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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CASCO INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies: Common Stock, par value $0.01 per share (the "Common
Stock"), of Casco International, Inc.
(2) Aggregate number of securities to which transaction applies:
1,340,320 shares of Common Stock (includes 410,000 shares
underlying options to purchase shares of Common Stock).
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
$2.10 per share in cash-out merger plus the excess, if any, of
$2.10 over the exercise price of each share underlying options
to purchase shares of Common Stock.
(4) Proposed maximum aggregate value of transaction: $2,097,172.
(5) Total fee paid: $420.
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CASCO INTERNATIONAL, INC.
13900 CONLAN CIRCLE, SUITE 150
CHARLOTTE, NORTH CAROLINA 28277
, 2001
DEAR STOCKHOLDERS:
You are cordially invited to attend a special meeting of stockholders
of Casco International Inc. ("Casco"), to be held on , 2001, at 10:00
a.m. local time, at 13900 Conlan Circle, Suite 150, Charlotte, North Carolina.
At the special meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of May
8, 2001 ("Merger Agreement"), among Casco, Davis Holdings of North Carolina,
Inc. ("Davis Holdings"), and Davis Acquisition of North Carolina, Inc., ("Davis
Acquisition"). The Davis Holdings and Davis Acquisition are newly-formed
corporations organized at the direction of American Home Building Corporation
("American"), a company owned 50% by S. Robert Davis the Chairman of the Board
and a stockholder of Casco, and 50% by Charles R. Davis, the President and a
director and stockholder of Casco. Davis Acquisition is a wholly owned
subsidiary of the Davis Holdings.
American is currently the sole stockholder of Davis Holdings. Prior to
the merger, S. Robert Davis and Melissa Davis, his wife, Charles R. Davis,
Randall J. Asmo, a director of Casco, and Daniel A. Splawn, the Vice President,
Operations of Casco and Jeffrey A. Ross, the Chief Financial Officer and
Secretary of Casco (collectively, the "Management Group"), joined by Dr. John
Graver, Richard B. Fentin and R. L. Renck & Co., Inc. (collectively, the
"Stockholder Group") will contribute all their shares of Casco common stock in
exchange for shares of capital stock of Davis Holdings. Under the Merger
Agreement, Davis Acquisition will be merged with and into Casco, with Casco as
the surviving corporation. Upon completion of the merger, each issued and
outstanding share of Casco common stock not owned by Davis Holdings will be
entitled to receive $2.10 per share in cash, without interest. Davis Holdings
will not be entitled to receive the $2.10 per share merger consideration.
After the merger, Casco will continue its operations as a privately
held company. Davis Holdings will be the sole stockholder of Casco as the
surviving corporation. Current stockholders of Casco, other than Davis Holdings,
will not participate in any future earnings and growth of Casco as the surviving
corporation. American, the Management Group and the Stockholder Group
(collectively referred to as the "Continuing Stockholders") will own all of the
equity in Davis Holdings. Each Casco warrant outstanding immediately prior to
the merger will be converted into the right to receive $2.10 per share of Casco
common stock upon exercise of such warrant. Each vested and unvested option to
purchase Casco common stock outstanding immediately prior to the merger will be
cancelled and Casco will pay option holders an amount determined by multiplying
the excess, if any, of $2.10 per share over the exercise price per share of such
options.
Details of the merger and the Merger Agreement are discussed in the
enclosed Proxy Statement, the forepart of which includes certain questions and
answers relating to the proposed transaction. A copy of the Merger Agreement is
attached as Appendix A to the Proxy Statement.
A special committee of the board of directors of Casco, consisting of
two independent directors (who are not stockholders of Davis Holdings and are
not affiliated with Davis Holdings or any of its stockholders) was formed in
December, 2000, to investigate, consider and evaluate the proposed Merger. The
special committee has unanimously recommended to Casco's board of directors that
the merger be approved.
In connection with its evaluation of the proposed merger, the special
committee engaged Ambient Advisors, LLC to act as its financial advisor. Ambient
rendered its opinion that, as of May 8, 2001, based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the cash
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merger consideration of $2.10 per share to be received in the merger is fair
from a financial point of view to the unaffiliated stockholders of the Company.
The written opinion of Ambient, dated May 8, 2001, is attached as Appendix C to
the enclosed Proxy Statement.
The special committee and the board of directors believes that the
terms of the merger are fair to, and in the best interests of, the Company's
unaffiliated stockholders and recommend that the stockholders approve the
merger. Three of the seven members of Casco's board of directors are
stockholders of Davis Holdings and, consequently, have conflicts of interest in
connection with this recommendation. None of those directors participated in the
vote on the merger. As a result, the four independent directors (two of whom
constituted the special committee) were the only members of the board of
directors who participated in the vote on the merger.
Adoption and approval of the merger agreement at the special meeting
will require the affirmative vote of holders of a majority of the outstanding
shares of common stock entitled to vote at the special meeting. The Continuing
Stockholders own 843,866 shares of Casco common stock in the aggregate, or
approximately 47.6% of the outstanding shares of Casco common stock, and have
indicated their intent to vote their respective shares in favor of the merger.
If the merger is approved by the holders of the common stock, the closing of the
merger will occur as soon after the special meeting as all of the other
conditions to closing the merger are satisfied.
The accompanying Notice of Meeting and Proxy Statement explain the
merger and the merger agreement and provide specific information concerning the
special meeting of stockholders. Please read these materials carefully.
Stockholders of Casco will be entitled to appraisal rights under Delaware law in
connection with the merger as described in the accompanying Proxy Statement
IT IS VERY IMPORTANT TO US THAT YOUR SHARES BE REPRESENTED AT THE
SPECIAL MEETING, WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY. THEREFORE, YOU
SHOULD COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS
POSSIBLE IN THE ENCLOSED POSTAGE PAID ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE REPRESENTED AT THE SPECIAL MEETING. A FAILURE TO VOTE WILL COUNT AS A
VOTE AGAINST THE MERGER. THIS WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN
PERSON IF YOU SUBSEQUENTLY CHOSE TO ATTEND.
Sincerely,
/s/ CHARLES R. DAVIS
--------------------------------------
Charles R. Davis
President and Chief Executive Officer
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CASCO INTERNATIONAL, INC.
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 2001
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, 2001
To Our Stockholders:
Notice is hereby given that a Special Meeting of Stockholders (the
"Special Meeting") of Casco International, Inc., a North Carolina corporation
("Casco"), will be held on 2001, at 10:00 a.m., local time, at 13900
Conlan Circle, Suite 150, Charlotte, North Carolina, for the following purposes:
(1) To consider and vote on a proposal to adopt and approve the
Agreement and Plan of Merger pursuant to which Davis Acquisition of North
Carolina, Inc., a newly-formed company, wholly-owned by Davis Holdings of North
Carolina, Inc. (the "Davis Holdings") will be merged (the "Merger") with and
into Casco and each stockholder of Casco (other than stockholders who are
entitled to and have perfected their appraisal rights and Davis Holdings) will
become entitled to receive $2.10 in cash for each outstanding share of common
stock, $.01 par value, of Casco owned immediately prior to the effective time of
the Merger. A copy of the Agreement and Plan of Merger dated as of May 8, 2001
is attached as Appendix A to and is described in the accompanying Proxy
Statement.
(2) To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment or adjournments thereof.
The board of directors has determined that only holders of Common Stock
of record at the close of business on , 2001, will be entitled to notice
of, and to vote at, the Special Meeting or any adjournments or postponements
thereof. A form of Proxy and a Proxy Statement containing more detailed
information with respect to the matters to be considered at the Special Meeting
accompany and form a part of this Notice.
The Merger has not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the fairness or merits of
the Merger nor upon the accuracy or adequacy of the information contained in
this document. Any representation to the contrary is unlawful.
IF THE MERGER AGREEMENT IS ADOPTED AND APPROVED BY THE STOCKHOLDERS AT
THE SPECIAL MEETING AND THE MERGER IS COMPLETED, ANY STOCKHOLDER (1) WHO FILES
WITH CASCO BEFORE THE TAKING OF THE VOTE ON THE ADOPTION AND APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER A WRITTEN DEMAND STATING THAT HE OR SHE INTENDS TO
SEEK APPRAISAL FOR HIS OR HER SHARES OF COMMON STOCK IF THE MERGER IS COMPLETED,
AND (2) WHOSE SHARES ARE NOT VOTED IN FAVOR OF THE AGREEMENT AND PLAN OF MERGER
WILL HAVE THE RIGHT TO SEEK APPRAISAL OF HIS OR HER SHARES OF COMMON STOCK
WITHIN 120 DAYS AFTER THE DATE A CERTIFICATE OF MERGER IS FILED WITH THE
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SECRETARY OF STATE OF THE STATE OF DELAWARE. CASCO AND ANY STOCKHOLDER SEEKING
AN APPRAISAL SHALL HAVE THE RIGHTS AND DUTIES AND SHALL FOLLOW THE PROCEDURES
SET FORTH IN SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW, A COPY OF
WHICH IS ATTACHED AS APPENDIX B TO THE ACCOMPANYING PROXY STATEMENT. SEE THE
SECTION ENTITLED "APPRAISAL RIGHTS" IN THE PROXY STATEMENT FOR MORE INFORMATION.
Your vote is important. Whether or not you are able to attend the
meeting, please date, sign and return the accompanying proxy card promptly in
the enclosed envelope which requires no postage if mailed in the United States.
Your proxy may be revoked at any time before it is voted, by filing with the
Secretary of Casco a written revocation, by submitting a proxy bearing a later
date, or by attending and voting in person at the meeting. Please do not send in
any certificates for your shares at this time.
By Order of the board of directors,
/s/ JEFFREY A. ROSS
---------------------------------------
Jeffrey A. Ross
SECRETARY
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PRELIMINARY
PROXY STATEMENT
TABLE OF CONTENTS
Page
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Summary................................................................................................... 1
Special Factors........................................................................................... 7
Background of the Merger............................................................................. 7
Determinations and Recommendations of the Special Committee and
the Casco Board of Directors; Fairness of the Merger.............................................. 11
Summary of The Financial Advisor's Fairness Analyses................................................. 13
Certain Forward-Looking Information....................................................................... 22
General Information About The Special Meeting............................................................. 22
Proxy Solicitation................................................................................... 22
Matters to be Considered at the Special Meeting...................................................... 22
Record Date and Voting Information................................................................... 23
Quorum............................................................................................... 24
Proxies; Revocation.................................................................................. 24
Expenses of Proxy Solicitation....................................................................... 24
Adjournments......................................................................................... 25
Appraisal Rights..................................................................................... 25
The Participants.......................................................................................... 25
Casco International, Inc............................................................................. 25
Davis Holdings of North Carolina, Inc................................................................ 26
Davis Acquisition of North Carolina, Inc............................................................. 26
The Continuing Stockholders.......................................................................... 26
Purpose and Reasons of the Davis Group and
Other Members of the Management Group for the Merger.................................................... 27
Position of the Management Group as to Fairness of the Merger............................................. 27
Purpose and Reasons of the Stockholder Group for the Merger............................................... 28
Purpose and Reasons of Casco for the Merger and Structure of the Merger................................... 28
Effects of the Merger..................................................................................... 29
Risks that the Merger Will Not Be Completed............................................................... 31
Interests of the Continuing Stockholders in the Merger.................................................... 32
Executive Officers and Directors of the Surviving Corporation............................................. 33
Merger Consideration to be Received by the Continuing Stockholders........................................ 33
Continuing Equity Interests of the Continuing Stockholders................................................ 33
Voting Agreement and Proxy................................................................................ 34
Indemnification........................................................................................... 35
Certain Risks in the Event of Bankruptcy.................................................................. 35
Merger Financing.......................................................................................... 36
Estimated Fees and Expenses of the Merger................................................................. 37
Federal Income Tax Considerations......................................................................... 38
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Page
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Anticipated Accounting Treatment of Merger................................................................ 39
Certain Regulatory Matters................................................................................ 39
Appraisal Rights.......................................................................................... 39
The Merger Agreement...................................................................................... 44
The Merger........................................................................................... 44
Effective Time of Merger............................................................................. 44
Certificate of Incorporation, Bylaws and Directors and
Officers of Casco as the Surviving Corporation................................................... 44
Conversion of Common Stock........................................................................... 45
Payment For Shares................................................................................... 45
Transfer of Shares................................................................................... 46
Treatment of Stock Options........................................................................... 46
Casco Stockholder Approval........................................................................... 47
Representations and Warranties....................................................................... 47
Conduct of Business Pending the Merger............................................................... 48
Notices of Certain Events............................................................................ 48
Acquisition Proposals................................................................................ 48
Conditions to the Merger............................................................................. 49
Termination of the Merger Agreement.................................................................. 51
Amendments; Waivers.................................................................................. 52
Selected Financial Data................................................................................... 53
Market Prices of Common Stock and Dividends............................................................... 55
Dividends............................................................................................ 56
Recent Stock Purchases.................................................................................... 56
Purchases by Casco, Davis Holdings and Davis Acquisition............................................. 56
Purchases by the Continuing Stockholders............................................................. 56
Recent Transactions.................................................................................. 57
Security Ownership of Certain Beneficial Owners and Management............................................ 57
Independent Auditors...................................................................................... 59
Future Stockholder Proposals.............................................................................. 59
Where Stockholders Can Find More Information.............................................................. 59
Incorporation of Certain Documents by Reference........................................................... 60
Appendix A Agreement and Plan of Merger dated as of May 8, 2001 among Casco, Davis Holdings and Davis
Acquisition ................................................................................. A-1
Appendix B Section 262 of Delaware General Corporation Law............................................... B-1
Appendix C Fairness Opinion of Ambient Advisors, dated May 8, 2001....................................... C-1
Appendix D Information relating to the directors and executive officers of Casco, Davis Holdings,
Davis Acquisition, and the Continuing Stockholders............................................ D-1
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CASCO INTERNATIONAL, INC.
13900 CONLAN CIRCLE, SUITE 150
CHARLOTTE, NORTH CAROLINA 28277
PRELIMINARY PROXY STATEMENT
DATED , 2001
We are providing this proxy statement and accompanying proxy card to
our stockholders in connection with the solicitation by our board of directors
of proxies to be used at the special meeting of stockholders to be held on
, 2001 at 10:00 a.m., local time, at 13900 Conlan Circle, Suite 150,
Charlotte, North Carolina, including at any adjournment of the special meeting.
We began mailing these materials and the accompanying letter to stockholders and
the notice of meeting to our stockholders on or about , 2001.
SUMMARY
THE FOLLOWING QUESTION - AND - ANSWER SUMMARY HIGHLIGHTS SELECTED INFORMATION
FROM THIS PROXY STATEMENT. THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION
THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THE ENTIRE PROXY STATEMENT
AND ALL OF ITS APPENDICES BEFORE VOTING ON THE PROPOSED MERGER.
o WHAT AM I BEING ASKED TO VOTE UPON? (SEE PAGE 22)
You are being asked to consider and vote upon a proposal to adopt and
approve a merger agreement under which Davis Acquisition of North Carolina,
Inc., a company controlled by S. Robert Davis, Casco's chairman and Charles R.
Davis, Casco's president will be merged into Casco, with Casco as the surviving
corporation.
o WHO ARE THE PARTIES TO THE MERGER AGREEMENT? (SEE PAGE 25)
The merger agreement is between Davis Holdings of North Carolina, Inc.,
Davis Acquisition (together referred to as the "Buyer") and Casco. Davis
Acquisition is wholly owned by Davis Holdings. Davis Holdings is currently owned
by American Home Building Corporation, a company owned by the Davises. S. Robert
Davis and Melissa Davis, his wife, Charles R. Davis, Randall J. Asmo, a director
of Casco, Daniel A. Splawn, the Vice President, Operations of Casco, Jeffrey A.
Ross, the Chief Financial Officer and Secretary of Casco (collectively, the
"Management Group") and Dr. John Graver, Richard B. Fentin, R. L. Renck & Co.,
Inc. (collectively, the "Stockholder Group") will indirectly, through their
ownership of Davis Holdings, own all of the equity interest in Casco as the
surviving corporation. American, the Management Group and the Stockholder Group
are collectively referred to in this Proxy Statement as the "Continuing
Stockholders."
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o WHAT WILL HAPPEN IN THE MERGER? (SEE PAGE 22)
Upon completion of the merger, each issued and outstanding share of
Casco common stock, other than those shares held by Davis Holdings, will be
converted into the right to receive $2.10 in cash, without interest and Casco
will no longer be a publicly held corporation.
o WHAT WILL HAPPEN TO MY WARRANTS? (SEE PAGE 23)
The holders of outstanding Casco warrants will have the right to
receive $2.10 for each share of Casco common stock upon exercise of such
warrants.
o WHAT WILL HAPPEN TO MY STOCK OPTIONS? (SEE PAGE 23)
Each vested and unvested option to purchase Casco common stock will be
canceled and Casco will pay option holders an amount determined by multiplying
the excess, if any, of $2.10 per share over the exercise price per share of such
options.
o WHY WAS THE SPECIAL COMMITTEE FORMED? (SEE PAGE 32)
The Continuing Stockholders will indirectly, through their ownership of
Davis Holdings, own all of the outstanding shares of Casco common stock
immediately following completion of the merger. Accordingly, our board of
directors believed that a special committee of independent directors who are not
officers or employees of Casco and who have no financial interest in the merger
different from Casco stockholders generally, other than as Casco stock option
holders, should be formed to eliminate any conflict of interest in evaluating,
negotiating and recommending the merger and the terms of the merger agreement.
The special committee independently selected and retained legal counsel and a
financial advisor to assist it in its deliberations. It received an opinion from
its financial advisor, Ambient Advisors, on which the special committee and the
board of directors relied, that as of May 8, 2001, the $2.10 per share you will
receive in the merger is fair to Casco's unaffiliated stockholders from a
financial point of view.
o HOW WAS THE AMOUNT OF THE MERGER PRICE DETERMINED? (SEE PAGE 7)
The per share merger consideration was determined based on the special
committee's discussions with Ambient Advisors and negotiations between the
special committee and the Davises. These discussions and negotiations resulted
in the $1.87 per share acquisition price initially offered by the Davises being
increased by approximately 12%, to $2.10 per share.
o HAS THE BOARD OF DIRECTORS RECOMMENDED THE MERGER? (SEE PAGE 11)
Yes. The board of directors of Casco, on the recommendation of the
special committee, has unanimously approved the merger and the merger agreement
and voted unanimously to recommend that you vote "FOR" approval of the merger
and the merger agreement.
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o WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE IN FAVOR OF THE
MERGER AGREEMENT? (SEE PAGE 11)
Casco's board of directors is recommending the merger because it
believes that the merger is a more desirable alternative for you than to have
Casco continue to operate as a public company. In reaching this conclusion,
Casco's board of directors, based on the recommendation of the special
committee, considered, among other factors:
o the special committee's and the board of directors' familiarity
with, and presentations by Ambient Advisors with regard to, Casco's
business and prospects and current economic and market conditions
and the opinion of Ambient that $2.10 per share was fair to Casco's
unaffiliated stockholders from a financial point of view;
o the fact that $2.10 per share represents a premium of approximately
110% over the $1.00 closing sale price for Casco's common stock as
traded on the Nasdaq SmallCap Market on December 8, 2000, the last
trading day before Casco announced the Davis' initial offer to take
Casco private by purchasing all of the outstanding shares of common
stock at a price of $1.87 per share, and represents a premium of
approximately 27% over the average closing sale price of the common
stock on the last trading day prior to the May 8, 2001 board of
directors meeting at which the merger was approved;o
o the special committee's and Casco's board's judgments in view of
Casco's prospects, that it is unlikely that one or more strategic or
financial acquirers would be willing pay a price for Casco that in
present value terms would be as high as the $2.10 per share;
o the fact that despite wide publication of the terms of the merger,
Casco has not received any proposals or indications of interest from
any other prospective purchaser;
o the alternatives available to Casco, and the possibility that if
Casco remains as an independent public corporation, because of a
decline in the market price of Casco common stock or the stock
market in general, the price received by the Casco stockholders in
the open market or in a future transaction might be less than $2.10
per share.
o DID THE SPECIAL COMMITTEE RECEIVE ANY OFFERS FROM OTHERS TO ACQUIRE
CASCO AT PRICES HIGHER THAN $2.10 PER SHARE? (SEE PAGE 9)
No. Even though the proposed merger was well publicized Casco did not
receive any offers from any other potential buyers following Casco's public
announcement on December 11, 2000 of the Davis' initial offer of $1.87 per
share.
o WHAT ARE THE CONSEQUENCES OF THE MERGER TO PRESENT MEMBERS OF
MANAGEMENT AND THE BOARD OF DIRECTORS? (SEE PAGE 29)
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It is expected that, in general, all members of Casco's current
management will continue as management of Casco as the surviving corporation.
Like all other Casco stockholders, members of management and the board of
directors will be entitled to receive $2.10 per share in cash for each of their
shares of Casco common stock, other than the shares that the Management Group
will contribute to Davis Holdings in exchange for common stock of Davis
Holdings. Vested and unvested options held by management and the board of
directors of Casco will be canceled and option holders will be paid an amount
determined by multiplying the excess, if any, of $2.10 per share over the
exercise price per share of such options whether or not such options are vested.
Immediately following completion of the merger, the Continuing Stockholders will
own 100% of the common stock of Davis Holdings and Davis Holdings will own 100%
of the outstanding common stock of Casco as the surviving corporation.
o IS THE MERGER SUBJECT TO THE SATISFACTION OF ANY CONDITIONS? (SEE PAGE
49)
Yes. Before completion of the merger, certain closing conditions must
be satisfied or waived. These conditions include, among others, obtaining
required consents and approvals, adoption and approval of the merger agreement
by a majority of the outstanding shares of Casco common stock, the accuracy of
each party's representations and warranties, each party's compliance in all
material respects with its respective obligations under the merger agreement,
the absence of a material adverse change in Casco's business, and the absence of
laws or governmental orders that would make the merger illegal or prohibit the
consummation of the merger. If these conditions are not satisfied or waived, the
merger will not be completed even if the stockholders vote to adopt and approve
the merger agreement.
o WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED? (SEE PAGE 44)
Casco, Davis Holdings and Davis Acquisition are working toward
completing the merger as quickly as possible. If the merger agreement is adopted
and approved and the other conditions to the merger are satisfied or waived, the
merger is expected to be completed promptly after the special meeting.
o CAN THE MERGER AGREEMENT BE TERMINATED PRIOR TO THE COMPLETION OF THE
MERGER? (SEE PAGE 51)
Yes. The parties may agree to terminate the merger agreement at any
time before the merger is completed. In addition, the merger agreement may be
terminated:
- by either the Buyer or Casco if the merger has not been consummated
on or before October 31, 2001;
- by either the Buyer or Casco if the Casco board of directors or the
special committee withdraws or modifies in a manner adverse to the
Buyer its recommendation of the Merger, or the Casco board of
directors or the special committee recommends or resolves to
recommend another acquisition proposal;
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- by the non-breaching party if the other party breaches any of its
representations, warranties or covenants in the merger agreement;
- by either Casco or the Buyer if there is any law that makes the
consummation of the merger illegal or otherwise prohibited or if any
order enjoining Casco and the Buyer from consummating the merger is
entered and becomes final and nonappealable.
o WHAT HAPPENS IF THE MERGER AGREEMENT IS TERMINATED PRIOR TO THE
COMPLETION OF THE MERGER? (SEE PAGE 51)
Generally, if the merger agreement is terminated, there will be no
liability on the part of Casco, or the Buyer or any of their affiliates,
directors, officers, employers or stockholders. However, if the merger agreement
is terminated because the special committee or the board of directors withdraws
or modifies in a manner adverse to the Buyer its approval or recommendation, or
recommends another acquisition proposal, Casco will pay to the Buyer an amount
equal to the greater of 10% of the amount by which the fair market value of the
consideration that would be received by the public stockholders under the
acquisition proposal exceeds $2.10 per share, or $100,000 and Casco will
reimburse the Buyer for its reasonable out-of-pocket expenses incurred with
respect to the merger.
o WHAT WILL HAPPEN TO THE MARKET FOR CASCO'S COMMON STOCK AND WARRANTS
AFTER THE MERGER? (SEE PAGE 29)
At the effective time of the merger, trading in Casco's common stock
and warrants on The Nasdaq SmallCap Market will cease and there will no longer
be a public market for Casco's common stock and warrants. Price quotations for
Casco's common stock and warrants will no longer be available and the
registration of Casco's common stock and warrants under the Securities Exchange
Act of 1934, as amended, will be terminated.
o WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER? (SEE
PAGE 38)
The receipt of cash for shares of Casco common stock in the merger will
be a taxable transaction for U.S. federal income tax purposes and also may be a
taxable transaction under applicable state, local, foreign or other tax laws.
Generally, you will recognize gain or loss equal to the difference between $2.10
per share and your tax basis for the shares of common stock that you owned
immediately before completion of the merger. For U.S. federal income tax
purposes, this gain or loss generally will be a capital gain or loss if you held
the shares of common stock as a capital asset.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER
TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER
TO YOU.
o WHEN AND WHERE IS THE SPECIAL MEETING? (SEE PAGE 22)
The special meeting of Casco stockholders will be held at 10:00 a.m.
local time on , 2001, at 13900 Conlan Circle, Suite 150, Charlotte,
North Carolina.
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o WHO CAN VOTE ON THE MERGER AGREEMENT? (SEE PAGE 23)
Holders of Casco common stock at the close of business on ,
2001, the record date for the special meeting, may vote in person or by proxy at
the special meeting.
o WHAT VOTE IS REQUIRED TO ADOPT AND APPROVE THE MERGER AGREEMENT? (SEE
PAGE 23)
The merger agreement must be adopted and approved by the affirmative
vote of at least a majority of the outstanding shares of Casco common stock. The
Continuing Stockholders have agreed to vote their shares of Casco common stock
in favor of the adoption and approval of the merger agreement. The Continuing
Stockholders hold 843,866 shares of Casco common stock, constituting
approximately 47.6% of the total number of issued and outstanding shares. In the
event a majority of the shares held by stockholders do not adopt and approve the
Merger Agreement, the merger will not be completed and the merger agreement will
be terminated. The stockholders other than the Continuing Stockholders hold a
total of 930,320 shares of Casco common stock.
o WHAT DO I NEED TO DO NOW? (SEE PAGE 22)
You should read this proxy statement carefully, including the
appendices accompanying this proxy statement and the documents incorporated by
reference into this proxy statement, and consider how the merger affects you.
