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)
ayment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, 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)
<PAGE>
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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 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>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED JULY , 2000
THE SOLOMON-PAGE GROUP LTD.
1140 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of
stockholders of The Solomon-Page Group Ltd. to be held at a.m., local time, on ,
2000 at .
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.
In December 1999, Solomon-Page's board of directors formed a
special committee of independent directors to avoid any conflict of interest in
evaluating the fairness to and also to negotiate on behalf of the stockholders
(other than the members of the management group) a potential management buyout
proposal. The members of the special committee are Joel A. Klarreich and Edward
Ehrenberg. Each is an independent, non-employee director of Solomon- Page. The
special committee negotiated the terms of the transaction, on behalf of
Solomon-Page, with members of the management group.
The special committee received a written opinion from Legg
Mason Walker Wood, Incorporated, its financial advisor, that as of June 27,
2000, the $5.25 per share cash merger price was fair from a financial point of
view to Solomon-Page's stockholders (other than the members of the management
group). The full text of Legg Mason's fairness opinion, which explains the
information reviewed, assumptions made, and matters considered by Legg Mason, is
attached as Annex B to the accompanying proxy statement.
The board of directors of Solomon-Page, acting on the
unanimous recommendation of the special committee, 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 and
adoption 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.
<PAGE>
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 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 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 agreement is approved
and adopted 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 and adoption 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 , 2000.
<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION,
DATED JULY , 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 , 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 a.m., local time, on , 2000 at
for the sole purpose of considering and voting upon a proposal to approve and
adopt 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 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 they comply with the Delaware law
procedures explained in the accompanying proxy statement.
Only holders of record at the close of business on , 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 and adoption of the merger agreement and the merger.
By Order of the Board of Directors
Eric M. Davis
Secretary
New York, New York
, 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. This summary does not contain
all the information that may be important for you to consider when evaluating
the merger. 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, 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 .
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 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 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 and adopt the merger and the merger
agreement. Please read "SPECIAL FACTORS - Recommendation of the Special
Committee and the Board of Directors; Fairness of the Merger" beginning on 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 agreement must be adopted by the affirmative vote
of the holders of at least 66-2/3% of the outstanding shares of Solomon-Page
common stock 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. Please read "INFORMATION CONCERNING THE SPECIAL MEETING --
Required Vote" beginning on page .
-3-
<PAGE>
o If you do not vote in favor of the merger 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. Please read "SPECIAL FACTORS -- Material Federal Income Tax
Consequences of the Merger" beginning on page .
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<PAGE>
CERTAIN QUESTIONS AND ANSWERS ABOUT THE merger
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Q: WHY AM I RECEIVING THESE MATERIALS? A: The board of directors of
Solomon-Page is sending you these
proxy materials to give you
information about how to vote in
connection with a special meeting
of stockholders, which will take
place at a.m., local time, on ,
2000 at .
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Q: WHAT WILL BE VOTED ON AT THE MEETING? A: Whether to approve a merger
agreement under which
Solomon-Page will merge with a
corporation formed by the
management group. You will have
no interest in the surviving
corporation.
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Q: WHAT WILL I RECEIVE IN THE MERGER? A: You will receive $5.25 per
share in cash for each share of
Solomon-Page's common stock owned
by you.
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Q: WILL ANY OTHER MATTERS BE VOTED ON AT A: No.
THE MEETING?
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Q: WHO CAN VOTE? A: All stockholders of record as
of the close of business on ,
2000.
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Q: HOW CAN I VOTE SHARES HELD IN MY A: If your broker holds your
BROKER'S NAME? shares in its 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 IS THE BOARD'S RECOMMENDATION? A: The board recommends that you
vote your shares FOR adoption of
the merger agreement.
-5-
<PAGE>
Q: WHY IS THE BOARD OF DIRECTORS A: A special committee of the
RECOMMENDING THAT I VOTE TO ADOPT THE board negotiated the terms of the
MERGER AGREEMENT? merger agreement with the
management group. For a number of
reasons, including a fairness
opinion it received from its
financial advisor, the special
committee concluded that the
merger is fair to, and in the
best interests of, Solomon-Page
and its stockholders other than
the members of the management
group. In the opinion of your
board, based in part on the
conclusion of the special
committee, the merger is fair to,
and in the best interests of,
Solomon-Page and the stockholders
other than the members of the
management group. For more
information about the merger, see
pages to .
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Q: WHAT VOTE IS REQUIRED TO APPROVE THE A: The holders of at least
MERGER AGREEMENT? 66-2/3% of the outstanding shares
of common stock of Solomon-
Page and 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
must vote to approve the merger
agreement.
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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
THAN ONE PROXY OR VOTING INSTRUCTION registered differently or are
CARD? held in more than one account.
Please complete, sign, date and
mail each proxy card that you
receive.
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Q: WHEN WILL THE MERGER TAKE PLACE? A: If the merger agreement is
adopted, we expect that it could
take up to [two] weeks after the
meeting to complete the merger.
However, the closing may take
longer if financing for the
merger has not been completed or
other closing conditions have not
yet been met.
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Q: SHOULD I SEND IN MY STOCK CERTIFICATES A: No. After the merger is
NOW? completed, we will 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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<PAGE>
Q: WILL I HAVE APPRAISAL RIGHTS? A: Yes. You are entitled to
appraisal rights. If you do not
strictly follow the rules
governing these rights, you may
lose them.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX A: Your receipt of cash for your
CONSEQUENCES OF THE MERGER TO ME? shares in the merger generally
will be taxable for U.S. federal
income tax purposes in the same
way as if you sold your shares in
the market for $5.25 per share in
cash. To review the federal
income tax consequences of the
merger to you, see pages to and
consult with your tax advisor.
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Q: WHO CAN ANSWER MY QUESTIONS? A: 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.
-7-
<PAGE>
TABLE OF CONTENTS
SUMMARY TERM SHEET............................................................
