SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or
Section240.14a-12
DYNAMIC HOMES, INC.
---------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: Common
Stock, par value $.10 per share, of Dynamic Homes, Inc.
2) Aggregate number of securities to which transaction applies: 2,240,850
outstanding shares, plus stock option settlements with respect to 155,000
shares.
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): The filing fee of $1,151.20
was calculated based upon the product of 2,240,850 shares of Common Stock
at $2.55 per share and 155,000 options at an average option spread of $.27
per share.
4) Proposed maximum aggregate value of transaction: $5,756,018
5) Total fee paid: $1,151.20
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
DYNAMIC HOMES, INC.
525 Roosevelt Avenue
Detroit Lakes, Minnesota 56501
October __, 2000
Dear Stockholder:
You are cordially invited to attend our Special Meeting of stockholders
of Dynamic Homes, Inc. to be held on November 21, 2000, at 9:00 a.m., Central
Standard Time, at the Holiday Inn Motel, Detroit Lakes, Minnesota.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated September
25, 2000, pursuant to which Dynamic Acquisitions, Inc., a newly formed Minnesota
corporation and a wholly owned subsidiary of Dynamic Homes, LLC, a Minnesota
limited liability company, will be merged with and into Dynamic Homes, Inc. and
Dynamic Homes, Inc. will become a wholly owned subsidiary of Dynamic Homes, LLC.
If the merger agreement is approved and the merger is subsequently consummated,
each outstanding share of common stock of Dynamic Homes, Inc. will be cancelled
and converted automatically into the right to receive cash of $2.55 per share,
without interest thereon.
Dynamic Homes, Inc.'s Board of Directors formed a Special Committee to
mitigate any possible conflict of interest in evaluating this merger proposal,
and to oversee the negotiation of the Agreement and Plan of Merger with Dynamic
Homes, LLC.
The Special Committee has unanimously approved the Agreement and Plan
of Merger and has determined that its terms are fair and in the best interests
of Dynamic Homes and its stockholders.
THE SPECIAL COMMITTEE RECOMMENDS THAT YOU VOTE IN FAVOR OF APPROVAL AND
ADOPTION OF AGREEMENT AND PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
Approval and adoption of the Agreement and Plan of Merger requires the
affirmative vote of the holders of a majority of the issued and outstanding
shares of common stock. Each share of Dynamic Homes, Inc. common stock is
entitled to one vote on all matters to come before the Special Meeting. Dynamic
Homes, Inc.'s common stock constitutes its only outstanding class of capital
stock.
Attached to this letter you will find a formal Notice of Special
Meeting a proxy statement, related information about Dynamic Homes, Inc. and a
proxy card. The accompanying proxy statement provides you with detailed
information about the Special Meeting and the proposed merger. If the Agreement
and Plan of Merger is approved by the requisite holders of Dynamic Homes, Inc.'s
common stock, the closing of the merger will occur soon after the Special
Meeting
and after all of the other conditions to closing the merger are satisfied.
Please give this material your careful attention. You may also obtain more
information from documents that Dynamic Homes, Inc. has filed with the
Securities and Exchange Commission.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF DYNAMIC
HOMES, INC. COMMON STOCK YOU OWN. A FAILURE TO VOTE WILL COUNT AS A VOTE AGAINST
THE MERGER. ACCORDINGLY, YOU ARE REQUESTED PROMPTLY TO COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND. THIS WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON
IF YOU SUBSEQUENTLY CHOOSE TO ATTEND THE SPECIAL MEETING.
Thank you for your cooperation.
Very truly yours,
Scott D. Lindemann
Chief Executive Officer
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.
DYNAMIC HOMES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 21, 2000
TO THE STOCKHOLDERS OF DYNAMIC HOMES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders of
Dynamic Homes, Inc., a Minnesota corporation ("Dynamic Homes"), will be held at
the Holiday Inn Motel, Detroit Lakes, Minnesota at 9:00 a.m., Central Standard
Time, on November 21, 2000, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated September 25, 2000, pursuant to which
Dynamic Acquisitions, Inc., a newly formed Minnesota corporation and a wholly
owned subsidiary of Dynamic Homes, LLC, a Minnesota limited liability company,
will be merged with and into Dynamic Homes and Dynamic Homes will become a
wholly owned subsidiary of Dynamic Homes, LLC. If the agreement is approved and
the merger is subsequently consummated, each outstanding share of common stock
of Dynamic Homes will be cancelled and converted automatically into the right to
receive cash of $2.55 per share, without interest thereon.
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement.
Only stockholders of record at the close of business on October 15,
2000, will be entitled to notice of and to vote at the Special Meeting and at
any adjournment or postponement of the Special Meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING
THE MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
Dynamic Homes stockholders have the right to dissent from the merger
and obtain payment in cash of the fair value of their shares of common stock
under applicable provisions of Minnesota law. In order to perfect appraisal
rights, stockholders must give written demand for appraisal of their shares
before the taking of the vote on the merger at the Special Meeting and must not
vote in favor of the merger. A copy of the applicable Minnesota statutory
provisions is included as APPENDIX B to the accompanying proxy statement and a
summary of these provisions can be found under "You Have Appraisal Rights in the
Merger" in the accompanying proxy statement. In the event that there are not
sufficient votes to approve the proposed merger at the time of the Special
Meeting, the Special Meeting may be adjourned in order to permit further
solicitation by Dynamic Homes.
By order of the Board of Directors
--------------------------------
Chief Executive Officer
Detroit Lakes, Minnesota
October__, 2000
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER AGREEMENT
IS APPROVED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
DYNAMIC HOMES, INC.
525 Roosevelt Avenue
Detroit Lakes, Minnesota 56501
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PROXY STATEMENT
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INTRODUCTION
This proxy statement is being furnished to the stockholders of Dynamic
Homes, Inc., a Minnesota corporation ("Dynamic Homes" or the "Company"), in
connection with the solicitation by the Board of Directors of proxies to be used
at a Special Meeting of Stockholders, as it may be adjourned or postponed from
time to time, to be held on November 21, 2000, at 9:00 a.m., Central Standard
Time, at the Holiday Inn Motel, Detroit Lakes, Minnesota. The purpose of the
Special Meeting is for Dynamic Homes, Inc.'s stockholders to consider and vote
upon a proposal to approve an Agreement and Plan of Merger, dated September 25,
2000, by and among Dynamic Homes, Dynamic Homes, LLC, a Minnesota limited
liability company (" Dynamic LLC"), and Dynamic Acquisition, Inc., a Minnesota
corporation and newly formed subsidiary of Dynamic LLC ("Merger Sub") and the
transactions contemplated thereby. The Agreement and Plan of Merger provides,
among other things, that:
- Merger Sub will merge with and into Dynamic Homes;
- Dynamic Homes will continue as the surviving corporation and
will be a wholly owned subsidiary of Dynamic LLC;
- each share of Dynamic Homes common stock issued and
outstanding at the effective time of the merger (other than
shares held by stockholders, if any, who properly exercise
their appraisal rights under Minnesota law) will convert into
the right to receive cash of $2.55 per share, without interest
thereon; and
- each option to purchase Dynamic Homes common stock outstanding
at the effective time of the merger will be deemed to have
been exercised by the holder thereof and will convert into the
right to receive cash in an amount equal to the difference
between $2.55 and the exercise price of such option.
Dynamic LLC will pay a total purchase price of approximately $5,756,018
for the Dynamic Homes shares and options outstanding at the effective time of
the merger.
This proxy statement is accompanied by copies of the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, and its Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000. These materials are
specifically incorporated by reference in this proxy statement and are included
to aid stockholders in their consideration of the merger.
This proxy statement and the accompanying notice, related information,
proxy card and letter are being mailed first on or about October ___, 2000, to
Dynamic Homes stockholders entitled to receive notice of, and to vote at, the
Special Meeting.
Stockholders who do not vote in favor of the Agreement and Plan of
Merger and who otherwise comply with the applicable procedures described in
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act will be
entitled to appraisal rights. The provisions of Sections 302A.471 and 302A.473
of the Minnesota Business Corporation Act are summarized in the section of this
Proxy Statement called "You Have Appraisal Rights in the Merger." That summary
includes a description of the procedure that dissenting stockholders must follow
to assert appraisal rights. The entire text of Sections 302A.471 and 302A.473 of
the Minnesota Business Corporation Act is attached as APPENDIX B to this Proxy
Statement.
A Special Committee appointed by the Board of Directors of Dynamic
Homes unanimously approved the Agreement and Plan of Merger and has determined
that its terms are fair and in the best interests of Dynamic Homes and its
stockholders. THE SPECIAL COMMITTEE RECOMMENDS THAT YOU VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
TABLE OF CONTENTS
INTRODUCTION
TABLE OF CONTENTS .......................................................... i
QUESTIONS AND ANSWERS ABOUT THE MERGER ..................................... 1
SUMMARY TERM SHEET ......................................................... 4
Proposed Acquisition ........................................4
Reasons for the Merger ......................................4
Dynamic Homes Stock Price ...................................4
The Special Committee........................................5
Recommendation of the Special Committee......................5
The Special Meeting of Stockholders .........................5
Appraisal Rights ............................................6
Federal Income Tax Consequences .............................6
When the Merger Will Be Completed ...........................7
Conditions to Completing the Merger .........................7
Interests of Directors and Officers in the Merger that
Differ From Your Interests ..................................7
The Merger ..................................................8
Selected Historical Consolidated Financial Data..............9
Contact Information ........................................11
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION ................................................ 11
THE PARTIES TO THE MERGER .................................................. 12
Dynamic Homes, Inc...........................................12
Dynamic Homes, LLC ..........................................12
Dynamic Acquisitions, Inc. ..................................12
WHERE YOU CAN FIND MORE
INFORMATION ................................................................ 12
THE SPECIAL MEETING OF DYNAMIC HOMES STOCKHOLDERS .......................... 13
Place, Date, Time and Purpose ...............................13
Who Can Vote at the Special Meeting .........................13
Attending the Meeting .......................................13
Vote Required ...............................................13
Voting by Proxy .............................................14
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SPECIAL FACTORS............................................................. 15
Background of the Merger ....................................15
Reasons for the Merger ......................................17
Source and Amount of Funds ..................................18
Interests of Dynamic Homes Directors and Officers in the
Merger that Differ from Your Interests ......................19
Plan For the Company After the Merger .......................19
General .....................................................20
THE MERGER AGREEMENT .................................................20
Generally ...................................................20
Conversion of Dynamic Homes Shares ..........................20
Stock Options ...............................................21
Payment for Dynamic Homes Shares.............................21
Regulatory Approvals ........................................21
When the Merger Will Be Completed ...........................21
Procedures for Exchanging Your Stock Certificates ...........21
Certain Federal Income Tax Consequences .....................22
Anticipated Accounting Treatment ............................23
Representations and Warranties of Dynamic Homes..............23
Representations and Warranties of Merger Sub and
Dynamic LLC..................................................25
Conduct of Business Prior to the Closing ....................25
No Solicitation Provision ...................................26
Additional Covenants of Dynamic Homes........................26
Conditions to Closing .......................................28
Termination .................................................29
Fees and Expenses ...........................................30
YOU HAVE APPRAISAL RIGHTS IN THE MERGER .................................... 32
MARKET PRICE OF DYNAMIC HOMES COMMON STOCK ................................. 37
BENEFICIAL OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS ................................................. 38
INDEPENDENT PUBLIC ACCOUNTANTS ............................................. 39
INFORMATION INCORPORATED BY REFERENCE ...................................... 39
AVAILABLE INFORMATION ...................................................... 40
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ADDITIONAL INFORMATION ..................................................... 40
OTHER MATTERS .............................................................. 41
APPENDIX A -- Agreement and Plan of Merger ........................... A-1
APPENDIX B -- Sections 302A.471 and 302A.473 of the
Minnesota Business Corporation Act .......................... B-1
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly
some commonly asked questions regarding the merger. These questions and answers
may not address all questions that may be important to you as a stockholder of
Dynamic Homes. Please refer to the more detailed information contained elsewhere
in this proxy statement and its appendices.
1. IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY DYNAMIC HOMES
COMMON STOCK AND/OR OPTIONS?
You will receive cash. Dynamic LLC will pay cash for all Dynamic Homes
shares outstanding as of the closing.
Each option to purchase Dynamic Homes common stock outstanding as of
the closing will be deemed to have been exercised and will convert into the
right to receive cash in an amount equal to the difference between $2.55 and the
exercise price of such option.
2. WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
The Special Meeting is scheduled to take place at 9:00 a.m., Central
Standard Time, on November 21, 2000, at the Holiday Inn Motel, Detroit Lakes,
Minnesota.
3. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
Holders of record of Dynamic Homes common stock as of the close of
business on October 15, 2000, are entitled to vote at the Special Meeting. Each
stockholder has one vote for each share of Dynamic Homes common stock he or she
owns.
4. WHAT VOTE IS REQUIRED FOR DYNAMIC HOMES STOCKHOLDERS TO APPROVE THE
MERGER?
In order for the merger to be approved, holders of a majority of the
outstanding shares of Dynamic Homes common stock must vote "FOR" the merger. If
your shares are not voted, it has the same effect as a vote "AGAINST" the
merger.
5. WHAT DO I NEED TO DO NOW?
After carefully reading and considering the information contained in
this proxy statement, please vote your shares as soon as possible by filling
out, signing and returning the enclosed proxy card. Your voting materials
include detailed information on how to vote.
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6. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
No. Your broker can only vote your shares if you provide instructions
on how to vote. You should instruct your broker on how to vote your shares using
the instructions provided by your broker. If your shares are not voted, it has
the same effect as a vote "AGAINST" the merger.
7. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
Yes. You can change your vote at any time before your proxy is voted at
the Special Meeting. You may revoke your proxy by notifying the Secretary of
Dynamic Homes in writing or by submitting a new proxy dated after the date of
the proxy being revoked. In addition, your proxy will be revoked by you if you
attend the Special Meeting and vote in person. However, simply attending the
Special Meeting will not revoke your proxy. If you have instructed a broker to
vote your shares, you must follow the instructions received from your broker to
change your vote.
8. DO I NEED TO ATTEND THE DYNAMIC HOMES SPECIAL MEETING IN PERSON?
No. It is not necessary for you to attend the Special Meeting to vote
your shares if Dynamic Homes has previously received your proxy, although you
are welcome to attend.
9. WILL I HAVE APPRAISAL RIGHTS AS A RESULT OF THE MERGER?
Yes. If you wish to exercise your appraisal rights, you must follow the
requirements of Minnesota law. A summary of the requirements you must follow to
exercise your appraisal rights is included in "You Have Appraisal Rights in the
Merger" in this proxy statement.
10. WHEN WILL HOLDERS OF DYNAMIC HOMES COMMON STOCK RECEIVE THE MERGER
CONSIDERATION?
The merger is expected to be completed promptly following the Special
Meeting of the Dynamic Homes stockholders. However, it is possible that delays
could require that the merger be completed at a later time. Following the
merger, you will receive instructions on how to receive your cash payment in
exchange for each share of Dynamic Homes common stock. You must return your
Dynamic Homes stock certificates as described in the instructions, and you will
receive your cash payment as soon as practicable after Wells Fargo Bank,
Minnesota N.A., the paying agent, receives your Dynamic Homes stock certificate.
If you hold shares through a brokerage account, your broker will handle the
surrender of stock certificates to Wells Fargo Bank, Minnesota N.A.
11. WHO WILL OWN DYNAMIC HOMES AFTER THE MERGER?
After the merger, Dynamic Homes will be a wholly owned subsidiary of
Dynamic LLC, a Minnesota limited liability company.
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12. SHOULD I SEND IN MY DYNAMIC HOMES STOCK CERTIFICATES NOW?
No. After the merger is completed, Wells Fargo Bank, Minnesota N.A., as
paying agent, will send you written instructions for exchanging your Dynamic
Homes stock certificates.
13. WILL I OWE TAXES AS A RESULT OF THE MERGER?
The cash you receive in the merger in exchange for your shares of
Dynamic Homes common stock and any cash you may receive from exercising your
appraisal rights will be subject to United States federal income tax and also
may be taxed under applicable state, local and foreign tax laws. In general, you
will recognize gain or loss equal to the difference between the amount of cash
you receive and your adjusted tax basis in your shares of Dynamic Homes common
stock. We recommend that you read the section entitled "The Merger
Agreement--Certain Federal Income Tax Consequences" in this proxy statement for
a more detailed explanation of the tax consequences of the merger. You should
consult your tax advisor regarding the specific tax consequences of the merger
applicable to you.
14. WHO CAN HELP ANSWER MY QUESTIONS?
If you have additional questions about the merger after reading this
proxy statement, you should contact:
Scott D. Lindemann
Dynamic Homes, Inc.
525 Roosevelt Avenue
Detroit Lakes, Minnesota 56501
(218) 847-2611 (telephone)
Email Address: scottl@dynamichomes.com
3
SUMMARY TERM SHEET
This summary term sheet does not contain all of the information that is
important to you. You should carefully read the entire proxy statement to fully
understand the merger. The Agreement and Plan of Merger ("Merger Agreement") is
attached as APPENDIX A to this proxy statement. We encourage you to read the
Merger Agreement, as it is the legal document that governs the merger.
PROPOSED MERGER
- Stockholder Vote. You are being asked to vote to approve a
merger transaction whereby Dynamic Acquisitions, Inc., a newly
formed Minnesota corporation ("Merger Sub") and a wholly owned
subsidiary of Dynamic Homes, LLC, a Minnesota limited
liability company ("Dynamic LLC"), will be merged with and
into Dynamic Homes, Inc., a Minnesota corporation
("Dynamic"Homes") and Dynamic Homes will become a wholly owned
subsidiary of Dynamic LLC.
- Price for Your Stock. As a result of the merger, you will
receive cash for each of your shares of Dynamic Homes common
stock. Dynamic LLC will pay $2.55 in cash for all Dynamic
Homes shares outstanding as of the closing. In addition, each
option to purchase Dynamic Homes common stock outstanding as
of the closing will be deemed to have been exercised and will
convert into the right to receive cash in an amount equal to
the difference between $2.55 and the exercise price of the
option. See "The Merger Agreement - Conversion of Securities."
- The Acquiror. Dynamic LLC was formed to engage in the proposed
merger by Peter K. Pichetti, Ronald L. Gustafson and Native
American Housing Co., LLC, a Nebraska limited liability
company. Mr. Pichetti and Mr. Gustafson are directors of
Dynamic Homes. Merger Sub is a wholly owned subsidiary of
Dynamic LLC and was formed for the purpose of acquiring
Dynamic Homes. See "The Parties to the Merger."
REASONS FOR THE MERGER
The merger presents an opportunity for Dynamic Homes stockholders to
realize a premium over recent market prices for their shares. See "Special
Factors - Background of the Merger," "Special Factors - Reasons for the Merger"
and "Market Price of Dynamic Homes Common Stock."
DYNAMIC HOMES STOCK PRICE
Shares of Dynamic Homes are quoted on the Nasdaq Small-Cap System under
the symbol "DYHM." On June 20, 2000, which was the last trading day before
Dynamic Homes announced the
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merger, Dynamic Homes common stock closed at $1.94 per share. See "Market Price
for Dynamic Homes Common Stock."
THE SPECIAL COMMITTEE
Two of the founders of Dynamic LLC are members of the Dynamic Homes
Board of Directors and they have a conflict of interest in recommending approval
of the Merger Agreement because they have a beneficial interest in Dynamic LLC.
If the merger occurs, these individuals will, by reason of their combined 100%
governance interest and combined 25% financial interest in Dynamic LLC, receive
a substantial benefit from the future earnings, growth and increased value of
the business of Dynamic Homes. To counteract this conflict of interest, the
Board of Directors formed a Special Committee consisting of three disinterested
persons to evaluate the various proposals for the acquisition of Dynamic Homes
and negotiate the terms of the Merger Agreement with Dynamic LLC. The three
members of the Special Committee are Gerald E. Magnuson, a retired partner of
the Lindquist & Vennum law firm in Minneapolis, Minnesota, Patrick McGuire,
former President of Woodland Container Corporation in Aitken, Minnesota, and
Michael Bochert, an independent investment banker in Edina, Minnesota, none of
whom has any present or prior business relationship with Dynamic Homes, any of
the directors of Dynamic Homes or the founders or members of Dynamic LLC or
Merger Sub.
RECOMMENDATION OF SPECIAL COMMITTEE
The Special Committee appointed by the Board of Directors of Dynamic
Homes unanimously approved the Merger Agreement and has determined that its
terms are fair and in the best interests of Dynamic Homes and its stockholders.
The Special Committee has recommended that the Merger Agreement and the
transactions contemplated thereby be approved by the stockholders of Dynamic
Homes.
THE SPECIAL MEETING OF STOCKHOLDERS
- Place, Date and Time. The Special Meeting will be held at the
Holiday Inn Motel, Detroit Lakes, Minnesota, at 9:00 a.m.,
Central Standard Time, on November 21, 2000.
- What Vote is Required for Approval of the Merger. The merger
requires the approval of the holders of a majority of the
outstanding shares of Dynamic Homes common stock. The failure
to vote has the same effect as a vote against the merger.
- Who Can Vote at the Meeting. You can vote at the Special
Meeting all of the shares of Dynamic Homes common stock you
own of record as of October 15, 2000, which is the record date
for the Special Meeting. If you own shares which are
registered in someone
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else's name, for example, a broker, you need to direct that
person to vote those shares or obtain an authorization from
them and vote the shares yourself at the meeting. As of the
close of business on October 2, 2000, there were 2,240,850
shares of Dynamic Homes common stock outstanding, held by
approximately 362 stockholders of record.
