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:
<Table>
[ ] Preliminary Proxy Statement [X] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</Table>
CASCO INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $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: $2,147,397.
(5) Total fee paid: $430.
[X] 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:
------------------------------------------------------------------------
CASCO INTERNATIONAL, INC.
13900 CONLAN CIRCLE, SUITE 150
CHARLOTTE, NORTH CAROLINA 28277
December 5, 2001
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders of
Casco International, Inc. ("Casco"), to be held on December 28, 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"). 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 Davis Holdings.
American is currently the sole stockholder of Davis Holdings. Prior to the
merger, S. Robert Davis, 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, and R.L. Renck & Co., Inc. will
contribute all their shares of Casco common stock to Davis Holdings in exchange
for shares of capital stock of Davis Holdings. Melissa Davis, S. Robert Davis's
wife, Dr. John Graver, and Richard B. Fentin (collectively, the "Stockholder
Group") will also contribute all of their shares of Casco common stock to Davis
Holdings 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, together with Charles and Robert Davis. R.L. Renck & Co.,
Inc. and Messrs. Asmo, Splawn and Ross (collectively, the "Davis Group") and the
Stockholder Group (the Davis Group and the Stockholder Group are 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 remain outstanding after the merger. Each warrant will entitle the holder,
upon exercise of a warrant, to receive, in lieu of a share of common stock of
Casco, $2.10 per share in cash. 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 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
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 believe that the terms of
the merger are fair to 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 members of the Davis Group 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 842,930 shares of Casco common stock in the aggregate, or
approximately 47.5% of the outstanding shares of Casco common stock, and have
agreed to vote their 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. The unaffiliated
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
CASCO INTERNATIONAL, INC.
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 28, 2001
---------------------
December 5, 2001
To Our Stockholders:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Casco International, Inc., a Delaware corporation ("Casco"), will
be held on December 28, 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. ("Davis Holdings") will be merged 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 Casco's common
stock of record at the close of business on December 3, 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
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
PROXY STATEMENT
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Summary..................................................... 1
Special Factors............................................. 8
Background of the Merger.................................. 8
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...... 14
Purpose and Reasons of the Davises and Other Members of
the Davis Group for the Merger......................... 21
Position of the Davis Group and the Buyer as to Fairness
of the Merger.......................................... 22
Purpose and Reasons of the Stockholder Group and R.L.
Renck & Co., Inc. for the Merger; Position of R.L.
Renck & Co., Inc. as to Fairness of the Merger......... 22
Purpose and Reasons of Casco for the Merger and Structure
of the Merger.......................................... 23
Effects of the Merger....................................... 23
Historical Per Share Information............................ 26
Certain Forward-Looking Information......................... 26
General Information About The Special Meeting............... 26
Proxy Solicitation........................................ 26
Matters to be Considered at the Special Meeting........... 26
Record Date and Voting Information........................ 27
Quorum.................................................... 28
Proxies; Revocation....................................... 28
Expenses of Proxy Solicitation............................ 28
Appraisal Rights.......................................... 28
The Participants............................................ 28
Casco International, Inc.................................. 28
Davis Holdings of North Carolina, Inc..................... 29
Davis Acquisition of North Carolina, Inc.................. 29
The Continuing Stockholders............................... 29
Risks that the Merger Will Not Be Completed................. 29
Interests of the Directors, Executive Officers and
Continuing Stockholders in the Merger..................... 30
Directors of Casco........................................ 30
Executive Officers of Casco and Executive Officers and
Directors of the Surviving Corporation................. 31
Merger Consideration to be Received by the Continuing
Stockholders........................................... 31
Continuing Equity Interests of the Continuing
Stockholders........................................... 31
Voting Agreement and Proxy.................................. 32
Indemnification............................................. 32
Certain Risks in the Event of Bankruptcy.................... 33
Merger Financing............................................ 33
Estimated Fees and Expenses of the Merger................... 34
Federal Income Tax Considerations........................... 35
Anticipated Accounting Treatment of Merger.................. 36
Certain Regulatory Matters.................................. 36
Appraisal Rights............................................ 36
The Merger Agreement........................................ 39
The Merger................................................ 39
Effective Time of Merger.................................. 39
Certificate of Incorporation, Bylaws and Directors and
Officers of Casco as the Surviving Corporation......... 39
Conversion of Common Stock................................ 40
Payment For Shares........................................ 40
Transfer of Shares........................................ 41
Treatment of Stock Options................................ 41
Casco Stockholder Approval................................ 41
</Table>
i
<Table>
<Caption>
PAGE
----
Representations and Warranties............................ 41
Conduct of Business Pending the Merger.................... 42
Notices of Certain Events................................. 42
Acquisition Proposals..................................... 42
Conditions to the Merger.................................. 43
Termination of the Merger Agreement....................... 44
Amendments; Waivers....................................... 45
Selected Financial Data..................................... 46
Market Prices of Common Stock and Dividends................. 47
Market Prices............................................. 47
Dividends................................................. 47
Recent Stock Purchases...................................... 48
Purchases by Casco, Davis Holdings and Davis
Acquisition............................................ 48
Purchases by the Continuing Stockholders.................. 48
Recent Transactions....................................... 48
Security Ownership of Certain Beneficial Owners and
Management................................................ 49
Independent Auditors........................................ 50
Future Stockholder Proposals................................ 50
Where Stockholders Can Find More Information................ 50
Incorporation of Certain Documents by Reference;
Attachments............................................... 51
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
</Table>
ii
CASCO INTERNATIONAL, INC.
13900 CONLAN CIRCLE, SUITE 150
CHARLOTTE, NORTH CAROLINA 28277
PROXY STATEMENT
DATED DECEMBER 5, 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 December
28, 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 December 5, 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.
- - WHAT AM I BEING ASKED TO VOTE UPON? (SEE PAGE 26)
You are being asked to consider and vote upon a proposal to adopt and
approve an Agreement and Plan of Merger, referred to as the "Merger Agreement",
pursuant to 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.
- - WHO ARE THE PARTIES TO THE MERGER AGREEMENT? (SEE PAGE 28)
The Merger Agreement is between Davis Holdings of North Carolina, Inc.,
Davis Acquisition of North Carolina, Inc. (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 S.
Robert Davis and Charles R. Davis. 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, and R.L. Renck & Co.,
Inc., an Illinois corporation (collectively, the "Davis Group"), and Melissa
Davis, Robert Davis's wife, Dr. John Graver and Richard B. Fentin (collectively,
the "Stockholder Group") will indirectly, through their ownership of Davis
Holdings, own all of the equity of Casco after the merger. The Davis Group and
the Stockholder Group are collectively referred to in this Proxy Statement as
the "Continuing Stockholders."
- - WHAT WILL HAPPEN TO MY COMMON STOCK IN THE MERGER? (SEE PAGE 23)
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.
- - WHAT WILL HAPPEN TO MY WARRANTS? (SEE PAGE 23)
Casco's warrants will remain outstanding after the merger, but the holders
of the warrants, instead of receiving shares of Casco common stock, will only be
entitled to receive $2.10 in cash for each share of Casco common stock they
purchase upon exercise of the warrants.
- - 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.
- - WHY WAS THE SPECIAL COMMITTEE FORMED? (SEE PAGE 8)
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.
- - HAS THE SPECIAL COMMITTEE CONCLUDED THAT THE MERGER IS FAIR TO CASCO'S
UNAFFILIATED STOCKHOLDERS? (SEE PAGE 11)
Yes. The special committee has determined that the merger is fair to
Casco's unaffiliated stockholders.
