SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filing by the Registrant
[ ] Filing by a party other than the Registrant
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE SOLOMON-PAGE GROUP LTD.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT,
IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock, par value $.001 per share
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(2) Aggregate number of securities to which transaction
applies:
4,153,948 outstanding shares of Common Stock and
1,813,418 shares of Common Stock subject to options
(a)
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(3)
Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
$5.25 per share of Common Stock (b)
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(4) Proposed maximum aggregate value of transaction:
$15,756,580(b) (c)
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(5) Total fee paid:
$ 3,151.32(b)
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(a) Represents the shares of Common Stock and options to purchase
shares of Common Stock outstanding as of July 14, 2000.
(b) The holders of 2,259,448 of such shares, who are not members
of the management group, will be paid the sum of $5.25 per
share in cash. The holders of 1,894,500 of such shares (which
holders are the management group described in the proxy
statement) will receive by virtue of the proposed merger,
securities of the surviving corporation in exchange for their
shares. The holders of options, who are not members of the
management group, to purchase 1,213,418 shares of Common Stock
will receive an aggregate of $3,894,478, which represents the
difference between the $5.25 per share merger consideration
and the exercise prices of such options. Options to purchase
600,000 shares of Common Stock held by the management group
will be canceled.
(c) Relates solely to the 2,259,448 shares and the 1,213,418
shares subject to options for which a cash purchase price is
being paid.
<PAGE>
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
------------------------------------------------------
(4) Date Filed:
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<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED SEPTEMBER __, 2000
THE SOLOMON-PAGE GROUP LTD.
1140 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
September __, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of
stockholders of The Solomon-Page Group Ltd. to be held at 12:00 p.m., local
time, on ________, October __, 2000 at The Penn Club, 30 West 44th Street, New
York, New York 10036.
At the special meeting, you will be asked to consider and vote
upon the merger of Solomon-Page with and into TSPGL Merger Corp., also known as
Mergeco, with Mergeco as the surviving corporation. In the merger, you will be
entitled to receive $5.25 in cash, without interest, for each of your shares of
common stock of Solomon-Page. Mergeco was formed in connection with the proposed
merger and is owned by a management group formed by Lloyd Solomon, Scott Page
and Herbert Solomon, Solomon-Page's three principal executive officers, all of
whom are also directors of Solomon-Page. The management group currently owns
approximately 45.6% of Solomon-Page's outstanding common stock. The management
group proposed the merger in order to acquire the entire equity interest of
Solomon-Page.
The board of directors of Solomon-Page, acting on the
unanimous recommendation of a special committee formed to negotiate on behalf of
the stockholders other than the members of the management group, has approved
the merger agreement between Mergeco and Solomon-Page. The special committee and
the full board of directors believe that the terms and provisions of the merger
agreement and the merger are fair to and in the best interests of Solomon-Page
and its stockholders (other than the members of the management group).
Therefore, the board of directors recommends that you vote in favor of the
approval of the merger agreement and the merger.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES REGULATORS HAVE APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT, NOR HAVE THEY DETERMINED IF THE PROXY STATEMENT IS
ADEQUATE OR ACCURATE. FURTHERMORE, THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT DETERMINED THE FAIRNESS OR MERITS OF THE MERGER. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The accompanying proxy statement explains the proposed merger
and provides specific information concerning the special meeting. Please read
these materials carefully. In addition, you may obtain information about
Solomon-Page from documents that Solomon-Page has filed with the Securities and
Exchange Commission.
If you do not vote in favor of the merger and the merger
agreement, you will have the right to dissent and to seek appraisal of the fair
market value of your shares if the merger is consummated and you comply with the
Delaware law procedures explained on pages __ to __ of the accompanying proxy
statement.
Whether or not you plan to attend the special meeting, we urge
you to sign, date and promptly return the enclosed proxy card to ensure that
your shares will be voted at the meeting. If you sign, date and return your
proxy card without indicating how you want to vote, your proxy will be counted
as a vote in favor of the merger and the merger agreement. Your proxy may be
revoked at any time before it is voted by submitting to the Secretary of
Solomon-Page a written revocation or a proxy bearing a later date, or by
attending and voting in person at the meeting. Even if you plan to attend the
special meeting, please sign, date and return your proxy card.
The merger is an important decision for Solomon-Page and its
stockholders. The merger cannot occur unless the merger and the merger agreement
are approved by the affirmative vote of the holders of at least 66-2/3% of all
outstanding shares of common stock of Solomon-Page and the holders of at least a
majority of the outstanding shares of common stock of Solomon-Page not held,
directly or indirectly, by members of the management group.
On behalf of the board of directors, we thank you for your
support and urge you to vote FOR approval of the merger agreement and the
merger.
Sincerely,
Herbert Solomon, Chairman
Lloyd B. Solomon, Vice Chairman
Scott R. Page, President
The proxy statement is first being mailed to stockholders on September __, 2000.
<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION,
DATED SEPTEMBER __, 2000
THE SOLOMON PAGE GROUP LTD.
1140 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 28, 2000
To the Stockholders of The Solomon-Page Group Ltd.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders
of The Solomon-Page Group Ltd. will be held at 12:00 p.m., local time, on
_________, October __, 2000 at The Penn Club, 30 West 44th Street, New York, New
York 10036 for the sole purpose of considering and voting upon a proposal to
approve the Amended and Restated Agreement and Plan of Merger dated June 28,
2000 between Solomon-Page and TSPGL Merger Corp., also known as Mergeco, and the
transactions contemplated by that merger agreement. The merger agreement
provides for, among other things, the merger of Solomon-Page with and into
Mergeco, with Mergeco as the surviving corporation, and with stockholders of
Solomon-Page, other than the three principal senior executive officers of
Solomon-Page forming the management group, entitled to receive $5.25 in cash,
without interest, for each share of Solomon-Page's common stock owned by them.
Holders of options to purchase shares of Solomon-Page's common stock (other than
options held by the management group which will be canceled) will receive the
difference between $5.25 and the exercise price per share of each such option.
Mergeco was formed in connection with the proposed merger and is owned by the
members of the management group. The merger agreement is more fully described in
the accompanying proxy statement and is attached to the proxy statement as Annex
A.
If you do not vote in favor of the merger and the merger
agreement, you have the right to dissent and to seek appraisal of the fair
market value of your shares if the merger is consummated and you comply with the
Delaware law procedures explained in the accompanying proxy statement.
Only holders of record at the close of business on August 18,
2000 are entitled to notice of and to vote at the special meeting or any
adjournment(s) or postponement(s) thereof. You will be able to examine a list of
the holders of record, for any purpose related to the special meeting, during
ordinary business hours during the 10-day period before the special meeting. The
list will be available at the offices of Solomon-Page.
You may vote in person or by proxy. The accompanying proxy
statement explains the merger in detail and is accompanied by a proxy card. In
order to assure that your vote will be counted, please sign, date and return the
enclosed proxy card promptly in the enclosed prepaid envelope, whether or not
you plan to attend the special meeting. Your proxy may be revoked at any time
before it is voted by submitting to the Secretary of Solomon-Page a written
revocation or a proxy card bearing a later date, or by attending and voting in
person at the special meeting.
The board of directors of Solomon-Page, acting upon the
unanimous recommendation of a special committee of the board, has approved the
merger agreement and the merger and recommends that stockholders vote FOR
approval of the merger agreement and the merger.
By Order of the Board of Directors
Eric M. Davis
Secretary
New York, New York
September __, 2000
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<PAGE>
SUMMARY TERM SHEET
The following summary briefly describes the material terms of
the merger of Solomon-Page with and into Mergeco. While this summary describes
the material terms that you should consider when evaluating the merger, the
proxy statement contains a more detailed description of such terms. We encourage
you to read this proxy statement and the documents we have incorporated by
reference before voting. We have included section references to direct you to a
more complete description of the topics described in this summary.
o Mergeco is a corporation newly formed by Lloyd Solomon, Vice
Chairman and Chief Executive Officer of Solomon-Page, Scott Page, President of
Solomon-Page, and Herbert Solomon, Chairman of Solomon-Page (together, the
management group), for the sole purpose of effecting the merger. Please read
"THE PARTIES -- Mergeco" on page --.
o If the merger is completed, you will receive $5.25 per share
in cash for each of your shares of Solomon-Page common stock unless you are a
dissenting stockholder and you perfect your appraisal rights. Please read
"CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER" beginning on page __; "SPECIAL
FACTORS" beginning on page __,"THE MERGER AGREEMENT" beginning on page __ and
"DISSENTERS' RIGHTS OF APPRAISAL" beginning on page __. If the merger is
completed, you will have no interest in the surviving corporation. The total
consideration to be paid in the merger is expected to be approximately $15.76
million. The management group will not receive any consideration in the merger.
o As a result of the merger:
-- Mergeco, the surviving corporation in the merger, will be
owned by Lloyd Solomon, Scott Page and Herbert Solomon;
-- Solomon-Page's stockholders (other than Lloyd Solomon,
Scott Page and Herbert Solomon) will receive cash in exchange for their shares
of Solomon-Page common stock and will no longer have any interest in the future
earnings or growth of Solomon-Page;
-- Solomon-Page will no longer be a public company; and
-- Solomon-Page's common stock will no longer be listed on
the Nasdaq SmallCap Market.
Please read "SPECIAL FACTORS -- Certain Effects of the Merger" beginning on page
__.
o Because the members of the management group have actual or
potential conflicts of interest in evaluating the merger, the Solomon-Page board
of directors appointed a special committee of independent Solomon-Page directors
to evaluate and negotiate the terms of the proposed merger. The special
committee and the Solomon-Page board of directors were aware of these actual or
potential conflicts of interest and considered them along with other matters in
approving the merger. The Solomon-Page board has delegated its authority to the
special committee to act on all matters relating to the merger, including with
respect to the merger agreement and the consideration of alternative transaction
proposals, if any.
o The special committee and the Solomon-Page board of
directors have determined that the merger and the merger agreement are advisable
and in the best interests of Solomon-Page and its stockholders (other than the
members of the management group) and recommend that you approve the merger and
the merger agreement. A primary reason for this conclusion was the fact that the
$5.25 merger consideration represents an 82.6% premium to the trading price of
the common stock prior to the initial announcement of the transaction. Please
read "SPECIAL FACTORS --Recommendation of the Special Committee and the Board of
Directors; Fairness of the Merger" beginning on page __ and "Conflicts of
Interest of Certain Persons in the Merger; Certain Relationships" beginning on
page __.
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<PAGE>
o The special committee received an opinion from Legg Mason
Wood Walker, Incorporated, its financial advisor, to the effect that as of the
date of such opinion and subject to the assumptions, limitations and
qualifications set forth in such opinion, the cash merger consideration of $5.25
per share to be received by stockholders of Solomon-Page (other than the members
of the management group) for their Solomon-Page common stock is fair to such
stockholders from a financial point of view. Please read "SPECIAL FACTORS --
Opinion of the Financial Advisor to the Special Committee" beginning on page __.
o The merger and the merger agreement must be approved by the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
Solomon-Page common stock, or 2,769,022 shares, and the holders of at least a
majority of the outstanding shares of Solomon-Page common stock not owned,
directly or indirectly, by members of the management group. The management group
collectively owns an aggregate of 1,894,500 shares of common stock, which is
45.6% of the common stock outstanding on the record date for the meeting. The
merger agreement must therefore be approved by a majority of the remaining 54.4%
of the outstanding common stock, or least 1,129,725 shares of common stock not
held by the management group. Eric Davis, the Chief Financial Officer of
Solomon-Page, intends to vote the 110,000 shares of common stock owned by him
for the merger, which is approximately 9.74% of shares not held by the
management group necessary to approve the merger. Please read "INFORMATION
CONCERNING THE SPECIAL MEETING -- Required Vote" beginning on page __.
o The merger is also subject to the following:
-- Mergeco's receipt of the financing necessary to
consummate the merger,
-- The representations and warranties of Solomon-Page and
Mergeco must be true and correct in all material
respects at the time of the merger,
-- Neither Solomon-Page nor Mergeco shall have breached in
any material respects their obligations under the merger
agreement
-- The holders of not more than 7.5% the outstanding common
stock shall have exercised appraisal rights under
Delaware law
-- Legg Mason's fairness opinion shall not have been
revoked; and
-- Mergeco shall have delivered solvency certificates to
Solomon-Page.
Please read "THE MERGER AGREEMENT - CONDITIONS" beginning on page __.
o If you do not vote in favor of the merger and the merger
agreement and you fulfill other procedural requirements, Delaware law entitles
you to a judicial appraisal of the fair value of your shares. Please read
"DISSENTERS' RIGHTS OF APPRAISAL" beginning on page __.
o The receipt of cash in the merger by you will be a taxable
transaction to you in the same way as if you sold your shares in the market for
$5.25 per share in cash. Please read "SPECIAL FACTORS -- Material Federal Income
Tax Consequences of the Merger" beginning on page __.
o If you have more questions about the merger or would like
additional copies of this proxy statement, you should contact Eric M. Davis at
The Solomon-Page Group Ltd., 1140 Avenue of the Americas, New York, New York
10036, Telephone: (212) 403-6100 or Innisfree M&A Incorporated, 501 Madison
Avenue, New York, New York 10022, Telephone: (888) 750-5834.
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CERTAIN QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
<TABLE>
<CAPTION>
<S> <C>
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Q: WHEN AND WHERE WILL THE SPECIAL A: The special meeting will take place at
MEETING BE HELD? 12:00 p.m., local time, on ________, October
__, 2000 at The Penn Club, 30 West 44th Street,
New York, New York 10036.
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Q: WHO CAN VOTE? A: All stockholders of record as of the close of
business on August 18, 2000.
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Q: HOW CAN I VOTE SHARES HELD IN MY A: If your broker holds your shares in its name
BROKER'S NAME? (or in what is commonly called "street name"),
then you should give your broker instructions on
how to vote. Otherwise your shares will not be
voted.
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Q: CAN I CHANGE MY VOTE? A: You may change your vote at any time before
the vote at the meeting. For shares held directly in
your name, you may do this by sending us a new
proxy or by coming to the meeting and voting
there. Coming to the meeting alone won't change
the vote in the proxy you sent us, unless you vote
at the meeting. For shares held in "street name,"
you may change your vote only by giving new
voting instructions to your broker or nominee.
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Q: WHAT SHOULD I DO NOW? A: Please vote. We would like you to come to
the meeting. If you mail your completed, signed
and dated proxy card in the enclosed envelope as
soon as possible, your shares will be voted at the
meeting even if you are unable to attend. No
postage is required if the proxy card is returned in
the enclosed postage prepaid envelope and mailed
in the United States.
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Q: WHAT DOES IT MEAN IF I RECEIVE MORE A: It means your shares are registered differently
THAN ONE PROXY OR VOTING INSTRUCTION or are held in more than one account. Please
CARD? complete, sign, date and mail each proxy card that
you receive.
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Q: SHOULD I SEND IN MY STOCK CERTIFICATES A: No. After the merger is completed, we will
NOW? send you written instructions that will tell you
how to exchange your certificates for $5.25 per
share in cash. PLEASE DO NOT SEND IN
YOUR CERTIFICATES NOW OR WITH
YOUR PROXIES. Hold your certificates until
you receive further instructions.
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</TABLE>
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<PAGE>
TABLE OF CONTENTS
SUMMARY TERM SHEET..........................................................3
CERTAIN QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING.....................5
INTRODUCTION................................................................8
INFORMATION CONCERNING THE SPECIAL MEETING..................................8
Time, Place, Date....................................................8
Purpose of the special meeting.......................................8
Common Stock; Voting at the Meeting; Quorum..........................9
Required Vote........................................................9
Action to be Taken at the Meeting...................................10
Proxy Solicitation..................................................10
THE PARTIES................................................................11
Solomon-Page........................................................11
Mergeco.............................................................11
SPECIAL FACTORS............................................................11
Strategy and Share Repurchase Program...............................11
Background of the Transaction.......................................12
Recommendation of the Special Committee and
Board of Directors; Fairness of the Merger........................22
The Management Group's Purpose and Reason for the Merger............26
Opinion of Financial Advisor to the Special Committee...............29
Certain Financial Projections.......................................37
Forward-looking Information.........................................38
Certain Effects of the Merger.......................................39
Plans for the Company after the Merger..............................40
Conduct of the Business of Solomon-Page if the
Merger is not Consummated.........................................40
Conflicts of Interest of Certain Persons in the
Merger; Certain Relationships.....................................42
Employment Agreements...............................................42
Accounting Treatment................................................42
Financing of the Merger.............................................43
Stockholder Lawsuit Challenging the Merger..........................45
Regulatory Requirements; Third Party Consents.......................45
Material Federal Income Tax Consequences of the Merger..............46
Fees and Expenses...................................................46
THE MERGER AGREEMENT.......................................................48
The Merger; Merger Consideration....................................48
The Exchange Fund; Payment for Shares of Common Stock...............49
Transfers of Common Stock...........................................50
Treatment of Options................................................50
Conditions..........................................................50
Representations and Warranties......................................51
Covenants...........................................................51
Indemnification and Insurance.......................................52
No Solicitation; Fiduciary Obligations of Directors.................52
Termination.........................................................53
Fees and Expenses...................................................53
Directors of the Company Following the Merger;
Certificate of Incorporation; By-laws.............................54
Amendment/Waiver....................................................54
DISSENTERS' RIGHTS OF APPRAISAL............................................54
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS...............................57
MARKET FOR THE COMMON STOCK................................................58
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Common Stock Market Price Information...............................58
Dividend Information................................................58
Common Stock Purchase Information...................................59
SECURITIES OWNERSHIP.......................................................59
Beneficial Ownership of Common Stock................................59
MANAGEMENT.................................................................60
Directors and Executive Officers of Solomon-Page....................60
CONSOLIDATED FINANCIAL STATEMENTS OF SOLOMON-PAGE..........................62
INDEPENDENT AUDITORS.......................................................63
STOCKHOLDER PROPOSALS......................................................63
WHERE YOU CAN FIND MORE INFORMATION........................................63
OTHER BUSINESS .........................................................64
AVAILABLE INFORMATION......................................................64
ANNEX A -- AMENDED AND RESTATED MERGER AGREEMENT.......................... A-1
ANNEX B -- APPRAISAL RIGHTS............................................... B-1
ANNEX C -- OPINION OF LEGG MASON.......................................... C-1
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<PAGE>
INTRODUCTION
Throughout this proxy statement, the term "merger agreement"
refers to the Amended and Restated Agreement and Plan of Merger dated June 28,
2000, between Solomon-Page and TSPGL Merger Corp. (a copy of which is included
at the back of this document as Annex A), the term "merger" refers to the merger
of Solomon-Page with and into TSPGL Merger Corp., with TSPGL Merger Corp. as the
surviving corporation, and the term "merger consideration" refers to the $5.25
per share in cash, without interest, to be received by stockholders other than
the members of the management group in the merger. TSPGL Merger Corp. is owned
by the members of the management group and was formed solely for the purpose of
effectuating the merger. For ease of reference, we sometimes refer in this
document to TSPGL Merger Corp. as "Mergeco" (or the "surviving corporation" upon
consummation of the merger), to The Solomon-Page Group Ltd. as "Solomon-Page" or
the "Company" and to Herbert Solomon, Lloyd Solomon and Scott Page,
collectively, as the "management group." We are also using the term "common
stock" to mean Solomon-Page's common stock, par value $.001 per share, and the
term "options" to mean all outstanding options to acquire common stock of
Solomon-Page.
INFORMATION CONCERNING THE SPECIAL MEETING
Time, Place, Date
This proxy statement is furnished in connection with the
solicitation by the board of directors of Solomon-Page of proxies from the
holders of shares of Solomon-Page's common stock for use at the special meeting
to be held at 12:00 p.m., local time, on ________, October ____, 2000, at The
Penn Club, 30 West 44th Street, New York, New York 10036, or at any
adjournment(s) or postponement(s) thereof, pursuant to the enclosed Notice of
Special Meeting of Stockholders.
Purpose of the Special Meeting
At the special meeting, the stockholders of Solomon-Page will
be asked to consider and vote upon the approval of the merger agreement and the
transactions contemplated thereby. A copy of the merger agreement is attached to
this proxy statement as Annex A. The merger agreement provides for the merger of
Solomon-Page with and into Mergeco, with Mergeco as the surviving corporation.
Pursuant to the merger agreement, each outstanding share of Solomon-Page's
common stock, other than common stock held (i) in the treasury of Solomon-Page,
(ii) by the members of the management group, or (iii) by stockholders who
perfect their rights under Delaware law to dissent from the merger and seek an
appraisal of the fair market value of their shares will be converted into the
right to receive $5.25 per share in cash, without interest.
The special committee, consisting of Joel A. Klarreich and
Edward Ehrenberg, was appointed by the board of directors to negotiate, review
and evaluate the terms of the merger and to report to the board regarding the
fairness of the merger to the holders of common stock other than the management
group. Messrs. Klarreich and Ehernberg are not employees of Solomon-Page and
will not have any continuing equity interest in the surviving corporation,
although each of them will receive, as a result of the merger, $79,747 in cash
for his options to be canceled in the merger. Eric M. Davis, the Chief Financial
Officer of Solomon-Page and a member of the board, was not appointed to the
special committee because the board thought that he was not independent because
of his position as an executive officer of Solomon-Page. The special committee
concluded that the terms and provisions of the merger agreement and the merger
are fair to and in the best interests of Solomon-Page and the holders of its
common stock (other than the members of the management group), and unanimously
recommended that the board approve the merger agreement and the transactions
contemplated thereby. At a meeting held on June 28, 2000, acting on the
unanimous recommendation of the special committee, the board unanimously
concluded that the terms and provisions of the merger agreement and the merger
are fair to and in the best interests of Solomon-Page and the holders of its
common stock (other than the members of the management group),
-8-
<PAGE>
approved the merger agreement, and recommended that the stockholders approve the
merger agreement and the transactions contemplated thereby. The special
committee and the board, in reaching their respective decisions, considered a
number of factors, including the opinion of Legg Mason Wood Walker,
Incorporated, financial advisor to the special committee, that, as of the date
of such opinion and based upon and subject to various considerations,
assumptions and limitations stated therein, the merger consideration to be
received by the stockholders of Solomon-Page (other than the members of the
management group) in the merger was fair from a financial point of view. A copy
of Legg Mason's opinion, which explains the information reviewed, assumptions
made, procedures followed and matters considered by Legg Mason in rendering of
its opinion, is attached as Annex C to this proxy statement. See "SPECIAL
FACTORS--Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger" and "SPECIAL FACTORS--Opinion of Financial Advisor to
the Special Committee."
BASED ON THE UNANIMOUS RECOMMENDATION OF ITS SPECIAL COMMITTEE, THE BOARD OF
DIRECTORS OF SOLOMON-PAGE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Record Date; Voting at the Meeting; Quorum
The board has fixed the close of business on Friday, August
18, 2000 as the record date for the special meeting. Only stockholders of record
as of the close of business on Friday, August 18, 2000, will be entitled to
notice of and to vote at the special meeting.
As of the close of business on the record date, Solomon-Page
had outstanding 4,153,948 shares of its common stock, held of record by 33
registered holders. Holders of the common stock are entitled to one vote per
share. The presence in person or by proxy of the holders of at least a majority
of the voting power of the outstanding common stock entitled to vote at the
special meeting constitutes a quorum. Broker non-votes and shares as to which a
stockholder abstains will be included in determining whether there is a quorum
at the special meeting.
Required Vote
Under Delaware law, the merger agreement must be approved by
the affirmative vote of the holders of a majority of the outstanding shares of
common stock of Solomon-Page but Solomon-Page's certificate of incorporation
requires that the holders of at least 66-2/3% of such shares approve the merger
agreement. The merger agreement provides that the affirmative vote of the
holders of at least 66-2/3% of the outstanding shares of common stock, or
2,679,022 shares, and a majority of the outstanding shares of common stock not
owned, directly or indirectly, by any member of the management group are the
only votes of the holders of any class or series of Solomon-Page's equity
securities necessary to approve the merger agreement, the merger and the other
transactions contemplated thereby. Lloyd Solomon, Scott Page and Herb Solomon
(the management group) currently own an aggregate of 1,894,500 shares of
Solomon-Page's common stock, representing approximately 45.6% of the outstanding
shares of common stock as of the record date. Thus, the merger agreement must be
approved by the holders of at least a majority of the remaining 54.4% of the
outstanding common stock, or at least 1,129,725 shares of common stock not held
by the management group. The members of the management group also hold options
to acquire 600,000 shares of Solomon-Page's common stock, which options will be
canceled in the merger. Solomon-Page believes that certain of its employees
currently own an aggregate of 294,244 shares of common stock, including 110,000
shares owned by Eric Davis. Such 294,244 shares represent approximately 7.08% of
the outstanding shares of common stock as of the record date. Messrs. Klarreich
and Ehrenberg, the members of the special committee, do not hold any shares of
common stock. Each of Messrs. Davis, Klarreich and Ehrenberg hold options to
purchase shares of common stock, but have no voting rights with respect thereto.
See "SPECIAL FACTORS -- Conflicts of Interest of Certain Persons in the Merger;
Certain Relationships." Solomon-Page has been advised that all of the members of
the management group and Eric Davis, the Chief Financial Officer and a director
of Solomon Page, intend to vote all of their shares in favor of the merger
agreement and the transactions contemplated thereby.
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Mr. Davis' 110,000 shares represent approximately 9.74% of the 1,129,725 shares
not held by the management group necessary to approve the merger. Solomon-Page
does know how the other employees that own shares of common stock will vote.
Failure to return an executed proxy card or to vote in person
at the special meeting or voting to abstain will constitute, in effect, a vote
against approval of the merger agreement and the transactions contemplated
thereby, for purposes of Delaware law. Similarly, broker non-votes will have the
same effect as a vote against approval of the merger agreement and the
transactions contemplated thereby.
Action to be Taken at the Meeting; Voting Procedures
The enclosed proxy card is solicited on behalf of the board.
The giving of a proxy does not preclude the right to vote in person should any
stockholder giving the proxy so desire. Stockholders have an unconditional right
to revoke their proxy at any time prior to the exercise thereof, either by
filing with Solomon-Page's Secretary at Solomon-Page's principal executive
offices a written revocation or a duly executed proxy bearing a later date or by
voting in person at the special meeting. Attendance at the special meeting
without casting a ballot will not, by itself, constitute revocation of a proxy.
Any written notice revoking a proxy should be sent to The Solomon-Page Group
Ltd., 1140 Avenue of the Americas, New York, New York 10036, Attention: Eric M.
Davis, Secretary.
All shares of common stock represented at the special meeting
by properly executed proxies received prior to or at the special meeting, unless
previously revoked, will be voted at the special meeting in accordance with the
instructions on the proxies. Unless contrary instructions are indicated, proxies
will be voted FOR the approval of the merger agreement and the transactions
contemplated thereby. As explained below in the section entitled "DISSENTERS'
RIGHTS OF APPRAISAL," a vote in favor of the merger agreement means that the
stockholder owning those shares will not have the right to dissent and seek
appraisal of the fair market value of his shares. Solomon-Page does not know of
any other matters that are to come before the special meeting. If any other
matters are properly presented at the special meeting for action, including,
among other things, consideration of a motion to adjourn such meeting to another
time and/or place for the purpose of soliciting additional proxies, allowing
additional time for the satisfaction of conditions to the merger or otherwise,
the persons named in the enclosed proxy card and acting thereunder generally
will have discretion to vote on such matters in accordance with their best
judgment. Notwithstanding the foregoing, the persons named in the enclosed proxy
card will not use their discretionary authority to use proxies voting against
the merger to vote in favor of adjournment or postponement of the special
meeting. The merger is also subject to a number of conditions. See "THE MERGER
AGREEMENT--Conditions."
Proxy Solicitation
The cost of preparing, assembling and mailing this proxy
statement, the notice of special meeting of stockholders and the enclosed proxy
card will be borne by Solomon-Page. Solomon-Page is requesting that banks,
brokers and other custodians, nominees and fiduciaries forward copies of the
proxy material to their principals and request authority for the execution of
proxies. Solomon-Page may reimburse such persons for their expenses in so doing.
In addition to the solicitation of proxies by mail, the directors, officers and
employees of Solomon-Page and its subsidiaries may, without receiving any
additional compensation, solicit proxies by telephone, telefax, telegram or in
person. Solomon-Page has retained Innisfree M&A Incorporated to assist in the
solicitation of proxies at an estimated cost of $10,000, plus reasonable costs
and expenses, including fees for making and receiving calls, distribution of
solicitation materials, working with agents involved in solicitation, printing,
traveling, copying and extraordinary contingencies. Solomon-Page has agreed to
indemnify Innisfree for any losses arising from Innisfree's fulfilment of its
retention by Solomon-Page.
No person is authorized to give any information or make any
representation not contained in this proxy statement, and if given or made, such
information or representation should not be relied upon as having been
authorized.
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YOU SHOULD NOT SEND ANY CERTIFICATES REPRESENTING SHARES OF
COMMON STOCK WITH YOUR PROXY CARD. IF THE MERGER IS CONSUMMATED, THE PROCEDURE
FOR THE EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMMON STOCK WILL BE AS
SET FORTH IN THIS PROXY STATEMENT. SEE "THE MERGER AGREEMENT--THE EXCHANGE FUND;
PAYMENT FOR SHARES OF COMMON STOCK" AND "THE MERGER AGREEMENT--TRANSFERS OF
COMMON STOCK."
THE PARTIES
Solomon-Page
Solomon-Page is a Delaware corporation, with its principal
executive offices located at 1140 Avenue of the Americas, New York, New York
10036 (Telephone: (212) 403-6100), that was formed in June 1993 and that
succeeded to the business of a predecessor New York corporation with the same
name through a merger that was effected in May 1994. The predecessor commenced
operations in 1990. Solomon-Page is a specialty niche provider of staffing
services organized into two primary operating divisions: temporary
staffing/consulting and executive search/full-time contingency recruitment. The
temporary staffing/consulting division provides services to companies seeking
personnel in the information technology, accounting, human resources and legal
areas. The executive search/full-time contingency recruitment division comprises
ten lines of business, including five industry (capital markets, publishing and
new media, healthcare, fashion services and banking), and five functional
(information technology, accounting, human resources, legal and administrative
support). For additional information regarding Solomon-Page and its business,
see "WHERE YOU CAN FIND MORE INFORMATION" and "AVAILABLE INFORMATION" herein.
Mergeco
Mergeco was incorporated in Delaware in March 2000 by the
management group in contemplation of the proposed merger. Mergeco has not been
engaged in any business activities other than those in connection with the
merger. The principal office and business address of Mergeco is 1140 Avenue of
the Americas, New York, New York 10036. The telephone number of Mergeco is (212)
403-6106.
SPECIAL FACTORS
Strategy and Share Repurchase Program
Over the last five years, Solomon-Page's management (which
includes Lloyd Solomon, Scott Page, Herbert Solomon and Eric Davis) has had
several consistent goals: to increase revenues and net profits, to increase
stockholder value through an increase in earnings per share and to develop a
financial community following and sponsorship. Management's strategy to increase
revenues and net profits has been predicated upon internal growth, rather than
acquisitions, and was dictated in part by the low trading levels of the common
stock. Solomon-Page has been able to achieve continuous growth in net profits
over the past five years. This is illustrated by progress from fiscal 1995
revenues of $7.3 million and earnings of $(.39) per share to fiscal 1999
revenues of $56 million and earnings per share of $.44.
Solomon-Page's management has regularly met with industry
analysts and potential investors and has regularly attended industry
conferences. Its intention was to develop relationships with the financial
community and to heighten awareness of Solomon-Page's operational progress.
Solomon-Page also retained a variety of consultants at a significant cost to
create a strategic investor relations program. Solomon-Page was advised by firms
in both of the above groups
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that in order to establish a financial community following and ultimately an
investment banking relationship, it needed to increase earnings per share both
by improved earnings and by a reduction in common share and common share
equivalents.
From October 1997 to February 1998, Solomon-Page repurchased
1,000,000 of its common stock purchase warrants in a publicly announced
repurchase program, at a cost of approximately $1,050,000. The warrants, which
had been issued in the unit offering by which Solomon-Page became a publicly
held corporation in 1994, provided for the purchase of common stock at a price
of $4.50 per share. Had the warrants not been repurchased, they would have
expired by their terms in October 1999. A number of firms with which
Solomon-Page spoke noted the "overhang" created by the warrants.
In September 1998, Solomon-Page announced that the board of
directors had approved the repurchase of up to 1,000,000 shares of common stock
at prevailing prices. On September 16, 1998, the date immediately preceding the
commencement of the repurchase, there were 5,152,282 shares of common stock
outstanding. Solomon-Page repurchased approximately 500,000 of such shares in
1998; and the balance on various dates from March to July 1999. On July 14,
1999, after completion of the repurchase, there were 4,152,282 shares of common
stock outstanding. Solomon-Page paid $2,231,770 to purchase such shares at
prices ranging from $1.46 to $3.31per share.
Background of the Transaction
During May 1999, Lloyd Solomon, Scott Page and Herbert Solomon
(the management group), held a number of discussions regarding the strategic
direction of Solomon-Page. Those discussions were occasioned principally by the
lack of market interest in and response to the continued improvement in
Solomon-Page's financial condition and results of operations. Among the
alternatives discussed were the acquisition of other operating businesses and
the sale or restructuring of Solomon-Page. The management group determined that
financial support for its analysis could best be provided by outside
professionals and accordingly retained the accounting firm of Richard A. Eisner
& Company LLP. Such firm assisted Solomon-Page in preparing multi-year cash-flow
and profit and loss forecasts, valuations of comparable companies and other
related analyses. The management group met with representatives of Richard
Eisner again in early July 1999 to review Solomon-Page's projections and
assumptions.
In June 1999, the management group and Eric Davis met with
Frederick Cook, a compensation consulting firm, and discussed what services such
firm could provide to Solomon-Page. The management group wanted to find out what
could be done to incentivize new employees to join Solomon-Page and current
employees to remain with Solomon-Page in light of the continued low market price
of the common stock, which had reduced or in most cases, eliminated, the utility
of stock options previously granted to existing employees. Solomon-Page did not
retain Frederick Cook to provide any services to it and Frederick Cook did not
provide any advice to Solomon-Page other than to inform Solomon-Page that there
were means to incentivize employees other than stock options.
On July 14, 1999, the management group and Eric Davis met with
Solomon-Page's counsel, Olshan Grundman Frome Rosenzweig & Wolosky LLP
("Olshan"), and representatives of Richard Eisner and Frederick Cook to discuss
the valuation of Solomon-Page, the current and desired ownership structure,
including possible exit strategies for the members of the management group, the
importance of retaining key employees and ways to include employees in the
future success of Solomon-Page. At that meeting, the participants also discussed
how a company might "go private," what was involved in such a transaction, the
pros and cons of going private and the potential costs of going private. They
also discussed the possibility of hostile takeover bids. Richard A. Eisner
provided the management group with information about how Solomon-Page compared
with other companies in its industry and about a recently completed going
private transaction. Richard A. Eisner advised the management group that
Solomon-Page was a relatively small company with no sponsorship in the financial
community, a small public float, limited liquidity and limited currency for
acquisitions due to Solomon-Page's depressed stock price. Richard A. Eisner also
reviewed for the management group the terms of a recently completed going
private transaction in Solomon-Page's industry
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in which a public company was purchased at a multiple of 3.9x EBITDA. Richard A.
Eisner was not ultimately retained as a financial advisor to Solomon-Page or the
management group.
Until Summer 1999, Solomon-Page's management pursued a course
that had been recommended by the many market professionals it had consulted. It
felt that the operating improvements it had achieved and the warrant and share
repurchases it had effected would be recognized by the marketplace in the common
stock price, in relationships it would create with the financial community and
in transactional opportunities that would become available to it. None of these
results occurred. Solomon-Page's management believes that this was in part the
result of staffing industry conditions. Many of Solomon Page's competitors,
including competitors far larger than Solomon-Page, had experienced precipitous
drops in their stock prices. It is the understanding of Solomon-Page's
management that the staffing industry, which had once enjoyed a great deal of
attention from the investment community, by Summer 1999 had fallen out of favor.
In August 1999, management again witnessed the apparent
indifference of the investment community to Solomon-Page's earning
announcements. Despite record revenues and earnings in the most recent quarter
and the continuous upward trend in these figures over the preceding five years,
there had been no indication from the financial community of any interest in
Solomon-Page, no increase in the trading levels of its stock (in fact, the stock
had actually declined in price) and there was no prospect either for a change in
these conditions or for a financing or business combination.
