Supplement
to
Offer to Purchase for Cash All Outstanding Shares of
Class A and Class B Common Stock
of
CONCORD FABRICS INC.
at
$7.875 NET PER SHARE
by
CONCORD MERGER CORP.
- --------------------------------------------------------------------------------
THE EXPIRATION OF THE OFFER HAS BEEN EXTENDED SUCH THAT THE OFFER AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON SEPTEMBER 10, 1999,
UNLESS THE OFFER IS FURTHER EXTENDED.
- --------------------------------------------------------------------------------
THIS SUPPLEMENT, DATED AUGUST 31, 1999, SUPPLEMENTS AND AMENDS THE OFFER
TO PURCHASE, DATED AUGUST 4, 1999, RELATING TO THE PROPOSED OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF CLASS A AND CLASS B COMMON STOCK OF CONCORD
FABRICS INC. (THE "OFFER TO PURCHASE"). THIS SUPPLEMENT, WHICH SHOULD BE READ IN
CONJUNCTION WITH THE OFFER TO PURCHASE, IS BEING PROVIDED TO GIVE YOU CERTAIN
ADDITIONAL INFORMATION. THE MATERIAL TERMS OF THE OFFER HAVE NOT BEEN CHANGED,
OTHER THAN TO EXTEND THE DATE FOR TENDERING YOUR SHARES FROM AUGUST 31, 1999 TO
SEPTEMBER 10, 1999. YOU MAY CONTINUE TO USE THE LETTER OF TRANSMITTAL AND
PROCEDURES FOR TENDERING PREVIOUSLY DELIVERED TO YOU OR YOU MAY USE THE REVISED
LETTER OF TRANSMITTAL INCLUDED HEREWITH. CAPITALIZED TERMS USED HEREIN AND NOT
OTHERWISE DEFINED HAVE THE MEANINGS ASCRIBED TO THEM IN THE OFFER TO PURCHASE.
THIS OFFER IS BEING MADE PURSUANT TO THE MERGER AGREEMENT, AS AMENDED ON
AUGUST 4, 1999 (THE "MERGER AGREEMENT").
IMPORTANT
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Supplement. Additional copies of
this Supplement, the Offer to Purchase, the original and the revised Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent or brokers, dealers, commercial banks or trust companies.
---------------------
The Dealer Manager for the Offer is:
FIRST UNION CAPITAL MARKETS CORP.
August 31, 1999
To the Holders of Common Stock of Concord Fabrics Inc.:
The Offer to Purchase is amended and supplemented as follows:
1. The fifth and sixth paragraphs under "Special Factors - 1. Background
of the Offer; Contacts with the Company - Background" are hereby replaced in
their entirety by inserting the following in lieu thereof:
"After Mr. Weinstein interviewed BHC and another investment banking
firm, on May 19, 1999, BHC was engaged by the Company to assist management
in determining an appropriate price to offer to the Public Stockholders in
a going private transaction and to advise with respect to dealings with
the holders of the Company's long term debt. On May 19, 1999,
representatives of BHC met with Alvin Weinstein, Joan Weinstein, David
Weinstein, Earl Kramer and Martin Wolfson and representatives of Bryan
Cave, and reviewed with them in depth the Company's history, financial and
otherwise, structure and future prospects, all with a view to determining
an appropriate price to be offered the Company's Public Stockholders in a
going private transaction. During that meeting, BHC made a preliminary
presentation summarizing its work to date. The presentation discussed
various approaches to valuation and included, among other things, an
analysis of public companies, a discounted cash flow analysis of the
Company, a leveraged going private analysis and a premiums paid analysis.
