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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement under Section 13(e) of the
Securities Exchange Act of 1934
ACORN PRODUCTS, INC.
(Name of Issuer)
ACORN MERGER CORPORATION
THE TCW GROUP, INC.
TRUST COMPANY OF THE WEST
TCW ASSET MANAGEMENT COMPANY
TCW SPECIAL CREDITS
OAKTREE CAPITAL MANAGEMENT, LLC
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
A. CORYDON MEYER
JOHN G. JACOB
GARY W. ZIMMERMAN
CAROL B. LASCALA
(Name of Person(s) Filing Statement)
Common Stock, $0.01 par value per share
(Title of Class of Securities)
004857 20 7
(CUSIP Number of Class of Securities)
Vincent J. Cebula
Oaktree Capital Management, LLC
1301 Avenue of the Americas, 34th Floor
New York, New York 10019
Phone: (212) 284-1900
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Persons Filing Statement)
COPIES TO:
John G. Jacob
Acorn Products, Inc.
390 West Nationwide Boulevard
Columbus, Ohio 43215
(614) 222-4400
Robert J. Tannous, Esq.
Porter, Wright, Morris & Arthur LLP
41 South High Street
Columbus, Ohio 43215
(614) 227-1953
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE
MERITS OR THE FAIRNESS OF THE TRANSACTION OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14(C) or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ x ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies [ ].
Check the following box if the filing is a final amendment reporting the
results of the transaction: [ ].
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------
$1,343,202.00 $123.57
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* Calculated for purposes of determining the filing fee only and in accordance
with Rule 0-11(b)(2) under the Securities Exchange Act of 1934, as amended, by
multiplying 383,772 (the number of shares of common stock held by stockholders
other than Parent immediately prior to the proposed transaction including shares
issuable concurrently therewith) by $3.50, the price to be paid per share.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A
Form or Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
SUMMARY TERM SHEET
This summary and the remainder of this Transaction Statement on Schedule
13E-3 include information describing the "going private" merger involving Acorn
Products, Inc., referred to herein as the Company, and Acorn Merger Corporation,
referred to herein as Parent, how it affects you, what your rights are with
respect to the merger as a stockholder of the Company and the position of
Parent, The TCW Group, Inc., Trust Company of the West, TCW Asset Management
Company, TCW Special Credits, Oaktree Capital Management, LLC, OCM Principal
Opportunities Fund, L.P., A. Corydon Meyer, John G. Jacob, Gary W. Zimmerman,
and Carol B. LaScala (collectively, the "Filing Persons") on the fairness of the
merger to the stockholders of the Company other than the Filing Persons and
CapitalSource Holdings LLC who will be transferring, or cause entities they
control to transfer, shares to Parent in advance of the merger.
PURPOSE OF THE MERGER (PAGE 4).
Immediately prior to the merger, Parent will own approximately 92.5% of the
Company's common stock. The purpose of the merger is to provide a source of
liquidity to the public stockholders and to enable Parent to acquire all of the
outstanding equity interests in the Company and eliminate the expenses and
potential liabilities associated with operating a public company.
CONTRIBUTION AND MERGER (PAGE 28).
The following steps are expected to be taken prior to the merger referred
to herein.
o Parent is a Delaware corporation recently organized by the Filing
Persons to hold all of the shares of Company common stock beneficially
owned by the Filing Persons and approximately 91% of the shares of
Company common stock beneficially owned by CapitalSource Holdings LLC.
Prior to March 31, 2003, the Filing Persons, or entities controlled by
the Filing Persons, and CapitalSource Holdings LLC will convey to
Parent 4,633,811 shares of Company common stock in exchange for
4,633,811 shares of Parent's common stock, par value $.01 per share.
o It is anticipated that on or about March 31, 2003, the Filing Persons'
and CapitalSource Holdings LLC's shares of Company common stock, as
transferred to Parent, will represent approximately 92.5% of the
Company's outstanding common stock. On or about March 31, 2003, Parent
proposes to cause the Company to merge with Parent as a means of
acquiring all of the shares of Company common stock not owned by
Parent (including 20,000 shares that will not be contributed to Parent
by CapitalSource Holdings LLC) and to provide a source of liquidity to
holders of those shares.
o The Company has received a waiver from its lenders which, subject to
certain events, waives certain defaults that would otherwise occur as
a result of the merger. Further, it is anticipated that the lenders
under the Company's current senior credit facility will amend the
terms of such facility to provide an additional term loan in an amount
anticipated to be approximately $1.5 million to fund the merger
consideration and related fees and expenses and revise some of the
Company's existing covenants. In connection with such amendment, the
lenders are expected to reduce the Company's revolving credit facility
to a maximum amount of $31 million. As consideration for the
amendment, the lenders will receive customary amendment and commitment
fees totaling approximately $50,000. The amendment to the Company's
current credit facility is subject to formal approval and
documentation, which has not been negotiated. The consummation of the
merger is not subject to the amendment becoming effective.
PRINCIPAL TERMS OF THE MERGER.
The Merger (Page 28). Parent intends to cause the Company to merge with
Parent on or about March 31, 2003 pursuant to a "short form" merger. As a
result of the "short form" merger, each share of Company common stock not
owned by Parent will be converted into the right to receive $3.50 in cash.
Parent will not be required to enter into a merger agreement with the Company
and Parent does not intend to seek the
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approval of the directors of the Company for any aspect of the transaction
contemplated hereby. Stockholders of the Company will not be entitled to vote
their shares with respect to the merger.
Merger Consideration (Page 29). The consideration in the merger will be
$3.50 per share in cash.
Company Shares Outstanding (Page 4). As of February 7, 2003, a total of
5,010,317 shares of Company common stock were outstanding. In addition, as of
February 7, 2003, options to purchase an additional 69,232 shares of Company
common stock were outstanding, of which options to purchase 60,000 shares are
held by three non-employee members of the Company's board of directors. As these
directors have expressed an intention to resign from the Company's board of
directors upon completion of the merger, such options will terminate by mutual
agreement. Options to purchase 9,232 shares held by former and current employees
will remain outstanding after the merger. Such options have exercise prices that
range from $7.66 per share to $140.00 per share. Moreover, 7,266 shares of
Company common stock shall be issued prior to the merger in connection with the
anticipated non-employee director resignations discussed above as payment for
prior service under a deferred compensation plan, which shares shall receive
$3.50 cash per share in connection with the merger on its effective date.
Payment for Shares (Page 29). Parent will pay you for your shares of
Company common stock promptly after the effective date of the merger.
Instructions for surrendering your stock certificates will be set forth in a
Notice of Merger and Appraisal Rights and a Letter of Transmittal, which will be
mailed to stockholders of record of the Company within 10 calendar days
following the date the merger becomes effective and should be read carefully.
Please do not submit your stock certificates before you have received these
documents. Sending us your stock certificates with a properly signed Letter of
Transmittal will waive your appraisal rights described below.
Source and Amount of Funds (Page 29). The total amount of funds expected to
be required to pay the merger consideration for Company common stock in the
merger and to pay related fees and expenses, is estimated to be approximately
$1,500,000, assuming no outstanding options to acquire Company common stock are
exercised prior to the merger. It is anticipated that the lenders under the
Company's current senior credit facility will amend the terms of such facility
to provide, among other things, an additional term loan in an amount anticipated
to be approximately $1.5 million to fund the merger consideration and related
fees and expenses. The consummation of the merger is not subject to the
amendment becoming effective.
THE FILING PERSONS' POSITION ON THE FAIRNESS OF THE MERGER (PAGE 8).
The Filing Persons have concluded that the merger is fair to the
unaffiliated stockholders of the Company - that is, the stockholders of the
Company other than the Filing Persons and CapitalSource Holdings LLC. In
reaching its conclusion the Filing Persons considered each of the following
factors:
o Current and Historical Market Prices;
o Net Book Value and Net Tangible Book Value;
o Recapitalization Conversion Price;
o Contractual "Put Right" of Lender Affiliate;
o Trend in Equity Markets Overall;
o Risk of Stock Market Delisting;
o Liquidation Value;
o Certain Negative Considerations; and
o Other Factors.
For a complete discussion of the factors that were considered by the Filing
Persons in determining fairness, see "Special Factors -- Fairness of the Merger
- -- Factors Considered in Determining Fairness."
POTENTIAL CONFLICTS OF INTEREST (PAGE 27).
There are various actual or potential conflicts of interest in connection
with the merger. The Filing Persons may be deemed to be in control of the
Company because they currently own approximately 88.2% of the Company's
outstanding common stock.
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For a discussion of other potential conflicts of interest, see "Information
About the Filing Persons -- Conflicts of Interest."
EFFECTS OF THE MERGER (PAGE 6).
Completion of the merger will have the following consequences:
o The Company and Parent will be combined into a single, privately held
entity;
o Only the Filing Persons, or entities related to the Filing Persons,
and CapitalSouce Holdings LLC will have the opportunity to participate
in the future earnings and growth, if any, of the Company. Similarly,
only the Filing Persons, or entities related to the Filing Persons,
and CapitalSource Holdings LLC will face the risk of losses generated
by the Company's operations or the decline in value of the Company
after the merger;
o The shares of Company common stock will no longer be publicly traded.
In addition, the combined entity will not be subject to the reporting
and other disclosure requirements of the Securities Exchange Act of
1934, including requirements to file annual and other periodic reports
or to provide the type of going-private disclosure contained in this
Schedule 13E-3; and
o Subject to the exercise of statutory appraisal rights, each of your
shares will be converted into the right to receive $3.50 in cash,
without interest.
APPRAISAL RIGHTS (PAGE 31).
You have a statutory right to dissent from the merger and demand payment of
the fair value of your Company shares as determined in a judicial appraisal
proceeding in accordance with Section 262 of the Delaware General Corporation
Law, plus a fair rate of interest, if any, from the date of the merger. This
value may be more or less than the $3.50 per share in cash consideration offered
in the merger. In order to qualify for these rights, you must make a written
demand for appraisal within 20 days after the date of mailing of the Notice of
Merger and Appraisal Rights and otherwise comply with the procedures for
exercising appraisal rights set forth in the Delaware General Corporation Law.
The statutory right of dissent is set out in Section 262 of the Delaware General
Corporation Law and is complicated. Any failure to comply with its terms will
result in an irrevocable loss of such right. Stockholders seeking to exercise
their statutory right of dissent are encouraged to seek advice from legal
counsel.
FOR MORE INFORMATION (PAGE 13).
More information regarding the Company is available from its public filings
with the Securities and Exchange Commission. See "Information About the
Company."
If you have any questions about the merger, please contact A. Corydon Meyer
at (614) 222-4400.
INTRODUCTION
This Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") is
being filed by (i) Acorn Merger Corporation, a Delaware corporation ("Parent"),
(ii) The TCW Group, Inc. ("TCWG"), (iii) Trust Company of the West ("TCW"), (iv)
TCW Asset Management Company ("TAMCO"), (v) TCW Special Credits ("Special
Credits"), (vi) Oaktree Capital Management, LLC ("Oaktree"), (vii) OCM Principal
Opportunities Fund, L.P. ("Oaktree Fund"), (viii) A. Corydon Meyer ("Meyer"),
(ix) John G. Jacob ("Jacob"), (x) Gary W. Zimmerman ("Zimmerman"), and Carol B.
LaScala ("LaScala", and collectively with Parent, TCWG, TCW, TAMCO, Special
Credits, Oaktree and Oaktree Fund, the "Filing Persons"), pursuant to Section
13(e) of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 13e-3 thereunder. The Filing Persons and CapitalSource Holdings
LLC ("CapitalSource") will beneficially own 100% of Parent immediately prior to
the Merger. The Filing Persons and CapitalSource currently beneficially own, and
intend to transfer, or cause entities related to them to
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transfer, to Parent, common shares of the Company which are expected to
represent 92.5% of the Company's common stock prior to the effective date (the
"Effective Date") of a proposed short form merger (the "Merger") of the Company
and Parent (with the Company being the surviving entity), pursuant to Section
253 of the Delaware General Corporation Law ("DGCL"). This Schedule 13E-3 is
being filed in connection with the Merger. The Effective Date is expected to be
on or about March 31, 2003.
As of February 7, 2003, a total of 5,010,317 shares of Company common
stock, par value $0.01 per share (the "Shares"), were outstanding. In addition,
as of February 7, 2003, options to purchase an additional 69,232 Shares were
outstanding, of which options to purchase 60,000 Shares are held by three
non-employee members of the Company's board of directors. As these directors
have expressed an intention to resign from the Company's board of directors upon
completion of the Merger, such options will terminate by mutual agreement.
Options to purchase 9,232 Shares held by former and current employees will
remain outstanding after the Merger. Such options have exercise prices that
range from $7.66 per share to $140.00 per share. Moreover, 55,000 restricted
Shares issued to three of the Company's directors unaffiliated with the Filing
Persons shall, pursuant to their terms, fully vest as of the Effective Date. In
addition, an additional 7,266 Shares shall be issued prior to the Merger in
connection with the anticipated non-employee director resignations discussed
above as payment for prior service under the Company's Amended and Restated
Deferred Equity Compensation Plan. All of the fully vested 55,000 restricted
Shares and the 7,366 Shares issued in connection with the Company's Amended and
Restated Deferred Equity Compensation Plan shall receive $3.50 cash per share in
connection with the Merger on the Effective Date. It is anticipated that
immediately prior to the Effective Date, there will be 5,010,317 Shares
outstanding, of which Parent will own 4,633,811 (92.5%).
Upon the consummation of the Merger, each outstanding Share will be
canceled and each outstanding Share not held by Parent (stockholders other than
Parent at the time of the Merger are hereafter referred to as "Public
Stockholders") or Public Stockholders of the Company who properly exercise
statutory appraisal rights under the DGCL, will be automatically converted into
the right to receive $3.50 per Share in cash (the "Merger Price"), without
interest, upon surrender of the certificate for such Share to American Stock
Transfer and Trust Company (the "Paying Agent"). Instructions with regard to the
surrender of stock certificates, together with a description of statutory
appraisal rights, will be set forth in a Notice of Merger and Appraisal Rights
and a Letter of Transmittal, which documents will be mailed to stockholders of
record of the Company on or about the Effective Date of the Merger and should be
read carefully.
Under the DGCL, no further action is required by the Board of Directors or
the stockholders of the Company for the Merger to become effective. The Company
will be the surviving corporation in the Merger.