CERTAIN QUESTIONS AND ANSWERS ABOUT THE MERGER................................
SUMMARY ............................................................
SPECIAL FACTORS...........................................................
Purpose And Effects of the Merger.....................................
Recommendation of Solomon-Page's Board of Directors...................
Factors Considered by the Special Committee and Board of Directors....
Fairness Opinion of Legg Mason Walker Wood, Incorporated..............
Interests of the Management Group in the Merger.......................
Accounting Treatment..................................................
Financing of the Merger...............................................
Material Federal Income Tax Consequences..............................
THE SPECIAL MEETING.......................................................
Voting .............................................................
THE MERGER AGREEMENT......................................................
The Merger Consideration..............................................
Conditions to the Merger..............................................
Termination of the Merger Agreement...................................
No Solicitation.......................................................
Fees and Expenses.....................................................
DISSENTERS' RIGHTS OF APPRAISAL...............................................
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY................
INFORMATION CONCERNING THE SPECIAL MEETING....................................
Time, Place, Date.....................................................
Purpose of the special meeting........................................
common stock; Voting at the Meeting; Quorum...........................
Required Vote.........................................................
Action to be Taken at the Meeting.....................................
proxy Solicitation....................................................
THE PARTIES...................................................................
Solomon-Page..........................................................
Mergeco...............................................................
SPECIAL FACTORS...............................................................
Background of the Transaction.........................................
Recommendation of the Special Committee and Board of Directors;
Fairness of the merger.......................................
The Management Group's Purpose and Reason for the Merger..............
Opinion of Financial Advisor to the Special Committee.................
Certain Financial Projections.........................................
Forward-looking Information...........................................
Certain Effects of the Merger.........................................
Plans for the Company after the Merger................................
Conduct of the Business of the Company the Merger
Not Consummated..............................................
Interests of Certain Persons in the Merger; Certain Relationships.....
Employment Agreements.................................................
Accounting Treatment..................................................
Financing of the merger...............................................
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<PAGE>
Shareholder Lawsuit Challenging the Merger............................
Regulatory Requirements; Third Party Consents.........................
Material Federal Income Tax Consequences of the Merger................
Fees and Expenses.....................................................
THE MERGER AGREEMENT..........................................................
The Merger; Merger Consideration......................................
The Exchange Fund; Payment for Shares of Common Stock.................
Transfers of Common Stock.............................................
Treatment of Options..................................................
Conditions............................................................
Representations and Warranties........................................
Covenants.............................................................
Indemnification and Insurance.........................................
No Solicitation; Fiduciary Obligations of Directors...................
Termination...........................................................
Fees and Expenses.....................................................
Directors of the Company Following the Merger
Certificate of Incorporation; By-laws........................
Amendment/Waiver......................................................
Directors and Executive Officers of Mergeco...........................
DISSENTERS' RIGHTS OF APPRAISAL...............................................
CERTAIN FINANCIAL PROJECTIONS.................................................
MARKET FOR THE COMMON STOCK...................................................
Common Stock Market Price Information.................................
Dividend Information..................................................
Common Stock Purchase Information.....................................
SECURITIES OWNERSHIP..........................................................
Beneficial Ownership of Common Stock...................................
MANAGEMENT....................................................................
Directors and Executive Officers of the Company........................
INDEPENDENT AUDITORS..........................................................
STOCKHOLDER PROPOSALS.........................................................
WHERE YOU CAN FIND MORE INFORMATION...........................................
OTHER BUSINESS ............................................................
AVAILABLE INFORMATION.........................................................
ANNEX A -- MERGER AGREEMENT.................................................A-1
ANNEX B -- APPRAISAL RIGHTS.................................................B-1
ANNEX C -- OPINION OF LEGG MASON............................................C-1
ANNEX D -- CONSOLIDATED FINANCIAL STATEMENTS OF THE SOLOMON-PAGE GROUP LTD..D-1
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<PAGE>
SUMMARY
This summary highlights selected information from this
document. This summary may not contain all of the information that is important
to you. To understand the merger fully and for a more complete description of
the terms of the merger, you should read this entire document carefully and the
other documents to which we have referred you. See the sections of this document
entitled "WHERE YOU CAN FIND MORE INFORMATION" and "AVAILABLE INFORMATION" on
pages and .
Throughout this document, 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 in the
merger. TSPGL Merger Corp. is owned by the members of the management group. 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.
SPECIAL FACTORS
Purpose And Effects of the Merger
The management group's purpose for the merger is to acquire
all of the shares of common stock that it does not already own. The management
group sought to structure the transaction as a merger because it would enable
the management group to obtain financing on the best terms possible and possibly
reduce transaction costs. If the merger is completed, the common stock would
cease to be publicly traded and you (unless you are a member of the management
group or, if you are not a member of the management group, and you validly
dissent from the merger and seek appraisal of your shares in accordance with the
Delaware law requirements explained in this proxy statement) would have the
right to receive $5.25 in cash, without interest for each share of common stock
you own. After the merger, your shares of common stock would only evidence your
right to receive the merger consideration and not ownership in the surviving
corporation. After the merger, the management group's common stock would become
the only outstanding shares of the surviving corporation.
Recommendation of Solomon-Page's Board of Directors
In December 1999, the management group informed Solomon-Page's
board of directors that it had an interest in organizing a management buyout of
Solomon-Page. Because three of the six members of the board were expected to
participate in such a management buyout, the board sought to avoid the potential
conflicts of interest involved by forming a special committee of independent
directors to receive, study, negotiate and make recommendations to the board in
connection with any proposed acquisition of Solomon-Page by the management group
or any other prospective acquiror. The special committee comprises Joel A.
Klarreich and Edward Ehrenberg. Each is a director of Solomon- Page and is not a
part of the management group.
