SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1 TO SCHEDULE TO-I/13E-3
(Rules 13e-3 and 13e-4)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
CURTIS INTERNATIONAL LTD.
(Name of Subject Company (Issuer))
CURTIS INTERNATIONAL LTD.
Aaron Herzog
Jacob Herzog
(Names of Filing Persons)
Common Stock, No Par Value
(Title of Class of Securities)
231461 10 4
(CUSIP Number of Class of Securities)
Aaron Herzog
Chief Executive Officer
315 Attwell Drive
Etobicoke, Ontario M9W 5C1
(416) 674-2123
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of filing person)
Copy to:
Arthus S. Marcus, Esq.
Gersten, Savage & Kaplowitz, LLP
101 East 52nd Street
New York, New York 10022
(212)752-9700
CALCULATION OF FILING FEE
-------------------------
Transaction valuation* Amount of filing fee**
$1,460,116 $292.02
---------------------- --------------------
* For purposes of calculating amount of filing fee only. This calculation
assumes the purchase of all outstanding shares of common stock, no par value, of
Curtis International Ltd. not currently owned by the principal shareholders and
primary officers of Curtis International Ltd. at a purchase price of $0.80 per
share, net to the seller in cash, without interest. This calculation also
assumes that the holders of the 1,825,145 shares of common stock tendered for
hereby will agree to sell such shares.
** The amount of the filing fee calculated in accordance with Regulation
2400.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of
one percent of the value of the transaction.
|X| Check 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: $292.02 Filing party: Curtis International Ltd.
Form or Registration No.: SC TO-I/13E-3 Date filed: May 4, 2001
|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
|_| third party tender offer subject to Rule 14d-1.
|X| issuer tender offer subject to Rule 13e-4.
|X| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer. |_|
INTRODUCTORY STATEMENT
This amendment (the "Amendment") to the Schedule TO-I/13E-3 (the
"Statement") supplements the Tender Offer and Going Private Transaction
Statement on Schedule TO-I/13E-3 filed on May 4, 2001 relating to the tender
offer by Curtis International Ltd., an Ontario corporation (the "Company" or the
"Issuer," as appropriate), to purchase all its outstanding shares of common
stock, no par value per share (the "Common Shares"), not currently held by Aaron
and Jacob Herzog, the principal shareholders and primary officers of the
Company, the A&E Herzog Family Trust and the Herzog Family Trust (collectively,
the "Herzog Group") to be followed by the Company's going-private transaction
(the "Transaction"). The Herzog Group owns approximately sixty-seven percent
(67%) of the issued and outstanding Common Shares. The Common Shares are
tendered for pursuant to the tender offer (the "Tender Offer") at a purchase
price of $0.80 per Common Share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated May 1, 2001 and the Amendment thereof dated May 30, 2001 (collectively,
the "Offer to Purchase"), a copy of which is filed herewith as Exhibit (A)(1)
and in the related Letter of Transmittal, previously filed as Exhibit (A)(4) to
the Offer to Purchase (which together with any amendments or supplements
thereto, collectively constitute the "Offer"). Unless otherwise specifically
stated, all monetary figures refer to US Dollars.
The information in the Offer to Purchase, including all schedules and
annexes thereto, is hereby expressly incorporated herein by reference in
response to all the Items of this Statement, except as otherwise set forth
below.
ITEM 1. SUMMARY TERM SHEET.
The information set forth in the Offer to Purchase under the caption "Summary
Term Sheet" is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
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(a) Name and Address. The name of the Company is Curtis International Ltd.,
which is the issuer of the Common Shares subject to the Tender Offer. The
Company's principal executive offices are located at 315 Attwell Drive,
Etobicoke, Ontario, M9W 5C1. The telephone number for the Company is (416)
674-2123. Reference is made to the information set forth in the Offer to
Purchase under the caption "THE OFFER--7. Certain Information Concerning Curtis
International Ltd.," which information is incorporated herein by reference.
(b) Securities. The securities which are the subject of the Tender Offer consist
of the Company's common stock, no par value (the "Common Shares"). As of April
30, 2001, there were 5,263,245 Common Shares outstanding, of which the Herzog
Group owns 3,548,000. Reference is made to the information set forth on the
cover page of the Offer to Purchase and in the Offer to Purchase under the
caption "INTRODUCTION," which information is incorporated herein by reference.
(c) Trading Market and Price. The Common Shares are traded in the Nasdaq Small
Cap Market under the symbol "CURT." Trading in the Common Shares has been
limited and sporadic. The Common Shares are not listed for trading on any
exchange. Reference is made to the information set forth in the Offer to
Purchase under the captions "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer" and "THE OFFER--5. Price Range of the Common Shares; Dividends," which
information is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) Name and Address. This is an offer tendered by the Company. The address of
the Company is 315 Attwell Drive, Etobicoke, Ontario, M9W 5C1. The information
set forth in the Offer to Purchase under the caption "THE OFFER--7. Certain
Information Concerning Curtis International Ltd." is incorporated herein by
reference.
ITEM 4. TERMS OF THE TRANSACTION.
The information set forth in the Offer to Purchase under the captions
"INTRODUCTION," "SPECIAL FACTORS --2. Purpose and Fairness of the Offer,"
"SPECIAL FACTORS-- 3. Interests of Certain Persons in the Offer," "SPECIAL
FACTORS-4. Material Federal Income Tax Consequences," "SPECIAL FACTORS - 8.
Certain Effects of the Transaction," "THE OFFER--1. Terms of the Offer," "THE
OFFER--2. Acceptance for Payment and Payment," "THE OFFER--3. Procedures for
Accepting the Offer and Tendering the Common Shares," "THE OFFER--4. Withdrawal
Rights," "THE OFFER--8. Conditions to the Offer" and "THE OFFER--9. Legal
Matters" is incorporated herein by reference.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(e) Agreements involving the subject company's securities. Aaron Herzog, the
President and Chief Executive Officer of the Company, Jacob Herzog, its
Principal Accounting Officer, Treasurer and Secretary, the A&E Herzog Family
Trust and the Herzog Family Trust collectively own approximately sixty-seven
percent (67%) of the Common Shares. While the members of the Herzog Group have
executed no formal agreement with respect to the Tender Offer in particular, the
members of the Herzog Group are parties to a voting agreement specifying that
they will vote their shares together.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) Purposes. The information set forth in the Offer to Purchase under the
caption "INTRODUCTION" and "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer" is incorporated herein by reference.
(b) Use of Securities. The information set forth in the Offer to Purchase under
the caption "SPECIAL FACTORS-8. Certain Effects of the Transaction" is
incorporated herein by reference.
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(c) Plans. The information set forth in the Offer to Purchase under the captions
"SPECIAL FACTORS--1. Operating History; Payment of Dividends and Redemption of
Common Shares Uncertain", "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer" and "SPECIAL FACTORS-8. Certain Effects of the Transaction" is
incorporated herein by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Source of Funds. The information set forth in the Offer to Purchase under
the caption "SPECIAL FACTORS-5. Financing of the Offer" is incorporated herein
by reference.
(b) Conditions. Not applicable.
(d) Borrowed Funds. Not applicable.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) Securities Ownership. See Item 8 (b) below.
(b) Securities Transactions. The information set forth in the Offer to Purchase
under the caption "SPECIAL FACTORS-3. Interests of Certain Persons in the
Offer", "SPECIAL FACTORS-6. Beneficial Ownership of the Common Shares", "SPECIAL
FACTORS-7. Transactions and Arrangements Concerning the Common Shares" and "THE
OFFER--7. Certain Information Concerning Curtis International Ltd." is
incorporated herein by reference.
ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) Solicitations or Recommendations. The information set forth in the Offer to
Purchase under the captions "THE OFFER--10. Fees and Expenses" is incorporated
herein by reference.
ITEM 10. FINANCIAL STATEMENTS.
The financial statements contained in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission (the "Commission") on March
27, 2000, the Form 10 K/A filed with the Commission on October 20, 2000 and the
Company's Quarterly Reports on Form 10-Q filed with the Commission on January
16, 2001 and April 16, 2001 are incorporated herein by reference.
ITEM 11. ADDITIONAL INFORMATION.
(a) Agreements, Regulatory Requirements and Legal Proceedings.
(1) None other than previously disclosed.
(2) See (3) below.
(3) The information set forth in the Offer to Purchase under the caption
"THE OFFER--9. Legal Matters" is incorporated herein by reference.
(4) Not applicable.
(5) Not applicable.
(b) Other Material Information. The information set forth in the Offer to
Purchase, a copy of which is attached hereto as Exhibit (A)(1) and the Letter of
Transmittal, previously filed as Exhibit (A)(4), is incorporated herein by
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reference.
ITEM 12. EXHIBITS.
(A)(1) Offer to Purchase dated May 30, 2001.
(A)(4) Form of Letter of Transmittal for Common Shares.*
(A)(5) Form of Notice of Guaranteed Delivery.*
(A)(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(A)(7) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
* Previously filed.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
The Transaction constitutes a "going-private" transaction within the meaning of
Rule 13e-3. As such, the following sets forth that information required by
Schedule 13E-3 that has not already been set forth in Items 1-12 of the Schedule
TO above. In addition, the following sets forth the information required by
Schedule 13E-3 with respect to Messrs. Herzog, who may be deemed to be engaged
in the Transaction by virtue of their status as affiliates of the Company,
insofar as such information is distinct or different from that applicable to the
Company. The information set forth in the Offer to Purchase is incorporated
herein by reference to the items required by Schedule 13E-3.
ITEM 2 OF SCHEDULE 13E-3. SUBJECT COMPANY INFORMATION
(d) Dividends. The information is set forth in the Offer to Purchase under the
Caption "THE OFFER--5. Price Range of the Common Shares; Dividends" is
incorporated herein by reference.
(e) Prior Public Offerings. The Company completed its initial public offering
pursuant to a registration statement on Form SB-2 that the Commission declared
effective on November 12, 1998. The Company sold 1,673,145 Common Shares for the
price of Five US Dollars per share ($5.00) for aggregate proceeds of $8,365,145
(f) Prior Stock Purchases. The information set forth in "SPECIAL FACTORS--7.
Transactions and Arrangements Concerning the Common Shares" is hereby
incorporated by reference.
ITEM 3 OF SCHEDULE 13E-3. IDENTITY AND BACKGROUND OF FILING PERSON
(a) Name and address. Aaron and Jacob Herzog (the "Affiliates") are the
President, CEO and Director as well as the Chairman, Treasurer and Secretary,
respectively, of the Company. Their address is c/o the Company's principal
executive office, at 315 Attwell Drive, Etobicoke, Ontario, M9W 5C1. The
telephone number for the Company is (416) 674-2123. Reference is made to the
information set forth in the Offer to Purchase under the caption "THE OFFER--7.
Certain Information Concerning Curtis International Ltd.," which information is
incorporated herein by reference
(b) Business and Background of Entities. Not applicable.
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(c) Business and Background of Natural Persons. Not applicable to the Company.
During the last five years, neither of the Affiliates has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
nor was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding 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.
Both the Affiliates are citizens of Canada.
The section entitled "THE OFFER - Certain Information Concerning Curtis
International Ltd." is hereby incorporated by reference with respect to the
Affiliates.
ITEM 4 OF SCHEDULE 13E-3 TERMS OF THE TRANSACTION
(c) Different Terms. None.
(d) Appraisal Rights. Shareholders who do not accept the Company's Offer will be
granted appraisal rights as provided for under Ontario law. See "SPECIAL
FACTORS--8. Certain Effects of the Transaction."
(e) Provisions for Unaffiliated Security Holders. Unaffiliated security holders
have access to the Company's public filings on the Commission's Web site at
http://www.sec.gov/edgar/searchedgar/formpick.htm. No other information or
services are provided to the unaffiliated security holders. Unaffiliated
security holders are asked to contact MacKenzie Partners, Inc., the Company's
Information Agent, collect at (212) 929-5500 or Toll-Free at (800) 322-2885.
(f) Eligibility for Listing or Trading. Not applicable.
ITEM 5 OF SCHEDULE 13E-3 PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS, AND
AGREEMENTS
(a) Transactions. See (c) below.
(b) Significant Corporate Events. See (c) below.
(c) Negotiations or Contracts. The information set forth in the Offer to
Purchase under the caption "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer" and "SPECIAL FACTORS-3. Interests of Certain Persons in the Offer" is
incorporated herein by reference.
(e) Agreements Involving the Subject Company's Securities. The Affiliates are
parties to a voting trust agreement stipulating that they shall vote their
Common Shares together.
ITEM 6. Of SCHEDULE 13E-3 PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(b) Use of Securities. The information set forth in the Offer to Purchase under
the caption "SPECIAL FACTORS-8. Certain Effects of the Transaction" is
incorporated herein by reference with respect to the Affiliates.
(c) Plans. The information set forth in the Offer to Purchase under the captions
"SPECIAL FACTORS--1. Operating History; Payment of Dividends and Redemption of
Common Shares Uncertain", "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer" and "SPECIAL FACTORS-8. Certain Effects of the Transaction" is
incorporated herein by reference with respect to the Affiliates.
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ITEM 7 OF SCHEDULE 13E-3. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a) Purposes. The information set forth in the Offer to Purchase under the
captions "INTRODUCTION," the "Summary Term Sheet" and "SPECIAL FACTORS -- 2.
Purpose and Fairness of the Offer" is incorporated herein by reference.
(b) Alternatives. Not applicable.
(c) Reasons. The information set forth in the Offer to Purchase under the
caption "SPECIAL FACTORS -- 2. Purpose and Fairness of the Offer" is
incorporated herein by reference.