The management group's analysis led it to conclude in early
August 1999 that it should consider, among other things, the acquisition of the
outstanding common stock held by Solomon-Page's public stockholders. On August
5, 1999, the management group and Eric Davis met with representatives of Peter
J. Solomon Company, an investment bank that has no relationship with
Solomon-Page other than as described in this proxy statement, to seek its advice
regarding available strategic alternatives and over the next several weeks,
discussions about strategic alternatives continued among members of the
management group and with Peter J. Solomon. Such strategic alternatives
included:
o the sale of the entire company,
o maintaining the status quo as an independent public company,
o continuation of stock buyback program, and
o acquisition program.
Discussions were had about each of these alternatives and it was concluded that
none were acceptable alternatives. The sale of the entire company was discarded
because the management group was not interested in giving up control of
Solomon-Page. It was concluded that Solomon-Page should not remain as an
independent public company because it was clear, based on the lack of response
to the management group's efforts to attract recognition from the financial
community and to Solomon-Page's continued growth and staffing industry
conditions, that the financial community was not likely to embrace Solomon-Page
in the foreseeable future. The continuation of the stock buyback program was
discarded because Solomon-Page's management did not want to operate a leveraged
company in a public company environment. The strategy of pursuing an acquisition
program was discarded because it would be too expensive and dilutive to use
Solomon-Page's depressed stock as currency and Solomon-Page's management did not
want to incur debt as a public company.
None of Solomon-Page, the management group, or their advisors
met with third parties with respect to other alternatives because no indication
of interest in acquiring Solomon-Page was expressed by any third parties and the
management group was not interested in giving up control of the company.
On September 23, 1999, Solomon-Page, on behalf of the
management group, retained Peter J. Solomon to act as Solomon-Page's financial
advisor with respect to either an offer to be made by Solomon-Page or members of
the management
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group to acquire the common stock held by Solomon-Page's public stockholders or
to engage in a business combination or similar transaction involving
Solomon-Page. As late as September 23, 1999, when Peter J. Solomon was retained,
the management group had not yet determined to pursue a going private
transaction. It did recognize that its efforts to increase stockholder value had
proven unsuccessful and that it was unlikely that this would change in the
foreseeable future. From September 23, 1999 until late October 1999, the
management group, with the assistance of Olshan and Peter J. Solomon, reviewed
the terms of comparable business combinations and management buyouts, including
transactions entered into by other companies in its industry and going private
transactions completed for $10 million to $50 million in enterprise value in the
staffing and other industries.
After such further discussion and analysis, the management
group concluded in late October 1999 that a management buyout was the only
viable alternative to the status quo. It became clear to the management group
that all of its prior efforts to increase stockholder value had failed to
achieve their desired results and none of the other alternatives proposed to the
management group were viable. The recognition that a management buyout was the
only apparent circumstance under which public stockholders could achieve
liquidity and realize an above market price for their stock was an important
factor in this decision. In a series of meetings during November 1999 arranged
by Peter J. Solomon, the management group discussed a management buyout with
various prospective financing sources, including The Bank of New York. In early
December 1999, the management group concluded, based in part on discussions with
The Bank of New York, that there was a reasonable probability that it could
obtain financing for the acquisition at a fair and reasonable price of the
common stock held by public stockholders. It determined that it would be
appropriate to convene a meeting of the board of directors to express its
interest in pursuing such a transaction.
The board of directors of Solomon-Page met on December 10,
1999, each of the directors in attendance. At the invitation of the management
group, representatives of Peter J. Solomon and Olshan were present. After the
conclusion of regular business, Lloyd Solomon (Chief Executive Officer of
Solomon-Page) advised the directors that a group consisting of himself, his
father, Herbert Solomon (Chairman of the Board of Directors of Solomon-Page),
and his brother-in-law, Scott Page (President of Solomon-Page), had been
considering whether it was in the best interest of Solomon-Page and its
stockholders to remain a public company. He referred to previous discussions
with the board of directors concerning the market activity of the common stock
since Solomon-Page's 1994 initial public offering, Solomon-Page's lack of
investment community sponsorship and the current treatment in the public markets
of the stock of staffing industry companies. But for these previous discussions,
this was the first time the management group advised the board that it was
pursuing various options regarding Solomon-Page. Lloyd Solomon advised that
Solomon-Page had retained Peter J. Solomon to explore such options as might be
available to Solomon-Page and its stockholders to increase stockholder value,
which options might include a purchase of the common stock owned by the public
stockholders. He further advised that with the assistance of Peter J. Solomon,
the management group had explored the feasibility of financing for the purchase
of the publicly held common stock and had concluded that such a transaction
could be financed. He explained that no decision had been made by the management
group as to whether to proceed with such a transaction or as to what form such
transaction might take.
Olshan suggested that, in view of the management group's
involvement in the potential transaction, the board of directors consider
constituting a special committee, which, with the assistance of its own
financial advisor and counsel, would have the responsibility of evaluating and
negotiating the terms of any purchase of the publicly held common stock, as well
as making a recommendation to the full board of directors with respect to any
such proposed transaction.
The board of directors then constituted the special committee,
consisting of Messrs. Klarreich and Ehrenberg, neither of whom was an employee
of Solomon-Page or a prospective member of the management group. The board of
directors delegated to the special committee the exclusive power and authority
to, among other things, negotiate the terms of a proposed transaction with the
management group, determine whether such a transaction is fair to, and in the
best interests of, Solomon-Page and its stockholders and recommend to the board
of directors what action, if any, Solomon-Page should take with respect to such
transaction. The board of directors also discussed the retention by the special
committee, at Solomon-Page's expense, of financial and legal advisors. The board
and the management group then determined that Olshan would represent the
management group in such transaction and that the special
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committee would retain separate counsel. It was also determined that Peter J.
Solomon would be the management group's financial advisor and the special
committee would retain a separate financial advisor. Subsequent to the meeting,
the board of directors determined that the fees of the members of the special
committee would be $60,000, to be divided as the members themselves deem
appropriate.
On January 18, 2000, the special committee met to interview
three investment banks for potential selection as the special committee's
financial advisor. The special committee heard presentations from Houlihan Lokey
Howard & Zukin, Gerard Klauer Matison & Co., and Legg Mason Wood Walker,
Incorporated, and determined to engage Legg Mason as its financial advisor based
on the presentations and material distributed by each investment bank and Legg
Mason's experience, expertise and familiarity with the business in which
Solomon-Page operates.
On January 26, 2000, the special committee engaged Legg Mason
as its financial advisor to assist it in evaluating and negotiating the terms of
a going-private transaction with the management group. Legg Mason also agreed,
if requested, to provide its opinion as to the fairness, from a financial point
of view, of such a transaction to the holders of common stock other than the
management group.
On January 27, 2000, the special committee conducted a
telephonic meeting with its financial advisor. Legg Mason confirmed that it had
begun work on its preliminary analysis of Solomon-Page, which included
assembling comparable company data. The special committee and Legg Mason also
confirmed that the management group had not yet submitted an indication of
interest. At that meeting and following the meeting, the special committee
discussed the retention of a legal advisor.
The special committee met on February 10, 2000 to consider
selecting a legal advisor from the two firms asked to attend the meeting.
Following presentations by the firms, the special committee determined to engage
Weil, Gotshal & Manges LLP ("Weil Gotshal") as its legal advisor, based on its
experience and expertise in management buyouts and other acquisition
transactions. At that meeting, Weil Gotshal reviewed with the special committee
its duties and responsibilities and the role of the special committee in
negotiating with any person making an acquisition proposal for Solomon-Page.
On February 14, 2000, the special committee met telephonically
with its legal advisors. Weil Gotshal reported that representatives of Legg
Mason had spoken to Peter J. Solomon, and that Peter J. Solomon had indicated
that the management group was exploring the desirability and financeability of a
transaction at $3.25 per minority-held share.
On February 18, 2000, the special committee met telephonically
with its legal and financial advisors. Legg Mason discussed with the special
committee on a preliminary basis Legg Mason's assessment, which indicated $3.25
was not a fair price from a financial point of view for the outstanding shares
not held by the management group, based on analysis of comparable companies and
Solomon-Page's past performance. Legg Mason compared the multiples of revenues
and earnings implied by the proposed share offer to the multiples for (i) a set
of comparable publicly-traded companies and (ii) a set of comparable
publicly-disclosed "going private" transactions. Legg Mason advised the special
committee that, in its preliminary analysis, Legg Mason was using a greater
number of comparable publicly-traded companies in its valuation analyses than
had been used by Peter J. Solomon in its analysis. Legg Mason stated that a
broader universe of comparable companies would, to an extent, offset the effects
of any outlying multiples of revenues and earnings. Legg Mason noted that the
$3.25 per share indication of interest represented a premium to the prevailing
price of Solomon-Page's common stock. Legg Mason discussed with the special
committee whether Legg Mason could retain its own legal counsel to assist Legg
Mason as it refined its methodology for determining fairness and later to assist
Legg Mason in drafting any opinion which might be issued and portions of the
disclosure in any public filings which might be made. After the special
committee determined that the $3.25 per share price was not in the best
interests of minority stockholders, the special committee authorized Legg Mason
to speak with Peter J. Solomon to elicit additional information as to the basis
of the management group's indication of interest.
On February 29, 2000, the special committee met telephonically
with its legal and financial advisors. Legg Mason reported to the special
committee that it had met with Peter J. Solomon and, on the basis of discussions
with that
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firm, had reexamined its analyses. Based on its discussions with Peter J.
Solomon and its analyses, Legg Mason stated to the special committee that it had
performed a series of preliminary valuation analyses, including a comparable
companies analysis and a comparable transactions analysis. Based on these
preliminary valuation analyses, Legg Mason stated that it would not be in a
position to provide an opinion of fairness for any indication of interest below
$4.00. Legg Mason stated that $4.00 represented an approximately 50% premium to
the then prevailing price of Solomon-Page's common stock.
On March 2, 2000, legal counsel to the management group
furnished an initial draft merger agreement to the special committee and its
legal advisors. The draft merger agreement contemplated a cash merger between
Mergeco, a newly-formed Delaware corporation owned by the management group, and
Solomon-Page, according to which Mergeco would merge with and into Solomon-Page,
with Solomon-Page as the surviving corporation. The draft merger agreement did
not identify the price that the management group would be willing to offer in
the merger.
On March 3, 2000, the special committee met telephonically
with its legal and financial advisors. Legg Mason reported to the special
committee that it had been discussing the insufficiency of the $3.25 indication
of interest with Peter J. Solomon, but had not received a revised indication of
interest. Mr. Klarreich reported that he had spoken to Peter J. Solomon
concerning the possibility of having a meeting of the members of the management
group and its advisors with the special committee and its advisors to discuss
their respective analyses and the potential range of values of Solomon-Page. The
special committee agreed to hold such a meeting.
On March 6, 2000, the special committee met telephonically
with its legal advisors. The special committee discussed the material terms of
the original draft merger agreement and proposed changes to the merger
agreement. In particular, the special committee discussed amending the
provisions of the merger agreement which would allow Solomon-Page to consider
other acquisition proposals and suggested provisions which would require that
the merger be approved by a majority of the shares not owned by the management
group. A merger agreement marked to show the special committee's changes was
presented to Olshan on March 7, 2000.
On March 8, 2000, based on a preliminary review of the draft
merger agreement marked with the special committee's comments, Olshan initially
informed Weil Gotshal of the management group's objections to requiring majority
of the minority approval of the merger, as was included in the marked draft.
On March 8, 2000, the special committee met with its legal and
financial advisors. The special committee received a presentation of Legg
Mason's current analysis of the management group's indication of interest. Legg
Mason advised the special committee that Legg Mason was in the process of
preparing a valuation analysis that would, upon completion, provide implied
valuations of Solomon-Page based upon data regarding publicly traded companies,
data regarding selected "going private" transactions, including premiums to
market value and multiples of income statement parameters such as revenue and
earnings and Solomon-Page's historical market prices. Legg Mason stated that its
analysis to date based upon such measures supported its earlier conclusion that
it would not be possible to provide an opinion of fairness for any transaction
that did not have an offer price in excess of $4.00 per share. Legg Mason
reported that it had spoken again to Peter J. Solomon regarding the
insufficiency of the management group's current indication of interest of $3.25
per share.
Later that day and following the meeting of the special
committee, the members of the special committee, along with its legal and
financial advisors, met with the members of the management group and its legal
and financial advisors. At that meeting, Peter J. Solomon presented on behalf of
the management group a revised indication of interest of $3.75 per share for
each share the management group did not already own and the basis for such
indication of interest to the special committee and its advisors. The special
committee and its legal and financial advisors met separately to evaluate and
discuss a possible response to the revised indication of interest. After the
members of the special committee and its advisors rejoined the meeting, Legg
Mason, on behalf of the special committee, informed the management group that a
purchase price in the amount of the revised indication of interest would not be
acceptable to the special committee.
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The special committee informed the management group that it would consider an
indication of interest at $4.75 per share.
On March 8, 2000, following the meetings with the management
group, the special committee reconvened its meeting with its legal and financial
advisors to discuss the meetings with the management group and its advisors.
On March 9, 2000, the management group and Peter J. Solomon
conveyed to Mr. Klarreich a revised indication of interest of $4.00 per share of
Solomon-Page's common stock. They also informed Mr. Klarreich that the
management group currently was assessing whether it could finance an indication
of interest as high as $4.10 per share of Solomon-Page's common stock. Later
that day, the members of the special committee met telephonically to discuss the
$4.00 per share indication of interest. The special committee determined that
the $4.00 per share indication of interest was unacceptable, and discussed
various strategies for proceeding with further negotiations.
On March 10, 2000, the special committee met telephonically
with its legal and financial advisors. The special committee discussed with its
legal and financial advisors the revised $4.00 per share indication of interest
submitted by the management group. The special committee informed its advisors
that it already had met the day before and had determined that the revised
indication of interest was insufficient. The special committee requested that
Weil Gotshal, on behalf of the special committee, convey a willingness to
consider an indication of interest of $4.50 per share. Following the meeting,
Weil Gotshal informed Olshan of the special committee's position.
On March 13, 2000, Peter J. Solomon contacted Mr. Klarreich to
convey the management group's revised indication of interest of $4.10 per share
of Solomon-Page's common stock.
Later on March 13, 2000, the special committee met with its
legal and financial advisors. After a discussion with its advisors, the special
committee declined to consider the management group's revised indication of
interest and instructed Weil Gotshal to convey that the special committee would
consider an indication of interest of $4.40 per share. Weil Gotshal did so.
On March 17, 2000, Olshan furnished a copy of a draft Bank of
New York commitment letter for the financing of a management group acquisition
and merger, whereby Solomon-Page would be signatory on behalf of the management
group. The special committee's legal advisors and counsel to its financial
advisors reviewed the draft commitment letter and requested modifications to
various terms and conditions contained therein, certain of which subsequently
were modified as a result of such discussions.
On March 18, 2000, Peter J. Solomon informed Mr. Klarreich
that the management group had increased its indication of interest to $4.20 per
share of Solomon-Page's common stock.
On March 20, 2000, the special committee met telephonically
with its legal and financial advisors to discuss the management group's $4.20
per share indication of interest and comments to the merger agreement. The
special committee determined that the further revised indication of interest
should not be accepted and instructed Weil Gotshal to convey to the management
group that the special committee would consider an indication of interest of
$4.30 per share.
On March 21, 2000, Weil Gotshal furnished Olshan with the
special committee's additional comments to the draft merger agreement along with
a proposed press release. Olshan informed Weil Gotshal that the management group
remained unwilling to proceed with the proposed management buyout if the special
committee insisted upon majority of the minority approval. On the same day,
Olshan provided Weil Gotshal with a form of press release proposed by the
management group. Weil Gotshal also advised Olshan shortly thereafter of the
special committee's request that the management group indemnify Solomon-Page,
pursuant to an indemnity agreement, for the fees and expenses associated with
Solomon-Page's obligations under the draft commitment letter and the engagement
letter entered into with Peter J. Solomon in the event that the merger agreement
was terminated.
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On March 26, Olshan informed Weil Gotshal that there would be
solvency and credit concerns if Solomon-Page were to purchase the publicly held
shares of common stock. If Solomon-Page were to purchase such shares, the
purchased shares would be treated as treasury stock, which would cause
Solomon-Page's stockholders' equity to be approximately negative $7 million, and
therefore Solomon-Page would be insolvent. Alternatively, if Mergeco were to
purchase such shares, the transaction would be treated as a purchase, and the
stockholders' equity of the surviving corporation would be approximately $9
million. Olshan proposed to change the structure of the transaction and have
Solomon-Page merge with and into Mergeco (i.e., a reverse in the direction of
the merger as a means to resolve the difficulties). Olshan and Weil Gotshal also
further negotiated the form of press release, in particular whether the press
release would include a statement as to the special committee's ability to
receive alternative acquisition proposals for Solomon-Page.
On March 28, 2000, Olshan furnished Weil Gotshal with forms,
as proposed by the management group, of an indemnity agreement and an offer to
purchase, without a price term. The special committee's legal advisor reviewed
the indemnity agreement and suggested changes that were incorporated in the
final version. On that same day, the special committee met telephonically with
its legal advisors. The special committee received an update from Weil Gotshal
with respect to Weil Gotshal's discussions with Olshan. After the meeting, Weil
Gotshal informed the management group's legal advisor of the special committee's
concern with respect to open issues related to the structure of the transaction.
The special committee insisted that these items be finalized before proceeding
with additional negotiations.
On March 30, 2000, the special committee, through its legal
advisor, received from the management group an offer to purchase the outstanding
shares of Solomon-Page not already owned by such group for $4.25 per share.
On March 31, 2000, the special committee met with its legal
and financial advisors and discussed the management group's offer to purchase at
$4.25 per share. The special committee then reviewed with its advisors the
fiduciary duties of members of the special committee and Legg Mason's financial
analysis. The special committee also discussed with its advisors the terms of
the proposed merger agreement and the benefits of the merger to Solomon-Page's
stockholders. Legg Mason rendered an oral opinion (which was subsequently
confirmed in writing) that, subject to the assumptions, limitations and
qualifications contained in the written opinion, as of such date, the amount of
$4.25 per share in cash to be received by the holders of Solomon-Page's common
stock (other than Mergeco and the management group) pursuant to the merger
agreement was fair to such stockholders from a financial point of view. The
special committee then approved the management group's $4.25 per share offer
price and the terms and provisions of the proposed merger agreement. In
connection with such approval, the special committee found such price and the
terms and provisions of the merger agreement to be fair to and in the best
interests of Solomon-Page and its stockholders (other than Mergeco and the
management group) and determined to recommend that the board of directors
approve the proposed merger agreement and the transactions contemplated thereby.
On March 31, 2000, immediately following the meeting of the
special committee, a special meeting of the full board of directors of
Solomon-Page was convened. All directors were present in person at the meeting,
and Olshan, Weil Gotshal and Legg Mason also were present. The directors were
advised by Olshan as to their fiduciary duties under Delaware law, and Legg
Mason summarized its financial analysis of Solomon-Page and advised the board of
directors of the oral opinion that it had rendered to the special committee,
which opinion was being confirmed in writing. The board of directors reviewed
the terms of the proposed merger agreement, and reasons that the special
committee was recommending to the full board of directors the approval of the
merger agreement. The full board of directors thereupon unanimously concluded
that the terms and provisions of the merger agreement, subject to nonmaterial
revisions agreed upon by counsel, and the merger were fair to and in the best
interests of Solomon-Page and its stockholders (other than Mergeco and the
management group), approved the merger, and recommended that Solomon-Page's
stockholders approve the merger agreement and the transactions contemplated
thereby. Following the board of directors meeting, Olshan and Weil Gotshal
finalized the merger agreement and prepared a letter agreement, later signed by
the individual members of the management group, agreeing to be bound by the
terms of the merger agreement. Following resolution of these items, Solomon-Page
and Mergeco executed the merger agreement.
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On March 31, 2000, Solomon-Page issued a press release
announcing that Solomon-Page had entered into a definitive merger agreement with
the management group and Mergeco. The press release stated that notwithstanding
the special committee's recommendation of the merger, the special committee
would be able to receive inquiries from other parties interested in a possible
acquisition of Solomon-Page.
On April 7, 2000, William Straub, a purported stockholder of
Solomon-Page, filed a putative class action complaint against Solomon-Page and
each of Solomon-Page's directors in the Court of Chancery of the State of
Delaware. The complaint sought, among other things, a judgment granting
preliminary and permanent injunctive relief against the consummation of the
merger and the payment of damages based on allegations that the merger was a
wrongful plan to take Solomon-Page private in a transaction that was inherently
unfair to Solomon-Page's public stockholders and that the directors breached
various duties under Delaware law.
On April 27, 2000, the special committee and its legal
advisors met with the management group and its legal advisors. At the meeting,
the management group presented to the special committee updated historical
information consisting of results for the quarter ended March 31, 2000 and
revised projected figures for Solomon-Page's performance based on improved
results that reflected a substantial increase from the figures on which the
special committee had negotiated and based its approval of the merger
transaction one month earlier at $4.25 per share.
On May 2, 2000, Weil Gotshal discussed with Olshan the
particular transaction that had resulted in a substantial increase in
Solomon-Page's earnings for the three months ended March 31, 2000, of which the
special committee had recently become aware. The transaction involved the
placement of an entire department with an investment banking client of
Solomon-Page, resulting in a $3,050,000 payment to Solomon-Page. Weil Gotshal
told Olshan that the special committee would need to evaluate the impact of this
information on the special committee's recommendation.
On May 3, 2000, Olshan contacted Weil Gotshal to convey the
additional information that a key employee of Solomon-Page responsible for one
of Solomon-Page's largest clients, had left Solomon-Page at the end of March.
On May 4, 2000, the special committee, through Weil Gotshal
contacted Legg Mason and requested that it analyze the $4.25 per share offer
price in light of the new information about the transaction involving the
placement of employees with an investment banking client. Legg Mason requested
that Solomon-Page's management provide information about the impact of the
placement of an entire department with an investment banking client on trailing
twelve months' EBITDA.
On May 11, 2000, Weil Gotshal spoke with Olshan, which
conveyed the analysis prepared by Solomon-Page's management of the impact of
such transaction on Solomon-Page's trailing twelve months' EBITDA. In such
connection, Solomon-Page's management believed that Legg Mason should also
consider the impact of a key employee's departure and the expenses associated
with the merger transaction on trailing twelve months' EBITDA to get a more
representative picture of Solomon-Page's earnings. The analysis prepared by
Solomon-Page's management reversed the effects of such transactions because they
were believed to be non-recurring and, therefore, distortional. The effects of
such adjustment were as follows: the adding back of expenses in connection with
the merger resulted in a $630,000 increase in EBITDA , the elimination of the
fee relating to the placement of an entire department with an investment banking
client resulted in a $1.2 million decrease in EBITDA and the adding back of the
fees relating to placements made by the key employee that left Solomon-Page
resulted in a $350,000 decrease in EBITDA . Weil Gotshal conveyed this analysis
to the special committee and Legg Mason.
On May 12, 2000, the special committee and its advisors met
telephonically to hear a revised presentation from Legg Mason on the $4.25 per
share offer price. Legg Mason expressed disagreement in part with the management
group's adjustments to EBITDA and confirmed to the special committee that, in
light of this new information, it could no longer opine that the $4.25 per share
offer was fair from a financial point of view. The special committee determined
to reopen negotiations with the management group in light of this new
information and to ask the
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management group to reconfirm the special committee's authority, including that
the board of directors would not recommend a proposed transaction for approval
by Solomon-Page's stockholders or otherwise approve a proposed transaction
without a prior favorable recommendation by the special committee. Later that
day, Weil Gotshal, at the special committee's request, relayed the special
committee's position to Olshan.
On June 1, 2000, the special committee met with its legal and
financial advisors. At that meeting, Mr. Klarreich updated the special committee
regarding his earlier telephone conversation with Peter J. Solomon. In that
conversation, Peter J. Solomon telephoned to explain the management group's
position that the revenues from the placement of employees with an investment
banking client was a one-time, non-recurring transaction. Legg Mason pointed out
to the special committee that the transaction increased EBITDA approximately 40%
on a trailing twelve-month basis, and that even if the management group's
adjustments were accepted (including the elimination from historical results of
revenues and EBITDA associated with the one-time placement of employees within
an investment banking client and the downward revision of revenues and EBITDA
associated with the departure of the key employee) and assuming that the
applicable range of multiples did not change, Legg Mason would not be in a
position to provide an opinion of fairness for any indication of interest below
$5.00. Legg Mason, nevertheless, reiterated to the special committee that it
disagreed with the management group's proposed adjustments to trailing twelve
months' EBITDA. Later that day, the special committee and its advisors met with
the management group and its advisors. Prior to the meeting, the board of
directors of Solomon-Page, comprised in part of management group members,
executed, effective as of May 31, 2000, a unanimous written consent reconfirming
the special committee's authority in connection with the proposed transaction
with the management group, which included that the board of directors would not
recommend a proposed transaction for approval by Solomon-Page's stockholders or
otherwise approve a proposed transaction without a prior favorable
recommendation by the special committee.
At the June 1, 2000 meeting, the management group and its
advisors, and the special committee and its advisors, discussed at length the
status and historical results of Solomon-Page, and the bases for the management
group's merger proposal. At that meeting, the special committee told the
management group that it would withdraw its recommendation of the merger at the
price of $4.25 per share in light of the new information that it had received;
that the special committee was open to receiving a new indication of interest;
and that it renewed its request for the affirmative vote of the holders of a
majority of the minority of Solomon-Page's outstanding shares as a condition to
any merger. Later in the day, Olshan, on behalf of the management group,
conveyed the management group's revised indication of interest of $4.80 per
share.
On June 2, 2000, the special committee and its advisors met
telephonically to discuss the management group's revised indication of interest
of $4.80 per share. Legg Mason affirmed the inadequacy of the revised $4.80
indication of interest based on its analysis of the offer. The special committee
determined that the $4.80 indication of interest should not be accepted and
authorized Weil Gotshal, on its behalf, to contact Olshan in this regard and to
advise that the management group should furnish a new indication of interest at
a higher price. Weil Gotshal did so later that day.
On June 5, 2000, the special committee and its advisors met
telephonically to discuss the status of the negotiations.
On June 6, 2000, Olshan, on the management group's behalf,
presented to Weil Gotshal a revised, but "final," indication of interest of
$5.25 per share, which was contingent upon an agreement by plaintiff's counsel
in the Straub lawsuit to settle that lawsuit. In addition, the management group
agreed, again subject to reaching agreement with plaintiff's counsel, to add the
requirement that the affirmative vote of the holders of a majority of the
minority of Solomon-Page's outstanding shares be necessary to approve the
merger.
On June 19, 2000, Olshan furnished the special committee with
a draft of the amended and restated merger agreement.
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On June 20, 2000, the special committee and its advisors met
telephonically. The special committee agreed to request a formal fairness
opinion from Legg Mason with respect to the $5.25 per share offer, after the
management group secured committed financing. The special committee further
determined to request an additional $.05 increase in the offer price, and
authorized Weil Gotshal to convey the special committee's request to Olshan. As
instructed, Weil Gotshal contacted Olshan later that day.
On June 21, 2000, Olshan contacted Weil Gotshal to state that
the management group would not offer $5.30 per share, insisting that $5.25 was
its last, best and final offer, contingent upon an agreement to settle the
Straub lawsuit and the management group finalizing the terms of a revised
commitment letter with The Bank of New York to finance the proposed increase in
the offer price.
On June 23, 2000, Olshan received and furnished to Weil
Gotshal a copy of the revised commitment letter.
On June 27, 2000, Olshan, on behalf of the management group,
presented Weil Gotshal with the management group's offer to purchase at $5.25
per share all of the outstanding shares of common stock not already owned by the
management group. Olshan also sent a revised draft of the amended and restated
merger agreement, which incorporated the comments conveyed previously by Weil
Gotshal. Later that day, the special committee met with its legal and financial
advisors and discussed the management group's $5.25 per share offer. The special
committee then reviewed with its advisors:
o the status of a proposed agreement in principle with
plaintiff's counsel for settling the lawsuit,
o Legg Mason's financial analysis,
o the terms of the proposed amended and restated merger
agreement, and
o the benefits of the merger to Solomon-Page's stockholders.
Legg Mason rendered an oral opinion (which was subsequently
confirmed in writing) that, subject to the assumptions, limitations and
qualifications contained in such opinion, as of such date, the amount of $5.25
per share in cash to be received by the holders of Solomon-Page's common stock
(other than the management group) pursuant to the amended and restated merger
agreement was fair to such stockholders from a financial point of view. See
"--Opinion of Financial Advisor to the Special Committee." The special committee
then approved the management group's $5.25 per share offer price and the terms
and provisions of the proposed amended and restated merger agreement and found
such price and the terms and provisions of the merger agreement to be fair to
and in the best interests of Solomon-Page and its stockholders (other than the
management group) and determined to recommend that the board of directors
approve the proposed amended and restated merger agreement and the transactions
contemplated thereby. See "--Recommendation of the Special Committee and Board
of Directors; Fairness of the Merger-Special Committee."
On June 27, 2000, immediately following the meeting of the
special committee, a special meeting of the full board of directors of
Solomon-Page was convened. All directors were present in person or
telephonically at the meeting, and representatives from Olshan and Weil Gotshal
also were present. After the board of directors' confirmation that Legg Mason
had delivered its oral fairness opinion and a discussion of the terms of the
proposed amended and restated merger agreement and of the special committee's
request to continue to receive current information on Solomon-Page, the full
board of directors thereupon unanimously concluded that the terms and provisions
of the amended and restated merger agreement and the merger were fair to and in
the best interests of Solomon-Page and its stockholders (other than the
management group), approved the merger, and recommended that Solomon-Page's
stockholders approve the amended and restated merger agreement and the
transactions contemplated thereby, all subject to the execution of an agreement
in principle to settle the Straub lawsuit. See "-Recommendation of the Special
Committee and Board of Directors; Fairness of the Merger-Board of Directors."
On June 28, 2000, Solomon-Page and the individual directors of
the board of directors of Solomon-Page entered into an agreement in principle to
settle the Straub lawsuit based upon the increase in the merger consideration
and the requirement that the merger be conditioned on the approval of the
holders of a majority of the outstanding shares of
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common stock of Solomon-Page not owned by the management group. The final
settlement of such lawsuit is conditioned upon the occurrence of several events.
See "--Stockholder Lawsuit Challenging the Merger." Later that day, Solomon-Page
and the management group executed the amended and restated merger agreement and
issued a press release announcing that Solomon-Page had agreed to a revised
management buyout by the management group at $5.25 per share and that
Solomon-Page had entered into the amended and restated merger agreement.
In early August 2000, the special committee received an
unsolicited inquiry with respect to a possible transaction with Solomon-Page
from a representative of a privately-held company in the staffing industry.
Prior to meeting with such third party and its representative and holding
substantive discussions, the special committee requested, according to the terms
of the merger agreement, that the third party enter into a confidentiality
agreement with customary "stand-still" and non-solicitation provisions. The
third party refused to sign such an agreement and no discussions ensued. At no
point has the special committee obtained any substantive information from such
third party or its representative with respect to a possible transaction.
Recommendation of the Special Committee and Board of Directors; Fairness of the
Merger
On June 27, 2000, the special committee met with its financial
and legal advisors, determined that the merger and the terms and provisions of
the merger agreement were fair to and in the best interests of Solomon-Page and
its stockholders (other than the management group), and unanimously recommended
to the full board of directors that it approve the merger agreement and the
transactions contemplated thereby.
At a special meeting of the board of directors held
immediately following the special committee's determination, at which all
directors of Solomon-Page were present, the board of directors considered the
recommendation of the special committee. The board of directors unanimously
concluded that the terms and provisions of the merger agreement and the merger
were fair to and in the best interests of Solomon-Page and its stockholders
(other than the management group), approved the merger agreement, and
recommended that the stockholders approve the merger agreement and the
transactions contemplated thereby.
SPECIAL COMMITTEE. In determining that the special committee
would approve and recommend the management group's increased offer of $5.25 per
share, the special committee considered the following positive factors, each of
which, individually and in the aggregate, in the opinion of the special
committee, supported such determination:
o MERGER PRICE. The special committee concluded that the $5.25
price per share represented the highest price that Mergeco was willing to pay to
acquire Solomon-Page's common stock.
o LEGG MASON FAIRNESS OPINION. The special committee
considered the financial presentations of Legg Mason and its opinion delivered
at the meeting to the effect that, as of the date of its opinion and based upon
and subject to the matters stated in its opinion, the increased offer of $5.25
per share to be received by Solomon-Page's stockholders (other than the members
of the management group) in the merger was fair from a financial point of view.
A copy of Legg Mason's opinion, with a discussion of the information reviewed,
assumptions made and matters considered by Legg Mason, is attached to this proxy
statement as Annex C. You should read this opinion in its entirety as well as
the other information described under " -- Opinion of Financial Advisor to the
Special Committee."
o MARKET PRICE AND PREMIUM. The special committee considered
the recent and historical market prices of Solomon-Page's common stock and noted
that the $5.25 per share price offered by the management group would represent
approximately:
-- a $1.00 per share or 23.5% increase from the offer
presented by the management group and accepted by the
special committee on March 31, 2000;
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-- a 52.7% premium to the trading price of the common stock
prior to the announcement of the increased offer;
-- a $2.00 per share or 61.5% increase over the management
group's initial indication of interest; and
-- a $2.37 per share or 82.6% premium to the trading price
of the common stock prior to the initial announcement of a
transaction with the management group on March 31, 2000.
The special committee noted that the closing price of the common stock on the
NASDAQ on June 26, 2000, the last full trading day prior to the special
committee and board of directors meetings held to approve the amended and
restated merger agreement, was $3.44 per share.
o JUST SAY NO AUTHORITY. The special committee considered the
fact that prior to any agreement being reached or reopened negotiations as to
the ultimate merger consideration and terms, the board of directors had
reconfirmed that it would not recommend a transaction with the management group
for approval by Solomon-Page's stockholders or otherwise approve a transaction
with the management group without a prior favorable recommendation of such
transaction by the special committee.
o VOTING REQUIREMENTS. The special committee considered that
the affirmative vote of the holders of at least 66-2/3% of the outstanding
shares of Solomon-Page's common stock and the holders of at least a majority of
the outstanding shares of Solomon-Page's common stock not owned, directly or
indirectly, by the management group would be required to approve the
transaction.
o SETTLEMENT OF PENDING LITIGATION. The special committee
considered that the parties had reached an agreement in principle, acceptable to
the special committee, with respect to a settlement of the lawsuit challenging
the original $4.25 per share transaction and the process related thereto.
o SPECIAL COMMITTEE FORMATION AND ARM'S-LENGTH NEGOTIATIONS.
The special committee considered the fact that both the original merger
agreement and the amended and restated merger agreement, the transactions
contemplated thereby and the increases in and the renegotiations of the offer
price and other terms and conditions of the merger were the product of
arm's-length negotiations between the management group and the special
committee, the members of which (and the legal and financial advisors of which)
were independent of the management group and did not and would not have any
equity interest in Mergeco.
o RECEIPT OF COMMITMENT LETTER. The special committee
considered the fact that the management group had received a revised commitment
letter from The Bank of New York to provide the necessary financing for the
proposed merger, and the special committee had reviewed, and had input into, the
terms and conditions of the revised commitment letter.
o ABSENCE OF ALTERNATE ACQUISITION PROPOSALS. Despite the
advantages of the transaction being structured as a one-step merger and of the
notice in the press releases announcing the original and the revised
transactions that the special committee was able to receive inquiries from other
parties interested in a possible acquisition of Solomon-Page, Solomon-Page and
the special committee had not received any indications of interest with respect
to an acquisition proposal other than from the management group.
