Qualified Employee Stock Purchase Plan.
On March 31, 2000, Garold E. Swan acquired 327 Shares at a price of $14.662
per Share under the Company's 1995 Qualified Employee Stock Purchase Plan.
On March 31, 2000, Kirk Black acquired 41 Shares at a price of $14.662 per
Share under the Company's 1995 Qualified Employee Stock Purchase Plan.
On March 31, 2000, Tom Miller acquired 40 Shares at a price of $14.662 per
Share under the Company's 1995 Qualified Employee Stock Purchase Plan.
On March 31, 2000, John S. Davis acquired 20 Shares at a price of $14.662
per Share under the Company's 1995 Qualified Employee Stock Purchase Plan.
Except as set forth in this Item 6, no transactions in the Shares during
the past 60 days have been effected by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or subsidiary
of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as described or referred to in this Statement, no negotiation is
being undertaken or engaged in by the Company which relates to or would result
in (i) a tender offer or other acquisition of the Shares by the Company, any of
its subsidiaries or any other person, (ii) an extraordinary transaction, such as
a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries, (iii) a purchase, sale or transfer of a material amount of assets
by the Company or any of its subsidiaries or (iv) any material change in the
present dividend rate or policy, or indebtedness or capitalization of the
Company. Except as described or referred to in this Statement, there are no
transactions, Board of Directors resolutions, agreements in principle or signed
contracts entered into in response to the Offer that would relate to one or more
of the matters referred to in this Item 7.
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<PAGE> 24
ITEM 8. ADDITIONAL INFORMATION.
RIGHTS AGREEMENT
The following is a summary of the material terms of the Rights Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text of the Rights
Agreement, a copy of which has been filed with the Commission as Exhibit 1 to
the Company's Registration Statement on Form 8-A, filed with the Commission on
August 29, 1997, the First Amendment to Rights Agreement, dated as of January
17, 2000, a copy of which has been filed with the Commission as Exhibit 99.2 to
the Company's Registration Statement on Form 8-A/A, filed with the Commission on
February 1, 2000, and the Second Amendment to Rights Agreement, dated as of
April 28, 2000, a copy of which has been filed with the Commission as Exhibit
4.2 to the Company's Current Report on Form 8-K, filed with the Commission on
May 5, 2000.
On August 19, 1997, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of the Company's
Common Stock to shareholders of record at the close of business on September 10,
1997. This dividend distribution was made on or about September 24, 1997. Each
Right entitles the registered holder to purchase from the Company one
ten-thousandth (1/10,000) of a share of Series A Preferred Stock, no par value
(the "Preferred Stock"), at a purchase price of $72.00 per one ten-thousandth
(1/10,000) of a share, subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement.
The Rights were attached to all Common Stock certificates representing
shares of the Company then outstanding, and no separate Rights Certificates were
distributed. The Rights are to separate from the Company's Common Stock upon the
earlier of (i) ten (10) business days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person")
(which term does not include an "Exempt Person" as defined in the Rights
Agreement) has acquired, or obtained the right to acquire, beneficial ownership
of fifteen percent (15%) or more of the outstanding shares of the Company's
Common Stock (the "Stock Acquisition Date") or (ii) ten (10) business days (or
such later date as the Board of Directors of the Company shall determine)
following the commencement of a tender or exchange offer that would result in a
person or group beneficially owning fifteen percent (15%) or more of such
outstanding shares of Common Stock. The date the Rights separate is referred to
as the "Distribution Date."
Until the Distribution Date, (i) the Rights will be evidenced by the
Company's Common Stock certificates and will be transferred with and only with
such Common Stock certificates, (ii) new Common Stock certificates issued after
September 10, 1997 contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for the
Company's Common Stock outstanding also constituted the transfer of the Rights
associated with the Company's Common Stock represented by such certificates.
Pursuant to the Rights Agreement, the Company reserves the right to require
prior to the occurrence of a Triggering Event (as defined below) that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and are to
expire at the close of business on September 10, 2007, unless earlier redeemed
by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Company's Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of the
Company's Common Stock issued or sold pursuant to the exercise of stock options
under any employee plan or arrangements, or upon the exercise, conversion or
exchange of securities hereafter issued by the Company, or as otherwise
determined by the Board of Directors, only shares of the Company's Common Stock
issued prior to the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged, (ii)
any person shall acquire beneficial ownership of more than fifteen percent (15%)
of the outstanding shares of the Company's Common Stock (except pursuant to (A)
certain consolidations or
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<PAGE> 25
mergers involving the Company or sales or transfers of the combined assets, cash
flow or earning power of the Company and its subsidiaries or (B) an offer for
all outstanding shares of the Company's Common Stock at a price and upon terms
and conditions which a majority of the Disinterested Directors (as defined
below) determines to be in the best interests of the Company and its
shareholders), or (iii) there occurs a reclassification of securities, a
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than one percent (1%)
the proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) will thereafter have the right to
receive, upon exercise, the Company's Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the purchase price of the Right. However, Rights are not
exercisable following the occurrence of any of the events described above until
such time as the Rights are no longer redeemable by the Company as described
below. Notwithstanding any of the foregoing, following the occurrence of any of
the events described in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company shall enter into a merger or other business combination transaction
in which the Company is not the surviving corporation, (ii) the Company is the
surviving corporation in a consolidation, merger or similar transaction pursuant
to which all or part of the outstanding shares of the Company's Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property or (iii) more than 50% of the combined assets, cash
flow or earning power of the Company and its subsidiaries is sold or transferred
(in each case other than certain consolidations with, mergers with and into, or
sales of assets, cash flow or earning power by or to subsidiaries of the Company
as specified in the Rights Agreement), each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the purchase price of the Right. The events described
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The purchase price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments amount to at least one percent (1%) of the
purchase price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one ten-thousandth
(1/10,000th) of a share of Preferred Stock) and, in lieu thereof, the Company
may make an adjustment in cash based on the market price of the Preferred Stock
on the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding shares of the Company's Common Stock, the Board of Directors of the
Company may, without payment of the purchase price by the holder, exchange the
Rights (other than Rights owned by such person or group, which will become
void), in whole or in part, for shares of the Company's Common Stock at an
exchange ratio of one-half (1/2) the number of shares of the Company's Common
Stock (or in certain circumstances Preferred Stock) for which a Right is
exercisable immediately prior to the time of the Company's decision to exchange
the Rights (subject to adjustment).
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<PAGE> 26
At any time until ten (10) business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (payable in cash, shares of the Company's Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $0.001 redemption price.
The term "Disinterested Director" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Disinterested
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of an acquiring company or in the event that the Rights are
redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; provided, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable; and, provided, that any
amendments after the Stock Acquisition Date must be approved by a majority of
the Disinterested Directors.
DISSENTERS' RIGHTS
No dissenters' rights are available under the GBCC in connection with the
Offer. However, if the Merger is consummated holders of Shares that do not
tender their Shares in the Offer will have certain rights under Article 13 of
the GBCC to dissent from the Merger and to demand payment in cash of the fair
value of their Shares. A person having a beneficial interest in Shares that are
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to properly follow the steps set forth
in Article 13 of the GBCC and in a timely manner to perfect whatever rights the
beneficial owner may have. The dissenters' rights provided by Article 13 of the
GBCC, if the statutory procedures are complied with in connection with the
Merger, could lead to a judicial determination of the fair value (excluding any
appreciation or depreciation in value arising from the accomplishment of the
Merger) being required to be paid in cash to such dissenting shareholders for
their Shares. Any such judicial determination of the fair value of the Shares
could be based on considerations other than, or in addition to, the price paid
in the Offer and the market value of the Shares, including asset values and the
investment value of the Shares. Shareholders considering seeking appraisal in
connection with the Merger should be aware that the "fair value" of their Shares
determined under Article 13 could be more than, the same as or less than the
price being paid in the Offer, and that the opinion of Credit Suisse First
Boston as to fairness, from a financial point of view, of the cash consideration
to be paid for Shares in the Offer and the Merger pursuant to the Merger
Agreement is not an opinion as to fair value under Article 13 of the GBCC. The
cost of any appraisal proceeding will be determined by the court and may be
assessed against the parties as the court deems equitable in the circumstances.
The court may order that all or a portion of the attorneys' fees incurred by the
dissenting shareholder in connection with any dissenters' rights proceeding be
charged pro rata against the value of all Shares of Common Stock entitled to
dissenters' rights.
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<PAGE> 27
GOING-PRIVATE TRANSACTIONS
Rule 13e-3 under the Exchange Act is applicable to certain "going-private"
transactions. The Purchaser does not believe that Rule 13e-3 will be applicable
to the Merger unless, among other things, the Merger is completed more than one
year after termination of the Offer. If applicable, Rule 13e-3 would require,
among other things, that certain financial information regarding the Company and
certain information regarding the fairness of the Merger and the consideration
offered to minority shareholders of the Company be filed with the Commission and
disclosed to such minority shareholders prior to consummation of the Merger.
STATE TAKEOVER LAWS
A number of states (including the State of Georgia in which the Company is
incorporated) have adopted takeover laws and regulations which purport, to
varying degrees, to be applicable to attempts to acquire securities of
corporations which are incorporated in such states or which have substantial
assets, shareholders, principal executive offices or principal places of
business therein. Except as set forth below, neither Parent nor the Purchaser
has not attempted to comply with any state takeover statutes in connection with
the Offer or the Merger. Each of Parent and the Purchaser reserves the right to
challenge the validity or applicability of any state law allegedly applicable to
the Offer or the Merger, and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that it is asserted that one or more takeover statutes apply to the Offer or the
Merger, and it is not determined by an appropriate court that such statute or
statutes do not apply or are invalid as applied to the Offer or the Merger, as
applicable, Parent and/or the Purchaser may be required to file certain
documents with, or receive approvals from, the relevant state authorities, and
Parent and/or the Purchaser might be unable to accept for payment or purchase
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, Parent and/or the Purchaser may not be
obligated to accept for purchase, or pay for, any Shares tendered. See the Offer
to Purchase.
Sections 14-2-1110 through 1132 of the GBCC restrict certain "business
combinations" with an "interested shareholder" (generally, any person who owns
or has the right to acquire 10% or more of the corporation's outstanding voting
stock) of a Georgia corporation that has expressly elected to be governed by
these provisions. The restrictions of Sections 14-2-1110 through 1132 of the
GBCC are inapplicable to the Merger, the Offer and the related transactions
because the Company has not elected to be governed by these provisions.
ANTITRUST
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may be consummated following the expiration of a
15-calendar day waiting period following the filing by Parent of a Notification
and Report Form with respect to the Offer, unless Parent receives a request for
additional information or documentary material from the Antitrust Division of
the Department of Justice (the "Antitrust Division") or the Federal Trade
Commission (the "FTC") or unless early termination of the waiting period is
granted. Parent currently anticipates making such filing on or about May 17,
2000. If, within the initial 15-day waiting period, either the Antitrust
Division or the FTC requests additional information or material from Parent
concerning the Offer, the waiting period will be extended and would expire at
11:59 p.m., Eastern time, on the tenth calendar day after the date of
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Parent. In practice, complying with a request for
additional information or material can take a significant amount of time.
Although the Company is required to file certain information and documentary
material with the Antitrust Division and the FTC in connection with the Offer,
neither the Company's failure to make such filings nor a request to the Company
from the Antitrust Division or the FTC for additional information or documentary
material will extend the waiting period. In addition, if the Antitrust Division
or the FTC raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while such negotiations continue.
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<PAGE> 28
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Purchaser, or of the Company or its subsidiaries. Private parties may also bring
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, of the results thereof.
CANADIAN COMPETITION ACT
The merger provisions of the Canadian Competition Act (the "Competition
Act") permit the Commissioner of Competition appointed thereunder (the
"Commissioner") to apply to the Competition Tribunal (the "Tribunal") to seek
relief in respect of a merger which prevents or lessens, or is likely to prevent
or lessen, competition substantially. The relief that may be ordered by the
Tribunal includes, in the case of a completed merger, ordering a dissolution of
the merger or a disposition of assets or shares, and in the case of a proposed
merger, prohibiting completion of the transaction.
The Competition Act also requires parties to certain proposed mergers which
exceed specified size thresholds to provide the Commissioner with prior notice
of and information relating to the transaction and the parties thereto, and to
await the expiration of the prescribed waiting period, prior to completing the
transaction. In lieu of, or in addition to, filing a prescribed notification
form, which can be either short-form or long-form, and awaiting the expiration
of the prescribed waiting period, a party to a proposed merger may apply to the
Commissioner for an advance ruling certificate ("ARC"), which may be issued by
the Commissioner if he is satisfied he would not have sufficient grounds on
which to apply to the Tribunal for an order under the merger provisions in
respect to the transaction. The Purchaser and the Company will be filing a
short-form pre-merger notification with the Commissioner and applying for an
ARC.
