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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9*
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SQUARE INDUSTRIES, INC.
(Name of Subject Company)
SQUARE INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
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8522351
(CUSIP Number of Class of Securities)
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LOWELL HARWOOD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SQUARE INDUSTRIES, INC.
921 BERGEN AVENUE
JERSEY CITY, NEW JERSEY 07306
(201) 798-0090
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement).
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COPIES TO:
DANIEL R. KAPLAN, ESQ. LEO SILVERSTEIN, ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN LLP BROCK, FENSTERSTOCK, SILVERSTEIN,
1585 BROADWAY MCAULIFFE & WADE, LLC
NEW YORK, NEW YORK 10036 153 EAST 53RD STREET
(212) 969-3200 NEW YORK, NEW YORK 10022
(212) 371-2000
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* This Solicitation/Recommendation Statement on Schedule 14D-9 relates to an
offer for 100% of the outstanding shares of common stock of Square Industries,
Inc. by a wholly-owned subsidiary of Central Parking Corporation.
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Square Industries, Inc., a New York
corporation (the "Company"), and the address of the principal executive offices
of the Company is 921 Bergen Avenue, Jersey City, New Jersey 07306. The title of
the class of equity securities to which this statement relates is the common
stock, par value $.01 per share, of the Company (the "Common Stock" or the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by Central Parking
System -- Empire State, Inc., a New York corporation ("Purchaser"), an indirect
wholly-owned subsidiary of Central Parking Corporation, a Tennessee corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
December 13, 1996 (the "Schedule 14D-1"), to acquire all of the outstanding
Shares, at a price of $28.50 per Share net to the seller in cash promptly
following the completion of the Offer, without interest thereon with an
additional $2.50 per Share to be deposited by Parent and held in escrow as
contingent consideration for distribution in whole or in part to either
shareholders of the Company or Parent based upon resolution of certain matters
and subject to adjustment pursuant to the Escrow Agreement (as defined in Item
3) (the "Offer Contingent Consideration") (the $28.50 and the Offer Contingent
Consideration, collectively the "Offer Price"), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated December 13, 1996, as
amended or supplemented (the "Offer to Purchase"), and the related letter of
transmittal (which together with the Offer to Purchase constitute the "Offer"
and are contained within the Schedule 14D-1).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 6, 1996 (the "Merger Agreement"), among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed herewith as
Exhibit 1 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at 2401 21st Avenue South, Suite 200,
Nashville, Tennessee 37212.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and its executive officers, directors and affiliates are described
on pages 2-7 and 11-12 of the Company's Proxy Statement, dated July 17, 1996,
for its 1996 Annual Meeting of Shareholders (the "1996 Proxy Statement") in the
section entitled "ELECTION OF DIRECTORS" in the section "EXECUTIVE COMPENSATION"
under the following subheadings: "Compensation Committee Interlocks and Insider
Participation," "Report of the Compensation Committee on Executive
Compensation," "Summary Compensation Table," and "Stock Options," in the section
entitled "CERTAIN TRANSACTIONS" and in the section entitled "PROPOSAL TO AMEND
THE 1992 STOCK OPTION PLAN." Pages 2-7 and 11-12 of the 1996 Proxy Statement are
filed as Exhibit 2 hereto and are incorporated herein by reference.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which has
been filed as Exhibit 1 hereto and is incorporated herein by reference. Such
summary is qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable, but in any event within five business days of the date
of the initial public announcement of the Merger Agreement. The obligation of
Purchaser to commence the Offer and to accept for payment and to pay for any
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain
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other conditions that are described in the Merger Agreement. Purchaser and
Parent have agreed that without the prior written consent of the Company no
change in the Offer may be made which (i) decreases the price per Share payable
in the Offer, (ii) changes the form of consideration to be paid in the Offer, or
(iii) modifies the conditions to the Offer or imposes conditions to the Offer in
addition to those set forth in the Merger Agreement. Purchaser and Parent have
agreed the Offer shall expire 21 business days after it is commenced and shall
not be extended without the prior written consent of the Company; provided
Parent may extend the Offer one time for no more than 10 days and only if at
least 80% of all of the outstanding Shares have been tendered prior to such
extension.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth therein, and in accordance with the New York
Business Corporation Law ("NYBCL"), at the effective time of the Merger (the
"Effective Time") Purchaser will be merged with and into the Company. As a
result of the Merger, the separate corporate existence of the Company will
cease, and the Company will continue as the Surviving Corporation and an
indirect wholly-owned subsidiary of Parent. Upon consummation of the Merger,
each issued and outstanding Share (other than (i) any Shares held in the
treasury of the Company and Shares owned by Parent or any direct or indirect
subsidiary of Parent or the Company (which shall be canceled at the Effective
Time), and (ii) Shares as to which the holder thereof shall have validly
exercised such holder's appraisal rights, if any, under Section 910 of the
NYBCL), without interest, will be converted into the right to receive an amount
net in cash equal to $28.50 per Share and an additional $2.50 per Share to be
deposited by Parent and held in escrow as contingent consideration for
distribution, in whole or in part, to either the shareholders of the Company or
Parent based upon the resolution of certain matters, subject to adjustment
pursuant to the Escrow Agreement (the "Merger Contingent Consideration" and
together with the Offer Contingent Consideration and the Option Contingent
Consideration (as defined below), the "Contingent Consideration") (the $28.50
and the Merger Contingent Consideration, the "Merger Consideration").
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement also provides that, at the Effective Time, the Certificate of
Incorporation and Bylaws of the Purchaser, as in effect immediately prior to the
Effective Time, will be the Certificate of Incorporation and Bylaws of the
Surviving Corporation until thereafter amended as provided therein and in the
NYBCL.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company, acting through the Board, will, subject to its fiduciary
duties under applicable law based on an opinion of outside legal counsel, if all
or any portion of the Merger Agreement or the transactions contemplated thereby
require approval by the shareholders of the Company, duly call, give notice of,
convene and hold a meeting of its shareholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby (the
"Shareholders' Meeting").
Proxy Statement. The Merger Agreement provides that, if shareholder
approval of the Merger is required, the Company will, as soon as practicable,
file with the Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and use its reasonable best efforts to have cleared by the
Commission, a proxy statement and related proxy materials (the "Proxy
Statement") with respect to the Shareholders' Meeting and will cause the Proxy
Statement to be mailed to shareholders of the Company at the earliest
practicable time. The Company has also agreed, subject to its fiduciary duties
under applicable law based on an opinion of outside legal counsel, to include in
the Proxy Statement the recommendation of the Board that the shareholders of the
Company approve and adopt the Merger Agreement and the transactions contemplated
thereby. To the extent permitted by applicable law, Parent and Purchaser have
each agreed to vote all shares beneficially owned by them in favor of the
Merger.
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Conduct of Business. Pursuant to the Merger Agreement, the Company has
agreed, among other things, that the Company will use its commercially
reasonable efforts to preserve the business organization of the Company intact
and to maintain its existing relations with its suppliers, customers, employees
and business associates. In addition, the Company will conduct its business only
in the ordinary and usual course. During the period from the date of the Merger
Agreement until the earlier to occur of the Effective Time or the termination of
the Merger Agreement, the Company has also agreed that, except as required under
or permitted by the Merger Agreement or as disclosed in the Disclosure Schedule
or Annexes to the Merger Agreement, or as otherwise consented to in writing by
Parent, each of the Company and its subsidiaries will not, among other things:
(A) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Shares, split, combine or reclassify
the outstanding Shares; (B) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible or exchangeable for, or any
warrants, options, calls, commitments or rights of any kind to acquire any
shares of its capital stock of any class other than shares issued pursuant to
exercise of warrants or options outstanding as of the date of the Merger
Agreement under the Stock Option Plan; (C) amend its certificate of
incorporation, bylaws or other organizational documents; (D) settle or
compromise any material debt, encumbrance, claims or litigation in excess of
$100,000 in the aggregate or, except in the ordinary and usual course of
business, modify, amend or terminate any of its contracts or waive, release or
assign any material rights or claims; (E) transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any of its assets or incur or
modify any indebtedness or other liability other than in the ordinary and usual
course of business and as provided in the Merger Agreement; (F) acquire directly
or indirectly by redemption or otherwise any shares of capital stock of the
Company; (G) enter into, amend or terminate any lease of real property other
than in the ordinary course of business and as provided in the Merger Agreement;
(H) except in the ordinary course of business and as provided in the Merger
Agreement, authorize capital expenditures in excess of $100,000 or make any
significant acquisition of, or investment in, assets or stock of any other
person or entity; (I) except in the ordinary and usual course of business and as
provided in the Merger Agreement, (i) grant any severance or termination pay to,
or enter into any employment or severance agreement with any director, officer
or other employee of the Company other than pursuant to contractual obligations
existing on the date of the Merger Agreement, or except as set forth in the
Merger Agreement, or (ii) establish, adopt, enter into, make any new grants or
awards under or amend, any bonus, profit sharing, thrift, savings, compensation,
stock purchase, stock bonus, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation, employment,
collective bargaining, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any current or former directors,
officers or employees; (J) make any tax election or permit any insurance policy
naming it as a beneficiary or a loss payable payee to be canceled or terminated
without notice to the Parent, except in the ordinary and usual course of
business, and shall maintain insurance upon all of its properties and operations
in such amounts and of such kinds comparable to that in effect on the date of
the Merger Agreement on such properties and with respect to such operations; (K)
in any material respect fail to (i) maintain its books, accounts and records in
the usual, regular and ordinary manner, on a basis consistent with prior years,
(ii) comply with all contractual and other obligations of the Company and its
subsidiaries, and (iii) comply with all applicable laws to which it is subject;
or (L) authorize or enter into an agreement to do any of the foregoing.
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of a majority of the outstanding Shares pursuant
to the Offer, Purchaser will be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as will give Purchaser representation on the Board equal to the product
of the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence and including current directors serving as
officers of the Company), multiplied by the percentage that the aggregate number
of Shares beneficially owned by Purchaser or any affiliate of Purchaser at such
time bears to the total number of Shares then outstanding, and the Company will,
at such time, promptly take all actions necessary to cause Purchaser's designees
to be elected as directors of the Company, including increasing the size of the
Board or securing the resignations of incumbent directors or both. The Merger
Agreement also provides that, at such times the Company will cause persons
designated by Purchaser to constitute the same percentage of (i) each committee
of the Board (some of the members of which may be required to be independent
under applicable
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law), (ii) each board of directors of each subsidiary of the Company, and (iii)
each committee of each such board, in each case only to the extent permitted by
applicable law, as Purchaser's designees are of the Board of Directors of the
Company.
Section 14(f) of the Exchange Act requires the Company to mail to its
stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. A copy
of the Information Statement is attached as Schedule I hereto and is
incorporated herein by reference.
