<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
WINSLOEW FURNITURE, INC.
------------------------
(NAME OF THE ISSUER)
TRIVEST FURNITURE CORPORATION
TRIVEST FURNITURE PARTNERS, LTD.
TRIVEST FUND II GROUP, LTD.
EARL W. POWELL
PHILLIP T. GEORGE, M.D.
WILLIAM F. KACZYNSKI, JR.
PETER W. KLEIN
BOBBY TESNEY
VINCENT A. TORTORICI, JR.
STEPHEN C. HESS
R. CRAIG WATTS
JERRY CAMP
WINSLOEW FURNITURE, INC.
------------------------
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(TITLE OF CLASS OF SECURITIES)
975377 10 2
-----------
(CUSIP NUMBER OF CLASS OF SECURITIES)
Peter W. Klein, Esq. Vincent A. Tortorici, Jr.
Trivest, Inc. WinsLoew Furniture, Inc.
2665 South Bayshore Drive, Suite 800 160 Village Street
Miami, Florida 33133 Birmingham, Alabama 35242
(305) 858-2200 (205-408-7600
WITH COPIES TO:
Bruce E. Macdonough, Esq. James F. Hughey, Jr.
Greenberg Traurig, P.A. Balch & Bingham LLP
1221 Brickell Avenue 1901 Sixth Avenue North
Miami, Florida 33131 Birmingham, Alabama 35203
(305) 579-0500 (205) 251-8100
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
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This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities
Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies: [X]
CALCULATION OF FILING FEE
- --------------------------------- -----------------------------------------
TRANSACTION VALUE AMOUNT OF FILING FEE
- --------------------------------- -----------------------------------------
- --------------------------------- -----------------------------------------
$237,002,964........ $47,401
- --------------------------------- -----------------------------------------
* For purposes of calculating the fee only. Assumes purchase of 7,181,908
shares of Common Stock, par value $.01 per share, of WinsLoew Furniture,
Inc. at $33.00 per share.
[X] Check box if any of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the form or schedule and the
date of its filing.
Amount previously paid: $47,401
Form or registration no.: Preliminary Proxy Statement on Schedule 14A
Filing party: WinsLoew Furniture, Inc.
Dates filed: April 20, 1999
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This Rule 13e-3 Transaction Statement (this "Statement") is being filed
in connection with the filing by WinsLoew Furniture, Inc. ("WinsLoew" or the
"Company") with the Securities and Exchange Commission (the "Commission") on
April 20, 1999 of a preliminary Proxy Statement on Schedule 14A (the "Proxy
Statement") in connection with a special meeting of the shareholders of
WinsLoew. At such meeting, the shareholders of WinsLoew will vote upon, among
other things, the adoption of an Amended and Restated Agreement and Plan of
Merger dated as of March 30, 1999 (the "Merger Agreement") by and among WinsLoew
and Trivest Furniture Corporation (the "Purchaser"), pursuant to which the
Purchaser will be merged with and into WinsLoew.
The following cross reference sheet is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Schedule 14A which is attached hereto as
Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- -------------------------------------------------------------------------------
<S> <C>
Item 1(a)........................ Outside Front Cover Page; "Introduction"; "Summary -- Parties to the Merger"
Item 1(b)........................ Outside Front Cover Page; "Summary--Record Date and Quorum"; "--Market Prices of
Common Stock and Dividends"; "Market Prices of Common Stock and Dividends"
Item 1(c)........................ "Summary--Market Prices of Common Stock and Dividends"; "Market Prices of
Common Stock and Dividends"
Item 1(d)........................ "Dividends"; "Market Prices of Common Stock and Dividends"
Item 1(e)........................ None
Item 1(f)........................ "Dividends"; "Market Prices of Common Stock and Dividends"
Item 2(a)........................ "Introduction"; "Summary--Parties to the Merger"; "Management--Directors and
Executive Officers of WinsLoew"; "Certain Information Concerning the Purchaser and
Other Affiliates"
Item 2(b)-(d).................... "Management--Directors and Executive Officers of WinsLoew"; "Certain Information
Concerning the Purchaser and Other Affiliates"
Item 2(e)........................ None
Item 2(f)........................ None
Item 2(g)........................ "Management--Directors and Executive Officers of WinsLoew"; "Certain Information
Concerning the Purchaser and Other Affiliates"
Item 3(a)(1)..................... "Certain Transactions"
</TABLE>
3
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<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- -------------------------------------------------------------------------------
<S> <C>
Item 3(a)(2)..................... "Summary--Conflicts of Interest"; "--Certain Effects of the Merger"; "Special
Factors--Background of the Merger"; "--Conflicts of Interest"; "--Certain Effects
of the Merger"
Item 3(b)......................... "Summary--Conflicts of Interest"; "--Certain Effects of the Merger"; "Special
Factors--Background of the Merger"; "--Conflicts of Interest";
"--Certain Effects of the Merger"
Item 4(a)......................... "Introduction"; "Summary--The Merger"; "--Effective Time of the Merger and
Payment for Shares"; "--Certain Effects of the Merger"; "--Conditions to the
Merger, Termination and Expenses"; "--Rights of Dissenting Shareholders"; "The
Merger"; "Rights of Dissenting Shareholders"; Appendix A
Item 4(b)......................... "Introduction"; "Summary--Purpose of the Special Meeting"; "--Parties to the
Merger"; "--Purpose and Reasons of the Affiliates for the Merger"; "--Conflicts
of Interest"; "--Rights of Dissenting Shareholders"; "Special Factors--Purpose
and Reasons of the Affiliates for the Merger"; "--Conflicts of Interest";
"--Certain Effects of the Merger"; "The Merger--Termination Fee"; "Rights of
Dissenting Shareholders"
Item 5(a), (b).................... "Summary--Purpose and Reasons of the Affiliates for the Merger"; "--Conflicts of
Interest"; "--Certain Effects of the Merger"; "--Financing of the Merger";
"Special Factors--Background of the Merger"; "--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of Interest"; "--Certain Effects of the
Merger"; "--Conduct of WinsLoew's Business After the Merger"
Item 5(c)......................... "Special Factors--Conflicts of Interest"; "--Conduct of WinsLoew's Business
After the Merger"
Item 5(d)......................... "Summary--Conflicts of Interest"; "--Financing of the Merger"; "Special
Factors--Conflicts of Interest"; "The Merger--Financing"
Item 5(e)......................... "Summary--Financing of the Merger"; "--Certain Effects of the Merger"; "Special
Factors--Certain Effects of the Merger"; "--Conduct of WinsLoew's Business After
the Merger"; "The Merger--Financing"
Item 5(f), (g).................... "Summary--Certain Effects of the Merger"; "Special Factors--Certain Effects of
the Merger"
Item 6(a)......................... "Summary--Financing of the Merger"; "The Merger--Financing"
Item 6(b)......................... "The Merger--Expenses of the Transaction"
Item 6(c)......................... "Summary--Financing of the Merger"; "The Merger--Financing"
Item 6(d)......................... Not applicable
</TABLE>
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<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- -------------------------------------------------------------------------------
<S> <C>
Item 7(a)-(c)..................... "Summary"; "Special Factors--Background of the Merger"; "--The Special
Committee's and the Board's Recommendation"; "--Opinion of Financial Advisor";
"--Purpose and Reasons of the Affiliates for the Merger"; "--Conflicts of
Interest"
Item 7(d)......................... "Introduction"; "Summary--The Merger"; "--Purpose and Reasons of the Affiliates
for the Merger"; "--Conflicts of Interest"; "--Certain Effects of the Merger";
"--Federal Income Tax Consequences"; "--Rights of Dissenting Shareholders";
"--Accounting Treatment"; "--Financing of the Merger"; "Special
Factors--Background of the Merger"; "--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest"; "--Certain Effects of the Merger";
"--Conduct of WinsLoew's Business After the Merger"; "--Certain Risks in the
Event of Bankruptcy"; "The Merger--Conversion of Securities"; "--Cash-out of
WinsLoew Stock Options"; "--Financing"; "--Accounting Treatment"; "Rights of
Dissenting Shareholders"; "Federal Income Tax Consequences"; "Principal
Shareholders and Stock Ownership of Management"
Item 8(a), (b)................... "Summary--The Special Committee's and the Board's Recommendation"; "--Opinion of
Financial Advisor"; "--Position of the Affiliates as to Fairness of the Merger";
"--Conflicts of Interest"; "--Rights of Dissenting Shareholders"; "Special
Factors--Background of the Merger"; "--The Special Committee's and the Board's
Recommendation"; "--Opinion of Financial Advisor"; "--Position of the Affiliates
as to Fairness of the Merger"; "--Conflicts of Interest"; "Rights of Dissenting
Shareholders"
Item 8(c)......................... "Introduction"; "Summary--Vote Required"; "Special Factors--The Special
Committee's and the Board's Recommendation"; "The Special Meeting--Voting
Procedures; Required Vote"; "The Merger--Conditions"
Item 8(d)........................ "Summary--The Special Committee's and the Board's Recommendation"; "--Opinion of
Financial Advisor"; "Special Factors--Background of the Merger"; "--The Special
Committee's and the Board's Recommendation"; "--Opinion of Financial Advisor"
Item 8(e)......................... "Summary--The Special Committee's and the Board's Recommendation"; "--Conflicts
of Interest"; "Special Factors--The Special Committee's and the Board's
Recommendation"; "--Conflicts of Interest"
Item 8(f)......................... None
Item 9(a)-(c)..................... "Summary--The Special Committee's and the Board's Recommendation"; "--Opinion of
Financial Advisor"; "Special Factors--Background of the Merger"; "--The Special
Committee's and the Board's Recommendation"; "--Opinion of Financial Advisor";
Appendix B
Item 10(a)........................ "Summary--Purpose and Reasons of the Affiliates for the Merger"; "--Conflicts of
Interest"; "Special Factors--Purpose and Reasons of the Affiliates for the
Merger"; "--Conflicts of Interest"; "Principal Shareholders and Stock Ownership
of Management"
</TABLE>
5
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<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- --------------------------------- -------------------------------------------------------------------------------
<S> <C>
Item 10(b)........................ "Market Prices of Common Stock and Dividends"
Item 11........................... "Introduction"; "Summary--Vote Required"; "--Parties to the Merger";
"--Conflicts of Interest"; "--Financing of the Merger"; "Special
Factors--Background of the Merger"; "--Purpose and Reasons of the Affiliates for
the Merger"; "--Conflicts of Interest"; "--Certain Effects of the Merger"; "The
Merger--Financing"
Item 12(a), (b)................... "Introduction"; "Summary--Vote Required"; "--Purpose and Reasons of the
Affiliates for the Merger"; "--The Special Committee's and the Board's
Recommendation"; "--Conflicts of Interest"; "Special Factors--The Special
Committee's and the Board's Recommendation"; "--Purpose and Reasons of the
Affiliates for the Merger"; "--Conflicts of Interest"; "The Special
Meeting--Voting Procedures; Required Vote"
Item 13(a)........................ "Summary--Rights of Dissenting Shareholders"; "Rights of Dissenting
Shareholders"
Item 13(b)........................ Not applicable
Item 13(c)........................ Not applicable
Item 14(a)........................ "Selected Consolidated Financial Data"; "Management's Discussion and Analysis of
Results of Operations and Financial Condition"; "Index to Financial Statements"
Item 14(b)........................ Not applicable
Item 15(a)........................ "Summary--Parties to the Merger"; "--Conflicts of Interest"; "--Conditions to
the Merger, Termination and Expenses"; "--Financing of the Merger"; "The Special
Meeting--Proxy Solicitation"; "Special Factors--Conflicts of Interest"; "The
Merger--Expenses"; "--Termination Fee"; "--Financing"
Item 15(b)........................ "The Special Meeting--Proxy Solicitation"
Item 16........................... Proxy Statement
Item 17(a)-(f).................... Not applicable
</TABLE>
6
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth on the cover page to the Proxy
Statement and in the sections entitled "Introduction" and "Summary--Parties to
the Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth on the cover page to the Proxy
Statement and in the sections entitled "Summary--Record Date and Quorum,"
"--Market Prices of Common Stock and Dividends" and "Market Prices of Common
Stock and Dividends" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in the sections entitled
"Summary--Market Prices of Common Stock and Dividends" and "Market Prices of
Common Stock and Dividends" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in the section entitled "Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
(e) None.
(f) The information set forth in the section entitled "Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The information set forth in the sections entitled
"Introduction", "Summary--Parties to the Merger," "Management--Directors and
Executive Officers of WinsLoew" and "Certain Information Concerning the
Purchaser and Other Affiliates" of the Proxy Statement is incorporated herein by
reference.
(b)-(d), (g) The information set forth in the sections entitled
"Summary--Parties to the Merger," "Management--Directors and Executive Officers
of WinsLoew" and "Certain Information Concerning the Purchaser and the Other
Affiliates" of the Proxy Statement is incorporated herein by reference.
(e), (f) Neither the Purchaser nor any executive officer,
director or person controlling the Purchaser or any Affiliate has during the
last five years (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the section entitled
"Certain Transactions" of the Proxy Statement is incorporated herein by
reference.
(a)(2) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Certain Effects of the Merger," "Special
Factors--Background of the Merger," "--Conflicts of Interest" and "--Certain
Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Certain Effects of the Merger," "Special
Factors--Background of the Merger," "--Purpose and Reasons of the Affiliates for
the Merger," "--Conflicts of Interest" and "--Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
7
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ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"Introduction," "Summary--The Merger," "--Effective Time of the Merger and
Payment for Shares," "--Certain Effects of the Merger," "--Conditions to the
Merger, Termination and Expenses," "--Rights of Dissenting Shareholders," "The
Merger" and "Rights of Dissenting Shareholders" of the Proxy Statement and
Appendix A to the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled
"Introduction," "Summary--Purpose of the Special Meeting," "--Parties to the
Merger," "--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts
of Interest," "--Rights of Dissenting Shareholders," "Special Factors--Purpose
and Reasons of the Affiliates for the Merger," "--Conflicts of Interest,"
"--Certain Effects of the Merger" "The Merger--Termination Fee" and "Rights of
Dissenting Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a), (b) The information set forth in the sections entitled
"Summary--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger," "--Financing of the Merger,"
"Special Factors--Background of the Merger," "--Purpose and Reasons of the
Affiliates for the Merger," "--Conflicts of Interest," "--Certain Effects of the
Merger" and "--Conduct of WinsLoew's Business After the Merger" of the Proxy
Statement is incorporated herein by reference.
(c) The information set forth in the sections entitled "Special
Factors--Conflicts of Interest" and "--Conduct of WinsLoew's Business After the
Merger" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary--Conflicts of Interest," "--Financing of the Merger," "Special
Factors--Conflicts of Interest" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled
"Summary--Financing of the Merger," "--Certain Effects of the Merger," "Special
Factors--Certain Effects of the Merger," "--Conduct of WinsLoew's Business After
the Merger" and "The Merger--Financing" of the Proxy Statement is incorporated
herein by reference.
(f), (g) The information set forth in the sections entitled
"Summary--Certain Effects of the Merger" and "Special Factors--Certain Effects
of the Merger" of the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the sections entitled
"Summary--Financing of the Merger" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the section entitled "The
Merger--Expenses of the Transaction" of the Proxy Statement is incorporated
herein by reference.
(c) The information set forth in the sections entitled
"Summary--Financing of the Merger" and "The Merger--Financing" of the Proxy
Statement is incorporated herein by reference.
(d) Not applicable.
8
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ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth in the sections entitled
"Summary," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation," "--Opinion of Financial Advisor,"
"--Purpose and Reasons of the Affiliates for the Merger" and "--Conflicts of
Interest" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Introduction," "Summary--The Merger," "--Purpose and Reasons of the Affiliates
for the Merger," "--Conflicts of Interest," "--Certain Effects of the Merger,"
"--Federal Income Tax Consequences," "--Rights of Dissenting Shareholders,"
"--Accounting Treatment," "--Financing of the Merger," "Special
Factors--Background of the Merger," "--Purpose and Reasons of the Affiliates for
the Merger," "--Conflicts of Interest," "--Certain Effects of the Merger,"
"--Conduct of WinsLoew's Business After the Merger," "--Certain Risks in the
Event of Bankruptcy," "The Merger--Conversion of Securities," "--Cash-out of
WinsLoew Stock Options," "--Financing," "--Accounting Treatment," "Rights of
Dissenting Shareholders," "Federal Income Tax Consequences" and "Principal
Shareholders and Stock Ownership of Management" of the Proxy Statement is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a), (b) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "--Position of the Affiliates as to Fairness of the Merger,"
"--Conflicts of Interest," "--Rights of Dissenting Shareholders," "Special
Factors--Background of the Merger," "--The Special Committee's and the Board's
Recommendation," "--Opinion of Financial Advisor," "--Position of the Affiliates
as to Fairness of the Merger," "--Conflicts of Interest" and "Rights of
Dissenting Shareholders" of the Proxy Statement are incorporated herein by
reference.
(c) The information set forth in the sections entitled
"Introduction," "Summary--Vote Required," "Special Factors--The Special
Committee's and the Board's Recommendation," "The Special Meeting--Voting
Procedures; Required Vote" and "The Merger--Conditions" of the Proxy Statement
is incorporated herein by reference.
(d) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation" and "--Opinion of Financial Advisor"
of the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Conflicts
of Interest," "Special Factors--The Special Committee's and the Board's
Recommendation" and "--Conflicts of Interest" of the Proxy Statement is
incorporated herein by reference.
(f) None.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the sections entitled
"Summary--The Special Committee's and the Board's Recommendation," "--Opinion of
Financial Advisor," "Special Factors--Background of the Merger," "--The Special
Committee's and the Board's Recommendation" and "--Opinion of Financial Advisor"
of the Proxy Statement and in Appendix B to the Proxy Statement is incorporated
herein by reference.
9
<PAGE> 10
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the sections entitled
"Summary--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "Special Factors--Purpose and Reasons of the Affiliates for the
Merger," "--Conflicts of Interest," "Principal Shareholders and Stock Ownership
of Management" of the Proxy Statement is incorporated herein by reference.
(b) "Market Prices of Common Stock and Dividends."
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The information set forth in the sections entitled "Introduction,"
"Summary--Vote Required," "--Parties to the Merger," "--Conflicts of Interest,"
"--Financing of the Merger," "Special Factors--Background of the Merger,"
"--Purpose and Reasons of the Affiliates for the Merger," "--Conflicts of
Interest," "--Certain Effects of the Merger" and "The Merger--Financing" of the
Proxy Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION.
(a), (b) The information set forth in the sections entitled
"Introduction," "Summary--Vote Required," "--Purpose and Reasons of the
Affiliates for the Merger," "--The Special Committee's and the Board's
Recommendation," "--Conflicts of Interest," "Special Factors--The Special
Committee's and the Board's Recommendation," "--Purpose and Reasons of the
Affiliates for the Merger," "--Conflicts of Interest" and "The Special
Meeting--Voting Procedures; Required Vote" of the Proxy Statement is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled
"Summary--Rights of Dissenting Shareholders" and "Rights of Dissenting
Shareholders" of the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the section entitled "Selected
Consolidated Financial Data" of the Proxy Statement and in the Consolidated
Financial Statements of the Company for the fiscal years ended December 31, 1997
and December 31, 1998, which are included in the Proxy Statement, is
incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the sections entitled
"Summary--Parties to the Merger," "--Conflicts of Interest," "--Conditions to
the Merger, Termination and Expenses," "--Financing of the Merger," "The Special
Meeting--Proxy Solicitation," "Special Factors--Conflicts of Interest," "The
Merger--Expenses," "--Termination Fee" and "--Financing" of the Proxy Statement
is incorporated herein by reference.
(b) The information set forth in the section entitled "The
Special Meeting--Proxy Solicitation" of the Proxy Statement is incorporated
herein by reference.
10
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ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(b)(1) Opinion of Mann, Armistead & Epperson, Ltd. dated
March 30, 1999 (included as Appendix B to the
preliminary Proxy Statement, which is filed herewith
as Exhibit (d)(3)).
(b)(2) Management's projections for fiscal years 1999 through
2002 provided to Mann, Armistead & Epperson, Ltd.,
that are summarized in the preliminary Proxy
Statement.
(b)(3) Financial Analysis Presentation materials prepared by
Mann, Armistead & Epperson, Ltd. in connection with
providing its opinion to the Special Committee.*
(c)(1) Amended and Restated Agreement and Plan of Merger
dated as of March 30, 1999 among WinsLoew Furniture,
Inc., WL Acquisition Corp. and WinsLoew Furniture
Corporation (included as Appendix A to the definitive
Proxy Statement, which is filed herewith as Exhibit
(d)(3)).
(c)(2) BankBoston, N.A. commitment letter to Trivest
Furniture Corporation dated March 29, 1999.
(c)(3) BankBoston, N.A. confirmation letter with respect to
$33.00 per share purchase price to Trivest Furniture
Corporation dated March 29, 1999.
(c)(4) Trivest, Inc. commitment letter to Trivest Furniture
Corporation dated March 29, 1999.
(d)(1) Letter to Shareholders.
(d)(2) Notice of Special Meeting of Shareholders.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release issued by WinsLoew Furniture, Inc. dated
January 18, 1999.
(d)(6) Press Release issued by WinsLoew Furniture, Inc. dated
January 25, 1999.
(d)(7) Press Release issued by WinsLoew Furniture, Inc. dated
March 5, 1999.
(d)(8) Press Release issued by WinsLoew Furniture, Inc. dated
March 31, 1999.
(e) Not applicable.
(f) Not applicable.
* To be filed by amendment.
11
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SIGNATURES
After due inquiry and to the best of our knowledge and belief, each of
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
WINSLOEW FURNITURE, INC.
Dated: April 20, 1999 By: /s/ Bobby Tesney
-----------------------------
Name: Bobby Tesney
Title: President and Chief
Executive Officer
TRIVEST FURNITURE CORPORATION
Dated: April 20, 1999 By: /s/ William F. Kaczynski, Jr.
-----------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
TRIVEST FURNITURE PARTNERS, LTD.
By: Trivest Furniture, Ltd., its General Partner
By: Trivest Equities, Inc., Its General Partner
Dated: April 20, 1999 By: /s/ William F. Kaczynski, Jr.
-----------------------------
Name: William F. Kaczynski, Jr.
Title: Managing Director
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc., its General Partner
Dated: April 20, 1999 By: /s/ William F. Kaczynski, Jr.
-----------------------------
Name: William F. Kaczynski, Jr.
Title: Managing Director
Dated: April 20, 1999 By: /s/ Earl W. Powell
------------------
Earl W. Powell
Dated: April 20, 1999 By: /s/ Phillip T. George, M.D.
---------------------------
Phillip T. George, M.D.
Dated: April 20, 1999 By: /s/ William F. Kaczynski, Jr.
-----------------------------
William F. Kaczynski, Jr.
12
<PAGE> 13
Dated: April 20, 1999 By: /s/ Peter W. Klein
------------------
Peter W. Klein
Dated: April 20, 1999 By: /s/ Bobby Tesney
----------------
Bobby Tesney
Dated: April 20, 1999 By: /s/ Vincent A. Tortorici, Jr.
-----------------------------
Vincent A. Tortorici, Jr.
Dated: April 20, 1999 By: /s/ Stephen C. Hess
-------------------
Stephen C. Hess
Dated: April 20, 1999 By: /s/ R. Craig Watts
------------------
R. Craig Watts
Dated: April 20, 1999 By: /s/ Jerry Camp
--------------
Jerry Camp
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------------- ----------------------------------------------------------------------------------
<S> <C>
(b)(2) Management's projections for fiscal years 1999 through 2002 provided to Mann
Armistead & Epperson, Ltd., that are summarized in the preliminary Proxy Statement.
(c)(2) BankBoston, N.A. commitment letter to Trivest Furniture Corporation dated
March 29, 1999.
(c)(3) BankBoston, N.A. confirmation letter with respect to $33.00 per share purchase
price to Trivest Furniture Corporation dated March 29, 1999.
(c)(4) Trivest, Inc. commitment letter to Trivest Furniture Corporation dated March 29,
1999.
(d)(1) Letter to Shareholders.
(d)(2) Notice of Special Meeting of Shareholders.
(d)(3) Preliminary Proxy Statement.
(d)(4) Form of Proxy.
(d)(5) Press Release issued by WinsLoew Furniture, Inc. dated January 18, 1999.
(d)(6) Press Release issued by WinsLoew Furniture, Inc. dated January 25, 1999.
(d)(7) Press Release issued by WinsLoew Furniture, Inc. dated March 5, 1999.
(d)(8) Press Release issued by WinsLoew Furniture, Inc. dated March 31, 1999.
</TABLE>
14
<PAGE> 1
EXHIBIT (b)(2)
WINSLOEW FURNITURE, INC.
ACTUAL FOR 1998 AND FORECAST FOR 1999
<TABLE>
<CAPTION>
ACTUAL FCST PROJ PROJ PROJ
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $ 141,360 $ 157,314 $ 169,113 $ 181,796 $ 195,431
Cost of Sales 87,232 98,135 105,495 113,100 121,350
--------- --------- --------- --------- ---------
Gross Margin 54,128 59,179 63,617 68,696 74,081
Selling, general and administrative expenses 23,124 25,859 27,400 29,500 31,750
Amortization 1,122 1,266 1,266 1,266 1,266
--------- --------- --------- --------- ---------
Operating income 29,882 32,054 34,951 37,930 41,065
Interest expense, net 635 810 (100) (750) (1,250)
--------- --------- --------- --------- ---------
Pre tax income 29,247 31,244 35,051 38,680 42,315
Income taxes 10,947 11,873 13,300 14,700 18,080
--------- --------- --------- --------- ---------
Net income 18,300 19,371 21,751 23,980 26,235
========= ========= ========= ========= =========
Weighted average shares 7,624 7,454 7,500 7,500 7,500
========= ========= ========= ========= =========
Earnings per share $ 2.40 $ 2.60 $ 2.90 $ 3.20 $ 3.50
========= ========= ========= ========= =========
</TABLE>
NOTE: THE ABOVE AMOUNTS INCLUDE SOUTHERN WOOD.
<PAGE> 1
EXHIBIT (c)(2)
[BANKBOSTON, N.A. LETTERHEAD]
March 29, 1999
Trivest Furniture Corporation
c/o Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133-5462
Attention: William F. Kaczynski Jr., Managing Director
Ladies and Gentlemen:
We are pleased to confirm the commitment of BankBoston, N.A. (BKB), subject to
the terms and conditions in this letter and in the Outline referred to below, to
provide $145 million senior, secured credit facilities (the FINANCING) to
Trivest Furniture Corporation (TFC) in connection with its acquisition of
WinsLoew Furniture, Inc. (WINSLOEW and the WINSLOEW ACQUISITION). The borrower
under the definitive credit documents governing the Financing (the BORROWER)
will be WinsLoew Furniture, Inc., the surviving corporation of the merger of TFC
with and into WinsLoew (the MERGER).
The Borrower will secure its obligations in respect of the Financing with a
pledge of substantially all of its tangible and intangible assets and property,
including inventory, accounts receivable, equipment, real estate, capital stock
of subsidiary companies and intellectual property. All of the Borrower's
significant domestic subsidiaries will be co-borrowers or will guaranty the
Financing, at BKB's election, and will secure their obligations in respect of
the Financing (whether direct or pursuant to their guaranties) with a pledge of
substantially all of their tangible and intangible property.
BKB will act as agent (in such capacity, the AGENT) for itself and any other
lending institutions which may become party to the Financing (the LENDERS) and
BancBoston Robertson Stephens Inc. (BRSI) will act as the exclusive syndication
agent and arranger for the Lenders (the ARRANGER) with respect to the Financing.
We understand that the proceeds of the Financing will be used to pay, in part,
the consideration to be paid to existing shareholders of WinsLoew in connection
with the Merger, to refinance existing debt of WinsLoew, to pay the purchase
price of the acquisition by the Borrower of Miami Metal Products, Inc. (POMPEII
and the POMPEII ACQUISITION), to pay expenses of the WinsLoew Acquisition and
the related transactions, to finance "Permitted Acquisitions" as described in
the Outline/as hereinafter defined) and to fund the continuing working capital
needs of the Borrower and its subsidiaries, including capital expenditures. The
balance of the funding required to consummate the WinsLoew Acquisition and the
Pompeii Acquisition will be provided by the issuance by the Borrower of up to
$130,000,000 (but at least $125,000,000) original principal
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 1 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 2
Trivest Furniture Corporation
March 29, 1999
amount of unsecured subordinated debt, on terms and conditions reasonably
acceptable to BKB (the UNSECURED DEBT).
BKB will provide the full amount of such Financing, but intends to syndicate the
Financing either before or after closing. Based on our discussions and on the
financial statements, projections and other information and documents previously
furnished to us, we are enclosing herewith an outline of terms and conditions
(the OUTLINE) which sets forth the principal terms on which BKB would be willing
to provide the proposed Financing (this letter and the Outline are collectively
referred to as the COMMITMENT LETTER) and BRSI would be willing to act as the
Arranger.
Our willingness to proceed with the proposed Financing is conditioned on (1)
there being no material misstatements in or omissions from the materials which
have previously been furnished in writing to us for our review, when taken as a
whole and in light of the circumstances in which such materials are presented,
(2) there being in our reasonable judgment no material adverse change in the
assets, business or financial condition of WinsLoew and its subsidiaries taken
as a whole, or in the businesses and assets to be acquired in the WinsLoew
Acquisition or, if applicable the Pompeii Acquisition or the ability of
WinsLoew, the Borrower, any co-borrower or subsidiary guarantor, to perform its
respective obligations described in the Outline, and (3) our receipt of
satisfactory environmental assessments with respect to real property owned or
operated by WinsLoew and its subsidiaries. The availability of the portion of
the proposed Term A loan to be applied to the Pompeii Acquisition will also be
subject to completion to our satisfaction in all respects of our due diligence
investigation as to Pompeii. In addition, the proposed Financing is subject to
the condition that prior to closing of the Financing there are no material
adverse changes in governmental regulation or policy affecting us, WinsLoew or
any of its subsidiaries and no material changes or disruptions in the
syndication, financial or capital markets that could reasonably be expected to
materially impair the syndication of the Financing.
By your signature below, you agree to assist and cooperate with the Arranger in
its syndication efforts, including, but not limited to, promptly preparing and
providing materials and information reasonably deemed necessary by the Arranger
to successfully complete and otherwise facilitate the syndication of the
facilities described herein. In the event that such syndication cannot be
achieved in a manner reasonably satisfactory to BKB and BRSI under the structure
described in the Outline, you agree to cooperate with BKB and BRSI in developing
a mutually acceptable alternative structure that will permit a satisfactory
syndication of such credit facilities. Without limiting the foregoing, you
hereby agree: (a) that the Arranger shall have the exclusive right to syndicate
the Financing and manage all aspects of the syndication (including, without
limitation, in consultation with and subject to the reasonable approval of
Trivest, decisions as to the selection of institutions to be approached and when
they will be approached, when their commitments will be accepted, which
institutions will participate, the allocations of the commitments among the
syndicate lenders and any titles to be given to any lender participating in the
Financing) and that you will assist the Arranger and cause WinsLoew and its
management to assist the Arranger in contacting and soliciting potential
co-lenders and will provide to the Arranger, as its reasonable request,
financial and organizational information as well as financial projections needed
for syndication purposes; (b) that the Arranger shall be expressly permitted to
distribute any and all documents and information relating to the transactions
contemplated hereby and received from
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 2 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 3
Trivest Furniture Corporation
March 29, 1999
you or any other source to any potential lender, participant or assignee, on a
confidential basis and subject to reasonable confidentiality agreements
requested by you; (c) to make available TFC and Trivest, Inc. personnel and
WinsLoew management personnel responsible for the Financing or operations of
WinsLoew and its subsidiaries for meetings with potential syndicate members upon
reasonable notification and at reasonable times to be mutually agreed; (d) to
permit the Arranger to publish information in respect of the Financing
(including the Agent's and the Arranger's roles in the structuring and financing
thereof), subject to your prior reasonable approval of the form and content
thereof; and (e) that prior to or after the execution of the definitive
documentation for the facilities, BKB may syndicate all or any portion of its
commitment hereunder to one or more financial institutions after consultation
with and subject to the reasonable approval of TFC and the Arranger, and
further, that upon acceptance by BKB of a written commitment of any lender to
provide a portion of the Financing, BKB shall be released from a portion of its
commitment hereunder in an aggregate amount equal to the commitment of such
lender. In particular, and without limitation of the foregoing, you, BKB and
the Arranger agree to negotiate in good faith regarding any changes in the
definitive loan documents that may be requested in good faith by prospective
Lenders.
Although the Outline sets forth the principal terms of the Financing, you should
understand that BKB, the Agent and the Arranger reserve the right, after
consultation with the Borrower, to change the pricing (limited to 50 basis
points), structure, terms or amount of any portion of the Financing if BKB and
the Arranger reasonably determine that such changes are advisable in order to
ensure a successful syndication or an optimal credit structure for the Financing
so long as the aggregate amount of the Financing shall not be reduced. Moreover,
the Outline does not purport to include all of the customary representations,
warranties, defaults, definitions and other terms which will be contained in the
definitive documents for the Financing, all of which must be reasonably
satisfactory in form and substance to us and our counsel and to you and your
counsel prior to proceeding with the Financing.
By your signature below, you agree to pay all reasonable out-of-pocket costs and
expenses incurred by BKB, the Agent and the Arranger and their respective agents
in connection with this Commitment Letter, the transactions contemplated hereby
and BKB's, the Agent's and the Arranger's ongoing due diligence in connection
therewith (the EXPENSES) (including, without limitation, reasonable attorneys'
fees and expenses (for a single special counsel for the Agent, as well as local
counsel in each relevant jurisdiction to address real estate and collateral
matters and an agreed upon amount for review by any documentation agent
appointed in the Financing)); whether or not such transactions are consummated.
Further, in consideration of the commitment contained herein, you agree to pay
the Agent the fees described in the letter enclosed herewith (the FEE LETTER) on
the dates and in the amounts provided in the Fee Letter.
By your signature below, you further agree to indemnify and hold harmless BKB,
BRSI, the Agent, the Arranger and each of their respective officers, directors,
employees, affiliates, agents and controlling persons from and against any and
all losses, claims, damages and liabilities to which any such person may become
subject arising out of, or in connection with, the WinsLoew
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 3 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 4
Trivest Furniture Corporation
March 29, 1999
Acquisition, the Pompeii Acquisition, this Commitment Letter, the transactions
contemplated hereby or any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any of such indemnified persons
is a party thereto, and to reimburse each of such indemnified persons, from time
to time upon their demand, for any reasonable legal or other expenses incurred
in connection with investigating or defending any of the foregoing, whether or
not the transactions contemplated hereby are consummated, PROVIDED that the
foregoing indemnity will not, as to any indemnified person, apply to losses,
claims, damages, liabilities or related expenses to the extent that they arise
from the bad faith, willful misconduct or gross negligence of such indemnified
person.
You agree that this Commitment Letter is for your confidential use only and that
it will not be disclosed by you to any person (including any lender bidding for
the financing contemplated by this Commitment Letter) other than to the Special
Committee of the Board of Directors of WinsLoew and its advisors, to your
securityholders, to your employees, officers, directors, accountants, attorneys,
and other advisors and to any other person consented to by BKB, the Agent or the
Arranger and in each case, only in connection with the transactions contemplated
hereby and on a confidential basis.
Each of BKB, the Agent and the Arranger agrees to keep any information delivered
or made available by you to it confidential and not to disclose such information
other than to their respective employees, officers, attorneys and other advisors
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Financing or rendering advice in connection therewith,
PROVIDED that nothing herein shall prevent BKB, the Agent or the Arranger from
disclosing such information (a) to potential participants in and assignees of
the Financing subject to reasonable confidentiality agreements, (b) upon the
order of any court or administrative agency, (c) upon the request or demand of
any administrative or regulatory agency or authority, (d) to the extent that
such information has been publicly disclosed other than as a result of a
disclosure by BKB, the Agent or the Arranger or (e) otherwise as required by
law.
This Commitment Letter is delivered with the specific understanding that, except
as specifically set forth in the preceding paragraphs, it is not intended to
give rise to any legal liability on the part of either you or BKB or BRSI and
that the commitment set forth herein shall be considered withdrawn if for any
reason you fail to return to BKB's head office in Boston, Massachusetts by 5:00
p.m. (Boston time) on April 16, 1999 (the EXPIRATION DATE) the enclosed copy of
this Commitment Letter, the related Fee Letter signed by you.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 4 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 5
Trivest Furniture Corporation
March 29, 1999
If the foregoing is in accordance with your understanding, please accept this
Commitment Letter by signing the enclosed duplicate in the space indicated and
returning it to us on or prior to Expiration Date. This letter supersedes all of
our prior letters and communications to you regarding the subject matter of this
letter.
Very truly yours,
BANKBOSTON, N.A. BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ John C. Todd, Jr. By: /s/ Christopher R. Carmosino
-------------------------------- ---------------------------------
John C. Todd, Jr. Christopher R. Carmosino
Managing Director Managing Director
Corporate Banking Leveraged Finance
ACCEPTED AND AGREED TO THIS 29 DAY
OF MARCH 1999.
TRIVEST FURNITURE CORPORATION
By: /s/ William F. Kaczynski, Jr.
---------------------------------
Title: Managing Director
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 5 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 6
----------------------------------------------------------
WINSLOEW FURNITURE, INC.
----------------------------------------------------------
OUTLINE OF TERMS AND CONDITIONS
$145,000,000 SENIOR SECURED CREDIT FACILITIES
March 29, 1999
- --------------------------------------------------------------------------------
THIS OUTLINE OF PROPOSED TERMS AND CONDITIONS IS NOT EXHAUSTIVE. BANKBOSTON,
N.A. ("BKB") AND BANCBOSTON ROBERTSON STEPHENS INC. ("BRSI") RESERVE THE
RIGHT TO PROPOSE OR REQUIRE ADDITIONAL OR MODIFIED TERMS THAT DO NOT RESULT
IN A MATERIAL CHANGE IN THE TRANSACTION OUTLINED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BORROWERS: The survivor of the merger of Trivest Furniture Corporation,
a newly created entity ("TFC") formed to acquire WinsLoew
Furniture, Inc. (such survivor, the "Company" or "WinsLoew")
and WinsLoew Furniture, Inc., together with all of the
Company's material domestic subsidiaries (together with the
Company, the "Borrowers"). At the Agent's option, such
subsidiaries may be guarantors, rather than co-borrowers (in
such case, the "Guarantors"), provided that no guaranty will
be required of any non-US subsidiary if such guaranty would
result in adverse tax consequences to the Company.
FACILITIES: $145,000,000 aggregate senior secured credit facilities
consisting of the following:
(i) $30,000,000 Revolving Credit Facility (the "Revolver"),
including a $10,000,000 sublimit for Standby Letters of
Credit and a $5,000,000 Swingline Facility;
(ii) $25,000,000 Term Loan A (the "Term A").
(iii) $50,000,000 Term Loan B (the "Term B"); and
(iv) $40,000,000 Acquisition Revolver/Term (the "Acquisition
Line").
The Revolver, Term A, Term B and Acquisition Line are
referred to herein as the "Credit Facilities" or
"Facilities."
PURPOSE: Amounts drawn under the Revolver, Term A and Term B on the
Closing Date will be used, in conjunction with the
subordinated debt proceeds and equity contribution, both
described herein, to finance the acquisition of WinsLoew, the
acquisition of Miami Metal Products, Inc. ("Pompeii") by TFC
which is owned by an investor group affiliated with Trivest,
Inc. ("Trivest"), to refinance existing indebtedness, and to
pay transaction expenses. Thereafter, the Revolver will be
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 1 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 7
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
available to fund on-going working capital and general
corporate needs, including capital expenditures, the
Acquisition Line will be available to fund Permitted
Acquisitions, and if the acquisition of Pompeii does not
occur on or prior to the Closing Date, an additional draw
under Term A will be available to pay, in part, the purchase
price of such acquisition all as further outlined below.
GUARANTORS: WinsLoew and all domestic material operating subsidiaries,
which are Borrowers, shall provide unlimited and
unconditional guarantees of all obligations under the
Facilities.
ADMINISTRATIVE
AGENT: BankBoston, N.A. ("BankBoston" or the "Agent").
ARRANGER: BancBoston Robertson Stephens Inc. ("BRSI") will underwrite
the full amount of Facilities as Arranger and will syndicate
the Facilities to a group of lenders acceptable to the
Borrowers and the Agent.
CLOSING DATE: Targeted to occur on or before July 15, 1999 ("Closing").
FINAL MATURITY: Revolver - 12/31/04 (approx. 5.5 years from Closing);
Term A - 12/31/04 (approx. 5.5 years from Closing);
Acquisition Line - 12/31/04 (approx. 5.5 years from Closing);
Term B - 6/30/06 (approx. 7 years from Closing).
SECURITY: First priority security interest in and lien on substantially
all tangible and intangible assets (including all
intellectual property and rights to payment(s) and related
intangibles) of the domestic Borrowers and Guarantors.
WinsLoew will pledge all of the capital stock of its
subsidiaries (other than non-US subsidiaries of which 65% of
the capital stock will be pledged).
AVAILABILITY: REVOLVER - Amounts under the Revolver may be drawn, repaid
and reborrowed, subject to availability under the Borrowing
Base, which shall be equal to the sum of: (i) 85% of combined
eligible accounts receivable; PLUS (ii) 60% of combined
eligible inventory. The Borrowing Base will be reported
monthly, or at more frequent intervals as determined by the
Agent in its reasonable discretion. The Agent, in its
reasonable credit judgment, reserves the right to conduct
periodic commercial finance exams and modify eligibility
standards and establish and modify reserves against Borrowing
Base availability.
TERM A - Term A may be drawn in two stages. If the Pompeii
acquisition has not occurred on or prior to the initial
funding of the Facilities, the initial draw under Term A
shall be $5,000,000 with the balance of $20,000,000 to be
funded upon consummation of the Pompeii acquisition. If the
remaining $20,000,000 commitment to Term A has not been drawn
in conjunction with the funding of the Pompeii acquisition on
or prior to September 30, 1999, such commitment shall
terminate.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 2 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 8
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Funding of the Pompeii acquisition will be subject to
satisfactory completion of the Agent's due diligence on
Pompeii including, but not limited to, satisfactory review of
all financial information provided to the Agent, and
satisfactory review of all material pending or threatened
litigation or proceeding in court or any administrative
forum.
TERM B - Term B shall be drawn in full at Closing.
Amounts of Term A and Term B that are repaid may not be
reborrowed.
Acquisition Line - THE ACQUISITION LINE WILL BE AVAILABLE THROUGH
DECEMBER 31, 2001, TO FUND PERMITTED ACQUISITIONS (AS DEFINED
HEREIN). ANY UNUTILIZED ACQUISITION LINE COMMITMENT AS OF
DECEMBER 31, 2001 WILL BE TERMINATED.
AMORTIZATION: REVOLVER - No amortization, bullet at maturity.
TERM A & TERM B - Quarterly payments in arrears based on the
following annual amortization schedule. The first payment
date will be September 30, 1999.
<TABLE>
<CAPTION>
($ IN MILLIONS)
---------------------------------------------------------------------------
YEAR Term A TERM B TOTAL
---- ------ ------ -----
<S> <C> <C> <C> <C>
1999 $0.000 $0.500 $0.500
2000 $3.000 $0.500 $3.500
2001 $3.000 $0.500 $3.500
2002 $6.000 $0.500 $6.500
2003 $6.000 $0.500 $6.500
2004 $7.000 $0.500 $7.500
------
2005 $23.500 $23.500
2006 $23.500 $23.500
------- -------
Total $25.000 $50.000 $75.000
---------------------------------------------------------------------------
</TABLE>
If Term A is not fully drawn by September 30, 1999, Term A
amortization amounts will be based upon the pro-rata
percentage of the drawn Term A as of September 30, 1999 to
the $25,000,000 Term A commitment.
ACQUISITION LINE - 12 equal quarterly installments beginning
March 31, 2002.
SWINGLINE FACILITY: Up to $5,000,000 of the Revolver will be available for
swingline advances ("Swingline Loans") to be made available
to the Borrowers by BankBoston. Swingline Loans will
constitute usage under the Revolver (except for used fee
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 3 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 9
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
purposes) and will reduce availability of the Revolver dollar
for dollar. Swingline Loans made by BankBoston will be
settled with the Lenders on a weekly basis.
INTEREST RATE: Outstanding amounts under the Facilities shall accrue
interest at the Borrowers' option at the Alternate Base Rate
or the Eurodollar Rate, plus the Applicable Margin. Alternate
Base Rate shall mean a floating rate equal to the higher of
(i) BankBoston's Base Rate and (ii) the Federal Funds
Effective Rate plus 1/2%. The Applicable Margin for each of
the Facilities will be determined as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Level Leverage REVOLVER, TERM A & ACQ. UNUSED FEE TERM B
LINE
(Funded Debt/EBITDA) Euro+ Base+ Euro+ Base+
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I (greater than) 5.25x 2.75% 0.75% 0.500% 3.25% 1.25%
II 4.50x (less than/equal to) x (less than/equal to) 5.25x 2.50% 0.50% 0.500% 3.00% 1.00%
III 3.75x (less than/equal to) x (less than) 4.50x 2.25% 0.25% 0.375% 3.00% 1.00%
IV 3.00x (less than/equal to) x (less than) 3.75x 2.00% 0.00% 0.375% 3.00% 1.00%
V (less than/equal to) 3.00x 1.75% 0.00% 0.375% 2.75% 0.75%
----------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of calculating the Applicable Margin, the
LEVERAGE RATIO is defined as the ratio of Total Funded Debt
divided by EBITDA, calculated on a rolling four-quarter
basis. Total Funded Debt and EBITDA shall be determined on a
consolidated basis in accordance with GAAP (with pro forma
adjustments permitted to give trailing four-quarter effect to
the acquisition of WinsLoew and Pompeii, as well as future
Permitted Acquisitions and related permitted debt).
Minimum pricing will be set at Level II until the Agent's
receipt of the Borrowers' December 31, 1999 compliance
certificate. Overdue principal, interest and fees will bear
interest at 2% over the rate otherwise applicable thereto.
INTEREST PERIODS: Eurodollar rates may be selected for interest periods of 1,
2, 3 or 6 months, as available.
UNUSED
FEE: An Unused Fee will be payable quarterly in arrears based on
the average daily unused commitment (not excluding borrowings
under the Swingline Facility), under the Revolver and the
Acquisition Line as set forth in the table above, EXCEPT that
the Unused Fee on the Acquisition Line will be equal to 0.75%
per annum until greater than 50% of the Acquisition Line has
been drawn.
LETTER OF
CREDIT FEES: Payable pro rata to the Lenders at the annual rate equal to
the Applicable Margin on Eurodollar Rate Revolving Credit
Loans and based on the maximum amount available to be drawn
under each standby letter of credit; standard fees and
charges on all documentary/commercial letters of credit. In
addition, the
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 4 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 10
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Borrowers will pay to the Issuing Bank a fronting fee equal
to 0.125% per annum on the maximum amount of each standby
letter of credit.
INTEREST PAYMENTS: Interest on Base Rate loans will be due and payable monthly
in arrears. Interest on Eurodollar Rate loans will be due and
payable at the earliest of the end of each applicable
interest period or quarterly. The effective date of any
change in the Applicable Margin due to a change in the
Borrowers' Leverage will be the third business day following
the receipt by the Agent and the Lenders of the Borrowers'
quarterly financial information.
UP FRONT FEE AND
AGENT'S FEE: As set forth in the Fee Letter.
VOLUNTARY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: Voluntary prepayments of the Term Loans and Acquisition Line
loans and voluntary reductions of the Revolver and
Acquisition Line commitments shall be permitted in whole or
in part with prior notice in a minimum amount of $200,000 and
increments of $50,000, but without premium or penalty, and
subject to standard Eurodollar breakage costs, if any.
MANDATORY
PREPAYMENTS: Subject to certain baskets and other permissible amounts to
be determined, and except to the extent that Total Funded
Debt/EBITDA (computed quarterly on a trailing four-quarter
basis and after giving pro forma effect to the relevant
payment event) is less than 3.0:1, the Borrowers will be
required to make mandatory prepayments of the Credit
Facilities equal to:
* 50% of Excess Cash Flow, computed on the basis of the
Borrowers' annual audited financial statements. Excess
Cash Flow shall mean, for any fiscal year of the
Borrowers, consolidated earnings before interest, taxes,
depreciation and amortization and any other non-cash
charges MINUS increases in working capital (or plus
decreases in working capital), actual cash taxes paid,
capital expenditures and scheduled debt service payments
(including total interest, actual and scheduled repayments
of any money borrowed or capital lease obligation), for
such fiscal year, determined in accordance with GAAP; to
the extent Total Funded Debt/EBITDA is less than 3.0:1
then the percentage of Excess Cash Flow will decrease to
25%.
* 100% of the net proceeds received from the sale of or
disposition of all or any part of the assets of the
Borrowers or any Guarantor (other than in the ordinary
course of business or for consideration pertaining to
sales not in the ordinary course of business not to exceed
in any fiscal year of the Borrowers an aggregate amount to
be determined).
* 100% of the net proceeds received from the issuance of
debt or equity in excess of $5 million by the Borrower or
any Guarantor, except to the extent issued to a seller of
a business acquired by the Company. In the event of an
IPO, the percentage will be 50% of the net proceeds.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 5 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 11
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
Mandatory prepayments shall be applied pro rata to repay
without penalty or premium to the Term A and Term B and, if
the revolving period under the Acquisition Line has expired,
Acquisition Line loans, and within each tranche pro-rata as
to remaining installments as of such date, PROVIDED that
proceeds of the sale of assets acquired with Acquisition Line
loans shall first be applied to repay Acquisition Line loans
without regard to whether the revolving period under the
Acquisition Line has expired. After the Term A, Term B and
all Acquisition Line loans have been repaid in full,
mandatory prepayments will be applied to the Revolver and the
commitment therefor will be permanently reduced in the amount
of any such prepayment.
FINANCIAL
COVENANTS: To be tested quarterly commencing September 30, 1999, on a
consolidated, rolling four-quarter basis (where applicable,
including trailing four-quarter credit for Pompeii and future
Permitted Acquisitions), including, but not limited to, the
following:
* MAXIMUM TOTAL FUNDED DEBT TO EBITDA [Covenant levels to be
mutually determined];
* MINIMUM FIXED CHARGE COVERAGE RATIO [Covenant levels to be
mutually determined];
* MINIMUM EBITDA/INTEREST RATIO [Covenant levels to be
mutually determined];
* MAXIMUM CAPITAL EXPENDITURES [Covenant levels to be
mutually determined].
OTHER COVENANTS: Usual and customary for transactions of this nature, and
subject to limitations and exceptions to be mutually agreed,
including, but not limited to limitations on additional
indebtedness, liens, investments, mergers and consolidations,
asset sales, transactions with affiliates, negative pledges,
restricted payments, distributions and dividends.
PERMITTED
ACQUISITIONS: Prior consent of majority Lenders shall be required for
acquisitions with total consideration of more than $25
million. Prior consent shall not be required for acquisitions
with total consideration of up to $25 million, provided the
conditions to outlined below are met. Each such acquisition
shall be defined as a "Permitted Acquisition":
* Target shall be in a line of business substantially
similar to the Borrowers' existing lines.
* Proposed acquisition shall be "friendly".
* Borrowers shall provide notice of proposed acquisition,
including an information package for Lenders least 14 days
in advance of the proposed drawdown in order to confirm
that the conditions set forth herein are satisfied.
* Target shall have had positive trailing four quarter pro
forma EBITDA (as adjusted for anticipated expense
reductions, etc., referred to below).
* Acquisition structure shall meet minimum requirements to
be detailed in the Credit Agreement or shall be otherwise
reasonably acceptable to the Lenders. Such conditions
shall include, without limitation, requirements that the
Borrowers shall own directly or indirectly a majority of
the equity interests in
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 6 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 12
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
the target and shall control a majority of any voting
securities, and/or shall otherwise control the governance
of the target.
* Security interest shall be granted in all of the target
company's assets; the target company shall be merged into
the Borrowers, or if it is to be a subsidiary of the
Borrowers shall become an obligor under the Facilities.
* The terms of any seller paper or subordinated debt issued
or incurred in connection with the acquisition shall meet
minimum requirements to be detailed in the Credit
Agreement or shall be otherwise reasonably acceptable to
the Lenders. Such conditions shall include, without
limitation, a maximum cash interest rate, a cap on
amortization of principal prior to maturity and repayment
of the Facilities, the absence of financial covenants or
security interests and minimum standards for
subordination.
* No default of event default shall exist at the time of or
after giving effect to the acquisition; Borrowers shall
demonstrate pro forma covenant compliance based on
combined pro forma trailing four-quarter operating
performance, pro forma debt and pro forma debt service
based on pro forma interest on total debt at then
prevailing interest rates (including any Acquisition Line
loan). Any pro forma adjustments to historical EBITDA of
the target company shall be acceptable to the Lenders in
their reasonable discretion (provided that contractual and
adequately documented reductions in former owner's
compensation and/or rental expense, which will be
effective as of the drawdown date, shall be deemed
acceptable).
* Appraisals, if material in the Agent's reasonable
discretion, and phase I environmental surveys satisfactory
to the Agent and Lenders if real estate is involved.
FINANCIAL
REPORTING: Borrowers will agree to provide the following reports:
ANNUAL FINANCIAL STATEMENTS prepared on a consolidated basis
in accordance with GAAP for the current and prior fiscal
year, all certified by a nationally recognized firm of
certified public accountants and accompanied by an
unqualified opinion of such firm on the annual financial
statements, accompanied by covenant compliance calculations
and a representation by the Chief Financial Officer of the
Company that no Event of Default shall have occurred or be
continuing, all submitted to the Agent and Lenders within 105
days of the end of each fiscal year.
MONTHLY FINANCIAL STATEMENTS prepared on a consolidated basis
in accordance with GAAP for the current and prior fiscal
year, all submitted to the Agent and Lenders within 30 days
of the end of each month accompanied at the end of each
fiscal quarter, by covenant compliance calculations and a
representation by the Chief Financial Officer of the Company
that no Event or Default shall have occurred or be
continuing, all submitted to the Agent and Lenders within 45
days of the end of each fiscal quarter.
CONDITIONS
PRECEDENT: In addition to the usual and customary conditions to lending
in transactions of the type contemplated herein, the
obligation of the Agent and the Lenders to provide
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 7 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 13
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
the Credit Facilities shall be subject to (but not limited
to) the following conditions at or prior to the Closing Date
on a basis satisfactory to the Agent:
* Satisfactory completion of the Agent's due diligence on
Pompeii, if applicable, and satisfactory review of all
material pending or threatened litigation or proceeding in
court or any administrative forum.
* Consummation of the acquisition of WinsLoew by TFC on
terms and conditions reasonably satisfactory to the Agent.
* Evidence that affiliates and associates of Trivest, Inc.
have invested not less than $60 million to acquire the
common stock of the Company.
* A review satisfactory to the Agent and its counsel of all
matters related to The Company's environmental liability,
if applicable.
* The Agent and the Arranger must be satisfied that the
financial statements delivered to them fairly present the
business and financial condition of the Borrowers and
their subsidiaries.
* Borrowers shall have issued and received gross proceeds of
not less than $125,000,000 from the issuance of senior
subordinated notes (the "Senior Subordinated Notes") on
terms and conditions reasonably satisfactory to the Agent.
* The Agent and the Arranger shall have received projections
satisfactory to them with respect to the Borrowers and
their subsidiaries for the period from 1999 - 2003.
* No material adverse change, in the reasonable judgment of
the Agent and Arrangers, shall have occurred in the
business, assets or financial condition of the Borrowers
and its subsidiaries taken as a whole since the most
recent financial statements provided to the Agent.
* The absence of any Default or Event of Default under the
loan documentation or under any material contract or
agreement of the Borrowers and their subsidiaries; and
accuracy of representations and warranties in all material
respects.
* At Closing, the ratio of Total Funded Debt divided by pro
forma EBITDA for the latest twelve month period ended
March 31, 1999 on a consolidated basis shall not exceed
5.5:1. For the purposes of this calculation only, Total
Funded Debt shall be adjusted to reflect the Borrowers'
average working capital investment.
* The Agent shall have received a reasonably satisfactory
PRO FORMA closing balance sheet, adjusted to give effect
to the refinancing contemplated hereby.
* The negotiation, execution and delivery of loan and
security documentation reasonably satisfactory in form and
substance to the Borrowers, Agent and the Arranger and
their respective counsel, each of which shall be in full
force and effect on the Closing Date, and the perfection
of all security interests.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 8 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 14
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
* There being no order or injunction or other pending
litigation in which there is a reasonable possibility of a
decision which would materially adversely affect the
ability of the Borrowers or any of its subsidiaries to
perform under the loan documents or the Agent's or
Lenders' rights in respect thereof or their ability to
exercise such rights.
* Other conditions precedent specific to the transaction and
typical of facilities of this type, including the Agent's
receipt of satisfactory corporate approval of the Target
acquisition and the financing as well as opinions of
counsel satisfactory to the Agent as to, among other
matters, valid corporate existence and authority,
legality, validity and binding effect of all loan,
guaranty and security documents, perfection of security
interests, the absence of any violation of law or
regulation or conflict with any existing contracts.
DOCUMENTATION: The Credit Facilities are subject to negotiation, execution
and delivery of a definitive credit agreement and related
security documents, guarantees and any other documents as
shall be reasonably requested by the Agent. The credit
agreement and related security agreements will contain
conditions precedent, covenants, events of default and other
provisions appropriate for transactions of this size, type
and purpose and acceptable to the parties and their
respective counsel.
EVENTS OF DEFAULT: Usual and customary, including (without limitation)
nonpayment, misrepresentation, breach of covenant or
agreement, insolvency, bankruptcy, ERISA, judgments, Change
of Control and cross defaults. No grace periods on principal
payments, certain other notices or grace periods and/or
thresholds to be agreed upon.
ASSIGNMENT AND
PARTICIPATIONS: Usual and customary for transactions of this type and size.
Each lender may assign all or a portion of its loans and
commitments under the Facilities, or sell participations
therein to another person(s), provided that assignments shall
be in a minimum amount of $5 million and shall be subject to
certain conditions, including but not limited to, the
approval of the Borrowers (so long as no Default or Event of
Default exists) and the Agent, such approvals not to be
unreasonably withheld.
SYNDICATION
MATTERS: BankBoston will act as the exclusive administrative agent for
the Facilities and BRSI will act as the exclusive arranger,
adviser and syndication manager for the Facilities and, in
such capacities, each of BankBoston and BRS will perform the
duties and exercise the authority customarily associated with
such roles. No additional agents, co-agents, arrangers or
syndication managers will be appointed, unless the Borrowers
and each of BankBoston and BRSI so agree.
Prior to or after the execution of definitive documentation
for the Facilities, BankBoston reserves the right to
syndicate all or a portion of its commitment to one or more
financial institutions after consultation with the Borrowers
and BRSI. Upon the acceptance by BankBoston of the written
commitment of any Lender to
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 9 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 15
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
provide a portion of the Facilities, BankBoston shall be
released from a portion of its commitment in an aggregate
amount equal to the commitment of such Lender.
