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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
AMENDMENT NO. 2
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
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$1,574,202.00 $142.25
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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 449,772 (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.
[x] 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: $142.25
Form or Registration No.: Schedule 13E-3 and Amendment No. 1 thereto
Filing Party: Filing Persons Listed Above
Date Filed: February 21, 2003 April 7, 2003
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 5).
Immediately prior to the merger, Parent will own approximately 91.2% 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.
- Parent is a Delaware corporation recently organized by the Filing
Persons to hold 4,354,461 shares of Company common stock
beneficially owned by the Filing Persons and approximately 213,354
shares of Company common stock beneficially owned by CapitalSource
Holdings LLC. On or about May 5, 2003, the Filing Persons, or
entities controlled by the Filing Persons, and CapitalSource
Holdings LLC will convey to Parent 4,567,815 shares of Company
common stock in exchange for 4,567,815 shares of Parent's common
stock, par value $.01 per share.
- It is anticipated that on or about May 5, 2003, the Filing
Persons' and CapitalSource Holdings LLC's shares of Company common
stock, as transferred to Parent, will represent approximately 91.2%
of the Company's outstanding common stock. On or about May 5,
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.
PRINCIPAL TERMS OF THE MERGER.
The Merger (Page 28). Parent intends to cause the Company to merge with
Parent on or about May 5, 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 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. The Filing Persons set the price of $3.50 and have
deemed it to be fair. The Filing Persons set the $3.50 per share price after
reviewing the various factors considered by Parent's Board of Directors in
determining the fairness of the Merger. See "Special Factors -- Fairness of the
Merger -- Factors Considered in Determining Fairness."
Company Shares Outstanding (Page 4). As of March 21, 2003, a total of
5,010,321 shares of Company common stock were outstanding. In addition, as of
March 21, 2003, options to purchase an additional 9,232 shares of Company common
stock held by former and current employees were outstanding and 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-
1
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 $1,700,000, assuming no outstanding options to acquire Company
common stock are exercised prior to the merger. The Company's current senior
credit facility has been amended, subject to the consummation of the Merger, to
provide an additional term loan at the time of the merger in an amount equal to
$1.5 million to fund most of the merger consideration. It is anticipated that
the balance of the merger consideration and related fees and expenses will be
funded from the revolver portion of the Company's senior credit facility.
THE FILING PERSONS' POSITION ON THE FAIRNESS OF THE MERGER (PAGE 9).
The Filing Persons have concluded that the merger is both substantively
and procedurally 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:
- Current and Historical Market Prices;
- Net Book Value and Net Tangible Book Value;
- Recapitalization Conversion Price;
- Contractual "Put Right" of Lender Affiliate;
- Trend in Equity Markets Overall;
- Risk of Stock Market Delisting;
- Liquidation Value;
- Going Concern Value;
- Financial Performance, Condition, Business Operations and Prospects
of the Company;
- Certain Negative Considerations; and
- Procedural Fairness.
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.
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:
- The Company and Parent will be combined into a single, privately
held entity;
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- 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;
- 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
- 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.
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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 transfer, to Parent,
common shares of the Company which are expected to represent 91.2% 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
May 5, 2003.
As of March 21, 2003, a total of 5,010,321 shares of Company common
stock, par value $0.01 per share (the "Shares"), were outstanding. In addition,
as of March 21, 2003, options to purchase an additional 9,232 Shares held by
former and current employees were outstanding and 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 5,010,321 Shares
outstanding, of which Parent will own 4,567,815 or 91.2% of the Shares
outstanding, and stockholders of the Company other than Parent, including all
unaffiliated stockholders of the Company, (the "Public Stockholders") will own
approximately 8.8% of the Shares outstanding.
Upon the consummation of the Merger, each outstanding Share will be
canceled and each outstanding Share not held by Parent or by 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.
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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 91.2% 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.
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:
- 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");
- 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;
- 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;
- 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;
- 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;
- 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
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- 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.
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 $15,167,000 on December 31, 2002 (which figure is being computed to include
$1.167 million of redeemable common stock issued to CapitalSource), and net loss
of $6,193,000 for the fiscal year ended December 31, 2002, will increase from
approximately 88.2% to 95.3 % of those amounts.
The Merger will have no effect upon the Company's ability to use net
operating loss carryforwards or NOLs, which benefit the Company by offsetting
taxable income dollar-for-dollar by the amount of the NOLs, thereby eliminating
(subject to a relatively minor alternative minimum tax) the federal corporate
tax on that income. The Filing Persons, by completing the Merger, will become
the beneficiaries of the Company's use of the NOLs. The maximum federal
corporate tax rate is currently 35%. At December 31, 2002, the Company had net
operating loss ("NOL") carryforwards of approximately $78.7 million for income
tax purposes that expire in varying amounts in the years 2008 through 2022. Of
this amount, approximately $28.6 million of net operating losses that originated
prior to the Company's initial public offering ("IPO") on June 27, 1997 are
subject to limitation under Internal Revenue Code Section 382. There are no
Section 382 limitations on the remaining $50.1 million of net operating loss
carryforwards. In accordance with the provisions of Section 382, utilization of
the pre-IPO net operating losses is limited to approximately $1.2 million
annually unless the Section 382 limitation exceeds the taxable income for a
given year, in which case the excess amount carries over to and increases the
annual Code Section 382 limitation for the succeeding year. Due to the carryover
of excess Code Section 382 limited net operating losses, at December 31, 2002,
the Company has approximately $7.3 million of Code Section 382 limited net
operating losses that are available to offset taxable income in 2003 (in
addition to the $50.1 million of net operating loss carryforwards that are not
limited). The Company also has capital loss carryforwards of approximately $4.3
million for income tax purposes that expire in 2003.
