EXHIBIT 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK AND CLASS B COMMON STOCK
OF
PEERLESS INDUSTRIAL GROUP, INC.
AT
$1.67 NET PER SHARE
BY
R-B ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
R-B CAPITAL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME,
ON THURSDAY, MAY 15, 1997 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION OF THE OFFER AND NOT WITHDRAWN A NUMBER OF
SHARES OF COMMON STOCK AND CLASS B COMMON STOCK (COLLECTIVELY, THE "SHARES")
OF PEERLESS INDUSTRIAL GROUP, INC. (THE "COMPANY") WHICH WILL CONSTITUTE AT
LEAST (1) A MAJORITY OF THE SHARES, AND (2) A NUMBER OF OUTSTANDING SHARES
ENTITLED TO ELECT A MAJORITY OF THE BOARD OF DIRECTORS OF THE COMPANY, IN EACH
CASE ON A FULLY DILUTED BASIS (OR, IF THE PURCHASER SO ELECTS IN ITS SOLE
DISCRETION, ON THE BASIS OF THE NUMBER OF SHARES THEN OUTSTANDING) AS OF THE
DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. THE OFFER ALSO
IS SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE.
SEE INTRODUCTION AND SECTIONS 1 AND 13 HEREOF.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 11, 1997 (THE "MERGER AGREEMENT"), AMONG THE COMPANY, R-B
ACQUISITION CORPORATION ("PURCHASER") AND R-B CAPITAL CORPORATION ("PARENT"),
PURSUANT TO WHICH, FOLLOWING THE CONSUMMATION OF THE OFFER, PURCHASER WILL BE
MERGED WITH AND INTO THE COMPANY (THE "MERGER"). THE BOARD OF DIRECTORS OF THE
COMPANY AND AN INDEPENDENT COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY,
UNANIMOUSLY HAVE DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS, HAVE APPROVED THE
OFFER AND THE MERGER AND RECOMMEND THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE
OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO.
IN CONNECTION WITH THE MERGER AGREEMENT, CERTAIN SHAREHOLDERS OF THE COMPANY
(INCLUDING ALL OF THE COMPANY'S DIRECTORS) HAVE EXECUTED AND DELIVERED A
TENDER AND STOCK OPTION AGREEMENT (THE "TENDER AGREEMENT"), PURSUANT TO WHICH
SUCH SHAREHOLDERS HAVE (1) AGREED TO TENDER IN THE OFFER AN AGGREGATE OF
APPROXIMATELY 4.45 MILLION SHARES (APPROXIMATELY 71% OF THE SHARES OUTSTANDING
ON THE DATE HEREOF), PLUS ADDITIONAL SHARES UNDER CERTAIN CIRCUMSTANCES AND
(2) GRANTED TO PURCHASER AN OPTION TO PURCHASE, UNDER CERTAIN CIRCUMSTANCES,
SHARES EQUAL TO 19.9% OF THE OUTSTANDING SHARES. SEE SECTION 11 HEREOF.
IMPORTANT
Any shareholder desiring to tender all or any portion of his or her Shares
should either (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal and
deliver the Letter of Transmittal or such manually signed facsimile and any
other required documents to the Depositary, and either deliver the
certificate(s) representing such Shares to the Depositary along with the
Letter of Transmittal or tender such Shares pursuant to the procedure for
book-entry transfer set forth in Section 3 hereof, or (2) request his or her
broker, dealer, bank, trust company or other nominee to effect the transaction
for such shareholder. Shareholders having Shares registered in the name of a
broker, dealer, bank, trust company or other nominee must contact such broker,
dealer, bank, trust company or other nominee if they desire to tender such
Shares.
A shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to the Information Agent or to brokers, dealers, banks or trust companies.
---------------
The Information Agent for the Offer is:
LOGO
April 17, 1997
TABLE OF CONTENTS
INTRODUCTION.............................................................. 1
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS........................ 2
THE TENDER OFFER.......................................................... 3
1. Terms of the Offer................................................ 3
2. Acceptance for Payment and Payment for Shares..................... 4
3. Procedure for Tendering Shares.................................... 5
4. Withdrawal Rights................................................. 7
5. Certain Federal Income Tax Consequences of the Offer.............. 8
6. Price Range of Shares; Dividends.................................. 9
7. Effect of the Offer on Market for the Shares, NASDAQ Quotation,
and Exchange Act Registration..................................... 9
8. Certain Information Concerning the Company........................ 10
Certain Information Concerning Ridge, Blair Mezzanine Fund, the
9. Purchaser and Parent.............................................. 12
10. Background of the Merger and the Offer; Contacts with the Company. 14
11. Purpose of the Offer; Plans for the Company; the Merger Agreement;
the Tender Agreement; Dissenters' Rights.......................... 15
12. Source and Amount of Funds........................................ 26
13. Certain Conditions of the Offer................................... 27
14. Dividends and Distributions....................................... 29
15. Certain Legal Matters............................................. 29
16. Fees and Expenses................................................. 31
17. Miscellaneous..................................................... 31
SCHEDULE I................................................................ 33
SCHEDULE II............................................................... 34
TO THE HOLDERS OF COMMON STOCK AND CLASS B
COMMON STOCK OF PEERLESS INDUSTRIAL GROUP, INC.:
INTRODUCTION
R-B Acquisition Corporation, a Minnesota corporation (the "Purchaser") and a
wholly owned subsidiary of R-B Capital Corporation, a Delaware corporation
("Parent"), hereby offers to purchase any and all of the outstanding shares of
Common Stock, no par value, and any and all of the outstanding shares of Class
B Common Stock, no par value (collectively, the "Shares"), of Peerless
Industrial Group, Inc., a Minnesota corporation (the "Company"), at $1.67 per
Share (the "Offer Price"), net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Parent and Purchaser are corporations formed by Ridge Capital Corporation,
Pandora Capital Corporation and their affiliates (collectively, "Ridge") and
William Blair Mezzanine Capital Fund II, L.P. ("Blair Mezzanine Fund") in
connection with the Offer and the transactions contemplated thereby. For
information concerning Ridge, Blair Mezzanine Fund and their respective
principals, see Section 9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 11, 1997 (the "Merger Agreement"), among the Company, Parent and
the Purchaser, pursuant to which, after the completion of the Offer and on the
terms and subject to the conditions set forth therein, the Purchaser will
merge with and into the Company (the "Merger"), with the Company to be the
surviving corporation in such Merger, and each outstanding Share (other than
Shares owned by Parent or its direct or indirect subsidiaries, which will be
cancelled, or by shareholders exercising their dissenters' rights in
accordance with Section 473 of the Minnesota Business Corporation Act (the
"MBCA")) will be converted into and represent the right to receive an amount
in cash equal to the Offer Price. Following the consummation of the Merger,
the Company will be a wholly owned subsidiary of Parent. The Merger Agreement
is more fully described in Section 11 below.
In connection with the Merger Agreement, certain shareholders of the Company
have executed and delivered a Tender and Stock Option Agreement (the "Tender
Agreement"), pursuant to which such shareholders have (1) agreed to tender in
the Offer an aggregate of approximately 4.45 million Shares (approximately 71%
of the Shares outstanding on the date hereof), together with additional Shares
under certain circumstances and (2) granted to Purchaser an option to
purchase, under certain circumstances, Shares equal to 19.9% of the
outstanding Shares. See Section 11 below. In addition, the Purchaser has been
advised that certain members of senior management of the Company's operating
subsidiary intend to tender Shares pursuant to the Offer. See Section 9 below.
THE BOARD OF DIRECTORS OF THE COMPANY, AND AN INDEPENDENT COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY, UNANIMOUSLY HAVE DETERMINED THAT EACH OF
THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
SHAREHOLDERS, UNANIMOUSLY HAVE APPROVED THE OFFER AND THE MERGER AND RECOMMEND
THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. SEE
"RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS."
Summit Investment Corporation, the Company's financial advisor, has
delivered to the Board of Directors of the Company its written opinion dated
March 20, 1997 and reaffirmed as of April 7, 1997 to the effect that, as of
April 7, 1997, the cash consideration of $1.67 per Share to be received to the
holders of Shares in the Offer and the Merger is fair to such shareholders
from a financial point of view. Such opinion is set forth in full as an annex
to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to shareholders of the Company
concurrently herewith. Holders of Shares are urged to read such opinion,
including the assumptions contained therein, in its entirety prior to
tendering any Shares in response to the Offer.
1
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Purchaser pursuant to the
Offer. The Purchaser will pay all charges and expenses of Harris Trust Company
of New York (the "Depositary"), and MacKenzie Partners, Inc. (the "Information
Agent") in connection with the Offer.
The purpose of the Offer is for Parent, through Purchaser, to acquire any
and all outstanding Shares and to facilitate the Merger. See Section 11.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION OF THE OFFER AND NOT WITHDRAWN A NUMBER OF
SHARES WHICH WILL CONSTITUTE AT LEAST (1) A MAJORITY OF THE SHARES, AND (2) A
NUMBER OF OUTSTANDING SHARES ENTITLED TO ELECT A MAJORITY OF THE BOARD OF
DIRECTORS OF THE COMPANY, IN EACH CASE ON A FULLY DILUTED BASIS (OR, IF THE
PURCHASER SO ELECTS IN ITS SOLE DISCRETION, ON THE BASIS OF THE NUMBER OF
SHARES THEN OUTSTANDING) AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT
PURSUANT TO THE OFFER (THE "MINIMUM CONDITION"). CERTAIN OTHER CONDITIONS TO
THE OFFER ARE DESCRIBED IN SECTION 13.
According to the Company, as of the date hereof there were 5,045,151 shares
of Common Stock, no par value, outstanding, 1,227,273 shares of Class B Common
Stock, no par value, outstanding and 1,373,500 shares of Common Stock, no par
value, subject to issuance pursuant to the Company's stock option plans and
other agreements. For purposes of this Offer, "fully diluted basis" assumes
that all outstanding stock options and other rights to acquire Shares are
exercised. Based on the foregoing, the Purchaser believes there are
approximately 7,645,924 Shares outstanding on a fully diluted basis.
Accordingly, the Purchaser believes that the Minimum Condition would be
satisfied if at least 3,822,963 Shares are validly tendered prior to the
expiration of the Offer and not withdrawn. Pursuant to the Tender Agreement,
holders of approximately 4.45 million Shares have agreed to tender their
Shares in the Offer. Tender of these Shares would be sufficient to satisfy the
Minimum Condition, and would provide Purchaser sufficient Shares to effect the
Merger. See Section 11.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO AN ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S SHAREHOLDERS OR ANY ACTION IN LIEU THEREOF.
ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS
IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
* * * * *
Purchaser expressly reserves the right to waive any one or more of the
conditions to the Offer other than the Minimum Condition which may only be
waived with the consent of the Company. See Sections 1 and 13.
Shareholders are urged to read this Offer to Purchase and the related Letter
of Transmittal carefully before deciding whether to tender their Shares.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY, AND AN INDEPENDENT COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY, UNANIMOUSLY HAVE DETERMINED THAT EACH OF
THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY HAVE APPROVED THE OFFER AND THE
MERGER AND RECOMMEND THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES. THE OFFER IS BEING EFFECTED TO ACQUIRE ANY AND ALL
OUTSTANDING SHARES AND TO FACILITATE THE MERGER. SEE SECTIONS 10 AND 11.
The Company's financial advisor, Summit Investment Corporation ("Summit")
has delivered to the Board of Directors of the Company its written opinion
dated March 20, 1997 and reaffirmed as of April 7, 1997 to the effect that, as
of April 7, 1997, the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view.
2
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the Purchaser will accept for payment, and pay
for, all Shares validly tendered on or prior to the Expiration Date (as herein
defined) and not withdrawn as permitted by Section 4, at a price of $1.67 per
Share, net to the seller in cash. The term "Expiration Date" means 12:00
Midnight, New York City time, on Thursday, May 15, 1997, unless the Purchaser
shall have extended the period for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date on which the Offer,
as so extended, shall expire. If the Purchaser accepts any Shares for payment
pursuant to the terms of the Offer, it will accept for payment all Shares
validly tendered prior to the Expiration Date and not withdrawn, and will
promptly (but in any event within five business days) pay for all Shares so
accepted for payment.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. The Offer is also subject to certain other conditions set
forth in Section 13 below. Purchaser expressly reserves the right, in its sole
discretion, to waive, in whole or in part, any or all of the conditions of the
Offer (other than the Minimum Condition, which may not be waived without the
prior written consent of the Company).
Subject to the terms of the Merger Agreement and applicable law, including
the applicable rules and regulations of the Securities and Exchange Commission
(the "Commission"), the Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, and regardless of whether or
not any of the events set forth in Section 13 hereof shall have occurred or
shall have been determined by the Purchaser to have occurred, (i) to extend
the period of time during which the Offer is open, and thereby delay
acceptance for payment of and the payment for any Shares, by giving oral or
written notice of such extension to the Depositary and (ii) to amend the Offer
in any other respect by giving oral or written notice of such amendment to the
Depositary. There can be no assurance that Purchaser will exercise its right
to extend the Offer.