BHC noted that it had not identified from publicly available data
information for any transactions sufficiently comparable to aid in the
valuation process. In connection with its preliminary analysis, BHC (i)
reviewed certain publicly available financial statements and other
information of the Company; (ii) reviewed certain internal financial
statements and other financial and operating data concerning the Company
prepared by the management of the Company; (iii) reviewed certain
financial projections of the Company prepared by the management of the
Company; (iv) discussed the past and current operations, financial
condition and prospects of the Company with management of the Company; (v)
reviewed the reported prices and the limited trading activity of the
Shares; (vi) compared the financial performance and condition of the
Company with that of certain other publicly-traded companies; (vii)
analyzed premiums paid for relevant tender offers; and (viii) performed
such other analyses as it deemed appropriate.
"BHC noted that the valuation methods employed in its preliminary
analysis were standard valuation methodologies, which may or may not be
appropriate for the purposes of valuing the Company. Moreover, the
applicability of these methodologies depends upon the validity of the
assumption that a willing acquiror for the Company exists. Due to the
unrelated nature of the Company's two operating divisions, as well as the
various operational issues faced by each division, it is questionable
whether or not a willing acquiror for the Company exists. In addition, the
Continuing Shareholders have stated that they have no current intention to
sell the Company. Finally, the projections upon which the
2
valuations were predicated assumed consistent increases in revenues and
profitability although since 1997 the Company actually experienced
declining revenues and earnings.
"Using public information, BHC compared selected historical and
operating performance data of the Company to the corresponding data of the
following companies: Cone Mills Corp., Culp, Inc., Dyersburg Corp., FAB
Industries, Inc., Galey & Lord, Inc., Guilford Mills, Inc. Johnston
Industries, Inc., and Quaker Fabric Corp. (the "Public Companies"). BHC
noted that while these companies were all active in various segments of
the textile industry, none was directly comparable to the Company. With
respect to the Public Companies, BHC calculated multiples of adjusted
market value ('AMV') (market value of equity, based on stock market prices
as of May 14, 1999, plus total debt less cash and cash equivalents as of
their most recent Form10-Q) to latest twelve months ('LTM') net income
before interest, taxes, depreciation and amortization ('EBITDA') and LTM
net income before interest and taxes ('EBIT'). BHC also calculated for the
Public Companies multiples of current equity market value to LTM net
income, projected calendar year 1999 net income and book value. When
applied to the operating performance of the Company, the multiples of the
Public Companies yielded an implied per share value for the Company
between $6.73 and $9.78.
"BHC also analyzed the projected unlevered free cash flows of the
Company through August 31, 2004, based on the estimates provided by
management to BHC, utilizing a range of discount rates and perpetuity
value assumptions. Based on this analysis, BHC derived an implied per
share value for the Company between $9.14 and $12.60. BHC did not do a
similar analysis based on an extrapolation of the Company's actual
declining revenue and earnings since 1997, nor did it revise its
calculations to take into account the Company's revised projections
delivered to Peter J. Solomon on July 9, 1999. See "Certain Financial
Projections."
"Based on the Company's projected results for fiscal year 2000
(delivered by management prior to the May 19, 1999 meeting), BHC analyzed
the potential pro-forma earnings impact of an acquisition of the Company
by a potential acquiror assuming an all cash purchase. BHC calculated the
maximum cash purchase price that a hypothetical acquiror could pay which
would result in no earnings dilution for the projected fiscal year 2000,
assuming costs of financing ranged from 7.0% to 8.0%. This analysis
indicated an implied per share value for the Company of up to $10.61.
"BHC analyzed a series of scenarios involving hypothetical
recapitalizations of the Company. This analysis calculated the maximum
cash price per share that could be paid to existing shareholders assuming
reasonable leverage levels for the Company and internal rates of return
for the new investor.
3
The analysis was based on the first set of projections provided by
management (though BHC again noted that a new investor might not base his
analysis on those projections, which project a turnaround from the
declining operating performance of the Company since 1997). Based on the
assumptions employed, the calculations implied a per share value for the
Company of $8.65, which could produce an internal rate of return in the
range of 21.1% and 37.0% over a five year period. The analysis was not
updated to reflect the revised projections delivered on July 9, 1999.