This Schedule 13E-3 and the documents incorporated by reference in this
Schedule 13E-3 include certain forward-looking statements. These statements
appear throughout this Schedule 13E-3 and include statements regarding the
intent, belief or current expectations of the Filing Persons, including
statements concerning the Filing Persons' strategies following completion of the
Merger. Such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties. Actual results may differ materially from
those described in such forward-looking statements as a result of various
factors.
SPECIAL FACTORS
PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER
PURPOSES
Immediately prior to the Merger and upon contribution by the Filing
Persons, entities controlled by the Filing Persons, and CapitalSource of their
Shares, Parent will own approximately 92.5% of the outstanding Shares. The
purpose of the Merger is to provide a source of liquidity to the Public
Stockholders and to enable Parent to acquire all of the outstanding equity
interests in the Company and eliminate the expenses and potential liabilities
associated with operating a public company.
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ALTERNATIVES
The Filing Persons believe that effecting the transaction via a short form
merger between the Company and Parent under Section 253 of the DGCL is the
quickest and most cost-effective way to provide value and liquidity to the
Public Stockholders and for Parent to acquire the outstanding public minority
equity interest in the Company. The Filing Persons considered and rejected a
long form merger because approval of the Public Stockholders would be required
under applicable law and would unnecessarily cause the Company to incur costs
and expenses associated with such a process. Similarly, the Filing Persons
rejected a tender offer as a viable alternative as it would entail additional
costs, and a subsequent short form merger could still be required. The Filing
Persons also considered and rejected a reverse-stock split because approval of
the Public Stockholders would be required under applicable law and would
unnecessarily cause the Company to incur costs and expenses associated with such
a process.
REASONS
In determining whether to acquire the outstanding public minority equity
interest in the Company and to effect the Merger, the Filing Persons considered
the following factors to be the principal benefits of taking the Company
private:
o the reduction in the amount of public information available to
competitors about the Company's business that would result from the
termination of the Company's obligations under the reporting
requirements of the Securities and Exchange Commission (the
"Commission");
o the Company's primary competitors are all private companies, which
puts the Company at a competitive disadvantage because such
competitors do not have to make the public disclosures that the
Company currently does under the reporting requirements of the
Commission;
o the elimination of additional burdens on management associated with
public reporting and other tasks resulting from the Company's public
company status, including dedication of management's time and
resources to stockholder inquiries and investor and public relations;
o the decrease in costs, particularly those associated with being a
public company (e.g., as a privately-held entity, the Company would no
longer be required to file quarterly, annual or other periodic reports
with the Commission or publish and distribute to its stockholders
annual reports and proxy statements), that the Filing Persons
anticipate could result in savings of approximately $500,000 per year,
including audit, legal, and personnel fees and costs;
o the greater flexibility that the Company's management would have to
focus on long-term business goals, as opposed to quarterly earnings,
as a non-reporting company, particularly in light of the potential
volatility in the Company's quarterly earnings;
o the trading volume in the Company's Shares is low and often the
Company's shares do not even trade on any given day; and
o recent public capital market trends affecting small-cap companies,
including a perceived lack of interest by institutional investors, in
companies with a limited public float.
The Filing Persons also considered the low volume of trading in the Shares
and considered that the Merger would result in immediate, enhanced liquidity for
the Public Stockholders. In addition, the Filing Persons considered trends in
the price of the Shares over the past three months.
The Filing Persons have determined to effect the Merger at this time
because they wish to realize the benefits of taking the Company private, as
discussed above. The Company's stock price was not a significant factor in the
timing of the Filing Persons' decision to propose the merger.
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This Rule 13e-3 transaction is structured as a short form merger under
Section 253 of the DGCL. This form of merger allows the Public Stockholders to
receive cash for their Shares quickly and allows Parent to acquire all of the
outstanding interests in the Company without any action by the Company's board
of directors or the Public Stockholders.
EFFECTS
General
Upon completion of the Merger, the Filing Persons, together with
CapitalSource, will have complete control over the conduct of the Company's
business and will have a 100% interest in the net book value and net earnings of
the Company. In addition, the Filing Persons will receive the benefit of the
right to participate in any future increases in the value of the Company and
will bear the complete risk of any losses incurred in the operation of the
Company and any decrease in the value of the Company. The Filing Persons'
beneficial ownership of the Company immediately prior to the Merger in the
aggregate is expected to amount to approximately 88.2%. Upon completion of the
Merger, the Filing Persons' beneficial interest in the Company's net book value
of $3,803,000 on September 29, 2002 and net loss of $2,258,000 for the nine
months ended September 29, 2002 will increase from approximately 88.2% to 95.4%
of those amounts.
Stockholders other than Parent (the Public Stockholders)
Upon completion of the Merger, the Public Stockholders will no longer have
any interest in, and the Public Stockholders will not be stockholders of, the
Company and, therefore, will not participate in the Company's future earnings
and potential growth and will no longer bear the risk of any decreases in the
value of the Company. In addition, the Public Stockholders will not share in any
distribution of proceeds after any sales of businesses of the Company or its
subsidiaries, whether contemplated at the time of the Merger or thereafter. All
of the Public Stockholders' incidents of stock ownership, such as the rights to
vote on certain corporate decisions, to elect directors, to receive
distributions upon the liquidation of the Company and to receive appraisal
rights upon certain mergers or consolidations of the Company (unless such
appraisal rights are perfected in connection with the Merger), as well as the
benefit of potential increases in the value of their holdings in the Company
based on any improvements in the Company's future performance, will be
extinguished upon completion of the Merger.
Upon completion of the Merger, the Public Stockholders also will not bear
the risks of potential decreases in the value of their holdings in the Company
based on any downturns in the Company's future performance. Instead, the Public
Stockholders will have liquidity, in the form of the Merger Price, in place of
an ongoing equity interest in the Company, in the form of the Shares. In
summary, if the Merger is completed, the Public Stockholders will have no
ongoing rights as stockholders of the Company (other than statutory appraisal
rights in the case of Public Stockholders who perfect such rights under Delaware
law).
The Shares
Once the Merger is consummated, public trading of the Shares will cease.
The Filing Persons intend to deregister the Shares under the Exchange Act. As a
result, the Company will no longer be required under the federal securities laws
to file reports with the Commission and will no longer be subject to the proxy
rules under the Exchange Act. In addition, the Shares will cease to be listed on
the Nasdaq SmallCap Market.
Treatment of Options
The Company has outstanding options to purchase 69,232 Shares, of which
options to purchase 60,000 Shares are held by three non-employee members of the
Company's board of directors. As these directors (Messrs. Abbott, Kahl and
Mariotti) have expressed an intention to resign from the Company's board of
directors upon completion of the Merger, such options will terminate by mutual
agreement. Options to purchase 9,232 Shares held by former and current employees
will remain outstanding after the Merger. Such options have exercise prices that
range from $7.66 per share to $140.00 per share and have expiration dates that
range from December 2003 to May 2012.
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Treatment of Restricted Stock
Pursuant to a restricted stock agreement entered into between the Company
and Mr. Meyer, the Company has the obligation to issue up to 83,500 restricted
Shares, upon satisfaction of vesting and other conditions of such restricted
stock agreements. This agreement will remain outstanding after the Merger.
The Company is also a party to restricted stock agreements with three
directors unaffiliated with the Filing Persons pursuant to which the Company has
issued 55,000 restricted Shares, subject to vesting and other conditions of such
restricted stock agreements. Pursuant to the terms of such agreements with
Messrs. Abbott, Kahl and Mariotti such Shares fully vest as of the Effective
Date. Such Shares will receive the same per share Merger Price as all other
Public Stockholders.
The Company is also a party to restricted stock agreements with Messrs.
Jacob and Zimmerman and Ms. LaScala pursuant to which the Company has issued
49,500 restricted Shares in the aggregate, subject to vesting and other
conditions of such restricted stock agreements. Immediately prior to the Merger,
the Company intends to amend the terms of such agreements with Messrs. Jacob and
Zimmerman and Ms. LaScala so that each of Messrs. Jacob and Zimmerman and Ms.
LaScala may transfer such restricted Shares to Parent in return for restricted
shares of Parent. The restricted shares of Parent obtained by Messrs. Jacob and
Zimmerman and Ms. LaScala are to be governed by restricted stock agreements with
Parent, each of which will contain substantially the same terms and conditions
as the restricted stock agreements currently in place between Messrs. Jacob and
Zimmerman and Ms. LaScala and the Company.
Directors
Upon the effectiveness of the Merger, Messrs. Abbott, Kahl, and Mariotti
intend to resign from their membership of the Company's board of directors.
Pursuant to the terms of the Amended and Restated Deferred Equity Compensation
Plan for Directors, each of these resigning directors shall be issued Shares,
totaling 7,266 Shares in the aggregate, reserved thereunder for prior service as
members of the Company's board of directors. Each of Messrs. Abbott, Kahl, and
Mariotti will receive the same per share Merger Price as the Public Stockholders
for such Shares.
Certain Federal Income Tax Consequences of the Merger
The following discussion is a summary of the material United States federal
income tax consequences of the Merger to beneficial owners of Shares. This
summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and the laws, regulations, rulings, and decisions in
effect on the date of this Schedule 13E-3, all of which are subject to change
(possibly with retroactive effect) and to differing interpretations. In
addition, this discussion only applies to holders that are U.S. persons, which
is defined as a citizen or resident of the United States, a domestic
partnership, a domestic corporation, any estate (other than a foreign estate),
and any trust so long as a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust.
Generally, for federal income tax purposes, an estate is classified as a
"foreign estate" based on the location of the estate assets, the country of the
estate's domiciliary administration, and the nationality and residency of the
domiciliary personal representative.
This discussion does not address all aspects of federal income taxation
that may be relevant to holders in light of their particular circumstances or to
holders who may be subject to special tax treatment under the Code, including
holders of outstanding options or restricted stock, holders who are brokers,
dealers or traders in securities or foreign currency, traders in securities that
elect to apply a mark-to-market method of accounting, foreign persons (defined
as all persons other than U.S. persons), insurance companies, tax-exempt
organizations, banks, financial institutions, broker-dealers, real estate
investment trusts, regulated investment companies, grantor trusts, holders who
hold common stock as part of a hedge, straddle, conversion, or other risk
reduction transaction, or who acquired common stock pursuant to the exercise of
compensatory stock options or warrants or otherwise as compensation.
The receipt of cash by a stockholder, pursuant to the Merger or pursuant to
the exercise of the stockholder's statutory appraisal rights, will be a taxable
transaction for United States federal income tax purposes. In general, a
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stockholder will recognize gain or loss for United States federal income tax
purposes equal to the difference between the amount of cash that the stockholder
receives in the Merger and that stockholder's adjusted tax basis in that
stockholder's Shares. Such gain or loss will be capital gain or loss if the
stockholder holds the Shares as a capital asset, and generally will be long-term
capital gain or loss if, at the Effective Date of the Merger, the stockholder
has held the Shares for more than one year.
The cash payments made to a stockholder pursuant to the Merger will be
subject to backup United States federal income tax withholding unless the
stockholder provides the Paying Agent with his, her or its tax identification
number (social security number or employer identification number) and certifies
that such number is correct, or unless an exemption from backup withholding
applies.
In general, cash received by stockholders who exercise statutory appraisal
rights ("Dissenting Stockholders") in respect of appraisal rights will result in
the recognition of gain or loss to the Dissenting Stockholder. Any such
Dissenting Stockholder should consult with his, her, or its tax advisor for a
full understanding of the tax consequences of the receipt of cash in respect of
appraisal rights pursuant to the Merger.
None of the Filing Persons, the Company, or Parent expects to recognize any
gain, loss, or income by reason of the Merger.
EACH BENEFICIAL OWNER OF SHARES IS URGED TO CONSULT SUCH BENEFICIAL OWNER'S
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO EACH SUCH BENEFICIAL OWNER OF
THE MERGER, INCLUDING THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
FAIRNESS OF THE MERGER
FAIRNESS
Each of the Filing Persons has determined that the Merger is fair to the
Public Stockholders. This belief is based, in part, upon the determination by
Parent's board of directors that the Merger is fair to the Public Stockholders.
After the close of trading on the Nasdaq SmallCap Market on February 19,
2003, Parent's board of directors held a meeting at which the proposed plan to
acquire the minority stockholder interests in the Company through the Merger was
presented and discussed. At the February 19, 2003 meeting, Parent's board of
directors resolved to take the Company private by having Parent acquire for
cash, through the Merger, all of the Shares held by the Public Stockholders at a
purchase price of $3.50 per share. Parent's board of directors determined that
the Merger is fair to the Public Stockholders.
FACTORS CONSIDERED IN DETERMINING FAIRNESS
In reaching its determination that the terms of the Merger are fair to the
Public Stockholders, Parent's board of directors considered the factors set
forth below, which constitute all of the material factors considered by Parent's
board of directors in making its determination. Parent's board of directors
determined that each of the following factors supported its belief that the
Merger is fair to the Public Stockholders.
o Current and Historical Market Prices. The Merger price of $3.50 per
Share. Parent's board of directors considered the current and
historical trading prices of the Shares. The closing sales price of
the Company's common stock at the end of fiscal 2001 was $4.10 per
share. While the sales price of the common stock increased to $8.00
per share in January 2002 on low trading volume, such price declined
over the balance of the year to a low of $1.00 per share in October
2002. Upon the completion of the recapitalization transactions on
December 23, 2002, the trading price of the common stock was $2.53 per
share, and since that date, trading prices of the common stock have
ranged from a high of $3.23 per share to a low of $2.41 per share on
extremely low volume. The Merger Price of $3.50 compares favorably
with the trading price range of the common stock for dates since the
consummation of the recapitalization transactions as the Parent and
Filing Persons believe that Public Stockholders have received or
otherwise have had access to, complete disclosures as to the Company's
new debt and equity structure, as well as the factors and
considerations that led to the recapitalization.