If by 12:00 Midnight, New York City time, on Thursday May 15, 1997 (or any
other date or time then set as the Expiration Date), any or all conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, to (i) terminate the Offer and not accept for payment any Shares
and return all tendered Shares to tendering shareholders, (ii) waive all the
unsatisfied conditions and, subject to complying with the terms of the Merger
Agreement and the applicable rules and regulations of the Commission, accept
for payment and pay for all Shares validly tendered prior to the Expiration
Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the
right of shareholders to withdraw Shares until the Expiration Date, retain the
Shares that have been tendered during the period or periods for which the
Offer is extended or (iv) amend the Offer.
In the Merger Agreement the Purchaser has agreed that, except as otherwise
required by law, it will not without the prior consent of the Company extend
the Offer if all of the Offer conditions referred to in Section 13 are
satisfied, except that the Purchaser may, in its sole discretion, extend the
Offer for a period of not more than 10 business days if the number of Shares
that have been validly tendered and not withdrawn pursuant to the Offer
represent less than 90% of the outstanding Shares. Purchaser may also extend
the Offer at any time and from time to time (a) if at the then scheduled
expiration date of the Offer any of the conditions to the Purchaser's
obligation to accept for payment and pay for Shares shall not have been
satisfied or waived and (b) for any period required by any law. In addition,
the Purchaser has agreed that, unless previously approved by the Company in
writing, the Purchaser will not (i) decrease the price per Share payable in
the Offer, (ii) reduce the number of Shares to be purchased in the Offer,
(iii) change the form of consideration payable in the Offer, (iv) impose
conditions to the Offer in addition to the conditions set forth in Section 13
or (v) make any other change in the terms of the Offer which is materially
adverse to the holders of Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of, or payment for, Shares or is unable to pay for Shares
3
pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Shares
on behalf of the Purchaser, and such Shares may not be withdrawn except to the
extent tendering shareholders are entitled to withdrawal rights as described
in Section 4. However, the ability of the Purchaser to delay the payment for
Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c)
under the Exchange Act, which requires that a bidder pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of such bidder's
offer.
Any extension, delay, termination, waiver or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which Purchaser may choose to
make any public announcement, except as provided by applicable law (including
Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any
material change in the information published, sent or given to shareholders in
connection with the Offer be promptly disseminated to shareholders in a manner
reasonably designed to inform shareholders of such change), the Purchaser
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service or as otherwise may be required by law.
If the Purchaser makes a material change in the terms of the Offer or if
Purchaser waives a material condition of the Offer, the Purchaser will extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer, other than a change in
price or a change in the percentages of securities sought, will depend of the
facts and circumstances, including the materiality, of the changes. With
respect to a change in price, or, subject to certain limitations, a change in
the percentage of securities sought, a minimum ten business day period from
the day of such change is generally required to allow for adequate
dissemination to shareholders. Accordingly, if prior to the Expiration Date,
Purchaser decreases the number of Shares being sought (which it may only do
with the consent of the Company), or increases or decreases the consideration
offered pursuant to the Offer and if the Offer is scheduled to expire at any
time earlier than the period ending on the tenth business day from the date of
that notice of such increase or decrease is first published, sent or given to
shareholders, the Offer will be extended at least until the expiration of such
ten business day period. For purposes of the Offer, a "business day" means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
The Company has provided the Purchaser, the Depositary and the Information
Agent with the Company's shareholder list and security position listings for
the purpose of disseminating the Offer to holders of Shares. The Offer to
Purchase and the related Letter of Transmittal are being mailed to record
holders of Shares whose names appear on the Company's shareholder list and is
being furnished, for subsequent transmittal to beneficial owners of shares, to
brokers, dealers, banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the shareholder list or, if applicable,
who are listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, Shares
validly tendered and not withdrawn as promptly as practicable after the later
to occur of (i) the Expiration Date and (ii) the date of satisfaction or
waiver of the conditions set forth in Section 13. Subject to applicable rules
of the Commission, the Purchaser expressly reserves the right to delay
acceptance for payment of or payment for Shares in order to comply, in whole
or in part, with any applicable law. See Section 13. Any determination
regarding the satisfaction of any condition will be made in the sole
discretion of the Purchaser, and such determination shall be final and binding
on all tendering shareholders, provided that the foregoing shall not limit any
claim of the Company for breach of the Merger Agreement.
4
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment and thereby purchased Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to the Depositary of its
acceptance for payment of such Shares pursuant to the Offer. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
the tendering shareholders for purpose of receiving payments from the
Purchaser and transmitting such payments to the tendering shareholders whose
Shares have been accepted for payment. Under no circumstances will interest on
the purchase price for Shares be paid, regardless of any delay in making such
payment.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) a
certificate(s) for such Shares or a timely confirmation (a "Book-Entry
Confirmation") of the book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (each a "Book-Entry Transfer Facility" and, collectively, the "Book-
Entry Transfer Facilities") pursuant to the procedures set forth in Section 3,
(ii) a Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message
(as defined in Section 3 below) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal. For a
description of the procedure for tendering Shares of the Company pursuant to
the Offer, see Section 3.
In all cases, execution and delivery of the Letter of Transmittal will
constitute a representation and warranty by the tendering shareholder that
such tendering shareholder has full power and authority to tender, sell,
assign and transfer the Shares (and any and all other Shares or other
securities issued or issuable in respect thereof on or after April 11, 1997
and any or all dividends thereon or distributions with respect thereto
(collectively, "Distributions")), and that when the same are accepted for
payment by Purchaser, Purchaser will acquire good and marketable title and
unencumbered ownership thereto, free and clear of all liens, restrictions,
charges, security interests, and encumbrances and not subject to any adverse
claims. The tender by a shareholder in accordance with the procedures
described below constitutes acceptance of the Offer.
If any tendered Shares are not accepted for payment for any reason or if
certificates are submitted for more Shares than are tendered, certificates
evidencing unpurchased or untendered Shares will be returned without expense
to the tendering shareholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility) as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
If Purchaser increases the consideration offered to shareholders pursuant to
the Offer, such increased consideration will be paid to all shareholders whose
Shares are purchased pursuant to the Offer, whether or not such Shares were
tendered or accepted for payment prior to such increase in consideration.
Purchaser reserves the right to assign, in whole or from time to time in
part, to Parent or a subsidiary of Parent, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such assignment
will not relieve Purchaser of its obligations under the Offer nor will any
such assignment prejudice in any way the rights of tendering shareholders to
receive payment for Shares validly tendered and accepted for payment pursuant
to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender of Shares. Except as set forth below, in order for Shares to be
validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry delivery of Shares as described below, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchaser and either (i) certificates evidencing tendered Shares must be
received by the Depositary at any such address or such Shares must be tendered
pursuant to the procedure for book-entry transfer (and a confirmation of
receipt of such
5
delivery must be received by the Depositary), in each case, on or prior to the
Expiration Date or (ii) the guaranteed delivery procedures set forth below
must be complied with. The term "Agent's Message" means a message transmitted
by a Book-Entry Transfer Facility to and received by the Depositary and
forming a part of a Book-Entry Confirmation, which states that such Book-Entry
Transfer Facility has received an express acknowledgment from the participant
in such Book-Entry Transfer Facility tendering the Shares which are the
subject of such Book-Entry Confirmation, that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against such participant. No conditional,
alternative or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Depository's account
in accordance with that Book-Entry Transfer Facility's procedures for such
transfer. Although delivery of Shares may be effected through book-entry
transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees. Except as otherwise provided below, signatures on
Letters of Transmittal must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc. (the "NASD"), or a commercial bank or trust company
having an office or correspondent in the United States (each of the foregoing
constituting an "Eligible Institution"). Signatures on Letters of Transmittal
need not be guaranteed (i) if the Letter of Transmittal is signed by the
registered holder of Shares tendered and such holder has not completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 1 and 5
of the Letter of Transmittal.
If the certificates representing Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made or certificates for Shares not accepted for payment or not tendered
are to be returned to a person other than the registered holder, then the
tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates are not immediately available,
or such shareholder cannot deliver the certificates and all other required
documents to reach the Depositary on or prior to the Expiration Date, or such
shareholder cannot complete the procedure for book-entry transfer on a timely
basis, such Shares may nevertheless be tendered if the following guaranteed
delivery procedures are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary as provided below on or prior to the Expiration Date; and
(iii) the certificates (or a Book-Entry Confirmation) representing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an
6
Agent's Message) and any other documents required by the Letter of
Transmittal are received by the Depositary within three Nasdaq Stock Market
("Nasdaq") trading days after the date of execution of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY
DELIVERY.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding on payments made to shareholders with respect to the purchase
price of Shares purchased pursuant to the Offer, each such shareholder must
provide the Depositary with such shareholder's correct taxpayer identification
number and certify that such shareholder is not subject to backup federal
income tax withholding by completing the substitute Form W-9 included in the
Letter of Transmittal. See Instruction 8 of the Letter of Transmittal.
Appointment as Proxy. By executing a Letter of Transmittal, a tendering
shareholder irrevocably appoints designees of Purchaser as such shareholder's
proxies in the manner set forth in the Letter of Transmittal to the full
extent of such shareholder's rights with respect to the Shares tendered by
such shareholder and accepted for payment by Purchaser (and with respect to
any and all other Shares or other securities issued or issuable in respect of
such Shares on or after the date of this Offer to Purchase). All such proxies
shall be irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, Purchaser
accepts such Shares for payment. Upon such acceptance for payment, all prior
proxies and consents granted by such shareholder with respect to such Shares
and other securities will be revoked without further action, and no subsequent
proxies may be given nor subsequent written consents executed (and, if given
or executed, will not be deemed effective). The designees of Purchaser will be
empowered to exercise all voting and other rights of such shareholder as they,
in their sole discretion, may deem proper at any annual, special or adjourned
meeting of the Company's shareholders, by written consent or otherwise.
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's payment for such Shares,
Purchaser must be able to exercise full voting rights with respect to such
Shares, including voting at any meeting of shareholders scheduled or acting by
written consent without a meeting.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding. Purchaser reserves the absolute
right to reject any and all tenders of Shares determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser reserves the absolute right to
waive any defect or irregularity in any tender of Shares of any particular
shareholder. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the Instructions thereto) will
be final and binding. None of Purchaser, Parent, any of their affiliates or
assigns, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after June
16, 1997.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set
7
forth on the back cover of this Offer to Purchase. Any notice of withdrawal
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the names in which the
certificate(s) evidencing the Shares to be withdrawn are registered, if
different from that of the person who tendered such Shares. The signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of any Eligible
Institution. If Shares have been tendered pursuant to the procedures for book-
entry transfer as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and otherwise comply with such Book-
Entry Transfer Facility's procedures. If certificates have been delivered or
otherwise identified to the Depositary, the name of the registered holder and
the serial numbers of the particular certificates evidencing the Shares
withdrawn must also be furnished to the Depositary as aforesaid prior to the
physical release of such certificates.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser and Parent, in their
sole discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give such
notification.
Notices of withdrawal may not be rescinded, and any Shares properly
withdrawn will be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept for payment Shares pursuant to the Offer, for
any reason, then, without prejudice to the Purchaser's rights under this
Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
that tendering shareholders are entitled to withdrawal rights as set forth in
this Section 4. Any such delay will be by an extension of the Offer to the
extent required by law.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER.
The following discussion is a summary of the principal federal income tax
consequences of the Offer and the Merger to holders whose Shares are purchased
pursuant to the Offer or the Merger (including any cash amounts received by
dissenting shareholders pursuant to the exercise of appraisal rights). The
discussion applies only to holders of Shares in whose hands Shares are capital
assets, and may not apply to Shares received pursuant to the exercise of
employee stock options or otherwise as compensation, or to holders of Shares
who are not citizens or residents of the United States.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES IS URGED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX
LAWS.
The receipt of cash pursuant to the Offer or the Merger (including any cash
amounts received by dissenting shareholders pursuant to the exercise of
appraisal rights) will be a taxable transaction for Federal income tax
purposes under the Internal Revenue Code of 1986, as amended, and also may be
a taxable transaction under applicable state, local and other income tax laws.
In general, for federal income tax purposes, a tendering shareholder will
recognize gain or loss equal to the difference between the cash received by
the shareholder pursuant to the Offer or the Merger and the shareholder's
adjusted tax basis in the Shares tendered by the shareholder and purchased
pursuant to the Offer or the Merger. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in
a single transaction) tendered pursuant to the Offer or the Merger. Such gain
or loss will be capital gain or loss and will be long-term gain or loss if, on
the date Purchaser accepts the Shares for payment pursuant to the Offer or, if
applicable, the effective date of the Merger, the Shares were held for more
than one year. There are limitations on the deductibility of capital losses.
8
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if
the shareholder (i) fails to furnish such shareholder's social security number
or other taxpayer identification number ("TIN"), (ii) furnishes an incorrect
TIN, (iii) fails properly to report interest or dividends or (iv) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that the TIN provided is such shareholder's correct
number and that such shareholder is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may
be refunded by the Internal Revenue Service to the extent it results in an
overpayment of tax. Certain persons generally are exempt from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Shareholders should consult with
their own tax advisors as to the qualification for exemption from withholding
and the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Company's common stock, no par value ("Common Stock") is listed on the
NASDAQ OTC Bulletin Board ("NASDAQ/OTCBB") under the symbol "PEER." The
following table sets forth, for the calendar quarters indicated, the high and
low sales prices for the Common Stock on the NASDAQ/OTCBB based upon the
Company's Annual Report on Form 10-KSB and other public sources.