The proposed acquisition may not be completed until 14 days after a
short-form pre-merger notification has been filed with the Commissioner unless
prior to the expiration of that time the Commissioner either (i) gives notice
that he does not intend to make an application to the Tribunal under section 92
of the Competition Act in respect of the proposed acquisition, or (ii) requires
that a long-form pre-merger notification filing be made. If a long-form
pre-merger notification filing is required, the proposed acquisition may not be
completed until 42 days after the long-form filing is made, unless prior to the
expiration of that time the Commissioner gives notice that he does not intend to
make an application the Tribunal under section 92 of the Competition Act in
respect of the proposed acquisition.
In either case, the issuance of an ARC prior to the expiration of the
applicable waiting period terminates the waiting period. An ARC precludes the
Commissioner from applying to the Tribunal for an order in respect of the
proposed transaction solely on the basis of information that is the same or
substantially the same as that upon which the ARC was issued, provided that the
proposed acquisition is substantially completed within one year after the ARC is
issued. There can be no assurance, however, that an ARC will be granted.
There can be no assurance that a challenge to or in respect of the
consummation of the transaction contemplated by the Offer and the Merger on
competition law grounds will not be made either prior to or following the
consummation thereof or that, if such a challenge were made; Guardian Industries
and the Company would prevail or would not be required to accept certain adverse
conditions in order to consummate such transaction or following consummation
thereof.
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<PAGE> 29
INVESTMENT CANADA ACT
The Investment Canada Act is Canada's statute of general application
governing the acquisition of control of Canadian businesses by non-Canadians. An
investment governed by the Investment Canada Act is either notifiable or
reviewable. A notifiable investment is simply one for which the acquiror must
provide notice to the Investment Review Division of Industry Canada ("Investment
Canada") at any time prior to the closing of the investment or within thirty
(30) days thereafter.
A reviewable investment is one for which the acquiror must submit an
application for review with prescribed information to Investment Canada. With
certain limited exceptions relating to the type of business carried on by the
target company, a direct acquisition of a Canadian business by a non-Canadian
that qualifies as a "WTO investor" for purposes of the Act is reviewable only if
the value of the assets acquired is equal to or greater than Cdn $192 million as
set forth in the audited financial statements of the target company for its most
recently completed fiscal period.
Before a reviewable investment may be completed, the Minister of the
federal Cabinet responsible for Investment Canada must determine that the
investment is likely to be of "net benefit to Canada." The Minister has an
initial 45-day period to make his determination from the date of receipt of the
Investment Review Division of a completed application for review. The Minister
may, at his discretion, extend this initial 45-day period for a further thirty
(30) days by giving notice to the prospective acquiror. Any further extensions
require the consent of the acquiror. If at the end of the 75-day period the
Minister is not satisfied that the investment is likely to be of net benefit to
Canada, he must send a notice to that effect to the prospective acquiror, and
the acquiror has thirty (30) days to make representations and submit
undertakings to the Minister in an attempt to change his decision.
The Purchaser does not believe that an application for review will be
necessary and believes that all that will be required is the filing of a notice
thirty (30) days following the closing of the investment.
SECTION 14(f) INFORMATION STATEMENT
The Information Statement attached hereto as Annex B is being furnished in
connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Company's Board of
Directors other than at a meeting of the Company's shareholders.
SHAREHOLDER LITIGATION
The Company and its directors have been named as defendants in three
purported shareholder class actions filed in the Superior Court of Fulton County
in the State of Georgia (collectively, the "Georgia Actions"). The Georgia
Actions are as follows:
- Robin Gregg v. J. Veronica Biggins, Richard L. Cravey, Henry K. Hornish,
Jr., Allen J. Keesler, L.P. Klamon, Walter J. Muratori, Ronald R. Ross,
Alan K. Swift, Edwin A. Whalen, Jr. and Cameron Ashley Building Products,
Inc.; Case No. 2000 CV 18586.
- Richard Meshulum, M.D. v. Cameron Ashley Building Products, Inc., Ronald
R. Ross, Walter J. Muratori, J. Veronica Biggins, Richard L. Cravey,
Harry K. Hornish, Alan K. Swift, Edwin A. Wahlen, Jr. and Lawrence P.
Klamon; Case No. 2000 CV 18793.
- Ran Sharma v. Cameron Ashley Building Products, Inc., Harry K. Hornish,
Walter J. Muratori, Alan Swift, Richard L. Cravey, Allen J. Keesler, Jr.,
J. Veronica Biggins, Ronald R. Ross, Edwin A. Wahlen and Lawrence Klamon;
Case No. 2000 CV 18677.
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<PAGE> 30
The Company and its directors also have been named as defendants in two
purported shareholder class actions filed in the County Court, Dallas County,
Texas (collectively, the "Texas Actions"). The Texas Actions are as follows:
- Anthony Rando v. Cameron Ashley Building Products, Inc., Harry K.
Hornish, Walter J. Muratori, Alan K. Swift, Richard L. Cravey, Allen J.
Keesler, Jr., J. Veronica Biggins, Ronald R. Ross, Edwin A. Wahlen, Jr.
and Lawrence P. Klamon; Case No. 00-0972-D.
- Maxwell Romotsky v. Cameron Ashley Building Products, Inc., Harry K.
Hornish, Walter J. Muratori, Alan K. Swift, Richard L. Cravey, Allen J.
Keesler, Jr., J. Veronica Biggins, Ronald R. Ross, Edwin A. Wahlen, Jr.
and Lawrence P. Klamon; Case No. 00-0971-A
Each of the five actions is similar. The complaints essentially allege that
by entering into the CBP Merger Agreement with the Investment Group, the
defendants were depriving the Company's public shareholders of their equity
interests in the Company at a grossly unfair and inadequate price and were
usurping the Company's growth opportunities and future prospects for the
defendants' own benefit. Each complaint alleges that defendants have breached
fiduciary duties in connection with the CBP Merger Agreement and seeks remedies
in the nature of an injunction against the merger contemplated by the CBP Merger
Agreement, an injunction against the payment of a $5 million termination fee
contained in the CBP Merger Agreement, an order compelling the defendants to
perform their fiduciary duties and an award of damages and attorneys fees in an
unspecified amount.
The plaintiffs' specific allegations include the following:
- That the members of the Special Committee, as well as its advisors and
legal counsel, are not independent and are biased in favor of the
Investment Group over other potential bidders for the Company;
- That the CBP Merger Agreement has given the Investment Group an unfair
advantage over other potential bidders for the Company, and therefore
impaired the bidding process, due to the $5 million termination fee
provision included in the CBP Merger Agreement, the nonsolicitation
covenant and a provision obligating the Company to disclose information
regarding competing bids to the Investment Group;
- That the members of the Board of Directors have acted in their own self
interest by executing the CBP Merger Agreement at an inadequate price and
including a $5 million termination fee provision without conducting an
auction of the Company;
- That the Company's Rights Agreement, which was waived for the CBP Merger
Agreement, further chilled the bidding process and favored the Investment
Group over other potential bidders; and
- That the members of the Board of Directors have further acted in their
self interest, at the expense of the Company's shareholders, by executing
lucrative change of control agreements, stock option agreements and
employment agreements in expectation of a merger.
The Company and the other defendants deny the material allegations of the
complaints and believe that the actions are without merit. The defendants
believe that they have properly fulfilled all fiduciary duties owed to the
shareholders of the Company, and therefore, intend to vigorously defend
themselves against all of the actions.
The Company and the other defendants have filed answers denying the
material allegations in the Texas Actions, but they have not yet filed answers
in the Georgia Actions. On February 24, 2000, the County Court in the Texas
Actions issued a temporary restraining order prohibiting the defendants from (i)
abiding by a nonsolicitation covenant contained in the CBP Merger Agreement,
(ii) making any payment to the Investment Group of a $5 million termination fee
contained in the CBP Merger Agreement and (iii) triggering the Rights Agreement
with respect to any potential bidders who offer $15.10 per Share or more for all
of the outstanding Shares. The court has scheduled a temporary injunction
hearing on June 13, 2000 to determine whether to extend the temporary
restraining order through the date of trial. In accordance with the Dallas
County Court's order, neither the Company nor Parent or the Purchaser has paid
any part of the
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<PAGE> 31
$5 million termination fee under the CBP Merger Agreement, but they may be
required to do so if the temporary restraining order is not extended.
ITEM 9. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(a)(1) -- Text of press release issued by the Company, dated May 1,
2000 (previously filed on Schedule 14D-9 by the Company
on May 1, 2000 and incorporated herein by reference).
(a)(2) -- Opinion of Credit Suisse First Boston Corporation, dated
April 28, 2000 (attached as Annex A hereto).
(a)(3) -- Letter to Shareholders dated May 12, 2000.
(e)(1) -- Agreement and Plan of Merger, dated as of April 28, 2000,
among Parent, the Purchaser and the Company (incorporated
by reference to Exhibit 2.2 to the Current Report on Form
8-K of the Company filed on May 5, 2000).
(e)(2) -- Tender and Option Agreement, dated as of April 28, 2000,
by and between the Purchaser and certain shareholders of
the Company signatory thereto.
(e)(3) -- Confidentiality Agreement, dated February 10, 2000,
between Guardian Industries Corp. and the Company.
(e)(4) -- The Information Statement of the Company, dated May 12,
2000 (attached as Annex B hereto).
</TABLE>
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
CAMERON ASHLEY BUILDING
PRODUCTS, INC.
/s/ JOHN S. DAVIS
Name: John S. Davis
Title: Vice President and General
Counsel
Dated: May 12, 2000
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<PAGE> 33
ANNEX A
CREDIT SUISSE FIRST BOSTON
CORPORATION
227 West Monroe Street
[CSBOSTON LOGO] Chicago, IL 60605-5016
April 28, 2000
Special Committee of the Board of Directors
Board of Directors
Cameron Ashley Building Products, Inc.
11651 Plano Road
Dallas, Texas 75243
Members of the Special Committee of the Board of Directors
and the Board of Directors:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of Cameron Ashley Building Products, Inc. ("Cameron"), other
than Guardian Fiberglass, Inc. ("Guardian") and its affiliates, from a financial
point of view of the Cash Consideration (as defined below) set forth in the
Agreement and Plan of Merger, dated as of April 28, 2000 (the "Merger
Agreement"), by and among Cameron, Guardian and CAB Merger Corp., a wholly owned
subsidiary of Guardian ("Merger Sub"). The Merger Agreement provides for, among
other things, (i) a tender offer by Merger Sub to purchase any and all
outstanding shares of the common stock, no par value, of Cameron (the "Cameron
Common Stock") at a purchase price of $18.35 per share, net to the seller in
cash (the "Cash Consideration" and, such tender offer, the "Tender Offer") and
(ii) subsequent to the Tender Offer, the merger of Merger Sub with and into
Cameron (the "Merger" and, together with the Tender Offer, the "Transaction")
pursuant to which each outstanding share of Cameron Common Stock not acquired in
the Tender Offer will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to
Cameron. We have also reviewed certain other information relating to Cameron,
including financial forecasts, provided to or discussed with us by Cameron, and
have met with the management of Cameron to discuss the business and prospects of
Cameron. We have also considered certain financial and stock market data of
Cameron, and we have compared those data with similar data for other publicly
held companies in businesses similar to Cameron, and we have considered, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Cameron as to
the future financial performance of Cameron. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of Cameron, nor have we been
furnished with any such evaluation or appraisals. Our opinion is necessarily
based upon information available to us, and financial, economic, market and
other conditions as they exist and can be evaluated, on the date hereof.
We have acted as financial advisor to Cameron in connection with the
Transaction and will receive a fee for such services, a significant portion of
which is contingent upon the consummation of the Merger. We also will receive a
fee upon delivery of this opinion. Credit Suisse First Boston and its affiliates
have in the past
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<PAGE> 34
CREDIT SUISSE FIRST BOSTON
[CSBOSTON LOGO] CORPORATION
Special Committee of the Board of Directors
Board of Directors
Cameron Ashley Building Products, Inc.
April 28, 2000
Page 2
provided financial services to Cameron unrelated to the proposed Merger. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of Cameron for their own accounts
and for the accounts of customers and, accordingly, may at any time hold long or
short positions in such securities.
It is understood that this letter is for the information of the Special
Committee of the Board of Directors and the Board of Directors of Cameron in
connection with their evaluation of the Merger, does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to any matter relating to the Merger, and is not to be quoted or
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other document used in connection with the offering
or sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent, except that this letter may be attached in
its entirety as an exhibit to Cameron's Schedule 14D-9 relating to the Tender
Offer.
Based upon and subject to the foregoing, it is our opinion that, as of
April 27, 2000 and as of the date hereof, the Cash Consideration is fair to the
holders of Cameron Common Stock (other than Guardian and its affiliates) from a
financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
CORPORATION
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<PAGE> 35
ANNEX B
CAMERON ASHLEY BUILDING PRODUCTS, INC.