8
Parent's board of directors also observed that the proposed Merger
Price represented a premium of approximately 40.0% over the closing
price of $2.50 for the Shares on February 19, 2003, which was the date
of the board meeting. The Filing Persons did not believe that it would
be realistic to expect that the market would sustain a price in excess
of $3.50 if more than a small number of Public Stockholders sought to
sell their shares of the Company's common stock. The Filing Persons
have observed that since consummation of the recapitalization
transactions on December 23, 2002, the highest number of shares traded
in a single day was 7,800 Shares while the average number of shares
traded per day (as computed for only those days when shares were
actually traded) was less than 1,200 shares per day. In addition,
approximately 66.7% of the total volume of Shares traded since
December 23, 2002 occurred on the three days with the highest reported
sales volume. The Filing Persons also noted that Shares of the
Company's common stock did not trade on 18 days or approximately 47.4%
of the days on which the Nasdaq SmallCap Market was open since
December 23, 2002. With approximately 535,000 Shares being held by
entities other than the Filing Persons (exclusive of shares underlying
restricted stock plans and deferred compensation plans), the Parent's
board of directors believes that any effort to sell a material portion
of such Shares in the open market or otherwise would materially
depress the then trading price.
o Net Book Value. The Company's estimated net book value at December 31,
2002 was $14.1 million, which yields a per Share valuation of
approximately $2.81 per share. The Merger Price represents a premium
of 24.6% to the book value per Share.
o Recapitalization Conversion Price. Parent's board of directors
observed that a per share price of $5.00 was established with respect
to the 12% convertible notes and Series A Preferred Stock that were
issued on June 28, 2002 as part of the recapitalization plan. Parent's
board of directors believes that such price is not indicative of the
current per Share value of the Company's publicly registered common
stock for several reasons including:
o convertible debt or equity securities typically have conversion
prices that are established at a premium relative to the then
trading price of the common stock into which they are convertible
and that, as the conversion of $5.00 per share represents a
premium of 42.9% over the Merger Price, such premium was not
unreasonable on account of both (a) the 12% interest or dividend
rate applicable to the convertible securities issued and (b) the
fact that the common stock into which these securities were
convertible represented a controlling interest in the Company's
post-recapitalization equity;
o estimates of the Company's net sales and earnings per share for
fiscal 2003 declined from the date on which the terms of the
recapitalization were formally agreed to the date on which
Parent's board of directors approved the terms of the Merger
(including the Merger Price) as (a) net sales for fiscal 2003 are
currently estimated to be $89.0 million or 12.6% lower than
previously anticipated and (b) earnings per common share for
fiscal 2003 are currently estimated to be $0.65 per Share or
39.3% lower than previously anticipated; and
o all estimates of the Company's future net income, earnings per
common share, cashflow and debt repayment capabilities are
predicated on the assumption that there is no sale or
distribution of equity securities by either the Company or the
Filing Persons that leads to a limitation on the Company's
substantial tax loss carryforwards which, as of December 31,
2001, were approximately $77 million and that at the Merger Price
and levels materially in excess of such price, any transaction
conducted or authorized by the Filing Persons (and over which
other holders of Shares have no ability to control or influence)
could materially adversely reduce the current and future value of
such tax loss carryforwards with a relative reduction in
prospective net earnings, earnings per common share, cashflow and
debt repayment capabilities.
o Contractual "Put Right" of Lender Affiliate. Parent's board of
directors observed that CapitalSource, an affiliate of the Company's
principal lender and a holder of 233,354 Shares (of which 213,354
Shares will be contributed to Parent immediately prior to the Merger
and the remaining 20,000 Shares will be converted into the right to
receive the Merger Price in connection with the Merger), has a
contractual right upon the termination of its $45 million Master
Credit Facility with UnionTools, Inc.,
9
the Company's principal operating subsidiary ("UnionTools"), and the
Company, upon the occurrence of certain events to cause the Company to
repurchase all shares then held by CapitalSource at a per share price
that is a function of the Company's recently reported earnings, debt
levels, holdings of cash, and shares of common stock then outstanding,
less an amount attributable, if any, to any prepayment or other
penalties paid in connection with the termination of such credit
facility. While the Company has recorded a potential future redemption
liability for these shares at the rate of $5.00 per Share held by
CapitalSource, the actual future liability cannot be quantified. Based
on estimated debt balances and cash holdings of the Company as of the
likely closing date of the Merger, the Filing Persons believe that the
actual per share "put" liability to CapitalSource would be less than
the Merger Price.
o Trend in Equity Markets Overall. Parent's board of directors observed
that since the completion of the recapitalization on December 24, 2002
through February 19, 2003 (the date of Parent's board of directors
meeting wherein the Merger was discussed and approved), each of the
Dow Jones Industrial Average and the NASDAQ Composite Index declined
by approximately 5.3% and 2.8%, respectively. Since the commencement
of the recapitalization transactions on June 28, 2002 through February
19, 2003, these stock market indices declined by 13.4% and 8.8%,
respectively. As such, the Filing Persons believe that the 38.3%
premium that the Merger Price represents relative to the trading price
of the Shares as of the completion of the recapitalization compares
favorably to general stock price performance in the United States
equity markets overall.
o Risk of Stock Market Delisting. Parent's board of directors is aware
that the Company was notified in 2002 by Nasdaq that it was subject to
delisting because it did not meet all of the Nasdaq SmallCap Market's
continued listing criteria, including minimum bid price per share,
minimum market value of publicly-held shares and minimum number of
shares in the public market. The Company has since regained full
compliance with all Nasdaq continued listing criteria. The failure of
the Company's Shares to be listed with a national exchange or
quotation system in the future decreases the liquidity of the Shares
for the Public Stockholders. Parent's board of directors is uncertain
whether the Company can continue to meet all Nasdaq continued listing
criteria and whether the Company's Shares will continue to be eligible
for listing by Nasdaq. The Company's ability to continue to have its
Shares remain listed is subject to many factors, including, but not
limited to: (1) a minimum bid price of $1.00 per Share; (2) a minimum
aggregate market value of Shares held by parties unaffiliated with the
Company of at least $1,000,000; and (3) a minimum of 500,000 Shares
held by parties unaffiliated with the Company. In this regard, the
Parent's board of directors has considered the fact that (x) the
Company's Shares have in the past twelve months traded to a level as
low as $1.00 per Share; (y) the average trading price required to
maintain the minimum aggregate market value requirement is
approximately $1.88 per share; and (z) the Company's lending
agreements were modified to permit repurchases under certain
circumstances of up to 400,000 Shares from persons unaffiliated with
the Filing Persons. While no repurchases of Shares have been effected
by the Company pursuant to this modification, the actual repurchase by
the Company of as few as approximately 35,000 Shares (including Shares
held by CapitalSource that are subject to mandatory redemption under
certain circumstances) could subject the Company's Shares to
delisting. The Filing Persons believe that a delisting of the Shares
would further exacerbate the illiquid nature of the common stock and
adversely affect the potential trading price thereof. Parent's board
of directors did consider the fact that holders of Shares other than
the Filing Persons have no ability to prevent the Company from
purchasing Shares in the open market or in private transactions that
could lead directly or indirectly to a delisting of the Shares.
o Liquidation Value. Parent's board of directors did not consider the
Merger Price as compared to any implied liquidation value because it
was not contemplated that the Company be liquidated, whether or not
the Merger was completed.
o Certain Negative Considerations. Parent's board of directors also
considered the following factors, each of which they considered
negative, in their deliberations concerning the fairness of the terms
of the Merger and its procedural fairness:
10
o Termination of participation in the future growth of the Company.
Following the successful completion of the Merger, the Public
Stockholders would cease to participate in the future earnings or
growth, if any, of the Company or benefit from increases, in any,
in the value of their holdings in the Company.
o Conflicts of Interest. The financial interests of Parent are
adverse as to the Merger Price to the financial interests of the
Public Stockholders. In addition, officers and directors of the
Company have actual or potential conflicts of interest with the
Merger. Certain officers and directors of Parent are also
officers and directors of the Company.
o No Public Stockholder Approval. The Public Stockholders will not
have an opportunity to vote on the Merger.
o No Unaffiliated Representatives or Independent Director Approval.
The majority of the members of the Company's board of directors
who are not employees of the Company have not retained an
unaffiliated representative to act solely on behalf of the Public
Stockholders for the purpose of negotiating the terms of the
Merger or preparing a report concerning the fairness of the
Merger.
o Other Factors. Information concerning the financial performance,
condition, business operations and prospects of the Company. Parent's
board of directors believes the Merger Price to be attractive in light
of the Company's current financial performance, profitability, and
growth prospects. In addition, the Merger would shift the risk of the
future financial performance of the Company from the Public
Stockholders, who do not have the power to control decisions made as
to the Company's business, entirely to Parent, who does have the power
to control the Company's business and who has the resources to manage
and bear the risks inherent in the business over the long term.
o Parent's board of directors believes that it may be difficult for the
Company to obtain capital in the equity markets should it desire to do
so in the future. Such belief was founded, in part, on the fact that
the Company's rights offering in the fourth quarter of fiscal year
2002 yielded only subscriptions to purchase 200 shares.
o Parent's board of directors believed that the liquidity that would
result from the Merger would be beneficial to the Public Stockholders
because the Filing Persons' combined ownership of approximately 88.2%
of the outstanding Shares (a) results in an extremely small public
float that limits the amount of trading in the Shares; and (b)
decreases the likelihood that a proposal to acquire the Shares by an
independent entity could succeed without the consent of Parent.
o Parent's determination to retain its majority ownership of the Company
and not to seek a third-party buyer for the Company. Parent intends to
retain its majority holdings in the Company, which foreclosed the
opportunity to consider an alternative transaction with a third party
purchaser of the Company or otherwise provide liquidity to the Public
Stockholders.
o The merger represents an opportunity for the Public Stockholders to
realize cash for their Shares, which would otherwise be extremely
difficult or impossible given the illiquidity of the market for shares
of the Company's common stock. In recent periods prior to the
announcement of the proposed Merger, the trading in the Company's
stock has been extremely light. A stockholder desiring to liquidate
his, her or its entire position under the Company's recent trading
volumes prior to such announcement would have found that demand for
such shares was nearly non-existent and that persistent attempts to
sell such Shares could have led to a reduction in the price to be paid
for such Shares.
o Parent's board of directors considered appointing a special committee
of its members who did not have any interests in the Company in order
to determine the fairness to the Public Stockholders of the proposed
Merger; however, Parent's board of directors decided not to pursue
that option for the
11
following reasons. Parent's board of directors believed that any
special committee that was appointed would need to retain its own
independent legal counsel and financial advisors to help the special
committee evaluate the fairness of the proposed transaction. Parent's
board of directors also believed that, based on the factors described
herein, the terms of the proposed Merger were fair to the Public
Stockholders, and that the potential financial cost of hiring such
advisors and the diversion of management resources that would be
caused by the negotiations between the special committee and Parent
would outweigh any benefit that would be derived from the appointment
of a special committee.
o Parent's board of directors determined that the Merger is procedurally
fair to the Public Stockholders. In making such determination,
Parent's board of directors considered the fact that Public
Stockholders who believe that the terms of the Merger are not fair can
pursue appraisal rights in the Merger under Delaware law.
o Conclusions of Parent's board of directors. Parent's board of
directors concluded that, given the performance of the Shares between
the Company's initial public offering and the announcement of Parent's
intention to take the Company private, the uncertainties surrounding
the Company's future growth prospects and the limited trading market
for the Shares, the Merger would result in a fair treatment of the
Public Stockholders. In determining that the merger is fair to the
Public Stockholders, Parent's board of directors considered the above
factors as a whole and did not assign specific or relative weights to
them, other than that the Merger Price of $3.50 per Share in cash was
considered the most important factor. Notwithstanding the
considerations set out in this section under the heading "--Certain
Negative Considerations," Parent's board of directors believes that
the Merger is procedurally fair to the Public Stockholders.
APPROVAL OF SECURITY HOLDERS
Because the Merger is being effected as a short form merger under Section
253 of the DGCL, it does not require approval by the Company's stockholders
(other than approval by the directors and stockholders of Parent) or approval by
the Public Stockholders.
UNAFFILIATED REPRESENTATIVE
The majority of the Company's directors who are not employed by the Company
have not retained a representative to act on behalf of the Public Stockholders.
APPROVAL OF DIRECTORS OF THE COMPANY
Because the Merger is being effected as a short form merger under Section
253 of the DGCL, it does not require approval by the Company's board of
directors.
OTHER OFFERS
No other firm offers have been made in the last two years for:
o the merger or consolidation of the Company with or into another
company, or vice versa; o the sale or other transfer of all or any
substantial part of the assets of the Company; or o a purchase of the
Company's securities that would enable the holder to exercise control
of the subject Company.
REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
The Filing Persons have not engaged any third parties to perform any
financial analysis of, or prepare any reports, opinions or appraisals
concerning, the Merger or value of the Shares and, accordingly, the Filing
Persons have not received any report, opinion, or appraisal from an outside
party relating to the fairness of the Merger Price being offered to the Public
Stockholders or the fairness of the Merger to the Filing Persons or to the
Public Stockholders.
12
INFORMATION ABOUT THE COMPANY
The Company is named Acorn Products, Inc. The principal executive offices
of the Company are located at 390 West Nationwide Boulevard, Columbus, Ohio
43215, and its telephone number is (614) 222-4400.
The Shares are listed on the Nasdaq SmallCap Market under the symbol
"ACRN." The following table sets forth the high and low closing prices per Share
on the Nasdaq SmallCap Market, adjusted for the 1-for-10 reverse stock split
effective November 21, 2002, as reported in publicly available sources for each
of the periods indicated.
HIGH LOW
--------- --------
FISCAL YEAR ENDING DECEMBER 31, 2003:
1st Quarter(1) .................................... $ 3.23 $ 2.50
FISCAL YEAR ENDED DECEMBER 31, 2002:
1st Quarter ....................................... $ 8.00 $ 3.50
2nd Quarter ....................................... $ 6.10 $ 6.00
3rd Quarter ....................................... $ 4.50 $ 3.00
4th Quarter ....................................... $ 4.13 $ 1.10
FISCAL YEAR ENDED DECEMBER 31, 2001:
1st Quarter ....................................... $ 10.00 $ 3.80
2nd Quarter ....................................... $ 14.50 $ 4.10
3rd Quarter ....................................... $ 8.20 $ 3.60
4th Quarter ....................................... $ 5.80 $ 3.30
- -----------------
(1) Through February 20, 2003.
The most recent closing sale price per Share as reported on the Nasdaq
SmallCap Market prior to the date of this Schedule 13E-3 was $2.51, on February
20, 2003.
The Company has not declared any dividends since its initial public
offering in 1997. In addition, as a holding company with no operations of its
own, the Company is dependent upon payments, dividends, and distributions from
UnionTools for funds to pay dividends to the Company's stockholders. UnionTools
has no current intention of paying dividends or making other distributions to
the Company in excess of amounts necessary to pay the Company's operating
expenses and taxes. In addition to the requirements of Delaware law, the
Company's revolving credit facility imposes contractual restrictions on
UnionTools' ability to declare dividends or make payments or other distributions
to the Company. The credit facility provides that, unless UnionTools meets
certain financial tests, it may not declare any dividends or make any other
payments or distributions to the Company except for amounts necessary to pay the
Company's operating expenses up to $300,000 per year and to pay the Company's
federal and state income taxes.