Amendment and Waiver. Subject to certain restrictions, the Merger
Agreement may be amended by the mutual agreement of the parties thereto, by
action taken or authorized by their respective Boards of Directors, prior to the
Effective Time, provided, however, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which by law requires
further approval by such shareholders without such further approval; provided
further, however, that after the completion of the Offer and the purchase of the
Shares thereunder by Parent or Purchaser, this Agreement will not be amended by
the Company without the approval of a majority of the persons who are directors
of the Company on the date of the Merger Agreement; and provided further,
however, that certain provisions in the Merger Agreement governing
indemnification of the Company's officers and directors and certain employment
matters may not be amended subsequent to the Effective Time.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date of the Merger Agreement until the Effective Time, the Company
shall afford to Parent and to the officers, employees, agents and other
authorized representatives of Parent access during normal business hours
throughout the period prior to the Effective Time to its properties, books,
contracts and records, and shall furnish promptly to Parent all information
concerning its business, properties and personnel as Parent or its
representatives may reasonably request. Parent and Purchaser have agreed to keep
such information confidential in accordance with the agreement, dated as of July
10, 1996, between the Company and Parent (the "Confidentiality Agreement").
No Solicitation of Transactions. The Merger Agreement provides that
neither the Company nor any of the officers and directors of the Company shall,
and the Company shall direct and use its reasonable best efforts to cause the
employees, agents and representatives of the Company or any subsidiary
(including, without limitation, any investment banker, attorney or accountant
retained by the Company) not to, initiate, solicit or encourage, directly or
indirectly, any proposal or offer to acquire all or any substantial part of the
business and properties of the Company and the Subsidiaries or any capital stock
of the Company and the Subsidiaries, whether by merger, purchase of assets,
tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof; provided, however, that the Company may
respond to certain unsolicited requests for information and participate in
negotiations with such parties as required by its fiduciary obligations under
applicable state law or the exercise of its duties under Rule 14e-2 under the
Exchange Act, subject to the terms and conditions described in the Merger
Agreement. The Merger Agreement requires that the Company immediately cease and
cause to be terminated any solicitation, initiation, encouragement, activity,
discussion or negotiation existing as of the date of the Merger Agreement with
any parties concerning an acquisition proposal. The Company has also agreed to
notify Parent promptly if any such proposal or offer, or any inquiry or contact
with any person or entity with respect thereto, is made. Subject to the Board's
fiduciary duties, the Company has further agreed not to enter into any
definitive agreement with any other person or entity unless it has delivered to
Parent, at least two business days prior to execution by the Company, a copy of
the definitive agreement and Parent shall have failed, within such two day
period, to amend the terms of the Merger Agreement so that the Merger would be,
in the good faith determination of the Board, at least as favorable to the
Company's shareholders from a financial point of view as the proposed
acquisition.
Agreement to Support the Transaction. The Company has agreed to cause
certain of its affiliates to (i) tender in the Offer all issued and outstanding
shares owned (or as to which such affiliates have the power of disposition) by
such affiliates which in the aggregate consist of 650,540 shares and to exercise
and tender in the Offer or "cash-out" all options and warrants held by such
affiliates which in the aggregate currently consist
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of options and warrants to acquire 387,500 shares as provided in the Merger
Agreement and (ii) enter into an agreement to support the transaction (the
"Agreement to Support the Transaction") (the Agreement to Support Transaction
was executed by the affiliates on December 6, 1996). The Company has agreed to
cause (i) Lowell and Sanford Harwood to enter into the Non-Competition
Agreements attached as exhibits to the Merger Agreement, (ii) Brett Harwood to
enter into the Employment Agreement attached as an exhibit to the Merger
Agreement, (iii) each of Lowell Harwood and Sanford Harwood to enter into a
Consulting Agreement with terms agreed upon by the parties, and (iv) Leslie
Harwood Ehrlich to enter into a Non-Competition Agreement similar to the
agreements referred to in clause (i) above, but with a one (1) year term. The
Company has also agreed to cause the non-union manager level and above employees
granted severance payments as disclosed in the Merger Agreement to enter into
Non-Competition Agreements equal to the duration of the severance granted.
Treatment of Stock Options. Promptly after the closing of the Offer, each
holder of a then outstanding option or warrant to purchase Shares, will, upon
the consent of each such holder thereof, (whether such options or warrants are
immediately exercisable or not) in settlement thereof, (a) receive a cash
payment from the Company in an amount equal to the product of (i) the difference
between the Offer Price less the Option Contingent Consideration and the per
share exercise price of such options or warrants (the "Option Consideration")
and (ii) the total number of shares which the holder of such option or warrant
is entitled to purchase under such option or warrant such option or warrant, as
provided above (the "Option Shares") and (b) there shall be deposited by Parent
$2.50 per Option Share to be held in escrow as contingent consideration for
distribution to optionholders and warrantholders of the Company or to be
disbursed in whole or in part to Parent subject to adjustment pursuant to the
Escrow Agreement (the "Option Contingent Consideration").
Escrow. The Merger Agreement provides that a portion of the Offer Price
and the Merger Consideration, including the Option Consideration, equal to
approximately $4.4 million in the aggregate shall be deposited by Parent and
held in escrow as Contingent Consideration for the shareholders, optionholders
and warrantholders of the Company by the Escrow Agent in compliance with the
terms and conditions of the Escrow Agreement and subject to adjustment as
provided in the Escrow Agreement. The escrowed funds are subject to and held
solely for the purpose of providing for the following contingencies:
(a) Wooster Property. $1.99 per Share of the Offer Price, Merger
Consideration and Option Consideration (as the case may be) shall be held
in escrow by the Escrow Agent as described in the Escrow Agreement.
(b) Occupancy Tax Escrow. $.51 per Share of the Offer Price, Merger
Consideration and Option Consideration (as the case may be) shall be held
in escrow by the Escrow Agent as described in the Escrow Agreement.
The interests of the shareholders, optionholders and warrantholders with
respect to the Escrowed Funds shall be represented in all matters by the escrow
committee (the "Escrow Committee").
Loan Arrangements. The Merger Agreement provides that promptly after the
purchase by Purchaser of the Shares upon the expiration of the Offer, Purchaser
shall (i) either repay or refinance the obligations of the Company and its
Subsidiaries pursuant to the Credit Agreement among National Westminster Bank
USA (Fleet Bank), the Company and 808 Square Corp. dated July 5, 1988 as amended
to date (the "Natwest Debt"), and (ii) simultaneously therewith repay in full
certain loans made to the Company by Lowell and Sanford Harwood in June, 1995 in
the original principal amount of $500,000, plus interest.
Indemnification and Insurance. The Merger Agreement provides that, for a
period of six years from and after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify, defend
and hold harmless each present and former officer, director or employee of the
Company from and against all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement with, the
approval of indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director, officer or employee of the
Company, pertaining to any matter existing or occurring at or prior to the
Effective Time, including liabilities arising as a
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result of the Merger Agreement and the transactions contemplated thereby, to the
fullest extent permitted under the NYBCL and the Surviving Corporation will pay
expenses in advance of the final disposition of any such action or proceeding to
the fullest extent permitted by law. The Merger Agreement provides that for a
period of six years after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims or matters existing or occurring before the
Effective Time; provided, that Surviving Corporation shall not be required to
pay an annual premium for such insurance in excess of two times the last annual
premium paid by the Company prior to the date of the Merger Agreement, but in
such case shall purchase as much coverage as possible for such amount.
Employee Benefits. The Merger Agreement provides that Parent will cause
the Surviving Corporation and its Subsidiaries, immediately after the Effective
Time, to honor the employment agreements, arrangements and programs between the
Company or its subsidiaries and their respective employees in accordance with
their terms as in effect on the date of the Merger Agreement (collectively, the
"Employee Arrangements"), to the same extent that the Company and its
subsidiaries would be required to perform them in the event that the Merger were
not consummated. The Merger Agreement provides that for a period of one year
following the Effective Time, Parent shall cause the Surviving Corporation to
provide the garage manager employees and other employees senior thereto of the
Company and its subsidiaries (excluding employees covered by collective
bargaining agreements whose benefits shall be governed by the collective
bargaining agreements in accordance with their terms as in effect on the date of
the Merger Agreement) who are not covered by spousal insurance arrangements with
retirement, pension, medical insurance, life insurance and other similar
benefits following the Effective Time which are, in the aggregate, substantially
comparable to such benefits under the plans and arrangements maintained for its
employees by the Parent as of the date of the Merger Agreement, provided the
Surviving Corporation is not required to continue the employment of the
Company's employees beyond that required by any applicable existing employment
agreement. Parent further agreed to cause the Surviving Corporation to honor,
comply with and perform all obligations of the Company and the subsidiaries
under certain severance arrangements as set forth in the Merger Agreement for a
period of one year following the Effective Time.
Further Action. The Merger Agreement provides that, subject to its terms
and conditions, Parent and the Company will make promptly its respective filing,
and thereafter make any other required submissions under the HSR Act and all
other required regulatory approvals and authorizations with respect to the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement (collectively, the "Transactions"), and except as contemplated by the
Merger Agreement, each of the parties to the Merger Agreement will use its
commercially reasonable best efforts to take or cause to be done, all other
things necessary or advisable to consummate and make effective as promptly as
practicable the Transactions, to obtain in a timely manner all necessary
waivers, consents, and approvals and to effect all necessary registrations and
filings, and to otherwise satisfy or cause to be satisfied all conditions
precedent to its obligations under the Merger Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals and
franchises of either Purchaser or the Company.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, regulatory approvals,
litigation, employee benefit plans, labor matters, leases and contracts,
intellectual property, environmental matters, brokers and taxes.
Conditions to the Merger. The respective obligations of Parent, Purchaser
and the Company to effect the Merger are subject to the satisfaction of the
following conditions at or prior to the Effective Time: (i) if required by
applicable law, the Merger Agreement and the Merger will have been approved by
two-thirds of the outstanding Shares of the Company at the Shareholders'
Meeting; (ii) any applicable waiting period under the HSR Act will have expired
or be terminated; (iii) there shall not be threatened, instituted or pending any
action, proceeding or other application before any court or governmental
authority or other regulatory or
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administrative agency or commission, by any government or governmental authority
or by any other person, which challenges or seeks to restrain or prohibit
consummation of the Offer and the Merger, or which seeks to impose any material
restriction on the Parent or the Company in connection with consummation of the
Merger, and no court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by the Merger Agreement or imposes material
restrictions on the Parent or the Company in connection with consummation of the
Merger; and (iv) the Offer shall have been made and Purchaser shall have
purchased, or caused to be purchased, Shares pursuant to the Offer.
The obligation of the Company to effect the Merger is also subject to the
conditions that (i) each of Parent and Purchaser shall have performed in all
material respects all material obligations and complied with all material
covenants and conditions required by the Merger Agreement to be performed or
complied by it at or prior to the Effective Time, and (ii) the representations
and warranties of the Parent and Purchaser contained in the Merger Agreement
shall be true at the Effective Time, except for (a) changes contemplated under
the Merger Agreement, (b) those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and (c) where the failure to be true and correct would not have a
material adverse effect on the financial condition, properties, business or
results of operations of Parent.