"Finally, BHC reviewed the consideration paid in tender offers
completed from January 1, 1997 to May 1, 1999 for transaction sizes
between $25 and $50 million and between $50 and $100 million. BHC
calculated the premiums paid in those transactions over the acquired
entities' equity values one month prior to the announcement of the
acquisition offers. The implied per share value for the Company was based
on the Company's then-current share price of $4.75 on May 14, 1999. The
median premium paid for relevant transactions in the $25 to $50 million
range was 44.3%, which implied a per share value for the Company of $6.85.
The median premium paid for relevant transactions in the $50 to $100
million range was 35.5%, which implied a per share value for the Company
of $6.44.
"While the foregoing summary describes all analyses and examinations
that BHC deemed material to the preparation of its report to the Company,
it does not purport to be a comprehensive description of all analyses and
examinations actually conducted by BHC. In addition, BHC may have given
some analyses more or less weight than other analyses and may have deemed
various assumptions more or less probable than other assumptions. In
performing its analyses, BHC made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. BHC also
used in its analysis various projections of future performance prepared by
the management of the Company. These projections were based on numerous
variables and assumptions that are inherently unpredictable. In fact,
market conditions changed to such a degree after BHC's presentation that
projections used by BHC in its analysis were later revised downward to
reflect significant raw material price increases.
"At a meeting of the Board on May 25, 1999, Alvin Weinstein informed
the Board that based upon the preliminary report of BHC, he proposed an
offer of $7.50 per Share for all shares of Common Stock held by Public
Stockholders, provided that the Special Committee agreed that the offered
price was fair (the "Initial Proposal"). Mr. Weinstein said that he had
met with representatives of Chase Manhattan Bank who had informally
advised him that they, alone or together with another bank, would provide
the necessary financing to a corporation to be formed by the Continuing
Shareholders for the purpose of making the offer. Thereafter, the Board
established the Special Committee
4
consisting of Fred Heller and Richard Solar, both of whom are neither
employees of, nor consultants to, the Company, Purchaser, or the
Continuing Shareholders and had no interest in the proposed transaction
other than as holders of non-employee director Company Stock Options and,
in one case, as a Public Stockholder. The Special Committee was authorized
to consider and take such action, if any, (including, without limitation,
negotiation and/or rejection) as the Special Committee may consider
appropriate with respect to a proposal by the Continuing Shareholders to
acquire all shares of common stock of the Corporation held by the Public
Stockholders at a purchase price of $7.50 per share. The Board also
authorized the Special Committee to retain, at the expense of the Company,
legal counsel and an independent investment banking firm to assist and
advise it in its work concerning the Initial Proposal. Before the meeting
adjourned, representatives of Bryan Cave reviewed with the members of the
Board the duties and responsibilities of the members of the Board and of
the Special Committee in connection with the Initial Proposal. They also
reviewed the various legal forms by which a going private transaction
might be accomplished."
2. The discussion under the caption "Special Factors - 1. Background of
the Offer; Contacts with the Company - Reasons for the Recommendation of the
Special Committee and the Board" is hereby replaced in its entirety by inserting
the following in lieu thereof:
"Reasons for the Recommendation of the Special Committee and the
Board. In determining that the Merger Agreement and the transactions
contemplated thereby are advisable and fair to the Public Stockholders as
a whole as well as to the Public Stockholders who hold Class A Shares, as
a class, and to the Public Stockholders who hold Class B Shares, as a
class, the Special Committee considered the following material factors,
which taken as a whole, supported its determinations:
(i) the financial condition, assets, results of
operations, business and prospects of the Company,
and the risks inherent in achieving those prospects.
The Special Committee particularly focused on the
financial and operating difficulties experienced by
the Concord House Division over the past five years
and management's belief that the Concord House
Division could not be expected to return to its prior
levels of profitability in the near future. To
return to such levels of profitability the division
would need to expand into new markets and there could
be no assurance that it could successfully do so.