FINANCIAL INFORMATION
The audited financial statements for the fiscal years ended December 31,
2000 and 2001 are incorporated herein by reference from Item 8 of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
2001 ("Form 10-K/A"). The Company's unaudited financial statements as of
September 29, 2002 and for the three and nine month fiscal periods ended
September 29, 2001 and September 30, 2002, are incorporated herein by reference
from Item 1 of the Company's Quarterly Report on Form 10-Q, as amended, for the
quarter ended September 29, 2002 ("Form 10-Q/A"). The Form 10-K/A and the Form
10-Q/A are referred to as the "Company Reports."
13
Adjusted for the 1-for-10 reverse stock split which occurred on November
21, 2002, the Company's book value per share as of September 29, 2002 was $5.94
per Share. Giving effect to the Company's recapitalization and fourth quarter
operating results, the Company's estimated book value per share as of
December 31, 2002 is approximately $2.81 per Share.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived by the Filing
Persons from the audited consolidated financial statements of the Company
contained in the Form 10-K/A and the unaudited financial statements of the
Company contained in the Form 10-Q/A. The information as of September 29, 2002
is derived from the Company's Quarterly Report on Form 10-Q/A for the quarter
ended September 29, 2002. More comprehensive financial information is included
in the Company Reports and in other documents filed by the Company with the
Commission, and the following financial information is qualified in its entirety
by reference to the Company Reports and other documents and all of the financial
information (including any related notes) contained therein or incorporated
therein by reference. The selected financial information presented below as of
and for the fiscal years ended December 31, 2000 and 2001, has been derived from
the Company's audited Consolidated Financial Statements. The selected financial
information as of and for the nine months ended September 29, 2002 and September
30, 2001 has not been audited. The results of operations for the nine months
ended September 29, 2002 are not necessarily indicative of results for the
entire year. All share and per share amounts are adjusted to give effect to the
1-for-10 reverse stock split effective November 21, 2002.
14
SELECTED FINANCIAL INFORMATION
(In thousands, except for share and per share data)
Fiscal Year Ended Nine Months Ended
----------------------- ------------------------
12/31/2000 12/31/2001 09/30/2001 09/29/2002
---------- ---------- ---------- ----------
STATEMENT OF OPERATIONS DATA:
Net sales $ 116,591 $ 93,482 $ 74,007 $ 72,797
Cost of goods sold 94,464 70,404 57,024 55,002
--------- --------- --------- ---------
Gross profit 22,127 23,078 16,983 17,795
Selling, general and 22,052 17,329 11,555 9,818
administrative expenses
Interest expense 6,947 5,895 5,184 2,904
Amortization of intangibles 974 876 656 0
Asset impairment (1) 4,402 14,130 0 4,241
Other expenses, net (2) 1,640 443 (77) 2,768
--------- --------- --------- ---------
Loss from continuing operations (13,888) (15,595) (335) (1,936)
before income taxes
Income taxes 80 84 63 63
--------- --------- --------- ---------
Income (loss) from continuing (13,968) (15,679) (398) (1,999)
operations
Preferred stock 0 0 0 259
--------- --------- --------- ---------
Net income (loss) ($ 13,968) ($ 15,679) ($ 398) ($ 2,258)
========= ========= ========= =========
Income (loss) from continuing ($ 23.06) ($ 25.86) ($ 0.66) ($ 3.65)
operations per share (basic and diluted)
Weighted average number of 605,736 606,222 606,236 618,850
shares outstanding
OTHER DATA:
Gross margin 19.0% 24.7% 22.9% 24.4%
Net cash provided by (used in) $ 4,056 $ 3,362 $ 5,820 $ 2,167
operating activities
Net cash provided by (used in) $ 2,528 ($ 1,211) ($ 534) ($ 1,643)
investing activities
Net cash provided by (used in) ($ 7,314) ($ 1,356) ($ 4,684) ($ 460)
financing activities
BALANCE SHEET DATA:
Working capital from
continuing operations (3) $ 5,690 $ 5,156 $ 6,408 $ 15,159
Total assets 81,881 61,152 73,221 59,120
Total debt 41,942 40,565 37,261 33,834
Stockholders' equity 22,310 6,062 21,911 3,803
(1) An asset impairment charge of $4.2 million was recognized in the first nine
months of fiscal 2002, as a result of an impairment evaluation according to
Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets." An asset impairment charge of $14.1 million was
recognized in fiscal 2001 based on management review of the recoverability
of goodwill given the completion of our evaluation of strategic
alternatives and our agreement to enter into a transaction which valued the
common stock of the Company at $10 per share. There were asset impairment
charges of $4.4 million in fiscal 2000 based on our review of the net
realizable value on certain long-lived assets (primarily goodwill) related
to the manufacture and sale of watering products.
15
(2) In fiscal 2000, we recognized a $1.2 million loss in connection with the
sale of certain assets related to the manufacturing and sale of the
watering products and other expenses of $407,821 in connection with
management restructuring charges, including severance and relocation
expenses.
In fiscal 2001, expenses of $545,000 were recognized related to evaluating
strategic alternatives and transactions.
Through the third quarter of fiscal 2002, $2.8 million of other expenses
were recognized, including $1.2 million of expenses related to the move of
our distribution center. The remaining $1.6 million of expenses were
incurred as a result of our strategic evaluation process and related
compensations.
(3) Represents current assets less current liabilities (excluding the
Acquisition Facility and the Junior Participation Term Loan Note).
INFORMATION ABOUT THE FILING PERSONS
PARENT
(A) NAME AND ADDRESS.
Parent's principal offices are located at 390 West Nationwide Boulevard,
Columbus, Ohio 43215, Attention: A. Corydon Meyer, and its telephone number is
614-222-4400. Immediately prior to the Merger on the Effective Date and upon
contribution of Shares beneficially owned by the Filing Persons and
CapitalSource to Parent, Parent will own 4,633,811 Shares or approximately 92.5%
of the Company's common stock.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Parent, a Delaware corporation, was formed for the sole purpose of merging
with the Company. During the last five years, Parent has not been convicted in a
criminal proceeding and Parent was not a party to any civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
Parent was or is subject to a judgment, decree, or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
The name, business address, position with Parent, principal occupation,
five-year employment history and citizenship of each of the officers of Parent,
together with the names, principal businesses and addresses of any corporations
or other organizations in which such principal occupations are conducted, are
set forth on Schedule I hereto. During the last five years, to the best
knowledge of Parent, none of the persons listed in Schedule I has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, to the best knowledge of Parent, none of the persons
listed in Schedule I was a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any of such
persons was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
THE TCW GROUP, INC.
(A) NAME AND ADDRESS.
The address of TCWG is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017, and its telephone number is 213-244-0000. TCWG, as parent
corporation of TCW and TAMCO, may be deemed to beneficially own 2,478,366 Shares
or 49.5% of the Company's common stock. In addition, immediately prior to the
Merger on the Effective Date and upon contribution of Shares beneficially owned
by TCWG to Parent, TCWG will be deemed to beneficially own 53.5% of Parent.
16
(B) BUSINESS AND BACKGROUND OF ENTITIES.
TCWG is a holding company of entities involved in the principal business of
providing investment advice and management services. During the last five years,
TCWG has not been convicted in a criminal proceeding, and TCWG was not a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which TCWG was or is subject to a judgment, decree,
or final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the officers of TCWG is set forth on
Schedule I hereto. During the last five years, to the best knowledge of TCWG,
none of the persons listed in Schedule I has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, to the best knowledge of TCWG, none of the persons listed in
Schedule I was a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which any of such persons was or
is subject to a judgment, decree or final order enjoining future violations of,
or prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
TRUST COMPANY OF THE WEST
(A) NAME AND ADDRESS.
The address of TCW is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017, and its telephone number is 213-244-0000. TCW may be deemed to
beneficially own 830,071 Shares or 16.6% of the Company's common stock. In
addition, immediately prior to the Merger on the Effective Date and upon
contribution of Shares beneficially owned by TCW to Parent, TCW will be deemed
to beneficially own 17.9% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
TCW is a trust company which provides investment management services.
During the last five years, TCW has not been convicted in a criminal proceeding,
and TCW was not a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which TCW was or is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the principals of TCW is set forth on
Schedule I hereto. During the last five years, to the best knowledge of TCW,
none of the persons listed in Schedule I has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, to the best knowledge of TCW, none of the persons listed in
Schedule I was a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which any of such persons was or
is subject to a judgment, decree or final order enjoining future violations of,
or prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
TCW ASSET MANAGEMENT COMPANY
(A) NAME AND ADDRESS.
The address of TAMCO is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017, and its telephone number is 213-244-0000. TAMCO, as the
managing partner of TCW Special Credits, may be deemed to beneficially own
1,648,295 Shares or 32.9% of the Company's common stock. In addition,
immediately prior to the Merger on the Effective Date and upon contribution of
Shares beneficially owned by TAMCO to Parent, TAMCO will be deemed to
beneficially own 35.6% of Parent.
17
(B) BUSINESS AND BACKGROUND OF ENTITIES.
TAMCO is an investment adviser and provides investment advice and
management services to institutional and individual investors. During the last
five years, TAMCO has not been convicted in a criminal proceeding, and TAMCO was
not a party to any civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which TAMCO was or is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the officers of TAMCO is set forth on
Schedule I hereto. During the last five years, to the best knowledge of TAMCO,
none of the persons listed in Schedule I has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, to the best knowledge of TAMCO, none of the persons listed in
Schedule I was a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which any of such persons was or
is subject to a judgment, decree or final order enjoining future violations of,
or prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
TCW SPECIAL CREDITS
(A) NAME AND ADDRESS.
The address of Special Credits is 865 South Figueroa Street, Suite 1800,
Los Angeles, California 90017, and its telephone number is 213-244-0000. Special
Credits may be deemed to beneficially own 1,648,295 Shares or 32.9% of the
Company's common stock. In addition, immediately prior to the Merger on the
Effective Date and upon contribution of Shares beneficially owned by Special
Credits to Parent, Special Credits will be deemed to beneficially own 35.6% of
Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Special Credits provides investment advice and management services to TCW
Special Credits Fund IIIb, TCW Special Credits Fund IV, TCW Special Credits Plus
Fund, and Weyerhaeuser Company Master Retirement Trust. The principal interests
in Special Credits are owned by Bruce A. Karsh, Howard S. Marks, Sheldon M.
Stone, and David Richard Masson. During the last five years, Special Credits has
not been convicted in a criminal proceeding, and Special Credits was not a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which Special Credits was or is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the principals of Special Credits is
set forth on Schedule I hereto. During the last five years, to the best
knowledge of Special Credits, none of the persons listed in Schedule I has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, to the best knowledge of Special
Credits, none of the persons listed in Schedule I was a party to any civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any of such persons was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
OAKTREE CAPITAL MANAGEMENT, LLC
(A) NAME AND ADDRESS.
The address of Oaktree is 333 South Grand Avenue, 28th Floor, Los Angeles,
California 90071, and its telephone number is 213-830-6300. Oaktree, as the
general partner of Oaktree Fund, may be deemed to beneficially own 1,890,441
Shares or 37.8% of the Company's common stock. In addition, immediately prior to
the Merger on
18
the Effective Date and upon contribution of Shares beneficially owned by Oaktree
to Parent, Oaktree will be deemed to beneficially own 40.8% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Oaktree is a limited liability company which provides advice and management
services to institutional and individual investors. The principal interests in
Oaktree are owned by Bruce A. Karsh, Howard S. Marks, Sheldon M. Stone, and
David Richard Masson, Larry Keele, Russel S. Bernard, Stephen A. Kaplan, Kevin
L. Clayton, John W. Moon, John B. Frank and David Kirchheimer. During the last
five years, Oaktree has not been convicted in a criminal proceeding, and Oaktree
was not a party to any civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which Oaktree was or is subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the principals of Oaktree is set forth
on Schedule I hereto. During the last five years, to the best knowledge of
Oaktree, none of the persons listed in Schedule I has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, to the best knowledge of Oaktree, none of the
persons listed in Schedule I was a party to any civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which any of
such persons was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
(A) NAME AND ADDRESS.
The address of Oaktree Fund is 333 South Grand Avenue, 28th Floor, Los
Angeles, California 90071, and its telephone number is 213-830-6300. Oaktree
Fund owns 1,890,441 Shares or 37.8% of the Company's common stock. In addition,
immediately prior to the Merger on the Effective Date and upon contribution of
Shares beneficially owned by Oaktree Fund to Parent, Oaktree Fund will be deemed
to beneficially own 40.8% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Oaktree Fund is a investment partnership which invests in entities over
which there is a potential for the Oaktree Fund to exercise significant
influence. During the last five years, Oaktree Fund has not been convicted in a
criminal proceeding, and Oaktree Fund was not a party to any civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
Oaktree Fund was or is subject to a judgment, decree, or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the principals of Oaktree Fund is set
forth on Schedule I hereto. During the last five years, to the best knowledge of
Oaktree Fund, none of the persons listed in Schedule I has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, to the best knowledge of Oaktree Fund, none of the
persons listed in Schedule I was a party to any civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which any of
such persons was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
19
A. CORYDON MEYER
(A) NAME AND ADDRESS.
The address of Mr. Meyer is 390 West Nationwide Boulevard, Columbus, Ohio
43215. Mr. Meyer owns 2,150 Shares or approximately 0.04% of the Company's
common stock. In addition, immediately prior to the Merger on the Effective Date
and upon contribution by Mr. Meyer of his Shares to Parent, Mr. Meyer will be
deemed to beneficially own 0.05% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Not applicable.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Mr. Meyer became a director and the President and Chief Executive Officer
of the Company and UnionTools in September 1999 and was elected Chairman in
December 2002. Mr. Meyer joined the Company and UnionTools in June 1999 as
Senior Vice President of Sales and Marketing. Mr. Meyer served as Vice President
and Chief Operating Officer of Reiker Enterprises, Inc. from 1998 to 1999. Mr.
Meyer served as Vice President and Business Unit Manager of Lamson & Sessions
Co. from 1990 to 1998. Mr. Meyer served in various finance, manufacturing,
sales, and marketing positions with White Consolidated Industries from 1977 to
1990. During the last five years Mr. Meyer has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) and was not a
party to any civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any of such persons was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
JOHN G. JACOB
(A) NAME AND ADDRESS.