COMMON STOCK
PRICE
-------------
CALENDAR YEAR HIGH LOW
------------- ------ ------
1995:
First Quarter............................................. $0.875 $0.875
Second Quarter............................................ $1.125 $0.875
Third Quarter............................................. $1.75 $1.00
Fourth Quarter............................................ $1.50 $1.25
1996:
First Quarter............................................. $1.875 $1.625
Second Quarter............................................ $2.125 $1.875
Third Quarter............................................. $1.50 $1.25
Fourth Quarter............................................ $1.313 $1.313
1997:
First Quarter............................................. $1.875 $1.25
Second Quarter (through April 14)......................... $1.625 $1.437
On March 27, 1997, the last full trading day prior to the public
announcement by the Company of its negotiations regarding a possible
acquisition at a price of $1.67 per share, the reported closing price on the
NASDAQ/OTCBB was $1.437 per Share. On April 16, 1997, the last full trading
day prior to commencement of the Offer, the reported closing price on the
NASDAQ/OTCBB was $1.565 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, NASDAQ/OTCBB QUOTATION, AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares by the Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by the public.
The shares of Common Stock are authorized for quotation on the NASDAQ/OTCBB.
The extent of the public market for the shares of Common Stock and the
availability of such quotations depends upon a number of factors, including
the number of shareholders and/or the aggregate market value of the shares of
Common Stock, the interest in maintaining a market in the shares of Common
Stock on the part of securities firms, the possible termination of
registration of the shares of Common Stock under the Exchange Act and other
factors. As the number of shares of Common Stock and the number of holders of
shares of Common Stock are reduced pursuant
9
to the purchase of Shares by the Purchaser, there will be less interest in
maintaining a market for the shares of Common Stock by securities firms, which
will adversely affect the liquidity and market value of the remaining Shares.
The shares of Common Stock are currently registered under the Exchange Act.
Such registration may be terminated by the Company upon application to the
Commission if the outstanding shares of Common Stock are not listed on a
national securities exchange and if there are fewer than 300 holders of record
of Shares. Termination of registration of the shares of Common Stock under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b) and the requirement of furnishing a proxy
statement in connection with shareholders' meetings pursuant to Section 14(a)
and the related requirement of furnishing an annual report to shareholders, no
longer applicable with respect to the shares of Common Stock. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
under the Securities Act of 1933, as amended, may be impaired or eliminated.
If registration of the shares of Common Stock under the Exchange Act were
terminated, the shares of Common Stock would no longer be eligible for NASDAQ
reporting. THE PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR
TERMINATION OF REGISTRATION OF THE SHARES OF COMMON STOCK AS SOON AS POSSIBLE
AFTER CONSUMMATION OF THE OFFER IF THE REQUIREMENTS FOR TERMINATION OF
REGISTRATION ARE MET.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources and is qualified in its entirety by reference thereto. None of Parent,
Purchaser or any of their affiliates takes any responsibility for the accuracy
or completeness of the information contained in such documents and records, or
for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's shareholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference room at the Commission's
office, 450 Fifth Street, N.W, Judiciary Plaza, Washington, D.C., and should
also be available for inspection and copying at the following regional offices
of the Commission: Citicorp Center, 600 West Madison Street, Suite 1400,
Chicago, Illinois; and 7 World Trade Center, 13th Floor, New York, New York.
Copies may be obtained, by mail, upon payment of the Commission's customary
charges, by writing to its principal office at 450 Fifth Street, N.W,
Judiciary Plaza, Washington, D.C. 20549.
The Company is a Minnesota corporation with its principal executive offices
located at 2430 Metropolitan Centre, 333 South Seventh Street, Minneapolis,
Minnesota, 55402.
The business of the Company and its subsidiaries is the manufacture and sale
of a varied line of traction products, all types of hardware chain and
industrial chain and wire form products in various lengths, diameters and
shapes, and cordage of various lengths and diameters. The Company's chain
products, consisting primarily of hardware and industrial chain, traction
products (tire chains) and wire form products, are sold to customers
throughout the United States and most of Canada with expanding sales in
England and Mexico. Its major customers include retailers and distributors
engaged in selling automotive, farm, hardware and home center products,
industrial and specialty distributors and original equipment manufacturers.
10
The Company's traction products primarily include automobile, farm tractor,
truck, snowblower and garden tractor tire chains available in numerous sizes,
weights, and cross link designs. Traction cable products for automobiles and
light trucks are also manufactured and sold.
The Company's hardware and industrial chains include a broad variety of both
welded and unwelded chain available in various link sizes and designs,
finishes and wire diameters up to 5/89. Many of these chains are sold in
straight, continuous lengths of 100 feet or more and are merchandised with
special packaging and displays to facilitate resale by the Company's retail
customers. A substantial portion of the Company's chain sales is comprised of
chain assemblies fabricated by the Company with attachments. Applications for
the Company's lower strength chains and chain assemblies include a broad range
of home, farm, shop and recreational uses, such as for animal restraints,
playground equipment, padlocks, boats, sign hangings, towing, load binding and
comparatively light lifting. The Company's higher strength chain and chain
assemblies have many heavy duty industrial and commercial applications, such
as auto tie downs, tree de-barking, heavy binding, and heavy overhead lifting
and hoisting.
The Company has the wire forming, welding, flattening, punching and plating
capacities to manufacture a wide variety of wire form products calling for a
continuous piece or pieces of wire. Principal examples of its numerous
products include axles for toys, peg board hooks, "S" hooks, soft tie-down
hooks and hitch pin clips. A significant portion of the Company's wire form
products are custom designed to meet specific customer requirements. The
balance of its wire form products are sold to its broad range of retail
customers and to support the Company's traction products.
Set forth below is certain summary consolidated financial information for
the Company's last two fiscal years as contained in the Company's Annual
Reports on Form 10-KSB for the years ended December 31, 1995 and December 31,
1996. More comprehensive financial information is included in such reports
(including management's discussion and analysis of financial condition and
results of operation) and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information and notes contained therein, copies of such reports and other
documents may be examined at or obtained from the Commission.
PEERLESS INDUSTRIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
FISCAL YEAR
ENDED
DECEMBER 31, PRO FORMA
---------------- DECEMBER 31,
1996 1995(1) 1995(2)
------- ------- ------------
INCOME STATEMENT INFORMATION:
Net sales ................................. $45,002 $1,419 $41,951
Net income (loss).......................... (215) (202) (331)
BALANCE SHEET INFORMATION:
Total assets............................... 38,395 39,497 --
Current portion of long-term debt.......... 9,870 11,300 --
Long-term debt, less current portion....... 6,861 7,767 --
Shareholders' equity....................... 6,278 5,094 --
- --------
(1) The Company purchased all outstanding shares of Peerless Chain Company
(the "Operating Company"), on December 15, 1995. The acquisition was
accounted for under the purchase method of accounting. Accordingly, the
results of operations of the Operating Company are included in the income
statement information since the date of acquisition. See footnote 2 to the
audited financial statements included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
(2) These unaudited pro forma results of operation are presented as if the
Company's acquisition of the Operating Company had occurred on January 1,
1995. See footnote 2 to the audited financial statements included in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1996.
11
Certain Company Projections.
To the knowledge of Parent and the Purchaser, the Company does not as a
matter of course make public forecasts as to its future financial performance.
However, in connection with the preliminary discussions concerning the
feasibility of the Offer and the Merger, the Company prepared and furnished
Parent with certain financial projections and has disclosed to Parent the
Company's budget for 1997.
The projections presented in the table below (the "Projections") are derived
or excerpted from the Company's 1997 budget and other information provided by
the Company and are based on numerous assumptions concerning future events.
The Projections have not been adjusted to reflect the effects of the Offer or
the Merger or the incurrence of indebtedness in connection therewith. The
Projections should be read together with the other information contained in
this Section 8.
PEERLESS INDUSTRIAL GROUP, INC.
SELECTED PROJECTIONS OF FUTURE OPERATING RESULTS
(DOLLARS IN THOUSANDS)
1997 1998 1999
------- ------- -------
Net Sales......................................... $49,157 $53,124 $57,256
Net Income........................................ 1,379 1,852 2,339
The Projections were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants
regarding projections or forecasts and are included herein only because such
information was provided to Parent and its prospective lenders. These forward-
looking statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from the Projections. The
Projections reflect numerous assumptions, all made by management of the
Company, with respect to industry performance, general business, economic,
market and financial conditions and other matters, including assumed interest
expense and effective tax rates consistent with historical levels for the
Company, all of which are difficult to predict, many of which are beyond the
Company's control and none of which were subject to approval by Parent or the
Purchaser. Accordingly, there can be no assurance that the assumptions made in
preparing the Projections will prove accurate, and actual results may be
materially greater or less than those contained in the Projections. The
inclusion of the Projections herein should not be regarded as an indication
that any of Parent, the Purchaser, the Company or their respective financial
advisors considered or consider the Projections to be a reliable prediction of
future events, and the Projections should not be relied upon as such. None of
Parent, the Purchaser, the Company and their respective financial advisors
assumes any responsibility for the validity, reasonableness, accuracy or
completeness of the Projections. None of Parent, the Purchaser, the Company
and any of their financial advisors has made, or makes, any representation to
any person regarding the information contained in the Projections and none of
them intends to update or otherwise revise the Projections to reflect
circumstances existing after the date when made or to reflect the occurrence
of future events even in the event that any or all of the assumptions
underlying the Projections are shown to be in error.
9. CERTAIN INFORMATION CONCERNING RIDGE, BLAIR MEZZANINE FUND, THE PURCHASER
AND PARENT.
Ridge Capital Corporation ("RCC") and Ridge Advisors, Inc. ("RAI") are
privately held Illinois corporations engaged, directly and through its
subsidiaries, in leveraged acquisitions, venture capital investments, real
estate investments and the provision of related advisory services. All of the
capital stock of RCC and RAI is owned by J. Bradley Davis.
Pandora Capital Corporation ("PCC") is a private equity investment firm
located in Barrington, Illinois. The sole shareholder of Pandora Capital
Corporation is Harrington Bischof. Mr. Bischof also serves as a Senior Advisor
to RCC and RAI.
12
RCC, RAI and PCC are jointly referred to herein as "Ridge". For certain
information regarding the shareholders, directors and executive officers of
Ridge. See Schedule I.
Blair Mezzanine Fund, a Delaware limited partnership, is a private
investment partnership. The general partner of Blair Mezzanine Fund is William
Blair Mezzanine Capital Partners II, L.L.C., a Delaware limited liability
company (the "WB General Partner"). The board of managers of WB General
Partner consists of Timothy J. MacKenzie, Terrance M. Shipp, Marc J. Walfish,
E. David Coolidge III and John P. Kayser. The principal business address of
Blair Mezzanine Fund and each member is 222 West Adams Street, Chicago,
Illinois, and the principal occupation and five-year employment history of
each member of the board of managers is set forth on Schedule I hereto.
The Parent is a Delaware corporation and the Purchaser is a Minnesota
corporation, each of which has been newly formed by Ridge and Blair Mezzanine
Fund for the purpose of effecting the Offer and the Merger. It is not
anticipated that, prior to the consummation of the Offer and the Merger, the
Purchaser or the Parent will have any significant assets or liabilities or
will engage in any activities other than those incident to the Offer and the
Merger and the financing thereof. The Purchaser is a wholly owned subsidiary
of Parent. The principal executive offices of the Purchaser and Parent are
located at 257 East Main Street, Barrington, Illinois 60010. After the
completion of the sale of the equity interests in Parent, the outstanding
common stock of Parent will be owned by Ridge and Blair Mezzanine Fund.
Purchaser has held discussions with members of the management of the Company
concerning their possible participation in the equity of Parent following
consummation of the Merger. Ridge and Blair Mezzanine Fund have committed
sufficient funds to enable Parent to consummate the Offer and Merger and pay
all other obligations associated therewith without the participation of any
members of Company management. Parent currently expects that Jan C. van
Osnabrugge, President of the Company and Chief Executive Officer of the
Company's operating subsidiary, Peerless Chain Company (the "Operating
Company") would invest $100,000 in Parent for 2.33% of the outstanding shares
of Parent; and Robert Deter, Chief Financial Officer of the Company and the
Operating Company would invest $63,750 in Parent for 1.49% of the outstanding
shares of Parent. Messrs. van Osnabrugge and Deter are executive officers of
the Company. In addition, Parent expects that Gerald Faurote, Vice-President--
Sales and Marketing of the Operating Company would invest $70,000 in Parent
for 1.63% of Parent's shares and that Dale Schwanke, Vice-President of
Operations of the Operating Company would invest $63,750 in Parent for 1.49%
of Parent's shares. Parent has also held discussions with eight other members
of the non-executive operating management of the Operating Company concerning
their interest in purchasing shares of Parent. Parent has allocated a total of
4.77% of its shares representing $202,500 of proceeds for possible purchase by
such eight individuals; however, neither Parent nor any of such individuals
has made any commitments with respect to the shares of Parent.
Any investments in Parent made by management would reduce the amount to be
invested by Ridge.
For certain information concerning the principals of Ridge and Blair
Mezzanine Fund, and the directors and executive officers of Parent and the
Purchaser, see Schedules I and II, respectively, to this Offer to Purchase.
An affiliate of the Blair Mezzanine Fund holds an equity interest of less
than 10% in, and is a subordinated lender to, Eagle Pacific Industries, Inc.
William Spell, Harry Spell, Bruce Richard and Richard Perkins, who are
directors of the Company, are also directors and shareholders of Eagle Pacific
Industries, Inc.