- - HAS THE CASCO BOARD OF DIRECTORS DETERMINED THAT THE MERGER IS FAIR TO CASCO'S
UNAFFILIATED STOCKHOLDERS? (SEE PAGE 11)
Yes. The board of directors has determined that the merger is fair to
Casco's unaffiliated stockholders.
- - HAVE THE MEMBERS OF THE DAVIS GROUP AND THE BUYER DETERMINED THAT THE MERGER
IS FAIR TO CASCO'S UNAFFILIATED STOCKHOLDERS? (SEE PAGE 22)
Yes. The members of the Davis Group and the Buyer have determined that the
merger is fair to Casco's unaffiliated stockholders.
- - HOW WAS THE AMOUNT OF THE MERGER PRICE DETERMINED? (SEE PAGE 8)
The per share merger consideration was determined based on the special
committee's discussions with Ambient Advisors and negotiations between the
special committee and Robert and Charles Davis. These discussions and
negotiations resulted in the $1.87 per share acquisition price initially offered
by Robert and Charles Davis being increased by approximately 12% to $2.10 per
share.
2
- - WHAT ARE THE SOURCES AND USES OF FUNDS FOR THE MERGER? (SEE PAGES 31 AND 32)
The following table describes the sources and uses of funds for the merger:
<Table>
Sources of Funds:
Loan to Casco from Branch
Banking & Trust Co. ................................... $2,200,000
Casco cash on hand........................................ 303,127
----------
Total............................................. $2,503,127
==========
Uses of Funds:
Payment for shares held by unaffiliated stockholders...... $1,953,672]
David J. Richards -- special committee fees............... 15,000
Rodney L. Taylor -- special committee fees................ 10,000
</Table>
Payment to the following holders of options:
<Table>
Charles R. Davis....................................... $ 70,000
S. Robert Davis........................................ 35,000
Jeffrey A. Ross........................................ 15,750
Daniel A. Splawn....................................... 15,650
Randall J. Asmo........................................ 7,000
Michael P. Beauchamp................................... 7,000
Rodney L. Taylor....................................... 7,000
David J. Richards...................................... 7,000
Richard W. Terlau...................................... 5,250
Christopher G. Sotos................................... 1,400
Jeffrey Scott Langkord................................. 1,400
James E. Barr.......................................... 1,400
Maria Lania Kent....................................... 1,400
Susan B. Campbell...................................... 1,400
Donald R. Costner...................................... 1,400
Paula G. Brackett...................................... 350
Thomas A. Hamrick...................................... 700
Karen A. Bolton........................................ 700
Roy Dean Kent.......................................... 700
Ginger D. Moss......................................... 175
Sandra F. White........................................ 175
Melodi Hatcher Ross.................................... 175
----------
</Table>
<Table>
181,025
Payment to R.L. Renck & Co. after exercise of in-the-money
warrant................................................ 10,500
SEC filing fees........................................... 430
Payment of debt financing fees and expenses:.............. 18,000
Ambient Advisors, LLC -- compensation for financial
advisory services...................................... 50,000
Payment of the following estimated legal fees and
expenses:
</Table>
<Table>
Moore & Van Allen PLLC, counsel to the Davis Group... $ 85,000
Johnson, Blakely, et al, counsel to Casco............ 95,000
Porter Wright Morris & Arthur, LLP, counsel to the
special committee.................................. 25,000
----------
</Table>
3
<Table>
$ 205,000
Paying agent fees........................................... 3,500
Hausser & Taylor LLP -- accounting fees and expenses........ 1,000
Bowne -- printing and mailing expenses...................... 35,000
Miscellaneous Expenses...................................... 20,000
----------
Total............................................. $2,503,127
==========
</Table>
- - 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 approved the merger and the Merger Agreement and voted to
recommend that you vote "FOR" approval of the merger and the Merger Agreement.
- - 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 that you vote in favor of the
Merger Agreement 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:
- 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;
- 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 initial offer to take Casco
private by purchasing the shares of Casco's common stock held by
unaffiliated stockholders 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;
- the possible loss of Charles Davis's services to Casco and the
potential effect on Casco's stock price;
- 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;
- 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 buyer;
- the alternatives available to Casco, and the possibility that if
Casco remains a 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.
- - DID THE SPECIAL COMMITTEE RECEIVE ANY OFFERS FROM OTHERS TO ACQUIRE CASCO AT
PRICES HIGHER THAN $2.10 PER SHARE? (SEE PAGE 11)
No. Even though the proposed merger was well publicized Casco did not
receive any offers or indications of interest from any other potential buyers
following Casco's public announcement on December 11, 2000 of the Davises
initial offer of $1.87 per share.
4
- - WHAT ARE THE CONSEQUENCES OF THE MERGER TO PRESENT MEMBERS OF MANAGEMENT AND
THE BOARD OF DIRECTORS? (SEE PAGE 30)
It is expected that, in general, all members of Casco's current management
will continue as management of Casco after the merger. 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 owned by officers and directors who are continuing
stockholders. 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 these options whether or not these options are
vested. Immediately after 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.
- - IS THE MERGER SUBJECT TO THE SATISFACTION OF ANY CONDITIONS? (SEE PAGE 43)
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.
- - WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED? (SEE PAGE 39)
Casco, Davis Holdings and Davis Acquisition intend to complete the merger
as quickly as possible. If the Merger Agreement is adopted and approved at the
special meeting, and the other conditions to the merger are satisfied or waived,
the merger is expected to be completed promptly after the special meeting.
- - CAN THE MERGER AGREEMENT BE TERMINATED PRIOR TO THE COMPLETION OF THE MERGER?
(SEE PAGE 44)
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. Both the Buyer and Casco have waived this
condition;
- 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;
- 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.
- - WHAT HAPPENS IF THE MERGER AGREEMENT IS TERMINATED PRIOR TO THE COMPLETION OF
THE MERGER? (SEE PAGE 44)
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 its approval or recommendation in a manner adverse to the Buyer, or
recommends another acquisition
5
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.
- - WHAT WILL HAPPEN TO THE MARKET FOR CASCO'S COMMON STOCK AND WARRANTS AFTER THE
MERGER? (SEE PAGE 23)
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.
- - WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER? (SEE PAGE 35)
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.
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.
- - WHEN AND WHERE IS THE SPECIAL MEETING? (SEE PAGE 26)
The special meeting of Casco stockholders will be held at 10:00 a.m. local
time on December 28, 2001, at 13900 Conlan Circle, Suite 150, Charlotte, North
Carolina.
- - WHO CAN VOTE ON THE MERGER AGREEMENT? (SEE PAGE 27)
Holders of Casco common stock at the close of business on December 3, 2001,
the record date for the special meeting, may vote in person or by proxy at the
special meeting.
- - WHAT VOTE IS REQUIRED TO ADOPT AND APPROVE THE MERGER AGREEMENT? (SEE PAGE 27)
The Merger Agreement must be adopted and approved by the affirmative vote
of at least a majority of the outstanding shares of Casco's common stock. As of
the record date for voting at the special meeting, Casco had 1,774,186 shares of
common stock outstanding. The merger is not subject to a vote of a majority of
the unaffiliated stockholders. 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 842,930 shares of Casco
common stock, constituting approximately 47.5% 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 931,256 shares of Casco common stock.