The address of Mr. Jacob is 390 West Nationwide Boulevard, Columbus, Ohio
43215. Mr. Jacob is the registered holder of 21,500 restricted Shares or
approximately 0.4% of the Company's common stock. Immediately prior to the
Merger on the Effective Date, the Company will permit Mr. Jacob to transfer the
21,500 restricted Shares to Parent in exchange for an equal number of restricted
shares of Parent. Upon contribution by Mr. Jacob of his restricted Shares to
Parent, Mr. Jacob will be deemed to beneficially own 0.5% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Not applicable.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Mr. Jacob became the Company's Vice President and Chief Financial Officer
in June 1999. From 1998 to June 1999, Mr. Jacob served as Vice President of
Finance for Sun Apparel Company/Polo Jeans Company. Prior to that, Mr. Jacob
served as Vice President of Finance and Treasurer of Maidenform Worldwide, Inc.
from 1996 to 1998. From 1991 to 1996, Mr. Jacob served in various positions at
Kayser-Roth Corporation, most recently as Vice President and Treasurer. During
the last five years Mr. Jacob has not been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) and was not a party to
any civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any of such persons was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
20
GARY W. ZIMMERMAN
(A) NAME AND ADDRESS.
The address of Mr. Zimmerman is 390 West Nationwide Boulevard, Columbus,
Ohio 43215. Mr. Zimmerman is the beneficial owner of 230 Shares and is the
registered holder of 20,000 restricted Shares or approximately 0.4% of the
Company's common stock. Immediately prior to the Merger on the Effective Date,
the Company will permit Mr. Zimmerman to transfer the 20,000 restricted Shares
to Parent in exchange for an equal number of restricted shares of Parent. Upon
contribution by Mr. Zimmerman of his restricted Shares to Parent, Mr. Zimmerman
will be deemed to beneficially own 0.4% of Parent. Mr. Zimmerman will retain the
230 unrestricted Shares that he beneficially owns and will receive the same per
share Merger Price as the Public Stockholders for such 230 Shares.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Not applicable.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Mr. Zimmerman became the Company's Senior Vice President of Operations in
September 2000. Prior to that, Mr. Zimmerman served as General Manager of U.S.
Operations for Lexmark International, Inc. from July 1998 to September 2000.
From January 1979 to July 1998, Mr. Zimmerman served in various positions at
Huffy Corporation, most recently as Vice President, Plant Operations and
Logistics, for Huffy Bicycles. During the last five years Mr. Zimmerman has not
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) and was not a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any of such
persons was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
CAROL B. LASCALA
(A) NAME AND ADDRESS.
The address of Ms. LaScala is 390 West Nationwide Boulevard, Columbus, Ohio
43215. Ms. LaScala is the registered holder of 8,000 restricted Shares or
approximately 0.2% of the Company's common stock. Immediately prior to the
Merger on the Effective Date, the Company will permit Ms. LaScala to transfer
the 8,000 restricted Shares to Parent in exchange for an equal number of
restricted shares of Parent. Upon contribution by Ms. LaScala of her restricted
Shares to Parent, Ms. LaScala will be deemed to beneficially own 0.2% of Parent.
(B) BUSINESS AND BACKGROUND OF ENTITIES.
Not applicable.
(C) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Ms. LaScala became the Company's Vice President of Human Resources in
December 2000. Ms. LaScala joined UnionTools in November 1999 as Director of
Human Resources. From June 1999 to November 1999, Ms. LaScala served as Director
of Human Resources for the Longaberger Company. Prior to that, Ms. LaScala
served as Manager, Human Resources, for Rubbermaid Incorporated from September
1995 to June 1999. From February 1984 to September 1995, Ms. LaScala served in
various positions with The Stanley Works, most recently as Division Human
Resources Manager for the Hand Tools Division. During the last five years Ms.
LaScala has not been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) and was not a party to any civil proceeding
of a judicial or administrative body of competent jurisdiction as a result of
which any of such persons was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
21
PRIOR STOCK PURCHASES
On June 28, 2002, the Company entered into a recapitalization plan
whereby the Principal Holders (the term "Principal Holders" shall mean the
funds, accounts, and trusts managed by direct and indirect subsidiaries of TCWG
(the "TCW Related Entities") and Oaktree) purchased preferred stock and 12%
convertible notes of the Company. The preferred stock accumulated dividends at a
rate of 12% per annum and the 12% convertible notes accrued interest at a rate
of 12% per annum. Pursuant to the recapitalization plan, the preferred stock (at
its stated value), plus all accumulated and unpaid dividends thereon, and the
12% convertible notes, plus all accrued and unpaid interest thereon, converted
into Shares at a rate of $5.00 per share on December 23, 2002. The table below
details the purchases and conversions made by the Principal Holders.
Shares
issuable Shares
upon issuable Total Shares
Shares of conversion 12% upon Total Beneficially
Preferred of Preferred Convertible conversion Shares Owned after
Fund Stock (1) Stock (2) Notes of Notes (3) Issuable Recapitalization
- ----------------------------------------------------------------------------------------------------------------------------------
OCM Principal Opportunities
Fund, L.P. (4) 263.2543 557,221 $ 5,379,149 1,138,586 1,695,807 1,890,441
The TCW Group, Inc. (5) 559.4153 1,184,091 $ 4,620,851 978,075 2,162,166 2,478,366
Trust Company of the West (5) 228.9818 484,676 $ 1,152,999 244,050 728,726 830,071
TCW Asset Management Company (5) 330.4335 699,415 $ 3,467,852 734,025 1,433,440 1,648,295
TCW Special Credits (5) 330.4335 699,415 $ 3,467,852 734,025 1,433,440 1,648,295
Total 822.6696 1,741,312 $10,000,000 2,116,661 3,857,973 4,368,807
- -----------
(1) The preferred stock has a stated value of $10,000 per share.
(2) The preferred stock converted into Shares on December 23, 2002 pursuant to
its terms. Includes conversion of accumulated dividends on the preferred
stock.
(3) The 12% convertible notes converted into Shares on December 23, 2002
pursuant to their terms. Includes conversion of accrued interest on the 12%
convertible notes.
(4) Oaktree, as the general partner of the Oaktree Fund, has voting and
dispositive power over the shares held by the Oaktree Fund and may be
deemed a beneficial owner of such shares.
(5) TCWG is the parent corporation of TAMCO. TAMCO is the managing general
partner of Special Credits, a general partnership among TAMCO and certain
individual general partners (the "Individual Partners"). Special Credits is
(i) the general partner of four limited partnerships that hold shares of
common stock (the "TCW Limited Partnerships") and (ii) the investment
advisor for three third party accounts that hold shares of common stock
(the "TCW Accounts"). The TCWG also is the parent corporation of TCW, which
is the trustee of four trusts that hold shares of common stock (the "TCW
Trusts").
Certain of the Individual Partners also are principals of Oaktree. The
Individual Partners, in their capacity as general partners of Special
Credits, have been designated to manage the TCW Limited Partnerships, the
TCW Accounts and the TCW Trusts. Although Oaktree provides consulting,
research and other investment management support to the Individual
Partners, Oaktree does not have voting or dispositive power with respect to
the TCW Limited Partnerships, the TCW Accounts or the TCW Trusts.
Additionally, on December 23, 2002, the Company issued 79,684 Shares to the
Oaktree Fund in consideration for the cancellation of certain options and
deferred compensation owing to Oaktree for consulting services provided by its
employees serving on the Company's board of directors.
22
TRANSACTIONS
Except as described below, there have been no transactions during the past
two years between (i) any of the Filing Persons or, to the best knowledge of the
Filing Persons, any of the persons listed on Schedule I and (ii) the Company or
any of its affiliates that are not natural persons where the aggregate value of
such transactions is more than one percent of the Company's consolidated
revenues for (1) the fiscal year in which the transaction occurred or (2), with
respect to the current year, the past portion of the current fiscal year, except
as described in the following paragraph.
On December 23, 2002, the Company issued 79,684 Shares to the Oaktree Fund
in consideration for the cancellation of certain options and deferred
compensation owing to Oaktree for consulting services provided by its employees
serving on the Company's board of directors.
Except as described below, during the past two years, there have been no
transactions between any of the Filing Persons or, to the best knowledge of the
Filing Persons, any of the persons listed on Schedule I and any executive
officer, director, or affiliate of the Company that is a natural person where
the aggregate value of the transaction or series of similar transactions with
such person exceeded $60,000.
SIGNIFICANT CORPORATE EVENTS
The following are all negotiations, transactions, or material contacts that
occurred during the past two years between (i) any of the Filing Persons or, to
the best knowledge of the Filing Persons, any of the persons listed in Schedule
I, and (ii) the Company and its affiliates concerning any merger, consolidation,
acquisition, tender offer for or other acquisition of any class of the Company's
securities, elections of the Company's directors, or sale or other transfer of a
material amount of assets of the Company.
Recapitalization
The Company and UnionTools entered into a purchase agreement, dated as of
June 26, 2002, with the Principal Holders whereby the Company agreed to
recapitalize by converting preferred stock and existing debt owed to existing
stockholders representing funds and accounts managed by the Principal Holders
into preferred stock and 12% convertible notes of the Company. Pursuant to their
terms, the preferred stock and 12% convertible notes converted into shares upon
the closing of a rights offering to Public Stockholders (described below) on
December 23, 2002. See also "Information About the Filing Persons -- Prior Stock
Purchases."
Rights Offering
The Company conducted a rights offering, which expired on December 23,
2002, whereby stockholders received rights (at the rate of 1,000 rights per 100
Shares held as of November 21, 2002) to purchase one share of newly-issued
common stock at $5.00 per share for each right received. The Principal Holders
and CapitalSource Holdings LLC (which together beneficially owned approximately
463,065 shares prior to the rights offering) agreed not to exercise any of the
rights that they received, and as such, the other holders having a combined
ownership interest of 176,671 shares prior to the rights offering received
1,766,716 nontransferable rights following the establishment of the record date.
Each right entitled the holder thereof to acquire one Share from the Company at
the price of $5.00.
Two-hundred Shares were purchased in the rights offering. The net proceeds
of the rights offering of $1,000 were applied toward payment of interest accrued
with respect to Company indebtedness owing to a third party. Pursuant to the
terms of such indebtedness, the remaining interest and principal thereon of
$634,000 was converted into 126,800 newly issued Shares.
23
BACKGROUND OF THE RECAPITALIZATION PLAN
In connection with the anticipated expiration of the Company's credit
facility agented by Heller Financial, Inc., the Company retained the investment
banking firm of Houlihan Lokey Capital to act as the Company's financial advisor
on June 21, 2001, to seek strategic alternatives for the Company.
On February 1, 2002, the Company entered into a letter of intent with the
Principal Holders that would lead to a financial restructuring of the Company.
The Principal Holders agreed under certain conditions to purchase $18 million of
newly-issued shares of the Company's common stock for the purpose of repaying
outstanding indebtedness (inclusive of $8 million of indebtedness owed to the
Principal Holders on account of a capital infusion). The letter of intent
contemplated a rights offering to unaffiliated stockholders whereby the
Company's stockholders would be afforded the opportunity to purchase
approximately $6 million of the Company's newly-issued common stock on the same
terms and conditions as the Principal Holders.
On February 1, 2002, the Company's board of directors created a special
committee of the board to review the terms of a possible transaction with the
Principal Holders. The special committee consisted of Messrs. Abbott (Chairman),
Mariotti, and Kahl, each of whom is an independent director.
The special committee held its first meeting by teleconference on January
31, 2002. The special committee discussed in detail the letter of intent. The
special committee observed that the letter of intent did not contain an
exclusivity provision and, therefore, allowed the Company to explore other
offers. The special committee also noted that while the letter of intent would
satisfy the Company's covenant under the Company's credit facility, it also
proposed a transaction that would allow the Company's minority stockholders to
participate in any future upside growth. The special committee also discussed
some of the issues that needed to be addressed and negotiated before entering
into a definitive agreement.
The special committee held its second meeting by teleconference on February
1, 2002. The special committee continued to discuss some of the issues that
needed to be addressed and negotiated before entering into a definitive
agreement and recommended to the Company's board of directors that the letter of
intent in the form presented to the special committee was acceptable.
The special committee held its third meeting by teleconference on March 1,
2002. The special committee ratified the selection of Squire, Sanders & Dempsey
L.L.P. ("SS&D") as its legal counsel. The special committee received a report
that there were no outstanding offers regarding either the purchase or
capitalization of the Company other than the recapitalization plan. The special
committee also received an update on details concerning the Company's credit
facility and negotiations regarding the Company's fee arrangements with Houlihan
Lokey Capital. SS&D then briefed the special committee on its fiduciary duties
under Delaware law in considering the recapitalization plan.
A member of the Company's management, the members of the special committee
and SS&D participated in a telephone conference on April 1, 2002, to discuss the
status of negotiations with existing lenders regarding extension of the existing
credit facility, the exploration of available mezzanine financing, the status of
negotiations with Houlihan Lokey Capital and the need to be prepared to extend
the letter of intent if necessary.
The special committee held its fourth meeting by teleconference on April
24, 2002. The special committee was advised that the Company's existing credit
facility was being extended from April 30 to June 30, 2002, and that the Company
was continuing to negotiate a fee arrangement with Houlihan Lokey Capital. The
special committee was also advised that the Company had commenced negotiations
with a new senior lender to refinance the Company's existing credit facility.
The proposed refinancing would consist of $45.0 million, $32.5 million of which
would be a revolving loan facility under which borrowings would bear interest at
prime plus 3% and $12.5 million of which would be a term loan bearing interest
at prime plus 5%.
The special committee held its fifth meeting by teleconference on June 6,
2002. At the meeting, a representative of the Principal Holders presented the
revised terms of the recapitalization plan. Among other things, the Principal
Holders committed to invest $10.0 million in new money in the Company with no
subsequent reduction tied to the outcome of a subsequent rights offering. In
order to complete the refinancing of the Company's
24
credit facility with a new lender by June 30, 2002, however, the Principal
Holders proposed to invest in convertible promissory notes bearing interest at
12% per annum and to exchange existing notes held by the Principal Holders in
the principal amount of approximately $8.3 million for convertible preferred
stock with a dividend rate of 12% per annum. The convertible promissory notes
and convertible preferred stock would automatically convert into common stock
upon completion of the rights offering at the rights offering per share price.