(d) Effects. The information set forth in the Offer to Purchase under the
captions "SPECIAL FACTORS--4. Material Federal Income Tax Consequences" and
"SPECIAL FACTORS--8. Certain Effects of the Transaction" is incorporated herein
by reference.
ITEM 8 OF SCHEDULE 13E-3. FAIRNESS OF THE GOING-PRIVATE TRANSACTION
(a) Fairness. See (b) below.
(b) Factors Considered in Determining Fairness. The information set forth in the
Offer to Purchase under the captions "SPECIAL FACTORS--2. Purpose and Fairness
of the Offer" is incorporated herein by reference.
(c) Approval of Security Holders. Not applicable.
(d) Unaffiliated Representative. At the request of David Ben-David, the
Company's independent Director, the Board of Directors, including the
Affiliates, has retained Rodman & Renshaw, Inc. ("Rodman") to produce a Fairness
Opinion to be delivered to all shareholders, which is attached as Exhibit (A)(2)
to the Statement.
(e) Approval of Directors. The Transaction has been approved by Board, including
the Company's non-employee director and the Affiliates.
(f) Other Offers. Not applicable.
ITEM 9 OF SCHEDULE 13E-3. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
(a) Report, Opinion or Appraisal. The Company has received a Fairness Opinion
from Rodman on the fairness of the Transaction, which Fairness Opinion is
attached to the Statement as Exhibit (A)(2). The Fairness Opinion is based upon
analysis Rodman performed, which analysis (the "Report") is filed herewith as
Exhibit (A)(8). In addition, the information set forth in the Offer to Purchase
under "SPECIAL FACTORS" is incorporated herein by reference.
(b) Preparer and Summary of the Report, Opinion or Appraisal.
(1) The identity of the preparer of the Fairness Opinion and the Report
is Rodman & Renshaw, Inc.
(2) Rodman, an investment bank, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations
for estate, corporate and other purposes.
(3) The method the Company used to select Rodman was a resolution
adopted by the Company's Board of Directors after discussions with
several investment banks.
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(4) Inapplicable with respect to prior or contemplated material
relationships. Rodman is to be paid a fee of $38,500 for its
services.
(5) The price at which the Company is offering to purchase its
outstanding Common Shares (the "Common Share Offer Price") was
determined by the Company.
(6) Summary of the Fairness Opinion:
(i) The Company did not place any limitations on Rodman on the scope
of the investigation.
(ii) The instructions given Rodman by the Company consisted of
informing the Company's Board of Directors whether, in Rodman's
opinion, $0.80 per Common Share is a fair price for the Company to
offer its shareholders.
(iii) The procedures followed by Rodman were to examine any
information in the public domain that Rodman deemed relevant to its
task. In addition, where information on the Company is concerned,
Rodman accepted as true and correct the information made available
to it by the Company or derived from other sources, and relied on
the representations made to Rodman by the Company's senior
management that, to the best knowledge of management, nothing has
occurred that would render the information provided to Rodman
incomplete, false or misleading.
(iv) Rodman's bases for and methods of arriving at the conclusion
were to review any financial information deemed relevant to the
discharge of its responsibilities, including the Offer to Purchase,
the market price of the Company's Common Shares in comparison with
that of similar companies, the listing status of the Company's
Common Shares and the impact of a potential delisting from Nasdaq,
the performance of the Company and the terms of recent acquisitions
of a similar nature. In addition, Rodman, discussed anything it
deemed pertinent with management of the Company, assessed general
market and economic conditions and, finally, reviewed any other
information it deemed appropriate.
(v) Based on the foregoing, Rodman found that $0.80 is a fair price
for the Company to offer its shareholders, but made no
recommendations in this or any other regard.
(c) Availability of Documents. The Fairness Opinion is filed with the Statement
as Exhibit (A)(2) and the Report is filed herewith as Exhibit (A)(8).
ITEM 10 OF SCHEDULE 13E-3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(c) Expenses. The Information contained in the Offer to Purchase under the
caption "THE OFFER--10. Fees and Expenses" is incorporated herein by reference.
ITEM 12 OF SCHEDULE 13E-3. THE SOLICITATION OR RECOMMENDATION
(d) Intent to Tender or Vote in a Going-Private Transaction. The information set
forth in the Offer to Purchase under the caption "SPECIAL FACTORS--3. Interest
of Certain Persons in the Offer" is incorporated herein by reference.
(e) Recommendations of Others. No member of the Herzog Group has made a
recommendation with respect to the Offer.
ITEM 14 OF SCHEDULE 13E-3. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR
USED
(b) Employees and Corporate Assets. Aaron and Jacob Herzog, the members of the
Herzog Group, are the Company's principal officers. They will be responsible for
the Company's role in the Offer. The Company will be responsible for the
expenses incurred in connection with the Tender Offer.
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ITEM 16 OF SCHEDULE 13E-3 EXHIBITS
(c) (A)(2) Form of Fairness Opinion
(A)(8) Form of Report
(f) (A)(3) Rights of Dissenting Shareholders under the Ontario Business
Corporation Act*
* Previously filed.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this Schedule TO-I/13E-3 is true, complete and correct.
Curtis International Ltd.
/s/ Aaron Herzog
-----------------------------
Aaron Herzog
Chief Executive Officer
Date: May 30, 2001
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this Schedule 13E-3 is true, complete and correct.
/s/ Aaron Herzog
-----------------------------
Aaron Herzog
Chief Executive Officer
/s/ Jacob Herzog
-----------------------------
Jacob Herzog
Chairman of the Board
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EXHIBIT(A)(1)
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF CURTIS INTERNATIONAL LTD.
COMMON SHARES AT $0.80 NET PER SHARE IN CASH
BY
CURTIS INTERNATIONAL LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 4:00 P.M., EASTERN STANDARD
TIME, ON JUNE 15, 2001, UNLESS EXTENDED. A SUMMARY OF THE PRINCIPAL TERMS OF THE
OFFER APPEARS ON PAGES 3 THROUGH 6 OF THIS OFFER TO PURCHASE. YOU SHOULD READ
THIS ENTIRE DOCUMENT CAREFULLY BEFORE DECIDING WHETHER TO TENDER YOUR SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURE CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
IMPORTANT
Any shareholder who would like to tender all or any portion of his or her
shares of common stock of Curtis International Ltd., no par value (the "Common
Shares") should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it (or such facsimile) and any other required
documents to the Continental Stock Transfer & Trust Company (referred to herein
as the "Depositary"), and either deliver the certificates for such Common Shares
and any other required documents to the Depositary or tender such Common Shares
pursuant to the procedure for book entry transfer set forth in "THE OFFER--3.
Procedures for Accepting the Offer and Tendering Shares," or (2) request his or
her broker, dealer, commercial bank, trust company or other nominee to effect
the transaction for him or her. Shareholders having Common Shares registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact the broker, dealer, commercial bank, trust company or other nominee
if they desire to tender their Common Shares.
A shareholder who desires to tender the Common Shares and whose
certificates for the Common Shares are not immediately available, or who cannot
deliver the certificates for Common Shares and all other required documents to
the Depositary on or prior to the expiration date, or who cannot comply with the
procedure for book entry transfer on a timely basis, may tender their Common
Shares by following the procedures for guaranteed delivery set forth in "THE
OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares."
Questions and requests for assistance may be directed to the Company at
the address and telephone number set forth on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal
and the Notice of Guaranteed Delivery may also be obtained from the Company.
May 30, 2001
TABLE OF CONTENTS
SUMMARY TERM SHEET ........................................................ 3
INTRODUCTION .............................................................. 7
SPECIAL FACTORS ........................................................... 7
1. OPERATING HISTORY; PAYMENT OF DIVIDENDS AND REDEMPTION OF COMMON
SHARES UNCERTAIN ................................................ 7
2. PURPOSE AND FAIRNESS OF THE OFFER ................................... 7
3. INTERESTS OF CERTAIN PERSONS IN THE OFFER ........................... 15
4. MATERIAL FEDERAL INCOME TAX CONSEQUENCES ............................ 16
5. FINANCING OF THE OFFER .............................................. 18
6. BENEFICIAL OWNERSHIP OF THE COMMON SHARES ........................... 18
7. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE COMMON SHARES .......... 18
8. CERTAIN EFFECTS OF THE TRANSACTION .................................. 19
THE OFFER ................................................................. 20
1. TERMS OF THE OFFER .................................................. 20
2. ACCEPTANCE FOR PAYMENT AND PAYMENT .................................. 21
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING THE COMMON SHARES .. 22
4. WITHDRAWAL RIGHTS ................................................... 24
5. PRICE RANGE OF THE COMMON SHARES; DIVIDENDS ......................... 25
6. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE COMMON SHARES
AND EXCHANGE ACT REGISTRATION ................................... 26
7. CERTAIN INFORMATION CONCERNING CURTIS INTERNATIONAL LTD ............. 26
8. CONDITIONS TO THE OFFER ............................................. 28
9. LEGAL MATTERS ....................................................... 29
10. FEES AND EXPENSES ................................................... 29
11. MISCELLANEOUS ....................................................... 30
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SUMMARY TERM SHEET
Curtis International Ltd. is offering to purchase all the outstanding
shares of its common stock (the "Common Shares") for $0.80 net per share, in
cash, without interest. The following are some of the questions you, as one of
our shareholders, may have and answers to those questions. We urge you to read
this Offer to Purchase carefully because the information in this summary is not
complete. Additional important information is contained in the remainder of this
Offer to Purchase and the accompanying Letter of Transmittal.
Who Is Offering to Buy My Shares?
We are making an offer to buy your shares of the Common Shares. See "THE
OFFER--1. Terms of the Offer."
What Are The Classes And Amounts of Securities Sought in The Offer?
We are offering to buy all of the outstanding shares of the Common Shares. See
"THE OFFER--1. Terms of the Offer".
How Much Are You Offering to Pay? What Is the Form of Payment? Will I Have to
Pay Any Fees or Commissions?
We are offering to pay $0.80 per share for the Common Shares, net to you in cash
without interest. If you are the record owner of your Common Shares and you
tender them to us in the offer (which we refer to as the "Offer"), you will not
have to pay brokerage fees or commissions. If you own your Common Shares through
a broker or other nominee, and your broker tenders your Common Shares on your
behalf, your broker or nominee may charge you a fee for doing so. You should
consult with your broker or nominee to determine whether any charges will apply.
See "INTRODUCTION".
What Is The Market Value of The Common Shares?
The Common Shares are traded in the Nasdaq Small Cap Market. See "THE OFFER--5.
Price Range of the Common Shares" for the bid history of the Common Shares. We
believe that the trading in the Common Shares has been limited and sporadic. On
April 27, 2001, the bid price for Common Shares was $0.44 per share. See
"SPECIAL FACTORS--2. Purpose and Fairness of the Offer" and "THE OFFER--5. Price
Range of the Common Shares".
Do You Have The Financial Resources to Make Payment?
We will need approximately $1.37 million to purchase all the outstanding Common
Shares, excluding the Common Shares beneficially owned by Aaron and Jacob
Herzog, our Chief Executive Officer and President and our Chairman and Principal
Accounting Officer, respectively, the A&E Herzog Family Trust and the Herzog
Family Trust (collectively, the "Herzog Group"), and to pay all the expenses
involved in the Offer. We intend to pay the purchase price and related expenses
using cash and other liquid assets owned by us. See "SPECIAL FACTORS--3.
Interests of Certain Persons in the Offer" and "SPECIAL FACTORS--5. Financing of
the Offer."
Is Your Financial Condition Relevant to My Decision Whether to Tender in The
Offer?
Because tendering your Common Shares in the Offer will end your ownership
interest in us, we believe that our financial condition is relevant to your
determination of whether the price at which the Common Shares are offered (the
"Common Share Offer Price") is fair and whether you should tender in the Offer.
The financial statements for us are included in the reports we have filed with
the Securities and Exchange Commission (the "Commission"). You can obtain copies
of these reports in the manner described in "The Offer--7. Certain Information
Concerning the Company."
How Long Do I Have to Decide Whether to Tender in The Offer?
You may tender your Common Shares anytime prior to the expiration of the Offer.
The Offer will expire at 4:00 p.m., Eastern Standard Time, on June 15, 2001,
unless extended in our sole discretion. See "THE OFFER--3. Procedures for
Accepting the Offer and Tendering Common Shares."
Can The Offer Be Extended, And If So Under What Circumstances?
Yes. We have the right to extend the Offer deadline at any time by giving
written notice to Continental Stock Transfer & Trust Company ("Continental"),
the depositary for the Offer. See "THE OFFER--1. Terms of the Offer".
3
How Will I Be Notified If The Offer Is Extended?
If we decide to extend the offering period, we will publicly announce the
extension before 4:00 p.m., Eastern Standard Time, on the next business day
after the previously scheduled expiration date. See "THE OFFER--1. Terms of the
Offer."
What Will Happen to Common Shares Not Tendered in The Offer?
Common Shares not tendered in the Offer will remain outstanding, at least for a
certain time. However, the trading market for any Common Shares not tendered may
be even more limited than it currently is, particularly because of the fact that
we may soon be delisted from the Nasdaq Small Cap Market. In addition, the
Herzog Group intends to acquire all the outstanding Common Shares by way of a
merger (the "Merger") which will result in the creation of a new company
("NewCo") immediately prior to consummating a so-called going-private
transaction (the "Transaction"), all as further described below. The Merger and
the Transaction are conceptually discrete events, but the interim period between
them will be so short as to the render the distinction meaningless.
If you do not accept the Offer your Common Shares will, after having been
converted into shares of preferred stock of NewCo as described below, be
redeemed at the Common Share Offer Price immediately following the Merger.