11651 PLANO ROAD
DALLAS, TEXAS 75243
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about May 12, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Statement") of Cameron Ashley Building Products, Inc. (the "Company"). You are
receiving this Information Statement in connection with the possible election of
persons designated by CAB Merger Corp. (the "Purchaser"), a Georgia corporation
and a wholly owned subsidiary of Guardian Fiberglass, Inc., a Delaware
corporation ("Parent"), to a majority of seats on the Board of Directors (the
"Board") of the Company.
Pursuant to an Agreement and Plan of Merger, dated as of April 28, 2000
with Parent and the Purchaser (the "Merger Agreement"), the Purchaser is
required to commence a tender offer to purchase all outstanding shares of common
stock, no par value, of the Company (the "Common Stock"), including the
associated Series A Preferred Stock purchase rights (the "Rights" and, together
with the Common Stock, the "Shares") issued pursuant to the Rights Agreement,
dated as of August 19, 1997, as amended, at a price per Share of $18.35, net to
the seller in cash (less any required withholding taxes), without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 12, 2000, and in the related Letter of
Transmittal (which, together with any amendments and supplements thereto,
collectively constitute the "Offer"). Copies of the Offer to Purchase and the
Letter of Transmittal have been mailed to shareholders of the Company and are
filed as Exhibits (a)(1)(A) and (a)(2)(B) respectively, to the Tender Offer
Statement on Schedule TO (as amended from time to time, the "Schedule TO") filed
by Parent and the Purchaser with the Securities and Exchange Commission (the
"Commission") on May 12, 2000.
The Merger Agreement provides that, subject to the satisfaction or waiver
of certain conditions, following completion of the Offer, and in accordance with
the Georgia Business Corporation Code, the Purchaser will be merged with and
into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation and will be a wholly-owned
subsidiary of Parent. At the effective time (the "Effective Time"), each issued
and outstanding Share (other than Shares held in the treasury of the Company or
by any of its wholly owned subsidiaries, or owned by Parent or the Purchaser or
held by shareholders who perfect and do not withdraw or otherwise lose their
dissenters' rights under Georgia law) will be converted into the right to
receive $18.35 in cash or any greater amount per Share paid pursuant to the
Offer.
The Offer, the Merger and the Merger Agreement are more fully described in
the Schedule 14D-9 to which this Information Statement forms Annex B, which was
filed by the Company with the Commission on May 12, 2000 and which is being
mailed to shareholders of the Company along with this Information Statement.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-1
promulgated thereunder. The information set forth herein supplements certain
information set forth in the Statement. Information set forth herein related to
Guardian Industries Corp., a Delaware corporation ("Guardian Industries"),
Parent, the Purchaser or the Designees (as defined herein) has been provided by
Guardian Industries, Parent and the Purchaser. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action in connection with the matters set forth herein.
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<PAGE> 36
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
12, 2000. The Offer is currently scheduled to expire at 12:00 midnight, Eastern
time, on Friday, June 9, 2000, unless the Purchaser extends it.
The Shares are the only class of equity securities of the Company
outstanding which are entitled to vote at a meeting of the shareholders of the
Company. As of May 11, 2000, there were 8,817,405 Shares issued and outstanding.
RIGHT TO DESIGNATE DIRECTORS; THE DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
acceptance for payment for any Shares by the Purchaser pursuant to the Offer or
the Tender and Option Agreement which represents at least a majority of the
Shares outstanding on a fully-diluted basis on the date of purchase, the
Purchaser will be entitled to designate such number of directors, rounded up to
the next whole number, on the Board as is equal to the product of the total
number of directors then serving on the Board multiplied by the ratio of the
aggregate number of Shares beneficially owned by the Purchaser and any of its
affiliates to the total number of Shares then outstanding (the "Designees"). The
Company has agreed to take all action necessary to cause the Designees to be so
elected or appointed to the Board, including, without limitation, increasing the
size of the Board or, at the Company's election, securing the resignations of
such number of its incumbent directors as are necessary to enable the Designees
to be so elected or appointed to the Board, and will cause the Designees to be
so elected or appointed. At such time, the Company also has agreed to cause
persons designated by the Purchaser to constitute the same percentage, rounded
up to the next whole number, as is on the Board of (i) each committee of the
Board, (ii) each board of directors (or similar body) of each subsidiary of the
Company and (iii) each committee (or similar body) of each such board. In the
event that the Designees are elected to the Board, until the Effective Time, the
Board will have at least two directors who were directors on the date of the
Merger Agreement (the "Company Directors").
Notwithstanding the foregoing, the Merger Agreement provides that,
following the election of the Designees to the Board, after the acceptance for
payment of the Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of the Company Directors is required to (i) amend or terminate
the Merger Agreement by the Company, (ii) exercise or waive any of the Company's
rights, benefits or remedies under the Merger Agreement, (iii) extend the time
for performance of the Purchaser's obligations under the Merger Agreement or
(iv) take any other action by the Board in connection with the Merger Agreement.
The Designees will be selected by the Purchaser from among the individuals
listed below. Each of the following individuals has consented to serve as a
director of the Company if appointed or elected. None of the Designees currently
is a director of, or holds any positions with, the Company. The Purchaser has
advised the Company that, to the best of the Purchaser's knowledge, except as
set forth below, none of the Designees or any of their affiliates beneficially
owns any equity securities or rights to acquire any such securities of the
Company nor has any such person been involved in any transaction with the
Company or any of its directors, executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations of the Commission
other than with respect to transactions among Parent, the Purchaser and the
Company that have been described in the Schedule TO or the Statement.
The name, age, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as Designees
are set forth below. Unless otherwise indicated, each such individual has held
his present position as set forth below for the past five years. Unless
otherwise indicated, each such person is a citizen of the United States and the
business address of each person listed below is 2300 Harmon Road, Auburn Hills,
Michigan 48326.
NAME, AGE, PRINCIPAL OCCUPATION AND HISTORY
David A. Clark, 41, has been Chairman of the Building Products Group of
Guardian Industries since January 2000, and President/Automotive Products Group
of Guardian Industries since July 1999. Prior to that time he was Vice
President/Corporate Finance & Acquisitions and Treasurer of Guardian Industries.
He
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has also served as Chairman of Builder Marts of America, Inc. since May 1999.
Mr. Clark has served as Treasurer of Parent for over five years and also serves
as Director, Chairman and Treasurer of the Purchaser.
Duane Faulkner, 56, has been President and General Manager of Parent for
over five years, and Director of Parent since August 1998. Mr. Faulkner has also
served as President (since August 1998) and Chief Executive Officer (since May
1999) of Builder Marts of America, Inc. Mr. Faulkner also serves as a Director
and President of the Purchaser.
Martin Powell, 47, has been Vice President/Sales & Marketing of Parent for
over five years, and Director of Parent since August 1999; since August 1998, he
has served as Senior Vice President of Builder Marts of America, Inc. Mr. Powell
also serves as a Director of the Purchaser.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Common Stock as of May 11, 2000, by (i) each person (or group
of affiliated persons) who is known by the Company to own beneficially more than
5% of the Common Stock, (ii) each of the Company's directors and named executive
officers and (iii) all directors and executive officers as a group. Unless
otherwise indicated, each shareholder has sole voting and investment power with
respect to the indicated Shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
NAME BENEFICIALLY OWNED CLASS(1)
- ---- ------------------ -----------
<S> <C> <C>
CGW Southeast Partners I, L.P.(2)........................... 938,121 10.8
FMR Corp.(3)................................................ 846,000 9.7
The Prudential Insurance Company of America(4).............. 774,400 8.9
T. Rowe Price Associates, Inc.(5)........................... 666,900 7.6
Dimensional Fund Advisors(6)................................ 651,300 7.5
Barry Segal(7).............................................. 549,400 6.3
Heartland Advisors Inc.(8).................................. 500,000 5.7
Wilen Management Company, Inc.(9)........................... 491,800 5.6
Ronald R. Ross.............................................. 189,335(10) 2.7
Walter J. Muratori.......................................... 292,505(11) 3.4
Garold E. Swan.............................................. 26,390(12) *
C. Steven Gaffney........................................... 129,462(13) 1.5
John S. Davis............................................... 33,983(14) *
Richard L. Cravey(2)........................................ 938,121(15) 10.8
Edwin A. Wahlen, Jr.(2)..................................... 938,121(15) 10.8
J. Veronica Biggins......................................... 9,667(16) *
Harry K. Hornish............................................ 5,667(17) *
Lawrence P. Klamon.......................................... 0 *
Alan K. Swift............................................... 4,500 *
All directors and executive officers as a group (13
persons).................................................. 1,663,733(18) 19.1
</TABLE>
- ---------------
* Represents less than 1% of the outstanding Shares.
(1) Pursuant to the rules of the Commission, Shares that a person has the right
to acquire within 60 days pursuant to the exercise of stock options are
deemed to be outstanding for the purposes of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Based upon a Schedule 13G filed with the Commission on October 15, 1998.
The address of CGW Southeast Partners I, L.P. and the business address of
Messrs. Cravey and Wahlen is Twelve Piedmont Center, Suite 210, Atlanta,
Georgia 30305.
(3) Based upon a Schedule 13G filed with the Commission on February 11, 2000.
The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
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<PAGE> 38
(4) Based upon a Schedule 13G filed with the Commission on January 31, 2000.
The address of The Prudential Insurance Company of America is 751 Broad
Street, Newark, New Jersey 07102-3777. Includes 216,200 Shares for which
Prudential has sole voting power and sole dispositive power or both and
558,200 Shares for which Prudential is deemed to have shared voting power
or shared dispositive power or both.
(5) Based upon a Schedule 13G filed with the Commission on February 2, 2000.
The address of T. Rowe Price Associates Inc. is 100 East Pratt Street,
Baltimore, Maryland 21202.
(6) Based upon a Schedule 13G filed with the Commission on February 3, 2000.
The address of Dimensional Fund Advisors is 1299 Ocean Avenue, Santa
Monica, California 90401.
(7) Includes 2,000 Shares owned by Bradco Supply Corporation. Based upon a
Schedule 13D jointly filed by Barry Segal and Bradco Supply Corporation
with the Commission on February 16, 2000. The address of Barry Segal is c/o
Bradco Supply Corporation, 13 Production Way, Avenel, New Jersey 07001.
(8) Based upon a Schedule 13G filed with the Commission on January 18, 2000.
The address of Heartland Advisors Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(9) Based upon a Schedule 13G filed with the Commission on February 9, 2000.
The address of Wilen Management Company, Inc. is 2360 West Joppa Road,
Greenspring Station, Suite 226, Lutherville, Maryland 21093.
(10) Includes 120,000 Shares subject to options exercisable within 60 days and
370 Shares owned by his children.
(11) Includes 155,003 Shares subject to options exercisable within 60 days.
(12) Includes 20,000 Shares subject to options exercisable within 60 days.
(13) Includes 37,794 Shares subject to options exercisable within 60 days.
(14) Includes 33,443 Shares subject to options exercisable within 60 days.
(15) As managing directors of the corporate general partner of CGW Southeast
Partners I, L.P. and of CGW Southeast Management Company, Messrs. Cravey
and Wahlen share voting and investment power with respect to the Shares
owned of record by CGW Southeast Partners I, L.P. and are, therefore,
deemed to be the beneficial owners of such Shares.
(16) Includes 7,667 Shares subject to options exercisable within 60 days.
(17) Includes 5,667 Shares subject to options exercisable within 60 days.
(18) Includes a total of 412,913 Shares subject to options exercisable within 60
days.
BOARD OF DIRECTORS
TERMS OF DIRECTORS
The directors of the Company are divided into three classes. At each annual
meeting, the term of one class expires. Directors in each class serve three-year
terms.
DIRECTOR INFORMATION
The following information relates to the current directors of the Company.
J. Veronica Biggins, 53, has been a director of the Company since October
1996. She is a partner with the executive search firm Heidrick & Struggles,
specializing in senior management recruitment where she has been employed since
February 1995. Previously, Ms. Biggins served as Assistant to the President of
the United States and Director of Presidential Personnel from January 1994 to
February 1995. Prior thereto, she was with NationsBank for 20 years serving in
various positions including Executive Vice President for Corporate Community
Relations. Ms. Biggins also serves on the board of directors for Avnet, Inc. and
National Data Corporation.
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<PAGE> 39
Richard L. Cravey, 55, has been a director of the Company since 1994. Mr.
Cravey has served as a Managing Director of Cravey, Green & Wahlen, Incorporated
since 1985, as a Managing Director of CGW Southeast Management Company since
1991, and as a Managing Director of CGW Southeast I, Inc., the general partner
of CGW Southeast Partners I, L.P. since 1991. CGW Southeast Partners I, L.P. is
an affiliate of the Company. Mr. Cravey also is a Managing Director of CGW
Southeast IV, Inc., the general partner of CGW Southeast Partners IV, L.P. Mr.