The recapitalization plan would also include a 1-for-10 reverse stock split
which would be implemented before commencement of the rights offering. The
rights offering would allow each stockholder to purchase 10 shares of the
Company's common stock for each share of common stock then held rather than the
3.5 shares originally proposed in the February 1, 2002 letter of intent. While
the rights offering price was decreased from $1.00 to $0.50 per share (on a
pre-reverse split basis) or $5.00 per share after giving effect to the reverse
stock split, total cash proceeds to the Company would, if such rights issued in
the rights offering were exercised in full, increase from $6.3 million as
originally proposed to $8.8 million. If the Company's public stockholders fully
exercised the rights, they would own approximately the same percentage of the
outstanding common stock as they currently own.
The special committee asked questions of the Principal Holders concerning
the revised recapitalization plan and the refinancing of the Company's credit
facility. The special committee was advised that the proposed refinancing had
been designed to fit the Company's capital structure following completion of the
recapitalization plan. The special committee also discussed the status of a
fairness opinion to be delivered by Houlihan Lokey Howard & Zukin Financial
Advisors, Inc., an affiliate of Houlihan Lokey Capital, and was advised that
Houlihan Lokey Financial Advisors would be prepared to make its presentation to
the special committee regarding the fairness of the transaction on or about June
21, 2002. The special committee then concluded that it would be prepared to
consider its recommendation to the Company's board of directors concerning the
recapitalization plan following the presentation to it by Houlihan Lokey
Financial Advisors.
On June 13, 2002, the Company entered into a new letter of intent with the
Principal Holders whereby the Principal Holders would agree to purchase $10
million of 12% convertible notes due 2005 and $8.3 million of preferred stock,
all of which newly-issued securities (together with accrued interest and
dividends thereon) would be convertible into newly-issued shares of common stock
at the rate of $0.50 per share (on a pre-reverse split basis). The Company also
announced that the Company would, as part of the recapitalization plan, seek to
obtain stockholder approval for the ultimate conversion of such newly-issued
securities, implement a 1-for-10 reverse stock split, and make a rights offering
to unaffiliated stockholders wherein such holders could purchase from the
Company newly-issued shares of common stock at the same $0.50 per share (on a
pre-reverse split basis) price.
The special committee held its sixth meeting by teleconference on June 25,
2002. At the meeting, Houlihan Lokey Financial Advisors made a presentation to
the special committee regarding the fairness of the recapitalization plan.
Houlihan Lokey Financial Advisors noted that Houlihan Lokey Capital, its
affiliate, had originally been retained by the Company in connection with the
prior marketing effort to sell the Company as required by the Company's senior
lenders. As a result of their participation in that marketing effort,
representatives of Houlihan Lokey Financial Advisors expressed their view that
the recapitalization plan was more favorable than any alternative that had been
previously considered. Houlihan Lokey Financial Advisors noted that the Company
was facing an imminent liquidity crisis on June 30, 2002, at which time the
Company's existing credit facility was scheduled to mature. Houlihan Lokey
Financial Advisors further advised the special committee that the only apparent
alternatives to the recapitalization plan were a distressed sale of the Company
or continuing to operate under short-term waivers from the Company's existing
lenders, neither of which appeared likely to provide greater value to the
Company and the Company's stockholders than the recapitalization plan.
Houlihan Lokey Financial Advisors further advised the special committee
that the value to the Company's stockholders assuming consummation of the
recapitalization plan as contemplated and successful implementation of the
Company's business plan as a going concern was greater than any of the
following:
o the value the stockholders would have likely received under the
highest and best proposal received by the Company during the marketing
process;
o the value indicated by the public market which Houlihan Lokey
Financial Advisors felt was a poor indicator of value in any event; or
25
o the value implied by Houlihan Lokey Financial Advisors' theoretical
valuation of the Company assuming the recapitalization plan was not
consummated.
Houlihan Lokey Financial Advisors concluded its presentation by stating
that it was their opinion that the recapitalization plan was fair, from a
financial point of view, to the Company and the Company's stockholders.
Following completion of Houlihan Lokey Financial Advisors' report, during
which the special committee and SS&D asked questions concerning the presentation
and the fairness opinion, the special committee asked questions of management
concerning the recapitalization plan. The special committee was advised that if
the recapitalization plan was not approved by the Company's board of directors
on or before July 1, 2002, the Company would be charged significant fees for
extending the Company's existing credit facility. Management also assured the
special committee that refinancing alternatives had been exhaustively explored
before selecting the new lender. After further discussion, the special committee
concluded that the recapitalization plan was fair to the Company and the
Company's stockholders and was the best available plan to maximize stockholder
value. Accordingly, the special committee unanimously resolved to recommend the
recapitalization plan to the Company's board of directors for approval.
Immediately following the June 25, 2002 special committee meeting, the
Company's entire board of directors convened. The special committee reported on
their recommendation that the Company's board of directors unanimously approve
the recapitalization plan. The Company's board of directors unanimously approved
the recapitalization plan.
The Company negotiated the final terms of the recapitalization plan on June
26, 2002. Loan documentation relating to the Company's new credit facility and
other ancillary agreements were finalized on June 28, 2002, on which date
borrowings under the Company's credit facility were repaid in full (including
amounts in which the Principal Holders had a participation interest), and the
12% convertible notes and the preferred stock were issued to the Principal
Holders.
On September 10, 2002, the Principal Holders and HLHZ Investments, Inc.
agreed to waive the right to an increase in the interest rate on the 12%
convertible notes and an increase in the dividend rate on the preferred stock
from 12% to 19% if the conversion of the 12% convertible notes and the preferred
stock had not occurred prior to December 15, 2002. Additionally, the Principal
Holders agreed to waive the increased redemption price of the preferred stock in
the event of a mandatory redemption. Previously, the redemption price equaled
the liquidation preference amount plus accrued and unpaid dividends times two.
Giving effect to the waiver, the redemption price equaled the liquidation
preference amount plus accrued and unpaid dividends.
New Credit Facility
In connection with the recapitalization plan, the Company also entered into
a five-year, $45 million credit facility, agented by CapitalSource Finance LLC,
consisting of a $12.5 million term loan and a $32.5 million revolving credit
component. In conjunction with the new facility, the Company issued to
CapitalSource, an affiliate of CapitalSource Finance LLC, 31,910 shares of
redeemable common stock on June 28, 2002. Moreover, the Company issued to
CapitalSource, 201,444 additional shares of redeemable common stock upon
completion of the rights offering with the effect that, as of the date hereof,
CapitalSource holds 233,354 Shares. The CapitalSource Shares represent
approximately a 4.7% interest in the Company's issued and outstanding shares of
common stock. The Shares issued to the Company's lender are considered
redeemable in that, upon a future termination in full of this new credit
facility, CapitalSource has the right to require the Company to repurchase all
the shares issued to CapitalSource at a price per share that is dependent on
certain measures of cash flow, debt, and cash at a future date. At the close of
the rights offering, the Company's repurchase obligation on account of all
shares issued to CapitalSource was approximately $1.1 million. All shares issued
to CapitalSource were recorded as redeemable common stock and as a cost of
financing with deferred financing fees, amortized over the life of the credit
facility.
26
Sale of Convertible Notes
Pursuant to the purchase agreement, the Principal Holders purchased for
cash from the Company on June 28, 2002, $10,000,000 principal amount of 12%
convertible notes due June 15, 2005. Upon the closing of the rights offering on
December 23, 2002, the convertible notes (together with accrued interest
thereon) were converted into Shares at the rights offering price of $5.00 per
share. The Principal Holders received 2,116,661 Shares upon conversion of the
12% convertible notes held by such entities.
Note Exchange
The Principal Holders, in connection with the purchase agreement, received
822.6696 shares of newly-issued preferred stock, $10,000 per share liquidation
preference, on June 28, 2002, in exchange for all of their previously existing
and outstanding interests in the 12% exchangeable notes of UnionTools, which
represented the total amount of principal and accrued interest on the
exchangeable notes.
Preferred Stock
The preferred stock had an initial aggregate liquidation preference equal
to $8,226,696 and accrued dividends at a 12% annual rate. The preferred stock
became mandatorily convertible into Shares at the rights offering price of $5.00
per share upon the December 23, 2002 closing of the rights offering based on the
liquidation preference and accrued dividends owing thereon as of the closing
date of the rights offering. The Principal Holders received 1,645,338 Shares
upon conversion of the preferred stock held by such entities plus an additional
95,978 Shares in respect of $479,891 of accrued dividends which was then owing
on account of such preferred stock as of that date.
Use of Proceeds from Sale of Convertible Notes
On June 28, 2002, the Company advanced $10,000,000 to UnionTools that it
applied, together with borrowings under a new secured credit facility agented by
CapitalSource Finance LLC, as payment of all outstanding obligations of
UnionTools due and payable under the then existing revolving loan and term loan
agreements. Contemporaneously with repayment of existing bank borrowings,
UnionTools reimbursed Houlihan Lokey Capital for remaining expenses that were
unpaid and paid Houlihan Lokey Financial Advisors and its affiliates $1,200,000
in connection with financial advisory work and the fairness opinion on behalf of
the Company and the Company's stockholders, of which $600,000 was paid in cash
and $600,000 pursuant to a 12% convertible note.
Any convertible notes (which includes notes held by the Principal Holders
and the HLHZ Investments LLC note) that remained outstanding upon completion of
the rights offering (together with any accrued interest remaining thereon), were
automatically converted into Shares at a rate equal to $5.00 per share.
Effective as of the closing of the rights offering on December 23, 2002, HLHZ
Investments LLC received $1,000 cash plus 126,800 Shares, representing a 2.6%
interest in the Company's outstanding common stock, upon the repayment and
conversion of its 12% convertible note (inclusive of accrued interest owing
thereon).
NEGOTIATIONS OR CONTACTS
Other than as described above, during the past two years there have been no
negotiations or material contacts concerning the matters referred to above
between (i) any affiliates of the Company or (ii) the Company or any of its
affiliates and any person not affiliated with the Company who would have a
direct interest in such matters.
CONFLICTS OF INTEREST
The following are all agreements, arrangements, or understanding, and any
actual or potential conflicts of interest, deemed to be material, between any of
the Filing Persons or their affiliates and the Company, its executive officers,
directors, or affiliates.
27
The Filing Persons may be deemed to be in control of the Company because
they currently own 88.2% of the Company's outstanding common stock.
Vincent J. Cebula and James R. Lind serve as members of the Company's board
of directors. Mr. Cebula also serves as a Vice President of Parent and is a
member of Parent's board of directors. Mr. Cebula is also a Managing Director of
Oaktree. Mr. Lind serves as a Vice President of Parent and is a member of the
parent's board of directors. Mr. Lind is also an Assistant Vice President of
Oaktree. As a result, there may be potential conflicts of interest between the
Messrs. Cebula and Lind and the Company.
Mr. Meyer entered into a restricted stock agreement with the Company,
pursuant to which he was granted 83,500 restricted Shares, issuable on vesting
and other conditions contained in such restricted stock agreement. In addition,
Mr. Meyer owns 2,150 Shares, which he will contribute to Parent and, after the
Merger, will continue to be outstanding. Mr. Meyer is a member of the Company's
board of directors and serves as its Chairman, President and Chief Executive
Officers. As a result, there may be a potential conflict of interest between the
Company and Mr. Meyer.
Messrs. Jacob and Zimmerman and Ms. LaScala each entered into a restricted
stock agreement with the Company, pursuant to which they were granted 21,500,
20,000, and 8,000 restricted Shares, respectively. Each of Messrs. Jacob and
Zimmerman and Ms. LaScala will contribute such restricted Shares to Parent in
exchange for an equal number of restricted shares of Parent, and such restricted
Shares of Parent will continue to be outstanding after the Merger, subject to
vesting and other conditions contained in the restricted stock agreements that
Parent will enter into with Messrs. Jacob and Zimmerman and Ms. LaScala. As a
result, there may be a potential conflict of interest between the Company and
each of Messrs. Jacob and Zimmerman and Ms. LaScala.
AGREEMENTS INVOLVING THE SUBJECT COMPANY'S SECURITIES
In addition to those described above, the following are all of the
agreements, arrangements, or understandings, whether or not legally enforceable,
between any of the Filing Persons or, to the best knowledge of the Filing
Persons, any of the persons listed on Schedule I hereto and any other person
with respect to any securities of the Company.
TCWG, TCW, TAMCO, Special Credits, TCW Special Credits Fund III, TCW
Special Credits Fund IV, TCW Special Credits Plus Fund, TCW Special Credits
Trust IIIb, TCW Special Credits Trust IV, Oaktree and the Oaktree Fund, and
Weyerhauser Company Master Retirement Trust, a third party account of which
Special Credits is the investment manager, have a written agreement relating to
the filing of a joint acquisition statement on Schedule 13D relating to the
Company's securities, as required by Rule 13d-1(f)(1) under the Exchange Act.
TCWG, TCW, TAMCO, Special Credits, TCW Special Credits Fund III, TCW Special
Credits Fund IV, TCW Special Credits Plus Fund, TCW Special Credits Trust IIIb,
TCW Special Credits Trust IV, individually or together, Oaktree, and the Oaktree
Fund reserve the right, subject to applicable law, to seek proxies, consents,
and/or ballots in support of nominees at special or scheduled meeting of the
Company's stockholders or otherwise, or in support of or against other matters
that may come before the Company's stockholders for their vote or consent.
SPECIFIC TERMS OF THE MERGER
CONTRIBUTION AND MERGER
Prior to the Effective Date, the Filing Persons plan to contribute all of
the Shares they own to Parent in exchange for common stock of Parent. As of
February 7, 2003, the Filing Persons beneficially owned 4,420,457 Shares,
representing in the aggregate approximately 88.2% of the outstanding Shares. On
the Effective Date, the Filing Persons will contribute, or cause entities that
they control to contribute, 4,420,457 Shares to Parent (the "Filing Persons
Contribution") in exchange for common stock of Parent. Additionally, on the
Effective Date, CapitalSource will contribute 213,354 Shares to Parent in
exchange for common stock of the Parent (the "CapitalSource Contribution" and
together with the Filing Persons Contribution, the "Contributions"). Upon
receipt of the contributions, Parent will merge with and into the Company
pursuant to Section 253 of the DGCL, with the Company to be the surviving
corporation. To so merge, the board of directors and the stockholders of Parent
will
28
approve the Merger and Parent will file a Certificate of Ownership and Merger
with the Secretary of State of Delaware. Upon the Effective Date:
o Each Share issued and outstanding immediately prior to the Effective
Date (other than Shares owned by Parent or the Company and Shares held
by Public Stockholders, if any, who properly exercise their
dissenters' statutory appraisal rights under the DGCL) will be
cancelled and extinguished and be converted into and become a right to
receive the Merger Price; and
o Each share of Parent's capital stock issued and outstanding
immediately prior to the Effective Date shall be converted into one
validly issued, fully paid and nonassessable share of the common stock
of the Company as the surviving corporation of the Merger.