Except as described in this Offer to Purchase, neither the Purchaser nor
Parent, nor, to the best of their knowledge, any of the persons listed in
Schedules I or II hereto nor any associate or majority-owned subsidiary of any
of the foregoing, beneficially owns or has a right to acquire any equity
securities of the Company. Neither the Purchaser nor Parent, nor, to the best
of their knowledge, any of the persons or entities referred to above, nor any
director, executive officer or subsidiary of any of the foregoing, has
effected any transaction in such equity securities during the past 60 days.
13
Except as described in this Offer to Purchase (i) none of Ridge, Blair
Mezzanine Fund, the Purchaser or Parent, nor, to the best knowledge of any of
the foregoing, any of the persons listed in Schedules I or II to this Offer to
Purchase or any associate or majority owned subsidiary of any of the
foregoing, had any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, (ii) there have been no
contacts, negotiations or transactions since January 1, 1994 between Parent or
the Purchaser, or, to the best of their knowledge, any of the persons listed
in Schedules I or II hereto, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets and
(iii) neither the Purchaser nor Parent, nor, to the best of their knowledge,
any of the persons listed in Schedules I or II hereto, has since January 1,
1994 had any transaction with the Company or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the Commission applicable to the Offer.
10. BACKGROUND OF THE MERGER AND THE OFFER; CONTACTS WITH THE COMPANY.
In October 1996, a representative of Coopers & Lybrand Securities L.L.C.
("Coopers"), as representative of the Company, contacted Harrington Bischof, a
Senior Advisor to Ridge Capital Corporation ("RCC") and President of Pandora
Capital Corporation ("PCC"), a corporation wholly-owned by Mr. Bischof, to
inquire as to PCC's potential interest in pursuing a possible transaction with
the Company. Coopers indicated that Coopers was simultaneously making similar
approaches to other potential purchasers of the Company. On October 30, 1996
PCC executed a confidentiality agreement, and in mid-November, 1996 PCC was
furnished an initial offering memorandum concerning the Company prepared by
the Company. In November, 1996, PCC contacted J. Bradley Davis of RCC, and PCC
and RCC (collectively, with other affiliates of RCC, "Ridge") determined to
proceed jointly in evaluating a potential transaction involving the Company.
On December 9, 1996, Ridge delivered to Coopers a non-binding expression of
interest in pursuing a potential transaction with the Company. Shortly
thereafter Ridge was notified by Coopers that Ridge had qualified as one of
the second round participants that would be permitted to conduct additional
due diligence investigations with respect to the Company.
From December 19, 1996 through mid-February, 1997, Ridge requested and
received various information concerning the Company of the type available to
all second round participants, and conducted various investigations and
reviews of the Company and its business. This process included attendance at a
presentation by Coopers and the Company and a plant tour on January 24, 1997,
and a series of telephone conversations and meetings with senior and operating
management of the Company and representatives of Coopers to further
investigate the business, strategies and prospects of the Company and to
discuss a possible acquisition of the Company by Ridge. During this period
Ridge also held various telephone conversations and meetings with certain of
the Company's lenders and lessors in order to obtain preliminary assurance
that the Company's relationships with such lenders and lessors would continue
after a change of control.
In early February, 1997, Ridge selected Blair Mezzanine Fund as its equity
partner and sole source of subordinated debt financing for a potential
acquisition of the Company. On February 4 and 5, 1997 Ridge and Blair
Mezzanine Fund made a visit to the Company, which included another
presentation by Coopers and operating management of the Company, in order to
provide Blair Mezzanine Fund an opportunity to conduct due diligence on the
Company.
On February 21, 1997, Ridge submitted to Coopers a binding bid to acquire
the Company for a price of $1.65 per share, in accordance with the bid
procedures established by the Company and Coopers. From February 21 through
February 28 Ridge held various discussions with Coopers and William H. Spell,
Chief Executive Officer of the Company, to discuss Ridge's bid. On February
28, 1997, Ridge and Blair Mezzanine Fund submitted a revised bid to acquire
the Company at a price of $1.67 per share.
From February 28 through March 4, 1997, Ridge held further discussions and
negotiations with the Company and Coopers regarding the structure of Ridge's
bid, including (i) Ridge's comments on a form of
14
Agreement and Plan of Merger distributed to bidders by the Company's counsel,
(ii) Ridge's requirement that certain shareholders of the Company execute and
deliver Tender and Stock Option Agreements, by which such shareholders would
agree to tender their shares to Ridge and would grant to Ridge an option,
exercisable under certain circumstances, to purchase up to 19.9% of the
Company's outstanding shares and (iii) Ridge's requirement for a termination
fee of $900,000, plus expenses, payable in certain circumstances. As a result
of these negotiations, Ridge abandoned its request for expense reimbursement,
and defined more specifically the circumstances in which the $900,000
termination fee would be payable.
On March 4, 1997, the Company's Board of Directors approved the execution of
a letter agreement among the Company, Ridge and Blair Mezzanine Fund, whereby
the Company agreed to negotiate exclusively with Ridge and Blair Mezzanine
Fund through April 7, 1997 (later extended through April 11, 1997) for the
acquisition of the Company's common stock including options, warrants and
other rights as if fully exercised, at a price of $1.67 per share, subject to
satisfactory completion of Ridge's due diligence investigation of the Company,
the negotiation of definitive agreements, receipt of necessary regulatory
approvals and the availability of financing.
On March 31, 1997, the Company filed its Annual Report on Form 10-KSB for
the year ended December 31, 1996, which indicated that pre-tax earnings were
$447,000 less than previously reported to the Purchaser as contained in the
Company's materials distributed to potential purchasers. Despite such
deficiency the Purchaser elected to continue with its due diligence and the
negotiation of the Merger Agreement.
From March 4 through April 11, 1997, Ridge and Blair Mezzanine Fund
continued their due diligence investigations of the Company. Ridge and Blair
Mezzanine Fund also met with operating management of the Company to discuss
the terms of their continued employment by the Company and the prospect that
certain members of management might be invited to invest in the Parent, and
continued their discussions with the Company's lenders and lessors regarding
the continuance of the Company's relationships with such lenders and lessors
following the Offer and the Merger. During this period, counsel for Ridge,
Blair Mezzanine Fund and the Company exchanged drafts of and comments on a
form of Agreement and Plan of Merger and related disclosure schedules, a form
of Tender and Stock Option Agreement, and the documents required to be filed
and disseminated in connection with the Offer. Also during this period, Parent
and Purchaser were organized.
On April 7, 1997, the Company's Board of Directors gave final approval to
the Merger and the Offer, and authorized execution and delivery of the Merger
Agreement. On April 11, 1997 the Company, Parent and Purchaser executed and
delivered the Merger Agreement, and Parent, Purchaser and the shareholders
party thereto executed and delivered the Tender Agreement.
In the Merger Agreement, Parent and Purchaser agreed with the Company that
at the Effective Time Parent would cause the Company, as the surviving
corporation in the Merger, and the Operating Company to enter into a
consulting agreement with Mr. William H. Spell for a two-year period,
providing for compensation of (i) $120,000 payable within seven days after the
execution of the Consulting Agreement, (ii) $25,000 per quarter for each of
the first four quarters of the Consulting Agreement, payable quarterly in
arrears, and (iii) $22,500 per quarter for each of the second four quarters of
the Consulting Agreement, payable quarterly in arrears.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER AGREEMENT; THE
TENDER AGREEMENT; DISSENTERS' RIGHTS.
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring control of, and the entire equity
interest in, the Company.
The acquisition of 90% or more of the outstanding Shares pursuant to the
Offer will permit the Merger to be effected under Minnesota law without the
approval of the Company's shareholders. Therefore, if at least approximately
5,465,182 Shares (or such greater number as may be necessary if options are
exercised), are acquired pursuant to the Offer, the Purchaser will be able to
and intends to effect the Merger without a meeting of holders of Shares. If
the Minimum Condition is met (but less than 90% of the outstanding Shares are
acquired), a special meeting will be called to obtain shareholder approval of
the Merger. Upon consummation of the Offer, Purchaser will have a sufficient
number of votes to approve the Merger at such a meeting.
15
Following the Offer and the Merger, Parent anticipates that it will operate
the Company as a wholly owned subsidiary of Parent.
If and to the extent that the Purchaser acquires control of the Company,
Parent and the Purchaser intend to conduct a detailed review of the Company
and its assets, corporate structure, capitalization, operations, properties,
policies, management and personnel and consider and determine what, if any,
changes would be desirable in light of the circumstances which then exist.
Such strategies could include, among other things, changes in the Company's
business, corporate structure, Restated Articles of Incorporation, Bylaws,
capitalization, dividend policy or management.
Except as noted in this Offer to Purchase, the Purchaser and Parent have no
present plans nor proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, or sale or
transfer of a material amount of assets, involving the Company or any
subsidiary of the Company or any other material changes in the Company's
capitalization, dividend policy, corporate structure, business or composition
of its management.
The Merger Agreement
The following is a brief summary of the Merger Agreement, and is qualified
in its entirety by reference to the text of the Merger Agreement, a copy of
which has been filed by Parent as an exhibit to the Schedule 14D-l and may be
obtained in the manner described in Section 8.
THE OFFER
Pursuant to the Merger Agreement, the Purchaser was required to commence the
Offer as promptly as practicable, but in any event within five business days
after the public announcement of the Merger Agreement. Subject to the prior
satisfaction or waiver of the conditions to the Offer described in Section 13
below, the Purchaser is obligated to accept for payment all Shares validly
tendered pursuant to the Offer, and not withdrawn, as soon as legally
permissible and to pay for all such Shares as soon as practicable thereafter;
provided, however, that subject to the terms of the Merger Agreement the Offer
may be extended by the Purchaser, in its sole discretion, for not more than
ten business days beyond the initially scheduled expiration date thereof.
Without the prior written consent of the Company, the Purchaser may not
decrease the price per Share, decrease the number of Shares being sought in
the Offer, change the form of consideration payable in the Offer, add
additional conditions to the Offer, or, subject to the preceding sentence,
make any other change in the terms of the Offer which is materially adverse to
the holders of Shares. The Merger Agreement provides that the Offer will be
subject only to the conditions described in Section 13 below, which are for
the benefit of the Purchaser and may be asserted or waived by the Purchaser in
whole or in part at any time and from time to time, in its sole discretion;
provided, however, that the Purchaser may not waive the Minimum Condition
without the prior written consent of the Company.
The Merger Agreement requires that, as soon as practicable on the date of
commencement of the Offer, (i) Parent and the Purchaser shall file with the
Commission a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (the "Schedule 14D-1"), which will contain the offer to purchase and
form of the related letter of transmittal and (ii) the Company will file with
the Commission, and mail to its shareholders, the Schedule 14D-9 containing
the recommendation of the Board of Directors of the Company that the Company's
shareholders accept the Offer and tender their Shares.
BOARD OF DIRECTORS
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number
of directors on the Company's Board of Directors and (ii) the percentage that
the number of Shares owned by Purchaser and its affiliates (including any
Shares purchased pursuant to the Offer) bears to the total number of
outstanding Shares. The Company will either increase the size of its Board of
Directors or use its best efforts to secure the resignation of such number of
directors as is necessary to enable Purchaser's designees to be elected to
such Board of Directors, and shall cause Purchaser's designees to be so
elected.
16
Following the election or appointment of Purchaser's designees, any
amendment of the Merger Agreement or the Restated Articles of Incorporation or
By-Laws of the Company, any termination of the Merger Agreement by the
Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of Parent or Purchaser or any waiver of any
of the Company's rights under the Merger Agreement will require the
concurrence of a majority of the directors of the Company then in office who
are not designees of Purchaser or employees of the Company.
THE MERGER
The Merger Agreement provides that, promptly after the purchase of Shares
pursuant to the Offer and the receipt of any required approval by the
Company's shareholders of the Merger Agreement and the satisfaction or waiver
of certain other conditions, the Purchaser and the Company will be merged.
Upon consummation of the Merger (the "Effective Time"), each then outstanding
Share (other than Shares owned by the Purchaser or Shares held by shareholders
of the Company who have exercised their dissenters' rights in accordance with
Section 473 of the MBCA) will be converted into the right to receive an amount
in cash (the "Merger Consideration") equal to the per Share price paid
pursuant to the Offer.
Following consummation of the Merger, the Company will be the surviving
corporation. The Merger Agreement also provides that the Articles of
Incorporation and the Bylaws of the Purchaser at the Effective Time will be
the Articles of Incorporation and Bylaws of the surviving corporation and that
the directors and officers of the Purchaser at the Effective Time will be the
directors and officers of the surviving corporation.