BRSI will manage all aspects of the syndication, including
the selection of Lenders, the determination of when BRSI will
approach potential Lenders and the final allocations among
the Lenders. The Borrowers agree to assist BRSI actively in
achieving a timely syndication that is reasonably
satisfactory to BRSI, such assistance to include, among other
things, (a) direct contact during the syndication between the
Borrowers' senior officers, representatives and advisors, on
the one hand, and prospective Lenders, on the other hand at
such times and places as BRSI may reasonably request, (b)
providing to BRSI all financial and other information with
respect to the Borrowers and the transactions contemplated
that BRSI may reasonably request, including but not limited
to financial projections relating to the foregoing, and (c)
assistance in the preparation of a confidential information
memorandum and other marketing materials to be used in
connection with the syndication.
The Borrowers agree that, prior to and during the syndication
of the Facilities, except for the Senior Subordinated Notes,
the Borrowers will not permit any offering, placement or
arrangement of any competing issues of debt securities or
commercial bank facility(ies) of any Borrower and any of its
subsidiaries.
BankBoston and BRSI shall be entitled, after consultation
with the Borrower, to change the pricing (limited to 50 basis
points), structure, terms or amount of any portion of the
Facilities if BankBoston and BRSI determine that such changes
are advisable in order to ensure a successful syndication or
an optimal credit structure for the Facilities so long as the
aggregate amount of the Facilities shall not be reduced.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 10 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 16
MARCH 29, 1999 WINSLOEW FURNITURE, INC.
OUTLINE OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
EXPENSES AND
INDEMNIFICATION: The Borrowers and Guarantors will pay the Agent's and
Arranger's reasonable legal, due diligence, and other
out-of-pocket expenses incurred in connection with the
negotiation, preparation and execution of the documentation
and the establishment of the syndicate, regardless of whether
the Facilities close. The Borrowers and the Guarantors
jointly and severally shall indemnify the Agent, the Arranger
and the Lenders (and all respective affiliates) against all
losses, liabilities, claims, damages or expense relating to
their loans, the loan documents, the Borrowers' use of loan
proceeds or the commitments, including but not limited to
attorneys and other professional fees and settlement costs,
excluding those arising from the indemnified party's own bad
faith, gross negligence or willful misconduct.
GOVERNING LAW: State of Georgia.
- --------------------------------------------------------------------------------
BANKBOSTON, N.A. 11 CONFIDENTIAL
BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE> 1
EXHIBIT (c)(3)
[BANKBOSTON ROBERTSON STEPHENS LETTERHEAD]
March 29, 1999
CONFIDENTIAL
Trivest Furniture Corporation
c/o Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133-5462
Attention: William F. Kaczynski Jr.
Managing Director
Ladies and Gentlemen:
We refer to the Commitment Letter of even date addressed by us,
BankBoston, N.A. and BancBoston Robertson Stephens Inc., to you in respect of
the Financing as described and defined in the Commitment Letter that we propose
to provide in connection with your acquisition, by merger, of the shares of
WinsLoew Furniture, Inc. ("WinsLoew"), including the Outline of Terms and
Conditions attached to and forming a part of the Commitment Letter.
The Commitment Letter provides that it is a condition to our obligation
to lend that the terms and conditions of the WinsLoew acquisition be acceptable
to BankBoston. As you know, it is our understanding that the price per share
payable to WinsLoew's shareholders upon consummation of the merger will be $30
and based on this understanding, the Commitment Letter includes additional,
specific conditions as to the required equity investment and gross proceeds of
the contemporaneous issue of senior subordinated debt that will fund, in part,
the WinsLoew acquisition.
You have asked us whether a per share price for WinsLoew of $33 would
be acceptable to BankBoston or would cause us to terminate our commitment in
accordance with the terms of the Commitment Letter. We are pleased to advise you
that our commitment could remain in place at a price per share of $33, PROVIDED
that the equity investment on the closing date is $75 million (rather than $60
million) and that the gross proceeds of the senior subordinated debt issue are
at least $130 million (rather than $125 million). If you arrive at a per share
price for WinsLoew between $30 and $33, we would expect a comparable adjustment
in equity investment and senior sub debt proceeds. The other terms and
conditions of the Commitment Letter, including our right to review and be
satisfied with the other terms and conditions of the WinsLoew acquisition, and
of the related Fee Letter would remain unchanged.
<PAGE> 2
We've issued this letter in two copies. Kindly countersign each copy of
this side letter in the space provided, keep one for your records and return an
original to the attention of Lauren Carrigan at the following address:
BankBoston, N.A.
Attn: Lauren Carrigan
115 Perimeter Center Place
Suite 500
Atlanta, GA 30346
Fax: 770-393-4166
We look forward to working with you toward the successful completion of
this transaction.
Very truly yours,
/s/ Christopher R. Carmosino
Christopher R. Carmosino
Managing Director
Accepted and agreed:
By: /s/ William F. Kaczynski, Jr.
----------------------------------
Name: William F. Kaczynski, Jr.
Title: Managing Director
Trivest, Inc.
<PAGE> 1
EXHIBIT (C)(4)
TRIVEST FUND II, LTD.
TRIVEST EQUITY PARTNERS II, LTD.
TRIVEST PRINCIPALS FUND II, LTD.
2665 SOUTH BAYSHORE DRIVE, SUITE 800
MIAMI, FLORIDA 33133
March 30, 1999
Trivest Furniture Corporation
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Gentlemen:
Reference is made to that certain Agreement and Plan of Merger, dated
as of March 5, 1999 (the "MERGER AGREEMENT"), pursuant to which Trivest
Furniture Corporation (the "PURCHASER") has agreed to acquire all of the
outstanding shares of common stock of WinsLoew Furniture, Inc. (the "COMPANY")
(other than certain shares owned by certain officers and directors of the
Company and/or their affiliates (the "ROLL-OVER SHARES")), in a transaction
structured as a cash merger, for $30.00 cash per share (the "ACQUISITION").
You have advised us that, contemporaneously herewith, the Purchaser and
the Company will enter into an amendment to the Merger Agreement (the
"AMENDMENT") pursuant to which each holder of common stock of the Company (other
than holders of Roll-OverShares) would receive $33.00 cash per share (and each
holder of outstanding options to purchase common stock of the Company would
receive a cash payment equal to the difference between $33.00 per share and the
per share exercise price of such options.)
We understand that the aggregate purchase price to the Purchaser,
together with fees and expenses, will be approximately $292.3 million, which
amount will be funded by:
(i) approximately $1.5 million of cash available at the Company
(the "CASH ON HAND");
(ii) the issuance of $130.0 million of senior subordinated notes
due 2009 (the "SENIOR NOTES");
(iii) borrowings of approximately $85.8 million under a $145.0
million senior secured bank credit facility consisting of (A)
a $30.0 million 5 1/2 year revolving credit facility (the
"REVOLVER") (not more than $10.8 million of which will be
drawn at
<PAGE> 2
Trivest Furniture Corporation
March 30, 1999
Page 2
closing), (B) a $25.0 million 5 1/2 year term loan A (of which
$5.0 million will be drawn at closing in connection with the
consummation of the Acquisition and $20.0 million may be used
exclusively for the consummation of the proposed acquisition
of Miami Metal Products, Inc., dba Pompeii Furniture
Industries and its Mexican affiliate (collectively,
"POMPEII")) and (C) a $50.0 million 7 year term loan B (the
"CREDIT FACILITY"), and (D) a $40.0 million 5 1/2 year
revolving acquisition facility; and
(iv) the issuance of not less than $75.0 million of common equity
to Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd.,
Trivest Principals Fund II, Ltd., certain members of senior
management of the Company, certain employees of the Company
and its subsidiaries and certain principals of Trivest II,
Inc. (the "EQUITY FINANCING").
We understand that the Cash on Hand, the proceeds of the Senior Notes,
the proceeds of the Credit Facility and the proceeds of the Equity Financing
will be used (i) to pay the consideration payable to the shareholders of the
Company (other than holders of Roll-Over Shares) in connection with the
Acquisition and to make the related payments to holders of outstanding Company
stock options, (ii) to refinance existing indebtedness of the Company and its
subsidiaries, (iii) to pay the purchase price for Pompeii, (iv) to finance
certain future acquisitions by the Company to the extent permitted under the
indenture relating to the Senior Notes and under the Credit Facility, (v) to pay
expenses of the Acquisition and the acquisition of Pompeii and (vi) to fund the
working capital needs of the Company and its subsidiaries and for general
corporate purposes.
Trivest Fund II, Ltd., Trivest Equity Partners II, Ltd. and Trivest
Principals Fund II, Ltd. hereby commit, severally in accordance with the pro
rata percentages set forth under Paragraph A of ANNEX I, hereto, to provide up
to $73.5 million of the Equity Financing for the transaction. Trivest Equity
Partners II, Ltd. and Trivest Principals Fund II, Ltd. hereby commit, severally
in accordance with the pro rata percentages set forth under Paragraph B of ANNEX
I, hereto, to provide up to $1.5 million of any exess of the Equity Financing
for the transaction over $73.5 million. The foregoing commitments are subject to
the following:
(a) the Amendment shall have been executed and delivered by the
parties thereto;
(b) no material adverse change shall have occurred after the date
hereof in the business, prospects, condition (financial or
otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole;
(c) the Senior Notes financing shall have been consummated on
terms substantially
<PAGE> 3
Trivest Furniture Corporation
March 30, 1999
Page 3
the same as those described above; and
(d) the Credit Facility financing shall have been consummated on
terms substantially the same as those described above.
You are hereby authorized to deliver a copy of this letter to the
Special Committee of the Board of Directors of the Company.
Very truly yours,
TRIVEST FUND II, LTD.
By: Trivest Fund II Manager, Ltd.,
General Partner
Trivest Equities, Inc., General Partner
By: /s/ Earl W. Powell
---------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST EQUITY PARTNERS II, LTD.
By: Trivest Fund II Manager, Ltd.,
General Partner
Trivest Equities, Inc., General Partner
By: /s/ Earl W. Powell
---------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
TRIVEST PRINCIPALS FUND II, LTD.
By: Trivest Principals Fund II, Inc.,
General Partner
By: /s/ Earl W. Powell
---------------------------------------
Earl W. Powell
Chairman and Chief Executive Officer
<PAGE> 4
ANNEX I
PRO RATA PERCENTAGES OF COMMITMENT
<TABLE>
<S> <C>
B. FIRST $73.5 MILLION OF EQUITY FINANCING
TRIVEST INVESTOR PRO RATA PERCENTAGE
---------------- -------------------
Trivest Fund II, Ltd. 72.73%
Trivest Equity Partners II, Ltd. 18.91%
Trivest Principals Fund II, Ltd. 8.36%
B. UP TO $1.5 MILLION EXCESS OF EQUITY FINANCING
TRIVEST INVESTOR PRO RATA PERCENTAGE
---------------- -------------------
Trivest Equity Partners II, Ltd. 69.33%
Trivest Principals Fund II, Ltd. 30.67%
</TABLE>
<PAGE> 1
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
_________, 1999
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
(the "Special Meeting") of WinsLoew Furniture, Inc. (the "Company" or
"WinsLoew") to be held on _____, June __, 1999, at 9:00 a.m., local time, at
the offices of Trivest, Inc., located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. The purpose of the Special Meeting is to consider and
vote upon a merger (the "Merger") that, if approved and subsequently
consummated, will result in the public shareholders of WinsLoew receiving
$33.00 in cash per share for their stock and WinsLoew becoming a
privately-owned company.
If approved by WinsLoew's shareholders, the Merger would be
accomplished pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") as follows: Trivest Furniture Corporation, a
newly-formed Florida corporation (the "Purchaser"), would merge with and into
WinsLoew, which would be the surviving corporation in the Merger. If the Merger
is consummated, each outstanding share of common stock, $.01 par value, of
WinsLoew (the "Common Stock"), other than shares held by the Purchaser, will be
cancelled and converted automatically into the right to receive $33.00 in cash,
payable to the holder thereof, without interest.
The Purchaser has been organized at the direction of two private
investment partnerships affiliated with certain WinsLoew directors, Trivest
Furniture Partners, Ltd. and Trivest Fund II Group, Ltd. (together, the
"Trivest Partnerships") for the purpose of acquiring all of WinsLoew's Common
Stock. As a result of the Merger, WinsLoew will become a privately held company
that is owned by the Trivest Partnerships, certain WinsLoew directors, certain
members of WinsLoew's management and certain WinsLoew employees.
A special committee of the Board of Directors of WinsLoew (the
"Special Committee"), consisting of five independent directors, was formed to
investigate, consider and evaluate the proposed Merger and possible strategic
alternatives to maximize shareholder value. The Special Committee has
unanimously recommended to WinsLoew's Board of Directors that the Merger and
related agreements be approved. In connection with its evaluation of the
proposed Merger and certain possible strategic alternatives, the Special
Committee engaged Mann Armistead & Epperson, Ltd. ("Mann Armistead") to act as
its financial advisor. Mann Armistead has rendered its opinion that, as of
April 7, 1999, based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the cash merger consideration of
$33.00 per share to be received in the Merger is fair from a financial point of
view to the public shareholders of the Company. The written opinion of Mann
Armistead, dated as of April 7, 1999, is attached as Appendix B to the enclosed
Proxy Statement and should be read carefully and in its entirety by the
shareholders.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE
TERMS OF THE MERGER ARE SUBSTANTIVELY AND PROCEDURALLY FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMEND THAT THE
SHAREHOLDERS APPROVE THE MERGER.
Approval of the Merger at the Special Meeting will require the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting. Shareholders (including members
of WinsLoew's senior management, the members of the Special Committee and
certain shareholders affiliated or associated with the Trivest Partnerships)
who, as of the record date, hold of record approximately 35.8% of the
outstanding shares of Common Stock, have expressed their intention to vote
their shares for approval of the Merger. If the Merger is approved by the
shareholders, the closing of the Merger will occur as soon after the Special
Meeting as all of the other conditions to closing the Merger are satisfied.
<PAGE> 2
The accompanying Proxy Statement provides you with a summary of the
proposed Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. Whether or
not you plan to attend, it is important that your shares are represented at the
Special Meeting. A failure to vote or a vote to abstain will count as a vote
against the Merger. Accordingly, you are requested to promptly complete, sign
and date the enclosed proxy and return it in the envelope provided.
EARL W. POWELL
Chairman of the Board
BOBBY TESNEY
President and Chief Executive Officer
2
<PAGE> 1
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE __, 1999
To the Shareholders of
WinsLoew Furniture, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
WinsLoew Furniture, Inc., a Florida corporation (the "Company"), will be held
at 9:00 a.m., local time, on ________, June __, 1999, at the offices of
Trivest, Inc., located at 2665 South Bayshore Drive, Suite 800, Miami, Florida
33133, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement"), providing for the merger (the "Merger")
of Trivest Furniture Corporation, a Florida corporation (the
"Purchaser"), with and into the Company, with the Company
being the surviving corporation. In the Merger, each
outstanding share of the Company's Common Stock, $.01 par
value (other than shares held by the Purchaser), will be
converted into the right to receive $33.00 in cash, without
interest. The Merger Agreement is more fully described in the
accompanying Proxy Statement and is attached as Appendix A to
the Proxy Statement.
2. To transact such other business as may properly come before
the meeting and any adjournments or postponements thereof.
The Board of Directors has determined that only shareholders of record
at the close of business on __________, 1999 are entitled to notice of, and to
vote at, the meeting and any adjournments or postponements thereof. The stock
transfer books of the Company will not be closed prior to the meeting.
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE THAT YOUR VOTE WILL BE COUNTED, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOUR PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED, BY FILING WITH THE SECRETARY OF THE COMPANY A
WRITTEN REVOCATION, BY SUBMITTING A PROXY BEARING A LATER DATE, OR BY ATTENDING
AND VOTING IN PERSON AT THE MEETING. PLEASE DO NOT SEND ANY CERTIFICATES FOR
YOUR SHARES AT THIS TIME.
By Order of the Board of Directors
Bobby Tesney
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Birmingham, Alabama
________, 1999
<PAGE> 1
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
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement / / Confidential, For Use of the Com-
/ / Definitive proxy statement mission Only (as permitted by Rule
/ / Definitive additional materials 14a-6(e)(2))
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WINSLOEW FURNITURE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of filing fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on the 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, $.01 par value per Share
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
7,181,908
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
$33.00
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$237,002,964
- -------------------------------------------------------------------------------
(5) Total fee paid:
$47,401
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE> 2
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
_________, 1999
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
(the "Special Meeting") of WinsLoew Furniture, Inc. (the "Company" or
"WinsLoew") to be held on _____, June __, 1999, at 9:00 a.m., local time, at
the offices of Trivest, Inc., located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. The purpose of the Special Meeting is to consider and
vote upon a merger (the "Merger") that, if approved and subsequently
consummated, will result in the public shareholders of WinsLoew receiving
$33.00 in cash per share for their stock and WinsLoew becoming a
privately-owned company.
If approved by WinsLoew's shareholders, the Merger would be
accomplished pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") as follows: Trivest Furniture Corporation, a
newly-formed Florida corporation (the "Purchaser"), would merge with and into
WinsLoew, which would be the surviving corporation in the Merger. If the Merger
is consummated, each outstanding share of common stock, $.01 par value, of
WinsLoew (the "Common Stock"), other than shares held by the Purchaser, will be
cancelled and converted automatically into the right to receive $33.00 in cash,
payable to the holder thereof, without interest.
The Purchaser has been organized at the direction of two private
investment partnerships affiliated with certain WinsLoew directors, Trivest
Furniture Partners, Ltd. and Trivest Fund II Group, Ltd. (together, the
"Trivest Partnerships") for the purpose of acquiring all of WinsLoew's Common
Stock. As a result of the Merger, WinsLoew will become a privately held company
that is owned by the Trivest Partnerships, certain WinsLoew directors, certain
members of WinsLoew's management and certain WinsLoew employees.
A special committee of the Board of Directors of WinsLoew (the
"Special Committee"), consisting of five independent directors, was formed to
investigate, consider and evaluate the proposed Merger and possible strategic
alternatives to maximize shareholder value. The Special Committee has
unanimously recommended to WinsLoew's Board of Directors that the Merger and
related agreements be approved. In connection with its evaluation of the
proposed Merger and certain possible strategic alternatives, the Special
Committee engaged Mann Armistead & Epperson, Ltd. ("Mann Armistead") to act as
its financial advisor. Mann Armistead has rendered its opinion that, as of
April 7, 1999, based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the cash merger consideration of
$33.00 per share to be received in the Merger is fair from a financial point of
view to the public shareholders of the Company. The written opinion of Mann
Armistead, dated as of April 7, 1999, is attached as Appendix B to the enclosed
Proxy Statement and should be read carefully and in its entirety by the
shareholders.
THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS BELIEVE THAT THE
TERMS OF THE MERGER ARE SUBSTANTIVELY AND PROCEDURALLY FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMEND THAT THE
SHAREHOLDERS APPROVE THE MERGER.
Approval of the Merger at the Special Meeting will require the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting. Shareholders (including members
of WinsLoew's senior management, the members of the Special Committee and
certain shareholders affiliated or associated with the Trivest Partnerships)
who, as of the record date, hold of record approximately 35.8% of the
outstanding shares of Common Stock, have expressed their intention to vote
their shares for approval of the Merger. If the Merger is approved by the
shareholders, the closing of the Merger will occur as soon after the Special
Meeting as all of the other conditions to closing the Merger are satisfied.
<PAGE> 3
The accompanying Proxy Statement provides you with a summary of the
proposed Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. Whether or
not you plan to attend, it is important that your shares are represented at the
Special Meeting. A failure to vote or a vote to abstain will count as a vote
against the Merger. Accordingly, you are requested to promptly complete, sign
and date the enclosed proxy and return it in the envelope provided.
EARL W. POWELL
Chairman of the Board
BOBBY TESNEY
President and Chief Executive Officer
2
<PAGE> 4
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE __, 1999
To the Shareholders of
WinsLoew Furniture, Inc.
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
WinsLoew Furniture, Inc., a Florida corporation (the "Company"), will be held
at 9:00 a.m., local time, on ________, June __, 1999, at the offices of
Trivest, Inc., located at 2665 South Bayshore Drive, Suite 800, Miami, Florida
33133, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement"), providing for the merger (the "Merger")
of Trivest Furniture Corporation, a Florida corporation (the
"Purchaser"), with and into the Company, with the Company
being the surviving corporation. In the Merger, each
outstanding share of the Company's Common Stock, $.01 par
value (other than shares held by the Purchaser), will be
converted into the right to receive $33.00 in cash, without
interest. The Merger Agreement is more fully described in the
accompanying Proxy Statement and is attached as Appendix A to
the Proxy Statement.
2. To transact such other business as may properly come before
the meeting and any adjournments or postponements thereof.
The Board of Directors has determined that only shareholders of record
at the close of business on __________, 1999 are entitled to notice of, and to
vote at, the meeting and any adjournments or postponements thereof. The stock
transfer books of the Company will not be closed prior to the meeting.
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE THAT YOUR VOTE WILL BE COUNTED, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOUR PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED, BY FILING WITH THE SECRETARY OF THE COMPANY A
WRITTEN REVOCATION, BY SUBMITTING A PROXY BEARING A LATER DATE, OR BY ATTENDING
AND VOTING IN PERSON AT THE MEETING. PLEASE DO NOT SEND ANY CERTIFICATES FOR
YOUR SHARES AT THIS TIME.
By Order of the Board of Directors
Bobby Tesney
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Birmingham, Alabama
________, 1999
<PAGE> 5
WINSLOEW FURNITURE, INC.
160 Village Street
Birmingham, Alabama 35242
-----------------------------
PROXY STATEMENT
-----------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE __, 1999
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of
WinsLoew Furniture, Inc., a Florida corporation (the "Company" or "WinsLoew"),
in connection with the solicitation by its Board of Directors (the "Board") of
proxies to be used at a Special Meeting of Shareholders (as it may be adjourned
or postponed, the "Special Meeting") to be held on _______, June ___, 1999 at
9:00 a.m., local time, at the offices of Trivest, Inc., located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133, and at any adjournments or
postponements thereof. The date of this Proxy Statement is __________, 1999,
and this Proxy Statement, the foregoing Notice of Special Meeting of
Shareholders and the enclosed proxy card are first being mailed to shareholders
of WinsLoew on or about _______, 1999.
The Special Meeting has been called to consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement"), which is attached to this Proxy Statement as
Appendix A. Pursuant to the Merger Agreement, Trivest Furniture Corporation
(the "Purchaser"), a newly-formed Florida corporation, will be merged with and
into WinsLoew (the "Merger"). In the Merger, each outstanding share of common
stock, $.01 par value (the "Common Stock"), of WinsLoew (other than shares held
by the Purchaser) will be canceled and converted automatically into the right
to receive $33.00 in cash, payable to the holder thereof, without interest. The
Purchaser has been organized at the direction of two private investment
partnerships, Trivest Furniture Partners, Ltd. and Trivest Fund II Group, Ltd.
(together, the "Trivest Partnerships") controlled by Earl W. Powell, WinsLoew's
Chairman of the Board. After the Merger, WinsLoew will become a privately held
company wholly-owned by the Purchaser's shareholders, and the public
shareholders will no longer own an equity interest in WinsLoew.
Immediately prior to the Merger, all of the outstanding common stock
of the Purchaser will be acquired by the following parties, which will purchase
such shares for cash or contribute to the Purchaser shares of WinsLoew Common
Stock in exchange for shares of Purchaser common stock: (i) the Trivest
Partnerships, Mr. Powell and Phillip T. George, M.D., who is also a director of
WinsLoew (collectively, the "Trivest Investors"); (ii) Bobby Tesney, the
President, Chief Executive Officer, and a director of the Company (the
"Management Director"), Vincent A. Tortorici, Jr., the Company's Vice President
and Chief Financial Officer, Stephen C. Hess, the Company's Executive Vice
President, Casual Furniture, R. Craig Watts, the Company's Executive Vice
President, Contract Seating, and Jerry Camp, the Company's Vice President,
Operations (together with the Management Director, the "Management Group"); and
(iii) approximately 35 other Company employees who will be offered the
opportunity to acquire shares of Purchaser common stock (the "Eligible
Employees").
-----------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
<PAGE> 6
Trivest Fund I, Ltd., Trivest Equity Partners, Ltd., Trivest
Principals' Fund 1988, Trivest Special Situations Fund 1985, L.P. and Trivest
Annuity Fund, Ltd. (collectively, the "Existing Trivest Shareholders"), which
are private investment partnerships controlled by Messrs. Powell and George,
currently hold of record approximately 23.7% of the outstanding WinsLoew Common
Stock. The Existing Trivest Shareholders will receive $33.00 per share in cash
for all of their shares on the same basis as other WinsLoew shareholders and
will not be shareholders of WinsLoew after the Merger.
Messrs. Tesney, Tortorici, Hess, Watts and Camp will remain executive
officers of the Company, and Mr. Tesney will remain a director of the Company
following the Merger. Earl W. Powell, Phillip T. George, M.D., William F.
Kaczynski, Jr. and Peter W. Klein, the current WinsLoew directors affiliated
with the Trivest Partnerships (the "Trivest Directors"), will remain directors
of WinsLoew. All of the Trivest Directors are indirect investors in the Trivest
Partnerships.
The aggregate consideration payable in the Merger, excluding fees and
expenses, is approximately $253.8 million. The amount to be paid in cash will
be reduced by the aggregate value of the Common Stock that the Management
Group, the Trivest Investors, and the Eligible Employees contribute to the
Purchaser.
Because certain directors of WinsLoew will have a financial interest
in the Merger, the Board of Directors appointed a special committee of
disinterested directors to consider and make recommendations with respect to
the Merger and possible strategic alternatives to maximize shareholder value
(the "Special Committee"). The Special Committee and the Board believe that the
terms of the Merger are substantively and procedurally fair to, and in the best
interests of, the Company's shareholders and unanimously recommend that the
shareholders approve the Merger.
Approval of the Merger at the Special Meeting will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting. Shareholders (including
the members of the Management Group, the individual Trivest Investors, the
Existing Trivest Shareholders, the other members of the Board and certain
shareholders affiliated or associated with the Trivest Partnerships) who, as of
the record date, held of record approximately 2,568,218, or 35.8%, of the
outstanding shares of Common Stock have expressed their intention to vote their
shares for approval of the Merger. Holders of 4,613,690, or approximately
64.2%, of the outstanding shares of Common Stock remain uncommitted with
respect to how they will vote on the Merger. Accordingly, the affirmative vote
by holders of Common Stock representing approximately 1,022,737 (or 22.2%) of
such uncommitted shares, or approximately 14.2% of the outstanding shares, will
be required to approve the Merger. The consummation of the Merger is subject to
a number of conditions, and, accordingly, even if shareholders approve the
Merger, there can be no assurance that the Merger will be consummated.
WHAT YOU NEED TO DO NOW
Please promptly complete, sign and date the enclosed proxy card and
return it in the envelope provided. A failure to vote or a vote to abstain will
have the same legal effect as a vote against the Merger. If your shares are
held in "street name" by your broker, then you should instruct your broker how
to vote your shares. If you do not provide instructions to your broker, your
shares will not be voted and they will be counted as votes against the proposal
to approve and adopt the merger Agreement. Please do not send in stock
certificates now. After the Merger is completed, we will send you written
instructions for exchanging your Common Stock certificates for the cash to
which your are entitled.
SHAREHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND TO CONSULT WITH THEIR PERSONAL FINANCIAL
AND TAX ADVISORS.
ii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction...................................................................................i
Summary........................................................................................1
Date, Time and Place of the Special Meeting.............................................1
Purpose of the Special Meeting..........................................................1
Record Date and Quorum..................................................................1
Vote Required...........................................................................1
Parties to the Merger...................................................................2
The Merger..............................................................................3
Effective Time of the Merger and Payment for Shares.....................................3
The Special Committee's and Board's Recommendation......................................3
Opinion of Financial Advisor............................................................4
Purpose and Reasons of the Affiliates for the Merger....................................4
Position of the Affiliates as to Fairness of the Merger.................................4
Conflicts of Interest...................................................................5
Certain Effects of the Merger...........................................................6
Conditions to the Merger, Termination and Expenses......................................6
Federal Income Tax Consequences.........................................................8
Rights of Dissenting Shareholders.......................................................8
Accounting Treatment....................................................................8
Financing of the Merger.................................................................8
Market Prices of Common Stock and Dividends.............................................9
The Special Meeting...........................................................................10
Proxy Solicitation.....................................................................10
Record Date and Quorum Requirement.....................................................10
Voting Procedures; Required Vote.......................................................10
Voting and Revocation of Proxies.......................................................11
Effective Time.........................................................................11
Special Factors...............................................................................12
Background of the Merger...............................................................12
The Special Committee's and the Board's Recommendation.................................24
Opinion of the Financial Advisor.......................................................28
Purpose and Reasons of the Affiliates for the Merger...................................32
Position of the Affiliates as to Fairness of the Merger................................34
Conflicts of Interest..................................................................34
Certain Effects of the Merger..........................................................37
Conduct of WinsLoew's Business After the Merger........................................38
Certain Forward Looking Information....................................................38
The Merger....................................................................................39
Conversion of Securities...............................................................39
Cash-out of WinsLoew Stock Options.....................................................39
Transfer of Shares.....................................................................39
Conditions.............................................................................40
Representations and Warranties.........................................................41
Covenants..............................................................................42
Nonsolicitation Covenant...............................................................44
Indemnification and Insurance..........................................................44
Expenses...............................................................................45
Termination, Amendment and Waiver......................................................45
Termination Fee........................................................................46
Financing..............................................................................46
</TABLE>
iii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses of the Transaction............................................................49
Regulatory Approvals...................................................................50
Accounting Treatment...................................................................50
Rights of Dissenting Shareholders.............................................................50
Federal Income Tax Consequences...............................................................51
Business of the Company.......................................................................52
Background.............................................................................52
Product Lines..........................................................................54
Competitive Strengths..................................................................54
Business Strategy......................................................................55
Products...............................................................................57
Manufacturing..........................................................................58
Marketing and Sales....................................................................60
Backlog................................................................................61
Raw Materials and Foreign Sourcing.....................................................61
Furniture Industry and Competition.....................................................62
Trademarks and Patents.................................................................62
Environmental Matters..................................................................62
Properties.............................................................................63
Employees..............................................................................63
Legal Proceedings......................................................................64
Selected Consolidated Financial Data..........................................................65
Management's Discussion and Analysis of Results of Operations and Financial Condition.........67
General................................................................................67
Results of Operations..................................................................67
Comparison of Years Ended December 31, 1998 and 1997...................................68
Comparison of Years Ended December 31, 1997 and 1996...................................69
Seasonality and Quarterly Information..................................................69
Liquidity and Capital Resources........................................................70
Foreign Exchange Fluctuations and Effects of Inflation.................................71
Year 2000..............................................................................72
Certain Forward Looking Information...........................................................73
Management....................................................................................74
Directors and Executive Officers of WinsLoew...........................................74
Executive and Director Compensation....................................................76
Principal Shareholders and Stock Ownership....................................................80
Certain Information Concerning the Purchaser and Other Affiliates.............................82
Certain Transactions..........................................................................84
Market Prices of Common Stock and Dividends...................................................85
Disclosure Regarding Forward-Looking Statements...............................................86
Independent Public Accountants................................................................86
Information Concerning Shareholder Proposals..................................................86
Other Business................................................................................86
Documents Incorporated by Reference...........................................................87
Available Information.........................................................................87
Index to Consolidated Financial Statements...................................................F-1
</TABLE>
APPENDICES
APPENDIX A - Amended and Restated Agreement and Plan of Merger
APPENDIX B - Opinion of Mann Armistead & Epperson, Ltd.
iv
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. Reference is made to, and this Summary is qualified in
its entirety by, the more detailed information contained elsewhere or
incorporated by reference in this Proxy Statement. Shareholders are urged to
read this Proxy Statement and its appendices in their entirety before voting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting of WinsLoew will be held on _______, June __,
1999, at 9:00 a.m., local time, at the offices of Trivest, Inc., located at
2665 South Bayshore Drive, Suite 800, Miami, Florida 33133.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will consider
and vote on a proposal to approve the Merger Agreement, which is attached to
this Proxy Statement as Appendix A, pursuant to which the Purchaser, a
newly-formed Florida corporation, would merge with and into WinsLoew, with
WinsLoew as the surviving corporation in the Merger, and each outstanding share
of Common Stock of WinsLoew, other than shares held by the Purchaser will be
converted automatically into the right to receive $33.00 in cash payable to the
holders thereof, without interest (the "Cash Merger Consideration"). See "THE
MERGER."
RECORD DATE AND QUORUM
The Board of Directors of the Company has fixed the close of business
on ________, 1999 as the Record Date for the determination of shareholders
entitled to notice of, and to vote at, the Special Meeting and any adjournments
or postponements thereof. Each holder of record of Common Stock at the close of
business on the Record Date is entitled to one vote for each share then held on
each matter submitted to a vote of shareholders. At the close of business on
the Record Date, there were 7,181,908 shares of Common Stock outstanding. The
holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Special Meeting must be present in person or represented by proxy
to constitute a quorum for the transaction of business. See "THE SPECIAL
MEETING."
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting is required to
approve the Merger Agreement. Thus, a failure to vote or a vote to abstain will
have the same legal effect as a vote cast against approval. In addition,
brokers who hold shares of Common Stock as nominees will not have discretionary
authority to vote such shares in the absence of instructions from the
beneficial owners. A broker non-vote will have the same effect as a vote
against the Merger. See "THE SPECIAL MEETING--Voting Procedures; Required
Vote."
Shareholders (including the Management Group, the individual Trivest
Investors, the Existing Trivest Shareholders, the other members of the Board
and certain shareholders affiliated or associated with the Trivest
Partnerships) who as of the record date held of record 2,568,218, or
approximately 35.8%, of the outstanding shares of Common Stock have expressed
their intention to vote their shares for approval of the Merger. Holders of
4,613,690 shares of Common Stock, or approximately 64.2%, of the outstanding
shares of Common Stock, remain uncommitted with respect to how they will vote
on the Merger. Accordingly, the affirmative vote by holders of Common Stock
representing approximately 1,022,737 (or 22.2%) of such uncommitted shares, or
approximately 14.2% of the outstanding shares, will be required to approve the
Merger.
1
<PAGE> 10
PARTIES TO THE MERGER
THE COMPANY.
WinsLoew designs, manufactures and distributes casual furniture,
contract seating and ready-to-assemble ("RTA") furniture.
CASUAL FURNITURE. WinsLoew designs, manufactures and distributes
casual furniture for both the residential and contract markets. WinsLoew's
residential products are constructed of extruded and tubular aluminum and cast
aluminum. WinsLoew markets its residential products through independent sales
representatives primarily to specialty patio stores, department stores and
furniture stores. WinsLoew's contract casual products are constructed of
extruded, tubular and cast aluminum, steel, wrought iron, wood and fiberglass.
Contract casual products are marketed primarily through an in-house sales
force, primarily to apartment developers and management companies, hospitality
providers (hotel, motel, restaurants, country clubs and resorts), and city and
state municipalities.
CONTRACT SEATING. WinsLoew designs, assembles and distributes contract
seating products constructed of contemporary, traditional and transitional
styles of wood and metal. Products include upholstered chairs, sofas and love
seats offered in a variety of finish and fabric options. Products are designed
for use in the restaurant, lodging, office, healthcare facilities and retail
stores. These products are assembled pursuant to specific orders and are
distributed to a broad customer base which includes architectural design firms,
office furniture dealers, and restaurant and lodging chains through independent
sales organizations.
RTA FURNITURE. WinsLoew's RTA products consist of promotionally priced
RTA "spindle" and "flatline" furniture and fully assembled case goods furniture
designed for household use. Products include corner spindle units, four drawer
chests, three drawer changing towers, coffee tables, end tables, entertainment
centers and tape storage units. Distribution is through mass merchants and
catalog wholesalers.
The principal executive offices of the Company are located at 160
Village Street, Birmingham, Alabama 35242. The Company's telephone number is
(205) 408-7600. See "BUSINESS OF THE COMPANY."
THE PURCHASER.
The Purchaser is a newly-formed Florida corporation organized at the
direction of the Trivest Partnerships, each of which is a private investment
partnership. See "CERTAIN INFORMATION CONCERNING THE PURCHASER AND OTHER
AFFILIATES." Immediately prior to the consummation of the Merger, the Trivest
Investors, the members of the Management Group and the Eligible Employees will
purchase shares of Purchaser common stock for cash or contribute to the
Purchaser shares of WinsLoew Common Stock in exchange for shares of Purchaser
common stock as follows:
o THE TRIVEST INVESTORS. The Trivest Investors together will acquire
an aggregate of approximately 96.0% of the outstanding Purchaser
common stock; provided, that the cash portion of such contribution
is subject to reduction by an amount equal to the cash and the
aggregate value (at $33.00 per share) of the shares of Common Stock
contributed to the Purchaser by the Eligible Employees. The Trivest
Investors include the Trivest Partnerships and Messrs. Powell and
George. See "SPECIAL FACTORS--Purpose and Reasons of the Affiliates
for the Merger" and "--Conflicts of Interest."
o THE MANAGEMENT GROUP. The members of the Management Group together
will acquire an aggregate of approximately 4.0% of the outstanding
Purchaser common stock. The members of the Management Group are the
following executive officers of WinsLoew: Bobby Tesney, President
and Chief Executive Officer, Vincent A. Tortorici, Jr., Vice
President and Chief Financial Officer, Stephen C. Hess, Executive
Vice President, Casual Furniture, R. Craig Watts, Executive Vice
President, Contract Seating, and Jerry Camp, Vice President,
Operations. Following consummation
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<PAGE> 11
of the Merger, the current executive officers of WinsLoew will
retain their positions with WinsLoew. Mr. Tesney will remain a
director of WinsLoew. The See "SPECIAL FACTORS--Purpose and Reasons
of the Affiliates for the Merger" and "--Conflicts of Interest."
o THE ELIGIBLE EMPLOYEES. Approximately 35 Eligible Employees of
WinsLoew (not including members of the Management Group) will
individually be offered the opportunity to purchase shares of common
stock of the Purchaser and/or contribute any or all of their shares
of Common Stock to the Purchaser in exchange for common stock of the
Purchaser.
After the Merger, the Trivest Directors and the Management Director
will continue to serve as directors of WinsLoew, and the five members of the
Management Group will continue to serve as executive officers of WinsLoew. See
"SPECIAL FACTORS--Conflicts of Interest."
The executive offices of the Purchaser are located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133. The Purchaser's telephone
number is (305) 858-2200.
THE MERGER
The Merger Agreement provides that subject to satisfaction of certain
conditions, the Purchaser will be merged with and into WinsLoew, and that
following the Merger, the separate existence of the Purchaser will cease and
WinsLoew will continue as the surviving corporation owned by the shareholders
of the Purchaser. At the effective time of the Merger, which shall be the date
and time of filing of Articles of Merger with the Secretary of State of the
State of Florida (the "Effective Time"), and subject to the terms and
conditions set forth in the Merger Agreement, each share of issued and
outstanding Common Stock (other than shares held by the Purchaser) will, by
virtue of the Merger, be canceled and converted into the right to receive
$33.00 in cash, without interest. As a result of the Merger, WinsLoew's Common
Stock will no longer be publicly traded and will be 100% owned by the
shareholders of the Purchaser. See "THE MERGER."
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The Effective Time is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the terms and
conditions of the Merger Agreement. See "--Conditions to the Merger,
Termination and Expenses" and "THE MERGER--Conditions." Detailed instructions
with regard to the surrender of share certificates, together with a letter of
transmittal, will be forwarded to shareholders by the Company's transfer agent,
American Stock Transfer & Trust Company (the "Disbursing Agent"), promptly
following the Effective Time. Shareholders should not submit their certificates
to the Disbursing Agent until they have received such materials. The Disbursing
Agent will send payment of the Cash Merger Consideration to shareholders as
promptly as practicable following receipt by the Disbursing Agent of their
certificates and other required documents. No interest will be paid or accrued
on the cash payable upon the surrender of certificates. See "THE
MERGER--Conversion of Securities." Shareholders should not send any share
certificates at this time.
THE SPECIAL COMMITTEE'S AND BOARD'S RECOMMENDATION
The Trivest Directors and the Management Director will have financial
interests in the Purchaser and are therefore subject to conflicts of interest
in evaluating the Merger. Accordingly, in January 1999, the Board appointed the
Special Committee, comprised of all five disinterested directors, to evaluate
and make recommendations with respect to the Merger and other strategic
options. Based on the factors set forth in this Proxy Statement (see "SPECIAL
FACTORS--The Special Committee's and the Board's Recommendation"), the Special
Committee unanimously recommended to the Board that the Merger Agreement be
approved and that it be recommended to the shareholders of the Company.
Following the unanimous recommendation of the Special Committee, the Board
unanimously approved the Merger Agreement and recommended that the shareholders
of the Company approve the Merger Agreement. In connection with the foregoing,
the Special Committee and the Board determined that the Merger is substantively
and procedurally fair to, and in the best interests of, the shareholders of
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<PAGE> 12
the Company other than the Purchaser (the "Public Shareholders"). In connection
with their recommendations, the Special Committee and the Board each adopted the
analyses and findings of the Special Committee's financial advisor, Mann
Armistead & Epperson, Ltd. See "SPECIAL FACTORS--Opinion of Financial Advisor."
THE SPECIAL COMMITTEE AND THE BOARD RECOMMEND THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
Mann Armistead & Epperson, Ltd. ("Mann Armistead") provided its opinion
to the Special Committee that, as of the date of such opinion, the Cash Merger
Consideration was fair from a financial point of view to the Public Shareholders
of the Company.
The full text of the written opinion of Mann Armistead, dated as of
April 7, 1999, which sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with such opinion, is
attached hereto as Appendix B and is incorporated herein by reference. The
opinion of Mann Armistead referred to herein does not constitute a
recommendation as to how any holder of such shares should vote with respect to
the Merger. Holders of shares of Common Stock are urged to, and should, read
such opinion in its entirety. See "SPECIAL FACTORS--Opinion of Financial
Advisor."
The Company has agreed to pay Mann Armistead aggregate fees of
$1,836,000 in connection with its services as financial advisor to the Special
Committee and the Company and its rendering of such opinion. See "SPECIAL
FACTORS--Opinion of Financial Advisor." The Company has agreed to reimburse
Mann Armistead for its reasonable out-of-pocket expenses, including attorneys'
fees, and to indemnify Mann Armistead against certain liabilities, including
certain liabilities under the federal securities laws.
PURPOSE AND REASONS OF THE AFFILIATES FOR THE MERGER
The purpose of the Purchaser, the members of the Management Group, the
Trivest Partnerships and the Trivest Directors (collectively, the "Affiliates")
for engaging in the transactions contemplated by the Merger Agreement is to
acquire, together with any participating Eligible Employees, 100% of the
ownership of the Company. As a result of the Merger, the Trivest Investors
together will increase their beneficial interest in WinsLoew's Common Stock
from approximately 29.8% to approximately 96.0% (less the interest acquired by
the Eligible Employees), and the members of the Management Group together will
decrease their beneficial interest in WinsLoew from approximately 6.1% to
approximately 4.0%. The Affiliates believe that as a private company WinsLoew
will have greater flexibility to focus on enhancing value by emphasizing growth
and operating cash flow without the constraint of the public market's emphasis
on quarterly earnings. See "SPECIAL FACTORS--Purpose and Reasons of the
Affiliates for the Merger."
POSITION OF THE AFFILIATES AS TO FAIRNESS OF THE MERGER
Each of the Affiliates has considered the analyses and findings of the
Special Committee and the Board (described in detail in "SPECIAL FACTORS -- The
Special Committee's and the Board's Recommendation") with respect to the
fairness of the Merger to the Public Shareholders of the Company. As of the
date of this Proxy Statement, each of the Affiliates adopts the analyses and
findings of the Special Committee and the Board with respect to the fairness of
the Merger and believes that the Merger is both procedurally and substantively
fair to, and in the best interest of, the Company's Public Shareholders;
provided that no opinion is expressed as to the fairness to any shareholder
making an investment in the Purchaser. See "SPECIAL FACTORS--Position of the
Affiliates as to Fairness of the Merger." The Trivest Directors have financial
interests in the Merger and the members of the Management Group have financial
and employment interests in the Merger. See "SPECIAL FACTORS--Conflicts of
Interest."
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<PAGE> 13
CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the
Merger, shareholders should be aware that certain officers and directors of
WinsLoew and affiliates and associates of these officers and directors have
interests in connection with the Merger which may present them with actual or
potential conflicts of interest, which are described in more detail under
"SPECIAL FACTORS -- Conflicts of Interest."
THE TRIVEST DIRECTORS. Upon consummation of the Merger, the Trivest
Directors will receive an aggregate of approximately $68.7 million in respect
of (i) Cash Merger Consideration on the same terms as other shareholders for
shares of Common Stock not contributed to the Purchaser and (ii) outstanding
options to purchase shares of Common Stock (including approximately $56.2
million of Cash Merger Consideration for the shares of Common Stock held by the
Existing Trivest Shareholders). See "SPECIAL FACTORS--Conflicts of
Interest--Cash Payments to the Trivest Directors and Members of the Management
Group." In addition, after the Merger, the Trivest Directors together will
beneficially own an approximately 96.0% interest in WinsLoew (including the
92.0% interest acquired by the Trivest Partnerships). In addition, each Trivest
Director is an indirect investor in the Trivest Partnerships. See "SPECIAL
FACTORS--Conflicts of Interest--Post-Merger Ownership and Control of WinsLoew."
After the Merger, WinsLoew's Board will be comprised of Messrs. Powell, George,
Kaczynski, Klein and Tesney.
PAYMENTS TO TRIVEST MANAGER. Upon consummation of the Merger, the
Company will pay a financial advisory fee to Trivest II, Inc., an investment
adviser affiliated with the Trivest Partnerships and related funds ("Trivest
Manager"), of $________ for services rendered in connection with the financing
of the Merger and related transactions. In addition, after consummation of the
Merger, WinsLoew will pay Trivest Manager an annual management fee of $________
for ongoing financial advisory services.
THE MANAGEMENT GROUP. Upon consummation of the Merger, the members of
the Management Group will receive an aggregate of approximately $13.0 million
in respect of (i) Cash Merger Consideration on the same terms as other
shareholders for shares of Common Stock not contributed to the Purchaser and
(ii) outstanding options to purchase shares of Common Stock. See "SPECIAL
FACTORS--Conflicts of Interest--Cash Payments to the Trivest Directors and
Members of the Management Group." In addition, after the Merger, the members of
the Management Group together will beneficially own an approximately 4.0%
interest in WinsLoew. See "SPECIAL FACTORS--Conflicts of Interest--Post-Merger
Ownership and Control of WinsLoew." Each member of the Management Group will
remain an executive officer of the Company and Bobby Tesney, the President and
Chief Executive Officer, will continue to serve on the Board of the Company
immediately following the Merger. Each member of the Management Group will,
upon consummation of the Merger, enter into a new employment agreement with
WinsLoew replacing his existing employment agreement. The new employment
agreements will provide for substantially the same base salaries and annual
cash bonuses as their existing employment agreements. In addition, each member
of the Management Group will enter into a subscription and shareholders
agreement with the Company restricting the executives' ability to transfer the
shares of WinsLoew Common Stock to be owned by them after the Merger and
creating certain other rights and obligations in respect of such shares.
THE SPECIAL COMMITTEE. Upon consummation of the Merger, the members of
the Special Committee will receive an aggregate of approximately $8.8 million
in respect of (i) the Cash Merger Consideration for their shares of Common
Stock and (ii) outstanding options to purchase Common Stock. As compensation
for serving on the Special Committee, which met approximately 19 times from
January 1999 through the date of this Proxy Statement, the Chairman of the
Special Committee will receive a fee in the amount of $20,000, and the other
members of the Special Committee will each receive $15,000. Members of the
Special Committee will be entitled to certain indemnification rights granted
under the Merger Agreement to the current and former directors and officers of
the Company. See "SPECIAL FACTORS--Conflicts of Interest."
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers of the Company and its subsidiaries (including the members of the
Special Committee) shall survive the Merger and shall continue in accordance
with their terms. In addition, the directors and executive officers of the
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<PAGE> 14
Company will be provided with continuing directors' and officers' liability
insurance coverage following the Merger, subject to certain limitations. See
"SPECIAL FACTORS--Conflicts of Interest."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company
will be owned by the Trivest Investors, the Management Group and by the
Eligible Employees who elect to invest in the Purchaser. The Public
Shareholders will no longer have any interest in, and will not be shareholders
of, WinsLoew, and therefore will not participate in WinsLoew's future earnings
and potential growth. Instead, the Public Shareholders will have the right to
receive $33.00 in cash, without interest, for each share held. An equity
investment in the Company following the Merger involves substantial risk
resulting from the limited liquidity of any such investment and the leverage
resulting from the borrowings that will be required to fund the payment of the
Cash Merger Consideration as well as any future borrowings necessary to support
the Company's business strategy. Nonetheless, if the Company successfully
executes its business strategy, the value of such an equity investment is
expected to be considerably greater than the original cost thereof. See
"SPECIAL FACTORS--Conflicts of Interest" and "CERTAIN FORWARD LOOKING
INFORMATION."
In addition, the Common Stock will no longer be traded on the Nasdaq
National Market and price quotations with respect to sales of shares in the
public market will no longer be available. The registration of the Common Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
will terminate, and this termination will eliminate the Company's obligation to
file periodic financial and other information with the Securities and Exchange
Commission (the "Commission") and will make most other provisions of the
Exchange Act inapplicable. See "SPECIAL FACTORS--Certain Effects of the
Merger."
CONDITIONS TO THE MERGER, TERMINATION AND EXPENSES
Each party's obligation to effect the Merger is subject to
satisfaction of a number of conditions, including with respect to one or both
parties: (i) the Merger Agreement shall have been approved by holders of a
majority of the outstanding shares of Common Stock, (ii) all required consents
and approvals shall have been obtained, and (iii) the representations and
warranties of the parties shall be true and correct in all material respects as
of the Effective Time except as contemplated by the Merger Agreement. Any or all
of the conditions that have not been satisfied may be waived (other than the
condition that the Merger Agreement shall have been approved by holders of a
majority of the outstanding shares of Common Stock). After approval of the
Merger Agreement by the shareholders of WinsLoew, however, no condition may be
waived which reduces the amount or changes the form of the Cash Merger
Consideration to be received by the shareholders or that by law would require
further approval of the shareholders of WinsLoew unless a waiver of such
condition is approved by the shareholders. See "THE MERGER--Conditions." Even if
the shareholders approve the Merger Agreement, there can be no assurance that
the Merger will be consummated.
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual written consent of WinsLoew and the Purchaser. In
addition, either WinsLoew or the Purchaser may terminate the Merger Agreement
prior to the Effective Time if (i) a court or other governmental entity
permanently enjoins, restrains or prohibits the Merger and such action is final
and non-appealable or (ii) the Effective Time shall not have occurred on or
before July 15, 1999, unless extended by agreement of the Purchaser and the
Company. See "THE MERGER--Termination, Amendment and Waiver."
The Merger Agreement may be terminated by the Purchaser prior to the
Effective Time if: (i)(A) the representations and warranties of the Company as
to its capitalization shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made, except
in any case where such failure to be true and correct would not, in the
aggregate, (x) have a material adverse effect on the Company, or (y) prevent or
delay the consummation of the Merger; (ii) the Company shall have failed to
comply in any material respect with any of its material obligations or
covenants contained in the Merger Agreement, except in any case where such
failure would not, in
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<PAGE> 15
the aggregate, (x) have a material adverse effect on the Company, or (y) prevent
or materially delay consummation of the Merger; (iii) there shall have been a
material adverse change with respect to the Company, provided that the Company
shall, if curable, have a reasonable period in which to cure any failure
described in clause (i), (ii) or (iii) of this paragraph; or (iv)(A) the Board
or the Special Committee fails to approve and recommend or withdraws or modifies
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approves or recommends any Acquisition
Proposal, (B) the Company enters into any agreement with respect to any Superior
Proposal following written notice to the Purchaser and payment of the
Termination Fee discussed below, or (C) the Board or the Special Committee
resolves to take any such action in clauses (iv)(A) or (B).
An "Acquisition Proposal" is defined under the Merger Agreement to
include any inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of 20% or more of the assets of the Company
and its subsidiaries or 20% or more of any class of equity securities of the
Company or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries (other than the transactions
between the parties to the Merger Agreement contemplated by the Merger
Agreement), or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Merger
or which could reasonably be expected to dilute materially the benefits to the
Purchaser of the transactions contemplated by the Merger Agreement.
A "Superior Proposal" is defined under the Merger Agreement to include
any bona fide proposal made by a third party to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of Common Stock then outstanding or all or substantially all
the assets of the Company and otherwise on terms which the Board reasonably
determines in its good faith judgment (based on the advice of Mann Armistead)
to be more favorable to the Company's shareholders than the Merger.
WinsLoew may terminate the Merger Agreement (i) in connection with
entering into a definitive agreement with respect to a Superior Proposal
following written notice to the Purchaser and the payment of the Termination
Fee discussed below, and provided that the Company complies with its covenant
against soliciting, discussing or negotiating any Acquisition Proposal (except
as required by the Board's fiduciary duties), (ii) if any representation or
warranty of the Purchaser was not true and correct in all material respects
when made or has ceased to be true and correct in all material respects as if
made on such later date, or (iii) if the Purchaser fails to comply in any
material respect with any of its material obligations or covenants in the
Merger Agreement, provided that the Purchaser shall, if curable, have a
reasonable period in which to cure any failure described in clause (ii) or
(iii) of this paragraph. See "THE MERGER--Nonsolicitation Covenant" and
"--Termination, Amendment and Waiver."
WinsLoew has agreed to pay to the Purchaser a termination fee (the
"Termination Fee") in the amount of $10.0 million, plus up to $1.5 million of
expenses of the Purchaser in the event the Merger Agreement is terminated (i)
by the Purchaser due to (A) the breach by the Company of any of its
representations, warranties or covenants, or a material adverse change with
respect to WinsLoew, each as described above, or (B)(1) the Board or the
Special Committee failing to approve and recommend or withdrawing or modifying
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approving or recommending any Acquisition
Proposal, (2) the Company entering into any agreement with respect to any
Superior Proposal or (3) the Board or the Special Committee resolving to take
any such action in clauses (1) or (2), or (ii) by the Company due to entering
into a definitive agreement in connection with a Superior Proposal. See "THE
MERGER--Termination Fee."
Except as provided above, each of the parties has agreed to pay its
own costs and expenses in connection with the Merger, provided that the
Purchaser will pay any filing fees required under the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended (the "HSR Act"). See "THE
MERGER--Termination Fee" and "--Expenses of the Transaction."
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<PAGE> 16
FEDERAL INCOME TAX CONSEQUENCES
The receipt of the Cash Merger Consideration by holders of Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes. All holders of Common Stock are urged to consult their tax advisors to
determine the effect of the Merger on such holders under federal, state, local
and foreign tax laws. See "FEDERAL INCOME TAX CONSEQUENCES."
RIGHTS OF DISSENTING SHAREHOLDERS
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
ACCOUNTING TREATMENT
The Merger will be treated as a purchase business combination for
accounting purposes.
FINANCING OF THE MERGER
It is estimated that approximately $271.1 million will be required to
consummate the Merger and pay related fees and expenses. This sum is expected
to be provided by the following: (i) approximately $75.0 million in equity
contributions to the Purchaser by the Trivest Investors (reduced by the cash
and the aggregate value (at $33.00 per share) of the shares of Common Stock
contributed to the Purchaser by the Eligible Employees) and the Management
Group; (ii) borrowings of approximately $64.6 million under a $145.0 million
senior secured credit facility to be obtained by the Purchaser, WinsLoew and
its subsidiaries pursuant to a commitment letter, dated as of March 29, 1999,
from BankBoston, N.A. ("BankBoston"); (iii) the issuance by WinsLoew of
approximately $130.0 million aggregate principal amount of senior subordinated
notes that the Purchaser expects to issue based upon a letter from Bear,
Stearns & Co. Inc. ("Bear Stearns") to the effect that, as of March 29, 1999
and subject to certain conditions, it was highly confident that it could
arrange for the sale of such notes in connection with the Merger; and (iv)
approximately $1.5 million of WinsLoew's expected cash on hand. The bank
financing commitment includes $75.0 million in term loans, a $30.0 million
revolver and a $40.0 million acquisition line for subsequent acquisitions by
WinsLoew, all to be secured by first-fee mortgages on owned real estate and
first priority security interests in substantially all of WinsLoew's assets.
The BankBoston commitment letter is subject to customary conditions, and the
Bear Stearns highly confident letter does not constitute a commitment or
undertaking by Bear Stearns to place or purchase the senior subordinated notes
and does not ensure the successful placement or completion of the offering of
such notes; moreover, the Bear Stearns letter sets forth only its expectation
as of March 29, 1999 with respect to its ability to arrange a sale of the notes
in connection with the Merger. Except for the BankBoston and Trivest commitment
letters, there are no firm commitments from any person to provide equity,
provide senior financing, purchase the Company's senior subordinated notes or
provide any other financing for the Merger, and there can be no assurance that
any such financing will be obtained. See "THE MERGER--Financing."
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<PAGE> 17
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "WLFI" since January 1, 1995. The following table sets
forth, for the periods indicated, the high and low sales price per share of
Common Stock as reported by the Nasdaq National Market:
HIGH LOW
---- ----
1997
- ----
First Quarter....................................... $11 7/8 $ 8 1/8
Second Quarter...................................... $11 $ 8 3/8
Third Quarter....................................... $15 $10 15/16
Fourth Quarter...................................... $16 13/16 $13 5/16
1998
- ----
First Quarter....................................... $20 5/8 $13 3/4
Second Quarter...................................... $29 $20 11/16
Third Quarter....................................... $28 3/4 $15 1/2
Fourth Quarter...................................... $26 1/2 $17 7/8
1999
- ----
First Quarter....................................... $28 3/4 $23
Second Quarter...................................... $ $
(through , 1999)
On January 6, the last trading day prior to the Board meeting at which
Mr. Powell stated that he, together with the other Trivest Investors and the
Management Group, would be willing to submit a proposal to purchase the
Company, the closing price per share of the Common Stock as reported by Nasdaq
was $24 3/8. On January 15, 1999, the last trading day prior to the
announcement of the delivery of Mr. Powell's initial proposal to the Special
Committee, the closing price per share of the Common Stock as reported by
Nasdaq was $27. On January 25, the last trading day prior to the announcement
of the execution of the letter of intent relating to the Merger, the closing
price per share of the Common Stock as reported by Nasdaq was $28 1/2. On March
4, 1999, the last trading day prior to announcement of the execution of the
Merger Agreement, the closing price per share of Common Stock as reported by
Nasdaq was $26 3/4. On March 30, 1999, the last trading day prior to the
announcement of the amendment of the Merger Agreement increasing the per share
purchase price from $30.00 to $33.00, the closing price per share of the Common
Stock as reported by Nasdaq was $27 1/2. On , 1999, the last trading
day prior to the printing of this Proxy Statement, the closing price per share
of Common Stock as reported by Nasdaq was $ .