The special committee also reaffirmed that the following
positive factors, which were considered by the special committee in approving
the initial $4.25 per share offer, were still applicable to the special
committee's determination as to the recommendation of the transaction at $5.25
per share:
o TERMS OF THE MERGER AGREEMENT. The special committee
considered the terms of the amended and restated merger agreement that were not
amended, including:
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-- the provision providing that the special committee or
Solomon-Page (upon the recommendation of the special
committee) may furnish or provide access to information
concerning Solomon-Page to third parties who indicate a
willingness to make an acquisition proposal for Solomon-Page;
-- the ability of the special committee, so long as it is
acting consistent with its fiduciary duty, to withdraw its
recommendation and/or terminate the amended and restated
merger agreement in order to permit Solomon-Page to enter into
a business combination transaction with a third party; and
-- the absence of any termination or "break-up" fees other
than the payment of the management group's out-of-pocket costs
and expenses up to a maximum amount of $500,000 (increased
from $400,000 in the original merger agreement) in the event
the special committee, acting consistent with its fiduciary
duties, terminated the amended and restated merger agreement,
or the board of directors (acting through the special
committee) withdrew or changed its recommendation to
stockholders, approved an acquisition proposal with respect to
an alternative transaction, or failed to call the annual
meeting or a special meeting of the stockholders, to mail the
proxy statement as promptly as practicable, or to include its
recommendation in the proxy statement.
o AVAILABILITY OF DISSENTERS' RIGHTS. The special committee
considered the fact that dissenters' rights of appraisal would be available to
the holders of common stock under Delaware law.
o NATURE OF SOLOMON-PAGE'S BUSINESS. The special committee
considered its familiarity with, and the facts relating to, Solomon-Page's
business, financial condition, results of operations, prospects and the nature
of the industries in which Solomon-Page operates, including the prospects of
Solomon-Page if it were to remain an independent public company.
o LIQUIDITY OF COMMON STOCK. The special committee considered
the thin trading market and the lack of liquidity of Solomon-Page's common stock
and the existence of a large percentage of common stock in the hands of a few
stockholders. The special committee believed that the proposed merger would
permit the stockholders of Solomon-Page to sell all of their shares at a fair
price and at a level considerably higher than historic levels, especially in
light of the fact that there existed little liquidity in Solomon-Page's common
stock.
o TRANSACTION STRUCTURE. The special committee evaluated the
benefits of the transaction being structured as a one-step merger, and concluded
that the period of time between the public announcement of the proposed merger
and the meeting of Solomon-Page's stockholders would provide a sufficient period
of time for any interested third party to prepare and present an acquisition
proposal for Solomon-Page.
o POSSIBLE DECLINE IN MARKET PRICE OF COMMON STOCK. The
special committee considered the distinct possibility that if a merger
transaction with the management group were not negotiated and Solomon-Page
remained as a publicly owned corporation, it was possible that because of a
decline in the market price of either the shares of Solomon-Page's common stock
or the stock market in general, the price that might be received by the holders
of Solomon-Page's shares in the open market or in a future transaction might be
substantially less than the $5.25 per share price to be received by stockholders
in connection with the proposed merger.
o RELIANCE LETTER. The special committee considered the fact
that Solomon-Page and its stockholders would receive a reliance letter
permitting them to rely on such certificates or other similar materials relating
to the solvency of Solomon-Page after giving effect to the transactions
contemplated by the amended and restated merger agreement.
o INDEMNITY AGREEMENT. The special committee considered the
fact that the special committee had negotiated for an agreement by the
management group to indemnify Solomon-Page for any fees and costs incurred under
the revised commitment letter or the engagement letter with the management
group's financial advisor in the event the amended and restated merger agreement
was terminated for any reason except for a breach caused by Solomon-Page.
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o REGULATORY APPROVALS. The special committee considered the
fact that there were no regulatory approvals required to consummate the merger.
In view of the wide variety of factors considered in
connection with its evaluation of the merger, the special committee did not find
it practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.
In the opinion of the special committee, the foregoing
positive factors outweighed the factors against the special committee approving
and recommending the management group's increased offer. The special committee
considered the negative factors that if the merger is approved, the holders of
the common stock will not participate in the future growth of Solomon-Page,
including as indicated in the revised projections of Solomon-Page's performance
provided by Solomon-Page's management. Because of the risks and uncertainties
associated with Solomon-Page's future prospects, the special committee concluded
that this detriment was not quantifiable. The special committee also concluded
that obtaining a cash premium for the common stock now was preferable to
enabling the holders of such stock to have a speculative potential future
return.
The special committee also noted the negative factor of the
potential conflicts of interest of the management group in connection with the
proposed merger. The special committee believes, however, that the procedures
followed in the process of considering the management group's offer and the
special committee's negotiating the terms of the amended and restated merger
agreement addressed these conflicts and were fair to the non-management
stockholders of Solomon-Page.
As part of the special committee's consideration of the
fairness of the merger consideration in relation to the comparable company
multiples set forth under "--Opinion of Financial Advisor to the Special
Committee" below, the special committee considered the management group's offer
in comparison to market values as a multiple of book value. The special
committee was not aware of any previous firm offers for Solomon-Page with which
to compare the merger consideration and it did not consider the liquidation
value of Solomon-Page because the liquidation of Solomon-Page was not considered
a viable option.
BOARD OF DIRECTORS. In reaching its determination referred to
above, the board of directors adopted the analyses, conclusions and
recommendations of the special committee, including the factors considered by
the special committee. The board of directors also considered the unanimous
approval of the amended and restated merger agreement and the merger by the
special committee.
The members of the board of directors, including the members
of the special committee, evaluated the merger in light of their knowledge of
the business, financial condition and prospects of Solomon-Page, and based upon
the advice of financial and legal advisors. In the light of the number and
variety of factors that the special committee and the board of directors
considered in connection with their evaluation of the merger, neither the
special committee nor the board of directors found it practicable to assign
relative weights to the positive factors, and, accordingly, neither the special
committee nor the board of directors did so. In addition, individual members of
the special committee and the board of directors may have given different
weights to different factors.
In considering the recommendations of the special committee
and the board of directors with respect to the amended and restated merger
agreement and the merger, stockholders should be aware that the management group
will own all of the shares of Solomon-Page following the merger and that Eric
Davis, a director and officer of Solomon-Page, and the members of the special
committee will receive cash consideration in connection with the merger. The
special committee and the board of directors were aware of these potential
conflicts of interests and considered them among other factors in deciding to
approve and recommend the transaction with the management group. The special
committee considered the management group's ownership of Solomon-Page after the
merger to be a negative factor in its determination that the amended and
restated merger agreement and the merger are fair to non-management group
stockholders of Solomon-Page.
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The board of directors and the special committee did not view
the equity holdings of Mr. Davis and the special committee members as a negative
factor. Because these individuals, either through their holdings of shares or
options in Solomon-Page, will receive cash consideration in the merger, the
board of directors and the special committee believe that these individuals'
interests as shareholders in considering the amended and restated merger
agreement and the merger are substantially the same as the interests of the
non-management group stockholders of Solomon-Page. The special committee and the
board of directors did not consider these interests or conflicts with respect to
Mr. Davis and the members of the special committee sufficient to require their
non-participation in evaluating the terms of the proposed transaction with the
management group.
The board of directors believes that the merger is
procedurally fair because, among other things:
o the special committee consisted solely of independent
directors appointed by the board of directors to represent only the interests of
Solomon-Page's stockholders other than the management group;
o the special committee retained and was advised by its own
legal counsel, who had no relationship with or interest in the management group
or the merger, who negotiated on behalf of the special committee;
o the special committee retained and was advised by its own
financial advisor, who had no relationship with or interest in the management
group or the merger, to assist it in evaluating the proposed transaction and
received financial advice from Legg Mason; and
o the $5.25 per share cash purchase price and the other terms
and conditions of the merger agreement resulted from active and extensive
arm's-length bargaining between the special committee and the management group
and their respective advisors, including reopening by the special committee of
negotiations as to price and other terms contained in the $4.25 per share merger
proposal.
The board of directors believes that sufficient procedural
safeguards to ensure fairness of the transaction and to permit the special
committee to represent effectively the interests of the holders of
Solomon-Page's common stock (other than the management group) were present and
were exercised. For example, the board of directors confirmed that it would not
recommend a proposed transaction with the management group for approval by
Solomon-Page's stockholders or otherwise approve a proposed transaction with the
management group without a prior favorable recommendation of such a proposed
transaction by the special committee. Therefore, the board of directors believes
there was no need to retain any additional unaffiliated representative to act on
behalf of the holders of Solomon-Page's common stock in view of:
o the unaffiliated status of the members of the special
committee whose sole purpose was to represent the interests of the holders of
Solomon-Page's common stock (other than the management group), and retention by
the special committee of legal counsel and financial advisors, and
o the fact that utilization of a special committee is a
mechanism well-recognized under Delaware law in transactions of this type.
The board of directors of Solomon-Page believes that the
merger is fair to and in the best interests of Solomon-Page and the holders of
common stock (other than the management group) and, upon the unanimous
recommendation of the special committee, recommends approval of the amended and
restated merger agreement, and the transactions contemplated thereby to
Solomon-Page's stockholders.
The Management Group's Purpose and Reasons for the Merger
The management group's purpose for engaging in the
transactions contemplated by the merger agreement is to acquire 100% ownership
of Solomon-Page in a transaction in which the holders of Solomon-Page's common
stock (other than the members of the management group) would be entitled to have
their equity interest in Solomon-Page extinguished
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in exchange for cash in the amount of $5.25 per share. Each member of the
management group believes that such an acquisition is an attractive investment
opportunity at this time based upon, among other things, the past performance of
Solomon-Page and its future business prospects. The management group believes
that Solomon-Page will continue to increase its revenues and profitability in
the foreseeable future. In addition, the management group's strategy of
increasing intrinsic value for Solomon-Page through internal growth rather than
through acquisitions makes Solomon-Page more viable as a privately held company
rather than a publicly held company in a market that has historically rewarded
companies with aggressive acquisition strategies. The management group also
considered the lack of liquidity of Solomon-Page's common stock and believes
that this transaction provides liquidity to Solomon-Page's stockholders. The
determination to proceed with the acquisition at this time would also, in the
view of the management group, afford Solomon-Page's stockholders an opportunity
to dispose of their shares at a premium over the market prices that prevailed
prior to March 31, 2000, the date on which Solomon-Page announced the execution
of the original merger agreement. In addition, the management group noted that
causing Solomon-Page to be closely held, and therefore no longer required to
file periodic reports with the SEC, would enable management to focus to a
greater degree on the creation of long term value by reducing management's
commitment of resources with respect to procedural and compliance requirements
of a public company, provide the management group with flexibility in dealing
with the assets of Solomon-Page, and reduce costs associated with Solomon-Page's
obligations and reporting requirements under the securities laws (for example,
as a privately held entity, Solomon-Page would no longer be required to file
quarterly and annual reports with the SEC or publish and distribute to its
stockholders annual reports and proxy statements), which the members of the
management group anticipate could result in savings of approximately $100,000
per year. The transactions contemplated by the merger agreement, however, will
involve a substantial risk to the management group because of the large amount
of indebtedness to be incurred in connection with the consummation of the merger
and the possibility that the unemployment rate will increase and demand for
employees will decrease. The management group also considered the negative
factor that if the merger is completed, the stockholders would not have the
opportunity to share in Solomon-Page's future growth. However, due to the lack
of historical market interest in Solomon-Page, this was not viewed as a
significant detriment to stockholders. See "SPECIAL FACTORS--Financing of the
Merger."
The acquisition of the entire equity interest in Solomon-Page
was structured as a cash merger in order to accomplish the acquisition in a
single step, without the necessity of financing separate purchases of shares in
a tender offer or in open market purchases while at the same time not materially
disrupting Solomon-Page's operations.
The management group and Mergeco have concluded that the
merger, including the merger consideration of $5.25 per share in cash and the
terms and conditions of the merger agreement, are fair to Solomon-Page and the
holders of the common stock (other than the members of the management group)
based upon the following factors:
o the fact that the special committee, consisting of
directors not affiliated with the members of the management
group, had unanimously approved the merger and recommended
that stockholders approve the merger agreement and the
transactions contemplated thereby;
o the fact that the merger consideration and the other terms
and conditions of the merger agreement were the result of
arm's-length, good faith negotiations between the special
committee and the management group and their respective
advisors;
o the fact that approval of the merger agreement would
require the affirmative votes of both the holders of at
least 66-2/3% of all outstanding shares of common stock and
at least a majority of all outstanding shares of common
stock not owned, directly or indirectly, by any member of
the management group;
o the fact that Legg Mason issued an opinion to the special
committee to the effect that, as of the date of such
opinion, based upon and subject to various considerations,
assumptions and limitations stated therein, the $5.25 per
share in cash to be received in the merger is fair from a
financial point of view to the holders of common stock
(other than the members of the management group);
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o the fact that during the substantial period of time that
would elapse between the announcement of the execution of
the merger agreement and the consummation of the merger
following the special meeting to be held to vote upon the
merger, there would be more than sufficient time and
opportunity for other persons to propose alternative
transactions to the merger, and that the terms of the
merger agreement authorize Solomon-Page to furnish or
provide access to information concerning Solomon-Page to
third parties who indicate an interest it or a willingness
to make an acquisition proposal and to terminate the merger
agreement in order to permit Solomon-Page to enter into a
business combination transaction with a third party; and
o the conclusions, recommendations, underlying analyses and
factors referred to above as having been taken into account
by the special committee and the board, which the members
of the management group adopted as their own (see "SPECIAL
FACTORS-Recommendation of the Special Committee and Board
of Directors; Fairness of the Merger" and "SPECIAL
FACTORS--Opinion of Financial Advisor to the Special
Committee"). The management group also considered the
ability of the management group to finance the merger at
the $5.25 per share price in cash. Although Peter J.
Solomon generally assisted the management group in this
transaction and, in particular, advised the management
group on bidding and negotiating strategies, participated
in negotiations with Legg Mason and analyzed Solomon-Page's
operations and prospects, Peter J. Solomon did not deliver
a fairness opinion as to the merger consideration.
The management group also considered the negative factors
considered by the special committee and the board of directors.
Financial Advisor to the Management Group
Peter J. Solomon primarily provided information to the
management group with respect to the amount of the merger consideration. In
addition, Peter J. Solomon discussed the structure and terms of the merger with
the management group and the availability of financing, including the amount of
leverage extended, the cost of the financing, the term of the financing, the
ability of the lender to give an over advance above asset-based formulas and the
experience level of the lender in the industry. The information provided by
Peter J. Solomon to the management group is summarized in the following
paragraphs.
In early August 1999, in connection with its solicitation of
Solomon-Page's business, Peter J. Solomon provided the management group with
historical analyses of Solomon-Page's financial and stock performance, as well
as information about comparable public companies, comparable completed going
private transactions, control premium analyses and funding analyses. In mid
November 1999 and March 2000, at the management group's request, Peter J.
Solomon provided the management group with similar updated analyses.
Peter J. Solomon's August 1999 analysis of selected comparable
company and Solomon-Page data included the following multiples: price as a
multiple of LTM (last twelve months) earnings - 9.5x (mean) , 9.7 (median) and
10.0x (Solomon-Page); price as a multiple of book value - 1.7x (mean) , 1.7
(median) and 1.6x (Solomon-Page); enterprise value as a multiple of LTM net
sales - 61.6% (mean) , 59.6% (median) and 29.4% (Solomon-Page); enterprise value
as a multiple of LTM EBITDA - 3.8x (mean), 3.4 (median) and 4.6x (Solomon-Page);
and enterprise value as a multiple of LTM EBIT - 4.6x (mean) and 3.6 (median).
Peter J. Solomon's comparable transaction data indicated the following
multiples: enterprise value as a multiple of LTM sales - 40.1% (mean) and 35.5%
(median), enterprise value as multiple of LTM EBITDA - 4.1x (mean) and 3.9
(median); enterprise value as a multiple of LTM EBIT - 6.0x (mean) and 5.5
(median); and enterprise value as a multiple of LTM net income - 9.4x (mean),
8.3x (median) and 5.6x (Solomon-Page). The enterprise value of Solomon-Page at
the time of this presentation was estimated to be $15.3 million.
Peter J. Solomon's November 1999 analysis of selected
comparable company and Solomon-Page data included the following multiples: price
as a multiple of LTM earnings - 8.4x (mean) , 7.7 (median) 3.9x
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(Solomon-Page); price as a multiple of book value - 1.2x (mean) , 1.0 (median)
and 1.1x (Solomon-Page); enterprise value as a multiple of LTM net sales - 34.2%
(mean) , 28.2% (median) and 15.0% (Solomon-Page); enterprise value as a multiple
of LTM EBITDA - 3.8x (mean) , 4.0 (median) and 3.9x (Solomon-Page); and
enterprise value as a multiple of LTM EBIT - 5.2x (mean) and 5.8 (median). Peter
J. Solomon's comparable transaction data indicated the following multiples:
enterprise value as a multiple of LTM sales - 40.1% (mean) and 35.5% (median),
enterprise value as a multiple of LTM EBITDA - 4.1x (mean) and 3.9 (median);
enterprise value as a multiple of LTM EBIT - 6.0x (mean) and 5.5 (median); and
enterprise value as a multiple of LTM net income - 9.4x (mean), 8.3x (median)
and 2.2x (Solomon-Page). The enterprise value of Solomon-Page at the time of
this presentation was estimated to be $8.4 million.
Peter J. Solomon's March 2000 analysis of selected comparable
company and Solomon-Page data included the following multiples: price as a
multiple of LTM earnings- 7.8x(mean) , 7.8 (median) and 6.3x (Solomon-Page);
price as a multiple of book value - 1.0x (mean) , 0.9 (median) and 1.7x
(Solomon-Page); enterprise value as a multiple of LTM net sales - 23.2% (mean) ,
21.5% (median) and 25.4% (Solomon-Page); enterprise value as a multiple of LTM
EBITDA - 3.9x (mean) , 3.7 (median) and 3.1x (Solomon-Page); and enterprise
value as a multiple of LTM EBIT - 5.6x (mean), 6.2 (median) and 3.6x
(Solomon-Page). Peter J. Solomon's comparable transaction data indicated the
following multiples: enterprise value as a multiple of LTM sales - 39.6%
(median), enterprise value as a multiple of LTM EBITDA - 3.9x (median);
enterprise value as a multiple of LTM EBIT -5.8x (median); enterprise value as a
multiple of LTM net income - 9.6x (median); and premium to one week prior to
announcement - 30.2% (median). The enterprise value of Solomon-Page at the time
of this presentation was estimated to be $15.4 million.
Comparable companies were based on Solomon-Page's standard
industry classification (SIC) code and size and enterprise value criteria. For
the August 1999 and November 1999 analyses, Peter J. Solomon used companies with
Solomon-Page's SIC code that had enterprise values below $70 million. For the
March 2000 analyses, Peter J. Solomon used companies with Solomon-Page's SIC
code that had enterprise values below $35 million. Peter J. Solomon concluded
that Solomon-Page's stock was trading at a discount to comparable companies. The
transaction value of the merger at $5.25 per share can be calculated to be
approximately $27.1 million.
Peter J. Solomon was not requested to, and did not, express an
opinion to the management group as to the merger consideration. However, the
management group consulted with representatives from Peter J. Solomon from time
to time regarding other terms of the transaction. Peter J. Solomon provided
input on these matters on the basis of its experience in public mergers and
acquisitions. Peter J. Solomon also assisted the management group in obtaining
bank financing for the transaction by advising the management group on potential
bank lenders and assisting in the preparation of bank presentation materials and
in the evaluation of financing proposals from potential bank lenders. The
Company has paid Peter J. Solomon financial advisory fees of $225,000 and will
pay Peter J. Solomon $75,000 upon consummation of the merger. The members of the
management group have agreed to indemnify Solomon-Page for such fees in the
event the merger is not consummated.
Opinion of Financial Advisor to the Special Committee
Under a letter agreement dated January 26, 2000, the special
committee appointed by the Solomon-Page board retained Legg Mason Wood Walker,
Incorporated ("Legg Mason") to act as its financial advisor for the merger. As
part of this engagement, the special committee requested that Legg Mason
evaluate the fairness, from a financial point of view, of the price to be paid
in the merger to the public stockholders of Solomon-Page, which was determined
on the basis of arm's-length negotiations between the special committee and the
management group. On March 31, 2000, Legg Mason delivered to the special
committee its oral opinion that, as of that date, the $4.25 per share cash
consideration was fair from a financial point of view to Solomon-Page's public
stockholders (other than the management group). As discussed above, on May 4,
2000, the special committee requested that Legg Mason analyze the $4.25 per
share offer in light of new information and management's latest projections. On
May 12, 2000, Legg Mason advised the special committee that, in light of the new
information, it could no longer opine that the $4.25 per share offer was fair
from a financial point of view. On June 27, 2000, Legg Mason delivered to the
special committee its oral opinion that, as of that date, the $5.25 per share
cash consideration was fair from a financial point of view to Solomon-Page's
public stockholders (other than
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the management group). Legg Mason later confirmed its oral opinion by delivering
a written opinion, which stated the considerations and assumptions upon which
its opinion was based.
The full text of the June 27, 2000 opinion, which explains the
assumptions made, procedures followed, matters considered and limitations on the
scope of the review undertaken by Legg Mason in rendering its opinion, is
attached as Annex C to this proxy statement. Legg Mason's written opinion is
directed to the special committee and only addresses the fairness of the $5.25
per share cash consideration from a financial point of view as of the date of
the opinion. Legg Mason's written opinion does not address any other aspect of
the merger and does not constitute a recommendation to any Solomon-Page
stockholder as to how to vote at the special meeting. The following is only a
summary of the Legg Mason opinion. We urge you to read the entire opinion.
In arriving at its opinion on March 31, 2000 and June 27,
2000, Legg Mason, among other things:
o reviewed the financial terms and conditions of the draft
amended and restated merger agreement, dated June 27, 2000;
o reviewed certain publicly available audited and unaudited
financial statements of Solomon-Page and certain other publicly available
information of Solomon-Page;
o reviewed and discussed with representatives of the
management of Solomon-Page certain information of a business and financial
nature regarding Solomon-Page furnished to Legg Mason by them, including
financial forecasts and related assumptions of Solomon-Page;
o reviewed public information with respect to certain other
companies in lines of business which Legg Mason believed to be generally
comparable to the business of Solomon-Page;
o reviewed the financial terms, to the extent publicly
available, of certain business combinations which Legg Mason believed to be
generally comparable to the merger;
o reviewed certain publicly available information
concerning the historical stock price and trading volume of Solomon-Page common
stock; and
o conducted such other financial studies, analyses and
investigations and considered such other information as Legg Mason deemed
necessary or appropriate.
Legg Mason assumed and relied upon, without independent
verification, the accuracy and completeness of all information supplied to it by
Solomon-Page, and all publicly available information. Legg Mason further relied
upon the assurances of management of Solomon-Page that they were unaware of any
facts that would make the information provided to Legg Mason incomplete or
misleading. Legg Mason assumed that there had been no material change in the
assets, financial condition, business or prospects of Solomon-Page since the
date the most recent financial statements were made available to it. Legg Mason
did not assume any responsibility for or make any independent valuation or
appraisal of any of the assets or liabilities of Solomon-Page or concerning the
solvency of, or issues relating to solvency concerning, Solomon-Page.
With respect to financial forecasts, Legg Mason assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of Solomon-Page as to the future financial
performance of Solomon-Page. Legg Mason assumed no responsibility for and
expressed no view as to such forecasts or the assumptions on which they were
based. The forecasts and projections were based on numerous variables and
assumptions that were inherently uncertain, including, without limitation, facts
related to general economic and market conditions. Accordingly, Legg Mason noted
that actual results could vary significantly from those set forth in such
forecasts and projections. Legg Mason's opinion was necessarily based on share
prices and economic and other
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conditions and circumstances as in effect on, and the information made available
to it up to and including, the date of the opinion. In rendering its opinion,
Legg Mason did not address the relative merits of the merger, any alternative
potential transaction or Solomon-Page's underlying decision to effect the
merger.
Legg Mason also assumed, with Solomon-Page's consent, that the
merger would be completed according to the terms of the amended and restated
merger agreement, without any waiver of any material term or condition contained
in that agreement. In addition, Legg Mason assumed that there would be no
material changes to the amended and restated merger agreement as executed from
the draft reviewed by Legg Mason.
The following is a brief summary of the material financial
analyses performed by Legg Mason in preparing its March 31, 2000 and June 27,
2000 opinions:
COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS
Legg Mason reviewed and compared the actual financial,
operating and stock market information of certain companies in lines of business
believed to be generally comparable to those of Solomon-Page in the staffing
industry. These companies included Acsys, Inc., Ablest Inc. (f/k/a C.H. Heist
Corp.), Diversified Corporate Resources, Inc., General Employment Enterprises,
Inc., Headway Corporate Resources, Inc. and Joule Inc.
Specifically, Legg Mason analyzed the respective multiples of
the market value of these companies to their last twelve months' net income and
most recent book value and the enterprise value of these companies to their last
twelve months' revenues, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and earnings before interest and taxes ("EBIT"). Legg
Mason's analysis indicated the following:
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<TABLE>
<CAPTION>
Market Value as a Multiple of: Enterprise Value as a Multiple of:
----------------------------- ---------------------------------
LTM Net Most Recent
Income Book Value LTM Revenues LTM EBITDA LTM EBIT
<S> <C> <C> <C> <C> <C>
Low 6.0x 0.62x 0.15x 1.4x 1.6x
High 20.4x 2.15x 0.68x 7.9x 10.6x
Mean 10.9x 1.12x 0.30x 4.5x 6.6x
Median 6.4x 1.03x 0.22x 4.9x 7.0x
</TABLE>
Legg Mason then derived a range of implied per share equity
values for Solomon-Page by applying the multiples of the comparable companies
listed above to corresponding data for Solomon-Page. This analysis indicated the
following:
<TABLE>
<CAPTION>
Market Value as a Multiple of: Enterprise Value as a Multiple of:
----------------------------- ---------------------------------
LTM Net Most Recent
Income Book Value LTM Revenues LTM EBITDA LTM EBIT
<S> <C> <C> <C> <C> <C>
Low $ 4.45 $ 1.25 $ 2.10 $ 2.09 $ 2.12
High $ 15.01 $ 4.35 $ 10.03 $ 11.87 $ 14.37
Mean $ 8.06 $ 2.27 $ 4.36 $ 6.82 $ 8.87
Median $ 4.70 $ 2.09 $ 3.14 $ 7.38 $ 9.44
</TABLE>
Legg Mason noted that, while the $5.25 per share cash merger
consideration was less than the implied valuations based on mean and median
multiples of EBITDA and EBIT, the $5.25 per share cash merger consideration was
greater than the implied valuations based on the median multiple of net income
and the mean and median multiples of revenues and book value. Furthermore, Legg
Mason noted that the $5.25 per share cash merger consideration fell between the
low and high range of implied valuations for each of the five income statement
and balance sheet data points analyzed. As a result, Legg Mason concluded that
this analysis supported its opinion of fairness.
In its comparable analysis relating to the $4.25 per share
cash merger consideration using Solomon-Page's historical data through December
31, 1999 rather than through March 31, 2000 as above, Legg Mason noted that,
while the $4.25 per share cash merger consideration was less than the implied
valuations based on mean and median multiples of EBITDA, EBIT and net income,
the $4.25 per share cash merger consideration was greater than the implied
valuations based on mean and median multiples of revenues and book value.
Furthermore, Legg Mason noted that the $4.25 per share cash merger consideration
fell between the low and high range of implied valuations for each of the five
income statement and balance sheet data points analyzed. As a result, Legg Mason
concluded that this analysis supported its opinion of fairness.
SELECTED COMPARABLE "GOING PRIVATE" TRANSACTION ANALYSIS
Legg Mason reviewed selected publicly available financial and
stock market information of thirteen (13) "going private" transactions with
characteristics determined to be comparable to those of the merger, including:
Kentek Information Systems, Inc. (1999), Winston Resources Inc. (1999), Equitrac
Corp. (1999), Haskel International, Inc. (1999), Back Bay Restaurant Group
(1999), Oacis Healthcare Holdings (1999), Audits & Surveys Worldwide, Inc.
(1999), Lion Brewery, Inc. (1999), Personnel Management Inc. (1998), GNI Group,
Inc. (1998), Portec, Inc. (1998), Plasti-Line, Inc. (1998), and El Chico
Restaurants Inc. (1998).
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Specifically, Legg Mason analyzed the respective multiples of
the enterprise values for these transactions to the last twelve months'
revenues, EBITDA and EBIT for the "going private" seller in these transactions.
Legg Mason's analysis indicated the following:
Enterprise Value as a Multiple of:
----------------------------------
LTM Revenues LTM EBITDA LTM EBIT
------------ ---------- --------
Low 0.20x 2.5x 3.6x
High 2.04x 11.2x 22.2x
Mean 0.75x 6.2x 10.4x
Median 0.52x 6.5x 10.8x
Legg Mason then derived a range of implied per share equity
values for Solomon-Page by applying the multiples from the comparable
transactions listed above to corresponding data for Solomon-Page. This analysis
indicated the following:
Enterprise Value as a Multiple of:
----------------------------------
LTM Revenues LTM EBITDA LTM EBIT
------------ ---------- --------
Low $ 2.95 $ 3.67 $ 4.75
High $ 30.33 $ 17.01 $ 30.19
Mean $ 11.10 $ 9.37 $ 14.03
Median $ 7.67 $ 9.73 $ 14.59
Legg Mason noted that the $5.25 per share cash merger
consideration was less than the implied valuations based on mean and median
multiples of revenues, EBITDA and EBIT. Nevertheless, Legg Mason noted that the
$5.25 per share cash merger consideration fell between the low and high range of
implied valuations for each of the three income statement data points analyzed.
As a result, Legg Mason concluded that this analysis supported its opinion of
fairness.
In its comparable analysis relating to the $4.25 per share
cash merger consideration using Solomon-Page's historical data through December
31, 1999 rather than through March 31, 2000 as above, Legg Mason noted that the
$4.25 per share cash merger consideration was less than the implied valuations
based on mean and median multiples of revenues, EBITDA and EBIT. Nevertheless,
Legg Mason noted that the $4.25 per share cash merger consideration fell between
the low and high range of implied valuations for each of the three income
statement data points analyzed. As a result, Legg Mason concluded that this
analysis supported its opinion of fairness.
PREMIUMS PAID ANALYSIS
Legg Mason reviewed the publicly available information
concerning premiums paid in the 13 selected "going private" transactions listed
above. Legg Mason analyzed the information on these transactions using three
criteria: the purchase price as a percentage premium to the one-day-prior
trading price, the one-week-prior trading price and the one-month-prior trading
price. This analysis indicated the following:
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Percentage Premium Over:
-----------------------
One-day-prior One-week-prior One-month-prior
Trading Price Trading Price Trading Price
------------- ------------- -------------
Low 4.3% 5.7% 11.3%
High 60.9% 49.6% 51.8%
Mean 25.5% 26.2% 31.0%
Median 22.8% 23.1% 28.1%
Legg Mason then derived a range of implied per share equity
values for Solomon-Page by applying the percentage premiums from the comparable
transactions listed above to corresponding data for Solomon-Page as of (i) March
30, 2000 (the day prior to the first announcement that Solomon Page would be
merged with and into Mergeco in a transaction involving $4.25 merger
consideration) and (ii) June 26, 2000 (the day prior to the special committee's
meeting to approve the merger and two days prior to the announcement of the
revised transaction of $5.25 per share cash merger consideration). These
analyses indicated the following:
1. Assuming a stock price as of March 30, 2000:
Percentage Premium Over:
-----------------------
One-day-prior One-week-prior One-month-prior
Trading Price Trading Price Trading Price
------------- ------------- -------------
Low $ 3.00 $ 3.04 $ 2.99
High $ 4.63 $ 4.30 $ 4.08
Mean $ 3.61 $ 3.63 $ 3.52
Median $ 3.53 $ 3.54 $ 3.44
Legg Mason noted that the $5.25 per share cash merger
consideration was greater than the implied valuations based on mean or median
percentage premiums paid for each of the three data points analyzed.
Furthermore, Legg Mason noted that the $5.25 per share cash merger consideration
was greater than the high end of the range of implied valuations for each of the
three data points analyzed. As a result, Legg Mason concluded that this analysis
strongly supported its opinion of fairness.
2. Assuming a stock price as of June 26, 2000:
Percentage Premium Over:
-----------------------
One-day-prior One-week-prior One-month-prior
Trading Price Trading Price Trading Price
------------- ------------- -------------
Low $ 3.72 $ 3.63 $ 4.03
High $ 5.73 $ 5.14 $ 5.50
Mean $ 4.47 $ 4.34 $ 4.75
Median $ 4.38 $ 4.23 $ 4.64
Legg Mason noted that the $5.25 per share cash merger
consideration fell within the low (and in one instance was greater than) and the
high range of implied valuations for each of the three data points analyzed.
Furthermore, Legg Mason noted that the $5.25 per share cash merger consideration
was greater than the implied valuations based on mean or median percentage
premiums paid for each of the three data points analyzed. As a result, Legg
Mason concluded that this analysis strongly supported its opinion of fairness.
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In its comparable analysis relating to the $4.25 per share
cash merger consideration, Legg Mason noted that the $4.25 per share cash merger
consideration fell within the low (or in one instance was greater than) and high
range of implied valuations for each of the three data points analyzed.
Furthermore, Legg Mason noted that the $4.25 per share cash merger consideration
was greater than the implied valuations based on mean or median percentage
premiums paid for each of the three data points analyzed. As a result, Legg
Mason concluded that this analysis strongly supported its opinion of fairness.
HISTORICAL COMMON STOCK PRICE PERFORMANCE ANALYSIS
Legg Mason reviewed the price of the common stock over the one
day, one week, two weeks, 30 days, 60 days, 90 days, 180 days, one year, two
years and three years prior to the March 31, 2000 announcement. This analysis
indicated the following:
Solomon-Page Common Stock Closing Price
Time Period Low High Mean
----- ----- -----
One Day $2.88 $2.88 $2.88
One Week $2.56 $3.00 $2.84
Two Weeks $2.56 $3.00 $2.78
30 Days $2.56 $3.06 $2.80
60 Days $2.41 $3.06 $2.73
90 Days $1.91 $3.06 $2.61
180 Days $1.88 $3.25 $2.59
One Year $1.59 $3.25 $2.46
Two Years $1.34 $4.88 $2.48
Three Years $1.34 $4.88 $2.66
Legg Mason noted that the $5.25 per share merger consideration
exceeded the Common stock's highest closing price at any time over the prior
three years. In addition, Legg Mason noted that the $5.25 per share merger
consideration represented a premium to the mean closing prices over the one day,
one week, two weeks, 30 days, 60 days, 90 days, 180 days, one year, two years
and three years prior to the March 31, 2000 announcement of 82.6%, 85.2%, 89.1%,
87.8%, 92.5%, 101.4%, 102.8%, 113.1%, 111.3% and 97.0%, respectively. Legg Mason
concluded that this analysis strongly supported its opinion.
In its comparable analysis relating to the $4.25 per share
cash merger consideration, Legg Mason noted that the $4.25 per share merger
consideration exceeded the common stock's closing price over the prior five
years, except for short periods in October 1997 and April 1998. In addition,
Legg Mason noted that the $4.25 per share merger consideration represented a
premium to the mean closing prices over the last day, week, two weeks, 30 days,
60 days, 90 days, 180 days, one year, two years and three years of 47.8%, 49.9%,
53.0%, 52.0%, 55.8%, 63.1%, 64.1%, 72.5%, 71.1% and 59.5%, respectively. Legg
Mason concluded that this analysis strongly supported its fairness
determination.
Legg Mason reviewed the price of the common stock over the one
day, one week, two weeks, 30 days, 60 days, 90 days, 180 days, one year, two
years and three years prior to June 27, 2000. This analysis indicated the
following:
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Solomon-Page Common Stock Closing Price
Time Period Low High Mean
--- ---- ----
One Day $3.44 $3.44 $3.44
One Week $3.44 $3.56 $3.48
Two Weeks $3.44 $3.63 $3.54
30 Days $3.44 $3.69 $3.58
60 Days $3.44 $3.88 $3.65
90 Days $2.56 $3.88 $3.62
180 Days $2.41 $3.88 $3.17
One Year $1.88 $3.88 $2.85
Two Years $1.34 $3.91 $2.47
Three Years $1.34 $4.88 $2.77
Legg Mason noted that the $5.25 per share merger consideration
exceeded the Common stock's highest closing price at any time over the prior
three years. In addition, Legg Mason noted that the $5.25 per share merger
consideration represented a premium to the mean closing prices over the one day,
one week, two weeks, 30 days, 60 days, 90 days, 180 days, one year, two years
and three years prior to June 27, 2000 announcement of 52.7%, 50.7%, 48.2%,
46.5%, 43.6%, 45.2%, 65.7%, 84.3%, 112.8% and 89.4%, respectively. Legg Mason
concluded that this analysis strongly supported its opinion.