The obligations of Parent and Purchaser to effect the Merger are also
subject to the conditions that: (i) the Company shall have performed in all
material respects each agreement or covenant to be performed by it at or prior
to the Effective Time; (ii) the representations and warranties of the Company
contained in the Merger Agreement shall be true at the Effective Time, except
for (a) changes contemplated under the Merger Agreement, (b) those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), and (c) where the
failure of the representations and warranties to be true and correct in the
aggregate would not have a Material Adverse Effect on the Company (Material
Adverse Effect as used in the preceding clause shall mean items which in the
aggregate would have (1) a recurring annual pre-tax income effect of $400,000 or
more or (2) a non-recurring income, balance sheet or financial condition effect
of $4,000,000 or more); (iii) Parent and Purchaser shall have received evidence
that the satisfaction of the Natwest Debt can be accomplished without incurring
payment for accrued deferred interest (which evidence has been received as of
the date hereof); (iv) all consents, authorizations, orders and approvals of (or
filings or registration with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of the Merger, the Merger Agreement and the Transactions shall have
been obtained or made, except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time; and (v) since the
date of Merger Agreement, there shall not have occurred a Material Adverse
Change with respect to the Company (for purposes of the preceding clause,
Material Adverse Change shall mean changes or events which in the aggregate
would have (a) a recurring annual pre-tax income effect of $400,000 or more or
(b) a non-recurring income, balance sheet or financial condition effect of
$4,000,000 or more).
Termination. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval of the Merger Agreement by the
shareholders of the Company: (a) by mutual written consent duly authorized by
the respective Boards of Directors of Parent, Purchaser and the Company; (b) by
Parent or the Company if (i) any court of competent jurisdiction or other
governmental authority or entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger or holding that any law applicable to the Merger declares
the Merger to be illegal and such order, decree, ruling or other action shall
have become final and nonappealable, (ii) the requisite approval of shareholders
shall not have been obtained at a meeting duly convened therefor, or (iii) the
Effective Time shall not have occurred on or before May 31, 1997, unless the
absence of such occurrence is due to the failure of the party seeking to
terminate to perform in all material respects any obligation under the Merger
Agreement required to be performed by it at or prior to the Effective Time; (c)
by Parent following the purchase of the Shares in the Offer, if (i) other than
as a direct result of any action or inaction by Parent, the
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Company shall have breached in any material respect any of its representations,
warranties, covenants or agreements contained in the Merger Agreement to the
extent such breach would constitute a Material Adverse Effect as previously
defined, (ii) the Board shall fail to make or shall have withdrawn or modified
in a manner adverse to Parent or Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger or the Board, upon reasonable request
by the Parent, shall fail to reaffirm such approval or recommendation, or shall
have resolved to do any of the foregoing or (iii) (a) all of the conditions to
the obligations of the Company to effect the Merger shall have been satisfied,
and (b) other than as a direct result of any action or inaction by Parent any
condition to the obligations of Parent to effect the Merger is not capable of
being satisfied prior to May 31, 1997; (d) by the Company, upon approval of the
Board, if (i) the Parent or Purchaser shall have breached in any material
respect any of their representations, warranties, covenants or agreements
contained in the Merger Agreement, (ii) prior to the purchase of Shares in the
Offer, the Board receives an unsolicited written offer with respect to a merger,
consolidation or sale of all or substantially all of the Company's assets or if
an unsolicited tender or exchange offer for the Shares is commenced, and the
Board determines in the reasonable exercise of its duties under applicable law,
that such transaction is more favorable from a financial point of view to the
shareholders of the Company than the Offer and the Merger and that approval,
acceptance or recommendation of such transaction is consistent with the
fiduciary obligation of the Board of Directors under applicable law as
determined in good faith by the Board of Directors based upon an opinion of
outside legal counsel (a "Third Party Acquisition"), (iii) the Offer shall be
terminated in accordance with its terms or shall expire without the purchase of
any of the Shares pursuant thereto; or (iv) (a) all of the conditions to the
obligations of Parent to effect the Merger shall have been satisfied, and (b)
any condition to the obligations of the Company to effect the Merger is not
capable of being satisfied prior to May 31, 1997.
Fees and Expenses. Except as set forth below, the Merger Agreement
provides that all expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
expenses.
The Merger Agreement provides for the payment by the Company to Parent of a
termination fee in cash of $2,500,000, including all of Parent's expenses and
fees, within five business days of the occurrence of any of the following
events: (i) if the Merger Agreement is terminated (a) by Parent because the
Board shall have failed to make or shall have withdrawn or modified, in a manner
adverse to Parent or Purchaser, its approval or recommendation of the Offer, the
Merger Agreement or the Merger or the Board, upon reasonable request by the
Parent, shall fail to reaffirm such approval or recommendation, or shall have
resolved to do any of the foregoing; (b) by Company if, prior to the purchase of
Shares in the Offer, the Board approves a Third Party Acquisition; or (ii) as a
result of the failure of certain affiliates of the Company to tender their
Shares in the Offer or support the Merger, based upon a claim that such action
is required in the exercise of their fiduciary duties, and the purchase of
Shares in the Offer or the Merger is not consummated.
EXECUTIVE SEVERANCE PAY PLAN
In October 1996, the Company adopted the Square Industries, Inc. Executive
Severance Pay Plan (the "Severance Plan") for certain executive officers (one of
whom is a member of the Harwood family) and one employee with limited executive
responsibilities (collectively, the "Participants"). The following summary is
qualified in its entirety by reference to the Severance Plan, a copy of which is
filed as Exhibit 3 hereto and is incorporated herein by reference. The severance
program entitles the Participants to a lump sum severance payment upon the
occurrence of any of the following events: (i) termination of employment by an
"Employer" without "Cause" within twelve months of the effective date of a
Change in Control or (ii) termination of employment by a Participant within
thirty days of the occurrence of any "Good Reason" event with regard to such
Participant; or (iii) termination of employment by a Participant after six
months following the effective date of a Change in Control with the "Control
Group" but within twelve months of the effective date of a change in control.
The severance will be a lump sum payment equal to the aggregate salary that such
Participant would have received for the entire period from the last day of such
Participant's employment through the end of the period ended twelve months after
the effective date of a Change in Control.
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EMPLOYMENT AGREEMENT
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer, an executed employment agreement from Brett Harwood in
substantially the form included as an exhibit to the Merger Agreement. The
following summary of the form of Employment Agreement among Parent, Central
Parking System, Inc., a subsidiary of Parent ("Employer"), and Brett Harwood is
qualified in its entirety by reference to the text of the Employment Agreement,
a copy of which is filed herewith as Exhibit 4 and is incorporated herein by
reference. Pursuant to the Merger Agreement, the Company will cause Brett
Harwood to serve as Executive Vice President of Employer in New Jersey within
the New York City metropolitan area for a term of three years from the date it
is executed, unless sooner terminated.
For all services to be rendered by Brett Harwood pursuant to the Employment
Agreement, Employer shall pay Brett Harwood a base salary of $200,000 per annum
plus incentive compensation ("Incentive Compensation"). As Incentive
Compensation, Brett Harwood shall be entitled to (i) 10% of all Gross Operating
Income (NOI less 5% of operating expenses G&A burden) derived from new leases or
10% of pre-tax operating profit from newly acquired companies, in each case
where Brett Harwood was primarily responsible for such lease or acquisition and
(ii) 10% of all Gross Operating Income (NOI less 5% of operating expenses G&A
burden) derived from new management agreements where Brett Harwood was primarily
responsible for securing such management agreement. In addition, Parent has
agreed that with respect to the acquisition of any real estate or real estate
venture by Employer or any affiliate of Employer including Parent resulting from
the efforts of Brett Harwood, Employer shall provide or cause to be provided the
opportunity for Brett Harwood or at his direction his immediate family or an
entity of which at least 75% of its equity interests is beneficially owned by
Brett Harwood and his family to acquire up to a 25% interest in such real estate
or real estate venture. For all opportunities generated by Brett Harwood in the
form of the acquisition of Employer leasehold interests and the subsequent
realization of value above the value of such asset operated as a parking
facility, Brett Harwood or Brett Harwood's affiliates will be entitled to
participate in realization of such property value maximization. Parent shall
lend Brett Harwood up to an aggregate of $10 million at a minimum interest rate
of 10% from Employer, with payment terms to be determined by Brett Harwood and
Employer to enable Brett Harwood to invest in such real estate or real estate
venture described above. In addition, Brett Harwood shall be entitled to receive
options, which vest over five years, under Parent's Stock Option Plan to
purchase 10,000 shares of Parent's Common Stock on the commencement of
employment and the first anniversary thereof.
If Brett Harwood leaves the employ of Employer during the three-year term
of the Employment Agreement, he shall be entitled to his Incentive Compensation
for the period during which he was employed, and for up to two and one-half
years from the commencement of the operations generating such Incentive
Compensation, provided that during such period, Brett Harwood complies with the
non-compete provisions of the Employment Agreement (described below) without
geographic limitation. If Mr. Harwood is not offered renewal of the Employment
Agreement at the end of three years, or is offered such renewal and does not
elect to continue his employment, he shall be entitled to receive the Incentive
Compensation for five years from the commencement of operations generating such
Incentive Compensation, provided that he abides by the non-competition
provisions during the payment of Incentive Compensation following termination of
his employment.
Pursuant to the Employment Agreement, Brett Harwood will generally agree to
refrain from engaging in the same or similar business as Parent during the term
of the Employment Agreement and for a period of one year after the expiration of
the term of his employment thereunder (subject to extension in connection with
the Incentive Compensation described above), without geographic limitation, and
for a period of five years following the expiration of the term of the
Employment Agreement with respect to parking locations owned, leased or managed
by Parent or Company (subject to certain exclusions provided for in the
Employment Agreement).
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ESCROW AGREEMENT
The Company, Parent, First American National Bank (the "Escrow Agent") and
Lowell Harwood and Sanford Harwood (such individuals, collectively, the "Escrow
Committee") entered into an escrow agreement (the "Escrow Agreement"), a copy of
which is filed herewith as Exhibit 5 and incorporated herein by reference. The
following summary of the Escrow Agreement is qualified in its entirety by
reference to the full text of the Escrow Agreement. Pursuant to the Merger
Agreement, the Offer Contingent Consideration, the Merger Contingent
Consideration and the Option Contingent Consideration shall be deposited by
Parent and held in escrow as contingent consideration for distribution to the
shareholders, optionholders and warrantholders of the Company (collectively for
purposes of the Escrow Agreement, the "Shareholders") or to be disbursed in
whole or in part to the Parent based upon the resolution of certain matters.