- - WHAT DO I NEED TO DO NOW? (SEE PAGE 26)
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
6
enclosed, postage paid return envelope as soon as possible so that your shares
can be voted at the special meeting.
- - WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD? (SEE PAGE 27)
The failure to return your proxy card will have the same effect as voting
against the Merger Agreement.
- - MAY I VOTE IN PERSON? (SEE PAGE 28)
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.
- - MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD? (SEE PAGE 28)
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.
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.
- - IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME? (SEE PAGE 28)
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.
- - SHOULD I SEND IN MY STOCK CERTIFICATES NOW? (SEE PAGE 28)
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.
- - WHAT RIGHTS DO I HAVE IF I OPPOSE THE PROPOSED MERGER? (SEE PAGE 36)
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.
- - WHO CAN HELP ANSWER MY QUESTIONS? (SEE PAGE 50)
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 appendices, the documents incorporated by reference and the
documents which accompany this Proxy Statement. 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) 752-0119
Attn: Jeffrey A. Ross, Secretary
7
SPECIAL FACTORS
BACKGROUND OF THE MERGER
During 1999 and the first several months of 2000, Charles Davis learned,
based on informal conversations with several financial consultants, that Casco
could not attract public or private equity capital to help finance the expansion
of its business, principally because it did not have sufficient prospects for
growth in revenues and profits. In addition, during this period, Charles Davis
became increasingly aware of the competitive disadvantages facing Casco as a
result of the financial information it was required to disclose as a public
company. Charles Davis also knew that he had developed and/or managed several
key customers of Casco who accounted for a significant portion of Casco's
revenues and profitability. Despite his contributions to the financial success
of Casco, Charles Davis owned a relatively small percentage of Casco's
outstanding common stock and was earning substantially less than he believed he
could earn as a sales representative for other companies.
Based principally on these factors, in September 2000, Charles Davis
informed S. Robert Davis, his father and the chairman of the board of Casco,
that he was considering terminating his employment with Casco in order to pursue
other opportunities. Upon learning of Charles' concerns about continuing his
affiliation with Casco, Robert Davis discussed with Charles the possibility of
joining together to make a proposal to convert Casco to a private company.
Robert Davis proposed to structure the acquisition to significantly increase
Charles' equity interest in Casco. Robert and Charles discussed, among other
things, the advantages of operating a fulfillment company as a private entity
and the disadvantages of continuing to operate as a public company, including
Casco's inability to raise funds through the capital markets, the lack of
liquidity in Casco's publicly traded common stock, Casco's depressed stock price
and the likelihood that these conditions would not improve due to the short- and
long-term economic outlook in the fulfillment industry.
Based on these discussions, Charles decided that if he and his father could
acquire control of Casco by purchasing the common stock held by unaffiliated
stockholders, he would be willing to remain with Casco and commit his business
time and effort to attempting to grow Casco's business as a private company.
During the next two months, Charles Davis began to explore possible financing
arrangements for a cash purchase of the stock of Casco held by unaffiliated
stockholders. In early December 2000, the Davises retained counsel to advise
them regarding their proposed transaction, the regulatory process that would be
required for a "going private" transaction and possible structures for such a
transaction. The Davises' discussions with their counsel led them to conclude
that a cash merger was the most desirable structure because it involved a single
transaction that required approval by only a majority of Casco's outstanding
shares and it also afforded Casco's unaffiliated stockholders dissenters' rights
under Delaware law if they believed the cash merger price did not represent fair
value for their shares.
On December 11, 2000, Robert Davis and Charles R. Davis sent a letter to
the board of directors of Casco proposing to merge 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 optionholders would receive cash equal
to the excess, if any, of $1.87 per share over the exercise price of their
options and all options would be cancelled.
The Davises initially proposed a cash price of $1.87 per share based on
their understanding of industry conditions at that time, Casco's uncertain
business prospects and their different views regarding the value of Casco. Each
of them understood that they would have to offer a premium over recent trading
prices for Casco's common stock in order to complete the proposed merger
transaction. Charles Davis believed that the Davises should initially offer
$1.75 per share. Robert Davis believed that the initial offer should be $2.00
per share. The Davises were unable to agree on either price and decided they
would offer the average of $2.00 and $1.75 and initially propose a cash price of
$1.87 per share which represented the median between the two prices they each
considered proposing to Casco's board.
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
8
board, containing only independent directors, to consider the proposal. The
board members other than the Davises are David J. Richards, Rodney L. Taylor,
Michael Beauchamp, Randall J. Asmo, and Phillip M. Shasteen. Mr. Asmo was not
considered for membership on the special committee because he is employed by a
company controlled by the Davises. Mr. Shasteen was not considered for the
special committee because he is a shareholder of the law firm that has
represented Casco for several years. Although Messrs. Richards, Taylor and
Beauchamp will all receive payment from Casco in the merger for options held by
them, the board believed that a two-person committee was sufficient and most
economical. Accordingly, 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 special committee unanimously selected and
engaged Ambient to provide financial advisory services to the special committee
to assist it in evaluating the Davises' proposal. Ambient agreed 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 advisor and Ambient on February
14, 2001. At the meeting, Ambient orally advised the special committee that:
- 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;
- 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
- 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.
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 acquisition transaction with
Casco. 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. Based on the members' knowledge of the industry and
the stock market, the special committee believed that the absence of any
indication of interest from prospective buyers inferred that a protracted market
survey for a buyer was unlikely to produce any positive results. In addition,
the special committee was concerned that a protracted market survey could
jeopardize Charles Davis' continued employment with Casco and that the Davises
might withdraw their offer to acquire Casco if the proposed transaction was
delayed for an indefinite period of time. Because the special committee believed
the unlikely benefits of a market survey were outweighed by the risks of losing
Charles Davis and the Davises offer, the special committee decided not to
actively solicit indications of interest from unrelated third parties and to
focus their efforts on negotiating a higher price from the Davises. Moreover,
since the proposed transaction was well publicized and the Company was free to
consider and accept competing offers, the special committee believed that the
Company's method of proceeding with the proposed transaction was procedurally
fair to the Company's unaffiliated stockholders.
9
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 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. Over the next few days the
Davises discussed a possible increase in the price. On February 28, 2001, the
Davises sent another letter to the special committee, amending their previous
offer to increase the price per share to $2.10, provided that the special
committee would recommend that the stockholders approve the transaction.
The Davises were willing to increase their offer to $2.10 per share in
order to propose a price that they believed could be financed without
jeopardizing Casco's financial viability and that would be high enough to enable
the special committee's financial advisor to conclude that it was fair to
Casco's unaffiliated stockholders from a financial standpoint.
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 Casco's unaffiliated stockholders, and that it is questionable
whether such a price could be achieved by them in the market at any time in the
foreseeable future in the absence of the Davises' buyout proposal.
Ambient then reviewed with the special committee a summary of observations,
market trading comparable analysis, discounted cash flow valuation analysis,
mergers and acquisitions comparables analysis, adjusted book value 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 sector, 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's would expect returns in the range of
20%-22% and a terminal exit value of 4x free cash flow, leading to a per share
value of $2.70 per share, $2.35 per share and $1.23 per share, based on high,
middle and low revenue projections, respectively, depending upon the earnings
multiple chosen.