- Procedure for Voting. You can vote your shares by attending
the Special Meeting and voting in person or by mailing the
enclosed proxy card. You may revoke your proxy at any time
before the vote is taken at the meeting. To revoke your proxy,
you must either advise the Secretary of Dynamic Homes in
writing, deliver a later dated proxy, before your common stock
has been voted at the Special Meeting, or attend the meeting
and vote your shares in person. Merely attending the Special
Meeting will not constitute revocation of your proxy. See "The
Special Meeting of Dynamic Homes Stockholders - Voting by
Proxy."
APPRAISAL RIGHTS
Minnesota law provides you with appraisal rights in the merger. This
means that if you are not satisfied with the amount you are entitled to receive
in the merger, you may have the value of your shares independently determined
and receive payment based on that valuation. The ultimate amount received by a
dissenting stockholder in an appraisal proceeding may be more or less than, or
the same as, the amount the dissenting stockholder would have received in the
merger. To exercise your appraisal rights, you must deliver a written objection
to the merger to Dynamic Homes at or before the Special Meeting and you must not
vote in favor of the merger. Your failure to follow exactly the procedures
specified under Minnesota law will result in the loss of your appraisal rights.
See "You Have Appraisal Rights in the Merger."
FEDERAL INCOME TAX CONSEQUENCES
The merger will be a taxable transaction to you. For United States
federal income tax purposes, your receipt of cash in exchange for your shares of
Dynamic Homes common stock generally will cause you to recognize a gain or loss
measured by the difference between the cash you receive in the merger and your
tax basis in your shares of Dynamic Homes common stock. YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES THAT
ARE PARTICULAR TO YOU. See "The Merger Agreement - Certain Federal Income Tax
Consequences."
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WHEN THE MERGER WILL BE COMPLETED
We are working to complete the merger as soon as possible. We
anticipate completing the merger by approximately November 28, 2000, subject to
receipt of stockholder approval and satisfaction of other requirements,
including the conditions described immediately below. See "The Merger Agreement
- - - - When the Merger Will be Completed."
CONDITIONS TO COMPLETING THE MERGER
The completion of the merger depends on a number of conditions being
met. In addition to the parties complying with the Merger Agreement, these
conditions, unless waived, include:
- approval of the merger and the Merger Agreement by Dynamic
Homes' stockholders;
- no action or proceeding having been instituted by any
governmental entity seeking to prevent consummation of the
merger, and the receipt of any governmental approvals which
may be required;
- holders of no more than 10% of Dynamic Homes' outstanding
shares of common stock having exercised appraisal rights;
- the resignation of certain directors and officers of Dynamic
Homes;
- the absence of a material adverse change in Dynamic Homes'
business from the date of the Merger Agreement to the
effective date of the merger;
- specified Dynamic Homes employees having signed employment
agreements with Dynamic LLC and not having indicated any
intention not to comply with the terms of those agreements;
and
- renewal of the union contract to which Dynamic Homes is
currently subject.
See "The Merger Agreement - Conditions to Closing."
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT DIFFER FROM YOUR
INTERESTS
Some of Dynamic Homes' directors and officers have interests in the
merger that are different from, or are in addition to, their interests as
stockholders in Dynamic Homes. The Dynamic Homes' Board of Directors knew about
these additional interests and considered them when the
7
directors appointed the Special Committee, and the Special Committee knew about
these additional interests when the Special Committee approved the Merger
Agreement. These interests include the following:
- Peter K. Pichetti and Ronald L. Gustafson, directors of
Dynamic Homes, are two of the founders of Dynamic LLC and have
a substantial interest in Dynamic LLC which will own Dynamic
Homes following the closing of the merger. Clyde R. Lund, Jr.,
a director of Dynamic Homes, was originally a member of the
group of individuals that proposed to form Dynamic LLC; he
removed himself from participation with the group on July 20,
2000; and
- some of the executive officers will continue as employees of
Dynamic Homes, in some cases pursuant to written employment
agreements.
See "Special Factors - Interests of Dynamic Homes' Directors and
Officers in the Merger that Differ from Your Interests."
THE MERGER
- Procedure for Receiving Merger Consideration. Dynamic LLC has
appointed Wells Fargo Bank, Minnesota N.A., as paying agent,
to coordinate the payment of the cash merger consideration
following the merger. The paying agent will send you written
instructions for surrendering your certificates and obtaining
the cash merger consideration after we have completed the
merger. See "The Merger Agreement - Payment for Dynamic Homes
Shares."
- Terminating the Merger Agreement. Dynamic Homes and Dynamic
LLC can mutually agree at any time to terminate the Merger
Agreement without completing the merger, even if the
stockholders of Dynamic Homes have approved it. Also, under
certain circumstances, either Dynamic Homes or Dynamic LLC can
decide, without the consent of the other, to terminate the
agreement prior to the closing of the merger, even if the
stockholders of Dynamic Homes have approved the Merger
Agreement. See "The Merger Agreement - Termination."
- Fees and Expenses. Generally, whether or not the merger is
consummated, Dynamic Homes and Dynamic LLC are each
responsible for their respective expenses incurred in
connection with the merger. Dynamic Homes, however, is
required to reimburse
8
Dynamic LLC for reasonable out-of-pocket fees and expenses,
not to exceed $25,000, incurred by Dynamic LLC in connection
with the Merger Agreement, if the Merger Agreement is
terminated under certain circumstances. Dynamic Homes is also
required to pay a termination fee of $200,000 if the Merger
Agreement is terminated under certain circumstances. Dynamic
LLC, however, is also required to reimburse Dynamic Homes for
reasonable out-of-pocket fees and expenses, not to exceed
$25,000, incurred by Dynamic Homes in connection with the
Merger Agreement, if the Merger Agreement is terminated due to
Dynamic LLC breaching, subject to materiality thresholds and
cure periods, any of its representations, warranties,
covenants or agreements contained in the Merger Agreement. See
"The Merger Agreement - Fees and Expenses."
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth below is a summary of selected consolidated financial data
with respect to the Company excerpted or derived from the information contained
in the Company's Annual Reports on Form 10-K for the years ended December 31,
1999 and 1998 and its Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000. More comprehensive financial information is included in
such reports and other documents filed by the Company with the Securities and
Exchange Commission (the "Commission"), and the following summary is qualified
in its entirety by reference to such reports and other documents and all of the
financial information (including any related notes) contained therein. Such
reports and other documents may be inspected and copies may be obtained from the
offices of the Commission. See "Where You Can Find More Information." In
addition, copies of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and its Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000, accompany this proxy statement being provided to
stockholders and are incorporated herein by reference. See "Information
Incorporated By Reference."
9
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
----------------- -----------------
2000 1999 1999 1998
- - - ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
DATA
- - - ----------------------------------------------------------------------------------------------------------------------------
Revenues $ 4,733,000 $ 4,565,000 $ 13,159,000 $ 11,969,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 24,000 (142,000) 744,000 954,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Interest expense, net 58,000 70,000 125,000 122,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Income (Loss) before income taxes and equity in earnings
of unconsolidated subsidiary 3,000 (188,000) 730,000 928,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from:
- - - ----------------------------------------------------------------------------------------------------------------------------
Continuing operations 2,000 (113,000) 438,000 593,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Discontinued operations (125,000) (114,000) (90,000) (219,000)
- - - ----------------------------------------------------------------------------------------------------------------------------
Loss on Disposal of Subsidiary (516,000)
- - - ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (639,000) $ (227,000) $ 348,000 $ 374,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ (0.29) $ (0.10) $ 0.16 $ 0.17
- - - ----------------------------------------------------------------------------------------------------------------------------
Basic and diluted weighted average common and common 2,240,850 2,240,850 2,240,850 2,240,850
equivalent shares outstanding(2)
- - - ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA (1) (END
OF PERIOD)
- - - ----------------------------------------------------------------------------------------------------------------------------
Total assets $ 7,441,000 $ 10,225,000 $ 9,784,000 $ 9,425,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Long-term debt, including current maturities 1,188,000 2,978,000 3,020,000 3,049,000
- - - ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 4,815,000 4,879,000 5,454,000 5,107,000
- - - ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
- - - ----------------------------------------------------------------------------------------------------------------------------
Period end book value per share $ 2.15 $ 2.18 $ 2.43 $ 2.28
- - - ----------------------------------------------------------------------------------------------------------------------------
Cash dividends declared per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
- - - ----------------------------------------------------------------------------------------------------------------------------
The Company has not provided any pro forma data giving effect to the
proposed merger as it does not believe such information is material to its
stockholders in evaluating the Merger Agreement since the proposed merger
consideration is all cash and if the proposed merger is completed, the Company's
common stock would cease to be publicly traded.
The Company has also not provided any separate financial information
for Dynamic LLC or Merger Sub since they are special purpose entities formed in
connection with the proposed merger and have no independent operations.
10
CONTACT INFORMATION
If you have any questions regarding the merger or any other matters
discussed in this proxy statement, please contact:
Scott D. Lindemann
Dynamic Homes, Inc.
525 Roosevelt Avenue
Detroit Lakes, Minnesota 56501
(218) 847-2611 (telephone)
Email Address: scottl@dynamichomes.com
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement, the accompanying related information and the
documents incorporated by reference contain forward-looking statements based on
estimates and assumptions. Forward-looking statements include information
concerning possible or assumed future results of operations of each of Dynamic
Homes and Dynamic LLC, as well as certain information relating to the merger.
There are forward-looking statements in several places in this proxy statement,
including under the headings "Summary Term Sheet" and "The Merger," and in
statements containing the words "believes," "expects," "anticipates," "intends,"
"estimates" or other similar expressions. For each of these statements, Dynamic
Homes claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
You should be aware that forward-looking statements involve known and
unknown risks and uncertainties. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that the actual results or developments we anticipate will be realized, or
even if realized, that they will have the expected effects on the business or
operations of each of Dynamic Homes and Dynamic LLC. These forward-looking
statements speak only as of the date on which the statements were made, and we
assume no obligation to update any forward-looking statements to reflect future
events or developments occurring after the date on which any of those statements
is made.
In addition to other factors and matters contained or incorporated in
this document, we believe the following factors could cause actual results to
differ materially from those discussed in the forward-looking statements:
- changes in the economic conditions in the markets served by
us;
- changes and/or delays in products, plans and schedules;
11
- customer acceptance of new products;
- the timing of, and regulatory and other conditions associated
with, the completion of the merger;
- intensified competitive pressures in the markets in which
Dynamic Homes competes;
- the loss of key employees;
- difficulty in obtaining supplies; and
- general economic conditions.
THE PARTIES TO THE MERGER
DYNAMIC HOMES, INC. Dynamic Homes, Inc. ("Dynamic Homes") is a
Minnesota corporation that manufactures modular, preconstructed buildings for
single-family, multiple-family and commercial use. Commercial operations include
the manufacture of preconstructed office buildings, motels and apartments.
Dynamic Homes common stock is quoted on the Nasdaq National Market System under
the symbol "DYHM." Dynamic Homes' principal executive offices are located at 525
Roosevelt Avenue, Detroit Lakes, Minnesota 56501, and its telephone number is
(218) 847-2611.
DYNAMIC HOMES, LLC. Dynamic Homes, LLC ("Dynamic LLC") is a Minnesota
limited liability company which was organized in Minnesota on September 25,
2000, by Peter K. Pichetti and Ronald L. Gustafson in connection with the
proposed merger. Dynamic LLC has not been engaged in any business activities
other than those in connection with the merger. Dynamic LLC's principal office
is located at 8039 Spirit Cove Drive, Duluth, Minnesota 55807, and its telephone
number is (218)624-0695.
DYNAMIC ACQUISITION, INC. Dynamic Acquisition, Inc. ("Merger Sub") is a
Minnesota corporation and wholly owned subsidiary of Dynamic LLC formed solely
for the purpose of engaging in the merger. Pursuant to the terms of the Merger
Agreement, at the effective time of the merger, Merger Sub will be merged with
and into Dynamic Homes, with Dynamic Homes being the surviving corporation.
WHERE YOU CAN FIND MORE INFORMATION
Dynamic Homes files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Dynamic Homes files at the SEC's public
reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the
12
public reference rooms. Dynamic Homes' public filings are also available to the
public from document retrieval services and at the Internet website maintained
by the SEC at http://www.sec.gov.
THE SPECIAL MEETING OF DYNAMIC HOMES STOCKHOLDERS
PLACE, DATE, TIME AND PURPOSE
The Special Meeting will be held at the Holiday Inn Motel, Detroit
Lakes, Minnesota, on November 21, 2000, at 9:00 a.m., Central Standard Time. The
purpose of the Special Meeting is to consider and vote on the proposal to
approve and adopt the Merger Agreement.
A SPECIAL COMMITTEE APPOINTED BY THE DYNAMIC HOMES BOARD OF DIRECTORS
HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF DYNAMIC HOMES AND ITS
STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT
DYNAMIC HOMES STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
WHO CAN VOTE AT THE SPECIAL MEETING
The holders of record of Dynamic Homes common stock as of the close of
business on October 15, 2000, which is the record date for the Special Meeting,
are entitled to receive notice of and to vote at the Special Meeting. On the
record date, there were 2,240,850 shares of Dynamic Homes common stock
outstanding held by approximately 362 stockholders of record.
ATTENDING THE MEETING
If you are a beneficial owner of Dynamic Homes common stock held by a
broker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Dynamic Homes common stock held in street name in person at the
meeting, you will have to obtain a written proxy or authorization in your name
from the broker, bank or other nominee who holds your shares.
VOTE REQUIRED
The approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote. Each share of common stock is entitled to one
vote. Failure to return a properly executed proxy card or to vote in person will
have the same effect as a vote "AGAINST" the merger. Abstentions and broker non-
votes also will have the same effect as a vote against the merger. Your broker
or nominee does not have the right to vote your shares of Dynamic Homes common
stock without your instruction. It is
13
important that you instruct your broker or nominee on how to vote your shares of
Dynamic Homes common stock for your shares to be represented at the Special
Meeting.
The holders of a majority of the outstanding shares of Dynamic Homes
common stock as of the record date, represented in person or by proxy, will
constitute a quorum for purposes of the Special Meeting. A quorum is necessary
to hold the Special Meeting. Once a share is represented at the Special Meeting,
it will be counted for the purpose of determining a quorum and any adjournment
of the Special Meeting, unless the holder is present solely to object to the
Special Meeting. However, if a new record date is set for an adjourned meeting,
then a new quorum will have to be established.
VOTING BY PROXY
This proxy statement is being sent to you on behalf of the Board of
Directors of Dynamic Homes for the purpose of requesting that you allow your
shares of Dynamic Homes common stock to be represented at the Special Meeting by
the persons named in the enclosed proxy card. All shares of Dynamic Homes common
stock represented at the meeting by properly executed proxies will be voted in
accordance with the instructions indicated on the proxy card. If you sign and
return a proxy card without giving voting instructions, your shares will be
voted as recommended by the Special Committee appointed by the Board of
Directors. The Special Committee recommends a vote in favor of ("FOR") approval
of the Merger Agreement.
If any matters not described in this proxy statement are properly
presented at the Special Meeting, the persons named in the proxy card will use
their own judgment to determine how to vote your shares. This includes a motion
to adjourn or postpone the meeting to solicit additional proxies. However, no
proxy voted against the proposal to approve the merger will be voted in favor of
an adjournment or postponement to solicit additional votes in favor of the
merger. Dynamic Homes does not know of any other matters to be presented at the
meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Secretary of Dynamic
Homes in writing, deliver a later dated proxy before your shares have been voted
at the Special Meeting or attend the meeting and vote your shares in person.
Merely attending the Special Meeting will not constitute revocation of your
proxy.
If your Dynamic Homes common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via telephone or the Internet.
Dynamic Homes will pay the cost of this proxy solicitation. In addition
to soliciting proxies by mail, directors, officers and employees of Dynamic
Homes may solicit proxies personally and by telephone. None of these persons
will receive additional or special compensation for soliciting proxies. Dynamic
Homes will, upon request, reimburse brokers, banks and other nominees for their
expenses in sending proxy materials to their customers who are beneficial owners
and obtaining their
14
voting instructions. Dynamic Homes may engage a proxy solicitation firm to
assist in the solicitation.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
As part of its ongoing business planning process, the Board of
Directors of Dynamic Homes and senior management regularly have considered
strategic alternatives in light of existing conditions and developments in the
housing industry. In addition, the Board of Directors and senior management have
been of the opinion that the market value of the Dynamic Homes stock on the
public market has frequently not properly reflected the value of the
corporation.
In 1998, Ray Madison, holder of approximately 28% of the outstanding
stock of Dynamic Homes, began urging the directors to consider selling the
Company or otherwise assisting him in liquidating all or a substantial part of
his shareholdings in Dynamic Homes as a part of his estate planning process. Mr.
Madison, then age 87, sought the advice of Fredrikson & Byron, P.A., a law firm
in Minneapolis, Minnesota, to assist him with his business and estate planning
matters.
At its meetings on July 27, August 24 and September 28, 1998, the Board
of Directors discussed the possibility of entering into a transaction for the
sale or merger of the Company. Following the September 28, 1998 meeting of the
Board of Directors, Dougherty Summit Securities LLC was engaged to provide a
valuation report on the Company.
On October 7, 1998, Fredrikson & Byron, P.A., acting on behalf of Ray
Madison, wrote to the President of the Company, urging the Board of Directors to
engage Dougherty Summit to assist the Company in evaluating unsolicited offers
that had been received from third parties relating to the possible acquisition
of the Company.
On October 29, 1998, Dougherty Summit Securities LLC rendered its
opinion stating that the common stock of the Company had an estimated value of
approximately $2.75 per share.
From late-1998 through mid-1999, senior management discussed possible
sale or merger transactions with several companies, most of which were engaged
in the housing industry, and many of which had submitted unsolicited letters of
interest to the Company. Senior management reported regularly to the Board of
Directors.
At its meeting on August 23, 1999, the Board of Directors authorized
management to engage Dougherty Summit Securities LLC as the Company's exclusive
agent for purposes of the sale of the assets or a merger transaction involving
the Company.
15
On September 27, 1999, an engagement letter was entered into by the
Company with Dougherty Summit Securities LLC, pursuant to which Dougherty Summit
Securities LLC was engaged as financial advisor to the Company for a period of
six months.
In a November 12, 1999 letter to the Board of Directors, Dougherty
Summit Securities LLC recommended that as a step toward maximizing stockholder
value, the Company should sell its subsidiary Shagawa Resort, Inc., which
operated the Shagawa Holiday Inn Sun Spree Motel in Ely, Minnesota. On November
17, 1999, the Company issued a press release announcing that it was exploring
various strategic alternatives for enhancing stockholder value, and that
Dougherty Summit Securities LLC had been retained to assist in that process.
At its meeting on January 24, 2000, the Board of Directors reviewed
offers received by the Company for the purchase of Shagawa Resort, Inc. The
directors concluded that Shagawa Resort, Inc. should be sold and requested legal
counsel to assist the Company in selecting the offer which would be in the best
interest of the stockholders. Following that meeting, management solicited final
offers for the sale of Shagawa Resort, Inc.
At its meeting on February 28, 2000, the Board of Directors approved
the sale of substantially all of the assets of Shagawa Resorts, Inc. The
officers of the Company were directed to work with legal counsel to negotiate
the terms of an appropriate sale agreement and to execute the same on behalf of
the Company and proceed to close the transaction. At the February 28, 2000
meeting, the directors accepted the resignation of Ray Madison as Chief
Executive Officer of the Company.
On April 10, 2000, Fredrikson & Byron, P.A., acting on behalf of Ray
Madison, wrote to the Board of Directors stating that the law firm was
recommending to Mr. Madison that he should vote as a director in favor of any
transaction recommended by Dougherty & Company LLC and if no such transaction is
approved by the directors, then he should individually pursue a sale of his
stock in the Company.
On May 1, 2000, the sale of substantially all of the assets of Shagawa
Resorts, Inc. was completed.
At its meeting on May 16, 2000, the Board of Directors heard a report
from representatives of Dougherty & Company LLC (formerly Dougherty Summit
Securities LLC) that seven parties were interested in acquiring the Company, and
that acceptable offers had been received from two of the seven. Following the
presentation by the representatives of Dougherty & Company LLC, and discussion,
the representatives of Dougherty & Company LLC left the meeting. Before the
meeting adjourned, Peter K. Pichetti, one of the directors of the Company,
advised the Board of Directors that he and directors Clyde R. Lund, Jr. and
Ronald Gustafson were submitting a letter of intent for acquisition of the
Company. After a brief review of the letter of intent and upon advice of legal
counsel, the directors determined that in accordance with the relevant
provisions of the Minnesota Business Corporation Act, a special committee of
non-directors should be appointed to consider the
16
various offers then available and which may thereafter be forthcoming. The
directors appointed Gerald E. Magnuson, a retired partner of the Lindquist &
Vennum law firm in Minneapolis, Minnesota, Patrick McGuire, former President of
Woodland Container Corporation in Aitkin, Minnesota, and Michael Bochert, an
independent investment banker in Edina, Minnesota, as members of the Special
Committee. The Board of Directors directed the Special Committee to recommend
one acquisition proposal to the President of the Company for signature on or
before June 21, 2000.
On May 16, 2000, pursuant to action by the Board of Directors at its
meeting on May 16, 2000, the September 27, 1999 agreement with Dougherty &
Company LLC was amended to extend the term of the agreement from six months to
nine months.
On June 7, 2000, the Special Committee met and conferred with the
President of the Company, a representative from Dougherty & Company LLC and the
Company's legal counsel. After discussion, the Special Committee concluded that
the three parties that had submitted bids prior to May 16, 2000, in addition to
the Mille Lacs Band of Chippewa Indians and the group consisting of Messrs.