The Special Committee also focused on trends in the
industry in which the Company operates, including the
shrinking home sewing market, the increasing
competition presented to the Company by companies
which manufacture fabric in countries with lower
labor costs, and the relocation of the manufacturing
facilities of the Company's customer base to such
countries. The Special Committee considered the
difficulties which the Company would face in
attempting to relocate its manufacturing facility to
5
such lower labor cost countries. The Special
Committee considered the unlikelihood of growth in
the Knit Division given the secular decline in
domestic demand for the division's traditional
products.
(ii) the terms and conditions of the Merger Agreement, including
the amount and form of consideration payable to the Public
Stockholders, and the structure of the transaction which is
designed, among other things, to result in the receipt by the
Public Stockholders of cash consideration at the earliest
practicable time without any brokerage fees;
(iii) the historical market prices and recent trading activity of
the Shares, including the fact that the $7.875 per Share cash
consideration to be paid to the Public Stockholders in the
offer represents a premium of approximately 40% over the last
reported sales price of the Class A Shares on July 28, 1999,
the last full trading day for the Class A Shares preceding the
public announcement of the Offer, and of the Class B Shares on
July 27, 1999, the last full trading day for the Class B
Shares preceding the public announcement of the Offer, and a
premium of approximately 38%, 56% and 49% over the average
closing price for the one-month, three-month and six-month
periods, respectively, preceding such date, as well as the
fact that such price would be payable in cash, thus
eliminating any uncertainties in valuing the consideration to
be received by the Public Stockholders. The Special Committee
also considered the opportunity provided by the Offer for a
substantial number of stockholders to realize a premium price
for their Shares in the near future as compared to market
prices that, absent the Offer and the Merger, may continue to
be significantly below the Offer price.
(iv) the prices paid by the Company in the stock repurchases made
by the Company beginning in September 1998, including the fact
that the $7.875 per Share cash consideration to be paid to the
Public Stockholders is approximately 31%, 27% and 28% greater
than the average price paid by the Company during each of the
three fiscal quarters following the commencement of such
repurchases. See "The Tender Offer - Certain Information
Concerning the Company."
(v) the fact that the Merger Agreement and the price of $7.875 per
Share are the product of arms' length negotiations between the
Continuing Shareholders and Purchaser, on the one hand, and
the Special Committee, on the other. These
6
negotiations led to an increase in the proposed price from
$7.50 to $7.875 per Share, which the Continuing Shareholders
agreed to on the condition that this price was final and there
would be no further negotiations.
(vi) the opinion of Peter J. Solomon as to the fairness, from a
financial point of view, of the price of $7.875 per Share to
be paid in the Offer and the Merger. The full text of Peter J.
Solomon's opinion, describing various considerations,
assumptions and limitations stated therein, is set forth in
Schedule I to the Offer to Purchase. The Special Committee
also considered the presentation by Peter J. Solomon to the
Special Committee regarding:
- the Company's current financial condition and results
of operations; and
- the financial, operating and stock market performance
data of the Company compared to certain publicly traded
textile companies, the analysis of the valuation of
selected going private transactions announced or
consummated since January 1, 1997, and a discounted cash
flow analysis.
These factors and the results of Peter J. Solomon's analysis
of such factors which are summarized in the discussion below
under the caption "Opinion of Peter J. Solomon" were
considered and specifically adopted by the Special Committee.
It is Peter J. Solomon's position that its duties in
connection with its fairness opinion are solely to the Special
Committee, and that it has no legal responsibility to any
other persons, including shareholders of the Company, under
the terms of its engagement letter. Peter J. Solomon's
engagement letter is governed by the laws of the State of New
York. Peter J. Solomon would likely assert the substance of
this disclaimer as a defense to claims, if any, that might be
brought against it by shareholders of the Company with respect
to its fairness opinion. However, since no New York court has
ruled specifically on the availability of such a disclaimer as
a defense in the context of a Special Committee financial
advisory engagement, it necessarily would have to be resolved
by a court of competent jurisdiction. In any event, the
availability or non-availability of the defense will have no
effect on Peter J. Solomon's rights and responsibilities under
the federal securities laws, or on the rights and
responsibilities of the directors of the Company under either
the governing state fiduciary law or the federal securities
laws.