The Merger Agreement provides that at or prior to the Effective Time, each
option and warrant granted pursuant to the Company's stock option plans and
other agreements (the "Stock Purchase Rights"), whether or not then
exercisable, which was outstanding as of the date of the Merger Agreement and
which has not been exercised prior to the acquisition of Shares pursuant to
the Offer, shall be cancelled and each holder of a cancelled Stock Purchase
Right shall be entitled to receive from the Company, in cancellation and
settlement of the Stock Purchase Right, an amount in cash (less applicable
withholding taxes) equal to the product of (x) the number of Shares previously
subject to the Stock Purchase Right and (y) the excess, if any, of the
purchase price paid pursuant to the Offer over the exercise price per Share
provided for in the Stock Purchase Right.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the Company, including representations by the Company as to (i)
organization, qualification and similar corporate matters of the Company and
its subsidiaries (ii) the capitalization of the Company and its subsidiaries,
(iii) the authorization, execution, delivery and enforceability of the Merger
Agreement, (iv) the lack of required consents and approvals in connection with
the Merger Agreement, and the non-contravention by the Merger Agreement and
the related transactions of any article provision, by-law, material contract,
order, law or regulation to which the Company or its subsidiaries is a party
or by which it is bound or obligated, (v) the filing of required Commission
reports, the absence of untrue statements of material facts or omissions of
material facts in such reports, and the absence of other undisclosed
liabilities, (vi) the absence of changes or events which have had a material
adverse effect on the Company, and the absence of casualty losses,
declarations of dividends, certain compensation arrangements, material
commitments or transactions and certain other events, (vii) the absence of
payments to any intermediary other than Coopers & Lybrand Securities L.L.C.
and of any finder's or other fee or commission, (viii) the absence of untrue
statements of material facts or omissions of material facts in the Schedule
14D-9 and the proxy statement to be sent to shareholders in connection with
the Merger, (ix) possession of all necessary rights and licenses in
intellectual property, (x) the absence of claims and litigation, (xi) labor
matters, (xii) the filing of tax returns and the payment of taxes, (xiii) the
absence of environmental claims and compliance with all environmental laws and
regulations, (xiv) employee benefits matters, (xv) compliance with laws,
rules, statutes, orders, ordinances or regulations, and material notes, bonds,
mortgages, indentures, contracts, agreements, leases, licenses, permits,
franchise or other instruments or obligations of the Company or any of its
subsidiaries which would result in a material adverse effect, (xvi) real
property ownership and the
17
possession and enforceability of all real property leases, (xvii) the absence
of notices, citations or decisions of governmental or regulatory bodies and
recalls with respect to any product produced, manufactured, marketed or
distributed by the Company, (xviii) applicable voting requirements and (xix)
inapplicability of certain state takeover laws.
The Merger Agreement also contains various customary representations and
warranties of the Parent and the Purchaser, including representations by
Parent and Purchaser as to (i) organization, qualification and similar
corporate matters of Parent and Purchaser, (ii) the authorization, execution,
delivery, and enforceability of the Merger Agreement, (iii) the absence of
untrue statements of material facts or omissions of material facts in any
documents related to the Offer or in the Schedule 14D-1, (iv) the absence of
untrue statements of material facts or omissions of material facts in any
information provided to the Company in connection with the proxy statement,
(v) the lack of required consents and approvals in connection with the Merger
Agreement, and the non-contravention by the Merger Agreement and the related
transactions of any charter provision, by-law, material contract, order, law
or regulation to which Parent or Purchaser is a party or by which it is bound
or obligated and (vi) the possession of all funds necessary to satisfy
Purchaser's obligations under the Merger Agreement.
In general, the representations and warranties in the Merger Agreement do
not survive the payment for shares in the Offer.
COVENANTS
No Solicitation. The Merger Agreement requires the Company to immediately
cease any existing discussions or negotiations with any third parties
conducted prior to the date of the Merger Agreement with respect to any
Acquisition Proposal (as defined below). The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent,
or any of its subsidiaries, or otherwise (i) solicit, initiate, continue or
encourage any inquiries, proposals or offers that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of
shares of capital stock (including, without limitation, by way of a tender
offer), liquidation, reorganization or similar transactions involving the
Company or any of its subsidiaries or divisions, other than the transactions
contemplated by the Merger Agreement (any of the foregoing inquiries or
proposals being referred to as an "Acquisition Proposal"), (ii) solicit,
initiate, continue or engage in negotiations or discussions concerning, or
provide any information or data to any person or entity relating to, or
otherwise cooperate in any way with, or assist or participate in, or
facilitate or encourage any Acquisition Proposal or (iii) agree to, approve or
recommend any Acquisition Proposal; provided, that the foregoing does not
prevent the Company from, prior to the acceptance for payment by the Purchaser
of Shares pursuant to the Offer, furnishing non-public information to, or
entering into discussions or negotiations with, any person or entity in
connection with an unsolicited Acquisition Proposal by such person or entity
(including a new and unsolicited Acquisition Proposal received by the Company
after the execution of the Merger Agreement from a person or entity whose
initial contact with the Company may have been solicited by the Company prior
to the execution of the Merger Agreement), and may recommend such an
unsolicited bona fide written Acquisition Proposal to the shareholders of the
Company, if and only to the extent that (i) the Board of Directors of the
Company determines in good faith (after consultation with and based upon the
advice of its financial advisor and considering the affect of such Acquisition
Proposal upon the employees, customers and the community) that such
Acquisition Proposal would, if consummated, result in a transaction more
favorable to the shareholders of the Company than the Offer and Merger and
that the person or entity making such Acquisition Proposal has the financial
means, or the ability to obtain the necessary financing, to conclude such
transaction (any such more favorable Acquisition Proposal being referred to as
a "Superior Proposal"), (ii) the Board of Directors of the Company determines
in good faith (after consultation with and based upon the advice of its
outside legal counsel) that the failure to take such action would be
inconsistent with the fiduciary duties of such Board of Directors to its
shareholders under applicable law and (iii) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, such Board of Directors receives from such person or entity
an executed confidentiality agreement with confidentiality provisions not
materially less favorable to the Company than those contained in
18
the confidentiality agreement between the Company and Ridge. The Company's
exercise of the rights described above may create an obligation to pay a fee
to Parent as described below. See "The Merger Agreement--Termination Fee;
Expenses."
The Company has also agreed not to release any third party from, and to
enforce strictly any confidentiality or standstill agreement to which the
Company and such third party are parties. The Company will promptly notify
Parent in writing if any proposal or offer, or any inquiry or contact with any
person with respect thereto, is made, or if any information is provided to any
person, and any such notice shall include a description of the terms of any
proposal or offer, or the nature of any inquiry or contact, which is made.
Termination of Stock Plans. Prior to the consummation of the Offer, the
Company's Board of Directors (or, if appropriate, any committee thereof) will
adopt resolutions or take other actions necessary to ensure that, following
the Effective Time, no participant in any stock, stock option, stock
appreciation or other benefit plan of the Company or any of its subsidiaries
or any holder of any option will have any right thereunder to acquire any
capital stock of the surviving corporation or any subsidiary thereof.
Conduct of Business of the Company. From the date of the Merger Agreement to
the Effective Time, the Company and its subsidiaries will each conduct its
operations in the ordinary course of business consistent with past practice,
and the Company and its subsidiaries will each use its reasonable best efforts
to preserve intact its business organization, to keep available the services
of its officers and employees and to maintain existing relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with it.
Accordingly, prior to the Effective Time, neither the Company nor any of its
subsidiaries may, without prior written consent of Purchaser, engage or agree
to engage in an enumerated list of transactions generally characterized as
being outside the ordinary course of business. Transactions requiring
Purchaser's prior approval include actions by the Company or its subsidiaries
to (i) amend its articles of organization or by-laws, (ii) issue, pledge or
sell any capital stock or any other securities, except as required by option
agreements and option plans as in effect as of the date of the Merger
Agreement, or split, combine or reclassify any shares of its capital stock,
(iii) declare, set aside, pay or make any dividend or other distribution or
payment (whether in cash, stock, or property) in respect of its capital stock,
or repurchase or redeem any of its capital stock or any capital stock of its
subsidiaries, (iv) subject to certain exceptions, enter into, adopt, amend or
terminate any bonus, compensation, severance, termination, or employee benefit
arrangement, (v) waive any provision of any confidentiality agreement, (vi)
other than ordinary course borrowings under existing lines of credit, incur
any debt or assume, guarantee or endorse the obligations of any other person,
make any loans, advances or capital contributions to, or investments in, any
other person (other than to wholly owned subsidiaries of the Company), pledge
or otherwise encumber shares of capital stock of the Company or any of its
subsidiaries or mortgage or pledge any of its assets or create any Lien
thereupon, (vi) acquire, sell, lease, license, encumber, transfer or dispose
of any assets of the Company and its subsidiaries, (vii) change any of the
accounting principals or practices used by it, except as may be required as a
result of a change in law or in generally accepted accounting principles, or
make any tax election, (viii) acquire any corporation, partnership or other
business organization or division thereof, authorize any new capital
expenditures exceeding $100,000 in the aggregate or settle any litigation for
amounts in excess of $25,000 individually or $50,000 in the aggregate, (ix)
pay, discharge or satisfy any claims, liabilities or obligations outside the
ordinary course or not in accordance with their terms, except where such
action would not result in a material adverse effect, (x) enter into any
transaction or amend any existing transaction with any affiliate of the
Company or (xi) take or agree to take any action which would make any of the
representations or warranties of the Company contained in the Merger Agreement
untrue or incorrect or would result in any of the conditions to the Offer not
being satisfied.
Access to Information. The Company will give Parent and Purchaser and their
representatives reasonable access to all necessary information, subject to a
confidentiality agreement.
Certain Filings, Etc. Parent, the Purchaser and the Company shall cooperate
with one another (i) in promptly determining whether any filings are required
to be made or consents, approvals, permits or
19
authorizations are required to be obtained under any federal, state or foreign
law or regulation or any consents, approvals or waivers are required to be
obtained from other parties to loan agreements or other contracts material to
the Company's and the Operating Company's business in connection with the
consummation of the Offer or the Merger and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such consents, permits, authorizations, approvals or
waivers.
Proxy Statement. If necessary to consummate the Merger, promptly after the
termination or expiration of the Offer, the Company shall prepare the Proxy
Statement, file it with the Commission and mail it to all holders of Shares.
Parent, the Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement.
State Takeover Statutes. The Company shall (i) take all action, if any,
necessary to exempt the Offer and the Merger from the effects of any state
takeover law and (ii) upon the request and at the expense of the Purchaser,
take all reasonable steps to assist in any challenge by the Purchaser to the
validity, or applicability to the Offer or the Merger, of any such state
takeover law.
Best Efforts. Subject to the terms and conditions of the Merger Agreement,
each of the parties will use its best efforts to take all actions and do all
things necessary to consummate and make effective the transactions
contemplated by the Merger Agreement.
Indemnification. The surviving corporation will assume the indemnification
and expense advancement obligations of the Company and its subsidiaries to
present and former directors, officers, employees and agents (i) pursuant to
certain indemnification agreements between the Company and each of such
individuals (the "Indemnification Agreements") and (ii) as provided in the
Articles of Incorporation and by-laws of the Company and its subsidiaries as
in effect at the time of execution of the Merger Agreement (the
"Indemnification Obligations"). From and after the Effective Time, Parent will
guarantee and cause the surviving corporation to perform all of the
Indemnification Obligations.
Consulting Agreement. At the Effective Time, Parent shall cause the Company,
as the surviving corporation in the Merger, and the Operating Company to enter
into a consulting agreement with Mr. William H. Spell for a two-year period,
providing for compensation of (a) $120,000 payable within seven days after the
execution of the Consulting Agreement, (b) $25,000 per quarter for each of the
first four quarters of the Consulting Agreement, payable quarterly in arrears,
and (c) $22,500 per quarter for each of the second four quarters of the
Consulting Agreement, payable quarterly in arrears.
Notification of Certain Matters. The Company will give prompt notice to
Parent or Purchaser, and Parent or Purchaser will give prompt notice to the
Company, as the case may be, of the occurrence, or non-occurrence of any event
which would cause any representation or warranty contained in this Agreement
to be untrue or inaccurate.
Public Announcements. Parent and Purchaser, on the one hand, and the
Company, on the other hand, will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by the Merger Agreement.
CONDITIONS
The obligations of the Company, the Purchaser and Parent to effect the
Merger are subject to the satisfaction of certain conditions set forth in the
Merger Agreement, including (i) the acceptance and purchase by the Purchaser
of Shares pursuant to the Offer, (ii) the receipt of shareholder approval of
the Company, if required, and (iii) there being no order, decree or injunction
of a court of competent jurisdiction which prohibits consummation of the
Merger and there shall not have been any action taken or any statute, rule, or
regulation enacted, promulgated or deemed applicable to the Merger by any
governmental or regulatory authority, agency, commission or other entity,
domestic or foreign, that makes consummation of the Merger illegal.