The special committee observed that increasing layoffs at Casco's larger
customers could have a dramatic adverse effect on Casco's business, as well as
the whole employee awards market, and that the loss by Casco of a single key
account could turn Casco from profitable to unprofitable. Based upon current
market conditions, the special committee believed and advised Ambient that it
was unlikely that Casco's revenues would grow in the foreseeable future, and
could very well decline, given conditions in the economy. Given this fact,
Ambient advised the special committee that its analysis would suggest a value in
the low to middle portion of the range.
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
Casco's balance sheet from prior acquisitions should be removed, and that the
fair market value of its real estate in Shelby, North Carolina would not likely
exceed its cost. 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
10
available. Moreover, Casco's current cash flow would not permit a financial
buyer to obtain financing comparable to that being obtained by the Davises
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 had 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 other sales personnel 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 advised the special committee that it
questioned 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. The special committee did not conduct an active survey
of the market, and believes that such a survey is not required. Mr. Richards
stated that he had requested several large stockholders to advise him if they
became aware of anyone potentially interested in offering more than 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.
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 its independent legal advisor,
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 Casco, including revisions to Casco's
representations and warranties, limitations on Casco's ability to consider
competing offers, and the payment of fees and expenses in the event of
termination of the agreement by Casco. The special committee insisted that in
order for the process to be procedurally fair, the Merger Agreement not preclude
the special committee and the Casco board from considering and recommending
competing proposals should they be presented as a result of the publicity of the
Davis Group's proposal. Substantially all of the proposed revisions were
accepted by Casco and the Davises 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 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 adopted Ambient's analysis and findings
and 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, Ambient's analysis and findings were adopted by the
Casco board, and the Casco board resolved that the terms of the merger, the
Merger
11
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 recommends that the Casco stockholders vote
FOR approval of the merger, the Merger Agreement and the transactions
contemplated thereby at the special meeting.
Reasons For The Special Committee's And The Boards' 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 material factors, which each of them considered as positive, negative or
neutral from a fairness standpoint.
Positive Factors In The Determination
- The increase in the price per share to $2.10, which represented an
increase of approximately 12% from the $1.87 per share initially
offered by the Davises.
- The fact that the price of $2.10 per share represented 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 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.
- The special committee's and the Casco board's capability to assess the
fairness of the merger consideration and the merger transaction based
on their familiarity with, and presentations by Ambient, 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 environment in which Casco competes, and current industry,
economic and market conditions, both on an historical and on an
on-going basis.
- The fact that the special committee retained and received advice from
independent legal counsel and an independent financial advisor in
negotiating the price of $2.10 per share and evaluating the terms of
the Merger Agreement.
- The financial presentations made by Ambient at the March 1, 2001
meeting of the special committee and at the board of directors' May 8,
2001 meeting;
- The opinion of Ambient, delivered on May 8, 2001, 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. The special
committee and the Casco board relied on the financial analysis of
Ambient, which included an overall outlook for Casco, an analysis of
the stock market performance and market trading for comparable
companies, a discounted cash flow analysis, a mergers and acquisitions
comparable transactions analysis, and an adjusted book
value/liquidation analysis, all of which, as a whole, led the special
committee and the Casco board to conclude that the consideration
offered to unaffiliated stockholders constitutes fair value.
- The fact that the merger consideration is all cash, which provides
certainty of value to the Casco stockholders.
- The fact that a transaction could be structured with the Davises to
enable Casco's unaffiliated stockholders to realize $2.10 per share
without Casco losing the services of Charles Davis. The special
committee and the board believed that the loss of his services would
have adversely affected Casco's results of operations with the
associated risk that Casco's stock price would fall below the low and
high bid prices of $0.86 to $1.63 per share that prevailed in the
fourth quarter of 2000.
- The absence of any likelihood in the special committee's and Casco's
board's judgments that one or more strategic or financial acquirers
would be willing to pay a price for Casco stock or its assets
12
that in present value terms would be as high as the merger consideration to be
received by Casco's unaffiliated stockholders pursuant to the Merger Agreement
due to Casco's limited prospects.
- The special committee and the Casco board considered Casco's book
value, and agreed with Ambient's conclusion that Casco's book value
should be adjusted to reflect the single-use nature of its facility in
Shelby, North Carolina and believe that Casco's liquidation value is
likely to be substantially below $2.10 per share.
- The special committee and the Casco board believed that, at the time
of their respective meetings, Casco's going concern value exceeded the
current trading price of the Casco common stock, and that the going
concern value is fairly reflected in the merger consideration.
- The absence of at least preliminary inquiries from any interested
buyers during the 5 month period from the date of the initial
announcement of the Davis' offer and the special committee and board
meetings in May 2001. Despite wide publication of the terms of the
merger, neither Casco nor any member of the board received any
proposals or indications of interest from any other prospective
purchaser. Notwithstanding Ambient's belief that strategic buyers
would be reluctant to break up a management-led buyout, the special
committee and the board believed that a buyer seriously interested in
acquiring Casco would have contacted Casco or a member of the board
and noted that the Merger Agreement permits the Company to consider
competing offers and to negotiate with other interested parties and
permits the special committee and the Casco board to recommend another
acquisition proposal if the Company pays a termination fee considered
by the special committee and the board to be reasonable in amount.
- The limited alternatives available to Casco, and the possibility that
if Casco remained a 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.
Negative Factors In The Determination
- The fact that the unaffiliated stockholders would not have the
opportunity to participate in the potential long-term success of
Casco.
Neutral Factors In The Determination
- The historic prices of Casco's common stock because of the volatility
of the bid prices during the 12 month period ended December 31, 2000.
During that period, the bid prices for Casco's common stock ranged
from a high of $5.84 to a low of $0.875. As Ambient noted in its
analysis, 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 market. Because Casco has abandoned its efforts to
enter that market, the historic bid prices were not considered an
accurate reflection of market value.
- The average price paid by S. Robert Davis for Casco stock during the
first and second quarters of 2000 was considered a neutral factor for
the same reason set forth in the immediately preceding bullet point.
- The lack of a market survey because of the special committee's and
board's belief that a market survey was unlikely to reveal a potential
buyer and the concern that a protracted market survey could jeopardize
Charles Davis' continued employment with Casco and that the Davises
might withdraw their offer to acquire Casco if the proposed
transaction was delayed for an indefinite period of time. The
circumstances surrounding the Davises' offer, including the
uncertainty of Charles Davis' employment with Casco and the Davises
guaranty of the acquisition debt, the Casco board and the special
committee did not believe that a search for other strategic
alternatives or an active solicitation of indications of interest from
independent third parties to
13
purchase Casco would contribute to the fairness of the transaction to
Casco's unaffiliated stockholders.
The foregoing discussion of the factors considered by the special committee
and the Casco board is not intended to be exhaustive. In determining whether the
terms of the merger, the Merger Agreement and the transactions contemplated
thereby were fair to Casco's unaffiliated stockholders, the Casco board and the
special committee determined that, because of the factors described above and
because the Casco unaffiliated stockholders have appraisal rights under Delaware
law, the transaction is procedurally fair without a requirement that it be
approved by Casco's unaffiliated stockholders. In view of the 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.
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 Casco board 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 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.
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
14
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 Casco board's attention the following key points of
its due diligence as they specifically related to Ambient's fairness analysis:
- 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;
- Management's estimate that the current market size of the industry
is approximately $600 million in annual sales;
- 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;
- 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 Casco's current president,
Charles R. Davis, who has developed and/or manages many of Casco'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
- 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
15
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.