At March 1, 1999, there were 105 holders of record of Common Stock and
approximately 1,550 persons or entities holding Common Stock in nominee name.
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<PAGE> 18
THE SPECIAL MEETING
PROXY SOLICITATION
This Proxy Statement is being delivered to WinsLoew's shareholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on ______, June __, 1999 at 9:00 a.m., local time,
at the offices of Trivest, Inc. located at 2665 South Bayshore Drive, Suite
800, Miami, Florida 33133. All expenses incurred in connection with
solicitation of the enclosed proxy will be paid by the Company. Officers,
directors and regular employees of the Company, who will receive no additional
compensation for their services, may solicit proxies by telephone or personal
call. In addition, the Company has retained D.F. King & Co., Inc. to solicit
proxies for a fee of $____ plus expenses. The Company may request banks,
brokers and other custodians, nominees and fiduciaries to forward copies of the
proxy material to their principals and to request authority for the execution
of proxies. The Company may reimburse such persons for their expenses in doing
so. This Proxy Statement and the accompanying proxy card are being mailed to
shareholders on or about ________, 1999.
RECORD DATE AND QUORUM REQUIREMENT
The Common Stock is the only outstanding voting security of the
Company. The Board has fixed the close of business on ______, 1999 as the
Record Date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting. Each holder of record of Common Stock at the
close of business on the Record Date is entitled to one vote for each share
then held on each matter submitted to a vote of shareholders. At the close of
business on the Record Date, there were 7,181,908 shares of Common Stock issued
and outstanding held by 105 holders of record and by approximately 1,550
persons or entities holding in nominee name.
Prior to the Special Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspectors shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
The holders of a majority of the outstanding shares entitled to vote
at the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions and shares
referred to as "broker or nominee non-votes" that are represented at the
Special Meeting (shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or other persons entitled to
vote and the broker or nominee does not have discretionary voting power on a
particular matter) are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. If less than a majority of
outstanding shares of Common Stock are represented at the Special Meeting,
holders of a majority of the shares so represented may adjourn the Special
Meeting to another date, time or place, and notice need not be given of the new
date, time or place if the new date, time or place is announced at the Special
Meeting before an adjournment is taken.
VOTING PROCEDURES; REQUIRED VOTE
Approval of the Merger Agreement, which is attached as Appendix A
hereto, will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting. A
failure to vote or a vote to abstain will have the same legal effect as a vote
cast against approval. Brokers and, in many cases, nominees will not have
discretionary power to vote on the proposal to be presented at the Special
Meeting. Accordingly, beneficial owners of shares should instruct their brokers
or nominees how to vote. A broker or nominee non-vote will have the same effect
as a vote against the Merger.
Shareholders (including the Management Group, the Trivest Directors,
the Existing Trivest Shareholders, the other members of the Board and certain
shareholders affiliated or associated with the Trivest Partnerships) who as of
the record date held of record 2,568,218, or approximately 35.8%, of the
outstanding shares of Common Stock have expressed their intention to vote their
shares for approval of the Merger. Holders of 4,613,690, or approximately
64.2%, of the outstanding shares of Common Stock remain uncommitted with
respect to how they
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will vote on the Merger. Accordingly, the affirmative vote by holders of Common
Stock representing approximately 1,022,737 (or 22.2%) of such uncommitted
shares, or approximately 14.2% of the outstanding shares, will be required to
approve the Merger.
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
VOTING AND REVOCATION OF PROXIES
The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Special Meeting or by filing with the
Company's Secretary at the Company's headquarters a written revocation or duly
executed proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the Company at
or prior to the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Secretary of
WinsLoew will be voted in accordance with the instructions indicated thereon,
and if no instructions are indicated, will be voted to approve the Merger and
in such manner as the persons named on the enclosed proxy card in their
discretion determine upon such other business as may properly come before the
Special Meeting.
The shares represented by the accompanying proxy card and entitled to
vote will be voted if the proxy card is properly signed and received by the
Secretary of the Company prior to the Special Meeting.
EFFECTIVE TIME
The Merger will be effective as soon as practicable following
shareholder approval of the Merger Agreement and upon the filing of Articles of
Merger with the Secretary of State of the State of Florida. The Effective Time
is currently expected to occur as soon as practicable after the Special
Meeting, subject to approval of the Merger Agreement at the Special Meeting and
satisfaction or waiver of the terms and conditions set forth in the Merger
Agreement. See "THE MERGER--Conditions."
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SPECIAL FACTORS
BACKGROUND OF THE MERGER
PAST CONTACTS, TRANSACTIONS AND NEGOTIATIONS.
WinsLoew's growth strategies have, since inception, included the
acquisition of complementary product lines, and, as part of its efforts to
pursue appropriate acquisition opportunities, WinsLoew regularly engages in
discussions with industry participants regarding possible transactions. During
the period from February 1998 through February 1999, representatives of the
Company, including Messrs. Powell, Kaczynski and Tesney, contacted, or responded
to inquiries from, 26 direct competitors and 30 other furniture manufacturers
with respect to WinsLoew's interest in exploring potential acquisitions,
combinations or other transactions with such companies. During that period and
in response to such contacts, the Company entered into confidentiality
agreements or fee reimbursement agreements with nine direct competitors and
eight other manufacturers. The remaining companies contacted declined to pursue
discussions with the Company. Ultimately, WinsLoew entered into letters of
intent with three of the competitors with whom it had entered into
confidentiality agreements. Of these, WinsLoew acquired one, Villella, Inc.
d/b/a Tropic Craft Aluminum Furniture Manufacturers, and has entered into a
stock purchase agreement to acquire another, Miami Metal Products, Inc. d/b/a
Pompeii Furniture Industries and its affiliate, Industrial Mueblera Pompeii de
Mexico, S.A. de C.V. (together, "Pompeii"). See "BUSINESS OF THE
COMPANY--Background." Following initial due diligence, WinsLoew determined not
to pursue an acquisition of the third competitor. In addition, in May and June
of 1998 and February and March of 1999, WinsLoew and Trivest Manager contacted
and engaged in a number of discussions with a publicly held manufacturer engaged
primarily in the contract seating markets of the furniture industry (the
"Possible Transaction Party"), with whom the Company had entered into a
confidentiality agreement. These discussions led to a general understanding of
terms regarding a possible business combination. Management and Trivest Manager
proposed the transaction to the Special Committee at a March 18 Board meeting;
however, the Special Committee recommended that WinsLoew not pursue such
transaction at that time. Subsequently, at a March 30 Board meeting, the
Chairman of the Board confirmed that the Board would not be asked to make a
final decision with respect to the proposed business combination with the
Potential Transaction Party until the completion of management's due diligence
investigation. WinsLoew is currently continuing to evaluate acquisitions of
three of the other companies that signed confidentiality agreements. However,
other than Pompeii, WinsLoew has not reached any agreements in principle with,
or made any formal proposals to, any of the foregoing 56 companies, and WinsLoew
is not currently in discussions with any such company relating to a possible
acquisition by WinsLoew.
In addition to pursuing WinsLoew's acquisition strategy, at various
times during 1997 and 1998, the Board considered certain limitations on the
Company's operating flexibility related to the public market's emphasis on
quarterly earnings. As a result, in April 1998, representatives of the Company,
including certain members of senior management and certain of the Trivest
Directors, met with representatives of Mann Armistead to discuss various
strategic alternatives that might enable the Company's shareholders to realize
the inherent value of their shares of Common Stock. As part of such
discussions, Mann Armistead and the WinsLoew representatives considered a
number of publicly and privately owned furniture manufacturers with whom a
strategic combination might be feasible. In May 1998, Mann Armistead contacted
two publicly owned furniture manufacturers regarding a potential sale of, or
combination with, the Company. See "--Opinion of the Financial Advisor" for a
description of the terms of Mann Armistead's current and previous engagements
with WinsLoew. Management of the Company and Trivest Manager selected these two
furniture manufacturers from among those identified by Mann Armistead based
primarily on their belief that it would not be in the best interests of the
Company's shareholders to receive the stock of any of the other proposed
companies as consideration. Of the two competitors contacted by Mann Armistead,
one declined to pursue discussions with the Company, and the other (the
"Potential Acquiror") expressed an interest in discussing a possible
transaction. During the summer of 1998, representatives of the Potential
Acquiror and representatives of WinsLoew, including Messrs. Kaczynski, Powell
and Tesney, as well as representatives of Mann Armistead, met several times to
discuss a possible strategic transaction. These discussions resulted in a July
1998 proposal by the Potential Acquiror to acquire the Company in a transaction
that would value WinsLoew's Common Stock at $25.00 per share. WinsLoew declined
such proposal and has had no further discussions with the Potential Acquiror,
except that Mann Armistead contacted the Potential Acquiror as part of its
solicitation process.
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THE MERGER AGREEMENT.
On January 7, 1999, at a regular meeting of the Board, the foregoing
exploratory efforts were reviewed by the Board. Certain members of the Board
also noted their belief that the low trading price of the Common Stock did not,
in their view, reflect the Company's financial and operating performance. Among
other items, directors noted that although the Company had announced its
expectation that 1998 earnings would be in excess of analysts' projections,
there had been no appreciable increase in the trading price of the Common
Stock. Members of the Board went on to discuss how the foregoing was
exacerbated by the Company's relatively small market capitalization and the
relatively low level of trading in the Common Stock on the Nasdaq National
Market. Finally, members of the Board expressed concern about how long it would
take for the trading price of the Common Stock to reflect its inherent value.
At the conclusion of that meeting, Mr. Powell suggested that he, on
behalf of certain partnerships affiliated with Mr. Powell or Trivest, Inc. (not
presently holders of WinsLoew Common Stock), together with certain members of
senior management, would be willing to submit a proposal to purchase the Company
in an all-cash transaction. At that time, because of the potential conflicts of
interest, the Board appointed a Special Committee of outside directors to
consider whether a sale of the Company would be in the best interests of the
shareholders and to consider and make recommendations with respect to any formal
proposal that might be submitted, as well as other possible strategic
alternatives. The Special Committee consists of James S. Smith (the Chairman of
the Special Committee), William H. Allen, Jr., Henry C. Cheek, M. Miller Gorrie,
and Sherwood M. Weiser. At the January 7 meeting, the Board authorized the
Special Committee to establish such procedures, review such information and
engage such financial advisors and legal counsel as it deemed reasonable and
necessary to carry out its duties, and to conduct negotiations with respect to
any proposed transaction. For their services on the Special Committee, the
Company has agreed to pay the Chairman a fee of $20,000 and each other member a
fee of $15,000.
The Special Committee members are the only members of the Board who
are not either employees of WinsLoew or participating as purchasers in the
Merger, except that Mr. Weiser and members of his family are indirect investors
in Trivest Fund II Group, Ltd., one of the Trivest Partnerships, which
investment is not a significant part of the assets of Mr. Weiser or his family
or of Trivest Fund II Group, Ltd. The Special Committee members discussed these
financial interests and determined that they would not impact Mr. Weiser's
independence or judgment and that his value to the Special Committee was
outweighed by any possible conflict of interest. All members of the Special
Committee hold shares of Common Stock and options to purchase shares of Common
Stock. See "Special Factors--Conflicts of Interest." In addition, Mr. Smith and
members of his family are limited partners of two of the Existing Trivest
Shareholders, which investment is not a significant part of the assets of Mr.
Smith or his family or of such Existing Trivest Shareholders. All of the shares
of Common Stock held by the Existing Trivest Shareholders and the members of the
Special Committee will be converted into the right to receive the Cash Merger
Consideration, and all options held by members of the Special Committee will be
cancelled in exchange for cash, on the same terms as the Public Shareholders.
The Common Stock beneficially owned by the members of the Special Committee is
significant, which was viewed as a positive factor in their ability to determine
the best interests of the WinsLoew shareholders. See "PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP."
On January 11, the Special Committee contacted Mann Armistead
regarding its possible engagement by the Special Committee in connection with
its appointment to consider the possible proposal by Mr. Powell and other
strategic alternatives.
On January 15, 1999, Mr. Powell made a formal proposal to the Special
Committee on behalf of a corporation to be formed by the Trivest Partnerships
and certain members of senior management to acquire all of the outstanding
shares of Common Stock not owned at the time of the Merger by such persons,
subject to certain terms and conditions. The Trivest Partnerships are
affiliated with Mr. Powell but are not presently holders of Common Stock. Mr.
Powell's proposal was set forth in a letter of intent (the "Letter of Intent")
that provided that the proposed transaction would be structured as a cash
merger in which shareholders not investing in the Purchaser would receive
$30.00 per share (and each holder of outstanding options to purchase Common
Stock would receive a cash payment equal to the difference between $30.00 per
share and the per share exercise price of such options). Mr. Powell also
provided the Special Committee with an initial draft of the Merger Agreement
for review by the Special Committee and its legal and financial advisors. Prior
to the opening of the market on Monday, January 18,
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<PAGE> 22
the first trading day after the delivery of the Merger proposal, the Company
issued a press release announcing its receipt of the Merger proposal and the
establishment of the Special Committee.
On January 19, the Special Committee engaged Balch & Bingham LLP
("Balch & Bingham") as its legal counsel. Also on January 19, pursuant to a
letter dated January 11, 1999, the Special Committee engaged Mann Armistead
regarding the possible sale of all or part of the assets or stock of the
Company, evaluating the Merger, soliciting and evaluating other potential
buyers for the Company, participating in negotiations with the Purchaser or
another potential acquiror, and providing a fairness opinion related to a
definitive agreement and closing of a sale transaction.
The Special Committee engaged Mann Armistead based on its nationally
recognized experience in the furniture manufacturing industry and its expertise
in the evaluation of businesses in connection with transactions similar to the
Merger. The Special Committee considered Mann Armistead's specific knowledge
of, and familiarity with, WinsLoew's business, financial condition and results
of operations in connection with the Company's 1998 retainer of Mann Armistead
to evaluate a number of furniture manufacturers in connection with a possible
strategic transaction, as described above. The Special Committee also
considered that management's prior contacts with Mann Armistead had focused
primarily on the feasibility of a sale of the Company to an unaffiliated
strategic buyer and, therefore, did not create a conflict of interest with
respect to the Special Committee's engagement of Mann Armistead.
Neither the Board nor the Special Committee determined that it was
necessary to elect additional outside directors to act on behalf of the
Company's public shareholders for the purpose of negotiating the terms of the
Merger Agreement based upon, among other factors, the engagement of independent
legal counsel to the Special Committee, the engagement of Mann Armistead as its
financial advisor and the absence of any affiliation on the part of the members
of the Special Committee with the Purchaser that was deemed to be problematic.
In its January 19 meeting, the Special Committee discussed with
representatives of Mann Armistead and Balch & Bingham various issues raised by
the Merger proposal and Letter of Intent, including whether the sale of the
Company at this time was in the best interests of the shareholders, the
desirability of soliciting other offers, and whether entering into the Letter
of Intent would facilitate or inhibit the possible sale of the Company at a
higher price. The Special Committee also considered the size and effect of any
termination fee to the Purchaser, the process for obtaining a fairness opinion
and the procedure to identify other strategic alternatives, including the sale
of the Company in whole or in part. The Special Committee was concerned, and
discussed with Mann Armistead, that while the $30.00 price may be in the range
of fair, a higher price might be obtainable. The Special Committee instructed
Mann Armistead to commence solicitation of offers from other potential acquirors
and investigation and analysis of the value of the Company and the Merger
proposal.
On January 20, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss other
potential acquirors of the Company. The Special Committee approved a list of
the ten most likely possible acquirors identified by Mann Armistead, which
included the Potential Acquiror with which the Company held discussions in 1998.
In addition, Mr. Smith reported on his discussions with Mr. Powell in which Mr.
Smith had attempted to negotiate a reduction in the termination fee in the
Letter of Intent, which Mr. Powell declined to do.
On January 22, after consultation with Mr. Smith and representatives
of Mann Armistead, Balch & Bingham submitted comments on the Letter of Intent
to the Purchaser and its counsel, Greenberg Traurig, P.A. ("Greenberg
Traurig"), which the Purchaser accepted. Later the same day, the Special
Committee held a telephonic meeting with representatives of Mann Armistead and
Balch & Bingham during which they discussed the Special committee's possible
recommendation to the Board of the revised Letter of Intent. The revised Letter
of Intent permitted the Company (i) for 90 days from execution, to solicit or
participate in discussions or negotiations regarding any acquisition proposal
that could reasonably be expected to result in a more favorable proposal, and
(ii) to (A) approve or recommend a more favorable proposal, (B) cause the
Company to enter into an agreement with respect to a more favorable proposal or
(C) terminate the letter of intent, but in each case only upon three days'
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<PAGE> 23
written notice and the payment of a termination payment of $6.0 million and
reimbursement of the Purchaser's expenses up to $1.2 million. The Letter of
Intent also provided that the parties would each pay their own costs and
expenses, except as provided above. The Special Committee believed that the
provisions of the Letter of Intent regarding the termination fee and expense
reimbursement obligations were not unreasonable and would not have the effect
of discouraging competing bids and that the Purchaser would not enter into the
Letter of Intent and incur various costs and expenses to secure financing for
the Merger without such provisions. During the same meeting, representatives of
Mann Armistead reported on its contacts with the possible acquirors that it had
identified and its preliminary views regarding the value of the Common Stock,
including that the $30.00 price per share price fell within the range of fair.
The Special Committee directed Mann Armistead to solicit interest from parties
in addition to the ten on the initial list. The Special Committee also directed
Mr. Smith to attempt to negotiate a higher price with the Purchaser. The
Special Committee agreed, however, that entering into the Letter of Intent
would be advisable in order to negotiate the terms of the Merger with the
Purchaser while continuing the solicitation process.
On January 22, Mr. Smith and Mr. Powell discussed by telephone an
increase in the $30.00 price per share, which Mr. Powell declined to do.
On January 25, at a special telephonic meeting of the Board of
Directors at which all of the directors participated except Messrs. Cheek and
Gorrie, Mr. Smith made a presentation to the Board to the effect that the
Special Committee had determined that the execution of the Letter of Intent in
its revised form dated January 22, 1999 containing the $30.00 per share Merger
proposal was in the best interest of the Company and its shareholders and that
the Special Committee had recommended that the execution of the Letter of
Intent be approved by the Board. The Board unanimously (except for Messrs.
Cheek and Gorrie, who did not participate) approved the execution of the Letter
of Intent. Shortly later that same day, the Letter of Intent was executed, and
Company issued a press release announcing the same.
Later the same day, the Special Committee held a telephonic meeting
with representatives of Mann Armistead and Balch & Bingham to discuss the
Letter of Intent and Mann Armistead's solicitation efforts. Mann Armistead
reported that its contacts included the Potential Acquiror, which had declined
further interest. Mann Armistead proposed, and the Special Committee authorized
communication with, an expanded list of potential acquirors with the
anticipated ability to finance a purchase of the Company. The Special Committee
also authorized Balch & Bingham to commence negotiation of the Merger
Agreement.
On February 2, the Special Committee held a telephonic meeting with
representatives of Mann Armistead and Balch & Bingham. The Special Committee
discussed the descriptive memorandum prepared by Mann Armistead to be sent to
potential acquirors. The Special Committee also discussed the status of the
contemplated Pompeii acquisition and any effect it might have on the Merger
proposal or any other strategic transaction. Representatives of Mann Armistead
also reported on its ongoing solicitation process. They reported that 13
possible strategic and financial acquirors had been contacted to date and that
confidentiality agreements in substantially the same form had been executed by
5 of them. Upon execution of a confidentiality agreement, the Special Committee
provided each potential acquiror with summary financial information.
Representatives of Mann Armistead also discussed with the Special Committee
specific potential acquirors and Mann Armistead's communications with them. In
addition, the Special Committee discussed a tentative timetable for negotiating
the Merger Agreement and the expected time required for the Purchaser to arrange
the necessary financing. In this regard, the Mann Armistead explained that the
delivery of its fairness opinion was contingent upon the Purchaser's
demonstration of its ability to obtain financing for the Merger. The Special
Committee determined to provide Mann Armistead an adequate opportunity to carry
out its solicitation process prior to the execution of the Merger Agreement with
the Purchaser. The Special Committee also approved the compensation for its
Chairman and other members, which was subsequently approved by the Board of
Directors.
During the remainder of February, 19 additional potential acquirors
were contacted, of which six executed confidentiality agreements and engaged in
due diligence reviews of the Company.
On February 13, Balch & Bingham sent to Greenberg Traurig a mark-up of
the initial draft Merger Agreement reflecting the Special Committee's comments.
On February 16 and 17, Balch & Bingham and
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<PAGE> 24
Greenberg Traurig negotiated various terms of the Merger Agreement. The
principal points of negotiation included (i) the scope of certain
representations and warranties of the Purchaser as to its financing for the
Merger, (ii) the restrictions on the Company's solicitation of alternative
proposals or offers to acquire the Company and the requirement of a "fiduciary"
determination, and (iii) a "drop dead" date after which the Merger Agreement
would terminate if the Merger had not been consummated. The Special Committee
insisted on the right to solicit Superior Proposals following the execution of
the Merger Agreement. In addition, the Special Committee insisted that the
Special Committee have the right to terminate the Merger Agreement if the Merger
was not consummated by a specified date. On February 18, Greenberg Traurig
distributed a revised draft of the Merger Agreement to the Special Committee and
Balch & Bingham which was revised to provide, among other things, that (i) the
Special Committee could solicit Superior Proposals for 30 days following the
execution of the Merger Agreement and, in addition, thereafter participate in
discussions or negotiations regarding unsolicited Superior Proposals and/or
Superior Proposals solicited prior to the expiration of such 30 days and (ii)
either party could terminate the Merger Agreement if the Merger had not been
consummated within 90 days of execution. The Special Committee found such terms
acceptable because they believed that any potential acquirors would be informed
of the opportunity to submit a bid by virtue of Mann Armistead's solicitation
process and the public announcement of the Merger proposal.
On February 17, the Special Committee held a telephonic meeting with
representatives of Mann Armistead and Balch & Bingham regarding the status of,
and issues raised in, the negotiation of the Merger Agreement, as well as Mann
Armistead's fairness opinion and solicitation process. At this meeting,
representatives of Mann Armistead described the two most serious potential
acquirors. One was a strategic acquiror that stated that it had been
considering WinsLoew as an acquisition target prior to the announcement of the
Merger Proposal. The Special Committee believed that a strategic transaction
with such acquiror would have provided substantial synergies. This strategic
acquiror had initially declined interest due to its perception that management
would not be receptive to another purchaser. Although representatives of the
Special Committee corrected this impression, this strategic acquiror stated it
would not participate in an auction process and that it was not prepared to act
quickly.
The other potential acquiror was Hancock Park Associates ("Hancock
Park"), a financial buyer that representatives of Mann Armistead believed would
likely structure a transaction similar to the Merger proposal. In 1995, Hancock
Park had acquired Brown Jordan Company, a competitor of WinsLoew that sells
casual outdoor furniture at a higher price point, and its subsidiary, Casual
Living Worldwide, which produces lower-priced casual furniture. Hancock Park
also owns Leslie's Poolmart, Inc. and Busy Body, Inc., which together with Brown
Jordan Company and Casual Living Worldwide, have net revenues in excess of
$400 million.
Representatives of Mann Armistead also informed the Special Committee
regarding other potential purchasers that had declined further interest and
summarized their due diligence and other work related to issuing a fairness
opinion.
The Special Committee discussed with Mann Armistead the likely timing
of any formal expression of interest from any other potential acquiror in order
to determine the schedule for finalizing the Merger Agreement. In particular,
the Special Committee considered the Purchaser's request to execute the Merger
Agreement prior to the Purchaser's receipt of committed financing, as well as
its request to execute the Merger Agreement prior to the Special Committee's
receipt of Mann Armistead's fairness opinion. In response to inquiries from the
Special Committee, representatives of Mann Armistead stated that they could not
render a fairness opinion without additional assurances, which were subsequently
obtained, regarding the Purchaser's ability to obtain financing. The Special
Committee determined that it would be consistent with its fiduciary duties to
execute the Merger Agreement so long as the Purchaser's financing was
sufficiently definite and Mann Armistead rendered its oral fairness opinion
prior to execution.
The Special Committee also discussed the Investment Services Agreement
between the Company and Trivest Manager dated as of December 16, 1994, (the
"Investment Services Agreement"), which provided for (i) an annual fee of
$500,000 to Trivest Manager for ten years, subject to increases for
acquisitions, (ii) an investment banking fee for certain transactions, and
(iii) payment of Trivest Manager's expenses. At the time it negotiated the
termination fee under the Merger Agreement, the Special Committee expected that
Trivest Manager would not receive additional
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<PAGE> 25
compensation pursuant to the Investment Services Agreement in addition to the
termination fee and expense reimbursement, because such a fee would effectively
increase the cost of the transaction to another purchaser. Consequently, Balch &
Bingham's comments to the Merger Agreement included a requested provision
requiring the termination of the Investment Services Agreement in the event the
Company were sold to a third party. The Purchaser did not initially agree to any
aspect of such requested change.
The Special Committee also considered requiring as a condition in the
Merger Agreement that a majority of the shares held by persons or entities not
affiliated with management or the Purchaser be voted in favor of the Merger.
The Special Committee determined not to require such a condition, provided that
(i) the Merger Agreement was not executed until the Special Committee had
received Mann Armistead's oral fairness opinion, (ii) the Purchaser had
provided adequate assurances of its ability to obtain the required financing,
and (iii) the Special Committee members voted unanimously to approve the
Merger.
During the period from January 25 through February 19, representatives
of the Purchaser, including the Trivest Directors and members of the Management
Group, pursued a variety of potential arrangements for financing the Merger.
The Purchaser received nine proposals for senior secured financing and six
proposals with respect to a possible unsecured debt financing. In addition,
representatives of the Purchaser also engaged in preliminary discussions with a
number of institutional investors regarding possible equity co-investments with
the Trivest Partnerships and the Management Group. On February 18, the
Purchaser selected BankBoston to provide its senior secured financing and Bear
Stearns to purchase and resell under Rule 144A $125.0 million aggregate
principal amount of senior subordinated notes. On February 22, the Purchaser
received a draft proposal letter from BankBoston for a $145.0 million senior
secured credit facility to provide a portion of the Cash Merger Consideration
and provide WinsLoew with working capital and an acquisition revolver after the
Merger. Following discussions concerning the terms and conditions set forth in
the draft proposal letter, representatives of BankBoston and the Purchaser
executed a revised proposal letter on February 26. The parties continued to
negotiate the terms of the proposed financing during the week of March 1.
Representatives of the Purchaser and Bear Stearns met on February 23 at the
offices of WinsLoew for an organizational meeting for the proposed Rule 144A
offering of senior subordinated notes. At that meeting, representatives of Bear
Stearns provided the Company and the Purchaser with a term sheet outlining the
terms of the proposed offering and commenced their due diligence review of the
Company. See "THE MERGER--Financing."
During the weeks of February 8, 15 and 22, representatives of Mann
Armistead and Balch & Bingham and members of the Special Committee performed
various due diligence and analyses with respect to WinsLoew. In this
connection, Mann Armistead reviewed certain financial and other information
concerning the Company and met with certain members of the Company's management
to discuss the Company's historical and projected financial results, as well as
opportunities available to WinsLoew to achieve higher levels of internal growth
and improved profitability, including the pending acquisition of Pompeii. The
Company's management annually prepares financial forecasts for internal use in
capital budgeting and other management decisions. Management provided to the
Special Committee and Mann Armistead such forecasts prepared during 1998 for
the fiscal years 1999 through 2002, which forecasts do not give effect to the
Merger or the related financing or to any possible acquisitions or other
transactions that might occur after the Merger. See "CERTAIN FORWARD LOOKING
INFORMATION."
On February 24, representatives of the Purchaser and Greenberg Traurig
met with representatives of Balch & Bingham at the offices of Balch & Bingham
in Birmingham, Alabama. At such meeting, representatives of Balch & Bingham
related the Special Committee's insistence that the Purchaser demonstrate its
ability to obtain financing for the Merger. In response, the Purchaser provided
the Special Committee with a draft proposal letter from BankBoston (followed by
a copy of the signed proposal letter dated February 26) for the $145.0 million
credit facility, as well as an indicative term sheet prepared by Bear Stearns
with respect to a senior subordinated note offering.
On February 26, Balch & Bingham provided to Greenberg Traurig a
mark-up of the February 18 draft of the Merger Agreement reflecting
negotiations during the February 24 meeting. On March 1, Greenberg Traurig
distributed a revised draft of the Merger Agreement which, among other changes,
included various representations and covenants as to the Purchaser's financing
arrangements.
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<PAGE> 26
During the weeks of February 22 and March 1, representatives of Mann
Armistead discussed the terms, conditions and status of the Purchaser's
proposed financing with representatives of each of BankBoston and Bear Stearns.
On March 1, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the then
current draft of the Merger Agreement. Balch & Bingham reported that the
unresolved issues were the status of the Investment Services Agreement, the
timing of the fairness opinion and the status of the Purchaser's financing
commitments. Representatives of Mann Armistead described its discussions with
and review of the Purchaser's financing sources and stated that they were
becoming increasingly confident that the requisite financing could be obtained.
They also reviewed Mann Armistead's valuation methods of the purchase price and
stated that $30.00 was within the range of fair. They stated that Mann
Armistead was prepared to provide its oral fairness opinion to this effect,
with the delivery of the written fairness opinion subject to the Purchaser's
receipt of a commitment letter from BankBoston for the senior secured financing
facility and absent the Company's receipt of a proposal to acquire the Company
for a higher per share purchase price. In that regard, the Mann Armistead
representatives explained that such opinion as to the fairness of the $30.00
price per share could be affected by the Special Committee's receipt of a
proposal for a competing merger transaction at a higher per share price than
the Merger proposal's $30.00 per share price. The Mann Armistead
representatives also reported that there were three potential acquirors that
had signed confidentiality agreements and had not yet declined further
interest, one strategic buyer and two financial buyers, one of which was not as
far along in its review process as the others.
A meeting of the Board was scheduled for March 4, and a meeting of the
Special Committee was scheduled for the same day prior to the Board meeting in
order to consider the Merger Agreement.
On March 3 and March 4, Balch & Bingham and Greenberg Traurig
substantially completed negotiation of the Merger Agreement providing for a
$30.00 per share purchase price.
On the evening of March 3, Mann Armistead received a written,
non-binding proposal from Hancock Park to acquire the Company for $32.50 per
share in cash.
On March 4, the Special Committee met to consider the Merger Agreement
and the Hancock Park proposal, which included a due diligence condition, as
well as customary conditions similar to Mr. Powell's initial Merger proposal in
January 1999, including the execution of a mutually acceptable agreement,
receipt of regulatory and shareholder approvals, and securing satisfactory
financing. In addition, the proposal stated that Hancock Park's representatives
were prepared to complete their due diligence investigation as soon as
possible. Hancock Park's proposal included a financing structure similar to the
Merger proposal. The Special Committee considered that the Purchaser might
withdraw its offer if the Merger Agreement were not executed and that the
Hancock Park proposal had not been analyzed. Following discussions with
representatives of Balch & Bingham and Mann Armistead regarding its fiduciary
duties and related issues, the Special Committee determined that it was in the
best interests of the Company's shareholders to execute the Merger Agreement
and pursue the Hancock Park proposal, noting in particular that (i) the
termination fee in the Letter of Intent would apply if the Company entered into
an agreement with Hancock Park, whether or not the Merger Agreement was
executed, and (ii) the Merger Agreement permitted the Special Committee
adequate opportunity to pursue the Hancock Park proposal and consider other
offers. The Special Committee also considered competitive concerns regarding a
due diligence investigation by Hancock Park of certain of the Company's
manufacturing operations, particularly the Winston facility, since Hancock Park
owns Brown Jordan Company, a competitor of WinsLoew, as well as the fact that
Hancock Park would be required to take into account other acquisition costs,
including the payment of the termination fee and expenses to the Purchaser.
At the March 4 meeting of the Special Committee, Mann Armistead made a
presentation regarding its solicitation process, which included contacting and
providing a descriptive memorandum to 32 companies, 11 of which executed
confidentiality agreements and obtained additional information. Representatives
of Mann Armistead reported that they had made numerous follow-up calls, and
three companies still showed apparent interest in acquiring the Company. Of
those three, only Hancock Park had made a formal proposal.
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<PAGE> 27
Representatives of Mann Armistead also reviewed the analyses that they had
performed to produce a range of implied values for the Company's Common Stock.
The Special Committee discussed with Mann Armistead its investigation of
WinsLoew and the assumptions made in connection with its analyses and the facts
upon which these analyses were based. Mann Armistead explained the assumptions,
methodologies and relative limits of its analyses. Mann Armistead concluded its
presentation by rendering its oral opinion, subject to certain assumptions made,
matters considered and limits on the review undertaken in connection with such
opinion and absent the Company's receipt of a proposal to acquire the Company
for a higher per share purchase price, that the $30.00 per share was fair from a
financial point of view to the Public Shareholders, with the delivery of its
written opinion and accompanying materials being subject to the Purchaser's
receipt of a commitment letter with respect to the Purchaser's senior secured
credit facility. The Special Committee then discussed the terms and conditions
of the transactions contemplated by Merger Agreement, which respect to which
Balch & Bingham made a detailed presentation. The Special Committee also
discussed its strong desire that the Investment Services Agreement be amended to
provide that it be terminated in connection with the Merger or the consummation
of a Superior Proposal. The Special Committee unanimously concluded that the
Merger (including the $30.00 per share to be paid to the Public Shareholders)
was substantively and procedurally fair to, and in the best interests of, the
Public Shareholders and determined to recommend the Merger Agreement to the full
Board and that the Board recommend it to the Company's shareholders.
Following the Special Committee's March 4 vote to recommend the Merger
Agreement to the Board, the Board met to accept the Special Committee's
recommendation, approve and adopt the Merger Agreement and recommend it to the
shareholders of the Company. Mr. Smith reported on the Special Committee's
consideration of the Merger proposal and possible strategic alternatives,
including Mann Armistead's valuation and solicitation process. Mann Armistead
repeated its Special Committee presentation to the full Board, including a
description of the Hancock Park proposal and its oral fairness opinion. The
members of the Board discussed the conditions set forth in the Hancock Park
proposal, the probability of Hancock Park obtaining financing on a timely
basis, its expected timetable for conducting diligence and related competitive
issues, as well as WinsLoew management's likely reaction to Hancock Park. The
members of the Special Committee further emphasized the terms of the Merger
Agreement that would permit WinsLoew to continue to solicit Superior Proposals
and engage in negotiations subsequent to execution. The members of the Board
then discussed the terms and conditions of the Merger Agreement, as well as the
relationship of the Investment Services Agreement to the Merger Agreement.
Following such discussion, the Trivest Directors agreed that the Investment
Services Agreement would be amended to provide that Trivest Manager would not
be entitled to a transaction fee or reimbursement of expenses by reason of
either the Merger or any Superior Proposal. The Board also ratified the fees
approved by the Special Committee for their service on such committee ($20,000
for the Chairman and $15,000 for each other member). All ten members of the
Board unanimously approved and adopted the Merger Agreement, recommended it to
the shareholders and determined that the Merger (including the $30.00 per share
to be paid to the Public Shareholders) was substantively and procedurally fair
to, and in the best interests of, the Public Shareholders. Prior to the opening
of the market on March 5, the parties executed the definitive Merger Agreement
and issued a press release announcing its execution.
On March 9, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the status of
the Hancock Park proposal. The Special Committee discussed the timing and scope
of Hancock Park's due diligence investigation of WinsLoew, including Hancock
Park's requested site visits and management meetings. The Special Committee
also instructed its Chairman to confirm with representatives of Hancock Park
that the $32.50 offer was net to the shareholders and that Hancock Park was
aware of the termination fee and expense reimbursement provisions of the Merger
Agreement and the terms of the Investment Services Agreement as required to be
amended by the Merger Agreement. The Special Committee also instructed Mann
Armistead to obtain additional information regarding Hancock Park's financing
structure and whether the response of the Company's management would have any
impact on such offer. Representatives of Hancock Park later confirmed that they
were interested in purchasing the Company with or without the continued
employment of management. The Special Committee also discussed the importance
of providing Hancock Park with access to Company information and personnel to
enable it to negotiate a definitive agreement and obtain financing commitments.
The Chairman of the Special Committee communicated the importance of such access
to management and directed them to respond on a priority basis and to consult
with the Special Committee regarding any concerns about providing potentially
sensitive information.
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<PAGE> 28
On March 10, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham. Representatives of the Purchaser, including
Mr. Powell, also participated for part of the meeting to update the Special
Committee on the progress of the Purchaser's financing arrangements. Mr. Powell
also shared with the Special Committee his concerns regarding the ability of
Hancock Park to obtain financing (including for the Pompeii transaction) and
that Mann Armistead may have been influenced by its compensation arrangement to
pursue the higher Hancock Park proposal prior to a demonstration by Hancock Park
of its ability to obtain financing. Mr. Powell was then excused from the
meeting, and representatives of Mann Armistead joined the meeting. The Special
Committee determined that Messrs. Smith and Gorrie, along with representatives
of Balch & Bingham, would meet the Hancock Park representatives in Birmingham
for its due diligence and management meetings, and that Mr. Smith would check
Hancock Park's financing references directly to enable the Special Committee to
better evaluate the Hancock Park proposal. The Special Committee also authorized
their engagement of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as
independent financial consultants to investigate the relative experience and
financing capabilities of the Purchaser and Hancock Park.
On March 12, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead. Mr. Smith reported his
conversations with representatives of three financial references which had
participated in previous debt or equity financings with Hancock Park as well as
other parties familiar with Hancock Park and its principal, Mr. Forticq. All of
these representatives were uniformly favorable in their opinion of Hancock Park
and Mr. Forticq. The Special Committee arranged for representatives of Hancock
Park and its financing sources to visit the Winston facility following a
preliminary meeting at the Company's offices in Birmingham scheduled for March
16. The Special Committee also consulted with PricewaterhouseCoopers about
providing additional independent financial advice.
On March 16, Messrs. Smith and Gorrie met with members of management
and representatives of Hancock Park and its financing sources at the Company's
offices in Birmingham. After discussions between the Special Committee and
members of management regarding competitive concerns related to touring the
Company's manufacturing facilities, members of management accompanied
representatives of Hancock Park on the planned plant tours.
On March 18, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the status of
the Hancock Park proposal and to consider Hancock Park's request for
reimbursement of certain expenses.
On March 18, the Company's Board held a meeting to consider the
Company's possible acquisition of the Potential Transaction Party. Mr. Powell
summarized the various discussions with the Potential Transaction Party that
had commenced in May 1998 when representatives of the Company, including
Messrs. Powell, Kaczynski and Tesney, had contacted a number of direct
competitors and other furniture manufacturers regarding WinsLoew's interest in
exploring potential acquisitions, combinations or other transactions. Mr.
Powell stated that these initial discussions had not resulted in a desire to
pursue a possible transaction, but that discussions had resumed subsequent to
Mr. Powell's initial Merger proposal in January 1999. From early February
through mid-March 1999, representatives of WinsLoew and Trivest Manager met
with representatives of the Potential Transaction Party regarding a possible
business combination, which culminated in a general understanding of terms
regarding a business combination. The members of the Board reviewed background
materials pertaining to the Potential Transaction Party, including a draft 1998
annual report and draft 1999 proxy statement, as well as valuation analyses
prepared for the Company by Trivest Manager. Mr. Powell pointed out that
management believed that the combination with the Potential Transaction Party
would be an attractive investment for WinsLoew and that affiliates of Trivest
Manager might seek a transaction should WinsLoew determine not to pursue the
opportunity. In response to questions from the Special Committee, Mr. Powell
also stated that management and Trivest Manager believed that financing would
be readily available to WinsLoew to effect a transaction. The members of the
Board also discussed that the practical effect of a decision to proceed with a
combination with the Potential Transaction Party would be for the Company to
remain publicly held for a long enough period of time to achieve the expected
financial and operating synergies. Mr. Powell then asked the Special Committee
to consider the proposed combination of the Company with the Potential
Transaction Party and make a recommendation as to whether or not WinsLoew
should further pursue a combination with the Potential Transaction Party. After
deliberation, the Special Committee determined to proceed with the Merger or a
comparable sale transaction and not to pursue a business combination with the
Potential Transaction Party at that time.
20
<PAGE> 29
Mr. Smith then reported to the Board on the status of Hancock Park's
financing and due diligence investigation. Mr. Smith also reported on
PricewaterhouseCoopers' work related to the relative experience and financing
capabilities of the Purchaser and Hancock Park. The members of the Board
unanimously determined to adjourn the meeting until after the Special
Committee's receipt of PricewaterhouseCooper's conclusions.
On March 19, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and PricewaterhouseCoopers to discuss the
advice to be provided by PricewaterhouseCoopers to the Special Committee. The
Special Committee also discussed facilitating management's providing due
diligence information to Hancock Park and the Special Committee's advisors,
including PricewaterhouseCoopers.
On March 16, at Hancock Park's request, the Special Committee had
directed Balch & Bingham and Mann Armistead to commence discussions with
representatives of Hancock Park regarding an agreement to reimburse Hancock
Park's expenses. From March 16 through March 23, Balch & Bingham negotiated
such an agreement with representatives of Hancock Park, including Hancock
Park's request that it be reimbursed for up to $300,000 of its expenses. These
negotiations resulted in a proposed agreement to reimburse up to $100,000 of
Hancock Park's expenses in the event that (i) Hancock Park made an offer that
the Special Committee determined to be a Superior Proposal vis a vis the Merger
proposal at $30.00 per share, (ii) the Company entered into an agreement with
another party for the acquisition of the Company at a per share price higher
than $30.00 or (iii) the Company determined not to pursue a sale of the
Company.
On March 24, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead to discuss the
negotiations with Hancock Park. The Special Committee authorized its Chairman
to enter into the foregoing agreement for reimbursement up to $100,000. Hancock
Park declined to execute such a reimbursement agreement. At the same meeting,
the Special Committee directed Balch & Bingham to continue discussions and
negotiations with Hancock Park for a possible merger transaction since the
members of the Special Committee expected that within a few days Hancock Park's
financing would be sufficiently developed to enable the Special Committee to
reach a decision regarding whether its $32.50 per share offer constituted a
Superior Proposal under the existing Merger Agreement with the Purchaser.
During the period from March 5 through March 29, representatives of the
Purchaser, including the Trivest Directors and members of the Management Group,
continued to negotiate their financing arrangements with BankBoston and Bear
Stearns. These efforts resulted in the execution and delivery on March 29 of (i)
a letter from Bear Stearns to the Purchaser stating that Bear Stearns was highly
confident that, as of March 29 and subject to certain conditions, it could
arrange for the sale of up to $130.0 million aggregate principal amount of
senior subordinated notes of WinsLoew in connection with the Merger, (ii) a
commitment letter from BankBoston for a $145.0 million senior secured credit
facility to provide a portion of the Cash Merger Consideration and provide
WinsLoew with working capital and an acquisition revolver after the Merger, and
(iii) a commitment letter from affiliates of the Trivest Partnerships for up to
$75.0 million of equity financing. The Bear Stearns highly confident letter does
not constitute a commitment or undertaking by Bear Stearns to place or purchase
the senior subordinated notes and does not ensure the successful placement or
completion of the offering of such notes; moreover, the Bear Stearns letter sets
forth only its expectation as of March 29, 1999 with respect to its ability to
arrange a sale of the notes in connection with the Merger. See "THE
MERGER--Financing."
On the morning of March 30, the Purchaser delivered to the Special
Committee a letter stating that it was prepared to increase the purchase price
by 10% from $30.00 per share to $33.00 per share. Such proposal was accompanied
by copies of the Trivest equity commitment letter, the BankBoston senior
secured financing commitment letter and the Bear Stearns highly confident
letter with respect to the senior subordinated notes, as well as a proposed
amendment to the Merger Agreement. The proposed amendment provided for the
following: (i) an increase in the per share purchase price from $30.00 to
$33.00; (ii) the deletion of the Purchaser's financing condition; (iii) a
revised non-solicitation provision prohibiting the Special Committee's ongoing
solicitations and negotiations with potential acquirors unless the Board
determined that it had a fiduciary obligation to do so and that
21
<PAGE> 30
a Superior Proposal had been received; (iv) an increase in the termination fee
from $6.0 million to $10.0 million and an increase in the maximum expense
reimbursement from $1.2 million to $1.5 million; (v) the Purchaser's right to
terminate the Merger Agreement and receive expense reimbursement up to $1.5
million and liquidated damages of $1.0 million if the Proxy Statement were not
filed by April 12 (unless the delay resulted from the Purchaser's
non-cooperation or the unavailability of required financial statements); (vi)
the delivery of Mann Armistead's written fairness opinion by April 7; and (vii)
the extension to July 15 of the date after which either the Company or the
Purchaser can terminate the Merger Agreement without payment of the Termination
Fee.
On the morning of March 30, in connection with its $32.50 offer,
Hancock Park delivered to the Special Committee (i) a letter from Desai Capital
Management Incorporated to Mann Armistead dated March 30, 1999 stating their
preparedness to provide the required equity capital for Hancock Park's
acquisition of the Company and (ii) a letter from BT Alex.Brown Incorporated
dated March 29, 1999 stating that BT Alex.Brown Incorporated was very
interested in pursuing a transaction in which BT Commercial Corporation would
underwrite, participate in and act as agent for a senior secured credit
facility and in which BT Alex.Brown Incorporated would place senior
subordinated debt and a preferred equity investment. Both letters were subject
to the completion of due diligence.
In the early afternoon of March 30, the Special Committee held a
telephonic meeting with representatives of Balch & Bingham, Mann Armistead and
PricewaterhouseCoopers. Representatives of Mann Armistead reported on the
status of discussions with representatives of Hancock Park and the letters
received from the proposed financing sources of each of the Purchaser and
Hancock Park. Representatives of Balch & Bingham described the status of
negotiations with representatives of Hancock Park with respect to a merger
agreement. Representatives of Balch & Bingham reported that they had completed
negotiating such an agreement, except for the termination fee. With the
assistance of PricewaterhouseCoopers, the Special Committee discussed the
Purchaser's $33.00 revised Merger proposal and Hancock Park's existing $32.50
offer and compared them on the basis of price and the ability to finance and
consummate the proposed transactions. PricewaterhouseCoopers advised the
Special Committee that based upon its investigation of the Purchaser and
Hancock Park and its review of their revised offers and financing commitments,
the Purchaser had more committed financing than Hancock Park. The Special
Committee concluded that the Purchaser's $33.00 per share proposal was more
favorable than Hancock Park's proposal on the basis of its higher per share
purchase price and more committed financing than Hancock Park. The Special
Committee determined to negotiate with the Purchaser regarding the termination
fee and expense reimbursement provisions of the proposed amendment to the
Merger Agreement. Members of the Special Committee also recommended to the
Board that it authorize the Company to enter into an agreement to pay Hancock
Park a fee if it submitted an offer higher than $33.00 per share, but such
offer did not result in a transaction with Hancock Park.
On the afternoon of March 30, the Board reconvened its March 18
meeting with all directors participating. As the first order of business, Mr.
Smith provided an update with respect to the Special Committee's activities.
Mr. Smith acknowledged receipt of Mr. Powell's letter dated March 29 providing
for the proposed increase in the purchase price from $30.00 per share to $33.00
per share. He went on to express the Special Committee's desire that with the
exception in the increase in the per share purchase price and the removal of
the Purchaser's financing condition, the terms and conditions of the Merger
Agreement remain unchanged. As the next order of business, Mr. Tesney made a
presentation to the Board with respect to management's ongoing due diligence
investigation of the Potential Transaction Party. The Chairman of the Board
also confirmed that the Board would not be asked to make a final decision with
respect to the proposed business combination with the Potential Transaction
Party until the completion of such due diligence investigation.
The members of the Board asked the Special Committee for its
recommendation regarding the Purchaser's proposed amendment to the Merger
Agreement. The Board meeting adjourned while the members of the Special
Committee further considered the proposed amendment. The members of the Special
Committee considered the reasonableness of providing for a higher termination
fee in exchange for a 10% increase in the per share purchase price. In addition,
the members of the Special Committee considered the Purchaser's expressed
concern that it not be used simply to elicit higher offers from other bidders
and its desire for increased certainty that the Company would consummate the
Merger. In addition, Mann Armistead rendered its oral advice, later confirmed in
writing in its opinion, subject to certain assumptions made, matters considered
and limits on the review undertaken in connection with such opinion, that the
$33.00 per share Cash Merger Consideration was fair from a financial point of
view to the
22
<PAGE> 31
Public Shareholders. Mann Armistead expressly advised the Special Committee that
its favorable opinion on the fairness of the Purchaser's $33.00 offer did not
imply a belief that such price was the highest price available. Following its
deliberations, the Special Committee determined to recommend that the full Board
approve the proposed amendment, subject to the deletion of the provision
permitting the Purchaser to terminate the Merger Agreement and receive expense
reimbursement up to $1.5 million and liquidated damages of $1.0 million if the
Proxy Statement were not filed by April 12. The Special Committee unanimously
concluded that the Merger Agreement, as so amended (including the $33.00 per
share Cash Merger Consideration to be paid to the Public Shareholders), was
substantively and procedurally fair to, and in the best interests of, the Public
Shareholders and determined to recommend approval of the Merger Agreement, as so
amended, to the full Board.
Immediately thereafter, the Board meeting reconvened. After the
Special Committee delivered its recommendation regarding the Merger Agreement,
the Board unanimously approved the proposed amendment, subject to the foregoing
change. All ten members of the Board unanimously approved and adopted the
Merger Agreement, as so amended, recommended it to the shareholders and
determined that the Merger, as so amended, is substantively and procedurally
fair to, and in the best interests of, the Public Shareholders. The Board
determined not to consider a fee arrangement with Hancock Park at that time.
Prior to the opening of the market on March 31, the parties executed the
Purchaser's proposed amendment to the Merger Agreement (without the provision
permitting the Purchaser to terminate the Merger Agreement and receive expense
reimbursement up to $1.5 million and liquidated damages of $1.0 million if the
Proxy Statement were not filed by April 12) and issued a press release
announcing its execution.
On March 31, the Special Committee held a telephonic meeting with
representatives of Balch & Bingham and Mann Armistead. Balch & Bingham
summarized the non-solicitation provisions of the amended Merger Agreement, and
the Special Committee directed Balch & Bingham and Mann Armistead to cease all
discussions and negotiations with Hancock Park.
On April 7, 1999, Mann Armistead delivered its written fairness
opinion, dated April 7, 1999, to the Special Committee, together with the
accompanying valuation analyses and other materials. A copy of such written
materials has been filed as an exhibit to the Schedule 13E-3 filed with the
Commission in connection with the Merger and is available for inspection and
copying at the principal executive offices of the Company during its regular
business hours by any shareholder or any representative of a shareholder who
has been so designated in writing. A copy of such materials will be provided by
the Company to any shareholder or any representative of a shareholder who has
been so designated in writing upon written request and at the expense of the
requesting shareholder or such representative. See "Available Information."
On April 9, the Special Committee received from Hancock Park a written,
non-binding offer dated April 8 to acquire the Company for a per share purchase
price of either (i) $34.00, provided that the Termination Fee under the Merger
Agreement with the Purchaser was reduced from $10.0 million to $6.0 million, or
(ii) $33.50, if there was no such reduction. Such offer expressly stated that it
would expire April 19, which date was subsequently extended until April 23. In
addition, the offer was accompanied by copies of (i) a letter from BT Alex.Brown
Incorporated that, as of April 7, 1999 and subject to certain conditions, BT
Alex.Brown Incorporated was highly confident that it could arrange for the sale
of up to $150.0 million aggregate principal amount of senior subordinated notes
of WinsLoew in connection with the proposed transaction with Hancock Park, (ii)
a commitment letter dated April 7, 1999 from BT Commercial Corporation for a
senior secured credit facility of up to $100.0 million, subject to the
completion of due diligence, (iii) a letter from BT Alex.Brown Incorporated
that, as of April 7, 1999 and subject to certain conditions, it was willing to
use its best efforts to act as underwriter or placement agent for the sale or
placement of up to $20.0 million of preferred equity, (iv) a commitment letter
dated April 8, 1999 from Private Equity Investors III, L.P., a private
investment partnership managed by Desai Capital Management Incorporated, for up
to $70.7 million of common equity financing, and (v) a revised version of the
agreement and plan of merger previously negotiated with Hancock Park providing
for the following changes: (A) an increase in the per share purchase price as
described above; and (B) the deletion of Hancock Park's financing condition. The
BT Alex.Brown Incorporated highly confident letter does not constitute a
commitment to place or purchase senior subordinated notes and does not ensure
the successful placement or completion of the offering of such notes; moreover,
such letter sets forth only the expectation of BT Alex.Brown Incorporated as of
April 7, 1999 with respect to its ability to arrange a sale of such notes.
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<PAGE> 32
On April 12, the Board held a meeting with all directors participating.
As the first order of business, the Board considered the April 8 offer from
Hancock Park. After discussion, the Board authorized its representatives to
direct Mann Armistead to advise the Board whether or not Hancock Park's April 8
offer constituted a "Superior Proposal" under the Merger Agreement. In addition,
the Board authorized the engagement of Paul, Weiss, Rifkind, Wharton & Garrison,
New York, New York ("Paul Weiss"), to assist the Board in evaluating its
fiduciary duties in connection with Hancock Park's April 8 offer. As the next
order of business, Mr. Tesney provided an update of management's ongoing due
diligence investigation of the Potential Transaction Party.
On April 19, the Board held a telephonic meeting with representatives
of Paul Weiss. Paul Weiss provided the Board with an update regarding the most
recent Hancock Park proposal and informed the Board that (i) the April 19
deadline had been extended to April 23 in order to permit the Board
sufficient time to consider such proposal and (ii) if the Hancock Park proposal
is determined to be a "Superior Proposal" under the Merger Agreement, the
deadline will be further extended to permit the notice period required by the
Merger Agreement. Following an appropriate motion, the Board unanimously
authorized the Special Committee to evaluate the Hancock Park proposal and
related financing in conjunction with Mann Armistead and PricewaterhouseCoopers.
The Special Committee thereafter met with representatives of Paul Weiss and
Balch & Bingham to further discuss their responsibilities under law and the
terms of the Merger Agreement.
Meetings of the Special Committee and the full Board were scheduled
for April 22 to consider the advice of Mann Armistead and PricewaterhouseCoopers
with respect to whether the Hancock Park proposal constituted a Superior
Proposal under the Merger Agreement, as well as the Board's fiduciary duties in
responding to such proposal.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
THE SPECIAL COMMITTEE AND THE BOARD HAVE EACH UNANIMOUSLY DETERMINED
THAT THE MERGER IS SUBSTANTIVELY AND PROCEDURALLY FAIR TO, AND IN THE BEST
INTERESTS OF, THE PUBLIC SHAREHOLDERS. UPON THE SPECIAL COMMITTEE'S UNANIMOUS
RECOMMENDATION, THE BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND RECOMMENDED IT TO THE SHAREHOLDERS.
The Special Committee met on approximately 19 occasions between
January 7, 1999 and the date of this Proxy Statement, in person or by telephone
conference, to consider and make recommendations with respect to the Merger and
other possible strategic alternatives for the Company. The Special Committee
was assisted in its deliberations by its (i) financial advisor, Mann Armistead,
(ii) its legal counsel, Balch & Bingham, and (iii) with respect to evaluating
the financings to be used by the Purchaser and Hancock Park,
PricewaterhouseCoopers. At a meeting held on March 30, 1999, the Special
Committee determined that the Merger, including the Cash Merger Consideration
to be paid to the Public Shareholders, was substantively and procedurally fair
to, and in the best interests of, the Public Shareholders and recommended that
the full Board approve the Merger Agreement.
The material factors the Special Committee evaluated in determining
that the Merger is substantively and procedurally fair to, and in the best
interests of, the Public Shareholders are described below. Except as noted
below, the Special Committee considered the following factors to be positive
factors supporting its determination that the Merger is substantively and
procedurally fair to, and in the best interests of, the Public Shareholders. In
arriving at its decision, the Special Committee gave the most weight to:
(i) Mann Armistead's oral advice delivered to the Special
Committee on March 30, 1999, which Mann Armistead confirmed in writing,
that the $33.00 per share to be received by the Public Shareholders was
fair to such holders from a financial point of view. Mann Armistead
expressly advised the Special Committee that its favorable opinion on
the fairness of the Purchaser's $33.00 offer did not imply a belief
that such price was the highest price available. The full text of the
written opinion of Mann Armistead dated April 7, 1999, which sets forth
assumptions made, matters considered and limitations on the review
undertaken in connection with its opinion, is attached hereto as
Appendix B and is incorporated herein by reference. The Company's
shareholders are urged to and should read such opinion in its entirety.
The Special Committee and the Board also considered Mann Armistead's
oral advice to the Special Committee and its solicitation of more
favorable proposals. See "--Opinion of the Financial Advisor." The
Special Committee and the Board also considered the preliminary written
materials and the conclusions and analyses of Mann Armistead in their
presentations at the March 4 Special Committee and Board meetings. In
their review of the analyses performed by Mann Armistead, the Special
Committee and the Board did not study each of the separate analyses
individually but rather relied upon the summary and conclusions of Mann
Armistead that the analyses, taken as a whole, supported the conclusion
that the Merger is fair to the Public Shareholders from a financial
point of view. Based on Mann Armistead's nationally recognized
expertise in the furniture manufacturing industry, its expertise and
experience in the evaluation of businesses in connection with
transactions similar to the Merger, its familiarity with WinsLoew's
business, financial condition, results of operations and prospects, its
solicitation process and negotiations with other potential acquirors,
and its analyses and presentations related to the fairness opinion, the
Special Committee and the Board believe that Mann Armistead's opinion
as to the fairness of the Cash Merger Consideration to be received by
the Public Shareholders was well supported and sound. The Board and the
Special Committee believe that the Mann Armistead written report, oral
presentations and opinion supported the Special Committee's and Board's
fairness determination.
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<PAGE> 33
(ii) The premium (35.4%) by which the Cash Merger
Consideration of $33.00 per share exceeds the closing price ($24 3/8
per share) of the Common Stock on the day prior to the Board meeting at
which Mr. Powell stated that he, together with the other Trivest
Investors and the Management Group, would be willing to submit a
proposal to purchase the Company, the premium (22.2%) by which the Cash
Merger Consideration exceeds the closing price ($27 per share) of the
Common Stock on the last trading day prior to the announcement of the
Merger proposal, the premium (78.4%) by which the Cash Merger
Consideration exceeds the closing price ($18 1/2 per share) of the
Common Stock on the date three months prior to such announcement and
the fact that the Cash Merger Consideration is substantially in excess
of the Company's book value per Share of $9.08 at December 31, 1998, or
approximately 3.6 times such book value per share. See "--Opinion of
Financial Advisor."
(iii) The low level of trading of the Common Stock on the
Nasdaq National Market and the small number of shareholders of record
(approximately 105 as of the Record Date). As a result, it is unlikely
that a significant number of shareholders would be able to sell their
Common Stock at the current market price. The Merger would provide each
shareholder other than the Purchaser with cash for his or her shares.