Legg Mason performed a variety of financial and comparative
analyses solely for the purpose of providing its opinion to the special
committee that the $5.25 per share merger consideration is fair from a financial
point of view. The summary of these analyses is not a complete description of
the analyses performed by Legg Mason. Preparing a fairness opinion is a complex
analytical process and is not readily susceptible to partial analysis or summary
description. Legg Mason believes that its analyses must be considered as a
whole. Selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying the analyses and its opinion.
Legg Mason's opinion and financial analyses were not the only
factors considered by the special committee and the Solomon-Page board in their
evaluation of the merger and should not be viewed as determinative of the views
of the special committee or the Solomon-Page board or Solomon-Page's management.
Legg Mason has consented to the inclusion of and references to its opinion in
this proxy statement.
Under the terms of Legg Mason's engagement, Solomon-Page has
paid Legg Mason an advisory fee of $225,000, which the special committee
believes is reasonable for the services provided in connection with the merger.
Solomon-Page has agreed to reimburse Legg Mason for travel and other
out-of-pocket expenses incurred in performing its services, including the fees
and expenses of its legal counsel, and to indemnify Legg Mason and related
persons against liabilities, including liabilities under the federal securities
laws, arising out of Legg Mason's engagement.
Legg Mason is an internationally recognized investment banking
firm and is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, leveraged buyouts, and valuations for real estate, corporate
and other purposes. Legg Mason was selected to act as investment banker to the
special committee based upon the presentations and materials it had provided to
the special committee and its experience, expertise and familiarity with
Solomon-Page's business.
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Certain Financial Projections
Solomon-Page does not as a matter of course make public
projections as to future revenues, earnings or other financial information.
Solomon-Page did, however, prepare projections that it provided to the special
committee and Legg Mason in connection with their analysis and their evaluation
of Solomon-Page's financial position at that time. The projections set forth
below are included in this proxy statement because such information was provided
to Legg Mason and the special committee. The accompanying prospective financial
information was not prepared by Solomon-Page with a view to public disclosure or
with a view to complying with the guidelines established by the American
Institute of Certified Public Accountants with respect to prospective financial
information.
Neither Solomon-Page's independent auditors, nor any other
independent accountants, have compiled, examined, or performed any procedures
with respect to any of the prospective financial information contained herein,
nor have they expressed any opinion or any other form of assurance on such
information or their achievability, and they assume no responsibility for, and
disclaim any association with the prospective financial information.
The assumptions and estimates underlying the prospective
financial information are inherently uncertain and, though considered reasonable
by Solomon-Page's management as of the date furnished to the special committee,
are subject to a wide variety of significant business, economic, and competitive
risks and uncertainties that could cause actual results to differ materially
from those contained in the prospective financial information. See " --
Forward-Looking Information" on page _ of this proxy statement. Accordingly,
Solomon-Page cannot assure you that the prospective results are indicative of
the future performance of Solomon-Page or that actual results will not differ
materially from those presented in the prospective financial information.
Inclusion of the prospective information in this proxy statement should not be
regarded as a representation by any person that the results contained in the
prospective financial information will be achieved.
The financial projections set forth below are not meant to be
a complete presentation of prospective financial statements, but in the view of
Solomon-Page's management, were prepared on a reasonable basis, reflected the
best currently available estimates and judgments and presented, to the best of
Solomon-Page's management's knowledge and belief, as of the date they were
provided, the expected course of action and the expected future financial
performance of the Solomon-Page. However, this information is not fact and you
should not rely upon it as necessarily indicative of future results, and
Solomon-Page cautions you not to place undue reliance on the financial
projections provided below.
Solomon-Page has assumed that revenue in the fiscal year
ending on September 30, 2000 will equal approximately $73 million, comprised of
approximately $34 million of revenues contributed by the executive search/full
time contingency recruitment business and an additional $39 million from its
temporary staffing business.
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The following table summarizes the projections that
Solomon-Page prepared:
The Solomon-Page Group Ltd. (Consolidated)
Projected Income
Statement for the year
ending September 30,
2000
----------------------
(Dollars in Thousands)
Revenue $ 72,548
Operating Expenses:
Selling Expenses $ 56,372
General and Administrative $ 10,069
Depreciation and Amortization $ 848
----------------------
Total Operating Expenses $ 67,289
----------------------
Income from Operations $ 5,259
----------------------
Other Income/[Expenses]
Interest and Dividend Income $ 114
Interest Expense ($ 264)
----------------------
Total Other Income/[Expense] ($ 150)
Income Before Income Tax Expense $ 5,109
----------------------
----------------------
EBITDA $ 6,107
----------------------
You should read the projections presented above together with
Solomon-Page's historical financial statements included in this proxy statement.
Solomon-Page's management and its financial advisors also
independently prepared projections, including projections relating to revenues,
gross profits and operating profits, in connection with its efforts to obtain
bank financing for the merger based upon the financial results it believed
Solomon-Page might achieve.
These projections were contained in a presentation to The Bank
of New York prepared by Solomon-Page's management and its financial advisors in
connection with obtaining financing for the merger. Solomon-Page advised The
Bank of New York that these projections were prepared by Solomon-Page's
management based upon assumptions which, in the opinion of the Solomon-Page's
management, were reasonable for the Solomon-Page as a private company. The
projections presented to The Bank of New York assumed that revenue will remain
constant for the period 2001 to 2004. Solomon-Page incorporated into the
estimates for net income the impact of reduced interest income and the
additional interest expense associated with our use of cash and our borrowing to
finance the merger. Excess cash flow generated from the business over the period
2001 to 2004 was projected to be deployed to repay indebtedness causing a
reduction in interest expense. Solomon-Page also assumed an estimated tax rate
of 45%.
Forward-Looking Information
This proxy statement contains or incorporates by reference
certain forward-looking statements and information relating to Solomon-Page that
are based on the beliefs of management as well as assumptions made by and
information currently available to Solomon-Page. When used in this document or
in material incorporated by reference
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into this document, the words "anticipate," "believe," "estimate," "expect,"
"plan" and "intend" and similar expressions, as they relate to Solomon-Page or
its management are intended to identify forward-looking statements. Such
statements reflect the current view of Solomon-Page with respect to future
events and are subject to certain risks, uncertainties and assumptions. Many
factors could cause the actual results, performance or achievements of
Solomon-Page to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward-looking
statements, including, among others, changes in general economic and business
conditions, changes in business strategy, and various other factors, both
referenced and not referenced in this proxy statement and in Solomon-Page's
periodic filings with the Securities and Exchange Commission. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected, planned or intended. Solomon-Page
does not intend, or assume any obligation, to update these forward-looking
statements.
Certain Effects of the Merger
If the merger is consummated, you will no longer have any
interest in, and will not be a stockholder of, Solomon-Page. Therefore, you will
not benefit from any future earnings or growth of Solomon-Page or benefit from
any increase in the value of Solomon-Page and will no longer bear the risk of
any decrease in value of Solomon-Page. Instead, you will have the right to
receive upon consummation of the merger $5.25 in cash for each share of
Solomon-Page's common stock held (other than common stock held in the treasury
of Solomon-Page, by the members of the management group, or by Dissenting
Stockholders). The benefit to the holders of common stock of the transaction is
the payment of a premium, in cash, above the market value for such stock prior
to the announcement of the original merger agreement. This cash payment assures
that all stockholders will receive the same amount for their shares, rather than
taking the risks associated with attempting to sell their shares in the open
market. The detriment to such holders is their inability to participate as
continuing stockholders in the possible future growth of Solomon-Page.
If the merger is consummated, the members of the management
group will hold the entire equity interest in Solomon-Page and the management
group will benefit from any future earnings or growth of Solomon-Page and any
increase in value of Solomon-Page; however, the members of the management group
will also bear the risk of any decrease in value of Solomon-Page and will bear
the risks associated with the significant amount of debt to be incurred by
Solomon-Page in connection with the merger. In addition, because Solomon-Page
will be closely held and cease to be publicly traded, the management group
believes that it may be able to focus on the increase in the long term value of
Solomon-Page to a greater degree by reducing management's commitment of
resources with respect to procedural and compliance requirements of a public
company. The management group will bear the risks associated with the lack of
liquidity in its investment in Solomon-Page.
If the merger is consummated, Solomon-Page will incur a high
level of indebtedness in connection with the merger, which will require
Solomon-Page to dedicate a substantial portion of its cash flow from operations
to make payments on the debt, thereby reducing cash flow available for general
corporate purposes. In addition, Solomon-Page will be unable to grant options to
its employee exercisable for publicly traded securities.
Solomon-Page's common stock is currently registered under the
Securities Exchange Act of 1934, as amended. As a result of the merger, the
common stock will be delisted from the Nasdaq SmallCap Market, the registration
of the common stock under the Exchange Act will be terminated, Solomon-Page will
be relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and its officers, directors and beneficial
owners of more than 10% of the common stock, subject to certain limitations,
will be relieved of the reporting requirements and "short-swing" trading
provisions under Section 16 of the Exchange Act. Further, Solomon-Page will no
longer be subject to periodic reporting requirements of the Exchange Act and
will cease filing information with SEC. Accordingly, less information will be
required to be made publicly available than presently is the case.
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The directors of Mergeco immediately prior to the effective
time of the merger, as described below, will be the directors of the surviving
corporation immediately after the merger. Messrs. Herbert Solomon, Lloyd Solomon
and Scott Page are the current directors of Mergeco and no determination has
been made as to whether additional persons will be invited to join the board of
directors of the surviving corporation following the merger. The officers of
Mergeco immediately prior to the effective time of the merger will be the
officers of the surviving corporation immediately after the merger. The
certificate of incorporation of Mergeco immediately prior to the effective time
will be the certificate of incorporation of the surviving corporation until
thereafter amended and the by-laws of Mergeco immediately prior to the effective
time of the merger will be the by-laws of the surviving corporation until
thereafter amended.
Plans for Solomon-Page After the Merger
The management group expects that the business and operations
of the surviving corporation will be continued substantially as they are
currently being conducted by Solomon-Page and its subsidiary. The management
group does not currently intend to dispose of any assets or operations of the
surviving corporation, other than in the ordinary course of business. The
management group may, from time to time, evaluate and review the surviving
corporation's businesses, operations and properties and make such changes as are
deemed appropriate.
Except as described in this proxy statement, none of the
management group, Mergeco or Solomon-Page has any present plans or proposals
involving Solomon-Page or its subsidiaries that relate to or would result in an
extraordinary corporate transaction such as a merger, reorganization, or
liquidation, or a sale or transfer of a material amount of assets, or any
material change in the present capitalization, or in indebtedness, except as
contemplated by the Credit Agreement (as hereinafter defined), or any other
material change in Solomon-Page's corporate structure or business. However, the
management group and Mergeco will review proposals or may propose the
acquisition or disposition of assets or other changes in the surviving
corporation's business, corporate structure, capitalization, management or
dividend policy that they consider to be in the best interests of the surviving
corporation and its stockholders. Neither Solomon-Page nor the management group
has formulated any specific plans regarding repayment of the indebtedness
incurred in connection with the merger; however, such persons anticipate that
such indebtedness will be repaid primarily with or by means of cash from the
operations of the business of Solomon-Page.
Conduct of the Business of Solomon-Page if the Merger is Not Consummated
If the merger is not consummated, the board expects that
Solomon-Page's current management will continue to operate Solomon-Page's
business substantially as presently operated.
Conflicts of Interest of Certain Persons in the Merger; Certain Relationships
The members of the management group own an aggregate of
1,894,500 shares of Solomon-Page's common stock, representing approximately
45.6% of the total outstanding shares of common stock. Based on the $5.25 merger
consideration, such shares would be worth $9,946,125. In addition, the members
of the management group hold options to purchase an aggregate of 600,000 shares
of common stock, which options are to be canceled in the merger.
Eric M. Davis, a Solomon-Page director, owns 110,000 shares of
stock, representing approximately 2.6% of the total outstanding shares of common
stock. It is expected that Mr. Davis will be the Chief Financial Officer of
Mergeco after the merger.
Edward Ehrenberg and Joel A. Klarreich, the members of the
special committee, and Mr. Davis have received options to acquire shares of
common stock under Solomon-Page's stock option plans. Upon consummation of the
merger, such outstanding options shall be canceled and each optionholder will be
entitled to receive, for each share
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subject to an option, the difference between $5.25 and the per-share exercise
price of that option, if any, regardless of whether the option is fully vested
or exercisable. The amount received will, however, be reduced to the extent of
any federal and state income and payroll tax withholding that is due.
The table below shows the number of shares of common stock and
options currently held by Mr. Davis and the members of the special committee and
the amounts to be paid to those individuals at the effective time of the merger
in exchange for their shares of common stock and for cancellation of their
options.
Amount of cash to be received
Shares of Outstanding upon the consummation of the
Name Common Stock Options merger for the shares/options
---- ------------ ----------- -----------------------------
Eric M. Davis 110,000 80,000 $577,500/$271,250
Edward Ehrenberg -- 25,000 --/$79,747
Joel A. Klarreich -- 25,000 --/$79,747
Upon consummation of the merger, the members of the management
group will own, in the aggregate, 100% of the surviving corporation's
outstanding common stock. Such ownership will arise from the conversion, upon
the consummation of the merger, of all of the outstanding shares of common stock
held by members of the management group into all of the outstanding shares of
common stock of the surviving corporation.
The merger agreement provides that the current directors of
Mergeco shall be the directors of the surviving corporation immediately after
the merger. Messrs. Herbert Solomon, Lloyd Solomon and Scott Page are the
current directors of Mergeco and no determination has been made as to whether
additional persons will be invited to join the board of directors of the
surviving corporation following the merger.
The merger agreement provides that the surviving corporation
will, from and after the effective time, indemnify, defend and hold harmless the
present and former officers and directors of Solomon-Page in connection with any
claims relating to such person serving as a director, officer, employee or agent
of Solomon-Page or at the request of Solomon-Page and any other entity to the
full extent permitted under Delaware law, Solomon-Page's certificate of
incorporation, by-laws or indemnification agreements in effect prior to the
effective time. In addition, the surviving corporation will, for a period of six
years, maintain all rights to indemnification and limitations on liability in
favor of such officers and directors to the same extent and upon the terms and
conditions provided in Solomon-Page's certificate of incorporation and by-laws
as in effect on the date of the merger agreement, and to the extent such rights
are consistent with the Delaware General Corporation Law, against certain losses
and expenses in connection with claims based on the fact that such person was an
officer or director of Solomon-Page. The merger agreement also provides that the
surviving corporation will maintain its existing policies of officers' and
directors' liability insurance for a period of six years after the effective
time, or substitute policies of at least the same coverage and amounts, subject
to certain limitations. See "THE MERGER AGREEMENT--Indemnification and
Insurance."
Solomon-Page has retained and continues to retain the law firm
of Tannenbaum Helpern Syracuse & Hirschtritt LLP, of which Mr. Klarreich is a
partner, for legal services unrelated to the merger. Solomon-Page has paid fees
to Tannenbaum Helpern of approximately $95,000, $98,000 and $108,000 for such
services in calendar years 1998, 1999 and in the year 2000 to date,
respectively.
The special committee and the board were aware of these actual
or potential conflicts of interest and considered them along with other factors
in approving the merger.
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Employment Agreements
Solomon-Page has entered into employment agreements with each
of Herbert Solomon, Lloyd Solomon and Scott Page, dated June 14, 1993 and
amended June 8, 1995 in the case of Lloyd Solomon and Scott Page, pursuant to
which Herbert Solomon agreed to serve as Chairman of the Board of Solomon-Page,
Lloyd Solomon agreed to serve as Vice Chairman of the Board and Chief Executive
Officer of Solomon-Page and Scott Page agreed to serve as President of
Solomon-Page. Pursuant to his employment agreement, Herbert Solomon receives a
base salary of $225,000, which amount is to be annually reviewed and may be
increased by the board of directors and, in addition, payments equal to 20% of
the revenues generated by his recruitment and placement activities as a
recruitment and placement counselor. Pursuant to his employment agreement, Lloyd
Solomon receives a base salary of $350,000, which amount is to be annually
reviewed and may be increased by the board of directors, and, in addition,
incentive compensation for each fiscal year during the term of his employment
equal to that percentage of Solomon-Page's pre-tax operating income as equals
the percentage of Solomon-Page's revenue represented by Solomon-Page's pre-tax
operating income. By way of example, in a particular year, should Solomon-Page's
pre-tax operating income equal 5% of Solomon-Page's revenue, Lloyd Solomon would
be entitled to receive as incentive compensation an amount equal to 5% of
Solomon-Page's pre-tax operating income. Additionally, in fiscal 1998, the
Compensation Committee of the board of directors of Solomon-Page awarded Lloyd
Solomon a discretionary bonus of $33,565, for his efforts in increasing
Solomon-Page's revenues. Pursuant to his employment agreement, Scott Page
receives a base salary of $200,000, which amount is to be annually reviewed and
may be increased by the board of directors and, in addition, payments equal to
30% of the revenues generated by his recruitment and placement activities as a
recruitment and placement counselor.
Each employment agreement provided for an initial term that
ended June 13, 1998, which has been extended until December 31, 2000. Each
employment agreement provides that if the employee is terminated other than for
"cause" (as defined therein), he is to continue to receive the compensation
provided for under his employment agreement, and that if he becomes disabled (as
defined therein), Solomon-Page may elect to place him on disability status, in
which event he would be paid one-half of the compensation provided for under his
employment agreement. Each of these employment agreements provides for a payment
of three times the employee's compensation during the most recent fiscal year,
minus one dollar, in the event of a change in control of Solomon-Page, which is
defined therein to mean (a) a change in control as defined in Rule 12b-2 under
the Exchange Act, (b) a person (as such term is defined in Sections 13(d) and
14(d) of the Exchange Act) other than a current director or officer of
Solomon-Page becoming the beneficial owner, directly or indirectly, of 20% of
the voting power of Solomon-Page's outstanding securities or (c) the members of
the board of directors at the beginning of any two-year period ceasing to
constitute at least a majority of the board of directors at any time during such
two-year period unless the election of any new director during such period has
been approved in advance by two-thirds of the directors in office at the
beginning of such two-year period. The merger will not constitute a change of
control under such agreements. Each employment agreement prohibits the employee
from competing with Solomon-Page's business during the term thereof and for a
period of one year thereafter.
The surviving corporation will assume each of such employment
agreements.
Accounting Treatment
The merger will be accounted for as a purchase. Because a
change in control will occur and the transaction will be effected entirely
through debt, it is a "highly leveraged transaction" and, as such, the
provisions of Emerging Issues Task Force ["EITF"] Issue 88-16, "Basic in
Leveraged Buyout Transactions" will apply. The provisions of the EITF require
that fair value adjustments of assets are limited to that percentage of the
assets represented by the percentage of the common stock acquired.
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Financing of the Merger
The total amount of funds required by Mergeco to pay the
aggregate merger consideration due to holders of Solomon-Page's common stock and
options at the closing of the merger, assuming that options held by members of
the management group are canceled in the merger and that there are no dissenting
stockholders, is expected to be approximately $15,757,000. In addition,
Solomon-Page will require approximately $1.8 million to pay Solomon-Page's and
Mergeco's expenses and costs relating to the transaction. In the event the
merger is not consummated, the management group will pay certain of Mergeco's
expenses. The proceeds to pay the merger consideration and related costs and
expenses of the transaction will be obtained from new senior secured revolving
credit and term loan facilities (described below) [and Solomon-Page's available
cash].
On June 27, 2000, Solomon-Page (on behalf of the management
group) and The Bank of New York executed a revised commitment letter. Pursuant
to such commitment letter, and subject to the conditions set forth therein, The
Bank of New York agreed to extend a senior secured revolving credit and term
loan facility aggregating $19.0 million, including a term loan of $7.5 million
and a senior secured revolving credit facility of $11.5 million for the purpose
of providing a portion of the financing for the merger.
The following summary describes the material terms of The Bank
of New York credit facility. The proceeds of the loan facility will be used:
o to pay the merger consideration,
o to pay expenses of the merger and
o for working capital and general corporate purposes.
The Bank of New York's obligations under the commitment letter
are subject to, among others, the following conditions:
o the negotiation and execution of a definitive credit
agreement in respect of the loan facility and related
documents,
o the absence of any material adverse change (from that
described to The Bank of New York in the information
previously provided to The Bank of New York) in the
assets, business, condition (financial or otherwise),
operations or prospects of Solomon-Page,
o The Bank of New York's satisfaction with the results of
its remaining due diligence,
o the simultaneous consummation of the merger on terms
and conditions substantially identical to the terms
described in the commitment letter,
o the sufficiency of the proceeds of the loan facility to
effect the merger and to pay all fees and expenses
associated therewith,
o the availability of at least $1,000,000 of unused
borrowing base upon consummation of the merger; and
o the satisfaction by the surviving corporation of
various financial tests.
The commitment letter contemplates that the definitive credit
agreement will contain terms and conditions that are customary in transactions
of this type, including the following:
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Borrower. The borrower under the loan facility will be the
surviving corporation. The obligor under the credit agreement at any particular
time is referred to as the "Borrower."
Interest Rate. Amounts outstanding under the loan facility
will bear interest, at the option of the Borrower, at a rate per annum equal to
either:
o the London interbank offered rate (LIBOR) plus the
LIBOR margin or
o the Alternate Base Rate, plus the Applicable Margin.
The "Alternate Base Rate" or "ABR" is defined as the higher of
(x) the Bank's prime rate in effect as publicly announced from time to time, and
(y) 0.50% plus the federal funds rate.
The LIBOR margin (ranging from 2.00% to 3.00% for the term
loan and from 1.625% to 2.625% for the revolving credit loan) will be based upon
the ratio of funded debt to EBITDA for the most recent four fiscal quarters. The
applicable margin (ranging from 0.00% to 1.00% for the term loan and from 0.00%
to .0750% for the revolving credit loan) also will be based upon such ratio;
provided that such ratio shall be deemed to be greater than 2.5 from the closing
date through the first anniversary of the closing date of the financing.
Advances. Advances under the revolving credit loan will be
made subject to a borrowing base, which is anticipated to be defined as 75% of
eligible accounts receivable of the Borrowers executive search/full time
contingency operations and 85% of eligible accounts receivable of its temporary
staffing and consulting operations.
Amortization and Maturity. The term loan will be amortized
over its five year term in accordance with an agreed schedule. The final
maturity of the revolving credit loan also will be five years. The loan facility
is subject to mandatory prepayment out of the proceeds of issuance of securities
of the surviving corporation, from Excess Cash Flow (as defined) and under
certain other circumstances.
Guarantor. All of the Borrower's obligations under the loan
facility will be fully and unconditionally guaranteed by its subsidiary,
Information Technology Partners, Inc.
Security. The credit facility will be secured by a first
priority security interest in:
o all assets of the Borrower and its subsidiary,
o all of the stock of the Borrower and its subsidiaries
owned by the management group, and (iii) the proceeds of
insurance policies maintained by the Borrower.
Covenants and Events of Default. The credit agreement will
contain affirmative and negative covenants and events of default, in each case
which are customary for credit facilities of that size, type and purpose. Such
affirmative and negative covenants will, among other matters, limit certain
activities of the Borrower and require it to satisfy certain ongoing financial
requirements. The credit agreement will permit the Borrower to repurchase up to
$1,500,000 of Solomon-Page's common stock from the management group during the
period from January 1, 2001 to December 31, 2002 provided that no covenant
violations exist or would be caused to exist by such repurchases and no events
of default exist or would be caused to exist from such repurchases.
Expiration. The obligations of The Bank of New York under the
commitment letter will expire and terminate automatically if loan documentation
satisfactory in form and substance to The Bank of New York, the surviving
corporation and their respective counsel is not executed on or before October
__, 2000.
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Stockholder Lawsuit Challenging the Merger
Following the initial public announcement of the merger on
March 31, 2000, William Straub filed a purported stockholders class action
complaint on April 7, 2000 against Solomon-Page and Solomon-Page's directors in
the Court of Chancery of the State of Delaware in and for New Castle County
(C.A. No. 17977-NC). The complaint alleged, among other things, that
Solomon-Page's directors had breached their fiduciary duties in connection with
the merger. The complaint sought, among other things, to enjoin the merger and
also sought damages.
On June 28, 2000, the parties to the lawsuit reached an
agreement in principle to settle the matter which was memorialized in a
memorandum of understanding. In connection with the settlement agreement in
principle:
o Solomon-Page, Mergeco and the management group agreed that the
original merger agreement would be amended to increase the
merger consideration from a right to receive $4.25 per share
in cash to a right to receive $5.25 per share in cash;
o Solomon-Page, Mergeco and the management group also agreed
that the original merger agreement would be amended to provide
that the merger will be conditioned upon the favorable vote by
the holders of at least a majority of the shares of common
stock that are not owned, directly or indirectly, by any
member of the management group;
o the parties to the litigation will agree upon a stipulation of
settlement which will expressly provide, among other things,
that the defendants have denied and continue to deny that they
committed any violations of law or breached any duty, or
engaged in any other wrongdoing, and that the defendants
settled the matter to eliminate the distraction, burden and
expense of further litigation; and
o the plaintiffs' counsel will apply to the applicable Delaware
state court for an award of attorneys' fees and expenses in an
aggregate amount not to exceed $125,000 (to be paid by
Solomon-Page), and Solomon-Page and the other defendants will
not object to this application.
The settlement contemplated by the agreement in principle is
subject to, among other things, the completion of confirmatory discovery by
plaintiff's counsel, the execution of a final stipulation of settlement, the
closing of the merger contemplated by the merger agreement and final court
approval.
Regulatory Requirements; Third Party Consents
Solomon-Page does not believe that any material federal or
state regulatory approvals, filings or notices are required by Solomon-Page in
connection with the merger other than:
o such approvals, filings or notices required pursuant to
federal and state securities laws and
o the filing of the certificate of merger with the Secretary of
State of the State of Delaware.
The parties are not required to file a Premerger Notification
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
because Solomon-Page does not satisfy the "size of person" jurisdictional test
of the Hart-Scott-Rodino Act insofar as it does not have annual net sales or
total assets of $100,000,000 or more, as reflected in its most recent regularly
prepared statement of income and expense and balance sheet, respectively.
Solomon-Page does not believe any material third party
consents will be required by Solomon-Page in connection with the merger.
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Material Federal Income Tax Consequences of the Merger
The following is a summary of material United States federal
income tax considerations relevant to stockholders whose shares of
Solomon-Page's common stock are converted to cash in the merger. This summary is
based upon laws, regulations, rulings and decisions currently in effect, all of
which are subject to change, possibly with retroactive effect. The summary
applies only to stockholders who hold shares of Solomon-Page's common stock as
capital assets within the meaning of Section 1221 of the Code, and may not apply
to shares of Solomon-Page's common stock received pursuant to the exercise of
employee stock options or otherwise as compensation, or to certain stockholders
who may be subject to special rules not discussed below (including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
or certain types of stockholders where such stockholder is, for United States
federal income tax purposes, a non-resident alien individual, a foreign
corporation, a foreign partnership, or a foreign estate or trust), nor does it
consider the effect of any foreign, state or local tax laws.
The receipt of cash for shares of Solomon-Page's common stock
pursuant to the merger will be a taxable transaction for U.S. federal income tax
purposes. The federal income tax consequences with respect to a particular
stockholder will depend upon, among other things, whether the conversion of
Solomon-Page's common stock to cash pursuant to the merger will be characterized
under Section 302 of the Code as a sale or exchange of such Solomon-Page's
common stock or, alternatively, as a dividend. To the extent such conversion of
Solomon-Page's common stock to cash is treated as a sale or exchange of
Solomon-Page's common stock, a stockholder will recognize capital gain or loss
equal to the difference between the amount of cash received for such
stockholder's Solomon-Page's common stock and the stockholder's adjusted tax
basis in such Solomon-Page's common stock. A stockholder's adjusted tax basis in
shares of Solomon-Page's common stock generally will equal the stockholder's
purchase price for such shares of Solomon-Page's common stock. Gain or loss must
be determined separately for each block of Solomon-Page's common stock (i.e.,
shares of Solomon-Page's common stock acquired at the same cost in a single
transaction) converted to cash in the merger. To the extent a stockholder
recognizes capital gain or loss, such capital gain or loss will be long-term
capital gain or loss if, at the time of the merger, the stockholder has held the
Solomon-Page's common stock for more than one year. The receipt of cash for
shares by a stockholder who is neither a member of the management group nor
related to a member of the management group for tax purposes through the
application of various attribution rules set forth in Section 318 of the Code
should qualify as a sale or exchange under Section 302 of the Code.
INDIVIDUAL CIRCUMSTANCES MAY DIFFER. EACH HOLDER OF
SOLOMON-PAGE'S COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW AND THE PARTICULAR TAX EFFECTS TO
SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL AND OTHER TAX LAWS.
Fees and Expenses
Whether or not the merger is consummated and except as
otherwise provided herein, all fees and expenses incurred in connection with the
merger will be the responsibility of the party incurring such fees and expenses,
except that Solomon-Page will pay for all costs and expenses relating to the
printing and mailing of this proxy statement. However, Solomon-Page will pay
Mergeco's costs and expenses incurred in connection with the merger, including
any fees or expenses payable pursuant to the commitment letter upon the
termination of the merger agreement, up to a maximum of $500,000, but only if
the merger agreement is terminated by (a) Mergeco if the board (acting through
the special committee) (i) withdraws, modifies or amends, in a manner adverse to
Mergeco, its approval or recommendation of the merger agreement and the merger
or its recommendation that the stockholders approve the merger agreement and the
merger, (ii) approves, recommends or endorses an acquisition proposal, (iii)
fails to call the special meeting or fails to mail this proxy statement to the
stockholders as promptly as practicable or fails to include the special
committees's recommendation in this proxy statement or (iv) resolves to do any
of the above or (b) the special committee or the board (acting through the
special committee) in order for the special committee to comply with its
fiduciary duties in connection with an alternative acquisition proposal. If the
merger is consummated, all fees and expenses will be paid by Solomon-Page.
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Estimated fees and expenses (rounded to the nearest thousand)
to be incurred by Solomon-Page or Mergeco in connection with the merger are as
follows:
Financing Fees (1) (2) ........................................ $ 285,000
Special Committee's Financial Advisor's Fee ................... $ 250,000
Management Group's Financial Advisor's Fees (2) ............... $ 300,000
SEC Filing Fees ............................................... $ 3,200
Legal Fees and Expenses ....................................... $ 800,000
Accounting Fees ............................................... $ 20,000
Printing, Mailing Expenses .................................... $ 30,000
Special Committee Fees ........................................ $ 60,000
Miscellaneous ................................................. $ 51,800
----------
Total .................................. $1,800,000
-------------------
(1) See "SPECIAL FACTORS-Financing of the Merger." Financing
fees include fees payable to legal counsel to The Bank of New
York.
(2) The members of the management group have agreed to
indemnify Solomon-Page in respect of such fees if the merger
is not consummated.
Solomon-Page will be responsible for paying all of these
expenses. These expenses will not reduce the merger consideration to be received
by Solomon-Page's stockholders.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the
merger agreement, a copy of which is attached as Annex A to this proxy
statement. Such summary is qualified in its entirety by reference to the full
text of the merger agreement.
The Merger; Merger Consideration
The merger agreement provides that the merger will become
effective at such time as a certificate of merger is duly filed with the
Secretary of State of the State of Delaware or at such later time as is agreed
to by the parties and as is specified in the certificate of merger, the
effective time. If the merger is approved at the special meeting by the
requisite stockholder vote, and the other conditions to the merger are
satisfied, it is currently anticipated that the merger will become effective as
soon as practicable after the special meeting (subject to compliance with or
waiver of the other conditions of the merger agreement); however, there can be
no assurance as to the timing of the consummation of the merger or that the
merger will be consummated.
At the effective time of the merger, Solomon-Page will be
merged with and into Mergeco, the separate corporate existence of Solomon-Page
will cease, and Mergeco will continue as the surviving corporation. In the
merger, each share of Solomon-Page's common stock (other than Solomon-Page's
common stock held (i) in the treasury of Solomon-Page, (ii) by the members of
the management group or (iii) by dissenting stockholders) will, by virtue of
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the merger and without any action on the part of the holder thereof, be
converted into the right to receive the merger consideration. Each certificate
representing shares of Solomon-Page's common stock that has been converted under
the terms of the merger agreement will, after the effective time of the merger,
evidence only the right to receive, upon the surrender of such certificate, an
amount of cash per share equal to the merger consideration.
Each share of Solomon-Page's common stock held in the treasury
of Solomon-Page will automatically be canceled and no payment will be made with
respect thereto.
Each share of Solomon-Page's common stock held by the members
of the management group will be converted into and become one share of
Solomon-Page's common stock of the surviving corporation and will constitute the
only outstanding shares of capital stock of the surviving corporation.
Dissenting stockholders who do not vote to approve the merger
agreement and who otherwise strictly comply with the provisions of the DGCL
regarding statutory appraisal rights have the right to seek a determination of
the fair value of their shares of Solomon-Page's common stock and payment in
cash therefor in lieu of the merger consideration. See "DISSENTERS' RIGHTS OF
APPRAISAL."
The Exchange Fund; Payment for Shares of Solomon-Page's Common Stock
On or before the closing date of the merger, Mergeco will
enter into an agreement with a bank or trust company jointly selected by Mergeco
and Solomon-Page acting through the special committee, also referred to as the
exchange agent. Substantially contemporaneously with the effective time of the
merger, Mergeco will cause to be deposited with the exchange agent, for the
benefit of Solomon-Page's holders of Solomon-Page's common stock (other than
Solomon-Page's common stock held by dissenting stockholders, treasury shares and
Solomon-Page's common stock held by the management group) an amount in cash
equal to the aggregate merger consideration (such amount being hereinafter
referred to as the exchange fund).
As soon as practicable after the effective time of the merger,
the exchange agent will mail to each record holder of shares of Solomon-Page's
common stock immediately prior to the effective time of the merger a letter of
transmittal containing instructions for use in surrendering certificates
formerly representing shares of Solomon-Page's common stock in exchange for the
merger consideration. No stockholder should surrender any certificates until the
stockholder receives the letter of transmittal and other materials for such
surrender. Upon surrender of a certificate for cancellation to the exchange
agent, together with a letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to the instructions, the holder
of such certificate will be entitled to receive in exchange therefor the merger
consideration for each share of Solomon-Page's common stock formerly represented
by such certificate, without any interest thereon, less any required withholding
of taxes, and the certificate so surrendered will be canceled. The merger
consideration will be delivered by the exchange agent as promptly as practicable
following surrender of a certificate and delivery of the Letter of Transmittal
and any other related transmittal documents. Cash payments may be made by check
unless otherwise required by a depositary institution in connection with the
book-entry delivery of securities.
If payment of the merger consideration is to be made to a
person other than the person in whose name the certificate surrendered is
registered, it will be a condition of payment that the certificate so
surrendered will be properly endorsed (together with signature guarantees on
such certificate and any related stock power) or otherwise be in proper form for
transfer and that the exchange agent receives evidence that any applicable
transfer or other taxes have been paid or are not applicable.
YOU SHOULD NOT SEND YOUR CERTIFICATES NOW AND SHOULD SEND THEM
ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN LETTERS OF TRANSMITTAL TO BE MAILED
TO STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE EFFECTIVE TIME OF THE MERGER.
IN ALL
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CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THIS PROXY STATEMENT AND SUCH LETTERS OF TRANSMITTAL.
One year following the effective time of the merger, the
exchange agent will return to the surviving corporation any portion of the
exchange fund that remains undistributed to the holders of the Solomon-Page's
common stock (including the proceeds of any investments thereof), and any
holders of Solomon-Page's common stock who have not theretofore complied with
the above-described procedures to receive payment of the merger consideration
may look only to the surviving corporation for payment.
Transfers of Solomon-Page's Common Stock
At the effective time of the merger, the stock transfer books
of Solomon-Page will be closed, and there will be no further registration of
transfers of shares of Solomon-Page's common stock thereafter on the records of
Solomon-Page. If, after the effective time of the merger, certificates are
presented to the exchange agent or the surviving corporation, they will be
canceled and exchanged for the merger consideration as provided above and
pursuant to the terms of the merger agreement (subject to applicable law in the
case of dissenting stockholders).