However, shareholders would be subject to a 25% (at minimum) Canadian
withholding tax on such redemption and it would be the responsibility of each
non-Canadian resident to make the requisite filings and apply for a refund of
such withholding tax (if applicable). If you do not approve the Merger and the
Transaction, you will be accorded rights of appraisal as provided for under the
Ontario Business Corporations Act (the "Ontario Act"). We cannot give any
assurance as to what a court of competent jurisdiction before which the matter
would be heard would award you as a fair price for your Common Shares or whether
it would be more or less than the Common Share Offer Price, though the Fairness
Opinion (the "Fairness Opinion") rendered by Rodman & Renshaw, Inc. ("Rodman")
indicates that the Common Share Offer Price is indeed a fair price. If you
sought appraisal rights, you would be responsible for the costs of the
litigation, unless otherwise determined by the Ontario court of competent
jurisdiction. In addition, you would be subject to the above-mentioned 25% (at
minimum) withholding tax. If you are eligible to receive the refund, you will be
required to take certain steps, as more fully described herein. The procedure
will likely not be free of cost, and your inconvenience may be considerable.
The fact that only Common Shares tendered through the Offer are exempt
from this withholding tax contributed to our decision to engage in the Offer, in
that it increases the benefit to our shareholders considerably. See "SPECIAL
FACTORS-8. Certain Effects of the Transaction."
How Will the Merger and The Transaction Be Effectuated?
The Herzog Group intends to form another company, the tentative name of which is
Curtis Acquisition Corp (which we refer to as the "Acquisition Corp."). The
Herzog Group will own all the shares of the Acquisition Corp. Promptly after the
expiration of the Offer, the Common Shares owned by the Herzog Group will be
reorganized into a new class of shares. These shares will have features somewhat
different from the Common Shares. After the reorganization has occurred, we will
consummate the Merger, resulting in the creation of NewCo, and the cessation of
Curtis International Ltd. and the Acquisition Corp. as separate entities. As a
result of the current concentration of ownership, we do not anticipate requiring
the affirmative vote of the Common Shares not held by the Herzog Group in order
to effectuate the Merger.
After the Merger has been completed, NewCo will have three classes of
shares: any untendered Common Shares, which will be converted into redeemable,
non-voting shares of preferred stock of NewCo (the "Preferred Shares") in the
Merger; the Herzog Group's shares that were previously Common Shares, and; the
Herzog Group's shares that were previously shares in the Acquisition Corp.
The Transaction will be completed by the redemption of the Preferred
Shares at the Common Share Offer Price. The Transaction will occur promptly
after the Merger, and will not be subject to a vote of shareholders. The
Preferred Shares will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), but will be issued under an exemption therefrom
to be found in Section 4(2) of the Securities Act. Consequently, your ability
4
to sell or transfer the Preferred Shares will be restricted. However, the period
during which the Preferred Shares would exist is so short as to render such
restriction inconsequential.
Do I have the right to vote on the Merger?
Yes, you do. However, it will not in any way affect the final result of the
Merger or the Transaction.
We are an Ontario company incorporated under the Ontario Act. The Merger
will require the affirmative vote of sixty-six and two thirds percent (66b%) of
the outstanding Common Shares. As of the date hereof, the Herzog Group owns or
controls over sixty-seven percent (67%) of the outstanding Common Shares and
will tender none of their Common Shares through the Offer. Consequently, you may
retain your Common Shares, and you may cast them against the resolution to
approve the Merger. However, such negative vote will not affect approval of the
Merger or the Transaction.
We are stating this clearly because we believe it important that you
understand the reason for the Offer. The Herzog Group could, by virtue of its
ownership of the required 66b% of the outstanding Common Shares as provided for
under the Ontario Act, have proceeded directly with the Merger and the
Transaction. From a legal perspective, the Offer is completely incidental
thereto. The net effect of a decision to engage in no more than the Merger and
the Transaction would have been two-fold; the Herzog Group would have faced far
lower costs and you would, absent the Offer, have been afforded no premium over
the market price of the Common Shares. In addition, there would have been no way
for you to avoid being subject to the Canadian withholding tax, to the extent
such tax is applicable to you. The purpose of the Offer is to provide you with a
fair price for your Common Shares and to avoid the Canadian withholding tax.
Are You Making Any Recommendation About The Offer?
No. We express no opinion and remain neutral with respect to whether you should
tender Common Shares in response to the Offer. You should determine whether or
not to accept the Offer based upon your own assessment of current market value,
liquidity needs, investment objectives and certain other factors, each as more
fully described below. See "SPECIAL FACTORS--2. Purpose and Fairness of the
Offer".
Has the Board of Directors Approved the Offer?
Yes. The Board has accepted and acted upon Rodman's opinion that the Common
Share Offering Price is fair to our shareholders.
What Are the Most Significant Conditions to the Offer?
We are not required to complete the Offer unless the conditions to the Offer are
met. A significant condition is the absence of any litigation, proceedings or
other events that would prohibit, prevent, restrict or delay consummation of the
Offer. Other important conditions to the Offer are described in "THE OFFER--8.
Conditions to the Offer." We may waive any of these conditions.
The Offer to Purchase as filed on May 4, 2001 included the condition that
there be 300 or fewer holders of record of the Common Shares. We have determined
to eliminate this condition from consideration due to the varying definitions of
the term "holder of record" and the resulting potential for confusion among our
shareholders, as well as with a view to establishing clearly that any condition
referred to herein is waivable. See "THE OFFER--8. Conditions to the Offer."
How Do I Tender My Common Shares?
To tender your Common Shares, you must do one of the following:
(1) If you are a record holder (i.e., a stock certificate has been issued to you
in your own name), you must complete and sign the applicable enclosed Letter(s)
of Transmittal and send it with your stock certificate to Continental, or follow
the procedures described in this Offer to Purchase for book-entry transfer in
"THE OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares."
These materials must reach Continental before the Offer expires. Detailed
instructions are contained in the Letter of Transmittal and in "THE OFFER--3.
Procedures for Accepting the Offer and Tendering Common Shares."
5
(2) If you are a record holder, but your stock certificate is not available, or
you cannot deliver it to Continental before the Offer expires, you may be able
to tender your Common Shares using the enclosed Notice of Guaranteed Delivery.
Please call Continental at 1-(212) 509-4000 for assistance.
(3) If you hold your Common Shares through a broker, bank or other nominee, you
should contact your nominee and instruct them to tender your Common Shares. See
"THE OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares".
Until What Time Can I Withdraw Previously Tendered Common Shares?
You can withdraw previously tendered Common Shares until 4:00 p.m., Eastern
Standard Time, June 15, 2001, unless we extend the Offer. If we extend the
Offer, you may withdraw previously tendered Common Shares until the end of the
extension period. In addition, your Common Shares may be withdrawn by the
fortieth business day after the commencement date of the Offer if the Common
Shares have not been accepted for payment. See "THE OFFER--4. Withdrawal
Rights."
How Do I Withdraw Previously Tendered Common Shares?
You can withdraw previously tendered Common Shares by instructing Continental.
If you tendered your Common Shares by giving instructions to a broker or bank,
you must instruct the broker or bank to arrange for a withdrawal of your Common
Shares. See "THE OFFER--4. Withdrawal Rights".
To Whom Can I Talk If I Have Questions About The Tender Offer?
You can call MacKenzie Partners, Inc., our information agent for the Offer, who
can be reached Toll-Free at (800) 322-2885 or collect at (212) 929-5500. You may
also access our public filings on the Commission's Web site at
http://www.sec.gov/edgar/searchedgar/formpick.htm.
6
INTRODUCTION
Curtis International Ltd., an Ontario corporation (the "Company") hereby
offers to purchase all outstanding shares of its Common Shares, no par value
(the "Common Shares"), at a purchase price of $0.80 per share, net to the
selling shareholder in cash, without interest thereon (the "Common Share Offer
Price"), on the terms and subject to the conditions set forth in this Offer to
Purchase and in the Letter of Transmittal (which, as amended or supplemented
from time to time, together constitute the "Offer"). The Offer is being made
prior to a merger (the "Merger") and a going-private transaction (the
Transaction"), as more fully described below.
If you are the record owner of your Common Shares and you tender your
Common Shares to the Company in the Offer, you will not have to pay brokerage
fees or commissions. If you own your Common Shares through a broker or other
nominee, and your broker tenders your Common Shares on your behalf, your broker
or nominee may charge you a fee for doing so. You should consult with your
broker or nominee to determine whether any charges will apply. Except as
described in Instruction 6 of the Letter of Transmittal, you will not be
required to pay stock transfer taxes on the purchase of Common Shares in the
Offer. However, if you do not complete and sign the Substitute Form W-9 that is
included in the Letter of Transmittal, you may be subject to a required backup
federal income tax withholding of 31% of the gross proceeds payable to you. See
"THE OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares".
The Company will pay all charges and expenses of Continental as depositary (the
"Depositary") incurred in connection with the Offer. See "THE OFFER--3.
Procedures for Accepting the Offer and Tendering Common Shares."
The Offer will expire at 4:00 p.m., Eastern Standard Time, on June 15,
2001, unless extended in the Company's sole discretion.
This Offer to Purchase and the Letter of Transmittal contain important
information which you should read carefully before you make any decision with
respect to the Offer.
SPECIAL FACTORS
1. Operating History; Payment of Dividends And Redemption of Common Shares
Uncertain
The Company has never paid dividends on the Common Shares. Accordingly,
there can be no assurance that the Company will achieve profitability at a level
sufficient to assure payment of dividends on the Commons Shares that remain
outstanding, assuming any such dividends were to be declared. In addition, there
are no restrictions on the ability of the Company to incur indebtedness. Any
indebtedness incurred by the Company would be senior to the rights conferred on
the holders of the Common Shares, whether to receive dividends or otherwise. The
existence of current or future indebtedness of the Company or its subsidiaries
may make payment of dividends on, or redemption of, the Common Shares less
probable. The Company has no present intention to pay dividends on the Common
Shares.
2. Purpose and Fairness of the Offer
Purposes, Alternatives Reasons and Effects in a Going-Private Transaction
Purposes
The purpose of the Transaction is to take the Company private. The purpose
of the Offer is to provide the Company's shareholders fair value for their
Common Shares prior to engaging in the Transaction
Alternatives
The Company has not considered an alternative to going private, believing
that there is none.
The Company could have selected a more direct and far less costly means of
completing the Merger and the Transaction. The Herzog Group was not required to
make an Offer for the Common Shares but could, under the
7
Ontario Act, have proceeded directly with the Merger and the Transaction, to
which the Offer is, from a legal perspective, entirely unnecessary. The net
effect of a decision to engage solely in the Merger and the Transaction would
have been two-fold; the Herzog Group would have faced far lower costs and
shareholders would have been offered no premium over the market price of the
Common Shares and become subject to the Canadian withholding tax, as applicable.
Shareholders who accept the Offer are being offered a considerable premium to
the market price and avoid being subject to the Canadian withholding tax and
are spared the expenditure of time, effort and personal funds in pursuing
appraisal rights and any applicable refund from the Canadian government.
Reasons
The primary reasons the Offer is being made is to provide shareholders
fair value for their Common Shares and to enable them to avoid being subject to
the Canadian withholding tax. The Board reviewed the Fairness Opinion provided
by Rodman and, in reliance thereon, confirmed its proposed offering price for
the Common Shares of $0.80 net to the shareholder (the "Common Share Offer
Price").
The primary reasons that led to the Board's determination to take the
Company private are provided below.
The Company incurs significant costs in being a public company. The
Company estimates that it incurs approximately $100,000 annually in connection
with (1) preparing and filing with the Commission periodic reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (2) preparing,
filing with the Commission and mailing to shareholders a proxy statement in
connection with the annual shareholders meeting, (3) the annual audit of the
Company' financial statements, (4) directors' fees and other expenses and (5)
directors and officers liability insurance, all of which expenses could be
eliminated if the Company were no longer subject to the reporting requirements
of the Exchange Act.
Further, the trading market for the Common Shares is extremely limited.
Since the Company's initial public offering in November 1998, the average daily
trading volume by quarter has been as follows; approximately 30,555 Common
Shares in 1999, 24,757 Common Shares in 2000, 10,888 in the first quarter of
2001 and 7,002 in the current quarter to date. As a result, the holders of the
Common Shares do not have what is considered one of the main advantages of
owning shares in a public company; a liquid market for their shares. Please see
http://quotes.nasdaq.com.
The recent bid prices for the Common Shares reflect the impact of recent
trends, fundamental as well as technical, on their fair value. The Board of
Directors believes that the low stock price is caused by the general lack of
interest in micro cap securities and the Company' poor recent operating results
in addition to general market conditions, which are particularly harmful to
companies with a modest market capitalization, as well as by the
industry-specific decrease in growth (see "SPECIAL FACTORS--1. Operating
History; Payment of Dividends and Redemption of Common Shares Uncertain").
According to Rule 4310(c)(8)(B) (the "Marketplace Rule") of the Nasdaq
Stock Market, Inc. promulgated by the National Association of Securities
Dealers, Inc. (the "NASD"), shares that trade on the Nasdaq Small Cap Market
(the "SCM") must meet a minimum bid price of one dollar. Any deficiency in this
regard for a period of thirty (30) consecutive trading days will cause Nasdaq
notify the Company of its non-compliance with the Marketplace Rule and alert it
to the fact that it may seek a hearing to determine a course of action whereby
the Company may be brought into compliance with such Marketplace Rule. The
closing price of the Common Shares has been below one dollar since November 9,
2000 (see http://stockcharts.com). Nasdaq set a date for the hearing, which was
canceled due to the filing of the Offer to Purchase and the related documents.