TERMINATION
According to its terms, the Merger Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether prior
to or after approval by the shareholders of the Company, by the
20
mutual written consent of Parent, the Purchaser and the Company. In addition,
the Merger Agreement may be terminated by the Company if (i) the Offer shall
not have been commenced within five business days from the date of public
announcement of the Merger Agreement or the Offer shall have expired and the
Purchaser shall not have accepted for payment Shares pursuant to the Offer
(provided, that the right to terminate the Merger Agreement thereby shall not
be available if the Company's failure to fulfill any obligation under the
Merger Agreement has been the cause of, or results in, the Offer not being so
commenced or consummated) or (ii) there has been a material breach by Parent
or the Purchaser of any representation, warranty, covenant or agreement as set
forth in the Merger Agreement on the part of Parent or the Purchaser and which
Parent or the Purchaser, as the case may be, fails to cure within 10 days
after notice thereof is given by the Company. The Merger Agreement may be
terminated by either Parent or the Company if (i) the Offer terminates or
expires pursuant to its terms on account of the failure of any condition to
the Offer described in Section 13 below to have been satisfied without the
Purchaser having purchased any Shares thereunder (provided, that the right to
so terminate the Merger Agreement shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or results in, the failure of any such condition), (ii) either
Parent or the Company (or any permitted assignee) is prohibited by an order or
injunction of a court of competent jurisdiction from consummating the Merger
and all means of appeal and all appeals from such order or injunction have
been finally exhausted; (iii) prior to the purchase of Shares pursuant to the
Offer (x) the Company shall have received (other than in violation of the
Company's non-solicitation covenant) a Superior Proposal (as defined in the
Merger Agreement), and (y) Parent does not make, within five business days of
receipt of written notice of the Company's desire to accept such Superior
Proposal, an offer that the Board of Directors believes, in good faith after
consultation with its financial advisors, is at least as favorable, from a
financial point of view, to the shareholders of the Company, as the Superior
Proposal or (iv) the Purchaser has not accepted Shares for payment on or
before July 11, 1997, provided that the right to terminate the Merger
Agreement as described in this clause (iv) shall not be available to any party
whose failure to fulfill any obligation under the Merger Agreement has been
the cause of or resulted in such failure to accept Shares for payment or the
failure to satisfy any condition set forth in the Merger Agreement, and shall
not be available to the Company if any shareholder of the Company shall have
breached any provision of the Tender Agreement. The Merger Agreement may be
terminated by Parent if (i) there has been a material breach by the Company of
any representation, warranty, covenant or agreement set forth in the Merger
Agreement on the part of the Company and which the Company fails to cure
within 10 days after notice thereof is given by the Parent, (ii) prior to the
purchase of Shares pursuant to the Offer, any person, corporation, entity or
"group," as defined in Section 13(d)(3) of the Exchange Act (other than Parent
or the Purchaser) shall have acquired beneficial ownership of 25% or more of
the outstanding Shares or (iii) the Board of Directors of the Company shall
have withdrawn or modified, or resolved to withdraw or modify, in any manner
which is materially adverse to Parent or the Purchaser, its recommendation or
approval of the Offer, the Merger or the Merger Agreement.
TERMINATION FEE; EXPENSES
If (i) the Merger Agreement is terminated after the occurrence of a
Triggering Event (as defined below), and (ii) within six months after such
termination the Company either (a) consummates any Alternative Transaction (as
defined below) or (b) becomes a party to any agreement relating to an
Alternative Transaction that is thereafter consummated, then upon the
consummation of such Alternative Transaction the Company shall pay Parent a
non-refundable fee of $900,000 (the "Termination Fee") which amount shall be
payable by wire transfer of same day funds on the date such Alternative
Transaction is consummated. The Company shall reimburse the Parent in
connection with any legal or other fees incurred by the Parent in connection
with the collection of the Termination Fee from the Company.
A "Triggering Event" shall mean any of the following:
(i) the Board of Directors of the Company shall have withdrawn or
modified its recommendation of the Offer or shall have resolved or publicly
announced its intention to do so; or
(ii) an Alternative Transaction shall have taken place or the Board of
Directors of the Company shall have recommended such an Alternative
Transaction to shareholders, or shall have resolved or publicly announced
its intention to recommend or engage in an Alternative Transaction; or
21
(iii) a tender offer or exchange offer with respect to shares of the
Company shall have been commenced or a registration statement with respect
thereto shall have been filed (other than by Parent and its affiliates),
and the Board of Directors of the Company shall have (1) recommended (or
shall have resolved or publicly announced its intention to recommend) that
the shareholders of the Company tender their shares in such tender or
exchange offer or (2) resolved or publicly announced its intention to take
no position with respect to such offer; or
(iv) the Offer shall have expired without satisfaction of the Minimum
Condition, and at any time during the Offer an Alternative Transaction
shall have been publicly announced and not absolutely and unconditionally
withdrawn and abandoned; or
(v) a material breach by the Company of the Merger Agreement shall have
occurred, and at the time of such breach or any termination based thereon
an Alternative Transaction shall have been publicly announced and not
absolutely and unconditionally withdrawn and abandoned; or
(vi) the Company shall have negotiated with, furnished information to,
entered into any agreement with, or consummated or recommended any
transaction with, any person other than Parent or its affiliates, based on
a determination regarding a "Superior Proposal"; or
(vii) the Company shall have breached its non-solicitation covenant.
An "Alternative Transaction" shall mean (i) any transaction or series of
transactions by which any person or group (other than Parent and its
affiliates) acquires or would acquire shares (or securities exercisable or
convertible into shares) representing 20% or more of the outstanding shares of
the Company, pursuant to a tender offer, exchange offer or otherwise, (ii) a
merger, consolidation, share exchange, sale of substantial assets or other
business combination involving the Company, (iii) any other transaction or
series of transactions whereby any person acquires or would acquire control of
the board of directors, business or assets of the Company, or (iv) any
agreement with respect to any of the foregoing, which in the case of any
transaction or agreement described in clauses (i) through (iv) above, involves
a greater value (considering the amounts payable to shareholders and all
payments under employment, consulting and other arrangements in connection
therewith) than the value of the Offer and the Merger and the other
arrangements related thereto.
Except as described above and except as described below under "The Tender
Agreement--Excess Expenses", each of the Company, Parent and the Purchaser
shall bear its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.
AMENDMENT
Subject to the applicable provisions of the MBCA, the Merger Agreement may
be amended by action taken by the Company, Parent and the Purchaser at any
time prior to the Effective Time.
The Tender Agreement
Parent and Purchaser have entered into the Tender Agreement with the
shareholders of the Company named below. The following is a brief summary of
the Tender Agreement, and is qualified in its entirety by reference to the
text of the Tender Agreement, a copy of which has been filed by Parent as an
exhibit to the Schedule 14D-l and may be obtained in the manner described in
Section 8.
22
PARTIES AND CONSIDERATION
The Tender Agreement has been executed and delivered by the following
shareholders of the Company, each holding the number of shares and Purchaser
Option Shares (as defined below) shown below opposite the name of such
shareholder:
PURCHASER
OUTSTANDING OPTIONS OPTION
SHAREHOLDER SHARES HELD HELD(1) SHARES
----------- ----------- --------- ---------
Perkins Capital Management, Inc...... 1,368,500 -- 383,747
Northland Business Capital L.L.P..... 1,227,273 100,000(2) 344,145
Reynold M. Anderson.................. 620,771(3) 102,000 174,073
Michael E. Platt..................... 532,500(4) 50,000 149,321
Richard W. Perkins................... 397,000(5) 144,000 111,325
William H. Spell..................... 103,636 415,000 29,061
Harry W. Spell....................... 117,453(6) 144,000 32,935
Bruce A. Richard..................... 84,181 133,000 23,606
--------- --------- ---------
TOTAL.............................. 4,451,314(7) 1,088,000(7) 1,248,213
========= ========= =========
- --------
(1) Includes shares subject to an option or warrant exercisable within 60 days
of March 3, 1997.
(2) Includes 50,000 shares purchasable pursuant to a warrant issued to Brian
K. Smith, a General Partner of Northland Business Capital L.L.P.
(3) Includes: (i) 370,000 shares owned by the Z. Albin E. Anderson Irrevocable
Trust, of which Mr. Anderson is a trustee and a beneficiary and (ii) 771
shares owned by Mr. Anderson's spouse.
(4) Includes 14,000 shares owned by Mr. Platt's spouse.
(5) Includes: (i) 72,000 shares owned by the Richard W. Perkins Trust dated
6/14/78, (ii) 25,000 shares owned by the Perkins Capital Management, Inc.
Profit Sharing Plan & Trust dated 12/15/86, (iii) 50,000 shares owned by
Quest Venture Partners and (iv) 250,000 shares owned by Pyramid Partners,
L.P.
(6) Includes 18,181 shares owned by the Spell Family Foundation of which Mr.
Spell is a director.
(7) All of the Existing Shares and options are subject to the Tender
Agreement.
THE SHAREHOLDERS WHO HAVE EXECUTED AND DELIVERED THE TENDER AGREEMENT OWN AN
AGGREGATE OF 4,451,314 SHARES, OR APPROXIMATELY 71% OF THE ISSUED AND
OUTSTANDING SHARES. SUCH SHAREHOLDERS ALSO OWN OPTIONS TO ACQUIRE AN
ADDITIONAL 1,088,000 SHARES, SO THAT, ASSUMING EXERCISE OF ALL OPTIONS TO
ACQUIRE SHARES, SUCH SHAREHOLDERS WOULD HOLD APPROXIMATELY 72.4% OF THE
COMPANY'S SHARES ON A FULLY-DILUTED BASIS. The Tender Agreement was executed
in consideration of Parent's and Purchaser's execution and delivery of the
Merger Agreement, and to induce Parent and Purchaser to execute and deliver
the Merger Agreement and to induce Purchaser to make the Offer. No additional
consideration was paid to the shareholders who executed the Tender Agreement.
AGREEMENT TO TENDER
In the Tender Agreement, the shareholders that are party thereto have each
severally agreed (i) to validly tender (or cause the record owner of any
Shares to tender) pursuant to the Offer all outstanding Shares beneficially
owned by such shareholder and his or its affiliates, not later than the fifth
business day after commencement of the Offer, (ii) to validly tender pursuant
to the Offer all Shares thereafter acquired by such shareholder or his or its
affiliates, within one business day following the acquisition thereof and
(iii) to the maximum extent permitted by law, not to withdraw any Shares so
tendered without the prior written consent of Purchaser.
Such shareholders have further agreed that if Parent or Purchaser shall
notify the shareholders at any time after the commencement of the Offer that
additional Shares are required to be tendered so that at least (x) 50% or (y)
90%, as specified by Parent or Purchaser, of all outstanding Shares shall have
been validly tendered in the
23
Offer, then each such shareholder shall (and shall cause his, her or its
affiliates to), exercise such options, warrants and other rights to acquire
additional shares in such amounts as may be specified by Parent or Purchaser
in order to cause at least (x) 50% or (y) 90%, as specified by Parent or
Purchaser, of all outstanding Shares to have been validly tendered in the
Offer, and shall tender or cause to be tendered in the Offer all Shares
acquired by such shareholder (or his, her or its affiliates) upon exercise of
such options, warrants and other rights. Parent and Purchaser have agreed that
(i) they shall not make any such request except to the extent required to
cause at least (x) 50% or (y) 90% of all outstanding Shares to have been
validly tendered in the Offer, and (ii) to the extent practicable, such
request shall be made to all shareholders pro rata, on the basis of the Shares
owned by all such shareholders and their respective affiliates on a fully-
diluted basis.
STOCK OPTIONS
Pursuant to the Tender Agreement, the shareholders that are parties thereto
have granted to Purchaser an irrevocable option (the "Stock Option") to
purchase the number of Shares owned by such shareholder or its affiliates set
forth in the table above opposite the name of such shareholder in the column
entitled "Purchaser Option Shares" (such Shares, as adjusted from time to
time, being referred to as the "Purchaser Option Shares") at a purchase price
equal to $1.67 per share in cash net to the seller; provided, that in no event
shall the aggregate number of Purchaser Option Shares subject to the Stock
Options granted by all shareholders pursuant to the Tender Agreement exceed an
amount equal to 19.9% of the outstanding Shares, and if the aggregate number
of Purchaser Option Shares subject to the Stock Options granted by all such
shareholders would otherwise exceed 19.9% of the outstanding Shares, then the
number of Purchaser Option Shares subject to the Stock Options granted by all
such shareholders shall be reduced, on a pro rata basis, so that the aggregate
number of Purchaser Option Shares subject to the Stock Options granted by all
such shareholders will not exceed an amount equal to 19.9% of the outstanding
Shares of Company Common Stock.
The Tender Agreement further provides that if at any time additional Shares
shall be issued so that the aggregate number of Purchaser Option Shares
subject to the Stock Options granted by all shareholders would otherwise be
less than 19.9% of the outstanding Shares, then each shareholder (pro rata in
accordance with the Purchaser Option Shares initially subjected to the Stock
Options as set forth above) (i) grants to Purchaser a Stock Option on such
further Shares beneficially owned by such shareholder as may be required to
increase the aggregate number of Purchaser Option Shares subject to the Stock
Options granted by all shareholders to an amount equal to 19.9% of the
outstanding Shares and (ii) agrees to exercise such options, warrants or
rights to acquire additional Shares in such amounts as may be requested by
Parent or Purchaser in order to obtain the result described in clause (i) of
this sentence.
Subject to the conditions described below, the Stock Option may be exercised
by Purchaser, in whole and for all shareholders but not in part or for less
than all shareholders, at any time following the occurrence of, or in
connection with, a "Purchase Event." The term "Purchase Event" means the
occurrence of any of the following: (i) the Company shall have entered into
any letter of intent, memorandum of understanding or agreement relating to or
providing for an Alternative Transaction (as defined in the Merger Agreement),
(ii) the Company or the shareholders shall have consummated an Alternative
Transaction or (iii) Purchaser shall have purchased any shares pursuant to the
Offer.
If the Stock Options are exercised in connection with an Alternative
Transaction, then in lieu of purchasing Purchaser Option Shares, Purchaser may
instruct any shareholder that is a party to the Tender Agreement to carry out
the Alternative Transaction (by tender, sale or surrender of the Purchaser
Option Shares or otherwise as instructed) and upon receipt of such
instructions, such shareholder will so carry out the Alternative Transaction;
provided that the Alternative Transaction provides for the shareholder to
receive at least $1.67 per share in cash net to the shareholder within thirty
days after receipt of such instructions. Each shareholder that is a party to
the Tender Agreement has agreed that Purchaser Option Shares will be the first
Shares transferred in an Alternative Transaction. Upon receipt of the
consideration with respect to Purchaser Option Shares payable in the
Alternative Transaction, each such shareholder will pay to Purchaser with
respect to each Purchaser Option Share an amount equal to the per share
consideration so received less $1.67 per Share. Any Purchaser Option Shares
not purchased in the Alternative Transaction shall remain subject to the
Tender Agreement.