Pichetti, Lund and Gustafson, should be invited to submit sealed bids directly
to the Special Committee, to be opened by the Special Committee on June 20,
2000. Representatives of Dougherty & Company LLC notified the bidders.
On June 20, 2000, the Special Committee met and opened the four sealed
bids that had been timely submitted to the Special Committee. Representatives of
Dougherty & Company LLC and legal counsel to the Company participated in the
meeting. At the conclusion of the meeting, the Special Committee unanimously
approved the letter of intent submitted by the law firm of Johnson, Killen &
Seiler, P.A., on behalf of Messrs. Pichetti, Lund and Gustafson as being in the
best interests of the stockholders. The letter of intent provided for a higher
price, $2.55 per share, than the other three bids. The $2.55 per share is
payable to the stockholders in cash at the closing of the merger transaction.
On June 26, 2000, the directors accepted the resignation of Ray Madison
as a director and Chairman of the Board of the Company.
On July 20, 2000, the law firm of Johnson, Killen & Seiler, P.A.
notified the Company that Clyde R. Lund, Jr. was no longer part of the group
represented by that law firm. The group represented by said law firm
subsequently formed Dynamic Homes, LLC.
REASONS FOR THE MERGER
The Special Committee appointed by the Dynamic Homes' Board of
Directors has determined by unanimous vote that the merger is in the best
interests of Dynamic Homes' stockholders. ACCORDINGLY, THE SPECIAL COMMITTEE HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
DYNAMIC HOMES' STOCKHOLDERS VOTE IN FAVOR OF APPROVAL AND
17
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
In reaching its determination to approve the Merger Agreement, the
Special Committee considered a number of matters affecting the value of Dynamic
Homes to its stockholders, including the matters described above in "Special
Factors -- Background of the Merger" and the following factors:
- the price being offered by Dynamic LLC, which, when compared
with the $1.94 closing price of Dynamic Homes common stock
immediately prior to the announcement of the merger,
represented a premium of 31% at a $2.55 per share purchase
price;
- the $2.55 per share price, to be paid in cash, appeared to be
in the best interests of the stockholders.
- the decision of the Board of Directors in 1999 that
stockholder value would be enhanced by the sale of the
Company, and the retention of Dougherty & Company LLC to
solicit offers from interested prospective purchasers;
- the substantial efforts undertaken by Dougherty & Company LLC
to locate prospective purchasers, the seven parties that
expressed an interest in acquiring the Company and the four
written offers received in the final submission of sealed bids
on June 20, 2000;
- the terms of the Merger Agreement, including the parties'
representations, warranties, covenants and conditions; and
- the potential impact of the merger on customers, employees and
other constituencies of Dynamic Homes.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Dynamic LLC to acquire all the
outstanding shares of Dynamic Homes common stock and to pay its fees and
expenses associated with the merger is estimated to be approximately $5,800,000.
On September 30, 2000, Dynamic LLC had a net worth of $2,000,000, consisting of
subscriptions payable. The subscriptions will be paid in cash prior to the
closing of the merger. The remaining amount will be borrowed from Bremer Bank,
Detroit Lakes, Minnesota.
18
INTERESTS OF DYNAMIC HOMES' DIRECTORS AND OFFICERS IN THE MERGER THAT MAY DIFFER
FROM YOUR INTERESTS
As discussed above, certain members of the Board of Directors of
Dynamic Homes have interests that may present actual, potential, or the
appearance of potential, conflicts of interest in connection with the merger.
The Special Committee and the Board of Directors were aware of these potential
or actual conflicts of interest and considered them along with other matters
described under "Background of the Merger." No member of the Special Committee
had any actual, potential or apparent conflicts of interest.
PLANS FOR THE COMPANY AFTER THE MERGER
After the merger, Dynamic LLC anticipates that it will continue to
operate the Company in Detroit Lakes, Minnesota, without any significant
near-term changes in its operations or management. In this regard, it is
anticipated that current management personnel will remain with the Company, and
that Scott D. Lindemann will retain his positions as Chief Executive Officer and
President of the Company. Peter K. Pichetti and Ronald L. Gustafson, the
founders and governors of Dynamic LLC, will continue to serve as directors of
Dynamic Homes after the merger. Lance Morgan will also continue to serve as a
director. It is anticipated that Clyde R. Lund, Jr. and Israel Mirviss will
resign as directors of Dynamic Homes, effective upon the closing of the merger.
The following contains the age and principal occupation or position
with respect to Messrs. Pichetti and Gustafson:
Richard K. Pichetti, age 54, from February 1993 to April 1998, was
President, Chief Executive Officer and Director of State Bank of Tower and Tower
Bancshares, Inc. (a bank holding company) in Tower, Minnesota. He was Chief
Financial Officer of Zenith Disposal, Inc., in Duluth, Minnesota, from November,
1991, to February, 1993. From 1990 to November, 1991, he was President of
Northland Business Credit. From October, 1989, to September, 1990, he was
President and Chief Executive Officer of the St. Louis Bank of Savings in
Duluth, Minnesota. He has served as a Director of the Company since 1991.
Ronald L. Gustafson, age 52, has been owner and operator of Heritage
Homes, Inc. (a residential and commercial construction company) since 1974 and
part owner of Don Beam Homes, Inc. (a residential and commercial construction
company), since March 1997. He has been a builder/dealer for the Company since
1976. He has served as a Director of the Company since 1989.
19
GENERAL
The foregoing discussion of the special factors considered by the
Dynamic Homes Special Committee is not intended to be exhaustive, but identifies
material factors considered by the Special Committee. In view of the wide
variety of factors considered in connection with the evaluation and
determination to approve and recommend the Merger Agreement with Dynamic LLC,
the Special Committee found it impracticable and did not quantify or otherwise
attempt to assign any relative or specific weights to the factors considered.
The substantial efforts undertaken by Dougherty & Company LLC to locate
prospective purchasers, and the competitive nature of the bidding process
initiated by Dougherty & Company LLC and overseen initially by the Board of
Directors and after May 16, 2000, by the Special Committee, led the Special
Committee to conclude that a fair value had been offered by the successful
bidding party and that, accordingly, there was no need for Dynamic Homes to
incur the cost of a fairness opinion.
Pursuant to the September 27, 1999 engagement letter, Dynamic Homes
will pay Dougherty & Company LLC a fee of approximately $173,000 at the closing,
less $50,000 in fees previously paid to Dougherty & Company LLC.
THE MERGER AGREEMENT
The discussion of the merger in this proxy statement is qualified by
reference to the Merger Agreement, which is attached to this proxy statement as
Appendix A. You should read the entire Merger Agreement carefully.
GENERALLY
The Merger Agreement provides for a business combination in which
Dynamic Homes will merge with Merger Sub, a wholly owned subsidiary of Dynamic
LLC. Upon the merger being completed, Merger Sub will cease to exist and Dynamic
Homes, as the surviving corporation, will become a wholly owned subsidiary of
Dynamic LLC. The current directors and officers of Dynamic Homes will cease to
be directors and officers of Dynamic Homes upon completion of the merger,
although most Dynamic Homes employees, including certain officers, will continue
as employees of Dynamic Homes after the merger.
CONVERSION OF DYNAMIC HOMES SHARES
At the effective time of the merger, each share of Dynamic Homes common
stock issued and outstanding immediately prior to the effective time of the
merger (other than those shares held by the stockholders, if any, who properly
exercise their appraisal rights under Minnesota law) will be automatically
converted into the right to receive $2.55 in cash.
20
STOCK OPTIONS
At the effective time of the merger, all outstanding Dynamic Homes
stock options, whether vested or unvested, exercisable or not exercisable, will
be deemed to have been exercised by the holder, whereupon all such holders of
options will be entitled to a cash payment in an amount equal to the difference
between $2.55 and the exercise price of each such option.
PAYMENT FOR DYNAMIC HOMES SHARES
As soon as practicable after the closing of the merger (but in any
event, within five business days), Wells Fargo Bank, Minnesota N.A. or another
bank or trust company designated by Dynamic LLC, in its capacity as paying
agent, will send a transmittal letter to each former Dynamic Homes stockholder.
The transmittal letter will contain instructions on how to surrender your shares
of Dynamic Homes common stock in order to receive the cash merger consideration.
Dynamic Homes stockholders should not send in their stock certificates until
they receive the transmittal materials from Wells Fargo Minnesota N.A..
REGULATORY APPROVALS
The closing of the merger is conditioned upon all material governmental
consents, approvals and authorizations legally required for the closing of the
merger having been obtained and being in effect. However, no assurance can be
given that the required consents, approvals or authorizations will be obtained.
Dynamic Homes and Dynamic LLC are not currently aware of any governmental
approvals or actions that may be required to close the merger.
WHEN THE MERGER WILL BE COMPLETED
The Company expects to complete the merger by November 28, 2000.
However, either Dynamic Homes or Dynamic LLC may terminate the Merger Agreement
if, among other reasons, the merger has not been completed on or before January
2, 2001, unless failure to complete the merger by that time is due to the
terminating party's failure to perform its obligations under the Merger
Agreement.
The closing of the merger will take place on a date within seven
business days after satisfaction or waiver of all of the conditions to
consummation of the merger or on a date to which Dynamic Homes and Dynamic LLC
mutually agree. On the date of the closing, the parties will file articles of
merger with the Minnesota Secretary of State. The merger will become effective
upon the filing of the articles of merger or at a later time if specified in the
articles of merger.
PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
Within five business days after the completion of the merger, Wells
Fargo Bank, Minnesota N.A., as paying agent, will mail to each former holder of
record of Dynamic Homes common stock
21
a letter with instructions on how to exchange Dynamic Homes stock certificates
for the cash merger consideration.
Please do not send in your Dynamic Homes stock certificates until you
receive the letter of transmittal and instructions from Wells Fargo Bank,
Minnesota N.A. Do not return your stock certificates with the enclosed proxy
card. If your shares of Dynamic Homes stock are held through a broker, your
broker will surrender your shares for cancellation.
After you mail the letter of transmittal and your stock certificates to
Wells Fargo Bank, Minnesota N.A., your check will be mailed to you. The Dynamic
Homes stock certificates you surrender will be canceled.
After the completion of the merger, there will be no further transfers
of Dynamic Homes common stock. Dynamic Homes stock certificates presented for
transfer after the completion of the merger will be canceled and exchanged for
the merger consideration.
If your Dynamic Homes stock certificates have been lost, stolen or
destroyed, you will have to prove your ownership of those certificates and that
they were lost, stolen or destroyed before you receive any consideration for
your shares. Wells Fargo Bank, Minnesota N.A. will send you instructions on how
to provide such evidence.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax
consequences of the merger to holders of Dynamic Homes common stock. The
discussion is based upon the Internal Revenue Code, Treasury regulations, IRS
rulings and judicial and administrative decisions in effect as of the date of
this proxy statement. This discussion assumes that the Dynamic Homes common
stock is generally held for investment. In addition, this discussion does not
address all of the tax consequences that may be relevant to you in light of your
particular circumstances or to Dynamic Homes stockholders subject to special
rules, such as stockholders who acquired their Dynamic Homes stock pursuant to
the exercise of stock options or otherwise as compensation, non-United States
persons, financial institutions, tax-exempt organizations, dealers in securities
or foreign currencies or insurance companies.
The receipt of cash for Dynamic Homes common stock pursuant to the
merger will be a taxable transaction for federal income tax purposes and may be
a taxable transaction for state, local and foreign tax purposes as well. You
will recognize gain or loss measured by the difference between your adjusted tax
basis for the Dynamic Homes common stock owned by you at the time of the merger
and the amount of cash you receive for your Dynamic Homes shares. Your gain or
loss will be a capital gain or loss if your Dynamic Homes stock is a capital
asset in your hands, and will
22
be long-term capital gain or loss if you have held your Dynamic Homes stock for
more than one year on the date of the merger.
The cash payments due to the holders of Dynamic Homes common stock upon
the exchange of Dynamic Homes common stock pursuant to the merger generally will
be subject to "backup withholding" at a 31% rate unless certain requirements are
met. Backup withholding will not apply if you (i) furnish a correct taxpayer
identification number on IRS Form W-9 or an appropriate substitute form and
certify on such form that you are not subject to backup withholding, (ii)
provide a certificate of foreign status on IRS Form W-8 or an appropriate
substitute form or (iii) are a corporation or are otherwise exempt from backup
withholding. Any amount paid as backup withholding will be credited against your
federal income tax liability.
Neither Dynamic LLC nor Dynamic Homes has requested or will request a
ruling from the IRS as to any of the tax effects to Dynamic Homes stockholders
of the transactions discussed in this proxy statement, and no opinion of counsel
has been or will be rendered to Dynamic Homes stockholders with respect to any
of the tax effects of the merger to stockholders.
The tax consequences of the merger to you may vary depending upon your
particular circumstances. Therefore, you should consult your tax advisor to
determine the particular tax consequences of the merger to you, including those
relating to state, local and/or foreign taxes.
ANTICIPATED ACCOUNTING TREATMENT
Dynamic Homes anticipates that the merger will be accounted for by
Dynamic LLC using the purchase method of accounting in accordance with generally
accepted accounting principles.
REPRESENTATIONS AND WARRANTIES OF DYNAMIC HOMES
Dynamic Homes made representations and warranties in the Merger
Agreement regarding the following:
- corporate organization and qualification to do business of
Dynamic Homes and each of its subsidiaries;
- validity and effectiveness of Articles of Incorporation and
Bylaws;
- capitalization of Dynamic Homes and each of its subsidiaries;
- authority to enter into the Merger Agreement and to consummate
the merger;
23
- absence of conflicts between the Merger Agreement and the
merger, on the one hand, and other contractual and legal
obligations of Dynamic Homes and each of its subsidiaries, on
the other hand;
- requirement of consents, approvals, filings or other
authorizations to enter into the Merger Agreement and
consummate the merger;
- compliance with all applicable SEC filing requirements and
accuracy and completeness of SEC filings since January 1,
1999;
- accuracy of financial statements contained in SEC filings
filed since January 1, 1999;
- material liabilities and obligations;
- material changes or events since June 30, 2000;
- material litigation;
- validity and effectiveness of all leasehold interests;
- possession, effectiveness and compliance with permits and
licenses necessary to carry on the business as currently
conducted;
- validity and enforceability of material contracts and
commitments;
- ownership of intellectual property rights and non-infringement
of the rights of others;
- compliance with applicable law;
- tax matters;
- labor matters;
- employee benefits matters;
- environmental matters;
- insurance matters;
- use of brokers or finders;
24
- approval of the merger by the Special Committee appointed by
the Board of Directors; and
- stockholder vote required to adopt the Merger Agreement.
None of the representations and warranties made by Dynamic Homes in the
Merger Agreement survive the closing of the merger.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND DYNAMIC LLC
Merger Sub and Dynamic LLC each made representations and warranties in
the Merger Agreement regarding the following:
- organization and qualification to do business;
- authority to enter into the Merger Agreement;
- absence of conflicts between the Merger Agreement and the
merger, on the one hand, and other contractual and legal
obligations of Merger Sub and Dynamic LLC, on the other hand;
and
- Dynamic LLC's ability to fund the merger consideration.
None of the representations and warranties made by Merger Sub and
Dynamic LLC in the Merger Agreement survive the closing of the merger.
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
Dynamic Homes has agreed that, subject to certain exceptions, between
the execution of the Merger Agreement and the earlier to occur of the
termination of the Merger Agreement or the consummation of the merger, Dynamic
Homes and its subsidiaries will:
- conduct their businesses in the ordinary course and in a
manner consistent with past practice; and
- use commercially reasonable efforts to preserve substantially
intact their business organizations and to keep available the
services of their current officers, employees and consultants
and to preserve their current relationships with customers,
suppliers, distributors and other persons that have
significant business relations with Dynamic Homes.
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Dynamic Homes has also agreed that, subject to certain exceptions,
prior to the effective time of the merger, Dynamic Homes and its subsidiaries
will not amend their charter documents, issue new shares of stock or enter into
other enumerated non-ordinary course transactions.
NO SOLICITATION PROVISION
Dynamic Homes has agreed not to seek a buyer for Dynamic Homes, other
than Dynamic LLC, and has agreed to terminate all existing discussions or
negotiations with respect to an acquisition. In particular, Dynamic Homes has
agreed, subject to fiduciary obligations discussed below, not to, or permit any
of its subsidiaries to:
- initiate, solicit or encourage any inquires or the making of
any proposal that constitutes an acquisition proposal;
- except as discussed below, engage or participate in
negotiations or discussions or provide information to any
person in connection with any proposal that constitutes or
could reasonably be expected to lead to an acquisition
proposal; or;
- enter into any agreement with respect to an acquisition
proposal or approve an acquisition proposal.
ADDITIONAL COVENANTS OF DYNAMIC HOMES AND DYNAMIC LLC
Dynamic Homes and Dynamic LLC have agreed as follows:
- each company will cooperate to file the SEC documents
necessary to complete the merger;
- each company will use its best efforts to make all
governmental filings necessary to consummate the merger, and
to obtain all required consents, licenses, permits, waivers,
approvals, authorizations or orders;
- Dynamic Homes will call a stockholders' meeting as promptly as
practicable for the purpose of voting on the merger and use
its commercially reasonable efforts to solicit votes in favor
of the merger;
- each company will consult with the other regarding any public
announcements it makes concerning the merger;
26
- each company will give notices to third parties and use its
best efforts to obtain any third party consents required to
effect the merger; and
- Dynamic Homes will deliver to Merger Sub the resignations of
specified officers and directors.
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CONDITIONS TO CLOSING
The obligations of Dynamic Homes and Dynamic LLC to consummate the
merger are subject to satisfaction or waiver of the following conditions:
- Dynamic Homes stockholders approve and adopt the Merger
Agreement and the merger;
- no governmental authority or court having entered an order
making the merger illegal or otherwise prohibiting its
consummation, or taken any legal action which seeks to prevent
or delay consummation of the merger; and
- the receipt of all necessary governmental consents, approvals
or other authorizations legally required to consummate the
merger from all governmental authorities.
The obligation of Dynamic LLC to consummate the merger is also subject
to the satisfaction or waiver of the following additional conditions:
- the continued truthfulness and accuracy of the representations
and warranties made by Dynamic Homes in the Merger Agreement;
- the performance or compliance in all material respects by
Dynamic Homes with all agreements and covenants required by
the Merger Agreement;
- the lack of a material adverse change in Dynamic Homes'
business;
- no judgment, order, decree or law imposing material
limitations on Dynamic LLC's ability to acquire the stock of
Dynamic Homes, imposing limitations on the ability of Dynamic
LLC or its affiliates to operate the business of Dynamic
Homes, imposing other material sanctions against Dynamic LLC
or any of its officers or directors for consummating the
merger, or requiring divestiture by Dynamic LLC of any
significant portion of the business, assets or property of
Dynamic Homes or of Dynamic LLC due to the consummation of the
merger;
- Dynamic Homes having delivered certain closing documents
contemporaneously with the consummation of the merger;
- the resignations of certain of Dynamic Homes' directors and
officers;
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- specified Dynamic Homes employees having entered into
employment agreements with Dynamic LLC; and
- holders of no more than 10% of all shares of Dynamic Homes
common stock outstanding as of the date of the Special Meeting
having demanded appraisal rights under Minnesota law.
The obligation of Dynamic Homes to consummate the merger is also
subject to the satisfaction or waiver of the following additional conditions:
- the continued truthfulness and accuracy of the representations
and warranties made by Dynamic LLC and Merger Sub in the
Merger Agreement;
- the performance or compliance in all material respects by
Dynamic LLC with all agreements and covenants required by the
Merger Agreement; and
- Dynamic LLC having delivered certain closing documents
contemporaneously with the consummation of the merger.
TERMINATION
The Merger Agreement may be terminated and the merger abandoned at any
time prior to the effective time:
- by mutual consent of Dynamic Homes and Dynamic LLC (on behalf
of Dynamic LLC and Merger Sub);
- by either Dynamic Homes or Dynamic LLC (on behalf of Dynamic
LLC and Merger Sub) if:
- - the transaction is not completed by January 2, 2001,
unless failure to complete the merger by that time is
due to the failure to perform obligations by the
party seeking to terminate;
- - Dynamic Homes stockholder approval is not obtained
at the Dynamic Homes stockholders meeting, or a
final and nonappealable governmental restraint
adversely affecting the merger is in effect;
29
- by either Dynamic Homes or Dynamic LLC (on behalf of Dynamic
LLC and Merger Sub) upon the other's breach, subject to
materiality thresholds and cure periods, of a representation,
warranty, covenant or agreement;
- by Dynamic LLC (on behalf of Dynamic LLC and Merger Sub) if
the Dynamic Homes Special Committee:
- - withdraws or modifies its approval of the merger in a
manner adverse to Dynamic LLC;
- - recommends a third-party acquisition proposal to the
stockholders of Dynamic Homes; or
- - resolves to take any of the foregoing actions.
FEES AND EXPENSES
Except as discussed below, whether or not the merger is consummated,
Dynamic Homes and Dynamic LLC are each responsible for their respective expenses
incurred in connection with the merger, including the preparation of the Merger
Agreement and all fees and expenses of investment bankers, legal counsel and
accountants. Pursuant to the engagement letter, dated September 27, 1999,
Dynamic Homes will pay a fee of approximately $172,600 (less $50,000 previously
paid) to Dougherty & Company LLC upon the closing of the merger.