Then, please mark your vote on your proxy card and date, sign and mail it in the
enclosed, postage paid return envelope as soon as possible so that your shares
can be voted at the special meeting.
o WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD? (SEE PAGE 24)
The failure to return your proxy card will have the same effect as
voting against the merger agreement.
o MAY I VOTE IN PERSON? (SEE PAGE 24)
Yes. You may attend the special meeting of Casco stockholders and vote
your shares in person whether or not you sign and return your proxy card. If
your shares are held of record by a broker, bank or other nominee and you wish
to vote at the meeting, you must obtain a proxy from the broker, bank or other
nominee.
o MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD? (SEE
PAGE 24)
Yes. You may change your vote at any time before your proxy card is
voted at the special meeting. You can do this in one of three ways. First, you
can send a written notice to the Secretary of Casco at Casco's executive offices
located at 13900 Conlan Circle, Suite 150, Charlotte, North Carolina 28277,
stating that you would like to revoke your proxy. Second, you can complete and
submit a new proxy card. Third, you can attend the meeting and vote in person.
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Your attendance alone will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the directions you receive from your
broker to change those instructions.
o IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME? (SEE PAGE 23)
No. Your broker will not be able to vote your shares without
instructions from you. You should instruct your broker to vote your shares by
following the procedures provided to you by your broker.
o SHOULD I SEND IN MY STOCK CERTIFICATES NOW? (SEE PAGE 25)
No. After the merger is completed, you will receive written
instructions for exchanging your shares of Casco common stock for a cash payment
of $2.10 per share, without interest.
o WHAT RIGHTS DO I HAVE IF I OPPOSE THE PROPOSED MERGER? (SEE PAGE 39)
If you do not vote in favor of the proposed merger and you fully comply
with the applicable provisions of Section 262 of the Delaware General
Corporation Law, you may have the right to require Casco as the surviving
corporation of the merger to purchase your shares of Casco stock for cash at the
fair value of those share as determined in accordance with Delaware law.
o WHO CAN HELP ANSWER MY QUESTIONS? (SEE PAGE 59)
The information provided above in question and answer format is for
your convenience only and is merely a summary of the information contained in
this proxy statement. You should carefully read this entire proxy statement,
including the exhibits and the documents incorporated by reference. If you would
like additional copies, without charge, of this proxy statement or if you have
questions about the merger, including the procedures for voting your shares, you
should contact:
Casco International, Inc.
13900 Conlan Circle, Suite 150
Charlotte, North Carolina 28277
Telephone: (704) 482-9591
Attn: Jeffrey A. Ross, Secretary
SPECIAL FACTORS
BACKGROUND OF THE MERGER
On December 11, 2000, S. Robert Davis and Charles R. Davis, on behalf
of themselves and American Home Building Corporation (collectively, the "Davis
Group"), sent a letter to the board of directors of Casco proposing to merge
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Casco with an acquisition entity owned by them. Under the terms of the proposal,
each share of Casco's outstanding common stock, except for the shares owned by
the Davises, would be converted into the right to receive $1.87 per share in
cash. Also under the terms of the December 11, 2000 offer all vested options
would receive cash equal to the excess, if any, of $1.87 per share over the
exercise price. All options with exercise prices in excess of $1.87 would be
cancelled.
On December 11, 2000, the board of directors of Casco met to consider
the proposal. Because the Davises were members of the board of directors, the
board resolved to appoint a special committee of the board, containing only
independent directors, to consider the proposal. The board appointed David J.
Richards and Rodney L. Taylor to the special committee and appointed Mr.
Richards Chairman of the special committee. The special committee retained
Porter, Wright, Morris & Arthur LLP to serve as legal counsel to the committee.
The special committee contacted Ambient Advisors, LLC ("Ambient")and
two other investment banking firms regarding their interest in serving as a
financial advisor to the special committee and ability to assess the fairness of
the proposed transaction, from a financial point of view, to the unaffiliated
stockholders of Casco. Representatives of the special committee reviewed the
qualifications of the firms, and had numerous telephone interviews with them
regarding the scope of their services and estimated fees. After reviewing and
discussing this information, the committee unanimously selected and engaged
Ambient to provide financial advisory services to the special committee to
assist it in evaluating the Davis' proposal. In addition, Ambient agreed, if
requested by the special committee, to render its opinion with respect to the
fairness, from a financial point of view, to the unaffiliated stockholders of
the consideration to be received in the proposed transaction, if Ambient could
satisfy itself as to the fairness of that consideration. The special committee
selected Ambient as its financial advisor based on the experience of its
principals in performing business valuation and other investment banking
services, its willingness to commence and complete its work promptly, and its
fee arrangement, which the special committee considered to be fair and
reasonable based on the dollar value of the proposed transaction.
The special committee met with its legal and financial advisors on
February 14, 2001. At the meeting, Ambient advised the special committee that:
o the $1.87 price per share offered for the proposed transaction
represented a substantial discount from Casco's $2.41 tangible net
book value per share at December 31, 2000;
o it would be difficult to support a fairness opinion at $1.87 per
share given a preliminary analysis of reasonable price/earnings
ratios and EBITDA multiples (free cash flow) generated from Casco's
operations, and estimated liquidation value; and
o it would be difficult to conclude, based upon the preliminary
review, that the $1.87 per share price was fair to the unaffiliated
stockholders of Casco.
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At the meeting, Mr. Richards noted that although the proposed
transaction had been well-publicized, there had been no inquiries from any other
persons or entities expressing an interest in a possible transaction. The
special committee agreed that, because of the depressed state of the stock
market, it was unlikely that another buyer for Casco could be found even if a
marketing effort were to be made. The special committee agreed that such a
marketing effort would take several months to complete and would involve
additional expense to Casco, but was unlikely to result in a better offer.
The special committee agreed to attempt to negotiate a higher price
with the Davises that would lead to the stockholders receiving a higher price
per share than currently offered. Mr. Richards agreed to discuss the matter with
the Davises.
After the special committee meeting on February 14, 2001, Mr. Richards
had a telephonic conference with the Davises in which he stated that the special
committee believed that the price per share being offered was too low. The
Davises agreed to take the matter under advisement.
On February 28, 2001, the Davises sent another letter to the special
committee, amending its previous offer to increase the price per share to $2.10,
provided that the special committee would recommend that the stockholders
approve the transaction.
On March 1, 2001, the special committee met with its legal and
financial advisors to discuss the revised offer. Ambient reported that it had
prepared a further valuation analysis of Casco since the last meeting. Ambient
stated that it had found a number of public companies selling for less than
their net tangible book value per share, and even some that were selling for a
price less than their cash on hand per share. Ambient concluded by stating that
based upon its analysis, Ambient was prepared to conclude that $2.10 per share
would be a fair price to stockholders, and that it is questionable whether such
a price could be achieved by stockholders in the market at any time in the
foreseeable future in the absence of this buyout proposal.
Ambient then reviewed with the special committee a summary of
observations, market trading comparables analysis, discounted cash flow
valuation analysis, mergers and acquisitions comparables analysis, adjusted
balance sheet analysis, and theoretical leveraged buyout feasibility analysis.
Ambient summarized his methodology and conclusions with respect to each of these
analytic approaches.
With respect to the selection of comparable companies, Ambient stated
that it had classified Casco in the "management services" sector and had
selected as comparables companies in this business, including several with an
Internet component. Ambient explained that this was relevant because of
opportunities that have been identified for Casco in the e-commerce fulfillment
business.
With respect to its discounted cash flow analysis, Ambient observed
that an investor in a business such as Casco would expect returns in a range in
excess of 20%-22%, leading to a per share value under a no revenue growth
scenario of from $1.99 per share to $3.09 per share, depending upon the earnings
multiple chosen.
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The special committee observed that increasing layoffs at larger
companies could have a dramatic adverse effect on Casco's business, as well as
the whole employee awards market, and that loss by Casco of a single key account
could turn Casco from profitable to unprofitable. Based upon current market
conditions, the special committee stated that that it was unlikely that Casco's
revenues would grow in the foreseeable future, and could very well decline,
given conditions in the economy.
Ambient then explained a mergers and acquisitions analysis, an adjusted
balance sheet analysis, and a leveraged buyout analysis. With respect to the
adjusted balance sheet analysis, Ambient observed that the goodwill carried on
the balance sheet from prior acquisitions should be removed, and that the fair
market value of the real estate in Shelby, North Carolina would not likely
exceed its costs. Ambient stated that an appraisal was obtained several years
ago at $3 million, but given the current market in Shelby, and the fact that the
building is a special purpose building, it would question whether this appraisal
is still valid.
Ambient stated that the leveraged buyout analysis is intended to
determine what a financial buyer would likely pay for Casco in a leveraged
buyout, representing a practical floor on the possible range of values of Casco.
Ambient observed that if Casco lost a key account, financing for a leveraged
buyout would not be available. Moreover, Casco's current cash flow would not
permit a financial buyer to obtain financing comparable to that being obtained
by the Davis' without personal guaranties and/or additional collateral and there
would not be enough cash flow coverage in the early years to cover debt service
on a comparable loan. Mr. Richards observed that Charles R. Davis has indicated
that he would likely terminate his employment if another group were to control
Casco and therefore a financial buyer in a leveraged buyout would have to
replace Charles R. Davis with a sales staff, and that prior efforts to move Mr.
Davis' sales functions to staff had proven to be unsuccessful. Consequently, he
felt that there would be little prospect for growth in revenues if Charles R.
Davis did not remain involved in sales.
Ambient stated that it was questionable whether Casco's stock price
would perform as well as the Nasdaq as a whole, and concluded that if the
stockholders were to reinvest the $2.10 offered for their shares in a Nasdaq
index, they would likely experience better returns than if they were to remain
invested in Casco. Given Casco's thin margins, Ambient would question whether,
in the event of a near term reversal of the decline in Nasdaq, Casco's stock
price would experience a similar reversal.
Mr. Richards stated that he had received calls from several significant
stockholders, and believed that most would consider $2.10 per share to be a fair
price for their shares. Mr. Richards stated that he had requested several large
stockholders to advise him if they became aware of anyone potentially interested
in offering more that the $1.87 originally offered, but no one had contacted
him.
Ambient was not asked to solicit offers to purchase Casco, but neither
Ambient nor any of the members of the special committee were aware of any third
party expressions of interest in discussing a possible transaction for control
of Casco.
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Ambient concluded the presentation by stating that, based upon its
analysis, Ambient was prepared to deliver an opinion to the special committee
and Casco's board of directors that the $2.10 price per share offered in the
proposed transaction is fair to the unaffiliated stockholders of Casco from a
financial point of view.
The special committee, with the advice of independent legal counsel,
reviewed the terms and conditions of the proposed merger agreement. Based upon
the discussion, counsel was instructed to discuss several changes to the
proposed agreement with counsel to the Company, including revisions to the
Company's representations and warranties, limitations on the Company's ability
to consider competing offers, and the payment of fees and expenses in the event
of termination of the agreement by the Company. Substantially all of the
proposed revisions were accepted by the Company and incorporated into the final
merger agreement.
On May 8, 2001, a special meeting of the board of directors was held.
At the special meeting, Ambient reviewed the fairness opinion it had prepared
for the transaction. The special committee unanimously approved and recommended
to the board that the board approve the transaction. The directors were provided
with a copy of the fairness opinion. Based upon the recommendation of the
special committee, the board unanimously approved the transaction and merger
agreement. S. Robert Davis, Charles R. Davis and Randall J. Asmo abstained from
voting.
DETERMINATIONS AND RECOMMENDATIONS OF THE SPECIAL COMMITTEE
AND THE CASCO BOARD OF DIRECTORS; FAIRNESS OF THE MERGER
The special committee unanimously determined that the terms of the
merger, the merger agreement and the transactions contemplated thereby were fair
to Casco's unaffiliated stockholders and unanimously recommended to the Casco
board that the merger, the merger agreement and the transactions contemplated
thereby be considered by the Casco board for its approval and adoption.
Following its receipt of the special committee's determination, the Casco board
unanimously resolved that the terms of the merger, the merger agreement and the
transactions contemplated thereby are advisable, and fair to Casco's
unaffiliated stockholders and determined to approve and adopt the merger, the
merger agreement and the transactions contemplated thereby. S. Robert Davis,
Charles R. Davis and Randall J. Asmo abstained from voting. Accordingly, the
board of directors unanimously recommends that the Casco stockholders vote FOR
approval of the merger, the merger agreement and the transactions contemplated
thereby at the stockholders meeting.
REASONS FOR THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATIONS. In
reaching their decisions to approve and adopt the merger, the merger agreement
and the transactions contemplated thereby, and in making their respective
recommendations, the special committee and the Casco board considered a number
of factors, both positive and negative, including the following material
factors:
o the special committee's and the Casco board's familiarity with, and
presentations by Ambient Advisors, regarding the business,
operations, properties and assets, financial condition, competitive
position, business strategy and prospects of Casco (as well as the
risks involved in achieving those prospects), and the current
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environment in which Casco competes, and current industry, economic
and market conditions, both on an historical and on an on-going
basis;
o the fact that the offer price of $2.10 per share of Casco common
stock represents a 110% premium over the closing sale price of Casco
common stock on December 8, 2001, the last trading day prior to
issuance of Casco's December 11, 2000 press release announcing the
receipt of the Davis' initial offer of $1.87 per share, and
represents a 27% premium over the closing sale price of Casco common
stock on the last trading day prior to the May 8 board of directors
meeting at which the merger was approved;
o the fact that the special committee retained and received advice
from independent legal counsel and an independent financial advisor
in negotiating and evaluating the terms of the merger agreement;
o the financial presentations made by Ambient at the February 14, 2001
and March 1, 2001 meetings of the special committee and at the board
of directors' May 8, 2001 meeting;
o the opinion of Ambient, delivered on May 8, 2001 and attached to
this proxy statement as Appendix C, that, as of such date, the
merger consideration to be received by the Casco stockholders
pursuant to the merger agreement was fair to Casco's unaffiliated
stockholders from a financial point of view;
o the current and historical market prices of Casco common stock;
o the fact that the merger consideration is all cash, which provides
relative certainty of value to the Casco stockholders;
o the special committee's and Casco's board's judgments, in view of
Casco's prospects, that it is unlikely that one or more strategic or
financial acquirers would be willing to pay a price for Casco or its
assets that in present value terms would be as high as the merger
consideration to be received by Casco stockholders pursuant to the
merger agreement, and the fact that despite wide publication of the
terms of the merger, Casco has not received any proposals or
indications of interest from any other prospective purchaser; and
o the alternatives available to Casco, and the possibility that if
Casco remained as an independent public corporation, because of a
decline in the market price of Casco common stock or the stock
market in general, the price received by the Casco stockholders in
the open market or in a future transaction might be less than the
merger consideration to be received by the Casco stockholders
pursuant to the merger agreement.
The foregoing discussion of the factors considered by the special
committee and the Casco board is not intended to be exhaustive. In view of the
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variety of factors considered in connection with their evaluation of the merger,
the merger agreement and the transactions contemplated thereby, the special
committee and the Casco board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching their respective determinations. The special committee and the Casco
board considered all the factors as a whole in reaching their respective
determinations. In addition, individual members of the special committee and the
Casco board may have given different weights to different factors.
SUMMARY OF THE FINANCIAL ADVISOR'S FAIRNESS ANALYSES
On May 8, 2001 Ambient rendered its oral and written opinion to the
special committee and to the board, that as of such date the consideration to be
received by the unaffiliated stockholders of Casco in the merger was fair from a
financial point of view to the unaffiliated public stockholders of Casco. No
limitations were imposed by the special committee on the scope of Ambient's
investigation or the procedures to be followed by it in rendering its opinion.
Ambient did not determine the form or amount of consideration to be offered to
stockholders in the merger which was agreed to as a result of negotiations
between the special committee and the Davises.
THE FULL TEXT OF AMBIENT'S WRITTEN OPINION TO THE SPECIAL COMMITTEE AND
TO THE BOARD OF DIRECTORS WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION IS
ATTACHED HERETO AS APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. THE
FOLLOWING SUMMARY OF AMBIENT'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION. AMBIENT'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE UNAFFILIATED STOCKHOLDERS OF
CASCO IN THE MERGER FROM A FINANCIAL POINT OF VIEW, AND HAS BEEN PROVIDED FOR
THE USE OF THE SPECIAL COMMITTEE AND THE BOARD IN THEIR EVALUATION OF THE MERGER
AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER. AMBIENT'S OPINION IS
ADDRESSED TO THE SPECIAL COMMITTEE AND TO THE BOARD ONLY AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO ACCEPT THE CONSIDERATION
BEING OFFERED TO SUCH STOCKHOLDER IN THE MERGER OR AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER.
In arriving at its determination of the fairness from a financial point
of view of the cash price per share, Ambient completed a number of traditional
valuation analyses and additional types of analyses and qualitative judgments
that it deemed to be relevant. However, Ambient advised the special committee
and the board of directors that certain traditional valuation analyses were not
likely to be definitive or be directly relevant for a variety of reasons
including the lack of clear comparability of Casco to other companies.
Additionally, Ambient noted that the proposed merger transaction was being
evaluated in the context of a period of high volatility for small capitalization
companies and a significant drop in stock market price for many companies of
Casco's size in a wide variety of industries. Finally, Ambient advised the
special committee and the board of directors that its determination of fairness
was not based on the possibility of the unaffiliated stockholders gaining the
maximum price theoretically or practically possible. Rather, its determination
of fairness was based on consideration of the overall reasonableness of the
price offered in the merger with reference to a variety of quantitative and
qualitative factors and the time frame of the merger proposal and Ambient's
analyses.
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The preparation of a fairness opinion and the related analysis is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analysis or of the summary set
forth below, without consideration of the analysis as a whole, could create an
incomplete view of the processes underlying the determination of fairness.
Ambient characterized its areas of analysis as follows: overall company
outlook, stock market price performance and market trading comparables analysis,
mergers and acquisitions and comparable transactions analysis, discounted cash
flow analysis, adjusted book value/liquidation analysis, and theoretical
leveraged buyout analysis. The highlights of Ambient's analysis and observations
with respect to each of these areas are presented below.
OVERALL COMPANY OUTLOOK. Ambient began its assignment with a due diligence
process focusing on Casco and its current industry setting. Ambient met with key
management executives and discussed Casco and its prospects in detail, visited
key Casco locations and reviewed a wide and detailed range of public and
private/confidential Casco information. This information included historical and
projected financial information, management presentations regarding alternative
business strategies and prospects, key customer accounts by size and year,
schedules of inventory and owned assets and substantial additional information
regarding Casco's assets and liabilities and its business prospects. All of
these business elements were discussed and clarified with management and in some
cases with knowledgeable board members. Ambient observed and called to the
special committee's and the board of directors' attention the following key
points of its due diligence as they specifically related to Ambient's fairness
analysis:
o The overall market for the "awards program management" industry was
likely not to grow significantly over the next 12 to 18 months and
might actually decline in real size terms due to changes in the
market and general slow growth to recession biased trends in the
U.S. economy;
o Management's estimate that the current market size of the industry
is approximately $600 million in annual sales;
o The awards program management industry is highly fragmented, but is
relatively highly concentrated with respect to companies serving the
relatively larger size customers (primarily accounts over $250,000).
Casco focuses primarily on smaller accounts between $50,000 and
$250,000. As a practical matter, however, Casco believes that it can
profitably serve these larger companies given its commitment to the
required infrastructure and sales efforts required to serve these
companies. Major competitors in Casco's market segment include O. C.
Tanner, Jostens, Robbins and Tharpe. Each of these competitors has
established positions in the market place and has resources
substantially greater than Casco. Management believes that it ranks
5th in its industry by sales volume and has almost the same sales as
the 4th ranked competitor, but only 10% of the sales volume of the
largest competitor. However, none of these competitors are publicly
owned, and thus competitive financial and other information is very
limited;
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o The business is largely a personal relationship business and
loyalties are often tied to the salesperson in charge of account
management, typically the company president in smaller companies in
the industry. It was Ambient's view, confirmed by members of Casco's
board very familiar with Casco, that Casco's profitability and
prospects were meaningfully dependent on the Company's current
president, Charles R. Davis, who has developed and/or manages many
of the Company's key accounts. Many medium and smaller size
customers expect to have their account relationship with the CEO or
president of the awards management company. This factor limits the
"scalability" of Casco and its ability to rapidly build an effective
sales force and grow; and
o Casco has over 3,500 customer accounts and this offers it some
degree of diversification. However, two customers together account
for over 10% of sales and the loss of these accounts could drive
Casco into a loss position.
STOCK MARKET PERFORMANCE AND MARKET TRADING COMPARABLES ANALYSES. Ambient
observed that the cash price of $2.10 per share was significantly (about 65%)
below the 52 week high for Casco's stock. However, Ambient's analysis of
similarly sized companies suggested that this fact was not unusual.
Additionally, over the 12-month time period preceding March 1, 2001 the NASDAQ
index had declined by over 50%. In addition, management and certain board
members advised Ambient that they believed that the rise in Casco's stock price
to its 52-week high of $5.84 was significantly influenced by the perception that
Casco had a large market opportunity to provide fulfillment services to the
growing e-commerce Internet business that lacked sufficient infrastructure,
skills and scale of business to do its own fulfillment. The rapid decline in the
perceived opportunity due to the "dot-com" crash of 2000 was believed by Casco
management to have contributed to the decline in Casco's stock. Management and
certain board members believe that the fulfillment business offered a more
scalable business opportunity which could significantly contribute to Casco's
sales volume and profitability.
Ambient compared the historical financial, operating and stock market
performances of ten publicly traded companies that it considered relevant with
the same data for Casco. As noted earlier, there are no public companies in
Casco's business, so no direct comparable companies were available to Ambient in
completing its analyses. Ambient selected the ten comparables from well over 100
companies with total market values of less than $50 million that were in the
"management services" or "business services" sectors. No company conducted the
same type of business as Casco. In fact, the comparable companies ranged widely
in type of service offered. Nevertheless, they each represented comparable
"investment opportunities" to investors. Five of the companies conduct business
in a range of traditional "outsourcing" services while five companies offer
outsourcing and consulting services related to "e-commerce" and "new economy"
activities. These e-commerce and related companies were included since these
types of services represent "new economy" business services related to certain
Casco business opportunities and its core skills, and also represent small
market value companies whose stock prices over the past year, like Casco's, were
influenced by strongly positive perceptions, at that time, of their
opportunities to serve the Internet and new economy businesses.
The ten companies with their ticker symbols and summary business
descriptions are presented below.
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CASCO COMPARABLE COMPANY DESCRIPTIONS.
Management Service Comparables:
o ABLEST CORP (AMEX: AIH) - Provides temporary and contract staffing
solutions to businesses in the clerical, light industrial and
technology professional sectors.
o BARRETT BUSINESS SERVICES (NASD: BBSI) - A leading human resource
management company that provides comprehensive outsourced solutions
addressing a broad array of employment-related issues for businesses
of all sizes.
o ON SITE SOURCING (NASD: ONSS) - Provides digital imaging, document
management, litigation reprographics services and facilities
management to law firms, corporations, non-profit organizations,
accounting firms, financial institutions and other organizations
throughout the East Coast.
o AMERICAN PHYSICIANS GROUP (NASD: AMPH) - Through its subsidiaries,
it provides services that include management of malpractice
insurance companies, and brokerage and investment services. Also the
company provides environmental consulting and engineering services.
o HEADWAY CORPORATE RESOURCES (AMEX: HEA) - Leader in human resource
management and advisory services. Offers a wide range of services,
including temporary, permanent, contract and technology staffing, as
well as executive search and management and strategic consulting.
Offices in U.S., U.K. & Asia.
Business Services Comparables:
o PFS WEB (NASD: PFSW) - An eBusiness enabler providing advanced
Internet, data, and voice connectivity, technical support and
application hosting services to the mid-size business market.
o STONEPATH GROUP (AMEX: STG) - Actively engages in building a network
of technology-driven businesses that leverage the Internet to
increase operational efficiencies. The Group offers strategic
consulting, finance, marketing and public relations, operations,
recruiting and technology.
o ASCENDENT SOLUTIONS (NASD: ASDS) - Offers software and service
solutions that enable Internet retailers and direct marketing
businesses to outsource their order management and fulfillment
operations.
o ALLIN CORP (NASD: ALLN) - A provider of technology consulting and
systems integration services oriented around practices meeting
customer needs for infrastructure, business operations, and
electronic business services.
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o TOWNE SERVICES (NASD: TWNE) - A provider of services and products
that process sales and payment information and related financing
transactions for small businesses and banks in the United States.