Pursuant to the Escrow Agreement:
(a) $1.99 per Share of the Escrowed Funds shall be held by the Escrow
Agent for a period of up to twelve months from the Effective Time unless
extended (the "Escrow Period") (the "Wooster Escrow") with respect to the
Wooster Property. If during the Escrow Period, the Wooster Property is
leased under a commercially reasonable lease agreement containing certain
terms set forth in the Escrow Agreement, which shall include an annual
rental rate of not less than $900,000 (a "Conforming Lease") or the Wooster
Property is sold on commercially reasonable terms containing certain terms
set forth in the Escrow Agreement which shall include a cash sale price of
not less than $9 million before brokerage fees (a "Conforming Sale"), then
the entire Wooster Escrow shall be promptly distributed on a pro rata basis
to the Shareholders by reason of their contingent rights thereto (based
upon the proportions set forth in the Escrow Certificate) upon notice to
the Escrow Agent that such lease, executed by the lessee, has been
presented to Parent or Surviving Corporation for execution (or a Conforming
Sale has been consummated). If a Conforming Lease is being negotiated but
has not been executed or a contract for a Conforming Sale executed by the
potential purchaser is presented to Parent during the Escrow Period, but
such Conforming Lease is not presented or a contract for such Conforming
Sale has been executed but has not closed during the Escrow Period, the
Escrow Period may be extended for 90 days, in which case a Conforming Lease
executed or a Conforming Sale closed during such extension shall qualify as
a Conforming Lease or Conforming Sale for purposes of the Wooster Escrow.
In the event that a Conforming Lease is not so presented nor a Conforming
Sale so executed during the Escrow Period, as may be extended as provided
above, Parent shall be entitled to receive the entire Wooster Escrow
without any further claim by the Shareholders. In the event that during the
Escrow Period the Wooster Property is leased on commercially reasonable
terms, but with a rental of less than $900,000 per annum, Parent shall be
entitled to receive from the Wooster Escrow a sum in the aggregate equal to
ten times the difference between $900,000 and the actual annual rental, up
to the maximum amount of the Wooster Escrow and the balance shall be
distributed to the Shareholders pro rata based upon the proportions set
forth in the Escrow Certificate. In the event that during the Escrow
Period, the Wooster Property is sold at a purchase price of less than
$9,000,000, payable in cash at the closing of such sale, Parent shall be
entitled to receive from the Wooster Escrow a sum in the aggregate equal to
the difference between $9,000,000 and the actual sales price, up to the
maximum amount of the Wooster Escrow and the balance of the Wooster Escrow,
if any, shall be distributed to the Shareholders pro rata. In the event
during the Escrow Period the Wooster Property is (i) leased for a sum in
excess of $900,000 per year, on commercially reasonable terms, Parent shall
pay over to the Escrow Agent an additional sum of five times the difference
between $900,000 and the actual annual rental; or (ii) the property is sold
for a sum in excess of $9,000,000 payable in cash at closing, Parent shall
pay over to the Escrow Agent an additional sum of fifty percent of the
difference between $9,000,000 and the actual sales price for distribution
to the Shareholders together with the entire Wooster Escrow on a pro rata
basis as additional consideration. In the event of any variation of the
terms other than the rental rate constituting a Conforming Lease, the
parties agreed pursuant to the Escrow Agreement to use their reasonable
efforts to negotiate an equitable distribution of the Wooster Escrow.
(b) $.51 per Share of the Escrowed Funds shall be held in escrow by
the Escrow Agent during the Escrow Period (the "Occupancy Tax Escrow"). In
the event the total commercial rent occupancy tax
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liability of the Company or the Surviving Corporation for all tax periods
from June 1, 1984 through May 31, 1991, in the aggregate (including all
interest, penalties and principal) (the "Occupancy Tax Liability") is less
than or equal to $800,000, the entire Occupancy Tax Escrow shall be
distributed to the Shareholders on a pro rata basis based upon the
proportions set forth in the Escrow Certificate. If the Occupancy Tax
Liability is more than $800,000 but less than or equal to $900,000, the
Escrow Agent shall pay to Parent the Occupancy Tax Escrow funds equal to
the difference between the amount of the Occupancy Tax Liability and
$800,000, and any remaining Occupancy Tax Escrow funds shall be distributed
to the Shareholders on a pro rata basis based upon the proportions set
forth in the Escrow Certificate. If the Occupancy Tax Liability is more
than $900,000 but less than or equal to $1,000,000, the Escrow Agent shall
pay to Parent the Occupancy Tax Escrow funds equal to 110% of the
difference between the amount of the Occupancy Tax Liability and $800,000,
and any remaining Occupancy Tax Escrow funds shall be distributed to the
Shareholders on a pro rata basis based upon the proportions set forth in
the Escrow Certificate. If the Occupancy Tax Liability is more than
$1,000,000, the Escrow Agent shall pay to Parent the Occupancy Tax Escrow
funds equal to 120% of the difference between the amount of the Occupancy
Tax Liability and $800,000, and any remaining Occupancy Tax Escrow funds
shall be distributed to the Shareholders on a pro rata basis based upon the
proportions set forth in the Escrow Certificate. In the event Parent,
Company or Surviving Corporation receives funds from certain lessors or
owners of property for payment of the commercial rent occupancy tax
required by such lease or management agreement for any tax periods from
June 1, 1984 through May 31, 1991, Parent will credit such amounts actually
received from such lessors or owners against the Occupancy Tax Liability
provided that Parent shall be required to make reasonable commercial
efforts to exercise its rights to recover such funds under the terms of the
Company's or the Surviving Corporation's agreements with respect thereto.
The Escrow Period for the Occupancy Tax Escrow may be extended if the
Occupancy Tax Liability is not finally resolved as of twelve months after
the Effective Time, provided in no event may the Escrow Period extend
beyond three years after the Effective Time. In the event that the
Occupancy Tax Liability has not been resolved within such three year period
the Escrow will terminate. If at such time there remains an outstanding
claim regarding resolution of the Occupancy Tax Liability, such matter will
be resolved in accordance with the dispute resolution provisions of the
Escrow Agreement.
The Escrow Agreement provides that the Escrow Agent shall be entitled
to reimbursement from the Escrowed Funds for all reasonable expenses paid
or incurred by it in connection with its duties, including, but not limited
to, reasonably incurred transactional charges, counsel's, advisor's and
agent's fees and disbursements. In the event a portion of the Escrowed
Funds is distributed to the Parent and a portion is distributed to the
Shareholders, the amount to be paid to the Escrow Agent shall be deducted
on a pro rata basis from the amounts distributed to the Parent and the
Shareholders.
The Escrow Committee shall have the right to object to or agree to, on
behalf of the Shareholders, any proposed resolution of the contingencies
described above. In the event that the Escrow Committee and Parent are
unable to resolve any matters concerning the contingencies described above,
the matter shall be determined by binding arbitration and the Escrow
Committee shall represent the interests of the Shareholders of the Company
in such arbitration. Because of the contingent nature of the matters
comprising the Wooster Escrow and the Occupancy Tax Escrow, it is uncertain
whether any Escrowed Funds will ever be distributed to the Shareholders.
All interest on the Escrowed Funds shall accrue on a pro rata basis to the
party receiving such funds.
AGREEMENT TO SUPPORT TRANSACTION
Parent, Purchaser, Lowell Harwood, Mrs. Lowell Harwood, Sanford Harwood,
Brett Harwood, Mrs. Brett Harwood, Brett Harwood as custodian and trustee for
his minor children, Leslie Harwood Ehrlich, Craig Harwood, Scott Harwood and
Scott Harwood as custodian for his minor children (collectively, the
"Significant Shareholders") entered into an Agreement to Support Transaction
dated December 6, 1996, a copy of which is filed herewith as Exhibit 6 hereto
and is incorporated herein by reference. The following summary is qualified in
its entirety by reference to the full text of the Agreement to Support
Transaction.
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Pursuant to the Agreement to Support Transaction, the Significant
Shareholders have agreed to (i) tender all of their Shares (including any Shares
owned by foundations or trusts over which the Significant Shareholder has the
power of distribution) in the Offer and to enter into agreements to cash out all
of their outstanding options and warrants, (ii) to support the Offer and the
Merger, to use their reasonable best efforts to recommend the Offer to the
Company's other shareholders and seek approval of the Merger from the other
shareholders of the Company, unless the Board shall conclude, in good faith, in
compliance with the Merger Agreement, not to recommend, or to withdraw or modify
its recommendation of, the Offer or the Merger to the shareholders of the
Company in a situation which would permit the termination of the Merger
Agreement, (iii) not seek indemnification, contribution, recourse or redress of
any kind against the Company in their capacities as shareholders in connection
with negotiating and approving the Merger and related transactions and any
transaction with the Company in which such person has a direct or indirect
conflict of interest, and (iv) to maintain the confidentiality of certain
proprietary and confidential information regarding the Company.
CONFIDENTIALITY AND NONCOMPETE AGREEMENTS
The Company has agreed to cause Lowell Harwood, Sanford Harwood and Leslie
Harwood Ehrlich each to enter into a Confidentiality and Noncompete Agreement
with Parent and Surviving Corporation on or prior to the expiration of the
Offer. Pursuant to the Noncompete Agreement, each of the above shall agree as
follows: (i) not to give to any person, firm, association, or governmental
agency any confidential information concerning the affairs, business, clients,
customers or other relationships of Parent, Company or the Surviving Corporation
except as required by law or to use such information for its own purposes or for
the benefit of any person or organization other than the Surviving Corporation
and to use its best efforts to prevent the disclosure of such information by
others, (ii) that for a period of five years (one year for Leslie Harwood
Ehrlich) from the closing and within a fifty mile radius of each location from
which the Business of the Company is conducted, such person will not directly or
indirectly (A) acquire, lease, manage, consult for, serve as agent or
subcontractor for, finance, invest in, own any part of or exercise management
control over any parking business or business that provides any services
competitive with the services provided by the Company; (B) solicit for
employment or employ any nonclerical person who at the Effective Time or
thereafter became an employee of Parent or Surviving Corporation unless such
person has not been employed by Parent or the Surviving Corporation for at least
six (6) months; or (C) with respect to any customer, supplier or property owner
with whom Parent or the Surviving Corporation contracts in connection with its
business, either solicit the same in a manner that could adversely affect Parent
or the Surviving Corporation, or make statements to the same that disparage
Parent or Surviving Corporation or its operations in any way, and (iii) to
furnish such information as may be in its possession and cooperate with
Surviving Corporation as may be requested in connection with any claims or legal
actions in which the Surviving Corporation is or may become a party.
Notwithstanding the foregoing, each person party to a Confidentiality and
Noncompete Agreement may: (i) acquire, own and lease real estate used in the
Business in the Noncompete Area, provided that Parent is offered the right of
first refusal to operate or manage parking located thereon, (ii) broker real
estate located in the Noncompete Area, provided that Parent is offered the right
of first refusal to manage parking thereon, and (iii) continue to own and lease
real estate currently owned or leased within the Noncompete Area, with parking
operations, provided that Parent is offered the right of first refusal to
operate or manage parking thereon; such right of first refusal being subject in
each of the foregoing cases to existing agreements with respect to such parking
operations. The foregoing is a summary of the Confidentiality and Noncompete
Agreement and is qualified in its entirety by reference to the text of the form
of Confidentiality and Noncompete Agreement, a copy of which is filed herewith
as Exhibit 7 and is incorporated herein by reference.