Treatment of Options
At the effective time of the merger, each outstanding option
to acquire Solomon-Page's common stock, whether or not then vested or
exercisable, will be canceled. In consideration of such cancellation, the
surviving corporation will pay to the holder of each such canceled option (other
than those held by the members of the management group), within five days after
the effective time of the merger, an amount determined by multiplying (i) the
excess, if any, of the merger consideration over the applicable exercise price
per share of such option by (ii) the number of shares of Solomon-Page's common
stock issuable upon exercise of the option, whether or not then vested or
exercisable, subject to any required withholding of taxes (hereafter referred to
as the option consideration). At the effective time of the merger, all options
(other than those held by members of the management group, which will be
canceled) will be converted into, and will thereafter only represent the right
to receive, the option consideration.
Prior to the effective time of the merger, Solomon-Page will
use its best efforts to take such actions as are necessary, subject if required
to determining any consents from the holders of the options, to consummate the
transactions contemplated by the merger agreement.
Conditions
The following are the conditions to the closing of the merger.
The respective obligations of Mergeco and Solomon-Page to consummate the merger
are subject to the following conditions: (i) the approval of the merger
agreement by at least 66-2/3% of the outstanding shares of common stock and at
least a majority of the outstanding shares of common stock not owned, directly
or indirectly, by any member of the management group; and (ii) the absence of
any law, governmental action or order that prevents or prohibits consummation of
the merger.
The obligation of Mergeco to effect the merger is subject to
the following additional conditions: (i) the representations and warranties of
Solomon-Page being true and correct in all material respects as of the effective
time of the merger as though made on and as of the effective time of the merger;
(ii) Solomon-Page having performed in all material respects all obligations
required by the merger agreement to be performed or complied with prior to the
effective time of the merger, including conducting its operations and business
according to their usual, regular and ordinary course consistent with past
practice, promptly notifying Mergeco of any material adverse change, permitting
Mergeco to inspect the assets, business, facilities and operations of
Solomon-Page, obtaining consents, permits and approvals, if
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any, necessary to effect the merger, holding the special meeting and providing
Mergeco with notice of certain events; (iii) Mergeco having obtained the
financing described in the commitment letter; and (iv) dissenting stockholders
not representing more than 7.5% of the outstanding shares of Solomon-Page's
common stock.
The obligation of Solomon-Page to effect the merger is subject
to the following additional conditions: (i) the representations and warranties
of Mergeco being true and correct in all material respects as of the effective
time of the merger as though made on and as of the effective time of the merger,
(ii) Mergeco having performed in all material respects all obligations required
by the merger agreement to be performed as complied with prior to the effective
time of the merger, including obtaining consents, permits and approvals, if any,
necessary to effect the merger, filing the Schedule 13E-3 and obtaining the
financing necessary to effect the merger, (iii) Legg Mason's fairness opinion
not having been withdrawn, revoked or annulled or adversely modified in any
material respect and (iv) Mergeco having delivered to Solomon-Page copies of
certificates or other similar materials relating to the solvency of the
surviving corporation delivered to the lenders providing the financing, upon
which Solomon-Page will be entitled to rely.
Representations and Warranties
The merger agreement contains very limited representations and
warranties of Mergeco and Solomon-Page. The representations of Mergeco relate
to, among other things, organization and qualification to do business of
Mergeco, authority to enter into the merger agreement, no conflict with or
violation of applicable law, required filings and consents, financing, absence
of brokers and the operations of Mergeco. The representations of Solomon-Page
relate to, among other things, organization and qualification to do business of
Solomon-Page and its subsidiary, capitalization, authority to enter into the
merger agreement, ownership of Solomon-Page's subsidiary, the operations of
Solomon-Page, no conflict with or violation of applicable law, required filings
and consents and corporate proceedings. Solomon-Page's representations are
subject to Mergeco and the members of the management group not having had actual
knowledge of any inaccuracies in such representations prior to the execution of
the merger agreement.
Covenants
Solomon-Page has agreed to conduct its business in the
ordinary and usual course prior to the effective time of the merger. In this
regard, Solomon-Page has agreed that it will, unless Mergeco has otherwise
consented (which consent may not be unreasonably withheld), use its reasonable
efforts to preserve intact its business organizations and goodwill, keep
available the services of its officers and key employees and maintain
satisfactory relationships with persons with whom it has business relationships.
In addition, Mergeco and Solomon-Page have made further agreements regarding
access to Solomon-Page's facilities and records and to designated personnel;
preparation and filing of this proxy statement and the Schedule 13E-3 with the
SEC and the special meeting to which this proxy statement relates; reasonable
best efforts to fulfill the conditions to the other party's obligation to
consummate the merger; public announcements; the financing pursuant to the
commitment letter and notices of certain events and voting of the Solomon-Page's
common stock held by the management group.
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Indemnification and Insurance
The merger agreement provides that from and after the
effective time of the merger, the surviving corporation will indemnify, defend
and hold harmless the present and former officers and directors of Solomon-Page,
to the full extent permitted under the Delaware General Corporation Law or
Solomon-Page's certificate of incorporation, by-laws or indemnification
agreements in effect prior to the effective time of the merger (including
provisions relating to advancement of expenses incurred in defense of any action
or suit), against all losses, claims, damages, liabilities, costs and expenses
(including attorneys' fees and expenses) and amounts paid in settlement with the
written approval of the surviving corporation (which approval will not
unreasonably be withheld) in connection with any action, suit, claim, proceeding
or investigation (each, a "claim") to the extent that any such claim is based
on, or arises out of, (i) the fact that such person is or was a director,
officer, employee or agent of Solomon-Page or any of its subsidiaries or is or
was serving at the request of Solomon-Page or any of its subsidiaries as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (ii) the merger agreement, or any of the
transactions contemplated thereby, in each case to the extent that any such
claim pertains to any matter or fact arising, existing, or occurring prior to or
at the effective time of the merger, regardless of whether such claim is
asserted or claimed prior to, at or after the effective time of the merger.
The merger agreement provides that the surviving corporation
will maintain in effect, for six years after the effective time of the merger,
Solomon-Page's existing directors' and officers' liability insurance policy;
provided, that the surviving corporation may substitute therefor policies of at
least the same coverage and amounts containing terms no less advantageous with
respect to claims arising from facts and events occurring at or before the
effective time of the merger; provided, further, that if the aggregate annual
premiums for any such insurance at any time during such period exceeds 200% of
the annual premiums paid by Solomon-Page for such insurance on the date of the
merger agreement, then the surviving corporation will be required to provide
such coverage as reasonably can be purchased for an annual premium equal to 200%
of such rate.
In addition, the merger agreement provides that, subject to
certain conditions, (i) all rights to indemnification and all limitations on
liability existing in favor of present or former directors or officers of
Solomon-Page, as provided in Solomon-Page's certificate of incorporation and
by-laws as currently in effect, will survive the merger and will continue in
effect for a period of six years from the effective time of the merger of the
merger and (ii) successors and assigns of the surviving corporation will be
required to assume the surviving corporation's obligations under the merger
agreement regarding such indemnification and insurance.
No Solicitation; Fiduciary Obligations of Directors
The merger agreement provides that Solomon-Page will not, and
will not authorize or permit any of its officers, directors, agents,
representatives or advisors to solicit, encourage, participate in or initiate
discussions or negotiations with, or provide any information to, or otherwise
cooperate with any corporation, partnership, person or other entity or group,
other than Mergeco, any of its affiliates or representatives (each offered to as
Person) concerning any merger, consolidation, tender offer, exchange offer, sale
of 25% or more of Solomon-Page's assets, acquisition of 25% or more of
Solomon-Page's shares of capital stock or similar business combination
transaction involving Solomon-Page or its subsidiaries (referred to as an
acquisition proposal). If, however, Solomon-Page or the special committee
receives an unsolicited inquiry, proposal or offer with respect to an
acquisition proposal and if the special committee concludes in good faith, upon
advice of its legal counsel, that the actions listed below are consistent with
the special committee's (and the board's) fiduciary duties to Solomon-Page's
stockholders under applicable law, then the special committee may do any or all
of the following:
o furnish or cause to be furnished information concerning
Solomon-Page's business, properties or assets to any such Person pursuant to an
appropriate confidentiality agreement,
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o engage in discussions or negotiations with any such Person
relating to such inquiry, proposal or offer and, following receipt of a bona
fide acquisition proposal, take and disclose to the stockholders of Solomon-Page
a position with respect to such acquisition proposal o following receipt of a
bona fide acquisition proposal, withdraw or modify the board of directors'
approval or recommendation of the merger or the merger agreement, and o
terminate the merger agreement.
Pursuant to the merger agreement, Solomon-Page is required
promptly to advise Mergeco in writing of any acquisition proposal or any inquiry
regarding the making of an acquisition proposal including any request for
information, the terms of such request, acquisition proposal or inquiry and the
identity of the Person making such request, acquisition proposal or inquiry.
Solomon-Page is also required, to the extent reasonably practicable, to keep
Mergeco reasonably informed of the status and details of any such request,
acquisition proposal or inquiry and the efforts and activities of the party
making such acquisition proposal.
Termination
The merger agreement may be terminated at any time prior to
the effective time of the merger, whether before or after the approval of the
merger agreement by the stockholders of Solomon-Page, by the mutual written
consent of Solomon-Page (acting through the special committee) and Mergeco, or
by either Solomon-Page or Mergeco (i) if any law, injunction, order or decree,
preventing the consummation of the merger has become final and nonappealable;
(ii) if the merger has not been consummated by November 30, 2000 (provided that
such termination will not be available to any party in breach of any material
obligation under the merger agreement) or (iii) if at the special meeting the
approval of the merger by the required stockholder vote has not been obtained.
Solomon-Page may terminate the merger agreement at any time
prior to the effective time of the merger if (i) the special committee
determines, in good faith and upon advice of its financial advisor and legal
counsel, that such action is consistent with the special committee's and the
board's fiduciary duties to Solomon-Page's stockholders under applicable law,
see "THE MERGER AGREEMENT-- No Solicitation; Fiduciary Obligations of
Directors"; or (ii) Solomon-Page receives a notice from Mergeco that the
commitment letter has been terminated or canceled.
Mergeco may terminate the merger agreement at any time prior
to the effective time of the merger, either before or after its approval by the
stockholders, if (i) the board (acting through the special committee) withdraws,
modifies or changes its recommendation so that it is not in favor of the merger
agreement or the merger; (ii) the board (acting through the special committee)
recommends or resolves to recommend to stockholders an acquisition proposal.
Fees and Expenses
Whether or not the merger is consummated and except as
otherwise provided herein, all fees and expenses incurred in connection with the
merger will be the responsibility of the party incurring such fees and expenses,
except that Solomon-Page will pay for all costs and expenses relating to the
printing and mailing of this proxy statement. However, Solomon-Page will pay
Mergeco's costs and expenses incurred in connection with the merger, including
any fees or expenses payable pursuant to the commitment letter, upon the
termination of the merger agreement, up to a maximum of $500,000, but only if
the merger agreement is terminated (a) by Mergeco because the board (acting
through the special committee) withdraws, modifies or changes in a manner
adverse to Mergeco its recommendation with respect to the merger agreement and
the merger; or (b) by the special committee or the board (acting through the
special committee) in order for the special committee or the board to comply
with its fiduciary duties to Solomon-Page's stockholders. If the merger is
consummated, all fees and expenses will be paid by Solomon-Page. See "SPECIAL
FACTORS--Fees and Expenses."
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Directors of Solomon-Page Following the Merger; Certificate of Incorporation;
By-Laws
The merger agreement provides that the current directors of
Mergeco will be the directors of the surviving corporation. Messrs. Herbert
Solomon, Lloyd Solomon and Page are the current directors and executive officers
of Mergeco. No determination has been made as to whether additional persons will
be invited to join the board of directors of the surviving corporation following
the merger. Information regarding such persons is set forth under
"MANAGEMENT--Directors and Executive Officers of Solomon-Page." The certificate
of incorporation of Mergeco immediately prior to the effective time of the
merger will be the certificate of incorporation of the surviving corporation,
until thereafter amended, and the by-laws of Mergeco immediately prior to the
effective time of the merger will be the by-laws of the surviving corporation
until thereafter amended.
Amendment/Waiver
Before or after approval of the merger agreement by the
stockholders, the merger agreement may be amended by the written agreement of
the parties thereto at any time prior to the effective time of the merger if
such amendment is approved on behalf of Solomon-Page by the special committee;
provided that, after any such stockholder approval has been obtained, no
amendment may be made that under applicable law requires the approval of the
stockholders of Solomon-Page, if such approval has not been obtained. If a
material amendment is to be made to the merger agreement, Solomon-Page intends
to solicit consents from stockholders and, if the special committee determines
that it is necessary, obtain additional fairness opinions. As of the date of
this proxy statement, neither Solomon-Page nor Mergeco expects that any
amendments will be made.
At any time prior to the effective time of the merger, either
Solomon-Page (acting through the special committee) or Mergeco, may extend the
time for performance of any of the obligations or other acts of the other party
to the merger agreement, waive any inaccuracies in the representations and
warranties of the other party contained in the merger agreement or in any
document delivered pursuant to the merger agreement, or waive compliance by the
other party with any agreements or conditions contained in the merger agreement.
Solomon-Page intends to promptly notify stockholders, either by mailing a
supplement to this proxy statement to the stockholders or by issuing a press
release, as determined to be appropriate by its advisors, if any material
condition to the merger has been waived. If a waiver of a material condition
contained in the merger agreement requires stockholder consent, Solomon-Page
intends to solicit consents from stockholders by mailing supplemental proxy
materials to stockholders. As of the date of this proxy statement, neither
Solomon-Page nor Mergeco expects that any condition will be waived.
DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Section 262 of the Delaware General Corporation
Law, any holder of Solomon-Page's common stock who does not wish to accept the
merger consideration may dissent from the merger and elect to have the fair
value of such stockholder's shares of Solomon-Page's common stock (exclusive of
any element of value arising from the accomplishment or expectation of the
merger) judicially determined and paid to such stockholder in cash, together
with a fair rate of interest, if any, provided that such stockholder complies
with the provisions of Section 262. The following discussion is not a complete
statement of the law pertaining to appraisal rights under the Delaware General
Corporation Law, and is qualified in its entirety by the full text of Section
262, which is provided in its entirety as Annex B to this proxy statement. All
references in Section 262 and in this summary to a "stockholder" are to the
record holder of the shares of Solomon-Page's common stock as to which appraisal
rights are asserted. A person having a beneficial interest in shares of
Solomon-Page's common stock held of record in the name of another person, such
as a broker or nominee, must act promptly to cause the record holder to follow
properly the steps summarized below and in a timely manner to perfect appraisal
rights.
-53-
<PAGE>
Under Section 262, where a proposed merger is to be submitted
for approval at a meeting of stockholders, as in the case of the special
meeting, the corporation, not less than 20 days prior to the meeting, must
notify each of its stockholders entitled to appraisal rights that such appraisal
rights are available and include in such notice a copy of Section 262. This
proxy statement shall constitute such notice to the holders of Solomon-Page's
common stock and the applicable statutory provisions of the Delaware General
Corporation Law are attached to this proxy statement as Annex B. If you wish to
exercise such appraisal rights or wish to preserve the right to do so, you
should review carefully the following discussion and Annex B to this proxy
statement, because failure to comply with the procedures specified in Section
262 timely and properly will result in the loss of appraisal rights. Moreover,
because of the complexity of the procedures for exercising the right to seek
appraisal of shares of common stock, Solomon-Page believes that if you consider
exercising such rights, you should seek the advice of counsel.
If you wish to exercise your right to dissent from the merger
and demand appraisal under Section 262 of the Delaware General Corporation Act:
o You must deliver to Solomon-Page a written demand for
appraisal of your shares before the vote on the merger
agreement at the special meeting, which demand will be
sufficient if you reasonably inform Solomon-Page of your
identity and that you intend to demand the appraisal of
your shares.
o You must not vote your shares of Solomon-Page's common
stock in favor of the merger agreement. A proxy that
does not contain voting instructions will, unless
revoked, be voted in favor of the merger agreement.
Therefore, if you vote by proxy and wish to exercise
appraisal rights, you must vote against the merger
agreement or abstain from voting on the merger
agreement.
o You must continuously hold such shares from the date of
making the demand through the effective time of the
merger. Accordingly, if you are a record holder of
shares of Solomon-Page's common stock on the date the
written demand for appraisal is made, but thereafter
transfer such shares prior to the effective time of the
merger, you will lose any right to appraisal in respect
of such shares.
None of voting (in person or by proxy) against, abstaining
from voting on or failing to vote on the proposal to approve the merger
agreement will constitute a written demand for appraisal within the meaning of
Section 262. The written demand for appraisal must be in addition to and
separate from any such proxy or vote.
Only a holder of record of shares of Solomon-Page's common
stock issued and outstanding immediately prior to the effective time of the
merger is entitled to assert appraisal rights with respect to the shares of
Solomon-Page's common stock registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the stockholder of record, fully
and correctly, as such stockholder's name appears on such stock certificates,
should specify the stockholder's name and mailing address, the number of shares
of Solomon-Page's common stock owned and that such stockholder intends thereby
to demand appraisal of such stockholder's Solomon-Page's common stock. If the
shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the shares are owned of record by more than one person as in a joint
tenancy or tenancy in common, the demand should be executed by or on behalf of
all owners. An authorized agent, including one or more joint owners, may execute
a demand for appraisal on behalf of a stockholder; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such owner or owners. A
record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more other beneficial owners while not exercising such rights with
respect to the shares held for one or more beneficial owners; in such case, the
written demand should set forth the number of shares as to which appraisal is
sought, and where no number of shares is expressly mentioned the demand will be
presumed to cover all shares held in the name of the record owner. If you hold
your shares in brokerage accounts
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<PAGE>
or other nominee forms and you wish to exercise appraisal rights, you are urged
to consult with your brokers to determine appropriate procedures for the making
of a demand for appraisal by such nominee.
If you elect to exercise appraisal rights pursuant to Section
262, you should mail or deliver a written demand to: The Solomon-Page Group
Ltd., 1140 Avenue of the Americas, New York, New York 10036, Attention: Eric M.
Davis, Secretary.
Within 10 days after the effective time of the merger, the
surviving corporation must send a notice of effectiveness of the merger to each
former stockholder of Solomon-Page who has made a written demand for appraisal
in accordance with Section 262 and who has not voted in favor of the merger
agreement. Within 120 days after the effective time of the merger, but not
thereafter, either the surviving corporation or any dissenting stockholder who
has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the value of the shares
of Solomon-Page's common stock held by all dissenting stockholders. Solomon-Page
is under no obligation to and has no present intent to file a petition for
appraisal, and stockholders seeking to exercise appraisal rights should not
assume that the surviving corporation will file such a petition or that the
surviving corporation will initiate any negotiations with respect to the fair
value of such shares. Accordingly, stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in Section
262. Inasmuch as Solomon-Page has no obligation to file such a petition, the
failure of a stockholder to do so within the period specified could nullify such
stockholder's previous written demand for appraisal. In any event, at any time
within 60 days after the effective time of the merger (or at any time thereafter
with the written consent of Solomon-Page), any stockholder who has demanded
appraisal has the right to withdraw the demand and to accept payment of the
merger consideration.
Pursuant to the merger agreement, Solomon-Page has agreed to
give Mergeco prompt notice of any demands for appraisal received by it and
Mergeco shall have the right to participate in negotiations and proceedings with
respect to such demands. Solomon-Page shall not, except with the prior written
consent of Mergeco, make any payment with respect to any demands for appraisal,
or offer to settle, or settle, any such demands.
Within 120 days after the effective time of the merger, any
stockholder who has complied with the provisions of Section 262 to that point in
time will be entitled to receive from the surviving corporation, upon written
request, a statement setting forth the aggregate number of shares not voted in
favor of the merger agreement and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. The
surviving corporation must mail such statement to the stockholder within 10 days
after receipt of such request or within 10 days after expiration of the period
for delivery of demands for appraisals under Section 262, whichever is later.
A stockholder timely filing a petition for appraisal with the
Court of Chancery must deliver a copy to the surviving corporation, which will
then be obligated within 20 days to provide the Delaware Court of Chancery with
a duly verified list containing the names and addresses of all stockholders who
have demanded appraisal of their shares. After notice to such stockholders, the
Delaware Court of Chancery is empowered to conduct a hearing on the petition to
determine which stockholders are entitled to appraisal rights. The Delaware
Court of Chancery may require stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates to the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings, and if any stockholder fails to comply with the
requirement, the Delaware Court of Chancery may dismiss the proceedings as to
that stockholder.
After determining the stockholders entitled to an appraisal,
the Delaware Court of Chancery will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The costs of the action may be
determined by the Delaware Court of Chancery and taxed upon the parties as the
Delaware Court of Chancery deems equitable. Upon application of a dissenting
stockholder, the Delaware Court of Chancery may also order that all or a portion
of the expenses incurred by any stockholder in connection with the appraisal
proceeding,
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<PAGE>
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all of the shares
entitled to appraisal. IF YOU ARE CONSIDERING SEEKING APPRAISAL, YOU SHOULD BE
AWARE THAT THE FAIR VALUE OF YOUR SHARES AS DETERMINED UNDER SECTION 262 COULD
BE MORE THAN, THE SAME AS OR LESS THAN THE MERGER CONSIDERATION YOU WOULD
RECEIVE PURSUANT TO THE MERGER AGREEMENT IF YOU DID NOT SEEK APPRAISAL OF YOUR
SHARES. YOU SHOULD ALSO BE AWARE THAT INVESTMENT BANKING OPINIONS ARE NOT
OPINIONS AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value and, if applicable, a fair rate of
interest, the Delaware Chancery Court is to take into account all relevant
factors. In WEINBERGER V. UOP, INC., the Delaware Supreme Court discussed the
factors that could be considered in determining fair value in an appraisal
proceeding, stating that "proof of value by any techniques or methods that are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that "fair price obviously
requires consideration of all relevant factors involving the value of a
company." The Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts that could
be ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In WEINBERGER, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
that are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262 provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger."
Any stockholder who has duly demanded an appraisal in
compliance with Section 262 will not, after the effective time of the merger, be
entitled to vote the shares subject to such demand for any purpose or be
entitled to the payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of record of shares
as of a record date prior to the effective time of the merger).
Any stockholder may withdraw such stockholder's demand for
appraisal and accept the merger consideration by delivering to the surviving
corporation a written withdrawal of such stockholder's demand for appraisal,
except that (i) any such attempt to withdraw made more than 60 days after the
effective time of the merger will require written approval of the surviving
corporation and (ii) no appraisal proceeding in the Delaware Court of Chancery
shall be dismissed as to any stockholder without the approval of the Delaware
Court of Chancery, and such approval may be conditioned upon such terms as the
Delaware Court of Chancery deems just. If the surviving corporation does not
approve a stockholder's request to withdraw a demand for appraisal when such
approval is required or if the Delaware Court of Chancery does not approve the
dismissal of an appraisal proceeding, the stockholder would be entitled to
receive only the appraised value determined in any such appraisal proceeding,
which value could be lower than the value of the merger consideration.
FAILURE TO COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET
FORTH IN SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW WILL RESULT IN THE
LOSS OF YOUR STATUTORY APPRAISAL RIGHTS. CONSEQUENTLY, IF YOU WISH TO EXERCISE
APPRAISAL RIGHTS, YOU ARE IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS
No provision has been made to grant unaffiliated stockholders
of Solomon-Page access to the corporate files of Solomon-Page or any other party
to the merger or to obtain counsel or appraisal services at the expense of
Solomon-Page or any other such party.
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<PAGE>
MARKET FOR SOLOMON-PAGE'S COMMON STOCK
Common Stock Market Price Information
Solomon-Page's common stock is traded on the Nasdaq SmallCap
Market under the symbol "SOLP." The following table shows, for the quarters
indicated, the range of bid prices for Solomon-Page's common stock as reported
by Nasdaq.
Solomon-Page's
--------------
Common Stock
------------
High Low
---- ---
Fiscal 2000
First Quarter............................................ $2.750 $1.875
Second Quarter........................................... $3.063 $2.406
Third Quarter............................................ $4.750 $3.063
Fourth Quarter (through September , 2000).............. $ $
Fiscal 1999
First Quarter............................................ $2.469 $1.438
Second Quarter........................................... $1.875 $1.344
Third Quarter............................................ $2.938 $1.563
Fourth Quarter .......................................... $3.375 $1.938
Fiscal 1998
Second Quarter........................................... $3.688 $2.625
Third Quarter............................................ $4.875 $3.125
Fourth Quarter .......................................... $3.688 $1.438
On March 31, 2000, the last full trading day prior to the day
on which the execution of the original merger agreement was publicly announced,
the closing price for the Solomon-Page's common stock on the Nasdaq SmallCap
Market was $2.875. On June 28, 2000, the last full trading prior to the public
announcement of the execution of the merger agreement, the closing price for
Solomon-Page's common stock on the Nasdaq Small Cap Market was $3.44.
On September __, 2000, the last trading day prior to the date
of this proxy statement, the closing price for Solomon-Page's common stock on
the Nasdaq SmallCap Market was $____.
The market price for Solomon-Page's common stock is subject to
fluctuation and stockholders are urged to obtain current market quotations.
Dividend Information
Solomon-Page has never paid any dividends on its
Solomon-Page's common stock and does not intend to pay such dividends in the
foreseeable future. Solomon-Page currently intends to retain any future earnings
for the development and growth of Solomon-Page.
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<PAGE>
Solomon-Page's Common Stock Purchase Information
None of the members of the management group nor Mergeco has
engaged in any transaction with respect to the Solomon-Page's common stock
during the past two years.
From September 17, 1998 to July 14, 1999, Solomon-Page
repurchased 1,000,000 shares of its common stock from stockholders at prevailing
prices in a publicly announced buyback program. Solomon-Page spent $2,231,770 to
purchase such shares at prices ranging from $1.46 to $3.31 per share. The shares
were purchased as follows: (i) from September 17, 1999 to September 30, 1999,
Solomon-Page purchased 31, 000 shares at an average purchase price of $2.05 per
share, (ii) from October 1, 1999 to December 31, 1999, Solomon-Page purchased
469,000 shares at an average purchase price of $2.28 per share, (iii) from
January 1, 2000 to March 31, 2000, 1999, Solomon-Page purchased 104, 300 shares
at an average purchase price of $1.54 per share, (iv) from April 1, 2000 to June
30, 1999, Solomon-Page purchased 259,500 shares at an average purchase price of
$2.00 per share, and (v) from July 1, 2000 to July 14, 2000, Solomon-Page
purchased 136,200 shares at an average purchase price of $3.05 per share.
SECURITIES OWNERSHIP
Beneficial Ownership of Solomon-Page's Common Stock
The following table sets forth certain information as of
August 18, 2000, concerning the beneficial ownership of Solomon-Page's common
stock by each person or group known by Solomon-Page to own more than 5% of its
common stock, each director, each executive officer and by all directors and
executive officers as a group. The persons indicated below have sole voting and
investment power with respect to the shares indicated as owned by them. Shares
issuable upon exercise of options that are exercisable currently or within the
next 60 days are deemed to be outstanding for the purpose of computing the
percentage ownership and overall voting power of persons beneficially owning
such options, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership or overall voting power of any other person.
Unless otherwise indicated, the address of each person or entity listed below is
Solomon-Page's principal executive offices.
Shares
Name and Address Beneficially Percentage
of Beneficial Owner (1) Owned of Class
----------------------- ----- ----------
Herbert Solomon.............................. 707,600(2) 16.25%
Lloyd Solomon................................ 985,000(2) 22.62%
Scott Page................................... 801,900(2) 18.41%
Eric M. Davis................................ 190,000(3) 4.49%
Edward Ehrenberg(4).......................... 20,500(5) (6)
Joel A. Klarreich(7)......................... 20,500(5) (6)
All directors and executive officers
as a group (6 persons)...................... 2,715,500(8) 55.70%
--------------------------
(1) All of such persons have sole investment and voting power over the
shares listed as being beneficially owned by them.
(2) Includes 200,000 shares subject to options, which options are to be
canceled in the merger.
(3) Includes 80,000 shares subject to options.
(4) Mr. Ehrenberg's address is 711 Daylily Drive, Langhorne,
Pennsylvania 19047.
(5) Represents 20,500 shares subject to options.
(6) Less than 1%.
(7) Mr. Klarreich's address is c/o Tannenbaum Helpern Syracuse &
Hirschtritt LLP, 900 Third Avenue, New York, New York 10022.
(8) Includes 721,000 shares subject to options.
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Mergeco. Mergeco is not currently the beneficial owner of any
shares of Solomon-Page's common stock.
MANAGEMENT
Directors and Executive Officers of Solomon-Page
Set forth below are the name and business address of each
director and executive officer of Solomon-Page, the present principal occupation
or employment of each such person and the name, principal business and address
of the corporation or other organization in which such occupation or employment
of each such person is conducted. Also set forth below are the material
occupations, positions, offices and employment of each such person and the name,
principal business and address of any corporation or other organization in which
any material occupation, position, office or employment of each such person was
held during the last five years. Messrs. Herbert Solomon, Lloyd Solomon, Page,
Davis, Klarreich and Ehrenberg are directors of Solomon-Page. Each person listed
below is a citizen of the United States. Unless otherwise indicated below, the
business address of each director and executive officer is 1140 Avenue of the
Americas, New York, New York 10036.
Herbert Solomon has been the Chairman of the Board of
Solomon-Page since August 1990, shortly after he retired from his previous
executive career in the apparel and retail industries. From 1981 to 1990, Mr.
Solomon was Executive Vice President -- Merchandising of Amcena Corporation,
which owned Ohrbach's, a leading apparel retailer. From 1976 to 1981, he served
as Chairman of the Board and Chief Executive Officer of Ohrbach's. Mr. Solomon
received a B.B.A. degree from Bernard Baruch College of the City of New York.
Mr. Solomon is the father of Lloyd Solomon and the father-in-law of Scott Page.
Lloyd Solomon has been the Vice Chairman of the Board and the
Chief Executive Officer of Solomon-Page since June 1995. Prior to his election
to these positions, he had been the President or an Executive Vice President and
a director of Solomon-Page since the inception of its business in 1990. From
1986 through 1990, Mr. Solomon served as an Executive Vice President of Rand
Thomson Consulting Group, a personnel services firm. Mr. Solomon received an
M.B.A. from New York University and a B.A. from Boston University. He is the son
of Herbert Solomon and the brother-in-law of Scott Page.
Scott Page has been the President of Solomon-Page since June
1995. Prior to becoming President, he had been an Executive Vice President of
Solomon-Page since August 1991, when he was also elected a director. From 1989
to 1991, Mr. Page served as a managing director of Rand Thomson Consulting
Group. Mr. Page is the son-in-law of Herbert Solomon and the brother-in-law of
Lloyd Solomon.
Eric M. Davis has been Vice President and Chief Financial
Officer of Solomon-Page since February 1994, and a director of Solomon-Page
since September 1994. From 1984 through February 1994, Mr. Davis was employed by
Mortensen and Associates, P.C., a predecessor of Moore Stephens, P.C.,
Solomon-Page's auditors. Mr. Davis is a Certified Public Accountant and received
a B.S. degree from Davis & Elkins College, Elkins, West Virginia.
Joel A. Klarreich has been a director of Solomon-Page since
June 1995. Mr. Klarreich has been a practicing attorney since 1968 and member of
the law firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP since 1996. He is
general counsel to the Association of Personnel Consultants of New York State,
the sole statewide trade association of permanent placement firms in New York.
From 1988 to 1996, Mr. Klarreich was a member of the law firm of Klein, Heisler
& Klarreich, P.C. He has a B.B.A. from the City College of the City of New York
and J.D. from St. John's University School of Law. Mr. Klarreich's address is
c/o Tannenbaum Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New York,
New York 10022.
Edward Ehrenberg has been a director of Solomon-Page since
June 1995. Mr. Ehrenberg has been the President of Tele-Matic Company,
Incorporated, a wholesale distributor of commercial laundry equipment, since May
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<PAGE>
1999. He was the President of E.E. Enterprises, a consulting firm, from 1988 to
April 1999. Mr. Ehrenberg was Vice President and General Manager of U.S.
Operations of Electrocatalytic, Inc., a manufacturer and marketer of cathodic
protection and chlorine generating products, from March 1995 to June 1995. He
was Executive Vice President of Enzon, Inc., a public biotech company in
Piscataway, New Jersey from August 1991 to August 1992. Mr. Ehrenberg has held
executive positions with the Ford Motor Company, Xerox, International Harvester
and was Chairman and Chief Executive Officer of CH Holdings, Chicago, Illinois
prior to moving to New Jersey. Mr. Ehrenberg has an M.B.A. from the Wharton
School of the University of Pennsylvania and a B.S. from New York University.
Mr. Ehrenberg's address is 711 Daylily Drive, Langhorne, Pennsylvania 19047.
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<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
SOLOMON-PAGE
INDEPENDENT ACCOUNTANT'S REPORT
To the Stockholders and Board of Directors of
The Solomon-Page Group Ltd.
We have reviewed the accompanying consolidated balance sheet,
consolidated statement of operations and consolidated statement of cash flows of
The Solomon-Page Group Ltd. and subsidiary as of June 30, 2000, and for the
three month and nine month periods then ended. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the consolidated financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of September 30, 1999, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended [not presented herein]; and in our report
dated November 16, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of September 30, 1999, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
/S/ MOORE STEPHENS, P. C.
-------------------------
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
August 8, 2000
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
---- ----
(Unaudited)
ASSETS:
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 557 $ 580
Investments 695 849
Accounts Receivable - [ Net of Allowances of $400 15,816 11,416
and $280, Respectively ]
Other Current Assets 585 391
------- -------
Total Current Assets 17,653 13,236
------- -------
Property and Equipment:
Equipment 2,367 2,022
Furniture and Fixtures 811 797
Leasehold Improvements 1,148 1,103
------- -------
Totals - At Cost 4,326 3,922
Less: Accumulated Depreciation 2,110 1,659
------- -------
Property and Equipment - Net 2,216 2,263
------- -------
Other Assets:
Investments 683 686
Intangible Assets - [ Net of Accumulated
Amortization of $464 and $310, Respectively ] 1,324 1,444
Deferred Tax Asset 314 324
Due from Related Parties 111 135
Other Assets 721 260
------- -------
Total Other Assets 3,153 2,849
------- -------
Total Assets $23,022 $18,348
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
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THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY: (unaudited)
Current Liabilities:
<S> <C> <C>
Accrued Payroll and Commissions $ 6,707 $ 4,607
Accounts Payable and Accrued Expenses 1,702 1,276
Income Taxes Payable 1,209 1,417
Line of Credit 750 350
Term Loan Payable 500 500
Deferred Revenue 333 380
Other Current Liabilities 501 576
----------- -----------
Total Current Liabilities 11,702 9,106
----------- -----------
Long-Term Liabilities:
Term Loan Payable - Net of Current Portion 375 750
Deferred Credit 632 638
----------- -----------
Total Long Term Liabilities 1,007 1,388
----------- -----------
Commitments and Contingencies -- --
----------- -----------
Stockholders' Equity:
Preferred stock - $.001 par value; 2,000,000
shares authorized, none issued or outstanding -- --
Common stock - Par Value $.001 Per Share;
Authorized 20,000,000 Shares, 5,163,948
Shares Issued and 4,153,948 Shares Outstanding at
June 30, 2000 and September 30, 1999, Respectively 5 5
Additional Paid-in Capital 7,428 7,428
Accumulated Other Comprehensive Income (11) (7)
Treasury Stock At Cost; 1,010,000 Common Shares
at June 30, 2000 and September 30, 1999, Respectively (2,248) (2,248)
Retained Earnings 5,139 2,676
----------- -----------
Total Stockholders' Equity 10,313 7,854
----------- -----------
Total Liabilities and Stockholders' Equity $ 23,022 $ 18,348
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 20,523 $ 16,151 $ 58,131 $ 40,446
----------- ----------- ----------- -----------
Operating Expenses:
Selling Expenses 15,836 12,037 44,623 31,598
General and Administrative 2,853 2,175 8,218 5,497
Depreciation and Amortization 187 171 605 508
----------- ----------- ----------- -----------
Total Operating Expenses 18,876 14,383 53,446 37,603
----------- ----------- ----------- -----------
Income from Operations 1,647 1,768 4,685 2,843
----------- ----------- ----------- -----------
Other Income [Expenses]
Interest and Dividend Income 25 27 84 74
Interest Expense (48) (56) (199) (219)
Realized Gain/(Loss) on Investments 0 (10) 2 (17)
----------- ----------- ----------- -----------
Total Other [Expenses] (23) (39) (113) (162)
----------- ----------- ----------- -----------
Income Before Income Tax Expense 1,624 1,729 4,572 2,681
Income Tax Expense 756 800 2,109 1,215
----------- ----------- ----------- -----------
Net Income $ 868 $ 929 $ 2,463 $ 1,466
=========== =========== =========== ===========
Basic Earnings Per Common Share $ 0.21 $ 0.21 $ 0.59 $ 0.32
=========== =========== =========== ===========
Diluted Earnings Per Common Share $ 0.18 $ 0.20 $ 0.52 $ 0.30
=========== =========== =========== ===========
Basic Weighted Average Shares 4,153,948 4,405,941 4,153,948 4,636,186
=========== =========== =========== ===========
Diluted Weighted Average Shares 4,948,058 4,753,644 4,700,371 4,913,796
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
June 30,
2000 1999
---- ----
Operating Activities:
<S> <C> <C>
Net Income $ 2,463 $ 1,466
------- -------
Adjustments to Reconcile Net Income
to Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization 605 508
Deferred Credit (6) 70
Net Realized (Gain)/Loss on Investments (2) 19
Deferred Taxes 10 (65)
Change in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (4,400) (677)
Other Assets (655) (189)
Increase [Decrease] in:
Accounts Payable, Accrued Expenses, Accrued Payroll
and Commissions 2,526 1,690
Income Tax Payable (208) 548
Deferred Revenue (47) 368
Other Liabilities (75) 65
------- -------
Total Adjustments ($2,252) $ 2,337
------- -------
Net Cash - Operating Activities $ 211 $ 3,803
------- -------
Investing Activities:
Capital Expenditures (404) (542)
Purchase of Investments (494) (399)
Proceeds from Sales of Investments 648 549
Acquisitions of and Additions to Trade Names (33) 0
Cash Received from Related Parties 24 0
------- -------
Net Cash - Investing Activities ($ 259) ($ 392)
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
-65-
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
June 30,
2000 1999
---- ----
Financing Activities:
<S> <C> <C>
Borrowings Under Term Loan and Line of Credit 7,000 3,114
Repayments Under Term Loan and Line of Credit (6,975) (4,839)
Purchase of Treasury Stock and Warrants 0 (1,752)
------- -------
Net Cash - Financing Activities $ 25 ($3,477)
------- -------
Net [Decrease] in Cash and Cash Equivalents (23) (66)
Cash and Cash Equivalents - Beginning of Periods 580 935
------- -------
Cash and Cash Equivalents - End of Periods $ 557 $ 869
======= =======
Supplemental Cash Flow Information:
Cash paid during the periods for:
Interest $ 182 $ 219
Income Taxes $ 2,373 $ 768
</TABLE>
See Notes to Consolidated Financial Statements.