The stock market price performance and market trading comparables
analysis resulted in the following salient points that were noted as reference
points in the determination of fairness:
o Casco had the smallest market value of the comparables group and
thus, in Ambient's opinion, was the least likely to ever attract
meaningful institutional investor support.
o All ten companies experienced drastic declines in their market
values from their 52-week highs. Stock market prices on March 1,
2001, the date that Ambient first informed the special committee of
its determination of fairness were only 3% to 63% of their 52-week
highs. The range for the outsourcing "management services" companies
was 40% to 63% of their 52 week highs, while the "new economy"
business services sector stocks declined even further with prices
ranging from 3% to 31% of their 52-week highs. The cash merger price
for Casco was 36% of its 52-week high.
o Many of the key traditional "market trading multiples" comparisons
yielded no conclusive indicators that could be applied to Casco. For
example, results of the Enterprise Value/Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") multiples ranged
widely and generally represented low multiples. (Enterprise Value is
the market value of all equity plus net debt.) All of the "new
economy" -related companies reported EBITDA losses, so no ratios of
this type could be calculated for this group. The management
services companies had Enterprise Value/EBITDA ratios ranging from
1.13 to 4.38. These ratios represent depressed stock market values
based on EBITDA ratios normally accorded such companies and, in
Ambient's opinion, reflect a new market reality of a significant
number of small capitalization stocks lacking meaningful stock
trading volume and institutional ownership. For Casco, the cash
merger price represents a ratio of 2.50.
o A further measure of the depressed state of the comparable companies
was revealed in the Stock Price to Tangible Book Value ratios for
the comparison group. Only two of the ten companies sold for more
than tangible book value. The range of the ten companies was a 73%
discount to a 74% premium. The cash merger price of $2.10 per share
represents a 13% discount from Casco's tangible book value as of
December 31, 2000, placing it within the range for the management
services companies and significantly higher than the same ratio for
the new economy related companies which sold for less than 50% of
tangible book value. Several companies sold at a discount from cash
value per share.
Ambient advised the special committee that the determination of fairness
of the cash merger price should not be based on Casco's 52-week high stock
price. Ambient observed that, in the current market environment, there were no
assurances that Casco would ever regain its 52-week high in the near future. At
the same time, a buyout offer at a significant reduction from its 52-week high
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could be considered fair given the market environment. The proposed merger also
offered the unaffiliated stockholders full liquidity for their shares and an
opportunity to reinvest in other equally attractive or more suitable stocks or
other investments.
DISCOUNTED CASH FLOW ANALYSES. A traditional valuation approach that acts
primarily independent of values in the stock market is the discounted cash flow
analysis. This methodology is based on a projection of the subject company's
free cash flow for some specified time in the future, typically three to five
years, and its terminal value, which is typically a multiple of the free cash
flow achieved at the end year of the projection period employed. The latter
measure approximates the "exit value" of the ownership of the company.
The discounted cash flow value approach is highly dependent on several
key variables: the year by year projections of company free cash flow, the
discount rate employed, and the multiple chosen for the terminal value. (For the
purpose of this analysis, free cash flow is defined as net income after taxes
plus depreciation and amortization, less required increases in working capital,
required capital expenditures, and required principal payments on company debt.)
In calculating Casco's value per share using the discounted cash flow
approach, Ambient used three sets of yearly cash flows for 2001-2003, which
represented a range of high, low and "expected" (medium) operating results. The
basis for calculating value in each case was projected information provided by
Casco, as previously presented to and reviewed by its board of directors. The
key operational variable in these projections was the rate of sales growth while
operating margins were held constant. Management and the board of directors
advised Ambient that they believed (based on their view of the base business,
historical results and trends in the industry) that flat sales for the
projection period represented the medium or most likely case, while a 5% annual
sales growth represented the upside case. A "downside scenario" was also
employed based on projections previously presented and reviewed by Casco's
board. This scenario was based on the loss of a key account(s) that resulted in
a loss of approximately $2 million in annual sales.
Ambient also constructed its discounted cash flow analyses to yield a
matrix of possible values using a range of discount rates ranging from 16% to
22% and terminal multiple ratios of 3 to 6 times 2003 EBITDA. Ambient noted that
the average annual return for the Standard and Poor's 500 Stock Index for the
period of 1991-2000 was 14.8%. Ambient further noted in its discount rate
analysis that Casco investors would demand and would be entitled to a rate of
return substantially in excess of 14.8% due to the higher business risk, higher
volatility and lower liquidity associated with an investment in Casco. Ambient
believed therefore that 16% to 22% represented a reasonable range of appropriate
discount rates for an investment in Casco, but advised the special committee
that as a practical matter, a 20% to 22% discount rate would be most
appropriate.
Terminal value exit multiples of free cash flow employed in this
analysis were 3 to 6 times 2003 free cash flow. Ambient advised the special
committee and the board of directors that 4x cash flow represented the most
appropriate multiple rate and noted that, since sales in this industry were
often highly related to personal relationships, an even lower multiple could be
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justified. In Ambient's opinion, a potential acquirer of all of Casco's capital
stock was likely to substantially discount income projections in its acquisition
analysis since it would very likely expect to lose sales if any key
sales/relationship person left the company or was not given the proper
incentives.
The most appropriate key variables were then selected by Ambient to be
a 22% discount rate and a 4x free cash flow terminal multiple. Using these
variables, Ambient's discounted cash flow analysis yielded the following
valuation per share results for the high, low and most likely operating
scenarios:
Most Likely Case: $2.35 per share
High Case: $2.70 per share
Low Case: $1.23 per share
MERGERS AND ACQUISITIONS COMPARABLE TRANSACTIONS ANALYSIS. An additional
valuation methodology used in situations similar to the merger is the analysis
of comparable acquisitions. To employ this analysis Ambient searched a variety
of sources to identify transactions that could be considered comparable. The key
parameters for this search were acquired companies in the business services
sector with total transaction values under $75 million. This search yielded a
group of five transactions as presented below:
TRANSACTION
ACQUIRER ACQUIREE BUSINESS DESCRIPTION DATE TYPE/APPROACH
- -------- -------- -------------------- ---- --------------
American Novacare Employee Provides a comprehensive 1/15/98 Private Stock
Employers Services Inc management system to medium sized
Group businesses
Lason, Inc. M-R Group Document and Data Management 6/30/99 Public Stock
Company
Isernhagen & Health Fitness Consulting- prevention and 2/7/97 Private
Associates Physical, Inc. management of work injuries
The Continuous Century Business Management training production and 3/31/98 Private Stock
Learning Services administrative support
Group
Bitterman & Ambassadors Corporate incentive performance 12/23/96 Private
Associates International, Inc. management
Ambient then analyzed these transactions in terms of ratios of price
paid to assets, book value, sales, earnings and cash flow. Several of the
companies in this group were private companies and thus price to stock market
ratios were not calculated.
Ambient discussed the mergers and acquisitions comparable transactions
results with the special committee and the board and advised the special
committee and the board that this valuation methodology did not yield any
results that would be meaningful in its evaluation of the fairness of the cash
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merger consideration. The key reasons for this conclusion were lack of
sufficient meaningful comparable companies of similar size and business and
varying time frames of the transactions. Additionally, several of the
transactions involved privately owned acquired companies and Ambient questioned
the reliability and comparability of accounting methods employed in these cases.
ADJUSTED BOOK VALUE/LIQUIDATION ANALYSIS. In some cases of determining fairness
of a particular transaction, a financial advisor may look at a company's net
liquidation value. In the great majority of cases, the ongoing value of a
business well exceeds its liquidation value. However, some companies with
substantial excess assets (e.g., real estate) or large cash positions may have
liquidation values exceeding their on-going concern value. Adjusted book value
analyses are particularly useful and meaningful checks on other valuation
methodologies in situations where a proposed acquisition or buyout price per
share is less than the stated book value per share.
Ambient analyzed the actual and book values of each of Casco's assets
and liabilities to determine an adjusted or fair market book value per share.
Ambient's analyses revealed that most all of Casco's assets and liabilities
were fairly stated on the balance sheet. However, a few adjustments were made
including eliminating good will and adding some depreciation back on certain
key real estate. Ambient concluded that a reasonable adjusted book value per
share would be $2.41 per share if all of the real estate depreciation was not
restored and $2.81 if all of the depreciation was restored. Ambient visited the
major Casco owned facility in Shelby, North Carolina and concluded that it was
a single use facility and not likely to be quickly sold for full value even
after adding back all depreciation. Ambient concluded that a reasonable
adjusted book value could be approximately $2.40 to $2.60 per share. The cash
merger price of $2.10 per share thus represented a 12.5% to 19% discount from
the adjusted book value. However, Ambient advised the special committee and the
board that Casco was highly unlikely to achieve $2.40 to 2.60 per share in any
liquidation. Using normal discounts for the liquidation of such assets as
inventory and specialized equipment, Ambient concluded that Casco's net
liquidation value was likely to be substantially below $2.10 per share.
THEORETICAL LEVERAGED BUYOUT ANALYSIS. A theoretical buyout analysis is not
normally considered a traditional valuation methodology. However, Ambient
observed that Casco was not offered for sale and thus it was not clear, at least
at the beginning of Ambient's analysis, whether or not a buyer could be found
that would offer a price higher than $2.10 per share. Thus, this type of
analysis provides an additional check to the traditional valuation techniques.
Neither Ambient nor any member of the special committee or the board
received any expressions of interest from strategic buyers in the industry.
Ambient advised the special committee and the board that strategic buyers were
often reluctant to attempt to break up buyout proposals led by significant
management and shareholders. Additionally, as noted earlier, strategic buyers
would likely be highly concerned with loss of accounts if the current president
could not be attracted to stay with Casco. Ambient, the members of the special
committee, and the other members of the board believed that the current
president, Charles R. Davis, would not stay on with a new owner. This factor is
believed to limit the interest of strategic buyers.
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However, Ambient believed that a financial buyer might have interest in
Casco if the proper financing and returns could be achieved. Financial buyers
(or leveraged buyout buyers, as they are often called) are not industry
sensitive as long as the business meets financing and return criteria and they
are able to either retain good management or install a new management team.
Ambient believes that there is a virtually unlimited supply of equity capital
available to lead leveraged buyouts of Casco's size. Ambient thus completed a
sufficient amount of financial modeling to determine if Casco would qualify as a
strictly financial acquisition. The analysis focused on the ability to serve
sufficient debt to purchase the entire company assuming buyout financing
consisting of 25% in equity and 75% in bank debt. For the purpose of this
analysis, Ambient assumed that either current management would stay or that
suitable new management could be hired and properly motivated.
Ambient's analysis of a theoretical leveraged buyout concluded that
Casco would be unlikely to appeal to a strictly financial buyer. The reasons for
this conclusion included uneven recent historical cash flow results over the
past five years and the likely inability to obtain sufficient capital without
meaningful personal guarantees. Financial buyout firms do not normally secure
their acquisition borrowings with personal guarantees or assets other than those
of the target company. The downside scenario resulted in particularly
unfavorable results for a financial buyer.
Ambient was advised that the Davises were being required to provide
personal guarantees and/or pledges of other assets to obtain sufficient
financing acquire the shares held by unaffiliated stockholders in the merger.
And, on a going forward basis, it is Ambient's understanding that Charles R.
Davis, Casco's current president, leading account relationship manager and
leading new account sales executive, will have a substantial equity position in
Casco if the merger is completed. The combination of personal guarantees/pledges
of assets by the Davises and the commitment of Charles R. Davis to continue to
manage the business are two critical assets that other buyers are unlikely to
either have or be willing to commit to.
Ambient thus concluded that the merger transaction is a both a
reasonable one for the Davises to pursue, and, that given the foregoing analyses
and other factors, that a price of $2.10 per share for the shares of the
unaffiliated stockholders was fair from a financial point of view.
The foregoing summary is not a complete description of the analyses
performed by Ambient. The preparation of a fairness opinion is a complex
process. Ambient believes that its analyses must be considered as a whole, and
that selecting portions of such analyses, or portions of the factors considered
by it, without considering all analyses and factors would create an incomplete
view of the evaluation processes underlying its opinion. Ambient did not attempt
to assign specific weights to particular analyses. Any estimates contained in
Ambient's, analyses are not necessarily indicative of actual values, which may
be significantly more or less favorable than suggested by the analyses. In
addition, estimates of the values of companies do not purport to be appraisals
or necessarily to reflect the prices at which companies may actually be sold.
Because such estimates are inherently subject to uncertainty, Ambient does not
assume responsibility for their accuracy.
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CERTAIN FORWARD-LOOKING INFORMATION
The following cautionary statement identifies important factors that
could cause Casco's actual results to differ materially from those projected in
forward-looking statements included in this proxy statement, including
statements incorporated by reference into this proxy statement. Except for the
historical information, the matters discussed in this proxy statement may be
deemed forward-looking statements. Forward-looking statements are statements
that include projections, predictions, expectations or beliefs about future
events or results or otherwise are not statements of historical fact. Such
statements are often characterized by the use of qualifying words (and their
derivatives) such as "expect," "believe," "plan," "project," or other statements
concerning our opinions or judgment about future events. Factors which could
cause actual results to differ from expectations include, among other things, a
loss of one or more of Casco's substantial clients, Casco's inability to grow
through acquisition and strategic alliances and through expanding its current
market share, Casco's inability to enter new markets, inadequate cash resources
to fund Casco's current operations, the effect of seasonality on Casco, and
ability of Casco to renew its credit facility, and other facts described in
reports filed by Casco with the Securities and Exchange Commission.
GENERAL INFORMATION ABOUT THE SPECIAL MEETING
PROXY SOLICITATION
This proxy statement is being furnished to Casco stockholders as part
of the solicitation of proxies by the Casco board of directors for use at the
special meeting of stockholders to be held at 13900 Conlan Circle, Suite 150,
Charlotte, North Carolina, on , 2001, beginning at 10:00 a.m. local
time, and at any adjournments or postponements thereof. This proxy statement is
accompanied by a form of proxy for use at the special meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, the stockholders will be asked to consider and
vote upon a proposal to adopt and approve the Agreement and Plan of Merger,
dated as of May 8, 2001, among Casco, Davis Holdings and Davis Acquisition,
pursuant to which Davis Acquisition will be merged with and into Casco, with
Casco being the surviving corporation. At the effective time of the merger, each
share of common stock of Casco issued and outstanding immediately prior to the
filing of a certificate of merger with the Secretary of State of the State of
Delaware will be converted into the right to receive $2.10 in cash, without
interest, except for:
o shares of Casco common stock held by Davis Holdings, which will be
canceled without payment;
o shares for which appraisal rights have been perfected properly under
Section 262 of the Delaware General Corporation Law, which will be
entitled to receive the consideration provided for by the Delaware
General Corporation Law; and
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o shares held by Casco in treasury, which will be canceled without
payment.
Like all other Casco stockholders, members of management (other than
the Management Group) and the board of directors will be entitled to receive
$2.10 per share in cash for each of their shares of Casco common stock held by
them at the time of the merger. Each Casco warrant outstanding immediately prior
to the merger will be converted into the right to receive $2.10 per share upon
exercise of such warrant. Vested and unvested options to purchase shares of
Casco common stock will be canceled and Casco will pay the holders an amount
determined by multiplying the excess, if any, of $2.10 per share over the
applicable exercise price per share of such options by the number of shares such
holder could have purchased had such holder exercised such options in full
immediately prior to the merger.
Immediately prior to the merger, the Management Group and the
Stockholder Group will contribute substantially all of their shares of Casco
common stock to Davis Holdings in exchange for shares of common stock of Davis
Holdings.
Casco does not expect a vote to be taken at the special meeting on any
matter other than the proposal to adopt and approve the merger agreement and, if
necessary, a vote to adjourn or postpone the meeting. However, if any other
matters are properly presented at the special meeting for consideration, the
holders of the proxies will have discretion to vote on these matters in
accordance with their best judgment. Casco is soliciting proxies to grant
discretionary authority to vote in favor of adjournment or postponement of the
special meeting.
RECORD DATE AND VOTING INFORMATION
Only holders of record of common stock at the close of business on
, 2001 will be entitled to notice of and to vote at the
special meeting. At the close of business on , 2001, there were
outstanding and entitled to vote 1,774,186 shares of Casco common stock.
A list of the Casco stockholders will be available for review at Casco's
executive offices during regular business hours for a period of 10 days before
the special meeting. Each holder of record of common stock on the record date
will be entitled to one vote for each share held.
All votes will be tabulated by the inspector of elections appointed for
the special meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Brokers who hold shares in street name
for clients typically have the authority to vote on "routine" proposals when
they have not received instructions from beneficial owners. However, absent
specific instructions from the beneficial owner of the shares, brokers are not
allowed to exercise their voting discretion with respect to the adoption and
approval of non-routine matters, such as the merger agreement. Proxies submitted
without a vote by the brokers on these matters are referred to as "broker
non-votes." Abstentions and broker non-votes are counted for purposes of
determining whether a quorum exists at the special meeting.
The affirmative vote of a majority of the outstanding shares of common
stock entitled to vote at the special meeting is required to adopt and approve
the merger agreement. The Continuing Stockholders have agreed to vote all of the
shares of Casco common stock held by them, aggregating 843,866 shares, for
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adoption and approval of the merger agreement. The shares of Casco common stock
held by the Continuing Stockholders constituted approximately 47.6% of the total
number of shares outstanding on the record date. The stockholders other than the
Continuing Stockholders held 930,320 shares of Casco common stock as of the
record date.
Because the affirmative vote of a majority of all outstanding shares of
Casco common stock is required in order to approve the merger agreement,
abstentions and broker non-votes will have the same effect as votes against
adoption and approval of the merger agreement.
With the exception of broker non-votes, the treatment of which is
discussed above, each share of Casco common stock represented by a proxy
properly executed and received by Casco in time to be voted at the special
meeting and not revoked will be voted in accordance with the instructions
indicated on such proxy and, if no instructions are indicated, will be voted
"FOR" the proposal to adopt and approve the merger agreement. All proxies "FOR"
such matter, including proxies on which no instructions are indicated, other
than broker non-votes, may, at the discretion of the proxy holder, be voted
"FOR" a motion to adjourn or postpone the special meeting to another time and/or
place for the purpose of soliciting additional proxies or otherwise. Any proxy
that is voted against the adoption and approval of the merger agreement, or
which specifically abstains from voting, will not be voted in favor of any such
adjournment or postponement.
QUORUM
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Casco common stock entitled to vote at the special
meeting is necessary to constitute a quorum for the transaction of business at
the special meeting.
PROXIES; REVOCATION
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of Casco at Casco's executive offices located at 13900 Conlan
Circle, Suite 150, Charlotte, North Carolina 28277, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the special meeting and voting in person. Attendance at the special
meeting will not, by itself, revoke a proxy. Furthermore, if a stockholder's
shares are held of record by a broker, bank or other nominee and the stockholder
wishes to vote at the meeting, the stockholder must obtain a proxy from the
record holder.
EXPENSES OF PROXY SOLICITATION
Casco will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock beneficially owned by
others for forwarding to these beneficial owners. Casco may reimburse persons
representing beneficial owners of common stock for their costs of forwarding
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solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of Casco. No
additional compensation will be paid to directors, officers or other regular
employees for their services.
ADJOURNMENTS
Although it is not expected, the special meeting may be adjourned for
the purpose of soliciting additional proxies. Any adjournment of the special
meeting may be made without notice, other than by an announcement made at the
special meeting, by approval of the holders of a majority of the outstanding
shares of Casco common stock present in person or represented by proxy at the
special meeting, whether or not a quorum exists. Casco is soliciting proxies to
grant discretionary authority in favor of adjournment or postponement of the
special meeting. In particular, discretionary authority may be exercised if the
purpose of the adjournment or postponement is to provide additional time to
solicit additional votes to adopt and approve the merger agreement and the
merger. The Continuing Stockholders will vote to adjourn or postpone the meeting
depending upon the circumstances at the time. It is likely that the Continuing
Stockholders will vote to adjourn or postpone the meeting if they believe that
they will be able to obtain the additional votes necessary to obtain approval by
the holders of a majority of the shares of Casco common stock held by persons
other than the Continuing Stockholders to adopt and approve the merger
agreement. It is unlikely that the Continuing Stockholders will vote to adjourn
or postpone the meeting if they do not believe that they will be able to obtain
the additional necessary votes.
APPRAISAL RIGHTS
Stockholders who do not vote in favor of adoption and approval of the
merger agreement, and who otherwise comply with the applicable statutory
procedures of the Delaware General Corporation Law summarized elsewhere in this
proxy statement, will be entitled to seek appraisal of the value of their Casco
common stock as set forth in Section 262 of the Delaware General Corporation
Law. See "Appraisal Rights."
PLEASE DO NOT SEND IN STOCK CERTIFICATES AT THIS TIME. IN THE EVENT THE
MERGER IS COMPLETED, CASCO WILL DISTRIBUTE INSTRUCTIONS REGARDING THE PROCEDURES
FOR EXCHANGING CASCO STOCK CERTIFICATES FOR THE $2.10 PER SHARE CASH PAYMENT.
THE PARTICIPANTS
CASCO INTERNATIONAL, INC.
Casco was formed as a North Carolina corporation in 1950. Pages, Inc.,
a Delaware Corporation ("Pages"), acquired all of the issued and outstanding
common stock of Casco in February, 1990. In November, 1996 Casco reincorporated
in the State of Delaware by merging into Clyde A. Short Incorporated, a Delaware
corporation which was the surviving corporation in the merger and which, in
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conjunction with the merger, changed its name to CA Short Company. Effective at
the close of business on December 31, 1996, Pages distributed all of Casco's
common stock to its stockholders. In 1997, Casco changed its name from CA Short
Company to Casco International, Inc., but does business under the CA Short
Company name.
Casco designs, administers, and fulfills innovative and effective
associate recognition programs. Programs offered by Casco include safety,
service recognition, and other programs that feature merchandise and jewelry.
Casco's programs fall into two broad categories; service recognition and safety
incentive and recognition. The programs include safety, sales incentive, quality
control, production, service recognition, attendance, birthday, and corporate
holiday gift programs.
A MORE DETAILED DESCRIPTION OF CASCO'S BUSINESS IS CONTAINED IN CASCO'S
MOST RECENT ANNUAL REPORT ON FORM 10-K, WHICH IS INCORPORATED BY REFERENCE INTO
AND ACCOMPANIES THIS PROXY STATEMENT. SEE ALSO "WHERE STOCKHOLDERS CAN FIND MORE
INFORMATION." INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE OFFICERS OF CASCO IS
SET FORTH IN APPENDIX D TO THIS PROXY STATEMENT. CASCO'S ADDRESS AND TELEPHONE
NUMBER ARE 13900 Conlan Circle, Suite 150, Charlotte, North Carolina 28277,
(704) 482-9591.
DAVIS HOLDINGS OF NORTH CAROLINA, INC.
Davis Holdings is a newly organized North Carolina corporation formed and
currently owned by American Home Building Corporation, a company owned 50% by S.
Robert Davis, the chairman of the board and a stockholder of Casco and 50% by
Charles R. Davis, the president and a director and stockholder of Casco. Davis
Holdings does not currently have any operations. The Continuing Stockholders
will own 100% of the equity of Davis Holdings immediately following the merger
will be the Continuing Stockholders. Information about the directors and
executive officers of Davis Holdings is set forth in Appendix D to this proxy
statement. Davis Holding's address and telephone number are 13900 Conlan Circle,
Suite 150, Charlotte, North Carolina 28277, (704) 482-9591.
DAVIS ACQUISITION OF NORTH CAROLINA, INC.
Davis Acquisition is a newly organized North Carolina corporation
formed and wholly owned by Davis Holdings. Davis Acquisition was formed solely
for the purpose of engaging in the transactions contemplated by the merger
agreement. It has no current operations. Information about the directors and
executive officers of Davis Acquisition is set forth in Appendix D to this proxy
statement. Davis Acquisition's address and telephone number are 13900 Conlan
Circle, Suite 150, Charlotte, North Carolina 28277, (704) 482-9591.
THE CONTINUING STOCKHOLDERS
Immediately prior to the merger, American, S. Robert Davis and Melissa
Davis, his wife, Charles R. Davis, Randall J. Asmo, a director of Casco, Daniel
A. Splawn, the Vice President-Operations of Casco, Jeffery A. Ross, the Chief
Financial Officer and Secretary of Casco, Dr. John Graver, Richard B. Fentin and
R. L. Renck & Co., Inc. will contribute their shares of Casco common stock to
Davis Holdings in exchange for shares of common stock of Davis Holdings.
Immediately following the merger, the Continuing Stockholders will hold,
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indirectly through their ownership of Davis Holdings, 100% of the outstanding
shares of common stock of Casco as the surviving corporation. The Continuing
Stockholders have interests that are different from, or in addition to, your
interests as a Casco stockholder generally. See "Special Factors--Interests of
the Continuing Stockholders in the Merger." Information about the Continuing
Stockholders is set forth in Appendix D to this proxy statement.
PURPOSE AND REASONS OF THE DAVIS GROUP
AND OTHER MEMBERS OF THE MANAGEMENT GROUP FOR THE MERGER
The purpose of the Davis Group for engaging in the merger transaction
is to acquire control of Casco as a private company. The purpose of the other
members of the Management Group for engaging in the merger transaction is to
acquire a minority ownership position in Casco as a private company that will be
controlled by the Davis Group. The Management Group believes that as a private
company Casco will have greater operating flexibility to focus on enhancing
value by emphasizing growth and cash flow without the constraint of the public
market's emphasis on quarterly earnings and the potential disruptive effect
associated with losses that could occur if Casco were to lose one or two key
customers. In addition, because customers are often sought by Casco through
competitive bidding, the Management Group believes that Casco is disadvantaged
as a public company in bidding for customers against other private companies and
larger public companies. As a private company, the Management Group believes
that Casco will be better positioned to compete for customers in competitive
bidding situations. The Management Group also believes that the costs incurred
by Casco to maintain itself as a public company, including filing reports under
the Exchange Act, providing annual reports and proxy statements to Casco
stockholders, listing its common stock and warrants with Nasdaq, directors and
officers insurance premiums, investor relations expenses and paying outside
board member fees (estimated at between $115,000 and $150,000 per year) are not
justified given the size of the Company, the thin trading market for its common
stock and warrants, and the lack of any following of Casco by research analysts.
The Management Group believes these resources can be deployed more effectively
in the business operations of Casco.
POSITION OF THE MANAGEMENT GROUP
AS TO FAIRNESS OF THE MERGER
Each member of the Management Group has considered the analyses and
findings of the special committee and the board with respect to the fairness of
the merger to the unaffiliated stockholders. As of the date of this proxy
statement, each member of the Management Group adopts the analyses and findings
of the special committee and the Board with respect to the merger and believes
that the merger is both procedurally and substantively fair to the unaffiliated
stockholders. No member of the Management Group expresses an opinion as to the
fairness of the merger to any stockholder making an investment in Davis
Holdings. None of the members of the Management Group are making any
recommendation as to how Casco's stockholders should vote on the merger
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agreement. The Management Group has financial interests in the merger that are
different from the interests of the unaffiliated stockholders. See "Interests of
the Continuing Stockholders in the Merger."