CONSULTANCY AGREEMENTS
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer an executed Consultancy Agreement from Lowell Harwood, a
form of which is filed herewith as Exhibit 8 hereto and incorporated herein by
reference. Pursuant to the Consultancy Agreement, Lowell Harwood will advise and
consult with Central Parking System, Inc., a subsidiary of Parent in connection
with the acquisition, ownership, leasing, operation and/or management of storage
and parking facilities in the United States. The Consultancy Agreement will be
for a term of one year and provide for the payment of $120,000 payable at the
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rate of $10,000 per month. In addition, the Consultancy Agreement will provide
for the payment of incentive compensation of (i) 10% of all Gross Operating
Income (NOI less 5% of operating expenses G&A burden) derived from new leases or
10% of pretax operating profit from newly acquired companies, in each case where
Lowell Harwood was primarily responsible for such lease or acquisition and (ii)
10% of all Gross Operating Income (NOI less 5% of operating expenses G&A burden)
derived from new management agreements where Lowell Harwood was primarily
responsible for securing the management agreement. The Consultancy Agreement
provides that Lowell Harwood would be offered a seat on the Parent's Board of
Directors. The Consultancy Agreement will be subject and subordinate to Lowell
Harwood's Confidentiality and Noncompete Agreement.
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer an executed Consultancy Agreement from Sanford Harwood,
a form of which is filed herewith as Exhibit 9 hereto and incorporated herein by
reference. Pursuant to the Consultancy Agreement, Sanford Harwood will advise
and consult with Central Parking System, Inc., a subsidiary of Parent, in
connection with the acquisition, ownership, leasing, operating and/or management
of storage and parking facilities in the United States. The Consultancy
Agreement will be for a term of six months and provide for the payment of
$60,000 payable at the rate of $10,000 per month. The Consultancy Agreement will
be subject and subordinate to Sanford Harwood's Confidentiality and Noncompete
Agreement.
CONFIDENTIALITY AGREEMENT
Parent and the Company entered into the confidentiality agreement, dated
July 10, 1996 (the "Confidentiality Agreement"), a copy of which is filed
herewith as Exhibit 10 hereto and incorporated herein by reference. Pursuant to
the Confidentiality Agreement, the Parent agreed, among other things, that
Parent would keep confidential certain information (the "Information") furnished
to it by the Company and that Parent would use the Information solely for the
purpose of evaluating a possible transaction between the parties.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
At a meeting of the Board held on December 6, 1996, the Board, based upon
and subject to the terms and conditions set forth in the Merger Agreement, by
unanimous vote, determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, taken together are
fair to and in the best interests of the Shareholders, approved and adopted the
Merger Agreement, the Merger and the Offer; and recommended that the
shareholders of the Company accept the Offer and adopt the Merger Agreement and
the transactions contemplated thereby.
A letter to the Company's shareholders communicating the Board's
recommendation and a press release announcing the Offer, the Merger and the
Merger Agreement are filed herewith as Exhibit 11 and Exhibit 12, respectively,
and are incorporated herein by reference.
(b) Background Reasons for the Board's Recommendation.
Background.
From time to time the Company has considered the desirability or
possibility of effecting material acquisitions or effecting sales of the Company
or a substantial portion of its operations with such considerations being
terminated or abandoned at different stages of development.
In early May 1996, the Company received an unsolicited oral inquiry from
the Chairman of the Board of Parent advising of Parent's interest in effecting a
business combination with the Company. The Chairman of the Board of the Company
advised in response that the Company was not in a position at such time to
respond appropriately to such an inquiry.
On May 10, 1996, the Company engaged The Blackstone Group L.P.
("Blackstone") to act as its financial advisor and review the Company's
financial and strategic alternatives, including possible acquisitions
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or a sale of the Company. The engagement letter with Blackstone provided that in
the event the review by Blackstone resulted in a determination by the Company to
initiate a possible sale, Blackstone would assist the Company in analyzing,
structuring, negotiating and effecting such sale.
Immediately thereafter, Blackstone, as part of its advisory services,
conducted a review of the Company's operations and financial condition,
including a limited inspection of certain of the Company's facilities,
interviews with members of management, a review of the Company's financial
statements, projections and certain material documents and a review of trends in
the parking services industry. The Chairman of the Board, the Assistant Chairman
and the President of the Company, after several conversations with Blackstone,
determined that Blackstone should investigate the feasibility and potential for
effecting a sale transaction at a price which would be fair and attractive to
the Company and its shareholders. In furtherance of this goal, Blackstone
assisted the Company in preparing an offering memorandum containing detailed
information about the Company.
Blackstone suggested that its efforts be directed to companies which met
certain criteria, including those having the financial resources to consummate a
transaction and the potential to realize strategic or financial synergies from a
transaction. Based on these criteria and other considerations developed in the
course of the investigation, representatives of several entities were contacted
by Blackstone to determine their interest in effecting such transaction and
confidentiality agreements were negotiated and executed, restricting the
potential participants from disclosing nonpublic information concerning the
Company. Included among the interested parties was Parent, which executed a
confidentiality agreement on July 10, 1996, a copy of which is attached as
Exhibit 10. Pursuant to the confidentiality agreements, the potential
participants were provided with certain financial and other information
regarding the Company and its operations.
On July 17, 1996, at the Annual Meeting of the Board of the Company, the
engagement of Blackstone was ratified by the Board and the Board was advised of
the decision to have Blackstone continue to conduct its investigation as to the
feasibility and desirability of a sale, including determining the interest of
other entities in effecting a transaction with the Company. Following the
meeting, members of management met with representatives of Blackstone and
analyzed and discussed potential participants in a possible transaction.
In August 1996, Blackstone invited potential participants, including
Parent, to indicate the extent of their interest in effecting such transaction.
On August 19, 1996 Parent submitted to the Company an initial indication of
interest in the acquisition of the Company at a price of $21.00 per share
payable in cash or $24.00 per Share payable in common stock of Parent subject to
due diligence and other contingencies. On August 26, 1996, the Board of
Directors of the Company was advised by Blackstone of those potential
participants who had indicated a preliminary interest as of such date. In early
September 1996 management of the Company determined, based on the responses
received, to continue to explore a possible sale of the Company and in
connection therewith engaged Proskauer Rose Goetz & Mendelsohn LLP, as special
transactional counsel.
During the period from September 10 through October 22, 1996, those
potential participants who indicated a serious interest in effecting a
transaction with the Company, including Parent, were given the opportunity to
conduct their due diligence as to the Company and its financial condition,
including meetings with representatives of management of the Company. Shortly
thereafter, those who had conducted a due diligence review were asked to submit
an acquisition proposal to the Company and comment on a draft of a proposed
acquisition agreement prepared by the Company.
On or about October 23, 1996, offers were submitted by three potential
buyers, accompanied by proposed acquisition agreements, including Parent which
submitted an all cash offer of $30.00 per share and, alternatively, an all stock
offer of $34.00 per share payable in common stock of Parent.
A Special Meeting of the Board of Directors was held on October 29, 1996 at
which the offers were reviewed and the Board authorized management of the
Company and Blackstone to commence discussions with the two highest bidders with
a view to achieving more favorable terms.
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On November 1 and 4, 1996, management of the Company met separately with
representatives of the two highest bidders to discuss the terms and suggested
improvements to their respective offers, and at each meeting the bidders were
requested to submit final offers by November 8, 1996.
On November 8, 1996, the bidders submitted revised "final" offers which
contained improved terms, including Parent which increased its cash offer to
$31.00 per share and its stock offer to $40.00 per share.
On November 11, 1996, the other bidder contacted the Company to advise that
it was withdrawing its "final" offer due to financing and other issues; however,
on November 20, 1996 it resubmitted a revised offer with new financing sources
indicated and new terms including a revised offer price which was lower than its
"final" offer price as previously submitted, but failed to provide a revised
agreement which would contain the revised terms as requested by Blackstone.
Blackstone was later advised by such other bidder of its determination not to
proceed with a transaction.
During the period from November 15 through December 5, 1996, the Company
and Parent negotiated the specific terms and conditions of the Merger Agreement
and related exhibits.
At a Special Meeting of the Board of the Company held on December 6, 1996,
the Board of Directors reviewed the proposed transaction including the latest
draft of the Merger Agreement. A presentation to the Board was made by
Blackstone which included a report of the history and status of negotiations and
its evaluation of the Agreement and its terms. Blackstone also provided
information as to the market for and market price of the common stock of Parent,
including its public float, trading activity and history and related market
considerations, and a valuation of the Company. The Board was also advised that
in view of the proposed tender offer followed by the Merger for a cash
consideration on the terms set forth in the Merger Agreement, Messrs. Lowell,
Sanford and Brett Harwood and members of their respective families in their
capacities as shareholders would not approve a Merger transaction with the
Parent on the terms of the proposed share exchange with a value of $40 per
share, based on the foregoing market considerations and the additional risk to
which the shareholders would be subjected as a result of the longer period
required to effect the sale on those terms. Following such discussions, the
Board heard presentations by its legal counsel on the terms and conditions
contained in the proposed Merger Agreement, including, the termination
provisions as modified through negotiations. Blackstone then delivered its oral
opinion to the Board, subsequently confirmed in writing, that as of the date of
the meeting, the consideration to be received by the holders of the Company's
Shares pursuant to the Merger Agreement is fair to such holders from a financial
point of view. After further discussion, the Board unanimously authorized its
officers to execute the Merger Agreement on behalf of the Company substantially
in the form presented to the Directors and recommended that the shareholders
tender their shares in the Offer and approve and adopt the Merger Agreement.