(iv) The establishment of the Special Committee to make an
independent determination as to the fairness of the Merger and to
negotiate the terms of the Merger Agreement with representatives of the
Purchaser, given the conflict of interest of the Trivest Directors and
the Management Director.
(v) The terms and conditions of the Merger Agreement. In
particular, the Special Committee considered the facts that: (a) from
its initial execution on March 5 until its amendment on March 30, the
Merger Agreement permitted the Special Committee to continue to solicit
Superior Proposals and to engage in negotiations regarding Superior
Proposals; (b) the Purchaser's obligation to consummate the Merger is
not subject to any due diligence investigation by the Purchaser or any
financing contingency; (c) the Merger Agreement does not provide for
unreasonable termination fees and expense reimbursement obligations
which would have the effect of discouraging competing bids; and (d) the
Merger Agreement provides that, subject to the satisfaction of certain
conditions, the Board may withdraw or modify its recommendation to the
shareholders regarding the Merger and enter into an agreement with
respect to a Superior Proposal, if such a transaction becomes available
prior to the consummation of the Merger and the Board determines that
it is necessary to do so in order to comply with its fiduciary duties.
See "THE MERGER."
(vi) The fact that subsequent to the announcement on January
15 of the initial Merger proposal, the Special Committee has only
received formal proposals for the acquisition of the Company from
Hancock Park.
(vii) The fact that the furniture industry is cyclical and
sensitive to changes in general economic conditions, consumer
confidence and discretionary income, interest rate levels and credit
availability and the effect of such factors on the market price of the
Common Stock and management's ability to execute the Company's business
strategy. In this connection, the Special Committee considered that the
Company is subject to pressures from public shareholders and market
professionals to maintain and grow earnings per share. The Special
Committee believes that as a public company WinsLoew does not have
adequate flexibility to consider business strategies that have
long-term benefits but that may adversely impact earnings per share and
the market price of the Common Stock in the short term.
(viii) The financial ability and willingness of the Purchaser
to consummate the Merger. The Purchaser's obligation to consummate the
Merger Agreement is not conditioned upon the Purchaser's having
obtained financing for the Merger. In addition, the Special Committee,
through its financial and legal advisors, discussed the proposed equity
and debt financing with representatives of the
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Purchaser, BankBoston and Bear Stearns. In this connection, the Special
Committee reviewed (A) a commitment letter for up to $75.0 million in
equity financing from affiliates of the Trivest Partnerships, (B) a
commitment letter for a $145.0 million senior secured credit facility
for debt financing for the Merger supplied by BankBoston, and (C) a
letter from Bear Stearns that, as of March 29 and subject to certain
conditions, it was highly confident that it could arrange for the sale
of $130.0 million aggregate principal amount of senior subordinated
notes for additional debt financing for the Merger. Based on the
foregoing, the Special Committee viewed as remote the risk that the
Merger Agreement would not be consummated. The Special Committee
believed that the likelihood of financing, combined with the proven
track record of the Trivest affiliates in consummating acquisition
transactions, particularly compared to Hancock Park, was a significant
positive factor in its determination that the Merger is fair to the
Public Shareholders.
(ix) Actual or potential conflicts of interest to which
certain officers and directors of the Company and their affiliates are
subject in connection with the Merger, as follows:
o The Special Committee considered that the Trivest
Directors, who together with the Existing Trivest
Shareholders, hold approximately 29.3% of the
outstanding shares of Common Stock, have expressed
their intention to vote all such shares in favor of
the Merger and further noted that approximately 95.7%
of such shares (including all of the shares held by
the Existing Trivest Shareholders) would be converted
into the right to receive the Cash Merger
Consideration on the same terms as the Public
Shareholders, and only 4.3% would be contributed for
Purchaser common stock. Moreover, none of the
Existing Trivest Shareholders will have a direct or
indirect interest in WinsLoew after the Merger. The
Special Committee viewed this high degree of
"sell-side" participation by affiliates of Trivest,
with respect to whom Mr. Powell and other Trivest
affiliates also had fiduciary obligations, as a
positive factor in its determination that the Merger
is fair to the Public Shareholders.
o Similarly, the Special Committee considered that the
members of the Management Group, who together hold
approximately 3.0% of the outstanding shares of
Common Stock, have expressed their intention to vote
all of such shares in favor of the Merger and further
noted that approximately 63.30% of such shares would
be converted into the right to receive the Cash
Merger Consideration on the same terms as the Public
Shareholders, and only 36.7% would be contributed for
Purchaser common stock. Furthermore, cash investment
in the Purchaser by members of the Management Group
is limited to approximately $422,000. The Special
Committee considered that the rollover of a larger
portion of the Management Group's Common Stock or
substantial cash investment in the Purchaser would
indicate a level of confidence in the Company's
prospects that might be inconsistent with the Special
Committee's assessment of the Company's prospects.
o The Special Committee considered that after the
Merger, the Trivest Directors will beneficially own
approximately 96.0% of the Company and that the
members of the Management Group will beneficially own
approximately 4.0% of the Company. The Special
Committee considered these conflicts of interest to
be a negative factor in its determination that the
Merger is fair to the Public Shareholders.
o The Special Committee further considered that members
of the Management Group will enter into new
employment agreements with WinsLoew replacing their
existing employment agreements with the Company, and
that such new employment agreements will provide for
the payment of substantially the same base salaries
and annual cash bonuses as their existing employment
agreements. The Special Committee considered these
conflicts of interest to be a negative factor in its
determination that the Merger is fair to the Public
Shareholders.
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<PAGE> 35
In addition to the factors referred to in subparagraphs (i) through
(ix) above, the other material factors considered by the Special Committee in
reaching the fairness determination are as follows:
(i) The adequacy of the information regarding the Company
which the Special Committee and its financial and legal advisors had
been provided. The members of the Board and the Special Committee have
knowledge of and a familiarity with the business, financial condition,
existing assets, results of operations and prospects of the Company, as
well as the industry, the risks associated with achieving its projected
operating results, and the impact on the Company of general economic
and market conditions. Based on such knowledge and general knowledge
about stock market values, the members of the Board and the Special
Committee believed that management's projections considered by Mann
Armistead and the Special Committee (see "CERTAIN FORWARD LOOKING
INFORMATION") were reasonable and supported the Board's and the Special
Committee's fairness determination.
(ii) Under Florida law, WinsLoew shareholders have no right to
an appraisal of the value of their shares in connection with the
Merger. The Special Committee considered this to be a negative factor
in its determination that the Merger is fair to the Public
Shareholders.
In view of the wide variety of factors considered in connection with
their evaluation of the Merger Agreement, neither the Special Committee nor the
Board found it practicable to, and did not, quantify or otherwise assign
relative weights to the individual factors considered in reaching their
respective determinations. In considering each such factor, the Special
Committee and the Board specifically took note of the following points:
With respect to factor (i) above, the Special Committee and the Board
considered the fact that Mann Armistead reviewed the projections prepared by
management with respect to net sales, operating income, net income, earnings per
share and other items. See "CERTAIN FORWARD LOOKING INFORMATION." In addition,
at the February 17 and March 4 meetings of the Special Committee, members of the
Special Committee asked representatives of Mann Armistead to elaborate generally
upon the methodologies on which its analyses were based.
With respect to factors (ii) and (iii) above, although the Special
Committee, the Board and Mann Armistead took note of the market price of the
Common Stock, none of such persons relied exclusively upon the current or
historical market prices of the Common Stock in making its determination with
respect to the fairness of the Cash Merger Consideration, given the fact that
the Common Stock has been and continues to be thinly traded. The Special
Committee concluded that the Merger would give the Public Shareholders,
particularly those holding a large number of shares of Common Stock, an
opportunity to realize immediate value for their Common Stock at a substantial
premium. The Special Committee recognized that while consummation of the Merger
would result in the shareholders being entitled to receive $33.00 in cash per
share, it also would eliminate the opportunity for the Public Shareholders
(other than the Eligible Employees) to participate in the future growth, if
any, of the business of WinsLoew and potential market appreciation in the
Common Stock. The Special Committee concluded that, based on the discount
historically applied by the market to the Common Stock, it was unlikely that
future trading value would compare favorably with the $33.00 per share payable
in the Merger. Thus, on balance and considering WinsLoew's future prospects, as
well as its historical results of operations, the Special Committee concluded
that the uncertain prospect for future appreciation did not justify depriving
WinsLoew's shareholders of the opportunity to obtain an immediate cash premium
for their Common Stock. In light of these conclusions and the other matters
discussed below, the Special Committee determined that the $33.00 Cash Merger
Consideration was fair and presented the shareholders with an attractive
opportunity and potentially greater benefit than maintaining their ownership
interest in WinsLoew.
With respect to factors (iv), (v), (vi) and (ix) above, the Special
Committee considered the fact that the obligation of the Company to consummate
the Merger is not conditioned upon the favorable vote of a majority of the
Public Shareholders, even though the Merger may not be considered to be at
"arm's length" because the Trivest Directors and the members of the Management
Group are (x) affiliates of the Company and also (y) parties to the Merger
Agreement with different interests than the Company. Notwithstanding the
absence of such a voting requirement, the Special Committee believes that the
procedure that was followed in determining the purchase price to be paid to the
shareholders of the Company was fair to the Public Shareholders. As described
above, the ten-person
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<PAGE> 36
Board of Directors of the Company (one of whom is the Management Director and
four of whom are the Trivest Directors) appointed as the only members of the
Special Committee the five non-employee directors who were independent of the
Management Group and the Trivest Partnerships. The terms of the Merger Agreement
were determined through arm's-length negotiations between the Special Committee
and its legal and financial advisors, on the one hand, and representatives of
the Purchaser, on the other. Moreover, from its initial execution on March 5
until its amendment on March 30, the Merger Agreement permitted WinsLoew to (x)
solicit Superior Proposals and (y) negotiate on behalf of the Company with
third parties with respect to Superior Proposals. As amended, the Merger
Agreement permits WinsLoew to (i) withdraw or modify its recommendation to the
shareholders regarding the Merger, (ii) enter into an agreement with respect
to, or approve, a Superior Proposal or (iii) terminate the Merger Agreement, so
long as the Board determines in each case (i), (ii) or (iii) that it is
necessary to do so in order to comply with its fiduciary duties and notifieds
the Purchaser that it has received a Superior Proposal. In addition, the Merger
Agreement contains provisions (without which the Special Committee believes the
Purchaser would not have entered into the Merger Agreement) imposing upon the
Company the Termination Fee and expense reimbursement obligations that, in the
view of the Special Committee, are reasonable and would not have the effect of
discouraging competing bids. (See "THE MERGER--Nonsolicitation Covenant). Thus,
although the Merger is not structured to require approval of a majority of the
unaffiliated shareholders (which the Special Committee considered to be a
negative factor), the Special Committee nevertheless believes, as of the date of
this Proxy Statement and for the reasons set forth above, that the Merger is
procedurally fair to the Public Shareholders.
The Special Committee also noted that approximately 35.8% of the
outstanding shares of Common Stock are held of record by persons who have
expressed their intention to vote their shares of Common Stock in favor of the
Merger, including members of the Management Group, members of the Board, the
Existing Trivest Shareholders and other individuals associated or affiliated
with the Trivest Partnerships. The Special Committee further noted that
approximately 97.6% of such shares would not be rolled over into shares of
Purchaser common stock, but rather would be converted into the Cash Merger
Consideration pursuant to the Merger on the same terms as the Public
Shareholders. The Special Committee viewed this as a significant positive factor
in its determination that the Merger is fair to the Public Shareholders.
Based on the foregoing, on March 30, 1999, the Special Committee
unanimously determined that the Merger is substantively and procedurally fair
to, and in the best interest of, the Public Shareholders and recommended to the
Board approval of the Merger Agreement and that it be recommended to the
shareholders of the Company.
The Board unanimously approved the Merger on March 30, 1999 and
determined that the Merger is substantively and procedurally fair to, and in
the best interest of, the Public Shareholders and resolved to recommend it to
the Company's shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
MERGER.
OPINION OF THE FINANCIAL ADVISOR
Mann Armistead delivered its written opinion to the Special Committee
to the effect that the Cash Merger Consideration to be received by the Public
Shareholders in the Merger is fair to such holders from a financial point of
view.
Mann, Armistead was retained by the Special Committee of the Board of
Directors of WinsLoew pursuant to the Engagement Letter dated January 19, 1999.
Mann Armistead is a recognized investment banking firm regularly engaged in the
valuation of private and public businesses and their securities in connection
with mergers and acquisitions, competitive biddings and valuations for estate,
corporate and other purposes and acting as financial advisor in connection with
other forms of strategic corporate transactions. Mann Armistead is actively
involved in securities research on the furniture industry. The Special
Committee selected Mann Armistead as its financial advisor because it is a
nationally known investment banking firm with expertise in the furniture
industry, its experience in transactions similar to the Merger and because it
is familiar with WinsLoew and its business.
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<PAGE> 37
As part of its role as financial advisor to the Special Committee,
Mann Armistead was asked by the Special Committee to render an opinion to the
Special Committee as to whether the consideration to be received by the Public
Shareholders is fair to the Public Shareholders from a financial point of view.
In addition, Mann Armistead was instructed by the Special Committee to solicit
superior proposals from both strategic and financial buyers. On March 4, 1999,
Mann Armistead rendered to the Special Committee an oral opinion, which was to
be subsequently confirmed by a written opinion on the same date that the $30.00
per share consideration described in the original Merger Agreement was fair,
from a financial point of view to the Public Shareholders of WinsLoew.
On March 30, the Special Committee received a proposed amendment to
the Merger Agreement. Among other things, the amendment increased the
consideration to WinsLoew shareholders to $33.00 per share, removed the
financing contingency and required the immediate termination of any discussions
and negotiations with other potential buyers, subject to the Board's fiduciary
duties. On March 30, the Special Committee unanimously approved the amendment,
subject to certain changes. Mann Armistead's written opinion dated April 7,
1999, states that as of such date, and based upon and subject to certain
matters stated therein, the $33.00 per share Cash Merger Consideration described
in this Proxy Statement was fair, from a financial point of view, to the Public
Shareholders of WinsLoew. Pursuant to the requirements of the amended Merger
Agreement, on March 31, the Special Committee instructed Mann Armistead to
discontinue its process to solicit superior offers from third parties.
The full text of Mann Armistead's written opinion, which sets forth
certain assumptions made, matters considered and limitations on review
undertaken is attached as Appendix B to this Proxy Statement and is incorporated
herein by reference, and the Company's shareholders are urged to carefully read
such opinion in its entirety. The summary of the opinion of Mann Armistead set
forth in this Proxy Statement is qualified in its entirety by reference to the
full text of the opinion attached. Mann Armistead's opinion is directed only to
the fairness, from a financial point of view, of the Cash Merger Consideration
as described herein, to the Public Shareholders of WinsLoew.
Mann Armistead's opinion is addressed to the Special Committee of the
Board of Directors of WinsLoew and does not constitute a recommendation as to
how any shareholder of WinsLoew should vote with respect to the Merger. The
opinion of Mann Armistead does not address (i) the relative merits of the
Merger and the other business strategies or transactions with third parties
considered by the Board of Directors or the effect of any such other
transaction, (ii) the Board's decision to proceed with the merger to the
exclusion of other transactions, or (iii) the value of the shares of WinsLoew's
common stock held by the Purchaser or fairness of any consideration being
received by the Purchaser in the merger.
Mann Armistead was not requested by the Special Committee to make, nor
did Mann Armistead make, any recommendation as to the amount of the
consideration to be received by the Public Shareholders. With the exception of
the instruction on March 31 to cease discussions with other interested third
parties, no limitations were imposed by the Special Committee with respect to
procedures followed or the investigations made by Mann Armistead in rendering
its opinions.
Mann Armistead reviewed certain financial, businesses and other
information that was publicly available or furnished to Mann Armistead by
WinsLoew, including: (1) WinsLoew's Annual Reports to Shareholders, Annual
Reports on Form 10-K and related financial information for the years ended
December 31, 1994 through December 31, 1998; (2) certain publicly available
information with respect to historical market prices and trading activities for
WinsLoew's common stock and for certain publicly traded furniture industry
companies which Mann Armistead deemed relevant; (3) certain mergers and
acquisitions in the furniture industry; (4) other financial information
concerning the business and operations of WinsLoew including certain financial
analyses and forecasts for WinsLoew prepared by senior management; and (5) such
other financial studies, analyses, securities research, inquiries and other
matters as Mann Armistead deemed necessary. In addition, Mann Armistead
discussed the business and prospects of WinsLoew with members of senior
management and visited several of the Company's operating facilities.
In connection with its review, Mann Armistead relied upon and assumed
the accuracy and completeness of all of the foregoing information provided to
it or publicly available, including the representations and warranties of
WinsLoew included in the Merger Agreement, and Mann Armistead has not assumed
any responsibility for
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<PAGE> 38
independent verification of such information. Mann Armistead relied upon the
senior management of WinsLoew as to the reasonableness and achievability of its
financial and operational forecasts and projections, and the assumptions and
bases therefore, provided to Mann Armistead, and assumed that such forecasts and
projections reflect the best currently available estimates and judgments of
WinsLoew's senior management and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
senior management. Mann Armistead did not undertake any independent valuation or
appraisal of the real estate owned by WinsLoew.
In rendering its opinion, Mann Armistead conducted a solicitation
process and performed a variety of financial analyses. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Moreover, the
evaluation of the fairness of the Cash Merger Consideration, from a financial
point of view, to holders of the WinsLoew common stock was to some extent a
subjective one based on the experience and judgment of Mann Armistead and not
merely or only the result of mathematical analysis of financial data.
Accordingly, not withstanding the separate factors summarized below, Mann
Armistead believes that its analyses must be considered as a whole and that
selecting certain portions of its analyses and of the factors contained therein,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. The Mann Armistead opinion is
based on market, economic and other conditions as they existed and should be
evaluated as of the date of the Mann Armistead opinion.
The following is a summary of the material analyses performed by Mann
Armistead in connection with its opinion expressed herein:
(A) OFFER VALUATION: Using publicly available information, Mann
Armistead analyzed, among other things, the market value and
trading multiples of the Company and the following selected
publicly traded companies in the furniture industry: Falcon
Products, Inc.; Kimball International, Inc.; LADD Furniture,
Inc.; Meadowcraft, Inc.; Pulaski Furniture Corp.; and Shelby
Williams Industries, Inc. (collectively the "Selected
Companies"). Mann Armistead compared market values of, among
other things, current equity value and adjusted market value
(equity value, plus total debt, less cash and cash
equivalents) as multiples of the latest 12 months net income,
earnings before interest and taxes (EBIT) and shareholders'
equity. Based on the above described analysis, Mann Armistead
determined the Selected Companies (based on a closing stock
price date of April 1, 1999) rendered on average a multiple
range of 9.2 times net income, 6.8 times EBIT and 1.3 times
shareholders' equity.
When compared to the merger consideration value of
$33.00 per share, Mann Armistead determined, based on
WinsLoew's financial results for the fiscal year ended
December 31, 1998, the offer to equate to 14.3 times net
income, 8.5 times EBIT and 4.0 times shareholders' equity.
Based on this information, Mann Armistead determined the
merger consideration to represent a premium value when
compared to the Selected Companies.
Mann Armistead reviewed the terms of the Merger
Agreement, based on a per share Cash Merger Consideration
value of $33.00 per share for WinsLoew's common stock, and
determined such offer to represent a premium, based on market
closing stock prices for WinsLoew for the following dates
noted: of 22.2% as of January 15, 1999 (based on $27.00 per
share), the last trading date immediately preceding the
announcement of the offer from the Purchaser; of 29.4% as of
January 8, 1999 (based on $25.50 per share), the date one week
prior to such announcement; and of 78.4% as of October 15,
1998 (based on $18.50 per share), the date three months prior
to the announcement.
(B) SOLICITATION PROCESS: After being retained by the Special
Committee, Mann Armistead prepared a descriptive memorandum on
WinsLoew, suggested a list of potential acquirors which was
approved by the Special Committee and began the solicitation
process to determine if there were other potential buyers who
might pay more than the original offer of $30.00 per share.
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<PAGE> 39
Mann Armistead contacted 32 potential acquirors of
whom 11 indicated an interest in receiving additional
information. From that group, only one, Hancock Park,
submitted to the Special Committee a formal proposal. The
proposal provided for an all cash offer of $32.50 per share,
subject to, among other things, the successful completion of
its financing efforts. The Special Committee instructed Mann
Armistead to investigate Hancock Park's financing sources in
order to determine the probability of closing a transaction
with Hancock Park. Mann Armistead accompanied Hancock Park on
its due diligence visits to WinsLoew's headquarters in
Birmingham, Alabama and to the Loewenstein operation in
Pompano Beach, Florida. During these visits, Mann Armistead
had the opportunity to discuss financing with Hancock Park and
its advisor, BT Alex.Brown Incorporated, as well as its equity
partner, Desai Capital Management Incorporated. On March 30,
Mann Armistead received letters from BT Alex.Brown and Desai
Capital Management Incorporated indicating their level of
support for financing the Hancock Park proposal. Also on March
30, the Special Committee received a proposed amendment to the
Merger Agreement from the Purchaser which, among other things,
increased its offer from $30.00 to $33.00 per share, removed
the financing contingency and required the Company and its
advisors to immediately cease discussions and negotiations
with other potential acquirors, including Hancock Park,
subject to the Board's fiduciary duties. On that same day, the
Special Committee recommended the amendment to the Board, and
the amendment was executed. Mann Armistead, in accordance with
the Special Committee's instructions and the amended Merger
Agreement, ceased discussions with Hancock Park and other
potential acquirors as of that date. Mann Armistead expressly
advised the Special Committee that its favorable opinion on
the fairness of the Purchaser's $33.00 offer did not imply a
belief that such price was the highest price available.
On April 9, the Special Committee received from
Hancock Park a written, non-binding proposal for an all cash
offer to acquire the Company for a per share purchase price of
either (i) $34.00, provided that the Termination Fee under the
Merger Agreement with the Purchaser was reduced from $10.0
million to $6.0 million, or (ii) $33.50, if there was no such
reduction. Such offer expressly stated that it would expire
April 19, which date was subsequently extended until April 23.
In addition, the proposal was accompanied by copies of letters
from BT Alex. Brown Incorporated and an affiliate of Desai
Capital Management Incorporated indicating their level of
support for financing the proposal. On April 12, the Board
authorized its representatives to direct Mann Armistead to
advise the Board whether or not Hancock Park's April 8
proposal constituted a "Superior Proposal" under the Merger
Agreement.
(C) DISCOUNTED CASH FLOW ANALYSIS: Using a discounted cash flow
analysis, Mann Armistead estimated the net present value of
the future streams of after-tax cash flow that WinsLoew could
produce on a stand alone basis for the fiscal year end periods
1999-2002 and a terminal multiple value was utilized to
determine value. For this analysis, Mann Armistead considered
various scenarios for the performance of the WinsLoew Common
Stock using (i) the sales revenue, net income and cash flow
projections as supplied by WinsLoew's senior management (see
"CERTAIN FORWARD LOOKING INFORMATION"), (ii) a range of 8.2
times to 10.2 times earnings as the terminal value of
WinsLoew's Common Stock (a range determined by using the
midpoint of the Selected Companies net income multiple
analysis), and (iii) a range of discount rates from 9.0% to
11.0%. The estimates and ranges used in this analysis were
chosen based upon what Mann Armistead, in its judgment,
considered to be appropriate taking into account, among other
things, WinsLoew's past and current financial performance, the
general level of inflation, and rates of return generally
required in the marketplace for companies with similar risk
profiles. In considering the average of the above described
range, the present value of a share of WinsLoew's Common Stock
was calculated to be less than that of the Cash Merger
Consideration.
(D) ANALYSIS OF SELECTED FURNITURE INDUSTRY ACQUISITION
TRANSACTIONS: Mann Armistead undertook a review of publicly
available information regarding selected acquisitions in the
furniture industry but did not find any transactions which
were in its opinion comparable to the Merger. Most of the
acquisitions occurring within the industry are those involving
private companies and complete financial information was not
generally available.
The summary set forth does not purport to be a complete description of
the analysis or data utilized by Mann Armistead in the preparation of its
opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to summary description. Mann Armistead based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning WinsLoew, general overall business and economic conditions and
industry related factors.
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<PAGE> 40
In the ordinary course of business, Mann Armistead has provided
securities research coverage on WinsLoew. Mann Armistead has ceased such
coverage since its engagement by the Company in connection with the Merger.
Pursuant to the Engagement Letter, the Company retained Mann Armistead
to assist the Special Committee by (i) evaluating the Merger proposal, (ii)
soliciting and evaluating other potential buyers for the Company as instructed
by the Special Committee, (iii) participating in negotiations related to the
possible sale of the Company and (iv) providing its fairness opinion. Pursuant
to the terms of the Engagement Letter, the Company agreed to pay Mann Armistead
a fee as follows: (i) if the Trivest Investors and the Management Group
purchased the Company for $30.00 per share, then the Company would have paid
Mann Armistead a fee of $350,000; and (ii) if (A) the Trivest Investors and the
Management Group purchased the Company for a per share price in excess of
$30.00 or (B) the Company was purchased by any buyer contacted by Mann
Armistead, then the Company would pay Mann Armistead a fee equal to 0.7% of the
purchase price for the Company (including cash payments in respect of
outstanding stock options). As of the date of this Proxy Statement, the Company
has paid Mann Armistead $105,000, plus expenses, and, upon consummation of the
Merger, has agreed to pay Mann Armistead an additional $1,731,000 pursuant to
the Engagement Letter. The Company has agreed to reimburse Mann Armistead for
its reasonable out-of-pocket expenses, including attorneys' fees, and to
indemnify Mann Armistead against certain liabilities, including certain
liabilities under the federal securities laws.
Prior to the Company's engagement of Mann Armistead under the
Engagement Letter, the Company had retained Mann Armistead in June 1997 in
connection with the possible sale of its Continental Engineering Group, Inc.
subsidiary and in May 1998 in connection with the possible sale of the Company
to the Potential Acquiror or another specified publicly held furniture
manufacturer. Pursuant to a letter dated June 30, 1997, as amended by a letter
dated November 17, 1997, the Company engaged Mann Armistead to act as the
Company's investment banker in connection with the possible sale of the stock
of Continental Engineering Group, Inc. The Company sold its Continental
Engineering Group, Inc. subsidiary in June 1998 and paid Mann Armistead a fee
of $193,000 in connection therewith. Pursuant to a letter dated May 7, 1998,
the Company engaged Mann Armistead to act as the Company's investment banker in
connection with the possible sale of the Company to the Potential Acquiror or
another specified publicly held furniture manufacturer for a fee of 0.6% of the
aggregate consideration, subject to a minimum fee of $1.0 million. No agreement
with respect to such a sale was ever reached, and the Company has had no
contact with either entity since July 1998, except that Mann Armistead
contacted the Potential Acquiror as part of its solicitation process. As a
result of such engagement, the Company reimbursed Mann Armistead for expenses,
but did not pay Mann Armistead any fees. See "--Background of the Merger--Past
Contracts, Transactions and Negotiations."
Except as described herein, neither Mann Armistead nor any of its
affiliates has performed any investment banking or other financial services
for, or had any material financial relationship with the Company during the two
years preceding the date hereof.
PURPOSE AND REASONS OF THE AFFILIATES FOR THE MERGER
The purpose of the Affiliates for engaging in the transactions
contemplated by the Merger Agreement is to acquire, together with any Eligible
Employees, 100% of the ownership of the Company. The Affiliates believe that as
a private company WinsLoew will have greater flexibility to focus on enhancing
value by emphasizing growth and operating cash flow without the constraint of
the public market's emphasis on quarterly earnings. In addition, the Affiliates
regard the acquisition of the Common Stock in the Merger as an attractive
investment opportunity because they believe that WinsLoew's future business
prospects are favorable and that the substantial increase in the debt to equity
ratio of WinsLoew after the Merger, although importing greater investment risks,
will create the potential for the shareholders' equity value of WinsLoew to
increase more rapidly on a percentage basis than the shareholders' equity value
of an identical corporation with a larger equity base and less debt. After the
Merger, the Trivest Investors and the Management Group could earn a substantial
return on their equity investment in WinsLoew. While the Trivest Investors and
the Management Group are looking to achieve substantial returns on their
investment in WinsLoew, they believe that such returns are available only to
those investors who are willing to bear the substantial risks associated with a
highly leveraged investment. Each believes that the discount on the potential
future value of WinsLoew that may be applied to reflect such risk from a point
of view of the Public
32
<PAGE> 41
Shareholders is necessarily different from the discount applied by the members
of the Trivest Investors and the Management Group who will own a significant
interest in a privately held company and who accordingly will be able to closely
and directly monitor and influence the performance of their investment.
Immediately prior to the Merger, the Trivest Investors, the Management
Group and the Eligible Employees will acquire equity interests in the Purchaser
by purchasing shares of Purchaser common stock or contributing to the Purchaser
shares of WinsLoew Common Stock in exchange for shares of Purchaser common
stock as follows:
THE TRIVEST INVESTORS. The Trivest Investors together beneficially
own, in the aggregate, approximately 29.8% of the outstanding Common Stock,
including 23.7% that is held of record by the Existing Trivest Shareholders.
The Trivest Partnerships do not currently hold any Common Stock. See "PRINCIPAL
SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT." The individual Trivest
Investors will contribute an aggregate of 90,909 shares of Common Stock (valued
at $33.00 per share with an aggregate value of approximately $3.0 million) in
exchange for shares of Purchaser common stock, and the Trivest Partnerships
will purchase additional shares of Purchaser common stock for approximately
$69.0 million in cash, such that the total amount of the Trivest Investors'
contribution to the Purchaser will be approximately $72.0 million, representing
approximately 96.0% of the outstanding Purchaser common stock and, after the
Merger, outstanding WinsLoew Common Stock, provided, that the cash portion of
such contribution from the Trivest Partnerships is subject to reduction by an
amount equal to the cash and the aggregate value (at $33.00 per share) of the
shares of Common Stock contributed to the Purchaser by the Eligible Employees.
Since the Trivest Partnerships do not currently hold any shares of Common
Stock, all shares of Common Stock contributed to the Purchaser will be from the
individual Trivest Investors. See "--Conflicts of Interest--Post-Merger
Ownership and Control of the Purchaser" and "THE MERGER -- Financing."
THE MANAGEMENT GROUP. The members of the Management Group beneficially
own, in the aggregate, approximately 6.1% of the outstanding Common Stock. See
"PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT." The members of the
Management Group will contribute to the Purchaser an aggregate of 79,031 shares
of Common Stock (valued at $33.00 per share with an aggregate value of
approximately $2.6 million) in exchange for shares of Purchaser common stock
and will purchase additional shares of Purchaser common stock for approximately
$422,000 in cash, such that the total amount of the Management Group's
contribution to the Purchaser will be approximately $3.0 million, representing
approximately 4.0% of the outstanding Purchaser common stock, and, after the
Merger, outstanding WinsLoew Common Stock. See "--Conflicts of
Interest--Post-Merger Ownership and Control of the Purchaser" and "THE MERGER --
Financing."
THE ELIGIBLE EMPLOYEES. Approximately 35 Eligible Employees of
WinsLoew (not including members of the Management Group) will individually be
offered the opportunity to purchase shares of common stock of the Purchaser
and/or contribute any or all of their shares of Common Stock to the Purchaser
in exchange for Purchaser common stock.
As a result of the Merger the following Affiliates are expected to
change their percentage beneficial ownership of the common equity of WinsLoew,
on a fully diluted basis, as follows: Messrs. Powell and George, from an
aggregate of approximately 29.8% to 96.0%; and the Management Group, from an
aggregate of approximately 6.1% to 4.0%. Such post-Merger percentages for
Messrs. Powell and George include approximately 92.0% to be acquired by the
Trivest Partnerships in the Merger. Such Affiliates' interests in WinsLoew's
net book value and net earnings will increase correspondingly. See "SELECTED
CONSOLIDATED FINANCIAL DATA." Payments in connection with the Merger and
related financing will reduce substantially WinsLoew's net book value and net
earnings. See "THE MERGER--Financing."
In order to provide a prompt and orderly transfer of ownership of
WinsLoew from the current shareholders to the Trivest Investors and the members
of the Management Group, in light of relevant financial, legal, tax and other
considerations, and to facilitate the required financing for the transaction,
the acquisition has been structured as a merger pursuant to which, if the
Merger Agreement is adopted by the requisite vote of the shareholders, the
33
<PAGE> 42
Purchaser will be merged with and into WinsLoew, and all of the outstanding
shares of Common Stock (other than shares held by the Purchaser) will be
converted into the right to receive the Cash Merger Consideration, without
interest.
While the Trivest Investors and the members of the Management Group
did not consider any alternatives to the Merger with respect to the Company,
representatives of the Company, including members of the Management Group and
the Trivest Directors, have had discussions with third parties regarding
possible business combinations, sales or acquisitions of assets and other
transactions. See "SPECIAL FACTORS--Background of the Merger--Past Contracts,
Transactions and Negotiations" and "BUSINESS OF THE COMPANY--Background--Recent
Developments."
While the Trivest Investors and the members of the Management Group
believe that there will be significant opportunities associated with their
investment in WinsLoew, there are also substantial risks that such
opportunities may not be fully realized.
POSITION OF THE AFFILIATES AS TO FAIRNESS OF THE MERGER
Each of the Affiliates has considered the analyses and findings of the
Special Committee and the Board (described in detail in "SPECIAL FACTORS -- The
Special Committee's and the Board's Recommendation") with respect to the
fairness of the Merger to the Public Shareholders of the Company. As of the
date of this Proxy Statement, each of the Affiliates adopts the analyses and
findings of the Special Committee and the Board with respect to the fairness of
the Merger and believes that the Merger is both procedurally and substantively
fair to, and in the best interest of, the Company's Public Shareholders;
provided that no opinion is expressed as to the fairness to any shareholder
making an investment in the Purchaser. The Trivest Directors have financial
interests in the Merger and the members of the Management Group have financial
and employment interests in the Merger. See "SPECIAL FACTORS--Conflicts of
Interest."
CONFLICTS OF INTEREST
In considering the recommendations of the Board with respect to the
Merger, shareholders should be aware that certain officers and directors of
WinsLoew and affiliates and associates of these officers and directors are
Trivest Investors or members of the Management Group or otherwise have
interests in connection with the Merger which may present them with actual or
potential conflicts of interest as summarized below. The Special Committee and
the Board were aware of these interests and considered them among the other
matters described under "--The Special Committee's and the Board's
Recommendation." The Special Committee considered the Management Group's
conflicts of interest to be a negative factor in its determination that the
Merger is fair to the Public Shareholders.
POST-MERGER OWNERSHIP AND CONTROL OF WINSLOEW. It is anticipated that
immediately after the Merger the following individuals and entities will
beneficially own the number of shares of common stock of the Purchaser shown in
the following table, which are to be issued in exchange for cash or shares of
WinsLoew Common Stock contributed prior to the Merger. See "--Purpose and
Reasons of the Affiliates for the Merger." The table does not reflect the
beneficial ownership of any shares of common stock of the Purchaser by Eligible
Employees. To the extent any of the Eligible Employees accept the Purchaser's
offer to issue to them shares of common stock of the Purchaser in exchange for
shares of Common Stock or for cash, the share numbers and percentages shown in
the following table for Trivest Equities, Inc. will decrease.
34
<PAGE> 43
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF PURCHASER
PURCHASER COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
------------------------ ---------------------- -----------------------
<S> <C> <C>
Trivest Equities, Inc. (2)................. 68,970,000 92.0%
Trivest Directors (3)
Earl W. Powell (4)..................... 70,970,000 94.6%
Phillip T. George, M.D. (5)............ 69,970,000 93.3%
Trivest Investors Subtotal........... 71,970,000 96.0%
Management Group (3)
Bobby Tesney........................... 1,000,000 1.3%
R. Craig Watts......................... 750,000 1.0%
Vincent A. Tortorici, Jr............... 600,000 0.8%
Stephen C. Hess........................ 500,000 0.7%
Jerry Camp............................. 180,000 *
Management Group Subtotal............ 3,030,000 4.0%
---------- ------
Total............................. 75,000,000 100.00%
</TABLE>
- ------------------
(1) Except as otherwise indicated below, all shares are owned directly and
each person has sole voting and investment power with respect to all
shares.
(2) Includes 31,824,000 shares to held of record by Trivest Furniture
Partners, Ltd. and 37,146,000 shares to be held of record by Trivest
Fund II Group, Ltd. Such entities do not currently own shares of Common
Stock. Trivest Equities, Inc. serves as the sole general partner of each
of (i) Trivest Fund II Group, Ltd., a privately-held investment
partnership, and (ii) Trivest Furniture, Ltd., which in turn is the sole
general partner of Trivest Furniture Partners, Ltd., a privately-held
investment partnership. Messrs. Powell and George are executive officers
and the sole directors of Trivest Equities, Inc. Mr. Powell is its
controlling shareholder. Each Trivest Director is also an indirect
investor in such Trivest Partnerships. See "CERTAIN INFORMATION
CONCERNING THE PURCHASER AND OTHER AFFILIATES."
(3) See "PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT" for
number of shares of Common Stock and percentage of Common Stock
beneficially owned before the Merger by these persons.
(4) Includes 2,000,000 shares to be held of record directly, 37,146,000
shares to be held of record by Trivest Furniture Partners, Ltd. and
31,824,000 shares held of record by Trivest Fund II Group, Ltd. See note
(2) above.
(5) Includes 1,000,000 shares to be held of record directly, 37,146,000
shares to be held of record by Trivest Furniture Partners, Ltd. and
31,824,000 shares held of record by Trivest Fund II Group, Ltd. See note
(2).
Following the consummation of the Merger, the members of the
Management Group will continue as executive officers of the Company, and Mr.
Tesney will continue to serve on the Board of Directors of the Company.
The Board of Directors of the Company after the Merger will be
comprised of Messrs. Powell, George, Kaczynski, Klein and Tesney. The Trivest
Investors are expected to beneficially own approximately 96.0% of the shares of
WinsLoew Common Stock after the Merger and by virtue of such ownership will be
able to designate all members of its Board of Directors.
35
<PAGE> 44
CASH PAYMENTS TO THE TRIVEST DIRECTORS AND MEMBERS OF THE MANAGEMENT
GROUP. Shares of Common Stock held by the Trivest Directors and the members of
the Management Group that are not contributed to the Purchaser will be
converted into the right to receive the same Cash Merger Consideration as
shares of Common Stock held by other shareholders of the Company. See
"--Purpose and Reasons of the Affiliates for the Merger." The Trivest Directors
and the members of the Management Group will also receive cash on the same
basis as all other optionees for the Aggregate Unrealized Gain on any stock
options they hold. Prior to the Effective Time, WinsLoew has agreed, pursuant
to the terms of the Merger Agreement, to take all necessary action to cancel
all outstanding options to purchase Common Stock, whether or not exercisable.
See "THE MERGER--Cash-out of WinsLoew Stock Options" and "PRINCIPAL
SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT." Under the terms of the Merger
Agreement, all outstanding options will be terminated (whether or not
exercisable) and each holder thereof will receive an amount in cash equal to
the Aggregate Unrealized Gain on such options on the same basis as other
holders of WinsLoew stock options. As of April 1, 1999, there were options
outstanding to purchase an aggregate of 765,400 shares of Common Stock at a
weighted average exercise price of $10.34 per share, all of which have an
exercise price per share of less than $33.00.
The following table sets forth information as of April 1, 1999 as to
the shares of Common Stock and the options to purchase shares of Common Stock
(whether or not exercisable) held by members of the Management Group and the
Trivest Directors for which cash payments will be received upon consummation of
the Merger.
<TABLE>
<CAPTION>
AMOUNT OF CASH TOTAL AMOUNT OF
TO BE RECEIVED AMOUNT OF CASH CASH TO BE
SHARES NOT FOR SHARES NOT SHARES TO BE RECEIVED RECEIVED UPON
TRIVEST DIRECTOR OR CONTRIBUTED TO CONTRIBUTED TO UNDERLYING FOR STOCK CONSUMMATION OF
MANAGEMENT GROUP MEMBER PURCHASER PURCHASER STOCK OPTIONS(1) OPTIONS THE MERGER
- ----------------------- -------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Bobby Tesney............ 21,390 $ 705,870 125,000 $ 2,998,125.00 $ 3,703,995.00
R. Craig Watts.......... 90,335 2,981,055 85,175 2,098,972.50 5,080,027.50
Stephen C. Hess......... 16,450 542,850 85,000 1,991,250.00 2,534,100.00
Vincent A. Tortorici,
Jr.................... 7,859 259,347 60,000 1,451,250.00 1,710,597.00
Jerry Camp.............. 4 132 8,500 187,312.50 187,444.50
Earl W. Powell.......... 1,901,956(2) 62,764,548 51,125 1,099,260.00 63,863,808.00
Phillip T. George, M.D.. 1,811,730(2) 59,787,090 35,750 753,777.50 60,540,867.50
William F. Kaczynski,
Jr.................... -- -- 7,500 85,468.75 85,468.75
Peter W. Klein.......... -- -- 22,550 397,712.50 397,712.50
</TABLE>
- ----------------
(1) Includes all options held, including both vested and unvested options.
(2) Includes 1,703,427 shares held of record by the Existing Trivest
Shareholders that will be converted into the right to receive the same
Cash Merger Consideration as shares of Common Stock held by other
shareholders of the Company.
PAYMENTS TO TRIVEST MANAGER. Upon consummation of the Merger, the
Purchaser will pay a financial advisory fee to Trivest Manager of $______ for
services rendered in connection with the financing of the Merger and related
transactions. In addition, WinsLoew will pay Trivest Manager an annual fee of
$________ for ongoing financial advisory services.
SUBSCRIPTION AND SHAREHOLDERS AGREEMENTS. Upon the consummation of the
Merger, each member of the Management Group will enter into a subscription and
shareholders agreement with the Company restricting the executive's ability to
transfer the shares of WinsLoew Common Stock to be owned by him after the
Merger and creating certain other rights and obligations with respect to such
shares.
NEW EMPLOYMENT AGREEMENTS WITH THE MANAGEMENT GROUP. Upon consummation
of the Merger, the employment agreement that each member of the Management
Group currently has with the Company will terminate. At such time, each member
of the Management Group will enter into a new employment agreement with
WinsLoew providing for the payment of substantially the same base salaries and
annual cash bonuses as their existing employment agreements.
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<PAGE> 45
THE SPECIAL COMMITTEE. As compensation for serving on the Special
Committee, which met on approximately 19 occasions between January 7, 1999 and
the date of this Proxy Statement, the Chairman of the Special Committee will
receive a fee of approximately $20,000, and the other members of the Special
Committee will each receive $15,000.
Each member of the Special Committee, as an outside director,
typically receives on the date of each meeting of the Board options to purchase
2,500 shares of Common Stock at the market price of the Common Stock on such
date. Each director received options to purchase 2,500 shares of Common Stock
on January 7, 1999, the date of the first Board meeting in 1999, none of which
have been exercised. Directors have not been granted any options since that
date.
The following table sets forth information as of April 1, 1999 as to
the shares of Common stock and options to purchase shares of Common Stock
(whether or not exercisable) held by members of the Special Committee and the
cash payments that they will receive upon consummation of the Merger.
<TABLE>
<CAPTION>
TOTAL AMOUNT OF
AMOUNT OF CASH AMOUTN OF CASH CASH TO BE
TO BE RECEIVED SHARES TO BE RECEIVED RECEIVED UPON
SHARES OF FOR SHARES OF UNDERLYING FOR STOCK CONSUMMATION OF
SPECIAL COMMITTEE MEMBER COMMON STOCK COMMON STOCK OPTIONS(1) OPTIONS THE MERGER
- ------------------------ ------------ -------------- ---------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
William H. Allen, Jr....... 1,050 $ 34,650 25,000 $ 517,343.75 $ 551,993.75
Henry C. Cheek............. 6,000 198,000 32,500 665,937.50 863,937.50
M. Miller Gorrie........... 141,450 4,667,850 30,000 625,937.50 5,293,787.50
James S. Smith............. 20,000 660,000 32,500 666,562.50 1,326,562.50
Sherwood M. Weiser......... 7,675 253,275 25,000 517,343.75 770,618.75
</TABLE>
- ----------------
(1) Includes all options held, including both vested and unvested options.
Members of the Special Committee will also be entitled to certain
indemnification rights granted under the Merger Agreement to the current and
former directors and officers of the Company. See "--Conflicts of
Interest--Indemnification and Insurance."
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers of the Company and its subsidiaries (including the members of the
Special Committee) shall survive the Merger and shall continue in accordance
with their terms. In addition, WinsLoew is obligated for a period of two years
from the Effective Time to continue in effect directors' and officers'
liability insurance with respect to matters occurring prior to the Effective
Time, which insurance must contain terms and conditions no less advantageous
than are contained in WinsLoew's current directors' and officers' liability
insurance policy; provided that WinsLoew is not obligated to expend annually
more than 200% of the current cost of such coverage.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, other than the Eligible Employees, the
Public Shareholders will not have an opportunity to continue their equity
interest in WinsLoew as an ongoing corporation and therefore will not share in
the future earnings and potential growth of WinsLoew. Upon consummation of the
Merger, the Common Stock will no longer be traded on the Nasdaq National
Market, price quotations will no longer be available and the registration of
the Common Stock under the Exchange Act will be terminated. The termination of
registration of the Common Stock under the Exchange Act will eliminate the
requirement to provide information to the Commission and will make most of the
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirement of furnishing a proxy or
information statement in connection with shareholders' meetings, no longer
applicable.
37
<PAGE> 46
The members of the Management Group, the Eligible Employees and two of
the Trivest Directors (Messrs. Powell and George) will own direct equity
interests in WinsLoew after the Merger that will allow them directly to share
in its future earnings and potential growth. In addition, all of the Trivest
Directors are indirect investors in the Trivest Partnerships. An investment in
WinsLoew following the Merger involves substantial risk resulting from the
limited liquidity of any such investment and the increased leverage associated
with future borrowings that will be necessary to fund the substantial capital
expenditures required to execute the Company's business strategy. Nonetheless,
if the Company is able to successfully implement its business strategy, the
value of such an equity investment would be considerably greater than the
original cost thereof. See "CERTAIN FORWARD LOOKING INFORMATION."
The receipt of cash pursuant to the Merger will be a taxable
transaction. See "FEDERAL INCOME TAX CONSEQUENCES."
CONDUCT OF WINSLOEW'S BUSINESS AFTER THE MERGER
The Purchaser is continuing to evaluate WinsLoew's business, assets,
practices, operations, properties, corporate structure, capitalization,
management and personnel and discuss what changes, if any, will be desirable,
including consideration of a business combination with the Possible Transaction
Party. Subject to the foregoing, the Purchaser expects that the day-to-day
business and operations of WinsLoew will be conducted substantially as they are
currently being conducted by WinsLoew. The Purchaser does not currently intend
to dispose of any assets of WinsLoew, other than in the ordinary course of
business. Additionally, the Purchaser does not currently contemplate any
material change in the composition of WinsLoew's current management, although
after the Merger, the Board will be comprised of Messrs. Powell, George,
Kaczynski, Klein and Tesney.
CERTAIN FORWARD LOOKING INFORMATION
Certain projections prepared by management of WinsLoew are included
elsewhere in this Proxy Statement under the heading "CERTAIN FORWARD LOOKING
INFORMATION."
38
<PAGE> 47
THE MERGER
The Merger Agreement provides that the Purchaser, a newly-formed
Florida corporation, will be merged with and into WinsLoew, and that following
the Merger, the separate existence of the Purchaser will cease and WinsLoew
will continue as the surviving corporation.
The terms of and conditions to the Merger are contained in the Merger
Agreement which is included in full as Appendix A to this Proxy Statement and
is incorporated herein by reference. The discussion in this Proxy Statement of
the Merger and the summary description of the principal terms of the Merger
Agreement are subject to and qualified in their entirety by reference to the
more complete information set forth in the Merger Agreement.
CONVERSION OF SECURITIES
At the Effective Time, subject to the terms, conditions and procedures
set forth in the Merger Agreement, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares held by
the Purchaser) will, by virtue of the Merger, be converted into the right to
receive the Cash Merger Consideration. Except for the right to receive the Cash
Merger Consideration, from and after the Effective Time, all shares (other than
shares held by the Purchaser), by virtue of the Merger and without any action
on the part of the holders, will no longer be outstanding and will be canceled
and retired and will cease to exist. Each holder of a certificate formerly
representing any shares (other than shares held by the Purchaser) will after
the Effective Time cease to have any rights with respect to such shares other
than the right to receive the Cash Merger Consideration for such shares upon
surrender of the certificate.
No interest will be paid or accrued on the amount payable upon the
surrender of any certificate. Payment to be made to a person other than the
registered holder of the certificate surrendered is conditioned upon the
certificate so surrendered being properly endorsed and otherwise in proper form
for transfer, as determined by the Disbursing Agent. Further, the person
requesting such payment will be required to pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the certificate surrendered or establish to the satisfaction of the
Disbursing Agent that such tax has been paid or is not payable. Six months
following the Effective Time, WinsLoew will be entitled to cause the Disbursing
Agent to deliver to it any funds (including any interest received with respect
thereto) made available to the Disbursing Agent which have not been disbursed
to holders of certificates formerly representing shares outstanding prior to
the Effective Time, and thereafter such holders will be entitled to look to
WinsLoew only as general creditors with respect to cash payable upon due
surrender of their certificates. Notwithstanding the foregoing, neither the
Disbursing Agent nor any party to the Merger Agreement will be liable to any
holder of certificates formerly representing shares for any cash paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Except as described in this paragraph, WinsLoew will pay all
charges and expenses, including those of the Disbursing Agent, in connection
with the exchange of shares for the Cash Merger Consideration.
Each share of the Purchaser's common stock that is issued and
outstanding immediately prior to the Merger will be converted at the Effective
Time into one share of Common Stock of WinsLoew.
CASH-OUT OF WINSLOEW STOCK OPTIONS
In general, outstanding stock options to purchase shares of WinsLoew
Common Stock shall be canceled or terminated as of the Effective Time. Holders
of such options shall receive a cash payment equal to the difference between
$33.00 per share and the exercise prices of their WinsLoew stock options times
the number of shares issuable upon exercise of such options (the "Aggregate
Unrealized Gain").
TRANSFER OF SHARES
No transfers of shares of Common Stock will be made on the stock
transfer books at or after the Effective Time. If, after the Effective Time,
certificates representing such shares are presented to WinsLoew, such shares
will be canceled and exchanged for the Cash Merger Consideration.
39
<PAGE> 48
CONDITIONS
Each party's respective obligation to effect the Merger is subject to
the satisfaction, at or prior to the Effective Time, of each of the following
conditions, any or all of which may be waived at the appropriate party's
discretion, to the extent permitted by applicable law:
(a) the Merger Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a majority
of the outstanding shares of Common Stock;
(b) all consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental authority or other regulatory body
required in connection with the execution, delivery and performance of the
Merger Agreement, the failure to obtain which would prevent the consummation of
the Merger or have a material adverse effect on the Company, shall have been
obtained without the imposition of any condition having a material adverse
effect on Company;
(c) early termination shall have been granted or applicable waiting
periods shall have expired under the HSR Act, if applicable;
(d) no governmental authority or other regulatory body (including any
court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of, and there shall be no action, suit or
proceeding pending which could reasonably be expected to have the effect of,
making illegal, materially restricting or in any way preventing or prohibiting
the Merger or the transactions contemplated by the Merger Agreement, or imposing
damages or penalties in connection therewith which are material to any of the
Company, the Purchaser or any of their respective affiliates; and
(e) all authorizations, consents, waivers and approvals from parties to
contracts or other agreements to which any of the Company or its subsidiaries is
a party, or by which any of them is bound, as may be required to be obtained by
them in connection with the performance of the Merger Agreement, the failure to
obtain which would prevent the consummation of the Merger or have, individually
or in the aggregate, a material adverse effect on Company, shall have been
obtained.
The obligations of the Purchaser to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions.
(a) there shall not have occurred any change, condition, event or
development that has resulted in, or could reasonably be expected to result in,
a material adverse effect on the Company;
(b) the representations and warranties of the Company in the Merger
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of the Merger Agreement and as of the Effective Time;
(c) the representations and warranties of the Company in the Merger
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the date of the Merger Agreement and as of the Effective
Time;
(d) the Company shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement;
(e) an officer of the Company shall have delivered to the Purchaser a
certificate to the effect that each of the conditions specified in the preceding
clauses (b), (c) and (d) is satisfied in all respects; and
(f) the Purchaser shall have received an opinion, dated the Effective
Time, of Balch & Bingham in form and substance reasonably satisfactory to the
Purchaser, with respect to the matters set forth in Sections 3.01, 3.02, 3.03,
3.04 and 3.05 of the Merger Agreement (relating to organization, subsidiaries,
capitalization, authority and consents, approvals and the absence of violations,
respectively).
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<PAGE> 49
The obligations of the Company to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of the Purchaser in the Merger
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of the Merger Agreement and as of the Effective Time;
(b) the representations and warranties of the Purchaser in the Merger
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the date of the Merger Agreement and as of the Effective
Time;
(c) the Purchaser shall have performed in all material respects all
obligations required to be performed by them under the Merger Agreement;
(d) the Purchaser shall have delivered to the Company a certificate to
the effect that each of the conditions specified in the preceding clauses (a),
(b) and (c) is satisfied in all respects;
(e) the Company shall have received an opinion, dated the Effective
Time, of Greenberg Traurig in form reasonably satisfactory to the Company, with
respect to the matters set forth in Sections 4.01, 4.02 and 4.03 of the Merger
Agreement; and
(f) the Purchaser shall have executed definitive documentation in
connection with their financing of the aggregate Cash Merger Consideration and
shall have sufficient funds available to consummate the Merger, to pay all
related expenses and to refinance the Company's existing indebtedness under its
credit facility.
After approval of the Merger Agreement by the shareholders of
WinsLoew, no condition may be waived that reduces the amount or changes the
form of the Cash Merger Consideration to be received by the shareholders or
that by law requires further shareholder approval unless a waiver of such
condition is approved by the shareholders.
REPRESENTATIONS AND WARRANTIES
WinsLoew has made representations and warranties in the Merger
Agreement regarding, among other things, organization and good standing,
subsidiaries, capitalization, authority to enter into the Merger Agreement,
requisite governmental and other consents and approvals, content and submission
of forms and reports required to be filed by WinsLoew with the Commission,
financial statements, absence of certain changes in the business of WinsLoew
such December 31, 1998, absence of undisclosed liabilities, employee benefits,
absence of litigation to which WinsLoew is a party, possession of necessary
permits and compliance with applicable law, requisite tax filings, brokers and
finders, labor matters, title to property, environmental matters, accounts
receivable, customers, interested party transactions, insurance, product
liability and inventory.
The Purchaser has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing,
authority to enter into the transaction, requisite governmental and other
consents and approvals, accuracy of information supplied by the Purchaser for
submission in forms and reports required to be filed with the Commission, the
Purchaser's financing capability, WinsLoew's solvency after the Merger, brokers
and finders and absence of prior activities.
The representations and warranties of the parties in the Merger
Agreement will expire upon consummation of the Merger, and upon such expiration
none of such parties or their respective officers, directors or principals will
have any liability whatsoever with respect to any such representations or
warranties.
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<PAGE> 50
COVENANTS
In the Merger Agreement, WinsLoew has agreed as to itself and its
subsidiaries that prior to the Effective Time, unless otherwise agreed to in
advance by the Purchaser or as otherwise contemplated by the Merger Agreement:
(a) The Company shall, and shall cause its subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course and the
Company shall, and shall cause its subsidiaries to, use all reasonable efforts
to preserve intact their present business organizations, keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
the Company and its subsidiaries.
(b) The Company shall not, and shall not permit any of its subsidiaries
to, (i) declare or pay any dividends on or make other distributions in respect
of any of its capital stock, except for dividends by a direct or indirect
wholly-owned subsidiary of the Company to its Purchaser, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or its subsidiaries or any
other securities thereof.
(c) The Company shall not, and shall not permit any of its subsidiaries
to, issue, deliver, sell, pledge or encumber, or authorize or propose the
issuance, delivery, sale, pledge or encumbrance of, any shares of its capital
stock of any class or any securities convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, any such shares or convertible
securities, or any other ownership interest (including stock appreciation rights
or phantom stock) other than (i) the issuance of shares of Common Stock upon the
exercise of Company stock options outstanding on the date of the Merger
Agreement and in accordance with the terms of such Company stock options, or
(ii) issuances by a wholly-owned subsidiary of the Company of its capital stock
to its Purchaser.
(d) The Company shall not, and shall not permit any of its subsidiaries
to, amend or propose to amend its articles or certificate of incorporation or
bylaws (or similar organizational documents) in any way which would be adverse
to the Purchaser's rights under the Merger Agreement.
(e) The Company shall not, and shall not permit any of its subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or any substantial assets of (other than
inventory and equipment in the ordinary course consistent with past practice, to
the extent not otherwise prohibited by the Merger Agreement), or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof.
(f) Other than dispositions in the ordinary course of business
consistent with past practice, the Company shall not, and shall not permit any
of its subsidiaries to, sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets.
(g) The Company shall not, and shall not permit any of its subsidiaries
to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any debt securities of others, enter into any "keep-well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
working capital borrowings incurred in the ordinary course of business
consistent with past practice under the Company's credit facility existing and
in effect on the date of the Merger Agreement, or (ii) make any loans, advances
or capital contributions to, or investments in, any other person, other than,
with respect to both clause (i) and (ii) above, (A) to the Company or any direct
or indirect wholly owned subsidiary of the Company, or (B) any advances to
employees in accordance with past practice.
(h) The Company shall confer with the Purchaser on a regular and
frequent basis as reasonably requested by the Purchaser, report on operational
matters and promptly advise Purchaser orally and, if requested by the
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<PAGE> 51
Purchaser, in writing of any change or event to the best knowledge of the
Company having, or which, insofar as can reasonably be foreseen, is likely to
have, a material adverse effect on the Company. The Company shall promptly
provide to the Purchaser (or its counsel) copies of all filings made by the
Company with any governmental entity in connection with the Merger Agreement and
the transactions contemplated hereby.
(i) The Company shall not make any material change, other than in the
ordinary course of business, consistent with past practice, or as required by
the Commission or law, with respect to any accounting methods, principles or
practices used by the Company (except insofar as may be required by a change in
generally accepted accounting principles).
(j) Except for fees and expenses related to the transactions
contemplated herein, the Company shall not, and shall not permit any of its
subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of (i) liabilities recognized or disclosed in the most recent
financial statements contained in documents filed by the Company with the
Commission, or (ii) liabilities incurred since the date of such financial
statements in the ordinary course of business consistent with past practice. The
Company shall not, and shall not permit any of its subsidiaries to, waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsidiaries is a party.