PURPOSE AND REASONS OF THE
STOCKHOLDER GROUP FOR THE MERGER
Each member of the Stockholder Group is participating in the merger
transaction because each of them was offered the opportunity to participate by
the Davis Group and will own a minority interest in Casco as a private company
if the merger is consummated. Each member of the Stockholder Group elected to
accept the Davis Group's offer to participate with the Management Group in the
ownership of Casco because of their belief that Casco, as a private company
controlled by the Davis Group, allows them an opportunity in the future to
realize a return on their investment in Casco that may be higher than the $2.10
per share in cash they would receive by not participating with the Management
Group in the merger. None of the members of the Stockholder Group have been
involved in the negotiation of the merger agreement or the determination of the
cash merger consideration of $2.10 per share. No member of the Stockholder Group
expresses an opinion as to the fairness of the merger transaction or the cash
merger consideration that will be paid to unaffiliated stockholders if the
merger is consummated. No member of the Stockholder Group is making any
recommendation as to how Casco's stockholders should vote on the merger
agreement. See "Interests of Continuing Stockholders in the Merger."
PURPOSE AND REASONS OF CASCO FOR THE MERGER
AND STRUCTURE OF THE MERGER
For Casco, the purpose of the merger is to allow Casco stockholders to
realize the value of their investment in Casco in cash at a price that
represents a premium over the market price of Casco common stock before the
public announcement of the Davis' initial offer to take Casco private by
purchasing all of the outstanding shares of common stock at a price of $1.87 per
share. The board of directors believes that, because of the limited liquidity of
the shares of Casco common stock and the undervaluation of the common stock in
the public market, Casco has not been able to realize fully the benefits of
public company status. At the same time, the public company status has imposed a
number of limitations on Casco and its management in conducting Casco's
operations. Accordingly, one of the purposes of the merger is to afford greater
operating flexibility, allowing management to concentrate on long-term growth
and to reduce its attention to the quarter-to-quarter performance often
emphasized by the public markets. Further, the merger is intended to enable
Casco to use in its operations those funds that would otherwise be expended in
complying with requirements applicable to public companies.
The transaction has been structured as a cash merger in which Davis
Holdings, Davis Acquisition and Casco as the surviving corporation will incur
indebtedness to acquire all shares of Casco common stock for cash, other than
shares held by Davis Holdings. Casco's purpose in submitting the merger to the
vote of its stockholders with a favorable recommendation at this time is to
allow the stockholders other than Davis Holdings an opportunity to receive a
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cash payment at a fair price to provide a prompt and orderly transfer of
ownership of Casco to Davis Holdings, and to provide the stockholders (other
than Davis Holdings) with cash for all of their shares of Casco common stock.
EFFECTS OF THE MERGER
Upon completion of the merger, Casco will be a privately held
corporation, wholly owned by Davis Holdings. The Continuing Stockholders will
indirectly, through their ownership of Davis Holdings, own 100% of the
outstanding shares of common stock in Casco as the surviving corporation. Each
warrant to purchase Casco common stock outstanding immediately prior to the
merger will be converted into the right to receive $2.10 per share of Casco
common stock upon exercise of such warrant. Each option to purchase Casco common
stock outstanding immediately prior to the merger, whether vested or unvested,
will be canceled and Casco will pay to each option holder an amount equal to the
excess, if any, of $2.10 per share over the exercise price per share of such
options held by such holder multiplied by the number of shares such holder could
have purchased had such holder exercised such options in full immediately prior
to the merger.
As a result of the merger, there will be no public market for Casco's
common stock and the shares will cease to be traded on The Nasdaq SmallCap
Market, and price quotations of sales of shares of common stock in the public
market will no longer be available. In addition, registration of the common
stock under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), will be terminated. This termination will make most provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement of furnishing a proxy or information statement in
connection with stockholders' meetings, no longer applicable to Casco. After the
effective time of the merger, Casco will no longer be required to file periodic
reports with the Securities and Exchange Commission.
At the effective time of the merger, the directors of Davis Acquisition
will become the directors of Casco and the officers of Casco will be the
officers of Casco as the surviving corporation. At the effective time of the
merger, Davis Acquisition's certificate of incorporation and bylaws will become
Casco's articles of incorporation and bylaws.
It is expected that, following completion of the merger, the operations
of Casco will be conducted substantially as they are currently being conducted.
Casco, Davis Holdings, Davis Acquisition, and the Continuing Stockholders do not
have any present plans or proposals that relate to or would result in an
extraordinary corporate transaction following completion of the merger involving
Casco's corporate structure, business or management, such as a merger,
reorganization, liquidation, relocation of any operations or sale or transfer of
a material amount of assets. However, Casco, Davis Holdings, Davis Acquisition,
and the Continuing Stockholders will continue to evaluate Casco's business and
operations after the merger and may develop new plans and proposals that Casco,
Davis Holdings, Davis Acquisition, and the Continuing Stockholders consider to
be in the best interests of Casco and its then current stockholders.
Among the benefits to Casco and its affiliates is the elimination of
the expenses related to Casco being a publicly-traded company and filing
periodic reports under the Exchange Act. Those expenses aggregate, on an annual
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basis, between about $115,000 and $150,000. A benefit to the Continuing
Stockholders is that future earnings and growth of Casco will be solely for
their benefit and not for the benefit of the current public stockholders of
Casco who are not Continuing Stockholders. The detriments to Casco and the
Continuing Stockholders are the lack of liquidity for the common stock of Casco
following the merger and the payment of about $2.2 million to fund the merger.
An additional detriment to the Davis Group is the risk created by the
requirement that they guaranty the $2.2 million debt to fund the merger.
The only benefit to unaffiliated holders of Casco common stock is the
right to receive $2.10 per share for their shares of Casco common stock. The
detriments are that such shareholders will cease to participate in future
earnings and growth, if any, of Casco and that the receipt of the payment for
their shares will be a taxable transaction for federal income tax purposes. Each
stockholder's gain or loss per share will be equal to the difference between
$2.10 and the stockholder's stock basis per share in the Casco common stock. If
a stockholder holds Casco common stock as a capital asset, the gain or loss from
the exchange will be a capital gain or loss. The gain or loss will be long term
if the stockholder's holding period is more than one year. See "Federal Income
Tax Considerations."
As a result of the merger, certain of the Continuing Stockholders who
hold Casco options will receive an amount equal to the excess, if any, of $2.10
per share over the exercise price per share of such options. See "Merger
Consideration to be Received by the Continuing Stockholders."
The following table sets forth for each Continuing Stockholder his or
her interest in the net book value and net income of Casco, based upon the
percentage of his or her ownership of Casco's outstanding common stock as of May
31, 2001:
OWNERSHIP NET BOOK NET NET
PERCENT VALUE(1) INCOME(2) INCOME(3)
------- -------- ---------- ---------
American Home Building Corporation................ 0% $ -0- $ -0- $ -0-
S. Robert Davis................................... 14.8% 973,527 2,574 50,468
Charles R. Davis.................................. 6.4% 420,984 1,113 21,824
R. L. Renck & Co., Inc............................ 19.1% 1,256,375 3,321 65,131
Dr. John Graver................................... 3.1% 203,914 539 10,571
Randall J. Asmo................................... 2.2% 144,713 383 7,502
Richard B. Fentin................................. 1.1% 72,357 191 3,751
Melissa Davis..................................... * 17,760 47 920
Jeffrey A. Ross................................... * 11,840 31 614
Daniel A. Splawn.................................. * 29,600 77 1,535
- ------------------------
* Less than one percent.
(1) Based on Casco's stockholders' equity as of March 31, 2001 (unaudited).
(2) Based on Casco's net income for the quarter ended March 31, 2001
(unaudited).
(3) Based on Casco's net income for the year ended December 31, 2000.
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The following table sets forth for each Continuing Stockholder, his or
her interest in the net book value and net income of Casco after the merger,
based upon the percentage of his or her expected ownership of capital stock of
Casco as the surviving corporation:
OWNERSHIP NET BOOK NET NET
PERCENT VALUE (1) INCOME (2) INCOME (3)
------- --------- ---------- ----------
American Home Building Corporation................ 50.0% $3,288,941 $8,695 $170,500
R. L. Renck & Co., Inc............................ 20.0% 1,315,576 3,478 68,200
S. Robert Davis................................... 15.5% 1,019,573 2,695 52,855
Charles R. Davis.................................. 6.8% 447,296 1,182 23,188
Dr. John Graver................................... 3.3% 217,070 574 11,253
Randall J. Asmo................................... 2.3% 151,291 400 7,843
Richard B. Fentin................................. 1.2% 78,935 209 4,092
David A. Splawn................................... 0.5% 32,889 87 1,705
Melissa Davis..................................... 0.3% 19,734 52 1,023
Jeffrey A. Ross................................... 0.2% 13,156 35 682
- ------------------------
* Less than one percent.
(1) Based on Casco's stockholders' equity as of March 31, 2001 (unaudited).
(2) Based on Casco's net income for the quarter ended March 31, 2001
(unaudited).
(3) Based on Casco's net income for the year ended December 31, 2000.
RISKS THAT THE MERGER WILL NOT BE COMPLETED
Completion of the merger is subject to various risks, including, but
not limited to, the following:
o that the merger agreement will not be adopted and approved by the
holders of a majority of the outstanding shares of Casco common
stock;
o that Davis Holdings and Davis Acquisition will not secure the
financing necessary to complete the merger on the terms and
conditions set forth in the financing commitment, as further
described in "--Merger Financing";
o that Casco, Davis Holdings or Davis Acquisition will not have
performed in all material respects their obligations contained in
the merger agreement before the effective time of the merger;
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o that the representations and warranties made by Casco, Davis
Holdings or Davis Acquisition in the merger agreement will not be
true and correct at the closing date of the merger; and
o that there may be litigation that could prevent the merger, cause
the merger to be rescinded following completion of the merger or
that could have a material adverse effect on Casco.
As a result of various risks to the completion of the merger, there can
be no assurance that the merger will be completed even if the requisite
stockholder approval is obtained. It is expected that, if Casco stockholders do
not adopt and approve the merger agreement or if the merger is not completed for
any other reason, the current management of Casco, under the direction of the
board of directors, will continue to manage Casco as an ongoing business.
INTERESTS OF THE CONTINUING STOCKHOLDERS IN THE MERGER
In considering the recommendation of the board of directors, Casco
stockholders should be aware that the Continuing Stockholders have interests
different from Casco stockholders generally since Davis Holdings will own all of
the outstanding shares of Casco following the merger. The Davises also own and
control American Home Building Corp., which will own 50% of Casco after the
merger. Also, immediately following the merger, current executives of Casco,
including the Davises, Mr. Splawn and Mr. Ross, will continue to serve in their
respective roles.
As a result of the potential conflict of interest, the board of
directors appointed the special committee, consisting of two independent
directors who are not officers or employees of Casco and who have no financial
interest in the merger different from Casco stockholders generally (other than
as holders of options to purchase shares of common stock of Casco). The special
committee was appointed to evaluate, negotiate and recommend the merger
agreement and to evaluate whether the merger is in the best interests of Casco's
unaffiliated stockholders. The special committee was aware of these differing
interests and considered them, among other matters, in evaluating and
negotiating the merger agreement and the merger and in recommending to the board
of directors that the merger agreement and the merger be adopted and approved.
The board of directors determined that each member of the special
committee would receive $10,000, regardless of whether any proposed transaction
was entered into or completed. The board of directors also determined that David
J. Richards, chairman of the special committee, would receive an additional
$5,000 fee for his time spent in connection with the performance of his
responsibilities and duties as chairman of the special committee. See also,
"Merger Consideration to be Received by the Continuing Stockholders."
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EXECUTIVE OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
Under the terms of the merger agreement, it is expected that, in
general, the current management of Casco will remain the management of Casco as
the surviving corporation. The executive officers of Casco that are expected to
remain officers of Casco following completion of the merger are Charles R. Davis
and Jeffrey A. Ross, each of whom are current executive officers of Casco. In
addition, it is expected that S. Robert Davis and Charles R. Davis will each be
a director of Casco as the surviving corporation.
MERGER CONSIDERATION TO BE RECEIVED BY
THE CONTINUING STOCKHOLDERS
The Continuing Stockholders will be contributing to Davis Holdings all
of their shares of Casco common stock. Accordingly, they will not receive $2.10
per share for those shares.
Each option to purchase Casco common stock outstanding immediately
prior to the merger and held by members of the Management Group, whether vested
or unvested, will be canceled and Casco will pay to each option holder an amount
equal to the excess, if any, of $2.10 per share over the exercise price per
share of such options held by such holder multiplied by the number of shares
such holder could have purchased had such holder exercised such options in full
immediately prior to the merger.
The following table sets forth information with respect to each
Continuing Stockholder who will receive payment for his options:
NUMBER OF SHARES OPTION EXERCISE
NAME SUBJECT TO OPTION PRICE TOTAL PAYMENT
- ---- ----------------- ----- -------------
Charles R. Davis 200,000 $1.75 $70,000
S. Robert Davis 100,000 1.75 35,000
Jeffrey A. Ross 45,000 1.75 15,750
David A. Splawn 45,000 1.75 15,750
Randall J. Asmo 20,000 1.75 7,000
CONTINUING EQUITY INTERESTS OF THE CONTINUING STOCKHOLDERS
American Home Building Corporation, of which S. Robert Davis and
Charles R. Davis each are 50% owners, owns 1,000 shares of Davis Holdings common
stock, representing 100% of the issued and outstanding shares of Davis Holdings
common stock as of the date of this proxy statement, for which it paid $1.
Immediately prior to the effective time of the merger, each share of
Casco common stock held by the Continuing Stockholders will be contributed to
Davis Holdings in exchange for one share of common stock of Davis Holdings and
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American Home Building Corporation will be issued additional shares of Davis
Holdings common stock so that it will own 50% of the issued and outstanding
common stock of Davis Holdings.
The ownership of common stock of Davis Holdings immediately following
the merger will be as follows:
NAME COMMON STOCK
- ---- ------------
American Home Building Corporation....................... 843,866
S. Robert Davis.......................................... 261,754
R. L. Renck & Co., Inc................................... 338,200
Charles R. Davis......................................... 114,266
Dr. John Graver.......................................... 55,000
Richard Fentin........................................... 20,000
Randall J. Asmo.......................................... 38,825
Daniel A. Splawn......................................... 7,900
Melissa Davis............................................ 4,714
Jeffrey A. Ross.......................................... 3,207
VOTING AGREEMENT AND PROXY
The Continuing Stockholders have agreed to vote all of their shares of
Casco common stock in favor of the adoption and approval of the merger
agreement. In addition, except as otherwise agreed to by Davis Holdings, against
the following actions (other than the merger and the transactions contemplated
by the Merger Agreement): (i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving Casco; (ii) a
sale, lease or transfer of a material amount of assets of Casco, or a
reorganization, recapitalization, dissolution or liquidation of Casco; (iii) any
change in a majority of the persons who constitute the board of directors of
Casco; (iv) any material amendment to Casco's certificate of incorporation or
bylaws, or any other action involving Casco which has the effect of impeding,
interfering with, delaying, postponing or impairing the ability of Casco to
consummate the merger or the transactions contemplated by the Merger Agreement.
Each of the Continuing Stockholders have also agreed not to enter into any
agreement or understanding with any person or entity prior to the termination of
a contribution agreement among them. The Continuing Stockholders hold 843,866
shares of common stock or approximately 47.6% of the total number of issued and
outstanding shares of Casco common stock.
Each of the Continuing Stockholders has granted to the Davises a proxy
to vote their share of Casco common stock in favor of the proposed merger. To
Casco's knowledge, after reasonable inquiry, all of the other directors and
executive officers of Casco who own shares of common stock of Casco currently
intend to vote their shares FOR the proposal to adopt and approve the merger
agreement.
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INDEMNIFICATION
Article VI of Casco's certificate of incorporation, as amended (the
"Certificate"), eliminates the personal liability of Casco's directors to Casco
or its stockholders for monetary damages for breaches of their fiduciary duty
(subject to certain exceptions, such as breaches of the duty of loyalty to Casco
or its stockholders). The certificate also provides that Casco shall indemnify
its officers and directors to the full extent authorized by the General
Corporation Law of the State of Delaware.
Article X of Casco's bylaws includes provisions for indemnification of
Casco's officers and directors to the extent permitted by the General
Corporation Law of the State of Delaware. Section 145 of the General Corporation
Law of the State of Delaware authorizes a corporation to indemnify its
directors, officers, employees or agents in non-derivative suits if such party
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, as determined in accordance with the Delaware General Corporation
Law. Section 145 further provides that indemnification shall be provided if the
party in question is successful on the merits or otherwise.
Casco has entered into indemnification agreements with all of its
directors and executive officers. The indemnification agreements contain
provisions which are in some respects broader than the specific indemnification
provisions contained in Casco's Certificate and Bylaws. The indemnification
agreements may require Casco, among other things, to indemnify such directors
and officers against certain liabilities that may arise by reason of their
status as directors and officers (other than liabilities arising from willful
misconduct of a culpable nature) and to advance their expenses as a result of
any proceeding against them as to which they could be indemnified. Insofar as
indemnification for liabilities under the Securities Act may be provided to
officers, directors or persons controlling Casco, Casco has been informed that
in the opinion of the Commission, such indemnification is against public policy
and is therefore unenforceable.
CERTAIN RISKS IN THE EVENT OF BANKRUPTCY
If Casco is insolvent at the effective time of the merger or becomes
insolvent as a result of the merger, the transfer of funds representing the
$2.10 per share price payable to stockholders upon completion of the merger may
be deemed to be a "fraudulent conveyance" under applicable law, and therefore
may be subject to claims of creditors of Casco. If such a claim is asserted by
the creditors of Casco after the merger, there is a risk that persons who were
stockholders at the effective time of the merger will be ordered by a court to
return to Casco's trustee in bankruptcy all or a portion of the $2.10 per share
in cash they received upon the completion of the merger. Management of Casco has
no reason to believe that Casco and its subsidiaries, on a consolidated basis,
will be insolvent immediately after giving effect to the merger.
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MERGER FINANCING
It is estimated that approximately $2.2 million will be required to
complete the merger and pay related fees and expenses. See "--Estimated Fees and
Expenses of the Merger." This sum will be provided by a new $2.2 million loan
(the "New Loan") which will be used to finance the merger. Casco's existing
asset-based line of credit (the "Existing Line") will be modified as described
below. The lender under both the Existing Line and the New Loan is Branch
Banking & Trust Co.
The New Loan will be cross-collateralized with the collateral securing
the Existing Line plus a second deed of trust on Casco's office and warehouse
building in Shelby, North Carolina and either additional real estate with a
minimum equity of $1,250,000 or a letter of credit in the amount of $750,000
with a minimum term of 18 months. S. Robert Davis and Charles R. Davis will post
or guaranty the required letter of credit. After the closing, Casco is also
required to pay down about $700,000 of the New Loan by drawing on the cash value
of a life insurance policy owned by Casco.
The interest rate on the New Loan will be at the lender's prime rate
plus .25%, adjusted daily. The New Loan is payable interest only for three
months, after which it is payable in equal monthly payments of principal and
interest over a period of 56 months.
The Existing Line will be modified by reducing the face amount from $5
million to $3 million. No alternative financing arrangements have been made in
the event that the merger financing described herein falls through. In addition,
the loan reporting and audits required under the Existing Line will be increased
from moderate to standard reporting and servicing and the borrowing availability
will change from 85% of eligible accounts receivable and 50% of eligible
inventory to 85% of eligible accounts receivable and 50% of eligible inventory,
with a $1.5 million limit on inventory.
Casco received a commitment for the New Loan and the modification of
the Existing Loan on March 22, 2001. The commitment letter was amended by letter
dated February 6, 2001. The following is a summary of the material conditions
which must be satisfied for Branch Banking & Trust Co. to fund the amount
contemplated by the commitment letter:
o satisfactory review by the lender of Casco's final 2000 audit;
o lender review and approval of final ownership structure;
o favorable opinion from lender's counsel;
o a pledge of stock of American to the lender; and
o receipt by the lender of an updated personal financial statement of
Charles R. Davis.
If the merger is completed, as the surviving corporation, Casco expects
to repay the debt incurred in connection with the merger primarily through cash
flow generated from operations in the ordinary course of business and/or through
refinancing. No alternative financing arrangements or alternative financing
plans have been made in the event that these financing arrangements are not
completed.
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The documentation governing the Existing Line and the New Loan has not
yet been finalized and, accordingly, remains subject to change.
The New Loan documentation and the documentation for the modification
of the Existing Loan is expected to contain customary representations and
warranties by Casco, including representations and warranties relating to
organization, authority, enforceability, financial statements, compliance with
law and other instruments, absence of material adverse changes, absence of
material litigation, absence of defaults, absence of conflicts with material
agreements, payment of taxes and certain business specific matters.
The documentation also is expected to contain numerous restrictive
covenants, including usual and customary financial covenants and covenants
related to capital expenditures, mergers and asset sales or purchases,
incurrence of debt obligations, liens and contingent obligations, transactions
with affiliates, distributions and dividends and use of proceeds.
The documentation also is expected to contain standard events of
default, including, among other events, defaults based on failure to pay
interest, principal or other amounts when due, failure to comply with covenants,
inaccurate or false representations or warranties, cross defaults, change of
control, judgment defaults, ERISA, bankruptcy and insolvency.
Casco has agreed to pay the fees and expenses payable to Branch Banking
& Trust Co. for the New Loan and the modification of the Existing Loan,
including a commitment fee of $5,500.
ESTIMATED FEES AND EXPENSES OF THE MERGER
The merger agreement provides that all expenses incurred in connection
with the merger agreement and the transaction contemplated thereby will be paid
by the party incurring such expense, except if the merger agreement is
terminated in certain circumstances as described below. However, if the merger
is consummated, Casco as the surviving corporation will pay or reimburse all
expenses in connection with the merger. These expenses will not reduce the
merger consideration to be received by Casco stockholders.
If the merger agreement is terminated by either party or if the board
of directors or the special committee withdraws or modifies in a manner adverse
to the Buyer its approval or recommendation of the merger or recommend another
acquisition proposal, and the Buyer is not in material breach of the merger
agreement, Casco will pay termination fee to the Buyer in an amount equal to the
greater of (i) 10% of the amount by which the fair market value of the
consideration that would be received by the public stockholders under the
acquisition proposal exceeds $2.10 per share, or (ii) $100,000; and Casco will
reimburse to the Buyer the amount of its expenses.
Casco has agreed to pay the fees and expenses payable to Branch Banking
& Trust Co. for the New Loan and for the modification of the Existing Loan.
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Fees and expenses of the merger are estimated to be as follows:
DESCRIPTION CASCO
- ----------- -----
Independent committee compensation............................. $ 25,000
SEC filing fees................................................ 420
Debt financing fees and expenses............................... 18,000
Financial advisory fees and expenses........................... 50,000
Legal fees and expenses........................................ 175,000(1)
Paying agent fees.............................................. 3,500
Accounting fees and expenses................................... 1,000
Printing and mailing expenses.................................. 15,000
Miscellaneous.................................................. 12,080
--------
Total...................... $300,000
========
- -----------
(1) Includes approximately $85,000 for legal counsel to the Buyer and the
Continuing Stockholders, $65,000 for legal counsel to Casco, and $25,000
for legal counsel to the special committee.
FEDERAL INCOME TAX CONSIDERATIONS
Upon completion of the merger, each outstanding share of Casco common
stock (other than shares held by Davis Holdings and other than shares as to
which appraisal rights are properly exercised) will be converted into the right
to receive the $2.10 in cash, without interest.
The following discussion is a summary of the principal United States
federal income tax consequences of the merger to stockholders whose shares are
surrendered pursuant to the merger (including any cash amounts received by
dissenting stockholders pursuant to the exercise of appraisal rights). The
discussion applies only to stockholders in whose hands shares of Casco common
stock are capital assets, and may not apply to shares of Casco common stock
received pursuant to the exercise of employee stock options or otherwise as
compensation, or to stockholders who are not citizens or residents of the United
States.
The United States federal income tax consequences set forth below are
based upon present law. Because individual circumstances may differ, each
stockholder is urged to consult his or her own tax advisor to determine the
applicability of the rules discussed below to him or her and the particular tax
effects of the merger, including the application and effect of state, local and
other tax laws.
The receipt of cash pursuant to the merger (including any cash amounts
received by dissenting stockholders 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 stockholder will recognize gain or loss equal to the
difference between the cash received by the stockholder pursuant to the merger
and the stockholder's adjusted tax basis in the shares of Casco common stock
surrendered in the merger. Such gain or loss will be capital gain or loss and
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will be long term gain or loss if, on the effective date of the merger, the
shares of Casco common stock were held for more than one year. There are
limitations on the deductibility of capital losses.
Payments in connection with the merger may be subject to "backup
withholding" at a 31% rate. Backup withholding generally applies if the
stockholder fails to furnish such stockholder's social security number or other
taxpayer identification number, or furnishes an incorrect taxpayer
identification number. Backup withholding is not an additional tax but merely an
advance payment, which may be refunded 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. Stockholders should consult with
their own tax advisors as to the qualifications for exemption from withholding
and procedures for obtaining such exemption.
Neither Davis Holdings nor Davis Acquisition will recognize gain or
loss for United States federal tax purposes as a result of the merger. The
Continuing Stockholders will not recognize gain or loss for federal income tax
purposes as a result of their exchange of Casco common stock for Davis Holdings
capital stock. The aggregate tax basis of Davis Holdings capital stock received
in exchange for Casco common stock will the same as the aggregate tax basis of
the Casco common stock surrendered in exchange. The holding period of Davis
Holdings stock received as a result of the exchange will include the holding
period of the Casco common stock surrendered.