Reasons for the Transaction; Factors Considered by the Board. In approving
the Merger, the Offer and the Merger Agreement and recommending that all
shareholders tender their Shares pursuant to the Offer, the Board of Directors
considered a number of factors, including:
1. the financial and other terms and conditions of the Offer, the
Merger and Merger Agreement;
2. the presentation of Blackstone at the December 6, 1996 Board of
Directors' meeting and the opinion of Blackstone (the "Opinion") to the
effect that, as of the date of its Opinion and based upon and subject to
certain matters stated therein, the consideration to be received by the
holders of Shares pursuant to the Offer and the Merger is fair, from a
financial point of view, to the shareholders of the Company. The full text
of the Opinion, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by Blackstone, is attached hereto
as Exhibit 13 and is incorporated herein by reference. Shareholders are
urged to read the Opinion carefully in its entirety;
3. the fact that the Merger Agreement, which prohibits the Company,
its subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates from initiating, soliciting or
encouraging, directly or indirectly, any proposal or offer to acquire all
or a substantial part of the business and properties of the Company and its
subsidiaries or any capital stock of the Company and its subsidiaries,
whether by merger, purchase of assets, tender offer or otherwise (any such
transaction being referred to herein as an "Acquisition Transaction"),
permits the Company to furnish information
15
17
concerning the Company and its business, properties and assets to, or to
enter into, maintain or continue discussions and negotiations with, any
person or entity that makes an unsolicited inquiry, offer or proposal
relating to an Acquisition Transaction after the date of the Merger
Agreement, and if such Acquisition Transaction is a tender offer the Board
of Directors may take a position with respect to such tender offer, if the
Board of Directors, determines in good faith, based upon an opinion of
outside counsel, that a failure to furnish the information or participate
in the discussions or negotiations could reasonably conflict with the
proper discharge of the fiduciary duties of the Company's directors;
4. the fact that in the event that the Board decided to accept an
unsolicited tender offer or exchange offer for the Company's Shares, the
Board may terminate the Merger Agreement and pay Parent a termination fee
of $2.5 million. The Board, after considering, among other things, the
advice of Blackstone, did not believe that such termination provision would
be a significant deterrent to a higher offer by a third party interested in
acquiring the Company;
5. the fact that the terms of the Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent
to the execution of the Merger Agreement and, if any such proposals were
made, the Company, in the exercise of its fiduciary duties, could determine
to provide information to and engage in negotiations with any such third
party;
6. the possible alternatives to the Offer and the Merger, including,
without limitations, continuing to operate the Company as an independent
entity and the risks associated therewith;
7. the familiarity of the Board of Directors with the business,
results of operations, properties and financial condition of the Company
and the nature of the industry in which it operates; and
8. the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendation as being on the totality of the
information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company and Blackstone entered into an agreement dated May 10, 1996
(the "Retention Letter") pursuant to which Blackstone was retained as the
Company's financial advisor in connection with the Company's review of its
financial and strategic alternatives. In the event that the review resulted in a
sale of the Company (the "Transaction") Blackstone would assist the Company in
analyzing, structuring, negotiating and effecting the Transaction. For its
services as financial advisor, the Company agreed to pay Blackstone the
following fees: (a) an initial retainer fee of $100,000, payable upon the
Company's execution of the Retention Letter, and an additional retainer fee in
the event Blackstone continues to provide financial advisory services to the
Company after December 31, 1996; plus (b) an additional fee, payable upon the
consummation of a Transaction, in an amount equal to $1 million, plus (i) 3% of
the consideration paid in connection with the Transaction, on the amount of
consideration paid over $50 million and less than $60 million, (ii) 4% of the
consideration paid in connection with the Transaction, on the amount of
consideration paid over $60 million and less than $70 million, and (iii) 5% of
the consideration paid in connection with the Transaction, on the amount of
consideration paid over $70 million. The Company has also agreed to reimburse
Blackstone for its reasonable out-of-pocket expenses (including the fees and
disbursements of its counsel) which shall not exceed $75,000 without the
Company's consent and to indemnify Blackstone against certain liabilities and
expenses.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to shareholders on its behalf concerning the Offer.
16
18
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, other than the
exercise of options, the transfers by Lowell Harwood on December 3, 1996 of (i)
20,000 shares to The Lowell and Toby Harwood Foundation, (ii) 8,000 shares to
The Charitable Remainder Trust of Lowell Harwood for the Benefit of Leslie
Harwood Ehrlich, (iii) 8,000 shares to The Charitable Remainder Trust of Lowell
Harwood for the Benefit of Craig Harwood, (iv) 8,000 shares to The Charitable
Remainder Trust of Lowell Harwood for the Benefit of David Ehrlich, and (v)
8,000 shares to the Charitable Remainder Trust of Lowell Harwood for the Benefit
of Laura Sonny Ehrlich, the transfer on December 6, 1996 of 10,000 shares by
Sanford Harwood to The Sanford Harwood Charitable Remainder Unitrust, the sale
by John Lyon of 100 Shares in the open market in November 1996 and the sale by
James Corr of 500 Shares in the open market in December 1996.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares beneficially owned by them. In addition, the Significant
Shareholders have entered into the Agreement to Support the Transaction
described in Section 3(b) above.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or divided
policy of the Company.
(b) Except as described in Item 3(b) and Item 4, there are no transactions,
Board resolutions, agreements in principle, or signed contracts in response to
the Offer, which relate to or would result in one or more of the matters
referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
17
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DOCUMENT
----------- -------------------------------------------------------------------------------
Exhibit 1 -- Agreement and Plan of Merger dated as of December 6, 1996 among Square
Industries, Inc., Central Parking Corporation and Central Parking
System -- Empire State, Inc.
Exhibit 2 -- Pages 2-7 and 11-13 of the Company's Proxy Statement dated July 17, 1996.
Exhibit 3 -- Square Industries, Inc. Executive Severance Pay Plan
Exhibit 4 -- Form of Employment Agreement between Brett Harwood, Central Parking
Corporation, and Central Parking System, Inc.
Exhibit 5 -- Escrow Agreement dated December 6, 1996 among Square Industries, Inc., Central
Parking Corporation, American National Bank and Lowell Harwood and Sanford
Harwood.
Exhibit 6 -- Agreement to Support Transaction dated December 6, 1996 among Central Parking,
Central Parking System -- Empire State, Inc., Lowell Harwood, Mrs. Lowell
Harwood, Sanford Harwood, Brett Harwood, Mrs. Brett Harwood, Brett Harwood as
custodian and trustee for his minor children, Leslie Harwood Ehrlich, Craig
Harwood, Scott Harwood and Scott Harwood as custodian for his minor children.
Exhibit 7 -- Form of Confidentiality and NonCompete Agreement among Lowell Harwood, Sanford
Harwood, Leslie Harwood Ehrlich, Central Parking Corporation and Central
Parking System -- Empire State, Inc.
Exhibit 8 -- Form of Consultancy Agreement between Lowell Harwood and Central Parking
System, Inc.
Exhibit 9 -- Form of Consultancy Agreement between Sanford Harwood and Central Parking
System, Inc.
Exhibit 10 -- Confidentiality Agreement dated July 10, 1996 between Square Industries, Inc.
and Central Parking Corporation.
Exhibit 11 -- Letter to Shareholders of Square Industries, Inc. dated December 13, 1996.
Exhibit 12 -- Press Release issued by Square Industries, Inc. dated December 9, 1996.
Exhibit 13 -- Opinion, dated December 6, 1996, of The Blackstone Group L.P.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SQUARE INDUSTRIES, INC.
By: /s/ LOWELL HARWOOD
------------------------------------
Lowell Harwood
Chairman of the Board and Chief
Executive Officer
Dated: December 13, 1996
19
21
SCHEDULE I
SQUARE INDUSTRIES, INC.
921 BERGEN AVENUE
JERSEY CITY, NEW JERSEY 07306
---------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULES 14F-1 THEREUNDER
---------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO
SEND THE COMPANY A PROXY.
---------------------
This Information Statement, which is being mailed on or about December 13,
1996 to the holders of shares of the common stock, par value $.01 per share (the
"Shares") of Square Industries, Inc., a New York corporation (the "Company"), is
being furnished in connection with the possible election of persons to the
Company's Board of Directors (the "Purchaser's Designees") designated by Central
Parking System -- Empire State, Inc., a New York corporation (the "Purchaser").
Such designation is made pursuant to an Agreement and Plan of Merger, dated as
of December 6, 1996 (the "Merger Agreement"), by and among the Company, Central
Parking Corporation, a Tennessee corporation ("Parent") and Purchaser. Pursuant
to the Merger Agreement, Parent caused the Purchaser to commence the offer to
purchase all of the outstanding Shares, at a price of $28.50 per Share net to
the seller in cash promptly following the completion of the Offer, without
interest thereon and an additional $2.50 per Share to be deposited by Parent and
held in escrow as contingent consideration for distribution in whole or in part
to either shareholders of the Company or Parent based upon resolution of certain
matters, subject to adjustment pursuant to the Escrow Agreement (the "Offer"),
on December 13, 1996. The Offer is scheduled to expire at 12:00 Midnight,
Eastern Standard Time, on January 14, 1997, unless the Offer is extended.
The Merger Agreement provides that promptly upon the purchase by Purchaser
of at least a majority of the outstanding Shares pursuant to the Offer,
Purchaser shall be entitled, subject to compliance with Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to designate
such number of directors, rounded up to the next greatest whole number, on the
Board of Directors of the Company as will give Purchaser representation on the
Board of Directors of the Company equal to that number of directors which equals
the product of the total number of directors on the Board of Directors of the
Company (giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser or any affiliate of Purchaser (including such Shares are as
accepted for payment pursuant to the Offer, but excluding Shares held by the
Company or its affiliates) bears to the number of Shares outstanding. At such
times, the Company will also cause (i) each committee of the Board of Directors
of the Company, (ii) if requested by Purchaser, the Board of Directors of each
of the Company's subsidiaries and (iii) if requested by Purchaser, each
committee of such board to include such persons designated by Purchaser
constituting the same percentage of each such committee or board as Purchaser's
Designees are of the Board of Directors of the Company. The Company shall, upon
request by Purchaser, promptly increase the size of the Board of Directors of
the Company or exercise its best efforts to secure the resignations of such
number of directors as is necessary to enable Purchaser's Designees to be
elected to the Board of Directors of the Company and shall cause Purchaser's
Designees to be so elected.
It is expected that Purchaser's Designees may assume office at any time
following the purchase by Purchaser of at least a majority of the outstanding
Shares on a fully diluted basis pursuant to the Offer, which purchase cannot be
earlier than January 14, 1997, and that, upon assuming office, Purchaser's
Designees
22
together with the continuing directors of the Company will thereafter constitute
the entire Board of Directors of the Company.
NO ACTION IS REQUIRED BY THE SHAREHOLDERS OF THE COMPANY IN CONNECTION WITH
THE ELECTION OF PURCHASER'S DESIGNEES TO THE COMPANY'S BOARD OF DIRECTORS.
HOWEVER, SECTION 14(F) OF THE EXCHANGE ACT REQUIRES THE MAILING TO THE COMPANY'S
SHAREHOLDERS OF THE INFORMATION SET FORTH IN THIS INFORMATION STATEMENT PRIOR TO
A CHANGE IN A MAJORITY OF THE COMPANY'S DIRECTORS.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Purchaser and
Purchaser's Designees has been furnished to the Company by Purchaser and Parent,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
GENERAL
The outstanding voting securities of the Company as of December 6, 1996
consisted of 1,200,856 Shares, each of which is entitled to one vote.
STOCK OWNERSHIP
The following table sets forth as of December 6, 1996, information
concerning the ownership of the Shares by (i) each person who is known to the
Company to own beneficially more than 5% of the outstanding Shares, (ii) by each
director and executive officer, and (iii) by all directors and executive
officers as a group.
PERCENTAGE
OF
NAME NUMBER OF SHARES CLASS(1)
- -------------------------------------------------------------------- ---------------- ----------
Lowell Harwood...................................................... 681,081(2) 49.5%
Sanford Harwood..................................................... 612,447(3) 46.2
Brett Harwood....................................................... 187,720(4) 14.7
Leslie Harwood Ehrlich.............................................. 83,879(5) 7.0
Stephen A. Bansak, Jr............................................... 16,250(6) 1.3
Daniel R. Schein.................................................... 7,500(7) *
Leo Silverstein..................................................... 7,242 *
Dan Jeremitsky...................................................... 18,000(9) 1.5
John Hogan.......................................................... 18,050(9) 1.5
John Kowal.......................................................... 4,000(7) *
Scott Harwood....................................................... 95,114(10) 7.9
James Corr.......................................................... 10,925(11) *
John Lyon........................................................... 1,600(7) *
Directors and executive officers as a group......................... 1,106,861(12) 67.5
- ---------------
* Less than 1%.