(k) Except as provided in the Merger Agreement, the Company and its
subsidiaries will not, without the prior written consent of the Purchaser, which
shall not be unreasonably withheld, except as may be required by law, (i) enter
into, adopt, amend or terminate any Company benefit plan or other employee
benefit plan or any agreement, arrangement, plan or policy for the benefit of
any director, executive officer or current or former key employee, (ii) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, executive officer or key employee, except as required by any Company
benefit plan or agreement with such employees existing on the date of this
Agreement, (iii) enter into, adopt, amend or terminate any Company benefit plan
or other benefit plan or agreement, arrangement, plan or policy for the benefit
of any employees who are not directors, executive offices or current or former
key employees of the Company, other than increases in the compensation of
employees made in the ordinary course of business consistent with past practice,
or (iv) pay any benefit not required by any plan or arrangement as in effect as
of the date hereof (including the granting of, acceleration of exercisability of
or vesting of stock options, stock appreciation rights or restricted stock).
(l) Except in the ordinary course of business consistent with past
practices, neither the Company nor any of its subsidiaries shall (i) modify,
amend or terminate any material contract or agreement to which the Company or
such subsidiary is a party, or (ii) waive, release or assign any material rights
or claims.
(m) The Company shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation of the Company or
any of its subsidiaries.
(n) Except as set forth in the Merger Agreement, the Company shall not
make any tax election or settle or compromise any material income tax liability.
(o) The Company shall not nor will it permit any of its subsidiaries to
take or agree or commit to take any action that is reasonably likely to result
in any of the Company's representations or warranties hereunder being untrue in
any material respect at, or as of any time prior to, the Effective Time.
(p) The Company shall not, and shall not permit any of its subsidiaries
to, authorize any of, or commit or agree to take any of, the foregoing actions
described in clauses (a) through (o).
In addition, except as contemplated by the Merger Agreement, the
Company shall not, and shall not permit any of its subsidiaries to, take any
action that could reasonably be expected to result in (i) any of the
representations and warranties of the Company set forth in the Merger Agreement
that are qualified as to materiality becoming
43
<PAGE> 52
untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect, or (iii) any of the
conditions to the Merger set forth above not being satisfied in all material
respects.
NONSOLICITATION COVENANT
The Company has agreed that it and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an
Acquisition Proposal that could not reasonably be considered a Superior
Proposal. The Company has agreed that it shall not, nor shall it permit any of
its subsidiaries to, authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing non-public information or assistance), or knowingly take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal, or (ii) participate in any discussions or negotiations regarding any
Acquisition Proposal; PROVIDED, HOWEVER, that if, at any time the Board of
Directors of the Company determines in good faith, based upon the opinion of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the
Company may, in response to an unsolicited Superior Proposal, (x) furnish
information with respect to the Company to the person making such unsolicited
Superior Proposal pursuant to a confidentiality agreement in a form approved by
the Company and Purchaser (such approval not to be unreasonably withheld or
delayed), and (y) participate in discussions or negotiations regarding such
Superior Proposal. WinsLoew is obligated to inform the Purchaser promptly of
any request for information or any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal and, unless the Company is
contractually prohibited from making such disclosure, the identity of the
person making such request or Acquisition Proposal.
Except as set forth above, neither the Board of Directors of the
Company nor any committee thereof may (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Purchaser, the approval or
recommendation by such Board of Directors or committee of the Merger Agreement
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal, or (iii) cause the Company to enter into any
agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of the Company determines
in good faith, based upon the opinion of independent legal counsel (who may be
the Company's regularly engaged independent counsel), that it is necessary to
do so in order to comply with its fiduciary duties to the Company's
shareholders under applicable law, the Board of Directors of the Company may
withdraw or modify its approval or recommendation of the Merger Agreement and
the Merger, approve or recommend a Superior Proposal, cause the Company to
enter into an agreement with respect to a Superior Proposal or terminate the
Merger Agreement, but in each case only at a time that is after the fifth
business day following Purchaser's receipt of written notice (a "Notice of
Superior Proposal") advising the Purchaser that the Board of Directors of the
Company has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. In addition, if the Company proposes to enter into an
agreement with respect to any Acquisition Proposal, it must concurrently with
entering into such agreement pay, or cause to be paid, to the Purchaser the
Termination Fee.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that all rights to indemnification for
acts or omissions occurring prior to the Effective Time existing in favor of
the current or former directors or officers of the Company and its subsidiaries
as provided in their respective certificates or articles of incorporation or
bylaws (or similar organizational documents) or existing indemnification
contracts shall survive the Merger and shall continue in full force and effect
in accordance with their terms. In addition, the Purchaser will provide for a
period of not less than two years after the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time that
is no less favorable than the Company's existing insurance and indemnification
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Company shall not be
required to pay an annual premium for the such insurance and indemnification
policy in excess of 200% of the annual premium
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<PAGE> 53
currently paid by the Company for such insurance, but in such case shall
purchase as much such coverage as possible for such amount.
EXPENSES
The parties have agreed to pay their own costs and expenses in
connection with the Merger Agreement and the transactions contemplated thereby,
provided that the Purchaser will pay any filing fees required under the HSR
Act. WinsLoew has agreed, however, to pay or reimburse the Purchaser for all
expenses up to $1.5 million incurred by the Purchaser in connection with the
Merger Transaction upon certain events. See "THE MERGER--Termination Fee."
TERMINATION, AMENDMENT AND WAIVER
At any time prior to the Effective Time, the Merger Agreement may be
terminated by the mutual written consent of WinsLoew and the Purchaser. In
addition, either WinsLoew or the Purchaser may terminate the Merger Agreement
prior to the Effective Time if (i) any governmental entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or payment
for, shares of Common Stock pursuant to the Merger and such order, decree or
ruling or other action shall have become final and nonappealable, provided,
however, that such right to terminate the Merger Agreement is not available to
any party that has failed to use its reasonable efforts to comply promptly with
legal requirements, cooperate with and furnish information to the other party
and obtain any required governmental or other consents, authorizations, orders,
approvals or exemptions or (ii) the Effective Time shall not have occurred on
or before July 15, 1999, unless extended by agreement of the Purchaser and the
Company.
The Merger Agreement may be terminated by the Purchaser prior to the
Effective Time if: (i)(A) the representations and warranties of the Company as
to its capitalization shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made, except
in any case where such failure to be true and correct would not, in the
aggregate, (x) have a material adverse effect on the Company, or (y) prevent or
delay the consummation of the Merger; (ii) the Company shall have failed to
comply in any material respect with any of its material obligations or
covenants contained in the Merger Agreement, except in any case where such
failure would not, in the aggregate, (x) have a material adverse effect on the
Company, or (y) prevent or materially delay consummation of the Merger; (iii)
there shall have been a material adverse change with respect to the Company,
provided that the Company shall, if curable, have a reasonable period in which
to cure any failure described in clause (i), (ii) or (iii) of this paragraph;
or (iv)(A) the Board or the Special Committee fails to approve and recommend or
withdraws or modifies in a manner adverse to the Purchaser its approval or
recommendation of the Merger or the Merger Agreement, or approves or
recommends any Acquisition Proposal, (B) the Company enters into any agreement
with respect to any Superior Proposal following written notice to the Purchaser
and payment of the Termination Fee discussed below, or (C) the Board or the
Special Committee resolves to take any such action in clauses (iv)(A) or (B).
WinsLoew may terminate the Merger Agreement (i) in connection with
entering into a definitive agreement with respect to a Superior Proposal
following written notice to the Board, a determination that the Company's
failure to do so would violate the Board's fiduciary duties and the payment of
the termination Fee described below and provided that the Company complies with
its covenant against soliciting, discussing or negotiating any Acquisition
Proposal (except as required by the Board's fiduciary duties), (ii) if any
representation or warranty of the Purchaser was not true and correct in all
material respects when made or has ceased to be true and correct in all
material respects as if made on such later date, or (iii) if the Purchaser
fails to comply in any material respect with any of its material obligations or
covenants in the Merger Agreement, provided that the Purchaser shall, if
curable, have a reasonable period in which to cure any failure described in
clause (ii) or (iii) of this paragraph.
Subject to the provisions of applicable law, the Merger Agreement may
be modified or amended, and provisions thereof waived, by written agreement of
the parties. However, after approval of the terms of the Merger Agreement by
the shareholders of WinsLoew, no amendment or waiver of a provision may be made
which reduces
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<PAGE> 54
the amount or changes the form of the Cash Merger Consideration
to be received by the shareholders or that by law requires further shareholder
approval unless such amendment or waiver of a provision is approved by the
shareholders. With respect to any decision regarding a material modification,
amendment or waiver of the Merger Agreement, the Board, in the exercise of its
fiduciary duty and in accordance with any applicable law or regulation, will
make a determination as to whether resolicitation of shareholders is required.
TERMINATION FEE
WinsLoew has agreed to pay to the Purchaser a Termination Fee in the
amount of $10.0 million plus up to $1.5 million of expenses of the Purchaser in
the event the Merger Agreement is terminated (i) by the Purchaser due to (A) the
breach by the Company of any of its representations, warranties or covenants, or
a material adverse change with respect to WinsLoew, each as described above (see
"THE MERGER--Termination; Amendment and Waiver"), or (B) (1) the Board or the
Special Committee failing to approve and recommend or withdrawing or modifying
in a manner adverse to the Purchaser its approval or recommendation of the
Merger or the Merger Agreement, or approving or recommending any Acquisition
Proposal, (2) the Company entering into any agreement with respect to any
Superior Proposal or (3) the Board or the Special Committee resolving to take
any such action in clauses (1) or (2), or (ii) by the Company due to entering
into a definitive agreement in connection with a Superior Proposal.
FINANCING
It is estimated that approximately $271.1 million will be required to
consummate the Merger and pay related fees and expenses. This sum is expected
to be provided by the following: (i) approximately $75.0 million in equity
contributions to the Purchaser by the Trivest Investors (reduced by the cash
and the aggregate value (at $33.00 per share) of the shares of Common Stock
contributed to the Purchaser by the Eligible Employees) and the Management
Group; (ii) borrowings of approximately $64.6 million under a $145.0 million
senior secured credit facility to be obtained by the Purchaser, WinsLoew and
its subsidiaries pursuant to a commitment letter, dated as of March 29, 1999,
from BankBoston; (iii) the issuance by WinsLoew of approximately $130.0 million
aggregate principal amount of senior subordinated notes that the Purchaser
expects to issue based upon a letter from Bear Stearns to the effect that, as
of March 29, 1999 and subject to certain conditions, it was highly confident
that it could arrange for the sale of such notes in connection with the Merger;
and (iv) approximately $1.5 million of WinsLoew's expected cash on hand. The
bank financing commitment includes $75.0 million in term loans, a $30.0 million
revolver and a $40.0 million acquisition line for subsequent acquisitions by
WinsLoew, all to be secured by first-fee mortgages on owned real estate and
first priority security interests in substantially all of WinsLoew's assets.
The BankBoston commitment letter is subject to customary conditions, and the
Bear Stearns highly confident letter does not constitute a commitment or
undertaking by Bear Stearns to place or purchase the senior subordinated notes
and does not ensure the successful placement or completion of the offering of
such notes; moreover, the Bear Stearns letter sets forth only its expectation
as of March 29, 1999 with respect to its ability to arrange a sale of the notes
in connection with the Merger. Except for the BankBoston and Trivest commitment
letters, there are no firm commitments from any person to provide equity,
provide senior financing, purchase the Company's senior subordinated notes or
provide any other financing for the Merger, and there can be no assurance that
any such financing will be obtained. See "SPECIAL FACTORS--Purpose and Reasons
of the Affiliates for the Merger."
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<PAGE> 55
CASH FINANCING FOR THE MERGER. The cash financing for the Merger is
expected to be provided by as follows:
<TABLE>
<CAPTION>
SOURCE OF FUNDS AMOUNT
--------------------------------------------------------------------------------- ------------
<S> <C>
Cash contribution to the Purchaser by the Trivest Partnerships(1)................ 68,970,000
Cash contribution to the Purchaser by the individual Trivest Investors........... --
Cash contribution to the Purchaser by the members of the Management Group........ 422,000
Cash on hand of WinsLoew......................................................... 1,500,000
Senior Secured Credit Facility................................................... 64,600,000
Senior Subordinated notes........................................................ 130,000,000
------------
Total........................................................................ $263,992,000
============
</TABLE>
- -------------
(1) The amount of the cash contribution of the Trivest Partnerships will be
reduced by an amount equal to the aggregate value (at $33.00 per share)
of any shares of Common Stock contributed to the Purchaser by the
Eligible Employees.
CREDIT FACILITY. The BankBoston commitment letter provides, subject to
the various conditions mentioned below, for a total of $145.0 million in
financing in the form of two term loans, described below, aggregating $75.0
million, a revolving credit facility in the amount of $30.0 million, and an
acquisition line in the amount of $40.0 million. WinsLoew and its subsidiaries,
Winston, Texacraft, Inc., Tropic Craft, Inc., Winston Properties, Inc., and
Loewenstein will be borrowers and guarantors under the BankBoston financing. The
Company's obligations are to be secured by first-fee mortgages on owned real
estate and first priority security interests in substantially all of WinsLoew's
assets, as well as pledges by WinsLoew of the capital stock of its subsidiaries.
One term loan is in the amount of $25.0 million ("Term Loan A"), and
the other is in the amount of $50.0 million ("Term Loan B"). Both term loans
are to be used to finance the Merger (including approximately $20.0 million for
the acquisition of Pompeii, see "BUSINESS OF THE COMPANY--Background"),
refinance existing indebtedness and pay transaction expenses. Term Loan A is to
amortize over a five and a half year term (beginning in the second year) in
quarterly payments increasing from $750,000 per quarter in the second year to
$1.75 million per quarter in the fifth year. Term Loan B is to amortize over a
seven year term in equal quarterly payments of $125,000 for the first five
years, with bullet payments of $23.5 million in each of the sixth and seventh
years. The term loans are to accrue interest at the Company's option at (i) the
Eurodollar rate or (ii) a floating rate equal to the higher of BankBoston's
base rate and 1/2% in excess of the Federal Funds effective rate plus, for each
of options (i) and (ii), an applicable margin based on the Company's leverage
ratio.
Term Loan A may be drawn in two stages. If the Pompeii acquisition has
not occurred on or prior to the Effective Time, the initial draw under Term
Loan A would be $5.0 million with the balance of $20.0 million to be funded
upon consummation of the Pompeii acquisition. If the remaining $20.0 million
commitment to Term Loan A has not been drawn in conjunction with the funding of
the Pompeii acquisition on or prior to September 30, 1999, such commitment
would terminate.
The commitment letter provides for a five and a half year $30.0
million revolving credit facility to be used to finance the Merger (including
the acquisition of Pompeii), refinance existing indebtedness and pay
transaction expenses, and, after the Merger, to fund working capital and
general corporate needs, including capital expenditures. Amounts borrowed under
the revolver are not to be amortized prior to maturity. Availability under the
revolver will be limited to the sum of (i) 85% of combined eligible accounts
receivable, plus (ii) 60% of combined eligible inventory. The revolver includes
a $10.0 million sublimit for standby letters of credit and a $5.0 million
swingline facility.
The commitment letter also provides for a five and a half year $40.0
million acquisition line to be used to fund permitted acquisitions after the
Merger. Amounts not drawn by December 31, 2001 would be canceled. Amounts
borrowed under the revolver are to amortize in 12 equal quarterly installments
beginning March 31, 2002.
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<PAGE> 56
The definitive agreements for the financing to be provided under the
BankBoston commitment letter have not been reached. Accordingly, the provisions
described herein may change as a result of the negotiation of definitive
agreements. It is a condition to the BankBoston financing that definitive
agreements be entered into. In addition, it is anticipated that the obligation
of BankBoston to provide financing will be subject to the satisfaction of
certain other conditions, including among others: (i) the satisfaction of all
conditions precedent to the Merger and BankBoston's satisfaction with the terms
and documentation for the Merger; (ii) evidence that the Trivest Partnerships
have invested not less than $75 million to acquire WinsLoew (including
Pompeii); and (iii) WinsLoew shall have received the net proceeds from not less
than $130.0 million aggregate principal amount of senior subordinated notes on
terms and conditions satisfactory to BankBoston.
The definitive agreements for the financing are also expected to
contain numerous restrictive covenants, including covenants related to mergers
and asset sales or purchases, incurrence of debt obligations, liens and
contingent obligations, transactions with affiliates, distributions, dividends
and use of proceeds. The definitive agreements also are expected to contain
standard event of default provision, including among other things, payment
defaults, misrepresentations, covenant defaults, defaults under material
contracts, cross-defaults to other material indebtedness, failure to have
perfected liens of purported priority, termination of BankBoston loan
documents, bankruptcy events, adverse judgments and change of control.
SENIOR SUBORDINATED NOTES. The Company expects to issue the senior
subordinated notes at the Effective Time in a private placement for resale
pursuant to Rule 144A under the Securities Act of 1993, as amended. The
Purchaser has received a highly confident letter, dated March 29, 1999, from
Bear Stearns which states that, as of such date and based upon and subject to
current market conditions and the information concerning WinsLoew and Pompeii
supplied to Bear Stearns by or on behalf of the Purchaser, Bear Stearns was
highly confident of its ability, as lead manager, to place the senior
subordinated notes. The Bear Stearns letter does not constitute a commitment or
undertaking by Bear Stearns to place or purchase the senior subordinated notes
and does not ensure the successful placement or completion of the offering of
such notes; moreover, the letter sets forth only Bear Stearns' expectation as
of March 29, 1999 with respect to its ability to arrange a sale of the notes in
connection with the Merger.
It is currently contemplated that the senior subordinated notes will
(i) be unsecured general obligations of the Company, (ii) mature on the tenth
anniversary of issuance, (iii) bear interest at a fixed rate to be determined,
(iv) have no mandatory redemption requirements prior to maturity, (v) not be
redeemable prior to the fifth anniversary after issuance and thereafter at
premiums to par (except that up to 35% of the original aggregate principal
amount may redeemed at the Company's option, in whole or in part, during the
first three years after issuance with proceeds from one or more public equity
offerings, at a price to be determined) and (vi) contain standard high yield
covenants typical for a transaction of this nature.
The highly confident letter is subject to, each of the following: (i)
all terms and conditions of the notes and the offering of the notes, including,
but not limited to, coupon, price, maturity and covenants; (ii) the terms and
conditions of all of the other components of financing for the Merger; (iii) the
terms of, and the execution of documentation related to the Merger and the
financing, including, but not limited to loan agreements for the senior credit
facility, a definitive note purchase agreement and a definitive registration
rights agreement with respect to the notes, (iv) no material adverse change in
the business, prospects, condition (financial or otherwise) or material adverse
change in the business, prospects, condition (financial or otherwise) or results
of operations of the WinsLoew or Pompeii; (v) completion of due diligence
regarding WinsLoew relating to the examination of accounting, legal, regulatory,
tax, labor, insurance, pension and environmental liabilities (actual or
contingent), material contracts, leases and debt agreements; (vi) nothing coming
to Bear Stearns' attention regarding WinsLoew that contradicts or calls into
question (A) the information previously provided to Bear Stearns by or on behalf
of the Purchaser or (B) the results of Bear Stearns' financial due diligence
investigation; (vii) satisfactory completion of due diligence on Pompeii; (viii)
no material adverse change in market conditions for new issues of high yield
debt; (ix) no material adverse change in conditions of the financial and capital
markets generally, and (x) the Purchaser's and WinsLoew's full and complete
cooperation with respect to the marketing of the notes. The acceptability of
each of the foregoing will be made in the sole discretion of Bear Stearns'
Commitment Committee. The termination of the agreement governing the acquisition
of Pompeii pursuant to its terms would not, in and of itself, cause Bear Stearns
to change its opinion, as of March 29, 1999, of its ability to place the notes.
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<PAGE> 57
CONTRIBUTED EQUITY FINANCING. Members of the Management Group and the
Trivest Investors will invest a portion of the shares of Common Stock that they
hold of record in shares of common stock of the Purchaser in the respective
amounts shown below and thereby relieve the Purchaser of the need to finance
the payment of Cash Merger Consideration for Common Stock in WinsLoew totaling
approximately $5.6 million. The Trivest Partnerships do not currently hold any
shares of Common Stock. Accordingly, all shares of Common Stock contributed to
the Purchaser will be from the individual Trivest Investors and members of the
Management Group.
<TABLE>
<CAPTION>
VALUE OF PORTION OF PERCENTAGE OF
OUTSTANDING COMMON OUTSTANDING COMMON
VALUE OF OUTSTANDING STOCK OF WINSLOEW STOCK OF WINSLOEW
COMMON STOCK OF CONTRIBUTED TO CONTRIBUTED TO
PERSON OR ENTITY WINSLOEW PURCHASER PURCHASER
- -------------------------------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
Management Group
Bobby Tesney........................ $1,705,869 $1,000,000 58.6%
R. Craig Watts...................... 3,731,046 750,000 20.1%
Stephen C. Hess..................... 1,042,866 500,000 47.9%
Vincent A. Tortorici, Jr.(1)........ 559,350 300,000 53.6%
Jerry Camp(2)....................... 58,146 58,000 99.8%
Trivest Partnerships................... -- -- --
Trivest Directors
Earl W. Powell(3)................... 64,754,546 2,000,000 3.1%
Phillip T. George, M.D.(3).......... 60,787,089 1,000,000 1.6%
</TABLE>
- ---------------
(1) Excludes $300,000 in cash contributed to the Purchaser.
(2) Excludes $122,000 in cash contributed to the Purchaser.
(3) Includes 1,703,427 shares held by the Existing Trivest Shareholders.
EXPENSES OF THE TRANSACTION
Assuming the Merger is consummated, the estimated costs and fees in
connection with the Merger, financing and the related transactions that will be
paid by WinsLoew are as follows:
<TABLE>
<CAPTION>
COST OR FEE ESTIMATED AMOUNT
----------------------------------------------------- ----------------
<S> <C>
Financial advisory fees.............................. $
Senior note underwriting commissions.................
Bank commitment fees.................................
Legal fees...........................................
Accounting fees......................................
Printing and mailing fees............................
Solicitation expenses................................
Commission filing fees............................... 47,400
Other regulatory filing fees.........................
Miscellaneous........................................
---------
$
=========
</TABLE>
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<PAGE> 58
See "SPECIAL FACTORS--Opinion of Financial Advisor" for a description
of the fees to be paid to Mann Armistead in connection with its engagement. For
a description of certain fees payable to the members of the Special Committee,
see "SPECIAL FACTORS--Conflicts of Interest."
For a description of WinsLoew's obligation, even if the Merger is not
consummated, to pay or reimburse the Purchaser for expenses incurred by the
Purchaser in connection with the Merger, see "THE MERGER--Expenses" and
"--Termination Fee."
REGULATORY APPROVALS
WinsLoew is not aware of any license or regulatory permit which is
material to the business of WinsLoew and which is likely to be adversely
affected by the Merger or of any approval or other action by any state, federal
or foreign government or governmental agency that would be required prior to
effecting the Merger.
ACCOUNTING TREATMENT
The Merger will be treated as a purchase business combination for
accounting purposes.
RIGHTS OF DISSENTING SHAREHOLDERS
Under Florida law, WinsLoew shareholders have no right to an appraisal
of the value of their shares in connection with the Merger.
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<PAGE> 59
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to the holders of Common Stock. This discussion is
based on the current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury Regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change. Any change, which may or may not be retroactive, could alter the tax
consequences to the holders of Common Stock as described herein. The following
discussion is addressed to a shareholder that holds Common Stock as a capital
asset and that, for federal income tax purposes, is a U.S. citizen or resident
or a domestic corporation, partnership, trust or estate. This summary does not
purport to deal with all aspects of taxation that may be relevant to a
particular shareholder in light of his, her or its particular circumstances or
to certain types of taxpayers subject to special treatment under the federal
income tax law, including financial institutions, broker-dealers, foreign
persons, persons holding Common Stock as part of a straddle, "synthetic
security" or other integrated investment (including a "conversion transaction")
or persons who acquired their Common Stock through the exercise of an employee
stock option or otherwise as compensation.
A holder of Common Stock will recognize capital gain or loss for
federal income tax purposes on each share of Common Stock exchanged for the
Cash Merger Consideration pursuant to the Merger. The amount of gain or loss
recognized on a share will be equal to the difference between $33.00 and the
holder's basis in the share. The gain or loss will be long-term capital gain or
loss in the case of shares held for more than one year as of the date of the
Merger. In the case of individuals, trusts and estates, net capital gain for a
taxable year (that is, the excess of net long-term capital gain for the taxable
year over any net short-term capital loss for the year) is subject to a maximum
federal income tax rate of 20 percent. Receipt of the Cash Merger Consideration
in exchange for Common Stock pursuant to the Merger also may be a taxable
transaction under applicable state, local and foreign tax laws.
A holder of Common Stock may be subject to backup withholding at the
rate of 31 percent with respect to Cash Merger Consideration received pursuant
to the Merger, unless the holder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates that fact or (b)
provides a correct taxpayer identification number ("TIN"), certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholdings rules. To prevent the
possibility of backup withholding on payments made to certain holders with
respect to shares of Common Stock pursuant to the Merger, each holder must
provide the Disbursing Agent with his, her or its correct TIN by completing a
Form W-9 or Substitute Form W-9 (or, in the case of a foreign person, must
provide to the Disbursing Agent a properly completed Form W-8 or Substitute Form
W-8). A holder of Common Stock that does not provide his, her or its correct
TIN, when required to do so, may be subject to penalties imposed by the Internal
Revenue Service (the "IRS"), as well as to backup withholding. Any amount
withheld under these rules will be refundable or creditable against the holder's
federal income tax liability, provided the required information is furnished to
the IRS. WinsLoew (or its agent) will report to the holders of Common Stock and
to the IRS the amount of any "reportable payments," as defined in Section 3406
of the Code, and the amount of tax, if any, withheld with respect thereto.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH IN THIS PROXY STATEMENT
ARE FOR GENERAL INFORMATION ONLY. THE TAX CONSEQUENCES FOR A PARTICULAR
SHAREHOLDER WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES APPLICABLE TO THAT
SHAREHOLDER. ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS
OWN TAX ADVISER TO DETERMINE THE TAX CONSEQUENCES OF THE MERGER TO THE
SHAREHOLDER IN LIGHT OF HIS, HER OR ITS PARTICULAR CIRCUMSTANCES, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND ANY
POSSIBLE CHANGES IN THOSE LAWS. THE FOREGOING DISCUSSION MAY NOT APPLY TO
SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE
AS COMPENSATION.
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<PAGE> 60
BUSINESS OF THE COMPANY
BACKGROUND
WinsLoew designs, manufactures and distributes casual furniture,
contract seating and ready-to-assemble ("RTA") furniture.
BUSINESS
CASUAL FURNITURE. WinsLoew designs, manufactures and distributes
casual furniture for both the residential and contract markets. WinsLoew
constructs its residential products of extruded and tubular aluminum, wrought
iron and cast aluminum. WinsLoew markets its residential products through
independent sales representatives primarily to specialty patio stores and
furniture stores. WinsLoew constructs its contract products of extruded,
tubular and cast aluminum, steel, wrought iron, wood and fiberglass. WinsLoew
markets its contract products primarily through its in-house sales force,
primarily to apartment developers and management companies, hospitality
providers (hotel, motel, restaurants, country clubs and resorts), architectural
design firms, and city and state municipalities.
CONTRACT SEATING. WinsLoew designs, and distributes contract seating
products constructed of contemporary, traditional and transitional styles of
wood and metal. Products include upholstered chairs, sofas and love seats
offered in a variety of finish and fabric options. WinsLoew designs its
contract seating products for use in the restaurant, lodging, office,
healthcare facilities and retail stores. WinsLoew assembles these products
pursuant to specific orders and distributes them to a broad customer base,
which includes architectural design firms, office furniture dealers, and
restaurant and lodging chains through independent sales organizations.
RTA FURNITURE. WinsLoew's RTA products consist of promotionally priced
RTA "spindle" and "flatline" furniture and fully assembled case goods furniture
designed for household use. Products include corner spindle units, four drawer
chests, three drawer changing towers, coffee tables, end tables, entertainment
centers and tape storage units. Distribution is through mass merchants and
catalog wholesalers.
HISTORY
MERGER OF WINSTON AND LOEWENSTEIN. WinsLoew was formed in December
1994 through the merger of Winston Furniture Company, Inc. ("Winston") and
Loewenstein Furniture Group, Inc. ("Loewenstein") with and into WinsLoew, a
newly-formed corporation that was formed for the purpose of the merger. As a
result of the merger, (i) each outstanding share of Winston common stock was
converted into 1.00 shares of WinsLoew Common Stock, and each outstanding share
of Loewenstein common stock was converted into 1.05 shares of WinsLoew Common
Stock.
WINSTON HISTORY. Winston, a designer, manufacturer and distributor of
casual furniture for both the residential and contract markets, began business
in October 1975 as a division of Marathon Corporation. In March 1986, Winston
management and certain other investors acquired the aluminum furniture business
of that division in a leveraged buyout. Winston acquired the wrought iron and
tubular steel furniture business of the Lyon-Shaw, Inc. a division of B.B.
Walker Company ("Lyon Shaw"), in November 1986. In August 1987, Winston
competed an initial public offering of its shares. In December 1988, Winston
management, other employees and affiliates of the Trivest Partnerships
purchased Winston in a leveraged buyout. Following the December 1988 buyout,
Winston expanded its manufacturing facilities, focused on its core business and
reduced its outstanding indebtedness. In February 1993, Winston competed its
initial public offering and used the net proceeds received therefrom to further
reduce outstanding indebtedness. In September 1994, Winston acquired
substantially all of the assets of Texacraft, Inc., a Texas corporation
("Texacraft"), which was a privately held manufacturer of aluminum furniture
for the contract market.
LOEWENSTEIN HISTORY. Loewenstein, Inc. was founded in 1967 and
acquired in February 1985 by Atlantis Plastics, Inc., a publicly-traded
plastics company and an affiliate of the Trivest Partnerships. In 1987 and
1988,
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<PAGE> 61
Atlantis acquired (i) Southern Wood Products, Inc. ("Southern Wood"), a
manufacturer of promotionally priced RTA furniture; (ii) Gregson Furniture
Industries, Inc. ("Gregson"), a manufacturer of traditional and transitional
styled seating for the office and institutional markets; and (iii) Excel Office
and Contract, Inc. ("Excel"), a manufacturer of contemporary and traditional
styled seating for the office furniture market. Loewenstein, Inc., Southern
Wood, Gregson and Excel represented the furniture group of Atlantis (the
"Atlantis Furniture Group"). In April 1991, former management and employees of
the Atlantis Furniture Group and certain affiliates of the Trivest Partnerships
formed Loewenstein, which concurrently therewith purchased the Atlantis
Furniture Group. In September 1993, Loewenstein completed its initial public
offering of Loewenstein common stock and used the net proceeds to retire
substantially all of its outstanding indebtedness and for working capital. In
November 1993, Loewenstein acquired substantially all of the assets of
Shaffield Industries, Inc., a Tennessee corporation, and certain of its
affiliates (collectively, "Shaffield"). The assets acquired consisted of
substantially all of the assets used by Shaffield in its business as a
vertically-integrated manufacturer of RTA furniture, including futons, chairs,
tables and related accessories marketed under the trademark FROM THE SOURCE. In
February 1994, Loewenstein acquired New West Industries, a California
corporation ("New West"). New West was a manufacturer of RTA furniture,
including futons, chairs and related accessories.
RECENT DEVELOPMENTS
SALE OF EXCEL. During the fourth quarter of 1995, WinsLoew disposed of
the assets of its Excel business.
SALE OF LYON SHAW. During the third quarter of 1997, WinsLoew disposed
of certain assets of its Lyon Shaw wrought iron furniture manufacturing
business in the casual furniture product line.
TROPIC CRAFT ACQUISITION. During the third quarter of 1998, WinsLoew
acquired the stock of Villella, Inc. d.b.a. Tropic Craft Aluminum Furniture
Manufacturers ("Tropic Craft"), a manufacturer of aluminum casual furniture sold
into contract markets.
POMPEII ACQUISITION. During the fourth quarter of 1998, WinsLoew
entered into a Stock Purchase Agreement with the shareholders of Miami Metal
Products, Inc. d.b.a. Pompeii Furniture Industries, a manufacturer of aluminum
casual furniture sold into contract and residential markets. The closing of the
Pompeii acquisition is expected to occur in the second quarter of 1999, once
certain conditions related to the Pompeii facility are met by the selling
shareholders.
RTA OPERATIONS. During 1997, WinsLoew adopted a plan to dispose of its
"RTA" operations and recorded a pretax non-cash charge totaling $12.4 million
in the fourth quarter of 1997 relating to the disposal of the "RTA" operations.
During 1998, WinsLoew sold its equity interest in the Continental Engineering
Group, Inc. subsidiary. In addition, WinsLoew liquidated the assets related to
its New West futon business. WinsLoew subsequently decided to retain its third
"RTA" entity (Southern Wood) due to improved profitability and, accordingly,
has reclassified its Southern Woods results to continuing operations.
Reference is made to Note 2 of the Company's Consolidated Financial
Statements for additional information with respect to the Company's
discontinued operations, acquisitions and dispositions, including the completed
Tropic Craft acquisition.
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<PAGE> 62
PRODUCT LINES
WinsLoew has three principal product lines (Casual Furniture, Contract
Seating and RTA Furniture) that are produced or distributed in 8 manufacturing
locations as follows:
<TABLE>
<CAPTION>
DIVISION AND LOCATION PRINCIPAL PRODUCTS PRINCIPAL CUSTOMERS
- --------------------- ------------------ -------------------
<S> <C> <C>
CASUAL FURNITURE:
Winston Residential casual furniture Specialty patio stores and
Haleyville, Alabama constructed of aluminum furniture stores
(2 locations)
Texacraft Contract casual furniture constructed Apartment developers and
Houston, Texas of aluminum, wrought iron, wood and management companies, hospitality
fiberglass providers and manufactures
Tropic Craft Contract casual furniture constructed Apartment developers and
Ocala, Florida of aluminum, wrought iron, wood and management companies, hospitality
fiberglass providers and manufactures
Winston International Imported residential casual furniture Specialty patio stores,
Haleyville, Alabama constructed of cast aluminum and department stores and furniture
wrought iron stores
CONTRACT SEATING:
Loewenstein Contemporary, transitional and Architectural design firms,
Pompano Beach, Florida traditional seating for hospitality, restaurant and lodging chains,
office and other institutional uses office furniture dealers and
retail store planners
Gregson Traditional office and other Office furniture dealers and
Liberty, North Carolina institutional seating lodging chains
RTA FURNITURE:
Southern Wood Promotional RTA furniture Mass merchandisers and catalog
Sparta, Tennessee wholesalers
(2 locations)
</TABLE>
COMPETITIVE STRENGTHS
WinsLoew believes that it has the following competitive strengths.
CASUAL FURNITURE
Management attributes its historical success in the casual furniture
product line to its: (i) commitment to producing a quality product delivered
"in time and on time", (ii) emphasis on providing extensive customer service,
(iii) cost-efficient manufacturing operations, (iv) innovatively styled
products and merchandising programs, and (v) results-oriented management, team
philosophy and culture. Management believes that WinsLoew can continue the
growth it has experienced in the casual furniture line by capitalizing on its
existing distribution channels, manufacturing capabilities and reputation for
quality and customer service. Specifically, WinsLoew intends to grow
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<PAGE> 63
in its existing market through: (i) continued leadership in new products and
merchandising programs, (ii) expanding existing market penetration, (iii)
broadening distribution channels, and (iv) developing off season products for
its distribution channel and other channels.
CONTRACT SEATING
WinsLoew is committed to providing value to its contract seating
customers by offering innovative designs, a broad range of high quality
products at competitive prices and responsive customer service with quick and
timely delivery. WinsLoew ensures that its products provide both superior
structural integrity and aesthetic styling through its adherence to strict
manufacturing and quality control standards and through its long-standing and
frequently exclusive relationships with a number of leading Italian designers
and manufacturers. These suppliers have extensive experience in the design,
engineering and production of contemporary and transitional-styled chairs. The
suppliers use steam-bending of solid wood components, intricate joinery and
other sophisticated manufacturing techniques generally unavailable in the
United States. In addition, WinsLoew's electrostatically applied, ultraviolet
cured wood finishing system produces one of the most consistent, durable and
vibrant finishes in the industry. The system also increases manufacturing
efficiency and reduces waste and air emissions. WinsLoew's commitment to
providing high levels of customer service is also typified by its policies of
paying freight charges if a guaranteed shipping date is missed and, under its
"Quick Ship" program, guaranteeing shipment of a significant portion of its
product line within 10 working days from receipt of a customer's order.
WinsLoew offers a broad selection of wood, metal and upholstered
chairs, sofas and love seats designed for restaurant, lodging, office and other
institutional uses, with prices generally ranging from $150 to $550. WinsLoew's
custom design capabilities also allow it to modify styles, materials and
production in order to provide customers with products that meet particular
specifications. WinsLoew's strategy of offering a broad selection of product
styles and price ranges provides it with access to distribution channels
serving a variety of end users, including restaurants, hotels, healthcare
facilities, retail store planners, corporate offices, schools, sports
facilities, airport lounges and cruise lines.
RTA FURNITURE
WinsLoew's RTA furniture product line consists of promotionally priced
RTA products sold directly to mass merchandisers and catalog wholesalers under
the Southern Wood name. Southern Wood's low cost structure is based on its use
of inexpensive raw materials, its relatively low labor rates and its use of
equipment to achieve manufacturing efficiencies. WinsLoew believes that its
focused price strategy and its ability to quickly introduce and begin
manufacturing new products will allow the Company to maintain or increase its
market share.
BUSINESS STRATEGY
CASUAL FURNITURE
The business strategy of the casual division emphasizes the following
elements:
EXPANSION OF SALES AND MARKET SHARE. WinsLoew's growth objectives for
the casual furniture line are primarily focused on areas where WinsLoew can
expand into new distribution channels, as well as capitalize on its existing
distribution channels, manufacturing capabilities and reputation for quality
and customer service, including: (i) new product introductions in WinsLoew's
extruded and tubular aluminum and International divisions, (ii) expansion into
new geographic areas, and (iii) increased sales to commercial customers such as
hotels, restaurants, country clubs, interior designers and apartment and hotel
developers.
PROVIDE VALUE TO CUSTOMERS. WinsLoew is committed to providing value
to its retailing customers by designing and manufacturing high quality,
competitively priced products and responding to its customers' needs for "in
time and on time" delivery. WinsLoew maintains a strong customer service
orientation that is typified by its PDQ shipping program, where WinsLoew either
ships within 15 business days after credit approval or pays for the freight
costs. Quick delivery is particularly important to casual furniture retailers
because of the short selling season
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<PAGE> 64
and the retailer's general desire to minimize inventory levels. Another
principal component of WinsLoew's marketing strategy is its focus on special
sales programs for customers. These programs also reduce the effects of
seasonality on WinsLoew's operations and minimize WinsLoew's finished good
inventory.
COMMITMENT TO PRODUCT DEVELOPMENT. Management believes that the high
fashion style and variety of WinsLoew's casual furniture designs provide a
strong competitive advantage and WinsLoew therefore devotes significant
resources to new product development and introductions.
COMMITMENT TO INDUSTRY LEADERSHIP. WinsLoew strives to establish a
reputation in the casual furniture and contract seating manufacturing industry
of superior products and service. For example, WinsLoew received the
prestigious "Manufacturer Leadership Award" for 1998 given by the Casual
Furniture Retailers Association. The Company has received this award three
times since its inception in 1990, when WinsLoew was the first recipient. The
award is voted upon by members of the Casual Furniture Retailers Association,
and the criteria include service, quality, ethics and product design, among
others. WinsLoew has been a finalist for the award every year.
ENHANCED USE OF MANUFACTURING CAPABILITIES, WinsLoew operates
approximately 205,000 square feet of manufacturing space for casual furniture
products and produces most of such products from basic raw materials using
strict quality control measures. WinsLoew's vertical integration permits
WinsLoew to: (i) produce a variety of chairs, tables and other furniture
products, (ii) manufacture cushions and (iii) cut and assemble the fabric
covers that are combined with preassembled poles to produce outdoor umbrellas.
WinsLoew also maintains strict cost containment measures in order to ensure
that its products are manufactured in a cost-efficient manner.
DEVELOP OR ACQUIRE COMPLEMENTARY PRODUCT LINES. WinsLoew continues to
seek opportunities to develop or acquire complementary product lines in order
to capitalize on its existing distribution channels, manufacturing capabilities
and reputation for quality and customer service.
CONTRACT SEATING
The business strategy of the contract seating division emphasizes the
following elements:
HISTORICAL BASE BUSINESS. WinsLoew has historically concentrated its
base contract seating business on its project driven core seating market.
WinsLoew has based its growth in this market on its manufacturing capabilities
and its reputation for quality and customer service. Examples of programs which
have increased sales in this business are the Company's custom design services
and its Quick Ship program.
LODGING BUSINESS. The Company supplies various seating products for
hotel rooms and common areas for lodging chains. The Company has based its
growth in this market on its reputation for quality, delivery and service.
PRIVATE LABEL PROGRAM. WinsLoew offers a "private label" program
through which contract seating products are marketed to nationally recognized
designers and manufacturers of office furniture systems. WinsLoew believes that
its success in generating private label business is primarily attributable to
its proven ability to produce a quality product on short lead time, its
state-of-the-art finishing capabilities, its competitive prices and the direct
involvement of its senior executives in private label marketing.
DEVELOP OR ACQUIRE COMPLEMENTARY PRODUCT LINES. WinsLoew continues to
seek opportunities to develop or acquire complementary product lines in order
to capitalize on its existing distribution channels, manufacturing capabilities
and reputation for quality and customer service.
RTA FURNITURE
The business strategy of the RTA division emphasizes the Company's
manufacturing flexibility and capabilities in order to broaden its line of
promotionally priced products. As a "niche player" in the RTA business, which
is dominated by several national large manufacturers and is experiencing a
trend toward consolidation, WinsLoew has positioned its RTA business to
manufacture and distribute products larger manufacturers do not
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<PAGE> 65
emphasize. This has broaden the Company's product line from just "spindle"
products to currently include both "flatline" and case goods.
PRODUCTS
WinsLoew designs, manufactures and distributes three principal product
lines: (i) casual furniture for both the residential and contract markets; (ii)
contract seating designed for restaurant, lodging, office or other general
institutional use; and (iii) promotionally priced "RTA" furniture designed for
household use.
CASUAL FURNITURE
WinsLoew's casual furniture products for residential use consist
principally of medium to upper-medium priced indoor and outdoor furniture sold
under five brand names: "Winston" residential extruded and tubular aluminum
furniture, "Texacraft" contract casual furniture, "Tropic Craft" contract
casual furniture and "Winston International" imports casual furniture. WinsLoew
currently manufactures and sells numerous residential style collections that
include traditional, European, and contemporary design patterns. Within each
style collection there are multiple products including chairs, tables, chaise
lounges and accessory pieces such as ottomans, cocktail tables, end tables, tea
carts and umbrellas. WinsLoew offers extruded and tubular aluminum with glider
action, adjustable positions and rocking and swivel motions. WinsLoew's casual
seating products feature cushions and vinyl strapping in a variety of colors
and patterns. All of WinsLoew's casual furniture products feature a durable
painted finish, which is also offered in a wide selection of colors. The
suggested retail prices for a residential table and four chairs currently range
from approximately $600 to $1,400.
WinsLoew's casual contract products include chairs, chaise lounges,
tables and umbrellas constructed of extruded, tubular and cast aluminum, steel,
wrought iron, wood and fiberglass. WinsLoew's casual contract products include
a selection of restaurant and outdoor seating and site furnishings. WinsLoew
markets casual contract products through Company employees and independent
sales representatives, primarily to apartment developers and management
companies, hospitality providers (hotel, motel, restaurants, country clubs, and
resorts), architectural design firms and city and state municipalities.
WinsLoew continually reviews and evaluates its casual furniture
designs, and annually adds and discontinues designs it deems appropriate.
WinsLoew identifies trends in shapes, colors and patterns through independent
research, contacts with WinsLoew's dealers and the occasional use of
independent designers. Management also solicits opinions from its
manufacturer's representatives, dealers and employees prior to final design
selection. WinsLoew has generally replaced or modified approximately one-third
to one-half of its casual furniture product lines annually. The costs of
implementing these annual changes have historically included certain: (i)
research and development costs; (ii) capital expenditures for tooling; and
(iii) advertising and catalog expenses. Shipments of WinsLoew's new designs
generally begin in September of each year.
CONTRACT SEATING
WinsLoew's contract seating products (other than the casual contract
products described above) include wood, metal and upholstered chairs, as well
as reception area love seats and sofas. WinsLoew's broad product line consists
of numerous distinct models of chairs in contemporary, traditional and
transitional styles. WinsLoew's general merchandising strategy for contract
seating is to provide innovative seating products that are practical,
comfortable, sturdy and moderately priced.
WinsLoew assembles wood frames and finishes them with one of
WinsLoew's numerous standard colors or, if requested, to the customer's
specification. WinsLoew's metal chairs are available in chrome or in a
selection of standard powder coat finishes. For upholstered products, the
customer may select from a number of catalog fabrics, vinyls and leathers or
may specify or supply its choice of materials. WinsLoew maintains an inventory
of unassembled chair components that enables it to respond quickly to large
quantity orders in a variety of finish and fabric combinations. See
"--Manufacturing."
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<PAGE> 66
WinsLoew believes that an important element of its success in the
contract seating business is its long-standing and frequently exclusive
relationships with leading Italian design firms, as well as its proven ability
to offer innovative products that are sturdy, aesthetically appealing and
scaled for the United States market. WinsLoew bases this belief upon its
extensive industry experience and discussions with key customers, sales
representatives and competitors. WinsLoew continually reviews and reconsiders
its contract furniture designs, and annually adds and deletes designs as it
deems appropriate to address perceived marketing opportunities. WinsLoew
generally begins the design process by identifying marketing needs and
conceptualizing product ideas through regular meetings of its senior management
team. Reflecting its focus on both sales and manufacturing, WinsLoew also
solicits opinions with respect to trends in styles, colors and other design
elements from its sales representatives, customers, and employees prior to
final design selection. WinsLoew provides preliminary sketches to either
WinsLoew's manufacturing personnel or WinsLoew's European suppliers, who in
turn engineer the product's construction and produce one or more prototypes in
preparation for actual full-scale production. WinsLoew generally introduces new
products at national or regional furniture markets. WinsLoew's custom design
capabilities also allow it to modify styles, materials and production in order
to provide customers with products that meet their particular needs.
RTA FURNITURE
WinsLoew's RTA products include promotionally priced RTA "spindle" and
"flatline" furniture and fully assembled case goods furniture products designed
for household use. WinsLoew's promotionally priced "spindle" products include
ready to assemble items such as coffee tables, end tables, wall units and
rolling carts. "Flatline" products include ready to assemble items such as book
shelves, entertainment centers and tape storage units. Case goods products
include fully assembled four drawer chests and three drawer chest and changing
towers, with an optional hutch.
WinsLoew's "spindle" and "flatline" products are sold in a box that
contains all components and hardware necessary for home-assembly. Case goods
are sold fully assembled and packaged, offering consumers a promotionally
priced alternative for household furniture.
MANUFACTURING
CASUAL FURNITURE
WinsLoew has manufacturing facilities for casual furniture products in
Haleyville, Alabama; Houston, Texas; and Ocala, Florida. The facilities in
Haleyville manufacture extruded and tubular aluminum casual furniture and most
related accessories, including cushions and umbrellas. In the Houston facility,
the Company manufactures extruded and tubular aluminum. In the Ocala facility,
the Company manufactures extruded and tubular aluminum, steel and wood
furniture. WinsLoew's goal at its facilities is to produce a high quality
product at the lowest possible manufacturing cost and deliver it in a timely
manner to dealers. WinsLoew's international products are manufactured in
Mexico. See "--Marketing and Sales."
WINSTON DIVISION - HALEYVILLE, ALABAMA. WinsLoew's aluminum furniture
manufacturing facility in Haleyville manufactures goods exclusively to order.
WinsLoew normally ships products on the day completed, eliminating the need to
maintain finished goods inventory. WinsLoew provides timely delivery service by
typically shipping goods within three weeks after credit approval.
In the manufacturing process, WinsLoew cuts extruded aluminum tubes to
size and shapes or bends them in specially designed machinery. The aluminum is
then welded to form a solid frame, and the frame is subjected to a grinding and
buffing process to eliminate any rough spots that may have been caused during
welding. After this process is completed, the frame is cleaned, painted in a
state-of-the-art powder coating system and heat cured. WinsLoew then adds vinyl
strapping, cushions, fabric slings, or other accessories to the finished frame,
as appropriate. WinsLoew then packages the product with umbrellas, tempered
glass and other accessories, as applicable, and ships it to the customer.
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<PAGE> 67
WinsLoew extensively refurbished and modernized its Haleyville
facilities in late 1984 and significantly expanded them in 1990 and 1993.
WinsLoew believes that its Haleyville facilities are some of the most modern in
the casual aluminum furniture industry, and that the efficiencies attributable
to these plants are a significant factor in WinsLoew's relatively low
manufacturing costs.
WinsLoew's vertical integration provides additional manufacturing
efficiencies. WinsLoew manufactures cushions for its aluminum furniture in
Haleyville, and, in addition, cuts, sews and assembles the fabric covers that
are combined with pre-assembled poles to produce outdoor umbrellas.
WinsLoew believes that it manufactures the highest quality aluminum
casual furniture in its price range. WinsLoew welds, not rivets or bolts, the
major frame components of its aluminum furniture, thereby increasing the
durability and enhancing the appearance of the aluminum product line. The
powder coated painting process results in an attractive and durable finish. To
ensure that only the highest quality products are shipped to customers,
WinsLoew's quality control department has established control check points
where the quality of 100% of its aluminum products is examined during the
manufacturing process. These processes allow WinsLoew to offer a two-year frame
and finish guarantee on all of its aluminum products for residential use.
Warranty expense to date has been negligible.
TEXACRAFT DIVISION - HOUSTON, TEXAS. WinsLoew's Houston facility
includes an aluminum furniture manufacturing facility with processes
essentially the same as WinsLoew's aluminum line in Haleyville. Additionally,
the Houston facility manufactures steel and wood furniture and includes a
fiberglass manufacturing facility for tables, umbrellas, and accessories.
TROPIC CRAFT DIVISION - OCALA, FLORIDA. WinsLoew's Ocala facility
includes an aluminum furniture manufacturing facility with processes
essentially the same as WinsLoew's aluminum line in Haleyville.
CONTRACT SEATING
WinsLoew currently utilizes approximately 226,000 square feet of
manufacturing space for contract seating production in facilities located in
Florida and North Carolina.
LOEWENSTEIN DIVISION - POMPANO BEACH, FLORIDA. This facility assembles
and finishes to customer order most of WinsLoew's contract seating products
(other than the casual contract products described above). WinsLoew purchases
component parts from a variety of suppliers, including a number of European
manufacturers, or manufactures. The principal elements of wood chair assembly
include: (i) frame glue-up, (ii) sanding, (iii) seat assembly (in which
upholstered seats are constructed from component bottoms, foam padding and
cloth coverings) and (iv) painting/lacquering. To provide consistency and speed
in this finishing process, WinsLoew utilizes a state-of-the-art conveyorized
paint line with electrostatic spray guns and a three-dimensional ultraviolet
drying system. For upholstered products, the specified fabric cloth is
stretched to the chair frame over foam padding. WinsLoew generally assembles
its metal chairs from imported components. After rework and leveling, WinsLoew
cartons its chairs to prevent damage in transportation. The manufacturing
process also includes a number of product inspections and other quality control
procedures.
GREGSON DIVISION - LIBERTY, NORTH CAROLINA. This manufacturing
facility includes such operations as assembling, upholstering, and finishing.
While styling is continuously updated, the basic construction process does not
change significantly from year to year, which reduces the need for substantial
modifications to the production process. The Company is the process of
consolidating the manufacture of its contract products for the hospitality
market at the Gregson facility and the manufacture of all other contract
seating products at the Pompano Beach facility. Management expects this process
to be completed by the end of 1999.
RTA FURNITURE
SOUTHERN WOOD DIVISION - SPARTA, TENNESSEE. WinsLoew currently
utilizes approximately 158,000 square feet of manufacturing and warehouse space
for its RTA products. For the manufacture of its "spindle" products the
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<PAGE> 68
Company uses high density particle board and dowels. The Company turns, stains
and lacquers all of the spindles. WinsLoew laminates the particle board with a
variety of wood grains and solid colors. WinsLoew individually boxes the product
with spindles and board, along with any necessary hardware and assembly
instructions. For "flatline" products WinsLoew individually boxes the cut
laminated particle board, along with necessary hardware and assembly
instructions. For case goods, the edges of the cut laminated particle board may
be "soft formed" for aesthetic value. The unit is then assembled using glue and
screws and utilizes quality components and hardware, such as self-closing drawer
runners, on all units. These fully assembled units are then packaged for
shipment.
MANUFACTURING CAPACITY
Management believes that the Company's manufacturing facilities in the
casual and contract seating product lines are currently operating, in the
aggregate, at approximately 75% of capacity, assuming a one-shift basis.
Management considers the Company's present manufacturing capacity to be
sufficient for the foreseeable future and believes that, by adding multiple
shift operations, the Company can significantly increase the total capacity of
its facilities to meet growing product demand with minimal additional capital
expenditures. In addition, the Company engages in an ongoing maintenance and
upgrading program, and considers its machinery and equipment to be in good
condition and adequate for the purposes for which they are currently used.
MARKETING AND SALES
CASUAL FURNITURE
WinsLoew markets its residential casual furniture products throughout
the United States, Canada and the Caribbean. WinsLoew currently makes
substantially all of its residential sales to customers located east of the
Rocky Mountains. WinsLoew markets residential products to approximately 800
active customers, including specialty patio stores, full-line furniture
retailers, and department stores. WinsLoew also sells its contract casual
products to certain commercial end-users such as hotels, restaurants, country
clubs, exporters, interior designers and developers of apartments and motels.
WinsLoew sells substantially all of its residential products through
approximately 30 independent manufacturer's representatives. Each
representative: (i) promotes, solicits and sells WinsLoew's products in an
assigned territory, (ii) agrees to assist in the collection of receivables and
adjustment of any complaints with regard to his or her sales and (iii) receives
commissions based on the net sales made in his or her territory. WinsLoew
determines the prices at which its products will be sold and may refuse to
accept any orders submitted by a sales representative for credit-worthiness or
other reasons. WinsLoew's representatives may carry other products which do not
directly compete with WinsLoew's product lines. WinsLoew has long-standing
relationships with most of its representatives.
WinsLoew's marketing program assists its representatives in various
ways, including: (i) holds exhibitions at national and regional furniture shows
and leases a year-round showroom at the Merchandise Mart in Chicago, Illinois,
(ii) provides retailers with annual four-color catalogs of its products, sample
materials illustrating available colors and fabrics, point of sale materials
and special sales brochures, (iii) provides information directly to
representatives at annual sales meetings attended by senior management and
manufacturing personnel, (iv) maintains a customer service department which
ensures that WinsLoew promptly responds to the needs and orders of WinsLoew's
customers, (v) maintains regular contact with key retailers and (vi) conducts
ongoing surveys to determine dealer satisfaction. WinsLoew markets its casual
contract products nationally through a team of company employed and independent
sales representatives.
WinsLoew organized its Winston International division primarily for
the purpose of distributing casual furniture products that it does not
manufacture. Winston International's current product offerings include a line
of cast aluminum products. WinsLoew inventories, distributes and administers
this product line in Haleyville, Alabama.
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CONTRACT SEATING
WinsLoew sells its contract seating products primarily to
architectural design firms, restaurant, lodging chains, office furniture
dealers and retail store planners. WinsLoew sells substantially all of its
contract seating products through approximately 40 independent sales
representative organizations that employ approximately 100 sales associates.
Each sales representative: (i) promotes and sells WinsLoew's products in an
assigned territory, (ii) assists WinsLoew in responding to customer service
request and (iii) receives commissions based on the net sales made in his or
her territory. WinsLoew determines the prices at which its products will be
sold, and may refuse to accept any orders submitted by a sales representative
for creditworthiness or other reasons.
WinsLoew's marketing program assists its representatives in various
ways, including: (i) holds exhibitions at national shows, (ii) provides its
representatives and customers with four color catalogs of its products, (iii)
provides information to representatives at sales meetings and (iv) maintains a
customer service department that ensures WinsLoew promptly responds to the
needs and orders of customers.
RTA FURNITURE
WinsLoew sells its promotionally priced RTA furniture products through
independent sales representatives, primarily to mass merchandisers and catalog
wholesalers. WinsLoew prepares product catalogs and brochures as sales material
for its independent sales representatives. The Company maintains a customer
service department to ensure prompt response to the needs and orders of
customers. The Company also holds exhibitions at national furniture shows.
BACKLOG
As of December 31, 1998, WinsLoew's backlog of orders was
approximately $21.8 million, compared to $17.6 million at December 31, 1997.
WinsLoew, in accordance with industry practice, generally permits orders to be
canceled prior to shipment without penalty. Management does not consider
backlog to be predictive of future sales activity because of WinsLoew's short
manufacturing cycle and delivery time, and, especially in the case of casual
furniture, the seasonality of sales.
RAW MATERIALS AND FOREIGN SOURCING
WinsLoew manufactures most of its products to order from basic raw
materials, and, consequently, is able to avoid carrying large amounts of
finished goods inventory particularly in its casual and contract seating
product lines. WinsLoew also attempts to maintain minimum levels of raw
material inventory. WinsLoew's principal raw materials consist of extruded
aluminum tubes, steel rods, woven vinyl fabrics, paint/finishing materials,
vinyl strapping, cushion filler materials, cartons, glass table tops, component
parts for contract seating, particle board and other lumber products and
hardware. Although WinsLoew has no long-term supply contracts, it generally has
a number of sources for its raw materials and has not experienced any
significant problems in obtaining adequate supplies for its operations.
Nevertheless, the purchase of aluminum is, from time to time, highly
competitive, and its price, as a commodity, is subject to market conditions
beyond WinsLoew's control. In addition, fluctuations in lumber prices and the
costs of other raw materials have not historically had a material adverse
effect on WinsLoew's results of operations.
However, future price increases may have a material adverse effect on
WinsLoew's financial condition and results of operations. Management believes
that WinsLoew's policy of maintaining several sources for most supplies
contributes to its ability to obtain competitive pricing.
A significant portion of the Loewenstein raw materials consist of
component chair parts purchased from several Italian manufacturers. WinsLoew
views its suppliers as "partners" and works with such suppliers on an ongoing
basis to design and develop new products. WinsLoew believes that these
cooperative efforts, its long-standing relationships with these suppliers and
its experience in conducting on-site, quality control inspections provide it
with a competitive advantage over many other furniture manufacturers, including
a competitive
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purchasing advantage in times of product shortages. In addition, in the case of
Italian and European suppliers, WinsLoew generally contracts for its purchases
of such component parts in such manner as to minimize its exposure to foreign
currency fluctuations. Although WinsLoew has close working relationships with
its foreign suppliers, WinsLoew's future success may depend, in part, on
maintaining such or similar relationships. Given the special nature of the
manufacturing capabilities of these suppliers, in particular certain
wood-bending capabilities, and sources of specialized wood types, the
Loewenstein division could experience a disruption in their operations in the
event of any required replacement of such suppliers. Situations beyond
WinsLoew's control, including political instability, significant and prolonged
foreign currency fluctuations, economic disruptions, the imposition of tariffs
and import and export controls, changes in government policies and other factors
may have a material adverse effect on WinsLoew.