The "increasingly probable likelihood" of delisting from the Nasdaq SCM
previously referred to has become a certainty. The Board has long attempted to
bring the minimum bid price of the Common Shares within the requirements of the
Marketplace Rule but has not been successful in so doing. The failure represents
one of the major reasons for the Board's determination to engage in the
Transaction.
The Board has regretfully concluded that the market price of the Common
Shares will not rise to a satisfactory level in the future. Having drawn that
conclusion, the Board sees no further advantage in remaining public.
8
Effects
Effects on the Company
Reduced liquidity of the Common Shares
Trading in the Common Shares has been very limited. See "SPECIAL FACTORS --2.
Purpose and Fairness of the Offer." There can be no assurance that any trading
market will exist for the Common Shares following consummation of the Offer. The
extent of the public market for the Common Shares following a consummation of
the Offer will depend on the number of holders that remain at such time, the
interest in maintaining a market in the Common Shares on the part of securities
firms, and other factors. An issue of securities with a smaller float may trade
at lower prices than would a comparable issue of securities with a greater
float. Accordingly, the market price for Common Shares that are not tendered in
the Offer may be adversely affected to the extent that the amount of Common
Shares purchased pursuant to the Offer reduces the float. The reduced float also
may have the effect of causing the trading prices of the Common Shares that are
not tendered or purchased to be more volatile. It must be considered highly
unlikely that there will be a public market after the consummation of the Offer.
In addition it is, in point of fact, the express intention of the Herzog
Group that there not be a public market for the Common Shares at all. Any Common
Shares acquired by the Company in the Offer will be cancelled. Shareholders who
remain shareholders of the Company after the Offer has expired will have their
Common Shares converted, through the Merger, into redeemable preferred shares of
NewCo, which will then be redeemed in short order with no consent required on
the part of such preferred shareholders as a measure necessary to the completion
of the Transaction.
Exchange Act Registration
The Common Shares are currently registered under the Exchange Act.
Registration of the Common Shares under the Exchange Act may, given the
conditions applicable to the Company, be terminated upon application of the
Company to the Commission if the Common Shares are no longer held by no less
than 300 holders of record. If the Exchange Act registration for the Common
Shares is terminated as a result of the Offer, the amount of information
publicly available to the remaining shareholders of the Company would be
significantly reduced, which could adversely affect the trading market and
market value for the remaining Common Shares.
However, the fact that the Company intends to engage in the Merger
followed shortly by the Transaction renders the foregoing irrelevant. The
termination of the registration of the Common Shares under the Exchange Act will
occur by virtue of their extinction.
The Merger
The reason the Offer for the Common Shares is being tendered is that the
Herzog Group intends that the Company go private, which will be accomplished
through the Merger followed by the Transaction. Unless every shareholder of the
Common Shares accepts the Offer, the Herzog Group intends to achieve its aims
through merging the Company with a non-public vehicle, which vehicle is referred
to herein as the Acquisition Corp. The separate corporate existence of the
Company shall cease, and the Company and the Acquisition Corp. shall become one
merged corporation, referred to herein as NewCo. Shareholders of the Common
Shares who do not accept the Company's Offer will have their currently issued
and outstanding Common Shares converted into shares of redeemable, non-voting
preferred stock of NewCo. Consequently, the current shareholders of the Common
Shares who do not accept the Company's Offer will possess shares in a private
company that will immediately be redeemed with no consent required on the part
of the shareholders, whether on the conversion or the redemption. While the
shareholders are granted rights of appraisal by the Ontario Act, it is
impossible to predict what the court of competent jurisdiction would determine
the fair market value of the Common Shares to be. In addition, the Canadian
withholding tax, as more fully described herein, will in all likelihood be
applied to shareholders who do not reside in Canada unless they accept the
Offer.
Effects on the Affiliated Shareholders
See "SPECIAL FACTORS - 3. Interests of Certain Persons in the Offer" for a
non-financial discussion.
9
The direct benefit to the affiliated shareholders will, assuming that all
Common Shares are tendered and accepted for payment, be a fifty percent (50%)
increase in their share of the Company's net book value and net earnings (or,
from another perspective, an increase of thirty-three percent (33%) of the total
net book value and net earnings) less the amount required to pay shareholders
for the Common Shares and the expenses of the Offer. The net book value of the
Company as of February 28, 2001 was $10,845,854 and the net earnings (loss) for
the nine (9) months ended at such date was $ (443,798). The price payable for
all the Common Shares would be $1,460,116 which, when aggregated with the
assumed expenses of the Offer of $52,077, results in total assumed expenditures
related to the Offer of $1,557,193. One third of the net book value is
approximately $3,615,285. The net gain, in terms of book value, to the
affiliated shareholders would be ($3,615,285 - $1,557,193) approximately
$2,058,092. The direct effect on the net earnings of the affiliated shareholders
will be an increase in the loss, as of February 28, 2001, of approximately
$147,933.
Effects on the Unaffiliated Shareholders
Shareholders who accept the Offer will receive a direct benefit of a
premium of 81.8% over the $0.44 closing price of the Company's Common Shares on
April 27, 2001. The net earnings (loss) per such Common Share was $ (0.08) as of
February 28, 2001. See below for a discussion of the outlook of the Company's
business, financial condition, results of operations and future prospects.
Shareholders who do not accept the Offer will have their Preferred Shares
redeemed at the Common Share Offer Price as part of the Transaction. However,
shareholders who do not reside in Canada would be subject to the 25% (at
minimum) Canadian withholding tax on such redemption and it would be the
responsibility of each such shareholder to make the requisite filings and apply
for a refund of such withholding tax (if applicable). A shareholder who does not
approve the Merger and the Transaction will be accorded rights of appraisal as
provided for under the Ontario Act. There can be no assurance as to what a court
of competent jurisdiction would award such dissenting shareholder. Any
shareholder who were to seek appraisal rights would be responsible for the costs
of the litigation, unless otherwise determined by the Ontario court of competent
jurisdiction. In addition, such dissenting shareholder would be subject to the
above-mentioned 25% (at minimum) withholding tax. The steps required to receive
a refund from the Canadian federal government will not be free of cost, and the
inconvenience may be considerable.
Fairness of the Going-Private Transaction
Fairness
The Board of Directors of the Company has determined the Common Share
Offer Price to be fair, in view of all the relevant circumstances, to
shareholders of the Common Shares. The Board can state categorically that its
view is based upon an extensive review of all material factors.
Certain Factors Considered in Determining Fairness
- - The average daily closing bid prices on the Nasdaq SCM over the thirty
(30), sixty (60) and ninety (90) day periods ending as of the date of this
Offer to Purchase, which were $0.5397, $0.5496 and $0.5833, respectively;
- - The lack of an active trading market for the Common Shares;
- - The fact that the Company's ability to engage in acquisitions, a key
advantage of being a public company upon which the decision to undertake
the Company's initial public offering was predicated, has been drastically
undermined as a result of the low market price of the Common Shares;
- - The most recently reported sale price of the Common Shares prior to the
public notification of the Offer ($0.48), and
- - The fact that the Common Shares will soon be delisted from Nasdaq as a
result of their current price (see above).
10
Management has been involved in the business of the Company for a
significant period, and believes itself capable of evaluating the discrete
factors that affect the Company and its business and what degree of weight to
ascribe to each such factor. The principal financial issues taken into account
prior to the making of the decision to engage in the Transaction and the
fairness of the consideration offered to the holders of the Common Shares are
discussed below. Readers are advised that the discussion is properly understood
to concern neither the Transaction nor the Common Share Offer Price
independently of the other, but that it details a set of variables severally
affecting the equity of the latter in the context of the former. In addition,
readers are alerted to the distinction between management's discussion and
analysis provided directly hereinafter and the evaluation performed by Rodman
which distinction, while far from absolute, may as applicable to management's
assessment loosely be abstracted as evincing a fundamental rather than technical
orientation.
Current Market Price
The low market price of the Common Shares has the effect of reducing the
Company's ability to conduct placements, whether private or public, of its
securities in order to raise capital and to perform acquisitions with its paper,
means by which it could otherwise have accomplished its plans for expansion, a
criterion management unreservedly believes represents an indispensable
constituent in fostering the long-term success of the Company's business.
The low volume of trading results in a lack of a liquid market for the
Common Shares and offers little in the way of exit strategies for investors,
which clearly influences the investment decisions of persons or entities who
might have been willing to purchase Common Shares. Management places heavy
emphasis on this factor.
Historical Market Prices
The market price of the Common Shares has been subjected to a continual,
downward trend despite the fact that the Company was reporting significant
growth in both the top and bottom lines. Management sees little reason to
believe that its future results in terms of both revenues and net income would
reverse this trend. The plausibility of material, sustained appreciation in the
market price of the Common Shares is deemed negligible. Management's conviction
is easily illustrated on any Web site where historical market prices are
available, whatever be the period examined. Concurrently therewith, support for
the Common Shares among broker-dealers has seen a sharp decline, which is a
frequent feature of shares in which investors have lost confidence, interest or
both. Management deems this factor to be of critical importance.
Net Book Value
Management believes that net book value, for a company that markets
serviceable products, is among the most illusory of financial indicators. In
light of the Company's exposure to the current weak retail environment, and the
fact that the Company's products would be worth significantly less without the
benefits of an ongoing warranty, management did not place a great deal of
emphasis on this factor.
Going Concern Value
Management believes that the current low market price and trading volume
of the Common Shares represents a ceiling that will persist for the foreseeable
future, since it appears to management that investors have lost interest in the
Company. The market price of the Common Shares has declined despite management's
ability, until recently, to generate revenues and derive earnings therefrom.
Consequently, management questions whether even a return to profitability would
inspire investors and materialize in a positive movement in the market price of
the Common Shares. Compounded by the Company's resulting inability to make the
acquisitions called for by its business model, this disinterest implies a clear
and present going concern.
Furthermore, the general retail environment including, but not limited to,
the attenuation and disappearance of the regional chains is an issue of
tremendous importance to the Company's ability to market its products. The
demonstrated aggressiveness of the major brands in pursuing the fewer remaining
retailers diminishes the Company's opportunities for market entry and highlights
its difficulty in competing with these major manufacturers and distributors.
11
Another factor impinging upon the Company's business is the marked
diminution of its customer base, both actual and potential, resulting from the
number of companies that have resorted to chapter 7 and 11, as aggravated by its
related unwillingness to enter into contractual relationships with a number of
retailers that may never provide adequate consideration for the Company's
products and services. In addition, others pose severe credit risks and
accordingly do not constitute dependable business partners. The decreasing
revenues seen in the context of selling serviceable products entails a
disadvantageous, from the Company's perspective, effect on the ratio of cost of
sales over earnings. Because this factor encompasses a plurality of material
factors ignored by concepts such as net book value (or related ones, e.g., net
tangible assets, etc.), management attributes far greater weight to this
element, though somewhat less than it accords the first two factors delineated
hereinabove.
Liquidation Value
The decrease in sales has led to a corresponding increase in the Company's
inventory. In addition, the Company markets serviceable products. The
requirement that there be a viable warranty guaranteeing service of the products
would, in a liquidation scenario, drastically reduce the price payable therefor:
the potential occurrence of a necessarily irremediable malfunction would
unquestionably reduce the products' appeal. This factor is deemed significant,
though it is not seen as the crucial factor.
Purchase Price Paid in Previous Purchases
As discussed under the rubric Significant Corporate Events, management
attempted to resuscitate the market price of the Common Shares during the fall
of 2000. When repurchasing the Common Shares on the open market, it obviously
paid the market price therefor. This factor was considered in determining the
Common Share Offer Price, but less as a factor like the others referred herein
than as a standard against which the Common Share Offer Price may be comparable.
Management deems it an expression of its fiduciary duty to the Company's
shareholders that it pay the market price on behalf of the Company itself while
offering the shareholders a premium in excess of eighty percent (80%) thereon.
The Fairness Opinion
Management has relied on Rodman's Fairness Opinion in supporting its
conclusion that the Common Share Offer Price is fair to shareholders in
acknowledgment of Rodman's experience in the field.
Additional Factors
The imminent delisting of the Common Shares from the Nasdaq SCM
self-evidently exerted a great deal of influence over management's
decision-making. Management was motivated by the impulse of securing as much of
a benefit to the Company's shareholders as feasible within the applicable
temporal constraints imposed by the Marketplace Rule. Management anticipates
that delisting will have a material, adverse effect on, above all, the Company's
Current Market Price and its Going Concern Value.
As a result of the foregoing, management does not foresee any material
improvements to the Company's business, financial condition, results of
operations or future prospects and can therefore state categorically that it
believes the Common Share Offer Price to be fair to the Company's shareholders
in the context of the Transaction.
Finally, the Company discussed the procedural steps of engaging in the
Transaction with its Canadian counsel. Based on the advice rendered thereby, the
Company was able to offer its shareholders a solution that offered them not only
a considerable premium over the market price of the Common Shares, but was also
able to devise means by which shareholders who do not reside in Canada be able
to avoid Canadian federal income tax withholding, thus further ameliorating the
terms offered to the shareholders.
Approval of Security Holders
The Transaction is not structured so as to require the approval of a
majority of the unaffiliated shareholders. Approval of the resolution
authorizing the Merger, which is a prerequisite of the Transaction, will not
require the vote
12
of any unaffiliated shareholder, whereas the Transaction itself necessitates no
shareholder vote whatsoever.