(1) Any shares not outstanding which are issuable upon exercise of options held
by an individual named in this table shall be deemed to be outstanding for
the purpose of computing the percentage of shares beneficially owned only
by such individual, but not other percentages in the table and footnotes
thereto.
(2) Includes 208,651 shares beneficially and directly owned by Mr. Sanford
Harwood and 10,000 shares owned by a charitable trust of which Sanford
Harwood is a trustee, all of which are subject to a Voting Agreement
between Mr. Lowell Harwood and Mr. Sanford Harwood (the "Voting
Agreement"), 175,000 shares currently issuable upon exercise of an employee
stock option and a Common Stock Purchase Warrant held by Mr. Lowell Harwood
and 18,634 shares owned by his wife, but excludes 67,759 shares directly
owned by his two children, one of whom is a director of the Company.
2
23
Mr. Harwood disclaims beneficial ownership of the shares owned by his wife.
Mr. Lowell Harwood's holdings also include an aggregate of 100,000 shares
as to which he has granted options to purchase to his children.
(3) Includes 208,796 shares beneficially and directly owned by Mr. Lowell
Harwood and 60,000 shares owned by a Foundation and trusts of which Lowell
Harwood is a trustee, all of which shares are subject to a Voting Agreement
(see note 2) and 125,000 shares currently issuable upon the exercise of an
employee stock option and a Common Stock Purchase Warrant, but excludes an
aggregate of 95,322 shares directly owned or owned as a custodian or
trustee for their respective minor children by his sons, Brett Harwood and
Scott Harwood. Mr. Sanford Harwood's holdings also include an aggregate of
100,000 shares as to which he has granted options to purchase to his sons.
(4) Includes 12 shares owned by his wife, 13,000 shares owned as custodian or
trustee for his minor children, 80,000 shares issuable upon the exercise of
employee stock options and 50,000 shares issuable upon exercise of an
option granted to him by his father, Mr. Sanford Harwood. Mr. Brett Harwood
disclaims beneficial ownership of the shares owned by his wife.
(5) Includes 50,000 shares currently issuable upon the exercise of a stock
option granted to her by her father, Mr. Lowell Harwood.
(6) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan.
(7) Represents shares issuable upon exercise of a stock option issued under the
1992 Stock Option Plan.
(8) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan and 242 shares owned by his
wife.
(9) Includes 12,000 shares currently issuable upon exercise of stock options
issued under the 1992 Stock Option Plan.
(10) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan and 50,000 shares currently
issuable upon the exercise of a stock option granted to him by his father,
Mr. Sanford Harwood.
(11) Includes 400 shares currently issuable upon the exercise of a stock option
issued under the 1992 Stock Option Plan.
(12) Includes (a) 268,796 shares and 218,651 shares which are directly owned by
Lowell Harwood and Sanford Harwood, respectively, or affiliated trusts or
foundations and which are included in both their individual holdings in the
table above, with respect to which shares they share voting and dispositive
power pursuant to a Voting Agreement, and (b) 440,000 shares currently
issuable upon exercise of employee stock options and Warrants held by
officers and directors.
3
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DIRECTOR AND EXECUTIVE OFFICERS
PURCHASER'S DESIGNEES
Purchaser has informed the Company that Purchaser's Designees shall be the
persons set forth in the following table.
The following table sets forth the name, current business address,
citizenship and present occupation or employment, and material occupations,
positions, offices or employments and business address thereof for the past five
years of each of the Purchaser's Designees. Unless otherwise indicated, (i) the
current business address of each person is Central Parking Corporation, 2401
21st Avenue South, Suite 200, Nashville, Tennessee 37212, (ii) each such person
is a citizen of the United States and has held his present position as set forth
below for the past five years, and (iii) each occupation set forth below
opposite an individual's name refers to employment with Parent.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS
NAME ADDRESS THEREOF
- ------------------------------------- ------------------------------------------------------
Monroe J. Carell, Jr................. Chief Executive Officer and Chairman of the Board of
Directors of Parent since 1979; trustee of Vanderbilt
University in Nashville, Tennessee, since 1991;
member of the Board of Trust of Urban Land
Institute; member of the Board of Directors of
Vanderbilt University Medical Center.
James H. Bond........................ President, Chief Operating Officer, and a member of
the Board of Directors of Parent since October 1990;
with Parent since 1971 in various positions
including regional manager and Senior Vice
President.
CURRENT DIRECTORS
The following table sets forth certain information with respect to the
current directors of the Company as of December 6, 1996.
NAME AGE PRINCIPAL OCCUPATION
- --------------------------------------- --- ----------------------------------------------------
Lowell Harwood......................... 66 Chairman of the Board Directors and Chief Executive
Officer of the Company
Sanford Harwood........................ 71 Assistant Chairman and Secretary of the Company
Brett Harwood.......................... 47 President and Chief Operating Officer
Stephen A. Bansak, Jr.................. 56 Director
Leslie Harwood Ehrlich................. 37 Director
Daniel R. Schein....................... 55 Director
Leo Silverstein........................ 66 Director
Lowell Harwood has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since the Company's organization.
Sanford Harwood has been the Assistant Chairman and Secretary of the
Company since March 1, 1994. Mr. Harwood was the President and Chief Operating
Officer of the Company from its incorporation until March 1, 1994.
Brett Harwood has been the President and Chief Operating Officer of the
Company since March 1, 1994. Mr. Harwood was the Executive Vice President and
Secretary of the Company from April 1989 until March 1994.
Stephen A. Bansak, Jr. is a director of the Company. Mr. Bansak has been an
independent financial advisor/consultant for more than the prior five years.
4
25
Leslie Harwood Ehrlich is a director of the Company. Mrs. Harwood Ehrlich
has been the Managing Director since 1993 of Newmark & Company Real Estate Inc.
and former Vice President of G.W. Michaels, Inc., with which she was associated
from 1984 to 1993, both companies engaged in leasing and management of
commercial real estate; a partner of Harber, Inc., engaged in real estate
investment and management; Co-Chairman of the Economic Development Committee of
the Real Estate Board of New York, Inc.; and former Chairman of the Board of
Directors of the Young Men's/Women's Real Estate Association of New York, Inc.
Daniel R. Schein is a director of the Company. Mr. Schein has been an
independent consultant for more than the prior five years.
Leo Silverstein is a director of the Company. Mr. Silverstein is a partner
of the law firm of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC,
general counsel to the Company, since August 1, 1995 and of Carter, Ledyard &
Milburn for more than ten years prior thereto.
MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995 ("Fiscal 1995"), the Board
of Directors held four meetings, including those in which matters were adopted
by unanimous written consent. All of the meetings were attended by all Directors
except one in which one Director was absent. The Board has an Audit Committee
and a Stock Option and Compensation Committee. The Board of Directors has no
standing nominating committee.
The Audit Committee consists of Messrs. Schein, Bansak and Silverstein. It
held two meetings during Fiscal 1995, at which meetings all members were
present. The duties and responsibilities of the Audit Committee include, among
other things, review of the Company's financial statements, consideration of the
nature and scope of the work to be performed by the Company's independent
auditors, discussion of the results of such work, the receipt from such auditors
of their letters to management which evaluate (as part of their annual audit of
the Company's financial statements) the internal accounting control systems of
the Company, and meeting with representatives of management to discuss
particular areas of the Company's operations.
The Stock Option and Compensation Committee, which held one meeting during
Fiscal 1995, is comprised of Messrs. Bansak, Schein, Silverstein and Ms.
Ehrlich. Its duties include administration of both the Key Employee Incentive
Stock Option Plan, as to which no further options may be granted, and the 1992
Stock Option Plan and a review of the Company's executive compensation policy.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company are excluded from receiving
additional compensation for their service on the Board of Directors and its
committees. Non-employee Director receive a retainer of $20,000 per annum. In
addition, Board members are reimbursed for all expenses incurred for the purpose
of attending a meeting, including airfare, mileage, parking, transportation and
lodgings. The Company currently maintains directors' and officers' liability
insurance policies with a primary limit of five million dollars and an excess
limit of ten million dollars.
The Company's 1992 Stock Option Plan (the "Plan") which relates to 425,000
shares of Common Stock permits the grant of five-year options to non-employee
Directors. Mr. Schein holds options to purchase 5,000 shares, granted in August
1992 under the Plan which are exercisable at $3.5625, the market price on the
date of grant and options to purchase 2,500 shares granted August 17, 1996 under
the Plan which are exercisable at $10.25 per share, the market price on the date
of such grant. Messrs. Silverstein and Bansak each hold options to purchase
7,500 shares granted on August 15, 1996, which are exercisable at $10.25 per
share, the market price on the date of grant.
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EXECUTIVE OFFICERS
The following table sets forth certain other information with respect to
the current executive officers of the Company as of December 6, 1996.
NAME AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ------------------------------------------- --- -------------------------------------------
Lowell Harwood............................. 66 Chairman of the Board of Directors and
Chief Executive Officer of the Company
Sanford Harwood............................ 71 Assistant Chairman and Secretary of the
Company
Brett Harwood.............................. 47 President and Chief Operating Officer
Dan Jeremitsky............................. 58 Vice President -- Design and Consulting
John Hogan................................. 47 Vice President -- Institutional and
Management
John Kowal................................. 35 Acting Vice President -- Finance and Chief
Financial Officer
Scott Harwood.............................. Vice President
John Lyon.................................. Vice President
James Corr................................. Vice President
Biographical information for Lowell Harwood, Sanford Harwood and Brett
Harwood is set forth above.
James Corr has been a Vice President of the Company since July 17, 1996. He
entered the employ of the Company on May 1993; prior thereto he had been, from
late 1991, the Washington, DC area Manager of Parent.
Scott Harwood has been a Vice President of the Company since July 17, 1996.
He has been employed by the Company for more than the prior five years.
John Hogan has served as Vice President -- Institutional Management since
1980, and the Company's contract administrator for institutions, primarily in
the field of hospital parking since 1978.
Dan Jeremitsky has served as Vice President -- Design and Consulting since
1979.
John Kowal has served as Vice President -- Finance since 1995 and has held
various other positions with the Company for more than the prior ten years,
John Lyon has been a Vice President of the Company since July 17, 1996. He
has been employed by the Company for more than the prior five years.
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27
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee until April 1993, at
which time the Stock Option Committee's duties were expanded to review executive
compensation policies. The current members of the Stock Option and Compensation
Committee are Messrs. Daniel Schein, Stephen A. Bansak, Jr. and Leo Silverstein,
and Mrs. Leslie Harwood Ehrlich, four non-employee Directors. Mr. Bansak
replaced Mr. Lowell Harwood in June 1995 as a member.