FURNITURE INDUSTRY AND COMPETITION
The furniture industry is cyclical and affected by changes in general
economic conditions, consumer confidence and discretionary income, interest
rate levels, and credit availability. Weather conditions during the peak retail
selling season and the resulting impact on consumer purchases of outdoor
furniture products also affect sales of casual furniture products.
The furniture industry is highly competitive and includes a large
number of manufacturers, none of which dominate the market. Certain of the
companies which compete directly with WinsLoew may have greater financial and
other resources than WinsLoew. Based on its extensive industry experience,
management believes that competition in casual furniture and contract seating
is generally a function of product design, construction quality, prompt
delivery, product availability, customer service and price. Management
similarly believes that competition in WinsLoew's promotional price niche of
the RTA furniture industry is limited, and is based primarily on prompt
delivery, product availability, customer service and price.
WinsLoew believes that it successfully competes in the furniture
industry primarily on the basis of its innovatively styled product offerings
and merchandising programs, the quality of its products, and WinsLoew's
emphasis on providing high levels of customer service. While sales of imported,
foreign-produced casual furniture have increased significantly in recent years,
WinsLoew's sales have not been adversely affected because such foreign products
are generally: (i) limited in design, styles and colors, (ii) of lesser quality
than WinsLoew's products, (iii) marketed in the lower-end price range and (iv)
not supported with competitive customer service and responsiveness to
customers' needs for quick delivery.
TRADEMARKS AND PATENTS
WinsLoew has registered the following trademarks with the United
States Patent and Trademark Office: WINSTON, LOEWENSTEIN/OGGO, GREGSON,
SOUTHERN WOOD PRODUCTS, and LeCASSO. Management believes that WinsLoew's
trademark position is adequately protected in all markets in which WinsLoew
does business. WinsLoew also believes that its various trade names are
generally well recognized by dealers and distributors, and are associated with
a high level of quality and value.
WinsLoew holds several design and utility patents, and has
applications pending for issuance of other design and utility patents. Since
WinsLoew believes that it is an innovator of styles and designs, it is the
Company's policy to apply for design and utility patents for those designs
which it believes may be of significance to WinsLoew.
ENVIRONMENTAL MATTERS
WinsLoew's management believes that WinsLoew complies in all material
respects with all applicable federal, state and local provisions relating to
the protection of the environment. The principal environmental regulations that
apply to WinsLoew govern air emissions, water quality and the storage and
disposition of solvents. Compliance with environmental protection laws and
regulations has not had a material adverse impact on
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WinsLoew's financial condition or results of operations in the past and is not
expected to have a material adverse impact in the future.
PROPERTIES
The following table provides information with respect to each of the
Company's facilities:
<TABLE>
<CAPTION>
APPR. LEASE
BUILDING AREA APPR. LAND OWNED OR EXPIRATION
LOCATION DIVISION PRIMARY USE (FEET) AREA (ACRES) LEASED DATE
-------- -------- ----------- ------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hoover, AL All Headquarters 9,800 2.0 Owned N/A
Haleyville, AL Winston Manufacturing 155,000 17 Owned N/A
and Offices
Haleyville, AL Winston Warehouse 20,000 1 Owned N/A
Haleyville, AL Winston Sewing Plant 30,000 1 Owned N/A
Chicago, IL Casual Division Merchandise 12,000 N/A Leased 8/31/02
Mart Showroom
Houston, TX Texacraft Manufacturing 89,500 N/A Leased 4/15/05
and Offices
Ocala, FL Tropic Craft Manufacturing 49,000 7.4 Owned N/A
and Offices
Pompano Beach, FL Loewenstein Manufacturing 100,000 13.8 Owned N/A
and Offices
Pompano Beach, FL Loewenstein Warehouse 6,500 N/A Leased MTM
Liberty, NC Gregson Manufacturing 126,000 9.5 Owned N/A
and Offices
Sparta, TN Southern Manufacturing 94,300 10.0 Owned N/A
Wood and Offices
Sparta, TN Southern Manufacturing 63,260 32.9 Owned N/A
Wood and Offices
</TABLE>
EMPLOYEES
At December 31, 1998, WinsLoew had approximately 1,124 full-time
employees, of whom 17 were employed in management, 203 in sales, general, and
administrative positions, and 904 in manufacturing, shipping, and warehouse
positions.
The only employees subject to collective bargaining agreements are
approximately 123 of WinsLoew's hourly employees in Haleyville, Alabama, who
are represented by the Retail, Wholesale, and Department Store Union. The labor
agreement between WinsLoew and such union, which expires on July 31, 2001,
provides that there shall be no strikes, slowdowns or lockouts. WinsLoew
considers its employee relations to be good.
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LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of its business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. Based primarily on discussions with counsel and
management familiar with the underlying disputes, the Company believes that it
is not presently a party to any litigation, the outcome of which would have a
material adverse effect on its business or operations.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data are derived from
the Consolidated Financial Statements of WinsLoew. The following data has been
restated to reflect Southern Wood as a continuing operation (see Note 2 of Notes
to Consolidated Financial Statements). The following selected consolidated
financial data should be read in conjunction with WinsLoew's Consolidated
Financial Statements and related Notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the other financial
information included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Net sales $141,360 $122,145 $117,405 $110,887 $95,561
Cost of sales 87,232 79,431 78,029 78,710 65,060
-------- -------- -------- -------- -------
Gross profit 54,128 42,714 39,376 32,177 30,501
Selling, general and administrative expenses 23,124 21,427 21,472 19,303 16,303
Amortization 1,122 992 1,444 2,087 2,000
Non-recurring charges -- -- -- -- 917
-------- -------- -------- -------- -------
Operating income 29,882 20,295 16,460 10,787 11,281
Interest expense 635 2,296 3,083 3,841 2,795
-------- -------- -------- -------- -------
Income from continuing operations before income
taxes and extraordinary item 29,247 17,999 13,377 6,946 8,486
Provision for income taxes 10,947 6,838 4,834 3,489 3,068
-------- -------- -------- -------- -------
Income from continuing operations before
extraordinary item 18,300 11,161 8,543 3,457 5,418
Income (loss) from discontinued operations, net
of taxes -- (718) (259) (9,199) 934
Gain (loss) from sale of discontinued
operations, net of taxes 2,031 (8,200) -- -- --
Extraordinary item -- -- -- 1,698 --
-------- -------- -------- -------- -------
Net income (loss) $ 20,331 $ 2,243 $ 8,284 $ (4,044) $ 6,352
======== ======== ======== ======== =======
Basic earnings (loss) per share:
Income from continuing operations before
extraordinary item $ 2.46 $ 1.49 $ 0.98 $ 0.38 $ 0.56
Income (loss) from discontinued operations,
net of taxes -- (0.09) (0.03) (1.02) 0.10
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.10) -- -- --
Extraordinary item -- -- -- 0.19 --
-------- -------- -------- -------- -------
Net income (loss) $ 2.73 $ 0.30 $ 0.95 $ (0.45) $ 0.66
======== ======== ======== ======== =======
Weighted average shares 7,450 7,484 8,724 9,029 9,655
======== ======== ======== ======== =======
Diluted earnings (loss) per share:
Income from continuing operations before
extraordinary item $ 2.40 $ 1.48 $ 0.98 $ 0.38 $ 0.56
Income (loss) from discontinued operations,
net of taxes -- (0.10) (0.03) (1.02) 0.10
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.08) -- -- --
Extraordinary item -- -- -- 0.19 --
-------- -------- -------- -------- -------
Net income (loss) $ 2.67 $ 0.30 $ 0.95 $ (0.45) $ 0.66
======== ======== ======== ======== =======
Weighted average shares and common share
equivalents outstanding 7,624 7,563 8,730 9,029 9,655
======== ======== ======== ======== =======
</TABLE>
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<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Working capital $25,840 $29,937 $40,102 $58,785 $37,711
Total assets 84,553 80,414 99,950 104,004 111,054
Long-term debt (less current portion) 1,400 15,908 38,726 40,130 39,094
Total debt 1,447 16,423 40,681 41,941 40,893
Stockholders' equity 66,226 51,026 48,400 53,228 60,680
</TABLE>
- -------------------------
(1) The ratio of earnings to fixed charges for the fiscal years ended
December 31, 1997 and 1998 was 9-to-1 and 4.7 to-1, respectively. The
book value per share as of December 31, 1998 was $9.08 per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
WinsLoew designs, manufactures and distributes of casual furniture and
contract seating furniture. WinsLoew's casual furniture products are
distributed through independent manufacturer's representatives and are
constructed of extruded and tubular aluminum and cast aluminum. These products
are distributed through fine patio stores, department stores and full line
furniture stores nationwide. WinsLoew's contract seating products are
distributed to a broad customer base, which includes architectural design firms
and restaurant and lodging chains.
During 1997 the Company adopted a plan to dispose of its RTA
operations. WinsLoew's RTA products included ergonomically-designed computer
workstations, which the Company denoted as "space savers", promotionally-priced
coffee and end tables, wall units and rolling carts and an extensive line of
futons, futon frames and related accessories. Distribution of RTA furniture
products was primarily through mass merchandisers, catalogue wholesalers and
specialty retailers. As a result of this decision, the Company recorded a
pre-tax non-cash charge totaling $12.4 million in the fourth quarter of 1997
relating to the disposal of the RTA operations. The charge can be summarized as
follows:
Write-off of goodwill in connection with sale of assets $ 3,902,000
Reduction of inventory value 2,791,000
Reduction of property to net realizable value 2,067,000
Reduction of accounts receivable value 1,390,000
Other liabilities / reserves 1,050,000
Accrual for losses through disposition 1,200,000
===========
Total $12,400,000
===========
The Company planned to sell two of the businesses and liquidate the
assets related to the futon business. During 1998 the Company sold one of the
businesses, completed the liquidation of the futon business and decided to
retain its Southern Wood business due to improved profitability (see Note 2 to
Notes to the Consolidated Financial Statements).
The amounts reflected hereafter include Southern Wood as a continuing
operation.
RESULTS OF OPERATIONS
The following table sets forth net sales, gross profit and gross
margin as a percent of net sales for the years ended December 31, 1998, 1997
and 1996 for each of the Company's product lines (in thousands, except for
percentages):
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- -------- ------------------------------ ----------------------------
NET GROSS GROSS NET GROSS GROSS NET GROSS GROSS
SALES PROFIT MARGIN SALES PROFIT MARGIN SALES PROFIT MARGIN
----------- --------- -------- ----------- --------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Casual furniture $ 59,733 $28,227 47.3% $ 56,363 $24,164 42.9% $ 58,066 $23,812 41.0%
Contract seating 69,938 23,439 33.5% 58,386 17,256 29.6% 48,629 14,126 29.0%
RTA 11,689 2,462 21.1% 7,396 1,294 17.5% 10,710 1,438 13.4%
------- ------- -------- ------- -------- -------
Total $141,360 $54,128 38.3% $122,145 $42,714 35.0% $117,405 $39,376 33.5%
======== ======= ======== ======= ======== =======
</TABLE>
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The following table sets forth certain information relating to the
Company's operations expressed as a percentage of the Company's net sales:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996
-------------- ------------ ------------
<S> <C> <C> <C>
Gross profit 38.3% 35.0% 33.5%
Selling, general and administrative expense 16.4% 17.5% 18.3%
Amortization 0.8% 0.8% 1.2%
Operating income 21.1% 16.6% 14.0%
Interest expense 0.4% 1.9% 2.6%
Provision for income taxes 7.7% 5.6% 4.1%
Income from continuing operations before extraordinary
item 12.9% 9.1% 7.3%
Loss from discontinued operations, net of taxes -- (0.6%) (0.2%)
Gain (loss) from sale of discontinued operations, net of
taxes 1.4% (6.7%) --
Net income 14.4% 1.8% 7.1%
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
NET SALES. WinsLoew's consolidated net sales for 1998 increased $19.2
million or 15.7% to $141.4 million, compared to $122.1 million in 1997. The
casual product line sales increased by 17.9%, after excluding sales for the
Company's wrought iron business sold during 1997. The Company believes that due
to its high quality and innovative designs, existing retail customers have
continued to allocate more floor space, requiring larger inventories of the
Company's casual aluminum furniture. The contract seating product line
experienced a sales increase of 19.8% due to growth in the core business and
increased demand from the lodging industry. The RTA product line experienced a
sales increase of 58.0% due to increased demand as the Company broadened it's
product offering to include additional flat-line products and case goods which
allowed the Company to enter new markets.
GROSS PROFIT. Consolidated gross profit increased $11.4 million in
1998 to $54.1 million compared to $42.7 million in 1997. The casual, contract
seating and RTA product lines improved gross profits in 1998 due to greater
operating efficiencies, increased sales volumes and improved raw material
costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.7 million in 1998, compared to 1997, due
to commissions expense and other variable costs related to the increased sales
volume in 1998.
AMORTIZATION. Amortization expense increased $130,000 in 1998, compared
to 1997, due to amortization of goodwill related to the Tropic Craft
acquisition.
OPERATING INCOME. As a result of the above, WinsLoew recorded
operating income of $29.9 million (21.1% of net sales) in 1998, compared to
operating income of $20.3 million (16.6% of net sales) in 1997.
INTEREST EXPENSE. WinsLoew's interest expense decreased $1.7 million in
1998, compared to 1997. The Company has reduced its debt by $15.0 million from
December 31, 1997.
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<PAGE> 77
PROVISION FOR INCOME TAXES. WinsLoew's effective tax rate from
continuing operations of 37.4% in 1998 and 38.0% in 1997 is greater than the
federal statutory rate due to the effect of state income taxes and
non-deductible goodwill amortization.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
NET SALES. WinsLoew's consolidated net sales for 1997 increased $4.7
million or 4.0% to $122.1 million, compared to $117.4 million in 1996. The
casual product line sales increased by 7.6% after excluding sales for the
Company's wrought iron business sold during 1997. The Company believes that due
to its high quality and innovative designs, existing retail customers have
allocated more floor space, requiring larger inventories of the Company's
casual aluminum furniture. The contract seating product line experienced a
sales increase of 20.1% due to growth in the core business and increased demand
from the lodging industry. The RTA product line experienced a sales decrease of
30.9% due to the loss of a major customer.
GROSS PROFIT. Consolidated gross profit increased $3.3 million in 1997
to $42.7 million compared to $39.4 million in 1996. The casual and contract
seating product lines improved gross profits in 1997 due to greater operating
efficiencies, increased sales volumes (after excluding sales for the Company's
Lyon Shaw wrought iron business sold in 1997) and improved raw material costs.
The RTA product line experienced a 10.0% decrease in gross profit in 1997 due
to lower sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $45,000 in 1997, compared to 1996, due to
various cost reduction programs which more than offset commission expense and
other variable costs related to the increased sales volume in 1997.
AMORTIZATION. Amortization expense decreased $452,000 due to the
intangible assets that became fully amortized in 1996.
OPERATING INCOME. As a result of the above, WinsLoew recorded
operating income of $20.3 million (16.6% of net sales) in 1997, compared to
operating income of $16.5 million (14.0% of net sales) in 1996.
INTEREST EXPENSE. WinsLoew's interest expense decreased $787,000 in
1997, compared to 1996. The Company reduced its debt by $24.3 million from
December 31, 1996 to December 31, 1997.
PROVISION FOR INCOME TAXES. WinsLoew's effective tax rate from
continuing operations of 38.0% in 1997 and 36.1% in 1996 is greater than the
federal statutory rate due to the effect of state income taxes and
non-deductible goodwill amortization.
SEASONALITY AND QUARTERLY INFORMATION
The furniture industry is cyclical and sensitive to changes in general
economic conditions, consumer confidence, and discretionary income, interest
rate levels and credit availability.
Sales of casual products are typically higher in the second quarter
and fourth quarters of each year, primarily as a result of the following: (i)
high retail demand for casual furniture in the second quarter, preceding the
summer months and (ii) the impact of special sales programs on fourth quarter
sales. The Company's casual product sales can also be affected by weather
conditions during the peak retail selling season and the resulting impact on
consumer purchases of outdoor furniture products. During the third quarter of
1997, the Company sold its Lyon Shaw wrought iron division (See Note 3 of the
Notes to the Consolidated Financial Statements).
The following table presents the Company's unaudited quarterly data
for 1998 and 1997. Such operating results are not necessarily indicative of
results for future periods. WinsLoew believes that all necessary and normal
recurring adjustments have been included in the amounts in order to present
fairly and in accordance with generally accepted accounting principles the
selected quarterly information when read in conjunction with WinsLoew's
Consolidated Financial Statements included elsewhere herein. The following data
has been restated to reflect Southern Wood as a continuing operation.
69
<PAGE> 78
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998 QUARTERS FIRST SECOND THIRD FOURTH
- ------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $27,576 $42,892 $36,258 $34,634
Gross profit 9,630 16,740 13,527 14,231
Operating income 4,871 10,282 6,265 8,464
Interest expense (income) 333 354 137 (189)
Income from continuing operations 2,873 6,199 3,791 5,437
Gain on sale of discontinued operations -- -- -- 2,031
Net income $ 2,873 $ 6,199 $ 3,791 $ 7,468
======= ======= ======= =======
Basic earnings per share:
Income from continuing operations (1) $ 0.38 $ 0.83 $ 0.51 $ 0.75
Gain on sale of discontinued
operations -- -- -- 0.27
------- ------- ------- -------
Net income (1) $ 0.38 $ 0.83 $ 0.51 $ 1.02
======= ======= ======= =======
Weighted average shares 7,535 7,513 7,468 7,296
======= ======= ======= =======
Diluted earnings per share:
Income from continuing operations $0.37 $0.80 $0.50 $0.73
Gain on sale of discontinued
operations -- -- -- 0.27
Net income $0.37 $0.80 $0.50 $1.00
======= ======= ======= =======
Weighted average shares and common share
equivalents outstanding 7,683 7,722 7,647 7,453
======= ======= ======= =======
1997 QUARTERS FIRST SECOND THIRD FOURTH
- ------------- ------- -------- ------- -------
Net sales $24,682 $39,854 $29,523 $28,086
Gross profit 7,519 15,020 10,073 10,102
Operating income 2,592 8,313 4,440 4,950
Interest expense 857 645 590 204
Income from continuing operations 1,047 4,729 2,355 3,030
Loss from discontinued operations (229) (225) (73) (191)
Loss on sale of discontinued operations -- -- -- (8,200)
Net income (loss) $ 818 $ 4,504 $ 2,282 $(5,361)
======= ======= ======= =======
Basic earnings (loss) per share:
Income from continuing operations (1) $ 0.14 $ 0.63 $ 0.31 $ 0.40
Loss from discontinued operations (1) (0.03) (0.03) (0.01) (0.03)
Loss on sale of discontinued
operations (1) -- -- -- (1.09)
------- ------- ------- -------
Net income (loss) $ 0.11 $ 0.60 $ 0.30 $ (0.72)
======= ======= ======= =======
Weighted average shares 7,443 7,456 7,508 7,524
======= ======= ======= =======
Diluted earnings (loss) per share:
Income from continuing operations $ 0.14 $ 0.63 $ 0.31 $ 0.40
Loss from discontinued
operations (0.03) (0.03) (0.01) (0.03)
Loss on sale of discontinued
operations (1) -- -- -- (1.07)
------- ------- ------- -------
Net income (loss) (1) $ 0.11 $ 0.60 $ 0.30 $ (0.70)
======= ======= ======= =======
Weighted average shares and common share
equivalents outstanding 7,495 7,502 7,602 7,630
======= ======= ======= =======
</TABLE>
- -----------
(1) Quarter amounts do not add to annual figures due to rounding.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for working capital
to support its debt service, accounts receivable and inventory requirements.
The Company has historically financed its short-term liquidity
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<PAGE> 79
needs with internally generated funds and revolving line of credit borrowings.
At December 31, 1998, the Company had $25.8 million of working capital and $18.4
million of unused and available funds under its credit facilities.
The Company has a senior credit facility with a consortium of banks
and other institutional lenders. The facility, which matures in February 2001
and is collateralized by substantially all of the assets of the Company,
consists of a revolving line of credit, term loan and an acquisition line of
credit. The working capital revolving line of credit allows the Company to
borrow funds up to a certain percentage of eligible inventories and accounts
receivable. The $12.5 million acquisition line of credit can be used for
capital expenditures and purchases of the Company's common stock.
In June 1996, WinsLoew amended its senior credit facility to provide
the Company with a variable amount available under the revolving line of credit
(see Note 4 to the Consolidated Financial Statements). Due to the seasonal
nature of the casual furniture product line, WinsLoew's cash requirements are
usually greater in the first quarter of each year. The June 1996 amendment
allows the amount available to fluctuate with the seasonal nature of the
Company's business. After the first quarter of each year, the Company's cash
requirements from its credit line decline. By use of a variable amount of
credit availability, the Company can avoid the cost of an available but unused
line of credit. At December 31, 1998, from an available maximum line of credit
of $40 million, WinsLoew has elected to set the amount available at $35
million.
WinsLoew's senior credit facility allows the Company to borrow under
its line of credit to purchase shares of the Company's common stock (see Note 5
of Notes to the Consolidated Financial Statements). As of December 31, 1998,
there was $6.1 million available for such repurchases.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operations
increased to $31.1 million in 1998 primarily due to improved profitability from
continuing operations.
CASH FLOWS FROM INVESTING ACTIVITIES. During 1998, the Company spent
$0.9 million on capital expenditures and $9.3 million on the purchase of Tropic
Craft (see Note 3 to the Consolidated Financial Statements).
At December 31, 1998, the Company had no material commitments for
capital expenditures.
CASH FLOWS FROM FINANCING ACTIVITIES. During 1998, The Company used
the cash generated by operations to repay $15.0 million of debt and purchase
$6.1 million of the Company's common stock (see Note 5 of Notes to the
Consolidated Financial Statements).
FOREIGN EXCHANGE FLUCTUATIONS AND EFFECTS OF INFLATION
WinsLoew purchases some raw materials from several Italian suppliers.
These purchases expose the Company to the effects of fluctuations in the value
of the U.S. dollar versus the Italian lira. If the U.S. dollar declines in
value versus the Italian lira, the Company will pay more in U.S. dollars for
these purchases. To reduce its exposure to loss from such potential foreign
exchange fluctuations, the Company will occasionally enter into foreign
exchange forward contracts. These contracts allow the Company to buy Italian
lira at a predetermined exchange rate, thereby transferring the risk of
subsequent exchange rate fluctuations to a third party. However, if the Company
is unable to continue such forward contract activities, and the Company's
inventories increase in connection with expanding sales activities, a weakening
of the U.S. dollar against the Italian lira could result in reduced gross
margins. The Company elected to hedge a portion of its exposure to purchases
made in 1998 by entering into foreign currency forward contracts. At December
31, 1998, the Company did not have any forward contracts outstanding. The
Company did not incur significant gains or losses from these foreign currency
transactions.
Inflation has not had a significant impact on the Company in the past
three years, nor is it expected to have a significant impact in the foreseeable
future.
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<PAGE> 80
YEAR 2000
The Company began an assessment of the Year 2000 issue on its systems
in mid 1995. Based on the assessment, the Company determined that it was
necessary to replace portions of its software and hardware so that those
systems will properly utilize dates beyond December 31, 1999. To date,
approximately 91% of the Company's continuing operations business critical
systems have been remediated and tested at a cost of approximately $0.5
million, which was provided by internally generated funds. This process is
projected to be completed by mid to late 1999 at minimal additional cost.
The Company has contacted its significant suppliers and customers
concerning Year 2000 compliance. Based on these discussions the Company is not
aware of any supplier or customer with a Year 2000 issue that would materially
impact the Company's financial position, results of operations or liquidity.
However, WinsLoew has no means of ensuring that suppliers or customers will be
Year 2000 ready. The effect of non-compliance by third parties is not
determinable.
Management believes that it has substantially completed an effective
program to resolve the Year 2000 issue in a timely manner. In the event that
the Company is unable to complete the program or if the program is not
successful, management believes that it has established adequate contingency
plans involving manual systems, maintaining increased inventory levels and
adjusting staffing levels for it's business critical systems and that such an
event would not materially impact the Company's financial position. However,
disruptions in the general economy resulting from Year 2000 issues could
adversely affect the Company.
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<PAGE> 81
CERTAIN FORWARD LOOKING INFORMATION
The Company does not, as a matter of course, make public projections
as to future financial results. However, WinsLoew management annually prepares
financial forecasts for internal use in capital budgeting and other management
decisions. Management provided to the Special Committee and Mann Armistead such
forecasts prepared during 1998 for the fiscal years 1999 through 2002, which
forecasts do not give effect to the Merger or the related financing. None of
these projections were prepared with a view to public disclosure or compliance
with published guidelines of the Commission or the guidelines established by
the American Institute of Certified Public Accountants regarding projections.
Ernst & Young LLP, the Company's independent auditors, have not performed any
procedures with respect to the projections and assume no responsibility for
them.
A summary of these projections is set forth below:
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 2000 FISCAL 2001 FISCAL 2002
------------------- -------------------- ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales $157,314 $169,113 $181,796 $195,431
Operating Income 32,054 34,951 37,930 41,065
Net income 19,371 21,751 23,980 26,235
Earnings per share 2.60 2.90 3.20 3.50
</TABLE>
The foregoing projections should be read together with the information
contained in WinsLoew's Consolidated Financial Statements and related Notes
included elsewhere herein and with the following assumptions made in preparing
such projections:
(a) The foregoing projections do not give effect to the Merger or
related financing.
(b) The foregoing projections do not give effect to the acquisition of
Pompeii or any other possible acquisitions or other transactions that may occur
after the Merger.
(c) Revenue would increase at a rate consistent with historical
financial performance.
None of the foregoing projections should be regarded as an accurate
prediction of future events. Such projections are subjective in many respects
and thus susceptible to various interpretations and periodic revision based
actual experience and business developments. In addition, such projections are
based on a number of assumptions that are subject to risks and uncertainties
which could cause actual results to differ materially from those projected.
Such risks and uncertainties include the cyclical nature of the furniture
manufacturing industry, significant competition in the furniture manufacturing
industry, WinsLoew's dependence on key management and extensive environmental
regulation. The projections have not been and will not be revised or updated
from the date of their preparation to reflect subsequent events, facts or other
information of which any person or entity has become aware.
Inclusion of the foregoing forecasts should not be regarded as a
representation by WinsLoew, the Purchaser, any of their respective affiliates
or financial advisors or any other entity or person that the projected results
would be achieved or as to any future event, occurrence or non-occurrence and
none of the foregoing parties assumes any responsibility for the accuracy of
such information. There can be no assurance that the projections will be
realized, and actual results may be higher or lower than those shown, possibly
be material amounts.
A complete copy of the projections provided by management to the
Special Committee and Mann Armistead for the fiscal years 1999 through 2002 has
been filed as an exhibit to the Schedule 13E-3 filed with the Commission in
connection with the Merger and is available for inspection and copying at the
principal executive offices of the Company during its regular business hours by
any shareholder or any representative of a shareholder who has been so
designated in writing. A copy of such projections will be provided by the
Company to any shareholder or any representative of a shareholder who has been
so designated in writing upon written request and at the expense of the
requesting shareholder or such representative. See "Available Information."
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<PAGE> 82
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF WINSLOEW
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------
<S> <C> <C>
Earl W. Powell................... 60 Chairman of the Board
Bobby Tesney..................... 54 President, Chief Executive Officer and Director
R. Craig Watts................... 45 Executive Vice President -- Contract Seating
Stephen C. Hess.................. 50 Executive Vice President -- Casual Furniture
Vincent A. Tortorici, Jr......... 45 Vice President and Chief Financial Officer
Jerry C. Camp.................... 33 Vice President -- Operations
William F. Kaczynski, Jr......... 39 Director
Phillip T. George, M.D........... 59 Director
Peter W. Klein................... 43 Director
William H. Allen, Jr............. 63 Director
Sherwood M. Weiser............... 68 Director
M. Miller Gorrie................. 63 Director
James S. Smith................... 70 Director
Henry C. Cheek................... 73 Director
</TABLE>
The Company was formed in September 1994, and in December 1994 the
Company merged with each of Winston and Loewenstein. Each of the Company's
directors and executive officers were also directors or officers of Winston
and/or Loewenstein, as described below. Prior to the merger, each of Winston
and Loewenstein were publicly held corporations whose common stock traded on
the Nasdaq National Market.
Mr. Powell, Chairman of the Board of the Company since October 1994,
serves as President and Chief Executive Officer of Trivest, Inc. ("Trivest"),
which is a private investment firm specializing in management services and
acquisitions, dispositions and leveraged buyouts, which was formed by Messrs.
Powell and George in 1981. Trivest is an affiliate of the Trivest Partnerships
and Trivest Manager. Mr. Powell has also served as Chairman of the Board of
Atlantis Plastics, Inc., an American Stock Exchange company whose subsidiaries
are engaged in the plastics industry ("Atlantis"), since founding that company
in February 1984, as Chief Executive of Atlantis from its organization until
February 1995 and as President of Atlantis from November 1993 to February 1995.
Mr. Powell has served as Chairman of the Board of Biscayne Apparel, Inc., a
company whose principal subsidiaries are engaged in the apparel industry
("Biscayne"), since October 1985 and presently serves as Chief Executive
Officer of Biscayne. The common stock of Biscayne is quoted on the NASD OTC
Bulletin Board. Biscayne filed a voluntary Chapter 11 bankruptcy petition in
February 1999. Mr. Powell also served as Chairman of the Board of Winston from
December 1988 to December 1994, Chairman of the Board of Loewenstein from
February 1985 to December 1994 and as Loewenstein's President and Chief
Executive Officer from May 1994 to December 1994. From 1971 until 1985, Mr.
Powell was a partner with KPMG Peat Marwick, Certified Public Accountants
("Peat Marwick"), where his positions included serving as managing partner of
Peat Marwick's Miami office.
Mr. Tesney, President, Chief Executive Officer and a director of the
Company since October 1994, served as President, Chief Executive Officer and a
director of Winston from December 1993 to December 1994, General Manager of
Winston from 1985 to December 1993 and as Senior Vice President-Operations of
Winston from January to December 1993. Mr. Tesney also served as Vice President
of Winston from 1979 until January 1992.
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<PAGE> 83
Mr. Watts, Executive Vice President-Contract Seating of the Company
since October 1994, served as a director of Loewenstein from December 1990 to
December 1994, and was appointed Loewenstein's Executive Vice
President-Contract Seating in May 1993, after serving as Vice President since
May 1991. Mr. Watts also serves as the President and Chief Operating Officer of
the Company's Loewenstein and Gregson divisions, and has served in a number of
management positions since joining Loewenstein in April 1981.
Mr. Hess, the Company's Executive Vice President-Casual Furniture
since October 1994, served as Winston's Executive Vice President from December
1993 to December 1994, Winston's Senior Vice President-Marketing and Sales from
January 1992 to September 1993, and as Winston's Vice President-Marketing and
Sales from January 1983 until January 1992.
Mr. Tortorici, the Company's Vice President and Chief Financial Officer
since October 1994, served as Winston's Vice President-Finance and
Administration and Chief Financial Officer from March 1988 to December 1994. Mr.
Tortorici is a certified public accountant and was employed by Arthur Andersen &
Co. from 1976 until March 1988.
Mr. Camp, the Company's Vice President - Operations since September
1998, served as the Company's Director of Safety, Environmental and Human
Resources from October 1994 to September 1998, served as Director of
Engineering at Winston from September 1988 to October 1994, and served in
various other capacities with Winston, including Project Engineer, from May
1984 to September 1988.
Mr. Kaczynski was elected director of the Company in January 1998. Mr.
Kaczynski has served as an executive officer of Trivest since January 1998 and
is presently a Managing Director. From July 1996 until December 1997, he was
Chief Financial Officer of WebSite Management Corp. d/b/a FlashNet
Communications, an Internet service provider. From June 1994 until June 1996, he
was Chief Financial Officer of Colorado Mountain Express, Inc., an airport
transportation company. Prior to that he was with Heller Financial, Inc. from
1986 until 1994, most recently as Senior Vice President-Corporate Finance Group,
Dallas, Texas.
Dr. George, a director of the Company since October 1994, served as a
director of Winston from October 1989 to December 1994 and as a director of
Loewenstein from February 1985 to December 1994. Dr. George also serves as the
Vice Chairman of the Board of Trivest, the Vice Chairman of the Board and
Chairman of the Executive Committee of the Board of Directors of Atlantis, and
as a Director of Biscayne. Biscayne filed a voluntary Chapter 11 bankruptcy
petition in February 1999. Dr. George's executive position with Trivest has been
his principal occupation since retiring from the private practice of plastic and
reconstructive surgery in February 1986.
Mr. Klein, a director of the Company since October 1994, served as a
director of Winston from December 1988 to December 1994 and as a director of
Loewenstein from May 1993 to December 1994. Mr. Klein has served as an executive
officer of Trivest since May 1986 and is presently a Managing Director and the
General Counsel of Trivest. Prior to joining Trivest, Mr. Klein practiced law in
Chicago, Illinois and Cleveland, Ohio.
Mr. Allen, a director of the Company since October 1994, served as a
director of Loewenstein from September 1993 to December 1994. Mr. Allen serves
as Vice Chairman of NationsBank Florida, and served as Chairman of the Board
and Chief Executive Officer of Intercontinental Bank, a Nasdaq National Market
company headquartered in Miami, Florida, from April 1987 until its merger with
NationsBank South in December 1994. Mr. Allen also serves as a director of
American Bankers Insurance Group, a New York Stock Exchange company
headquartered in Miami, Florida, and Decorator Industries, Inc., traded on the
American Stock Exchange, headquartered in Hollywood, Florida.
Mr. Weiser, a director of the Company since October 1994, has been,
since 1972, the Chairman of the Board, President and Chief Executive Officer of
CHC International, Inc., a leading hotel and casino development and management
company that does business as "Carnival Hotels and Casinos," and its
predecessors. Mr. Weiser also serves as a director of Carnival Corporation, a
cruise line traded on the New York Stock Exchange, Wyndam
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<PAGE> 84
International, Inc., traded as a paired share real estate investment trust on
the New York Stock Exchange, and Mellon United National Bank, a New York Stock
Exchange company.
Mr. Gorrie, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994 and from May 1986 to
December 1988. Mr. Gorrie has been Chairman of Brasfield & Gorrie General
Contractor, Inc., a diversified general contractor based in Birmingham, Alabama,
since 1964. Mr. Gorrie is a director of Colonial Properties Trust, a real estate
investment trust traded on the New York Stock Exchange.
Mr. Smith, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994, and as a director of
Biscayne from June 1986 to February 1992. Mr. Smith has been engaged in private
investment activities as his principal occupation for more than the prior five
years. Mr. Smith served as Executive Vice President of Stephens, Inc., an
investment banking firm based in Little Rock, Arkansas, from January 1985 until
May 1987. Mr. Smith has also served as President of the Arnold D. Frese
Foundation since March 1979.
Mr. Cheek, a director of the Company since October 1994, served as a
director of Winston from February 1993 to December 1994. Mr. Cheek has been
engaged in private investment activities as his principal occupation for more
than the prior five years. From 1951 until his retirement in 1984, Mr. Cheek was
Vice President of U.S. Industries, Inc., a diversified holding company and
served as Chief Executive Officer of its Furniture Group. Mr. Cheek served as a
director of Winston from May 1987 through December 1988.
EXECUTIVE AND DIRECTOR COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to, earned by or
paid to the Company's Chief Executive Officer, and each of the Company's other
executive officers whose total 1998 salary and bonus from the Company was
$100,000 or more (the Chief Executive Officer and such other executive officer
are referred to herein as the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
----------------------------------------------------------- ---------------
OTHER ANNUAL NUMBER OF
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMPENSATION(1) OPTIONS GRANTED
--------------------------- ----------- ------ ----- -------------- ---------------
<S> <C> <C> <C> <C> <C>
BOBBY TESNEY....................... 1998 $250,150 $250,150 $104,236 --
President and Chief Executive 1997 245,000 183,750 49,221 40,000
Officer 1996 216,400 162,300 28,240 --
STEPHEN C. HESS.................... 1998 204,200 173,570 42,256 --
Executive Vice 1997 200,000 150,000 20,935 30,000
President-Casual Furniture 1996 178,218 133,663 18,606 --
VINCENT A. TORTORICI, JR........... 1998 148,050 96,233 15,784 --
Vice President and Chief 1997 145,000 72,500 12,669 25,000
Financial Officer 1996 129,900 64,950 8,718 --
R. CRAIG WATTS..................... 1998 185,824 157,803 21,067 --
Executive Vice 1997 181,830 136,373 19,343 25,000
President-Contract Seating 1996 166,138 121,103 20,357 --
JERRY C. CAMP...................... 1998 94,096 28,800 7,820 --
Vice President --Operations 1997 85,770 8,900 5,908 5,000
1996 71,850 7,185 5,195 --
</TABLE>
- ---------------------
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<PAGE> 85
(1) "Other Annual Compensation" represents amount paid by the Company on
behalf of the Named Executive Officer under the Company's Non-Qualified
Supplemental Executive Retirement Plan established in October 1996.
Under the terms of this Plan, selected employees make after-tax
contributions of their salary to one or more investment alternatives
available under such Plan. The Company then matches the employee
contribution (up to 10% of compensation on an after-tax basis) depending
on the employee's length of service (up to 50% for 15 years of
continuous service). The employee is vested at all times in the deferred
compensation and is vested immediately in the matching contribution.
OPTION GRANTS
No stock options were granted to any Named Executive Officers in 1998.
AGGREGATED 1998 FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1998. No stock options were exercised by such persons during 1998. All
"unexercisable" options will become fully exercisable and cancelled in exchange
for cash payments pursuant to the Merger. See "THE MERGER -- Cash-out of
WinsLoew Stock Options."
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE MONEY OPTIONS
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Bobby Tesney...................... 73,000 52,000 $1,263,625 $922,000
Stephen C. Hess................... 51,000 34,000 849,750 589,000
Vincent A. Tortorici, Jr.......... 30,000 30,000 536,250 525,000
R. Craig Watts.................... 55,175 30,000 1,020,335 525,000
Jerry C. Camp..................... 4,500 4,000 68,063 64,000
</TABLE>
401 (K) PLAN
Effective January 1, 1997, the WinsLoew Furniture, Inc. 401 (k) Plan
was established. Employees of the Company and its subsidiaries are eligible to
participate in the Plan following the later to occur of (i) the employee's
completion of one year of service or (ii) the employee's 21st birthday.
Eligible employees may make a salary reduction contributions to the Plan on a
pretax basis. For each calendar year, the Company and the other participating
employees may make matching contributions to the Plan based on a discretionary
matching percentage to be determined each year by the Company. In addition, the
Company and the other participating employers may make a discretionary profit
sharing contribution to the plan on behalf of each participant who completes
more than 500 hours of service during the year or who is employed on the last
day of the year. This latter contribution is allocated proportionately based on
each participants compensation. An employee's vested benefits are payable upon
his retirement, death, disability, or other termination of employment or upon
the attainment of age 59-1/2. An employee is always fully vested in his account
balance attributable to his own contributions to the Plan. The employee's
interest in the account attributable to his employers contributions and
earnings thereon becomes fully vested upon the earlier of the attainment of his
normal retirement date (age 65), his death, his permanent and total disability,
or his completion of six years of service. If an employee terminates employment
for reasons other than retirement, death, or disability, his vested interest is
based on a graduated vesting schedule which provides for 20% vesting after two
years of service and 20% for each year thereafter. Nonvested amounts are
forfeited.
LONG TERM INCENTIVE AND PENSION PLANS
The Company has no Long Term Incentive or Pension Plans.
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<PAGE> 86
DIRECTOR COMPENSATION
During 1996 and the first quarter of 1997, the Company paid each
director who was neither an employee of the Company nor Trivest an annual
retainer of $10,000, an additional retainer of $2,500 for serving on the
Compensation Committee, a $500 fee for each meeting of the Board of Directors
attended and, unless held on the same day as a Board meeting, $500 for each
committee meeting attended. The Company also reimburses all directors for
expenses incurred in connection with their activities as directors.
Additionally, prior to 1997, on March 31 of each year, each director
who was neither an employee of the Company nor Trivest received automatic
grants of options to purchase 5,000 shares of Common Stock pursuant to the
Company's 1994 Stock Option Plan. Such options become exercisable at the rate
of 20% per year on each anniversary of the date of grant, and have an exercise
price equal to the fair market value of Common Stock on the date of grant. The
unexercised portion of any such option will terminate upon the earliest to
occur of the following: (i) the expiration of 10 years from the date of grant
of the option, (ii) twelve months after the date on which the optionee ceases
to be a director by reason of the death or disability of the optionee, or (iii)
three months after the optionee ceases to be a director for any other reason.
In addition, each other director of the Company is eligible to receive
discretionary grants of options pursuant to such plan. These automatic grants
were terminated in connection with the adoption of the Amended and Restated
1994 Stock Option Plan by the Board of Directors in January 1997.
The Board of Directors approved new compensation policies effective
April 1, 1997. Directors who are neither employees of the Company nor Trivest
are paid a $2,500 cash fee for each meeting attended in person and a $500 cash
fee for each meeting attended by telephone. In addition, each member of the
Compensation and Audit Committee receives a $2,500 annual retainer, payable
quarterly in advance.
In addition, during 1998 each of the Company's directors was granted
options to purchase 2,500 shares of Common Stock pursuant to the Company's
Amended and Restated 1994 Stock Option Plan for each meeting of the Board of
Directors attended by him. There were two meetings of the Board of Directors in
1998. Such options become exercisable at the rate of 20% per year on each
anniversary of the date of grant and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. The unexercised portion
of such options will terminate on the earliest to occur of the following (i)
the expiration of 10 years from the date of grant of the option, (ii) twelve
months after the date on which the optionee ceases to be a director by reason
of the death or disability of the optionee, or (iii) except as otherwise may be
determined by the Board, three months after the date on which the optionee
ceases to be a director for any other reason. The unvested portion of the
foregoing options will become fully vested in the event of a change in control
of the Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Effective January 1, 1995, the Company entered into five-year
employment agreements with each of Messrs. Tesney, Watts, Hess and Tortorici
(as amended, the "Employment Agreement"). The Employment Agreements provide for
the Company to pay Messrs. Tesney, Watts, Hess and Tortorici base salaries of
$200,000, $150,000, $165,000 and $120,000, respectively, in each case subject
to annual cost of living adjustments. The Employment Agreements also provide
for annual incentive compensation payments of a portion of the executive's then
base salary (100% in the case of Mr. Tesney, 85% in the case of each of Messrs.
Hess and Watts, and 65% in the case of Mr. Tortorici) based on the operating
earnings (adjusted to exclude the effect of goodwill amortization) of (i) the
Company, in the case of Messrs. Tesney and Tortorici, (ii) the Company's
Contract Seating divisions, in the case of Mr. Watts,) and (iii) the Company's
Casual Furniture divisions, in the case of Mr. Hess. None of such officers will
receive any incentive compensation payment under his Employment Agreement for
any particular year unless the relevant operating earnings for such year are at
least 75% of the "target earnings" for such year. Target earnings for 1998 were
set by the Compensation Committee of the Board. Each Employment Agreement also
provides that the executive will receive six months base salary if his
employment is terminated without "cause" (as defined), and prohibits the
executive from directly or indirectly competing with the Company for one year
after termination of his employment (six months if he is terminated by the
Company without "cause"). The Employment Agreements were approved by the
Compensation Committee of the Company's Board of Directors.
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<PAGE> 87
Each of the Named executive Officers holds options to purchase Common
Stock under the company's Amended and restated 1994 Stock Option Plan. To the
extent not already exercisable, such options generally become exercisable upon
(i) a reorganization, merger, consolidation or other form of corporate
transaction with respect to which ownership of a majority of the voting power
of the Common Stock is transferred, (ii) liquidation or dissolution of the
Company or (iii) the sale of all or substantially all of the Company's assets.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Powell, the Company's Chairman, also serves on the Board of
Directors of CHC International, Inc., a hotel and casino development and
management company. Mr. Weiser, a director and member of the Compensation
Committee of the Company, serves as Chairman of the Board, President and Chief
Executive Officer of CHC International, Inc. See "--Directors and Executive
Officers of WinsLoew."
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<PAGE> 88
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1999 by (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each "Named Executive Officer" of the Company (as defined below in "Executive
Compensation-Summary Compensation Table"), and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK(2)
-----------------------------------
NUMBER OF SHARES PERCENTAGE
---------------- ----------
<S> <C> <C>
Earl W. Powell(3)(4).............................................. 1,999,187 27.7%
Phillip T. George, M.D.(3)(5)..................................... 1,865,283 25.9%
Trivest Group, Inc.(3)(6)......................................... 908,455 12.6%
FMR Corp.(7)...................................................... 596,200 8.3%
Trivest Special Situations Fund 1985, L.P.(3)(8).................. 542,816 7.6%
Heartland Advisors, Inc.(9)....................................... 229,300 3.2%
R. Craig Watts(10)................................................ 173,237 2.4%
M. Miller Gorrie(11).............................................. 155,950 2.2%
Bobby Tesney(12).................................................. 134,693 1.9%
Stephen C. Hess(13)............................................... 87,602 1.2%
Vincent A. Tortorici, Jr.(14)..................................... 51,950 *
James S. Smith(15)................................................ 35,000 *
Henry C. Cheek(16)................................................ 21,000 *
Sherwood M. Weiser(17)............................................ 17,175 *
William H. Allen, Jr.(18)......................................... 10,550 *
Peter W. Klein(3)(19)............................................. 8,050 *
Jerry C. Camp(20)................................................. 6,262 *
William F. Kaczynski, Jr.(3)(21).................................. 500 *
All directors and executive officers as a group (14 persons)(22).. 2,863,012 37.9%
</TABLE>
- ---------------------
(*) Less than 1%
(1) Except as otherwise indicated below, the address of each beneficial owner
is 160 Village Street, Birmingham, Alabama 35242.
(2) Except as otherwise indicated below, all shares are owned directly and
each person has sole voting and investment power with respect to all
shares. For purposes of this table, a person is deemed to have
"beneficial ownership" of any shares as of a given date which the person
has the right to acquire within 60 days after such date. For purposes of
computing the outstanding shares held by each person named above on a
given date, any shares which such person has the right to acquire within
60 days after such date are deemed to be outstanding, but are not deemed
to be outstanding for the purpose of computing the percentage ownership
of any other person. However, the table does not reflect the
acceleration of stock options vesting that will result from the Merger.
See "THE MERGER -- Cash-out of WinsLoew Stock Options."
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<PAGE> 89
(3) The beneficial owner's address is 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133.
(4) Includes 259,135 shares owned directly, 36,625 shares subject to
exercisable options granted under the Company's stock option plan,
662,484 shares held of record by Trivest Fund I, Ltd., 245,971 shares
held of record by Trivest Equity Partners I, Ltd., 116,459 shares held
of record by Trivest Principals' Fund 1988, of which Mr. Powell is a
general partner, 542,816 shares owned of record by Trivest Special
Situations Fund 1985, L.P. ("TSSF") (see note (8)) and 135,697 shares
owned of record by Trivest Annuity Fund, Ltd.("Annuity Fund") . The
General Partner of Annuity Fund is Trivest Plan Sponsor, Inc. ("Trivest
Plan Sponsor"). Messrs. Powell and George are executive officers and
directors of Trivest Plan Sponsor and beneficially own 100% of its
outstanding stock.
(5) Includes 136,641 shares owned directly, 1,965 shares held of record by
Dr. George as custodian for his minor children under the Florida Uniform
Gifts to Minors Act as to which Dr. George disclaims beneficial
ownership, 23,250 shares subject to exercisable options under the
Company's stock option plan, 662,484 shares held of record by Trivest
Fund I, Ltd., 245,971 shares held of record by Trivest Equity Partners
I, Ltd., 116,459 shares held of record by Trivest Principals' Fund 1988,
of which Dr. George is a general partner, 542,816 shares of record owned
by TSSF (See note (8)), and 135,697 shares owned of record by Annuity
Fund. The General Partner of Annuity Fund is Trivest Plan Sponsor.
Messrs. Powell and George are executive officers and directors of
Trivest Plan Sponsor and beneficially own 100% of its outstanding stock.
(6) Trivest Group, Inc. serves as the sole general partner of Trivest 1988
Fund Managers, Ltd., which in turn is the sole general partner of (i)
Trivest Fund I, Ltd., a privately held investment partnership that holds
of record 662,484 shares of Common Stock, and (ii) Trivest Equity
Partners I, Ltd., a privately held investment partnership that holds of
record 245,971 shares of Common Stock. Messrs. Powell and George are
executive officers and directors of Trivest Group, Inc. and beneficially
own 100% of its outstanding capital stock.
(7) The address for FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(8) The general partner of TSSF is Trivest Associates, L.P. ("Associates"), a
Florida limited partnership whose general partner is Trivest, Inc.
Messrs. Powell and George are executive officers and directors of Trivest
Inc. and beneficially own 100% of its outstanding capital stock. Messrs.
Powell and George are also limited partners of Associates.
(9) The address for Heartland Advisors, Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(10) Includes 113,062 shares owned directly and 60,175 shares subject to
exercisable options granted under the Company's Stock Option Plan. Mr.
Watts' address is 1801 N. Andrews Avenue, Pompano Beach, Florida 33062.
(11) Includes 62,750 shares owned directly and 14,500 shares subject to
exercisable options granted under the Company's stock option plan and
78,700 shares owned by Brasfield & Gorrie, General Contractors,
Incorporated. Mr. Gorrie's address is c/o Brasfield and Gorrie, 729
South 30th Street, Birmingham, Alabama 35223.
(12) Includes 51,693 shares owned directly and 83,000 shares subject to
exercisable options granted under the Company's stock option plan.
(13) Includes 31,602 shares owned directly and 56,000 shares subject to
exercisable options granted under the Company's stock option plan.
(14) Includes 16,950 shares owned directly and 35,000 shares subject to
exercisable options granted under the Company's stock option plan.
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<PAGE> 90
(15) Includes 20,000 shares owned directly and 15,000 shares subject to
exercisable options granted under the Company's stock option plan. Mr.
Smith's address is Suite 916, 10 Rockefeller Plaza, New York, New York
10020.
(16) Includes 6,000 shares owned directly and 15,000 shares subject to
exercisable options granted under the Company's stock option plan. Mr.
Cheek's address is 3713 Fairway Drive, DCBE, Granbury, Texas 76049.
(17) Includes 5,675 shares held by Mr. Weiser's wife, 2,000 shares owned
directly and 9,500 shares subject to exercisable options granted under
the Company's stock option plan. Mr. Weiser's address is 3250 Mary
Street, 5th Floor, Miami, Florida 33133.
(18) Includes 1,050 shares owned directly and 9,500 shares subject to
exercisable options granted under the Company's stock option plan. Mr.
Allen's address is c/o Nations Bank South, 200 S.E. 1st Street, Suite
800, Miami, Florida 33131.
(19) Represents 8,050 shares subject to exercisable options granted under the
Company's stock option plan.
(20) Includes 1,762 shares owned directly and 4,500 shares subject to
exercisable options granted under the Company's stock option plan.
(21) Includes 500 shares subject to exercisable options.
(22) Includes an aggregate of 361,100 shares subject to exercisable options
granted under the Company's stock option plan, 1,024,914 shares owned of
record by Trivest Fund I, Ltd., Trivest Equity Fund I, Ltd., and Trivest
Principals' Fund 1988 and 678,513 shares owned of record by TSSF and
Annuity Fund. See notes (4), (5), (6) and (7).
CERTAIN INFORMATION CONCERNING
THE PURCHASER AND OTHER AFFILIATES
PURCHASER. The Purchaser is a newly-formed Florida corporation
organized at the direction of the Trivest Partnerships. The principal executive
offices of the Purchaser are located at 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133. The telephone number is (305) 858-2200.
TRIVEST DIRECTORS. The Trivest Directors are Earl W. Powell, Phillip T.
George, M.D., William F. Kaczynski, Jr. and Peter W. Klein. See
"MANAGEMENT--Directors and Executive Officers of WinsLoew." The principal
business address of each of them is c/o Trivest, Inc., 2665 South Bayshore
Drive, Suite 800, Miami, Florida 33133. Each of the Trivest Directors is a
citizen of the United States. Each of their principal occupations is as a
director and/or executive officer of Trivest and associated entities.
MANAGEMENT GROUP. The members of the Management Group are the
following executive officers of WinsLoew: Bobby Tesney, President and Chief
Executive Officer, Vincent A. Tortorici, Jr., Vice President and Chief
Financial Officer, Stephen C. Hess, Executive Vice President, Casual Furniture,
R. Craig Watts, Executive Vice President, Contract Seating, and Jerry Camp,
Vice President, Operations. See "MANAGEMENT--Directors and Executive Officers
of WinsLoew." The business address for each member of the Management Group is
the principal executive offices of WinsLoew, located at 160 Village Street,
Birmingham, Alabama 35242. Each member of the Management Group is a citizen of
the United States.
TRIVEST FURNITURE PARTNERS, LTD.
TRIVEST FURNITURE PARTNERS, LTD. Trivest Furniture Partners, Ltd., a
Florida limited partnership, is a privately held investment partnership
established for the purpose of providing equity financing for the Merger. Its
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<PAGE> 91
principal executive offices are located at 2665 South Bayshore Drive, Suite
800, Miami, Florida 33133. Its sole general partner is Trivest Furniture, Ltd.
TRIVEST FURNITURE, LTD. Trivest Furniture, Ltd. is a Florida limited
partnership established for the purpose of managing Trivest Furniture Partners,
Ltd., of which it is the sole general partner. Its principal executive offices
are located at 2665 South Bayshore Drive, Suite 800, Miami, Florida 33133. Its
sole general partner is Trivest Equities, Inc.
TRIVEST EQUITIES, INC. Trivest Equities, Inc., a Florida corporation,
is principally engaged in the business of investing through partnerships in
other companies. It is the sole general partner of each of Trivest Furniture,
Ltd. and Trivest Fund II Group, Ltd. Mr. Powell is the controlling shareholder
of Trivest Equities, Inc., and Messrs. Powell and George are its sole directors.
The following persons are the executive officers of Trivest Equities, Inc.: Mr.
Powell, Dr. George, Mr. Kaczynski, Mr. Klein, Troy D. Templeton, Derek A.
McDowell and B. Jay Anderson. Each such person is a citizen of the United
States. Each of their principal occupations is as a director or executive
officer of Trivest and associated entities. See "MANAGEMENT--Directors and
Executive Officers of WinsLoew." Set forth below is a brief description of the
business experience during at least the last five years of each of Messrs.
Templeton, McDowell and Anderson. The principal executive offices of Trivest
Equities, Inc. are located at 2665 South Bayshore Drive, Suite 800, Miami,
Florida 33133.
Troy D. Templeton. Mr. Templeton has served as an executive officer of
Trivest since 1989 and is presently Senior Managing Director. Prior to joining
Trivest, Mr. Templeton served in various capacities with Southeast Bank, N.A. in
Miami, Florida.
Derek A. McDowell. Mr. McDowell has served as an executive officer of
Trivest since January 1998 and is presently a Managing Director. Prior to
joining Trivest, Mr. McDowell served in various capacities for eight years with
private equity and management consulting firms, including: H.I.G. Capital
Management, Continental Illinois Venture Corporation, and Corporate Value
Associates.
B. Jay Anderson. Mr. Anderson has served as an executive officer of
Trivest since 1987 and is presently Treasurer and Chief Financial Officer. Prior
to joining Trivest, Mr. Anderson served as Audit Manager with KPMG-Peat Marwick
in Miami from 1981 to 1987.
TRIVEST FUND II GROUP, LTD.
TRIVEST FUND II GROUP, LTD. Trivest Fund II Group, Ltd., a Florida
limited partnership, is a privately held investment partnership established for
the purpose of providing equity financing for the Merger. Its principal
executive offices are located at 2665 South Bayshore Drive, Suite 800, Miami,
Florida 33133. Its sole general partner is Trivest Equities, Inc.
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<PAGE> 92
CERTAIN TRANSACTIONS
INVESTMENT SERVICES AGREEMENT. In December 1994, the Company entered
into a ten-year Investment Services Agreement with Trivest, pursuant to which
Trivest provides corporate finance, strategic and capital planning and other
management advice to the Company, including (i) conducting relations on behalf
of the Company with accountants, attorneys, financial advisors and other
professionals, (ii) providing reports to the Company with respect to the value
of its assets, and (iii) rendering advice with respect to acquisitions,
dispositions, financings and refinancings. Pursuant to the Investment Services
Agreement, Trivest receives a base annual fee of $500,000 (in 1994), subject to
cost-of-living increases. In addition, for each additional business acquired by
the Company, Trivest's base compensation will generally be increased by the
greater of (i) $100,000, and (ii) the sum of 5% of the additional business's
projected annual earnings before income taxes, interest expense and
amortization of goodwill ("EBITA") for the fiscal year in which it is acquired
up to $2.0 million of EBITA, plus 3.5% of EBITA in excess of $2.0 million.
Moreover, subject to the approval of the Company's board (including a majority
of disinterested directors), for each acquisition or disposition of any
business operation by the Company introduced or negotiated by Trivest, Trivest
will generally receive a fee of up to 3% of the purchase price. The Company
paid Trivest $640,980 for services rendered under the Investment Services
Agreement during 1998.
Pursuant to an amendment entered into between Trivest and the Company
as of March 5, 1999, the parties agreed that (i) no such fee would be payable
to Trivest with respect to the Merger, (ii) if the Termination Fee is paid in
connection with a Superior Proposal pursuant to the Merger Agreement, no such
fee shall be payable with respect to such Superior Proposal under the
Investment Services Agreement, and (iii) Trivest shall not be reimbursed under
the Investment Services Agreement for any expenses related to the Merger or a
Superior Proposal. See "SPECIAL FACTORS--Background" and "THE
MERGER--Termination."
TRIVEST LEGAL DEPARTMENT. Trivest maintains an internal legal
department. The Trivest legal department accounts for its time on an hourly
basis and bills Trivest and its affiliates, including the Company, for services
rendered at prevailing rates. In 1998, the Company paid Trivest $40,516.25 for
services rendered by the Trivest legal department. The Company believes that
the fees charged by the Trivest legal department in 1998 were no less favorable
to the Company than fees charged by unaffiliated third parties for similar
services.