Cravey is also a director of AMRESCO, INC.
Harry K. Hornish, 54, has been a director of the Company since October
1996. He is President and Chief Operating Officer of the Distribution Group of
United States Filter Corporation, a manufacturer and distributor of water and
sewer related products and systems. From November 1991 to October 1996, Mr.
Hornish was President and Chief Executive Officer of The Utility Supply Group,
Inc. prior to its sale to United States Filter in October 1996. He served as
Vice President and General Manager of the Cameron Wholesale Division of
CertainTeed Corporation prior to its purchase by CGW Southeast Partners I, L.P.
in November 1991.
Lawrence P. Klamon, 63, has been a director of the Company since September
1999. Mr. Klamon is a private investor. He served as President and Chief
Executive Officer of Fuqua Enterprises, Inc., an Atlanta based, New York Stock
Exchange listed medical products company from 1995 until the sale of that
company in 1997. Prior thereto, Mr. Klamon was senior counsel to Alston & Bird,
an Atlanta law firm, from 1991 to 1995. From 1967 to 1991, Mr. Klamon served in
a variety of capacities, most recently as Chairman of the Board of Fuqua
Industries, a Fortune 500 diversified holding company.
Walter J. Muratori, 56, has been a director of the Company since 1994. Mr.
Muratori has served as Vice Chairman and Chief Operating Officer of the Company
since March 1998, as President of the Company since February 1994 and as
President of Wm. Cameron & Co. since June 1997. He also served as Chairman of
the Board of Ashley Aluminum L.L.C. ("Ashley"), formerly Ashley Aluminum, Inc.,
a subsidiary of the Company from June 1997 until its conversion to a limited
liability company in November 1998. He previously served as President of Ashley
from October 1991 to June 1997. From 1989 to 1991, Mr. Muratori served as
President of Building Products, Inc., a division of Florida Progress Corporation
and the parent of Ashley. From 1970 to 1986, Mr. Muratori held various sales and
management positions at Ashley.
Ronald R. Ross, 47, has been a director of the Company since 1994. Mr. Ross
has served as Chief Executive Officer of the Company since September 1996, as
Chairman of the Board of the Company since February 1994 and as Chairman of the
Board and Chief Executive Officer of Wm. Cameron & Co., a subsidiary of the
Company, since November 1996. From December 1991 to June 1997, he served as
President of Cameron. Mr. Ross was Vice President, Operations of the Cameron
Wholesale division of CertainTeed Corporation, a building products manufacturer,
from September 1987 to September 1991 and served as Vice President and General
Manager of the division until its sale in December 1991.
Alan K. Swift, 49, has been a director of the Company since October 1997.
Mr. Swift is Chairman of the Board of Field Marketing, Inc., a provider of
merchandising and other in-field marketing services to national manufacturers
and consumer goods companies. From May 1998 to June 1999 he served as Chairman
of A-Three Services Agency, Ltd., a national fulfillment company specializing in
promotional materials handling and database/direct marketing. From 1994 to May
1998, he served as Chief Executive Officer of Field Marketing. Field Marketing
is a subsidiary of the Company. See "Related Party Transactions; Compensation
Committee Interlocks and Insider Participation". He also was Chairman and Chief
Executive Officer of Promotional Marketing, Inc., a marketing services company
headquartered in Chicago, Illinois, from 1982 to 1994.
Edwin A. Wahlen, Jr., 52, has been a director of the Company since August
1996. He has served as a Managing Director of Cravey, Green & Wahlen
Incorporated since 1985, as Managing Director of its investment management
affiliate, CGW Southeast Management Company since 1991, and as a Managing
Director of CGW Southeast I, Inc., the general partner of CGW Southeast Partners
I, L.P. since 1991. CGW Southeast Partners I, L.P. is an affiliate of the
Company. Mr. Wahlen also is a Managing Director of CGW Southeast IV, Inc., the
general partner of CGW Southeast Partners IV, L.P.
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<PAGE> 40
FORMER DIRECTORS
Allen J. Keesler, Jr., a director of the Company since August 1996,
resigned from the Board on May 21, 1999. After Mr. Keesler's resignation, the
Board reduced the number of director positions from nine to eight.
Donald S. Huml, a director of the Company since 1994, resigned from the
Board on August 27, 1999. Mr. Klamon was appointed to fill the vacancy occurring
in the Board by Mr. Huml's resignation.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board has established standing executive, audit and compensation
committees. The Company does not have a standing nominating committee.
Executive Committee. The executive committee, which is comprised of Messrs.
Cravey, Ross and Muratori, generally may exercise the authority of the Board, to
the extent permitted by law, in the management of the Company between meetings
of the Board. During fiscal 1999, the executive committee did not meet.
Audit Committee. The audit committee, which is comprised of Messrs. Hornish
and Klamon is responsible for recommending independent auditors, reviewing the
scope and results of the audit engagement with the independent auditors and
establishing and monitoring the Company's financial policies and control
procedures. Mr. Klamon was appointed to the audit committee on December 14, 1999
to replace Mr. Huml. During fiscal 1999, the audit committee met four times.
Compensation Committee. The compensation committee, which is comprised of
Mr. Cravey and Ms. Biggins, is responsible for establishing salaries, bonuses
and other compensation for the executive officers and for administering the
stock incentive plans. Mr. Cravey was appointed to the compensation committee on
January 1, 1999. During fiscal 1999, the compensation committee met four times.
The Board functions as the nominating committee to select management's
nominees for election as directors.
During fiscal 1999, the Board met four times. Each director, during the
period he or she was a director, attended at least 75% of the meetings of the
Board and at least 75% of the total number of meetings of all of the committees
on which he or she served.
RELATED PARTY TRANSACTIONS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Richard L. Cravey and Edwin A. Wahlen, Jr. are each managing directors of
CGW Southeast Management Company. CGW Southeast Management Company, an affiliate
of CGW Southeast Partners I, L.P., was previously a party to a consulting
agreement with the Company which expired on December 20, 1998. Under the
agreement, the Company paid a monthly retainer fee to CGW Southeast Management
Company for financial and management consulting services. CGW Southeast
Management Company also was eligible to receive additional compensation, if
approved by the Board at the end of the fiscal year, based upon the overall
performance of the Company and its subsidiaries. The aggregate monthly fees paid
by the Company in fiscal 1999 were $72,000. No additional compensation was paid
at fiscal year-end. The consulting agreement was not renewed or replaced by any
similar arrangement.
Mr. Cravey and Mr. Wahlen each hold a one-third interest in the CGW
Southeast Management Company, a one-third interest in the corporate general
partner of CGW Southeast Partners I, L.P. that made a 1% investment in CGW
Southeast Partners I, L.P., and a one-third interest in Le Select, a Georgia
general partnership and limited partner of CGW Southeast Partners I, L.P. that
owns a 5.33% limited partnership interest in CGW Southeast Partners I, L.P.
Messrs. Cravey and Wahlen also are managing directors of CGW Southeast I, Inc.
and of CGW Southeast Management Company.
Alan K. Swift is Chairman of the Board and a minority shareholder of Field
Marketing, a subsidiary of the Company. Mr. Swift, Field Marketing and the
Company are parties to a stock purchase and option agreement dated October 31,
1997 pursuant to which the Company purchased a one-third equity interest in
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<PAGE> 41
the common stock of Field Marketing for $2,640,000. In addition, the Company
granted Mr. Swift and the other shareholders of Field Marketing "put" options
for their remaining shares of Field Marketing common stock. Under the "put"
options, the shareholders of Field Marketing may elect during specified options
periods in each fiscal year until October 31, 2001 to require the Company to
purchase their Field Marketing shares at a price based upon the financial
performance of Field Marketing. Mr. Swift exercised put options for an aggregate
exercise price of $813,000 in February 1999. The Company currently owns
approximately 70% of Field Marketing.
Mr. Swift did not serve on the compensation committee during fiscal 1999.
Mr. Cravey was appointed to the compensation committee effective January 1, 1999
after expiration of the consulting agreement in December 1998.
Ms. Biggins, who is a member of the compensation committee, is a partner of
Heidrick & Struggles, which firm provided retained executive recruitment
services to the Company in fiscal 1999. The amount paid by the Company for such
services did not exceed 5% of consolidated gross revenues of either the Company
or Heidrick & Struggles in fiscal 1999.
DIRECTOR COMPENSATION
Members of the Board who are not officers or employees of the Company or
its subsidiaries, are eligible to receive annual aggregate compensation equal to
$25,000 (plus an additional $1,000 per meeting for each meeting attended in
excess of four meetings per year) in a combination of monthly retainers, meeting
fees and optional equity-based awards. All of these fees are paid in a lump sum
at the end of the fiscal year. Each outside director receives a monthly retainer
of $1,000 and a fee of $1,000 for each Board or committee meeting attended plus
reimbursement for expenses incurred in serving as directors. Outside directors
are also eligible to receive, at the end of each fiscal year, an award of 1,000
stock options under the Company's stock incentive plan at a discount to market
value on the date of grant with a total value of $9,000. These options vest in
full on the one year anniversary of the date of grant. Each outside director may
elect to receive the total of monthly and meeting fees in the form of additional
discounted stock options under the Company's stock incentive plan in lieu of
cash.
Upon the expiration of the consulting agreement in December 1998, Mr.
Cravey and Mr. Wahlen became eligible to receive compensation for service as
outside directors of the Company for fiscal 1999.
At its meeting in December 1999, the compensation committee approved
management's proposal to pay all outside director compensation for fiscal 1999
in cash in lieu of equity-based awards. The Company paid the following cash
amounts to outside directors in 1999: Mr. Hornish, $25,000; Ms. Biggins,
$26,000; Mr. Cravey, $25,000; Mr. Wahlen, $25,000; and Mr. Klamon, $11,000.
The Company paid four of the outside directors additional compensation for
serving on a special committee of the Board. This committee was formed in
December 1998 to evaluate a proposal by an investment group, which included
members of the Company's management, to acquire the Company. The proposed
transaction was not completed. This special committee completed its work in
March 1999. The Company paid the following amounts to the members of this
special committee: $15,000 to Mr. Huml, as Chairman, and $10,000 each to Mr.
Hornish, Mr. Keesler and Ms. Biggins.
The Board has approved the Company paying $75,000 to Mr. Klamon, as
Chairman, and $25,000 to Ms. Biggins, for their services as members of the
special committee in negotiation of the Merger Agreement.
B-7
<PAGE> 42
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are Mr. Ross and Mr. Muratori, who
are identified above, Garold E. Swan, C. Steven Gaffney, Kirk Black, John S.
Davis and Thomas R. Miller.
Garold E. Swan, 47, has served as Executive Vice President -- Chief
Financial Officer and Treasurer of the Company and Wm. Cameron & Co. since April
1999. Prior to joining the Company, Mr. Swan served as Senior Vice President and
Chief Financial Officer of PC Service Source, Inc., a personal computer service
logistics provider, in 1998. From 1988 to 1997, Mr. Swan was employed by
Fibreboard Corporation, serving as Vice President and Controller from 1988 to
1996 and as Vice President of Finance from 1996 through that company's
acquisition by Owens Corning in 1997. Mr. Swan was employed by Arthur Andersen,
LLP from 1977 to 1988.
C. Steven Gaffney, 51, has served as Executive Vice President of the
Company since 1994 and as President of Ashley division since June 1997. Mr.
Gaffney was Executive Vice President of Ashley from 1991 to June 1997. He
previously served as President of Ashley from 1989 to 1991 and as its Vice
President from 1986 to 1989.
Kirk Black, 38, has served as Executive Vice President and Chief
Information Officer of the Company and Wm. Cameron & Co. since June 1999. Mr.
Black was a Senior Consultant with IBM Corporation from 1997 to 1999 focusing on
ERP and E-Commerce implementation initiatives. He served as Director of Supply
Chain Systems for Paging Network, Inc., a paging and wireless service company,
from 1995 to 1997. Mr. Black was employed by Andersen Consulting, LLP from 1983
to 1995.
John S. Davis, 43, has served as Vice President -- General Counsel and
Secretary of the Company since August 1994. Prior to joining the Company, he was
employed as Associate Counsel -- Mergers and Acquisitions of Electronic Data
Systems Corporation (EDS) from 1990 to August 1994. Mr. Davis was engaged in
private legal practice prior to 1990.
Thomas R. Miller, 50, has served as Vice President -- Human Resources of
the Company since December 1994. From 1980 until December 1994, Mr. Miller
served as Managing Director of Employee Relations for American Airlines, Inc.