The board of directors, acting on the unanimous recommendation
of the special committee, has approved the merger agreement and the merger and
recommends that you vote FOR the approval and adoption of the merger agreement
and the transactions contemplated thereby. The board of directors believes that
the merger and the terms and
-10-
<PAGE>
provisions of the merger agreement (including the $5.25 per share cash purchase
price) are fair to and in the best interests of Solomon-Page and its
stockholders (other than the members of the management group).
Factors Considered by the Special Committee and Board of Directors
In reaching their decision to approve and recommend adoption
of the merger agreement, the special committee and the board of directors
considered a number of factors. These include, among others, the following:
o the opinion of Legg Mason Wood Walker, Incorporated, the
special committee's financial advisor, addressed to the special committee that,
as of June 27, 2000, the $5.25 per share in cash to be received by Solomon-
Page's stockholders (other than the members of the management group) in the
merger is fair from a financial point of view;
o the special committee's conclusion after extensive
negotiations 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 the $5.25 per share merger consideration represented, among
other things, a 82.6% premium to the trading price of the common stock prior to
the initial announcement of a proposed merger transaction with the management
group on March 31, 2000, and for $4.25 per share merger consideration a 52.7%
premium to the trading price of the common stock prior to the announcement of
the increased offer on June 28, 2000; and
o the affirmative vote of the holders of at least 66-2/3% of
the outstanding shares of the common stock and the holders of at least a
majority of the outstanding shares of common stock not owned, directly or
indirectly, by the management group would be required to approve the
transaction.
Additional factors considered by the special committee and the
board of directors are set forth on pages __ to --.
Fairness Opinion of Legg Mason Walker Wood, Incorporated
Legg Mason, financial advisor to the special committee, has
delivered a written opinion to the special committee that, as of June 27, 2000,
the $5.25 per share cash merger consideration was fair from a financial point of
view to Solomon-Page's public stockholders (other than the management group). A
copy of Legg Mason's opinion, which includes 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 "SPECIAL FACTORS - Opinion of
Legg Mason Wood Walker, Incorporated to the Special Committee."
Interests of the Management Group in the Merger
The members of the management group will own all of the
outstanding capital stock of the surviving corporation after the merger. They
will be the sole directors and the principal executive officers of the surviving
corporation after the merger. They will be employed by the surviving corporation
after the merger under the terms of their existing employment agreements with
Solomon-Page.
The members of the management group have relationships or
interests in the merger that are different than your interests as a stockholder
or that may present a conflict of interest. For a description of these
interests, see pages ___ to ___.
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O The special committee and the board were aware of these
interests and considered them in recommending and approving the merger.
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.
Financing of the Merger
At the closing of the merger, Mergeco expects to pay an
aggregate purchase price of approximately $15.76 million to the holders of
common stock and the holders of options to acquire common stock (other than
shares of common stock owned by members of the management group, which will be
converted into shares of the surviving corporation, and options held by members
of the management group, which will be canceled). In addition, the parties
anticipate that Solomon-Page and Mergeco will require approximately $ million to
pay for Solomon-Page's and Mergeco's expenses and costs relating to the merger
agreement and the transactions contemplated thereby. On June 27, 2000,
Solomon-Page, on behalf of the management group, obtained a commitment from The
Bank of New York to fund, subject to certain specified conditions, senior
secured revolving credit and term loan facilities aggregating up to $19.0
million in order to finance the merger and to fund the ongoing operations of the
surviving corporation. It is a condition to Mergeco's obligation to consummate
the merger that it has obtained the financing for the merger described in the
commitment letter. The remaining portion of the proceeds necessary to pay the
merger consideration and pay for costs and expenses of the transaction will be
provided from cash on hand of Solomon-Page. For a discussion of certain terms of
the commitment letter and other factors relating to the financing of the merger,
see pages to .
Material Federal Income Tax Consequences
You will be taxed on your receipt of the $5.25 per share in
cash. You should consult your tax advisor in order to understand fully how the
merger will affect you.
THE SPECIAL MEETING
Voting
Solomon-Page will hold a special meeting of stockholders at
a.m., local time, on , 2000 at . At the special meeting, you will be asked to
vote on a proposal to approve and adopt the merger agreement and the
transactions contemplated thereby. Each share of common stock of Solomon-Page is
entitled to one vote per share.
Unless contrary instructions are indicated, proxies will be
voted FOR the approval and adoption 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
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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." At the present time, Solomon-Page does not anticipate
waiving, and has been advised by the management group that it does not
anticipate waiving, any of the material conditions of the merger.
Delaware law requires that the holders of a majority of all
outstanding shares of common stock vote to approve and adopt the merger
agreement, but Solomon-Page's certificate of incorporation requires that the
holders of at least 66-2/3% of such outstanding shares vote to approve and adopt
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 and at
least 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. Under the terms of the merger agreement, the members of the management
group will comprise the directors of the surviving corporation following
consummation of the merger. The members of the management group (who comprise
three directors and who are also the three principal executive officers of
Solomon-Page) currently own 1,894,500 shares of common stock, representing
approximately 45.6% of the outstanding shares of common stock as of the record
date (as described below). The members of the management group also hold options
to acquire 600,000 shares of record date, which options are to be canceled in
the merger. To review a more detailed description of the interests of the
members of the management group in connection with the merger, see pages to .
Solomon-Page has been advised that all members of the management group intend to
vote all their shares in favor of the merger agreement and the transactions
contemplated thereby.
The board has set the close of business on , 2000 as the
record date for determining who is entitled to vote at the special meeting. On
the record date, there were 4,153,948 shares of common stock outstanding and
entitled to vote held by approximately stockholders of record.
THE MERGER AGREEMENT
The Merger Consideration
If the merger is completed, you will be entitled to receive
$5.25 per share in cash for your common stock, without interest.
Conditions to the Merger
There are a number of conditions that must be satisfied before
either Solomon-Page or Mergeco is obligated to complete the merger, including,
among others, the following:
o the merger must be approved by the holders of 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
o there can be no legal restraints or prohibitions that
prevent completion of the merger.