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<PAGE> 93
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "WLFI" since January 1, 1995. The following table sets
forth, for the period indicated, the high and low sales price per share of
Common Stock as reported by the Nasdaq National Market System:
<TABLE>
<CAPTION>
HIGH LOW
------------ ------------
<S> <C> <C>
1997
-----
First Quarter................................... $ 11 7/8 $ 8 1/8
Second Quarter.................................. $ 11 $ 8 3/8
Third Quarter................................... $ 15 $ 10 15/16
Fourth Quarter.................................. $ 16 13/16 $ 13 5/16
1998
----
First Quarter................................... $ 20 5/8 $ 13 3/4
Second Quarter.................................. $ 29 $ 20 11/16
Third Quarter................................... $ 28 3/4 $ 15 1/2
Fourth Quarter.................................. $ 26 1/2 $ 17 7/8
1999
----
First Quarter................................... $ 28 3/4 $ 23
Second Quarter.................................. $ $
(through , 1999)
</TABLE>
On January 6, the last trading day prior to the Board meeting at which
Mr. Powell stated that he, together with the other Trivest Investors and the
Management Group, would be willing to submit a proposal to purchase the
Company, the closing price per share of the Common Stock as reported by Nasdaq
was $24 3/8. On January 15, 1999, the last trading day prior to the
announcement of the delivery of Mr. Powell's initial proposal to the Special
Committee, the closing price per share of the Common Stock as reported by
Nasdaq was $27. On January 25, the last trading day prior to the announcement
of the execution of the Letter of Intent relating to the Merger, the closing
price per share of the Common Stock as reported by Nasdaq was $28 1/2. On March
4, 1999, the last trading day prior to announcement of the execution of the
Merger Agreement, the closing price per share of Common Stock as reported by
Nasdaq was $26 3/4. On March 30, 1999, the last trading day prior to the
announcement of the amendment of the Merger Agreement increasing the per share
purchase price from $30.00 to $33.00, the closing price per share of the Common
Stock as reported by Nasdaq was $27 1/2. On , 1999, the last trading day
prior to the printing of this Proxy Statement, the closing price per share of
Common Stock as reported by Nasdaq was $ .
As of March 1, 1999, there were approximately 105 holders of record of
Common Stock and approximately 1,550 persons or entities holding Common Stock
in nominee name.
The Company has not declared nor paid any cash dividends on its Common
Stock, does not anticipate that any dividends will be declared nor paid in the
foreseeable future, and intends to retain earnings to finance the development
and expansion of the Company's operations. Under the Merger Agreement, the
company has agreed not to pay any dividends on the Common Stock prior to the
Effective Date. In addition, the Company's payment of dividends is also
restricted under the terms of its credit facilities (see Note 4 of Notes to the
Company's Consolidated Financial Statements).
In January 1998, the Board approved a plan to acquire up to 1,000,000
shares of Common Stock. The purchases commenced in May 1998 and were funded by
the Company's senior credit facility. As of the date of this Proxy Statement,
the Company had acquired 112,500 shares for approximately $3.2 million under
the plan at prices ranging from $27 5/8 to $28 1/2 per share, and the last
purchase of Common Stock by the Company under such plan was on February 25, 1999
of 20,000 shares at a per share price of $27 5/8. All such purchases were
effected through brokers on the Nasdaq National Market System. The average price
per share for such purchases during each fiscal quarter since January 1998 were
as follows:
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<PAGE> 94
1998
----
First Quarter............................. N/A
Second Quarter............................ $27 1/2
Third Quarter............................. $17 3/4
Fourth Quarter............................ $19
1999
----
First Quarter............................. $28 1/3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements
regarding the intent, belief and current expectations of the Company's
management. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. Generally, these statements relate
to business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving anticipated
revenues, expenses, earnings, levels of capital expenditures or other aspects
of operating results. The operations of the Company are subject to a number of
uncertainties, risks and other influences, many of which are outside the
control of the Company and any one of which, or a combination of which, could
materially affect the results of the Company's operations and whether the
forward-looking statements made by the Company ultimately prove to be accurate.
The Company assumes no obligation to update any forward-looking statements.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP, certified public accountants, served as the
Company's independent auditors for the fiscal year ended December 31, 1998. The
Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997, and
the related Consolidated Statements of Income, Shareholders' Equity and Cash
Flows for each of the three fiscal years in the period ended December 31, 1998
included in this Proxy Statement have been audited by Ernst & Young LLP,
independent auditors, as stated in their report.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
If the Merger is not consummated, the next Annual Meeting of
Shareholders of the Company is expected to be held in April 2000. Shareholders
interested in presenting a proposal to be considered for inclusion in the proxy
statement for presentation at the 2000 annual meeting of shareholders may do so
by following the procedures prescribed in Rule 14a-8 under the Securities
Exchange Act of 1934. To be eligible for inclusion, shareholder proposals must
be received by the Company on a reasonable time before the Company begins to
print and mail its proxy materials.
Shareholders interested in presenting a proposal for consideration at
the 2000 annual meeting of shareholders must submit such proposal to the
Company, and such proposal must be received by the Company on or before the
tenth day following the date on which notice of the date of the annual meeting
is given to shareholders or made public, whichever occurs first.
OTHER BUSINESS
The Board knows of no other business to be brought before the Special
Meeting. If, however, any other business should properly come before the
Special Meeting, it is the intention of the persons named in the accompanying
proxy to vote proxies as in their discretion they may deem appropriate, unless
they are directed by a proxy to do otherwise.
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<PAGE> 95
DOCUMENTS INCORPORATED BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the Special Meeting and any adjournment or postponement thereof,
shall be deemed to be incorporated by reference in this Proxy Statement and to
be a part hereof for purposes of the Exchange Act from the date of the filing
of such documents. Any statement contained in this Proxy Statement, in a
supplement to this Proxy Statement or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any subsequently filed supplement to this Proxy
Statement or in any document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements, and
other information with the Commission. The reports, proxy statements, and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following Regional Offices
of the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov. that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The same information is also available on
the Internet at http://www.FreeEDGAR.com.
The Affiliates (consisting of the Purchaser, the members of the
Management Group, the Trivest Partnerships and the Trivest Directors), have
filed a Schedule 13E-3 with the Commission with respect to the transactions
contemplated by the Merger Agreement. As permitted by the rules and regulations
of the Commission, this Proxy Statement omits certain information and exhibits
contained in the Schedule 13E-3. The Schedule 13E-3 (including exhibits) and
any amendments thereto may be inspected and copied at, or obtained from, the
Commission's offices as set forth above. For further information, reference is
hereby made to the Schedule 13E-3 and the exhibits thereto. Statements
contained in this Proxy Statement concerning documents filed with the
Commission as exhibits to the Schedule 13E-3 or attached as Appendices to this
Proxy Statement are not necessarily complete and, in each instance, reference
is made to the copy of the document filed as an exhibit to the Schedule 13E-3
or attached as an Appendix to this Proxy Statement. Each statement in this
Proxy Statement concerning such a document is qualified in its entirety by
reference to such document.
Certain documents discussed in this Proxy Statement, including,
without limitation, the Schedule 13E-3 and all exhibits thereto, are also
available for inspection and copying at the principal executive offices of the
Company at 160 Village Street, Birmingham, Alabama 35242, telephone (205)
408-7600, during its regular business hours, by any shareholder or his or her
representative so designated in writing. Upon the written request of a
shareholder directed to the Secretary of the Company at the above address, the
Company will mail to such shareholder a copy of any such document at the expense
of such shareholder.
If the Merger is consummated, the Company will deregister the Common
Stock and will no longer be subject to the requirements of the Exchange Act.
See "SPECIAL FACTORS--Certain Effects of the Merger."
87
<PAGE> 96
No person has been authorized to give any information or make any
representation in connection with the solicitation of proxies made hereby other
than those contained or incorporated by reference in this Proxy Statement, and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or the Purchaser. This Proxy Statement
does not constitute a solicitation of a proxy in any jurisdiction where, or to
or from any person to whom, it is unlawful to make such proxy solicitation in
such jurisdiction. The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
or incorporated by reference herein is correct as of any time subsequent to its
date.
By Order of the Board of Directors
Bobby Tesney
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Birmingham, Alabama
__________, 1999
88
<PAGE> 97
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Ernst & Young LLP, Independent Auditors..................... F-2
Consolidated Balance Sheets as of
December 31, 1998 and 1997......................................... F-3
Consolidated Statements of Income
For the Years Ended December 31, 1998, 1997 and 1996............... F-4
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998, 1997 and 1996............... F-5
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996............... F-6
Notes to Consolidated Financial Statements............................ F-7
F-1
<PAGE> 98
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
STOCKHOLDERS OF WINSLOEW FURNITURE, INC.
We have audited the accompanying consolidated balance sheets of WinsLoew
Furniture, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of WinsLoew
Furniture, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
January 29, 1999
F-2
<PAGE> 99
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) DECEMBER 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,475 $ 707
Accounts receivable, less allowances for doubtful accounts of
$1,694 and $788 at December 31, 1998 and 1997, respectively 23,647 22,031
Inventories 12,206 10,433
Prepaid expenses and other current assets 4,638 7,409
Net assets of discontinued operations -- 1,470
------- -------
Total current assets 41,966 42,050
Net assets of discontinued operations -- 4,548
Property, plant and equipment, net 13,948 12,023
Goodwill, net 27,176 21,021
Other assets, net 1,463 772
------- -------
$84,553 $80,414
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 47 $ 515
Accounts payable 4,377 3,395
Other accrued liabilities 9,952 8,203
Net liabilities of discontinued operations 1,750 --
------- -------
Total current liabilities 16,126 12,113
Long-term debt, net of current portion 1,400 15,908
Deferred income taxes 801 1,367
------- -------
Total liabilities 18,327 29,388
------- -------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, par value $.0l per share, 5,000,000 shares
authorized, none issued -- --
Common stock- par value $.0l per share, 20,000,000 shares
authorized, 7,294,408 and 7,526,508 shares issued and
outstanding at December 31, 1998 and 1997, respectively 73 75
Additional paid-in capital 19,797 24,926
Retained earnings 46,356 26,025
------- -------
Total stockholders' equity 66,226 51,026
------- -------
$84,553 $80,414
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 100
WINSLOEW FURNITURE, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 141,360 $ 122,145 $ 117,405
Cost of sales 87,232 79,431 78,029
--------- --------- ---------
Gross profit 54,128 42,714 39,376
Selling, general and administrative expenses 23,124 21,427 21,472
Amortization 1,122 992 1,444
--------- --------- ---------
Operating income 29,882 20,295 16,460
Interest expense 635 2,296 3,083
--------- --------- ---------
Income from continuing operations before
income taxes 29,247 17,999 13,377
Provision for income taxes 10,947 6,838 4,834
--------- --------- ---------
Income from continuing operations 18,300 11,161 8,543
Loss from discontinued operations,
net of taxes -- (718) (259)
Gain (loss) from sale of discontinued operations,
net of taxes 2,031 (8,200) --
--------- --------- ---------
Net income $ 20,331 $ 2,243 $ 8,284
========= ========= =========
Basic earnings (loss) per share:
Income from continuing operations $ 2.46 $ 1.49 $ 0.98
Loss from discontinued operations,
net of taxes -- (0.09) (0.03)
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.10) --
--------- --------- ---------
Net income $ 2.73 $ 0.30 $ 0.95
========= ========= =========
Weighted average number of shares 7,450 7,484 8,724
========= ========= =========
Diluted earnings (loss) per share:
Income from continuing operations $ 2.40 $ 1.48 $ 0.98
Loss from discontinued operations,
net of taxes -- (0.10) (0.03)
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.08) --
--------- --------- ---------
Net income $ 2.67 $ 0.30 $ 0.95
========= ========= =========
Weighted average number of shares and
common stock equivalents 7,624 7,563 8,730
========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 101
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 8,967,112 $90 $37,640 $15,498 $53,228
Exercise of stock options 25,100 -- 187 -- 187
Repurchase and cancellation of stock (576,925) (6) (3,958) -- (3,964)
Repurchase and cancellation of stock
from affiliated company (933,504) (9) (9,326) -- (9,335)
Net income -- -- -- 8,284 8,284
--------- ----- ------- ------- -------
BALANCE, DECEMBER 31, 1996 7,481,783 75 24,543 23,782 48,400
Exercise of stock options 94,725 1 872 -- 873
Repurchase and cancellation of stock (50,000) (1) (489) -- (490)
Net income -- -- -- 2,243 2,243
--------- ----- ------- ------- -------
BALANCE, DECEMBER 31, 1997 7,526,508 75 24,926 26,025 51,026
Exercise of stock options 63,900 1 924 -- 925
Repurchase and cancellation of stock (296,000) (3) (6,053) -- (6,056)
Net income -- -- -- 20,331 20,331
--------- ----- ------- ------- -------
BALANCE, DECEMBER 31, 1998 7,294,408 $73 $19,797 $46,356 $66,226
========= ===== ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 102
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS) YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,331 $ 2,243 $ 8,284
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,618 2,634 2,979
Provision for losses on accounts receivable 1,331 42 1,759
Change in net assets held for sale 6,743 14,710 1,591
Changes in operating assets and liabilities,
net of effects from acquisitions and dispositions:
Accounts receivable (2,210) 1,875 (617)
Inventories (1,164) 1,182 288
Prepaid expenses and other current assets 2,779 (3,871) 50
Other assets 843 691 (144)
Accounts payable 792 (591) 1,841
Other accrued liabilities (357) 3,386 (497)
Deferred income taxes (566) (310) 690
-------- -------- --------
Total adjustments 10,809 19,748 7,940
-------- -------- --------
Net cash provided by operating activities 31,140 21,991 16,224
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals (942) (425) (1,351)
Proceeds from disposition of business -- 2,119 --
Investment in subsidiary (9,323) -- --
-------- -------- --------
Net cash provided by (used in) investing activities (10,265) 1,694 (1,351)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under revolving credit agreements (10,837) (19,872) (65)
Payments on long-term debt (4,139) (4,386) (4,225)
Proceeds from issuance of common stock, net 925 873 187
Repurchase and cancellation of stock (6,056) (490) (3,964)
Repurchase and cancellation of stock from affiliated company -- -- (9,335)
Proceeds front issuance of long-term debt -- -- 3,030
-------- -------- --------
Net cash used in financing activities (20,107) (23,875) (14,372)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 768 (190) 501
Cash and cash equivalents at beginning of year 707 897 396
-------- -------- --------
Cash and cash equivalents at end of year $ 1,475 $ 707 $ 897
======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 695 $ 2,318 $ 3,296
Income taxes paid $ 9,579 $ 6,048 $ 3,937
======== ======== ========
Investing activities included the acquisition of Tropic Craft in 1998.
Assets acquired, liabilities assumed and consideration paid was as follows:
Fair value of assets acquired $10,078
Cash acquired (43)
Liabilities assumed (712)
-------
$ 9,323
=======
</TABLE>
See accompanying notes.
F-6
<PAGE> 103
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of WinsLoew
Furniture, Inc. ("WinsLoew") and its subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated.
BUSINESS
WinsLoew is comprised of companies engaged in the design, manufacture and
distribution of casual, contract seating and ready-to-assemble ("RTA")
furniture. WinsLoew's casual furniture products are distributed through
independent manufacturer's representatives, and are constructed of extruded and
tubular aluminum, wrought iron and cast aluminum. These products are
distributed through fine patio stores, department stores and full line
furniture stores nationwide. WinsLoew's contract seating products are
distributed to a customer base which includes architectural design firms,
restaurant and lodging chains. WinsLoew's RTA products include promotionally
priced coffee and end tables, wall units and rolling carts. Distribution of RTA
furniture products is primarily through mass merchandisers, catalogue
wholesalers and specialty retailers. The Company performs periodic credit
evaluations of its customers' financial condition and determines if collateral
is needed on a customer by customer basis.
CASH AND CASH EQUIVALENTS
The Company classifies as cash and cash equivalents all highly liquid
investments which have maturities at the date of purchase of three months or
less. The Company maintains its cash in bank deposit accounts which, at times,
may exceed the federally insured limits. The Company has not experienced any
losses in such accounts. The Company's cash balance at December 31, 1998
includes $1.0 million in an escrow account pending final purchase price
adjustments related to the sale of a discontinued operation (see Note 2).
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
utilizing the first-in, first-out ("FIFO") and weighted average methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company provides for
depreciation on a straight-line basis over the following estimated useful
lives: building and improvements, 8 to 40 years; manufacturing equipment, 2 to
10 years; office furniture and equipment, 3 to 7 years; and vehicles, 3 to 5
years.
GOODWILL
Goodwill is amortized on a straight-line basis over forty years from the date
of the respective acquisition. The carrying value of goodwill is reviewed if
the facts and circumstances suggest it may be impaired. If the review, using
undiscounted cash flows over the remaining amortization period, indicates that
the cost of goodwill will not be recoverable, the Company's carrying value are
reduced.
F-7
<PAGE> 104
DEFERRED COSTS (OTHER ASSETS)
Loan acquisition costs and related legal fees, included in other assets, are
deferred and amortized over the respective terms of the related debt.
INCOME TAXES
Deferred income taxes are provided for temporary differences between the basis
of assets and liabilities for financial reporting purposes and the related
basis for income tax purposes in accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR INCOME TAXES.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, EARNINGS
PER SHARE. Statement 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to SFAS No. 128 requirements.
The numerators for the earnings per share calculation are set forth on the face
of the accompanying income statements. The only difference between the
denominator for the basic and dilutive calculations are the number of shares
added to basic for the dilutive effect of employee stock options.
REVENUE RECOGNITION
Sales are recorded at time of shipment from the Company's facilities to
customers.
USE OF ESTIMATES
The preparation of the consolidated financial statements requires the use of
estimates in the amounts reported. Actual results could differ from those
estimates.
ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS
The Company follows the provisions of Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related Interpretations to
account for its stock option plan. Under provisions of APB No. 25, no
compensation expense has been recognized for stock option grants.
FOREIGN CURRENCY FORWARD CONTRACTS
The Company has exposure to losses which may result from settlement of certain
raw materials purchases denominated in a foreign currency. To reduce this
exposure, the Company has entered into forward contracts to buy foreign
currency. These forward contracts are accounted for as hedges, therefore, gains
and losses from settlement of the forward contracts are used to offset gains
and losses from settlement of the liability for the purchased raw materials.
Gains and losses are recognized in the same period in which gains or losses
from the raw material purchases are recognized. The Company is exposed to
losses on the forward contracts in the event it does not purchase the raw
materials, however, the Company does not anticipate this event.
At December 31, 1998 the Company did not have any forward contracts
outstanding. There were no significant deferred gains or (losses) and actual
gains (losses) included in cost of sales were ($12,000), $30,000 and $15,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
F-8
<PAGE> 105
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. The standard establishes principles for the
disclosure of information about operating segments in financial statements. The
adoption did not have any effect on the Company's primary financial statements,
but did effect the disclosure of segment information contained in Note 9.
2. DISCONTINUED OPERATIONS
During 1997 the Company adopted a plan to dispose of its RTA operations.
WinsLoew's RTA products included ergonomically-designed computer workstations,
which the Company denoted as "space savers", promotionally-priced coffee and
end tables, wall units and rolling carts and an extensive line of futons, futon
frames and related accessories. Distribution of RTA furniture products was
primarily through mass merchandisers, catalogue wholesalers and specialty
retailers. As a result of this decision, the Company recorded a pre-tax
non-cash charge totaling $12.4 million ($8.2 million net of taxes) in the
fourth quarter of 1997 relating to the disposal of the RTA operations. The
charge can be summarized as follows:
Write-off of goodwill in connection with sale of assets $ 3,902,000
Reduction of inventory value 2,791,000
Reduction of property to net realizable value 2,067,000
Reduction of accounts receivable value 1,390,000
Other liabilities / reserves 1,050,000
Accrual for losses through disposition 1,200,000
-----------
Total $12,400,000
===========
The Company planned to sell two of the businesses and liquidate the assets
related to the futon business. During 1998 the Company sold one of the
businesses, completed the liquidation of the futon business and decided to
retain its Southern Wood business due to improved profitability.
As a condition of the sale mentioned above, WinsLoew is required to hold in
escrow $1.0 million of the sales proceeds to provide indemnification to the
purchaser for claims arising from the date of purchase to December 31, 1999.
F-9
<PAGE> 106
The operating results of the discontinued operations are summarized as follows
(dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------
1998 1997 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
Net sales $ 4,432 $ 15,921 $ 26,574
Income before taxes -- (1,178) (385)
Net loss -- (718) (259)
Net loss per share - diluted $ -- ($0.10) ($0.03)
</TABLE>
The net assets of the discontinued operations at December 31, 1998 and 1997 are
as follows:
(IN THOUSANDS) 1998 1997
--------- ----------
Current assets $ -- $ 3,449
Current liabilities, including reserve
for estimated losses through
disposal date (1,750) (1,979)
--------- ----------
Net assets/liabilities of discontinued
operations, current $ (1,750) $ 1,470
========= ==========
Property, net $ -- $ 478
Goodwill, net -- 4,018
Other assets -- 52
--------- ----------
Net assets of discontinued
operations, non-current $ -- $ 4,548
========= ==========
The total assets and liabilities of the subsequently retained Southern Wood
operation for the period classified as a discontinued operation were $4.0
million and $1.1 million, respectively, at December 31, 1997.
The operating results of the subsequently retained Southern Wood operation for
each of the years the operation was reported as a discontinued operation are
summarized as follows (dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------
1998 1997 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
Net sales $ 11,689 $ 7,396 $ 10,710
Income before taxes 1,004 399 30
Net income 611 247 18
Net income per share - diluted $ 0.08 $ 0.03 $ --
</TABLE>
During 1998, the Company recorded pre-tax income from the disposition of
discontinued operations totaling $3.2 million ($2.0 million net of taxes). The
components are as follows:
Reversal of reserves related to Southern Wood $ 2,425,000
Gain on liquidation of Futon operations 1,857,000
Loss on sale of remaining RTA operation (1,093,000)
-------------
Total $ 3,189,000
=============
As a result of the Board's decision to retain Southern Wood, the consolidated
financial statements for 1997 and 1996 have been reclassified to reflect the
results of operations and assets and liabilities, net of reserves for
discontinued operations, of Southern Wood as a continuing operation.
F-10
<PAGE> 107
3. ACQUISITION AND DISPOSITION
During the third quarter of 1997 the Company disposed of certain assets of its
wrought iron business in the casual furniture product line. The sale generated
proceeds of $2.1 million. This business accounted for net sales of $5.7 million
and $11.0 million in the years ended December 31, 1997 and 1996, respectively.
The operating income of this business was not material to consolidated
operating income. During the third quarter of 1997, the Company recorded
approximately $230,000 of costs associated with the sale in selling, general
and administrative expenses.
In June 1998, the Company purchased all of the stock of Villella, Inc. d/b/a
Tropic Craft Aluminum Furniture Manufacturers ("Tropic Craft") for $9.3
million. In addition, the seller will be entitled to receive a contingent
purchase price payment of up to $1.0 million upon achievement of targeted
earning performance with respect to the years ending June 30, 1999 and June 30,
2000. Tropic Craft is engaged in the design and manufacture of contract casual
furniture. The acquisition resulted in goodwill of $6.9 million. Funds for the
acquisition were provided under WinsLoew's credit facility. The acquisition was
accounted for under the purchase method and, accordingly, the operating results
of Tropic Craft have been included in the consolidated operating results since
the date of acquisition.
The following unaudited pro forma information has been prepared assuming that
the acquisition of Tropic Craft occurred on January 1, 1997. Permitted pro
forma adjustments include only the effects of events directly attributable to
the transaction that are factually supportable and expected to have a
continuing impact. The pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been in effect for the
entire period presented. In addition, they are not intended to be a projection
of future results and do not reflect any synergies that might be achieved from
combined operations.
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS) For the Years Ended December 31,
---------------------------------
1998 1997
-------- --------
Net sales $144,752 $127,108
Income from continuing
operations $18,946 $11,298
Net income $20,977 $2,380
Income from continuing
operations per share - diluted $2.49 $1.49
Net income per share - diluted $2.76 $0.32
F-11
<PAGE> 108
4. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1998 and 1997:
(IN THOUSANDS) 1998 1997
------ -------
Revolving line of credit $1,400 $ 1,546
Term loan -- 2,287
Acquisition line of credit -- 12,500
Other 47 90
------ -------
1,447 16,423
Less: current portion 47 515
------ -------
$1,400 $15,908
====== ========
SENIOR CREDIT FACILITIES
The Company's senior credit facility, as amended, provides for $62.5 million
which matures in February 2001, and is collateralized by substantially all of
the assets of the Company. The facility consists of a working capital revolving
line of credit (maximum of $40 million), a term loan (originally $10 million)
and an acquisition line of credit (maximum of $12.5 million). The working
capital revolving line of credit allows the Company to borrow funds up to a
certain percentage of eligible inventories and accounts receivable. The term
loan requires quarterly repayments. The acquisition line of credit converts to
a term loan with principal payments due in quarterly installments.
Additionally, a payment equal to 50% of cash flow, as defined, is required for
each year within 90 days of year-end. WinsLoew's amended senior credit facility
provides the Company with a variable amount available under the revolving line
of credit. Effective each June 30, the maximum amount available under its
revolving line of credit is $20 million. The Company may, at its option, elect
to increase the revolving line of credit at each December 31 through the
following June 30 to a maximum of $40 million. As of December 31, 1998,
WinsLoew elected to increase the revolving line of credit to $35 million.
The WinsLoew's senior credit facility allows the Company to borrow up to $10
million under its line of credit to purchase shares of the Company's common
stock (see Note 5 below). At December 31, 1998 there was $6.1 million available
for this purpose.
The interest rates on the components of the senior credit facility are either
the base rate plus a spread, or the LIBOR rate plus a spread, as elected by the
Company. The spread is determined by the leverage ratio, as defined, for the
twelve month period ending each quarter. At December 31, 1998, the loans are
priced at the base rate plus 0.25% (8.25% at December 31, 1998). If any LIBOR
loans been outstanding at December 31, 1998 they would have been priced at the
LIBOR rate plus 1.25%. In addition, WinsLoew pays an unused facility fee of
.375% per annum on a quarterly basis in arrears.
The agreement requires the Company to meet certain financial ratios for
leverage, interest coverage, tangible net worth and includes other provisions
generally common in such agreements including restrictions on dividends,
additional indebtedness and capital expenditures. At December 31, 1998, the
Company was in compliance with its debt covenants. The carrying value of the
revolving line of credit approximated its fair value at December 31, 1998.
F-12
<PAGE> 109
5. CAPITAL STOCK
On January 23, 1998, the Board approved a plan authorizing the repurchase of
1,000,000 shares of the Company's stock in the open market at times and prices
deemed advantageous. During 1998, the Company retired 296,000 shares of common
stock purchased for $6.1 million. Subsequent to December 31, 1998 the Company
has purchased 92,500 shares at a cost of $2.6 million. Currently, under the
Board approved repurchase plan, there are 611,500 shares available for
repurchase.
6. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
(IN THOUSANDS) 1998 1997 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
Provision for taxes related to
continuing operations $10,947 $6,838 $4,834
Benefit for taxes related to
discontinued operations -- (375) (126)
Provision (benefit) for taxes related
to loss on sale of discontinued
operations 1,158 (4,200) --
================ =============== ================
Total provision for taxes $12,105 $2,263 $4,708
================ =============== ================
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
(IN THOUSANDS) 1998 1997 1996
---------------- ---------------- ---------------
<S> <C> <C> <C>
Federal:
Current $10,128 $ 3,985 $4,478
Deferred 856 (1,936) (251)
State:
Current 989 496 542
Deferred 132 (282) (61)
---------------- ---------------- ----------------
$12,105 $2,263 $4,708
================ ================ ================
</TABLE>
At December 31, 1998 and 1997, deferred tax assets and liabilities consisted of
the following:
(IN THOUSANDS)
1998 1997
------- -------
Deferred tax assets:
Capitalized inventory costs $ 173 $ 415
Reserves and accruals 2,894 3,660
State net operating loss carryforwards 304 344
------- -------
Deferred tax assets 3,371 4,419
------- -------
Deferred tax liabilities:
Intangible asset basis difference (191) (98)
Excess of tax over book depreciation (611) (1,194)
Prepaid expenses (94) (93)
Other (504) (75)
------- -------
Deferred tax liabilities (1,400) (1,460)
------- -------
Deferred income taxes, net $ 1,971 $ 2,959
======= =======
Included in:
Other current assets/liabilities $ 2,772 $ 4,326
Deferred income taxes (801) (1,367)
------- -------
$ 1,971 $ 2,959
======= =======
F-13
<PAGE> 110
The following table summarizes the differences between the federal income tax
rate and the Company's effective income tax rate for financial statement
purposes:
For the Years Ended December 31,
-------------------------------------------
1998 1997 1996
----------- ----------- -----------
Federal income tax rate 35.0% 34.0% 34.0%
State income taxes 3.4% 4.7% 2.2%
Goodwill amortization 2.1% 9.3% 2.0%
Other (3.4%) 2.2% (2.0%)
----------- ---------- -----------
Effective tax rate 37.1% 50.2% 36.2%
=========== ========== ===========
7. RELATED PARTY TRANSACTIONS
In October 1994, WinsLoew entered into a ten-year agreement (the "Investment
Services Agreement") with Trivest, Inc. ("Trivest"). Trivest and the Company
have certain common shareholders, officers and directors. Pursuant to the
Investment Services Agreement, Trivest provides corporate finance, financial
relations, strategic and capital planning and other management advice to the
Company. The base compensation is $500,000, subject to cost of living increases
and increases for additional businesses acquired. For 1998, 1997 and 1996, the
amount expensed was $641,000, $628,000 and $604,000, respectively. In 1996, the
Company retired 933,504 shares of its common stock purchased from an affiliated
company at $10 per share.
8. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain office space, manufacturing facilities and various
items of equipment under operating leases. Some leases for office and
manufacturing space contain renewal options and provisions for increases in
minimum payments based on various measures of inflation. Rental expense
amounted to approximately $830,000, $769,000, and $792,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. Operating lease agreements in
effect at December 31, 1998, have the following remaining minimum payment
obligations:
(IN THOUSANDS)
1999 $765
2000 740
2001 744
2002 714
2003 306
2004 - 2007 757
F-14
<PAGE> 111
EMPLOYMENT AGREEMENTS
The Company has employment agreements with certain employees. The agreements
provide for minimum salary levels and bonuses based on a percentage of pre-tax
operating income, as defined in the agreements.
EMPLOYEE BENEFIT PLANS
The Company has an employee benefit plan established under the provisions of
Section 401(k) of the Internal Revenue Code. Full-time employees who meet
various eligibility requirements may voluntarily participate in the plan. The
plan provides for voluntary employee contributions through salary reduction, as
well as discretionary employer contributions. Company contributions were
$161,000 and $143,000 in 1998 and 1997, respectively.
STOCK OPTION PLAN
In 1994, the Company established a Stock Option Plan (the "Plan") as a means to
retain and motivate key employees and directors. The Compensation Committee of
the Board of Directors administers and interprets the Plan and is authorized to
grant options to all eligible employees of the Company and non-employee
directors. The Plan provides for both incentive stock options and non-qualified
stock options. Options are granted under the Plan on such terms and at such
prices as determined by the Compensation Committee, except that the per share
exercise price of incentive stock options cannot be less than the fair market
value of the Company's common stock on the date of grant. The Company has
reserved 1,500,000 shares of common stock for issuance upon exercise of stock
options. All options which have been granted have a term of ten years and vest
ratably over five years.
Pro forma net income and earnings per share have been determined as if the
Company had accounted for its employee stock options as compensation expense
based on their fair value. Fair value was estimated at the date of grant using
a Black-Scholes option pricing model for 1998, 1997 and 1996 assuming a
risk-free interest rate of 4.83%, 6.45% and 6.2% for 1998, 1997 and 1996,
respectively, a volatility factor for the Company's common stock of .608, .411
and .532 in 1998, 1997 and 1996, respectively and a weighted-average expected
life of the options of six years. The pro forma information is not likely to be
representative of the effects of options on pro forma net income in future
years because the Company is required to include only options granted since
1994 in the pro forma information.
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1998 1997 1996
-------------- --------------- ----------------
<S> <C> <C> <C>
(IN THOUSANDS)
Pro forma net income $20,035 $2,068 $8,198
======= ====== ======
Pro forma income (loss) per share, diluted:
Income from continuing operations $ 2.36 $ 1.45 $ 0.97
Loss from discontinued operations,
net of taxes -- (0.09) (0.03)
Gain (loss) from sale of discontinued
operations, net of taxes 0.27 (1.08) --
------- ------ ------
Net income $ 2.63 $ 0.28 $ 0.94
======= ====== ======
</TABLE>
F-15
<PAGE> 112
Information with respect to WinsLoew's Plan is as follows:
<TABLE>
<CAPTION>
1998
-----------------------------------
Weighted
Average
Options Exercise Price 1997 1996
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Options outstanding at
January 1 784,850 $ 9.19 671,550 738,450
Granted 40,000 $20.62 250,000 25,000
Exercised (63,900) $ 8.25 (94,725) (25,100)
Canceled (18,050) $9.29 (41,975) (66,800)
---------------- ----------------- -----------------
Options outstanding at
December 31 742,900 $9.89 784,850 671,550
================ ================= =================
Exercise prices per share $5.88-$23.44 $5.88-$16.06 $5.88-$11.63
Options exercisable at
December 31 422,060 $9.20 407,100 480,400
================ ================= =================
Options available for grant
at December 31 573,375 595,325 803,350
================ ================= =================
</TABLE>
Information with regard to options outstanding and exercise price at December
31 is as follows:
<TABLE>
<CAPTION>
Options Exercisable
at December 31, 1998
----------------------
Weighted
Weighted Average
Average Options Outstanding Remaining Weighted
Exercise Exercise ----------------------------------- Life Average
Price Price 1998 1997 1996 at 12/31/98 Shares Price
- ------------------- ----------- ---------- ---------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$5.88 - $6.67 $6.16 255,800 291,850 356,250 6.1 160,240 $ 6.20
8.66 8.66 8,200 10,250 10,250 6.2 4,920 8.66
10.00 - 10.50 10.35 240,900 284,750 158,550 7.3 104,900 10.16
11.13 - 11.63 11.56 163,000 163,000 146,500 5.4 145,000 11.61
12.63 12.63 20,000 20,000 -- 8.6 4,000 12.63
16.06 16.06 15,000 15,000 -- 8.9 3,000 16.06
17.00 17.00 17,500 -- -- 9.0 -- --
23.44 23.44 22,500 -- -- 9.4 -- --
------- ------- ------- -------
Total 9.89 742,900 784,850 671,550 7.0 422,060 9.20
======= ======= ======= =======
</TABLE>
The estimated weighted average fair value of options granted in 1998 is $12.51
per option. The weighted average remaining contractual life for options granted
in 1998 is 9.3 years.
LITIGATION AND LIABILITY CLAIMS
The Company is, from time to time, involved in routine litigation including
general liability and worker's compensation claims. It is the opinion of
management that sufficient insurance has been purchased to cover current and
potential general liability and worker's compensation claims. None of such
litigation in which the Company is presently involved is believed to be
material to its liquidity, financial position or results of operations.
F-16
<PAGE> 113
9. OPERATING SEGMENTS
The Company has three segments organized and managed based on the products
sold. These reportable segments are described in Note 1.
The Company evaluates performance and allocates resources based on gross
profit. The accounting policies are the same as those described in the summary
of significant accounting policies. There are no intersegment sales/transfers.
Export revenues are not material.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1998 1997 1996
-------------- --------------- -----------------
<S> <C> <C> <C>
(IN THOUSANDS)
REVENUES:
Casual products $59,733 $ 56,363 $ 58,066
Contract seating products 69,938 58,386 48,629
Ready to assemble products 11,689 7,396 10,710
--------- --------- ---------
Total revenues $141,360 $122,145 $117,405
======== ======== ========
SEGMENT GROSS PROFIT:
Casual products $ 28,227 $ 24,164 $ 23,812
Contract seating products 23,439 17,256 14,126
Ready to assemble products 2,462 1,294 1,438
--------- --------- ---------
Total segment gross profit 54,128 42,714 39,376
Reconciling items:
Selling and general and administrative
expenses 23,124 21,427 21,472
Amortization 1,122 992 1,444
--------- --------- ---------
Operating income 29,882 20,295 16,460
Interest expense, net 635 2,296 3,083
--------- --------- ---------
Income from continuing operations before
income taxes $ 29,247 $ 17,999 $ 13,377
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Casual products $ 1,550 $ 1,532 $ 1,956
Contract seating products 425 411 360
Ready to assemble products 309 341 349
--------- --------- ---------
Total 2,284 2,284 2,665
Reconciling items:
Corporate 334 350 314
--------- --------- ---------
Total depreciation and amortization $ 2,618 $ 2,634 $ 2,979
======== ======== ========
</TABLE>
F-17
<PAGE> 114
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
EXPENDITURES FOR (DISPOSAL OF) LONG LIVED
ASSETS, NET:
Casual products $ (24) $ 790 $ 629
Contract seating products 129 236 162
Ready to assemble products 103 (576) 61
------- ------- -------
Total 208 450 852
Reconciling items:
Corporate 734 (25) 499
------- ------- -------
Total expenditures for long lived assets,
net $ 942 $ 425 $ 1,351
======= ======= =======
SEGMENT ASSETS:
Casual products $51,880 $41,964 $48,086
Contract seating products 23,486 21,836 22,372
Ready to assemble products 6,496 3,974 6,246
------- ------- -------
Total 81,862 67,774 76,704
Reconciling items:
Corporate 2,691 6,622 2,518
Assets held for sale -- 6,018 20,728
------- ------- -------
Total consolidated assets $84,553 $80,414 $99,950
======= ======= =======
</TABLE>
The Company has one contract seating customer that accounted for 17%, 16% and
10% of consolidated revenues in the years ended December 31, 1998, 1997 and
1996, respectively.
10. SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified
below:
December 31,
----------------------------
1998 1997
------- --------
(IN THOUSANDS)
Inventories:
Raw materials $ 9,288 $8,146
Work in process 1,521 1,089
Finished goods 1,397 1,198
------- -------
$12,206 $10,433
======= =======
F-18
<PAGE> 115
December 31,
--------------------------------------
1998 1997
---------------- ------------------
Property, plant and equipment:
Land $ 2,628 $ 1,834
Building and improvements 10,838 9,273
Manufacturing equipment 9,464 9,146
Office equipment 1,953 1,776
Construction in progress 81 74
Vehicles 176 141
-------- --------
25,140 22,244
Accumulated depreciation (11,192) (10,221)
-------- --------
$ 13,948 $ 12,023
======== ========
Other accrued liabilities:
Compensation, commissions and
employee benefits $ 3,063 $ 2,324
Customer deposits 1,749 1,559
Income taxes 1,546 971
Interest 24 88
Other 3,570 3,261
-------- --------
$ 9,952 $ 8,203
======== ========
Depreciation expense for continuing operations was $1,496,000, $1,642,000, and
$1,535,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Accumulated amortization at December 31, 1998 and 1997 related to goodwill was
$6,348,000 and $5,564,000, respectively. Accumulated amortization at December
31, 1998 and 1997 related to other intangible assets was $1,110,000 and
$773,000, respectively.
11. SUBSEQUENT EVENTS
In January 1999, the Company entered into a non-binding letter of intent (the
"letter") to pursue a potential merger in which the Company's public
shareholders would receive $30.00 per share in cash. The purchasing entity
would be formed by the Chairman of the Board of Directors and other members of
management. A Special Committee of the Company's Board of Directors was
established to review the proposal and it has recommended the letter.
The letter permits the Company to solicit and consider superior proposals
subject to the payment of a termination fee to the management group upon the
acceptance of another offer. The proposed merger is subject to, among other
things, approval by the Company's shareholders and the Special Committee.
Accordingly, there can be no assurance that the merger will be consummated.
F-19
<PAGE> 116
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BETWEEN
TRIVEST FURNITURE CORPORATION
AND
WINSLOEW FURNITURE, INC.
DATED AS OF MARCH 30, 1999
<PAGE> 117
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
SECTION 1.01. The Merger..................................................................1
SECTION 1.02. Closing.....................................................................1
SECTION 1.03. Effective Time..............................................................1
SECTION 1.04. Effects of the Merger.......................................................2
SECTION 1.05. Articles of Incorporation and Bylaws........................................2
SECTION 1.06. Directors...................................................................2
SECTION 1.07. Officers....................................................................2
ARTICLE II
SECTION 2.01. Effect on Capital Stock.....................................................2
SECTION 2.02. Exchange of Certificates....................................................3
ARTICLE III
SECTION 3.01. Organization................................................................4
SECTION 3.02. Subsidiaries................................................................4
SECTION 3.03. Capitalization..............................................................4
SECTION 3.04. Authority...................................................................5
SECTION 3.05. Consents and Approvals; No Violations.......................................5
SECTION 3.06. SEC Reports and Financial Statements........................................6
SECTION 3.07. Absence of Certain Changes or Events........................................6
SECTION 3.08. No Undisclosed Liabilities..................................................7
SECTION 3.09. Information Supplied........................................................7
SECTION 3.10. Benefit Plans...............................................................7
SECTION 3.11. Other Compensation Arrangements.............................................8
SECTION 3.12. Litigation..................................................................8
SECTION 3.13. Permits; Compliance with Law................................................8
SECTION 3.14. Tax Matters.................................................................9
SECTION 3.15. State Takeover Statutes....................................................10
SECTION 3.16. Brokers; Fees and Expenses.................................................10
SECTION 3.17. Intellectual Property......................................................10
SECTION 3.18. Vote Required..............................................................11
SECTION 3.19. Labor Matters..............................................................11
SECTION 3.20. Title to Property..........................................................11
SECTION 3.21. Environmental Matters......................................................12
SECTION 3.22. Accounts Receivable........................................................12
SECTION 3.23. Customers..................................................................12
SECTION 3.24. Interested Party Transactions..............................................12
SECTION 3.25. Absence of Certain Payments................................................12
SECTION 3.26. Insurance..................................................................13
SECTION 3.27. Product Liability and Recalls..............................................13
SECTION 3.28. Inventory..................................................................13
SECTION 3.29. Full Disclosure............................................................13
ARTICLE IV
SECTION 4.01. Organization...............................................................13
SECTION 4.02. Authority..................................................................14
SECTION 4.03. Consents and Approvals; No Violations......................................14
SECTION 4.04. Information Supplied.......................................................14
SECTION 4.05. Purchaser's Financing Capability...........................................14
</TABLE>
(i)
<PAGE> 118
<TABLE>
<S> <C>
SECTION 4.06. Surviving Corporation Solvency.............................................15
SECTION 4.07. Brokers....................................................................15
SECTION 4.08. Board Determination........................................................15
SECTION 4.09. Full Disclosure............................................................15
ARTICLE V
SECTION 5.01. Covenants of the Company...................................................15
SECTION 5.02. No Solicitation............................................................17
SECTION 5.03. Other Actions..............................................................19
SECTION 5.04. Financing Covenants of Purchaser and Sub...................................19
SECTION 5.05. Solvency...................................................................19
SECTION 5.06. Amendment of Management Agreement..........................................19
ARTICLE VI
SECTION 6.01. Shareholder Approval; Preparation of Proxy Statement.......................19
SECTION 6.02. Access to Information......................................................20
SECTION 6.03. Reasonable Efforts.........................................................21
SECTION 6.04. Company Stock Options; Plans...............................................21
SECTION 6.05. Confidentiality............................................................21
SECTION 6.06. Fees and Expenses..........................................................22
SECTION 6.07. Indemnification; Insurance.................................................22
SECTION 6.08. Employment and Benefit Arrangements........................................22
ARTICLE VII
SECTION 7.01. Conditions to Each Party's Obligation To Effect the Merger.................23
SECTION 7.02. Conditions to Obligations of Purchaser to Effect the Merger................23
SECTION 7.03. Conditions to Obligations of the Company to Effect the
Merger...................................................................24
ARTICLE VIII
SECTION 8.01. Termination................................................................24
SECTION 8.02. Effect of Termination......................................................25
SECTION 8.03. Amendment..................................................................26
SECTION 8.04. Extension; Waiver..........................................................26
ARTICLE IX
SECTION 9.01. Nonsurvival of Representations and Warranties..............................26
SECTION 9.02. Notices....................................................................26
SECTION 9.03. Interpretation.............................................................27
SECTION 9.04. Counterparts...............................................................27
SECTION 9.05. Entire Agreement; Third Party Beneficiaries................................27
SECTION 9.06. Governing Law..............................................................28
SECTION 9.07. Publicity..................................................................28
SECTION 9.08. Assignment.................................................................28
SECTION 9.09. Enforcement................................................................28
</TABLE>
(ii)
<PAGE> 119
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of March
30, 1999, between Trivest Furniture Corporation, a Florida corporation
("PURCHASER"), and WinsLoew Furniture, Inc., a Florida corporation (the
"COMPANY").
WHEREAS the respective Boards of Directors of Purchaser and the Company
have approved the acquisition of the Company by Purchaser on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS the respective Boards of Directors of Purchaser and the Company
have each approved the merger of Purchaser into the Company (the "MERGER"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each outstanding share of Common Stock, par value $0.01 per share, of the
Company (the "COMPANY COMMON STOCK"; the outstanding shares of Company Common
Stock being hereinafter collectively referred to as the "SHARES"), other than
shares of Company Common Stock owned directly or indirectly by Purchaser or the
Company, will be converted into the right to receive $33.00 in cash; and
WHEREAS Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Corporation Law (as
defined below), Purchaser shall be merged with and into the Company at the
Effective Time (as defined in Section 1.03). Following the Effective Time, the
separate corporate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
succeed to and assume all the rights and obligations of Purchaser in accordance
with the Florida Business Corporation Act (the "CORPORATION LAW"). At the
election of Purchaser, any direct or indirect wholly owned subsidiary (as
defined in Section 9.03) of Purchaser may be substituted for Purchaser as a
constituent corporation in the Merger. In such event, the parties agree to
execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 1.02. CLOSING. The closing of the Merger will take place at
10:00 a.m. (Miami time) on a date to be specified by Purchaser which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII (the "CLOSING DATE"), at the offices of
Greenberg, Traurig, P.A., counsel to Purchaser (or, at Purchaser's request, the
offices of counsel to any lender providing financing in connection with the
Merger), unless another date, time or place is agreed to in writing by the
parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file articles of merger or other appropriate documents (in any such case,
the "ARTICLES OF MERGER") executed in accordance with the relevant provisions of
the Corporation Law and shall make all other filings or recordings required
under the Corporation Law. The Merger shall become effective at such time as the
Articles of Merger are duly filed with the Florida Secretary of State, or at
such other time as Purchaser and the Company shall agree
<PAGE> 120
should be specified in the Articles of Merger (the time the Merger becomes
effective being hereinafter referred to as the "EFFECTIVE TIME").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the Corporation Law.
SECTION 1.05. ARTICLES OF INCORPORATION AND BYLAWS.
(a) The Articles of Incorporation of Purchaser as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law; provided that Article I thereof shall be amended
to provide that the corporate name of the Surviving Corporation is "WinsLoew
Furniture, Inc.".
(b) The bylaws of Purchaser as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Purchaser immediately prior
to the Effective Time shall be the directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of the Company immediately prior
to the Effective Time and such other persons as Purchaser shall designate shall
be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or any shares of capital stock of Purchaser:
(a) CAPITAL STOCK OF PURCHASER. Each issued and outstanding
share of capital stock of Purchaser shall be converted into and become one fully
paid and nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF PURCHASER OWNED STOCK. Each share of
Company Common Stock that is owned by Purchaser or any subsidiary of Purchaser
shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) CANCELLATION OF COMPANY OWNED STOCK. All Shares (if any)
that are held in the treasury of the Company or by any wholly owned subsidiary
of the Company and any Shares owned by Purchaser or any wholly owned subsidiary
of Purchaser shall be cancelled and no consideration shall be delivered in
exchange therefor.
(d) CONVERSION OF COMPANY COMMON STOCK. Each Share issued and
outstanding (other than Shares to be canceled in accordance with Section
2.01(b)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, $33.00 (the "MERGER CONSIDERATION"). As
of the Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration,
without interest.
2
<PAGE> 121
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Purchaser shall
designate American Stock Transfer & Trust Company or other bank or trust company
acceptable to the Company to act as paying agent in the Merger (the "PAYING
AGENT"), and, prior to the Effective Time, Purchaser shall make available, or
cause the Surviving Corporation to make available, to the Paying Agent funds in
amounts necessary for the payment of the Merger Consideration upon surrender of
certificates representing Shares as part of the Merger pursuant to Section 2.01
(it being understood that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned over to Purchaser).
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented Shares (the "CERTIFICATES"), other than Shares to be cancelled in
accordance with Section 2.01(b) hereof, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in form and have such other provisions as Purchaser and the
Company may reasonably specify) and (ii) instructions, in form reasonably
acceptable to the Company, for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Purchaser, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.01, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.01. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate. In the event any Certificate shall have
been lost, stolen or destroyed, Purchaser may, in its discretion and as a
condition precedent to the payment of the Merger Consideration in respect of the
shares represented by such Certificate, require the owner of such lost, stolen
or destroyed Certificate to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Purchaser, the
Surviving Corporation or the Paying Agent.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates. At
the Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article III.
(d) NO LIABILITY. At any time following the expiration of six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
any applicable abandoned property, escheat or similar law) only as general
creditors thereof with respect to the Merger Consideration payable upon due
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surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, none of Purchaser, the Company or the Paying Agent shall be
liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
SECTION 3.01. ORGANIZATION. The Company and each of its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority could not be reasonably expected to (i) prevent or
materially delay the consummation of the Merger, or (ii) have a Material Adverse
Effect (as defined in Section 9.03) on the Company. The Company and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing could not reasonably be expected to
have a Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger. The Company has made available to Purchaser complete
and correct copies of its Articles of Incorporation and Bylaws and the
certificates of incorporation and bylaws (or similar organizational documents)
of its subsidiaries.
SECTION 3.02. SUBSIDIARIES. The only subsidiaries of the Company are
Winston Furniture Company of Alabama, Inc., an Alabama corporation, Lowenstein
Furniture Group, Inc., a Florida corporation, Texacraft, Inc., a Texas
corporation, and Tropic Craft, Inc., a Florida corporation (the "SUBSIDIARIES").
All the outstanding shares of capital stock of each such subsidiary are owned by
the Company, by another wholly owned subsidiary of the Company or by the Company
and another wholly owned subsidiary of the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "LIENS"), except for a first priority lien
granted to Heller Financial, Inc. upon the capital stock of the Subsidiaries
pursuant to a Credit Agreement dated as of February 2, 1995, as amended, and are
duly authorized, validly issued, fully paid and nonassessable. Except for the
capital stock of its subsidiaries and the Company's ownership interest in
certain incidental investments (the aggregate book value of which do not exceed
$5,000), the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, joint venture or other
entity.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share ("COMPANY PREFERRED
STOCK"). At the close of business on March 1, 1999, (i) 7,181,908 shares of
Company Common Stock were issued and outstanding, (ii) 765,400 shares of Company
Common Stock were reserved for issuance upon exercise of outstanding Company
Stock Options (as defined in Section 6.04), and (iii) no shares of Company
Preferred Stock were issued and outstanding. Except as set forth above, and
except for shares issued upon the exercise of Company Stock Options since March
1, 1999, as of the date of this Agreement, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, as of the date of this Agreement, there are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound obligating the Company
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered
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or sold, additional shares of capital stock or other voting securities of the
Company or of any of its subsidiaries or obligating the Company or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
as disclosed in Section 3.03 of the Disclosure Schedule, there are not any
outstanding contractual obligations (i) of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or (ii) of the Company to vote or to dispose of any shares
of the capital stock of any of its subsidiaries. Except as set forth in Section
3.03 of the disclosure schedule annexed hereto (the "DISCLOSURE SCHEDULE"),
there are no restrictions on the right of the Company to vote or dispose of any
shares of the capital stock of its subsidiaries.
SECTION 3.04. AUTHORITY.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the terms of this Agreement by the holders of a
majority of the Shares (the "COMPANY SHAREHOLDER APPROVAL")). The execution,
delivery and performance of this Agreement and the consummation by the Company
of the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated (in
each case, other than, with respect to the Merger, the Company Shareholder
Approval). This Agreement has been duly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding obligation of
Purchaser, constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally.
(b) The Board of Directors of the Company, as well as a
special committee (the "SPECIAL COMMITTEE") comprised of five independent
members of the Company's Board of Directors, at meetings duly called and held on
March 4, 1999, duly and unanimously adopted resolutions (i) approving this
Agreement and the Merger (and such approval is sufficient to render inapplicable
the provisions of Sections 607.0901 and 607.0902 of the Corporation Law), (ii)
determining that the Merger is substantively and procedurally fair to, and in
the best interests of, the Company's shareholders, and (iii) recommending that
the Company's shareholders approve and adopt this Agreement.
(c) The Company's Board of Directors and the Special Committee
have received the oral opinion of Mann, Armistead and Epperson, Ltd. ("MANN,
ARMISTEAD") that the proposed consideration to be received by the holders of
Shares (other than Shares to be cancelled in accordance with Section 2.01(b)
hereof) pursuant to the Merger is fair, from a financial point of view, to such
holders, and Mann, Armistead has advised the Special Committee that it will
deliver a complete and correct signed copy of such opinion to the Company and to
Purchaser, as well as a draft of the description of such opinion and Mann
Armistead's related analyses to be included in the Proxy Statement (as
hereinafter defined), not later than April 7, 1999.
SECTION 3.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and the rules and regulations promulgated
thereunder (including the filing with the Securities and Exchange Commission
(the "SEC") of a proxy statement relating to any required approval by the
Company's shareholders of this Agreement (the "PROXY STATEMENT")), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and Sections 607.1103 - 607.1105 of the Corporation Law, neither the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of the Company or of the similar organizational
documents of any of its subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any Federal, state or local government or
any court, tribunal, administrative agency or commission or other
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governmental or other regulatory authority or agency, domestic, foreign or
supranational (a "GOVERNMENTAL ENTITY") (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings could not
reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger), (iii) except as set
forth in Section 3.05 of the Disclosure Schedule, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound;
PROVIDED, HOWEVER, that certain contracts and agreements, the material ones of
which are listed in Section 3.05 of the Disclosure Schedule, (A) provide for
their termination upon a change of control of the Company or (B) contain
provisions restricting their assignment, or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its subsidiaries or any of their properties or assets, except in the case of
clauses (iii) or (iv) for violations, breaches or defaults that could not
reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger.
SECTION 3.06. SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the SEC, and has heretofore made available to Purchaser true and
complete copies of, all forms, reports, schedules, statements and other
documents (other than preliminary materials) required to be filed by it under
the Exchange Act or the Securities Act of 1933 (the "SECURITIES ACT") from and
after December 31, 1997 (such forms, reports, schedules, statements and other
documents, including any financial statements or schedules included therein, are
referred to as the "COMPANY SEC DOCUMENTS"). The Company SEC Documents, at the
time filed, (a) did not contain any untrue statement of a material fact or omit
to state a 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, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. The
financial statements of the Company included in the Company SEC Documents as
well as the Company's financial statements as of and for the year ended December
31, 1998 heretofore delivered to Purchaser, as of the dates thereof comply as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X promulgated
by the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal adjustments, none of which will be material) the
consolidated financial position of the Company and its consolidated subsidiaries
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Company SEC Documents, as contemplated by Section 6.04 or as set forth in
Section 3.07 of the Disclosure Schedule, since December 31, 1998, the Company
and its subsidiaries have conducted their respective businesses only in the
ordinary course consistent with past practice, and there has not been any
material adverse change (as defined in Section 9.03) with respect to the
Company. Except as disclosed in the Company SEC Documents, as contemplated by
Section 6.04 or as set forth in Section 3.07 of the Disclosure Schedule, since
December 31, 1998, there has not been (i) any declaration, setting aside or
payment of any dividend or other distribution with respect to the Company's
capital stock or any redemption, purchase or other acquisition of any of its
capital stock, (ii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iii) any material change in accounting methods, principles
or practices by the Company, (iv) (w) any granting by the Company or any of its
subsidiaries to any executive officer of the Company or any of its subsidiaries
of any increase in compensation, except in the ordinary course of business
(including in connection with promotions) consistent with past practice or as
was required under employment agreements in effect as of December 31, 1998, (x)
any granting by the Company or any of its subsidiaries to any such officer of
any increase in severance or termination pay, except as part of a
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standard employment package to any person promoted or hired, or as was required
under employment, severance or termination agreements in effect as of December
31, 1998, (y) except employment arrangements in the ordinary course of business
consistent with past practice with employees other than any executive officer of
the Company, any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such employee or
executive officer, or (z) except as contemplated by Section 6.04, any increase
in or establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit-sharing, stock option (including the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock appreciation
rights, performance awards or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, (v) any damage, destruction
or loss, whether or not covered by insurance, that has or reasonably could be
expected to have a Material Adverse Effect on the Company, (vi) any amendments
or changes in the Articles of Incorporation or Bylaws of the Company, or (vii)
any material revaluation by the Company of any of its assets, including writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as and to the extent
set forth in the Company SEC Documents or in Section 3.08 of the Disclosure
Schedule, as of December 31, 1998, neither the Company nor any of its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its subsidiaries (including the notes thereto). Since December 31,
1998, except as and to the extent set forth in the Company SEC Documents or in
Section 3.08 of the Disclosure Schedule and except for liabilities or
obligations incurred in the ordinary course of business consistent with past
practice, neither the Company nor any of its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise, that
could be reasonably expected to have a Material Adverse Effect on the Company,
or would be required by generally accepted accounting principles to be reflected
on a consolidated balance sheet of the Company and its subsidiaries (including
the notes thereto).
SECTION 3.09. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in the Proxy Statement or Schedule 13E-3 (as hereinafter defined),
will, at the time the Proxy Statement is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting (as defined in Section
6.01), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Purchaser specifically for inclusion or incorporation by
reference therein.
SECTION 3.10. BENEFIT PLANS.
(a) Except as set forth in Section 3.10 of the Disclosure
Schedule, each "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (a
"PENSION PLAN"), "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) (a "WELFARE PLAN") and each other plan, arrangement or policy (written or
oral) relating to stock options, stock purchases, compensation, deferred
compensation, bonuses, severance, fringe benefits or other employee benefits, in
each case maintained or contributed to, or required to be maintained or
contributed to, by the Company or its subsidiaries for the benefit of any
present or former employee, officer or director (each of the foregoing, a
"BENEFIT PLAN") has been administered in all material respects in accordance
with its terms. The Company and its subsidiaries and all the Benefit Plans are
in compliance in all material respects with the applicable provisions of ERISA,
the Internal Revenue Code of 1986, as amended (the "CODE"), all other applicable
laws and all applicable collective bargaining agreements. Section 3.10 of the
Disclosure Schedule sets forth a list of all material Benefit Plans. Except as
set forth in Section 3.10(a) of the Disclosure Schedule, none of the Welfare
Plans promises or provides retiree medical or other retiree welfare benefits to
any person. To the Best
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Knowledge (as defined below) of the Company, no fiduciary of a Benefit Plan has
breached any of the responsibilities or obligations imposed upon fiduciaries
under Title I of ERISA, which breach would reasonably be expected to result in
any material liability to the Company. Each Benefit Plan intended to qualify
under section 401(a) of the Code and each trust intended to qualify under
section 501(a) of the Code is the subject of a favorable determination letter
from the IRS, and nothing has occurred which would reasonably be expected to
impair such determination. All contributions required to be made with respect to
any Benefit Plan pursuant to the terms of the Benefit Plan or any collective
bargaining agreement, have been made on or before their due dates.