-66-
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
--------------------------------------------------------------------------------
[1] Basis of Reporting
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. These unaudited financial statements include the accounts
of The Solomon-Page Group Ltd. and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited consolidated financial
statements included in this Form 10-Q reflect all adjustments, consisting only
of normal recurring items, which are considered necessary for a fair
presentation of the results of operations for the periods presented. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
It is suggested that these financial statements be read in conjunction with the
audited financial statements and notes for the fiscal year ended September 30,
1999 included in The Solomon-Page Group Ltd. Form 10-K.
[2] Summary of Significant Accounting Policies
Accumulated Other Comprehensive Income - The Company has adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," as of October 1, 1998. SFAS No. 130 establishes new rules for reporting
and display of comprehensive income and its components, however it has had no
material impact on the Company's net income or total stockholders' equity.
Accumulated other comprehensive income presented in the accompanying
consolidated balance sheets consists entirely of accumulated net of tax
unrealized losses on available-for-sale securities.
Reclassification - Certain prior period amounts have been reclassified to
conform to the current period presentation.
[3] Business Segments
Business Segments - The Company is a provider of staffing services organized
into two primary operating divisions: temporary staffing and consulting and
executive search and full-time contingency recruitment. The temporary staffing
and consulting division provides services to companies seeking personnel in the
information technology, accounting, human resources, legal and banking areas.
The executive search and full-time contingency recruitment division comprises
ten lines of business, including five industry, capital markets, publishing and
new media, healthcare, fashion services and banking, and five functional
information technology, accounting, human resources, legal and administrative
support.
-67-
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
--------------------------------------------------------------------------------
[3] Business Segments [Continued]
The Company evaluates performance based on the segments' profit from operations
before unallocated corporate overhead. (Amounts in Thousands)
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
Staffing Search Staffing Search
-------- ------ -------- ------
Revenues $10,868 $9,655 $8,412 $7,739
Segment profit 897 1,320 958 1,271
Segment Assets 9,750 8,586 7,175 6,622
Nine Months Ended Nine Months Ended
June 30, 2000 June 30, 1999
Staffing Search Staffing Search
-------- ------ -------- ------
Revenues $29,967 $28,164 $24,280 $16,166
Segment profit 2,160 4,018 1,697 2,074
A reconciliation of combined segment profit to consolidated net income is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, June 30, 1999
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total profit for reportable segments $2,217 $2,229 $6,178 $3,770
Interest expense (48) (56) (199) (219)
Corporate overhead (545) (444) (1,407) (870)
Income tax expense (756) (800) (2,109) (1,215)
Net income 868 929 2,463 1,466
</TABLE>
-68-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
The Solomon-Page Group Ltd.
We have audited the accompanying consolidated balance sheets of The
Solomon-Page Group Ltd. and subsidiary as of September 30, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three fiscal years in the period ended September 30,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Solomon-Page Group Ltd. and subsidiary as of September 30, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three fiscal years in the period ended September 30, 1999, in conformity
with generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
November 16, 1999
-69-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
September 30,
1 9 9 9 1 9 9 8
Assets:
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 580 $ 935
Investments 849 603
Accounts Receivable - [Net of Allowances of $280 and $200,
Respectively] 11,416 10,161
Other Current Assets 391 246
------- -------
Total Current Assets 13,236 11,945
------- -------
Property and Equipment:
Equipment 2,022 1,727
Furniture and Fixtures 797 563
Leasehold Improvements 1,103 938
------- -------
Totals - At Cost 3,922 3,228
Less: Accumulated Depreciation 1,659 1,113
------- -------
Property and Equipment -Net 2,263 2,115
------- -------
Other Assets:
Investments 686 1,112
Intangible Assets - [Net of Accumulated Amortization of $310 and
$195, Respectively] 1,444 1,019
Deferred Tax Asset 324 177
Due from Related Parties 135 136
Other Assets 260 231
------- -------
Total Other Assets 2,849 2,675
------- -------
Total Assets $18,348 $16,735
======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-70-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
September 30,
1 9 9 9 1 9 9 8
<S> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accrued Payroll and Commissions $ 4,607 $ 3,498
Accounts Payable and Accrued Expenses 1,276 968
Income Taxes Payable 1,417 298
Line of Credit 350 3,100
Term Loan Payable 500 --
Deferred Revenue 380 131
Other Current Liabilities 576 156
-------- -------------
Total Current Liabilities 9,106 8,151
-------- -------------
Long-Term Liabilities:
Term Loan Payable - Net of Current Portion 750 --
Deferred Credit 638 545
-------- -------------
Total Long-Term Liabilities 1,388 545
-------- -------------
Commitments and Contingencies -- --
-------- -------------
Stockholders' Equity:
Preferred Stock - Par Value $.001 Per Share; Authorized
2,000,000 Shares, None Issued or Outstanding -- --
Common Stock - Par Value $.001 Per Share;
Authorized 20,000,000 Shares, 5,163,948 and 5,162,282 Shares
Issued and 4,153,948 and 5,121,282 Shares Outstanding
at September 30, 1999 and 1998, Respectively 5 5
Additional Paid-in Capital 7,428 7,426
Accumulated Other Comprehensive Income (7) 11
Treasury Stock - At Cost; 1,010,000 and 41,000 Common Shares
at September 30, 1999 and 1998, Respectively (2,248) (80)
Retained Earnings 2,676 677
-------- -------------
Total Stockholders' Equity 7,854 8,039
-------- -------------
Total Liabilities and Stockholders' Equity $ 18,348 $ 16,735
======== =============
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-71-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
<S> <C> <C> <C>
Revenue $ 56,329 $ 44,639 $ 28,996
----------- ----------- -----------
Operating Expenses:
Selling Expenses 44,139 35,015 22,413
General and Administrative 7,771 7,486 4,555
Depreciation and Amortization 660 516 337
----------- ----------- -----------
Total Operating Expenses 52,570 43,017 27,305
----------- ----------- -----------
Income from Operations 3,759 1,622 1,691
----------- ----------- -----------
Other Income [Expenses]:
Interest and Dividend Income 110 128 133
Interest Expense (269) (219) (27)
Realized Gain on Investments 3 2 37
----------- ----------- -----------
Total Other [Expenses] Income (156) (89) 143
----------- ----------- -----------
Income Before Income Tax Expense 3,603 1,533 1,834
Income Tax Expense 1,604 710 552
----------- ----------- -----------
Net Income $ 1,999 $ 823 $ 1,282
=========== =========== ===========
Basic Earnings Per Common Share $ .44 $ .16 $ .25
=========== =========== ===========
Diluted Earnings Per Common Share $ .41 $ .14 $ .23
=========== =========== ===========
Basic Weighted Average Shares 4,517,298 5,134,122 5,131,751
=========== =========== ===========
Diluted Weighted Average Shares 4,885,699 5,985,319 5,633,806
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-72-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C>
Balance - October 1, 1996 -- $ -- 5,139,285 $ 5 $ 8,488
Treasury Shares
Purchased -- -- -- -- --
Net Income -- -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1997 -- -- 5,139,285 5 8,488
Repurchase of 1,000,000
Class A Warrants -- -- -- -- (1,054)
Costs Associated with
Registering Class A
Warrants -- -- -- -- (37)
Exercise of Options -- -- 22,997 -- 29
Treasury Shares Purchased -- -- -- -- --
Unrealized Gain on Available
for Sale Securities - Net -- -- -- -- --
Net Income -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1998 -- -- 5,162,282 5 7,426
Exercise of Options -- -- 1,666 -- 2
Treasury Shares Purchased -- -- -- -- --
Unrealized [Loss] on Available
for Sale Securities - Net -- -- -- -- --
Net Income -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1999 -- $ -- 5,163,948 $ 5 $ 7,428
====== ======== ========= ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Retained Total
Comprehensive Treasury Stock Earnings Stockholders'
Income Shares Amount [Deficit] Equity
<S> <C> <C> <C> <C> <C>
Balance - October 1, 1996 $ -- -- $ -- $ (1,428) $ 7,065
Treasury Shares
Purchased -- 10,000 (16) -- (16)
Net Income -- -- -- 1,282 1,282
-------- ------ --------- --------- ----------
Balance - September 30, 1997 -- 10,000 (16) (146) 8,331
Repurchase of 1,000,000
Class A Warrants -- -- -- -- (1,054)
Costs Associated with
Registering Class A
Warrants -- -- -- -- (37)
Exercise of Options -- -- -- -- 29
Treasury Shares Purchased -- 31,000 (64) -- (64)
Unrealized Gain on Available
for Sale Securities - Net 11 -- -- -- 11
Net Income -- -- -- 823 823
-------- ------ --------- --------- ----------
Balance - September 30, 1998 11 41,000 (80) 677 8,039
Exercise of Options -- -- -- -- 2
Treasury Shares Purchased -- 969,000 (2,168) -- (2,168)
Unrealized [Loss] on Available
for Sale Securities - Net (18) -- -- -- (18)
Net Income -- -- -- 1,999 1,999
-------- --------- --------- --------- ----------
Balance - September 30, 1999 $ (7) 1,010,000 $ (2,248) $ 2,676 $ 7,854
======== ========= ========= ========= ==========
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-73-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[AMOUNTS IN THOUSANDS]
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Operating Activities:
<S> <C> <C> <C>
Net Income $ 1,999 $ 823 $ 1,282
------- ------- -------
Adjustments to Reconcile Net Income to
Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization 660 516 337
Deferred Credit 93 161 118
Provision for Losses on Accounts Receivable 80 75 35
Net Realized Gain on Investments (3) (2) (37)
Deferred Taxes (297) (79) (84)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (1,335) (2,858) (3,253)
Other Assets (27) (49) (32)
Increase [Decrease] in:
Accounts Payable, Accrued Expenses,
Accrued Payroll and Commissions 1,417 1,004 1,492
Income Tax Payable 1,119 31 290
Deferred Revenue 249 155 --
Other Current Liabilities 448 (245) 36
------- ------- -------
Total Adjustments 2,404 (1,291) (1,098)
------- ------- -------
Net Cash - Operating Activities 4,403 (468) 184
------- ------- -------
Investing Activities:
Capital Expenditures (693) (1,089) (791)
Purchases of Investments (602) (800) (2,845)
Proceeds from Sales of Investments 750 1,249 2,042
Acquisitions of and Additions to Trade Names (540) (350) (265)
Cash Received from Related Parties 1 55 10
Increase in Cash Surrender Value of Officer
Life Insurance (8) (46) (23)
------- ------- -------
Net Cash - Investing Activities (1,092) (981) (1,872)
------- ------- -------
Financing Activities:
Borrowings Under Term Loan and Line of Credit 4,164 3,100 --
Repayments Under Term Loan and Line of Credit (5,664) -- --
Purchase of Treasury Stock and Warrants (2,168) (1,118) (16)
Warrant Registration Costs -- (37) --
Proceeds from Exercise of Stock Options 2 29 --
------- ------- -------
Net Cash - Financing Activities (3,666) 1,974 (16)
------- ------- -------
Net [Decrease] Increase in Cash and
Cash Equivalents - Forward $ (355) $ 525 $(1,704)
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-74-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
<S> <C> <C> <C>
Net [Decrease] Increase in Cash and
Cash Equivalents - Forwarded $ (355) $ 525 $(1,704)
Cash and Cash Equivalents - Beginning of Years 935 410 2,114
------- ------- -------
Cash and Cash Equivalents - End of Years $ 580 $ 935 $ 410
======= ======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $ 269 $ 219 $ 27
Income Taxes $ 861 $ 777 $ 422
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
-75-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[1] Nature of Operations
The Solomon-Page Group Ltd. and its wholly-owned subsidiary [the "Company"]
provides staffing services comprised of two primary operating divisions: (i)
temporary staffing and consulting, which provides approximately 58% of the
Company's revenue and (ii) retained executive search and full-time contingency
search which provides approximately 42% of the Company's revenue. The Company
provides its services principally in the New York metropolitan area through its
offices located in New York and New Jersey. The Company also provides services
in California and Georgia through its offices located in those areas.
[2] Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiary. All material intercompany accounts
and transactions are eliminated.
Revenue Recognition - Search revenues are recognized in full-time contingency
search engagements upon the successful completion of the assignment. In a
retained executive search engagement, the non-refundable retainer is recognized
according to the terms of the search contract, with the unearned portions of the
retainer reflected as deferred revenue. The balance of the contract is
recognized upon successful completion of the search. Temporary staffing and
consulting revenue is recognized when the temporary personnel provide the
service.
Receivable Allowances - The Company records allowances against accounts
receivable, based on historical experience to estimate losses due to placed
candidates not fulfilling the terms of the search agreement or not remaining in
employment for the Company's guarantee period which generally ranges from 30 to
120 days but may extend up to one year. Losses from bad debts are charged to
expense and losses related to contract fulfillment are charged to revenue. The
Company recognizes a loss on receivables when placed candidates do not fulfill
the terms of search agreement or for not remaining in employment for the
guarantee period.
Investments - The Company accounts for investments in accordance with Statement
of Financial Accounting Standards ["SFAS"] No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Management determines the
appropriate classification of its investments in debt and equity securities at
the time of purchase and reevaluates such determination at each balance sheet
date. Equity securities, and debt securities which the Company does not have the
intent to hold to maturity, are classified as trading or available for sale.
Securities available for sale are carried at fair value, with any unrealized
holding gains and losses, net of tax, reported in a separate component of
stockholders' equity until realized. Trading securities are carried at fair
value with any unrealized gains or losses included in earnings. Held to maturity
securities are carried at amortized cost. Marketable debt and equity securities
available for current operations, and maturing within one year, are classified
in the balance sheet as current assets while securities held for non-current
uses, and maturing after one year, are classified as long-term assets. Realized
gains and losses are calculated utilizing the specific identification method
[See Note 3].
Depreciation - Depreciation of furniture, fixtures and equipment is computed
utilizing the straight-line method based on estimated useful lives ranging from
5 to 7 years. Depreciation of leasehold improvements is computed utilizing the
straight-line method over the lesser of the life of the improvement or the
remaining lease term. Depreciation expense was $545, $431 and $273 for the years
ended September 30, 1999, 1998 and 1997, respectively.
-76-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[2] Summary of Significant Accounting Policies [Continued]
Deferred Income Taxes - The Company accounts for deferred income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." The statement
requires that deferred income taxes reflect the tax consequences on future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts.
Deferred Credit - The Company's lease on its premises provides for periodic
increases over the lease term. Pursuant to SFAS No. 13, "Accounting for Leases,"
the Company records rent expense on a straight-line basis. The effect of these
differences is recorded as a deferred credit.
Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased.
Earnings Per Common Share - Basic earnings per share represents the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period. Diluted earnings per share reflects the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of securities into
common stock.
The computation of diluted earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on earnings per share. The dilutive effect of outstanding options and
warrants and their equivalents is reflected in diluted earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earning per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the option or
warrants.
Potential future dilutive securities include 2,050,000, 2,050,000 and 3,050,000
shares issuable under outstanding warrants and 350,500, 225,500 and 0 shares
issuable under outstanding options as of September 30, 1999, 1998 and 1997,
respectively.
Intangibles - Intangibles which consist of trade names and customer lists are
recorded at cost and are amortized utilizing the straight-line method over
periods ranging from 4 to 15 years. When changing circumstances warrant, the
Company evaluates the carrying value and the periods of amortization based on
the current and expected future non-discounted cash flows from operations to
determine whether revised estimates of carrying value or useful lives is
required. Amortization expense was $115, $85 and $64 for the years ended
September 30, 1999, 1998 and 1997, respectively [See Note 9].
Accumulated Other Comprehensive Income - Accumulated other comprehensive income
consists entirely of unrealized gains and losses on available for sale
securities. The financial statement and footnote disclosures required by SFAS
130 have not been presented as they are not material.
-77-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[2] Summary of Significant Accounting Policies [Continued]
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to concentrations of credit risk include cash, cash equivalents and
accounts receivable arising from its normal business activities. The Company
places its cash and cash equivalents with high credit quality financial
institutions. The Company had approximately $370 and $561 in financial
institutions that is subject to normal credit risk beyond insured amounts at
September 30, 1999 and 1998, respectively.
The Company believes that credit risk related to accounts receivable is limited
due to the large number of Fortune 1000 companies comprising the Company's
customer base and the diversified industries in which the Company operates. The
Company does not require collateral on accounts receivable or other financial
instruments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Advertising - The Company expenses advertising costs as incurred. Total
advertising costs charged to expense amounted to approximately $410, $430 and
$207 for the years ended September 30, 1999, 1998 and 1997, respectively.
Stock Based Compensation - The Company accounts for employee stock-based
compensation under the intrinsic value based method as prescribed by Accounting
Principles Board ["APB"] Opinion No. 25. The Company applies the provisions of
SFAS No. 123, "Accounting for Stock Based Compensation," to non-employee
stock-based compensation and the pro forma disclosure provisions of that
statement to employee stock-based compensation.
Reclassifications - Certain amounts in prior years consolidated financial
statements have been reclassified to conform with the current year presentation.
[3] Investments in Debt and Equity Securities
At September 30, 1999 and 1998, the Company's securities consisted of certain
highly liquid debt securities which were classified as available for sale and
held to maturity. A summary of the Company's investments in debt securities is
as follows:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
Financial Statement Caption Cost Fair Value Cost Fair Value
--------------------------- ---- ---------- ---- ----------
Available for Sale:
<S> <C> <C> <C> <C>
Investments $ 1,550 $ 1,535 $ 1,695 $ 1,715
Held to Maturity:
Restricted Investment - Noncurrent $ -- $ -- $ 34 $ 34
</TABLE>
Gross proceeds from sale of available for sale securities was $750, $1,249 and
$2,042 and realized gains on sales was $3, $2 and $37 for the years ended
September 30, 1999, 1998 and 1997, respectively.
-78-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[3] Investments in Debt and Equity Securities [Continued]
At September 30, 1999 and 1998, gross unrealized [losses] gains on available for
sale securities was $(15) and $20 and is included in stockholders' equity net of
taxes of $8 and $(9), respectively.
Contractual maturities of debt securities classified as available for sale and
held to maturity are as follows:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
Available for Sale Held to Maturity Available for Sale Held to Maturity
------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Within 1 year $ 850 $ -- $ 600 $ 36
Between 1 and 5 years $ 700 $ -- $ 1,100 $ --
</TABLE>
[4] Due From Related Parties
At September 30, 1999 and 1998, the Company had a balance due from various
officers of the Company aggregating $135 and $136, respectively. The advances
bear interest at 8%. Interest income on the advances was $10, $13, and $12 for
the years ended September 30, 1999, 1998 and 1997, respectively. No interest was
receivable at September 30, 1999 and 1998.
[5] Line of Credit
In February 1999, the Company entered into a $6,500 credit facility agreement.
The facility agreement consists of a $5,000 working capital line of credit under
which up to $250 can be borrowed under standby letters of credit at a commitment
rate of 2%, and a term loan of $1,500. The facility agreement is collateralized
by all of the Company's assets. The agreement provides for borrowings under the
working capital line of credit at 1% above the bank reference rate and expires
on February 28, 2002. The bank's reference rate at September 30, 1999 was 8.5%.
At September 30, 1999, there was $350 of borrowings under the working capital
line of credit and $161 under standby letters of credit leaving $4,489 of credit
available. The agreement contains various covenants among which are minimum
working capital and tangible net worth requirements and a provision that
restricts the payment of dividends in excess of 50% of net profits.
In February 1998, the Company entered into a one year $4,000 demand line of
credit facility agreement, which was collateralized by all the Company's assets.
The agreement provided for borrowing at 1% above the bank's reference rate (8.5%
at September 30, 1998). Borrowings were limited to 80% of eligible accounts
receivable and expired in February 1999, on which date the outstanding principal
amount was repaid. As of September 30, 1998, the full balance under the line was
available and the Company borrowed approximately $3,100 under the credit
facility, of which approximately $1,118 was used for the repurchase of the
Company's common stock, and Class A redeemable common stock purchase warrants
with the balance used to fund current working capital requirements.
The weighted average interest rate on short-term borrowings outstanding as of
September 30, 1999 and 1998 was 9.3% and 9.5%, respectively.
-79-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[6] Long-Term Debt
At September 30, 1999 and 1998, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8
<S> <C> <C>
Note payable under credit facility agreement [See Note 5], payable in equal
quarterly principal installments of $125 plus interest at 1.25% above bank's
reference rate per annum through February 2002 $1,250 $ --
Less: Current Portion 500 --
------ -------
Totals $ 750 $ --
====== =======
</TABLE>
<TABLE>
<CAPTION>
Long-term debt at September 30, 1999 matures as follows:
<S> <C>
2000 $ 500
2001 500
2002 250
------
Total $1,250
======
</TABLE>
[7] Leases
Operating Leases - The Company leases office space under operating leases
expiring through September 2006.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of September 30, 1999 for each of the
next five years and in the aggregate are:
Year ending
September 30,
2000 $ 1,111
2001 1,137
2002 1,151
2003 1,057
2004 993
Subsequent to 2004 1,776
--------
Total Minimum Future Rental Payments $ 7,225
========
In addition, the Company is liable for its pro-rata share of increases in real
estate taxes and escalations as provided in the lease agreements.
Rent expense was approximately $1,231, $1,017 and $617 for the years ended
September 30, 1999, 1998 and 1997, respectively.
-80-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[8] Capital Stock
On September 11, 1998, the Company's Board of Directors authorized the
repurchase of 1,000,000 shares of the Company's common stock, from time to time,
in the open market or in privately negotiated transactions. During the year
ended September 30, 1999, 969,000 shares were repurchased at a cost of $2,168.
During the year ended September 30, 1998, 31,000 shares were repurchased at a
cost of $64.
On December 18, 1996, the Company's Board of Directors authorized the repurchase
of up to 500,000 shares of the Company's common stock, from time to time, in the
open market or in privately negotiated transactions. The Company repurchased
10,000 shares during the year ended September 30, 1997, at a cost of $16. On
October 31, 1997, the Company's Board of Directors terminated the December 18,
1996 common stock repurchase plan.
[9] Commitments and Contingencies
Litigation - The Company is party to litigation arising from the normal course
of business. In managements' opinion, this litigation will not materially affect
the Company's financial position, results of operations or cash flows.
Intangibles - In connection with certain acquisitions, the Company will be
required to pay purchase price adjustments through September 2004 based on the
achievement of various criteria. These additional payments are charged to
intangibles and are amortized over the then remaining life of the intangible.
Purchase price adjustments amounted to approximately $190 and $350 during the
years ended September 30, 1999 and 1998, respectively. During the fiscal year
ending September 30, 1999, the Company acquired two trade names for $350. The
acquisitions also include potential purchase price adjustments.
[10] Options and Warrants
On April 1, 1994, the Company issued 175,000 Class A warrants and 175,000 Class
B warrants in connection with certain bridge financing which was repaid on
October 20, 1994. The Class A warrants are identical to those issued in the
Company's initial public offering. The Class B warrants are identical to the
Class A warrants except that the exercise price is $6.00 per share.
On October 20, 1994, in connection with its initial public offering the Company
issued 2,300,000 Class A redeemable common stock purchase warrants. Each Class A
warrant entitles the holder to purchase one share of common stock at $4.50 per
share commencing October 20, 1995 and expired on October 20, 1999.
The Class A warrants are redeemable at $.05 per warrant based on the achievement
of certain criteria.
On October 20, 1994, in connection with its initial public offering, the Company
granted to its underwriter an option to purchase an aggregate of 200,000 units
of Company securities [consisting of one share of common stock and one Class A
redeemable common stock purchase warrant] exercisable at $6.60 per unit
commencing October 20, 1995 and expired on October 20, 1999.
On October 31, 1997, the Company's Board of Directors authorized the repurchase
of up to 1,000,000 of the Company's Class A redeemable common stock purchase
warrants in open market or privately negotiated transactions. On February 12,
1998, the Company completed the repurchase of 1,000,000 Class A redeemable
common stock purchase warrants at a cost of $1,054.
-81-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[10] Options and Warrants [Continued]
On August 17, 1995, the Company adopted the 1995 Director's Stock Option Plan
[the "Director's Plan"]. The Director's Plan provides for the grant of options
to purchase up to 100,000 shares of common stock to Directors who are not
employees of the Company. Options granted under the Director's Plan will be
exercisable commencing a minimum of 6 months from the date of grant for a period
of 10 years from the date of grant at an exercise price which is not less than
the fair market value of the common stock on the date of the grant. Options vest
at a rate of 50% after one year and 50% after two years.
On August 6, 1993, the Company adopted the 1993 Long Term Incentive Plan [the
"1993 Plan"], which was amended on June 24, 1994. The 1993 Plan provides for the
issuance of incentive awards in the form of but not limited to stock options,
stock appreciation rights, restricted stock and performance grants to purchase
up to 1,500,000 shares of common stock and provides that all individuals
performing services for the Company are eligible to receive incentive awards.
The 1993 Plan is administered by a committee designated by the Board of
Directors. The selection of participants, allotment of shares, determination of
price and other conditions of purchase of any awards granted will be determined
by such committee at its sole discretion. The purpose of the 1993 Plan is to
attract and retain persons instrumental to the success of the Company. Incentive
stock options granted under the 1993 Plan will be exercisable for a period of up
to 10 years from the date of grant at an exercise price which is not less than
the fair market value of the common stock on the date of the grant, except that
the term of an incentive stock option granted under the 1993 Plan to a
stockholder owning more than 10% of the outstanding shares of the common stock
may not exceed five years and its exercise price may not be less than 110% of
the fair market value of the common stock on the date of the grant.
Non-executive officer options vest at a rate of 33 1/3% after three years, 33
1/3% after four years and 33 1/3% after five years. Options to purchase 450,000
shares of common stock have been granted to executive officers and vest at a
rate of 33 1/3% upon grant, 33 1/3% after six months and 33 1/3% after thirteen
months.
On September 17, 1996, the Company adopted the 1996 Stock Option Plan [the "1996
Plan"]. The 1996 Plan provides for awards of incentive stock options and
non-qualified options to purchase up to 1,000,000 shares of common stock to
employees and directors of the Company. The 1996 Plan provides that
non-qualified options must be granted at not less than 80% of fair market value
on the date granted. No options at less than fair market value have been
awarded. Non-executive officer options vest at a rate of 33 1/3% after three
years, 33 1/3% after four years and 33 1/3% after five years. Executive officers
vest at a rate of 33 1/3% after one year, 33 1/3% after two years and 33 1/3%
after three years.
A summary of the activity in the option plans is as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
<S> <C> <C>
Outstanding at October 1, 1996 1,773,500 $ 1.71
Granted 246,750 2.33
Exercised --
Expired/Canceled (55,000) 1.43
---------
Outstanding at September 30, 1997 1,965,250 1.80
Granted 355,500 2.70
Exercised (22,997) 1.27
Expired/Canceled (128,169) 1.85
---------
Outstanding at September 30, 1998 2,169,584 1.95
Granted 190,000 2.13
Exercised (1,666) 1.25
Expired/Canceled (94,000) 2.35
---------
Outstanding at September 30, 1999 2,263,918 1.95
=========
Exercisable at September 30, 1999 1,429,888 $ 1.80
=========
</TABLE>
-82-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[10] Options and Warrants [Continued]
No compensation cost was charged to earnings during the years ended September
30, 1999, 1998 and 1997. If compensation cost for the stock option plans had
been determined based on the fair value at the grant dates for awards under the
plans, consistent with the alternative method set forth under SFAS No. 123, the
Company's net income, basic and diluted earnings per share would have been
reduced on a pro forma basis as indicated below:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8 1 9 9 7
Year ended September 30:
Net Income:
<S> <C> <C> <C>
As Reported $ 1,999 $ 823 $ 1,282
Pro Forma $ 1,888 $ 500 $ 953
Basic Earnings Per Common Share:
As Reported $ .44 $ .16 $ .25
Pro Forma $ .42 $ .10 $ .19
Diluted Earnings Per Common Share:
As Reported $ .41 $ .14 $ .23
Pro Forma $ .40 $ .09 $ .17
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for the grants awarded in 1999 and 1998, respectively:
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Dividend Yields 0.00% 0.00% 0.00%
Expected Volatility 88.86% 131.54% 105.29%
Risk-Free Interest Rate 5.41% 4.32% 5.99%
Expected Lives 4 Years 5.5 Years 4 Years
The weighted-average fair value of options granted was $1.42, $2.40 and $1.73
for the years ended September 30, 1999, 1998 and 1997, respectively.
The following table summarizes information about stock options at September 30,
1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
Weighted Weighted Weighted
Range of Remaining Average Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- ------ ---------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
$0.56 - $2.00 1,157,918 4.2 Years $ 1.47 717,988 $ 1.35
$2.01 - $3.69 1,106,000 6.3 Years $ 2.45 712,000 $ 2.25
--------- ---------
2,263,918 4.9 Years $ 1.95 1,429,988 $ 1.80
========= =========
</TABLE>
-83-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[11] Income Taxes Expense
The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
Current:
<S> <C> <C> <C>
Federal $ 1,283 $ 524 $ 836
Utilization of Net Operating Loss Carryforward (5) (13) (423)
State and City 623 278 453
Utilization of Net Operating Loss Carryforward -- -- (230)
------- ------- -------
Total Current 1,901 789 636
------- ------- -------
Deferred [Benefit]:
Federal (200) (50) (61)
State and City (97) (29) (23)
------- ------- -------
Total Deferred (297) (79) (84)
------- ------- -------
Total Income Tax Expense $ 1,604 $ 710 $ 552
======= ======= =======
</TABLE>
Income tax at the federal statutory rate reconciled to the Company's effective
rate is as follows:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
<S> <C> <C> <C>
Federal Statutory Rate 34.0% 34.0% 34.0%
Non Deductible Expenses 2.2 1.9 4.4
Benefit of Net Operating Loss Carryforward (.1) (.9) (23.1)
Change in Deferred Tax Asset Valuation Allowance -- -- 7.8
State and City Income Taxes [Net of Federal Tax Benefit] 11.5 12.0 8.1
Other (3.1) (.7) (1.1)
----- ---- ----
Effective Rate 44.5% 46.3% 30.1%
===== ==== ====
</TABLE>
The major components of deferred income tax assets and liabilities are as
follows:
September 30,
1 9 9 9 1 9 9 8
Deferred Tax Liabilities:
Cash Basis Adjustments $ -- $ (89)
Accelerated Depreciation (65) (90)
Other -- (9)
--------- --------
Total Deferred Tax Liabilities (65) (188)
--------- --------
Deferred Tax Assets:
Rent Deferrals 276 240
Net Operating Loss -- 5
Reserves 121 79
Other 47 --
Deferred Revenue 72 27
--------- --------
Total Deferred Tax Assets 516 351
--------- --------
Net Deferred Tax Asset $ 451 $ 163
========= ========
-84-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[11] Income Taxes Expense [Continued]
The provision for income tax expense consists of the following:
September 30,
1 9 9 9 1 9 9 8
------- -------
Net Current Deferred Tax Asset [Liability] $ 127 $ (14)
Net Noncurrent Deferred Tax Asset 324 177
-------- --------
Net Deferred Tax Asset $ 451 $ 163
======== ========
As of September 30, 1999, the net current deferred tax asset is included in
other current assets in the accompanying balance sheet.
As of September 30, 1998, the net current deferred tax liability is included in
other current liabilities in the accompanying balance sheet.
[12] Earnings Per Share
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the years ended September 30, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
<S> <C> <C> <C>
Basic Earnings Per Common Share $ .44 $ .16 $ .25
=========== ========= ==========
Weighted Average Shares Outstanding - Basic 4,517,298 5,134,122 5,131,751
Dilutive Options 368,401 851,197 502,055
----------- --------- ----------
Weighted Average Shares Outstanding - Diluted 4,885,699 5,985,319 5,633,806
=========== ========= ==========
Diluted Earnings Per Common Share $ .41 $ .14 $ .23
=========== ========= ==========
</TABLE>
[13] Retirement Plan
The Company maintains a 401[k] savings plan which covers substantially all
employees. Under the plan, employees may elect to defer up to 15% of their
salary, subject to the Internal Revenue Code limits. The Company may make a
discretionary match as well as a discretionary contribution. No discretionary
match or contribution was made, and no amount was charged to operations, during
the years ended September 30, 1999, 1998 or 1997.
[14] Segment Information
Significant Customers - For the year ended September 30, 1999, one customer
accounted for 10% of revenues from continuing operations. For the year ended
September 30, 1998, another customer accounted for 14% of revenues from
continuing operations. For the year ended September 30 1997, two customers each
accounted for 11% of revenues from continuing operations.
Geographic Information - For the years ended September 31, 1999, 1998 and 1997,
the Company derived substantially all of its revenues from businesses located in
the United States, and no other country accounted for more than 10% of the
Company's revenues.
-85-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[14] Segment Information [Continued]
Business Segments - The Company is provider of staffing services organized into
two primary operating divisions: temporary staffing and consulting and executive
search and full-time contingency recruitment. The temporary staffing and
consulting division provides services to companies seeking personnel in the
information technology, accounting, human resources and legal areas. The
executive search and full-time contingency recruitment division comprises ten
lines of business, including five industry [capital markets, publishing and new
media, healthcare and fashion services and banking], and five functional
[information technology, accounting, human resources, legal and administrative
support].
The Company evaluates performance based on the segments' profit from operations
before unallocated corporate overhead. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies [see Note 2].