(vii) that the Continuing Shareholders have stated that they have
7
no current intention to sell the Company, which made the
pursuit of other potential alternatives (such as a sale of the
Company as a going concern) impracticable. The Special
Committee also considered the intention of the Continuing
Shareholders to continue the business as a going concern,
which makes any consideration of liquidation of the Company or
values that ultimately might be obtained from such liquidation
impracticable and speculative; and
(viii) the availability of appraisal rights under the DGCL to
holders of Shares who dissent in the Merger.
"The Board considered and specifically adopted the conclusions and
recommendation of the Special Committee and the factors described above
which the Special Committee took into account in making its recommendation
to the Board. The members of the Board, including the members of the
Special Committee, evaluated the various factors considered in light of
their knowledge of the business, financial condition and prospects of the
Company, and sought and considered the advice of financial and legal
advisors. In light of the number and variety of factors that the Board and
the Special Committee considered in connection with their evaluation of
the Offer and the Merger, neither the Board nor the Special Committee
found it practicable to quantify or otherwise assign relative weights to
any of the foregoing factors, and, accordingly, neither the Board nor the
Special Committee did so. The Board and the Special Committee, however,
gave significant weight to the factors specified in clauses (i) through
(vi), inclusive, above.
"In addition to the factors listed above, the Special Committee
considered the fact that consummation of the Offer and the Merger would
eliminate the opportunity of the Public Stockholders to participate in any
potential future growth in the value of the Company, but believed that
this loss of opportunity was appropriately reflected by the price of
$7.875 per Share to be paid in the Offer and the Merger. See "Purpose of
the Offer and the Merger; Plans for the Company."
"The Board, including the Special Committee, the Continuing
Shareholders and the Purchaser believe that the Offer and the Merger are
procedurally fair because, among other things: (i) the Special Committee
consisted of independent directors (unaffiliated with Purchaser or its
affiliates or the Company's management) appointed to represent the
interests of the Public Stockholders; (ii) the Special Committee retained
and was advised by independent legal counsel; (iii) the Special Committee
retained and was advised by independent financial advisors, who negotiated
the terms of the Offer solely on behalf of the Special Committee as
representative of the Public Stockholders, assisted the Special Committee
in evaluating the Offer and the Merger and rendered a fairness opinion, as
described herein; (iv) the detailed review by the Special Committee and
its advisors of the business and financial condition of the Company; (v)
the deliberations pursuant to which the Special Committee evaluated the
Offer and the Merger; (vi) the $7.875 per Share
8
price and the other terms and conditions of the Merger Agreement resulted
from active arms' length bargaining between members of the Special
Committee, on the one hand, and Purchaser and the Continuing Shareholders,
on the other; and (vii) the Minimum Condition, which cannot be waived by
Purchaser without the consent of the Special Committee and which the
Board, the Special Committee, the Continuing Shareholders and the
Purchaser believe is tantamount to a requirement that approval of the
Merger Agreement be subject to the affirmative vote of a majority of the
Public Stockholders since, if it is not satisfied or waived, it will
prevent consummation of the Offer and the Merger. The Board, including the
Special Committee, the Continuing Shareholders and Purchaser reached the
conclusion that the Offer and Merger are procedurally fair for the
foregoing reasons, notwithstanding the fact that approval of the Merger
Agreement is not subject to the affirmative vote of at least a majority of
the Public Stockholders, as well as the fact that, pursuant to the
Company's engagement letter with Peter J. Solomon, the opinion of Peter J.