The Company is an Ontario company incorporated under the Ontario Act. The
Merger will require the affirmative vote of sixty-six and two thirds percent
(66b%) of the outstanding Common Shares. Prior to the Offer, the Herzog Group
owned or controlled over sixty-seven percent (67%) of the outstanding Common
Shares and will tender no such Common Shares through the Offer. Consequently,
unaffiliated shareholders may retain their Common Shares, and may cast them
against the resolution whereby the Merger will be approved, but passage thereof
will not be affected by the vote. Dissenting shareholders are granted appraisal
rights under the Ontario Act.
Unaffiliated Representative
There have been no negotiations between the Company and any unaffiliated
shareholders, whether retained by the non-employee Director of the Board or
otherwise. However, the Board of Directors has, at the request of David
Ben-David, the Company's non-employee Director, retained Rodman to produce a
Fairness Opinion.
Approval of Directors
The Offer for the Common Shares has been unanimously approved by the
Company's Board of Directors. The Company believes that the Offer is fair, but
is not making a recommendation to its shareholders because it is an interested
party, as are its affiliates. While the number of Common Shares tendered will be
of little practical significance, and the Company could have accomplished its
stated goals without making shareholders the Offer, the Company does not intend
to exert direct influence over the decision to be made by the shareholders. The
Board retained Rodman to determine whether the Common Share Offer Price is fair,
and is relying on Rodman's opinion that it is. Holders of Common Shares should
determine whether to accept the Offer based upon their own assessment of, among
other factors, current market value as well as the trading volume of the Common
Shares, liquidity needs and investment objectives. The Transaction has been
approved by Board, including by the Company's non-employee director.
Reports, Opinions, Appraisals and Negotiations
Report, opinion or appraisal
The Board of Directors has received a Fairness Opinion from Rodman &
Renshaw, Inc, a national investment banking firm, which Fairness Opinion is
based on Rodman's analysis as contained within the report relating thereto (the
"Report") and concludes that the Common Share Offer Price is fair to
unaffiliated shareholders from a financial point if view.
Preparer and summary of the report, opinion or appraisal
The Board of Directors retained Rodman to provide a Fairness Opinion with
respect to the Transaction and the Report, filed herewith as Exhibits (A)(2) and
(A)(8), respectively.
Rodman is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
The method the Company used in its selection of Rodman was a resolution
adopted by the Company's Board after discussions with several investment banks.
The Company, after consulting with its securities counsel, felt that Rodman had
the requisite expertise to provide the Fairness Opinion. This determination was
based primarily on the extensive experience of Rodman's Senior Managing Director
and his staff.
There was no relationship, material or otherwise, between Rodman and the
Company prior to the Company's retention of Rodman to provide the Fairness
Opinion. Rodman is to be paid a fee of $38,500 for its services.
The Common Share Offer Price was proposed by the Board, subject to the
conclusions of the Fairness Opinion performed by Rodman. Upon receipt of the
Fairness Opinion, which determined that the Common Share Offer Price
13
was a fair price for the Common Shares from a financial point of view, and in
view of the Company's business, financial condition, results of operations and
future prospects, the Board confirmed the establishment of $0.80 net in cash per
Common Share as the Common Share Offer Price.
In preparing the Fairness Opinion and the underlying Report, Rodman
utilized several methods to arrive at its conclusion, including comparing the
premium over the prevailing market price received by stockholders in similar
transactions, especially in light of the liquidity of the Company's Common
Shares. The Report provides depictions and demonstrations, as the case may be,
historical income statement data, the trading range of the Common Shares,
comparative stock performance and analyses based on the valuation of the Common
Shares, as expressed through premiums paid, comparable companies and comparable
transaction. See the Report filed herewith.
Rodman's analysis of premiums paid was based upon the review and analysis
of the range of premiums paid in similar acquisitions of minority ownership
positions. Rodman reviewed 20 recent transactions (the "20 Transactions") that
it deemed relevant where the ownership of the acquiror in the target six months
prior to the announcement of the transaction was greater than 50%. Using
publicly available information, Rodman obtained the premium of the offer price
per share relative to the target company's stock price one day, one week and one
month prior to the date of announcement of the transaction (the "Announcement
Date"). The mean and median range of premiums paid to the target company's stock
price one day, one week, and one month prior to the Announcement Date were 52.5%
and 33.4%, 55.3% and 43.6%, 58.6% and 54.4%, respectively. The Common Share
Offer Price of $0.80 represents a premium of 81.8% over the $0.44 closing price
of the Company's Common Shares on April 27, 2001.
The 20 Transactions Rodman reviewed are given below.
Transaction Date Target Acquiror Target Market Cap. ($)
- --------------------------------------------------------------------------------------
04/19/00 Conning Corp Metropolitan Life 131,518,217
Insurance Co
04/28/00 Metrika Systems Corp Thermo Instrument 71,399,482
Systems Inc
04/13/00 ONIX Systems Inc Thermo Instrument 125,628,335
Systems Inc
04/07/00 Thermedics Detection Thermedics 153,326,179
Inc
04/14/00 Thermo BioAnalysis Thermo Instrument 381,613,579
Systems Inc
05/12/00 Thermo Optek Corp Thermo Instrument 740,840,612
Systems Inc
03/31/00 Thermo Sentron Inc Thermedics 136,231,929
05/12/00 ThermoQuest Corp Thermo Instrument 632,038,500
Systems Inc
09/15/00 Vastar Resources Inc BP Amoco PLC 6,975,598,515
04/20/00 Travelers Property Citigroup Inc 12,974,985,484
Casualty
06/08/00 Homestead Village Inc Security Capital Group 330,086,562
Inc
06/27/00 Hartford Life Hartford Fin Svcs 5,956,032,847
Group Inc
07/17/00 Cherry Corp Investor Group 130,545,350
11/16/00 JLK Direct Kennametal Inc 143,998,659
Distribution Inc
09/27/00 800-JR Cigar Inc Investor Group 127,519,714
11/08/00 Minolta-QMS Inc Minolta Investments Co 39,798,393
11/29/00 Trex Medical Corp Thermo Electron Corp 33,945,384
12/22/00 pcOrder.com Trilogy Software Inc 58,038,712
03/16/01 Azurix Corp Enron Corp 418,001,538
04/12/01 Vitaminshoppe.com Inc Vitamin Shoppe 6,362,211
Industries Inc
As the table demonstrates, only one of the 20 Transactions completed since
January 1, 2000 was of comparable size to the Transaction. None of the companies
referenced above was involved in consumer electronics, the industry in which the
Company operates. For a full discussion of the analysis of such 20 Transactions,
see the Report filed herewith.
Rodman also considered the recent downturn in the Company's operating
performance, the potential negative impact of the recent bankruptcy of several
key customers on the Company's future prospects and the potential delisting
14
from Nasdaq of the Company's Common Shares, among other factors.
In arriving at its conclusion, Rodman did not attribute any particular
weight to the analyses or factors it considered, but rather made qualitative
judgments as to the significance and relevancy of each piece of analysis and
factor. Accordingly, Rodman believes that its finding must be considered as a
whole and that placing greater reliance on one portion of its analyses and of
the factors than another could result in a misleading or incomplete view of the
process underlying its conclusion. See the Report filed as an exhibit hereto for
further information in relation thereto.
Availability of documents
The Fairness Opinion was mailed to shareholders with the Offer to Purchase
and is available for review at the Commission's Web site at www.sec.gov, as is
the Report, filed herewith as Exhibit (A)(8).
Past Contacts, Transactions, Negotiations and Agreements
Transactions
See "SPECIAL FACTORS -- 7. Transactions and Arrangements Concerning the
Common Shares."
Significant Corporate Events
Management of the Company began considering, with the backdrop of a
decline in the market price of the Common Shares, means to improve such price
during discussions held during the summer of 2000, including the possibility of
a privatization or a share buyback. Management initiated consideration of a
repurchase program of the Common Shares early in August, and discussed the
matter with the Board shortly thereafter.
The Company repurchased 95,4000 Common Shares for cancellation on August
10, 2000 (see "SPECIAL FACTORS -- 7. Transactions and Arrangements Concerning
the Common Shares").
Nonetheless, the price of the Common Shares deteriorated further during
the fall of 2000. The depreciation continued unabatedly despite the repurchase
of an additional 14,500 Common Shares on December 1, 2000. On December 27, 2000,
the Company was notified by the Nasdaq that the Common Shares had traded below
$1.00 for 30 consecutive days and was therefore confronted by the delisting of
the Common Shares unless the Common Shares could sustain a price above $1.00 for
10 consecutive days within the following 90 day period. This prospect led
management to reconsider the possibility, if not the desirability, of
maintaining the Company's listing on the Nasdaq SCM. Accordingly, management
again considered the issue of taking the Company private.
On March 28, 2001, the Company received notice from Nasdaq that the 90 day
period had expired. Management had at this point seriously considered taking the
Company private after an extensive review of all the plausible scenarios.
Management then discussed privatization with the Board, undertaking a careful
examination of the Company's outlook. See "SPECIAL FACTORS - 2. Purpose and
Fairness of the Transaction."
Having completed its assessment, the Board approved a resolution to engage
in the Offer with a view to engaging in the Transaction on April 25, 2001.
Agreements Involving the Subject Company's Securities
The members of the Herzog Group are party to a voting agreement
stipulating that they shall vote together on any matter put before the
shareholders.
3. Interests of Certain Persons in the Offer
Aaron Herzog, the Company's Chief Executive Officer and President and
Jacob Herzog, its Chairman, Treasurer and Secretary, and their respective family
trusts, collectively own approximately 67% of the Common Shares of the Company.
The Herzog Group intends to form Curtis Acquisition Corp., an entity that the
Herzog Group anticipates being able, subsequent to the completion of the Offer,
to control. To the extent that holders of Common
15
Shares accept the Offer, the Herzog Group's beneficial ownership percentage in
the Company will increase proportionately. Consequently, the Herzog Group will
be free to operate the business of the Company under the aegis of NewCo, after
the Merger has been consummated, which would not be subject to the reporting
requirements imposed by the Exchange Act. Accordingly, the members of the Herzog
Group stand to benefit substantially from the Transaction. There can be no
assurance that benefits will accrue to the shareholders of the Company to a
comparable degree, if at all.
The address for Messrs. Herzog is care of the Company at 315 Attwell
Drive, Etobicoke, Ontario, M9W 5C1.
4. Material Federal Income Tax Consequences
This summary of federal income tax consequences is not intended to be a
complete discussion of all possible federal income tax consequences that
shareholders may have by selling their Common Shares in the Offer to Purchase.
It is not intended as a substitute for careful tax planning. The applicability
of federal income tax laws to shareholders owning Common Shares will vary from
one shareholder to another, depending upon each shareholder's tax situation.
Accordingly, shareholders are advised to consult with their own attorneys,
accountants and other tax advisors as to the effect on their own tax situation
of selling their Common Shares.
The following discussion of the federal income tax consequences does not
purport to discuss all aspects of federal, state and local tax laws which may
affect shareholders. Instead, it focuses on the federal income tax consequences
of a typical shareholder. This discussion of federal income tax consequences is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), and upon
regulations, revenue rulings, court decisions and administrative authorities
governing the Code, as of the date of this Offer to Purchase, and related
documents and factual representations made by the Company. Many of the
provisions of the Code which are discussed in this summary were added or amended
by one or more of the tax acts passed by Congress from 1987 to the present,
including 1999 legislation. Legislation proposed in 2000, but not signed into
law or enacted, is not considered in this discussion. In many instances, the
Internal Revenue Service ("IRS") has not issued regulations or rulings setting
forth its interpretation of provisions discussed in this summary, or the courts
have not yet ruled on relevant issues. Where neither the IRS nor the courts have
provided any guidance as to their position on an issue, this summary contains an
interpretation of legal counsel to the Company of such provisions, which merely
represents the judgment of such legal counsel and is not binding upon the IRS or
the courts. The following discussion presumes the accuracy of facts and
assumptions, and continued applicability of legislative, administrative and
judicial authorities, all of which authorities are subject to change, possibly
retroactively. Subsequent changes in such authorities may cause the tax
consequences to vary substantially from the consequences described below, and
any such change could be retroactively applied in a manner that could adversely
affect the tax consequences to shareholders of disposing of the Common Shares.
Furthermore, in an effort to provide guidance to taxpayers as
expeditiously as possible, the IRS in many cases adopts its proposed regulations
in temporary form or issues announcements or notices of its position. Temporary
regulations, announcements and notices may differ significantly from, or be
contrary to, the interpretation ultimately adopted by the IRS or the courts.
Where the IRS has not released any guidance as to its position, the
interpretations in this Offer to Purchase may be based almost entirely upon Tax
Counsel's interpretation of the Code provisions. There can be no assurance that
Tax Counsel's interpretation will prove to be correct in light of future IRS or
judicial decisions. Shareholders are urged, therefore, to seek independent
advice in evaluating the merits of this discussion, and specifically, evaluating
those provisions of the Code which may have a material affect on the disposition
of Common Shares.
The discussion below is directed primarily to shareholders who own Common
Shares in the Company and who are United States persons (as determined for
federal income tax purposes). Except as specifically noted, the discussion does
not address all of the federal income tax consequences that may be relevant to
shareholders in light of each individual shareholder's particular circumstances.
In particular, if a shareholder holds Common Shares in the name of a
partnership, corporation, trust or estate, or if shareholders are subject to
special rules, such as certain financial institutions, tax exempt entities,
foreign corporations, non-resident alien individuals, regulated investment
companies, insurance companies, dealers in securities or traders in securities
who elect to mark-to-market, or if
16
shareholders own Common Shares of the Company as part of a "straddle,"
"synthetic security," "hedge," "conversion transaction" or other integrated
investment, then such shareholders should seek independent advice in evaluating
the merits of this discussion and, specifically, in evaluating the provisions of
the Code which may have a material effect upon a decision to dispose of Common
Shares in the Company. Furthermore, the discussion deals only with Common Shares
held as "capital assets" within the meaning of Section 1221 of the Code.