Casco Comparable Company Descriptions. Set forth below are brief
descriptions of the business of the companies comparable to Casco.
Management Service Comparables:
- ABLEST CORP. (AMEX: AIH) -- Provides temporary and contract
staffing solutions to businesses in the clerical, light industrial
and technology professional sectors.
- 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.
- 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.
- 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.
- 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 the United States, the United Kingdom &
Asia.
Business Services Comparables:
- 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.
- 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.
16
- 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.
- 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.
- 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:
- Casco had the smallest market value of equity of the comparables group
and thus, in Ambient's opinion, was the least likely to ever attract
meaningful institutional investor support.
- All ten companies experienced drastic declines in their market values
of equity 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.
- 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 represented
a ratio of 2.50.
- 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 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 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
17
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 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:
<Table>
Most Likely Case:......................................... $2.35 per share
High Case:................................................ $2.70 per share
Low Case:................................................. $1.23 per share
</Table>
18
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:
<Table>
<Caption>
TRANSACTION
ACQUIRER ACQUIREE BUSINESS DESCRIPTION DATE TYPE/APPROACH
- -------- ------------------- ------------------------- -------- -------------
American Employers Group Novacare Employee Provides a comprehensive 1/15/98 Private Stock
Services Inc management system to
medium sized businesses
Lason, Inc. M-R Group Document and Data 6/30/99 Public Stock
Management Company
Isernhagen & Associates Health Fitness Consulting-prevention and 2/7/97 Private
Physical, Inc management of work
injuries
The Continuous Learning Century Business Management training
Group Services production and 3/31/98 Private Stock
administrative support
Bitterman & Associates Ambassadors Corporate incentive 12/23/96 Private
International, performance management
Inc
</Table>
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
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
19
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. 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. This type of analysis, however,
provides an additional check to the traditional valuation techniques and was an
appropriate consideration in this transaction.
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.
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. Ambient was advised that the Davises were being
required to provide personal guarantees and/or pledges of other assets to obtain
sufficient financing to acquire the shares held by unaffiliated stockholders in
the merger. And, on a going forward basis, it is Ambient's understanding that
Charles 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 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. 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 thus concluded 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 only a summary of the material 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 were based on information provided by Casco and its management and 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.
20
PURPOSE AND REASONS OF THE DAVISES AND OTHER MEMBERS OF THE DAVIS GROUP FOR THE
MERGER
The Davises, individually and through American Home Building Corporation,
are engaging in the merger transaction to acquire control of Casco as a private
company. The other members of the Davis Group are engaging in the merger
transaction to acquire a minority ownership position in Casco as a private
company that will be controlled by the Davises. The members of the Davis Group
are participating in the merger for the following reasons:
- The members of the Davis Group believe that Casco, as a private company,
will have greater operating flexibility to incur expenses, hire
personnel, incur debt and seek to expand Casco's business with a view
toward enhancing value over the long term without the constraint of the
public market's emphasis on short-term quarterly results. The members of
the Davis Group also believe that Casco, as a private company, can avoid
the potential disruptive effect on its results of operations that could
occur if Casco remained a public company and it were to incur losses due
to the loss of one or two key customers.
- Because Casco often seeks customers through competitive bidding, the
members of the Davis Group believe that Casco is disadvantaged as a
public company in bidding for customers. As a public company, Casco is
required to disclose financial information that enables competitors to
estimate Casco's cost of goods sold and gross margins. This information
allows Casco's competitors, all of which are private and many of which
manufacture the goods they sell, to submit bids that are lower than
Casco's. As a private company, the members of the Davis Group believe
that Casco will not be subject to this competitive disadvantage when
Casco bids for customer accounts.
- The merger transaction will result in a substantial increase in Charles
Davis's equity ownership of Casco as a private company. Because Casco's
business depends, in large part, on Charles Davis's sales ability and his
relationship with several key customers, the members of the Davis Group
believe that, through his increased equity position, Charles Davis will
have a greater incentive to grow Casco's business than he has had in the
past as a relatively small equity owner of Casco. The members of the
Davis Group believe that this increased incentive for Charles Davis may
enable them to derive greater value from their investment in Casco as a
private company than they could have derived from Casco's continued
operation as a public company.
- The members of the Davis Group also believe 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 outside board member fees (estimated, in the aggregate, at between
$115,000 - $150,000 per year) are not justified given the size of Casco,
the thin trading market for its common stock and warrants and the lack of
any following of Casco by research analysts. The members of the Davis
Group believe these resources can be deployed more effectively in the
business operations of Casco as a private company.
The Davises did not consider other alternatives to the merger, such as
retaining an investment banker to sell Casco to a third party, as a means to
enhance stockholder value. The Davises were interested in a transaction that
enabled them to obtain control of Casco as a private company. The other
individual members of the Davis Group were offered the opportunity by the
Davises to participate in the merger transaction and agreed to participate to
retain a minority equity interest in Casco. However, the Davises and the other
members of the Davis Group were aware that the proposed merger transaction and
the cash price per share offered by the Davises would be publicly announced,
giving any interested third party an opportunity to discuss with the Davises or
Casco a business combination transaction that might yield more than $2.10 per
share for Casco's unaffiliated stockholders. The Davises, as well as the other
members of the Davis Group, were willing to consider any third-party proposals
made to Casco, or the Davises, that would enable the unaffiliated stockholders
to realize more than $2.10 for their shares of Casco common stock. Despite
publication of the Davises initial offer and the subsequent increase in their
offer, neither Casco nor any member of the Davis Group received any indications
of interest from a third party to acquire Casco.
21
The Davises structured the transaction as a merger to enable the Continuing
Stockholders to acquire all of the outstanding common stock of Casco in a single
transaction. This structure also allows any unaffiliated stockholder who does
not believe that a cash price of $2.10 per share is fair to exercise dissenters
rights under Delaware law. The primary reason for the timing of the transaction
was Charles Davis's frustration with the competitive disadvantages that Casco
confronted as a public company, the costs incurred by Casco as a public company,
the lack of liquidity in Casco's stock, the depressed price of Casco's common
stock and Casco's inability to access the capital markets.
POSITION OF THE DAVIS GROUP AND THE BUYER AS TO FAIRNESS OF THE MERGER
Each member of the Davis Group and the Buyer have 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 Davis Group and the Buyer adopt the analyses and
findings of the special committee and the board with respect to the merger and
believe that the merger is both procedurally and substantively fair to the
unaffiliated stockholders. Neither the members of the Davis Group nor the Buyer
are making any recommendation as to how Casco's stockholders should vote on the
Merger Agreement. The members of the Davis Group and the Buyer have 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 AND R.L. RENCK & CO., INC. FOR THE
MERGER; POSITION OF R.L. RENCK & CO., INC. AS TO FAIRNESS OF THE MERGER
The Stockholder Group consists of Melissa Davis, Robert Davis's wife, Dr.
Graver and Mr. Fentin. In early December 2000, Robert Davis discussed with
Melissa the proposed merger transaction and recommended that she participate
which she agreed to do. Dr. Graver, Mr. Fentin and R.L. Renck & Co., Inc.
("Renck") first became aware of the proposed transaction when Casco publicly
announced in December 2000 that the Davises had proposed a cash merger
transaction to Casco's board of directors at a price of $1.87 per share.
Subsequently, Charles Davis talked with each of them about the proposed
transaction, explained to them Davis Holding's proposed capital structure and
asked them if they would be interested in retaining an equity position in Casco
through the ownership of a minority interest in Davis Holdings. They each
indicated they would be interested which led the Davises to invite them to
become minority stockholders in Davis Holdings upon the consummation of the
merger.