Solomon states that it may be relied upon solely by the Special Committee.
"THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER IS
ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND THE
PUBLIC STOCKHOLDERS AS A WHOLE AS WELL AS THE PUBLIC STOCKHOLDERS WHO HOLD
CLASS A SHARES, AS A CLASS, AND THE PUBLIC STOCKHOLDERS WHO HOLD CLASS B
SHARES, AS A CLASS, AND, UPON THE RECOMMENDATION OF THE SPECIAL COMMITTEE,
RECOMMENDS THAT THE PUBLIC STOCKHOLDERS WHO HOLD CLASS A SHARES AND THE
PUBLIC STOCKHOLDERS WHO HOLD CLASS B SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES TO PURCHASER.
"Except to the extent a recommendation is made in a person's
capacity as a director, no executive officer of the Company, nor any of
the Continuing Shareholders nor the Purchaser, has made any recommendation
with respect to the Offer, the adoption of the Merger Agreement or the
Merger."
3. The discussion under "Special Factors - 1. Background of the Offer;
Contacts with the Company - Certain Financial Projections" is hereby replaced in
its entirety by inserting the following in lieu thereof:
"Certain Financial Projections. The Company does not as a matter of
course make public forecasts or projections as to future performance
(including as to revenues, earnings, other income statement items and cash
flows) or financial position. However, in May 1999, the Company engaged
BHC to assist management in determining an appropriate price to offer to
the Public Stockholders in a going private transaction. During the course
of its consultation with BHC, the Company prepared income statement
projections and certain other financial data through August 31, 2004 (the
"Original Projections"). The assumptions used by the Company in preparing
the Original Projections were:
9
o revenues are expected to grow slightly as a result of increased
sales at Concord House Division;
o EBITDA margin is expected to be 7.2% in 1999, and to increase
slightly each year thereafter due to improved margin contribution
from the Concord House Division;
o capital expenditures and depreciation are expected to be
approximately $1.8 million;
o working capital needs are expected to remain relatively constant;
o base year is estimated to be the fiscal year ending August 29, 1999;
o 179,000 Shares authorized to be repurchased are assumed to be
repurchased equally in fiscal years 2000 and 2001 at a Price to
Forward Earnings multiple of 7.3; and
o the Chino California facility is assumed to be sold in year 2000 at
a net sales price of $3.0 million. (The Company has subsequently
received an offer to purchase the Chino California facility at a net
sales price of $3.44 million. Although, the difference between the
assumed net sales price and the offered net sales price may have a
material effect on the projected net income of the Company for the
year in which the facility is sold (if the offer is accepted), such
difference would not affect the projected income from continuing
operations of the Company. Accordingly, BHC has orally advised the
Company that in its opinion the sale of the Chino California
facility at a net sales price of $3.44 million would not have a
material effect on the valuation of the Company.)
"Based upon the assumptions in the Original Projections, the Company
estimated that net sales would increase from an estimated $87.8 million for
fiscal 1999 to $89.0 million in fiscal 2000, $90.6 million in fiscal 2001, $92.7
million in fiscal 2002, $94.8 million in fiscal 2003 and $97.1 million in fiscal
2004. In total, therefore, the Company estimated a five year compound annual
growth rate of 2.0% in sales for the Company. Gross profit was also expected to
rise at a compound annual growth rate of 2.5% from $28.4 million in fiscal 1999
to a projected $32.2 million by fiscal 2004. Net Income was expected to rise at
a compound annual growth rate of 12.1% from $2.2 million in fiscal 1999 to $4.0
million in fiscal 2004.
"In June 1999, the Company's management updated the Company's operating
plan to reflect an industry-wide price increase for polyester by the fiber's
largest global suppliers. The operational and financial projections prepared by
the Company in connection with the updated operating plan are referred to as the
"Updated Projections." The Updated Projections yielded the same sales growth
figures, but the gross profit increased only at a compound annual growth rate of
0.7% through fiscal 2003, to $29.3 million, and net income was expected to
increase only at a
10
compound annual growth rate of 0.9% from $2.2 million in fiscal 1999 to $2.3
million in fiscal 2003."