ANTICIPATED ACCOUNTING TREATMENT OF MERGER
The merger will be treated as a purchase business combination for
accounting purposes.
CERTAIN REGULATORY MATTERS
Casco, Davis Holdings, Davis Acquisition and the Continuing
Stockholders do not believe that any governmental filings are required with
respect to the merger other than the filing of the certificate of merger with
the Secretary of State of the State of Delaware and filings with the Securities
and Exchange Commission and The Nasdaq SmallCap Market. Casco, Davis Holdings,
Davis Acquisition and the Continuing Stockholders do not believe that they are
required to make a filing with the Department of Justice and the Federal Trade
Commission pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, although each agency has the authority to challenge the merger on
antitrust grounds before or after the merger is completed.
APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law, referred to
as the "DGCL," any holder of common stock who does not wish to accept $2.10 per
share in cash for the holder's shares of common stock may exercise appraisal
rights under the DGCL and elect to have the fair value of the holder's shares of
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common stock on the date of the merger (exclusive of any element of value
arising from the accomplishment or expectation of the merger) judicially
determined and paid to the holder in cash, together with a fair rate of
interest, if any, provided that the holder complies with the provisions of
Section 262 of the DGCL.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL, and is qualified in its entirety
by the full text of Section 262, which is provided in its entirety as Appendix B
to this proxy statement. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the shares of common stock as to which
appraisal rights are asserted. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES
OF COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER
OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS
SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.
Under Section 262, where a proposed merger is to be submitted for
adoption and approval at a meeting of stockholders, as in the case of the
special meeting, the corporation, not less than 20 days before the meeting, must
notify each of its stockholders entitled to appraisal rights that appraisal
rights are available and include in that notice a copy of Section 262. This
proxy statement constitutes that notice to the holders of common stock, and the
applicable statutory provisions of the DGCL are attached to this proxy statement
as Appendix B. Any stockholder who wishes to exercise appraisal rights or who
wishes to preserve that right should review carefully the following discussion
and Appendix B to this proxy statement. Moreover, because of the complexity of
the procedures for exercising the right to seek appraisal of the common stock,
Casco believes that stockholders who consider exercising such appraisal rights
should seek the advice of counsel, which counsel or other appraisal services
will not be paid for by Casco. FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE
PROCEDURES SPECIFIED IN SECTION 262 WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
FILING WRITTEN OBJECTION. Any holder of common stock wishing to
exercise the right to demand appraisal under Section 262 of the DGCL must
satisfy each of the following conditions:
- as more fully described below, the holder must deliver to Casco a
written demand for appraisal of the holder's shares before the vote
on the merger agreement at the special meeting, which demand must
reasonably inform Casco of the identity of the holder and that the
holder intends to demand the appraisal of the holder's shares;
- the holder must not vote the holder's shares of common stock in
favor of the merger agreement at the special meeting or consent
thereto in writing pursuant to Section 228 of the DGCL; and
- the holder must continuously hold the shares from the date of making
the demand through the effective time of the merger; a stockholder
who is the record holder of shares of common stock on the date the
written demand for appraisal is made, but who thereafter transfers
those shares before the effective time of the merger, will lose any
right to appraisal in respect of those shares.
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The written demand for appraisal must be in addition to and separate
from any proxy or vote. Neither voting (in person or by proxy) against,
abstaining from voting or failing to vote on the merger agreement and the merger
will constitute a written demand for appraisal within the meaning of Section
262.
Only a holder of record of shares of common stock issued and
outstanding immediately before the effective time of the merger is entitled to
assert appraisal rights for the shares of common stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as the stockholder's name appears on
the applicable stock certificates, and should specify the stockholder's name and
mailing address, the number of shares of common stock owned and that the
stockholder intends to demand appraisal of the stockholder's common stock. If
the shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity.
If the shares are owned of record by more than one person, as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a stockholder; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for such owner or owners. A
record holder such as a broker who holds shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more other beneficial owners while not exercising appraisal rights
with respect to the shares held for one or more beneficial owners; in such case,
the written demand should set forth the number of shares as to which appraisal
is sought, and where no number of shares is expressly mentioned, the demand will
be presumed to cover all shares held in the name of the record owner.
STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS
AND WHO WISH TO EXERCISE APPRAISAL RIGHTS ARE URGED TO CONSULT WITH THEIR
BROKERS TO DETERMINE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR
APPRAISAL BY THE NOMINEE.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the effective time of the merger, be entitled to
vote the shares subject to that demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares as of a record date
before the effective time of the merger).
Any stockholder may withdraw its demand for appraisal and accept $2.10
per share by delivering to Casco a written withdrawal of the stockholder's
demand for appraisal. However, any such attempt to withdraw made more than 60
days after the effective date of the merger will require written approval of
Casco as the surviving corporation. No appraisal proceeding in the Delaware
Court of Chancery will be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just. If Casco as the surviving corporation does not approve a
stockholder's request to withdraw a demand for appraisal when that approval is
required, or if the Delaware Court of Chancery does not approve the dismissal of
an appraisal proceeding, the stockholder will be entitled to receive only the
appraised value determined in any such appraisal proceeding, which value could
be more than, the same as or less than $2.10 per share.
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A stockholder who elects to exercise appraisal rights under Section 262
should mail or deliver a written demand to Casco International, Inc., 13900
Conlan Circle, Suite 150, Charlotte, North Carolina 28277, Attn.: Jeffrey A.
Ross, Secretary.
NOTICE BY CASCO. Within 10 days after the effective time of the merger,
Casco, the surviving corporation, must send a notice as to the effectiveness of
the merger to each former stockholder of Casco who (1) has made a written demand
for appraisal in accordance with Section 262 and (2) has not voted to approve
and adopt, nor consented to, the merger agreement.
Under the merger agreement, Casco has agreed to give Davis Holdings
prompt notice of any demands for appraisal received by Casco. In addition, a
condition to the completion of the merger requires the holders of no more than
5% of the total number of outstanding shares of Casco common stock request to
exercise their appraisal rights. Davis Holdings has the right to participate in
all negotiations and proceedings with respect to demands for appraisal under the
DGCL. Casco will not, except with the prior written consent of Davis Holdings,
make any payment with respect to any demands for appraisal, or offer to settle,
or settle, any such demands.
Within 120 days after the effective time of the merger, any former
stockholder of Casco who has complied with the provisions of Section 262 to that
point in time will be entitled to receive from Casco as the surviving
corporation, upon written request, a statement setting forth the aggregate
number of shares not voted in favor of the merger agreement and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Casco as the surviving corporation must mail that
statement to the stockholder within 10 days of receipt of the request or within
10 days after expiration of the period for delivery of demands for appraisals
under Section 262, whichever is later.
FILING A PETITION FOR APPRAISAL. Within 120 days after the effective
date of the merger, either Casco as the surviving corporation or any stockholder
who has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the value of the shares
of common stock held by all such stockholders. Casco is under no obligation, and
has no present intent, to file a petition for appraisal, and stockholders
seeking to exercise appraisal rights should not assume that Casco as the
surviving corporation will file such a petition or that it will initiate any
negotiations with respect to the fair value of the shares. Accordingly,
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
and the manner prescribed in Section 262. Inasmuch as Casco has no obligation to
file such a petition, the failure of a stockholder to do so within the time
specified could nullify the stockholder's previous written demand for appraisal.
A stockholder timely filing a petition for appraisal with the Delaware
Court of Chancery must deliver a copy to Casco as the surviving corporation,
which will then be obligated within 20 days to provide the Register in Chancery
with a duly verified list containing the names and addresses of all stockholders
who have demanded payment for their shares and with whom agreements as to the
value of their shares have not been reached by Casco as the surviving
corporation. After notice to those stockholders, the Delaware Court of Chancery
may conduct a hearing on the petition to determine which stockholders have
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become entitled to appraisal rights. The Delaware Court of Chancery may require
stockholders who have demanded an appraisal of their shares and who hold stock
represented by certificates to submit their certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings. If
any stockholder fails to comply with the requirement, the Delaware Court of
Chancery may dismiss the proceedings as to that stockholder.
DETERMINATION OF FAIR VALUE. After determining the stockholders
entitled to an appraisal, the Delaware Court of Chancery will appraise the
shares, determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest, if any, to be paid upon the amount determined to be the fair value.
STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD BE AWARE THAT THE
FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN,
THE SAME AS OR LESS THAN THE $2.10 PER SHARE THEY WOULD RECEIVE UNDER THE MERGER
AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR SHARES. STOCKHOLDERS SHOULD
ALSO BE AWARE THAT INVESTMENT BANKING OPINIONS ARE NOT OPINIONS AS TO FAIR VALUE
UNDER SECTION 262.
In determining fair value and, if applicable, a fair rate of interest,
the Delaware Court of Chancery is to take into account all relevant factors. In
WEINBERGER V. UOP, INC., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider "market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which were known or
which could be ascertained as of the date of the merger and which throw any
light on future prospects of the merged corporation." Furthermore, the court may
consider "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation."
The costs of the action may be determined by the Delaware Court of
Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable. Upon application of a dissenting stockholder, the Delaware Court of
Chancery may also order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all of the shares entitled to appraisal.
EXAMINATION OF CORPORATE RECORDS. Stockholder's right to examine corporate
records is described in "Where Stockholders can find more information".
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ANY STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO
CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE APPRAISAL RIGHTS. FAILURE TO
COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW MAY RESULT IN THE LOSS OF A STOCKHOLDER'S
STATUTORY APPRAISAL RIGHTS.
THE MERGER AGREEMENT
The description of the merger agreement contained in this proxy
statement describes the material terms of the merger agreement. A complete copy
of the merger agreement appears in Appendix A to this proxy statement and is
incorporated by reference. You are urged to read the entire merger agreement as
it is the legal document that governs the merger.
THE MERGER
The merger agreement provides that, subject to the conditions
summarized below, Davis Acquisition will merge with and into Casco. Upon
completion of the merger, Davis Acquisition will cease to exist and Casco will
continue as the surviving corporation.
EFFECTIVE TIME OF MERGER
The merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware and articles of
merger with the Secretary of State of the State of North Carolina or at such
later time as is specified in the certificate or articles of merger. This time
is referred to as the "effective time." The filing is expected to occur as soon
as practicable after adoption and approval of the merger agreement by Casco
stockholders at the special meeting and satisfaction or waiver of the other
conditions to the merger set forth in the merger agreement.
CERTIFICATE OF INCORPORATION, BYLAWS AND DIRECTORS
AND OFFICERS OF CASCO AS THE SURVIVING CORPORATION
When the merger is completed:
- the articles of incorporation of Davis Acquisition as in effect
immediately prior to the effective time will be the certificate of
incorporation of Casco as the surviving corporation;
- the bylaws of Davis Acquisition in effect immediately prior to the
effective time will be the bylaws of Casco as the surviving
corporation;
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- the directors of Davis Acquisition immediately prior to the
effective time will become the directors of Casco as the surviving
corporation; and
- the officers of Casco immediately prior to the effective time will
become officers of Casco as the surviving corporation.
CONVERSION OF COMMON STOCK
At the effective time, each outstanding share of Casco common stock
will automatically be converted into and represent the right to receive $2.10 in
cash, without interest, referred to as the merger consideration, except for:
- each share of common stock of Davis Acquisition outstanding
immediately prior to the effective time will be converted into and
become one share of common stock of Casco, as the surviving
corporation in the merger;
- each Casco warrant which is outstanding immediately prior to the
effective time will be converted into the right to receive $2.10 per
share of Casco common stock, upon exercise of such Casco warrant;
- shares held by stockholders seeking appraisal rights in accordance
with Delaware law; and
- shares held by Casco in treasury that will be canceled without any
payment thereon.
At the effective time, each outstanding share of capital stock of Davis
Acquisition will be converted into and exchanged for that number of shares of
common stock of Casco as the surviving corporation, equal to that number of
shares of Casco common stock outstanding immediately before the effective time,
less the number of shares of Casco common stock held by Davis Holdings at the
effective time.
PAYMENT FOR SHARES
When and as needed, but in any event prior to or simultaneous with the
effective time, Davis Holdings or Davis Acquisition will deposit with the paying
agent appointed by Davis Holdings sufficient funds to pay the merger
consideration. Promptly after the effective time, Casco as the surviving
corporation will cause to be mailed to each record holder of shares of Casco
common stock immediately prior to the effective time a letter of transmittal and
instructions to effect the surrender of their certificate(s) in exchange for
payment of the merger consideration.
STOCKHOLDERS OF CASCO SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
PAYING AGENT UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
The holder will be entitled to receive $2.10 per share only upon
surrender to the paying agent of a share certificate, together with such letter
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of transmittal, duly completed in accordance with the instructions thereto. If
payment of the merger consideration is to be made to a person whose name is
other than that of the person in whose name the share certificate is registered,
it will be a condition of payment that (1) the share certificate so surrendered
be properly endorsed or otherwise in proper form for transfer and (2) the person
requesting such exchange pay any transfer or other taxes that may be required to
the satisfaction of the paying agent. No interest will be paid or accrued upon
the surrender of the share certificates for the benefit of holders of the share
certificates on any merger consideration.
One year following the effective time, Davis Holdings will cause the
paying agent to deliver to Casco as the surviving corporation all cash and
documents in its possession, which have been deposited with the paying agent and
which have not been disbursed to holders of share certificates. Thereafter,
holders of certificates representing shares of Casco common stock outstanding
before the effective time will surrender their certificates to Casco as the
surviving corporation and will be entitled to look only to Casco as the
surviving corporation for payment of any claims for merger consideration to
which they may be entitled. Casco, Davis Holdings, Davis Acquisition and the
paying agent will not be liable to any person in respect of any merger
consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
TRANSFER OF SHARES
At the effective time, the stock transfer books of Casco will be closed
and there will be no further transfers on the records of Casco as the surviving
corporation, or its transfer agent of certificates representing shares of Casco
common stock outstanding before the effective time and any such certificates
presented to Casco as the surviving corporation for transfer, other than shares
held by stockholders seeking appraisal rights, will be canceled. From and after
the effective time, the holders of share certificates representing shares of
Casco common stock before the effective time will cease to have any rights with
respect to these shares except as otherwise provided for in the merger agreement
or by applicable law. All merger consideration paid upon the surrender for
exchange of those share certificates in accordance with the terms of the merger
agreement will be deemed to have been issued and paid in full satisfaction of
all rights pertaining to the share certificates.
TREATMENT OF STOCK OPTIONS
Prior to the effective time, Casco will take all steps necessary to
give written notice to each holder of options granted under the Casco Incentive
Stock Option Plan, as amended and the Casco Non-Employee Director Stock Option
Plan, as amended collectively, the "Option Plans." All such options outstanding
as of the effective time, whether vested or unvested, will be canceled effective
as of the effective time and upon the execution and delivery to the Company by
such holder of an instrument acknowledging cancellation of all such options held
by such holder, Casco shall pay such holder promptly following the effective
time, an amount determined by multiplying (i) the excess, if any, of $2.10 per
share over the applicable exercise price per share of such options held by such
holder by (ii) the number of shares such holder could have purchased had such
holder exercised such options in full immediately prior to the effective time.
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CASCO STOCKHOLDER APPROVAL
The approval and adoption by a majority of all shares of Casco common
stock entitled to vote thereon, in accordance with Section 251 of the Delaware
General Corporation Law is a condition to the obligations of the parties under
the merger agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of Casco relating to, among other things:
- Casco's due organization, valid existence, good standing and
necessary corporate power and authority of Casco and its
subsidiaries to carry on their business;
- the capitalization of Casco;
- authorization, execution, delivery and enforceability of the merger
agreement;
- the absence of any violations of or conflicts between the merger
agreement and applicable laws or agreements or Casco's certificate
of incorporation, as amended, and amended and bylaws, and any
applicable laws;
- the absence of consents, approvals, authorizations or permits of
governmental authorities, except those specified in the merger
agreement, required for Casco to complete the merger;
- the absence liabilities that individually or in the aggregate would
have a material adverse effect other than (i) liabilities incurred
in the ordinary course of business consistent with past practice
since December 31, 2000; (ii) liabilities that have been repaid or
otherwise extinguished; and (iii) liabilities under or contemplated
by the merger agreement;
- the adequacy and accuracy of filings made by Casco with the
Securities and Exchange Commission;
- the conduct of Casco's business and operations in the ordinary
course of business since December 31, 2000, except as disclosed in
Casco's reports filed with the Securities and Exchange Commission
and the absence of any material adverse effect;
- the absence of any action, claim, suit, investigation or proceeding
actually pending or threatened against Casco that if adversely
determined, would, individually or in the aggregate, have a material
adverse effect on Casco's business or operations, except for those
disclosed in Casco's reports filed with the Securities and Exchange
Commission; and
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- brokers', finders' and investment bankers' fees.
The merger agreement contains various customary representations and
warranties of Davis Holdings and Davis Acquisition relating to, among other
things:
- the due organization, valid existence, good standing and necessary
corporate power and authority of Davis Holdings and Davis
Acquisition to carry on their business;
- the capitalization of Davis Holdings and Davis Acquisition;
- the authorization, execution, delivery and enforceability of the
merger agreement;
- the absence of consents, approvals, authorization or permits of
governmental authorities, except those specified in the merger
agreement, required for Davis Holdings or Davis Acquisition to
complete the merger;
- the absence of any conflicts between the merger agreement and Davis
Holdings' or Davis Acquisition's certificate of incorporation or
bylaws, any applicable law or other contracts or documents;
- brokers', finders' and investment bankers' fees; and
- the absence of any intent to sell Casco's business following the
consummation of the merger.
All representations and warranties are subject to various
qualifications and limitations.
CONDUCT OF BUSINESS PENDING THE MERGER
Casco is subject to restrictions on its conduct and operations until
the merger is completed. In the merger agreement, Casco has agreed that, prior
to the effective time, it will operate its business only in the ordinary course
consistent with past practice and will use its best efforts to preserve in tact
its business relationships with third parties and to keep available the services
of its present officers and employees.
NOTICES OF CERTAIN EVENTS
Casco has agreed to notify the Buyer promptly of any notice or other
communication received by Casco from any person alleging that the consent of
such person may be required in connection with the merger, and any notice or
other communication received by Casco in connection with the merger.
ACQUISITION PROPOSALS
Casco has agreed not to directly or indirectly (i) take any action to
solicit, initiate or encourage any acquisition proposal, (ii) participate in any
discussions or negotiations with, encourage any effort or attempt by, any other
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person to facilitate an acquisition proposal or (iii) take any other action to
produce an acquisition proposal. For these purposes, an acquisition proposal
includes any offer or proposal concerning (i) any tender or exchange offer, (ii)
proposal for a merger, share exchange, recapitalization, consolidation or other
business combination involving Casco or (iii) any proposal or offer to acquire
in any manner, directly or indirectly, any significant equity interest in, or a
substantial portion of the assets of, Casco, other than pursuant to the
transactions contemplated by the merger agreement.
Notwithstanding the foregoing, Casco may, subject to a confidentiality
agreement, furnish to any party information and access in response to a request
for information or access made into an acquisition proposal after the date of
the merger agreement and participate in discussions and negotiate with such
party concerning any written acquisition proposal made after the date of the
merger agreement. However, Casco may not initiate or encourage such acquisition
proposal and the special committee must have determined in good faith based upon
advice of counsel to the special committee that the taking of such action is
necessary to discharge the board of directors' fiduciary duties under applicable
law.
The board of directors of Casco must immediately notify the Buyer if
any acquisition proposal is made and thereafter keep the Buyer promptly advised
of all material developments that could culminate in the board of directors
withdrawing, modifying or amending its recommendation of the merger.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligations of Casco, Davis
Holdings and Davis Acquisition to complete the merger are subject to the
satisfaction or waiver on or prior to the effective time of the following
conditions:
- the merger and the merger agreement shall have been adopted and
approved by the holders of a majority of the outstanding shares of
Casco common stock;
- the parties shall have received a certified copy of consent
resolutions duly adopted by the board of directors and sole
stockholder of Davis Acquisition, by the terms of which resolutions
such board of directors shall have adopted and approved the merger
agreement and the merger and recommended that the merger to Davis
Holdings, as the sole stockholder of Davis Acquisition, and Davis
Holdings shall have adopted and approved the merger agreement and
the merger;
- the absence of any law, order or injunction that prohibits the
completion of the merger; and
- the completion of all actions by or in respect of or filings with
governmental authorities required to permit the consummation of the
merger, other than the filing of the requisite articles of merger
with the Secretary of State of the State of Delaware.
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CONDITIONS TO DAVIS HOLDINGS' AND DAVIS ACQUISITION'S OBLIGATIONS. The
obligations of each of Davis Holdings and Davis Acquisition to complete the
merger are subject to the satisfaction, or waiver by Davis Holdings and Davis
Acquisition, on or prior to the effective time, of the following conditions:
- Casco must have performed in all material respects all obligations
under the merger agreement required to be performed at or prior to
the effective time, the representations and warranties made by Casco
in the merger agreement must be true and correct in all material
respects as of the date of the merger agreement and as of the
effective date, and Davis Holdings must have received a certificate
signed by the chief executive officer and the principal financial
officer of Casco to such effect;
- no matter shall have occurred that would reasonably be expected to
affect materially or adversely the business, condition (financial or
otherwise), properties, assets, prospects or results of operations
of Casco considered as a whole;
- Casco must have obtained all consents and approvals from third
parties with respect to the transactions contemplated by the merger
agreement except for consents and approvals that would, individually
or in the aggregate, not have a material adverse effect on Casco
following completion of the merger;
- Casco shall have delivered cancellation instruments executed by all
holders of options with respect to all outstanding options as of the
effective time;
- The Buyer shall have received all documents it may reasonably
request relating to the authority of Casco to enter into the merger
agreement; and
- The Buyer shall have received an opinion of counsel to the Company
covering such matters as are reasonably requested by Davis Holdings.
CONDITIONS TO CASCO'S OBLIGATIONS. The obligation of Casco to effect
the merger is subject to the satisfaction, or waiver by Casco, on or prior to
the effective time, of the following conditions:
- each of Davis Holdings and Davis Acquisition must have performed in
all material respects all obligations under the merger agreement
required to be performed at or prior to the effective time, the
representations and warranties of each of Davis Holdings and Davis
Acquisition must be true and correct in all material respects as of
the effective time, and Casco must have received a certificate
signed by the chief executive officer and chief financial officer of
Davis Holdings and Davis Acquisition to such effect;
- Casco shall have received all documents it may reasonably request
relating to the authority of Davis Holdings and Davis Acquisition to
enter into the merger agreement; and
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- Casco shall have received from counsel to Davis Holdings and Davis
Acquisition an opinion covering such matters as Casco reasonably
requests.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated and the merger may be abandoned
at any time prior to the effective time (notwithstanding any approval of the
merger agreement by the stockholders of Casco):
o by mutual consent of Casco and the Buyer;
o by either Casco or the Buyer if the merger has not been consummated
by October 31, 2001;
o by either Casco or the Buyer, if there shall be any law that makes
consummation of the merger illegal or otherwise prohibited or if any
order enjoining the Buyer or Casco from consummating the merger is
entered and such order shall become final non-appealable; or
o by either Casco or the Buyer if the merger agreement and the merger
shall fail to be approved and adopted by the stockholders of Casco;
o by either Casco or the Buyer if the board of directors or special
committee of Casco shall (i) withdraw or modify in a manner adverse
to the Buyer its approval or recommendation of the merger agreement
and the merger, (ii) recommend another acquisition proposal, or
(iii) resolve to do any of the foregoing;
o by either Casco or the Buyer if the other party has breached any
representation, warranty, or covenant contained in the merger
agreement in any material respect, the breaching party has been
notified of such breach and the breach cannot be or has not been
cured within 15 days after the giving of such notice.
Generally, if the merger agreement is terminated, there will be no
liability on the part of any party except for the payment of fees and expenses
as described below. However, no party will be relieved from liability for
breaches of the merger agreement.
If the merger agreement is terminated by either Casco or the Buyer if
the board of directors or special committee of Casco shall have (i) withdrawn or
modified in a manner adverse to the Buyer its approval or recommendation of the
merger agreement and the merger, (ii) recommended another acquisition proposal,
or (iii) resolved to do any of the foregoing, and the Buyer is not in material
breach of its covenants, representations and warranties contained in the merger
agreement, Casco will pay a termination fee to the Buyer in an amount equal to
the greater of (i) 10% of the amount by which the fair market value of the
consideration that would be received by the public stockholders under the
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acquisition proposal exceeds $2.10 per share of Casco common stock, or (ii)
$100,000; and Casco will reimburse to the Buyer the amount of its reasonable
out-of-pocket expenses (including fees and expenses of counsel, investment
bankers, experts, etc.) incurred in connection with the merger.
AMENDMENTS; WAIVERS
Any provision of the merger agreement may be amended or waived prior to
the effective time if, and only if, such amendment or waiver is in writing and
signed by all parties, or in the case of a waiver, by the party against whom the
waiver is to be effective. After the adoption of the merger agreement by the
stockholders of the Company, no such amendment or waiver may, without the
further approval of such stockholders, alter or change (i) the merger
consideration or (ii) any of the terms or conditions of the merger agreement if
such alteration or change would adversely affect the public stockholders.
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SELECTED FINANCIAL DATA
Casco's selected historical financial data presented below as of and
for the five fiscal years ended December 31, 2000 are derived from Casco's
audited consolidated financial statements. Data as of and for the three-month
periods ended March 31, 2001 and March 31, 2000 have been derived from unaudited
financial statements of Casco. Interim operating results are not necessarily
indicative of the results that may be achieved for the entire year. The
following selected historical financial data should be read in conjunction with
Casco's most recent Annual Report on Form 10-K and Quarterly Report on Form
10-Q, which are incorporated by reference in, and accompany, this proxy
statement.