Dynamic Homes, however, is required to reimburse Dynamic LLC for all
reasonable out-of-pocket fees and expenses, not to exceed $25,000, incurred by
Dynamic LLC in connection with the Merger Agreement, if the Merger Agreement is
terminated:
- by either Dynamic Homes or Dynamic LLC because the
stockholders of Dynamic Homes do not approve the merger at the
stockholders meeting;
- by Dynamic LLC, due to Dynamic Homes breaching, subject to
materiality thresholds and cure periods, any of Dynamic Homes'
representations, warranties, covenants or agreements; or
- by Dynamic LLC, due to Dynamic Homes' Special Committee
withdrawing or modifying its approval of the merger in a
manner adverse to Dynamic LLC, recommending a third-party
acquisition proposal to the stockholders of Dynamic Homes, or
resolving to take any of the foregoing actions.
30
In addition to Dynamic Homes' requirement to pay fees and expenses of
$25,000 described above, Dynamic Homes is also required to pay a termination fee
of $200,000 if the Merger Agreement is terminated:
- by Dynamic LLC or Dynamic Homes, at a time when Dynamic LLC is
entitled to terminate the Merger Agreement due to:
- - Dynamic Homes stockholder approval not being
obtained at the Dynamic Homes stockholder meeting,
or
- - Dynamic Homes breaching, subject to materiality
thresholds and cure periods, any of Dynamic Homes'
representations, warranties, covenants or agreements,
and within nine months of such termination Dynamic Homes
enters into an agreement with a third party with respect to an
acquisition proposal;
- by Dynamic LLC, due to a breach by Dynamic Homes of its
obligations not to initiate, solicit or encourage the making
of any acquisition proposal by a third party, or to engage or
participate in negotiations or discussions which facilitate
the making of an acquisition proposal by a third party, or
enter into an agreement with respect to an acquisition
proposal; or
- by Dynamic LLC, due to Dynamic Homes' Special Committee
withdrawing or modifying its approval of the merger in a
manner adverse to Dynamic LLC, recommending a third-party
acquisition proposal to the stockholders of Dynamic Homes, or
resolving to take any of the foregoing actions.
Dynamic LLC is required to reimburse Dynamic Homes for all reasonable
out-of-pocket fees and expenses, not to exceed $25,000, incurred by Dynamic
Homes in connection with the Merger Agreement, if the Merger Agreement is
terminated due to Dynamic LLC breaching, subject to materiality thresholds and
cure periods, any of Dynamic LLC's representations, warranties, covenants or
agreements.
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YOU HAVE APPRAISAL RIGHTS IN THE MERGER
If the merger is completed, holders of Dynamic Homes common stock on
October 15, 2000, who exercised their dissenter's rights and who did not vote in
favor of the Merger Agreement, will have the right to obtain payment for the
"fair value" of their shares, plus interest, in accordance with Sections
302A.471 and 302A.473 of the Minnesota Business Corporation Act ("MBCA"). The
term "fair value" means the value of the shares of common stock immediately
before the effective time of the merger and the term "interest" means interest
commencing five days after the effective time of the merger up to and including
the date of payment at the rate provided by Minnesota law for interest on
verdicts and judgments.
Any Dynamic Homes stockholder contemplating the exercise of dissenters'
rights is urged to review carefully the provisions of Sections 302A.471 and
302A.473 of the MBCA, particularly with respect to the procedural steps required
to perfect dissenters rights. Failure to comply with the statutory requirements
will result in the loss of the stockholder's dissenters' rights. The following
is a summary of the material provisions of the dissenters' rights statute but it
is not a complete statement of the relevant provisions of Minnesota Law. This
summary should be read in conjunction with the full text of Sections 302A.471
and 302A.473, which is attached to this proxy statement as APPENDIX B, and any
amendments to such Sections as may be adopted after the date of this proxy
statement.
FILING WRITTEN OBJECTION
Stockholders of record who desire to exercise their dissenters' rights
must satisfy all of the following conditions. A written notice of intent to
demand fair value for shares must be delivered to the executive offices of
Dynamic Homes before the taking of the stockholder vote to approve the Merger
Agreement at the Special Meeting on November 21, 2000. This written demand must
be in addition to and separate from any proxy or vote against approval of the
Merger Agreement. Voting against, abstaining from voting or failing to vote to
approve the Merger Agreement does not constitute a demand for fair value of the
shares within the meaning of the MBCA.
The written demand should be delivered to the Corporate Secretary of
Dynamic Homes at 525 Roosevelt Avenue, Detroit Lakes, Minnesota 56501. The
written demand should specify the stockholder's name and mailing address, the
number of shares owned and that the stockholder intends to demand the "fair
value," plus interest, of his or her shares.
NO VOTING IN FAVOR OF THE MERGER AGREEMENT
Stockholders electing to exercise their dissenters' rights under the
MBCA must not vote for approval of the Merger Agreement. A stockholder's failure
to vote against approval of the Merger Agreement will not constitute a waiver of
dissenters' rights. However, if a stockholder returns a signed proxy but does
not specify a vote against approval of the Merger Agreement or direction to
32
abstain, the proxy will be voted for approval of the Merger Agreement, and the
stockholder's dissenters' rights will be waived.
A stockholder may not assert dissenters' rights as to less than all of
the shares registered in such holder's name except where certain shares are
beneficially owned by another person but registered in such holder's name. If a
record owner, such as a broker, nominee, trustee or custodian, wishes to dissent
with respect to shares beneficially owned by another person, the stockholder
must dissent with respect to all of such shares and must disclose the name and
address of the beneficial owner on whose behalf the dissent is made. A
beneficial owner of shares of Dynamic Homes common stock who is not the record
owner of those shares may assert dissenters' rights as to shares held on such
person's behalf, provided that the beneficial owner submits a written consent of
the record owner to Dynamic Homes at or before the time such rights are
asserted.
NOTICE BY DYNAMIC HOMES
After approval of the Merger Agreement by the stockholders at the
Special Meeting, Dynamic Homes will send a written notice to each stockholder
who filed a written demand for dissenters' rights. The notice will contain
- the address to which the stockholder must send a demand for
payment and the stock certificates in order to obtain payment;
- the date by which they must be received;
- any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
- a form to be used to certify the date on which such
stockholder, or the beneficial owner on whose behalf the
stockholder dissents, acquired the shares, or an interest in
them, and to demand payment; and
- a copy of Sections 302A.471 and 302A.473 of the MBCA and a
brief description of the procedures to be followed under these
Sections.
REMITTANCE OF CERTIFICATES
In order to receive the fair value for his or her shares under Section
302A.473, a dissenting stockholder must, within 30 days after the date Dynamic
Homes gives the notice described in the preceding paragraph, demand payment and
deposit his or her stock certificates, at the address specified in the notice.
Under Minnesota law, notice by mail is given by Dynamic Homes when deposited in
the U.S. mail. A dissenting stockholder will retain all rights as a stockholder
until the effective time of the merger. After a valid demand for payment and the
related stock certificates are timely received, or after the effective time of
the merger, whichever is later, Dynamic Homes will
33
remit to each dissenting stockholder who has complied with the statutory
requirements the amount that Dynamic Homes estimates to be the fair value of the
dissenting stockholder's shares, with interest commencing five days after the
effective time of the merger at a rate prescribed by statute.
Dynamic Homes has no current intention of offering to pay more than
$2.55 per share as its estimate of fair value of a dissenting stockholder's
shares and reserves the right to offer less. Dynamic Homes will also send its
closing balance sheet and statement of income for a fiscal year ending not more
than 16 months before the effective time of the merger, together with
- the latest available interim financial statements,
- an estimate of the fair value of the stockholder's shares and
a brief description of the method used to reach the estimate,
- a brief description of the procedure to be followed if the
dissenting stockholder decides to make a demand for a
supplemental payment and
- copies of Sections 302A.471 and 302A.473 of the MBCA.
As described below, Dynamic Homes is not required at that time to send
its estimated payment to any person who was not a stockholder and who is not
dissenting on behalf of a person who was the beneficial owner of shares of
common stock, of Dynamic Homes on October 15, 2000. If, however, the merger is
not completed or Dynamic Homes disputes a stockholder's right to dissent,
Dynamic Homes will not send to the stockholder the fair value of such
stockholder's share or the additional information listed above.
ACCEPTANCE OR SETTLEMENT OF DEMAND
If the dissenting stockholder believes that the amount remitted by
Dynamic Homes is less than the fair value of the holder's shares, plus interest,
if any, the stockholder must give written notice to Dynamic Homes of such
holder's own estimate of the fair value of the shares, plus interest, if any,
within 30 days after the mailing date of the remittance and demand payment of
the difference. The notice must be given at the executive offices of Dynamic
Homes at the address set forth above. A stockholder who fails to give written
notice within this time period is entitled only to the amount remitted by
Dynamic Homes.
Within 60 days after receipt of a demand for supplemental payment,
Dynamic Homes must either (1) pay the stockholder the amount demanded or agreed
to by the stockholder after discussion with Dynamic Homes, or (2) petition a
court in Becker County, Minnesota for the determination of the fair value of the
shares, plus interest, if any. Upon payment of the agreed value, the dissenting
stockholder will cease to have any interest in Dynamic Homes. Dynamic Homes has
no current intention of offering to pay more than $2.55 per share in respect of
any dissenting stockholder's shares.
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COURT DETERMINATION
If, within the 60 days after the receipt of demand for supplemental
payment, any one or more of the dissenting stockholders and Dynamic Homes do not
agree on the fair value of the shares, then Dynamic Homes must file a petition
with the court to obtain a judicial finding and determination of the fair value
of the dissenting stockholder's shares of Dynamic Homes common stock. The
petition must name as parties all stockholders who have demanded supplemental
payment and have not reached an agreement with Dynamic Homes.
The court, after determining that the stockholder or stockholders in
question have complied with all statutory requirements, may use any valuation
method or combination of methods it deems appropriate to use, whether or not
used by Dynamic Homes or a dissenting stockholder, and may appoint appraisers to
recommend the amount of the fair value of the shares. The court's determination
will be binding on all stockholders of Dynamic Homes who properly exercised
dissenters' rights and did not agree with Dynamic Homes as to the fair value of
the shares and may be less than, equal to or more than the merger consideration.
Dissenting stockholders are entitled to judgment in cash for the amount by which
the court-determined fair value per share, plus interest, exceeds the amount per
share, plus interest, remitted to the stockholders by Dynamic Homes. The
stockholders shall not be liable to Dynamic Homes for any amounts paid by
Dynamic Homes which exceed the fair value of the shares as determined by the
court, plus interest.
The costs and expenses of such a proceeding, including the expenses and
compensation of any appraisers, will be determined by the court and assessed
against Dynamic Homes, except that the court may, in its discretion, assess part
or all of those costs and expenses against any stockholder whose action in
demanding supplemental payment is found to be arbitrary, vexatious or not in
good faith. The court may award fees and expenses to an attorney for the
dissenting stockholders out of the amount, if any, awarded to such stockholders.
The court may assess fees and expenses of experts or attorneys against any
person who acted arbitrarily, vexatiously or not in good faith in bringing the
proceeding and also may award fees and expenses of experts or attorneys against
Dynamic Homes if Dynamic Homes fails to comply substantially with Section
302A.473.
Stockholders considering exercising dissenters' rights should bear in
mind that the fair value of their shares determined under Sections 302A.471 and
302A.473 of the MBCA could be more than, the same as or, in certain
circumstances, less than the consideration they would receive pursuant to the
Merger Agreement if they did not seek appraisal of their shares.
Under Section 302A.471 a stockholder of Dynamic Homes has no right at
law or equity to set aside the adoption of the Merger Agreement or the
consummation of the merger, unless such stockholder can establish that adoption
or consummation was fraudulent with respect to such stockholder or Dynamic
Homes.
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Any holder who fails to comply fully with the statutory procedures
summarized above within the time periods specified above will forfeit his or her
rights of dissent and will receive the cash and/or stock consideration payable
in the merger for his or her shares, which may be more or less than or equal to
the fair value of the shares determined under section 302A.473.
36
MARKET PRICE OF DYNAMIC HOMES COMMON STOCK
Dynamic Homes common stock is quoted on the NASDAQ Small-Cap System
under the symbol "DYHM." The following table sets forth, for the periods
indicated, the high and low sales prices per share for Dynamic Homes common
stock as reported on the NASDAQ Small-Cap System.
High Low
-------- -------
1998
First Quarter $ 2 7/16 $ 1 3/4
Second Quarter 2 1/16 1 3/4
Third Quarter 2 1/4 1 9/16
Fourth Quarter 1 7/8 1 7/16
1999
First Quarter $ 1 7/8 $ 1 3/8
Second Quarter 1 11/16 1 1/4
Third Quarter 1 11/16 1 5/16
Fourth Quarter 1 5/8 1 1/16
2000
First Quarter $ 2 1/8 $ 1 5/32
Second Quarter 2 3/16 1 5/16
Third Quarter 2 11/32 2 3/16
The closing market price per share of Dynamic Homes common stock on
June 20, 2000, which was the last full trading day immediately preceding the
public announcement of the proposed merger, was $1.94. On October __, 2000,
which is the latest practicable date prior to the printing of this proxy
statement, the closing price for Dynamic Homes common stock was $_____.
As of October 2, 2000, there were 2,240,850 shares of Dynamic Homes
common stock outstanding, held by approximately 362 stockholders of record of
Dynamic Homes common stock. This number does not reflect the number of persons
or entities who may hold their stock in nominee or "street" name through
brokerage firms.
Dynamic Homes has never paid any cash dividends on its common stock,
nor does it have any intention of doing so in the near future.
37
BENEFICIAL OWNERSHIP OF MANAGEMENT AND
PRINCIPAL STOCKHOLDERS
The following table sets forth as of October 2, 2000, information
relating to the beneficial ownership of Dynamic Homes' common stock by (a) each
person known by Dynamic Homes to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Dynamic Homes common stock, (b) each
executive officer, (c) each director, and (d) all executive officers and
directors as a group. As of October 2, 2000, 2,240,850 shares of the Dynamic
Homes' common stock were outstanding. Unless otherwise indicated, all persons
named as beneficial owners of common stock have sole voting power and sole
investment power with respect to the shares indicated as beneficially owned.
Name and No. of Approximate
Address Shares Owned(1) Percentage Owned(1)
------- --------------- -------------------
D. Raymond Madison 634,692(2) 28.32
2116 Spruce Drive
Brainerd, MN 56401
Clyde R. Lund, Jr. 64,774 2.86
31338 Cty. Hwy. 64
Frazee, MN 56544
Israel Mirviss 50,000 2.21
7300 Metro Blvd.
Suite #500
Minneapolis, MN 55439
Ronald L. Gustafson 50,300 2.22
4 White Birch Drive
Superior, WI 54880
Peter K. Pichetti 30,000 1.32
8039 East Spirit Cove Dr.
Tower, MN 55790
Lance G. Morgan 0 0
P.O. Box 390
Winnebago, NE 68071
38
All directors and 206,074 8.78
executive officers
as a group (7 persons)
HCI Investment 241,750(3) 10.79
Company
One St. Augustine Dr.
Hwy. 77
Winnebago, NE 68071
(1) Under the rules of the SEC, a person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days
from the date beneficial ownership is determined, upon the exercise of
warrants or options. Each beneficial owner's percentage ownership is
based upon 2,240,850 shares of Dynamic Homes Common Stock issued and
outstanding as of October 2, 2000, and is determined by assuming
options that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of October 2, 2000,
have been exercised. Amounts include shares of Common Stock subject to
presently exercisable stock options held by the following: 25,000 each
by Clyde R. Lund, Jr., Israel Mirviss, Ronald L. Gustafson, Peter K.
Pichetti and 50,000 by D. Raymond Madison, and by all directors and
officers as a group 105,000 shares.
(2) Mr. Madison and his wife share voting and investment power with respect
to 86,309 shares of those shown on the table.
(3) Information as identified in Schedule 13D as filed by HCI Investment
Company with SEC on December 15, 1997 and 13D/A filed on March 3, 1999.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company as of December 31,
1999, and December 31, 1998, and for each of the years in the two-year period
ended December 31, 1999, incorporated by reference in this proxy statement, have
been audited by Eide Bailly LLP, independent public accountants. The Board of
Directors of the Company has appointed Eide Bailly LLP as independent auditors
for the Company for the year ending December 31, 2000.
INFORMATION INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1999, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
as filed by the Company with the Commission, are incorporated by reference into
this proxy statement.
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All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this proxy statement and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Copies of the documents (without exhibits) incorporated by reference
in this proxy statement are available without charge upon written or oral
request from Scott Lindemann, Chief Executive Officer of Dynamic Homes, 525
Roosevelt Avenue, Detroit Lakes, MN 56402. To obtain timely delivery, requests
for copies should be made no later than November 14, 2000 (five business days
before the date of the Special Meeting).
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Exchange Act and, in accordance therewith, files reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copies made at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street NW, Washington, D.C.
20549 and the Commission's regional offices at Seven World Trade Center, Suite
1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such material can also be obtained from the
Public Reference Section of Commission at its Washington, D.C. address at
prescribed rates. The Commission also maintains a web site address,
http://www.sec.gov. The Company's common stock is quoted and traded on the
NASDAQ and such reports, proxy statements and other information may be inspected
at the offices of NASDAQ Operations, 1735 K Street N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
This proxy statement contains information disclosed pursuant to Rule
13e-3 under the Exchange Act, which governs so-called "going private"
transactions by certain issuers and their affiliates. Dynamic LLC and the
Company are filing a Rule 13e-3 Transaction Statement ("Schedule 13E-3") with
the Commission to furnish information with respect to the transactions described
herein. This proxy statement does not contain all of the information set forth
in the Schedule 13E-3, parts of which are omitted in accordance with the
regulations of the Commission. The Schedule 13E-3, and any amendments thereto,
including exhibits filed as part thereof, will be available for inspection and
copying at the offices of the Commission as set forth above.
40
OTHER MATTERS
You should rely only on the information contained in this proxy
statement to vote your shares at the meeting. Dynamic Homes has not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement. This proxy statement is dated October ___, 2000. You
should not assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of this document
to stockholders is not intended to create any implication to the contrary.
In order to be considered for inclusion in the proxy statement for the
next annual meeting, if any, of stockholders of Dynamic Homes, any stockholder
proposal intended to be presented at the meeting must be received by Dynamic
Homes on or before ___________, 2000. The annual meeting will be held only if
the merger is not consummated.
The Board of Directors does not intend to bring before the meeting any
matters other than those set forth herein, and has no present knowledge that any
other matters will or may be brought before the meeting by others. If, however,
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the proxies in accordance
with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Detroit Lakes, Minnesota -------------------------
October ____, 2000 Chief Executive Officer
41
APPENDIX A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
DYNAMIC HOMES, LLC,
DYNAMIC ACQUISITIONS, INC.
AND
DYNAMIC HOMES, INC.
--------------
September 25, 2000
--------------
TABLE OF CONTENTS
ARTICLE I
THE MERGER...............................................................................................1
1.1. The Merger......................................................................................1
1.2. Effect of Merger................................................................................1
1.3. Effective Time..................................................................................2
1.4. Articles of Incorporation; Bylaws...............................................................2
1.5. Directors and Officers..........................................................................2
1.6. Taking of Necessary Action; Further Action......................................................2
1.7. The Closing.....................................................................................2
ARTICLE II
CONVERSION OF SECURITIES.................................................................................3
2.1. Conversion of Securities........................................................................3
2.2. Stock Options...................................................................................3
2.3. Intentionally omitted...........................................................................4
2.4. Dissenting Shares...............................................................................4
2.5. Exchange of Certificates........................................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
3.1. Organization and Qualification..................................................................6
3.2. Capital Stock of Subsidiaries...................................................................6
3.3. Capitalization..................................................................................7
3.4. Authority Relative to this Agreement............................................................7
3.5. No Conflict; Required Filings and Consents......................................................8
3.6. SEC Filings; Financial Statements...............................................................8
3.7. Absence of Changes or Events....................................................................9
3.8. Absence of Certain Developments................................................................10
3.9. Litigation.....................................................................................10
3.10. Title to Properties............................................................................10
3.11. Certain Contracts..............................................................................10
3.12. Compliance with Law............................................................................11
3.13. Intellectual Property Rights; Year 2000........................................................12
3.14. Taxes..........................................................................................13
3.15. Employees......................................................................................15
3.16. Employee Benefit Plans.........................................................................15
3.17. Environmental Matters..........................................................................18
3.18. Insurance......................................................................................19
3.19. Anti-Bribery Compliance........................................................................19
3.20. Export Control Laws............................................................................19
3.21. Finders or Brokers..............................................................................19
3.22. Board Recommendation...........................................................................19
3.23. Vote Required..................................................................................19
3.24. Intentionally omitted..........................................................................20
3.25. State Takeover Statutes........................................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT.................................................20
4.1. Organization and Qualification.................................................................20
4.2. Authority Relative to this Agreement...........................................................20
4.3. No Conflicts; Required Filings and Consents....................................................21
4.4. Funds..........................................................................................21
ARTICLE V
COVENANTS AND AGREEMENTS ...............................................................................21
5.1. Conduct of Business of the Company Pending the Merger..........................................21
5.2. Preparation of Proxy Statement.................................................................24
5.3 Meeting of Stockholders........................................................................25
5.4. Additional Agreements, Cooperation.............................................................25
5.5. Publicity......................................................................................25
5.6. No Solicitation................................................................................26
5.7. Access to Information..........................................................................27
5.8. Notification of Certain Matters................................................................27
5.9. Resignation of Officers and Directors..........................................................28
5.10 Intentionally omitted..........................................................................28
5.11. Stockholder Litigation.........................................................................28
5.12. Intentionally omitted..........................................................................28
5.13. Determination of Optionholders.................................................................28
5.14. Preparation of Tax Returns.....................................................................28
5.15. SEC Filings; Compliance........................................................................29
ARTICLE VI
CONDITIONS TO CLOSING...................................................................................29
6.1. Conditions to Each Party's Obligation to Effect the Merger.....................................29
6.2. Conditions to Obligations of Parent............................................................29
6.3. Conditions to Obligations of the Company.......................................................31
ARTICLE VII
TERMINATION.............................................................................................31
7.1. Termination....................................................................................31
7.2. Effect of Termination..........................................................................33
7.3. Fees and Expenses..............................................................................33
ARTICLE VIII
MISCELLANEOUS...........................................................................................34
8.1. Nonsurvival of Representations and Warranties..................................................34
8.2. Waiver.........................................................................................34
8.3. Notices........................................................................................34
8.4. Counterparts...................................................................................35
8.5. Interpretation.................................................................................35
8.6. Amendment......................................................................................36
8.7. No Third Party Beneficiaries...................................................................36
8.8. Governing Law..................................................................................36
8.9. Entire Agreement...............................................................................36
8.10. Validity.......................................................................................36
EXHIBITS
EXHIBITS
A Articles and Plan of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
September 25, 2000, is made and entered into by and among Dynamic Homes, LLC, a
Minnesota limited liability company ("Parent"), Dynamic Acquisitions, Inc., a
Minnesota corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
Dynamic Homes Inc., a Minnesota corporation (the "Company"). Merger Sub and the
Company are sometimes collectively referred to as the "Constituent
Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their stockholders that Merger Sub be merged
with and into the Company in accordance with the Minnesota Business Corporations
Act (the "MBCA") and the terms of this Agreement, pursuant to which the Company
will be the surviving corporation and will be a wholly owned subsidiary of
Parent (the "Merger"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and conditions of this Agreement and the Articles
and Plan of Merger (as defined in Section 1.3 hereof), Merger Sub shall be
merged with and into the Company, the separate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation. The Company,
in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2. Effect of Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Articles and Plan of Merger and the
applicable provisions of the MBCA. Without limiting the generality of the
foregoing, the Surviving Corporation shall succeed to and possess all the
properties, rights, privileges, immunities, powers, franchises and purposes, and
be subject to all the duties, liabilities, debts, obligations, restrictions and
disabilities, of the Constituent Corporations, all without further act or deed.