B-8
<PAGE> 43
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table summarizes compensation with respect to the fiscal
years 1997, 1998 and 1999 earned by or paid to or accrued for the chief
executive officer and the other four most highly compensated executive officers
during fiscal 1999. J. Andrew Kerner, the former Executive Vice President and
Chief Financial Officer, who resigned in March 1999 is included as a named
executive officer for fiscal 1999. The Company did not grant any restricted
stock awards or stock appreciation rights or make any long-term incentive
payouts during fiscal 1997, 1998 or 1999. The named executive officers in the
following tables were officers of the Company and Wm. Cameron & Co. or Ashley
during fiscal 1997, 1998 and 1999 and were compensated by such companies for
service in such capacities in the amounts set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- SECURITIES ALL OTHER
UNDERLYING COMPENSATION
FISCAL SALARY BONUS OPTIONS ------------
NAME AND CURRENT POSITION YEAR ($) ($) (#) $
- ------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Ronald R. Ross............................. 1999 391,731 258,240 60,179 4,800(1)
Chairman of the Board & 1998 295,192 181,600 0 4,800(1)
Chief Executive Officer 1997 275,000 209,575 0 4,763(1)
Walter J. Muratori......................... 1999 332,987 223,840 41,185 16,232(2)
Vice Chairman, President & 1998 251,141 164,640 0 18,297(2)
Chief Operating Officer 1997 233,872 220,050 0 13,627(2)
C. Steven Gaffney.......................... 1999 175,526 165,312 0 16,350(2)
Executive Vice President, 1998 163,318 105,600 50,000 15,223(2)
President -- Ashley Division 1997 137,818 123,240 6,994 12,398(2)
Garold E. Swan............................. 1999 121,154 44,100 100,000 0
Executive Vice President -- 1998 0 0 0 0
Chief Financial Officer(3) 1997 0 0 0 0
J. Andrew Kerner........................... 1999 99,203 0 40,000 0
Former Executive Vice President and 1998 124,038 48,411 100,000 0
Chief Financial Officer(4) 1997 0 0 0 0
John S. Davis.............................. 1999 171,298 55,360 30,000 4,800(1)
Vice President, General Counsel & 1998 160,000 48,400 0 4,800(1)
Secretary 1997 120,000 50,000 33,443 3,948(1)
</TABLE>
- ---------------
(1) Represents Wm. Cameron & Co.'s matching contribution under its 401(k) Plan.
(2) Represents Ashley's matching contribution under its 401(k) Plan and
contributions to the Ashley profit sharing plan.
(3) Mr. Swan joined the Company in April 1999.
(4) Mr. Kerner joined the Company in April 1998 and resigned in March 1999.
B-9
<PAGE> 44
EMPLOYEE STOCK OPTIONS
The Company's incentive plans provide for the grant of awards in the form
of non-qualified stock options, incentive stock options, stock appreciation
rights and shares of restricted stock as well as several types of equity-based
incentive compensation awards including performance units, performance shares,
phantom stock, unrestricted bonus stock and dividend equivalent rights. All
officers and several key employees of the Company and its subsidiaries,
approximately 150 persons, are eligible to participate in the incentive plans.
Set forth below is information relating to grants of options to purchase Shares
made to the named executive officers in fiscal 1999 under the incentive plans.
The Company did not grant any incentive stock options, stock appreciation rights
or restricted stock during fiscal 1999.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR OPTION TERM
OPTIONS GRANTED TO EXERCISE OR --------------------------------------
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION
NAME # FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ronald R. Ross............. 41,235 6.9 11.81 5/25/09 306,262 776,129
18,944 3.2 2.95 5/25/09 308,546 524,410
Walter J. Muratori......... 28,220 4.7 11.81 5/25/09 209,597 531,160
12,965 2.2 2.95 5/25/09 211,164 358,898
C. Steven Gaffney.......... 0 -- -- -- -- --
Garold E. Swan............. 100,000 16.8 13.00 4/12/09 817,563 2,071,865
J. Andrew Kerner........... 40,000 6.7 13.00 Cancelled -- --
John S. Davis.............. 30,000 5.0 13.00 10/29/07 212,713 522,912
</TABLE>
- ---------------
(1) These options become exercisable in equal installments over a three- to
five-year period. In the event of a change of control, the options listed
above become immediately exercisable.
(2) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned Shares or by offset of the underlying
Shares, subject to restrictions.
The following table presents information regarding the value realized
through stock option exercises during fiscal 1999 and the value of unexercised
options held by the named executive officers at October 31, 1999. There were no
incentive stock options, stock appreciation rights or restricted stock
outstanding during fiscal 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED OPTIONS
UNEXERCISED OPTIONS IN-THE-MONEY AT
SHARES AT FY-END (#) FY-END(1)
ACQUIRED --------------------- -------------------
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME # REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------------------- -------------------
<S> <C> <C> <C> <C>
Ronald R. Ross........................ 0 0 120,000/140,180 0/107,507
Walter J. Muratori.................... 0 0 155,003/ 81,186 726,306/ 73,576
C. Steven Gaffney..................... 0 0 37,794/ 30,000 82,566/ 0
Garold E. Swan........................ 0 0 0/100,000 0/ 0
J. Andrew Kerner...................... 0 0 0/ 0 0/ 0
John S. Davis......................... 0 0 33,443/ 10,000 0/ 0
</TABLE>
- ---------------
(1) Dollar values were calculated by determining the difference between the
closing sale price of the Common Stock on October 29, 1999 of $8.625 per
Share and the exercise price of such options.
B-10
<PAGE> 45
EMPLOYMENT AGREEMENTS
Mr. Ross is party to an employment agreement with the Company dated May 25,
1999. This agreement replaced, superseded and extended the term of a prior
agreement dated September 1, 1996 between Mr. Ross and Wm. Cameron & Co. Mr.
Ross' agreement provides for his employment by the Company for a period of four
years commencing on May 25, 1999 or until earlier termination upon (i) death or
disability; (ii) cause, as defined in the agreement; (iii) 90-days' prior
written notice to the Company by Mr. Ross; (iv) immediate written notice by the
Company to Mr. Ross; or (v) mutual agreement between Mr. Ross and the Company.
Mr. Ross' agreement provides for a minimum base salary of $460,000, subject to
periodic review and discretionary increase by the Board; eligibility for an
annual cash performance bonus in an amount up to 100% of base salary for the
applicable year based on attainment of performance objectives established by the
Board in good faith; and a grant of stock options effective as of the date
thereof in accordance with the Company's long-term incentive compensation
program. Mr. Ross is also entitled to reimbursement of reasonable business
expenses and to participate in all employee benefit plans for which he is
eligible. Upon termination of Mr. Ross' employment for any reason except the
Company's termination without cause, Mr. Ross will be paid only his earned but
unpaid base salary as of the date of termination. If the Company terminates Mr.
Ross without cause, Mr. Ross will be entitled to receive severance pay equal to
(a) his then current annualized base salary for a period of 12 months plus (b)
the average of the annual bonus actually paid to or accrued for him for the two
most recent fiscal years ended prior to the date of termination, paid over 12
months. The agreement also contains noncompetition and nonsolicitation covenants
covering the term of the agreement plus one year following termination.
Mr. Muratori is party to an employment agreement with the Company dated May
25, 1999. This agreement replaced, superseded and extended the term of a prior
agreement dated December 20, 1991, between Mr. Muratori and Ashley. Mr.
Muratori's agreement provides for his employment by the Company for a period of
four years commencing on May 25, 1999 or until earlier termination upon (i)
death or disability; (ii) cause, as defined in the agreement; (iii) 90-days'
prior written notice to the Company by Mr. Muratori; (iv) immediate written
notice to Mr. Muratori by the Company; or (v) mutual agreement between Mr.
Muratori and the Company. Mr. Muratori's agreement provides for a minimum base
salary of $340,000, subject to periodic review and discretionary increase by the
Board; eligibility for an annual cash performance bonus in an amount up to 100%
of base salary for the applicable year based on attainment of performance
objectives established by the Board in good faith; and a grant of stock options
effective as of the date thereof in accordance with the Company's long-term
incentive compensation program. Mr. Muratori is also entitled to reimbursement
for reasonable business expenses and to participate in all employee benefit
plans for which he is eligible. Upon termination of Mr. Muratori's employment
for any reason except the Company's termination without cause, Mr. Muratori will
be paid only his earned but unpaid based salary as of the date of termination.
If the Company terminates Mr. Muratori without cause, Mr. Muratori will be
entitled to receive severance pay equal to (a) his then current annualized base
salary for a period of 12 months plus (b) the average of the annual bonus
actually paid to or accrued for him for the two most recent fiscal years ended
prior to the date of termination, paid over 12 months. The agreement also
contains noncompetition and nonsolicitation covenants covering the term of the
agreement plus one year from the date of termination.
Mr. Gaffney is party to an employment agreement with Ashley dated December
1, 1997. Mr. Gaffney's agreement provides for his employment by Ashley for a
period of three years commencing on December 1, 1997 or until earlier
termination upon (i) death or disability; (ii) cause, as defined in the
agreement; (iii) 90-days' prior written notice to Ashley by Mr. Gaffney; (iv)
immediate written notice to Mr. Gaffney by Ashley; or (v) mutual agreement
between Mr. Gaffney and Ashley. Mr. Gaffney's agreement provides for a minimum
base salary of $160,000, subject to periodic review and discretionary increase
by Ashley; eligibility for an annual cash performance bonus in an amount of up
to 100% of base salary for the applicable year based on attainment of
performance objectives established by the board of directors of Ashley and the
Board in good faith; and a grant of stock options for 50,000 Shares and an
additional grant of options at the end of the term thereof in the discretion of
the Board. Mr. Gaffney also is entitled to reimbursement for reasonable business
expenses and to participate in all employee benefit plans for which he is
eligible. Upon termination of Mr. Gaffney's employment for any reason except
Ashley's termination without cause, Mr. Gaffney will be paid
B-11
<PAGE> 46
only his earned but unpaid base salary as of the date of termination. If Ashley
terminates Mr. Gaffney without cause, Mr. Gaffney will be entitled to receive
severance pay equal to his then current annualized base salary for a period of
12 months, paid over 12 months. The agreement also contains noncompetition and
nonsolicitation covenants covering the term of the agreement plus one year from
the date of termination.
Mr. Swan is a party to an employment agreement with Wm. Cameron & Co. dated
April 12, 1999. Mr. Swan's agreement provides for his employment by Wm. Cameron
& Co. for a period of three years commencing on April 12, 1999 or until earlier
termination upon (i) death or disability; (ii) cause, as defined in the
agreement; (iii) 90-days' prior written notice to Wm. Cameron & Co. by Mr. Swan;
(iv) immediate written notice to Mr. Swan by Wm. Cameron & Co.; or (v) mutual
agreement between Mr. Swan and Wm. Cameron & Co. Mr. Swan's agreement provides
for a minimum base salary of $225,000, subject to periodic review and
discretionary increase by the Company; eligibility for an annual cash
performance bonus in an amount of up to 60% of base salary for the applicable
year based on attainment of performance objectives established by the Board in
good faith; and a grant of stock options for 100,000 Shares. Mr. Swan is also
entitled to reimbursement for reasonable business expenses and to participate in
all employee benefit plans for which he is eligible. Upon termination of Mr.
Swan's employment for any reason except Wm. Cameron & Co's termination without
cause, Mr. Swan will be paid only his earned but unpaid base salary as of the
date of termination. If Wm. Cameron & Co. terminates Mr. Swan without cause, Mr.
Swan will be entitled to receive severance pay equal to his then current
annualized base salary for a period of 12 months, paid over 12 months. The
agreement also contains noncompetition and nonsolicitation covenants covering
the term of the agreement plus one year from the date of termination.
Mr. Davis is party to an employment agreement with Wm. Cameron & Co. dated
October 13, 1997. Mr. Davis' agreement provides for his employment by Wm.
Cameron & Co. for a period of three years commencing on October 13, 1997 or
until earlier termination upon (i) death or disability; (ii) cause, as defined
in the agreement; (iii) 90-days' prior written notice to Wm. Cameron & Co. by
Mr. Davis; (iv) immediate written notice to Mr. Davis by Wm. Cameron & Co.; or
(v) mutual agreement between Mr. Davis and Wm. Cameron & Co. Mr. Davis'
agreement provides for a minimum base salary of $160,000, subject to periodic
review and discretionary increase by Wm. Cameron & Co.; eligibility for an
annual cash performance bonus in an amount of up to 60% of base salary for the
applicable year based on attainment of performance objectives established by the
board of directors of Wm. Cameron & Co. and the Board in good faith; and a grant
of stock options for 30,000 Shares. Mr. Davis is also entitled to reimbursement
for reasonable business expenses and to participate in all employee benefit
plans for which he is eligible. Upon termination of Mr. Davis' employment for
any reason except Wm. Cameron & Co.'s termination without cause, Mr. Davis will
be paid only his earned but unpaid base salary as of the date of termination. If
Wm. Cameron & Co. terminates Mr. Davis without cause, Mr. Davis will be entitled
to receive severance pay equal to his then current annualized base salary for a
period of 12 months, paid over 12 months. The agreement also contains
noncompetition and nonsolicitation covenants covering the term of the agreement
plus one year from the date of termination.