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------------------------------------------- -------------------------
2000 1999 1998 1997 1996 2001 2000
----------- ----------- ----------- ----------- ----------- ----------- -----------
(In thousands except per share data)
STATEMENT OF OPERATIONS DATA:
Revenues ...................... $ 23,545 $ 24,199 $ 21,718 $ 19,333 $ 21,959 $ 5,336 $ 5,242
Costs and expenses ............ $ 22,952 $ 23,549 $ 22,102 $ 20,007 $ 22,542 $ 5,306 $ 5,261
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative
effect of change in
accounting principle .. 593 650 (384) (674) (583) 30 (18)
Benefit (Provision) for income
taxes ................. (252) (293) 146 256 195 (13) 7
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary gain
and cumulative effect
of change in accounting
principle ............. 341 357 (238) (418) (388)
Cumulative effect of change in
accounting principle* ......... -- -- -- -- 597
Extraordinary gain on
retirement of debt .... -- -- 930 -- --
----------- ----------- ----------- ----------- -----------
Net Income (loss) ............. 341 357 692 (418) 209 17 (11)
=========== =========== =========== =========== =========== =========== ===========
PER SHARE DATA:
Income (loss) before cumulative
effect of change in
accounting principle .. $ 0.19 $ 0.20 $ (0.13) $ (0.34) $ (0.39) $ 0.01 $ (0.01)
Cumulative effect of change in
accounting principle . -- -- -- -- 0.59 -- --
Extraordinary gain on
retirement of debt .... -- -- 0.52 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) per common share 0.19 0.20 0.39 (0.34) 0.20 0.01 (0.01)
=========== =========== =========== =========== =========== =========== ===========
Weighted average common and
common equivalent
shares ................ 1,782,237 1,783,200 1,783,200 1,255,447 1,003,431 1,774,186 1,783,200
=========== =========== =========== =========== =========== =========== ===========
- -----------
* In 1996, the Company changed its method of accounting for the recognition
of revenues relating to advanced deposits. Effective with the change,
revenues are recognized over the course of the programs based on the
Company's historical and expected redemption percentages. The effect of the
accounting change in 1996 was to increase income before income taxes and
cumulative effect of change in accounting principle by $209,190.
BALANCE SHEET DATA:
Working capital ........... $ 4,920 $ 4,787 $ 4,606 $ 7,202 $ 5,025 $ 5,056 $ 4,806
Total assets .............. 16,544 17,344 18,843 16,148 18,249 14,782 14,947
Long-term debt ............ 2,054 2,190 2,413 4,900 4,125 2,023 2,153
Stockholders' equity ...... 6,560 6,237 5,880 5,188 3,328 6,578 6,226
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Casco has not provided any pro forma data giving effect to the proposed
merger. Casco does not believe such information is material to its unaffiliated
stockholders in evaluating the merger agreement and the merger since the merger
consideration is all cash; and if the merger is completed, Casco stock would
cease to be publicly traded and the unaffiliated stockholders of Casco would not
retain or receive a continuing interest in Casco's business.
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MARKET PRICES OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
Casco's common stock and warrants trade on The Nasdaq SmallCap Market
under the symbols "CASC" and "CASCW". As of May 31, 2001, there were
approximately 510 record holders of Casco common stock. The following table sets
forth, for the periods indicated, the high and the low bid prices for shares of
the Company's common stock and warrants. These quotations represent prices
between dealers, do not include markups, markdowns or commissions and may not
necessarily represent actual transactions.
BID PRICE
---------------------------------------
HIGH LOW
----------------- ------------------
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter......................................................... $1.750 $0.875
Second Quarter........................................................ $2.125 $1.625
Third Quarter......................................................... $4.500 $1.750
Fourth Quarter........................................................ $3.500 $2.000
FISCAL YEAR ENDED DECEMBER 31, 2000
First Quarter......................................................... $5.843 $1.781
Second Quarter........................................................ $4.500 $2.625
Third Quarter......................................................... $3.687 $1.187
Fourth Quarter........................................................ $1.625 $0.875
FISCAL YEAR ENDED DECEMBER 31, 2001
First Quarter......................................................... $1.843 $1.156
Second Quarter (through May 31, 2001)................................. $1.940 $1.480
Both the high and the low bid price of Casco's common stock on The
Nasdaq SmallCap Market on December 8, 2000, the last trading day before Casco
announced the Davis' initial offer to take Casco private by purchasing all of
the outstanding shares of common stock at a price of $1.87 per share, was $1.00
per share. The average high and low bid price per share of Casco common stock
was $1.59 and $0.875, respectively, during the four week period preceding the
initial announcement to take Casco private. On May 10, 2001, the last full
trading day before the public announcement of the signing of the merger
agreement, the high and low bid prices of Casco common stock as reported on The
Nasdaq SmallCap Market were $1.93 and $1.91 per share, respectively, and the
closing sale price on that date was $1.91 per share. On , 2001, the
last practicable trading day for which information was available prior to the
date of the first mailing of this proxy statement, the closing price per share
of Casco common stock as reported on The Nasdaq SmallCap Market was $ .
Stockholders should obtain a current market quotation for Casco common stock
before making any decision with respect to the merger.
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DIVIDENDS
Casco has not declared or paid any cash dividends on the Common Stock
since it was acquired by Pages, Inc. in 1990. Casco's management anticipates
that for the foreseeable future it will retain earnings in order to finance the
expansion and development of its business, and no cash dividends will be paid on
its common stock. Casco may reconsider this policy from time to time in light of
conditions then existing, including earnings performance, financial condition
and capital requirements. The Loan Agreement between Casco and Branch Banking &
Trust (the "Loan Agreement") does not allow Casco to pay cash dividends which
total in excess of $100,000 on its common stock and only then when Casco is not
in default under the Loan Agreement.
Casco will be subject to financial and operating covenants, including
limitations on the payment of cash dividends, under the proposed $2.2 million
loan anticipated to provide the financing for the merger. See "Merger
Financing."
RECENT STOCK PURCHASES
PURCHASES BY CASCO, DAVIS HOLDINGS AND DAVIS ACQUISITION
Neither Casco, Davis Holdings nor Davis Acquisition have purchased any
Casco common stock during the past two years. Except as disclosed under
"Purchased by the Continuing Stockholders," none of the directors or executive
officers of Davis Holdings or Davis Acquisition purchased any Casco common stock
in the past two years.
PURCHASES BY THE CONTINUING STOCKHOLDERS
The table below sets forth information regarding purchased by each of
the Continuing Stockholders of Casco common stock during the past two years,
including the number of shares purchased, the range of prices paid and the
average purchase price:
AVERAGE PURCHASE
NAME DATE NO. OF SHARES PRICE RANGE PRICE
- ---- ---- ------------- ----------- --------------------
S. Robert Davis.............. Second Quarter 1999 3,400 $0.90-1.84375 $1.09
Third Quarter 1999 1,000 2.3750 2.3750
First Quarter 2000 1,000 4.3125 4.3125
Second Quarter 2000 1,000 3.6875 3.6875
Melissa Davis................ Fourth Quarter 2000 648 1.68 1.68
Jeffrey A. Ross.............. Third Quarter 2001 1,112 2.10 2.10
Randall J. Asmo.............. Second Quarter 1999 5,000 0.90625 0.90625
David J. Richards............ First Quarter 2000 500 3.31 3.31
Second Quarter 2000 2,500 3.31-3.50 3.41
Rodney L. Taylor............. Third Quarter 1999 3,000 1.7813 1.7813
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RECENT TRANSACTIONS
There have been no transactions in the common stock of Casco effected
during the last 60 days by Casco, any of its directors or executive officers,
Davis Holdings, Davis Acquisition, or any Continuing Stockholder other than the
purchase by Jeffrey A. Ross described above under "Purchases by the Continuing
Stockholders."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Casco as of May 31, 2001 by (1) all those known to Casco
to be beneficial owners of more than 5% of its common stock; (2) each director;
(3) Casco's chief executive officer; (4) all executive officers and directors of
Casco as a group, and (5) all other Continuing Stockholders. Unless otherwise
indicated, the address for each of the stockholders listed below is c/o Casco
International, Inc., 13900 Conlan Circle, Suite 150, Charlotte, North Carolina
28277. Except as otherwise specified, each of the stockholders named in the
table has indicated to Casco that such stockholder has sole voting and
investment power with respect to all shares of Casco common stock beneficially
owned by that stockholder.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
---------------------------------
NAME POSITION WITH CASCO SHARES (1) PERCENTAGE(1)
- ---- ------------------- ---------- -------------
S. Robert Davis Chairman of the Board 987,341 (3) 52.1%
Charles R. Davis President 1,159,141 (4) 56.2%
R. L. Renck & Co., Inc.(2) None 398,200 (5) 21.7%
Daniel A. Splawn Vice President, Operations 58,300 (6) 3.2%
Dr. John Graver None 55,000 3.1%
David J. Richards(2) Director 41,609 (7) 2.3%
Michael P. Beauchamp(2) Director 46,480 (7) 2.6%
Randall J. Asmo(2) Director 61,525 (8) 3.4%
Rodney L. Taylor(2) Director 23,000 (9) 1.3%
Richard R. Fentin(2) None 20,000 1.1%
Philip M. Shasteen(2) Director 11,713 (10) 0.7%
Jeffrey A. Ross Chief Financial Officer 54,687 (11) 3.0%
Melissa Davis(2) None 4,714 0.3%
Media Source, Inc.(2) None 28,411 1.6%
All directors and executive -- 1,641,103 69.9%
officers as a group (8 persons)
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- ------------------
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Shares of
common stock issuable upon the exercise of options currently exercisable or
convertible or exercisable or convertible within 60 days, are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person. Percentage ownership is based on 1,774,186
shares outstanding on May 31, 2001.
(2) The address of S. Robert Davis, Randall J. Asmo, Media Source, Inc. ("Media
Source") and Melissa Davis is 5695 Avery Road, Dublin, OH 43016. The
address of R. L. Renck & Co., Inc. is 2 Rector Street, 25th Floor, New
York, NY 10006. The address of Dr. John Graver is 1535 Old Henderson Road,
Columbus, OH 43220. The address of Richard R. Fenton is 82 Devonshire
Street, Boston, MA 02109. The address of David J. Richards is 5900 Cromdale
Drive, Suite 300, Dublin, OH 43017. The address of Michael P. Beauchamp is
7422 Carmel Executive Park, Suite 107, Charlotte, North Carolina 28226. The
address of Rodney L. Taylor is SR 7 Newport Pike, Marietta, OH 45750. The
address of Mr. Shasteen is 100 North Tampa Street, Suite 1800, Tampa, FL
33602.
(3) Includes 110,000 shares issuable upon exercise of stock options within 60
days, 28,411 shares held by Media Source (as to which Mr. Davis has
beneficial ownership as Chairman of the Board and President), and 581,176
shares for which Mr. Davis and Charles R. Davis have the power to vote
pursuant to a proxy granted by each of the Continuing Stockholders to them
to vote in favor of the proposed merger (the "Proxy").
(4) Includes 287,800 shares issuable upon exercise of stock options within 60
days, 28,411 shares held by Media Source (as to which Mr. Davis has
beneficial ownership as a director of Media Source), and 729,600 shares for
which Mr. Davis and S. Robert Davis have the power to vote pursuant to the
Proxy.
(5) Includes 60,000 shares issuable upon the exercise of warrants within 60
days.
(6) Includes 50,400 shares issuable upon the exercise of options within the
next 60 days.
(7) Includes 35,400 shares issuable upon the exercise of options within the
next 60 days.
(8) Includes 22,700 shares issuable upon the exercise of options within the
next 60 days.
(9) Includes 20,000 shares issuable upon the exercise of options within the
next 60 days.
(10) Includes 10,000 shares issuable upon the exercise of options within the
next 60 days.
(11) Includes 51,480 shares issuable upon the exercise of options within the
next 60 days.
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INDEPENDENT AUDITORS
Casco's financial statements as of December 31, 2000 and 1999, and for
each of the years in the three-year period ended December 31, 2000, incorporated
by reference in this proxy statement, have been audited by Hausser + Taylor,
independent auditors, as stated in their report.
FUTURE STOCKHOLDER PROPOSALS
Casco's annual meeting of stockholders is normally held in May or June
of each year. When Casco received the proposal of S. Robert Davis and Charles R.
Davis in December, 2000 for a proposed merger, management postponed the annual
meeting of shareholders. If the merger is completed, there will be no public
participation in any future meetings of stockholders of Casco. However, if the
merger is not completed, Casco stockholders will continue to be entitled to
attend and participate in Casco stockholders' meetings. If the merger is not
completed, Casco will inform its stockholders, by press release or other means
determined reasonable by Casco, of the date by which stockholder proposals must
be received by Casco for inclusion in the proxy materials relating to the annual
meeting, which proposals must comply with the rules and regulations of the
Commission then in effect.
WHERE STOCKHOLDERS CAN FIND MORE INFORMATION
Casco files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. In addition,
because the merger is a "going private" transaction, Casco has filed a Rule
13e-3 Transaction Statement on Schedule 13E-3 with respect to the merger. The
Schedule 13E-3, the exhibits to the Schedule 13E-3 and such reports, proxy
statements and other information contain additional information about Casco.
Each exhibit to the Schedule 13E-3 will be made available for inspection and
copying at Casco's executive offices during regular business hours by any Casco
stockholder or a representative of a stockholder as so designated in writing.
Casco stockholders may read and copy the Schedule 13E-3 and any
reports, statements or other information filed by Casco at the Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Casco's filings with
the Commission are also available to the public from commercial document
retrieval services and at the website maintained by the Commission located at:
http://www.sec.gov.
This proxy statement is being furnished to stockholders together with a
copy of Casco's Annual Report on Form 10-K for the year ended December 31, 200
and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows Casco to "incorporate by reference" information
into this proxy statement. This means that Casco can disclose important
information by referring to another document filed separately with the
Commission. The information incorporated by reference is considered to be part
of this proxy statement. This proxy statement and the information that Casco
files later with the Commission may update and supersede the information
incorporated by reference. Casco incorporates by reference each document it
files under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this proxy statement and before the special meeting. Casco also
incorporates by reference into this proxy statement the following documents
filed by it with the Commission under the Exchange Act:
o Casco's Annual Report on Form 10-K for the year ended December 31,
2000; and
o Casco's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001.
Casco undertakes to provide without charge to each person to whom a
copy of this proxy statement has been delivered, upon request, by first class
mail or other equally prompt means, within one business day of receipt of such
request, a copy of any or all of the documents incorporated by reference herein,
other than the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this proxy statement
incorporates. Requests for copies should be directed to Casco International,
Inc., 13900 Conlan Circle, Suite 150, Charlotte, North Carolina 28277,
Attention: Jeffrey A. Ross, Secretary (telephone number: (704) 482-9581).
Document requests from Casco should be made by , 2001 in order to receive them
before the special meeting.
The proxy statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a proxy,
in any jurisdiction to or from any person to whom it is not lawful to make any
offer or solicitation in such jurisdiction. The delivery of this proxy statement
should not create an implication that there has been no change in the affairs of
Casco since the date of this proxy statement or that the information herein is
correct as of any later date.
Stockholders should not rely on information other than that contained
or incorporated by reference in this proxy statement. Casco has not authorized
anyone to provide information that is different from that contained in this
proxy statement.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAVIS HOLDINGS OF NORTH CAROLINA, INC.
DAVIS ACQUISITION CORP.
AND
CASCO INTERNATIONAL, INC.
DATED AS OF MAY 8, 2001
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TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER............................................................................................A-5
Section 1.1 Company Action.......................................................................A-5
Section 1.2 The Merger...........................................................................A-5
Section 1.3 Conversion of Shares and Warrants. At the Effective Time:...........................A-6
Section 1.4 Surrender and Payment................................................................A-6
Section 1.5 Dissenting Shares....................................................................A-7
Section 1.6 Stock Options........................................................................A-8
Section 1.7 Closing..............................................................................A-8
ARTICLE II THE SURVIVING CORPORATION............................................................................A-8
Section 2.1 Certificate of Incorporation.........................................................A-8
Section 2.2 Bylaws...............................................................................A-8
Section 2.3 Directors and Officers...............................................................A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................A-9
Section 3.1 Corporate Organization...............................................................A-9
Section 3.2 Capitalization.......................................................................A-9
Section 3.3 Authority Relative to this Agreement.................................................A-9
Section 3.4 No Violation........................................................................A-10
Section 3.5 Compliance with Laws................................................................A-11
Section 3.6 Litigation..........................................................................A-11
Section 3.7 Financial Statements and Reports....................................................A-11
Section 3.8 Absence of Certain Changes or Events................................................A-12
Section 3.9 No Undisclosed Material Liabilities.................................................A-12
Section 3.10 No Default..........................................................................A-12
Section 3.11 Finders' and Brokers' Fees..........................................................A-13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................A-13
Section 4.1 Corporate Organization..............................................................A-13
Section 4.2 Capitalization......................................................................A-13
Section 4.3 Corporate Authorization.............................................................A-13
Section 4.4 Governmental Authorization..........................................................A-14
Section 4.5 Non-Contravention...................................................................A-14
Section 4.6 Finders' and Brokers' Fees..........................................................A-14
Section 4.7 No Current Intent to Sell Business..................................................A-14
ARTICLE V COVENANTS OF THE COMPANY.............................................................................A-14
Section 5.1 Conduct of the Company..............................................................A-14
Section 5.2 Shareholder Meeting; Proxy Material.................................................A-14
Section 5.3 Disclosure Documents................................................................A-15
Section 5.4 Access to Information...............................................................A-15
Section 5.5 Notices of Certain Events...........................................................A-16
Section 5.6 Acquisition Proposals...............................................................A-16
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Page
----
ARTICLE VI COVENANTS OF BUYER..................................................................................A-17
Section 6.1 Director and Officer Liability......................................................A-17
Section 6.2 Disclosure Documents................................................................A-17
Section 6.3 Notices of Certain Events...........................................................A-17
ARTICLE VII COVENANTS OF BUYER AND THE COMPANY.................................................................A-18
Section 7.1 Best Efforts........................................................................A-18
Section 7.2 Certain Filings.....................................................................A-18
Section 7.3 Public Announcements................................................................A-18
Section 7.4 Further Assurances..................................................................A-18
ARTICLE VIII CONDITIONS TO THE MERGER..........................................................................A-19
Section 8.1 Conditions to the Obligations of Each Party.........................................A-19
Section 8.2 Additional Conditions to the Obligations of Buyer and Merger Subsidiary.............A-19
Section 8.3 Additional Conditions to the Obligations of the Company.............................A-20
ARTICLE IX TERMINATION.........................................................................................A-21
Section 9.1 Termination.........................................................................A-21
Section 9.2 Effect of Termination...............................................................A-21
Section 9.3 Fees and Expenses...................................................................A-21
ARTICLE X MISCELLANEOUS........................................................................................A-22
Section 10.1 Definitions.........................................................................A-22
Section 10.2 Notices. 21
Section 10.3 No Survival of Representations and Warranties.......................................A-25
Section 10.4 Amendments; No Waivers..............................................................A-25
Section 10.5 Successors and Assigns..............................................................A-25
Section 10.6 Governing Law.......................................................................A-25
Section 10.7 Severability........................................................................A-26
Section 10.8 Headings and Captions...............................................................A-26
Section 10.9 Interpretations.....................................................................A-26
Section 10.10 Counterparts; Effectiveness.........................................................A-26
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of May 8, 2001, by and
among Davis Holdings of North Carolina, Inc., a North Carolina corporation
("Davis"), Davis Acquisition of North Carolina, Inc. a North Carolina
corporation and wholly-owned subsidiary of Davis ("Merger Subsidiary" or "Merger
Sub") (Davis and Merger Subsidiary are sometimes referred to collectively as
"Buyer"), and Casco International, Inc., a Delaware corporation (the "Company").
WHEREAS:
A. The authorized capital stock of the Company consists of (i)
5,000,000 shares of common stock, $.01 par value (the "Company Common Stock"),
of which 1,783,200 shares were issued and outstanding as of close of business on
May 8, 2001, and (ii) 300,000 shares of preferred stock, $.01 par value (the
"Preferred Stock"), of which no shares were issued and outstanding as of the
close of business on May 8, 2001.
B. The Company has outstanding warrants to purchase 1,620,000 shares of
Company Common Stock ("Company Warrants"), consisting of warrants to purchase
1,560,000 shares at an exercise price of $5.50 per share, warrants to purchase
30,000 shares at an exercise price of $3.00 per share and warrants to purchase
30,000 shares at an exercise price of $2.75 per share.
C. Davis will own immediately prior to the Effective Time, 845,800
shares of Company Common Stock representing approximately 47% of the total
issued and outstanding Company Common Stock.
D. A special committee of the Board of Directors of the Company
appointed on December 11, 2000 and comprised entirely of directors who are
neither members of management of the Company nor affiliated with Buyer or any
Affiliate of Buyer (other than the Company) (the "Special Committee") has
unanimously determined that the Merger is fair to the shareholders of the
Company other than Buyer (the "Public Shareholders") and has unanimously
recommended its approval by the Board of Directors (the "Board").
E. The Board, based on the recommendation of the Special Committee and
the written opinion of Ambient Advisors, LLC, the financial advisor to the
Special Committee (the "Financial Advisor") that the consideration to be
received by the Public Shareholders in the Merger is fair from a financial point
of view, has determined that the Merger is fair to the Public Stockholders and
has approved and adopted this Agreement and its contemplated transactions and,
subject to the following terms and conditions, resolved to recommend the
approval and adoption of this Agreement by the shareholders of the Company.
F. The Board, Davis, and Merger Sub each have approved the merger of
Merger Subsidiary with and into the Company (the "Merger") in accordance with
the Delaware General Corporation Law ("DGCL"), the North Carolina Business
Corporation Act ("NCBCA"), as applicable, and the terms and conditions provided
below, pursuant to which each share (other than shares of Company Common Stock
A-4
72
held by the Company as treasury stock, shares of Company Common Stock owned by
Davis immediately prior to the Effective Time and shares of Company Common Stock
as to which appraisal rights have been perfected in accordance with the DGCL)
will be converted into the right to receive the Merger Consideration.
G. Certain capitalized terms are defined in Section 10.1 hereof.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants, representations, warranties, and agreements herein, the parties agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 COMPANY ACTION.
The Company represents that the Board, at a meeting called and held,
and relying in part on the unanimous recommendation of the Special Committee,
has (i) unanimously determined that this Agreement and its contemplated
transactions, including the Merger, are fair to, and in the best interests of,
the Public Shareholders, (ii) unanimously approved and adopted this Agreement
and its contemplated transactions, including the Merger, and (iii) unanimously
resolved to recommend the approval and adoption of this Agreement and the Merger
by the Company's shareholders, provided that such recommendation may be
withdrawn, modified, or amended by the Board if the Board deems such withdrawal,
modification, or amendment necessary in light of its fiduciary obligations to
the Company's shareholders after consultation with counsel.
SECTION 1.2 THE MERGER.
(a) At the Effective Time, Merger Subsidiary will be merged
with and into the Company in accordance with the DGCL and the NCBCA,
the separate existence of Merger Subsidiary shall cease, and the
Company shall be the Surviving Corporation.
(b) As soon as practicable after satisfaction of all
conditions to the Merger, or waiver of conditions to the extent
permitted herein, the Company and Merger Subsidiary will file a
certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware and articles of merger (together with
the Certificate of Merger, "Articles of Merger") with the Secretary of
State of the State of North Carolina and make all other filings or
recordings required by the DGCL and the NCBCA in connection with the
Merger. The Merger shall become effective when the Articles of Merger
are filed with the Secretary of State of the States of Delaware and
North Carolina or at such later time as is specified in the Articles of
Merger (the "Effective Time").
(c) After the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, and powers, and be subject to all
of the restrictions, disabilities, and duties of the Company and Merger
Subsidiary, all as provided under the DGCL.
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SECTION 1.3 CONVERSION OF SHARES AND WARRANTS. At the Effective Time:
(a) Each share of Company Common Stock (a "Share") which is
outstanding immediately prior to the Effective Time, except as
otherwise provided in Section 1.3(b) or as provided in Section 1.5 with
respect to Shares for which appraisal rights have been perfected, shall
be converted into the right to receive $2.10 in cash, without interest
(the "Merger Consideration").
(b) Each Share held by the Company as treasury stock
immediately prior to the Effective Time and each share held by Davis
immediately prior to the Effective Time shall be canceled and no
payment shall be made for it.
(c) Each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation
with the same rights, powers, and privileges as the shares so converted
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(d) Each Company Warrant which is outstanding immediately
prior to the Effective Time shall be converted into the right to
receive the Merger Consideration, upon exercise of such Company
Warrant.
SECTION 1.4 SURRENDER AND PAYMENT.
(a) At or before the Effective Time, the Company shall appoint
First Union National Bank, as agent (the "Exchange Agent"), for the
purpose of exchanging certificates representing Shares for the Merger
Consideration. At or immediately prior to the Effective Time, Davis
shall make a capital contribution to the Company in an amount that,
together with funds available to the Company, is sufficient to permit
the Company to make the aggregate Merger Consideration available to the
Exchange Agent in accordance herewith. At the Effective Time, the
Company shall make the aggregate Merger Consideration available to the
Exchange Agent for all applicable outstanding Shares to be converted in
accordance with Section 1.3(a) hereof. At or promptly following the
Effective Time, the Company or Surviving Corporation will send or cause
the Exchange Agent to send to each holder of Shares at the Effective
Time a letter of transmittal for use in such exchange. This letter of
transmittal shall specify that the delivery shall be effected and risk
of loss and title shall pass only upon proper delivery of the
certificates representing Shares to the Exchange Agent.
(b) Each holder of Shares that have been converted into a
right to receive Merger Consideration will be entitled to receive the
Merger Consideration payable for such holder's Shares upon surrender to
the Exchange Agent of a certificate or certificates representing such
Shares, together with a properly completed letter of transmittal
covering such Shares. After the Effective Time and until surrendered
with the letter of transmittal, each such certificate shall only
represent the right to receive Merger Consideration.