1
1.3. Effective Time. Subject to the terms and conditions of this
Agreement, the parties hereto will cause a copy of the Articles and Plan of
Merger, substantially in the form attached hereto as EXHIBIT A (the "Articles
and Plan of Merger") to be executed, delivered and filed with the Secretary of
State of the State of Minnesota in accordance with the applicable provisions of
the MBCA at the time of the Closing (as defined in Section 1.7 hereof). The
Merger shall become effective upon filing of the Articles and Plan of Merger
with the Secretary of State of the State of Minnesota or at such later time as
may be agreed to by the parties and set forth in the Articles and Plan of
Merger. The time of effectiveness is herein referred to as the "Effective Time."
The day on which the Effective Time shall occur is herein referred to as the
"Effective Date."
1.4. Articles of Incorporation; Bylaws. From and after the Effective
Time and until further amended in accordance with applicable law, the Articles
of Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation, as
amended and as set forth in an exhibit to the Articles and Plan of Merger.
From and after the Effective Time and until further amended in
accordance with law, the Bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.
1.5. Directors and Officers. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Sub immediately prior to the Effective Time, and the
officers of the Surviving Corporation shall be the persons who were the officers
of Merger Sub immediately prior to the Effective Time . Said directors and
officers of the Surviving Corporation shall hold office for the term specified
in, and subject to the provisions contained in, the Articles of Incorporation
and the Bylaws of the Surviving Corporation and applicable law. If, at or after
the Effective Time, a vacancy shall exist on the Board of Directors or in any of
the offices of the Surviving Corporation, such vacancy shall be filled in the
manner provided in the Articles of Incorporation and the Bylaws of the Surviving
Corporation.
1.6. Taking of Necessary Action; Further Action. Parent, Merger Sub and
the Company, respectively, shall each use their best efforts to take all such
action as may be necessary or appropriate to effectuate the Merger under the
MBCA at the time specified in Section 1.3 hereof. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges, immunities,
powers and franchises of either of the Constituent Corporations, the officers of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
1.7. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Johnson, Killen &
Seiler, P.A., 230 West Superior Street, Suite 811, Duluth, Minnesota, or Lommen,
Nelson , Cole & Stageberg, P.A., 1800 IDS
2
Center, 80 South 8th Street, Minneapolis, Minnesota as the parties agree within
seven business days after the date on which the last of the conditions set forth
in Article VI shall have been satisfied or waived, or at such other place and on
such other date as is mutually agreeable to Parent and the Company (the "Closing
Date"). The Closing will be effective as of the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES
2.1. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company,
the holder of any shares of Company Common Stock (defined below) or the holder
of any options, warrants or other rights to acquire or receive shares of Company
Common Stock, the following shall occur:
(a) Conversion of Company Common Stock. At the Effective Time, each
share of common stock, par value $.10 per share, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Common Stock to be canceled pursuant to
Section 2.1(b) hereof or any Dissenting Shares (as defined in Section 2.4
hereof)) will be canceled and extinguished and be converted automatically into
the right to receive an amount of cash equal to the Per Share Amount (as defined
in Section 2.1(e)(i) hereof), without interest thereon, upon surrender of the
certificate formerly representing such share.
(b) Cancellation of Company Common Stock Owned by Parent or Company. At
the Effective Time, all shares of Company Common Stock that are owned by the
Company as treasury stock and each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of Parent or of Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Capital Stock of Merger Sub. At the Effective Time, each share of
common stock, no par value, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, $.10 par value, of the Surviving Corporation, and the Surviving
Corporation shall be a wholly owned subsidiary of Parent. Each stock certificate
of Merger Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(d) Per Share Amount. The "Per Share Amount" shall be equal to $2.55.
2.2. Stock Options.
(a) On or before the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each, a "Company Option"), whether
vested or unvested, exercisable or not exercisable, shall be deemed to have been
exercised by the holder thereof, whereupon all such holders of each Company
Option shall be entitled to a cash payment at the Effective Time
3
in an amount equal to the difference between the Per Share Amount and the
exercise price of each such Company Option.
(b) At the Effective Time, each Company Option will be canceled and
extinguished and be converted automatically into the right to receive the amount
of cash provided for in Section 2.2(a) hereof, without interest thereon, upon
surrender of the Company Option to the Parent.
2.3. Intentionally omitted.
2.4. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares
of Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such shares
in favor of the Merger, who shall have delivered, prior to any vote on the
Merger, a written demand for appraisal of such shares in the manner provided in
Sections 302A.471 and 302A.473 of the MBCA and who, as of the Effective Time,
shall not have effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares") shall not be converted into or represent a right to
receive the Per Share Amount pursuant to Section 2.1 hereof, but the holders
thereof shall be entitled only to such rights as are granted by Sections
302A.471 and 302A.473 of the MBCA. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Sections 302A.471 and 302A.473
of the MBCA shall receive payment therefor from the Surviving Corporation in
accordance with the MBCA; provided, however, that if any such holder of
Dissenting Shares shall have effectively withdrawn such holder's demand for
appraisal of such shares or lost such holder's right to appraisal and payment of
such shares under Sections 302A.471 and 302A.473 of the MBCA, such holder or
holders (as the case may be) shall forfeit the right to appraisal of such shares
and each such share shall thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive payment from the Surviving Corporation of the Per Share Amount
as provided in Section 2.1 hereof.
2.5. Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate a commercial
bank, trust company or other financial institution, which may include Company's
stock transfer agent, to act as disbursement agent ("Disbursement Agent") in the
Merger.
(b) Promptly after the Effective Time, Parent shall make available to
the Disbursement Agent for exchange in accordance with this Article II, cash in
an amount sufficient to permit payment of the aggregate Per Share Amount
pursuant to Section 2.1 hereof (the "Exchange Fund").
(c) Promptly, and in any event no later than five business days after
the Effective Time, the Parent shall cause to be mailed to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company
4
Common Stock (the "Certificates") (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 proper delivery of the Certificates to the
Disbursement Agent, and shall be in such form and have such other provisions as
Parent may reasonably specify and which shall be reasonably acceptable to the
Company) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Per Share Amount. Upon surrender of a
Certificate for cancellation to the Disbursement Agent, together with such
letter of transmittal, duly completed and validly executed, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange a check
representing the Per Share Amount in accordance with Section 2.1, and the
Certificate so surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 2.5, each Certificate that, prior to the Effective
Time, represented shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the right to receive
the Per Share Amount, if any, multiplied by the number of shares of Company
Common Stock such certificate represented.
(d) None of Parent, the Surviving Corporation or the Disbursement Agent
shall be liable to any holder of shares of Company Common Stock for any amount
properly delivered to a public official in compliance with any abandoned
property, escheat or similar law.
(e) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers of
shares of Company Common Stock thereafter on the records of the Company, except
in favor of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock except as otherwise provided in this Agreement or
by law.
(f) Subject to any applicable escheat or similar laws, any portion of
the Exchange Fund that remains unclaimed by the former stockholders of the
Company for one year after the Effective Time shall be delivered by the
Disbursement Agent to Parent, upon demand of Parent, and any former stockholders
and optionholders of the Company shall thereafter look only to Parent for
satisfaction of their claim for cash in exchange for their shares of Company
Common Stock pursuant to the terms of Section 2.1 hereof and 2.2.
(g) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact, in form and substance acceptable to the
Disbursement Agent, by the person claiming such Certificate to be lost, stolen
or destroyed, and complying with such other conditions as the Disbursement Agent
may reasonably impose (including the execution of an indemnification undertaking
or the posting of an indemnity bond or other surety in favor of the Disbursement
Agent and Parent with respect to the Certificate alleged to be lost, stolen or
destroyed), the Disbursement Agent will deliver to such person the amount as may
be required pursuant to Section 2.1 hereof.
5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub and Parent that the
statements contained in this Article III are true and correct, except as set
forth in the letter delivered by the Company to Merger Sub on the date hereof
(the "Company Disclosure Letter") (which Company Disclosure Letter sets forth
the exceptions to the representations and warranties contained in this Article
III under captions referencing the Sections to which such exceptions apply):
3.1. Organization and Qualification. Each of the Company and its
Subsidiaries (as defined below) is a company (or similar entity with corporate
characteristics including limited liability of stockholders or other owners)
duly organized, validly existing, duly registered and, if applicable, in good
standing under the laws of the jurisdiction of its organization and each such
entity has all requisite corporate (or similar) power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified or
licensed to carry on its business as it is now being conducted, and is qualified
to conduct business, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified that would not, individually
or in the aggregate, have, or would not reasonably be expected to have, a
Company Material Adverse Effect (as defined below). Neither the Company nor any
of its Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or other applicable charter document (any such document of any
business entity hereinafter referred to as its "Charter Document") or its
Bylaws, or other applicable governing document (any such documents of any
business entity hereinafter referred to as its "Governing Document"). The
Company has made available to Parent accurate and complete copies of the
respective Charter Documents and Governing Documents, as currently in effect, of
each of the Company and its Subsidiaries. As used in this Agreement, the term
"Company Material Adverse Effect" means any change, effect, event or condition
that (i) has a material adverse effect on the assets, business, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole (other than any such change, effect, event or condition that arises from
changes in general economic conditions or conditions affecting the Company's
industry generally, or such changes, effects, events or conditions resulting
from the consummation of the transactions contemplated hereby); or (ii) would
prevent or materially delay the Company's ability to consummate the transactions
contemplated hereby. As used in this Agreement, the term "Subsidiary" when used
with respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions.
3.2. Capital Stock of Subsidiaries. Neither the Company nor any of its
Subsidiaries owns, controls or holds with the power to vote, directly or
indirectly, of record, beneficially or otherwise, any share capital, capital
stock or any equity or ownership interest in any company, corporation,
partnership, association, joint venture, business, trust or other entity, except
for the Subsidiaries described in the Company SEC Reports (as defined in Section
3.6(a) hereof) or listed in Section 3.2 of the Company Disclosure Letter, and
except for ownership of securities
6
in any publicly traded company held for investment by the Company or any of its
Subsidiaries and comprising less than five percent of the outstanding stock of
such company. Except as set forth in Section 3.2 of the Company Disclosure
Letter, the Company is directly or indirectly the registered, record and
beneficial owner of all of the outstanding share capital or shares of capital
stock (or other ownership interests having by their terms ordinary voting power
to elect a majority of directors or others performing similar functions with
respect to such Subsidiary) of each of its Subsidiaries, there are no proxies
with respect to such shares, and no equity securities of any of such
Subsidiaries are or may be required to be issued by reason of any options,
warrants, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, share capital or shares of any capital stock of any such Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any such Subsidiary is bound to issue, transfer or sell any share
capital or shares of such capital stock or securities convertible into or
exchangeable for such shares. Other than as set forth in Section 3.2 of the
Company Disclosure Letter, all of such shares so owned by the Company are
validly issued, fully paid and nonassessable and are owned by it free and clear
of any claim, lien, pledge, security interest or other encumbrance of any kind
(collectively "Liens") with respect thereto.
3.3. Capitalization. The authorized capital stock of the Company
consists of 5,000,000 shares of Company Common Stock . As of the close of
business on June 30, 2000 (the "Company Measurement Date"), (a) 2,240,850 shares
of Company Common Stock were issued and outstanding, (c) the Company had 43,080
shares of Company Common Stock held in its treasury, (d) in excess of 205,000
shares of Company Common Stock were reserved for issuance under Company Options,
(e) Company Options to purchase 205,000 shares of Company Common Stock in the
aggregate had been granted and remained outstanding under Company Options, (f)
no warrants to purchase shares of Company Common Stock were outstanding and (g)
except for the Company Options, there were no outstanding Rights (defined
below). Since the Company Measurement Date, no additional shares in the Company
have been issued, except pursuant to the exercise of Company Options outstanding
at the Company Measurement Date, and no Rights have been granted. Except as
described in the preceding sentence or as set forth in Section 3.3 of the
Company Disclosure Letter, the Company has no outstanding bonds, debentures,
notes or other securities or obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote on any matter on which any stockholder of the Company has a right
to vote. All issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 3.3 of the Company Disclosure Letter,
there are not as of the date hereof any existing options, warrants, stock
appreciation rights, stock issuance rights, calls, subscriptions, convertible
securities or other rights which obligate the Company or any of its Subsidiaries
to issue, exchange, transfer or sell any shares in the capital of the Company or
any of its Subsidiaries (collectively, "Rights"). As of the date hereof, there
are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, reprice, redeem or otherwise acquire any shares of
the capital of the Company or any of its Subsidiaries. As of the date hereof,
there are no outstanding contractual obligations of the Company to vote or to
dispose of any shares in the capital of any of its Subsidiaries.
7
3.4. Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and, subject to obtaining the necessary
approval of its stockholders, to consummate the Merger and the other
transactions contemplated hereby under applicable law. The execution and
delivery of this Agreement and the consummation of the Merger and other
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company by and through that certain Special Committee
appointed by the Board of Directors of the Company to act in its stead in
connection with the transactions contemplated herein (hereinafter the "Board of
Directors" or "Company Board" or "Special Committee") and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger or other transactions contemplated hereby (other
than approval by the Company's stockholders required by applicable law). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by Parent and
Merger Sub, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors rights generally or by general equitable principles.
3.5. No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement by the Company
nor the consummation of the Merger or other transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or suspension of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, any of the
terms, conditions or provisions of (x) their respective Charter Documents or
Governing Documents, (y) any note, bond, charge, lien, pledge, mortgage,
indenture or deed of trust to which the Company or any such Subsidiary is a
party or to which they or any of their respective properties or assets may be
subject, or (z) any license, lease, agreement or other instrument or obligation
to which the Company or any such Subsidiary is a party or to which they or any
of their respective properties or assets may be subject, or (ii) violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, except, in the case of clauses (i) (y)and (z) and (ii)
above, for such violations, conflicts, breaches, defaults, terminations,
suspensions, accelerations, rights of termination or acceleration or creations
of liens, security interests, charges or encumbrances which would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, schedules, statements
and other documents required to be filed by it since January 1, 1999 to the date
hereof (collectively, as
8
supplemented and amended since the time of filing, the "Company SEC Reports")
with the SEC. The Company SEC Reports (i)were prepared in all material respects
with all applicable requirements of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"), and the
Exchange Act, as the case may be and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The representation in clause (ii) of the preceding sentence does not
apply to any misstatement or omission in any Company SEC Report filed prior to
the date of this Agreement which was superseded by a subsequent Company SEC
Report filed prior to the date of this Agreement. No Subsidiary of the Company
is required to file any report, form or other document with the SEC.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company and its Subsidiaries
included or incorporated by reference in such Company SEC Reports (collectively,
the "Financial Statements")have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be otherwise indicated in the notes thereto)
and present fairly, in all material respects, the financial position and results
of operations and cash flows of the Company and its Subsidiaries on a
consolidated basis at the respective dates and for the respective periods
indicated (except, in the case of all such financial statements that are interim
financial statements, for footnotes and normal year-end adjustments).
(c) Neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature, whether absolute, accrued, unmatured, contingent
or otherwise whether due or to become due, known or unknown, or any unsatisfied
judgments or any leases of personalty or realty or unusual or extraordinary
commitments that are required to be disclosed under United States generally
accepted accounting principles, except (i) as set forth in the Company SEC
Reports or in Section 3.6(c) of the Company Disclosure Letter, (ii) the
liabilities recorded on the Company's consolidated balance sheet at June 30,
2000 (the "Balance Sheet") included in the financial statements referred in
Section 3.6(a) hereof and the notes thereto, (iii) liabilities or obligations
incurred since June 30, 2000 (whether or not incurred in the ordinary course of
business and consistent with past practice) that would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect,
or (iv) liabilities that would not be required by United States generally
accepted accounting principles to be disclosed in financial statements or in the
notes thereto and that would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
3.7. Absence of Changes or Events. Except as set forth in Section 3.7
of the Company Disclosure Letter or in the Company SEC Reports, since June 30,
2000 through the date of this Agreement, the Company and its Subsidiaries have
not incurred any liability or obligation that has resulted or would reasonably
be expected to result in a Company Material Adverse Effect, and there has not
been any change in the business, financial condition or results of operations of
the Company or any of its Subsidiaries which has had, or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, and the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past practices.
9
3.8. Absence of Certain Developments. Except as disclosed in the
Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Letter, since June 30, 2000, the Company has not taken any of the actions set
forth in Section 5.1 hereof.
3.9. Litigation. Except as disclosed in the Company SEC Reports or as
set forth in Section 3.9 of the Company Disclosure Letter, there is no (a)
claim, action, suit or proceeding pending or, to the Knowledge of the Company or
any of its Subsidiaries, threatened against or relating to the Company or any of
its Subsidiaries before any Governmental Entity, or (b) outstanding judgment,
order, writ, injunction or decree (collectively, "Orders"), or application,
request or motion therefor, of any Governmental Entity in a proceeding to which
the Company, any Subsidiary of the Company or any of their respective assets was
or is a party except actions, suits, proceedings or Orders that, individually or
in the aggregate, has not had or would not reasonably be expected to have a
Company Material Adverse Effect, and neither the Company nor any Subsidiary is
in default in any material respect with respect to any such Order.
3.10. Title to Properties. Except as set forth in Section 3.10 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries owns
any real property. The Company has heretofore made available to Parent correct
and complete copies of all leases, subleases and other agreements (collectively,
the "Real Property Leases") under which the Company or any of its Subsidiaries
uses or occupies or has the right to use or occupy, now or in the future, any
real property or facility (the "Leased Real Property"), including without
limitation all modifications, amendments and supplements thereto. Except in each
case where the failure would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect or except as otherwise set
forth in Section 3.10 of the Company Disclosure Letter, (i) the Company or one
of its Subsidiaries has a valid leasehold interest in each parcel of Leased Real
Property free and clear of all Liens except liens of record and each Real
Property Lease is in full force and effect, (ii) all rent and other sums and
charges due and payable by the Company or its Subsidiaries as tenants thereunder
are current in all material respects, (iii) no termination event or condition or
uncured default of a material nature on the part of the Company or any such
Subsidiary or, to the Knowledge of the Company or any such Subsidiary, the
landlord, exists under any Real Property Lease, (iv) the Company or one of its
Subsidiaries is in actual possession of each Leased Real Property and is
entitled to quiet enjoyment thereof in accordance with the terms of the
applicable Real Property Lease and applicable law, and (v) the Company and its
Subsidiaries own outright all of the property (except for leased property or
assets for which it has a valid and enforceable right to use) which is reflected
on the Balance Sheet, except for property since sold or otherwise disposed of in
the ordinary course of business and consistent with past practice and except for
liens of record. The plant, property and equipment of the Company and its
Subsidiaries that are used in the operations of their businesses are in good
operating condition and repair, subject to ordinary wear and tear, and, subject
to normal maintenance, are available for use.
3.11. Certain Contracts. Neither the Company nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of (i) any agreement, contract or
commitment required to be filed as an exhibit to the Company SEC Reports
(including any agreements, contracts or commitments entered into since June 30,
2000 that will be required to be filed by the Company with the SEC in any
report), (ii) any
10
agreements, contracts or commitments with manufacturers, suppliers, sales
representatives, distributors, OEM strategic partners or customers of the
Company pursuant to which the Company recognized revenues or payments in excess
of $25,000 for the twelve-month period ended December 25, 1999, or (iii) any
agreements, contracts or commitments containing covenants that limit the ability
of the Company or any of its Subsidiaries to compete in any line of business or
with any Person (as defined in Section 8.5 hereof), or that include any
exclusivity provision or involve any restriction on the geographic area in which
the Company or any of its Subsidiaries may carry on its business (collectively,
"Company Material Contracts"), in such a manner as, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect. Section 3.11 of the Company Disclosure Letter lists each Company
Material Contract described in clauses (ii) and (iii) of the preceding sentence.