Sale or Exchange Treatment for Shareholders
Assuming that the Company purchases all of the Common Shares that
shareholders own in the Company so that their interest in the Company is
completely terminated, then each individual shareholder will, upon the sale of
the Common Shares, recognize a gain or loss for federal income tax purposes in
an amount equal to the difference between the amount realized and their adjusted
tax basis in the Common Shares so purchased. Such gain or loss will be long-term
capital gain or loss if the Common Shares were held for more than one year.
Shareholders are required to hold their Common Shares for more than one year in
order for the investment to qualify as a long-term capital gain, which is
subject to an effective maximum federal income tax rate of 20%. If shareholders
sell their Common Shares after having held them more than five years, such
shareholders may qualify for a lower maximum federal income tax rate on the
long-term capital gain. If shareholders sell their Common Shares at a profit
within 12 months of purchasing them, any gain would be taxed at ordinary income
tax rates. Any loss upon the sale of their Common Shares will generally be a
capital loss. Net capital losses may offset no more than $3,000 of ordinary
income in the case of individuals and may only offset capital gain in the case
of a corporation. If the shareholder is an individual, unused portions of such
capital loss can be carried over to be used in later tax years until such net
capital loss is exhausted. If the Common Shares are held in the name of a
corporation, an unused capital loss may be carried back three years from the
loss year and carried forward five years from the loss year to offset capital
gains.
The Company May be Required to Withhold Taxes from Payments Otherwise Made to
Shareholders
Under certain circumstances, the Company is required to engage in backup
withholding. Under Code ss. 3406, the Company may be required to withhold 31% of
the distributions (known as "backup withholding") that would otherwise be made
to shareholders. These rules apply to shareholders who fail to furnish
information to the Company or if the Company receives a notice that a
shareholder has failed to include interest or dividend payments on returns that
were to have been filed with the IRS. Any tax that is withheld can be claimed as
a credit on a shareholder's federal income tax return. Shareholders should
consult with their own tax advisor as to the impact of the backup withholding
rules upon such shareholder's situation. These rules may apply whether the
payments are treated as capital gain transactions or as dividend distributions
under the discussion immediately above.
Conclusion Regarding Tax Treatment of the Company and Shareholders
This synopsis of the federal income tax consequences is not intended to be
a complete summary of the tax consequences to shareholders of accepting the
Offer to Purchase, nor is it intended as a substitute for careful tax planning.
The applicability of the tax laws to shareholders will vary from one shareholder
to another, depending upon each such shareholder's individual tax situation.
Accordingly, shareholders are advised to consult with one of their own
attorneys, accountants and other personal tax advisors as to the effect on their
tax situation of the proposed purchase of the Common Shares.
Shareholders should also be aware that any sale of the Common Shares will
likely have income tax consequences to them under state income tax laws,
depending upon the state in which they are domiciled. Shareholders should
consult their tax advisor about the income tax impact upon them of any state
income taxation of the offered Common Shares if they believe they may be subject
to state income taxation.
The federal income tax discussion set forth above is included for general
information only. Shareholders are urged to consult their tax advisor with
respect to the specific tax consequences to them of the Offer, including
federal, state, local and foreign tax consequences.
17
5. Financing of the Offer
The total amount of funds required by the Company to purchase all the
outstanding Common Shares, other than those owned by the Herzog Group, is
expected to be approximately $1.37 million. The Company will provide the funds
needed from cash, cash equivalents and other marketable securities.
6. Beneficial Ownership of the Common Shares
The following table sets forth certain information regarding beneficial
ownership of the Common Shares as of May 30, 2001 by (a) each shareholder who is
known by the Company to beneficially own, directly or indirectly, more than 5%
of the Common Shares, (b) each executive officer of the Company, (c) each
director of the Company and (d) all directors and executive officers of the
Company as a group. As of May 30, 2001, there were 5,263,245 Common Shares
outstanding, of which the Herzog Group owns 3,548,000.
Percentage of Common Shares
Name (1) Common Shares Held Outstanding (2)
Aaron Herzog(3) (5) 1,799,000 34%
Jacob Herzog (4)(5) 1,799,000 34%
David Ben-David (6) 12,500 *
All Executive Officers and
Directors as a Group 3,610,500 68.3%
* Less than one percent.
(1) Unless otherwise indicated, the address of each person listed below is c/o
Curtis International Ltd., at 315 Attwell Drive, Etobicoke, Ontario, M9W 5C1.
(2) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of common stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the
table.
(3) Consists of: (i) 1,689,208 Common Shares owned directly by Aaron Herzog;
(ii) 84,792 Common Shares owned by the A&E Herzog Family Trust of which Aaron
Herzog and Evelyn Fisher Herzog are the Trustees; and (iii) 25,000 Common Shares
issuable upon the exercise options granted under the Company's Stock Option
plan.
(4) Consists of: (i) 1,663,882 Common Shares owned by Jacob Herzog; (ii) 110,118
Common Shares owned by the Herzog Family Trust of which Jacob Herzog, Beatrice
Herzog and Aaron Grubner are the Trustees; and (iii) 25,000 Common Shares
issuable upon the exercise of options granted under the Company's Stock Option
plan.
(5) Aaron and Jacob Herzog, the members of the Herzog Group, are parties to a
voting trust agreement which provides that they will vote their Common Shares
together.
(6) Consists of 12,500 Common Shares issuable upon the exercise of options
granted under the Company's Stock Option Plan. The exercise price of the options
is higher than the Common Share Offer Price.
7. Transactions and Arrangements Concerning the Common Shares
To the Company' knowledge, no transaction in the Common Shares has been
effected during the past two (2) years by the Company or its executive officers,
directors, affiliates or subsidiaries, or by any executive officers, directors
or affiliates of its subsidiaries other than the 95,400 Common Shares
repurchased by the Company for cancellation on
18
August 10, 2000, and the 14,500 Common Shares repurchased by the Company for
cancellation on December 1, 2000 under the repurchase program. Both transactions
were recorded as reductions of capital stock and both purchases were made at the
then prevailing market price, to wit, $1.00 and $0.75 per share, respectively.
8. Certain Effects of the Transaction
Reduced liquidity of the Common Shares
Trading in the Common Shares has been very limited. See "SPECIAL FACTORS
- --2. Purpose and Fairness of the Offer." There can be no assurance that any
trading market will exist for the Common Shares following consummation of the
Offer. The extent of the public market for the Common Shares following a
consummation of the Offer will depend on the number of holders that remain at
such time, the interest in maintaining a market in the Common Shares on the part
of securities firms, and other factors. An issue of securities with a smaller
float may trade at lower prices than would a comparable issue of securities with
a greater float. Accordingly, the market price for Common Shares that are not
tendered in the Offer may be adversely affected to the extent that the amount of
Common Shares purchased pursuant to the Offer reduces the float. The reduced
float also may have the effect of causing the trading prices of the Common
Shares that are not tendered or purchased to be more volatile. It must be
considered highly unlikely that there will be a public market after the
consummation of the Offer.
In addition it is, in point of fact, the express intention of the Herzog
Group that there not be a public market for the Common Shares at all. Any Common
Shares acquired by the Company in the Offer will be cancelled. Shareholders who
remain shareholders of the Company after the Offer has expired will have their
Common Shares converted, through the Merger, into redeemable preferred shares of
NewCo, which will then be immediately redeemed with no consent required on the
part of such preferred shareholders as a measure necessary to the completion of
the Transaction.
Exchange Act Registration
The Common Shares are currently registered under the Exchange Act.
Registration of the Common Shares under the Exchange Act may, given the
conditions applicable to the Company, be terminated upon application of the
Company to the Commission if the Common Shares are no longer held by no less
than 300 holders of record. If the Exchange Act registration for the Common
Shares is terminated as a result of the Offer, the amount of information
publicly available to the remaining shareholders of the Company would be
significantly reduced, which could adversely affect the trading market and
market value for the remaining Common Shares.
However, the Company intends to engage in the Merger followed immediately
thereafter by the Transaction, which will result in the cancellation of all
outstanding Common Shares. The termination of the registration of the Common
Shares under the Exchange Act will occur by virtue of their extinction.
The Merger
The reason the Offer for the Common Shares is being tendered is that
the Herzog Group intends that the Company go private, which will be accomplished
through the Merger followed by the Transaction. Unless every shareholder of the
Common Shares accepts the Offer, the Herzog Group intends to achieve its aims
through merging the Company with the Acquisition Corp. The Herzog Group controls
more than 66b% of the issued and outstanding Common Shares, which is the
percentage required to bring its plans to fruition. Any Common Shares tendered
through the Offer described herein will increase the Herzog Group's percentage
ownership in the Company through the concomitant reduction in the number of
Common Shares outstanding. The separate corporate existence of the Company shall
cease, and the Company and the Acquisition Corp. shall become one merged
corporation, referred to herein as NewCo. Shareholders of the Common Shares who
do not accept the Company's Offer will have their currently issued and
outstanding Common Shares converted into shares of redeemable, non-voting
preferred stock of NewCo. Consequently, the current shareholders of the Common
Shares who do not accept the Company's Offer will possess shares in a private
company that will immediately be redeemed with no consent required on the part
of the shareholders, whether on the conversion or the redemption. The
shareholders are to be granted rights of appraisal under the Ontario Act, but it
is impossible to predict what the court of competent jurisdiction would
determine the fair
19
market value of the Common Shares to be. In addition, the Canadian withholding
tax will in all likelihood be applied to the Company's shareholders who are not
Canadian residents unless such shareholders accept the Offer, though such
shareholders have the right, at their own expense, to apply for an exemption
from the withholding.
Management of the Company has regretfully concluded that the market price
of the Common Shares will not rise to a satisfactory level in the future. Having
drawn that conclusion, and seeing no advantage in remaining public, the Company
could at far lesser expense have proceeded directly to the Merger described
herein. However, the Company's management does not believe that such a course of
action would have been in the best interests of the Company's shareholders, in
contrast to the Offer made to shareholders hereby. The terms of the Offer to
Purchase represent, in the belief of the Company's management, the best means
currently available in providing value to its shareholders: Not only are
shareholders provided a significant premium over the current market price and
are not subject to the Canadian withholding tax, but are spared the expenditure
of time, effort and personal funds in pursuing appraisal rights or a refund from
the Canadian government.
THE OFFER
1. Terms of the Offer
Upon the terms and subject to the conditions of the Offer, the Company
will purchase all Common Shares at a purchase price of $0.80 net per share, in
cash, without interest, that are validly tendered and not withdrawn prior to the
expiration of the Offer. There are no accrued dividends on the Common Shares. If
at the Expiration Date, all of the Common Shares have not been tendered, the
Company may extend the Expiration Date for an additional period or periods of
time by making public announcement and giving oral or written notice of the
extension to the Depositary. During any such extension, all Common Shares
previously tendered and not withdrawn will remain subject to the Offer and
subject to the shareholder's right to withdraw the Common Shares. See "THE
OFFER--4. Withdrawal Rights."
Subject to the applicable regulations of the Commission, the Company also
reserves the right, in its sole discretion, at any time or from time to time,
to: (a) terminate the Offer (whether or not any Common Shares have been
purchased) if any condition referred to in "THE OFFER--8. Conditions to the
Offer" has not been satisfied or upon the occurrence of any event specified in
"THE OFFER--8. Conditions to the Offer"; and (b) waive any condition or
otherwise amend the Offer in any respect, in each case by giving oral or written
notice of the termination, waiver or amendment to the Depositary and, other than
in the case of any waiver, by making a public announcement thereof. The Company
acknowledges (a) that Rule 14e-1(c) under the Securities Act requires it to pay
the consideration offered or return the Common Shares tendered promptly after
the termination or withdrawal of the Offer and (b) that the Company may not
delay purchase of, or payment for, any Common Shares upon the occurrence of any
event specified in "THE OFFER--8. Conditions to the Offer" without extending the
period of time during which the Offer is open.
The rights the Company reserves in the preceding paragraph supplement but
do in no form replace its rights described in "THE OFFER--8. Conditions to the
Offer". Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement. An announcement in the case of
an extension will be made no later than 4:00 p.m., Eastern Standard Time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement, subject to applicable law (including Rules 13e-4(e), 14d-4(d) and
14d-6(c) under the Exchange Act, which require that material changes be promptly
disseminated to holders of Common Shares), the Company will have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.
If the Company makes a material change in the terms of the Offer, or if
the Company waives a material condition to the Offer, the Company will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 13e-3(e), 13e-4(e), 14d-4(d), 14d-6(c) and 14e-1 under the
Exchange Act. The minimum period during which a tender offer must remain open
following material changes in the terms of the offer, other than a change in
price or a change in percentage of securities sought, depends upon the facts and
circumstances, including
20
the materiality of the changes. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to shareholders, and, if material changes are
made with respect to information that approaches the significance of price and
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination and investor response. With respect
to a change in price, a minimum ten-business-day period from the date of the
change is generally required to allow for adequate dissemination to
shareholders. Accordingly, if prior to the Expiration Date, the Company
decreases the number of Common Shares being sought, or increases or decreases
the consideration offered pursuant to the Offer, and if the Offer is scheduled
to expire at any time earlier than the period ending on the tenth business day
from the date that notice of the increase or decrease is first published, sent
or given to holders of Shares, the Company will extend the Offer at least until
the expiration of such period of ten business days. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern
Standard Time.