<TABLE>
<CAPTION>
Temporary Executive
Staffing and Search and
Consulting Full-Time Corporate Total
---------- --------- --------- -----
Year ended September 30, 1999:
<S> <C> <C> <C> <C>
Revenues $ 32,894 $ 23,435 $ -- $ 56,329
Income from Operations $ 2,424 $ 2,328 $ (993) $ 3,759
Capital Expenditures $ 235 $ 354 $ 104 $ 693
Total Assets $ 6,401 $ 7,508 $ 4,439 $ 18,348
Depreciation and Amortization $ 253 $ 210 $ 197 $ 660
Year ended September 30, 1998:
Revenues $ 26,865 $ 17,774 $ -- $ 44,639
Income from Operations $ 1,206 $ 1,159 $ (743) $ 1,622
Capital Expenditures $ 185 $ 740 $ 164 $ 1,089
Total Assets $ 6,268 $ 6,643 $ 3,824 $ 16,735
Depreciation and Amortization $ 209 $ 162 $ 145 $ 516
Year ended September 30, 1997:
Revenues $ 14,479 $ 14,517 $ -- $ 28,996
Income from Operations $ 1,129 $ 1,085 $ (523) $ 1,691
Capital Expenditures $ 201 $ 471 $ 119 $ 791
Segment Assets $ 5,064 $ 3,980 $ 3,771 $ 12,815
Depreciation and Amortization $ 122 $ 113 $ 102 $ 337
Reconciliation to Net Income:
</TABLE>
Ye a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Segment Income from Operations $ 3,759 $ 1,622 $ 1,691
Unallocated Amounts:
Interest and Dividend Income 110 128 133
Interest Expense (269) (219) (27)
Realized Gain on Investments 3 2 37
---------- --------- ---------
Income Before Income Tax Expense $ 3,603 $ 1,533 $ 1,834
========== ========= =========
-86-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[15] Fair Value of Financial Instruments
Effective October 1, 1995, the Company adopted SFAS No. 107, "Disclosure about
Fair Value of Financial Instruments," which requires disclosing fair value to
the extent practicable for financial instruments which are recognized or
unrecognized in the balance sheet. The fair value of the financial instruments
disclosed herein is not necessarily representative of the amount that could be
realized or settled, nor does the fair value amount consider the tax
consequences of realization or settlement. Carrying value approximates fair
value for amounts classified as due from related parties as the receivables
carry market rates of interest. For certain instruments, including cash and cash
equivalents, trade receivables and trade payables and line of credit, it was
estimated that the carrying amount approximates fair value for the majority of
these instruments because of their short maturities.
[16] Quarterly Information [Unaudited]
<TABLE>
<CAPTION>
Q u a r t e r E n d e d
December 31, March 31, June 30, September 30,
Fiscal 1999:
<S> <C> <C> <C> <C>
Revenues $ 11,516 $ 12,779 $ 16,151 $ 15,928
Income from Operations 342 733 1,768 926
Net Income 165 372 929 533
Net Income per Share - Basic .03 .08 .21 .12
Net Income per Share - Diluted .03 .08 .20 .11
</TABLE>
[17] New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of
Effective Date of FASB Statements No. 133." The Statement defers for one year
the effective date of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The rule now will apply to all fiscal
quarters of all fiscal years beginning after June 15, 2000. In June 1998, the
FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years beginning after June 15,
1999. The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company has not yet determined what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company is in the process of evaluating this SAB and the effect it will have
on our future consolidated financial statements and future revenue recognition
policy.
-87-
<PAGE>
INDEPENDENT AUDITORS
The consolidated financial statements of Solomon-Page as of
September 30, 1999 and 1998 and for each of the years in the three year period
ended September 30, 1999, included as Annex E hereto, have been audited by Moore
Stephens, P.C., independent auditors, as stated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing. It is expected that representatives of Moore
Stephens, P.C. will be present at the special meeting, both to respond to
appropriate questions of stockholders of Solomon-Page and to make a statement if
they so desire.
STOCKHOLDER PROPOSALS
If the merger is consummated, there will be no public
stockholders of Solomon-Page and no public participation in any future meetings
of stockholders of Solomon-Page. However, if the merger is not consummated,
Solomon-Page's public stockholders will continue to be entitled to attend and
participate in Solomon-Page stockholders' meetings. Pursuant to Rule 14a-8 under
the Exchange Act promulgated by the SEC, any stockholder of Solomon-Page who
wishes to present a proposal at the next Annual Meeting of Stockholders of
Solomon-Page (in the event the merger is not consummated), and who wishes to
have such proposal included in Solomon-Page's proxy statement for that meeting,
must deliver a copy of such proposal to Solomon-Page at 1140 Avenue of the
Americas, New York, New York 10036, Attention: Corporate Secretary, so that it
is received no later than May 1, 2001.
In addition, Solomon-Page's by-laws require that a stockholder
give advance notice to Solomon-Page of nominations for election to the board of
directors and of other matters that the stockholder wishes to present for action
at an annual meeting of stockholders (other than matters included in
Solomon-Page's proxy statement in accordance with Rule 14a-8). Such
stockholder's notice must be given in writing, include the information required
by the by-laws of Solomon-Page, and be delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of Solomon-Page at its principal
offices. Solomon-Page must receive such notice not less than 45 days prior to
the date in the current year that corresponds to the date in the prior year on
which Solomon-Page first mailed its proxy materials for the prior year's annual
meeting of stockholders. While Solomon-Page has not set a date for a 2001 Annual
Meeting of Stockholders, if a meeting were held on [September 28], 2001 (the
date that corresponds to the date on which the special meeting is being held),
notice of a director nomination or stockholder proposal made otherwise than in
accordance with Rule 14a-8 would be required to be given to Solomon-Page no
later than [May 31], 2001.
The advance notice provisions of Solomon-Page's by-laws
supersede the notice requirements contained in Rule 14a-4 under the Exchange
Act. Any stockholder proposal must also comply with other applicable provisions
of Solomon-Page's Certificate of Incorporation and by-laws and with the rules
and regulations under the Exchange Act. Solomon-Page will not consider a
stockholder proposal unless it is presented in accordance with the foregoing
requirements.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows Solomon-Page to "incorporate by reference"
information into its proxy statement, which means that Solomon-Page can disclose
important information by referring you to another document filed separately with
the SEC. The following documents are incorporated by reference in this proxy
statement and are deemed to be a part hereof:
(1) Solomon-Page's Annual Report on Form 10-K for the fiscal
year ended September 30, 1999;
(2) Solomon-Page's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2000 and June 30, 2000; and
-88-
<PAGE>
(3) Solomon-Page's Current Reports on Form 8-K filed on
April 3, 2000 and June 30, 2000.
Any statement contained in a document incorporated by
reference shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained in this proxy statement modifies or replaces
such statement.
Solomon-Page also incorporates by reference the information
contained in all other documents Solomon-Page files with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
proxy statement and before the special meeting. The information contained in any
such document will be considered part of this proxy statement from the date the
document is filed and will supplement or amend the information contained in this
proxy statement.
Solomon-Page undertakes to provide by first class mail,
without charge and within one business day after receipt of any request, to any
person to whom a copy of this proxy statement has been delivered, a copy of any
or all of the documents referred to above that have been incorporated by
reference in this proxy statement, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference therein).
Solomon-Page's Annual Report on Form 10-K for the fiscal year ended September
30, 1999 is accompanied by a list briefly describing all the exhibits not
contained therein. Solomon-Page will furnish any exhibit upon the payment of a
specified reasonable fee, which fee will be limited to Solomon-Page's reasonable
expenses in furnishing such exhibit. Requests for such copies should be directed
to The Solomon-Page Group Ltd., 1140 Avenue of the Americas, New York, New York
10036; telephone number (212) 403-6100, attention: Eric M. Davis, Secretary.
OTHER BUSINESS
The board of directors does not know of any other matters to
be presented for action at the special meeting. If any other business should
properly come before the special meeting, the persons named in the enclosed
proxy card intend to vote thereon in accordance with their best judgment on the
matter.
AVAILABLE INFORMATION
The merger is a "going private" transaction. Mergeco, the
management group and Solomon-Page have filed a Rule 13e-3 Transaction Statement
on Schedule 13E-3 under the Exchange Act with respect to the merger. The
Schedule 13E-3 contains additional information about Solomon-Page. A copy of the
written report presented by Legg Mason to the special committee, including Legg
Mason's opinion as to the fairness of the consideration to be received in the
merger, was filed as an exhibit to such Schedule 13E-3. Copies of the Schedule
13E-3 are available for inspection and copying at the principal executive
offices of Solomon-Page during regular business hours by any interested
stockholder of Solomon-Page, or a representative who has been so designated in
writing, and may be inspected and copied, or obtained by mail, by written
request directed to The Solomon-Page Group Ltd., 1140 Avenue of the Americas,
New York, New York 10036, attention: Eric M. Davis, Secretary.
Solomon-Page is currently subject to the information
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the SEC relating to its
business, financial and other matters. Copies of such reports, proxy statements
and other information, as well as the Schedule 13E-3, may be copied (at
prescribed rates) at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the following Regional Offices of the SEC: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New
York, New York 10048. For further information concerning the SEC's public
reference rooms, you may call the SEC at 1-800-SEC-0330. Some of this
information may also be accessed on the World Wide Web through the SEC's
Internet address at
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"http://www.sec.gov." The Solomon-Page's common stock is quoted on the National
Association of Securities Dealers Automated Quotation (Nasdaq) SmallCap market
under the symbol "SOLP," and certain reports, proxy statements and other
information can also be inspected and copied at the offices of the National
Association of Securities Dealers, 33 Whitehall Street, New York, NY 10004-2193.
By Order of the Board of Directors
Eric M. Davis
Secretary
New York, New York
September , 2000
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ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE SOLOMON-PAGE GROUP LTD.,
A DELAWARE CORPORATION,
AND
TSPGL MERGER CORP.,
A DELAWARE CORPORATION
DATED: June 28, 2000
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS..............................................................1
Section 1.1 Defined Terms..............................................1
Section 1.2 Other Defined Terms........................................3
ARTICLE II
THE MERGER...............................................................4
Section 2.1 The Merger.................................................4
Section 2.2 Effective Time.............................................4
Section 2.3 Closing....................................................4
Section 2.4 Certificate of Incorporation and By-Laws...................5
Section 2.5 Directors..................................................5
ARTICLE III
EFFECT OF MERGER ON SECURITIES OF MERGECO AND THE COMPANY................5
Section 3.1 Cancellation of Mergeco Common Stock.......................5
Section 3.2 Conversion of Certain Company Common Stock for Merger
Consideration; Converted Shares; Treasury Shares...........5
Section 3.3 Options....................................................6
Section 3.4 Exchange of Certificates...................................6
Section 3.5 Dissenting Shares..........................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................8
Section 4.1 Organization and Capitalization............................8
Section 4.2 Authorization..............................................9
Section 4.3 Subsidiary................................................10
Section 4.4 Absence of Certain Changes or Events......................10
Section 4.5 No Conflict or Violation..................................10
Section 4.6 Consents and Approvals....................................10
Section 4.7 Corporate Proceedings.....................................11
Section 4.8 Required Company Vote.....................................11
Section 4.9 Proxy Statement; Schedule 13E-3...........................11
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGECO................................12
Section 5.1 Organization...............................................12
Section 5.2 Authorization..............................................12
Section 5.3 Consents and Approvals.....................................12
Section 5.4 No Conflict or Violation...................................12
Section 5.5 Proxy Statement; Schedule 13E-3............................13
Section 5.6 Financing..................................................13
Section 5.7 Mergeco's Operations.......................................13
Section 5.8 Status of Representations of the Company...................13
Section 5.9 No Brokerage...............................................14
ARTICLE VI
COVENANTS OF THE COMPANY AND MERGECO.....................................14
Section 6.1 Maintenance of Business Prior to Closing...................14
Section 6.2 Investigation by Mergeco...................................14
Section 6.3 Consents and Efforts; Other Obligations....................15
Section 6.4 Other Offers...............................................16
Section 6.5 Meeting of Stockholders....................................17
Section 6.6 Proxy Statement............................................18
Section 6.7 Schedule 13E-3.............................................18
Section 6.8 Director and Officer Liability.............................19
Section 6.9 Notices of Certain Events..................................20
Section 6.10 Further Assurances.........................................21
Section 6.11 Financing..................................................21
Section 6.12 Voting.....................................................21
ARTICLE VII
CONDITIONS TO THE MERGER.................................................21
Section 7.1 Conditions to the Obligations of Each Party................21
Section 7.2 Conditions to the Obligations of the Company...............22
Section 7.3 Conditions to the Obligations of Mergeco...................23
ARTICLE VIII
MISCELLANEOUS............................................................23
Section 8.1 Termination................................................23
Section 8.2 Assignment.................................................25
Section 8.3 Notices....................................................25
Section 8.4 Entire Agreement; Waivers..................................26
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Section 8.5 Multiple Counterparts......................................26
Section 8.6 Invalidity.................................................26
Section 8.7 Titles.....................................................26
Section 8.8 Fees and Expenses..........................................26
Section 8.9 Cumulative Remedies........................................27
Section 8.10 Governing Law..............................................27
Section 8.11 Amendment..................................................27
Section 8.12 Public Announcements.......................................27
Section 8.13 Enforcement of Agreement...................................27
Section 8.14 Non-survival of Representations and Warranties.............27
Section 8.15 Interpretive Provisions....................................28
EXHIBITS
Exhibit A Converted Shares
Exhibit B Directors of the Surviving Corporation
SCHEDULES
Disclosure Schedule
Schedule 4.1(b) Outstanding Options
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this
"Agreement"), dated June 28, 2000, is by and between THE SOLOMON-PAGE GROUP
LTD., a Delaware corporation (the "Company"), and TSPGL MERGER CORP., a Delaware
corporation ("Mergeco").
RECITALS
A. On March 31, 2000, the Company and Mergeco entered into a
merger agreement pursuant to which, among other things, the Company was to be
merged with and into Mergeco, and each share of Company Common Stock outstanding
immediately prior to the Effective Time (other than Treasury Shares, Converted
Shares and Dissenting Shares, if any) were automatically to be changed into the
right to receive $4.25 per share in cash (the "Original Agreement").
B. In light of additional financial data that became available
to the Special Committee subsequent to the execution of the Original Agreement,
the Special Committee consulted with the Financial Advisor and requested that
negotiations be reopened in respect of the Merger Consideration.
C. After negotiations between the Management Group and the
Special Committee, the Management Group agreed to increase the Merger
Consideration.
D. In order to give effect, among other things, to the
parties' agreement to increase the Merger Consideration, the Company and Mergeco
desire to amend and restate the Original Agreement as set forth herein.
E. This Agreement provides for the merger (the "Merger") of
the Company with and into Mergeco, with Mergeco as the surviving corporation in
such merger, all in accordance with the provisions of this Agreement.
F. The respective Boards of Directors of Mergeco and the
Company and the stockholders of Mergeco have approved this Agreement and the
Merger, and have deemed the Agreement and the Merger advisable, fair to and in
the best interests of their respective companies and stockholders. The Company
intends promptly to submit to its Stockholders the approval of the Merger and
the approval and adoption of this Agreement.
G. The parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used herein, the terms below
shall have the following meanings:
"Affiliate" shall mean, with respect to any person or entity
(the "referent person"), any person or entity that controls the referent person,
any person or entity that the referent person controls, or any person or entity
that is under common control with the referent person. For purposes of the
preceding sentence, the term "control" shall mean the power, direct or indirect,
to direct or cause the direction of the management and policies of a person or
entity through voting securities, by contract or otherwise.
"Assets" shall mean all of the Company's right, title and
interest in and to all properties, assets and rights of any kind, whether
tangible or intangible, real or personal, owned by the Company or in which the
Company has any interest whatsoever.
"Board" shall mean the Board of Directors of the Company.
"Company Common Stock" shall mean the Common Stock having a
par value of $0.001 per share of the Company.
"Converted Shares" shall mean the shares of Company Common
Stock owned of record and beneficially by the Stockholders listed on Exhibit A
hereto.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Dissenting Stockholders" shall mean those Stockholders who
hold Dissenting Shares.
"Dissenting Shares" shall mean any shares held by Stockholders
who are entitled to an appraisal of their shares under the DGCL, and who have
properly exercised, perfected and not subsequently withdrawn or lost their
appraisal rights with respect to their Company Common Stock in accordance with
the DGCL.
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"Equity Securities" shall mean (i) shares of capital stock or
other equity securities, (ii) subscriptions, calls, warrants, options or
commitments of any kind or character relating to, or entitling any person or
entity to purchase or otherwise acquire, any capital stock or other equity
securities and (iii) securities convertible into or exercisable or exchangeable
for shares of capital stock or other equity securities.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Financial Advisor" shall mean Legg Mason Wood Walker,
Incorporated.
"GAAP" shall mean, with respect to any person, generally
accepted accounting principles in the United States of America, as in effect
from time to time, consistently applied.
"Management Group" shall mean Herbert Solomon, Lloyd B.
Solomon and Scott R. Page.
"Material Adverse Effect" or "Material Adverse Change" or a
similar phrase shall mean any material adverse effect on or change with respect
to (i) the business, operations, assets (taken as a whole), liabilities (taken
as a whole), condition (financial or otherwise), results of operations of the
Company and the Subsidiary, taken as a whole, or (ii) the relations with
customers, suppliers, distributors or employees of the Company and the
Subsidiary, taken as a whole, or (iii) the right or ability of the Company to
consummate any of the transactions contemplated hereby, other than (A) changes
relating to (x) the securities markets in general, (y) conditions in the
staffing and recruitment industry in general, or (z) general economic
conditions, or (B) changes resulting from the announcement of the transactions
contemplated by this Agreement.
"Mergeco Common Stock" shall mean the Common Stock having a
par value of $0.001 per share of Mergeco.
"Options" shall mean the options to purchase in the aggregate
1,813,418 shares of Company Common Stock issued to certain key employees and
non-employee directors of the Company pursuant to the Stock Option Plans and
outside of any of the Stock Option Plans.
"Personnel" shall mean all directors, officers and employees
of the Company.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Special Committee" shall mean a special committee of
independent directors of the Company constituted to consider the transactions
contemplated by this Agreement.
"Special Meeting" shall mean the Special Meeting of
Stockholders of the Company.
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"Stock Option Plans" shall mean the Company's 1993 Long Term
Incentive Plan, 1995 Directors' Stock Option Plan and 1996 Stock Option Plan.
"Stockholders" shall mean the record holders of Company Common
Stock.
"Subsidiary" shall mean, with respect to the Company,
Information Technology Partners, Inc., a Delaware corporation.
"Treasury Shares" shall mean Company Common Stock held in
treasury by the Company.
Section 1.2 Other Defined Terms. In addition to the terms
defined in Section 1.1, the following terms shall have the meanings defined for
such terms in the Recitals or Sections set forth below:
TERM SECTION
---- -------
"Acquisition Proposal" 6.4 (a)
"Claim" 6.8(a)
"Closing" 2.3
"Closing Date" 2.3
"Company Reports" 4.7
"Disclosure Schedule" Article IV Preamble
"Effective Time" 2.2
"Exchange Fund" 3.4 (d)
"Fairness Opinion" 4.11(a)
"Financial Statements" 4.7
"Financing" 5.6
"Financing Commitment Letter" 5.6
"Indemnified Party" 6.8(a)
"Laws" 4.10
"Merger" Recitals
"Merger Consideration" 3.2 (a)
"Original Agreement" Recitals
"Paying Agent" 3.4 (a)
"Payment Event" 6.4 (b)
"Preferred Stock" 4.1(b)
"Proxy Statement" 6.6 (a)
"Regulatory Filings" 4.6
"Requisite Stockholder Vote" 4.8
"Schedule 13E-3" 6.7
"Stockholders Agreement" 7.3 (f)
"Surviving Corporation" 2.1
"Surviving Corporation Common Stock 3.2(b)
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"Third Party" 6.4
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the
satisfaction or waiver, if permissible, of the conditions hereof, and in
accordance with the DGCL, at the Effective Time, the Company shall be merged
with and into Mergeco. Upon the effectiveness of the Merger, the separate
corporate existence of the Company shall cease and Mergeco, under the name "The
Solomon-Page Group Ltd." shall continue as the surviving corporation (the
"Surviving Corporation"). The Merger shall have the effects specified under the
DGCL.
Section 2.2 Effective Time. On the Closing Date, the parties
shall cause the Merger to be consummated by causing a certificate of merger with
respect to the Merger to be executed and filed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at the time of filing of the
certificate of merger or at such later time as is specified therein (the
"Effective Time").
Section 2.3 Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the "Closing") shall
take place (a) at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP,
505 Park Avenue, New York, New York at 10:00 a.m., local time, on the second
business day immediately following the day on which the last to be satisfied or
waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) shall be satisfied or waived in
accordance herewith or (b) at such other time, date or place as Mergeco and the
Company may agree. The date on which the Closing occurs is herein referred to as
the "Closing Date."
Section 2.4 Certificate of Incorporation and By-Laws.
(a) At the Effective Time, and without any further action on
the part of the Company or Mergeco, the certificate of incorporation of Mergeco,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation of the Surviving Corporation following the Merger, until
thereafter further amended as provided therein and under the DGCL.
(b) At the Effective Time, and without any further action on
the part of the Company or Mergeco, the by-laws of Mergeco as in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation following the Merger, until thereafter changed or amended as
provided therein and under the DGCL.
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Section 2.5 Directors. The directors of the Surviving
Corporation shall be those individuals set forth on Exhibit B hereto who shall
hold such positions until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
ARTICLE III
EFFECT OF MERGER ON SECURITIES OF MERGECO AND THE COMPANY
Section 3.1 Cancellation of Mergeco Common Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, shares of Mergeco Common Stock issued and outstanding
immediately prior to the Effective Time shall automatically be canceled and no
consideration shall be paid with respect thereto.
Section 3.2 Conversion of Certain Company Common Stock for
Merger Consideration; Converted Shares; Treasury
Shares.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each share of Company Common Stock
outstanding immediately prior to the Effective Time (other than Treasury Shares,
Converted Shares and Dissenting Shares, if any) shall automatically be changed
into the right to receive, and each certificate which immediately prior to the
Effective Time represented a share of such Company Common Stock shall evidence
solely the right to receive, $5.25 in cash (the "Merger Consideration") upon
surrender of the certificate formerly representing Company Common Stock as
provided in Section 3.4.
(b) At the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, each Converted Share shall be
converted into and shall become one duly authorized, validly issued, fully paid
and non-assessable share of Mergeco Common Stock (the "Surviving Corporation
Common Stock"), such shares of Surviving Corporation Common Stock to comprise
1,894,500 shares of the Surviving Corporation.
(c) All Treasury Shares shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be canceled
and no consideration shall be paid with respect thereto.
Section 3.3 Options.
(a) As of the Effective Time, each outstanding Option granted
under the Stock Option Plans or otherwise whether or not then exercisable, shall
be canceled by the Company, and as of the Effective Time, the former holder
thereof (which for purposes of this Section 3.3 shall exclude the Management
Group) shall be entitled to receive from the Surviving Corporation in
consideration for such cancellation an amount in cash equal to the product of
(i) the number of shares of Company
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Common Stock subject to such Option at the time of such cancellation (whether or
not vested or exercisable) and (ii) the excess, if any, of the Merger
Consideration per share over the exercise price per share subject to such Option
at the time of such cancellation, reduced by the amount of withholding or other
taxes required by law to be withheld.
(b) The Stock Option Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company shall terminate as of the Effective Time,
and the Company shall exercise its best efforts to ensure that following the
Effective Time, no current or former employee or director shall have any Option
to purchase shares of the Company Common Stock or any other equity interest in
the Company under any Stock Option Plan or otherwise.
(c) Prior to the Effective Time, the Board (or, if
appropriate, any committee administering the Stock Option Plans) shall adopt
such resolutions or use reasonable efforts to take such actions as are
necessary, subject if necessary, to obtaining consents of the holders thereof,
to carry out the terms of this Section 3.3.
Section 3.4 Exchange of Certificates.
(a) Substantially contemporaneously with the Effective Time,
Mergeco shall cause to be deposited with a paying agent to be jointly selected
by the Company (acting through the Special Committee) and Mergeco (the "Paying
Agent"), for the benefit of the holders of shares of Company Common Stock (other
than Treasury Shares, Converted Shares and Dissenting Shares), for payment in
accordance with this Article III, the funds necessary to pay the Merger
Consideration for each share as to which the Merger Consideration shall be
payable.
(b) As soon as practicable after the Effective Time, and using
its reasonable best efforts to do so within three business days thereafter, the
Paying Agent shall mail to each holder of an outstanding certificate or
certificates that immediately prior to the Effective Time represented shares of
Company Common Stock (other than Treasury Shares, Converted Shares and
Dissenting Shares, if any), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such certificates
shall pass, only upon delivery of such certificates to the Paying Agent and
shall be in such form and have such other provisions as Mergeco and the Company
may reasonably specify) and (ii) instructions for use in effecting the surrender
of each certificate in exchange for payment of the Merger Consideration. As soon
as practicable after the Effective Time, each holder of an outstanding
certificate or certificates that immediately prior to the Effective Time
represented such shares of Company Common Stock, upon surrender to the Paying
Agent of such certificate or certificates, together with a properly completed
letter of transmittal, and acceptance thereof by the Paying Agent, shall be
entitled to receive in exchange therefor the Merger Consideration multiplied by
the number of shares of Company Common Stock formerly represented by such
certificate. No interest shall be paid or accrue on the Merger Consideration.
The Paying Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Paying Agent may impose to effect an
orderly exchange thereof in accordance with customary
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<PAGE>
exchange practices. After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of certificates formerly
representing shares of Company Common Stock that have been converted, in whole
or in part, pursuant to this Agreement, into the right to receive cash, and if
such certificates are presented to the Company for transfer, they shall be
canceled against delivery of such cash. Until surrendered as contemplated by
this Section 3.4(b), each certificate formerly representing shares of such
Company Common Stock shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
for each such share of Company Common Stock.
(c) Subject to the provisions of the DGCL, all cash paid upon
the surrender for exchange of certificates formerly representing shares of
Company Common Stock in accordance with the terms of this Article III shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares exchanged for cash theretofore represented by such certificates.
(d) Any cash deposited with the Paying Agent pursuant to this
Section 3.4 (the "Exchange Fund") that remains undistributed to the holders of
the certificates formerly representing shares of Company Common Stock one year
after the Effective Time shall be delivered to the Surviving Corporation at such
time and any former holders of shares of Company Common Stock prior to the
Merger who have not theretofore complied with this Article III shall thereafter
look only to the Surviving Corporation and only as general unsecured creditors
thereof for payment of their claim for cash, if any.
(e) None of Mergeco, the Company or the Paying Agent shall be
liable to any person in respect of any cash from the Exchange Fund delivered to
a public office pursuant to any applicable abandoned property, escheat or
similar law.
(f) In the event any certificate formerly representing Company
Common Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by Surviving Corporation, the posting by
such person of a bond in such reasonable amount as Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such certificate, the Paying Agent will issue in exchange for such lost,
stolen or destroyed certificate the Merger Consideration.
Section 3.5 Dissenting Shares. Notwithstanding Section 3.2
hereof, Dissenting Shares shall not be converted into the right to receive the
Merger Consideration. The holders thereof shall be entitled only to such rights
as are granted by Section 262 of the DGCL. Each holder of Dissenting Shares who
becomes entitled to payment for such shares pursuant to Section 262 of the DGCL
shall receive payment therefor from the Surviving Corporation in accordance with
the DGCL; provided, however, that (i) if any such holder of Dissenting Shares
shall have failed to establish his entitlement to appraisal rights as provided
in Section 262 of the DGCL, (ii) if any such holder of Dissenting Shares shall
have effectively withdrawn his demand for appraisal of such shares or lost his
right to appraisal and payment for his shares under Section 262 of the DGCL, or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
shall have filed a petition demanding a
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<PAGE>
determination of the value of all Dissenting Shares within the time provided in
Section 262 of the DGCL, such holder shall forfeit the right to appraisal of
such shares and each such share shall be treated as if it had been converted as
of the Effective Time, into the right to receive the Merger Consideration,
without interest thereon, from the Surviving Corporation as provided in Section
3.2 hereof. The Company shall give Mergeco prompt notice of any demands received
by the Company for appraisal of shares, and Mergeco shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Mergeco, make
any payment with respect to, or settle or offer to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Mergeco to enter into this Agreement, the
Company hereby makes, as of the date hereof, the following representations and
warranties to Mergeco, except as otherwise set forth in a written disclosure
schedule (the "Disclosure Schedule") delivered by the Company to Mergeco prior
to the date hereof, a copy of which is attached hereto.
Section 4.1 Organization and Capitalization.
(a) Organization. The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to conduct its business as it is presently
being conducted and to own and lease the Assets. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary under applicable law,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect. The Company has delivered to Mergeco true, correct
and complete copies of its certificate of incorporation and by-laws (in each
case, as amended to date). The Company is not in violation of any provision of
its certificate of incorporation or by-laws.
(b) Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 2,000,000
shares of Preferred Stock having a par value of $1.00 per share (the "Preferred
Stock"). As of May 31, 2000, there were 4,153,948 shares of Company Common Stock
and no shares of Preferred Stock issued and outstanding. Since such date, no
additional shares of capital stock of the Company have been issued and no shares
of Preferred Stock have been issued, except shares of Company Common Stock
issued upon the exercise of Options outstanding under any Stock Option Plan or
otherwise. As of May 31, 2000, Options to acquire 1,213,418 shares of Company
Common Stock pursuant to the Stock Option Plans or otherwise were outstanding.
Schedule 4.1(b) includes a complete and correct list of outstanding Options
under the Stock Option Plans or otherwise (including the number of Options and
exercise price of each such Option) held by each employee, director or other
person other than the Management Group. Except for the outstanding Options, the
Company has no outstanding bonds,
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debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the Stockholders of the Company on any matter. All issued
and outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Except as set
forth in this Section 4.1(b) or on Schedule 4.1(b), (i) there are no outstanding
Equity Securities of the Company and (ii) the Company is not a party to any
commitments, agreements or obligations of any kind or character for (A) the
issuance or sale of Equity Securities of the Company or (B) the repurchase,
redemption or other acquisition of any Equity Securities of the Company.
(c) Voting Trusts, Proxies, Etc. The Company is not a party to
any stockholder agreements, voting trusts, proxies or other agreements or
understandings with respect to or concerning the purchase, sale or voting of the
Equity Securities of the Company.
Section 4.2 Authorization. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. Subject only to (i) the approval
of this Agreement and the transactions contemplated hereby by the Requisite
Stockholder Vote, and (ii) the filing and recordation of appropriate merger
documents as required by, and in accordance with, the DGCL, the consummation by
the Company of the transactions contemplated hereby has been duly authorized by
all requisite corporate action. This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as the enforceability thereof may be limited by (a) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect that affect the enforcement of creditors' rights
generally or (b) general principles of equity, whether considered in a
proceeding at law or in equity.
Section 4.3 Subsidiary.
(a) Ownership; Capitalization. The Company is the record and
beneficial owner of all of the outstanding shares of capital stock of the
Subsidiary. All of the outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued and are fully paid and non-
assessable. Except for the outstanding capital stock of the Subsidiary owned by
the Company, (i) there are no outstanding Equity Securities of the Subsidiary
and (ii) the Company is not a party to commitments or obligations of any kind or
character for (A) the issuance of Equity Securities of the Subsidiary or (B) the
repurchase, redemption or other acquisition of any Equity Securities of the
Subsidiary. There are no stockholder agreements, voting trusts, proxies or other
agreements or understandings to which the Company is a party with respect to or
concerning the purchase, sale or voting of the Equity Securities of the
Subsidiary.
(b) Organization. The Subsidiary is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its assets and properties. The Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing in each
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jurisdiction in which such qualification is necessary under applicable law,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect. The Company has delivered to Mergeco true, correct
and complete copies of the Subsidiary's certificate of incorporation and by-laws
(in each case, as amended to date).
Section 4.4 Absence of Certain Changes or Events. Since
October 1, 1999, (i) the Company has been operated in the ordinary course of
business, consistent with past practice, and (ii) there has been no Material
Adverse Change.
Section 4.5 No Conflict or Violation. Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby, by the Company will result in (i) a violation
of or a conflict with any provision of the certificate of incorporation or
by-laws of the Company, or (ii) a violation by the Company of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree or award
applicable to it, except for such violations that would not have, individually
or in the aggregate, a Material Adverse Effect.
Section 4.6 Consents and Approvals. No consent, waiver,
agreement, approval, permit or authorization of, or declaration, filing, notice
or registration to or with, any federal, state, local or foreign governmental or
regulatory authority or body is required to be made or obtained by the Company
in connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby other than (i) filings
required in connection with or in compliance with the provisions of the Exchange
Act, the Securities Act or applicable state securities and "Blue Sky" laws
(collectively, the "Regulatory Filings"), (ii) the filing of the Merger
Certificate under the DGCL (iii) filings under the rules and regulations of The
Nasdaq Stock Market and (iv) those consents, waivers, agreements, approvals,
authorizations, declarations, filings, notices or registrations, that have been,
or will be prior to the Closing Date, obtained or made, except those consents,
waivers, agreements, approvals, authorizations, declarations, filings, notices
or registrations, the failure of which to obtain would not have a Material
Adverse Effect or prevent or materially delay the Merger.
Section 4.7 Corporate Proceedings.
(a) The Special Committee has received the opinion (the
"Fairness Opinion") of the Financial Advisor dated the date hereof,
substantially to the effect that the Merger Consideration to be received by the
holders of the Company Common Stock (other than the Management Group) in the
Merger is fair from a financial point of view.
(b) The Special Committee (at a meeting duly called and held
at which a quorum was present) has determined that this Agreement and the Merger
are advisable and in the best interests of the Company and the Stockholders and
are fair to and in the best interests of the Company and the Stockholders (other
than the Management Group), and has recommended the adoption of this Agreement
to the Board, subject to the rights of the Special Committee set forth in
Section 6.4 hereof.
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(c) The Board, based on the unanimous recommendation of the
Special Committee (at a meeting duly called and held at which a quorum was
present), has (i) determined that this Agreement and the Merger are advisable
and in the best interests of the Company and the Stockholders (other than the
Management Group) and are fair to and in the best interests of the Company and
the Stockholders (other than the Management Group), (ii) approved this Agreement
and the Merger, and (iii) resolved to recommend the adoption of this Agreement
and the Merger by the Stockholders of the Company, subject to the rights of the
Special Committee set forth in Section 6.4 hereof. Such approval is sufficient
to render inapplicable to the Merger, this Agreement and the transactions
contemplated hereby the restrictions of Section 203 of the DGCL or any
antitakeover provision in the Company's certificate of incorporation and
by-laws.
Section 4.8 Required Company Vote. The affirmative vote of (i)
the holders of 66-2/3% of the outstanding shares of Company Common Stock and
(ii) the holders of a majority of the outstanding shares of Company Common Stock
not owned, directly or indirectly, by any member of the Management Group are the
only votes of the holders of any class or series of the Company's equity
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby (such votes being collectively referred to as
the "Requisite Stockholder Vote").
Section 4.9 Proxy Statement; Schedule 13E-3. The information
concerning the Company and its officers, directors, employees and stockholders
supplied by and relating to the Company for inclusion in the Proxy Statement or
the Schedule 13E-3 will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company makes no representation or warranty
with respect to any information supplied by Mergeco, the Management Group or any
of their respective stockholders, directors, officers and/or representatives
that is contained in the Proxy Statement or in the Schedule 13E-3.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGECO
As an inducement to the Company to enter into this Agreement,
Mergeco hereby makes the following representations and warranties as of the date
hereof to the Company:
Section 5.1 Organization. Mergeco is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to conduct its business as it is presently
being conducted and to own, lease and operate its properties. Mergeco is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is necessary under applicable law
except where the failure to be so qualified and in good standing would not
reasonably be expected to have a material adverse effect on Mergeco. Mergeco has
delivered to the Company true, correct and complete copies of its
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certificate of incorporation and by-laws (in each case, as amended to date).
Mergeco is not in violation of any provision of its certificate of incorporation
or by-laws.
Section 5.2 Authorization. Mergeco has all necessary corporate
power and authority to, and has taken all corporate action necessary on its part
to, execute and deliver this Agreement and all agreements and documents
contemplated hereby and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Mergeco and is a legal, valid
and binding obligation of Mergeco, enforceable against it in accordance with its
terms, except as the enforceability thereof may be limited by (i) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect that affect the enforcement of creditors' rights
generally or (ii) general principles of equity, whether considered in a
proceeding at law or in equity.