The Company will be the beneficiary of the projected net savings of
$500,000 per year after terminating registration under the Exchange Act (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). The
projected net savings would include savings from audit, legal, and personnel
fees and costs.
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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 9,232 Shares, which are
held by former and current employees and which 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.
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.
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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 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.
8
FAIRNESS OF THE MERGER
FAIRNESS
Each of the Filing Persons has determined that the Merger is both
substantively and procedurally 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 both procedurally and substantively fair to the Public
Stockholders.
FACTORS CONSIDERED IN DETERMINING FAIRNESS
In reaching its determination that the terms of the Merger are both
procedurally and substantively 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.
- 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. 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 through February
19, 2003, 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 between December 23, 2002 and
February 19, 2003, occurred on the three days during such period
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 between December 23, 2002 and February 19, 2003.
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.
- Net Book Value. The Company's net book value at December 31, 2002
was $14.0 million (which figure is being computed to exclude $1.167
million of redeemable common stock issued to
9
CapitalSource), which yields a per Share valuation of approximately
$2.93 per share. The Merger Price represents a premium of 19.5% to
the book value per Share.
- 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:
- 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;
- 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
- 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,
2002, were approximately $79 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.
- 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., 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.
- 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.
10
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.
- 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.
- 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.
- Going Concern Value. Parent's board of directors did not consider
"shopping" the Company to prospective buyers. Shopping the Company
would not only entail substantial time delays and allocation of
management's time and energy, but would also disrupt and discourage
the Company's employees and create uncertainty among the Company's
customers and suppliers. Further, 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.
- 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.
11
- Other Factors.
- 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.
- 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.
- 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
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.
- 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:
- 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.
- 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.
- No Public Stockholder Approval. The Public Stockholders will
not have an opportunity to vote on the Merger.
- 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.
- Procedural Fairness. 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. In making such determination,
Parent's board of directors primarily
12
considered and relied on 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. In addition,
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.
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:
- the merger or consolidation of the Company with or into another
company, or vice versa;
- the sale or other transfer of all or any substantial part of the
assets of the Company; or
- 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.
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.
13
HIGH LOW
---- ---
FISCAL YEAR ENDING DECEMBER 31, 2003:
1st Quarter................................................... $3.64 $2.50
2nd Quarter(1)................................................ $3.64 $3.45
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 April 10, 2003.
The most recent closing sale price per Share as reported on the Nasdaq
SmallCap Market prior to the date of this Amendment No 1. to Schedule 13E-3 was
$3.47, on April 10, 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, 2001 and 2002 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, 2002 ("Form 10-K").
The Company's book value per share as of December 31, 2002 is
approximately $2.93 per Share (with such figure being computed as to exclude
shares owned by CapitalSource that are subject to mandatory redemption by the
Company under certain circumstances).
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. More comprehensive financial information is included
in the Form 10-K 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 Form 10-K 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, 2001 and 2002, has been derived from
the Company's
14
audited Consolidated Financial Statements. All share and per share amounts are
adjusted to give effect to the 1-for-10 reverse stock split effective November
21, 2002.
Fiscal Year Ended
(In thousands, except per share data)
-------------------------------------
12/31/2001 12/31/2002
---------- ----------
STATEMENT OF OPERATIONS DATA:
Net sales $ 91,304 $ 91,203
Cost of goods sold 70,404 70,088
--------- ---------
Gross profit 20,900 21,115
Selling, general and
administrative expenses 15,151 15,566
Interest expense 5,895 4,068
Amortization of intangibles 876 0
Asset impairment(1) 14,130 4,241
Other expenses, net(2) 443 3,004
--------- ---------
Income (loss) from continuing
operations before income taxes (15,595) (5,764)
Income taxes (benefit) 84 (51)
Preferred stock dividends 0 480
--------- ---------
Income (loss) from continuing operations (15,679) (6,193)
Loss from discontinued operations 0 0
--------- ---------
Net income (loss) $ (15,679) $ (6,193)
========= =========
Income (loss) from continuing
operations per share (basic and diluted) $ (25.86) $ (8.61)
Weighted average number of shares outstanding 606,222 718,987
OTHER DATA:
Gross margin 22.9% 23.2%
Net cash provided by (used in) operating activities $ 3,362 $ 2,685
Net cash provided by (used in) investing activities $ (1,211) $ (2,272)
Net cash provided by (used in) financing activities $ (1,356) $ (623)
BALANCE SHEET DATA:
Working capital from continuing operations (3) $ 5,156 $ 9,833
Total assets 61,152 55,467
Total debt 40,565 21,842
Stockholders' equity 6,062 14,000
(1) A goodwill impairment charge of $4.2 million was recognized in fiscal
2002 based on management review of the recoverability of goodwill in
accordance with Statement of Financial Accounting Standards No. 142,
Goodwill and Intangible Assets. A goodwill impairment charge of $14.1
million was recognized in fiscal 2001 based on management review of the
recoverability of goodwill. There were asset impairment charges of $4.4
million in fiscal 2000 and $2.8 million in calendar 1999 based on our
review of the net realizable value of certain long-lived assets
(primarily goodwill) related to the manufacture and sale of watering
products.