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There are additional conditions that must be satisfied or
waived before Mergeco is obligated to complete the merger, including:
o Mergeco must obtain the financing described in the
commitment letter to complete the merger;
o holders of not more than 7.5% of the outstanding
shares of common stock of Solomon-Page shall have
exercised dissenters' appraisal rights;
o Solomon-Page must comply with the merger agreement;
and
o the representations and warranties made by
Solomon-Page in the merger agreement must be true and
correct in all material respects, except for changes
permitted by the merger agreement.
There are additional conditions that must be satisfied before
Solomon-Page is obligated to complete the merger, including:
o Mergeco must comply with the merger agreement;
o Mergeco must deliver to Solomon-Page copies of
certificates or other similar materials relating to
the solvency of the surviving corporation delivered
to the lenders proving the financing for the merger,
on which Solomon-Page will be entitled to rely; and
o the representations and warranties made by Mergeco in
the merger agreement must be true and correct in all
material respects.
Termination of the Merger Agreement
Solomon-Page (acting through the special committee) and
Mergeco may agree at any time (including any time after the special meeting) to
terminate the merger agreement. In addition, either Solomon-Page or Mergeco may
terminate the merger agreement if:
o the merger has not been completed by November 30,
2000;
o a final court order or other governmental action
prohibits the merger; or
o at a meeting of stockholders of Solomon-Page, the
approval of 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 is not obtained.
Solomon-Page (acting through the special committee) may
terminate the merger agreement if:
o Solomon-Page receives a notice from Mergeco that the
commitment letter has been terminated or canceled; or
o the special committee determines, under certain
circumstances and before the approval of stockholders
required by the merger agreement, that it is
necessary to terminate the merger agreement in order
to comply with its fiduciary duties to Solomon-Page's
stockholders.
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<PAGE>
To review the circumstances under which the special committee
may terminate the merger agreement in order to comply with its fiduciary duties
to Solomon-Page's stockholders, see page .
Mergeco may terminate the merger agreement if:
o Solomon-Page's board of directors decides to
withdraw, modify or change adversely to Mergeco its
recommendation in favor of the merger; or
o Solomon-Page's board of directors recommends or
resolves to recommend an alternative acquisition
proposal (as defined in the merger agreement) to
Solomon-Page's stockholders.
No Solicitation
Solomon-Page and its officers, directors, agents,
representatives and advisors will not solicit or encourage any acquisition
proposal, but if Solomon-Page or the special committee receives an unsolicited
inquiry, offer or proposal relating to an acquisition proposal, then
Solomon-Page or the special committee may provide information to the person
making such inquiry, offer or proposal pursuant to an appropriate
confidentiality agreement; and Solomon-Page or the special committee may engage
in discussions and negotiations with any person concerning an acquisition
proposal and, under certain circumstances, may terminate the merger agreement.
Fees and Expenses
The management group will be reimbursed up to a maximum amount
of $500,000 for its costs and expenses incurred in connection with the
transactions contemplated by the merger agreement, but only if the merger
agreement is terminated:
o by Mergeco, because the special committee withdraws,
modifies or changes its recommendation that the
stockholders of Solomon-Page approve the merger
agreement;
o by Mergeco, after the special committee recommends an
alternative acquisition proposal to Solomon- Page's
stockholders; and
o by the special committee or the board (acting through
the special committee), in order for the special
committee to comply with its fiduciary duties to
Solomon-Page's stockholders in connection with an
alternative acquisition proposal.
DISSENTERS' RIGHTS OF APPRAISAL
Any stockholder who does not wish to accept $5.25 per share in
cash in the merger has the right under Delaware law to have the "fair value" of
his shares determined by the Delaware Chancery Court. This "right of appraisal"
is subject to a number of restrictions and technical requirements. Generally, in
order to exercise appraisal rights:
o you must not vote in favor of the merger; and
o you must make a written demand for appraisal in
compliance with Delaware law before the vote on the
merger.
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<PAGE>
Merely voting against the merger will not protect your right
of appraisal. Annex C to this proxy statement contains the Delaware statute
relating to your right of appraisal. Failure to follow all of the steps required
by this statute will result in the loss of your right of appraisal. The Delaware
law requirements for exercising appraisal rights are explained on pages to .
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF SOLOMON-PAGE
The following table sets forth selected consolidated financial
data for Solomon-Page and its subsidiary (i) as of and for the six months ended
March 31, 2000 and 1999 and (ii) as of and for each of the five fiscal years in
the period ended September 30, 1999. No separate financial information is
provided for Mergeco because Mergeco is an entity formed for the sole purpose of
the merger and has no independent operations. No pro forma data giving effect to
the merger have been provided because Solomon-Page does not believe such
information is material to stockholders in evaluating the proposed merger and
merger agreement because (i) the proposed merger consideration is all cash and
(ii) if the merger is completed, the common stock of Solomon-Page would cease to
be publicly traded.
The financial information for Solomon-Page as of and for each
of the five fiscal years in the period ended September 30, 1999 has been derived
from audited consolidated financial statements of Solomon-Page. The financial
information as of and for the six months ended March 31, 2000 and 1999 has been
derived from unaudited consolidated financial statements of Solomon-Page and, in
the opinion of management, includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information set forth
therein. Operating results for such unaudited interim periods should not be
considered indicative of results to be expected for the full fiscal year.
The following financial information should be read in
conjunction with "management's Discussion and Analysis of Financial Condition
and Results of Operations" and Solomon-Page's consolidated financial statements,
accompanying notes and other financial information included in Solomon-Page's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and
Solomon-Page's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000. See "WHERE YOU CAN FIND MORE INFORMATION" on page .