Each member of the Stockholder Group and Renck are participating in the
merger transaction because each of them was offered the opportunity to
participate by the Davises and will own a minority interest in Casco as a
private company if the merger is consummated. Each member of the Stockholder
Group and Renck elected to accept the Davises offer to participate with the
Davis Group in the ownership of Casco because of their belief that Casco, as a
private company controlled by the Davises, may enable them in the future to
realize a return on their investment in Casco higher than the $2.10 per share in
cash they would receive by not participating in the merger. None of the members
of the Stockholder Group or Renck 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. Neither Renck
nor any 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." Renck is a member of the Davis Group
and, as such, believes that the proposed transaction is procedurally and
substantively fair to Casco's unaffiliated stockholders. See "Position of the
Davis Group and the Buyer as to the Fairness of the Merger."
The Davises know Dr. Graver and Mr. Fentin, but neither Dr. Graver nor Mr.
Fentin have had any prior business relationships with Casco. In February 1998,
Casco entered into a consulting agreement with Renck pursuant to which Renck
consulted with Casco about possible capital raising transactions, the possible
acquisition of other companies and the development of investor relations
strategies. Pursuant to this
22
agreement, Renck, among its other services, introduced Casco to a company in
August 1999 with a business segment similar to Casco's business to enable Casco
to discuss a possible acquisition of that business segment. Renck also
introduced Casco to a regional investment banking firm to provide Casco with a
potential source of financing for the proposed acquisition. After several
discussions with the management of the target company, Casco's management
decided not to pursue the acquisition. For its consulting services, Casco issued
a warrant to Renck on February 28, 1998 to purchase 30,000 shares of Casco's
common stock at an exercise price of $3.00 per share and another warrant on June
27, 1999 to purchase 30,000 shares of Casco's common stock at an exercise price
of $1.75 per share. Casco also agreed to reimburse Renck for pre-approved
expenses. The consulting agreement terminated in February 2000.
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 initial offer by the Davises to take Casco private by
purchasing the outstanding shares of common stock held by unaffiliated
stockholders 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
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 in cash for each share of Casco common stock
purchased upon exercise of such warrant. Since all publicly traded warrants are
exercisable at a price above $2.10 per share, it is not anticipated that any of
those warrants will be exercised.
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'
23
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, Robert and Charles Davis 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 Davises 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
Davises 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 Davises 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 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 Davises is the risk created by the requirement that they personally
guarantee 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."
24
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
December 3, 2001:
<Table>
<Caption>
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% 1,006,057 3,169 50,468
Charles R. Davis............................. 6.4% 435,052 1,370 21,824
R. L. Renck & Co., Inc....................... 19.1% 1,298,357 4,089 65,131
Dr. John Graver.............................. 3.1% 210,728 663 10,571
Randall J. Asmo.............................. 2.2% 149,549 471 7,502
Richard B. Fentin............................ 1.1% 74,774 235 3,751
Melissa Davis................................ * 18,353 58 920
Jeffrey A. Ross.............................. * 12,235 38 614
Daniel A. Splawn............................. * 30,589 96 1,535
</Table>
- ---------------
* Less than one percent.
(1) Based on Casco's stockholders' equity as of September 30, 2001 (unaudited).
(2) Based on Casco's net income for the quarter ended September 30, 2001
(unaudited).
(3) Based on Casco's net income for the year ended December 31, 2000.
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:
<Table>
<Caption>
OWNERSHIP NET BOOK NET NET
PERCENT VALUE(1) INCOME(2) INCOME(3)
--------- ---------- --------- ---------
American Home Building Corporation........... 50.0% $3,398,841 $10,705 $170,500
R. L. Renck & Co., Inc....................... 20.0% 1,351,536 4,282 68,200
S. Robert Davis.............................. 15.5% 1,053,640 3,319 52,855
Charles R. Davis............................. 6.8% 462,242 1,456 23,188
Dr. John Graver.............................. 3.3% 224,323 707 11,253
Randall J. Asmo.............................. 2.3% 156,347 492 7,843
Richard B. Fentin............................ 1.2% 81,572 257 4,092
David A. Splawn.............................. 0.5% 33,988 107 1,705
Melissa Davis................................ 0.3% 20,393 64 1,023
Jeffrey A. Ross.............................. 0.2% 13,595 43 682
</Table>
- ---------------
* Less than one percent.
(1) Based on Casco's stockholders' equity as of September 30, 2001 (unaudited).
(2) Based on Casco's net income for the quarter ended September 30, 2001
(unaudited).
(3) Based on Casco's net income for the year ended December 31, 2000.
25
HISTORICAL PER SHARE INFORMATION
The cash merger consideration the unaffiliated shareholders will receive in
the merger is $2.10 per share. The following table sets forth certain per share
information about Casco for the five-year period ending December 31, 2000:
<Table>
<Caption>
PER SHARE INFORMATION 2000 1999 1998 1997 1996
- --------------------- ---- ---- ---- ----- ----
Book value.................................................. 3.68 3.50 3.30 4.23 3.32
Tangible book value......................................... 2.41 2.15 1.87 3.34 2.19
Cash dividends.............................................. 0.00 0.00 0.00 0.00 0.00
Income (loss)............................................... 0.19 0.20 0.39 (0.34) 0.20
</Table>
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 December 28, 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:
- shares of Casco common stock held by Davis Holdings, which will be
canceled without payment;
- 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
- shares held by Casco in treasury, which will be canceled without
payment.
26
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.
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.
RECORD DATE AND VOTING INFORMATION
Only holders of record of common stock at the close of business on December
3, 2001 will be entitled to notice of and to vote at the special meeting. At the
close of business on December 3, 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 842,930 shares, for
adoption and approval of the Merger Agreement. The shares of Casco common stock
held by the Continuing Stockholders constituted approximately 47.5% of the total
number of shares outstanding on the record date. The stockholders other than the
Continuing Stockholders held 931,256 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 and in such manner as the persons named on the
enclosed proxy card in their discretion determine upon such other business as
may properly come before the meeting or any adjournments thereof.
27
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
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.
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
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.
28
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) 752-0119.
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.
Information about the directors and executive officers of Davis Holdings is set
forth in Appendix D to this proxy statement. Davis Holdings' address and
telephone number are 13900 Conlan Circle, Suite 150, Charlotte, North Carolina
28277, (704) 752-0119.
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) 752-0119.
THE CONTINUING STOCKHOLDERS
Immediately prior to the merger, 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, 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.
RISKS THAT THE MERGER WILL NOT BE COMPLETED
Completion of the merger is subject to various risks, including, but not
limited to, the following:
- that the merger agreement will not be adopted and approved by the
holders of a majority of the outstanding shares of Casco common
stock;
- 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";
- that Casco, Davis Holdings or Davis Acquisition will not have
performed in all material respects their respective obligations
contained in the merger agreement before the effective time of the
merger;
- 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
- 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.
29
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 DIRECTORS, EXECUTIVE OFFICERS AND CONTINUING
STOCKHOLDERS IN THE MERGER
In considering the recommendation of the board of directors, Casco
stockholders should be aware that:
- all but one of the Casco directors will receive payment for Casco options
held by them;
- immediately following the merger, current executive officers of Casco,
including the Davises, Mr. Splawn and Mr. Ross, will continue to serve in
their respective roles as employees of Casco;
- 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; and
- The Davises also own and control American Home Building Corporation,
which will own 50% of Casco after the merger.