4. The discussion under "Special Factors - 1. Background of the Offer;
Contacts with the Company - Special Cautionary Notice Regarding Forward-Looking
Statements" is hereby replaced in its entirety by inserting the following in
lieu thereof:
"Special Cautionary Notice Regarding Forward-Looking Statements. The
Projections were based upon numerous estimates and assumptions that are
inherently subject to significant uncertainties, are difficult to predict
and, in many cases, are influenced by factors beyond the Company's
control. The material assumptions used in preparing the Projections are
described in the respective Projections and footnotes to the Projections.
There can be no assurance that the projected results will be realized or
that actual results will not be significantly higher or lower than those
predicted. While the Projections were prepared in good faith by the
Company's management, no assurance can be made regarding future events.
Therefore, neither the Original Projections nor the Updated Projections
can be considered a reliable prediction of future operating results and
should not be relied on as such. Additionally, the Projections were
prepared at the times indicated above and do not reflect any subsequent
results or any changes that have occurred or may occur in the future
regarding the business, assets, operations, properties, management,
capitalization, corporate structure or policies of the Company, general
economic or business conditions, or any other transaction or event that
has occurred since the respective dates of preparation, or that may occur,
and were not anticipated at the time such information was prepared. The
Company does not intend to update the Projections. The Projections were
prepared by the Company solely for use by the Company's and the Special
Committee's financial advisors and not for publication or with a view to
complying with the published guidelines of either the Commission regarding
projections or forecasts or the American Institute of Certified Public
Accountants' Guide for Prospective Financial Statements, nor in accordance
with generally accepted accounting principles. The Company's independent
auditors have not examined, compiled or performed any procedures regarding
the Projections, nor have they expressed any opinion or given any
assurance on such information or its achievability and, accordingly, they
assume no responsibility for the Projections. The Purchaser assumes no
responsibility for the validity, reasonableness, accuracy or completeness
of the Projections and makes no representation regarding the Projections.
None of the Company, Purchaser or the Continuing Shareholders intends to
update or supplement the Projections prior to consummation of the Offer or
the Merger, except to the extent required by law. Shareholders are
cautioned not to place undue reliance on the Projections."
5. The discussion under "Special Factors - 3. Purpose of the Offer and the
Merger; Plans for the Company - Purpose of the Offer and the Merger" is hereby
amended by inserting the following after the fourth paragraph thereof:
"The Continuing Shareholders and Purchaser have concluded that the
Offer and the Merger, including the $7.875 per Share cash consideration to
be
11
paid pursuant thereto and the terms and conditions of the Merger
Agreement, are fair to the Company and the Public Stockholders as a whole
as well as to the Public Stockholders who hold Class A Shares, as a class,
and to the Public Stockholders who hold Class B Shares, as a class, based
upon the same factors identified by the Special Committee and the Board as
discussed under the caption "- 1. Background of the Offer; Contacts with
the Company - Reasons for the Recommendation of the Special Committee and
the Board" and have specifically adopted the analysis and conclusions of
the Special Committee and the Board as to the fairness of the Offer and
the Merger, including the $7.875 per Share cash consideration to be paid
pursuant thereto, and the terms and conditions of the Merger Agreement.
The Continuing Shareholders recognize that, following the Merger, the
Public Stockholders will no longer have an equity interest in the Company
and, therefore, will not participate in any potential future earnings and
growth of the Company. While this could be detrimental to the Public
Stockholders if the Company's operational performance improves and it
grows, the Continuing Shareholders believe that any significant business
improvement and growth is uncertain and not likely in the near term and
that it is also uncertain that any improvement and growth would favorably
affect the market price of the Shares. Accordingly, the Continuing
Shareholders believe that offering Public Stockholders the opportunity to
select, by a majority of the Public Shareholders of each class tendering
their Shares pursuant to the Offer, the present receipt of $7.875 per
Share in cash instead of a speculative future return is appropriate."