(b) None of the Pension Plans is subject to Title IV of ERISA
and none of the Company or any other person or entity that, together with the
Company, is or was treated as a single employer under Section 414 of the Code or
pursuant to Title IV of ERISA (each, including the Company, a "COMMONLY
CONTROLLED ENTITY") has any liability under Title IV of ERISA (whether actual or
contingent) with respect to a Pension Plan, or to any other employee pension
benefit plan that is or was maintained, contributed to or required to be
contributed to by a Commonly Controlled Entity (other than for contributions not
yet due) or to the Pension Benefit Guaranty Corporation (other than for payment
of premiums not yet due), which liability has not been fully paid.
(c) No Commonly Controlled Entity is required to contribute to
any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid or as to which a commonly controlled
entity would have liability pursuant to Section 4212(c) of ERISA.
(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without material liability to
the Company or its subsidiaries.
SECTION 3.11. OTHER COMPENSATION ARRANGEMENTS. Except as disclosed in
the Company SEC Documents or in Section 3.11 of the Disclosure Schedule, and
except as provided in this Agreement, as of the date of this Agreement, neither
the Company nor any of its subsidiaries is a party to any oral or written (i)
consulting agreement not terminable on not more than 60 calendar days notice and
involving the payment of more than $100,000 per annum, (ii) agreement with any
executive officer or other key employee of the Company or any of its
subsidiaries (x) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement, or (y) providing any term of
employment or compensation guarantee extending for a period longer than two
years or the payment of more than $100,000 per year, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 3.12. LITIGATION. Except as disclosed in the Company SEC
Documents or Section 3.12 of the Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending before any Governmental Entity or,
to the Best Knowledge of the Company, threatened against the Company or any of
its subsidiaries that could reasonably be expected to have a Material Adverse
Effect on the Company or prevent or materially delay the consummation of the
Merger. Except as disclosed in the Company SEC Documents or Section 3.12 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries is subject
to any outstanding order, writ, injunction or decree that could reasonably be
expected to have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Merger.
SECTION 3.13. PERMITS; COMPLIANCE WITH LAW. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "COMPANY PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals that could not
reasonably be
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expected to have a Material Adverse Effect on the Company. The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply could not reasonably be expected to have a
Material Adverse Effect on the Company. Except as disclosed in the Company SEC
Documents or in the Disclosure Schedule, the businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations that could not
reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Merger. As of the date of
this Agreement, no investigation or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the Best
Knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct any such investigation or review, other than, in each
case, those the outcome of which could not be reasonably expected to have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger.
SECTION 3.14. TAX MATTERS.
(a) The Company and each of its subsidiaries has filed all
Federal income tax returns and all other material tax returns and reports
required to be filed by it. All such returns are complete and correct in all
material respects (except to the extent a reserve has been established on the
Company's financial statements as of and for the year ended December 31, 1998
(the "MOST RECENT FINANCIAL STATEMENTS"). Each of the Company and each of its
subsidiaries has paid (or the Company has paid on its subsidiaries' behalf) all
taxes required to be paid by it (without regard to whether a tax return is
required or to the amount shown on any tax return), except taxes for which an
adequate reserve has been established on the Most Recent Financial Statements.
The Most Recent Financial Statements reflect an adequate reserve for all taxes
payable by the Company and its subsidiaries for all taxable periods and portions
thereof through the date of such financial statements.
(b) Except as set forth in Section 3.14 of the Disclosure
Schedule, no material tax return of the Company or any of its subsidiaries is
under audit or examination by any taxing authority, and no written or unwritten
notice of such an audit or examination has been received by the Company or any
of its subsidiaries. Each material deficiency resulting from any audit or
examination relating to taxes by any taxing authority has been paid, except for
deficiencies being contested in good faith. No material issues relating to taxes
were raised in writing by the relevant taxing authority during any presently
pending audit or examination, and no material issues relating to taxes were
raised in writing by the relevant taxing authority in any completed audit or
examination that can reasonably be expected to recur in a later taxable period.
The Federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have not been examined by and settled with the
Internal Revenue Service.
(c) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
taxes and no power of attorney with respect to any taxes has been executed or
filed with any taxing authority.
(d) No material liens for taxes exist with respect to any
assets or properties of the Company or any of its subsidiaries, except for liens
for taxes not yet due.
(e) None of the Company or any of its subsidiaries is liable
for taxes of any other person (other than taxes of the Company and its
subsidiaries) or is a party to or is bound by any tax sharing agreement, tax
indemnity obligation or similar agreement, arrangement or practice with respect
to taxes (including any advance pricing agreement, closing agreement or other
agreement relating to taxes with any taxing authority).
(f) None of the Company or any of its subsidiaries shall be
required to include in a taxable period ending after the Effective Time taxable
income attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of
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accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) As used in this Agreement, "TAXES" shall include all
Federal, state, local and foreign income, property, sales, excise, withholding
and other taxes, tariffs or governmental charges of any nature whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts.
(h) Neither the Company nor, to the Best Knowledge of the
Company, any of its subsidiaries has filed a consent pursuant to or agreed to
the application of Section 341(f) of the Code.
(i) Neither the Company nor any of its subsidiaries is a party
to any joint venture, partnership, or other arrangement or contract which could
reasonably be expected to be treated as a partnership for federal income tax
purposes.
(j) Except as set forth in Section 3.14 of the Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that would result (taking into account
the transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(k) Except as set forth in Section 3.14 of the Disclosure
Schedule, neither the Company nor any of its subsidiaries has ever been a
Subchapter S corporation (as defined in Section 1361 (a)(1) of the Code).
SECTION 3.15. STATE TAKEOVER STATUTES. The Board of Directors of the
Company has approved the Merger and this Agreement and such approval is
sufficient to render inapplicable to the Merger, this Agreement and the
transactions contemplated by this Agreement, the provisions of Sections 607.0901
and 607.0902 of the Corporation Law.
SECTION 3.16. BROKERS; FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Mann, Armistead, the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has furnished to Purchaser true
and complete copies of all written agreements or arrangements, and reduced to
writing and furnished to Purchaser the terms of all unwritten agreements or
arrangements, providing for any such broker's, finder's financial advisor's or
similar fee or commission between the Company and Mann, Armistead.
SECTION 3.17. INTELLECTUAL PROPERTY.
(a) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy) could not
reasonably be expected to have a Material Adverse Effect on the Company:
(1) the Company and each of its subsidiaries owns, or
is licensed or otherwise has the legally enforceable right to use (in each case,
clear of any liens or encumbrances of any kind), all Intellectual Property (as
hereinafter defined) used in or necessary for the conduct of its business as
currently conducted;
(2) no claims are pending or, to the Best Knowledge
of the Company, threatened that the Company or any of its subsidiaries is
infringing on or otherwise violating the rights of any person with regard to any
Intellectual Property used by, owned by and/or licensed to the Company or its
subsidiaries and, to the Best Knowledge of the Company, there are no valid
grounds for any such claims;
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(3) to the Best Knowledge of the Company, no person
is infringing on or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or its subsidiaries.
(4) to the Best Knowledge of the Company, there are
no valid grounds for any claim challenging the ownership or validity of any
Intellectual Property owned by the Company or any of its subsidiaries or
challenging the Company's or any of its subsidiaries' license or legally
enforceable right to use any Intellectual Property licensed by it; and
(5) to the Best Knowledge of the Company, all
patents, registered trademarks, service marks and copyrights held by the Company
and each of its subsidiaries are valid and subsisting.
(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrighted,
copyrightable or not in any jurisdiction; registration or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; any similar intellectual property or proprietary rights and computer
programs and software (including source code, object code and data); licenses,
immunities, covenants not to sue and the like relating to the foregoing; and any
claims or causes of action arising out of or related to any infringement or
misappropriation of any of the foregoing.
SECTION 3.18. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class of capital stock necessary to approve this Agreement
and the Merger.
SECTION 3.19. LABOR MATTERS. Except as set forth in Section 3.19 of the
Disclosure Schedule or the Company SEC Documents, (i) there is no unfair labor
practice complaint pending or, to the knowledge of the Company or any of its
subsidiaries, threatened, between the Company or any of its subsidiaries and any
of their respective employees, which have had, or could reasonably be expected
to have, a Material Adverse Effect on the Company; (ii) neither the Company nor
any of its subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or its
subsidiaries, nor does the Company or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees; and
(iii) to the Best Knowledge of the Company, there are no strikes, slowdowns,
work stoppages, lockouts, or threats thereof, by or with respect to any
employees of the Company or any of its subsidiaries which could reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 3.20. TITLE TO PROPERTY. Except as set forth in Section 3.20 of
the Disclosure Schedule or which could not reasonably be expected to have a
Material Adverse Effect on the Company, the Company and each of its subsidiaries
have good and defensible title to all of their properties and assets, free and
clear of all liens, charges and encumbrances, except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or materially interfere with the present
use of the property affected thereby; and, to the knowledge of the Company, all
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not, to
the knowledge of the Company, under any of such leases, any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default could not
reasonably be expected to have a Material Adverse Effect on the Company.
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SECTION 3.21. ENVIRONMENTAL MATTERS. Except as set forth in Section
3.21 of the Disclosure Schedule or the Company SEC Documents, and except in all
cases as have not had and could not reasonably be expected to have a Material
Adverse Effect on the Company, to the Best Knowledge of the Company, the Company
and each of its subsidiaries (i) have obtained all applicable permits, licenses
and other authorizations which are required to be obtained under all applicable
Federal, state or local laws or any regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder ("ENVIRONMENTAL LAWS") relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic material
or wastes into ambient air, surface water, ground water or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes by the Company or its subsidiaries (or their
respective agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding against the
Company or any of its subsidiaries based on or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, emission, discharge or release into the environment of any pollutant,
contaminant, or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by the Company or its subsidiaries (or
any of their respective agents) thereunder.
SECTION 3.22. ACCOUNTS RECEIVABLE. The accounts receivable of the
Company and its subsidiaries as reflected in the most recent financial
statements contained in the Company SEC Documents, to the extent uncollected on
the date hereof, and the accounts receivable reflected on the books of the
Company and its subsidiaries, are valid and existing and represent monies due,
and the Company has made reserves reasonably considered adequate for receivables
not collectible in the ordinary course of business, and (subject to the
aforesaid reserves) are subject to no refunds or other adjustments and to no
defenses, rights of setoff, assignments, restrictions, encumbrances or
conditions enforceable by third parties on or affecting any thereof, except for
such refunds, adjustments, defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions as would not reasonably be expected to
have a Material Adverse Effect on the Company.
SECTION 3.23. CUSTOMERS. Section 3.23 of the Disclosure Schedule sets
forth a list of the Company's twenty five (25) largest customers (detailed, in
the case of government agencies, by separate government agency) in terms of
gross sales for the fiscal year ended December 31, 1998. Except as set forth in
Section 3.23 of the Disclosure Schedule, since December 31, 1998, there have not
been any changes in the business relationships of the Company with any of the
customers named therein that would constitute a Material Adverse Effect on the
Company.
SECTION 3.24. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 3.24 of the Disclosure Schedule or the Company SEC Documents, since
December 31, 1997, no event has occurred that would be required to be reported
as a Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-K promulgated by the SEC, except for contracts with terms no less
favorable to the Company than would reasonably be expected in a similar
transaction with an unaffiliated third party.
SECTION 3.25. ABSENCE OF CERTAIN PAYMENTS. To the Best Knowledge of the
Company, neither the Company nor any of its subsidiaries or any of their
respective affiliates, officers, directors, employees or agent or other people
acting on behalf of any of them have (i) engaged in any activity prohibited by
the United States Foreign Corrupt Practices Act of 1977 or any other similar
law, regulation, decree, directive or order of any other country and (ii)
without limiting the generality of the preceding clause (i), used any corporate
or other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to government
officials or
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others, in each case except to the extent that such activities, individually or
in the aggregate, would not have a Material Adverse Effect on the Company. To
the Best Knowledge of the Company, neither the Company nor any of its
subsidiaries or any of their respective affiliates, directors, officers,
employees or agents of other persons acting on behalf of any of them, has
accepted or received any unlawful contributions, payments, gifts or expenditures
that could reasonably be expected to have a Material Adverse Effect on the
Company.
SECTION 3.26. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage insurance policies maintained by the Company or any of its subsidiaries
are with reputable insurance carriers, provide coverage of all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets, except as could not reasonably be expected to
have a Material Adverse Effect on the Company.
SECTION 3.27. PRODUCT LIABILITY AND RECALLS.
(a) Except a disclosed in Section 3.27 of the Disclosure
Schedule or the Company SEC Documents to the Best Knowledge of the Company,
there is no claim, or the basis of any claim, against the Company or any of this
subsidiaries for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service by
the Company or any of its subsidiaries, including claims arising out of any
alleged defective nature of its products or services, which could reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Except as disclosed in Section 3.27 of the Disclosure
Schedule or the Company SEC Documents, there is not pending or, to the knowledge
of the Company, threatened recall or investigation of any product sold by the
Company, which recall or investigation could reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 3.28. INVENTORY. The inventories of the Company and its
subsidiaries as reflected in the most recent financial statements contained in
the Company SEC Documents, or acquired by the Company or any of its subsidiaries
after the date thereof, to the extent it does not constitute a Material Adverse
Effect on the Company, (i) are carried at an amount not in excess of the lower
of cost or net realizable value, and (ii) do not include any inventory which is
obsolete, surplus or not usable or saleable in the lawful and ordinary course of
business of the Company and its subsidiaries as heretofore conducted, in each
case net of reserves provided therefor.
SECTION 3.29. FULL DISCLOSURE. No statement contained in any
certificate or schedule furnished or to be furnished by the Company or its
subsidiaries to Purchaser in, or pursuant to the provisions of, this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary, in the light of the circumstances under which it was made, in
order to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
SECTION 4.01. ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Florida and has all
requisite corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority could not be reasonably expected to
prevent or materially delay the consummation of the Merger. Purchaser is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing could not reasonably be
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expected to prevent or materially delay the consummation of the Merger.
Purchaser has made available to the Company complete and correct copies of its
articles of incorporation and bylaws.
SECTION 4.02. AUTHORITY. Purchaser has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Purchaser
and no other corporate proceedings on the part of Purchaser are necessary to
authorize this Agreement or to consummate such transactions. No vote of
Purchaser shareholders is required to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Purchaser and, assuming this Agreement constitutes a valid and binding
obligation of the Company, constitutes a valid and binding obligation of each of
Purchaser enforceable against it in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally.
SECTION 4.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of a Rule 13E-3 Transaction Statement on Schedule 13E-3
(together with all supplements and amendments thereto, the "SCHEDULE 13E-3"),
the HSR Act and Sections 607.1103 - 607.1105 of the Corporation Law, neither the
execution, delivery or performance of this Agreement by Purchaser nor the
consummation by Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
articles of incorporation or bylaws of Purchaser, (ii) require any filing with,
or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings could not be reasonably expected to prevent or
materially delay the consummation of the Merger), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which Purchaser or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Purchaser, any of its subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches or
defaults which could not, individually or in the aggregate, be reasonably
expected to prevent or materially delay the consummation of the Merger.
SECTION 4.04. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Purchaser specifically for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 13E-3 will, at the time the
Proxy Statement is first mailed to the Company's shareholders or at the time of
the Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Schedule 13E-3 to be filed by Purchaser in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made by
Purchaser with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
SECTION 4.05. PURCHASER'S FINANCING CAPABILITY. Purchaser has
heretofore provided the Company with true and correct copies of (i) a proposal
letter with respect to Purchaser's expected senior debt financing sources for
the funding (the "SENIOR DEBT FINANCING") of a portion of the Merger
Consideration, and (ii) a term sheet with respect to Purchaser's expected
subordinated debt financing sources for the funding (the "SUBORDINATED DEBT
FINANCING") of a portion of the Merger Consideration. Purchaser is reasonably
satisfied that it will have sufficient funds (including equity capital, Senior
Debt Financing and Subordinated Debt Financing) to enable it to purchase the
Shares pursuant to the Merger
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in accordance with terms hereof, pay all related fees and expenses and effect
all other transactions contemplated hereby.
SECTION 4.06. SURVIVING CORPORATION SOLVENCY. Immediately after the
Effective Time and after giving effect to any changes in the Surviving
Corporation's assets and liabilities as a result of the Merger and the financing
for the Merger Consideration, the Surviving Corporation will not (i) be
insolvent (either because its financial condition is such that the sum of its
debts is greater than the fair value of its assets or because the fair saleable
value of its assets is less than the amount required to pay its probable
liability on its existing debts as they mature), (ii) have unreasonably small
capital with which to engage in its business, or (iii) have incurred debts
beyond its ability to pay as they become due; PROVIDED, that for purposes of
making the representation and warranty set forth in this Section 4.06 Purchaser
has relied on the accuracy of (i) all information provided to them by the
Company, and (ii) all information set forth in the Company's SEC Documents.
SECTION 4.07. BROKERS. No broker, investment banker, financial advisor
or other person, other than Trivest II, Inc., the fees and expenses of which
will be paid by Purchaser, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Purchaser.
SECTION 4.08. BOARD DETERMINATION. The Board of Directors of Purchaser
at a meeting duly called and held, duly and unanimously adopted resolutions
approving this Agreement and the Merger.
SECTION 4.09. FULL DISCLOSURE. No statement contained in any
certificate or schedule furnished or to be furnished by Purchaser to the Company
in, or pursuant to the provisions of, this Agreement contains or shall contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in the light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
ARTICLE V
COVENANTS
SECTION 5.01. COVENANTS OF THE COMPANY. The Company agrees as to itself
and its subsidiaries that (except as expressly contemplated or permitted by this
Agreement, as set forth in the Disclosure Schedule or to the extent that
Purchaser shall otherwise consent in advance, which consent shall not be
unreasonably withheld and shall subsequently be confirmed in writing):
(a) ORDINARY COURSE. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course and the Company shall, and shall cause its subsidiaries to, use
all reasonable efforts to preserve intact their present business organizations,
keep available the services of their present officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with the Company and its subsidiaries.
(b) DIVIDENDS; CHANGES IN STOCK. The Company shall not, and
shall not permit any of its subsidiaries to, (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, except for
dividends by a direct or indirect wholly owned subsidiary of the Company to its
Purchaser, (ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (iii) repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or its
subsidiaries or any other securities thereof.
(c) ISSUANCE OF SECURITIES. The Company shall not, and shall
not permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber,
or authorize or propose the issuance, delivery,
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sale, pledge or encumbrance of, any shares of its capital stock of any class or
any securities convertible into, or any rights, warrants, calls, subscriptions
or options to acquire, any such shares or convertible securities, or any other
ownership interest (including stock appreciation rights or phantom stock) other
than (i) the issuance of shares of Company Common Stock upon the exercise of
Company Stock Options outstanding on the date of this Agreement and in
accordance with the terms of such Company Stock Options, or (ii) issuances by a
wholly-owned subsidiary of the Company of its capital stock to its Purchaser.
(d) GOVERNING DOCUMENTS. The Company shall not, and shall not
permit any of its subsidiaries to, amend or propose to amend its articles or
certificate of incorporation or bylaws (or similar organizational documents) in
any way which would be adverse to Purchaser's rights under this Agreement.
(e) NO ACQUISITIONS. The Company shall not, and shall not
permit any of its subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any substantial
assets of (other than inventory and equipment in the ordinary course consistent
with past practice, to the extent not otherwise prohibited by this Agreement),
or by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof.
(f) NO DISPOSITIONS. Other than dispositions in the ordinary
course of business consistent with past practice, the Company shall not, and
shall not permit any of its subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any of its assets.
(g) INDEBTEDNESS. The Company shall not, and shall not permit
any of its subsidiaries to, (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of others, enter into any
"keep-well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for working capital borrowings incurred in the ordinary
course of business consistent with past practice under the Company's credit
facility existing and in effect on the date of this Agreement, or (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than, with respect to both clause (i) and (ii) above, (A) to the
Company or any direct or indirect wholly owned subsidiary of the Company, or (B)
any advances to employees in accordance with past practice.
(h) ADVICE OF CHANGES; FILINGS. The Company shall confer with
Purchaser on a regular and frequent basis as reasonably requested by Purchaser,
report on operational matters and promptly advise Purchaser orally and, if
requested by Purchaser, in writing of any change or event to the Best Knowledge
of the Company having, or which, insofar as can reasonably be foreseen, is
likely to have, a Material Adverse Effect on the Company. The Company shall
promptly provide to Purchaser (or its counsel) copies of all filings made by the
Company with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
(i) ACCOUNTING CHANGES. The Company shall not make any
material change, other than in the ordinary course of business, consistent with
past practice, or as required by the SEC or law, with respect to any accounting
methods, principles or practices used by the Company (except insofar as may be
required by a change in generally accepted accounting principles).
(j) DISCHARGE OF LIABILITIES. Except for fees and expenses
related to the transactions contemplated herein, the Company shall not, and
shall not permit any of its subsidiaries to, pay, discharge, settle or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of (i) liabilities
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recognized or disclosed in the Most Recent Financial Statements, or (ii)
liabilities incurred since the date of such financial statements in the ordinary
course of business consistent with past practice. The Company shall not, and
shall not permit any of its subsidiaries to, waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement to
which the Company or any of its subsidiaries is a party.
(k) COMPENSATION OF COMPANY EMPLOYEES. Except as provided in
Section 3.07 of the Disclosure Schedule or in Sections 6.04 or 6.08, the Company
and its subsidiaries will not, without the prior written consent of Purchaser,
which shall not be unreasonably withheld, except as may be required by law, (i)
enter into, adopt, amend or terminate any Company Benefit Plan or other employee
benefit plan or any agreement, arrangement, plan or policy for the benefit of
any director, executive officer or current or former key employee, (ii) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, executive officer or key employee, except as required by any Company
Benefit Plan or agreement with such employees existing on the date of this
Agreement, (iii) enter into, adopt, amend or terminate any Company Benefit Plan
or other benefit plan or agreement, arrangement, plan or policy for the benefit
of any employees who are not directors, executive offices or current or former
key employees of the Company, other than increases in the compensation of
employees made in the ordinary course of business consistent with past practice,
or (iv) pay any benefit not required by any plan or arrangement as in effect as
of the date hereof (including the granting of, acceleration of exercisability of
or vesting of stock options, stock appreciation rights or restricted stock).
(l) MATERIAL CONTRACTS. Except in the ordinary course of
business consistent with past practices, neither the Company nor any of its
subsidiaries shall (i) modify, amend or terminate any material contract or
agreement to which the Company or such subsidiary is a party, or (ii) waive,
release or assign any material rights or claims.
(m) NO DISSOLUTION, ETC. The Company shall not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation of the Company or any of its subsidiaries.
(n) TAX ELECTION. Except as set forth in Section 3.14 of the
Disclosure Schedule, the Company shall not make any tax election or settle or
compromise any material income tax liability.
(o) GENERAL. The Company shall not, and shall not permit any
of its subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 5.01.
SECTION 5.02. NO SOLICITATION.
(a) The Company and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (as hereinafter defined). From and after the date hereof until the
termination of this Agreement, the Company shall not, nor shall it permit any of
its subsidiaries to, authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing non-public information or assistance), or knowingly take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or (ii) participate in any discussions or negotiations regarding any Acquisition
Proposal; PROVIDED, HOWEVER, that if, at any time the Board of Directors of the
Company determines in good faith, based upon the opinion of independent legal
counsel (who may be the Company's regularly engaged independent counsel), that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company may, in response to an
unsolicited Superior Proposal (as hereinafter defined), and subject to
compliance with Section 5.02(c), (x) furnish information with respect to the
Company to the person making such unsolicited Superior Proposal pursuant to a
confidentiality agreement in a form approved by the Company and Purchaser (such
approval not to be unreasonably
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withheld or delayed), and (y) participate in discussions or negotiations
regarding such Superior Proposal. For purposes of this Agreement, "ACQUISITION
PROPOSAL" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 20% or more of the assets of the
Company and its subsidiaries or 20% or more of any class of equity securities of
the Company or any of its subsidiaries, any tender offer or exchange offer that
if consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries (other than the transactions
between the parties hereto contemplated by this Agreement), or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger or which could reasonably
be expected to dilute materially the benefits to Purchaser of the transactions
contemplated hereby. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means
any bona fide proposal made by a third party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, more than 50% of the
shares of Company Common Stock then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Board of Directors of the
Company reasonably determines in its good faith judgment (based on the advice of
Mann, Armistead) to be more favorable to the Company's shareholders than the
Merger.
(b) Except as set forth in this Section 5.02, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Purchaser,
the approval or recommendation by such Board of Directors or committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal, or (iii) cause the Company to enter into
any agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of the Company determines in
good faith, based upon the opinion of independent legal counsel (who may be the
Company's regularly engaged independent counsel), that it is necessary to do so
in order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Board of Directors of the Company may (subject to the other
provisions of Section 5.02) withdraw or modify its approval or recommendation of
this Agreement and the Merger, approve or recommend a Superior Proposal, cause
the Company to enter into an agreement with respect to a Superior Proposal or
terminate this Agreement, but in each case only at a time that is after the
fifth business day following Purchaser's receipt of written notice (a "NOTICE OF
SUPERIOR PROPOSAL") advising Purchaser that the Board of Directors of the
Company has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. In addition, if the Company proposes to enter into an
agreement with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Purchaser the
Termination Fee (as such term is defined in Section 6.06(b)).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company shall promptly advise
Purchaser orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and, unless the Company is contractually prohibited from
making such disclosure (it being agreed that the Company shall use its good
faith, reasonable efforts to not be subject to such contractual prohibition).
the identity of the person making such request or Acquisition Proposal.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's shareholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with independent legal
counsel (who may be the Company's regularly engaged independent counsel),
failure so to disclose would be inconsistent with its fiduciary duties to the
Company's shareholders under applicable law; PROVIDED, HOWEVER, neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by Section 5.02(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
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SECTION 5.03. OTHER ACTIONS.
(a) Except as contemplated by Section 5.02 or the other
provisions of this Agreement, the Company shall not, and shall not permit any of
its subsidiaries to, take any action that could reasonably be expected to result
in (i) any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so qualified becoming untrue in
any material respect, or (iii) any of the conditions to the Merger set forth in
Article VII hereof not being satisfied in all material respects.
(b) Except as contemplated by Section 5.02 or the other
provisions of this Agreement, Purchaser shall not, and shall not permit any of
its subsidiaries to, take any action that could reasonably be expected to result
in (i) any of the representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions to the Merger set forth in
Article VII hereof not being satisfied in all material respects.
SECTION 5.04. FINANCING COVENANTS OF PURCHASER AND SUB. Purchaser will
use its good faith and reasonable commercial efforts to obtain all debt and/or
equity financing reasonably expected to be required to accomplish the Merger and
the payment for Shares pursuant to this Agreement and to pay Purchaser's related
fees and expenses. Purchaser shall promptly (x) forward to the Company copies of
all written commitment letters, letters of intent and/or other agreements in
principle with respect to all debt and/or equity financing reasonably expected
to be obtained in connection with the Merger (collectively the "COMMITMENTS"),
and (y) advise the Company orally, and if requested by Company, in writing of
(i) any significant change in the status of any such financing arrangements, or
(ii) to the knowledge of Purchaser, any other event which could reasonably be
expected to materially delay or prevent the Merger. Purchaser shall promptly
provide Company with copies of any written changes or termination of the
Commitments and any written commitments for alternate financing.
SECTION 5.05. SOLVENCY. Purchaser agrees to provide to the Special
Committee any opinions (and supporting documentation) regarding the matters
referred to in Section 4.06 as are provided to any banks or other lenders in
connection with the Merger at the same time that they are provided to such banks
or other lenders.
SECTION 5.06. AMENDMENT OF MANAGEMENT AGREEMENT. Purchaser shall cause
Trivest II, Inc. ("TRIVEST") to promptly execute an amendment to its existing
Investment Services Agreement with the Company (the "MANAGEMENT AGREEMENT") in
order to provide to the effect that, (x) no Fee shall be payable to Trivest
pursuant to Section 6.3 of the Management Agreement with respect to the Merger,
(y) if the Termination Fee is paid in connection with a Superior Proposal
pursuant to the terms hereof, no fee shall be payable to Trivest pursuant to
Section 6.3 of the Management Agreement with respect to such Superior Proposal,
and (z) Trivest shall not be reimbursed pursuant to Section 4 of the Management
Agreement for any expenses related to the Merger or a Superior Proposal, which
amendment shall be in form reasonably acceptable to the Special Committee.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. SHAREHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) Subject to the receipt of the written fairness opinion of
Mann, Armistead contemplated by Section 3.04(c) hereof, the Company shall, (i)
as soon as practicable, duly call, give notice of, convene and hold a meeting of
its shareholders (the "SHAREHOLDERS MEETING") for the purpose of obtaining the
Company Shareholder Approval, (ii) through its Board of Directors, recommend to
its shareholders that the Company Shareholder Approval be given, and (iii) at
the direction of Purchaser,
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solicit from holders of Shares entitled to vote at the Shareholder Meeting
proxies in favor of the Company Shareholder Approval and shall take all other
action necessary or, in the judgment of Purchaser, helpful to secure the vote or
consent of such holders required by the Corporation Law or this Agreement to
effect the Merger.
(b) Purchaser and the Company shall, as soon as practicable,
jointly prepare and the Company shall file a preliminary Proxy Statement (or, if
requested by Purchaser and applicable, an information statement in lieu of a
proxy statement pursuant to Rule 14C under the Exchange Act, with all references
herein to the Proxy Statement being deemed to refer to such information
statement, to the extent applicable) with the SEC and shall use its best efforts
to respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after responding to all such comments to the satisfaction of the staff. The
Company shall notify Purchaser promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and shall
supply Purchaser with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. If at any time prior to
the Shareholders Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its shareholders such an amendment or supplement. The
Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Purchaser reasonably objects unless required by law. The
Company and its counsel shall permit Purchaser and its counsel to participate in
all communications with the SEC and its staff, including all meetings and
telephone conferences, relating to the Proxy Statement, the Merger or this
Agreement.
(c) Purchaser agrees to cause all Shares owned by Purchaser or
any subsidiary of Purchaser to be voted in favor of the Company Shareholder
Approval.
(d) The Company hereby consents to the inclusion in the Proxy
Statement of the recommendation of the Company's Board and the recommendation of
the Board's Special Committee described in Section 3.04, subject to any
modification, amendment or withdrawal thereof; provided, however, that in no
event shall the Company be required to mail the Proxy Statement to its
shareholders prior to the receipt of the written fairness opinion of Mann,
Armistead contemplated by Section 3.04(c) hereof.
(e) In connection with the Merger, the Company shall cause its
transfer agent to furnish Purchaser promptly with mailing labels containing the
names and addresses of the record holders of Shares as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of shareholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Purchaser such information
and assistance (including updated lists of shareholders, security position
listings and computer files) as Purchaser may reasonably request.
SECTION 6.02. ACCESS TO INFORMATION. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which the Company is
subject, the Company shall, and shall cause each of its subsidiaries to, afford
to Purchaser and to the officers, employees, accountants, counsel and other
representatives of Purchaser access, during normal business hours to all their
respective properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of its subsidiaries to)
furnish promptly to Purchaser (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to SEC requirements, and (b) all other information concerning its business,
properties and personnel as Purchaser may reasonably request. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the documents necessary to consummate the Merger, Purchaser and its
agents shall hold in confidence all non-public information received from the
Company, shall use such information only in connection with the Merger and, if
this Agreement shall be terminated, shall, upon request, deliver, and shall use
their best efforts to cause Its agents to deliver, to the Company all copies of
such non-public information then in their possession or control.
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SECTION 6.03. REASONABLE EFFORTS. Each of the Company and Purchaser
agrees to use its reasonable efforts to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
itself with respect to the Merger (which actions shall include furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and shall promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their subsidiaries in connection with the
Merger. Each of the Company and Purchaser will, and shall cause its subsidiaries
to, use its reasonable efforts to take all reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Purchaser, the Company or any of their subsidiaries in connection with the
Merger or the taking of any action contemplated by this Agreement, except that
no party need waive any substantial rights or agree to any substantial
limitation on its operations or to dispose of or hold separate any material
assets.
SECTION 6.04. COMPANY STOCK OPTIONS; PLANS.
(a) Purchaser and the Company shall, effective as of the
Effective Time, (i) cause each outstanding option to purchase Company Common
Stock (a "COMPANY STOCK OPTION") issued pursuant to the Company's 1994 Stock
Option Plan, as Amended and Restated Effective January 23, 1997 (the "COMPANY
STOCK OPTION PLAN"), whether or not exercisable or vested, to become fully
exercisable and vested, (ii) cause each Company Stock Option that is outstanding
to be canceled, and (iii) in consideration of such cancellation and, except to
the extent that Purchaser and the holder of any such Company Stock Option
otherwise agree, cause the Company (or, at Purchaser's option, Purchaser) to pay
such holders of Company Stock Options an amount in respect thereof equal to the
product of (x) the excess, if any, of the Merger Consideration over the exercise
price of each such Company Stock Option, and (y) the number of shares of Company
Common Stock subject to the Company Stock Option immediately prior to its
cancellation (such payment to be net of applicable withholding taxes).
(b) Except as may otherwise be agreed by Purchaser and the
Company, the Company Stock Option Plan shall terminate as of the Effective Time,
and no holder of Company Stock Options or any participant in the Company Stock
Option Plan shall have any rights thereunder to acquire any equity securities of
the Company, the Surviving Corporation or any subsidiary thereof.
(c) Except as may otherwise be agreed by Purchaser and the
Company, all other plans, programs or arrangements providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any of its subsidiaries shall terminate as of the Effective Time, and no
participant in any such plans, programs or arrangements shall have any rights
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof.
SECTION 6.05. CONFIDENTIALITY. Prior to the Closing, Purchaser shall,
and shall cause its Affiliates and its and their employees, agents, accountants,
legal counsel and other representatives and advisers to, hold in strict
confidence all, and not divulge or disclose any information of any kind
concerning the Company and its business; provided, however, that the foregoing
obligation of confidence shall not apply to (i) information that is or becomes
generally available to the public other than as a result of a disclosure by
Purchaser, any of its Affiliates or any of their respective employees, agents,
accountants, legal counsel or other representatives or advisers, (ii)
information that is or becomes available to Purchaser, any of its Affiliates or
any of their respective employees, agents, accountants, legal counsel or other
representatives or advisers on a nonconfidential basis, and (iii) information
that is required to be disclosed by Purchaser, any of its Affiliates or any of
their respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that Purchaser
promptly shall notify the Company of any disclosure pursuant to clause (iii) of
this Section 6.05. Promptly after any termination of this Agreement, Purchaser
and its representatives shall return to the Company or destroy all copies of
documentation with respect to the Company that were supplied by or on behalf of
the Company pursuant to this Agreement, without retaining any copy thereof, and
destroy any notes or analyses Purchaser and/or its representatives may have
prepared containing information derived from such materials.
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SECTION 6.06. FEES AND EXPENSES.
(a) Except as provided below in this Section 6.06, all fees
and expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated. Notwithstanding
the foregoing, the Purchaser shall pay all filing fees required under the HSR
Act in connection with the Merger and the transactions contemplated hereby.
(b) If (i) Purchaser terminates this Agreement under Section
8.01(d) or Section 8.01(e), or (ii) the Company terminates this Agreement
pursuant to Section 8.01(f), the Company shall assume and pay to Purchaser, or
cause to be paid, a termination fee in an amount equal to the sum of (i) all
expenses incurred by Purchaser in connection with the transactions contemplated
hereby, up to a maximum total of $1,500,000, PLUS (ii) $10,000,000 (such sum is
referred to herein as the "TERMINATION FEE").
SECTION 6.07. INDEMNIFICATION; INSURANCE.
(a) Purchaser agrees that all rights to indemnification for
acts or omissions occurring prior to the Effective Time now existing in favor of
the current or former directors or officers (the "INDEMNIFIED PARTIES") of the
Company and its subsidiaries as provided in their respective certificates or
articles of incorporation or bylaws (or similar organizational documents) or
existing indemnification contracts shall survive the Merger and shall continue
in full force and effect in accordance with their terms.
(b) In addition, Purchaser will provide, or cause the
Surviving Corporation to provide, for a period of not less than two years after
the Effective Time, the Company's current directors and officers an insurance
and indemnification policy that provides coverage for events occurring at or
prior to the Effective Time (the "D&O INSURANCE") that is no less favorable than
the Company's existing D&O Insurance policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, that Purchaser and the Surviving Corporation shall not be required to
pay an annual premium for the D&O Insurance in excess of 200% of the annual
premium currently paid by the Company for such insurance, but in such case shall
purchase as much such coverage as possible for such amount.
(c) This Section 6.07 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, Purchaser, the
Surviving Corporation and the Indemnified Parties and their respective heirs,
personal representatives, successors and assigns, and shall be binding on all
successors and assigns of Purchaser and the Surviving Corporation.
SECTION 6.08. EMPLOYMENT AND BENEFIT ARRANGEMENTS.
(a) From and after the Effective Time, Purchaser shall cause
the Surviving Corporation to honor all employment, severance, termination and
retirement agreements to which the Company is a party, as such agreements are in
effect on the date hereof.
(b) For a one-year period following the Effective Time,
Purchaser shall cause the Surviving Corporation to provide those employees who
are employees of the Surviving Corporation at the Effective Time with benefits
that are, in the aggregate, no less favorable to such employees as are the
benefits of the Company available to such employees immediately prior to the
Effective Time.
(c) The provisions of this Section 6.08 are not intended to
create rights of third party beneficiaries.
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ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a majority
of the outstanding shares of Company Common Stock;
(b) All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Authority or other regulatory
body required in connection with the execution, delivery and performance of this
Agreement, the failure to obtain which would prevent the consummation of the
Merger or have a Material Adverse Effect on the Company, shall have been
obtained without the imposition of any condition having a Material Adverse
Effect on the Company;
(c) Early termination shall have been granted or applicable
waiting periods shall have expired under the HSR Act, if applicable;
(d) No Governmental Authority or other regulatory body
(including any court of competent jurisdiction) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of, and there shall be no action,
suit or proceeding pending which could reasonably be expected to have the effect
of, making illegal, materially restricting or in any way preventing or
prohibiting the Merger or the transactions contemplated by this Agreement, or
imposing damages or penalties in connection therewith which are material to any
of the Company, Purchaser or any of their respective affiliates;
(e) All authorizations, consents, waivers and approvals from
parties to contracts or other agreements to which any of the Company or its
subsidiaries is a party, or by which any of them is bound, as may be required to
be obtained by them in connection with the performance of this Agreement, the
failure to obtain which would prevent the consummation of the Merger or have,
individually or in the aggregate, a Material Adverse Effect on Company, shall
have been obtained; and
(f) The Company shall have received the written fairness
opinion of Mann, Armistead contemplated by Section 3.04(c) hereof.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PURCHASER TO EFFECT THE
MERGER. The obligations of Purchaser to effect the Merger are further subject to
satisfaction or waiver at or prior to the Effective Time of the following
conditions.
(a) There shall not have occurred any change, condition, event
or development that has resulted in, or could reasonably be expected to result
in, a Material Adverse Effect on the Company;
(b) The representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time;
(c) the representations and warranties of the Company in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective Time;
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(d) the Company shall have performed in all material respects
all obligations required to be performed by it under this Agreement;
(e) an officer of the Company shall have delivered to
Purchaser a certificate to the effect that each of the conditions specified in
Sections 7.02(b), (c) and (d) is satisfied in all respects; and
(f) Purchaser shall have received an opinion, dated the
Effective Time, of Balch & Bingham L.L.P., counsel to the Company, in form and
substance reasonably satisfactory to Purchaser, with respect to the matters set
forth in Sections 3.01, 3.02, 3.03, 3.04 and 3.05 hereof.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Purchaser in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time;
(b) The representations and warranties of the Purchaser in
this Agreement that are not qualified by materiality shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Time;
(c) Purchaser shall have performed in all material respects
all obligations required to be performed by it under this Agreement;
(d) Purchaser shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Sections
7.03(a), (b) and (c) is satisfied in all respects;
(e) The Company shall have received an opinion, dated the
Effective Time, of Greenberg Traurig, P.A., counsel to Purchaser, in form
reasonably satisfactory to the Company, with respect to the matters set forth in
Sections 4.01, 4.02 and 4.03 hereof; and
(f) Purchaser shall have executed definitive documentation in
connection with their financing of the Merger Consideration and shall have
sufficient funds available to consummate the Merger, to pay all related expenses
and to refinance the Company's existing indebtedness to Heller Financial, Inc.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the shareholders of the Company:
(a) by mutual written consent of Purchaser and the Company;
(b) by either Purchaser or the Company if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, shares of Company Common Stock pursuant to the
Merger and such order, decree or ruling or other action shall have become final
and nonappealable; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.01(b) shall not be available to any party that has
failed to perform its obligations under Section 6.03;
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(c) by either Purchaser or the Company if the Effective Time
shall not have occurred on or before July 15, 1999, unless extended by agreement
of the parties.
(d) by Purchaser, if
(i) (A) the representations and warranties of the
Company in Section 3.03 shall not have been true and correct in all material
respects when made, or (B) any other representation or warranty of the Company
shall not have been true and correct in all material respects when made, except
in any case where such failure to be true and correct would not, in the
aggregate, (x) have a Material Adverse Effect on the Company, or (y) prevent or
materially delay consummation of the Merger;
(ii) the Company shall have failed to comply in any
material respect with any of its material obligations or covenants contained
herein, except in any case where such failure would not, in the aggregate, (x)
have a Material Adverse Effect on the Company, or (y) prevent or materially
delay consummation of the Merger; or
(iii) there shall have been a Material Adverse Change
with respect to the Company; provided that the Company shall, if curable, have a
reasonable period in which to cure any failure described in clause (i), (ii) or
(iii) above.
(e) by Purchaser, if
(i) the Board of Directors of the Company or the
Special Committee shall have failed to approve and recommend or shall have
withdrawn or modified in a manner adverse to Purchaser its approval or
recommendation of the Merger or this Agreement, or approved or recommended any
Acquisition Proposal;
(ii) the Company shall have entered into any
agreement with respect to any Superior Proposal in accordance with Section
5.02(b); or
(iii) the Board of Directors of the Company or the
Special Committee shall have resolved to take any of the foregoing actions;
(f) by the Company in connection with entering into a
definitive agreement in accordance with Section 5.02(b), provided it has
complied with all provisions thereof, including the notice provisions therein
and the payment of the Termination Fee, and provided that the Company shall not
have breached in any material respect the provisions of Section 5.02(a); or
(g) by the Company, if
(i) any representation or warranty of Purchaser shall
not have been true and correct in all material respects when made or shall have
ceased at any later date to be true and correct in all material respects as if
made at such later date; or
(ii) Purchaser fails to comply in any material
respect with any of its material obligations or covenants contained herein;
provided that Purchaser shall, if curable, have a reasonable period in which to
cure any failure described in clause (i) or (ii) above.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a termination of
this Agreement by either the Company or Purchaser as provided in Section 8.01,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Purchaser, the Company or their respective
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officers, directors, shareholders or affiliates, except with respect to Section
3.16, Section 4.06, Section 6.05, Section 6.06, this Section 8.02 and Article
IX; PROVIDED, HOWEVER, that nothing herein shall relieve any party for liability
for any breach hereof.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after obtaining the Company Shareholder Approval, but,
after any such approval, no amendment shall be made which by law requires
further approval by such shareholders (or which reduces the amount or changes
the Merger Consideration to be delivered to such shareholders) without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or, in the
case of the Company, shall survive the acceptance for payment of, and payment
for, Shares pursuant to the Merger.
SECTION 9.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Purchaser, to
Trivest Furniture Corporation
2655 South Bayshore Drive, Suite 800
Miami, Florida 33131
Attn: General Counsel
Telecopy No.: (305) 858-1629
Confirm No.: (305) 858-2200
with a copy to:
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough, Esq.
Telecopy No.: (305) 579-0717
Confirm No.: (305) 579-0500
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and
(b) if to the Company, to
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Attn: James S. Smith
Telecopy No.: (205) 408-7028
Confirm No.: (205) 408-7600
with a copy to:
Balch & Bingham, LLP
1901 Sixth Avenue North
Suite 2600
Birmingham, Alabama 35203
Attn: James F. Hughey, Jr.
Telecopy No.: (205) 226-8799
Confirm No.: (205) 226-3469
SECTION 9.03. INTERPRETATION. (i) When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this Agreement, they
shall be deemed to be followed by the words "WITHOUT LIMITATION". The phrase
"MADE AVAILABLE" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, the term "SUBSIDIARY" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person, and the term "AFFILIATE"
shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act. As used in this Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE
EFFECT" means, when used in connection with the Company, any change or effect,
except those relating to general economic conditions or the furniture industry
generally (or any development that, insofar as can reasonably be foreseen, is
likely to result in any change or effect) that, individually or in the aggregate
with any such other changes or effects, is materially adverse to the business,
prospects, assets (including intangible assets), financial condition or results
of operations of the Company and its subsidiaries taken as a whole; and (ii)
"BEST KNOWLEDGE" of the Company or any of its Subsidiaries shall be limited to
the knowledge of the following designated officers: Earl W. Powell, Vincent A.
Tortorici, Jr., Bobby Tesney and Stephen C. Hess. An individual shall be deemed
to have "knowledge" of or to have "known" a particular fact or other matter if
(i) such individual is actually aware of such fact or other matter, or (ii) a
prudent individual should have known such fact or other matter in the course of
performing the responsibilities of his or her job position.
SECTION 9.04. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject
27
<PAGE> 146
matter hereof, and (b) except as provided in Section 6.07 and Section 6.08, are
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
SECTION 9.06. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida and, to the extent
provided herein, the Corporation Law, without regard to any applicable conflicts
of law.
SECTION 9.07. PUBLICITY. Except as otherwise required by law or the
rules of the Nasdaq National Market, for so long as this Agreement is in effect,
neither the Company nor Purchaser shall, or shall permit any of its subsidiaries
to, issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect wholly owned subsidiary of Purchaser. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.09. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their 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 of this Agreement. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of Florida in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of Florida.
28
<PAGE> 147
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
TRIVEST FURNITURE CORPORATION
By: /s/ William F. Kaczynski, Jr.
--------------------------------------
William F. Kaczynski, Jr.
Vice President
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
--------------------------------------
Bobby Tesney
President and Chief Executive Officer
29
<PAGE> 148
APPENDIX B
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKERS AND ADVISORS
April 7, 1999
Special Committee of the Board of Directors
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Gentlemen:
WinsLoew Furniture, Inc. (the "Company") and Trivest Furniture
Corporation (the "Purchaser") have entered into an Amendment and Restated Plan
of Merger dated as of March 30, 1999 (the "Agreement") whereby the Purchaser
would be merged into the Company (the "Merger") pursuant to the terms and
subject to the conditions of the Agreement. The Agreement provides that each
outstanding share of common stock of the Company, other than the shares owned
directly or indirectly by the Purchaser, (the "Public Shareholders") will be
converted into the right to receive $33.00 in cash. You have requested our
opinion to the fairness, from a financial point of view, to the Public
Shareholders of the cash consideration to be received by the Public
Shareholders in the Merger.
In arriving at our opinion, we, among other things: (i) reviewed the
Agreement; (ii) solicited the interest of third parties in submitting a
competing offer for the acquisition of the Company; (iii) met with officers
and certain members of the management of WinsLoew to discuss the respective
business, financial condition, operating results and future prospects; (iv)
reviewed the Company's annual audited financial statements and interim
unaudited financial statements through February 22, 1999; (v) reviewed
publicly available information including recent Securities and Exchange
Commission filings and shareholder communications for WinsLoew: (vi) compared
certain financial and stock market data of WinsLoew with similar data for
selected publicly-held furniture companies; (vii) reviewed projected financial
statements through December 31, 2002 as prepared by management of the Company;
(viii) reviewed historical market price and volume data for the common stock
of WinsLoew; (ix) reviewed various published research reports for WinsLoew;
and (x) made such other financial studies, analyses, and investigations as we
deemed appropriate.
In rendering this opinion, we have relied upon the accuracy and
completeness of all financial and other information furnished to us by or on
behalf of the Company and other published information that we considered in
our review. We were not requested to and generally have not undertaken to
verify independently the accuracy and completeness of such information. We
have relied upon the reasonableness of all projections and forecasts provided
to us and have assumed that they were prepared in accordance with accepted
practice on bases reflecting the best currently available estimates and good
faith judgments of the Company's management. Our opinion herein is based on
the circumstances existing and known to us as of the date hereof. We
<PAGE> 149
Special Committee of the Board of Directors
WinsLoew Furniture, Inc.
April 7, 1999
Page 2
have not made or obtained any independent evaluations or appraisals of the
assets or liabilities (contingent or otherwise) of the Company, nor were we
furnished with any such evaluations or appraisals. Consequently, we do not
express any opinion regarding the value of any of the Company's specific
individual assets. We were not requested to, and therefore did not,
participate in the structuring or negotiating of the Merger and have relied as
to certain legal matters on advice from counsel to the Special Committee.
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. Although subsequent developments may affect
this opinion, we do not have any obligation to update or revise this opinion.
Our opinion does not address (i) the relative merits of the Merger and the
other business strategies or transactions with third parties being considered
by the Company's Board of Directors, (ii) the Board's decision to proceed
with the Merger or (iii) the value of the shares of common stock held by the
Purchaser or fairness of any consideration being received by the Purchaser in
the Merger. Our opinion does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the proposed
transaction.
Mann, Armistead & Epperson, Ltd., as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities
in connection with mergers, acquisitions, underwritings, private placements
and valuations for corporate, estate and other purposes. Pursuant to our
engagement in connection with this fairness opinion, we will receive a fee
for our services in rendering said opinion, a substantial portion of which is
contingent upon the consummation of the Merger. We are familiar with WinsLoew,
having acted as investment banker in the sale of one of the Company's
subsidiaries and having provided investment research on the Company.
The opinion expressed herein is provided solely for the benefit of
the Special Committee of the Board of Directors of WinsLoew and the opinion,
and any supporting analysis or other material supplied by us may not be
quoted, referred to, or used in any public filing or in any written document
or for any other purpose without the prior written approval of Mann, Armistead
& Epperson, Ltd. This letter is not intended to, and shall not, confer any
rights or remedies upon any security holder of WinsLoew or any other person or
entity
Based upon the foregoing considerations, it is our opinion that as of
April 7, 1999, the consideration to be received by the Public Shareholders of
WinsLoew upon consummation of the Merger is fair, from a financial point of
view, to the Public Shareholders of WinsLoew.
Truly yours,
MANN, ARMISTEAD & EPPERSON, LTD.
/s/ MANN, ARMISTEAD & EPPERSON, LTD.
<PAGE> 1
Exhibit (d)(4)
COMMON STOCK PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
WINSLOEW FURNITURE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of WINSLOEW FURNITURE,
INC., a Florida corporation (the "Company"), hereby appoints Earl W. Powell and
William F. Kaczynski, Jr., and each of them, as proxies for the undersigned,
each with full power of substitution, and hereby authorizes them to represent
and to vote, as designated on the reverse side of this proxy card, all shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Special Meeting of Shareholders of the Company to be held at the offices of
Trivest, Inc., 2665 South Bayshore Drive, Miami, Florida 33133 at 9:00 A.M.,
local time, on ___________, June _, 1999, and at all adjournments and
postponements thereof.
(To be signed on the other side)
<PAGE> 2
A /X/ Please mark
your
votes as in this
example
The Board of Directors recommends a vote FOR proposal 1 set forth below.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Proposal to approve and adopt an Amended and Restated Agreement and Plan The proxies are authorized to vote, in their
of Merger pursuant to which Trivest Furniture Corporation, a newly-formed discretion, upon such other business as may
corporation (the "Purchaser"), will be merged with and into the Company properly come before the Annual Meeting and
and each outstanding share of the Company's Common Stock, $.01 par any adjournments or postponements thereof.
value per share (other than shares held by the Purchaser), will
be converted into the right to receive $33.00 in cash, without interest.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" PROPOSAL 1 SET
/ / For / / Against / / Abstain FORTH ABOVE.
PLEASE MARK, SIGN AND DATE, THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED. NO
POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
The undersigned hereby acknowledges receipt of the
Notice of Special Meeting and related Proxy
Statement.
(Signature)_________________________________________ DATE ____________________ __________________________________ DATE __________
SIGNATURE, IF HELD JOINTLY
IMPORTANT: Please sign exactly as your name appears hereon and mail it promptly even though you now plan to attend the meeting.
When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or
guardian please give full title as such. If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by authorized person.
</TABLE>
<PAGE> 1
EXHIBIT (d)(5)
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION:
Earl W. Powell
Chairman of the Board
(305) 858-2200
WINSLOEW RECEIVES GOING PRIVATE BUYOUT OFFER
FROM MANAGEMENT GROUP LED BY CHAIRMAN
BIRMINGHAM, AL -- (January 18, 1999) WinsLoew Furniture, Inc. (NASDAQ/NM:WLFI)
today announced that its Board of Directors received a proposal from an entity
controlled by Earl W. Powell, the Chairman of the Board of the Company, together
with members of management, for the merger of the Company pursuant to which the
public shareholders of the Company would receive $30 per share in cash.
The Company also announced that its Board of Directors has established a special
committee to evaluate and consider the offer. The proposed merger is subject,
among other things, to (i) the execution of a definitive merger agreement
containing customary terms, (ii) approval of the transaction by the special
committee, the board of directors and the Company's shareholders, (iii) the
receipt of satisfactory financing for the transaction, and (iv) compliance with
all applicable regulatory and governmental requirements. Accordingly, there can
be no assurance that the proposed merger will be consummated.
WinsLoew Furniture, Inc. designs, manufactures, and distributes aluminum casual
(porch and patio) furniture and contract seating for the hospitality and office
furniture markets.
Additional information is available on the Internet at
http://www.cfonews.com/wlfi.
###
<PAGE> 1
EXHIBIT (d)(6)
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION:
EARL W. POWELL (305) 858-2200
BOBBY TESNEY (205) 408-7600
WINSLOEW SIGNS LETTER OF INTENT
FOR MANAGEMENT BUYOUT
BIRMINGHAM, AL - (January 25, 1999) WinsLoew Furniture, Inc. (NASDAQ/NM:WLFI)
today announced that it has entered into a non-binding letter of intent
expressing the parties' mutual intent to pursue a potential merger in which the
Company's public shareholders would receive $30.00 per share in cash. The
purchasing entity would be formed by Earl W. Powell, the Chairman of the Board
of the Company, together with the other members of management. A Special
Committee of the Company's Board of Directors recommended the letter of intent
after consultation with its financial advisor, Mann, Armistead & Epperson, Ltd.,
Richmond, Virginia, and its legal counsel, Balch & Bingham LLP, Birmingham,
Alabama.
The letter of intent permits the Company to solicit and consider
superior proposals subject to the payment of a termination fee to the management
group if the Company terminates the letter of intent by entering into an
agreement with another purchaser. The letter of intent terminates in 90 days if
a definitive agreement has not been entered into with the management group by
that time.
The proposed merger is subject, among other things, to (i) execution of
a definitive merger agreement containing customary terms, (ii) approval of the
transaction by the Special Committee, the Board of Directors and the Company's
shareholders, (iii) the purchaser obtaining satisfactory financing for the
transaction, (iv) receipt of a fairness opinion, and (v) compliance with all
applicable regulatory and governmental requirements. Accordingly, there can be
no assurance that the proposed merger will be consummated.
WinsLoew Furniture, Inc. designs, manufactures, and distributes
aluminum casual (porch and patio) furniture and contract seating for the
hospitality and office furniture markets.
Additional information is available on the Internet at
http://www.cfonews.com/wlfi.
###
<PAGE> 1
EXHIBIT(d)(7)
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION:
Vincent A.Tortorici, Jr.
Chief Financial Officer
205-408-7600
WINSLOEW EXECUTES MERGER AGREEMENT WITH
TRIVEST ACQUISITION GROUP
BIRMINGHAM, AL - (March 5, 1999) WinsLoew Furniture, Inc. (NASDAQ/NM:WLFI) today
announced that it has entered into an Agreement and Plan of Merger with Trivest
Furniture Corporation, a newly formed company controlled by Earl W. Powell of
Trivest, Inc., who is also the Chairman of WinsLoew's board of directors.
Several members of WinsLoew's present management are included in the purchaser
group. Under the terms of the Agreement, Trivest will acquire WinsLoew in a
merger transaction for $30.00 per share in cash. The Agreement permits WinsLoew
for a period of thirty days to continue to solicit alternative proposals which
may be superior to the Trivest merger and, thereafter, to participate in
discussions regarding unsolicited superior proposals.
The Merger Agreement was approved by a special committee of WinsLoew's board of
directors acting on, among other things, an oral opinion received from its
financial advisor, Mann, Armistead & Epperson, Ltd., Richmond, Virginia, that
the merger consideration is fair to WinsLoew's shareholders from a financial
point of view.
The proposed merger is subject, among other things, to (i) shareholder approval,
(ii) receipt of Mann, Armistead's written fairness opinion, (iii) Trivest
obtaining adequate financing, and (iv) compliance with all applicable regulatory
and governmental requirements. Accordingly, there can be no assurance that the
Trivest merger will be consummated.
WinsLoew Furniture, Inc. designs, manufactures, and distributes aluminum casual
(porch and patio) furniture and contract seating for the hospitality and office
furniture markets.
Additional information is available on the Internet at
HTTP://WWW.CFONEWS.COM/WLFI.
###
<PAGE> 1
EXHIBIT(d)(8)
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION:
Vincent A.Tortorici, Jr.
Chief Financial Officer
205-408-7600
TRIVEST ACQUISITION GROUP INCREASES
PER SHARE CASH PURCHASE PRICE FOR WINSLOEW
BIRMINGHAM, AL - (March 31, 1999) WinsLoew Furniture, Inc. (NASDAQ/NM:WLFI)
today announced that it has amended its Agreement and Plan of Merger with
Trivest Furniture Corporation, a newly formed company controlled by Earl W.
Powell of Trivest, Inc., who is also the Chairman of WinsLoew's board of
directors, to increase the per share cash purchase price from $30.00 per share
to $33.00 per share. The amendment to the Agreement and Plan of Merger was
approved by WinsLoew's board of directors, as well as the Special Committee of
the Board appointed to evaluate the initial Trivest proposal and possible
strategic alternatives.
Pursuant to the amended agreement, the proposed merger is subject, among other
things, to (i) shareholder approval and (ii) compliance with all applicable
regulatory and governmental requirements. Accordingly, there can be no assurance
that the Trivest merger will be consummated.
WinsLoew Furniture, Inc. designs, manufactures, and distributes aluminum casual
(porch and patio) furniture and contract seating for the hospitality and office
furniture markets.
Additional information is available on the Internet at
http://www.cfonews.com/wlfi.
###