Each Company Material Contract that has not expired by its terms is in full
force and effect and is the legal, valid and binding obligation of the Company
and/or its Subsidiaries, enforceable against them in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), except where the
failure of such Company Material Contract to be in full force and effect or to
be legal, valid, binding or enforceable against the Company and/or its
Subsidiaries has not had and would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.11 of the Company Disclosure Letter, no consent, approval,
waiver or authorization of, or notice to any Person is needed in order that each
such Company Material Contract shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination by reason of the consummation of the Merger and the other
transactions contemplated by this Agreement.
3.12. Compliance with Law. Except as disclosed in Section 3.12 of the
Company Disclosure Letter, all activities of the Company and its Subsidiaries
have been, and are currently being, conducted in compliance in all material
respects with all applicable United States federal, state, provincial and local
and other foreign laws, ordinances, regulations, interpretations, judgments,
decrees, injunctions, permits, licenses, certificates, governmental
requirements, Orders and other similar items of any court or other Governmental
Entity or any nongovernmental self- regulatory agency, and no notice has been
received by the Company or any Subsidiary of any claims filed against the
Company or any Subsidiary alleging a violation of any such laws, regulations or
other requirements which would be required to be disclosed in any Company SEC
Report or any New SEC Report (as defined in Section 5.15 hereof). The Company
Options have been duly authorized, approved and operated in compliance in all
material respects with all applicable securities, corporate and other laws of
each jurisdiction in which participants of such Company Options are located. The
Company and its Subsidiaries have all permits, licenses and franchises from
Governmental Entities required to conduct their businesses as now being
conducted (including, but not limited to, permits issued under or pursuant to
the Communications Act or the rules or regulations of the Federal Communications
Commission), except for such permits, licenses and franchises the absence of
which has not had and would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
11
3.13. Intellectual Property Rights; Year 2000.
(a) The Company and its Subsidiaries own, or are validly licensed or
otherwise possess legally enforceable and, except for limitations arising under
a license or similar agreement governing the Company's or a Subsidiary's rights
therein, unencumbered rights to use, all patents, trademarks, trade names,
service marks, domain names and copyrights, any applications for and
registrations of such patents, trademarks, trade names, service marks, domain
names and copyrights, and all database rights, net lists, processes, formulae,
methods, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material that
are necessary to conduct the business of the Company and its Subsidiaries as
currently conducted, or necessary with respect to the production, marketing
and/or sale of products currently under development by the Company, except for
such rights the absence of which would not be reasonably expected to have a
Company Material Adverse Effect (the "Company Intellectual Property Rights").
The Company and its Subsidiaries have taken all action reasonably necessary to
protect the Company Intellectual Property Rights which is customary in the
industry, including without limitation, use of reasonable secrecy measures to
protect the trade secrets included in the Company Intellectual Property Rights.
(b) The execution and delivery of this Agreement and consummation of
the transactions contemplated hereby will not result in the breach of, or create
on behalf of any third party the right to terminate or modify, any license,
sublicense or other agreement relating to the Company Intellectual Property
Rights, or any material licenses, sublicenses or other agreements as to which
the Company or any of its Subsidiaries is a party and pursuant to which the
Company or any of its Subsidiaries is authorized to use any third party patents,
trademarks, copyrights or trade secrets ("Company Third Party Intellectual
Property Rights"), including software that is used in the manufacture of,
incorporated in, or forms a part of any product sold by or expected to be sold
by the Company or any of its Subsidiaries, the breach of which would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect. The Company Disclosure Letter, under the caption
referencing this Section 3.13, lists all royalties, license fees, sublicense
fees or similar obligations involving aggregate annual payments by the Company
or any Subsidiary in excess of $5,000.00 for any Company Third Party
Intellectual Property Rights that are used in the manufacture of, incorporated
in, or forms a part of any product sold by or expected to be sold by the Company
or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks, domain names and
copyrights which are held by the Company or any of its Subsidiaries, the loss or
invalidity of which would reasonably be expected to cause a Company Material
Adverse Effect, are valid and subsisting. The Company (i) has not, since January
1, 2000, been sued in any suit, action or proceeding, or received in writing any
claim or notice, which involves a claim of infringement or misappropriation of
any patents, trademarks, service marks, domain names, copyrights or violation of
any trade secret or other proprietary right of any third party (nor are there
any suits, actions or proceedings that arose prior to such date that remain
outstanding and unresolved); and (ii) has no Knowledge that the manufacturing,
marketing, licensing or sale of its products or services infringe upon,
misappropriate or otherwise come into conflict with any patent, trademark,
service mark, copyright, trade secret or other proprietary right of any third
party,
12
which infringement, misappropriation or conflict in the cases of clause (i) and
(ii) would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. To the Knowledge of the Company, no other
Person has interfered with, infringed upon, or otherwise come into conflict with
any Company Intellectual Property Rights or other proprietary information of the
Company or any of its Subsidiaries which has or would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(d) No employee, agent, consultant or contractor who has materially
contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material on behalf of the Company, any
of its Subsidiaries or any predecessor in interest thereto either: (i) is a
party to an agreement under which the Company or such Subsidiary is deemed to be
the original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of the Company, such Subsidiary
or such predecessor in interest, as applicable, all right, title and interest in
such material.
(e) The Company and its Subsidiaries have experienced no material
disruption or interruption of their business or operations as a result of or
related to any of their information systems, data processing and other hardware,
software and other systems, facilities, programs and procedures used or sold by
the Company or any of its Subsidiaries (collectively, "Information Systems")
failing to be Y2K Compliant. "Y2K Compliant" means, with respect to any
Information System, that such Information System (i) handles date information
involving any and all dates before, during and/or after January 1, 2000,
including accepting input, providing output and performing date calculations in
whole or in part; (ii) operates accurately without interruption on and in
respect of any and all dates before, during and/or after January 1, 2000 and
without any change in performance; (iii) responds to and processes two-digit
year input without creating any ambiguity as to the century; and (iv) stores and
provides date input information without creating any ambiguity as to the
century, in each case without utilizing bridges, gateways and the like while
still preserving the level of functionality, usability, reliability, efficiency,
performance and accessibility of such data and associated programs as existed
prior to any modification to such Information System and its constituent
elements to make the same Y2K Compliant.
3.14. Taxes.
(a) "Tax" or "Taxes" shall mean all United States federal, state,
provincial, local or foreign taxes and any other applicable duties, levies,
fees, charges and assessments that are in the nature of a tax, including income,
gross receipts, property, sales, use, license, excise, franchise, ad valorem,
value-added, transfer, social security payments, and health taxes and any
deductibles relating to wages, salaries and benefits and payments to
subcontractors for any jurisdiction in which the Company or any of its
Subsidiaries does business (to the extent required under applicable Tax law),
together with all interest, penalties and additions imposed with respect to such
amounts.
13
(b) Except as set forth in Section 3.14 of the Company Disclosure
Letter or as could not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect:
(i) the Company and its Subsidiaries have prepared and timely filed
with the appropriate governmental agencies all franchise, income and all other
material Tax returns and reports required to be filed on or before the Effective
Time (collectively "Returns"), taking into account any extension of time to file
granted to or obtained on behalf of the Company and/or its Subsidiaries; (ii)
all Taxes of the Company and its Subsidiaries shown on such Returns or otherwise
known by the Company to be due or payable for any period ending on, ending on
and including, or ending prior to the Effective Time, have been timely paid in
full to the proper authorities, other than such Taxes as are being contested in
good faith by appropriate proceedings or which are adequately reserved for in
accordance with generally accepted accounting principles and reflected, in a
manner consistent with past practice, on the Company's books as an accrued Tax
liability, either current or deferred; (iii) all deficiencies resulting from Tax
examinations of income, sales and franchise and all other material Returns filed
by the Company and its Subsidiaries in any jurisdiction in which such Returns
are required to be so filed have either been paid or are being contested in good
faith by appropriate proceedings; (iv) no deficiency has been asserted against
the Company or any of its Subsidiaries which has not been satisfied or otherwise
resolved, and no examination of the Company or any of its Subsidiaries is
pending or, to the Knowledge of the Company, threatened for any material amount
of Tax by any taxing authority; (v) no extension of the period for assessment or
collection of any material Tax is currently in effect and no extension of time
within which to file any material Return has been requested, which Return has
not since been filed; (vi) all Returns filed by the Company and its Subsidiaries
are correct and complete or adequate reserves have been established with respect
to any additional Taxes that may be due (or may become due) as a result of such
Returns not being correct or complete; (vii) to the Knowledge of the Company, no
Tax liens have been filed with respect to any Taxes; (viii) neither the Company
nor any of its Subsidiaries have made, and none will make, any voluntary
adjustment by reason of a change in their accounting methods for any pre-Merger
period; (ix) the Company and its Subsidiaries have made timely payments of the
Taxes required to be deducted and withheld from the wages paid to their
employees; (x) the Company and its Subsidiaries are not parties to any Tax
sharing or Tax matters agreement; (xi) to the Knowledge of the Company, neither
the Company nor any of its Subsidiaries is liable to suffer any recapture,
clawback or withdrawal of any relief or exemption from Tax howsoever arising
(including the entering into and the consummation of the Merger), and whether by
virtue of any act or omission by the Company or any of its Subsidiaries or by
any other person or persons; and (xii) to the Knowledge of the Company, neither
the Company nor any of its Subsidiaries is liable to be assessed for or made
accountable for any Tax for which any other person or persons may be liable to
be assessed or made accountable whether by virtue of the entering into or the
consummation of the Merger or by virtue of any act or acts done by or which may
be done by or any circumstance or circumstances involving or which may involve
any other person or persons.
(c) The Company and its Subsidiaries are not parties to any agreement,
contract, or arrangement that would, as a result of the transactions
contemplated hereby, result, separately or in the aggregate, in (i) the payment
of any "excess parachute payments" within the meaning of
14
Section 280G of the Code by reason of the Merger or (ii) the payment of any form
of compensation or reimbursement for any Tax incurred by any Person arising
under Section 280G of the Code.
3.15. Employees. Except as set forth in Section 3.15 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement, arrangement or labor contract with a labor
union or labor organization, whether formal or otherwise. The Company Disclosure
Letter, under the caption referencing this Section 3.15, lists all employment,
severance and change of control agreements (or any other agreements that may
result in the acceleration of the exercisability of outstanding options) of the
Company or its Subsidiaries. Each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable laws (including, without
limitation, all applicable extension orders) respecting employment and
employment practices, terms and conditions of employment, equal opportunity,
anti-discrimination laws, and wages and hours. There is no labor strike,
slowdown or stoppage pending (or, to the Knowledge of the Company or any of its
Subsidiaries, any unfair labor practice complaints, labor disturbances or other
controversies respecting employment which are pending or threatened which, if
they actually occurred, would materially disrupt the operations of the Company
or its Subsidiaries) against the Company or any of its Subsidiaries.
3.16. Employee Benefit Plans.
(a) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and "Plan" means every plan, fund, contract, program and arrangement
(whether written or not) which is maintained or contributed to by the Company
for the benefit of present or former United States employees or with respect to
which the Company otherwise has current or potential liability, including, but
not limited to, Plans which have been terminated but with respect to which the
Company has current or potential liability. "Plan" includes any arrangement
intended to provide: (i) medical, surgical, health care, hospitalization,
dental, vision, workers' compensation, life insurance, death, disability, legal
services, severance, sickness, accident, or cafeteria plan benefits (whether or
not defined in Section 3(1) of ERISA), (ii) pension, profit sharing, stock
bonus, retirement, supplemental retirement or deferred compensation benefits
(whether or not tax qualified and whether or not defined in Section 3(2) of
ERISA), (iii) bonus, incentive compensation, stock option, stock appreciation
right, phantom stock or stock purchase benefits, change in control benefits or
(iv) salary continuation, unemployment, supplemental unemployment, termination
pay, vacation or holiday benefits (whether or not defined in Section 3(3) of
ERISA). The Company Disclosure Letter, under the caption referencing this
Section 3.16(a), sets forth all Plans by name and brief description identifying:
(i) the type of Plan, including a specific reference to any Plan which provides
benefits (or increased benefits or vesting) as a result of a change in control
of the Company, (ii) the funding arrangements for the Plan, (iii) the
sponsorship of the Plan and (iv) the participating employers in the Plan.
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all Plans comply with all material
requirements of ERISA and the Code. With respect to the Plans, except as set
forth in Section 3.16 of the Company Disclosure Letter (i) all required
contributions which are due have been made and any accrual required by generally
accepted accounting principles has been made on the books and records of the
15
Company for all future contribution obligations; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code) except for such items which have not or would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. Except as otherwise disclosed in the Company Disclosure
Letter under the caption referencing this Section 3.16(b), all benefits under
the Plans (other than Code Section 125 cafeteria plans) are payable either
through a fully-funded trust or an insurance contract and no welfare benefit
Plan (as defined in Section 3(1) of ERISA) is self-funded. Except as otherwise
disclosed in the Company Disclosure Letter under the caption referencing this
Section 3.16(b), no qualified retirement plans sponsored by the Company are
invested in stock of the Company.
(c) Parent has received true and complete copies of (i) all Plan
documents, including related trust agreements or funding arrangements; (ii) the
most recent determination letter, if any, received by the Company from the
Internal Revenue Service (the "IRS") regarding the Plans, the termination of any
Plan, and any amendment to any Plan made subsequent to any Plan amendments
covered by any such determination letter; (iii) the most recent financial
statements for the Plans, if any; (iv) the most recently prepared actuarial
valuation reports, if any; (v) current summary plan descriptions; (vi) annual
returns/reports on Form 5500 and summary annual reports for the most recent plan
year, and (vii) any filings (other than Forms 5500) with the IRS or the
Department of Labor ("DOL") within the last five years preceding the date of
this Agreement with respect to the Plans. To the Knowledge of the Company,
nothing has occurred that could materially adversely affect the qualification of
the Plans and their related trusts.
(d) Except as set forth in Section 3.16 of the Company Disclosure
Letter, the Company does not maintain or contribute to (and has never
contributed to) any multi-employer plan, as defined in Section 3(37) of ERISA.
The Company has no actual or potential liabilities under Title IV of ERISA,
including under Section 4201 of ERISA for any complete or partial withdrawal
from a multi-employer plan.
(e) The Company has no actual or potential liability for death, or
medical or dental benefits after separation from employment, other than (i)
death benefits under the Plans (whether or not subject to ERISA) set forth in
Section 3.16 of the Company Disclosure Letter and (ii) health care continuation
benefits described in Section 4980B of the Code.
(f) Neither the Company nor any of its directors, officers, employees
or other "fiduciaries", as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject the Company, Parent
or any of their respective directors, officers or employees to any liability
under ERISA or any applicable law except for such breaches which have not or
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(g) Except as set forth in Section 3.16 of the Company Disclosure
Letter, there are no other trades or businesses, whether or not incorporated,
which, together with the Company,
16
would be deemed to be a "single employer" within the meaning of Code Sections
414(b), (c) or (m).
(h) Except with respect to Taxes on benefits paid or provided, no Tax
has been waived or excused, has been paid or is owed by any person (including,
but not limited to, any Plan, any Plan fiduciary or the Company) with respect to
the operations of, or any transactions with respect to, any Plan. No action has
been taken by the Company, nor has there been any failure by the Company to take
any action, nor is any action or failure to take action contemplated by the
Company (including all actions contemplated under this Agreement), that would
subject the Company, Parent or any of their respective directors, officers or
employees to any liability or Tax imposed by the IRS or DOL in connection with
any Plan. No reserve for any Taxes has been established with respect to any Plan
by the Company nor has any advice been given to the Company with respect to the
need to establish such a reserve.
(i) There are no (i) legal, administrative or other proceedings or
governmental investigations or audits, or (ii) complaints to or by any
Governmental Entity, which are pending, anticipated or, to the Knowledge of the
Company, threatened, against any Plan or its assets, or against any Plan
fiduciary or administrator, or against the Company or its officers or employees
with respect to any Plan.
(j) There are no leased employees, as defined in Section 414(n) of the
Code, providing services to the Company, that must be taken into account with
respect to the requirements under Section 414(n)(3) of the Code.
(k) Except as set forth in Section 3.16 of the Company Disclosure
Letter, each Plan may be terminated directly or indirectly by the Company, in
its sole discretion, at any time before or after the Effective Date in
accordance with its terms, without causing the Parent or the Company to incur
any liability to any person, entity or government agency for any conduct,
practice or omission of the Company which occurred prior to the Effective Date,
except for liabilities to, and the rights of, the employees thereunder accrued
prior to the Effective Date, or if later, the time of termination, and except
for continuation rights required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or other applicable law.
(l) "Foreign Plan" means every plan, fund, contract program and
arrangement (whether written or not) which is maintained or contributed to by
the Company or an affiliate for the benefit of present or former employees
working outside of the United States or with respect to which the Company or an
affiliate otherwise has current or potential liability for such current or
former employees that is not subject to the laws of the United States. Foreign
Plan may include plans that also benefit United States employees and include any
arrangement intended to provide: (i) medical, surgical, health care,
hospitalization, dental, vision, workers compensation, life insurance, death,
disability, legal services, severance, sickness, or accident benefits; (ii)
pension, profit sharing, retirement, supplemental retirement or deferred
compensation benefits; (iii) bonus, incentive compensation, stock option, stock
appreciation rights, phantom stock or stock purchase benefits, change in control
benefits; or (iv) salary continuation, unemployment, supplemental unemployment,
termination pay, vacation or holiday benefits. Section 3.16 of the Company
Disclosure Letter sets forth all Foreign Plans by name and provides a brief
description
17
for each plan. Except as described in Section 3.16 of the Company Disclosure
Letter, no condition, agreement or plan provision limits the right of the
Company or an affiliate to amend, cut back or terminate any Foreign Plan, nor
will the transaction contemplated by this Agreement limit the right of the
Company or an affiliate or the Parent to amend, cut back or terminate any
Foreign Plan and none of the benefits under a Foreign Plan have been materially
augmented. Either as a matter of law or to obtain the intended tax treatment and
tax benefits, the Foreign Plans have at all times complied with and been duly
administered in accordance with all applicable laws and regulations and
requirements having force of law and in accordance with their terms except for
such matters which have not or would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. There are not
in respect of any Foreign Plan or the benefits thereunder any actions, suits or
claims pending or, to the Knowledge of the Company, threatened other than
routine claims for benefits. Neither the Company nor any of its affiliates have
received any notice or directive that it has not complied with all material
provisions of the Foreign Plans applicable to it and has no Knowledge of any
reason why the tax exempt (or favored) status, if any of the Foreign Plans might
be withdrawn.
3.17. Environmental Matters.
(a) The Company and its Subsidiaries (i) have been in compliance and
are presently complying with all applicable health, safety and Environmental
Laws (defined below), and (ii) have obtained all material permits, licenses and
authorizations which are required under all applicable health, safety and
Environmental Laws and are in compliance in all material respects with such
permits, licenses and authorizations, except in each case for such failure to
comply or to obtain permits, licenses or authorizations that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. To the Knowledge of the Company, (i) none of the Leased
Real Property (including without limitation soils and surface and ground waters)
are contaminated with any Hazardous Materials in quantities which require
investigation or remediation under Environmental Laws, (ii) neither the Company
nor any of its Subsidiaries is liable for any off-site contamination, and (iii)
there is no environmental matter which could reasonably be expected to expose
the Company or any of its Subsidiaries to a claim to clean-up any Hazardous
Materials or otherwise to remedy any pollution or damage at any of the
properties utilized in the Company's business under any Environmental Laws.
(b) For purposes of this Agreement, the term (i) "Environmental Laws"
means all applicable United States federal, state, provincial, local and other
foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution, contamination
or protection of the environment (including, without limitation, all applicable
United States federal, state, provincial, local and other foreign laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits, licenses
and judgments relating to Hazardous Materials in effect as of the date of this
Agreement), and (ii) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance as
defined in or governed by any United States federal, state, provincial, local or
other foreign law, statute, code, ordinance, regulation, rule or other
requirement relating to such substance or otherwise relating to the environment
or human health or safety, including without limitation any waste, material,
substance, pollutant or contaminant that might cause any injury to
18
human health or safety or to the environment or might subject the Company or any
of its Subsidiaries to any imposition of costs or liability under any
Environmental Law.
3.18. Insurance. The Company has made available to Parent copies of all
material policies of insurance and bonds in force on the date hereof covering
the businesses, properties and assets of the Company and its Subsidiaries, and
all such policies are currently in effect and all premiums with respect thereto
have been duly paid to date. Except as disclosed in Section 3.18 of the Company
Disclosure Letter, there are no claims outstanding under any insurance policy
which could, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect and, to the Knowledge of the Company or any of
its Subsidiaries, neither the Company nor any of its Subsidiaries has failed to
give any notice or to present any such claim with respect to its business under
any such policy in due and timely fashion which could, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
3.19. Anti-Bribery Compliance. Neither the Company nor any of its
Subsidiaries (nor any person representing the Company or any of its
Subsidiaries) has at any time during the last five years (a) made any payment in
violation of the Foreign Corrupt Practices Act, the OECD Convention or similar
laws of other countries where the Company engages in business, or (b) made any
payment to any foreign, federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the OECD Convention, the laws of the United
States or any jurisdiction thereof or the laws of the countries in which such
payments were made and received.