Consummation of the Offer is conditioned upon satisfaction of the
conditions set forth in "THE OFFER--8. Conditions to the Offer". The Company
reserves the right (but is not obligated), in accordance with applicable rules
and regulations of the Commission, to waive any or all of those conditions. If,
by the Expiration Date, any or all of those conditions have not been satisfied,
the Company may elect to (a) extend the Offer and, subject to applicable
withdrawal rights, retain all tendered Common Shares until the expiration of the
Offer, as extended, subject to the terms of the Offer; or (b) terminate the
Offer and not accept for payment any Common Shares and return all tendered
Common Shares to tendering shareholders. In the event that the Company waives
any condition set forth in "THE OFFER--8. Conditions to the Offer", the
Commission may, if the waiver is deemed to constitute a material change to the
information previously provided to the shareholders, require that the Offer
remain open for an additional period of time and/or that the Company
disseminates information concerning such waiver.
This Offer to Purchase, the Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the security holder lists or,
if applicable, who are listed as participants in a clearing agency's security
position listing, for forwarding to beneficial owners of Common Shares.
2. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer (including, if
the Company extends or amends the Offer, the terms and conditions of the Offer
as so extended or amended), the Company will purchase, by accepting for payment,
and will pay for, all Common Shares validly tendered and not properly withdrawn
(as permitted under "THE OFFER--4. Withdrawal Rights") promptly after the
Expiration Date if all of the conditions to the Offer set forth in "THE
OFFER--8. Conditions to the Offer" have been satisfied or waived on or prior to
the Expiration Date.
In all cases, the Company will pay for the Common Shares purchased in the
Offer only after timely receipt by the Depositary of (a) certificates
representing the Common Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of the Common Shares into
the Depositary's account at Continental (referred to herein, where appropriate,
as the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
"THE OFFER--3. Procedures for Accepting the Offer and Tendering Common Shares";
(b) the appropriate Letter of Transmittal (or a facsimile), properly completed
and duly executed, with any required signature guarantees or an Agent's Message
(as defined below) in connection with a book-entry transfer; and (c) any other
documents that the Letter of Transmittal requires. Accordingly, payment may be
made to tendering shareholders at different times. See "THE OFFER--3. Procedures
for Accepting the Offer and Tendering Common Shares" for a description of the
procedure for tendering Common Shares pursuant to this Offer.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Common Shares which are the subject of the
Book-Entry Confirmation that the participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that the Company may enforce that
agreement
21
against the participant.
For purposes of the Offer, the Company will be deemed to have accepted for
payment, and purchased, Common Shares validly tendered and not withdrawn if, as
and when the Company gives oral or written notice to the Depositary of
acceptance of the Common Shares for payment pursuant to the Offer. In all cases,
upon the terms and subject to the conditions of the Offer, payment for Common
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price for the Common Shares with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Company and
transmitting payment to validly tendering shareholders.
Under no circumstances will the Company pay interest on the Common Share
Offer Price for the Common Shares, regardless of any extension of the Offer or
any delay in making such payment.
If the Company does not purchase any tendered Common Shares pursuant to
the Offer for any reason, or if shareholders submit Share Certificates
representing more Common Shares than they wish to tender, the Company will
return Share Certificates representing unpurchased or untendered Common Shares,
without expense to the shareholder (or, in the case of Common Shares delivered
by book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedures set forth in "THE OFFER--3. Procedures for
Accepting the Offer and Tendering Shares", the Common Shares will be credited to
an account maintained within the Book-Entry Transfer Facility), as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
If, prior to the expiration date, the Company increases the price offered
to holders of Common Shares in the Offer, the Company will pay the increased
price to all holders of Common Shares that it purchases in the Offer, whether or
not the Common Shares were tendered before the increase in price.
3. Procedures for Accepting the Offer and Tendering the Common Shares
To tender Common Shares pursuant to this Offer, shareholders must deliver
before the expiration of this Offer to the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase (1) either (a) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (and any other documents
required by the Letter of Transmittal) or (b) an Agent's Message in connection
with a book-entry delivery of Common Shares and (2) either (a) the Share
Certificates for the tendered Common Shares must be received by the Depositary
at one of such addresses, (b) the Common Shares must be tendered pursuant to the
procedure for book-entry transfer described below and a Book-Entry Confirmation
must be received by the Depositary or (c) shareholders must comply with the
guaranteed delivery procedures described below.
The method of delivery of Common Shares, the Letter of Transmittal and all
other required documents, including delivery through the Book-Entry Transfer
Facility, is at the shareholder's option and sole risk, and delivery will be
considered made only when the Depositary actually receives the Common Shares. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, shareholders should allow sufficient time
to ensure timely delivery.
Book-Entry Transfer
The Depositary will make a request to establish an account with respect to
the Common Shares at the Book-Entry Transfer Facility for the purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make book-entry delivery of Common Shares by causing the
Book-Entry Transfer Facility to transfer the Common Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures. However, although Common Shares may be delivered
through book-entry transfer into the Depositary's account at the Book-Entry
Transfer Facility, the Depositary must receive the Letter of Transmittal (or
facsimile), properly completed and executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, at one of its addresses set forth on the back
cover of this Offer to Purchase on or before the Expiration Date, or
shareholders must comply with the guaranteed delivery procedure set
22
forth below. Delivery of documents to the Book-Entry Transfer facility in
accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
Signature Guarantees
A bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of the Securities Transfer Agents Medallion
Program (an "Eligible Institution") must guarantee signatures on the Letter of
Transmittal, unless the Common Shares tendered are tendered (a) by a registered
holder of Common Shares who has not completed either the box labeled "Special
Payment Instructions" or the box labeled "Special Delivery Instructions" on the
Letter of Transmittal or (b) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Common Shares are to be issued or returned
to, a person other than the registered holder, then the tendered certificates
must be endorsed or accompanied by appropriate stock powers, signed exactly as
the name or names of the registered holder or holders appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 of the Letter of Transmittal. If the Share Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or facsimile) must accompany each delivery of Share
Certificates.
Guaranteed Delivery
If shareholders want to tender Common Shares in the Offer but do not have
Share Certificates immediately available or time will not permit all required
documents to reach the Depositary on or before the Expiration Date or the
procedures for book-entry transfer cannot be completed on time, such Common
Shares may nevertheless be tendered if shareholders comply with all of the
following guaranteed delivery procedures:
(a) the tender is made by or through an Eligible Institution;
(b) the Depositary receives, as described below, a properly completed and
signed Notice of Guaranteed Delivery, substantially in the form made available
by the Company, on or before the Expiration Date; and
(c) the Depositary receives the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Common Shares, in proper form for
transfer together with a properly completed and duly executed Letter of
Transmittal (or facsimile), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message) and any other documents
required by the Letter of Transmittal within three (3) trading days after the
date of execution of the Notice of Guaranteed Delivery.
Shareholders may deliver the Notice of Guaranteed Delivery by hand, mail
or facsimile transmission to the Depositary. The Notice of Guaranteed Delivery
must include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
Notwithstanding any other provision of the Offer, the Company will pay for
Common Shares only after the conditions to the Offer have been met and only
after timely receipt by the Depositary of Share Certificates for, or of
Book-Entry Confirmation with respect to, the Common Shares, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the appropriate Letter of
Transmittal. Accordingly, payment might not be made to all tendering
shareholders at the same time, and will depend upon when the Depositary receives
Share Certificates or Book-Entry Confirmation that the Common Shares have been
transferred into the Depositary's account at the Book-Entry Transfer Facility.
Backup Federal Income Tax Withholding
Under the backup federal income tax withholding laws applicable to certain
shareholders (other than certain
23
exempt shareholders, including, among others, all corporations and certain
foreign individuals), the Depositary may be required to withhold 31% of the
amount of any payments made to those shareholders pursuant to the Offer. To
prevent backup federal income tax withholding, shareholders must provide the
Depositary with their correct taxpayer identification number and certify that
they are not subject to backup federal income tax withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Instruction 9 of
the Letter of Transmittal.
Determination of Validity
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Common
Shares will be determined by the Company, in its sole discretion, which
determination will be final and binding on all parties. The Company reserves the
absolute right to reject any or all tenders determined by it not to be in proper
form or the acceptance of or payment for which may, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer or any defect or irregularity in any
tender of Common Shares of any particular shareholder whether or not similar
defects or irregularities are waived in the case of other shareholders.
The Company' interpretation of the terms and conditions of the Offer will
be final and binding. No tender of Common Shares will be deemed to have been
validly made until all defects and irregularities with respect to the tender
have been cured or waived by the Company. None of the Company nor any of its
affiliates or assigns, the Depositary or any other person or entity will be
under any duty to give any notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Binding Agreement
The Company' acceptance for payment of Common Shares tendered pursuant to
any of the procedures described above will constitute a binding agreement
between the Company and each individual shareholder upon the terms and subject
to the conditions of the Offer.
4. Withdrawal Rights
Except as described in this Section 4, tenders of Common Shares made in
the Offer are irrevocable. Shareholders may withdraw Common Shares that they
have previously tendered in the Offer at any time on or before the Expiration
Date.
In order for the withdrawal to be effective, shareholders must deliver a
written or facsimile transmission notice of withdrawal to the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase. Any such
notice of withdrawal must specify the shareholder's name, the number of Common
Shares that such shareholder wants to withdraw, and (if Share Certificates have
been tendered) the name of the registered holder of the Common Shares as shown
on the Share Certificate, if different from such shareholder's name. If Share
Certificates have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, shareholders must submit the
serial numbers shown on the particular certificates evidencing the Common Shares
to be withdrawn and an Eligible Institution, as defined in "THE OFFER--3.
Procedures for Accepting the Offer and Tendering Shares," must guarantee the
signature on the notice of withdrawal, except in the case of Common Shares
tendered for the account of an Eligible Institution. If Common Shares have been
tendered pursuant to the procedures for book-entry transfer set forth in "THE
OFFER--3. Procedures for Accepting the Offer and Tendering Shares," the notice
of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Common Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Shareholders may not rescind a withdrawal of Common
Shares. Any Common Shares that shareholders withdraw will be considered not
validly tendered for purposes of the Offer, but shareholders may tender their
Common Shares again at any time before the Expiration Date by following any of
the procedures described in "THE OFFER--3. Procedures for Accepting the Offer
and Tendering Shares."
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole discretion,
which determination will be final and binding. Neither the
24
Company, any of its respective affiliates or assigns, the Depositary or any
other person or entity will be under any duty to give any notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
5. Price Range of the Common Shares; Dividends
The Company's Common Shares are traded in the Nasdaq SCM under the symbol
"CURT." The following table sets forth for the periods indicated the range of
the high and low bid quotations for the Company's Common Shares as quoted on the
Nasdaq SCM. The reported bid quotations reflect inter-dealer prices, without
retail markup, markdown or commissions, and may not necessarily represent actual
transactions.
2001
HIGH LOW
---- ---
1st Quarter $0.75 $0.531
2nd Quarter to date $0.78 $0.47
2000
HIGH LOW
---- ---
1st Quarter $3.219 $1.875
2nd Quarter $2.0 $0.938
3rd Quarter $1.688 $0.906
4th Quarter $1.313 $0.625
1999
HIGH LOW
---- ---
1st Quarter $6.125 $5.25
2nd Quarter $7.125 $5.5
3rd Quarter $7.125 $1.75
4th Quarter $3.125 $1.531
The closing price for the Common Shares on April 27, 2001, was $0.44. See,
e.g., http://quotes.nasdaq.com.
Although the Company expects any untendered Common Shares to continue to
be traded after the consummation of the Offer, to the extent that the Common
Shares are traded, the prices of Common Shares may fluctuate depending on the
trading volume and the balance between buy and sell orders. The Company believes
that the trading market for the Common Shares that remain outstanding after the
Offer will be very limited. See "SPECIAL FACTORS-8. Certain Effects of the
Transaction --Reduced Liquidity of the Common Shares".
The Company and its affiliates, including its executive officers and
directors, will be prohibited under applicable federal securities law from
repurchasing additional Common Shares outside of the Offer until at least the
10th business day after the Expiration Date. Following such time, if any Common
Shares remain outstanding, the Company may purchase additional Common Shares in
the open market, in private transactions, through a subsequent offer, or
otherwise, any of which may be consummated at purchase prices higher or lower
than that offered in the Offer described in this Offer to Purchase. The decision
to repurchase additional Common Shares, if any, will depend upon many factors,
including the market price of the Common Shares, the results of the Offer, the
business and financial position of the Company, and general economic and market
conditions. Any such repurchase may be on the same terms or on terms more or
less favorable to shareholders than the terms of the Offer as described in this
Offer to Purchase. In addition, the Company intends to effectuate the Merger,
whereby the Common Shares will be converted into shares of NewCo, a private
company.
As of April 30, 2001, there were 18 registered holders of the Common
Shares. Dividends on the Common Shares have never been paid. There are no
accrued dividends on the Common Shares. The Company has no present
25
intention to pay dividends on the Common Shares in the near future.
6. Possible Effects of the Offer on the Market for the Common Shares and
Exchange Act Registration
The purchase of the Common Shares pursuant to the Offer will reduce the
number of Common Shares that might otherwise be traded and the number of holders
of Common Shares, which could adversely affect the liquidity and market value of
the remaining Common Shares held by the public and have other consequences with
respect to the Exchange Act registration of the Common Shares. See "SPECIAL
FACTORS-8. Certain Effects of the Transaction" and "THE OFFER-- 8. Conditions to
the Offer."
7. Certain Information Concerning Curtis International Ltd.
General
The Company is an Ontario corporation with its principal executive offices
located at 315 Attwell Drive, Etobicoke, Ontario, M9W 5C1 and its phone number
is (416) 674-2123.