As a result of the Merger, the Filing Persons will own all of the outstanding
equity interests in the Company.
Under the DGCL, because Parent will hold at least 90% of the outstanding
Shares, Parent will have the power to effect the Merger without a vote of the
Company's board of directors or the Public Stockholders. Parent intends to take
all necessary and appropriate action to cause the Merger to become effective on
the Effective Date, without a meeting or consent of the Company's board of
directors or the Public Stockholders. The Merger Price will be $3.50 in cash per
Share.
MERGER PRICE
Upon completion of the Merger, in order to receive the cash Merger Price of
$3.50 per Share, each stockholder or a duly authorized representative must (1)
deliver a Letter of Transmittal, appropriately completed and executed, to
American Stock Transfer and Trust Company, and (2) surrender such Shares by
delivering the stock certificate or certificates that, prior to the Merger, had
evidenced such Shares to the Paying Agent, as set forth in a Notice of Merger
and Appraisal Rights and Letter of Transmittal which will be mailed to
stockholders of record on the Effective Date. Stockholders are encouraged to
read the Notice of Merger and Appraisal Rights and Letter of Transmittal
carefully when received. Delivery of an executed Letter of Transmittal shall
constitute a waiver of statutory appraisal rights.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds expected to be required to pay the Merger Price
for the Shares in the Merger and to pay related fees and expenses, is estimated
to be approximately $1,500,000, assuming no outstanding options to acquire
Company Shares are exercised prior to the Merger.
In June 2002, the Company entered into a five-year, $45.0 million credit
facility, agented by CapitalSource Finance LLC, consisting of a $12.5 million
term loan and a $32.5 million revolving credit component. The term loan bears
interest at prime plus 5.0% and the revolving credit component bears interest at
prime plus 3.0%. The Lender's facility terminates in June 2007. The facility is
secured by a first priority security interest in all of the Company's assets.
The Company anticipates repaying the loan from existing cash flow.
The Company has received a waiver from its Lenders which, subject to
certain events, waives certain defaults that would otherwise occur as a result
of the Merger. Further, it is anticipated that the Lenders under the Company's
current senior credit facility will amend the terms of such facility to provide
an additional term loan in an amount anticipated to be approximately $1.5
million to fund the Merger Price and related fees and expenses and revise some
of the Company's existing covenants. In connection with such amendment, the
Lenders are expected to reduce the Company's revolving credit facility to a
maximum amount of $31 million. As consideration for the amendment, the Lenders
will receive customary amendment and commitment fees totaling approximately
$50,000. The amendment to the Company's current credit facility is subject to
formal approval and documentation, which has not been negotiated. The
consummation of the Merger is not subject to the amendment becoming effective.
29
ACCOUNTING
The Merger will be accounted for as the acquisition of a minority interest
using the purchase method of accounting.
FUTURE OPERATIONS
It is currently expected that, following the consummation of the Merger,
the business and operations of the Company will, except as set forth in this
Schedule 13E-3, be conducted by the Company substantially as they are currently
being conducted. The Filing Persons intend to continue to evaluate the business
and operations of the Company with a view to maximizing the Company's potential.
As such, the Filing Persons will take such actions as they deem appropriate
under the circumstances and market conditions then existing. The Filing Persons
intend to cause the Company to terminate the registration of the Shares under
Section 12(g) of the Exchange Act following the Merger, which would result in
the suspension of the Company's duty to file reports pursuant to the Exchange
Act. In addition, the Filing Persons intend to cause the Shares to cease to be
listed on the Nasdaq SmallCap Market. For additional information see "Special
Factors -- Purposes Alternatives, Reasons and Effects of the Merger -- Effects."
The Filing Persons do not currently have any commitment or agreement for,
and are not currently negotiating, the sales of any of the Company's businesses.
Additionally, it is contemplated that upon completion of the Merger, Messrs.
Abbott, Kahl and Mariotti will resign from their positions as members of the
Company's board of directors.
Except as otherwise described in this Schedule 13E-3, the Company has not,
and the Filing Persons have not, as of the date of this Schedule 13E-3, approved
any specific plan or proposals for, or negotiated:
o any extraordinary transaction, such as a merger, reorganization or
liquidation involving the surviving company or any of its subsidiaries
after the completion of the Merger;
o any purchase, sale, or transfer of a material amount of assets of the
surviving company or any of its subsidiaries after the completion of
the Merger;
o any material change in the Company's dividend rate or policy, or
indebtedness or capitalization;
o any change in the present board of directors or management of the
Company, including, but not limited to, any plans or proposals to
change the number or the term of directors or to fill any existing
vacancies on the board or to change any material term of the
employment contract of any officer; or
o any other material change in the Company's corporate structure or
business.
None of the Filing Persons intends to grant Public Stockholders special
access to the Company's records in connection with the Merger. None of the
Filing Persons intends to obtain counsel or appraisal services for the Public
Stockholders.
FEES
The Paying Agent will receive reasonable and customary out-of-pocket
expenses and will be reimbursed for certain reasonable out-of-pocket expenses
and will be indemnified against certain liabilities in connection with the
Merger, including certain liabilities under the U.S. federal securities laws.
None of the Filing Persons will pay any fees or commissions to any broker
or dealer in connection with the Merger. Brokers, dealers, commercial banks and
trust companies will, upon request, be reimbursed by the Company for customary
mailing and handling expenses incurred by them in forwarding materials to their
customers.
The following is an estimate of fees and expenses to be incurred by the
Filing Persons and Parent in connection with the Merger:
30
Legal fees and expenses ..................... $ 75,000
Accounting fees and expenses ................ $ 15,000
Paying Agent fees and expenses .............. $ 5,000
Printing Fees ............................... $ 10,000
Filing Fees ................................. $ 124
Miscellaneous fees and expenses ............. $ 19,876
--------
Total ........................... $125,000
========
Such fees, to the extent not paid by the Effective Date, will be paid from
the resources of the combined entity resulting from the Merger of Parent into
the Company. Such fees paid prior to the Effective Date will be paid by the
Company.
For a discussion of the reasons for the Merger, see "Special Factors --
Purposes, Alternatives Reasons and Effects -- Reasons." For federal income tax
purposes, the receipt of the cash consideration by holders of the Shares
pursuant to the Merger will be a taxable sale of the holders' Shares. See
"Special Factors -- Purposes, Alternatives Reasons and Effects -- Effects --
Certain Federal Income Tax Consequences of the Merger."
APPRAISAL RIGHTS
Under the DGCL, record holders of the Shares who follow the procedures set
forth in Section 262 will be entitled to have their Shares appraised by the
Court of Chancery of the State of Delaware and to receive payment of the fair
value of such shares together with a fair rate of interest, if any, as
determined by such court. The fair value as determined by the Delaware court is
exclusive of any element of value arising from the accomplishment or expectation
of the Merger. The following is a summary of certain of the provisions of
Section 262 of the DGCL and is qualified in its entirety by reference to the
full text of Section 262, a copy of which is attached to this Schedule 13E-3 as
Exhibit (f). Notice of the Effective Date and the availability of appraisal
rights under Section 262 (the "Merger Notice") will be mailed to record holders
of the Shares and should be reviewed. Any Public Stockholder entitled to
appraisal rights will have the right, within 20 days after the date of mailing
of the Merger Notice, to demand in writing from the Company an appraisal of his
or her Shares. Such demand will be sufficient if it reasonably informs the
Company of the identity of the stockholder and that the stockholder intends to
demand an appraisal of the fair value of his or her Shares. Failure to make such
a timely demand would foreclose a stockholder's right to appraisal.
Only a holder of record of Shares is entitled to assert appraisal rights
for the Shares registered in that holder's name. A demand for appraisal should
be executed by or on behalf of the holder of record fully and correctly, as the
holder's name appears on the stock certificates. Holders of Shares who hold
their shares in brokerage accounts or other nominee forms and wish to exercise
appraisal rights should consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such nominee. All written
demands for appraisal of Shares should be sent or delivered to John G. Jacob c/o
Acorn Products, Inc., 390 Nationwide Boulevard, Columbus, Ohio 43215.
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, and 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 joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners.
A record holder such as a broker holding Shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the Shares held
for one or more beneficial owners while not exercising such rights with respect
to the Shares held for other 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.
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Within 10 calendar days after the Effective Date, the Company, as the
surviving corporation in the Merger, must send a notice as to the effectiveness
of the Merger. Within 120 calendar days after the Effective Date, the Company,
or any stockholder entitled to appraisal rights under Section 262 and who has
complied with the foregoing procedures, may file a petition in the Delaware
Court of Chancery demanding a determination of the fair value of the Shares of
all such stockholders. The Company is not under any obligation, and has no
present intention, to file a petition with respect to the appraisal of the fair
value of the Shares. Accordingly, it is the obligation of the stockholders to
initiate all necessary action to perfect their appraisal rights within the time
prescribed in Section 262.
Within 120 calendar days after the Effective Date, any stockholder of
record who has complied with the requirements for exercise of appraisal rights
will be entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of Shares with respect to which demands for
appraisal have been received and the aggregate number of holders of such Shares.
Such statement must be mailed within 10 calendar days after a written request
therefor has been received by the Company or within 10 calendar days after the
expiration of the period for the delivery of demands for appraisal, whichever is
later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the fair value of the Shares,
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. Holders 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 amount per
Share that they would otherwise receive if they did not seek appraisal of their
Shares. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods that are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
Shares have been appraised. Upon application of a stockholder, the costs of the
action may be determined by the Court and taxed upon the parties as the Court
deems equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of Shares in connection with an appraisal, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts used in the appraisal proceeding, be charged pro rata against the value
of all the Shares entitled to appraisal.
The Court may require stockholders who have demanded an appraisal and who
hold Shares represented by certificates to submit their certificates to the
Court for notation thereon of the pendency of the appraisal proceedings. If any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder. Any stockholder who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Date, be
entitled to vote the Shares subject to such 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 date prior to the Effective Date).
If any stockholder who demands appraisal of Shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the Shares of such holder will be converted into the right
to receive the Merger Price, without interest. A stockholder will fail to
perfect, or effectively lose, the right to appraisal if no petition is filed
within 120 calendar days after the Effective Date. A stockholder may withdraw a
demand for appraisal by delivering to the Company a written withdrawal of the
demand for appraisal and acceptance of the Merger Price, except that any such
attempt to withdraw made more than 60 calendar days after the Effective Date
will require the written approval of the Company. Once a petition for appraisal
has been filed, such appraisal proceeding may not be dismissed as to any
stockholder without the approval of the Court.
For federal income tax purposes, stockholders who receive cash for their
Shares upon exercise of their statutory right of dissent will realize taxable
gain or loss. See "Certain Federal Income Tax Consequences of the Merger."
The foregoing summary does not purport to be a complete statement of the
procedures to be followed by stockholders desiring to exercise their appraisal
rights and is qualified in its entirety by express reference to the Section 262
of the DGCL, the full text of which is attached hereto as Exhibit (f).
STOCKHOLDERS ARE URGED TO READ
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EXHIBIT (F) IN ITS ENTIRETY BECAUSE FAILURE TO COMPLY WITH THE PROCEDURES SET
FORTH THEREIN WILL RESULT IN LOSS OF APPRAISAL RIGHTS.
TRANSACTION STATEMENT
ITEM 1. SUMMARY TERM SHEET.
See "Summary Term Sheet."
ITEM 2. SUBJECT COMPANY INFORMATION.
(A) NAME AND ADDRESS.
See "Information About the Company."
(B) SECURITIES.
The exact title of the class of equity securities subject to the Merger is:
common stock, par value $0.01 per share, of the Company. As of February 7, 2003,
5,010,317 Shares were outstanding.
(C) TRADING MARKET AND PRICE.
See "Information about the Company."
(D) DIVIDENDS.
See "Information about the Company."
(E) PRIOR PUBLIC OFFERINGS.
The Filing Persons have not made an underwritten public offering of the
Company's securities during the past three years.
(F) PRIOR STOCK PURCHASES.
See "Information about the Filing Persons."
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
See "Information about the Filing Persons."
ITEM 4. TERMS OF THE TRANSACTION.
(A) MATERIAL TERMS.
See "Specific Terms of the Merger."
(B) PURCHASES.
None of the Filing Persons, Parent or the Company will be purchasing any
Shares from any officer, director or affiliate of the Company prior to the
Merger. Any such officer, director or affiliate who is the holder of any Shares
(other than Shares contributed to Parent) will be entitled to receive the Merger
Price just as any other stockholder of the Company.
33
(C) DIFFERENT TERMS.
Stockholders of the Company will be treated as described in "Specific Terms
of the Merger."
(D) APPRAISAL RIGHTS.
See "Appraisal Rights."
(E) PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS.
Neither the Filing Persons nor Parent intends to grant the Public
Stockholders special access to the Company's records in connection with the
Merger. Neither the Filing Persons nor Parent intends to obtain counsel to or
appraisal services for the Public Stockholders.
(F) ELIGIBILITY FOR LISTING OR TRADING.
Not applicable.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(A) TRANSACTIONS.
See "Information about the Filing Persons -- Transactions."
(B) SIGNIFICANT CORPORATE EVENTS.
See "Information about the Filing Persons -- Significant Corporate Events."
(C) NEGOTIATIONS OR CONTACTS.
See "Information about the Filing Persons -- Negotiations or Contracts."
(D) CONFLICTS OF INTEREST.
See "Information about the Filing Persons -- Conflicts of Interest."
(E) AGREEMENTS INVOLVING THE SUBJECT COMPANY'S SECURITIES.
See "Information about the Filing Persons -- Agreements Involving the
Subject Company's Securities."
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(B) USE OF SECURITIES ACQUIRED.
The Shares acquired in the Merger from the Public Stockholders will be
cancelled.
(C) PLANS.
See "Specific Terms of the Merger."
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
See "Special Factors -- Purposes, Alternatives, Reasons and Effects."
34
ITEM 8. FAIRNESS OF THE TRANSACTION
See "Special Factors -- Fairness of the Merger."
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
See "Special Factors -- Reports, Opinions, Appraisals and Negotiations."
ITEM 10. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(A) SOURCE OF FUNDS.
See "Specific Terms of the Merger -- Source and Amount of Funds."
(B) CONDITIONS.
There are no conditions to the Merger.