(Amounts in thousands except for per share data)
<TABLE>
<CAPTION>
Six Months Ended March 31, Fiscal Year Ended September 30,
------------------------------- -----------------------------------------------------
Statements of Operations Data: 2000 1999 1999 1998 1997 1996 1995
----------------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $37,608 $24,295 $56,329 $44,639 $28,996 $17,166 $ 7,331
Income (Loss) from Operations 3,039 1,075 3,759 1,622 1,691 509 (2,094)
Net Income (Loss) 1,595 537 1,999 823 1,282 710 (1,928)
Basic Earnings (Loss) Per Common Share $ .38 $ .11 $ .44 $ .16 $ .25 $ .14 $ (.39)
Diluted Earnings (Loss) Per Common Share .35 .11 .41 .14 .23 .13 (.39)
</TABLE>
<TABLE>
<CAPTION>
March 31, September 30,
----------- ------------------------------------------------------------
Balance Sheet Data: 2000 1999 1999 1998 1997 1996 1995
------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital $ 5,392 $ 4,192 $ 4,130 $ 3,794 $ 4,921 $ 5,530 $ 5,402
Total Assets 22,630 16,841 18,348 16,735 12,815 9,613 7,642
Total Liabilities 13,185 9,508 10,494 8,696 4,484 2,548 1,287
Stockholders' Equity 9,445 7,333 7,854 8,039 8,331 7,065 6,355
</TABLE>
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<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 a.m., local time, on , 2000, at , 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 and adoption 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 Solomon-Page's Mergeco,
with Mergeco as the surviving corporation. Pursuant to the merger agreement,
each outstanding share of 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 (the
"Dissenting Stockholders") will be converted into the right to receive $5.25 per
share in cash, without interest.
The special committee, consisting of Messrs. Klarreich and
Ehrenberg, was appointed by the board 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. Messrs. Klarreich and Ehernberg are not
employees of Solomon-Page and will not have any continuing equity interest in
the surviving corporation. 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 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 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 common stock (other than the members of the
management group), approved the merger agreement, and recommended that the
stockholders approve and adopt 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 is fair from a financial point of
view. A copy of Legg Mason's opinion, which explains the assumptions made
procedures followed, matters considered and limitations on the review Legg Mason
undertook in rendering 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 AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
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<PAGE>
Record Date; Voting at the Meeting; Quorum
The board has fixed the close of business on , 2000 as the
record date for the special meeting. Only stockholders of record as of the close
of business on , 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 common its stock, held of record by
approximately ____ 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 and
adopted 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 lest 66-2/3% of such shares to
approve and adopt 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 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. The members of the management group (who include three
directors and the principal executive officers of Solomon-Page) Solomon-Page's
currently own 1,894,500 shares of common stock, representing approximately 45.6%
of the outstanding shares of common stock as of the record date. 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. See
"SPECIAL FACTORS-Interests of Certain Persons in the Merger; Certain
Relationships." Solomon-Page has been advised that all members of the management
group and Eric M. 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.
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 and adoption 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 and adoption 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 and adoption of the merger agreement and the
transactions contemplated thereby. As explained below in the section entitled
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"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 to assist in the solicitation of proxies at an
estimated cost of $ plus reasonable expenses.
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.
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.
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<PAGE>
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)
.
SPECIAL FACTORS
Background of the Transaction
During May 1999, the members of 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 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 depressed market price of its common
stock.
On July 14, 1999, the management group met with its counsel
and representatives of Richard Eisner and the compensation consulting firm 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.
The management group's analysis led it to conclude in early
August 1999 that it should consider the acquisition of the outstanding common
stock held by Solomon-Page's public stockholders. On August 5, 1999, it met with
representatives of Peter J. Solomon Company, an investment bank, to seek its
advice regarding available strategic alternatives and over the next several
weeks, discussions continued among members of the management group and with
Peter J. Solomon. On September 23, 1999, Solomon-Page retained Peter J. Solomon
to act as financial advisor with respect to an offer to be made by Solomon-Page
or members of the management 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. During this period, the management
group, with the assistance of its financial and legal advisors, reviewed the
terms of comparable business combinations and management buyouts, including
transactions entered into by other companies in its industry.
The management group concluded in late October 1999 that
stockholder value could best be maximized by a management buyout. 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
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<PAGE>
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 Solomon-Page's counsel, Olshan
Frome Rosenzweig & Wolosky LLP ("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. He 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 Joel A. Klarreich and Edward 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 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.
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 27, 2000, the special committee conducted a
telephonic meeting with its financial advisor. Legg Mason updated the special
committee with respect to the analysis that it had conducted to date. 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 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.
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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 for the outstanding shares not held by the management
group, based on analysis of comparable companies and Solomon-Page's past
performance. 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 determining 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 reexamined its analyses and the companies constituting
comparables. Based on its discussions with Peter J. Solomon and its revised
calculations, Legg Mason presented to the special committee an analysis of the
management group's indication of interest.
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 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.
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
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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. The
special committee informed the management group that it would consider an
indication of interest at approximately $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
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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.
On March 26, 2000, Olshan informed Weil Gotshal that there
might be solvency concerns with the surviving corporation if Mergeco were to
merge with and into Solomon-Page. [DESCRIBE HOW REVERSE SOLVED PROBLEM] 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 and. 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, 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 and adopt 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
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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.
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 revised historical and
projected figures for Solomon-Page's performance 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 and the key employee's
departure.
On May 11, 2000, Weil Gotshal spoke with Olshan, which
conveyed Solomon-Page's management's latest projections and discussed three
proposed adjustments to historical earnings to account for the placement
transaction, the loss of the key employee and the expenses related to the
proposed transaction with the management group. Such adjustments included a
$680,000 increase in EBITDA for one-time expenses relating to the management
buyout, a $1.2 million decrease in EBITDA relating to the placement of an entire
department with an investment banking client and a $350,000 decrease in EBITDA
relating to the departure of key personnel. Weil Gotshal conveyed these
suggested adjustments 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 revenues 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 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.
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On June 1, 2000, after meeting separately with its advisors,
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. 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 lawsuit to settle the 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.