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(c) If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the Shares represented
by the certificate(s) surrendered in exchange, it will be a condition
to payment that the certificate(s) surrendered be properly endorsed or
otherwise be in proper form for transfer. Additionally, the Person
requesting such payment must pay to the Exchange Agent any transfer or
other taxes required as a result of payment to a Person other than the
registered holder of such Shares, or establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, no further transfers of Shares
will be registered. After the Effective Time, if certificates
representing Shares are presented to the Surviving Corporation, they
will be canceled and exchanged for the Merger Consideration in
accordance with the procedures set forth in this Article I.
(e) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 1.4(a) that remains unclaimed by
the holders of Shares six (6) months after the Effective Time shall be
returned within one week after the end of the six (6) month period,
without further action or request, to the Surviving Corporation, and
any such holder who has not exchanged such Shares for the Merger
Consideration in accordance with this Section prior to that time shall
thereafter look only to the Surviving Corporation for payment of the
Merger Consideration in respect of such Shares. However, neither Buyer
nor the Surviving Corporation shall be liable to any holder of Shares
for any amount paid to a public official pursuant to applicable
abandoned property Laws. Any amounts remaining unclaimed by holders of
Shares two years after the Effective Time (or an earlier date
immediately prior to such time as the amounts would otherwise escheat
to or become property of any governmental entity) shall, to the extent
permitted by applicable Law, become the property of the Surviving
Corporation free and clear of any claims or interest of any Person
previously entitled to them. Nothing in this section limits the
obligations of the Buyer under Section 1.4(a).
SECTION 1.5 DISSENTING SHARES.
Notwithstanding Section 1.3, Shares outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of this
Agreement or consented in writing and who has demanded payment of the fair value
of such Shares in accordance with the DGCL shall not be converted into a right
to receive the Merger Consideration, but shall be converted into the right to
receive such consideration as may be determined to be due in respect of such
dissenting Shares pursuant to Section 262 of the DGCL; provided, however, that
if the holder of such dissenting Shares shall have failed to perfect or shall
have waived, rescinded or otherwise lost (in each such instance, to the
reasonable satisfaction of the Surviving Corporation) its status as a
"dissenter" pursuant to Section 262 of the DGCL, then such holder shall forfeit
the right to dissent from the Merger and such Shares shall be deemed to have
been converted into the right to receive the Merger Consideration as of the
Effective Time. The Company shall give Buyer prompt notice of any demands
received by the Company for appraisal of Shares, and Buyer shall have the right
to participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Buyer, make any
payment with respect to, or settle, or offer to settle, any such demands.
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SECTION 1.6 STOCK OPTIONS.
Prior to the Effective Time, the Company shall take all steps necessary
to give written notice to each holder of options granted under the Casco
International, Inc. Incentive Stock Option Plan, as amended, and the Casco
International, Inc. Non-Employee Director Stock Option Plan, as amended
(collectively, the "Option Plans"), specifying that: (i) all such options
outstanding as of the Effective Time, whether vested or unvested (collectively
the "Options"), shall be cancelled effective as of the Effective Time and (ii)
upon the execution and delivery to the Company by such holder of an instrument
acknowledging cancellation of all such Options held by such holder effective as
the Effective Time ("Cancellation Instrument"), the Company shall pay such
holder, promptly following the Effective Time, an amount determined by
multiplying (a) the excess, if any, of the Merger Consideration over the
applicable exercise price per share of such Options held by such holder by (b)
the number of shares such holder could have purchased had such holder exercised
such Options in full immediately prior to the Effective Time (assuming all such
Options are fully vested). The Board or any committee thereof responsible for
the administration of the Option Plans shall take any and all action necessary
to effectuate matters described in this Section 1.6(a) on or before the
Effective Time.
SECTION 1.7 CLOSING.
Subject to the terms and conditions of this Agreement, the Closing of
the Merger (the "Closing") shall take place at the offices of Moore & Van Allen
at 100 North Tryon Street, Suite 4700, Charlotte, North Carolina, as promptly as
practicable after satisfaction or waiver, if permissible, of the conditions set
forth in Article VIII hereof, or at such other location, time, or date as may be
agreed to in writing by the parties hereto. The date on which the Closing occurs
is hereinafter referred to as the "Closing Date."
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 CERTIFICATE OF INCORPORATION.
The articles of incorporation of the Merger Subsidiary in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable Law.
SECTION 2.2 BYLAWS.
The bylaws of the Merger Subsidiary in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable Law.
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SECTION 2.3 DIRECTORS AND OFFICERS.
From and after the Effective Time, until successors are elected or
appointed and qualified in accordance with applicable Law, (i) the directors of
Merger Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (ii) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Davis and Merger Sub that:
SECTION 3.1 CORPORATE ORGANIZATION.
The Company has been duly organized and is validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, and is qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the ownership or leasing of its properties
makes such qualification necessary, other than where failure to be so qualified
or licensed, individually or in the aggregate, would not have a Material Adverse
Effect. The Company is not in violation of any provision of its charter or
bylaws or other organizational documents, as the case may be.
SECTION 3.2 CAPITALIZATION.
As of the date of this Agreement, the authorized capital stock of the
Company consists in its entirety of (i) 5,000,000 shares of common stock, $.01
par value per share, and (ii) 300,000 shares of preferred stock, none of which
are issued and outstanding. As of the date of the Agreement, (i) 1,783,200
shares of Company Common Stock were issued and outstanding, (ii) options to
acquire 821,940 shares of Company Common Stock were outstanding under the
Company Option Plans and (iii) warrants to acquire 1,620,000 shares of Company
Common Stock were outstanding under the Company Warrant Agreements. All of the
outstanding shares of capital stock of the Company have been duly authorized,
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights created by statute, their respective charter or bylaws or any
agreement to which any such entity is a party or by which any such entity is
bound. Except as set forth in Section 1.6(b) and this Section 3.2, there are no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company is a party
relating to the issued or unissued capital stock, or other interest in, of the
Company or obligating the Company to grant, issue or sell any shares of capital
stock of, or other equity interests in, the Company , by sale, lease, license or
otherwise.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
The Company has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated on its part hereby to be consummated by
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the Company. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated on its part hereby have been duly
authorized by all necessary corporate action, and, other than the approval of
the Company's shareholders as provided in Section 8.1(a) hereof, no other
corporate proceedings on the part of the Company are necessary to authorize the
consummation of the transactions contemplated on its part hereby. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Davis and Merger Sub,
constitutes the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equity principles.
SECTION 3.4 NO VIOLATION.
The execution and delivery of this Agreement by the Company do not, the
performance by the Company of its obligations hereunder will not, and the
consummation by the Company of the transactions contemplated to be performed by
it hereby will not (i) violate or conflict with any provision of any Laws in
effect on the date of this Agreement and applicable to the Company or by which
any of their respective properties or assets is bound or subject, (ii) require
the Company to obtain any consent, waiver, approval, license or authorization or
permit of, or make any filing with, or notification to, any Governmental
Entities, based on Laws, rules, regulations and other requirements of
Governmental Entities in effect as of the date of this Agreement (other than (a)
filings or authorizations required in connection or in compliance with the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the DGCL and (b) any other filings and approvals expressly
contemplated by this Agreement , (iii) require the consent, waiver, approval,
license or authorization of any person (other than Governmental Entities), (iv)
violate, conflict with or result in a breach of or the acceleration of any
obligation under, or constitute a default (or an event which with notice or the
lapse of time or both would become a default) under, or give to others any
rights of, or result in any, termination, amendment, acceleration or
cancellation of, or loss of any benefit or creation of a right of first refusal,
or require any payment under, or result in the creation of a lien or other
encumbrance on any of the properties or assets of the Company pursuant to or
under any provision of any indenture, mortgage, note, bond, lien, lease,
license, agreement, contract, order, judgment, ordinance, Company Permit (as
defined below) or other instrument or obligation to which the Company is a party
or by which the Company or any of their respective properties is bound or
subject to, or (v) conflict with or violate the articles of incorporation or
bylaws, or the equivalent organizational documents, in each case as amended or
restated, of the Company, except for any such conflicts or violations described
in clause (i) or breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or encumbrances
described in clause (iv) that would not have a Material Adverse Effect and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not, either individually
or in the aggregate, prevent the Company from performing any of its obligations
under this Agreement and would not have a Material Adverse Effect.
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SECTION 3.5 COMPLIANCE WITH LAWS.
(a) As of the date of this Agreement, each of the Company
holds all licenses, franchises, grants, permits, easements, variances,
exemptions, consents, certificates, identification numbers, approvals,
orders, and other authorizations (collectively, "Company Permits")
necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted and are in compliance with all
Company Permits and all Laws governing their respective businesses,
except where the failure to hold such Company Permits or to so comply,
individually or in the aggregate, would not have a Material Adverse
Effect.
(b) No action or proceeding is pending or, to the Company's
knowledge, threatened that may result in the suspension, revocation or
termination of any the Company Permit, the issuance of any
cease-and-desist order, or the imposition of any administrative or
judicial sanction, and the Company has received any notice from any
governmental authority in respect of the suspension, revocation or
termination of any Company Permit, or any notice of any intention to
conduct any investigation or institute any proceeding, in any such case
where such suspension, revocation, termination, order, sanction,
investigation or proceeding would result, individually or in the
aggregate, in a Material Adverse Effect.
SECTION 3.6 LITIGATION.
As of the date of this Agreement, except as may be disclosed in the
Company 10-K (as defined below), reports filed on Forms 10-Q or 8-K for periods
subsequent to the period covered by the Company 10-K, in each case filed prior
to the date hereof (such reports and filings, including the Company 10-K,
collectively, the "the Company Current Reports"), there is no claim, litigation,
suit, arbitration, mediation, action, proceeding, unfair labor practice
complaint or grievance pending or, to the Company's knowledge, investigation of
any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the Company's knowledge, threatened in
writing against the Company or with respect to any property or asset of any of
them, except for claims, litigations, suits, arbitrations, mediations, actions,
proceedings, complaints, grievances or investigations which, individually or in
the aggregate, would not have a Material Adverse Effect. Neither the Company nor
any of its property or assets is subject to any continuing order, judgment,
settlement agreement, injunction, consent decree or other similar written
agreement with or, to the Company's knowledge, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, consent decree or
award of any Governmental Entity or arbitrator, including, without limitation,
cease-and-desist or other orders, except for such matters which would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.7 FINANCIAL STATEMENTS AND REPORTS.
The Company has made available to Davis true and complete copies (in
each case, as amended) of (i) its Annual Report on Form 10-K for the year ended
December 31, 2000 (the "Company 10-K"), as filed with the Securities and
Exchange Commission (the "Commission") and (ii) all other reports (including
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed by it with
the Commission subsequent to December 31, 2000. The reports referred to in the
two immediately preceding sentences (including, without limitation, any
financial statements or schedules or other information included or incorporated
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by reference therein) are referred to in this Agreement as the "the Company SEC
Filings." As of the respective times such documents were or are filed, the
Company SEC Filings complied or will comply in all material respects with the
requirements of the Securities Act of 1933, as amended, or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder, except
for such noncompliance which, individually or in the aggregate, would not have a
Material Adverse Effect, and did not and will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Filings comply or will
comply as to form in all material respect with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, were or will be prepared in accordance with generally accepted
accounting principles (as in effect from time to time) applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto or, in the case of the unaudited interim financial statements, as
permitted by Form 10-Q of the Commission) and present fairly the consolidated
financial position, consolidated results of operations and consolidated cash
flows of the Company as of the dates and for the periods indicated, except (i)
in the case of unaudited interim consolidated financial statements, to normal
recurring year-end adjustments and any other adjustments described therein and
(ii) any pro forma financial information contained therein is not or will not be
necessarily indicative of the consolidated financial position of the Company as
of the respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated.
SECTION 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Other than as disclosed in the Company Current Reports, and the
financing the Company plans to incur to finance the transactions contemplated by
this Agreement, since December 31, 2000 and through the date hereof, the
business of the Company has been conducted in the ordinary course, and there has
not been any event that would have a Material Adverse Effect.
SECTION 3.9 NO UNDISCLOSED MATERIAL LIABILITIES.
Except as disclosed in the Company Current Reports, the Company has not
incurred any liabilities of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that, individually or in the
aggregate, would have a Material Adverse Effect other than (i) liabilities
incurred in the ordinary course of business consistent with past practice since
December 31, 2000, (ii) liabilities that have been repaid, discharged or
otherwise extinguished and (iii) liabilities under or contemplated by this
Agreement.
SECTION 3.10 NO DEFAULT.
The Company is not in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (a) its certificate of
incorporation or bylaws or other organizational document, (b) indenture,
mortgage, note, bond, lien, lease, license, agreement, contract, order,
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judgment, ordinance, the Company Permit or other instrument or obligation to
which the Company is a party or by which the Company or any of its properties is
bound or subject to, or (c) any order, writ, injunction, decree or Law
applicable to the Company, except in the case of clauses (b) and (c) above for
defaults or violations which would not have a Material Adverse Effect.
SECTION 3.11 FINDERS' AND BROKERS' FEES.
Except for the Financial Advisor, a copy of whose engagement agreement
has been provided to Buyer, there is no investment banker, broker, finder, or
other intermediary which has been retained by or is authorized to act on behalf
of the Company or the Special Committee who might be entitled to any fee or
commission from the Company, Buyer or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
SECTION 4.1 CORPORATE ORGANIZATION.
Davis is a validly existing corporation in good standing under the laws
of Delaware. Merger Subsidiary has been duly incorporated and is validly
existing and in good standing under the laws of Delaware. Each has all corporate
powers and all material governmental licenses, authorizations, consents, and
approvals required to consummate the transactions contemplated by this
Agreement. Since the date of its incorporation, Merger Subsidiary has not
engaged in any material activities other than in connection with or as
contemplated by this Agreement.
SECTION 4.2 CAPITALIZATION.
As of the date of this Agreement, (i) the authorized capital stock of
Davis consists in its entirety of 4,500,000 shares of common stock, $0.001 par
value per share, 1,776,186 shares of which are issued and outstanding and
500,000 shares of preferred stock, $0.001 par value per share, no shares of
which are issued and outstanding and (ii) the authorized capital stock of Merger
Subsidiary consists of one share of common stock, all of which have been issued
to Davis.
SECTION 4.3 CORPORATE AUTHORIZATION.
The execution, delivery, and performance by Davis and Merger Subsidiary
of this Agreement and the consummation of the contemplated transactions
contemplated are within the corporate powers of Davis and Merger Subsidiary and
are duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Davis and Merger Subsidiary
enforceable against them in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equity principles.
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SECTION 4.4 GOVERNMENTAL AUTHORIZATION.
The execution, delivery and performance by Davis and Merger Subsidiary
of this Agreement and the consummation by Davis and Merger Subsidiary of the
transactions contemplated by this Agreement require no action by or in respect
of, or filing with, any Governmental Authority other than (i) the filing of
Articles of Merger in accordance with the DGCL and (ii) compliance with any
applicable requirements of the Exchange Act.
SECTION 4.5 NON-CONTRAVENTION.
The execution, delivery and performance by Davis and Merger Subsidiary
of this Agreement and the consummation by Davis and Merger Subsidiary of the
contemplated transactions contemplated do not and will not (i) contravene or
conflict with organizational documents of Davis or the articles of incorporation
or bylaws of Merger Subsidiary, or (ii) assuming compliance with the matters
referred to in Section 4.3, contravene or conflict with any material provision
of Law or Order binding upon or applicable to Davis or Merger Subsidiary.
SECTION 4.6 FINDERS' AND BROKERS' FEES.
There is no investment banker, broker, finder, or other intermediary
which has been retained by or is authorized to act on behalf of Buyer who is
entitled to any fee or commission from the Company if the transactions
contemplated by this Agreement are not consummated.
SECTION 4.7 NO CURRENT INTENT TO SELL BUSINESS.
Buyer has no intention to sell, transfer or otherwise dispose of the
business of the Company or any material part thereof following the consummation
of the Merger, but there can be no assurance that the Surviving Corporation will
not determine to cause such a transfer in the future.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 CONDUCT OF THE COMPANY.
From the date of this Agreement until the Effective Time, the Company
shall conduct its business in the ordinary course consistent with past practice
and (except for acts in connection with the Merger) shall use its best efforts
to preserve intact its business relationships with third parties and to keep
available the services of its present officers and employees.
SECTION 5.2 SHAREHOLDER MEETING; PROXY MATERIAL.
The Company shall cause a meeting of its shareholders (the "Company
Shareholder Meeting") to be called and held as soon as reasonably practicable
for the purpose of voting on the approval and adoption of this Agreement and the
Merger. The directors of the Company, acting in part in reliance upon the
unanimous recommendation of the Special Committee, shall, subject to their
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fiduciary duties after consultation with counsel, recommend approval and
adoption of this Agreement and the Merger by the Company's shareholders. In
connection with this meeting, but subject to the terms hereof, the Company (i)
will promptly prepare and file with the Commission, will use its best efforts to
have cleared by the Commission and will then mail to its shareholders as
promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, and will cooperate with Davis to prepare and file
the Schedule 13E-3 Transaction Statement required to be filed by the Company and
Davis pursuant to Section 13(e) of the Exchange Act (the "Schedule 13E-3"), (ii)
will use its best efforts to obtain the necessary approvals by its shareholders
of this Agreement and the transactions contemplated hereby and (iii) will
otherwise comply with all legal requirements applicable to such meeting.
SECTION 5.3 DISCLOSURE DOCUMENTS.
(a) Each document required to be filed by the Company with the
Commission in connection with the transactions contemplated by this
Agreement (the "Company Disclosure Documents"), including without
limitation the proxy statement of the Company (the "Company Proxy
Statement") to be filed with the Commission in connection with the
Merger, and any amendments or supplements will, when filed, comply as
to form in all material respects with the applicable requirements of
the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment
or supplement is first mailed to shareholders of the Company, at the
time such shareholders vote on adoption of this Agreement, and at the
Effective Time, the Company Proxy Statement, as supplemented or amended
if applicable will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements not misleading in the light of the circumstances under which
they were made. At the time of the filing of any Company Disclosure
Document other than the Company Proxy Statement and at the time of any
distribution, such Company Disclosure Document will not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements not misleading in the light
of the circumstances under which they were made. The representations
and warranties contained in this Section 5.3(b) will not apply to
statements or omissions included in any Company Disclosure Documents
(including without limitation the Company Proxy Statement) based upon
information furnished to the Company in writing by Buyer specifically
for use therein.
SECTION 5.4 ACCESS TO INFORMATION.
From the date of this Agreement until the Effective Time, the Company
will give Buyer, its counsel, financial advisors, auditors, and other authorized
representatives full access to the offices, properties, books and records of the
Company, will furnish to Buyer, its counsel, financial advisors, auditors, and
other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct the
Company's employees, counsel, financial advisors, and auditors to cooperate with
Buyer in its investigation of the business of the Company; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by the Company to Buyer hereunder.
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SECTION 5.5 NOTICES OF CERTAIN EVENTS.
The Company shall promptly notify Buyer of:
(a) any notice or other communication received by the Company
from any Person alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement; and
(b) any notice or other communication received by the Company
from any Governmental Authority in connection with the transactions
contemplated by this Agreement.
SECTION 5.6 ACQUISITION PROPOSALS.
(a) Any offer or proposal by any Person or group concerning
(i) any tender or exchange offer, (ii) proposal for a merger, share
exchange, recapitalization, consolidation or other business combination
involving the Company or (iii) any proposal or offer to acquire in any
manner, directly or indirectly, a significant equity interest in, or a
substantial portion of the assets of, the Company, other than pursuant
to the transactions contemplated by this Agreement, is hereby defined
as an "Acquisition Proposal."
(b) Except as permitted under Section 5.6(c) below, the
Company shall not, nor shall it permit any of its officers, directors,
affiliates, representatives or agents to, directly or indirectly, (i)
take any action to solicit, initiate or encourage any Acquisition
Proposal, (ii) participate in any discussions or negotiations with, or
encourage any effort or attempt by, any other Person to facilitate an
Acquisition Proposal or (iii) take any other action to produce an
Acquisition Proposal. From and after the date hereof, the Company and
all of its officers, directors, employees, attorneys, advisors and
other representatives shall cease doing any of the foregoing.
(c) Notwithstanding the foregoing, the Company may, directly
or indirectly, subject to a confidentiality agreement containing
customary terms, (i) furnish to any party information and access in
response to a request for information or access made incident to an
Acquisition Proposal made after the date hereof and (ii) participate in
discussions and negotiate with such party concerning any written
Acquisition Proposal made after the date hereof; provided that (i)
neither the Company nor any such Person solicited, initiated or
encouraged such Acquisition Proposal and (ii) the Special Committee
shall have determined in good faith based upon the advice of counsel to
the Special Committee that the taking of such action is necessary to
discharge the Board's fiduciary duties under applicable law.
(d) During the term of this Agreement, the Board of the
Company shall (i) immediately notify Buyer if any Acquisition Proposal
is made, indicating in reasonable detail the identity of the offeror
and the terms and conditions of such Acquisition Proposal and (ii) keep
Buyer promptly advised of all material developments that could
culminate in the Board withdrawing, modifying or amending its
recommendation of the Merger and the other transactions contemplated by
this Agreement.
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(e) During the term of this Agreement, the Company shall not
waive or modify any provisions contained in any confidentiality
agreement entered into relating to a possible Acquisition Proposal
unless the Special Committee shall have determined in good faith based
on advice of counsel to the Special Committee that the taking of such
action is necessary to discharge the Board's fiduciary duties under
applicable law. Notwithstanding the foregoing, the Company may make the
disclosure contemplated by Rule 14e-2(a) under the Exchange Act to the
extent that such disclosure is required to be made by such Rule;
provided that the Company may only recommend a tender offer giving rise
to such obligation as contemplated by such Rule if the Special
Committee shall have determined in good faith based upon the advice of
counsel to the Special Committee that the taking of such action is
necessary to discharge the Board's fiduciary duties under applicable
law.
ARTICLE VI
COVENANTS OF BUYER
SECTION 6.1 DIRECTOR AND OFFICER LIABILITY.
For six years after the Effective Time, each of the Surviving
Corporation and Davis shall indemnify and hold harmless the present officers and
directors of the Company with respect to acts or omissions occurring at or prior
to the Effective Time to the fullest extent provided under the Company's
certificate of incorporation and bylaws in effect on the date hereof. The
provisions of this Section 6.1 are intended to be for the benefit of, and shall
be enforceable by, the indemnified parties referred to in this Section 6.1 and
their heirs and personal representatives, and shall be binding upon Davis and
the Surviving Corporation and their respective successors and assigns.
SECTION 6.2 DISCLOSURE DOCUMENTS.
The information with respect to Buyer and its Affiliates that Buyer
furnishes to the Company in writing specifically for use in any Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements not
misleading in the light of the circumstances under which they were made (i) in
the case of the Company Proxy Statement, at the time the Company Proxy Statement
or any amendment or supplement is first mailed to shareholders of the Company,
at the time the shareholders vote on adoption of this Agreement and at the
Effective Time, and (ii) in the case of any Company Disclosure Document other
than the Company Proxy Statement, at the time of filing, and at the time of any
distribution thereof.
SECTION 6.3 NOTICES OF CERTAIN EVENTS.
Buyer shall promptly notify the Company of:
(a) any notice or other communication received by Buyer from
any Person alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement; and
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(b) any notice or other communication received by Buyer from
any Governmental Authority in connection with the transactions
contemplated by this Agreement.
ARTICLE VII
COVENANTS OF BUYER AND THE COMPANY
SECTION 7.1 BEST EFFORTS.
Subject to the terms and conditions of this Agreement, each party will
use its best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper, or advisable under applicable
Laws to consummate the transactions contemplated by this Agreement.
SECTION 7.2 CERTAIN FILINGS.
The Company and Buyer shall cooperate with one another (i) in
connection with the preparation of the Company Disclosure Documents, including
without limitation the Company Proxy Statement and the Schedule 13E-3, (ii) in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Company Disclosure Documents and seeking timely to obtain
any such actions, consents, approvals or waivers.
SECTION 7.3 PUBLIC ANNOUNCEMENTS.
Buyer and the Company will consult with each other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable Law or any agreement with NASDAQ, will not issue any such press
release or make any such public statement prior to such consultation.
SECTION 7.4 FURTHER ASSURANCES.
After the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver in the name and on behalf
of the Company or Merger Subsidiary any deeds, bills of sale, assignments,
agreements, certificates, other documents, or assurances and to take and do in
the name and on behalf of the Company or Merger Subsidiary any other actions and
things they may deem desirable to vest, perfect, or confirm of record or
otherwise in the Surviving Corporation, any and all right, title, and interest
in, to, and under any of the rights, properties, or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The obligations of the Company, Davis, and Merger Subsidiary to
consummate the Merger are subject to the satisfaction at or before the Effective
Time of the following conditions, any or all of which may be waived, in whole or
in part, by each of the parties intended to benefit therefrom, to the extent
permitted by applicable Law:
(a) this Agreement and the Merger shall have been approved and
adopted by a majority of all shares of the Company Common Stock
entitled to vote thereon, in accordance with Section 251 of the DGCL;
(b) such parties shall have received a copy, certified by the
Secretary of Merger Subsidiary, of consent resolutions duly adopted
(and not subsequently rescinded or modified) by the Board of Directors
and sole shareholder of Merger Subsidiary, by the terms of which
resolutions such Board of Directors shall have adopted and approved
this Agreement and the Merger and recommended the Merger to Davis, as
the sole shareholder of Merger Subsidiary, and Davis shall have adopted
and approved this Agreement and the Merger;
(c) no Governmental Authority shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of
the Merger; and
(d) all actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the
Merger shall have been obtained, other than the filing of the requisite
Articles of Merger with the Secretary of State of Delaware.
SECTION 8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER AND
MERGER SUBSIDIARY.