3.20. Export Control Laws. The Company has conducted its export
transactions in accordance in all material respects with applicable provisions
of United States export control laws and regulations, including but not limited
to the Export Administration Act and implementing Export Administration
Regulations.
3.21. Finders or Brokers. Except for the Company's obligations to
Dougherty & Company, LLC, none of the Company, the Subsidiaries of the Company,
the Board of Directors of the Company (the "Company Board") or any member of the
Company Board has employed any agent, investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission in connection with the Merger or the
other transactions contemplated hereby.
3.22. Board Recommendation. The Company Board has, at a meeting of such
Company Board duly held on September 7, 2000, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby, declared
the advisability of the Merger and recommended that the stockholders of the
Company approve the Merger and the other transactions contemplated hereby, and
has not as of the date hereof rescinded or modified in any respect any of such
actions.
3.23. Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock outstanding on the record date set for the
Company Stockholders Meeting (as defined in Section 5.2 hereof) is the only vote
of the holders of any of the
19
Company's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
3.24. Intentionally omitted.
3.25. State Takeover Statutes. The Company has taken all actions so
that the restrictions contained in Section 302A.673 of the MBCA applicable to a
"business combination" (as such term is defined in Section 302A.011(46) of the
MBCA) will not apply to the execution, delivery of performance of this Agreement
or the consummation of the Merger or the other transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT
Merger Sub and Parent represent and warrant to the Company that the
statements contained in this Article IV are true and correct:
4.1. Organization and Qualification. Parent is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Minnesota, with the corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Merger Sub is a corporation validly existing and in good standing under the laws
of the State of Minnesota. Each of Merger Sub and Parent is duly qualified or
licensed to carry on its business as it is now being conducted, and is qualified
to conduct business, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified that would not, individually
or in the aggregate, have, or would not reasonably be expected to have, a Parent
Material Adverse Effect (as defined below). Neither Parent nor Merger Sub is in
violation of any of the provisions of its Charter Document or its Governing
Document. As used in this Agreement, the term "Parent Material Adverse Effect"
means any change, effect, event or condition that (i) has a material adverse
effect on the assets, business, results of operations or financial condition of
Parent and its Subsidiaries, taken as a whole (other than any such change,
effect, event or condition that arises from changes in general economic
conditions or conditions affecting Parent's industry generally, or such changes,
effects, events or conditions resulting from the consummation of the
transactions contemplated hereby; provided, however, that the termination of
contracts requiring third party consent or approval because of the consummation
of the transactions contemplated hereby the loss of which would otherwise have a
material adverse effect on the assets, business, results of operations or
financial condition of Parent shall not be excluded from this definition) or
(ii) would prevent or materially delay Merger Sub's or Parent's ability to
consummate the transactions contemplated hereby.
4.2. Authority Relative to this Agreement. Each of Parent and Merger
Sub has the requisite corporate power and authority to execute and deliver, and
to perform its obligations under, this Agreement under applicable law. The
execution and delivery by Parent and Merger Sub of this Agreement, and the
consummation of the Merger and the transactions contemplated
20
hereby, have been duly and validly authorized by all necessary corporate action
on the part of Parent and Merger Sub. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery of this Agreement by the Company, is a
valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors rights generally or by general
equitable principles.
4.3. No Conflicts; Required Filings and Consents.
(a) Neither the execution, delivery or performance of this Agreement by
Merger Sub or Parent, nor the consummation of the transactions contemplated
hereby, nor compliance by Merger Sub or Parent with any provision hereof will
(i) conflict with or result in a breach of any provision of the Charter
Documents or Governing Documents of Merger Sub or Parent, (ii) cause a default
or give rise to any right of termination, cancellation or acceleration or loss
of a material benefit under, or result in the creation of any lien, charge or
other encumbrance upon any of the properties of Merger Sub or Parent under any
of the terms, conditions or provisions of any note, bond, mortgage or indenture,
or any other material instrument, obligation or agreement to which Merger Sub or
Parent is a party or by which its properties or assets may be bound or (iii)
violate any law applicable to Merger Sub or Parent or binding upon any of its
properties, except for, in the case of clauses (ii) and (iii), such defaults or
violations which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(b) No filing or registration with or notification to and no permit,
authorization, consent or approval of any Governmental Entity is required to be
obtained, made or given by Merger Sub or Parent in connection with the execution
and delivery of this Agreement or the consummation by Merger Sub of the Merger
or other transactions contemplated hereby.
4.4. Funds. At the Closing, Parent will have the funds necessary to
consummate the Merger and pay the aggregate Per Share Amount in accordance with
the terms of this Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. Conduct of Business of the Company Pending the Merger. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent,
during the period from the date of this Agreement to the earlier of (i) the
termination of this Agreement or (ii) the Effective Time, each of the Company
and its Subsidiaries will conduct their respective operations according to its
ordinary course of business consistent with past practice, and will use
commercially reasonable efforts consistent with past practice and policies to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and will take no action which would adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement, or the
timing
21
thereof. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not nor will it permit any of its Subsidiaries to, without the
prior written consent of Parent:
(a) amend any of its Charter Documents or Governing Documents;
(b) authorize for issuance, issue, sell, deliver, grant any options,
warrants, stock appreciation rights, or stock issuance rights for, or otherwise
agree or commit to issue, sell, deliver, pledge, dispose of or otherwise
encumber any shares of any class of its share capital or any securities
convertible into shares of any class of its share capital, except (i) pursuant
to and in accordance with the terms of Company Options outstanding on the
Company Measurement Date or (ii) or pursuant to the grant of Company Options as
set forth in Section 5.1(b) of the Company Disclosure Letter or consistent with
past practices to new employees (or, subject to the prior written consent of
Parent, which consent shall not be unreasonably withheld, to existing employees
in connection with regularly scheduled performance reviews), which Company
Options will represent the right to acquire no more than 1,000 shares of Company
Common Stock per employee, and no more than 5,000 shares of Company Common Stock
in the aggregate;
(c) subdivide, cancel, consolidate or reclassify any shares of its
share capital, issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its share capital,
declare, set aside or pay any dividend or other distribution (whether in cash,
shares or property or any combination thereof) in respect of its share capital
or purchase, redeem or otherwise acquire any shares of its own share capital or
of any of its Subsidiaries, except as otherwise expressly provided in this
Agreement;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations of any other person
(other than Subsidiaries of the Company); or (iii) make any material loans,
advances or capital contributions to, or investments in, any other person (other
than to Subsidiaries of the Company);
(e) except as otherwise expressly contemplated by this Agreement or as
set forth in Section 5.1(e) of the Company Disclosure Letter, (i) increase in
any manner the compensation of (A) any employee who is not an officer of the
Company or any Subsidiary (a "NonExecutive Employee"), except in the ordinary
course of business consistent with past practice or (B) any of its directors or
officers, except in the ordinary course of business, consistent with past
practice, after consultation with and consent of Parent, (ii) pay or agree to
pay any pension, retirement allowance or other employee benefit not required, or
enter into, amend or agree to enter into or amend any agreement or arrangement
with any such director or officer or employee, whether past or present, relating
to any such pension, retirement allowance or other employee benefit, except as
required to comply with law or under currently existing agreements, plans or
arrangements or with respect to NonExecutive Employees, in the ordinary course
of business consistent with past practice; (iii) grant any rights to receive any
severance or termination pay to, or enter into or amend any employment or
severance agreement with, any employee or any of its directors or
22
officers, except as required by applicable law or with respect to severance or
termination pay to NonExecutive Employees in the ordinary course of business,
consistent with past practices; or (iv) except as may be required to comply with
applicable law, become obligated (other than pursuant to any new or renewed
collective bargaining agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar plan
or arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, share purchase, share option, share
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; provided, however, that this clause
(iv) shall not prohibit the Company from renewing any such plan, agreement or
arrangement already in existence on terms no more favorable to the parties to
such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this Agreement, enter
into, amend in any material respect or terminate any Company Material Contracts
other than in the ordinary course of business consistent with past practice;
(g) sell, lease, license, mortgage or dispose of any of its properties
or assets, other than (i) transactions in the ordinary course of business
consistent with past practice, and (ii) sales of assets, for the fair market
value thereof, which sales do not individually or in the aggregate exceed
$25,000 and, in the case of both clauses (i) and (ii), except as may be required
or contemplated by this Agreement;
(h) except as otherwise contemplated by the Merger, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial portion
of the assets of or equity in, or by any other manner, any business or any
corporation, limited liability company, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than the acquisition of assets that are in the
ordinary course of business consistent with past practice and not material to
the Company and its Subsidiaries taken as a whole;
(i) alter (through merger, liquidation, reorganization, restructuring
or in any fashion) the corporate structure or ownership of the Company or any
Subsidiary;
(j) authorize or commit to make any material capital expenditures in
the aggregate of $25,000 or more not reflected in the budget previously provided
in writing by the Company to Parent without the prior written consent of Parent,
which consent shall not be unreasonably withheld;
(k) make any change in the accounting methods or accounting practices
followed by the Company, except as required by generally accepted accounting
principles or applicable law;
(l) make any election under United States federal, state, provincial,
local or foreign Tax law which would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect;
23
(m) settle any action, suit, claim, investigation or proceeding (legal,
administrative or arbitrative) requiring a payment by the Company or its
Subsidiaries in excess of $25,000 without the consent of Parent, which consent
shall not be unreasonably withheld or delayed;
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), or the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the most recent financial statements (or the notes thereto) of the Company
included in the Company SEC Reports or incurred in the ordinary course of
business consistent with past practice; or
(o) authorize, recommend, propose, agree or announce an intention to do
any of the foregoing or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
5.2. Preparation of Proxy Statement. As promptly as practicable and no
later than 15 days after the date hereof, the Company shall prepare and file
with the SEC the proxy statement to be sent to the stockholders of the Company
in connection with the meeting of the Company's stockholders to consider the
Merger (the "Company Stockholders Meeting") (such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement"). The Proxy
Statement will, when prepared pursuant to this Section 5.2 and mailed to the
Company's stockholders, comply in all material respects with the applicable
requirements of the Exchange Act. The information supplied by each of Parent and
the Company for inclusion in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to Company's stockholders, at the time of the
Company Stockholders Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
misleading. Each of Parent and the Company shall indemnify and hold harmless the
other from any obligations, claims or liabilities arising from any statement
supplied by such party for inclusion in the Proxy Statement which, at the time
such statement was made, is false or misleading with respect to any material
fact, or omits to state any material fact necessary in order to make the
statement, in light of the circumstances under which is was made, not false or
misleading. If at any time prior to the Effective Time any event or information
should be discovered by Parent, Merger Sub or the Company which should be set
forth in a supplement to the Proxy Statement, Parent, Merger Sub or the Company,
as the case may be, will promptly inform the other parties. The Proxy Statement
shall include the declaration of the Company Board of the advisability of the
Merger and its recommendation that the Company's stockholders approve the
Merger, unless the Company Board determines in good faith, after considering the
advice of its financial advisor and reputable outside legal counsel experienced
in such matters , that withdrawal or modification of its declaration and
recommendation is necessary because this Agreement or the Merger is no longer in
the best interests of the Company's stockholders. The Proxy Statement shall be
reviewed and approved by Parent and Parent's counsel prior to the mailing of
such Proxy Statement to the Company's stockholders.
24
5.3 Meeting of Stockholders. The Company shall, promptly after the date
hereof, take all action necessary in accordance with the MBCA and its Articles
of Incorporation and Bylaws to convene the Company Stockholders Meeting within
45 days of the filing of a definitive Proxy Statement with the SEC, whether or
not the Company Board determines at any time after the date hereof that the
Merger is no longer advisable. The Company shall consult with Parent regarding
the date of the Company Stockholders Meeting. The Company shall use commercially
reasonable efforts to solicit from stockholders of the Company proxies in favor
of the Merger and shall take all other commercially reasonable action necessary
or advisable to secure the vote or consent of stockholders required to effect
the Merger, unless the Company Board determines in good faith, after considering
the advice of its financial advisor and reputable outside legal counsel
experienced in such matters that the Merger is no longer in the best interests
of the Company's stockholders.
5.4. Additional Agreements, Cooperation.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, and to cooperate, subject to compliance with
applicable law, with each other in connection with the foregoing, including
using its best efforts (i) to obtain all necessary waivers, consents and
approvals from other parties to loan agreements, material leases and other
material contracts, (ii) to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any United States federal or
state, or other foreign law or regulations, (iii) to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, (iv) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, (v) to effect all necessary
registrations and filings and submissions of information requested by
Governmental Entities, and (vi) to fulfill all conditions to this Agreement.
(b) Each of the parties hereto agrees, subject to compliance with
applicable law, to furnish to each other party hereto such necessary information
and reasonable assistance as such other party may request in connection with its
preparation of necessary filings or submissions to any regulatory or
governmental agency or authority, including, without limitation, any filing
necessary under the provisions of the HSR Act, the Exchange Act, the Securities
Act or any other United States federal or state, or foreign statute or
regulation. Each party hereto shall promptly inform each other party of any
material communication from the U.S. Federal Trade Commission or any other
government or governmental authority regarding any of the transactions
contemplated thereby.
5.5. Publicity. Except as otherwise required by law or the rules of any
applicable securities exchange or the Nasdaq National Market, so long as this
Agreement is in effect, Parent and the Company will not, and will not permit any
of their respective affiliates or representatives to, issue or cause the
publication of any press release or make any 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.
Parent and the Company
25
will cooperate with each other in the development and distribution of all press
releases and other public announcements with respect to this Agreement and the
transactions contemplated hereby, and will furnish the other with drafts of any
such releases and announcements as far in advance as possible. Nothing in this
Section 5.5 shall prohibit or restrict the Company from at any time
communicating to the Company's stockholders if the Company Board has determined
in good faith, after considering the advice of reputable outside legal counsel
experienced in such matters that any such communication is required to fulfill
its fiduciary duties to the Company's stockholders.
5.6. No Solicitation.
(a) Immediately upon execution of this Agreement, the Company shall
(and shall cause its officers, directors, employees, investment bankers,
attorneys and other agents or representatives to) cease all discussions,
negotiations, responses to inquiries and other communications relating to any
potential business combination with all third parties who, prior to the date
hereof, may have expressed or otherwise indicated any interest in pursuing an
Acquisition Proposal (as hereinafter defined) with the Company.
(b) Prior to termination of this Agreement pursuant to Article VII
hereof, the Company and its Subsidiaries shall not, nor shall the Company
authorize or permit any officers, directors or employees of, or any investment
bankers, attorneys or other agents or representatives retained by or acting on
behalf of, the Company or any of its Subsidiaries to, (i) initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
that constitutes an Acquisition Proposal, (ii) except as permitted below, engage
or participate in negotiations or discussions with, or furnish any information
or data to, or take any other action to, facilitate any inquiries or making any
proposal by, any third party relating to an Acquisition Proposal, or (iii)
except as permitted below, enter into any agreement with respect to any
Acquisition Proposal or approve an Acquisition Proposal. Notwithstanding
anything to the contrary contained in this Section 5.6 or in any other provision
of this Agreement, prior to the Company Stockholders Meeting, the Company Board
may participate in discussions or negotiations with or furnish information to
any third party making an unsolicited Acquisition Proposal (a "Potential
Acquiror") or approve or recommend an unsolicited Acquisition Proposal if both
(A) a majority of the directors of the Company Board, without including
directors who may be considered Affiliates (as defined in Rule 405 under the
Securities Act) of any person making an Acquisition Proposal ("Disinterested
Directors") determines in good faith, after receiving advice from its
independent financial advisor, that a Potential Acquiror has submitted to the
Company an Acquisition Proposal that is a Superior Proposal (as hereinafter
defined), and (B) a majority of the Disinterested Directors of the Company Board
determines in good faith, after considering advice from reputable outside legal
counsel experienced in such matters that the failure to participate in such
discussions or negotiations or to furnish such information or to approve or
recommend such unsolicited Acquisition Proposal is inconsistent with the Company
Board's fiduciary duties under applicable law. In the event that the Company
shall receive any Acquisition Proposal, it shall promptly (and in no event later
than 24 hours after receipt thereof) furnish to Parent the identity of the
recipient of the Acquisition Proposal and of the Potential Acquiror, the terms
of such Acquisition Proposal and copies of all non-public information requested
by the Potential Acquiror not previously delivered to Parent, and shall further
promptly
26
inform Parent in writing as to the fact such information is to be provided after
compliance with the terms of the preceding sentence. Nothing contained herein
shall prevent the Company from complying with Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal or making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company Board, after considering advice from reputable outside legal counsel
experienced in such matters such disclosure is required by applicable law.
Without limiting the foregoing, the Company understands and agrees that any
violation of the restrictions set forth in this Section 5.6(b) by the Company or
any of its Subsidiaries, or by any director or officer of the Company or any of
its Subsidiaries or any financial advisor, attorney or other advisor or
representative of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its Subsidiaries
or otherwise, shall be deemed to be a breach of this Section 5.6(b) sufficient
to enable Parent to terminate this Agreement pursuant to Section 7.1(d)(i)
hereof
(c) For the purposes of this Agreement, "Acquisition Proposal" shall
mean any proposal, whether in writing or otherwise, made by any person other
than Parent and its Subsidiaries to acquire "beneficial ownership" (as defined
under Rule 13(d) of the Exchange Act) of 20% or more of the assets of, or 20% or
more of the outstanding capital stock of any of the Company or its Subsidiaries
pursuant to a merger, consolidation, exchange of shares or other business
combination, sale of shares of capital stock, sales of assets, tender offer or
exchange offer or similar transaction involving the Company or its Subsidiaries.
(d) The term "Superior Proposal" means any bona fide Acquisition
Proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Company Common Stock then
outstanding or all or substantially all the assets of the Company, and otherwise
on terms that a majority of the Disinterested Directors determines, in good
faith, is reasonably likely to be more favorable to the Company and its
stockholders than the Merger (after considering advice from the Company's
independent financial advisor that the Acquisition Proposal is more favorable to
the Company's stockholders, from a financial point of view, than the Merger).
5.7. Access to Information. From the date of this Agreement until the
Effective Time, and upon reasonable notice, the Company will give Parent and its
authorized representatives (including counsel, other consultants, accountants
and auditors) reasonable access during normal business hours to all facilities,
personnel and operations and to all books and records of it and its
Subsidiaries, will permit Parent to make such inspections as it may reasonably
require, will cause its officers and those of its Subsidiaries to furnish Parent
with such financial and operating data and other information with respect to its
business and properties as Parent may from time to time reasonably request and
confer with Parent to keep it reasonably informed with respect to operational
and other business matters relating to the Company and its Subsidiaries and the
status of satisfaction of conditions to the Closing. All information obtained by
Parent pursuant to this Section 5.7 shall be kept confidential in accordance
with the confidentiality provisions of the Letter of Intent dated June 19, 2000,
between legal counsel for the Parent and the Company.
5.8. Notification of Certain Matters. The Company or Parent, as the
case may be, shall promptly notify the other of (a) its obtaining of Knowledge
as to the matters set forth in clauses
27
(i), (ii) and (iii) below, or (b) the occurrence, or failure to occur, of any
event, which occurrence or failure to occur would be likely to cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, (ii) any material failure of the Company or Parent, as the case
may be, or of any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement or (iii) the institution of any claim, suit, action
or proceeding arising out of or related to the Merger or the transactions
contemplated hereby; provided, however, that no such notification shall affect
the representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
5.9. Resignation of Officers and Directors. Except as otherwise
provided in Section 5.18 hereof, at or prior to the Effective Time, the Company
shall deliver to Parent the resignations of such officers and directors of the
Company and its Subsidiaries (in each case, in their capacities as officers and
directors, but not as employees if any of such persons are employees of the
Company or any Subsidiary) as Parent shall specify, which resignations shall be
effective at the Effective Time and shall contain an acknowledgment that the
relevant individual has no outstanding claims for compensation for loss of
office, redundancy, unfair dismissal or otherwise.
5.10 Intentionally omitted
5.11. Stockholder Litigation. The Company shall give Parent the
reasonable opportunity to participate in the defense of any stockholder
litigation against or in the name of the Company and/or its respective directors
relating to the transactions contemplated by this Agreement.
5.12. Intentionally omitted.
5.13. Determination of Optionholders. At least ten business days before
the Effective Time, the Company shall provide Parent with a true and complete
list of (a) the holders of Company Options, (b) the number of shares of Company
Common Stock subject to Company Options held by each such optionholder, (c) the
exercise price of each option outstanding and (d) the address of each such
optionholder as set forth in the books and records of the Company or any
Subsidiary, which lists shall be true and correct based upon the Company's
records, following upon which there shall be no additional grants of Company
Options without Parent's prior consent.
5.14. Preparation of Tax Returns. The Company shall file (or cause to
be filed) at its own expense, on or prior to the due date thereof, all Returns
required to be filed on or before the Closing Date. The Company shall provide
Parent with a copy of appropriate workpapers, schedules, drafts and final copies
of each foreign and domestic, federal, provincial and state income Tax return or
election of the Company (including returns of all Employee Benefit Plans) at
least ten days before filing such return or election and shall consult with
Parent with respect thereto prior to such filing. Any Return filed after the
date hereof but prior to the Effective Date shall first be approved by Parent,
which approval shall not be unreasonably withheld.
28
5.15. SEC Filings; Compliance. The Company shall cause the forms,
reports, schedules, statements and other documents required to be filed with the
SEC by the Company , between the date of this Agreement and the Effective Time
(the "New SEC Reports") to be prepared in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and such New SEC Reports will not at the time they are filed 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.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company
under the MBCA and the Company's Charter Document and Governing Documents.