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
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 furnished a copy of a draft of the
revised commitment letter to Weil Gotshal.
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
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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, 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 Legg
Mason Wood Walker, Incorporated 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 and adopt the amended and restated merger agreement and the
transactions contemplated thereby, all subject to the execution of an agreement
in principle to settle the 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 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 common stock of Solomon-Page not owned by
the management group. 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.
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
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(other than the management group), approved the merger agreement, and
recommended that the stockholders approve and adopt 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 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 Legg Mason Wood
Walker, Incorporated 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;
-- 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 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, prior to any agreement being reached or reopened
negotiations as to the ultimate merger consideration and terms.
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.
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o Settlement of Pending Litigation. The special
committee considered that it 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 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
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:
-- 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.
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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 independent.
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 Favorable Press Release. The press release negotiated by the special
committee specifically mentioned that notwithstanding the special committee's
recommendation of the transactions contemplated by the amended and restated
merger agreement, the special committee was able to receive inquiries from any
other parties interested in a possible acquisition of 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.
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.
The special committee also considered the fact that if the merger is
approved, the holders of the common stock will not participate in the future
growth of Solomon-Page. 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.
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Board of Directors. In reaching its determination referred to above, the
board of directors considered and relied upon the conclusions and
recommendations of the special committee, the unanimous approval of the amended
and restated merger agreement and the merger by the special committee, and the
following additional factors, each of which, in the view of the board of
directors, supported such determinations:
o the considerations referred to above as having been taken into account by
the special committee, including the receipt by the special committee of the
opinion of Legg Mason addressed to the special committee 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 by the
holders of common stock (other than the management group) in the merger was fair
to such holders from a financial point of view, and the related analyses
presented by Legg Mason;
o the fact that the management group had obtained the revised commitment
letter from The Bank of New York, to the effect that, subject to certain
qualifications and conditions set forth in the letter, they could successfully
arrange and fund approximately $19 million for the purpose of financing the
merger and paying all fees, expenses and costs in connection with the merger
(see " -- Financing of the Merger" for a summary of the terms and conditions of
the revised commitment letter); and
o the fact that the merger consideration to be paid in the merger and the
terms and conditions of the amended and restated merger agreement were the
result of arm's-length negotiations between the special committee and the
management group and their respective advisors.
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 foregoing
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.
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 negotiated on behalf of the special committee;
o the special committee retained and was advised by its own financial
advisor 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, 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
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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 and adoption of the amended and restated merger
agreement, and the transactions contemplated thereby to Solomon-Page's
stockholders.
The Management Group's Purpose and Reason 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 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 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. 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 has 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 conclusions and recommendations of the special committee;
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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 and
adopt 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 and adoption 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);
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 terminate the merger
agreement in order to permit Solomon-Page to enter into a business
combination transaction with a third party; and
o the other factors referred to above as having been taken into account
by the special committee and the board, which the members of the
management group adopt 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 and did not
provide the management group with any reports, opinions or appraisals
other than discussion materials in connection with the negotiation of
the original merger agreement.
Financial Advisor to the Management Group
In early March 2000, at the management group's request, 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.
Peter J. Solomon's selected comparable company data included the following
multiples: price as a multiple of LTM revenues - 7.8x(mean) and 7.8 (median);
price as a multiple of book value - 1.0x (mean) and 0.9(median); enterprise
value as a multiple of LTM net sales - 23.2% (mean) and 21.5% (median);
enterprise value as a multiple of LTM EBITDA - 3.9x (mean) and 3.7 (median); and
enterprise value as a multiple of LTM EBIT - 5.6x (mean) and 6.2 (median). 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
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value as a multiple of LTM EBIT -5.8x; enterprise value as a multiple of LTM net
income - 9.6x (median); and premium to one week prior to announcement - 30.2%
(median).
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. Peter J. Solomon
has received financial advisory fees of $225,000 and is entitled to receive
$75,000 upon consummation of the merger.
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 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 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
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 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, 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;
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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 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 opinion:
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:
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
------ ---------- ------------ ---------- --------
Low 6.0x 0.62x 0.15x 1.4x 1.6x
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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
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:
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
------ ---------- ------------ ---------- --------
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
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.
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).
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:
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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, 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.
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:
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) 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
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2. Assuming a stock price as of June 26, 2000.
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.
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, and in one instance was greater than the high range of, the low 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.
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%,
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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
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:
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 fairness determination.
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.
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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.
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 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, we 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 we
caution you not to place undue reliance on the financial projections provided
below.
Solomon-Page has assumed that revenue in our 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.
The following table summarizes the projections that Solomon-Page prepared:
Year ended
September 30, 2000
(All amounts in millions)
Revenue $72.6
EBIT/Operating Profit $5.3
EBITDA $6.1
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Net Income $2.8
You should read the projections presented above together with the "Selected
Historical Consolidated Financial Data" included in this proxy statement and
Solomon-Page's historical financial statements attached as Annex D to 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. We 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. We 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 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.
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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.
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
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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.
Interests 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. 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.
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 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
amount 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.
<TABLE>
<CAPTION>
Amount of cash to be received
Shares of upon the consummation of the
Name Common Stock Outstanding Options merger for the shares/options
---- ------------ ------------------- -----------------------------
<S> <C> <C> <C> <C>
Eric M. Davis 110,000 80,000 $577,500/$
Edward Ehrenberg __ 65,000 $ __/$
Joel A. Klarreich __ 65,000 $ __/$
</TABLE>
Upon consummation of the merger, the members of the management group will
own, in the aggregate, 100% of the surviving corporation's outstanding
Solomon-Page's 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
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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 $96,000 for such
services in calendar years 1998, 1999 and in the year 2000 to date,
respectively.
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, and that has been and may be extended automatically from year-to-year
unless terminated by either party. 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
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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.