Section 5.3 Consents and Approvals. No consent, waiver,
agreement, approval, permit or authorization of, or declaration, filing, notice
or registration to or with, any federal, state, local or foreign governmental or
regulatory authority or body or other person or entity is required to be made or
obtained by Mergeco in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
other than any Regulatory Filings and the filing of the Merger Certificate under
the DGCL.
Section 5.4 No Conflict or Violation. Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby, by Mergeco will result in (i) a violation of
or a conflict with any provision of the certificate of incorporation or by- laws
of Mergeco, (ii) a breach of, or a default under, or the creation of any right
of any party to accelerate, terminate or cancel pursuant to (including, without
limitation, by reason of the failure to obtain a consent or approval under any
such contract), any term or provision of any contract, indenture, lease,
encumbrance, permit, or authorization or concession to which Mergeco is a party
or by which any of its assets are bound, which breach, default or creation of
any such right would reasonably be expected to have a material adverse effect on
Mergeco.
Section 5.5 Proxy Statement; Schedule 13E-3. The information
concerning Mergeco and its officers, directors, employees and shareholders
supplied by and relating to Mergeco for inclusion in the Proxy Statement and the
Schedule 13E-3 will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Mergeco makes no representation or warranty with
respect to any information supplied by the Company or any of its representatives
that is contained in the Proxy Statement or in the Schedule 13E-3.
Section 5.6 Financing. Mergeco has delivered to the Company
complete and correct executed copies of the Commitment Letter (the "Financing
Commitment Letter") issued in connection with the senior secured debt financing
of the transactions contemplated hereby (the "Financing"). Assuming satisfaction
of all applicable conditions set forth in the Financing
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Commitment Letter and full funding thereunder, Mergeco and the Company at
Closing shall have sufficient funds to consummate the transactions contemplated
hereby.
Section 5.7 Mergeco's Operations. Mergeco has not engaged in
any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
Section 5.8 Status of Representations of the Company.
In entering into the Agreement, Mergeco:
(a) acknowledges that, other than as set forth in this
Agreement, as of the date of execution of this Agreement, none of the Company,
or any of its directors or officers, makes any representation or warranty,
either express or implied, as to the accurateness or completeness of any of the
information provided or made available to Mergeco or its agents or
representatives prior to the execution of this Agreement;
(b) agrees to the fullest extent permitted by law, that none
of the Company, nor any of its respective directors, officers, employees,
stockholders, Affiliates, agents or representatives, shall have any liability or
responsibility whatsoever to Mergeco based upon any information provided or made
available, or statements made, to Mergeco prior to the execution of this
Agreement; and
(c) acknowledges that prior to the date hereof, none of the
officers of the Company has any actual knowledge of any representation or
warranty of the Company being untrue or inaccurate in any material respect. If
an officer of Mergeco or any member of the Management Group had actual knowledge
prior to the execution of this Agreement of any breach by the Company of any
representation, warranty, covenant, agreement or condition of this Agreement,
such breach shall not be deemed to be a breach of this Agreement for any purpose
hereunder, and neither Mergeco nor any member of the Management Group shall have
any claim or recourse against the Company or its Personnel, affiliates,
controlling persons, agents, advisors or representatives with respect to such
breach.
Section 5.9 No Brokerage. None of Mergeco or any of its
officers, directors, employees, stockholders or Affiliates has employed or made
any agreement with any broker, finder or similar agent or any person or entity
to pay any finder's fee, brokerage commission or similar payment in connection
with the transaction contemplated by this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY AND MERGECO
The Company and Mergeco covenant and agree with each other
that from the date hereof through the Closing:
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Section 6.1 Maintenance of Business Prior to Closing. Prior to
the Effective Time, except as set forth in the Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Mergeco has
consented in writing thereto, such consent not to be unreasonably withheld or
delayed, the Company:
(a) except as contemplated by Section 6.4 hereof, shall
conduct its operations and business according to their usual, regular and
ordinary course consistent with past practice;
(b) shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of its officers
and key employees and maintain satisfactory relationships with those persons
having business relationships with it;
(c) shall promptly notify Mergeco of any Material Adverse
Change; and
(d) shall promptly deliver to Mergeco correct and complete
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement.
Section 6.2 Investigation by Mergeco. The Company shall allow
Mergeco, and its counsel, accountants and other representatives and the
financial institution (and its counsel and representatives) providing or
proposed to provide the Financing, during regular business hours upon reasonable
notice, to make such reasonable inspection of the Assets, facilities, business
and operations of the Company and to inspect and make copies of contracts, books
and records and all other documents and information reasonably related to the
operations and business of the Company including, without limitation, historical
financial information concerning the business of the Company and to meet with
designated Personnel of the Company and/or their representatives. The Company
shall furnish to Mergeco promptly upon request (i) all additional documents and
information with respect to the affairs of the Company relating to its business
in its possession and (ii) access to the Personnel and to the Company's
accountants and their counsel as Mergeco, or its counsel or accountants, may
from time to time reasonably request, and the Company shall instruct its
Personnel, accountants and counsel to cooperate with Mergeco, and to provide
such documents and information as Mergeco, or its representatives may request,
and Mergeco and the members of the Management Group will hold, and will use
their reasonable best efforts to cause their respective counsel, accountants and
other representatives and the financial institution (and its counsel and
representatives) providing or proposed to provide the Financing, any nonpublic
information in confidence.
Section 6.3 Consents and Efforts; Other Obligations.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties shall use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this
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Agreement, including, without limitation, with respect to Mergeco, its obtaining
the Financing. Mergeco and the Company will use their reasonable best efforts
and cooperate with one another (i) in promptly determining whether any filings
are required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would
result in an event of default, termination or acceleration of any agreement or
any put right under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by this Agreement, including the Merger, and (ii) in promptly
making any such filings, in furnishing information required in connection
therewith and in timely seeking to obtain any such consents, approvals, permits
or authorizations. For purposes of this Section 6.3, best efforts shall not
include the obligation to make any payment to any third party as a condition to
obtaining such party's consent or approval.
(b) The Company will provide, and will cause its officers,
employees and advisors to provide, all reasonable cooperation in connection with
the arrangement of the Financing, including without limitation, (i)
participation in meetings and due diligence sessions, and (ii) the execution and
delivery of any Commitment Letter, pledge and security documents, other
definitive financing documents, or other requested certificates or documents,
including such comfort letters of accountants and legal opinions as may be
requested by Mergeco; provided that the form and substance of any of the
material documents referred to in clause (ii) shall be substantially consistent
with the terms and conditions of the Financing.
(c) The Company shall give prompt written notice to Mergeco if
the Company obtains actual knowledge of: (i) the occurrence, or failure to
occur, of any event which occurrence or failure would reasonably be expected to
cause any representation or warranty of the Company contained in this Agreement,
if made on or as of the date of such event or as of the Effective Time, to be
untrue or inaccurate, except for changes permitted by this Agreement and except
to the extent that any representation and warranty is made as of a specified
date, in which case, such representation and warranty shall be true, complete
and accurate as of such date; or (ii) any failure of the Company or any officer,
director, employee, consultant or agent of the Company, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it or them under this Agreement; provided, however, that no such notification
shall affect the representations or warranties of the Company or the conditions
to the obligations of Mergeco hereunder.
(d) Mergeco and each member of the Management Group shall give
prompt written notice to the Company if Mergeco or any member of the Management
Group obtains actual knowledge of (i) the occurrence, or failure to occur, of
any event which occurrence or failure would reasonably be expected to cause any
representation or warranty of the Company contained in this Agreement, if made
on or as of the date of such event or as of the Effective Time, to be untrue or
inaccurate, except for changes permitted by this Agreement and except to the
extent that any representation and warranty is made as of a specified date, in
which case, such representation and warranty shall be true, complete and
accurate as of such date; or (ii) any failure of the Company or any officer,
director, employee, consultant or agent of the Company, to comply with or
satisfy any
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covenant, condition or agreement to be complied with or satisfied by it or them
under this Agreement provided, however, that no such notification shall affect
the representations and warranties of the Company or the conditions to the
obligations of Mergeco hereunder.
Section 6.4 Other Offers.
(a) The Company shall not (whether directly or indirectly
through advisors, agents or other intermediaries), nor shall the Company
authorize or permit any of its or its officers, directors, agents,
representatives or advisors to (i) solicit, initiate or take any action
knowingly to facilitate the submission of inquiries, proposals or offers from
any corporation, partnership, person or other entity or group, other than
Mergeco and its representatives and Affiliates, relating to (A) any acquisition
or purchase of 25% or more of the assets, or of over 25% of any class of Equity
Securities of, the Company or the Subsidiary, (B) any tender offer (including a
self tender offer) or exchange offer that if consummated would result in any
person beneficially owning 25% or more of any class of Equity Securities of the
Company, or (C) any merger, consolidation, recapitalization, sale of all or
substantially all of the assets, liquidation, dissolution or similar transaction
involving the Company (each such transaction being referred to herein as an
"Acquisition Proposal"), or agree to or endorse any Acquisition Proposal, (ii)
enter into or participate in any discussions or negotiations regarding any of
the foregoing, or otherwise cooperate in any way with, or knowingly assist or
participate in, facilitate or encourage, any effort or attempt by any other
person (other than Mergeco and its representatives and Affiliates) to do or seek
any of the foregoing, or (iii) grant any waiver or release under any standstill
or similar agreement with respect to any Equity Securities of the Company;
provided, however, that the foregoing shall not prohibit the Special Committee
or the Board (acting through the Special Committee) (either directly or
indirectly through advisors, agents or other intermediaries) from (v) furnishing
information in writing or orally (through the Company's employees and advisors)
pursuant to a customary confidentiality letter (a copy of which shall be
provided for informational purposes only to Mergeco) concerning the Company and
its businesses, properties or Assets to any person, corporation, entity or
"group," as defined in Section 13(d) of the Exchange Act, other than Mergeco (a
"Third Party") in response to any unsolicited inquiry, proposal or offer, (w)
engaging in discussions or negotiations with such a Third Party that has made
such inquiry, proposal or offer, (x) following receipt of a bona fide
Acquisition Proposal, taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or otherwise
making disclosure to its stockholders, (y) following receipt of a bona fide
Acquisition Proposal, failing to make or withdrawing or modifying its
recommendation referred to in Section 4.7 hereof, and/or (z) terminating this
Agreement but in each case referred to in the foregoing clauses (x) through (z),
only to the extent that the Special Committee shall have concluded in good faith
upon the advice of legal counsel that such action is consistent with the Special
Committee's (and the Board's) fiduciary duties to the stockholders of the
Company under applicable law. The Company shall immediately cease and cause its
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted prior to the
date hereof with respect to any of the foregoing.
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(b) If a Payment Event (as hereinafter defined) occurs, the
Company shall pay to Mergeco, within three business days following such event,
the reasonable out-of-pocket expenses incurred by Mergeco in connection with or
relating to this Agreement and the Merger, which shall include reasonable fees
and expenses of legal counsel, accountants, a financial advisor to Mergeco and
the commitment fees related to the financing of the Merger actually paid or
contractually required to be paid to investment funds, banks or other financial
institutions providing the Financing up to a maximum reimbursement amount of
$500,000. "Payment Event" means the termination of this Agreement pursuant to
Section 8.1(a)(iv) or (v).
(c) The Special Committee shall (i) promptly notify Mergeco
(in writing) if any offer is made, any discussions or negotiations are sought to
be initiated, any inquiry, proposal or contact is made or any information is
requested with respect to any Acquisition Proposal, (ii) promptly notify Mergeco
of the terms of any proposal that it may receive in respect of any such
Acquisition Proposal, including, without limitation, the identity of the
prospective purchaser or soliciting party, (iii) promptly provide Mergeco with a
copy of any such offer, if written, or a written summary (in reasonable detail)
of such offer, if not in writing, and (iv) keep Mergeco reasonably informed of
the status of such offer and the offeror's efforts and activities with respect
thereto.
(d) This Section 6.4 shall survive any termination of this
Agreement, however caused.
Section 6.5 Meeting of Stockholders. Except as set forth in
Section 6.4 hereof, (i) the Company acting through the Board shall take all
action necessary in accordance with applicable law and its certificate of
incorporation and by-laws, including the timely mailing of the Proxy Statement,
to convene the Special Meeting as promptly as practicable after SEC clearance of
the Proxy Statement to consider and vote upon the approval of this Agreement and
the transactions contemplated hereby, and (ii) the Board, based on the
recommendation of the Special Committee, shall recommend such approval and shall
take all lawful action to solicit such approval.
Section 6.6 Proxy Statement.
(a) Mergeco and the Company shall cooperate and prepare, and,
as soon as practicable after the date of this Agreement, the Company shall file
with the SEC, a proxy statement with respect to the Special Meeting (the "Proxy
Statement"), respond to comments of the staff of the SEC, clear the Proxy
Statement with the staff of the SEC and promptly thereafter mail the Proxy
Statement to all holders of record of Company Common Stock. The Company shall
comply in all respects with the requirements of the Exchange Act and the rules
and regulations of the SEC thereunder applicable to the Proxy Statement and the
solicitation of proxies for the Special Meeting (including any requirement to
amend or supplement the Proxy Statement) and each party shall furnish to the
other such information relating to it and the transactions contemplated by this
Agreement and such further and supplemental information as may be reasonably
requested by the other party. The Proxy Statement shall include the
recommendation of the Board in favor of the Merger, except as otherwise provided
herein. The Company shall use all reasonable efforts, and Mergeco will cooperate
with the
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Company, to have all necessary state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this Agreement
and will pay all expenses incident thereto.
(b) The information provided by each of the Company and
Mergeco for use in the Proxy Statement shall not, as of (i) the time of the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to the Stockholders or (ii) the time of the Special Meeting contemplated by such
Proxy Statement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to any party hereto, or its
respective officers or directors, should be discovered by such party that should
be set forth in an amendment or a supplement to the Proxy Statement, such party
shall promptly inform the Company and Mergeco thereof and take appropriate
action in respect thereof.
(c) No amendment or supplement to the Proxy Statement shall be
made by Mergeco or the Company without notice to the other party. The Company
shall promptly advise Mergeco of any request by the SEC for amendment of the
Proxy Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
Section 6.7 Schedule 13E-3.
(a) As soon as practicable after the date of this Agreement,
Mergeco and the members of the Management Group and the Company shall file with
the SEC a Rule 13E-3 Transaction Statement on Schedule 13E-3 ("Schedule 13E-3"),
with respect to the Merger. Mergeco and the Company shall cooperate and provide
each other with such information as any of such parties may reasonably request
in connection with the preparation of the Schedule 13E-3. The information
provided by each of the Company and Mergeco for use in the Schedule 13E-3 shall
not, as of time the Schedule 13E-3 is filed with the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. Each party hereto agrees promptly to supplement, update and correct
any information provided by it for use in the Schedule 13E-3 if and to the
extent that it is or shall have become incomplete, false or misleading.
(b) No amendment or supplement to the Schedule 13E-3 shall be
made by Mergeco or the Company without notice to the other party. Mergeco shall
promptly advise the Company of any request by the SEC for amendment of the
Schedule 13E-3 or comments thereon and responses thereto or requests by the SEC
for additional information.
Section 6.8 Director and Officer Liability.
(a) From and after the consummation of the Merger, the parties
shall, and shall cause the Surviving Corporation to, indemnify, defend and hold
harmless any person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an officer or director (the
"Indemnified Party") of the Company or the Subsidiary against all losses,
claims,
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damages, liabilities, costs and expenses (including attorney's fees and
expenses), judgments, fines, losses, and amounts paid in settlement, with the
written approval of the Surviving Corporation(which approval shall not be
unreasonably withheld), in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent that any
such Claim is based on, or arises out of, (i) the fact that such person is or
was a director, officer, employee or agent of the Company or the Subsidiary or
is or was serving at the request of the Company or the Subsidiary as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (ii) this Agreement, or any of the transactions
contemplated hereby, in each case to the extent that any such Claim pertains to
any matter or fact arising, existing, or occurring prior to the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under the DGCL or the Company's
Certificate of Incorporation, by-laws or indemnification agreements from time to
time in effect, including provisions relating to advancement of expenses
incurred in the defense of any action or suit. Without limiting the foregoing,
in the event any Indemnified Party becomes involved in any capacity in any
Claim, then from and after consummation of the Merger, the parties shall cause
the Surviving Corporation to periodically advance to such Indemnified Party its
legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by such
Indemnified Party of an undertaking to reimburse the amounts so advanced in the
event of a final non-appealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto.
(b) All rights to indemnification and all limitations on
liability existing in favor of the Indemnified Party as provided in the
Company's Certificate of Incorporation and by-laws as in effect as of the date
hereof shall survive the Merger and shall continue in full force and effect,
without any amendment thereto, for a period of six years from the Effective Time
to the extent such rights are consistent with the DGCL; provided that in the
event any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims; provided further, that any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under the DGCL, the Company's
Certificate of Incorporation or by-laws or such agreements, as the case may be,
shall be made by independent legal counsel selected by the Surviving Corporation
and reasonably acceptable to the Indemnified Party; and provided further, that
nothing in this Section 6.8 shall impair any rights or obligations of any
present or former directors or officers of the Company.
(c) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then and in each case, to the extent
necessary to effectuate the purposes of this Section 6.8, proper provision shall
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 6.8.
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(d) For a period of six years after the Effective Time, the
parties shall cause the Surviving Corporation to maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (or policies of at least the same coverage and amounts containing terms
and conditions which are no less advantageous, which policies may include a
"tail policy") with respect to claims arising from facts or events which
occurred before or at the Effective Time; provided, however, that the Surviving
Corporation shall not be obligated to make annual premium payments for such
insurance to the extent that such premiums exceed an amount equal to 200% of the
annual premiums paid as of the date hereof by the Company for such insurance and
if such premiums exceed such amount the Surviving Corporation shall purchase
insurance policies in amounts and with coverage as reasonably can be purchased
for such amount.
(e) The provisions of this Section 6.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives and shall be binding on the Surviving Corporation
and its respective successors and assigns.
Section 6.9 Notices of Certain Events. The Company shall
promptly notify Mergeco of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits or proceedings commenced or, to the
best of its knowledge threatened against, relating to or involving or otherwise
affecting the Company that would reasonably be anticipated to have a Material
Adverse Effect or that relate to the consummation of the transactions
contemplated by this Agreement.
Section 6.10 Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation are authorized to
execute and deliver, in the name and on behalf of the Company, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of the Company or Mergeco, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
Section 6.11 Financing. Mergeco shall use its commercially
reasonable efforts to obtain the Financing. Mergeco shall use its commercially
reasonable efforts to satisfy on or before the Closing Date all requirements of
the Financing Commitment Letter that are conditions to closing the transactions
constituting the Financing, provided that the satisfaction of such conditions is
in the control of Mergeco or the Management Group and provided that such efforts
shall not require undue expense and that such efforts shall not materially
impair the operation of the business of the Company after the Effective Time.
The obligations contained herein are not intended, nor shall they
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be construed, to benefit or confer any rights upon any person, firm or entity
other than Mergeco and the Company. Mergeco and its Affiliates shall keep the
Special Committee reasonably apprised concerning the status of completing the
Financing. Following receipt by Mergeco or any of its Affiliates of any written
communication to the effect that the lenders that are parties to the Financing
Commitment Letter do not intend to provide the financing for the Merger or are
terminating or canceling the Financing Commitment Letter or are modifying the
Financing Commitment Letter in a manner that is materially adverse to Mergeco,
Mergeco shall promptly communicate such event to the Special Committee and
provide the Special Committee with a true and complete copy of any such written
communication.
Section 6.12 Voting. Each of the Management Group, Mergeco and
their Affiliates, as applicable, will vote any shares of Company Common Stock
held by them, or that they have the right to vote, in favor of approval of the
Merger, in person, or by proxy; provided, however, that in the event the Special
Committee recommends to the Board that the Board withdraw its recommendation of
the Merger, the provisions of this Section 6.12 shall thereafter be null and
void.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to the Obligations of Each Party. The
obligations of the Company and Mergeco to consummate the transactions
contemplated hereby on the Closing Date are subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
(a) The Requisite Stockholder Vote shall have been obtained;
(b) No provision of any applicable law or regulation and no
judgment, order, decree, temporary restraining order or preliminary or permanent
injunction prohibiting or restraining the consummation of the Merger shall be in
effect; provided, however, that the Company and Mergeco shall each use
reasonable efforts to have any such judgment, order, decree or injunction
vacated; and
(c) The action captioned William Straub v. The Solomon-Page
Group Ltd. and Scott Page, et al., C.A. No. 17977-NC, pending before the Court
of Chancery of the State of Delaware in and for New Castle County, shall have
been settled or otherwise resolved on terms acceptable to the Company and
Mergeco.
Section 7.2 Conditions to the Obligations of the Company. The
obligation of the Company to consummate the transactions contemplated hereby on
the Closing Date is subject, in the sole discretion of the Company, to the
satisfaction on or prior to the Closing Date of the following conditions, which
may be waived by the Company in accordance with Section 8.4:
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(a) Representations, Warranties and Covenants.
(i) All representations and warranties of Mergeco
contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, as if such
representations and warranties were made at and as of the
Closing Date, except (i) for any changes specifically
permitted by this Agreement and (ii) to the extent that any
such representations and warranties were made as of a
specified date, which representations and warranties shall
continue on the Closing Date to be true in all material
respects as of such specified date.
(ii) Mergeco shall have performed in all material respects
all obligations arising under the agreements and covenants
required hereby to be performed by it prior to or on the
Closing Date, unless such failure to perform is due to any
material act by, or material omission of, the Company.
(iii) the Company shall have received, at or prior to the
Closing, (A) a certificate executed by the President of
Mergeco certifying that, as of the Closing Date, the
conditions set forth in Section 7.2(a) (i) and (ii) have been
satisfied, and (B) certified resolutions duly adopted by the
Board of Directors of Mergeco approving the Merger, the
execution and delivery of this Agreement and all other
necessary corporate action to enable Mergeco to comply with
the terms of this Agreement.
(b) Fairness Opinion. The Fairness Opinion shall not have been
withdrawn, revoked or annulled or adversely modified in any material respect.
(c) Reliance Letter. Mergeco shall have delivered to the
Company copies of such certificates or other similar materials relating to the
solvency of the Company after giving effect to the transactions contemplated by
this Agreement and the Financing as shall have been delivered to the lenders
providing the Financing and the Stockholders and the Company may rely on such
certificates or other materials with the same effect as if they had been issued
to the Company and the Stockholders.
Section 7.3 Conditions to the Obligations of Mergeco. The
obligation of Mergeco to consummate the transactions contemplated hereby on the
Closing Date is subject, in the sole discretion of Mergeco, to the satisfaction
on or prior to the Closing Date of each of the following conditions, any of
which may be waived by Mergeco in accordance with Section 8.4:
(a) Representations, Warranties and Covenants.
(i) All representations and warranties of the Company
contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the
Closing Date, except (i) for any changes specifically
permitted by this Agreement and (ii) to the extent that any
such
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representations and warranties were made as of a specified
date, which representations and warranties shall continue on
the Closing Date to be true in all material respects as of
such specified date.
(ii) The Company shall have performed in all material
respects all obligations arising under the agreements and
covenants required hereby to be performed by it prior to or on
the Closing Date, unless such failure to perform is due to any
material act by, or material omission of, Mergeco.
(iii) Mergeco shall have received, at or prior to the
Closing, (A) a certificate executed by the Chief Financial
Officer of the Company certifying that, as of the Closing
Date, the conditions set forth in Sections 7.3(a)(i) and (ii),
(c) and (d) have been satisfied; and (B) certified resolutions
duly adopted by the Board approving the Merger, the execution
and delivery of this Agreement and all other necessary
corporate action to enable the Company to comply with the
terms of this Agreement.
(b) Financing. The funding contemplated by the Financing shall
have been obtained by Mergeco.
(c) Dissenting Shares. The total number of Dissenting Shares
shall not exceed 7.5% of the outstanding shares of Company Common Stock at the
Effective Time.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Termination.
(a) Termination. This Agreement may be terminated prior to the
Effective Time as follows (notwithstanding any approval of the Merger by the
stockholders of the Company):
(i) by mutual written consent of Mergeco and the Company
(acting through the Special Committee) at any time;
(ii) by Mergeco or the Company if the Closing shall not
have occurred on or before November 30, 2000, provided that
the party seeking to exercise such right is not then in breach
of any of its material obligations under this Agreement;
(iii) by either the Company or Mergeco if there shall be
any law or regulation that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Mergeco or the Company
from consummating the
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Merger is entered and such judgment, injunction, order or
decree shall become final and non- appealable;
(iv) by Mergeco if the Board (acting through the Special
Committee) shall have (A) withdrawn or modified or amended, in
a manner adverse to Mergeco, its approval or recommendation of
this Agreement and the Merger or its recommendation that
Stockholders adopt and approve this Agreement and the Merger,
(B) approved, recommended or endorsed an Acquisition Proposal
(including a tender or exchange offer for Company Common
Stock), (C) failed to call the Special Meeting or failed as
promptly as practicable to mail the Proxy Statement to the
Stockholders or failed to include in such statement the
recommendation referred to above, or (D) resolved to do any of
the foregoing;
(v) by the Special Committee or the Board (acting through
the Special Committee) as provided in Section 6.4;
(vi) by either the Company or Mergeco if, at a duly held
stockholders meeting of the Company (including the Special
Meeting) or any adjournment thereof at which this Agreement
and the Merger is voted upon, the Requisite Stockholder Vote
shall not have been obtained; or
(vii) by the Company (acting through the Special
Committee) if it has received a notice from Mergeco that the
Financing Commitment Letter has been terminated or canceled.
The party desiring to terminate this Agreement pursuant to Sections
8.1(a)(ii)-(vii) shall give written notice of such termination to the other
party in accordance with Section 8.3.
(b) Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no effect with
no liability on the part of an party hereto or such party's officers, directors,
employees or representatives, except (i) that the agreements contained in
Sections 6.4, 8.8 and 8.13 hereof shall survive the termination hereof and (ii)
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(c) Procedure Upon Termination. In the event of termination of
this Agreement pursuant to Section 8.1, each party shall redeliver all
documents, work papers and other material of any other party and any and all
copies thereof relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same.
Section 8.2 Assignment. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned, in whole or in part, by
operation of law or otherwise by any party without the prior written consent of
the other party to this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and, with respect to the provisions of
Section 6.8 hereof, shall inure to the
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benefit of the persons or entities benefitting from the provisions thereof who
are intended to be third- party beneficiaries thereof, and no other person shall
have any right, benefit or obligation hereunder.
Section 8.3 Notices. All notices, requests, demands and other
communications that are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received, if
personally delivered; the day after it is sent, if sent for next day delivery to
a domestic address by recognized overnight delivery service (e.g., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
If to the Company, addressed to:
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
With copies to:
The Special Committee of the Board of Directors
of The Solomon-Page Group, Ltd.
c/o Joel A. Klarreich, Esq.
Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
and
Weil Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold, Esq.
If to Mergeco, addressed to:
TSPGL Merger Corp.
1140 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
With a copy to:
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Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: David J. Adler, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others pursuant to this Section 8.3.
Section 8.4 Entire Agreement; Waivers. This Agreement,
together with all exhibits and schedules hereto (including, without limitation,
the Disclosure Schedule), and the other agreements referred to herein,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Section 8.5 Multiple Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
Section 8.6 Invalidity. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
Section 8.7 Titles. The titles, captions or headings of the
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
Section 8.8 Fees and Expenses. Except as provided in Section
6.4 hereof, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, provided that the Company shall pay all fees and expenses in
connection with the printing and mailing of the Proxy Statement.
Section 8.9 Cumulative Remedies. All rights and remedies of
either party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
Section 8.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
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REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS.
Section 8.11 Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval of matters presented in
connection with the Merger by the Stockholders, but after any such Stockholder
approval, no amendment shall be made that by law requires the further approval
of Stockholders without obtaining such further approval; provided that any
amendment of this Agreement shall have been approved by the Special Committee on
behalf of the Company. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 8.12 Public Announcements. Neither Mergeco, on the one
hand, nor the Company (as shall be approved by the Special Committee acting for
the Company), on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement,
including the Merger, without the other party's prior consent (such consent not
to be unreasonably withheld), except (i) as may be required by applicable law,
court process or the requirements of The Nasdaq Stock Market, and (ii) upon the
execution of this Agreement and notwithstanding Section 6.4 hereof, the Company
(as approved by the Special Committee on its behalf) may issue a public
announcement in substantially the form approved by Mergeco or its counsel prior
to such execution. In addition to the foregoing, Mergeco and the Company will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any such press release or other public statements
with respect to such transactions. The initial press release or releases to be
issued with respect to the transactions contemplated by this Agreement shall be
mutually agreed upon prior to the issuance thereof.
Section 8.13 Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with its specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 8.14 Non-survival of Representations and Warranties.
The representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time.
Section 8.15 Interpretive Provisions.
(a) The words "hereof," "herein," "hereby" and "hereunder" and
words of similar import refer to this Agreement as a whole and, unless otherwise
specified herein, not to any particular Article, Section or other subdivision
hereof.
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(b) Accounting terms used but not otherwise defined herein
shall have the meanings given to such terms under GAAP.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
representative or officer thereunto duly authorized, all as of the day and year
first above written.
THE SOLOMON-PAGE GROUP LTD.
By: /s/ Joel A. Klarreich
-------------------------
Name: Joel A. Klarreich
Title: Member of the Special Committee
TSPGL MERGER CORP.
By: /s/ Scott R. Page
--------------------------
Name: Scott R. Page
Title: President
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Exhibit A
---------
Converted Shares
Name of Stockholder Number of Shares
------------------- ----------------
Herbert Solomon 507,600
Lloyd B. Solomon 785,000
Scott R. Page 601,900
A-1
<PAGE>
Exhibit B
---------
Directors of the Surviving Corporation
Herbert Solomon
Lloyd B. Solomon
Scott R. Page
B-1
<PAGE>
ANNEX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were
either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the Surviving Corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Section
Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand.
A stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within twenty days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record is
fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such
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stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
B-3
<PAGE>
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-4
<PAGE>
ANNEX C
LEGG MASON WOOD WALKER, INCORPORATED
June 27, 2000
Special Committee of the Board of Directors
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, NY 10036
Members of the Special Committee:
We understand that The Solomon-Page Group Ltd., a Delaware corporation
("Solomon-Page" or the "Company"), and TSPGL Merger Corp., a Delaware
corporation ("Mergeco"), are considering amending and restating that certain
Agreement and Plan of Merger dated as of March 31, 2000 (the "Merger Agreement")
which provides, among other things, that the Company will merge with and into
Mergeco with Mergeco being the surviving corporation (the "Merger"). The Merger
Agreement as so amended and restated is hereinafter referred to as the "Amended
and Restated Merger Agreement." All capitalized terms used herein and not
otherwise defined shall have the same meanings ascribed to such terms in the
draft Amended and Restated Merger Agreement. Pursuant to the terms of the draft
Amended and Restated Merger Agreement, each share of Company Common Stock (with
certain exceptions) will be converted into the right to receive $5.25 in cash
(the "Per Share Purchase Price").
You have asked for our opinion as investment bankers as to whether the Per Share
Purchase Price to be received by the holders of the Company's Common Stock
(other than the Management Group) in the Merger is fair from a financial point
of view as of the date hereof.
In arriving at our opinion set forth below, we have, among other things:
(i) reviewed the financial terms and conditions of the draft Amended
and Restated Merger Agreement dated June 27, 2000;
(ii) reviewed certain publicly available audited and unaudited
financial statements of Solomon-Page and certain other publicly
available information of Solomon-Page;
(iii) reviewed and discussed with representatives of the management of
Solomon-Page certain information of a business and financial
nature regarding Solomon-Page
<PAGE>
Special Committee of the Board of Directors June 27, 2000
The Solomon-Page Group Ltd. Page 2
furnished to us by them, including financial forecasts and
related assumptions of Solomon-Page;
(iv) reviewed public information with respect to certain other
companies in lines of business which we believe to be generally
comparable to the business of Solomon-Page;
(v) reviewed the financial terms, to the extent publicly available,
of certain business combinations which we believe to be
generally comparable to the Merger;
(vi) reviewed certain publicly available information concerning the
historical stock price and trading volume of Solomon-Page common
stock; and
(vii) conducted such other financial studies, analyses and
investigations and considered such other information as we
deemed necessary or appropriate.
In connection with our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of the foregoing
information, all financial and other information supplied to us by Solomon-Page,
and all publicly available information. We have further relied upon the
assurances of management of the Company that they are unaware of any facts that
would make the information provided incomplete or misleading. We have assumed
that there has been no material change in the assets, financial condition,
business or prospects of Solomon-Page since the date of the most recent
financial statements made available to us. We have not assumed any
responsibility for any independent valuation or appraisal of any of the assets
or liabilities of the Company or concerning the solvency of, or issues relating
to solvency concerning, the Company.
With respect to financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of management of the Company as to the future financial
performance of the Company. We assume no responsibility for and express no view
as to such forecasts or the assumptions on which they are based. The forecasts
and projections were based on numerous variables and assumptions that are
inherently uncertain, including, without limitation, facts related to general
economic and market conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts and projections. Our
opinion is necessarily based on share prices and economic and other conditions
and circumstances as in effect on, and the information made available to us up
to and including, the date of this letter. In rendering our opinion, we did not
address the relative merits of the Merger, any alternative potential transaction
or the Company's underlying decision to effect the Merger.
In rendering our opinion, we have assumed that the Merger will be consummated on
the terms described in the draft Amended and Restated Merger Agreement without
any waiver of any
<PAGE>
Special Committee of the Board of Directors June 27, 2000
The Solomon-Page Group Ltd. Page 3
material term or condition by the Company. In addition, we have assumed that
there have been no material changes made to the definitive Amended and Restated
Merger Agreement from the draft Amended and Restated Merger Agreement we
reviewed for purposes of rendering our opinion.
Legg Mason Wood Walker, Incorporated is acting as investment banker to the
Special Committee of the Board of Directors of Solomon-Page in connection with
the Merger and we will receive a fee for our services, a substantial portion of
which is contingent upon the delivery of this opinion.
It is understood that this letter is directed to the Special Committee of the
Board of Directors of Solomon-Page and does not constitute a recommendation to
any holder of Company Common Stock as to how such stockholder should vote on the
proposed merger between Solomon-Page and Mergeco. This letter 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, provided that this opinion (and
references to this opinion) may be included in its entirety in the proxy
statement and any filing made by Solomon-Page with the Securities and Exchange
Commission with respect to the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Per Share Purchase Price to be received by the holders of the
Company's Common Stock (other than the Management Group) in the Merger is fair
from a financial point of view.
Very truly yours,
/s/ LEGG MASON WOOD WALKER, INCORPORATED
LEGG MASON WOOD WALKER, INCORPORATED
<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 2000
PROXY
THE SOLOMON-PAGE GROUP LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE SOLOMON-PAGE GROUP LTD.
The undersigned, a stockholder of The Solomon-Page Group Ltd.,
a Delaware corporation (the "Company"), hereby appoints Joel A. Klarreich and
Edward Ehrenberg and each of them, attorneys-in-fact, agents and proxies, with
full power of substitution to each, for and in the name of the undersigned and
with all the powers the undersigned would possess if personally present, to vote
all the shares of Common Stock of the Company which the undersigned is entitled
to vote at the Special Meeting of Stockholders of the Company, to be held at The
Penn Club, 30 West 44th Street, New York, New York 10036 on ________, October
__, 2000 at 12:00 p.m. and at all adjournments or postponements thereof, hereby
revoking any proxy heretofore given.
The Board of Directors recommends a vote FOR the proposal:
To approve the Amended and Restated Agreement and Plan of
Merger, dated June 28, 2000 between the Company and TSPGL
Merger Corp., and the transactions contemplated thereby
FOR _____ AGAINST _____ ABSTAIN _____
The proxies are hereby authorized to vote in their discretion
upon all other business as may properly come before the
Special Meeting.
This Proxy will be voted as directed, but if no direction is
indicated, it will be voted FOR the approval of the Agreement
and Plan of Merger and the transactions contemplated thereby.
Receipt is acknowledged of the Notice of Special Meeting of
Stockholders and accompanying Proxy Statement.
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
SIGNATURE:______________________
SIGNATURE:______________________
DATE:____________________________
NOTE: Please sign exactly as your name appears on this
Proxy. If signing as attorney, executor, trustee or in other
representative capacity, sign name and indicate title.