6. The first paragraph under "The Tender Offer - 2. Acceptance for Payment
and Payment for Shares" is hereby replaced in its entirety by inserting the
following in lieu thereof:
"Upon the terms and subject to the conditions of the Merger
Agreement and the conditions of the Offer (including, if the Offer is
extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment, and will pay for promptly
after the Expiration Date, including any extension thereof all Shares
validly tendered and not properly withdrawn in accordance with "The Tender
Offer - 9. Conditions to the Offer." Subject to applicable rules of the
Commission, Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Shares in order to comply in whole or in part
with any applicable law."
7. The introductory clause to the first paragraph under "The Tender Offer
- - 9. Conditions to the Offer" is hereby replaced in its entirety by inserting
the following in lieu thereof:
"Notwithstanding any other provision of the Offer, Purchaser shall
not be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer and may extend
the Expiration Date, if (i) the condition (the "Minimum Condition") that a
number of Shares which constitutes at least a majority of each class of
the Shares outstanding on a fully
12
diluted basis not then owned, beneficially or of record, by Purchaser
shall have been tendered shall not have been satisfied, (ii) Purchaser
shall not have obtained sufficient financing to enable it to purchase the
Shares to be purchased by it and to pay fees and expenses of the Offer and
the Merger, including, without limitation, fees and expenses incurred or
to be incurred in connection with the financing (the "Financing
Condition") or (iii) at any time on or after the date of the Merger
Agreement, and on or prior to the Expiration Date, any of the following
conditions shall exist:"
8. The consummation of the Offer by Purchaser is subject to certain
conditions which are discussed under the caption "The Tender Offer - 9.
Conditions to the Offer." One of the conditions is that there shall not be
pending any action or proceeding challenging the Offer or the Merger before any
court. The Company has announced that an action has been filed in Delaware
Chancery Court challenging the Offer and the Merger. The Company has stated that
it intends to proceed with the Merger and Purchaser has no current intention to
terminate the Offer. However, the failure of Purchaser to exercise its right to
terminate the Offer is not a waiver of such right to terminate.
9. The item (c) in the first paragraph under "The Tender Offer - 9.
Conditions to the Offer" is hereby replaced in its entirety by inserting the
following in lieu thereof:
"(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect, which is
defined in the Merger Agreement to mean a change or effect
that is materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent
liabilities) or prospects of the Company. The foregoing
description of the definition of the term "Material Adverse
Effect" is a summary thereof and is qualified in its
entirely by reference to the full text of the Merger
Agreement, a copy of which is filed as an Exhibit to the
Schedule 14D-1."
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The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depository at one of its
addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON
SHAREHOLDER SERVICES, LLC
--------------------------
Facsimile Transmission: (201) 296-4293
(For Eligible Institutions Only)
Confirmation Facsimile Only: (201) 296-4860
------------------------
By Mail: By Overnight Delivery: By Hand:
-------- ---------------------- --------
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3301 85 Challenger Road-Mail 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Drop-Reorg New York, NY 10271
Attn: Reorganization Ridgefield Park, NJ 07660 Attn: Reorganization
Department Attn: Reorganization Department
Department
Any questions or requests for assistance or additional copies of this
Supplement, the Offer to Purchase, the original or the revised Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Information Agent at its telephone numbers and location listed below. You may
also contact your broker, dealer, commercial bank or trust company or nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
46th Floor
New York, NY 10005
or
CALL TOLL FREE: (800) 937-5449 or (212) 936-5100
The Dealer Manager for the Offer is:
FIRST UNION CAPITAL MARKETS CORP.
901 East Byrd Street
3rd Floor
Richmond, VA 23219
(800) 532-2916
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