As a result of the potential conflicts 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."
DIRECTORS OF CASCO
Each of the Casco directors holds options to purchase Casco common stock.
Under the terms of the merger, each option to purchases Casco common stock
outstanding immediately prior to the merger, whether vested or unvested, will be
canceled and Casco will pay 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 prior to the merger.
All of the Casco directors except for Mr. Shasteen held options with an
exercise price less than $2.10 per share and will receive payment for those
options. The amount of the payments to directors Charles Davis, Robert Davis and
Randall J. Asmo are described below under "Merger Consideration to Be Received
By The Continuing Stockholders".
30
The following table sets forth information with regard to option payments
to Messrs. Richards, Taylor and Beauchamp, each of whom are Casco directors:
<Table>
<Caption>
NUMBER OF
SHARES
NAME SUBJECT TO OPTION TOTAL PAYMENT
- ---- ----------------- -------------
David J. Richards........................................ 20,000 $7,000
Rodney L. Taylor......................................... 20,000 $7,000
Michael P. Beauchamp..................................... 20,000 $7,000
</Table>
EXECUTIVE OFFICERS OF CASCO AND 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.
Messrs. Davis and Ross will receive payment in the merger for the Casco options
held by them as described under "Merger Consideration To Be Received By The
Continuing Stockholders", below. In addition, it is expected that only Robert
Davis and Charles Davis will be directors of Casco after the merger.
MERGER CONSIDERATION TO BE RECEIVED BY THE CONTINUING STOCKHOLDERS
The Continuing Stockholders other than American Home Building Corporation
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.
American Home Building Corporation does not own any shares of Casco common
stock.
Each option to purchase Casco common stock outstanding immediately prior to
the merger and held by a Continuing Stockholder, 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:
<Table>
<Caption>
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
</Table>
R.L. Renck & Co., Inc., a Continuing Stockholder, will receive $10,500 upon
exercise of its warrant to purchase 30,000 shares of Casco common stock at $1.75
per share.
CONTINUING EQUITY INTERESTS OF THE CONTINUING STOCKHOLDERS
American Home Building Corporation, of which Robert Davis and Charles 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 (other than American Home
Building Corporation) will be contributed to Davis Holdings in exchange for one
share of common stock of Davis Holdings and American Home Building Corporation
will be issued additional shares of Davis Holdings common stock for cash so that
it will own 50% of the issued and outstanding common stock of Davis Holdings.
31
The ownership of common stock of Davis Holdings immediately following the
merger will be as follows:
<Table>
<Caption>
NAME COMMON STOCK
- ---- ------------
American Home Building Corporation.......................... 842,930
S. Robert Davis............................................. 261,754
R. L. Renck & Co., Inc...................................... 338,200
Charles R. Davis............................................ 113,330
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
</Table>
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 842,930
shares of common stock or approximately 47.5% of the total number of issued and
outstanding shares of Casco common stock.
Each of the Continuing Stockholders has granted the Davises a proxy to vote
their shares 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.
Those directors and officers own 26,902 shares, or approximately 1.5%, of
Casco's outstanding common stock.
Robert Davis holds exercisable options to purchase 110,000 shares of Casco
common stock and Charles Davis holds exercisable options to purchase 287,800
shares of Casco common stock. If these options were exercised prior to the
record date for the special meeting, the Davises would have the power to vote
1,240,730 shares of Casco's outstanding common stock, or approximately 57%, of
the outstanding shares assuming no other options or warrants were exercised
prior to the record date. This would give the Davises voting control over a
sufficient number of Casco's outstanding shares of common stock to assure
approval of the Merger Agreement at the special meeting. The Davises do not have
any present intention to exercise the options they hold prior to the record date
for the special meeting.
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.
32
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.
MERGER FINANCING
It is estimated that approximately $2.5 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 and by Casco cash on
hand. 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.
33
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:
- satisfactory review by the lender of Casco's final 2000 audit;
- lender review and approval of final ownership structure;
- favorable opinion from lender's counsel;
- a pledge of stock of American to the lender; and
- 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.
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.
34
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.
Fees and expenses of the merger are estimated to be as follows:
<Table>
<Caption>
DESCRIPTION CASCO
- ----------- --------
Special committee compensation.............................. $ 25,000
SEC filing fees............................................. 430
Debt financing fees and expenses............................ 18,000
Financial advisory fees and expenses to Ambient............. 50,000
Legal fees and expenses..................................... 205,000(1)
Paying agent fees........................................... 3,500
Accounting fees and expenses................................ 1,000
Printing and mailing expenses............................... 35,000
Miscellaneous............................................... 20,000
--------
Total............................................. $357,930
========
</Table>
- ---------------
(1) Includes approximately $85,000 for legal counsel to the Buyer and the
Continuing Stockholders, $95,000 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 material 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 who hold shares of Casco common stock as
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. The gain or loss will be capital gain or loss and
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 his or her 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
35
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
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.
36
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.
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.
37
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
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.
38
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".
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;
39
- 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 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
40
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.
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;
41
- 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
- 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
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
42
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.
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;
43
- 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
- Casco shall have received from counsel to Davis Holdings and Davis
Acquisition an opinion covering such matters as Casco reasonably
requests.
It is not anticipated that any of the parties to the Merger Agreement will
waive any of the foregoing conditions.
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):
- by mutual consent of Casco and the Buyer;
- by either Casco or the Buyer if the merger has not been consummated
by October 31, 2001;
- 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
- 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;
- 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;
- 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
44
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 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.
45
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 nine-month periods
ended September 30, 2001 and September 30, 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. Casco has never paid a cash dividend.
<Table>
<Caption>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
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 $ 15,429 $ 15,149
Costs and expenses................... $ 22,952 $ 23,549 $ 22,102 $ 20,007 $ 22,542 $ 15,111 $ 15,540
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle............... 593 650 (384) (674) (583) 318 (391)
Benefit (Provision) for income
taxes.............................. (252) (293) 146 256 195 (134) 158
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
gain and cumulative effect of
change in accounting principle..... 341 357 (238) (418) (388) 184 (234)
Cumulative effect of change in
accounting principle*.............. -- -- -- -- 597 -- --
Extraordinary gain on retirement of
debt............................... -- -- 930 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss).................... 341 357 692 (418) 209 184 (234)
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Income (loss) before cumulative
effect of change in accounting
principle.......................... $ 0.19 $ 0.20 $ (0.13) $ (0.34) $ (0.39) $ 0.10 $ (0.13)
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 0.10 (0.13)
========== ========== ========== ========== ========== ========== ==========
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
========== ========== ========== ========== ========== ========== ==========
</Table>
- ---------------
* 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.
<Table>
BALANCE SHEET DATA:
Working capital...................... $ 4,920 $ 4,787 $ 4,606 $ 7,202 $ 5,025 $ 5,433 $ 4,535
Total assets................. 16,544 17,344 18,843 16,148 18,249 15,185 15,032
Long-term debt....................... 2,054 2,190 2,413 4,900 4,125 1,949 2,093
Stockholders' equity................. 6,560 6,237 5,880 5,188 3,328 6,798 6,019
</Table>
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.
46
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 December 3, 2001, there were approximately
501 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.