15
(2) In fiscal 2001, expenses of $545,000 were recognized for financial
advisory, consulting and legal fees incurred to evaluate strategic
alternatives.
In fiscal 2002, we incurred $1.0 million of expense for financial
advisory, consulting and legal fees associated with our
recapitalization and refinancing. We also incurred $2.0 million of
expense related to the relocation of our distribution facility from
Columbus, Ohio to Louisville, Kentucky.
(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 4,567,815 Shares or approximately 91.2%
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 2,478,370
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 2,412,370 Shares
beneficially owned by TCWG to Parent, TCWG will be deemed to beneficially own
52.8% 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 830,073 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 18.2% 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
1,648,297 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
1,582,297 Shares beneficially owned by TAMCO to Parent, TAMCO will be deemed to
beneficially own 34.6% 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 1,648,297 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 1,582,297 Shares beneficially owned by
Special Credits to Parent, Special Credits will be deemed to beneficially own
34.6% 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 41.4% 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, 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 37.7% 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 41.4% 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 2,478,370
Trust Company of the West (5) 228.9818 484,676 $1,152,999 244,050 728,726 830,073
TCW Asset Management
Company (5) 330.4335 699,415 $3,467,852 734,025 1,433,440 1,648,297
TCW Special Credits (5) 330.4335 699,415 $3,467,852 734,025 1,433,440 1,648,297
Total 822.6696 1,741,312 $10,000,000 2,116,661 3,857,973 4,368,811
- ------------
(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:
- the value the stockholders would have likely received under the
highest and best proposal received by the Company during the
marketing process;
- the value indicated by the public market which Houlihan Lokey
Financial Advisors felt was a poor indicator of value in any event;
or
25
- 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 understandings, 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 serves as a member of the Company's board of
directors. Mr. Cebula also serves as President and Chairman of Parent and is a
member of Parent's board of directors. Mr. Cebula is also a Managing Director of
Oaktree. As a result, there may be potential conflicts of interest between Mr.
Cebula and the Company.
Mr. Jacob serves as a Vice President and Chief Financial Officer of the
Company. Mr. Jacob also serves and treasurer and secretary of Parent. As a
result, there may be a potential conflicts of interest between Mr. Jacob 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
Weyerhaeuser 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
March 21, 2003, the Filing Persons beneficially owned 4,420,461 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, 4,354,461 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
28
Company to be the surviving corporation. To so merge, the board of directors and
the stockholders of Parent will approve the Merger and Parent will file a
Certificate of Ownership and Merger with the Secretary of State of Delaware.
Upon the Effective Date:
- 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
- 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 $1,700,000, 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, the Company's current senior credit facility has been
amended, subject to the consummation of the Merger, to provide an additional
term loan at the time of the Merger in an amount equal to $1.5 million to fund
most of the Merger consideration. In connection with such amendment, the
Company's revolving credit facility will be reduced to a maximum amount of $31
million, effective upon the completion of the Merger. It is anticipated that the
balance of the Merger consideration and related fees and expenses will be funded
from the revolving credit facility. The amendment to the Company's senior credit
facility also revised some of the Company's existing covenants and will permit
the Company to pay cash to the Filing Persons and CapitalSource in an amount of
not more than $2,000 in respect of fractional shares that could remain
outstanding following a reverse stock split that the Filing Persons may effect
subsequent to the completion of the Merger; provided further that in connection
therewith the price per share being paid to such holders on account
29
of fractional shares would not exceed $3.50 per share. As consideration for the
amendment, the lenders will receive customary amendment and commitment fees
totaling approximately $50,000.
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:
- 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;
- 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;
- any material change in the Company's dividend rate or policy, or
indebtedness or capitalization;
- 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
- 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.
30
The following is an estimate of fees and expenses to be incurred by the
Filing Persons and Parent in connection with the Merger:
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................................................................ $ 128
Miscellaneous fees and expenses............................................ $ 19,872
------
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
31
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.
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."
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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 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 March 21,
2003, 5,010,321 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
4,567,815 Shares, representing 91.2% 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)(1)* 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).
(b)(2)* Amendment No. 1 to 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 April 4, 2003.
(f) Delaware General Corporation Law Section 262.
* Previously filed.
36
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this amended statement is true, complete and
correct.
Dated: April 11, 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 amended statement is true, complete and
correct.
Dated: April 11, 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.
John G. Jacob Mr. Jacob serves as Parent's Treasurer and Secretary. Mr. Jacob has also served as Vice
President and Chief Financial Officer of the Company since 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.
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