The obligations of Buyer and Merger Subsidiary to consummate the Merger
are also subject to the satisfaction at or prior to the Effective Time of the
following further conditions, any or all of which may be waived, in whole or in
part, by each of the parties intended to benefit therefrom, to the extent
permitted by applicable Law:
(a) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, the representations and warranties of the
Company contained in this Agreement and in any certificate delivered by
the Company pursuant hereto shall be true and correct in all respects,
except where the breach or inaccuracy thereof would not, individually
or in the aggregate, have a Material Adverse Effect, at and as of the
Effective Time as if made at and as of such time, except that those
representations and warranties which address matters only as of a
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particular date shall remain true and correct as of such date, and
Buyer shall have received a certificate signed by the chief executive
officer and the principal financial officer of the Company to the
foregoing effect;
(b) no Material Adverse Effect shall have occurred;
(c) Buyer shall have received or be satisfied that it will
receive all consents and approvals necessary in connection with the
consummation of the Merger if the failure to obtain any such consent or
consents would have a Material Adverse Effect;
(d) The Company shall deliver Cancellation Instruments
executed by all holders of Options with respect to all outstanding
Options;
(e) Buyer shall have received all documents it may reasonably
request relating to the authority of the Company to enter into this
Agreement, all in form and substance reasonably satisfactory to Buyer;
and
(f) Buyer shall have received from Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A., counsel to the Company, an opinion or
opinions dated as of the Effective Time covering such matters as shall
be reasonably requested by Davis.
SECTION 8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY.
The obligations of the Company to consummate the Merger are also
subject to the satisfaction at or prior to the Effective Time of the following
further conditions, any or all of which may be waived, in whole or in part, by
the Company to the extent permitted by applicable Law:
(a) Buyer and Merger Subsidiary shall have performed in all
material respects all of their respective obligations required to be
performed by them at or prior to the Effective Time, the
representations and warranties of Buyer contained in this Agreement and
in any certificate delivered by Buyer or Merger Subsidiary pursuant
hereto shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time, except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, and the
Company shall have received a certificate signed by the chief executive
officer and chief financial officer of each of Davis and Merger
Subsidiary to the foregoing effect;
(b) the Company shall have received all documents it may
reasonably request relating to the authority of Buyer or Merger
Subsidiary to enter into this Agreement, all in form and substance
reasonably satisfactory to the Company; and
(c) the Company shall have received from counsel to Buyer and
Merger Subsidiary, and opinion or opinions dated as of the Effective
Time covering such matters as shall be reasonably requested by the
Company.
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ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the shareholders of the Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer, if the Merger has not been
consummated by October 31, 2001;
(c) by either the Company or Buyer, if there shall be any Law
that makes consummation of the Merger illegal or otherwise prohibited
or if any Order enjoining Buyer or the Company from consummating the
Merger is entered and such Order shall become final and nonappealable;
or
(d) by either the Company or Buyer if this Agreement and the
Merger shall fail to be approved and adopted by the shareholders of the
Company at the Company Shareholder Meeting called for such purpose, as
set forth in Section 8.1(a) above;
(e) by either the Company or Buyer if the Board or Special
Committee shall (i) withdraw or modify in a manner adverse to Buyer its
approval or recommendation of this Agreement and the Merger, (ii)
recommend another Acquisition Proposal, or (iii) resolve to do any of
the foregoing;
(f) by either the Company or Buyer if the other party has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the breaching party has been
notified of such breach and the breach cannot be or has not been cured
within 15 days after the giving of such notice.
SECTION 9.2 EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 9.1, this Agreement
shall become void and of no effect with no liability on the part of any party,
except that the agreements contained in Section 9.3 shall survive the
termination hereof; provided however, that, except as specifically provided,
nothing herein shall relieve any party of liability for any breach of this
Agreement.
SECTION 9.3 FEES AND EXPENSES.
(a) If this Agreement is terminated pursuant to Section 9.1(e)
and Buyer is not in material breach of its covenants, representations
or warranties contained in this Agreement, the Company shall pay a
termination fee to Buyer not later than five business days after such
termination occurs in an amount equal to the greater of (i) ten percent
(10%) of the amount by which the fair market value of the consideration
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that would be received by the Public Shareholders under the Acquisition
Proposal exceeds the amount of the Merger Consideration, or (ii)
$100,000; and the Company shall reimburse to Buyer the amount of its
Expenses, within five (5) business days of the submission of a written
request for reimbursement accompanied by reasonable documentation of
such Expenses.
(b) Except as provided in Section 9.3(a), all Expenses
incurred in connection with this Agreement and the transaction
contemplated hereby shall be paid by the party incurring such Expense.
(c) In the event that the Company shall fail to pay the
termination fee and Expense reimbursement to Buyer when due under
Section 9.3(a), the Company shall pay the Buyer interest on any unpaid
amounts, which shall accrue at a rate per annum equal to the Prime Rate
as listed in the "Money Rates" section of The Wall Street Journal on
the effective date of termination.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 DEFINITIONS.
As used in this Agreement, the following terms have the following
respective meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"AFFILIATE" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such given Person.
"AGREEMENT" means this Agreement and Plan of Merger, as the same may be
supplemented, modified, or amended from time to time.
"EXPENSES" means all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts, consultant and commitment fees and other financing fees and
expenses) incurred by Davis, Merger Subsidiary, or the Company, or on behalf of
any such party in connection with or related to the authorization, preparation,
negotiation, execution, and performance of this Agreement, the preparation,
printing, filing, and mailing of the Company Proxy Statement and Schedule 13E-3,
the solicitation of the shareholder approvals, and all other matters related to
the consummation of the contemplated transactions.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local,
foreign, or other governmental or public agency, instrumentality, commission,
authority, board, or body, and any court, arbitrator, mediator, or tribunal.
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"LAW" means any code, law, ordinance, regulation, rule, or statute of
any Governmental Authority.
"LIEN" means any security interest, lien, mortgage, deed to secure
debt, deed of trust, pledge, charge, conditional sale, or other title retention
agreement, or other encumbrance of any kind.
"MATERIAL ADVERSE EFFECT" means any matter that would reasonably be
expected to affect materially and adversely the business, condition (financial
or otherwise), properties, assets, prospects or results of operations of the
Company considered as a whole.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or other Governmental Authority.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision, or any agency or
instrumentality thereof.
"SURVIVING CORPORATION" means the Company as the surviving corporation
resulting from the Merger.
The following terms are defined in the following Sections of this
Agreement:
TERM SECTION
---- -------
"Acquisition Proposal" 5.6
"Articles of Merger 1.2(b)
"Board" Recital C
"Buyer" Opening Paragraph
"Closing" 1.7
"Closing Date" 1.7
"Commission" 3.7
"Company" Opening Paragraph
"Company Common Stock" Recital A
"Company Current Reports" 3.6
"Company Disclosure Documents" 5.3
"Company Option Plans" 1.6
"Company Permits" 3.5
"Company Proxy Statement" 5.3
"Company SEC Filings" 3.7
"Company Shareholder Meeting" 5.2
"Company Warrant Agreements" 1.6
"Company 10-K" 3.7
"DGCL" Recital E
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"Exchange Act" 3.4
"Exchange Agent" 1.4(a)
"Effective Time" 1.2(b)
"Merger" Recital E
"Merger Consideration" 1.3(a)
"Merger Subsidiary" Opening Paragraph
"Preferred Stock" Recital A
"Public Shareholders" Recital C
"Schedule 13E-3" 5.2
"Share" 1.3(a)
"Special Committee" Recital C
SECTION 10.2 NOTICES.
Unless otherwise specifically provided herein, any notice, demand,
request, or other communication herein requested or permitted to be given shall
be in writing and may be personally served, sent by overnight courier service,
or sent by telecopy with a confirming copy sent by United States first-class
mail, each with any postage or delivery charge prepaid. For the purposes hereof,
the addresses of the parties (until notice of a change is delivered as provided
in this Section) shall be as follows:
If to the Company: Casco International, Inc.
13900 Conlan Circle, Suite 150
Charlotte, NC 28277
Fax: (704) 752-9698
Copies to: Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.
100 North Tampa Street, Suite 1800
Tampa, Florida 33602
Attention: Philip M. Shasteen, Esq.
Fax: (813) 225-1857
If to Davis or
Merger Sub: Davis Holdings of North Carolina, Inc.
13900 Conlan Circle, Suite 150
Charlotte, NC 28277
Fax: (704) 752-9698
Copies to: Moore & Van Allen PLLC
100 North Tryon Street, Suite 4700
Charlotte, NC 28202-4003
Attention: Barney Stewart, Esq.
Fax: (704) 378-2029
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Any notice provided hereunder shall be deemed to have been given on the
date delivered in person, or on the next business day after deposit with an
overnight courier service, or on the date received by telecopy transmissions.
SECTION 10.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained herein and in any
certificate delivered shall not survive the Effective Time or the termination of
this Agreement.
SECTION 10.4 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver
is in writing and signed by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective; and
provided, further, that after the adoption of this Agreement by the
shareholders of the Company, no such amendment or waiver shall, without
the further approval of such shareholders, alter or change (i) the
Merger Consideration or (ii) any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the
Public Shareholders.
(b) No failure or delay by any party in exercising any right,
power, or privilege hereunder shall operate as a waiver nor shall any
single or partial exercise preclude any other or further exercise or
the exercise of any other right, power or privilege. The parties'
rights and remedies shall be cumulative and not exclusive of any rights
or remedies provided by law.
SECTION 10.5 SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, provided
that no party may assign, delegate, or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties hereto
except that Buyer may transfer or assign, in whole or from time to time in part,
to one or more of its Affiliates, its rights under this Agreement, but any such
transfer or assignment will not relieve Buyer of its obligations under this
Agreement or prejudice the rights of shareholders to receive the Merger
Consideration for Shares properly surrendered in accordance with Section 1.4.
This Agreement shall not be construed so as to confer any right or benefit upon
any person other than the parties to this Agreement, and their respective
successors and assigns.
SECTION 10.6 GOVERNING LAW.
Regardless of the place or places where this Agreement may be executed,
delivered or consummated, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
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SECTION 10.7 SEVERABILITY.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
SECTION 10.8 HEADINGS AND CAPTIONS.
The headings and captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
SECTION 10.9 INTERPRETATIONS.
Neither this Agreement nor any uncertainty or ambiguity shall be
construed or resolved against any party, whether under any rule of construction
or otherwise. No party to this Agreement shall be considered the drafter. The
parties acknowledge and agree that this Agreement has been reviewed, negotiated,
and accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all the parties.
SECTION 10.10 COUNTERPARTS; EFFECTIVENESS.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures were upon
the same instrument. This Agreement shall become effective when each party has
received a counterpart signed by all of the other parties.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
"The Company" "Davis"
CASCO INTERNATIONAL, INC DAVIS HOLDINGS OF NORTH CAROLINA, INC,
By: /s/ Charles R. Davis By: /s/ Charles R. Davis
-------------------------------- -----------------------------------
Name: CHARLES R. DAVIS Name: CHARLES R. DAVIS
----------------------------- --------------------------------
Title: PRESIDENT Title: PRESIDENT
----------------------------- --------------------------------
"Merger Subsidiary"
DAVIS ACQUISITION OF NORTH CAROLINA,
INC.
By: /s/ Charles R. Davis
-----------------------------------
Name: CHARLES R. DAVIS
-------------------------------
Title: PRESIDENT
------------------------------
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APPENDIX B
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d)
of this section with respect to such shares, who continuously holds
such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who
has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of
the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the
word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by
those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt
or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to sec. 251 (other than a merger
effected pursuant to Section 251(g) of this title), Section 252,
Section 254, Section 257, Section 258, Section 263 or Section 264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on
an interdealer quotation system by the National Association of
Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of
this title.
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(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if
the holders thereof are required by the terms of an agreement
of merger or consolidation pursuant to Section 251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or
depository receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares
of stock (or depository receipts in respect thereof)
or depository receipts at the effective date of the
merger or consolidation will be either listed on a
national securities exchange or designated as a
national market system security on an interdealer
quotation system by the National Association of
Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing
subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or
fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of
this title is not owned by Davis Holdings corporation
immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate
of incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and (e) of this
section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not
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less than 20 days prior to the meeting, shall notify each of
its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand
the appraisal of SUCH STOCKHOLDER'S shares shall deliver to
the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of SUCH
STOCKHOLDER'S shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand
the appraisal of SUCH STOCKHOLDER'S shares. A proxy or vote
against the merger or consolidation shall not constitute such
a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10
days after the effective date of such merger or consolidation,
the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent
corporation, either before the effective date of the merger or
consolidation or within ten days thereafter, shall notify each
of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of
the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any
class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of
the effective date of the merger or consolidation, either (i)
each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after
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such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof and
who is otherwise entitled to appraisal rights, may file a petition in
the Court of Chancery demanding a determination of the value of the
stock of all such stockholders. Notwithstanding the foregoing, at any
time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw SUCH
STOCKHOLDER'S demand for appraisal and to accept the terms offered upon
the merger or consolidation. Within 120 days after the effective date
of the merger or consolidation, any stockholder who has complied with
the requirements of subsections (a) and (d) hereof, upon written
request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger
or consolidation and with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares. Such
written statement shall be mailed to the stockholder within 10 days
after SUCH STOCKHOLDER'S written request for such a statement is
received by the surviving or resulting corporation or within 10 days
after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified
list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the surviving
or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the
Court, shall give notice of the time and place fixed for the hearing of
such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
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addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington,
Delaware or such publication as the Court deems advisable. The forms of
the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders
who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to
the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of
the merger or consolidation, together with a fair rate of interest, if
any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all
relevant factors. In determining the fair rate of interest, the Court
may consider all relevant factors, including the rate of interest which
the surviving or resulting corporation would have had to pay to borrow
money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of
the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted SUCH
STOCKHOLDER'S certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is
finally determined that SUCH STOCKHOLDER is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be
simple or compound, as the Court may direct. Payment shall be so made
to each such stockholder, in the case of holders of uncertificated
stock forthwith, and the case of holders of shares represented by
certificates upon the surrender to the corporation of the certificates
representing such stock. The Court's decree may be enforced as other
decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion
of the expenses incurred by any stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable
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100
attorney's fees and the fees and expenses of experts, to be charged pro
rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on
the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date
of the merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in subsection
(e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of this section
or thereafter with the written approval of the corporation, then the
right of such stockholder to an appraisal shall cease. Notwithstanding
the foregoing, no appraisal proceeding in the Court of Chancery shall
be dismissed as to any stockholder without the approval of the Court,
and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting
corporation.
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101
APPENDIX C
AMBIENT ADVISORS, LLC
100 North Crescent Drive
Suite 305
Beverly Hills, CA 90210
Tel (310) 772-2852
Fax (310) 772-2854
May 8, 2001
Board of Directors
CASCO INTERNATIONAL, INC.
13900 Conlan Circle, Suite 150
Charlotte, North Carolina 28277
Gentlemen:
We understand that Casco International, Inc. (the "Company") has received an
offer (the "Offer") from S. Robert Davis, the Company's Chairman and a Director
of the Company, and Charles R. Davis, the Company's President, Chief Executive
Officer, and a Director of the Company, to acquire the Company through a cash
merger at $1.87 per share. Such transaction and all related transactions are
referred to collectively herein as the "Transaction." The price per share Offer
to complete the Transaction was increased to $2.10 per share on February 28,
2001.
It is our understanding that the Company has formed a special committee (the
"Committee") to consider certain matters relating to the Transaction. The Davis"
currently own 21.88% (excluding options) of the outstanding shares of the
Company's common stock. The remainder of the fully diluted shares of the Company
is owned by institutional stockholders (less than 2%) and general public
stockholders (both, collectively, "Public Stockholders").
The Committee has requested our opinion (the "Opinion") as to the fairness, from
a financial point of view, to the Public Stockholders of the Company of the
consideration to be received by them in connection with the Transaction. This
Opinion does not address the Company's underlying business decision to effect
the Transaction.
In connection with the Opinion, we have made such reviews, analyses and
inquiries, as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
a. Reviewed the Company's annual reports to stockholders and on
Form 10-K for the past two fiscal years and quarterly reports
on Form 10-?Q since the date of the latest annual report and
10-K.
b. Reviewed the final proxy statement dated April 24, 2000.
c. Reviewed copies of Board minutes and various presentations to
the Board during the past 12 months.
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AMBIENT ADVISORS, LLC
d. Reviewed recent press releases of the Company.
e. Reviewed the Offer letter of December 11, 2000 and the revised
Offer letter of February 28, 2001.
f. Met with certain members of the Company's senior management to
discuss the current condition and future prospects of the
Company.
g. Visited the Company's main offices and facilities in
Charlotte, North Carolina and Shelby, North Carolina.
h. Reviewed product information and brochures prepared by the
Company.
i. Reviewed forecasts and projections prepared by the Company's
management.
j. Reviewed certain historical market prices and trading volume
for the Company's publicly traded securities.
k. Reviewed certain other publicly available financial data for
certain companies that we deem comparable to the Company
including historical market prices and trading volumes of
these companies.
l. Reviewed prices paid in other transactions that we considered
similar to the Transaction.
m. Conducted such other studies, analyses and inquiries, as we
have deemed appropriate.
In preparing our Opinion, we have relied upon and assumed, without independent
verification, that the financial forecasts and projections provided to us have
been reasonably prepared and reflect the best currently available estimates of
the future financial results and condition of the Company. We have not been
requested to, and did not solicit, third party indications of interest in
acquiring all or any part of the Company. Furthermore, we have not negotiated
the transaction nor have we advised you with respect to alternatives to it.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to any such information. We have not made any
physical inspections or independent appraisals of any of the properties or
assets of the Company. Our Opinion is necessarily based on business, economic,
market and other conditions as they exist and can be evaluated by us as of the
date of this letter.
Based on the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the public stockholders of the Company in
connection with the Transaction is fair to them from a financial point of view.
This Opinion may be included in its entirety in any filing made by the Company
in respect of the Transaction with the Securities and exchange Commission, so
long as this Opinion is reproduced in full in such filing, and any description
of, or reference to, us or a summary of this Opinion and/or the related analysis
in such filing is in a form acceptable to us and/or our legal counsel.
AMBIENT ADVISORS, LLC
/s/AMBIENT ADVISORS, LLC
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APPENDIX D
INFORMATION RELATING TO THE DIRECTORS AND EXECUTIVE OFFICERS OF CASCO
INTERNATIONAL, INC., DAVIS HOLDINGS OF NORTH CAROLINA, DAVIS ACQUISITION OF
NORTH CAROLINA, INC., AMERICAN HOME BUILDING CORPORATION, AND R. L. RENCK & CO.,
INC. AND OTHER INDIVIDUALS WHO ARE CONTINUING STOCKHOLDERS, AND THE OTHER
CONTINUING STOCKHOLDERS.
I. DIRECTORS AND EXECUTIVE OFFICERS OF CASCO INTERNATIONAL, INC.
The name and position and the principal occupation or employment,
business address and material occupations, positions, offices or employment for
the past five years, of each director and executive officer of Casco
International, Inc. are set forth below. S. Robert Davis, Charles R. Davis,
Randall J. Asmo, and Jeffrey A. Ross are members of the Management Group. The
business address of each executive officer of Casco International, Inc. is c/o
Casco International, Inc., 13900 Conlan Circle, Suite 150, Charlotte, North
Carolina 28277. The business telephone number of each executive officer of Casco
International, Inc. is (704) 482-9591.
S. ROBERT DAVIS has been the Chairman of the Board of Casco and is the
Chairman of the Board and President of Media Source, Inc., a distributor of
children's literature, since 1990. Mr. Davis is also a director and executive
officer of American Home Building Corporation ("American"), a developer of
residential and commercial real estate. See Part II, Directors and Executive
Officers of American Home Building Corporation, below. Mr. Davis' business
address is 5695 Avery Road, Dublin, OH 43016 and his business telephone number
is (614) 761-9570.
CHARLES R. DAVIS is a director and has been the President of the
Company since 1992. Mr. Davis is also a director and executive officer of
American Home Building Corporation. See "Part II, Directors and executive
Officers of American Home Building Corporation", below.
JEFFREY A. ROSS has been Casco's Chief Financial Officer since 1993.
DAVID J. RICHARDS, a director of Casco, has been the Chief Executive
Officer and President of Preventive Imaging Technologies, Inc., a health care
services company, since February, 1999. For over five years prior to February,
1999, he was Chief Executive Officer, President and a director of NetMed, a
health care services company. Mr. Richards' address and the address of
Preventive Imaging Technologies, Inc., is 5900 Cromdale Drive, Dublin, Ohio
43017, and his business telephone number is (704)-761-7600.
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104
MICHAEL P. BEAUCHAMP, a director of Casco, has been the President of
Beauvestco, a management consulting firm, since 1989. The address of Beauvestco
is 7422 Carmel Executive Park, Suite 107, Charlotte, North Carolina 28226 and
his telephone number is (704) 542-1600.
RANDALL J. ASMO, a director of Casco, has been Executive Vice
President, Secretary and Director of Media Source, Inc., a distributor of
children's literature, since 1999. From 1992 until 1999, he was the Vice
President of Media Source, Inc. He is also vice President of American and
Mid-States Development Corp. ("Mid-States"), a privately held real estate
development and leasing company. Mr. Asmo's address and the address of Media
Source, and American and Mid-States is 5695 Avery Road, Dublin, OH 43016 and his
telephone number is (614) 761-9570.
RODNEY L. TAYLOR, a director of Casco, has been the general manager of
Family Ford Lincoln Mercury in Marietta, Ohio, an automobile dealership, since
June, 1997. Mr. Taylor's address and the address of Family Ford Lincoln Mercury
is ST 7, Newport Pike, Marietta, Ohio 45750 and his telephone number is
(740)-373-3975.
PHILIP M. SHASTEEN, a director of Casco, has been an attorney with, and
stockholder and director of, Johnson, Blakely, Pope, Bokor ,Ruppel & Burns,
P.A., a law firm located in Tampa, Florida, since 1992. Mr. Shasteen's address
and the address of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. is 100
North Tampa Street, Suite 1800, Tampa, FL 33602-5145 and his telephone number is
(813) 225-2500.
II. DIRECTORS AND EXECUTIVE OFFICERS OF DAVIS HOLDINGS OF NORTH CAROLINA,
INC. ("DAVIS HOLDINGS") AND DAVIS ACQUISITION OF NORTH CAROLINA, INC.
("DAVIS ACQUISITION")
Charles R. Davis is the President and S. Robert Davis is the Vice
Present of both Davis Holdings and Davis Acquisition. The directors of Davis
Holdings and Davis Acquisition are Charles R. Davis and S. Robert Davis. The
principal occupation or employment, business address and material occupations,
positions, offices or employment during the past five years of the Davises are
described in Part I above.
III. DIRECTORS AND EXECUTIVE OFFICERS OF AMERICAN HOME BUILDING CORPORATION.
The name and position and the principal occupation or employment,
business address and material occupations, positions, offices or employment for
the past five years, of each director and executive officer of American are set
forth below. S. Robert Davis, Charles R. Davis, Randall J. Asmo and Jeffrey A.
Ross are members of the Management Group. The principal occupation or
employment, business address and material occupations, positions, offices or
employment during the past five years of the Davises and Randall J. Asmo are
described in Part I, above.
D-2
105
S. Robert Davis.................Chairman and President
Charles R. Davis................Senior Vice President and Treasurer
Randall J. Asmo.................Senior Vice President
The address of American Home Building Corporation is 5695 Avery Road,
Dublin, OH 43016.
IV. DIRECTORS AND EXECUTIVE OFFICERS OF R. L. RENCK & CO., INC.
The name and position and the principal occupation or employment,
business address and material occupations, positions, offices or employment for
the past five years, of each director and executive officer of R. L. Renck &
Co., Inc., ("Renck") are set forth below. Renck's principal business is that of
a private investment banking firm. Robert L. Rencks, Jr. is the sole director
and president, treasurer and chief executive officer of Renck, and Carol Kroll
Kahn is the secretary of Renck. Their business address and the principal address
of Renck is 2 Rector Street, 25th Floor, New York, NY 10006.
V. INDIVIDUAL CONTINUING STOCKHOLDERS.
The name and position and the principal occupation or employment,
business address and material occupations, positions, offices or employment for
the past five years of individual continuing stockholders are set forth below.
S. R. Davis, Charles R. Davis, Randall J. Asmo, Jeffrey A. Ross and Daniel A.
Splawn are members of the Management Group.
S. Robert Davis. See Parts I, II, and III, above.
Charles R. Davis. See Parts I, II, and III, above.
Melissa Davis. Melissa Davis is employed by Mid States. See Part I
above for the address of Mid States.
Randall J. Asmo. See Parts I and III, above.
Daniel A. Splawn. Mr. Splawn has been the vice president - operations
of Casco since 1997. His business address is 13900 Conlan Circle, Suite 150,
Charlotte, North Carolina 28277.
Jeffrey A. Ross. See Part I, above.
Dr. John Graver has been an orthodontist with his own practice for over
five years. His business address and the principal business address of his
practice is 1535 Old Henderson Road, Columbus, OH 43220.
Richard B. Fentin has been a vice president of Fidelity Investments, an
investment firm for over five years. His business address and the principal
business address of Fidelity is 82 Devonshire Street, Boston, MA 02109.
D-3
106
CASCO INTERNATIONAL, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2001
The undersigned hereby appoints and
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Casco International, Inc.
that the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Casco International, Inc. to be held on , 2001,
at a.m., local time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE PROPOSAL AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
[X] Please mark votes as in this example.
1. To adopt and approve the Agreement and Plan of Merger, dated as of May
8, 2001, among Davis Holdings of North Carolina, Inc., Casco
Acquisition of North Carolina, Inc., and Casco International, Inc.,
pursuant to which Casco Acquisition of North Carolina, Inc. will be
merged with and into Casco International, Inc., with Casco
International, Inc. as the surviving corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To grant discretionary authority to the attorneys and proxies appointed
hereby to vote in favor of any postponements or adjournments of the
meeting, if necessary.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE CONSIDERED A VOTE FOR PROPOSAL NUMBER 1, UNLESS THE CONTRARY
IS INDICATED IN THE APPROPRIATE PLACE.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE, WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
Date:
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Signature
Date:
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Signature