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, Mergeco will require
approximately $ million to pay other expenses and costs incurred by Mergeco
relating to the transactions and for other general corporate purposes. In
addition, Solomon- Page will require approximately $ million to pay
Solomon-Page's expenses and costs relating to the transaction. 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 proceeds of the loan
facility will be used:
o to pay a portion of the merger consideration, to pay expenses of the merger
and (iii) 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,
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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, without limitation, the following:
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
Agent's Base Rate 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 (each as defined) 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.
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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 September
30, 2000.
Shareholder Lawsuit Challenging the Merger
Following the initial public announcement of the merger on March 31, 2000,
William Straub filed a purported shareholders 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 to amend the original
merger agreement 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 the parties also agreed to amend the original merger agreement 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 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, 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, 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, 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
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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.
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.
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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
paid by 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. Solomon-Page will pay Mergeco its 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 adopt and 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.
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.........................................
Accounting Fees................................................. $20,000
Printing, Mailing Expenses...................................... $30,000
Special Committee Fees.......................................... $60,000
Miscellaneous...................................................
Total....................................
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(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.
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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 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 and adopt 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
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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 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.
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Conditions
The respective obligations of Mergeco and Solomon-Page to consummate the
merger are subject to the following conditions, among others: (i) the approval
and adoption 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; (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 one 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, (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 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, 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 adoption 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 Requisite 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 adoption 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
in the merger agreement, all fees and expenses incurred in connection with the
merger will be paid by 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 its
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. 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 adoption 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.
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.
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.
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
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procedures for exercising the right to seek appraisal of the Solomon-Page's
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, you must
satisfy each of the following conditions:
(A) 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.
(B) 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.
(C) 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 and adopt 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 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.
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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, 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.
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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.
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.
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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 , 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 July 27, 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 $3.44.
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.
Solomon-Page's Common Stock Purchase Information
None of the members of the management group, Mergeco or Solomon-Page has
engaged in any transaction with respect to the Solomon-Page's common stock
during the past 60 days.
SECURITIES OWNERSHIP
Beneficial Ownership of Solomon-Page's Common Stock
The following table sets forth certain information as of May 31, 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
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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.
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
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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 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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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 , 2000.
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 was held on , 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 ,
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 Report on Form 10-Q for the quarter
ended March 31, 2000; and
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(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
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of this information may also be accessed on the World Wide Web through the SEC's
Internet address at "HTTP://WWW.SEC.GOV. Solomon Page" 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
, 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
----
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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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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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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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<PAGE>
(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
B-2
<PAGE>
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>
ANNEX D
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Accountant's Report................................................1
Consolidated Balance Sheets as of March 31, 2000 [Unaudited] and
September 30, 1999.............................................................2
Consolidated Statements of Operations for the three and six months
ended March 31, 2000 and 1999 [Unaudited]......................................4
Consolidated Statements of Cash Flows for the six months ended
March 31, 2000 and 1999 [Unaudited]............................................5
Notes to Consolidated Financial Statements [Unaudited].........................7
Independent Auditor's Report...................................................9
Consolidated Balance Sheets as of September 30, 1999 and 1998.................10
Consolidated Statements of Operations for the years ended
September 30, 1999, 1998 and 1997.............................................12
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1999, 1998 and 1997.............................................13
Consolidated Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997.............................................14
Notes to Consolidated Financial Statements....................................16
<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 March 31, 2000, and for the
three month period 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
May 11, 2000
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---- ----
(Unaudited)
ASSETS:
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 1,559 $ 580
Investments 495 849
Accounts Receivable - [ Net of Allowances of $320 14,963 11,416
and $280, Respectively ]
Other Current Assets 426 391
------- -------
Total Current Assets 17,443 13,236
------- -------
Property and Equipment:
Equipment 2,302 2,022
Furniture and Fixtures 806 797
Leasehold Improvements 1,146 1,103
------- -------
Totals - At Cost 4,254 3,922
Less: Accumulated Depreciation 1,975 1,659