(b) Governmental Action; No Injunction or Restraints. No action or
proceeding shall be instituted by any Governmental Entity seeking to prevent
consummation of the Merger, asserting the illegality of the Merger or this
Agreement or seeking material damages directly arising out of the transactions
contemplated hereby which continues to be outstanding. No judgment, order,
decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition shall be in
effect (i) imposing or seeking to impose material sanctions, damages, or
liabilities directly arising out of the Merger on the Company or any of its
officers or directors; or (ii) preventing the consummation of the Merger.
(c) Governmental Consents. All necessary authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration or waiver
of waiting periods imposed by, any Governmental Entity of any applicable
jurisdiction required for the consummation of the transactions contemplated by
this Agreement shall have been filed, expired or obtained, as to which the
failure to obtain, make or occur would have the effect of making the Merger or
this Agreement or any of the transactions contemplated hereby illegal or which,
individually or in the aggregate, would have a Parent Material Adverse Effect
(assuming the Merger had taken place).
6.2. Conditions to Obligations of Parent. The obligation of Parent to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth herein shall be true and correct both when made and at
and as of the Effective Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date),
except where the failure of such representations and warranties to
29
be so true and correct (without giving effect to any limitation as to
materiality or material adverse effect set forth therein) does not have, and
would not, individually or in the aggregate, reasonably be expected to have, a
Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Date.
(c) No Material Adverse Effect. Since the date of this Agreement, there
has not been a Company Material Adverse Effect nor has there been any change,
event or condition that, with the passage of time, would reasonably be expected
to result in a Company Material Adverse Effect.
(d) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity of competent jurisdiction or
other legal restraint or prohibition shall be in effect (i) imposing or seeking
to impose material limitations on the ability of Parent to acquire or hold or to
exercise full rights of ownership of any securities of the Company; (ii)
imposing or seeking to impose material limitations on the ability of Parent or
its Affiliates to combine and operate the business and assets of the Company;
(iii) imposing or seeking to impose other material sanctions, damages, or
liabilities directly arising out of the Merger on Parent or any of its officers
or directors; or (iv) requiring or seeking to require divestiture by Parent of
any significant portion of the business, assets or property of the Company or of
Parent.
(e) Delivery of Closing Documents. At or prior to the Effective Time,
the Company shall have delivered to Parent all of the following: (i) a
certificate of the Chief Executive Officer of the Company (in his capacity as
such an officer), dated as of the Effective Date, stating that the conditions
precedent set forth in Sections 6.2(a), (b) and (c) hereof have been satisfied;
(ii) a copy of (A) the Articles of Incorporation of the Company, dated as of a
recent date, certified by the Secretary of State of the State of Minnesota and
(B) the Bylaws of the Company and the resolutions of the Company Board and
stockholders authorizing the Merger and the other transactions contemplated by
this Agreement, certified by the Secretary of the Company; and (iii) a list of
(A) all options that have been exercised after the date of this Agreement.
(f) Director and Officer Resignations. Merger Sub shall have received
the resignation of the directors and officers of the Company as are described in
Section 5.9 hereof.
(g) Key Employee Agreements. The persons identified in Section 6.2(g)
of the Company Disclosure Letter shall have entered into employment agreements
with Parent, and such agreements shall be in full force and effect, and none of
such employees shall have indicated any intention of not fulfilling his or her
obligations thereunder.
(h) Exercise of Appraisal Rights. The total shares of Company Common
Stock held by stockholders of the Company who have indicated in accordance with
the MBCA (and not withdrawn) their intent to elect to exercise their appraisal
rights under the MBCA shall not exceed 10% of the shares of Company Common Stock
outstanding as of the date of the
30
Company Stockholders Meeting. Parent shall have received a certificate of the
Chief Executive Officer of the Company to that effect.
(i) Approval of Company's Shareholders. At least 51% of the total
shares of the Company Common Stock held by Stockholders of the Company have
voted in favor of the transactions contemplated herein.
(j) Renewal of Union Contract. The union contract to which the Company
is currently subject shall have been renewed for a term of at least one (1) year
upon terms and conditions acceptable to Parent, and written documentation of
same shall have been delivered to Parent.
6.3. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
materiality or material adverse effect set forth therein) does not have, and
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Date.
(c) Delivery of Closing Documents. At or prior to the Effective Time,
the Parent shall have delivered to the Company a certificate of the President
and the Chief Financial Officer of Parent (in their capacities as such
officers), dated as of the Effective Date, stating that the conditions precedent
set forth in Sections 6.3(a) and (b) hereof have been satisfied.
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
Company's stockholders:
(a) by mutual written consent of the Company and Parent (on behalf of
Parent and Merger Sub);
(b) by either the Company or Parent (on behalf of Parent and Merger
Sub): (i) if the Merger shall not have been completed by January 2, 2001;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.1(b)(i) shall not be available to any party
31
whose failure to perform any of its obligations under this Agreement results in
the failure of the Merger to be consummated by such time; (ii) if stockholder
approval shall not have been obtained at the Company Stockholders Meeting duly
convened therefor or at any adjournment or postponement thereof; (iii) if any
restraint having any of the effects set forth in Section 6.1(b) or Section
6.2(d) hereof shall be in effect and shall have become final and nonappealable;
or (iv) if the Company enters into a merger, acquisition or other agreement
(including an agreement in principle) or understanding to effect a Superior
Proposal or the Company Board or a committee thereof resolves to do so;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 7.1(b)(iv) unless (a) the Company has delivered to Parent and
Merger Sub a written notice of the Company's intent to enter into such an
agreement to effect such Acquisition Proposal, which notice shall include,
without limitation, the material terms and conditions of the Acquisition
Proposal and the identity of the Person making the Acquisition Proposal, (b)
three business days have elapsed following delivery to Parent and Merger Sub of
such written notice by the Company and (c) during such three-business-day
period, the Company has fully cooperated with Parent and Merger Sub to allow
Parent and Merger Sub within such three-business-day period to propose
amendments to the terms of this Agreement to be at least as favorable as the
Superior Proposal; provided, further, that the Company may not terminate this
Agreement pursuant to this Section 7.1(b)(iv) unless, at the end of such
three-business-day-period (and after due consideration by the Company Board of
any proposed amendment to this Agreement that has been submitted by Parent
during such three-day period), the Company Board continues reasonably to believe
that the Acquisition Proposal constitutes a Superior Proposal;
(c) by the Company, if Parent or Merger Sub shall have breached any of
its representations and warranties contained in Article IV hereof which breach
has or is reasonably likely to have a Parent Material Adverse Effect or Parent
or Merger Sub shall have breached or failed to perform in any material respect
any of its covenants or other agreements contained in this Agreement, in each
case, which breach or failure to perform has not been cured by Parent or Merger
Sub within ten days following receipt of notice thereof from the Company;
provided, however, that no cure period shall apply for a breach by Parent or
Merger Sub of the obligations to close pursuant to Section 1.7 hereof or make
cash available pursuant to Section 2.5(b) hereof; or
(d) by Parent (on behalf of Parent and Merger Sub): (i) if the Company
shall have breached any of its representations and warranties contained in
Article III hereof which breach has or is reasonably likely to have a Company
Material Adverse Effect or the Company shall have breached or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement, in each case (other than a breach of Section 5.6(b) hereof, as
to which no cure period shall apply), which breach or failure to perform has not
been cured by the Company within ten days following receipt of notice thereof
from Parent; or ii) if (a) the Company Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Merger or this Agreement, or approved or recommended an
Acquisition Proposal (including a Superior Proposal), or (b) the Company Board
or any committee thereof shall have resolved to take any of the foregoing
actions.
32
7.2. Effect of Termination. The termination of this Agreement pursuant
to the terms of Section 7.1 hereof shall become effective upon delivery to the
other party of written notice thereof. In the event of the termination of this
Agreement pursuant to the foregoing provisions of this Article VII, there shall
be no obligation or liability on the part of any party hereto (except as
provided in Section 7.3 hereof) or its stockholders or directors or officers in
respect thereof, except for agreements in Sections 5.5, 5.7, 7.2, 7.3 and 8.8,
which survive the termination of this Agreement, and except for liability that
Parent or Merger Sub or the Company might have to the other party or parties
arising from the willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach results in a termination of this Agreement pursuant to
Sections 7.1(c) or 7.1(d)(i), or otherwise due to the fraudulent or willful
misconduct of such party.
7.3. Fees and Expenses.
(a) Except as provided in this Section 7.3, whether or not the Merger
is consummated, the Company, on the one hand, and Parent and Merger Sub, on the
other, shall bear their respective expenses incurred in connection with the
Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants, provided, however, Parent and Merger
Sub acknowledge that the Company will pay all amounts owing to said parties at
closing and any unpaid amount will be disclosed to Parent and Merger Sub and
shall thereafter be paid by Surviving Corporation.
(b) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated (x) by the Company or Parent pursuant to Section
7.1(b)(ii) and if, after the date hereof and prior to the termination date, an
Acquisition Proposal occurs, or (y) by Parent pursuant to Section 7.1(b)(iv),
7.1(d)(i) or 7.1(d)(ii) hereof, then, in each case, the Company shall (without
prejudice to any other rights Parent may have against the Company for breach of
this Agreement), reimburse Parent upon demand for all reasonable out-of-pocket
fees and expenses not to exceed $25,000 incurred or paid by or on behalf of
Parent or any Affiliate of Parent in connection with this Agreement, the Merger
and transactions contemplated herein, including all fees and expenses of
counsel, investment banking firms, accountants and consultants.
(c) Notwithstanding any other provision in this Agreement to the
contrary, if (x) this Agreement is terminated by the Company or Parent at a time
when Parent is entitled to terminate this Agreement pursuant to Section
7.1(b)(ii) or 7.1(d)(i) (other than due to a breach of Section 5.6(b) hereof)
and, concurrently with or within nine months after such a termination, the
Company shall enter into an agreement, arrangement or binding understanding with
respect to an Acquisition Proposal (which shall include, for this purpose, the
commencement by a third party of a tender offer or exchange offer or similar
transaction directly with the Company's stockholders) with a third party
(collectively, a "Third Party Deal") or (y) this Agreement is terminated
pursuant to Section 7.1(b)(iv), Section 7.1(d)(i) (only if such termination
results from a breach of Section 5.6(b) hereof) or 7.1(d)(ii), then, in each
case, the Company shall (in addition to any obligation under Section 7.3(b)
hereof and as liquidated damages and not as a penalty or forfeiture) pay to
Parent U.S.$200,000 (the "Termination Fee") in cash, such payment to be made
promptly, but in no event later than the second business day following, in the
case of clause (x),
33
the later to occur of such termination and the entry into of such Third Party
Deal, or, in the case of clause (y), such termination.
(d) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated by the Company pursuant to Section 7.1(c) hereof,
then Parent shall (without prejudice to any other rights the Company may have
against Parent for breach of this Agreement), reimburse the Company upon demand
for all reasonable out-of-pocket fees and expenses not to exceed $25,000
incurred or paid by or on behalf of the Company or any Affiliate of the Company
in connection with this Agreement, the Merger and the transactions contemplated
herein, including all fees and expenses of counsel, investment banking firm,
accountants and consultants.
(e) The parties acknowledge that the agreements contained in Sections
7.3(b), (c) and (d) hereof are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Parent and Merger Sub on
the one hand, and the Company on the other, would not enter into this Agreement.
Accordingly, if the Company fails promptly to pay the amounts due pursuant to
Sections 7.3(b) and/or (c) hereof, or if Parent fails promptly to pay the
amounts due pursuant to Section 7.3(d) hereof, (i) the party failing to so pay
shall pay interest on such amounts at the prime rate announced by Wells Fargo
Minnesota N. A, Minneapolis office, in effect on the date the Termination Fee
(or fees and expenses) were required to be paid, and (ii) if, in order to obtain
such payment, a party commences a suit or takes other action which results in a
judgment or other binding determination against the nonpaying party for the fees
and expenses in Sections 7.3(b) or 7.3(d) hereof or the Termination Fee, the
nonpaying party shall also pay to the party entitled to receive payment its
reasonable costs and expenses (including reasonable attorneys' fees) incurred in
connection with such suit, together with interest payable under the preceding
clause (i).
ARTICLE VIII
MISCELLANEOUS
8.1. 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. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.2. Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
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 an instrument in writing
duly authorized by and signed on behalf of such party.
8.3. Notices.
34
(a) Any notice or communication to any party hereto shall be duly given
if in writing and delivered in person, by facsimile (with receipt electronically
acknowledged) or by overnight air courier guaranteeing next day delivery, to
such other party's address.
If to Parent: Dynamic Homes, LLC
230 West Superior St., Ste. 811
Duluth, Minnesota 55802
Attn: Robert C. Pearson and
John N. Nys
with a copy to: Johnson, Killen & Seiler, P.A.
Attn: Robert C. Pearson, Esq. and
John N. Nys, Esq.
230 West Superior St., Ste. 811
Duluth, Minnesota 55802
If to the Company: Dynamic Homes, Inc.
Attn: Scott Lindemann
P.O. Box 1137
525 Roosevelt Avenue
Detroit Lakes, Minnesota 55502
with copies to:
and to: Lommen, Nelson, Cole & Stageberg, P.A.
Attn: Roger V. Stageberg, Esq.
Sherri D. Ulland, Esq.
80 S. Eighth Street, Suite 1800
Minneapolis, Minnesota 55402
(b) All notices and communications will be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when sent, if
sent by facsimile and receipt is electronically confirmed; and one business day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
8.4. Counterparts. This Agreement may be executed via facsimile in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.5. Interpretation. The language used in this Agreement and the other
agreements contemplated hereby shall be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction shall
be applied against any party. The headings of articles and sections herein are
for convenience of reference, do not constitute a part of this Agreement, and
shall not be deemed to limit or affect any of the provisions hereof. As used in
this Agreement, "Person" means any individual, corporation, limited liability
company, limited
35
or general partnership, joint venture, association, joint stock company, trust,
unincorporated organization or other entity; "Knowledge" means the actual
knowledge of a director or any executive officer of the applicable party or any
of its Subsidiaries, and with respect to the Company as such knowledge has been
obtained by such person in the normal conduct of the business; and all amounts
shall be deemed to be stated in U.S. dollars, unless specifically referenced
otherwise.
8.6. Amendment. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by such stockholders 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.
8.7. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
8.8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota.
8.9. Entire Agreement. This Agreement (together with the Exhibits and
the Company Disclosure Letter, and the other documents delivered pursuant hereto
or contemplated hereby) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, in each case other than the
Confidentiality Agreement.
8.10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
* * * * *
[BALANCE OF THIS PAGE LEFT BLANK INTENTIONALLY]
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be executed by their duly authorized officers all as of the
day and year first above written.
PARENT
Dynamic Homes, LLC Date: September 25, 2000
By: /s/ illegible signature
------------------------------------
Its Chief Manager
MERGER SUB
Dynamic Acquisitions, Inc. Date: September 25, 2000
By: /s/ illegible signature
------------------------------------
Its President
COMPANY
Dynamic Homes, Inc. Date: September 25, 2000
By: /s/ illegible signature
------------------------------------
Its Chief Executive Officer
37
EXHIBIT A
38
ARTICLES AND PLAN OF MERGER BY AND BETWEEN
DYNAMIC ACQUISITIONS, INC.
AND
DYNAMIC HOMES, INC.
The directors of Dynamic Acquisitions, Inc., a Minnesota corporation
("DAI"), and Dynamic Homes, Inc., a Minnesota corporation ("DHI"), having each
resolved by a majority vote of the members of each of the respective boards of
those corporations to approve these Articles and Plan of Merger pursuant to
Minnesota Statutes, Section 302A.613, Subdivision 1, and notice having been duly
given to the shareholders of each constituent corporation, and a majority of the
voting power of all shares entitled to vote having voted, pursuant to Minnesota
Statutes, Section 302A.613, subdivision 2, to approve these Articles and Plan of
Merger, do hereby file these Articles and Plan of Merger.
On the effective date of this merger, DAI shall merge into DHI. Each
share of DAI shall be canceled and DHI shall be the surviving corporation.
The terms and conditions on which this merger shall occur are contained
in that certain Agreement and Plan of Merger by and among Dynamic Homes, LLC, a
Minnesota limited liability company ("DHLLC"), DAI and DHI dated September 25,
2000, which is incorporated herein by reference.
These Articles and Plan of Merger are effective on filing with the
Minnesota Secretary of State on _________________, 2000.
Dynamic Acquisitions, Inc.
By
-----------------------------------------------
Its President
Dated: , 2000
--------------------------------
Dynamic Homes, Inc.
By
-----------------------------------------------
Its President
Dated: , 2000
--------------------------------
STATE OF MINNESOTA )
)ss.
COUNTY OF ST. LOUIS )
On this __ day of _______________, 2000, before me,
___________________________, a notary public, personally appeared
_____________________________________, known to me to be the President of
Dynamic Acquisitions, Inc.
In Witness Whereof, I have hereunto set my hand and affixed by official
seal the day and year in this certificate first above written.
_________________________
Notary Public
STATE OF MINNESOTA )
)ss.
COUNTY OF ST. LOUIS )
On this __ day of _______________, 2000, before me,
___________________________, a notary public, personally appeared
_____________________________________, known to me to be the President of
Dynamic Homes, Inc.
In Witness Whereof, I have hereunto set my hand and affixed by official
seal the day and year in this certificate first above written.
_________________________
Notary Public
APPENDIX B
MINNESOTA BUSINESS CORPORATION ACT
302A.471 RIGHTS OF DISSENTING STOCKHOLDERS
Subdivision 1. Actions creating rights. A stockholder of a corporation
may dissent from, and obtain payment for the fair value of the stockholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting stockholder in that
it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking fund for
the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a stockholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or new class
or series with similar or different voting rights; except that an amendment to
the articles of an issuing public corporation that provides that section
302A.671 does not apply to a control share acquisition does not give rise to the
right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without stockholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the stockholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a constituent organization, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares will
be acquired by the acquiring corporation, if the shares of the stockholder are
entitled to be voted on the plan; or
B-1
(e) Any other corporate action taken pursuant to a stockholder vote
with respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting stockholders may obtain payment for their shares.
Subd.2. Beneficial owners. (a) A stockholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the stockholder, unless the stockholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
stockholder and discloses the name and address of each beneficial owner on whose
behalf the stockholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the stockholder has dissented
and the other shares were registered in the names of different stockholders.
(b) The beneficial owner of shares who is not the stockholder may
assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting stockholder under the
terms of this section and section 302A.473, if the beneficial owner submits to
the corporation at the time of or before the assertion of the rights a written
consent of the stockholder.
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a stockholder of the surviving corporation
in a merger, if the shares of the stockholder are not entitled to be voted on
the merger.
(b) If a date is fixed according to section 302A.445, subdivision
1, for the determination of stockholders entitled to receive notice of and to
vote on an action described in subdivision 1, only stockholders as of the date
fixed, and beneficial owners as of the date fixed who hold through stockholders,
as provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights. The stockholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining stockholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
Subdivision 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
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(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1, up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a stockholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each stockholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by
the stockholders, a stockholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the stockholder and must not vote
the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the stockholders, the
corporation shall send to all stockholders who have complied with subdivision 3
and to all stockholders entitled to dissent if no stockholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates
of certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
(3) A form to be used to certify the date on which the
stockholder, or the beneficial owner on whose behalf the stockholder dissents,
acquired the shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
stockholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a stockholder until the proposed action takes effect.
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Subd. 5. Payment; return of shares. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting stockholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of
income for a fiscal year ending not more than 16 months before the effective
date of the corporate action, together with the latest available interim
financial statements;
(2) an estimate by the corporation of the fair value of the
shares and a brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a stockholder on the date the action dissented
from was first announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the dissenter has
complied with subdivisions 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of the reason
for withholding the remittance, and an offer to pay to the dissenter the amount
listed in the materials if the dissenter agrees to accept the amount in full
satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
mount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall
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file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as
parties all dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation shall, after
filing the petition, serve all parties with a summons and copy of the petition
under the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the stockholder or stockholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all stockholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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REVOCABLE PROXY
DYNAMIC HOMES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Dynamic Homes, Inc. ("Dynamic Homes")
hereby appoints Clyde R. Lund, Jr. and Eldon Matz, and each of them, with full
power of substitution in each, to act as proxies to cast all votes which the
undersigned stockholder is entitled to cast at the Special Meeting of
stockholders to be held at 9:00 a.m., Central Standard Time, on November 21,
2000 at the Holiday Inn Motel, Detroit Lakes, Minnesota, and at any adjournments
or postponements thereof, upon the following matters.
The undersigned stockholder hereby revokes any proxy or proxies
heretofore given.
When this proxy is properly executed, the shares represented hereby
will be voted as specified. If no specification is made, this proxy will be
voted for the approval of the Merger Agreement and, in the discretion of the
proxies, with respect to all other matters which may properly come before the
meeting and any and all adjournments thereof.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
(continued and to be signed and dated on reverse side)
SEE REVERSE SIDE
[X]
Please mark your
vote as this.
Proposal 1: To approve and adopt the Agreement and Plan of Merger, dated
September 25, 2000, between Dynamic Homes, LLC, Dynamic
Acquisitions, Inc. and Dynamic Homes, Inc., and the merger
contemplated thereby.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Other Matters: The proxies are authorized to vote upon such other business as
may properly come before the stockholders meeting, or any
adjournments or postponements of the meeting.
Please sign exactly as name or names appear on this
proxy. If stock is held jointly, each holder should
sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate
officer, please give full title.
Dated: __________________________, 2000
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Signature
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Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.