24
The obligations of the parties to the Tender Agreement to consummate the
purchase and sale of Shares upon the exercise of the Stock Options are subject
to the condition that there shall be no preliminary or permanent injunction or
other order or decree by any court of competent jurisdiction restricting,
preventing or prohibiting the exercise of the Stock Option or the delivery of
the Purchaser Option Shares in respect of such exercise. The obligations of
Purchaser to consummate the purchase of any Option Shares upon the exercise of
the Stock Option is subject to the further condition that all representations
and warranties of the shareholders in the Tender Agreement shall be true and
correct when made, shall be true and correct in all material respects at and
as of the closing of such purchase as though made on and as of such Closing
and Purchaser being satisfied that the Alternative Transaction shall be
consummated.
LIMITATION ON CERTAIN ACTIONS
In order to ensure that the shares subject to the Tender Agreement will be
tendered as provided therein, the Tender Agreement provides that so long as
the Tender Agreement is in effect no shareholder that is a party thereto shall
(i) offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of or enter into any contract, option or other arrangement
or understanding with respect to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any of the Shares
subject to the Tender Agreement or any interest therein, (ii) grant any
proxies or powers of attorney, deposit any such Shares into a voting trust or
enter into a voting agreement with respect to any such Shares, (iii) take any
action that would make any representation or warranty of any shareholder
contained in the Tender Agreement untrue or incorrect or have the effect of
preventing or disabling any shareholder from performing its obligations under
the Tender Agreement or (iv) take or cause the Company to take any action that
would make any representation or warranty of the Company in the Merger
Agreement untrue or incorrect or have the effect of preventing or disabling
the Company from performing its obligations thereunder. The shareholders who
are party to the Tender Agreement have also agreed to a non-solicitation
covenant corresponding to that contained in the Merger Agreement.
WAIVER OF DISSENTER'S RIGHTS
To the maximum extent permitted by law, each shareholder that is a party to
the Tender Agreement has waived all dissenter's rights, appraisal rights and
other similar rights available by law to such shareholder as a result of the
Offer and the Merger.
REPRESENTATIONS AND WARRANTIES
The Tender Agreement contains various representations and warranties of the
shareholders that are parties thereto, including representations and
warranties as to (i) the ownership of Shares and options, warrants and other
rights, (ii) the authorization, execution and enforceability of the Tender
Agreement, (iii) the lack of required governmental consents and filings in
connection with the Tender Agreement, and the non-contravention by the Tender
Agreement of organizational documents contracts, agreements, orders or laws
applicable to such shareholders or their assets, (iv) the absence of
encumbrances, (v) the absence of obligations with respect to broker's or
finder's fees and (vi) the approval of the Offer, the Merger and the Tender
Agreement by the Company's Board of Directors.
The Tender Agreement also contains various representations and warranties of
the Parent and the Purchaser, including representations and warranties as to
(i) organization and corporate power and (ii) the authorization, execution and
enforceability of the Tender Agreement.
EXCESS EXPENSES
Pursuant to the Tender Agreement, the shareholders who are parties thereto
have agreed, jointly and severally, that if (i) the Offer and the Merger shall
be consummated and (ii) the total transaction expenses (including, without
limitation, legal and accounting expenses and fees and commissions payable to
Coopers & Lybrand Securities, L.L.C. and other investment bankers and
financial advisors to the Company) incurred by the
25
Company in connection with the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby and not reflected on the Company's audited
balance sheet as of December 31, 1996 shall exceed $502,000.00, then such
shareholders, jointly and severally, shall reimburse Parent for all such
transaction expenses in excess of $502,000.00 promptly upon demand made within
60 days after the Effective Time of the Merger.
TERMINATION
If Purchaser has not previously exercised the Stock Option, then the Tender
Agreement shall terminate on the earliest of (i) the termination of the Merger
Agreement in accordance with its terms without the occurrence of a Triggering
Event; (ii) if a Triggering Event occurs prior to the termination of the
Merger Agreement, the 180th day after the termination of the Merger Agreement
without a Purchase Event having occurred and (iii) the first anniversary of
the date of the Tender Agreement.
Dissenters' Rights
No dissenters' rights are available in connection with the Offer. However,
if the Merger is consummated, each shareholder of the Company who has neither
voted in favor of the Merger nor consented thereto in writing will have
certain rights to dissent and demand payment of fair value for his or her
Shares under Section 473 of the MBCA. The value, which would be determined by
appraisal in a court proceeding, could be more or less than the consideration
to be paid in the Offer and the Merger. Any judicial determination of the fair
value could be based upon considerations other than or in addition to the
market value of the Shares, including, among other things, asset values and
earning capacity.
General
There can be no assurance that the Merger will take place because the Merger
is subject to conditions discussed above which are beyond the control of
Parent and the Company. In the event that, for any reason, the Merger does not
occur, depending on the results of the Offer, Parent may consider the
desirability of acquiring either additional Shares or the entire remaining
equity interest in the Company. If Parent determines to do either, any such
future transaction or transactions might be by means of a merger, reverse
stock split, open market or privately negotiated purchases, one or more
additional tender offers, exchange offers or otherwise. Such transactions
might be on terms and at prices more or less favorable than those of the
Offer. Moreover, the decision to enter into such future transactions and the
forms they might take will depend on the circumstances then existing,
including the financial resources of the Company and Parent and Parent's
business, tax and accounting objectives, performance of the Shares in the
market, availability and alternative uses of funds, money market and stock
market conditions, general economic conditions and other factors.
12. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all of the
Shares and to cancel all of the existing options to acquire the Company's
capital stock pursuant to the Offer and the Merger and to pay related fees and
expenses (including prepayment of approximately $2.5 million of debt) is
expected to be approximately $15.7 million. The Offer is not conditioned on
the obtaining of financing. Parent has represented in the Merger Agreement
that it has, or will have, sufficient funds available to purchase all the
outstanding Shares.
Parent and the Purchaser expect to obtain debt and equity financing in an
aggregate amount of approximately $16.5 million for the purchase of Shares by
the Purchaser in the Offer and the payment of related fees and expenses
(including prepayment of approximately $2.5 million of debt), of which
approximately $4.285 million will be obtained by Parent from the sale by the
Parent of its common stock to Ridge and Blair Mezzanine Fund, and
approximately $12.215 million will be obtained from the sale by the Parent to
Blair Mezzanine Fund
26
of Subordinated Notes (the "Subordinated Notes") in an aggregate face amount
of $13.5 million. Parent will, in turn, contribute to Purchaser the funds
required to finance the Offer and the Merger and pay related fees and
expenses.
The Subordinated Notes will be general unsecured senior subordinated
obligations of Parent, the entire principal of which will be due and payable
no later than June 30, 2005.
Interest on the face amount of the Subordinated Notes will accrue at a rate
equal to 13% per annum from and including the date of issuance. Unless the
Merger is consummated after September 30, 1997, no accrued interest on the
Subordinated Notes will be payable prior to the consummation of the Merger.
Parent will have the option, at any time on or after the third anniversary
of the issuance of the Subordinated Notes, to prepay any amounts of principal
of the Subordinated Notes in increments of $500,000, together with all accrued
interest but without any penalty or prepayment premium thereon, provided that
such prepayment is made from excess cash flow. Upon a change in control or a
sale, Blair Mezzanine Fund will have the right to require Parent, and Parent
will have the option, upon the occurrence of those events and upon an initial
public offering of securities to repay the principal of the Subordinated Notes
in full without penalty.
The Subordinated Notes will contain customary representations and
warranties, and affirmative and negative covenants. The covenants will
include, among other things, restrictions which limit dividends, indebtedness,
liens, investments, mergers and consolidations, contingent obligations,
capital expenditures, transactions with affiliates and asset sales, and will
require Parent to maintain its property and insurance, to pay all taxes and
comply with all laws and to provide periodic information (including financial
statements) and conduct periodic audits on behalf of Blair Mezzanine Fund. In
addition, after the consummation of the Merger, Parent will be required to
comply with certain financial covenants.
The Subordinated Notes will also contain customary events of default
including, among other things, those resulting from (i) the nonpayment of any
amount due under the Subordinated Notes, (ii) the material breach of any
representation or warranty, (iii) the default in the performance of any
covenant, (iv) the default under any instrument evidencing indebtedness for
borrowed money or related guaranty obligations in excess of $250,000, (vi) a
bankruptcy or insolvency and (v) the rendering of a material judgment against
Parent. Upon the occurrence of an event of default with respect to
Subordinated Notes, Blair Mezzanine Fund may, subject to its obligations under
subordination agreements to be entered into with the Company's senior lender
and the lessor of its Winona, Minnesota facility, declare the principal of the
Subordinated Notes and the accrued and unpaid interest thereon to be
immediately due and payable.
In connection with the sale of the Subordinated Notes, Parent will pay to
Blair Mezzanine Fund a loan fee of $350,000.
Following the Effective Time of the Merger, Ridge and Blair Mezzanine Fund
intend to cause the Company to pay to Ridge a transaction fee of $150,000.
The Company's current credit facility with CIT Business Credit will be
amended in certain respects and, as amended, will remain outstanding following
the Offer and the Merger.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser shall not be
required to accept for payment or pay for any tendered Shares, and may
terminate or amend the Offer and may postpone the acceptance for payment and
payment for tendered Shares, and may terminate or amend the Offer and not
accept for payment any Shares, if (i) there are not validly tendered prior to
the Expiration Date and not withdrawn a number of Shares which satisfies the
Minimum Condition or (ii) at any time on or after the commencement of the
Offer
27
(unless otherwise indicated below) and before the time of payment for such
Shares (whether or not Shares have been accepted for payment or paid for
pursuant to the Offer), any of the following events shall occur:
a. there shall have been instituted or pending any action or proceeding
by or before any court or governmental regulatory or administrative agency,
authority or tribunal, domestic or foreign, which could (i) directly or
indirectly restrain or prohibit the consummation of the Offer or the
Merger, or impose any material fines, penalties or damages in connection
therewith, (ii) make the purchase of or payment for some or all of the
Shares pursuant to the Offer or the Merger illegal, (iii) impose or confirm
material limitations on the ability of Parent or the Purchaser (or any of
their affiliates) effectively to acquire or hold, or requiring Parent, the
Purchaser or the Company or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any material portion of the
assets or the business of Parent or the Purchaser and their affiliates
taken as a whole or the Company and its Subsidiaries taken as a whole or
(iv) impose material limitations on the ability of Parent (or its
affiliates) to acquire, hold or exercise full rights of ownership of the
Shares purchased by it on all matters properly presented to the
shareholders of the Company; or
b. there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any state, federal or
governmental authority or by any court, any statute, rule, regulation,
judgment, decree, order or injunction, that could, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (iv)
of subsection a. above; or
c. the Merger Agreement shall have been terminated in accordance with its
terms; or
d. (i) any of the representations or warranties made by the Company in
the Merger Agreement that is not qualified by reference to materiality
shall not have been true and correct in all material respects when made, or
(other than representations and warranties made as of a specified date)
shall thereafter have ceased to be true and correct in all material
respects on the Expiration Date, or (ii) any of the representations or
warranties made by the Company in the Merger Agreement that is qualified by
reference to materiality shall not have been true and correct when made, or
(other than (x) with respect to the representations and warranties with
regard to the absence of a material adverse change, changes in or
disruptions of the Company's business resulting from the execution of the
Merger Agreement or the announcement of the Offer and the Merger, and (y)
representations and warranties made as of a specified date) shall
thereafter have ceased to be true and correct on the Expiration Date, or
(iii) the Company shall not in all material respects have performed each
obligation and agreement and complied with each covenant to be performed
and complied with by it under the Merger Agreement and the Company shall
not have cured such breach within 10 days after notice thereof is given by
the Purchaser, but in no event later than the Expiration Date; or
e. a tender or exchange offer for at least a majority of the then
outstanding Shares shall have been publicly proposed to be made, or shall
have been made, by any person, corporation, entity or "group," as defined
in Section 13(d)(3) of the Exchange Act (other than Parent or the
Purchaser); which, in any case, and regardless of the circumstances
(including any action or inaction by Parent or the Purchaser or any of
their affiliates) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with acceptance for payment or payment for
Shares; or
f. there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any securities exchange or in the
over-the-counter market in the United States (other than a shortening of
trading hours or any coordinated trading halt triggered solely as a result
of a specified increase or decrease in a market index), (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), or (iii)
any limitation (whether or not mandatory), by any United States
governmental authority or agency on the extension of credit by banks or
other financial institutions.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Purchaser in whole or in part at
any time or from time to time in its sole discretion. The failure by the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with
28
respect to particular facts or circumstances shall not be deemed a waiver with
respect to any other facts or circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time or from time to time.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two following paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
If on or after the date of the Merger Agreement the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell additional Shares, shares
of any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, other than Shares issued pursuant to the
exercise of outstanding employee stock options, then subject to the provisions
of Section 13 above, the Purchaser, in its sole discretion, may make such
adjustments as it deems appropriate in the Offer Price and other terms of the
Offer, including, without limitation, the number or type of securities offered
to be purchased.