<Table>
<Caption>
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.............................................. $1.940 $1.480
Third Quarter............................................... $1.961 $1.916
Fourth Quarter (through November 30, 2001).................. $1.880 $1.852
</Table>
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 November 30, 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 $1.95.
Stockholders should obtain a current market quotation for Casco common stock
before making any decision with respect to the merger.
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.
47
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 purchases by each of the
Continuing Stockholders of shares of Casco's common stock during the past two
years, including the number of shares purchased, the range of prices paid and
the average purchase price:
<Table>
<Caption>
AVERAGE PURCHASE
NAME DATE NO. OF SHARES PRICE RANGE PRICE
- ---- ------------------- ------------- ------------- ----------------
S. Robert Davis......... 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
</Table>
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.
48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Casco as of December 3, 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.
<Table>
<Caption>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
----------------------------
NAME POSITION WITH CASCO SHARES(1) PERCENTAGE(1)
- ---- -------------------------- --------- -------------
S. Robert Davis.......................... Chairman of the Board 981,341(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 officers as a
group (8 persons)...................... -- 1,641,103 69.9%
</Table>
- ---------------
(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 December 3, 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. Fentin 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").
49
(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.
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, 2000,
as amended on Form 10-K/A, its Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, its amended Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001 and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001.
50
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; ATTACHMENTS
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. The following documents filed by the
Company with the Commission under the Exchange Act accompany this Proxy
Statement:
- Casco's Annual Report on Form 10-K for the year ended December 31,
2000;
- Amendment No. 1 to Casco's Annual Report on Form 10-K for the year
ended December 31, 2000;
- Amendment No. 2 to Casco's Annual Report on Form 10-K for the year
ended December 31, 2000;
- Casco's Quarterly Report on Form 10-Q for the quarter ended March 31,
2001;
- Casco's Quarterly Report on Form 10-Q for the quarter ended June 30,
2001;
- An Amendment to Casco's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001; and
- Casco's Quarterly Report on Form 10-Q for the quarter ended September
30, 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 December 23, 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.
51
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
A-1
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE I THE MERGER........................................ A-4
Section 1.1 Company Action............................. A-4
Section 1.2 The Merger................................. A-5
Section 1.3 Conversion of Shares and Warrants.......... A-5
Section 1.4 Surrender and Payment...................... A-5
Section 1.5 Dissenting Shares.......................... A-6
Section 1.6 Stock Options.............................. A-6
Section 1.7 Closing.................................... A-7
ARTICLE II THE SURVIVING CORPORATION........................ A-7
Section 2.1 Certificate of Incorporation............... A-7
Section 2.2 Bylaws..................................... A-7
Section 2.3 Directors and Officers..................... A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY... A-7
Section 3.1 Corporate Organization..................... A-7
Section 3.2 Capitalization............................. A-8
Section 3.3 Authority Relative to this Agreement....... A-8
Section 3.4 No Violation............................... A-8
Section 3.5 Compliance with Laws....................... A-9
Section 3.6 Litigation................................. A-9
Section 3.7 Financial Statements and Reports........... A-9
Section 3.8 Absence of Certain Changes or Events....... A-10
Section 3.9 No Undisclosed Material Liabilities........ A-10
Section 3.10 No Default................................ A-10
Section 3.11 Finders' and Brokers' Fees................ A-10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......... A-11
Section 4.1 Corporate Organization..................... A-11
Section 4.2 Capitalization............................. A-11
Section 4.3 Corporate Authorization.................... A-11
Section 4.4 Governmental Authorization................. A-11
Section 4.5 Non-Contravention.......................... A-11
Section 4.6 Finders' and Brokers' Fees................. A-11
Section 4.7 No Current Intent to Sell Business......... A-12
ARTICLE V COVENANTS OF THE COMPANY.......................... A-12
Section 5.1 Conduct of the Company..................... A-12
Section 5.2 Shareholder Meeting; Proxy Material........ A-12
Section 5.3 Disclosure Documents....................... A-12
Section 5.4 Access to Information...................... A-13
Section 5.5 Notices of Certain Events.................. A-13
Section 5.6 Acquisition Proposals...................... A-13
ARTICLE VI COVENANTS OF BUYER............................... A-14
Section 6.1 Director and Officer Liability............. A-14
Section 6.2 Disclosure Documents....................... A-14
Section 6.3 Notices of Certain Events.................. A-14
ARTICLE VII COVENANTS OF BUYER AND THE COMPANY.............. A-14
Section 7.1 Best Efforts............................... A-14
Section 7.2 Certain Filings............................ A-14
Section 7.3 Public Announcements....................... A-15
Section 7.4 Further Assurances......................... A-15
</Table>
A-2
<Table>
<Caption>
PAGE
----
ARTICLE VIII CONDITIONS TO THE MERGER....................... A-15
Section 8.1 Conditions to the Obligations of Each
Party................................................. A-15
Section 8.2 Additional Conditions to the Obligations of
Buyer and Merger Subsidiary........................... A-16
Section 8.3 Additional Conditions to the Obligations of
the Company........................................... A-16
ARTICLE IX TERMINATION...................................... A-17
Section 9.1 Termination................................ A-17
Section 9.2 Effect of Termination...................... A-17
Section 9.3 Fees and Expenses.......................... A-17
ARTICLE X MISCELLANEOUS..................................... A-18
Section 10.1 Definitions............................... A-18
Section 10.2 Notices................................... A-19
Section 10.3 No Survival of Representations and
Warranties............................................ A-20
Section 10.4 Amendments; No Waivers.................... A-20
Section 10.5 Successors and Assigns.................... A-20
Section 10.6 Governing Law............................. A-20
Section 10.7 Severability.............................. A-20
Section 10.8 Headings and Captions..................... A-21
Section 10.9 Interpretations........................... A-21
Section 10.10 Counterparts; Effectiveness.............. A-21
</Table>
A-3
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
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
A-4
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.
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
A-5
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.
(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.
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
A-6
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.
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.
A-7
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 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,
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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.
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
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
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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,
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.
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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.
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.
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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
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.
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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.
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.
(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
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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
(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
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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.
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.
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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 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 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.
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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.
"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.
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The following terms are defined in the following Sections of this
Agreement:
<Table>
<Caption>
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
"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
</Table>
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:
<Table>
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
</Table>
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<Table>
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
</Table>
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.
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
A-20
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.
<Table>
"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
</Table>
A-22
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.
(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.
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(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 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 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
B-2
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 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
B-3
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 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.
B-4
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.
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.
C-1
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.
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.
D-1
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.
<Table>
S. Robert Davis......................... Chairman and President
Charles R. Davis........................ Senior Vice President and Treasurer
Randall J. Asmo......................... Senior Vice President
</Table>
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-2
CASCO INTERNATIONAL, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 28, 2001
The undersigned hereby appoints Charles R. Davis and Jeffrey A. Ross 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 December 28, 2001, at
10:00 a.m., local time, 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.
[X] Please mark votes as in this example.
To adopt and approve the Agreement and Plan of Merger, dated as of May 8, 2001,
among Davis Holdings of North Carolina, Inc., Davis Acquisition of North
Carolina, Inc., and Casco International, Inc., pursuant to which Davis
Acquisition of North Carolina, Inc. will be merged with and into Casco
International, Inc., with Casco International, Inc. as the surviving corporation
and each outstanding share of Casco common stock will automatically be converted
into and represent the right to receive $2.10 in cash.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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.
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Signature
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Date
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Signature
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Date
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE, WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.