Mr. Black is a party to an employment agreement with Wm. Cameron & Co.
dated June 1, 1999. Mr. Black's agreement provides for his employment by Wm.
Cameron & Co. for a period of five years commencing on June 1, 1999 or until
earlier termination upon (i) death or disability; (ii) cause, as defined in the
agreement; (iii) 90-days' prior written notice to Wm. Cameron & Co. by Mr.
Black; (iv) immediate written notice to Mr. Black by Wm. Cameron & Co.; or (v)
mutual agreement between Mr. Black and Wm. Cameron & Co. Mr. Black's agreement
provides for a minimum base salary of $200,000, subject to periodic review and
discretionary increase by the Company; eligibility for an annual cash
performance bonus in an amount of up to 60% of base salary for the applicable
year based on attainment of performance objectives established by the Board in
good faith; and a grant of stock options for 30,000 Shares. Mr. Black is also
entitled to reimbursement for reasonable business expenses and to participate in
all employee benefit plans for which he is eligible. Upon termination of Mr.
Black's employment for any reason except Wm. Cameron & Co's termination without
cause, Mr. Black will be paid only his earned but unpaid base salary as of the
date of termination. If Wm. Cameron & Co. terminates Mr. Black without cause,
Mr. Black will be entitled to receive severance pay equal to his then current
annualized base salary for a period of 12 months, paid over 12 months.
B-12
<PAGE> 47
The agreement also contains noncompetition and nonsolicitation covenants
covering the term of the agreement plus one year from the date of termination.
Mr. Miller is a party to an employment agreement with Wm. Cameron & Co.
dated September 1, 1999. Mr. Miller's agreement provides for his employment by
Wm. Cameron & Co. for a period of five years commencing on September 1, 1999 or
until earlier termination upon (i) death or disability; (ii) cause, as defined
in the agreement; (iii) 90-days' prior written notice to Wm. Cameron & Co. by
Mr. Miller; (iv) immediate written notice to Mr. Miller by Wm. Cameron & Co.; or
(v) mutual agreement between Mr. Miller and Wm. Cameron & Co. Mr. Miller's
agreement provides for a minimum base salary of $157,500, subject to periodic
review and discretionary increase by the Company; and eligibility for an annual
cash performance bonus in an amount of up to 60% of base salary for the
applicable year based on attainment of performance objectives established by the
Board in good faith. Mr. Miller is also entitled to reimbursement for reasonable
business expenses and to participate in all employee benefit plans for which he
is eligible. Upon termination of Mr. Miller's employment for any reason except
Wm. Cameron & Co's termination without cause, Mr. Miller will be paid only his
earned but unpaid base salary as of the date of termination. If Wm. Cameron &
Co. terminates Mr. Miller without cause, Mr. Miller will be entitled to receive
severance pay equal to his then current annualized base salary for a period of
12 months, paid over 12 months. The agreement also contains noncompetition and
nonsolicitation covenants covering the term of the agreement plus one year from
the date of termination.
CHANGE OF CONTROL AGREEMENTS
Mr. Ross and Mr. Muratori are parties to change of control agreements with
the Company dated June 1, 1999 (replacing and superseding prior agreements dated
June 1, 1996). Mr. Swan, Mr. Gaffney, Mr. Davis and Mr. Miller are parties to
change of control agreements with the Company dated October 25, 1999. These
agreements become effective upon a "change of control", as defined in the change
of control agreements, and remain in effect for a period of five years
thereafter. Upon a change of control, the employment agreements of Mr. Ross, Mr.
Muratori, Mr. Gaffney, Mr. Swan, Mr. Davis and Mr. Miller would be automatically
superseded by the change of control agreements and the terms of their employment
with the Company would be governed thereby.
Under the change of control agreements, each executive is provided a base
salary equal to a 12-month annualized amount of the highest monthly base salary
paid to such executives during the preceding 12-month period. They are also
entitled to receive a guaranteed bonus in cash equal to their highest bonus
under existing bonus plans for the last three full fiscal years prior to the
effective date. Each executive would be entitled to participate in all incentive
plans, fringe benefits, vacation and expense reimbursement policies as in effect
with respect to the Company prior to the change of control.
The change of control agreements provide remedies to the executive in the
event his employment is terminated during the employment period initiated by the
change of control. If the executive is terminated for "cause", as defined in the
change of control agreements, he is entitled only to salary and benefits accrued
through the date of termination. If terminated without cause or if the executive
resigns for "good reason", as defined in the change of control agreements, he is
entitled to severance benefits. Such benefits would consist of (i) unpaid base
salary through the termination date; (ii) bonus earned through the termination
date; (iii) any unpaid deferred compensation and accrued vacation pay; (iv)
three times annual base salary and annual bonus (two years in the case of Mr.
Gaffney, Mr. Swan, Mr. Davis and Mr. Miller); (v) three years extra credit
toward retirement plan benefits (two years in the case of Mr. Gaffney, Mr. Swan,
Mr. Davis and Mr. Miller); (vi) three years continued coverage under welfare
plans (two years in the case of Mr. Gaffney, Mr. Swan, Mr. Davis and Mr.
Miller); and (vii) any other unpaid benefits to which the executive is entitled.
The change of control agreements also provide for the payment of accrued salary,
bonus and benefits in the event of the death or disability of the executives.
The severance payments owed to the executive are further subject to adjustment
to mitigate the impact on the Company and on the executive of Sections 280G,
dealing with the limitation on deductibility of so-called excess "parachute"
payments, and 4999, dealing with excise taxes payable by the recipient of
"parachute" payments, of the Internal Revenue Code of 1986, as amended,
applicable to such payments.
B-13
<PAGE> 48
In addition, on January 18, 2000, the Company committed to pay a special
bonus in lieu of stock option awards to Thomas R. Miller and John S. Davis of
$75,000 each in conjunction with the completion of a buyout transaction.
INDEMNIFICATION AGREEMENTS
Each of the directors and the named executive officers is a party to an
indemnification agreement with the Company under which the Company has granted
to each named executive officer rights of indemnification and, under some
circumstances, mandatory indemnification, permissible under the provisions of
the Company's articles of incorporation and bylaws and the Georgia Business
Corporation Code. The indemnification is applicable to expenses, liabilities and
other costs actually and reasonably incurred or suffered by these persons in
connection with any threatened, pending or completed action, suit or proceeding
to which they are made a party because they were an officer or director of the
Company, provided that they have met the requisite standard of conduct
established by the indemnification agreement and applicable law.
SECTION 16(a) BENEFICIAL OWNER REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of the Common
Stock, to file reports of ownership and changes in ownership of such securities
with the Commission and the National Association of Securities Dealers, Inc.
Officers, directors and beneficial owners of more than 10% of the Common Stock
are required by applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from some of the reporting persons that no
Forms 5 were required, the Company believes that during fiscal 1999 all persons
subject to the reporting requirements with regard to the Common Stock complied
with all applicable filing requirements, except that each of Mr. Ross, Mr. Davis
and Mr. Miller filed a Form 5 late for the fiscal year ended October 31, 1999
relating to employee stock purchase plan transactions, each because of technical
software problems in connection with the preparation of such forms.
B-14
<PAGE> 49
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(a)(1) -- Text of press release issued by the Company, dated May 1,
2000 (previously filed on Schedule 14D-9 by the Company
on May 1, 2000).
(a)(2) -- Opinion of Credit Suisse First Boston Corporation, dated
April 28, 2000 (attached as Annex A hereto).
(a)(3) -- Letter to Shareholders dated May 12, 2000.
(e)(1) -- Agreement and Plan of Merger, dated as of April 28, 2000,
among Parent, the Purchaser and the Company (incorporated
by reference to Exhibit 2.2 to the Current Report on Form
8-K of the Company filed on May 5, 2000).
(e)(2) -- Tender and Option Agreement, dated as of April 28, 2000,
by and between the Purchaser and certain shareholders of
the Company signatory thereto.
(e)(3) -- Confidentiality Agreement, dated February 10, 2000,
between Guardian Industries Corp. and the Company.
(e)(4) -- The Information Statement of the Company, dated May 12,
2000 (attached as Annex B hereto).
</TABLE>
<PAGE> 1
[Cameron Ashley Logo]
May 12, 2000
Dear Fellow Shareholders:
I am pleased to inform you that on April 28, 2000, Cameron Ashley Building
Products, Inc. ("Cameron Ashley") entered into a Merger Agreement (the "Merger
Agreement") with Guardian Fiberglass, Inc., a Delaware corporation ("Parent"),
and CAB Merger Corp., a Georgia corporation and a wholly owned subsidiary of
Parent ("Purchaser"), pursuant to which Purchaser has today commenced a tender
offer (the "Offer") to purchase all of the outstanding shares of Cameron Ashley
common stock, no par value (the "Common Stock"), together with the associated
Series A Preferred Stock purchase rights (the "Rights" and, together with the
Common Stock, the "Shares") issued pursuant to the Rights Agreement, dated as of
August 19, 1997, between Cameron Ashley and SunTrust Bank, Atlanta, as Rights
Agent, for $18.35 per Share in cash, without interest. Under the Merger
Agreement and subject to the terms thereof, following the Offer, Purchaser will
be merged with and into Cameron Ashley (the "Merger") and all Shares not
purchased in the Offer (other than Shares held in the treasury of the Company or
by any of its wholly owned subsidiaries, or owned by Parent or Purchaser or held
by shareholders who perfect and do not withdraw or otherwise lose their
dissenters' rights under Georgia law) will be converted into the right to
receive $18.35 per Share in cash, without interest.
Your Board of Directors, based upon the unanimous recommendation of the
Special Committee of the Board, has unanimously (i) determined that the Offer
and the Merger are fair to and in the best interests of Cameron Ashley's
shareholders (other than Parent and its affiliates) and (ii) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger. The Cameron Ashley Board of Directors recommends that Cameron Ashley's
shareholders accept the Offer and tender their Shares pursuant to the Offer.
In arriving at its recommendation, the Cameron Ashley Board gave careful
consideration to a number of factors described in the attached Schedule 14D-9
which has been filed today with the Securities and Exchange Commission,
including, among other things, the opinion, dated April 28, 2000, of Credit
Suisse First Boston Corporation, financial advisor to the Special Committee and
the Board of Directors of Cameron Ashley, to the effect that, as of such date,
the consideration to be received by holders of Shares (other than Parent and its
affiliates) pursuant to the Offer and the Merger pursuant to the Merger
Agreement was fair to such shareholders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated May 12, 2000, of Parent and Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. I urge you to read the enclosed materials carefully.
<PAGE> 2
On behalf of myself, the Board of Directors and the other members of
management of Cameron Ashley, I want to sincerely thank you for the support you
have given us over the years. If you have any questions about the Offer, please
feel free to call MacKenzie Partners, Inc., the Information Agent, at (212)
929-5550 (collect) or (800) 322-2885 (toll free).
Very truly yours,
/s/ Ronald R. Ross
Ronald R. Ross
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT (e)(2)
TENDER AND OPTION AGREEMENT
This TENDER AND OPTION AGREEMENT (the "Agreement") is entered into as
of April 28, 2000 by and between CAB Merger Corp., a Georgia corporation
("Acquisition Sub"), and each of the individuals a signatory to this Agreement
(the "Shareholders").
RECITALS
WHEREAS, concurrently herewith, Acquisition Sub is entering into an
Agreement and Plan of Merger (the "Merger Agreement") with Guardian Fiberglass,
Inc., a Delaware corporation ("Purchaser"), and Cameron Ashley Building
Products, Inc., a Georgia corporation (the "Company"), pursuant to which
Acquisition Sub will acquire the Company, on the terms and subject to the
conditions set forth in the Merger Agreement, by means of a tender offer by
Acquisition Sub (the "Offer") for all outstanding shares of common stock, no par
value, of the Company (the "Company Common Stock"), at $18.35 per share, net to
the seller in cash, without interest, followed by a merger (the "Merger") of
Acquisition Sub into the Company (capitalized terms used herein and not
otherwise defined are used as defined in the Merger Agreement); and
WHEREAS, as of the date hereof, the Shareholders together beneficially
own directly or indirectly 382,574 shares of Company Common Stock, together with
the associated Rights (which stock and associated rights are referred to as the
"Existing Shares" and, together with any After-Acquired Shares (as defined
below), the "Shares"), which Existing Shares constitute approximately 4.3% of
the issued and outstanding shares of Company Common Stock; and
WHEREAS, as an inducement to Acquisition Sub to acquire the Company,
and as a condition to Acquisition Sub's willingness to enter into the Merger
Agreement and consummate the transactions contemplated thereby, Acquisition Sub
has required that the Shareholders agree, and the Shareholders have agreed (i)
to grant Acquisition Sub an irrevocable option to buy the Shares at $18.35 per
share (the "Option"); and (ii) to tender and, in the event such option is not
theretofore exercised, sell the Shares in the Offer and vote their Shares in
favor of the Merger, in each case upon the terms and subject to the conditions
set forth herein.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and such other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Agreement to Tender; Option.