------- -------
Property and Equipment - Net 2,279 2,263
------- -------
Other Assets:
Investments 584 686
Intangible Assets - [ Net of Accumulated
Amortization of $412 and $310, Respectively ] 1,360 1,444
Web Site Development Costs 236 0
Deferred Tax Asset 350 324
Due from Related Parties 111 135
Other Assets 267 260
------- -------
Total Other Assets 2,908 2,849
------- -------
Total Assets $22,630 $18,348
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY: (unaudited)
Current Liabilities:
<S> <C> <C>
Accrued Payroll and Commissions $ 6,937 $ 4,607
Accounts Payable and Accrued Expenses 1,642 1,276
Income Taxes Payable 628 1,417
Line of Credit 1,500 350
Term Loan Payable 500 500
Deferred Revenue 489 380
Other Current Liabilities 355 576
----------- -----------
Total Current Liabilities 12,051 9,106
----------- -----------
Long-Term Liabilities:
Term Loan Payable - Net of Current Portion 500 750
Deferred Credit 634 638
----------- -----------
Total Long Term Liabilities 1,134 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
March 31, 2000 and September 30, 1999, Respectively 5 5
Additional Paid-in Capital 7,428 7,428
Accumulated Other Comprehensive Income (12) (7)
Treasury Stock At Cost; 1,010,000 Common Shares
at March 31, 2000 and September 30, 1999, Respectively (2,248) (2,248)
Retained Earnings 4,272 2,676
----------- -----------
Total Stockholders' Equity 9,445 7,854
----------- -----------
Total Liabilities and Stockholders' Equity $ 22,630 $ 18,348
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 21,617 $ 12,779 $ 37,608 $ 24,295
----------- ----------- ----------- -----------
Operating Expenses:
Selling Expenses 16,295 10,164 28,788 19,561
General and Administrative 2,985 1,710 5,364 3,322
Depreciation and Amortization 225 172 417 337
----------- ----------- ----------- -----------
Total Operating Expenses 19,505 12,046 34,569 23,220
----------- ----------- ----------- -----------
Income from Operations 2,112 733 3,039 1,075
----------- ----------- ----------- -----------
Other Income [Expenses]
Interest and Dividend Income 24 21 59 47
Interest Expense (89) (87) (152) (163)
Realized Gain/(Loss) on Investments 1 (7) 2 (7)
----------- ----------- ----------- -----------
Total Other [Expenses] (64) (73) (91) (123)
----------- ----------- ----------- -----------
Income Before Income Tax Expense 2,048 660 2,948 952
Income Tax Expense 947 288 1,353 415
----------- ----------- ----------- -----------
Net Income $ 1,101 $ 372 $ 1,595 $ 537
=========== =========== =========== ===========
Basic Earnings Per Common Share $ 0.27 $ 0.08 $ 0.38 $ 0.11
=========== =========== =========== ===========
Diluted Earnings Per Common Share $ 0.24 $ 0.08 $ 0.35 $ 0.11
=========== =========== =========== ===========
Basic Weighted Average Shares 4,153,948 4,607,036 4,153,948 4,750,289
=========== =========== =========== ===========
Diluted Weighted Average Shares 4,612,060 4,893,878 4,576,527 4,993,393
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended
March 31,
2000 1999
---- ----
Operating Activities:
<S> <C> <C>
Net Income $ 1,595 $ 537
------- -------
Adjustments to Reconcile Net Income
to Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization 418 337
Deferred Credit (4) 47
Net Realized (Gain)/Loss on Investments (2) 7
Deferred Taxes (26) (65)
Change in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (3,547) (308)
Other Assets (37) (120)
Increase [Decrease] in:
Accounts Payable, Accrued Expenses, Accrued Payroll
and Commissions 2,696 (302)
Income Tax Payable (789) 401
Deferred Revenue 109 335
Other Liabilities (221) 93
------- -------
Total Adjustments ($1,403) $ 425
------- -------
Net Cash - Operating Activities $ 192 $ 962
------- -------
Investing Activities:
Capital Expenditures (332) (521)
Purchase of Investments (200) (399)
Proceeds from Sales of Investments 648 549
Acquisitions of and Additions to Trade Names (17) 0
Web Site Development Costs (236) 0
Cash Received from Related Parties 24 0
------- -------
Net Cash - Investing Activities ($ 113) ($ 371)
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended
March 31,
2000 1999
---- ----
Financing Activities:
<S> <C> <C>
Borrowings Under Term Loan and Line of Credit 5,125 239
Repayments Under Term Loan and Line of Credit (4,225) 0
Purchase of Treasury Stock and Warrants 0 (1,232)
------- -------
Net Cash - Financing Activities $ 900 ($ 993)
------- -------
Net Increase [Decrease] in Cash and Cash Equivalents 979 (402)
Cash and Cash Equivalents - Beginning of Periods 580 935
------- -------
Cash and Cash Equivalents - End of Periods $ 1,559 $ 533
======= =======
Supplemental Cash Flow Information:
Cash paid during the periods for:
Interest $ 151 $ 163
Income Taxes $ 2,157 $ 80
</TABLE>
See Notes to Consolidated Financial Statements.
6
<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
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 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 of the accumulated net unrealized gains on available-for-sale
investments.
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].
7
<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.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
Staffing Search Staffing Search
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Revenues $ 9,900 $11,700 $ 7,800 $ 5,000
Segment profit 956 1,939 591 616
Segment Assets 7,895 9,260 5,875 6,891
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
March 31, 2000 March 31, 1999
Staffing Search Staffing Search
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Revenues $19,100 $18,500 $15,900 $8,400
Segment profit 1,375 2,787 754 787
</TABLE>
A reconciliation of combined segment profit to consolidated net income is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total profit for reportable segments $2,895 $1,207 $4,162 $1,541
Interest expense (89) (87) (152) (163)
Corporate overhead (758) (460) (1,062) (426)
Income tax expense (947) (288) (1,353) (415)
Net income 1,101 372 1,595 537
</TABLE>
8
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
--------------------------------------------------------------------------------
[4] Subsequent Event
On March 31, 2000, the Company announced that it had entered into a
definitive agreement under which a Management Group would acquire, through a
one-step cash merger (the "Merger"), all of the outstanding publicly held Common
Stock at a price of $4.25 per share. On April 7, 2000, William Straub,
purportedly a stockholder of the Company, filed a class action complaint against
the Company and each of the Company's directors in the Court of Chancery of the
State of Delaware in and for New Castle County. The complaint alleges, among
other things, that: (i) the Merger is in furtherance of a wrongful plan to take
private the Company in a transaction that is inherently unfair to them and is a
product of the Management Group's conflict of interest, and (ii) the defendants
have violated their duty of fair dealing, as well as their fiduciary duties to
the stockholders of the Company. The complaint seeks, among other things, a
judgement (i) certifying that the lawsuit may be maintained as a class actions,
(ii) granting preliminary and permanent injunctive relief against the
consummation of the Merger, (iii) in the event the Merger is consummated,
rescinding the Merger or awarding rescissory damages to the members of the
purported class, (iv) ordering the defendants to pay to the members of the
purported class damages suffered and to be suffered by them as a result of these
alleged wrongs, and (v) awarding the plaintiff costs, including counsel fees and
expert fees. The Company and the defendant directors have not yet responded to
the complaint.
9
<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
F-2
<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.
F-3
<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.
F-4
<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.
F-5
<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.
F-6
<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.
F-7
<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.
F-8
<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.
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.
F-9
<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.
F-10
<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.
F-11
<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.
F-12
<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.
F-13
<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.
F-14
<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>
F-15
<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>
F-16
<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
========= ========
F-17
<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.
F-18
<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
========== ========= =========
F-19
<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.
F-20
<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION, DATED JULY 14, 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 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
_________________ on _______________, 2000 at __________ A.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 and adopt the Agreement and Plan of Merger, dated
as of March 31, 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
representation capacity, sign name and indicate title