Mr. Silverstein is a partner in the law firm of Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC. The Company has used the services as general
counsel of this firm since August 1, 1995 and used until that date the services
of Carter, Ledyard & Milburn in which he had been a partner. Fees for legal
services performed for the Company during Fiscal 1995 accounted for less than 5%
of the revenues of each firm during such period.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Since the Company's organization and until April 13, 1993 the cash
compensation of each of its Chairman of the Board (the Chief Executive Officer)
and President (the Chief Operating Officer) had been determined by the Board of
Directors, with the cash compensation of the other executive officers determined
by the Chairman. Grants of stock options have been determined either by the full
Board or the Stock Option Committee. Three of the seven current Directors are
officers of the Company--the Chairman, Assistant Chairman and President of the
Company. On April 13, 1993, the Board expanded the duties of the Stock Option
Committee to provide it with authority to review and make recommendations to the
Board as to the compensation in cash or other forms of the Company's executive
officers, including those whose compensation had been previously determined by
the Chief Executive Officer.
The executive compensation policy with respect to the Chief Executive
Officer, President and Chief Operating Officer and Assistant Chairman, who is
also the President of the Company's operating subsidiaries, has been to provide
for a base salary which in most instances is not greater, and likely lower, than
base salaries paid by other companies of comparable size and capitalization in
or out of the parking industry to officers with the same positions and
responsibilities and provide for cash bonuses based on the attainment of
favorable operating results by the Company. To the knowledge of the Company,
there is only one other company engaged solely or principally in parking
operations which is publicly-held (only since October 1995).
Commencing with the fiscal year ended February 28, 1982, the Board adopted
a cash bonus program for Mr. Lowell Harwood as the Chairman of the Board and Mr.
Sanford Harwood as then President, establishing $300,000 of pre-tax and
pre-bonus income as the threshold, with the bonus for Mr. Sanford Harwood to
equal 7 1/2% of the excess but not to exceed his base salary and the bonus for
Mr. Lowell Harwood to equal 7 1/2% of the first $1,400,000 of the excess and 5%
of the balance, if any. On March 1, 1994 Mr. Brett Harwood, who had been
Executive Vice President and Secretary for approximately five years, was
appointed President and Mr. Sanford Harwood, who had been President, was
appointed Assistant Chairman of the Board. Sanford Harwood continued as
President of the Company's operating subsidiaries.
The compensation policy with respect to the Company's other executive
officers adopted by the Committee, consistent with the prior policy, is to
provide a base salary which the Chairman believes is competitive with those paid
by other companies in the parking industry to individuals with similar
responsibilities and to provide as further inducements a cash bonus equal to
percentages, which vary among such officers, of the Company's operating profits
determined quarterly on a cumulative basis for the fiscal year.
In reviewing the Company's compensation program, the Committee considered a
report by the Company's independent auditors, Deloitte & Touche, LLP, as to the
compensation of executive officers of other publicly-held corporations of
similar size principally engaged in the furnishing of services similar to those
provided by the Company.
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The Committee was of the view that the salaries of its executive officers,
including those of the Chief Executive and Chief Operations Officers and
President whose salaries reflect $25,000 increases authorized in 1994, compare
favorably for the Company with executive compensation and benefits paid to
executives of other operations of similar scope and size both within and without
the parking industry, particularly in view of the substantial improvements
achieved during 1995. The improvements include the material increase in net
income, the successful extension of the maturity of the Company's principal
credit facility on more favorable terms and success in renegotiating certain
leases resulting in lower rentals.
The Committee believes that the Company's stock option program, as it has
in the past, should be used as a means to conserve cash in rewarding executives
and key employees for good or exceptional performance, the performance of
increased responsibilities, improved performance independent of operating
results, loyalty and seniority.
The Compensation Committee
Daniel R. Schein, Chairman
Stephen A. Bansak, Jr.
Leslie Harwood Ehrlich
Leo Silverstein
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal year ended December 31, 1995,
the ten-month period ended December 31, 1994 and the fiscal year ended February
28, 1994, the compensation for services rendered in all capacities to the
Company and subsidiaries by the Chief Executive Officer and the next four most
highly compensated executive officers of the Company:
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- AWARDS
SALARY -------------
(1) BONUS STOCK OPTIONS
NAME AND PRINCIPAL POSITION PERIOD ($) ($) (# OF SHARES)
----------------------------- ------------------------- --------- ------- -------------
Lowell Harwood............... Year Ended 12/31/95 183,420 139,556 --
Chairman of the Board and 10 months ended 12/31/94 151,913 36,722 --
Chief Executive Officer Year ended 2/28/94 161,356 -- --
Sanford Harwood.............. Year ended 12/31/95 137,312 137,312 --
Assistant Chairman, 10 months ended 12/31/94 113,687 36,722 --
Secretary and Director(2) Year ended 2/28/94 136,500 -- --
Brett Harwood................ Year ended 12/31/95 174,912 4,580 50,000
President, Chief Operating 10 months ended 12/31/94 144,681 6,700 --
Officer and Director(3) Year ended 2/28/94 153,504 10,967 --
Dan Jeremitsky............... Year ended 12/31/95 132,004 4,053 10,000
Vice President -- Design 10 months ended 12/31/94 104,068 16,943 --
and Consulting Year ended 2/28/94 115,440 8,311 --
John Hogan................... Year ended 12/31/95 112,245 14,285 10,000
Vice 10 months ended 12/31/94 89,884 12,232 --
President -- Institutional Year ended 2/28/94 94,640 16,589 --
and Management
- ---------------
(1) Includes car allowances, which represent for each of the officers named,
less than 1.0% of their salary amounts.
(2) He had been President and Chief Operating Officer until March 1, 1994.
(3) He had been Executive Vice President and Secretary until March 1, 1994.
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The Company paid Directors' fees to each Director who is not an officer or
an employee of the Company at the rate of $20,000 per annum. Mr. Schein holds a
stock option granted August 19, 1992 to him under the 1992 Stock Option Plan to
purchase 5,000 shares of Common Stock at a price of $3.5625, which was the
market price on the date of grant.
The bonuses paid to Messrs. Lowell Harwood and Sanford Harwood are pursuant
to an arrangement originally authorized by the Board of Directors in January
1982 and subsequently amended. The bonuses are contingent upon the achievement
by the Company for the fiscal year of consolidated income of more than $300,000,
before provision for income taxes and accrual of the bonuses for the year and
before giving effect to the additional compensation, with the amount for Mr.
Sanford Harwood to be 7 1/2% of the excess, but not to exceed his base salary,
and for Mr. Lowell Harwood to be 7 1/2% of the first $1,400,000 of the excess
and 5% of the balance of the excess. The bonuses paid to the other executive
officers were authorized by the Chairman of the Board pursuant to a bonus
program under which he established goals and results to be achieved.
STOCK OPTIONS
The Company's 1992 Stock Option Plan (the "1992 Plan"), provides authority
for the grant of options with respect to 425,000 shares of Common Stock to key
employees, non-employee Directors and independent consultants during the
ten-year period ended August 18, 2002. As of December 31, 1995, there were
options outstanding under the 1992 Plan with respect to 393,400 shares. See
"Proposal to Amend the 1992 Stock Option Plan" for proposed increase in the
number of shares subject to the Plan.
The following table shows all grants of options to the executive officers
of the Company named in the Summary Compensation Table during the 1995 Year.
Pursuant to Commission rules, the table also shows the value of the options
granted at the end of the option terms (five years) if the stock price were to
appreciate annually by 5% and 10%, respectively. There is no assurance that the
stock price will appreciate at the rates shown in the table. The table also
indicates that if the stock price does not appreciate, there will be no increase
in the potential realizable value of the options granted:
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------------------------------- AT
(C) ASSUMED ANNUAL RATES OF
PERCENT OF STOCK PRICE APPRECIATION
TOTAL FOR OPTION TERM
OPTIONS (D) ----------------------------
(B) GRANTED TO EXERCISE (E)
(A) OPTIONS EMPLOYEES IN PRICE EXPIRATION (F) (G) (H)
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---------------------------- ------- ------------ -------- ---------- --- ------- --------
Lowell Harwood.............. 0 N/A N/A N/A $ 0 $ 0 $ 0
Brett Harwood............... 50,000 59.5% $ 6.4625 6/14/2000 $ 0 $51,738 $150,962
Sanford Harwood............. 0 N/A N/A N/A $ 0 $ 0 $ 0
Dan Jeremitsky.............. 10,000 11.9% $ 5.875 6/14/2000 $ 0 $16,231 $ 35,867
John Hogan.................. 10,000 11.9% $ 5.875 6/14/2000 $ 0 $16,231 $ 35,867
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No options were exercised by any executive officer or director during the
fiscal year ended December 31, 1995 and the ten months ended December 31, 1994.
The following table reflects information with respect to options which have been
granted to any of the above named officers:
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY-OPTIONS
OPTIONS AS OF 12/31/95 ON 12/31/95*
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------------------------- ------------------------- -------------------------
Lowell Harwood............................. 50,000/50,000 $229,062/229/062
Sanford Harwood............................ 50,000/ $229,062/
Brett Harwood.............................. 39,400/40,600 $141,327/99,282
Dan Jeremitsky............................. 8,000/12,000 $34,875/40,750
John Hogan................................. 8,000/12,000 $34,875/40,750
- ---------------
* Based on the closing sales price of $8.50 on December 29, 1995, the last date
in December on which shares traded on the Nasdaq National Market System (the
"NMS").
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EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
- ----------- --------
Exhibit 1 Agreement and Plan of Merger dated as of December 6, 1996 among
Square Industries, Inc., Central Parking Corporation and Central
Parking System -- Empire State, Inc.
Exhibit 2 Pages 2-7 and 11-13 of the Company's Proxy Statement dated July
17, 1996.
Exhibit 3 Square Industries, Inc. Executive Severance Pay Plan
Exhibit 4 Form of Employment Agreement between Brett Harwood, Central
Parking Corporation and Central Parking System, Inc.
Exhibit 5 Escrow Agreement dated December 6, 1996 among Square Industries,
Inc., Central Parking Corporation and American National Bank and
Lowell Harwood and Sanford Harwood.
Exhibit 6 Agreement to Support Transaction dated December 6, 1996 among
Central Parking, Central Parking System -- Empire State, Inc.,
Lowell Harwood, Mrs. Lowell Harwood, Sanford Harwood, Brett
Harwood, Mrs. Brett Harwood, Brett Harwood as custodian and
trustee for his minor children, Leslie Harwood Ehrlich, Craig
Harwood, Scott Harwood and Scott Harwood as custodian for his
minor children.
Exhibit 7 Form of Confidentiality and NonCompete Agreement between Lowell
Harwood, Sanford Harwood, Leslie Harwood Ehrlich, Central Parking
Corporation and Central Parking System -- Empire State, Inc.
Exhibit 8 Form of Consultancy Agreement between Lowell Harwood and Central
Parking System, Inc.
Exhibit 9 Form of Consultancy Agreement between Sanford Harwood and Central
Parking System, Inc.
Exhibit 10 Confidentiality Agreement dated July 10, 1996 between Square
Industries, Inc. and Central Parking Corporation.
Exhibit 11 Letter to Shareholders of Square Industries, Inc. dated December
13, 1996.
Exhibit 12 Press Release issued by Square Industries, Inc. dated December 9,
1996.
Exhibit 13 Opinion, dated December 6, 1996, of The Blackstone Group L.P.