If on or after the date of the Merger Agreement the Company should declare
or pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire,
any of the foregoing, payable or distributable to shareholders of record on a
date prior to the transfer of the Shares purchased pursuant to the Offer to
the Purchaser or its nominee or transferee on the Company's stock transfer
records, then, subject to the provisions of Section 13 above, (a) the Offer
Price may, in the sole discretion of the Purchaser, be reduced by the amount
of any such cash dividend or cash distribution and (b) the whole of any such
noncash dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for
the account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer or (ii) at
the direction of the Purchaser, be exercised for the benefit of the Purchaser,
in which case the proceeds of such exercise will promptly be remitted to the
Purchaser. Pending such remittance and subject to applicable law, the
Purchaser will be entitled to all rights and privileges as owner of any such
noncash dividend, distribution, issuance or proceeds and may withhold the
entire Offer Price or deduct from the Offer Price the amount or value thereof,
as determined by the Purchaser in its sole discretion.
15. CERTAIN LEGAL MATTERS.
General
Except as otherwise disclosed herein, based upon an examination of publicly
available filings with respect to the Company, Parent and the Purchaser are
not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected
by the acquisition of Shares by the Purchaser pursuant to the Offer or of any
approval or other action by any governmental, administrative or regulatory
agency or authority which would be required for the acquisition or ownership
of Shares by the Purchaser pursuant to the Offer. Should any such approval or
other action be required, it is currently contemplated that such approval or
action would be sought or taken. There can be no assurance that any such
approval or action, if needed, would be obtained or, if obtained, that it will
be obtained without substantial conditions or that adverse consequences might
not result to the Company's or Parent's business or that certain parts of the
Company's or Parent's business might not have to be disposed of in the event
that such approvals were not obtained or such other actions were not taken,
any of which could cause the Purchaser to elect to
29
terminate the Offer without the purchase of the Shares thereunder. The
Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions. See Section 13.
State Takeover Laws
Section 673 of the MBCA ("MBCA Section 673") prevents an "Interested
Shareholder" (defined generally as a person who beneficially owns or controls
10% or more of a corporation's outstanding voting stock) from engaging in a
"Business Combination" (defined to include a variety of transactions,
including mergers) with a Minnesota corporation for four years following the
date such person became an Interested Shareholder, unless a committee of the
corporation's board formed in accordance with MBCA Section 673 approves the
Business Combination or the transaction whereby a person will become an
Interested Shareholder before such person becomes an Interested Shareholder.
Because the Board of Directors of the Company has formed a committee in
accordance with MBCA Section 673 and because such committee has unanimously
approved the Offer and the Merger, the requirements of MBCA Section 673 have
been satisfied.
Section 671 of the MBCA ("MBCA Section 671") requires a person or
organization acquiring shares of an issuing public corporation in a control
share acquisition in excess of certain threshold levels to deliver to the
corporation being acquired an information statement containing certain
information regarding the acquiring organization's and definitive financing
agreements demonstrating the acquiring organization's financial ability to
acquire the corporation's shares. MBCA Section 671 further requires that any
such acquisition of shares be approved by (i) a majority of all shares
entitled to vote and (ii) a majority of all shares entitled to vote excluding
those shares held by the acquiring organization. Shares acquired in
noncompliance with MBCA Section 671 have no voting rights, may not be
transferred and may be redeemed by the corporation for a period of one year
following acquisition. MBCA Section 671 does not apply to tender offers (i) to
purchase all voting stock of the corporation which has been approved by a
committee of the corporation's board formed in accordance with MBCA 673 before
commencement of the intent to commence the tender offer and (ii) pursuant to
which the acquiring organization will become the owner of over fifty percent
of the corporation's voting stock. Because the tender offer has been extended
to holders of all voting stock of the Company, a committee of the Company's
Board of Directors has been formed in compliance with MBCA Section 673 and has
unanimously approved the Merger and Offer and the Offer will not, by its
terms, be consummated unless Purchaser acquires at least a majority of the
Company's Shares, MBCA Section 671 does not apply to the Offer.
Minnesota Statutes Chapter 80B ("Chapter 80B") requires a person who makes a
takeover offer to file a registration statement with the commissioner of
commerce of the State of Minnesota containing certain information as
proscribed in Section 3 of Chapter 80B. Such person must also deliver a copy
of the registration statement to the target company not later than the filing
of the registration statement and the material terms of the proposed offer and
the information specified in Section 3 of Chapter 80B to all offerees as soon
as practicable after the filing. Chapter 80B does apply to the Offer.
The Purchaser does not believe that any state takeover laws, other than MBCA
Sections 671 and 673 and Chapter 80B, apply to the Offer and it has not
complied with any other state takeover laws. If the Purchaser becomes aware of
any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, the Purchaser will make a good faith effort to
comply with such statute. If, after such good faith effort, the Purchaser
cannot comply with such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
See Section 13.
Antitrust
The Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed
acquisition of the Company. The Parent, the Purchaser and the Company have
concluded that the Offer and the Merger are not subject to the filing and
waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976. However, at any time before or after the Purchaser's purchase of
Shares pursuant to
30
the Offer, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
the consummation of the Merger or seeking the divestiture of Shares acquired
by the Purchaser or the divestiture of substantial assets of Parent or its
subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer on antitrust grounds will
not be made or, if such a challenge is made, of the results thereof.
Other Matters.
Parent and Purchaser believe that Rule 13e-3 will not be applicable to the
Merger because of the exemption afforded by Rule 13e-3(g)(1), among other
reasons. However, under certain circumstances, Rule 13e-3 could be applicable
to the Merger or other business combination in which Parent seeks to acquire
the remaining Shares it does not beneficially own following the purchase of
Shares pursuant to the Offer. For example, if the Merger as consummated is not
substantially similar to the Merger as described in this Offer to Purchase and
the Merger Agreement, Rule 13e-3 could apply. However, the terms and
conditions of the Merger are governed by the Merger Agreement, and any
amendment to the Merger Agreement must be approved by each party thereto. If
Parent has exercised its right to appoint directors to the Board of Directors
of the Company following its purchase of Shares pursuant to the Offer, any
such amendment must be approved on behalf of the Company by a majority of the
directors of the Company then in office who have not been designated by Parent
and are not employees of the Company.
16. FEES AND EXPENSES.
Parent has retained MacKenzie Partners, Inc. to act as the Information Agent
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent
will receive reasonable and customary fees for such services, plus
reimbursement of out-of-pocket expenses and the Purchaser will indemnify the
Information Agent against certain liabilities and expenses in connection with
the Offer, including liabilities under the federal securities laws.
Parent will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws.
No commissions will be paid by the Purchaser or Parent to brokers, dealers,
banks and trust companies, but such persons will be reimbursed by the
Purchaser for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. However, the Purchaser may, in its sole discretion, take
such action as it may deem necessary to make the Offer comply with the laws of
any such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In any jurisdiction where the securities or blue sky laws of a
jurisdiction require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed made on behalf of the Purchaser by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
The Purchaser and Parent have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, which furnishes certain additional
information with respect to the Offer, and may file amendments thereto. The
Company has filed with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 with respect to the Offer pursuant
31
to Rule 14d-9 under the Exchange Act, setting forth its recommendation with
respect to the Offer and the reasons for such recommendation and furnishing
certain additional related information. Such Schedules and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the principal office of the Commission in Washington, D.C. in the manner set
forth in Section 8 (except that they will not be available at the regional
offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS BEING ACCURATE OR AS
HAVING BEEN AUTHORIZED.
R-B Acquisition Corporation
April 17, 1997
32
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF RIDGE AND
BOARD OF MANAGERS OF WB GENERAL PARTNER
1. DIRECTORS AND EXECUTIVE OFFICERS OF RIDGE. The following sets forth the
name, age, present principal occupation and the material occupations,
positions and employment within the past five years for each director and
executive officer of RCC, RAI and PCC. Each person listed below is a United
States citizen and, unless otherwise specified, has his principal business
address at the offices of Parent, 257 East Main Street, Barrington, Illinois
60010.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY AGE
---- ------------------------------------------ ---
J. Bradley Davis............ President, sole director and sole 57
shareholder of Ridge Capital Corporation,
Ridge Advisors, Inc. and affiliated
companies since 1989.
Nancy L. Kendall-Ward....... Senior Vice President, Ridge Capital 49
Corporation, Ridge Advisors, Inc. and
affiliated companies since 1989.
Harrington Bischof.......... President, sole director and sole 62
shareholder of Pandora Capital Corporation
since July 1996 and Senior Advisor to Ridge
since January 1, 1997. Mr. Bischof served
as Senior Advisor to Prudential Securities,
Inc. from 1991 through June 1996.
2. BOARD OF MANAGERS OF WB GENERAL PARTNER. WB General Partner is the general
partner of Blair Mezzanine Fund. Blair Mezzanine Fund was organized in
September, 1996 and commenced operations in March, 1997. The following sets
forth the name, age, present principal occupation and the material occupations,
positions and employment within the past five years for each member of the
Board of Managers of the WB General Partner. Each person listed below is a
United States citizen and, unless otherwise specified, has his principal
business address at the offices of the WB General Partner, 222 West Adams
Street, Chicago, Illinois 60606. Unless otherwise stated the person has held
the indicated position for at least five years.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY AGE
---- ------------------------------------------ ---
E. David Coolidge III....... Chief Executive Officer of William Blair & 53
Company, LLC, an investment banking firm,
since January, 1995; previously, head of
Corporate Finance Department of the same
firm since 1977.
John P. Kayser.............. Chief Financial Officer of William Blair & 47
Company, LLC, since 1988.
Timothy MacKenzie........... General Partner of William Blair Mezzanine 38
Capital Partners, L.P., a private
investment firm, since March 1993 and a
managing director of WB General Partner
since its organization in September 1996.
Prior to March, 1993, Mr. MacKenzie was
Senior Vice President of Fiduciary Capital,
an investment advisor.
Terrance M. Shipp........... General Partner of William Blair Mezzanine 38
Capital Partners, L.P., a private
investment firm, and a managing director of
WB General Partner since its organization
in September 1996.
Marc J. Walfish............. General Partner of William Blair Mezzanine 44
Capital Partners, L.P., a private
investment firm, and a managing director of
WB General Partner since its organization
in September 1996.
33
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS OF PARENT AND PURCHASER. The following sets forth the name, age,
present principal occupation and the material occupations, positions and
employment within the past five years for each director (and J. Bradley Davis,
an executive officer) of Parent and Purchaser. Each person listed below is a
United States citizen and, unless otherwise specified, has his principal
business address at the offices of Parent, 257 East Main Street, Barrington,
Illinois 60010.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE YEAR EMPLOYMENT HISTORY AGE
---- ------------------------------------------ ---
J. Bradley Davis............ President and sole shareholder of Ridge 57
Capital Corporation and affiliated
companies since 1989.
Clark F. Davis.............. Vice President, Ridge Capital Corporation 30
since 1992. Mr. Davis was Manager of Flint
Creek Farm, Inc., Barrington Illinois from
May 1989.
Harrington Bischof.......... President and sole shareholder of Pandora 62
Capital Corporation since July 1996. Mr.
Bischof served as Senior Advisor to
Prudential Securities, Inc. from 1991
through June 1996.
Terrance M. Shipp........... General Partner of William Blair Mezzanine 38
Capital Partners, L.P., a private
investment firm, and a managing director of
WB General Partner since its organization
in September 1996. Mr. Shipp's principal
business address is c/o William Blair
Mezzanine Capital Partners, L.P., 222 West
Adams, Chicago, Illinois 60606.
Marc J. Walfish............. General Partner of William Blair Mezzanine 44
Capital Partners, L.P., a private
investment firm, and a managing director of
WB General Partner since its organization
in September 1996. Mr. Walfish's principal
business address is c/o William Blair
Mezzanine Capital Partners, L.P., 222 West
Adams, Chicago, Illinois 60606.
2. EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER. Set forth below are the
names and positions held by each of Parent's and the Purchaser's executive
officers. Each person holds the positions indicated at both Parent and
Purchaser. All information for each such person is set forth in Item 1 above.
All directors and executive officers listed below are citizens of the United
States.
NAME AND BUSINESS ADDRESS POSITION WITH PURCHASER
------------------------- -----------------------
Harrington Bischof................ President
Clark Davis....................... Vice President and Assistant Secretary
J. Bradley Davis.................. Vice President, Treasurer and Secretary
34
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Shares and any other required documents should be sent by each shareholder of
the Company or such shareholder's broker, dealer, bank, trust company or other
nominee to the Depositary at on of the following addresses:
The Depositary is:
HARRIS TRUST COMPANY OF NEW YORK
By Hand: By Courier: By Mail:
Receive Window 77 Water Street, 4th Wall Street Station
77 Water Street, 5th Floor P.O. Box 1023
Floor New York, NY 10005 New York, NY 10268-1023
New York, NY 10005
By Facsimile Telephone Numbers
Transmission: For information call
(212) 701-7636 collect
(212) 701-7640 (212) 701-7624
Confirm by telephone
(212) 701-7624
(For Eligible
Institutions Only)
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its telephone number and location listed
below, and will be furnished promptly at Purchaser's expense. You may also
contact your broker, dealer, bank or trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is
LOGO
156 Fifth Avenue
New York, NY 10010
Call Toll Free (800) 322-2885
35