(C) EXPENSES.
See "Specific Terms of the Merger -- Fees."
(D) BORROWED FUNDS.
See "Specific Terms of the Merger -- Source and Amount of Funds."
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(A) SECURITIES OWNERSHIP.
On the Effective Date, immediately prior to the Merger and after giving
effect to the CapitalSource Contribution, Parent is expected to be the owner of
4,633,811 Shares, representing 92.5% of the outstanding Shares. See also
"Information About the Filing Persons."
(B) SECURITIES TRANSACTIONS.
Each of the Filing Persons will contribute the Shares held by such Filing
Person to Parent on the Effective Date immediately prior to the Merger. Except
as stated in Item 2 "Subject Company Information -- Prior Stock Purchases," none
of the Shares acquired by each of the Filing Persons that will be contributed to
Parent immediately prior to the Effective Date were acquired by such Filing
Person in the past 60 days.
ITEM 12. THE SOLICITATION OR RECOMMENDATION.
Not applicable.
ITEM 13. FINANCIAL STATEMENTS.
(A) FINANCIAL INFORMATION.
See "Information About the Company -- Selected Consolidated Financial
Information."
(B) PRO FORMA INFORMATION.
Not applicable.
35
(C) SUMMARY INFORMATION.
See "Information About the Company -- Financial Information."
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(A) SOLICITATIONS OR RECOMMENDATIONS.
There are no persons or classes of persons who are directly or indirectly
employed, retained, or to be compensated to make solicitations or
recommendations in connection with the Merger.
(B) EMPLOYEES AND CORPORATE ASSETS.
No employees of the Company will be used by the Filing Persons or Parent in
connection with the Merger, except that certain employees may perform
ministerial acts in connection with the Merger. The combined assets of the
Company and Parent will be used to fund the Merger consideration and pay all
expenses of the Merger. See "Specific Terms of the Merger."
ITEM 15. ADDITIONAL INFORMATION
None.
ITEM 16. EXHIBITS
(b) Revolving Credit, Term Loan and Security Agreement among Acorn
Products, Inc. and UnionTools, Inc. as Borrower, CapitalSource Finance
LLC, as Agent and Lender and other Lenders thereto, dated as of June
28, 2002 (reference is made to Exhibit 10.1 to the Current Report on
Form 8-K, dated June 28, 2002, filed with the Securities and Exchange
Commission on July 2, 2002).
(f) Delaware General Corporation Law Section 262.
36
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 21, 2003
-----------------------------------
ACORN MERGER CORPORATION
By: /s/ Vincent J. Cebula
-----------------------------------
Name: Vincent J. Cebula
Title: Chairman and President
THE TCW GROUP, INC.
By: /s/ Matthew Barrett
-----------------------------------
Name: Matthew Barrett
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TRUST COMPANY OF THE WEST
By: /s/ Matthew Barrett
-----------------------------------
Name: Matthew Barrett
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW ASSET MANAGEMENT COMPANY
By: /s/ Matthew Barrett
-----------------------------------
Name: Matthew Barrett
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
OAKTREE CAPITAL MANAGEMENT, LLC
By: /s/ Vincent J. Cebula
-----------------------------------
Name: Vincent J. Cebula
Title: Managing Director
By: /s/ Stephen A. Kaplan
-----------------------------------
Name: Stephen A. Kaplan
Title: Principal
37
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 21, 2003
-----------------------------------
TCW SPECIAL CREDITS
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Matthew Barrett
-----------------------------------
Name: Matthew Barrett
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Vincent J. Cebula
-----------------------------------
Name: Vincent J. Cebula
Title: Managing Director
By: /s/ Stephen A. Kaplan
-----------------------------------
Name: Stephen A. Kaplan
Title: Principal
A. CORYDON MEYER
/s/ A. Corydon Meyer
- -------------------------------------------
A. Corydon Meyer, an Individual
JOHN G. JACOB
/s/ John G. Jacob
- -------------------------------------------
John G. Jacob, an Individual
GARY W. ZIMMERMAN
/s/ Gary W. Zimmerman
- -------------------------------------------
Gary W. Zimmerman, an Individual
CAROL B. LASCALA
/s/ Carol B. LaScala
- -------------------------------------------
Carol B. LaScala, an Individual
38
SCHEDULE 1
PARENT
Directors and Executive Officers.
The name, business address, position with Parent, present principal
occupation or employment and five-year employment history of the directors
and executive officers of Parent, together with the names, principal
businesses and addresses of any corporations or other organizations in which
such principal occupation is conducted, are set forth below. Each of the
directors and executive officers of Parent is a United States citizen unless
otherwise stated. To the knowledge of the Filing Persons, no director or
executive officer of Parent has been convicted in a criminal proceeding
during the last five years (excluding traffic violations or similar
misdemeanors) and no director or executive officer of Parent has been a
party to any judicial or administrative proceeding during the last five
years (except for any matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree or final order enjoining him
from future violations of, or prohibiting activities subject to, federal or
state securities laws, or a finding of any violation of federal or state
securities laws.
The principal business address for each executive officer and director is
390 West Nationwide Blvd, Columbus, Ohio, 43215.
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT
AND FIVE-YEAR EMPLOYMENT HISTORY
Vincent J. Cebula Mr.Cebula serves as Parent's Chairman
and President. Mr. Cebula also has served as a director of
the Company since June 2001. Mr. Cebula is a Managing
Director of Oaktree where he has worked since June 1995.
From April 1994 until May 1995, Mr. Cebula was a Senior
Vice President of TCW Asset Management Company.
James R. Lind Mr. Lind serves as Parent's Vice President, Treasurer and
Secretary. Mr. Lind has also served as a director of the
Company since November 2002. James R. Lind is an Assistant
Vice President with Oaktree where he has worked since June
1998. Prior to joining Oaktree, Mr. Lind worked at Lehman
Brothers where he served as an analyst in the New York
Mergers and Acquisitions Group. While at Lehman, Mr. Lind
primarily on transactions for Lehman Brothers' Merchant
Banking Group and its affiliated companies.
TCW GROUP, INC.
Directors and Executive Officers.
The executive officers of TCW Group, Inc. are listed below. The principal
business address for each executive officer is 865 South Figueroa Street,
Suite 1800, Los Angeles, California, 90017. Each executive officer is a
citizen of the United States of America unless otherwise specified below:
EXECUTIVE OFFICERS
Robert A. Day Chairman of the Board & Chief Executive Officer
Ernest O. Ellison Vice Chairman of the Board
Thomas E. Larkin, Jr. Vice Chairman of the Board
Marc I. Stern President
Alvin R. Albe, Jr. Executive Vice President & Chief Marketing Officer
Robert D. Beyer Executive Vice President & Chief Investment Officer
William C. Sonneborn Executive Vice President & Chief Operating Officer
Patrick R. Pagni Executive Vice President
(Citizen of France)
Michael E. Cahill Managing Director, General Counsel & Secretary
David S. DeVito Managing Director, Chief Financial Officer & Assistant Secretary
Hilary G. D. Lord Managing Director, Chief Compliance Officer & Assistant Secretary
The directors of TCW Group, Inc., along with each director's
principal business address and position are listed below. Each
director is a citizen of the United States of America unless
otherwise specified below:
DIRECTORS
MARK L. ATTANASIO DR. HENRY A. KISSINGER
Group Managing Director Chairman
Trust Company of the West Kissinger Associates, Inc.
11100 Santa Monica Blvd., Ste. 2000 350 Park Ave., 26th Floor
Los Angeles, CA 90025 New York, NY 10022
PHILIPPE CITERNE THOMAS E. LARKIN, JR.
Chief Executive Officer Vice Chairman
Societe Generale, S.A. The TCW Group, Inc.
17 Cours Valmy 865 South Figueroa St., Suite 1800
92972 Paris, La Defense Cedex Los Angeles, California 90017
France
(Citizen of France)
PHILIPPE COLLAS MICHAEL T. MASIN, ESQ.
Chairman and Chief Executive Officer Vice Chairman & President
Societe Generale Asset Management, S.A. Verizon Communications
Elf Tower, 2 Place de la Coupole 1095 Avenue of the Americas, Room 3922
92078 Paris, La Defense Cedex New York, New York 10036
France
(Citizen of France)
ROBERT A. DAY EDFRED L. SHANNON,JR.
Chairman and Chief Executive Officer Investor/Rancher
Trust Company of the West 14081 Summit Dr.
865 S. Figueroa St., Ste. 1800 Whittier, CA 90602
Los Angeles, CA 90017
DAMON P. DE LASZLO, ESQ. ROBERT G. SIMS
Chairman of Harwin PLC Private Investor
Byron's Chambers 16855 W. Bernardo Dr., Suite 250
A2 Albany, Piccadilly San Diego, CA 92127-1626
London W1V 9RD--England
(Citizen of United Kingdom)
WILLIAM C. EDWARDS MARC I. STERN
Partner President
Bryan & Edwards The TCW Group, Inc.
3000 Sand Hill Road 865 S. Figueroa St. Suite 1800
Building 1, Suite 190 Los Angeles, CA 90017
Menlo Park, CA 94025
ERNEST O. ELLISON YASUYUKI TAYAMA
Vice Chairman Managing Director
Trust Company of the West The Yasuda Fir & Marine Insurance Co., Ltd.
865 South Figueroa St., Suite 1800 26-1, Nishi-Shinjuku 1-Chrome
Los Angeles, California 90017 Shinjuku-ku, Tokyo, 160-8338
Japan
(Citizen of Japan)
RICHARD N. FOSTER JAMES R. UKROPINA
Partner & Director Of Counsel
McKinsey & Company, Inc. O'Melveny & Myers
55 E. 52nd St., 21st Floor 400 S. Hope St., 15th Floor
New York, NY 10022 Los Angeles, CA 90071-2899
CARLA A. HILLS
Chairman Hills & Company
1200 19th Street, N.W., Suite 201
Washington, DC 20036
TRUST COMPANY OF THE WEST
Directors and Executive Officers.
The executive officers and directors of Trust Company of the West
are listed below. The principal business address for each executive
officer and director is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017. Each executive officer is a citizen of
the United States of America unless otherwise specified below:
EXECUTIVE OFFICERS & DIRECTORS
Robert A. Day Director, Chairman of the Board & Chief Executive Officer
Ernest O. Ellison Director & Vice Chairman of the Board
Thomas E. Larkin, Jr. Director & Vice Chairman of the Board
Alvin R. Albe, Jr. Director, Executive Vice President & Chief Marketing Officer
Marc I. Stern Director, Vice Chairman of the Board
Robert D. Beyer Director & President
William C. Sonneborn Executive Vice President & Chief Operating Officer
Patrick R. Pagni Executive Vice President
(Citizen of France)
Jeffrey E. Gundlach Director
Michael E. Cahill Managing Director, General Counsel & Secretary
David S. DeVito Managing Director, Chief Financial Officer & Assistant Secretary
Hilary G. D. Lord Managing Director & Chief Compliance Officer
TCW ASSET MANAGEMENT COMPANY
Directors and Executive Officers.
The executive officers and directors of TCW Asset Management Company
are listed below. The principal business address for each executive
officer and director is 865 South Figueroa Street, Suite 1800, Los
Angeles, California, 90017. Each executive officer and director is a
citizen of the United States of America unless otherwise specified
below:
EXECUTIVE OFFICERS & DIRECTORS
Robert A. Day Director, Chairman of the Board & Chief Executive Officer
Thomas E. Larkin, Jr. Director & Vice Chairman of the Board
Marc I. Stern Director, President & Vice Chairman of the Board
Alvin R. Albe, Jr. Director, Executive Vice President & Chief Marketing Officer
Robert D. Beyer Director, Executive Vice President & Chief Investment Officer
William C. Sonneborn Director, Executive Vice President & Chief Operating Officer
Mark W. Gibello Director & Executive Vice President
Michael E. Cahill Director, Managing Director, General Counsel & Secretary
Christopher J. Ainley Director
Mark L. Attanasio Director
Philip A. Barach Director
Javier W. Baz Director
Glen E. Bickerstaff Director
Arthur R. Carlson Director
Jean-Marc Chapus Director
Penelope D. Foley Director
Douglas S. Foreman Director
Nicola F. Galluccio Director
Jeffrey E. Gundlach Director
Raymond F. Henze, III Director
Stephen McDonald Director
Nathan B. Sandler Director
Komal S. Sri-Kumar Director
TCW SPECIAL CREDITS
The following sets forth with respect to each general partner of TCW
Special Credits his name, residence or business address, present
principal occupation or employment and the name, principal business
and address of any corporation or other organization in which such
employment is conducted for. Each general partner who is a natural
person is a citizen of the United States of America unless otherwise
specified below:
TCW Asset Management Company is the Managing General Partner. See
information in the paragraph regarding TCW Asset Management Company
above.
Bruce A. Karsh Sheldon M. Stone
President and Principal Principal
Oaktree Capital Management, LLC Oaktree Capital Management, LLC
333 South Grand Avenue 333 South Grand Avenue
28th Floor 28th Floor
Los Angeles, California 90071 Los Angeles, California 90071
Howard S. Marks David Richard Masson
Chairman and Principal Principal
Oaktree Capital Management, LLC Oaktree Capital Management, LLC
333 South Grand Avenue 333 South Grand Avenue
28th Floor 28th Floor
Los Angeles, California 90071 Los Angeles, California 90071
OAKTREE CAPITAL MANAGEMENT, LLC
Executive Officers and Members.
The members and executive officers of Oaktree Capital Management,
LLC are listed below. The principal address for each member and
executive officer of Oaktree Capital Management, LLC is 333 South
Grand Avenue, Los Angeles, California 90071. All individuals listed
below are citizens of the United States of America.
Howard S. Marks Chairman and Principal
Bruce A. Karsh President and Principal
Sheldon M. Stone Principal
David Richard Masson Principal
Larry Keele Principal
Russel S. Bernard Principal
Stephen A. Kaplan Principal
Kevin L. Clayton Principal
John W. Moon Principal
David Kirchheimer Principal
John B. Frank Managing Director and General
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
Oaktree Capital Management, LLC is the sole general partner of OCM
Principal Opportunities Fund, L.P. See information in the paragraph
above regarding Oaktree Capital Management, LLC and its members and
executive officers. The names and addresses of the portfolio
managers of OCM Principal Opportunities Fund, L.P. are listed below:
Stephen A. Kaplan
333 South Grand Avenue
28th Floor
Los Angeles, California 90071
Ronald N. Beck
1301 Avenue of the Americas
34th Floor
New York, NY 10019