1.1 Tender of Shares. Each Shareholder hereby agrees (a) to validly
tender (or cause the record owner of any Shares to tender) all Shares
beneficially owned by such Shareholder pursuant to the Offer, not later than the
fifth business day after commencement of the Offer or, with respect to
After-Acquired Shares, within one business day following the acquisition
thereof, (b) not to withdraw any Shares so tendered without the prior written
consent of Acquisition Sub except as
<PAGE> 2
otherwise provided in Section 1.1(c) and (c) to withdraw all Shares tendered in
the Offer immediately upon receipt of notice from Acquisition Sub that it is
exercising the Option in order that it may acquire such Shares in accordance
with Section 1.2(a) hereof. Each Shareholder hereby acknowledges and agrees that
Acquisition Sub's obligation to accept for payment and pay for the Shares in the
Offer is subject to the terms and conditions of the Offer.
1.2 Option.
(a) In order to induce Acquisition Sub to enter into the Merger
Agreement, and subject to the terms and conditions of this Agreement, each of
the Shareholders hereby irrevocably grants to Acquisition Sub the Option,
exercisable in whole but not in part from and after the date hereof, to purchase
Shares at a purchase price of $18.35 per Share. If (i) the Offer is terminated,
abandoned or withdrawn by Acquisition Sub (whether due to the failure of any of
the conditions thereto or otherwise) or (ii) the Merger Agreement is terminated
pursuant to Section 7.1(c), 7.1(d), 7.1(f) or 7.1(g), the Option shall continue
to be exercisable, in whole but not in part for a period of 90 days after the
date of the occurrence of such event, so long as (x) all applicable waiting
periods under the HSR Act required for the purchase of the Shares pursuant to
the Option upon such exercise shall have expired or been terminated and (y)
there shall not be in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority or legislative body or commission prohibiting the exercise of the
Option pursuant to this Agreement. In the event the Merger Agreement is
terminated other than pursuant to Section 7.1(c), 7.1(d), 7.1(f) or 7.1(g), the
Option shall terminate upon such termination of the Merger Agreement.
(b) In the event Acquisition Sub wishes to exercise the Option,
Acquisition Sub shall deliver written notice thereof to each of the
Shareholders, specifying the date, time and place for the closing of such
purchase. A closing of the purchase of Shares pursuant to the Option (a
"Closing") shall take place on the date, at the time and at the place specified
in such notice; provided, that if at such date any of the conditions specified
in Section 1.2(a)(x) or (y) hereof shall not have been satisfied or waived,
Acquisition Sub may postpone such Closing until a date within two business days
after such conditions are satisfied or waived. At the Closing, each of the
Shareholders will deliver to Acquisition Sub (in accordance with Acquisition
Sub's instructions) the certificates representing the Shares being purchased
pursuant to Section 1.2, duly endorsed or accompanied by stock powers duly
executed in blank. At such Closing, Acquisition Sub shall either (i) wire
transfer to the account designated by each Shareholder or (ii) deliver to each
Shareholder a certified or bank cashier's check payable to or upon the order of
such Shareholder, in each case in an amount equal to the number of Shares being
purchased from such Shareholder at such Closing multiplied by $____, in
immediately available funds.
1.3 Assignment of Dividends and Other Distributions. Each Shareholder
hereby assigns to Acquisition Sub any and all dividends and other distributions
that may be declared, set aside or paid by the Company with respect to such
Shareholder's Shares during the term of this Agreement.
2
<PAGE> 3
1.4 Title. Each Shareholder agrees that, in connection with the
transfer of his Shares to Acquisition Sub in the Offer or to Acquisition Sub
pursuant to the Option, he shall transfer to and unconditionally vest in the
Acquisition Sub good and valid title to such Shares, free and clear of all
claims, liens, restrictions, security interests, pledges, limitations and
encumbrances whatsoever, except those arising hereunder.
1.5 No Purchase. Acquisition Sub may allow the Offer to expire without
accepting for payment or paying for any Shares, as set forth in the Offer to
purchase, and Acquisition Sub may allow the Option to terminate without
purchasing all or any Shares pursuant to the exercise thereof. If any Shares are
not accepted for payment in accordance with the terms of the Offer or purchased
pursuant to the Option, they shall be returned to the respective Shareholder,
whereupon they shall continue to be held by such Shareholder subject to the
terms and conditions of this Agreement.
1.6 Certain Price Protection. If, within 12 months following the
exercise of the Option by Acquisition Sub, Acquisition Sub, directly or
indirectly, sells, transfers or otherwise disposes of any or all of the Shares
acquired upon exercise of the Option or the Offer to a third party (or realizes
cash proceeds in respect of such Shares as a result of a distribution to
shareholders of the Company following the sale of substantially all of the
Company's assets) in connection with a transaction whereby the third party is
acquiring the entire equity interest in the Company pursuant to a merger, tender
offer, exchange offer, sale of assets, sale of shares or a similar business
transaction (a "Subsequent Sale") at a per Share price in excess of $18.35 (the
"Subsequent Sale Price"), then Acquisition Sub will pay to each Shareholder,
within five (5) days of receipt of payment by Acquisition Sub, an amount equal
to such Shareholder's pro rata share of 50% of the excess of the Subsequent Sale
Price over $18.35 multiplied by the number of Shares sold in the Subsequent
Sale.
2. Voting. Each Shareholder hereby agrees that (for so long as the
Merger Agreement is in effect), at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, he shall vote (or cause to be voted) his Shares (a) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions required
in furtherance thereof and hereof; (b) against any action or agreement that
would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or this Agreement; and (c) except as otherwise agreed to in writing in
advance by Acquisition Sub, against any of the following actions or agreements
(other than the Merger Agreement or the transactions contemplated thereby): (i)
any action or agreement that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or attempt to discourage or adversely
affect the Merger, the Offer and the transactions contemplated by this Agreement
and the Merger Agreement; (ii) any extraordinary corporate transaction, such as
a merger, consolidation or other business combination involving the Company and
its Subsidiaries; (iii) a sale, lease or transfer of a material amount of assets
of the Company or its Subsidiaries or a reorganization, recapitalization,
dissolution or liquidation of the Company or its Subsidiaries; (iv) any change
in the
3
<PAGE> 4
management or Board of Directors of the Company, except as contemplated by the
Merger Agreement; (v) any change in the present capitalization or dividend
policy of the Company; (vi) any amendment of the Company's certificate of
incorporation or bylaws; or (vii) any other material change in the Company's
corporate structure or business. Notwithstanding anything to the contrary
contained in this Agreement, each Shareholder who is also a member of the Board
of Directors of the Company shall be free to act in his or her capacity as a
member of the Board of Directors of the Company and to discharge his or her
fiduciary duty as such. At the request of Acquisition Sub, each Shareholder, in
furtherance of the voting agreement and the transactions contemplated hereby and
by the Merger Agreement, shall promptly execute and deliver to Acquisition Sub
an irrevocable proxy and irrevocably appoint Acquisition Sub or its designees,
its attorney and proxy to vote all Shares of such Shareholder, for all purposes
whatsoever, with full power of substitution. Each such Shareholder acknowledges
that this proxy (a) shall be coupled with an interest, (b) constitutes, among
other things, an inducement for Acquisition Sub to enter into the Merger
Agreement, and (c) shall be irrevocable and shall not be terminated by operation
of law upon the occurrence of any event. Any such proxy shall terminate upon the
termination of the Option. The provisions of this Section 2 shall constitute a
voting agreement under Section 14-2-731 of the Georgia Business Corporation
Code.
3. Representation and Warranties. Each Shareholder hereby severally and
not jointly represents and warrants to Acquisition Sub as follows:
3.1 Ownership of Shares; Purchase Rights. (a) On the date hereof, (i)
such Shareholder is the record owner of the Existing Shares as set forth
opposite such Shareholder's name on the signature page hereto and (ii) such
Existing Shares constitute all of the shares of Company Common Stock owned of
record and beneficially by each such Shareholder. Such Shareholder has sole
voting power, sole power of disposition and sole power to agree to all of the
matters set forth in this Agreement with respect to all of such Existing Shares,
with no limitations, qualifications or restrictions on such rights, and such
Existing Shares are the only shares of Company Common Stock over which such
Shareholder has such powers or otherwise are owned of record or beneficially by
such Shareholder as of the date hereof.
(b) On the date hereof, (i) such Shareholder is the beneficial owner of
the options and warrants as set forth opposite such Shareholder's name on the
signature page hereto and (ii) such Shareholder does not have any option or
other right to acquire Shares ("Purchase Right") except as indicated thereon.
3.2 Power, Binding Agreement. Such Shareholder has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by such
Shareholder will not violate any other agreement to which he is a party,
including, without limitation, any voting agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered by
such Shareholder and constitutes a valid and binding agreement of him,
enforceable against him in
4
<PAGE> 5
accordance with its terms, except that such enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights.
3.3 No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (a) no filing with, and no permit, authorization, consent or approval of,
any Federal, state or foreign public body or authority is necessary for the
execution of this Agreement by such Shareholder and the consummation by such
Shareholder of the transactions contemplated hereby and (b) neither the
execution and delivery of this Agreement by such Shareholder nor the
consummation by such Shareholder of the transactions contemplated hereby nor
compliance by such Shareholder with any of the provisions hereof shall (i)
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation to which such Shareholder is a party or by
which such Shareholder or any of his properties or assets may be bound or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to such Shareholder or any of his properties or assets.
3.4 Encumbrances. The Shares owned by such Shareholder and the
certificates representing such Shares are now, and at all times during the term
hereof will be, held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
3.5 Finder's Fees. Except for the fee to be paid to Credit Suisse First
Boston Corporation, no investment banker, broker, financial advisor, finder or
other person is entitled to a commission or fee from Acquisition Sub or the
Company in respect of this Agreement or the transactions contemplated hereby
based upon any arrangement or agreement made by or on behalf of such
Shareholder, except as otherwise specifically provided in the Merger Agreement
or arrangements or agreements made by or on behalf of Acquisition Sub by its
authorized representatives.
3.6 Reliance by Acquisition Sub. Such Shareholder understands and
acknowledges that Acquisition Sub is entering into the Merger Agreement in
reliance upon such Shareholder's execution and delivery of this Agreement and
the representations, warranties and covenants of such Shareholder set forth
herein.
4. Other Covenants of the Shareholders. Each Shareholder hereby
severally and not jointly covenants and agrees as follows:
4.1 No Solicitation. Each Shareholder agrees that he shall comply with
the provisions of Section 5.2 of the Merger Agreement.
5
<PAGE> 6
4.2 Restriction on Transfer, Proxies and Non-Interference; Stop
Transfer Order.
(a) Each Shareholder hereby agrees, while this Agreement is in effect,
and except as specifically contemplated hereby, not to (i) offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any of his Shares or any interest therein, (ii) grant any
proxies or powers of attorney, deposit any of his Shares into a voting trust or
enter into a voting agreement with respect to any of his Shares or (iii) take
any action that would make any representation or warranty of any Shareholder
contained herein untrue or incorrect or have the effect of preventing or
disabling any Shareholder from performing his obligations under this Agreement.
(b) In furtherance of the provisions of Section 4.2(a) hereof,
concurrently herewith the Shareholders shall and hereby do authorize the Company
to notify the Company's transfer agent that there is a stop transfer order with
respect to all of the Existing Shares and any additional Shares of Common Stock
acquired by any Shareholder after the date hereof (and that this Agreement
places limits on the voting and transfer of such shares).
4.3 Confidentiality. Each Shareholder recognizes that successful
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, each Shareholder hereby agrees
not to disclose or discuss such matters with anyone not a party to this
Agreement (other than counsel and advisors, if any) without the prior written
consent of Acquisition Sub, except for filings required pursuant to the Exchange
Act and the rules and regulations thereunder or disclosures such Shareholder's
counsel advises are necessary in order to fulfill his obligations imposed by
laws, in which event such Shareholder shall give notice of such disclosure to
Acquisition Sub as promptly as practicable so as to enable Acquisition Sub to
seek a protective order from a court of competent jurisdiction with respect
thereto.
4.4 Additional Shares. (a) Each Shareholder agrees, subject to the
following provisions of this Section 4.4(a), at the request of Acquisition Sub,
to exercise, exchange or convert his Rights into Shares of Company Common Stock,
so as to constitute After-Acquired Shares under this Agreement. In order to
facilitate the exercise at the request of Acquisition Sub of any such Right,
Acquisition Sub shall loan to any requesting Shareholder funds sufficient to
allow such Shareholder to exercise the Right. Such loan shall not be interest
bearing and, at Acquisition Sub's option, shall be secured by a pledge of the
shares of Company Common Stock acquired upon exercise of such Right.
(b) Each Shareholder hereby agrees to promptly notify Acquisition Sub
in writing of the number of After-Acquired Shares that may be acquired by such
Shareholder, if any, after the date hereof.
6
<PAGE> 7
4.5 Public Disclosure. Each Shareholder hereby agrees that Acquisition
Sub may publish and disclose in (i) the Offer Documents and (ii) if approval of
the Company's Shareholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC) his identity and
ownership of Company Common Stock and the nature of his commitments,
arrangements and understandings under this Agreement.
4.6 No Inconsistent Agreements. No Shareholder shall enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions of this Agreement.
4.7 Further Assurances. From time to time, at the other party's request
and without further consideration, each of the Acquisition Sub, on the one hand,
and a Shareholder, on the other, shall execute and deliver such additional
documents and take all such further action as may be necessary or desirable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
5. Miscellaneous.
5.1 Fees and Expenses. All costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
5.2 Survival of Representations and Warranties. Except for the
representations and warranties in Section 3.2 of this Agreement, the
representations and warranties contained in this Agreement shall not survive the
delivery of and payment for the Shares or termination of the Option in
accordance with this Agreement.
5.3 Effect of Representations, Warranties and Covenants of
Shareholders. The representations, warranties and covenants of the Shareholders
shall be several and not joint. The liability of each individual Shareholder
shall extend only to the representations, warranties and covenants of such
Shareholder and not to any representation, warranty or covenant of any other
Shareholder. No Shareholder shall have any liability for incidental or
consequential damages or any amount in excess of the aggregate purchase price
for his Shares.
5.4 Amendment and Modification. This Agreement may be amended, modified
and supplemented in any and all respects by written agreement of all parties
hereto.
5.5 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that any or all of the Acquisition Sub's respective rights,
interests and obligations hereunder may be assigned by the Acquisition Sub to
any other direct or indirect wholly owned subsidiary of Purchaser. Subject to
the preceding sentence, this
7
<PAGE> 8
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective heirs, executors, legal representative or
successors and assigns or other transferees and any other successor in interest.
5.6 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
5.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile transmission
(which is confirmed), telex or delivery by an overnight express courier service
(delivery, postage or freight charges prepaid), or on the fourth day following
deposit in the United States mail (if sent by registered or certified mail,
return receipt requested, delivery, postage or freight charges prepaid),
addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to a Shareholder: c/o Cameron Ashley Building Products, Inc.
11651 Plano Road
Dallas, Texas 75243
Attention: Ronald R. Ross, Chairman and CEO
Facsimile No.: (214) 860-5148
With a copy to: Locke Liddell & Sapp LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201
Attention: Guy Kerr, Esq.
Facsimile No.: (214) 740-8800
With a copy to: Cameron Ashley Building Products, Inc.
11651 Plano Road
Dallas, Texas 75243
Attention: John Davis, Vice President and
General Counsel
Facsimile No.: (214) 860-5148
If to Acquisition Sub, to: c/o Guardian Fiberglass, Inc.
2300 Harmon Road
Auburn Hills, Michigan 48326
Attention: David Clark, President
Facsimile No.: (248) 340-2175
8
<PAGE> 9
with a copy to: Dykema Gossett PLLC
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304
Attention: D. Richard McDonald
Facsimile No.: (248) 203-0763
5.8 Definitions; Interpretation.
(a) As used in this Agreement, (i) the term "After-Acquired Shares"
shall mean any shares of Company Common Stock acquired directly or indirectly,
or otherwise beneficially owned, by any of the Shareholders in any capacity
after the date hereof and prior to the termination hereof, whether upon the
exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of a purchase, dividend,
distribution, gift, bequest, inheritance or as a successor in interest in any
capacity (including a fiduciary capacity) or otherwise; (ii) the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act; and (iii) the phrases "beneficially own" or "beneficial ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing (without duplicative counting of the same securities by the same
holder, securities beneficially owned by a person shall include securities
beneficially owned by all other persons with whom such Person would constitute a
"group" within the meaning of Rule 13d-5 of the Exchange Act).
(b) When a reference is made in this Agreement to a Section, such
reference shall be to a Section in this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The descriptive
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
5.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
5.10 Entire Agreement, No Third Party Beneficiaries, Rights of
Ownership. This Agreement (a) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
5.11 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
9
<PAGE> 10
5.12 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Georgia without giving effect to the
principles of conflicts of law thereof.
5.13 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
10
<PAGE> 11
IN WITNESS WHEREOF, Acquisition Sub and each of the Shareholders have
caused this Agreement to be duly executed as of the day and year first above
written.
CAB MERGER CORP.
By: /s/ DAVID A. CLARK
------------------------------------
Name: David A. Clark
Title: Chairman
<TABLE>
<CAPTION>
SHAREHOLDERS:
Purchase Rights
----------------------
Shares Options Warrants
------ ------- --------
<S> <C> <C> <C>
21,221 64,601 0 /s/ JOHN H. BRADBERRY
----------------------------
2,000 7,667 0 /s/ J. VERONICA BIGGINS
----------------------------
560 43,443 0 /s/ JOHN S. DAVIS
----------------------------
700 33,536 0 /s/ FRED FRANKLIN
----------------------------
109,462 50,000 0 /s/ CHARLES S. GAFFNEY
----------------------------
0 5,667 0 /s/ HARRY K. HORNISH
----------------------------
0 10,000 0 /s/ JOHN KLINGSTEDT
----------------------------
11,053 8,788 0 /s/ GARY A. KONKE
----------------------------
0 10,000 0 /s/ ROD MATTHEWS
----------------------------
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Purchase Rights
----------------------
Shares Options Warrants
------ ------- --------
<S> <C> <C> <C>
805 43,339 0 /s/ THOMAS R. MILLER
----------------------------
137,502 236,189 0 /s/ WALTER J. MURATORI
----------------------------
66,944 260,179 0 /s/ RONALD R. ROSS
----------------------------
21,110 27,885 0 /s/ J. HARRELL SPIVEY
----------------------------
6,717 100,000 0 /s/ GAROLD E. SWAN
----------------------------
4,500 0 0 /s/ ALAN K. SWIFT
----------------------------
-------- -------- ------
382,574 901,294 0
======== ======== ======
</TABLE>
12
<PAGE> 1
EXHIBIT (e)(3)
February 10, 2000
Guardian Industries Corp.
2300 Harmon Road
Auburn Hills, Michigan 48328-1714
Attn: David Clark, Chairman & Duane Faulkner, President --
Building Products Group
Gentlemen:
In connection with your consideration of a possible transaction with
Cameron Ashley Building Products, Inc. (the "Company"), you have requested
information concerning the Company. This confidentiality agreement amends and
supersedes the prior letter agreement executed by the Company and you on
February 7, 2000. As a condition to your being furnished such information, you
agree to treat any information concerning the Company (whether prepared by the
Company, its advisors or otherwise) which is furnished to you by or on behalf of
the Company (herein collectively referred to as the "Evaluation Material") in
accordance with the provisions of this letter and to take or abstain from taking
certain other actions herein set forth. The term "Evaluation Material" does not
include information which (i) is already in your possession, provided that such
information is not known by you to be subject to another confidentiality
agreement with, or other obligation of secrecy to, the Company or another party,
or (ii) becomes generally available to the public other than as a result of a
disclosure by you or your directors, officers, employees, agents, lenders,
co-investors or advisors, or (iii) becomes available to you on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not known by you to be bound by a confidentiality
agreement with, or other obligation of secrecy to, the Company or another party.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and you, and
that such information will be kept confidential by you, your advisors, lenders,
co-investors and their representatives; provided, however, that (i) any of such
information may be disclosed to your directors, officers, employees, lenders,
co-investors (including for the purposes of this agreement, the principal
shareholders of Builder Marts of America, Inc) and representatives of the same
who need to know such information for the purpose of evaluating any such
possible transaction between the Company and you (it being understood that such
directors, officers, employees, lenders, co-investors and representatives shall
be informed by you of the confidential nature of such information and shall be
directed by you to treat such information confidentially), and (ii) any
disclosure of such information may be made to which the Company consents in
writing.
<PAGE> 2
You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees, lenders, co-investors and representatives who
are informed as to the matters which are the subject of this letter, that the
United States securities laws prohibit any person who has received from an
issuer material, non-public information concerning the matters which are the
subject of this letter from purchasing or selling securities of such issuer or
from communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
Unless the Company has disclosed the existence of your offer or has
indicated an intention to pursue an offer or transaction that is not financially
superior to your offer, without the prior written consent of the Company, you
will not, and will direct such directors, officers, employees, lenders,
co-investors and representatives not to, disclose to any person either the fact
that discussions or negotiations are taking place concerning a possible
transaction between the Company and you or any of the terms, conditions or other
facts with respect to any such possible transaction, including the status
thereof.
You hereby acknowledge that the Evaluation Material is being furnished to
you in consideration of your agreement that you will not, directly or
indirectly, propose or state a willingness to propose to the Company or any
other person any transaction between you and the Company and/or its security
holders involving any of its securities or security holders unless the Company
shall have requested in writing that you make such a proposal or the Company has
indicated an intention to pursue an offer or transaction that is not financially
superior to yours (provided you are still actively pursuing a transaction
similar to the one currently proposed). Further, you will not acquire, or
assist, advise or encourage any other persons in acquiring, directly or
indirectly, control of the Company or in excess of 4.9% of the Company's
securities or any of the Company's businesses or assets for a period of two
years from the date of this letter unless the Company shall have consented in
advance in writing to such acquisition or has indicated an intention to pursue
an offer or transaction that is not financially superior to yours (provided you
are still actively pursuing a transaction similar to the one currently
proposed). In the event that the Company terminates all discussions with third
parties for a change of control transaction and does not pursue a transaction
with any party as contemplated by this letter, the restrictions of this
paragraph will end one year from the date of this letter.
If after the date of this agreement, the Company enters into a
confidentiality agreement with a third party in connection with a proposed
change of control transaction between the Company and such third party, and such
agreement contains restrictions different than the restrictions in the foregoing
paragraph, the Company will promptly notify you and you will have the option to
amend this agreement to include such different terms.
Although the Company has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of your
investigation, you understand that neither the Company nor any of its
representatives or advisors have made or make any representation or warranty as
to the accuracy or completeness of the Evaluation Material. You agree that
neither the Company nor its representatives or advisors shall have any liability
to you or any of your representatives or advisors resulting from the use of the
Evaluation Material.
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<PAGE> 3
In the event that you do not proceed with the transaction that is the
subject of this letter within a reasonable time, you shall promptly redeliver to
the Company all written Evaluation Material and any other written material
containing or reflecting any information in the Evaluation Material (whether
prepared by the Company, its advisors or otherwise) and will not retain any
copies, extracts or other reproductions in whole or in part of such written
material. All documents, memoranda, notes and other writings whatsoever prepared
by you or your advisors based on the information in the Evaluation Material
shall be destroyed, and such destruction shall be certified in writing to the
Company by an authorized officer supervising such destruction.
You agree that unless and until a definitive agreement between the Company
and you with respect to any transaction referred to in the first paragraph of
this letter has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of its directors, officers, employees, agents or any
other representatives or the advisors or representatives thereof except, in the
case of this letter, for the matters specifically agreed to herein. The
agreement set forth in this paragraph may be modified or waived only by a
separate writing by the Company and you expressly so modifying or waiving such
agreement.
You agree that the Company shall be entitled to equitable relief, including
injunction and specific performance, in the event of any breach of the
provisions of this agreement, in addition to all other remedies available to the
Company at law or in equity. You further agree to waive any requirement for the
security or posting of any bond in connection with such remedy.
It is further understood and agreed that no failure or delay by the Company
in exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. You agree to reimburse, hold harmless and indemnify the Company and
its directors, officers, employees, advisors and representatives from any
damage, loss or expense including attorney's fees and expenses, incurred as a
result of the disclosure or use of the Evaluation Material by you or your
directors, officers, employees, lenders, co-investors and representatives
contrary to the terms of this agreement or any other breach by you or your
directors, officers, employees, lenders, co-investors or representatives of any
of the terms and provisions thereof.
Very truly yours,
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /s/ RONALD R.ROSS
-------------------------------------
Ronald R. Ross, Chairman and CEO
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<PAGE> 4
Confirmed and Agreed to this 10th day of February, 2000:
GUARDIAN INDUSTRIES CORP.
By: /s/ DAVID A. CLARK
------------------------
Name: David A. Clark
Title: Chairman
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