Directors and Executive Officers
Each of the persons named below was elected to serve as a member of the
Company's Board of Directors until the 2001 Annual Meeting of Stockholders or
until his successor shall have been duly elected and qualified. The names of the
current directors and certain information about them, as of May 30, 2001, are
set forth below.
Name Age Position
- ---- --- --------
Aaron Herzog 40 President, Chief Executive Officer and
Director
Jacob Herzog 49 Chairman, Treasurer and Secretary
David Ben-David 39 Director
Set forth below is a biographical description of each director and
executive officer of the Company based on information supplied by each of them.
Aaron Herzog is a co-founder of Curtis International Ltd., and has served
as the Company's President, Chief Executive Officer and Director since its
formation in 1990. Mr. Herzog also acts as sales director of the Company. Mr.
Herzog earned a degree in Management from McGill University in 1981.
Jacob Herzog is a co-founder of Curtis International Ltd., and has served
as the Company's Chairman, Treasurer, Secretary and Director since its formation
in 1990. Mr. Herzog has been in the consumer electronics business since the
early 1970's.
David Ben-David has been a Director of the Company since August 1998. From
July 1990 - June 1997, Mr. Ben-David served as Vice President and Chief
Financial Officer of NSI Communications, Inc. From June 1997 -present, Mr.
Ben-David has served as President and Chief Operating Officer of NSI
Communications, Inc. NSI Communications, Inc. is a manufacturer of
communications products. Mr. Ben-David earned a B.A. in Economics in 1983 from
Bar Ilan University in Israel, an M.B.A. in 1987 from McGill University and a
Public Accountant degree in 1989 from McGill University.
Aaron Herzog and Jacob Herzog are brothers. There are no other family
relationships among the Company's directors and executive officers.
During the last five years, to the best knowledge of the Company, none of
the persons listed above has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding 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.
26
Available Information
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of certain dates
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
shareholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and also should be available for inspection at the Commission's
regional offices located at Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may also be obtained (i) by mail, upon
payment of the Commission's customary fees, by writing to its principal office
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or (ii) at
the Commission's world-wide web site at www.sec.gov.
Historical Financial Information
The audited financial statements set forth on pages F-2 through F-20 of
the Company' Form 10-K for the fiscal year ended May 31, 2000 and the unaudited
financial statements in the Company' Forms 10-Q for the fiscal quarters ended
August 31, 2000, November 30, 2000 and February 28, 2001 are hereby incorporated
by reference into this Offer to Purchase. Such reports, documents and other
financial information may be inspected and copies may be obtained from the
Commission in the manner set forth above.
Summary Financial Information
A summary of the financial information is provided below. For complete
rendition of such financial information, see immediately above.
Income Statement Data:
February 28,
2001* May 31, 2000 May 31, 1999
---------- ------------ ------------
Net Sales ............................ 35,873,160 $42,612,206 $39,309,062
Gross Margin ......................... 5,963,716 7,670,593 7,266,563
Other Expenses ....................... 6,798,378 4,878,426 4,814,041
Income from continuing operations .... (834,662) 2,792,167 2,452,522
Income from continuing operations
per share ............................ (0.16) 0.52 0.53
Net income ........................... (443,798) $1,649,105 1,343,757
Basic Earnings Per Share ............. (0.08) 0.31 0.29
Weighed Average Number of Common
Shares ............................... 5,2297,426 5,373,145 4,591,162
* As of the nine months ended on such date
27
Balance Sheet Data:
February 28,
2001 May 31, 2000 May 31, 1999
----------- ------------ ------------
Current Assets ....................... 11,775,746 $13,227,924 $13,777,744
Total assets ......................... 12,484,516 $14,079,208 $14,663,946
Total liabilities .................... 1,638,662 $2,512,157 $4,494,470
Shareholders' Equity:
February 28,
2001 May 31, 2000 May 31, 1999
----------- ------------ ------------
Capital Stock ........................ $7,236,199 $7,342,163 $7,342,163
Cumulative Translation
Adjustment ........................... (470,027) (298,592) (47,062)
Retained Earnings .................... 4,079,682 4,253,480 2,874,375
Shareholders'
equity ............................... $10,845,854 $11,567,051 $10,169,476
Book Value per Common Share .......... $2.05 $2.15 $2.21
Total Liabilities and Shareholders'
Equity ............................... $12,484,516 $14,079,208 $14,663,946
8. Conditions to the Offer
Notwithstanding any other term of the Offer, the Company will not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Company's obligation to pay for or return tendered Common
Shares after the termination or withdrawal of the Offer), pay for any Common
Shares not theretofore accepted for payment or paid for, and may terminate or
amend the Offer, if:
(1) there will be pending or overtly threatened any suit, action or proceeding
brought by or on behalf of any governmental entity, or any suit, action or
proceeding brought by or on behalf of any shareholder of the Company or any
other person or party (A) challenging the acquisition of any Common Shares
pursuant to the Offer, seeking to restrain or prohibit the making or
consummation of the Offer, or alleging that any such acquisition or other
transaction relates to, involves or constitutes a breach of fiduciary duty by
the Company' directors or a violation of federal securities law or applicable
corporate law or (B) seeking to impose a material condition to the Offer which
would be adverse to the Company' shareholders;
(2) there will be any statute, rule, regulation, judgment, order or injunction
enacted, entered, enforced, promulgated or deemed applicable to the Offer or any
other action will be taken by any governmental entity or court, that is
reasonably likely to result, in any of the consequences referred to in clauses
(A) and (B) of paragraph (2) above;
(3) there will have occurred (A) any general suspension of, shortening of hours
for or limitation on prices for trading in the Common Shares in the
over-the-counter market (whether or not mandatory), (B) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (C) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States and having a material adverse effect on the Company
or materially adversely affecting (or materially delaying) the consummation of
the Offer, (D) any limitation or proposed limitation (whether
28
or not mandatory) by any U.S. governmental authority or agency, or any other
event, that materially adversely affects generally the extension of credit by
banks or other financial institutions, or (E) in the case of any of the
situations described in clauses (A) through (D) inclusive existing at the date
of commencement of the Offer, a material escalation or worsening thereof; or
(4) there will have occurred or be likely to occur any event or series of events
that, in the reasonable judgment of the Company, would or might prohibit,
prevent, restrict or delay consummation of the Offer or that will, or is
reasonably likely to, impair the contemplated benefits to the Company of the
Offer, or otherwise result in the consummation of the Offer not being or not
being reasonably likely to be in the best interest of the Company; which, in the
reasonable judgment of the Company, and regardless of the circumstances giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with such acceptance for payment or payment for Common Shares.
The foregoing conditions are for the sole benefit of the Company and its
affiliates and may be asserted by the Company regardless of the circumstances
giving rise to such condition or may, prior to the expiration of the Offer, be
waived by the Company in whole or in part at any time and from time to time in
its sole discretion. If any condition to the Offer is not satisfied or waived by
the Company prior to the Expiration Date, the Company reserves the right (but
shall not be obligated), subject to applicable law, (i) to terminate the Offer
and return the tendered Common Shares to the tendering shareholders; (ii) to
waive all unsatisfied conditions and accept for payment and purchase all Common
Shares that are validly tendered (and not withdrawn) prior to the Expiration
Date; (iii) to extend the Offer and retain the Common Shares that have been
tendered during the period for which the Offer is extended; or (iv) to amend the
Offer. The failure by the Company at any time to exercise any of the foregoing
rights will not be deemed a waiver of or otherwise affect any other rights and
each such right will be deemed an ongoing right which may be asserted at any
time and from time to time. Any determination by the Company concerning the
events described above will be final and binding upon all parties.
The Company acknowledges that the Commission believes that (a) if the
Company is delayed in accepting the Common Shares it must either extend the
Offer or terminate the Offer and promptly return the Common Shares and (b) the
circumstances in which a delay in payment is permitted are limited and do not
include unsatisfied conditions of the Offer.
9. Legal Matters
The Company is not aware of any license or regulatory permit that appears
to be material to the business of the Company and that might be adversely
affected by the Company' acquisition of Common Shares pursuant to the Offer, or
of any approval or other action by any governmental, administrative or
regulatory agency or authority, domestic or foreign, that would be required for
the acquisition or ownership of Common Shares by the Company pursuant to the
Offer. Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought and if such approval
could not be obtained in a timely manner, the Offer would be terminated.
10. Fees and Expenses
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Offer will be paid by the party incurring such fees and
expenses, except that the Company will pay for all fees and expenses relating to
the filing, printing and mailing of the documents in connection with the Offer.
Estimated fees and expenses to be incurred by the Company in connection with the
Offer are as follows:
Depositary Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,500
Legal, Accounting and Other Professional Fees . . . . . . . . . . . . . 80,000
Printing and Mailing Costs . . . . . . . . . . . . . . . . . . . . . . 7,500
Commission Filing Fees. . . . . . . . . . . . . . . . . . . . . . . . . 1,077
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
=====
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,077
=======
29
Directors, officers and regular employees of the Company and its
affiliates (who will not be specifically compensated for such services) may
contact shareholders by mail, telephone, telex, telegram messages, mailgram
messages, datagram messages and personal interviews regarding the Offer and may
request brokers, dealers and other nominees to forward this Offer to Purchase
and related materials to beneficial owners of Common Shares. The Company will
reimburse its affiliates for the time that the employees of such affiliates
spend performing such services.
Except as set forth above, neither the Company nor any person acting on
its behalf has employed, retained or compensated any person or class of persons
to make solicitations or recommendations on its behalf with respect to the
Offer.
11. Miscellaneous
The Depositary for the Offer is Continental Stock Transfer & Trust
Company. All deliveries, correspondence and questions sent or presented to the
Depositary relating to the Offer should be directed to the address or telephone
number set forth on the back cover of this Offer to Purchase. The Company will
pay the Depositary reasonable and customary compensation for its services in
connection with the Offer, plus reimbursement for reasonable out-of-pocket
expenses.
The Depositary does not assume any responsibility for the accuracy or
completeness of the information concerning the Company or its affiliates
contained in this Offer to Purchase or for any failure by the Company to
disclose events that may have occurred and may affect the significance or
accuracy of such information.
Brokers, dealers, commercial banks and trust companies will be reimbursed
by the Company for customary mailing and handling expenses incurred by them in
forwarding material to their customers. The Company will not pay any fees or
commissions to any broker, dealer or other person in connection with the
solicitation of tenders of Common Shares pursuant to the Offer.
The Company is not aware of any jurisdiction where the making of the Offer
is prohibited by any administrative or judicial action pursuant to any valid
state statute. If the Company becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Common Shares, the
Company will make a good faith effort to comply with that state statute. If,
after a good faith effort, the Company cannot comply with the state statute, it
will not make the Offer to, nor will it accept tenders from or on behalf of, the
holders of Common Shares in that state.
The Company has filed with the Commission a combined Tender Offer
Statement on Schedule TO-I and Rule 13E-3 Transaction Statement on Schedule
13E-3 together with exhibits, furnishing certain additional information with
respect to the Offer, and may file amendments to such Schedule TO-I/13E-3. The
Schedule TO-I/13E-3 and any exhibits or amendments may be examined and copies
may be obtained from the Commission in the same manner as described in "THE
OFFER--7. Certain Information Concerning the Company" with respect to
information concerning the Company except that copies will not be available at
the regional offices of the Commission.
The Company has not authorized any person to give any information or to
make any representation on behalf of the Company not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, shareholders
should not rely on any such information or representation as having been
authorized.
Neither the delivery of this Offer to Purchase nor any purchase pursuant
to the Offer will under any circumstances create any implication that there has
been no change in the affairs of the Company since the date as of which
information is furnished or the date of this Offer to Purchase.
30
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
31
Exhibit (A)(2)
April 30, 2001
Board of Directors
Curtis International Ltd.
315 Atwell Drive
Toronto, ON M9W 5C1
Dear Gentlemen:
We understand that Curtis International Ltd. ("Curtis" or the "Company")
and Curtis Acquisition Corp. (the "Acquiror") intend, subject to approval by its
shareholders, to undertake the following: (i) the Company would commence a
tender offer (the "Tender Offer") for all of the outstanding shares of the
Company's common stock (the "Common Shares"), other than those held by Jacob
Herzog, Aaron Herzog, the A&E Herzog Family Trust and the Herzog Family Trust
(collectively, the "Herzog Group"), for $0.80 per share, net to the seller in
cash (the "Consideration") and (ii) the Company would be merged with the
Acquiror in a merger (the "Merger"), in which each Common Share not acquired in
the Tender Offer, other than Company Shares held in treasury or held by the
Acquiror or as to which dissenters rights have been perfected, would be
converted into the right to receive the Consideration. The Tender Offer and the
Merger, taken together, are referred to as the "Transaction." Further, we
understand that the Herzog Group beneficially owns approximately 67% of the
Company's currently outstanding Common Shares.
You have asked for our opinion, as investment bankers, as to whether the
sum of $0.80 per share, is fair to the Company's shareholders, excluding the
Herzog Group, from a financial point of view.
Rodman & Renshaw, Inc., as part of our investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. We have acted as financial
advisor to the Board of Directors of Curtis in connection with the Transaction
and have received fees for financial advisory services upon execution of our
financial advisory engagement with the Company and will receive additional fees
for our financial advisory services upon the delivery of this opinion.
In arriving at the opinion set forth below, with respect to the Company,
we have, among other things: (a) reviewed certain publicly available historical
business and financial information relating to the Company which we deemed to be
relevant; (b) reviewed, from a financial point of view, the Offer to Purchase;
(c) reviewed certain publicly available financial and operating data relating to
the Company's
business and prospects, which historical information and data the senior
management of Curtis has represented to us fairly represents the financial
condition and operating results of the Company as of the dates presented; (d)
discussed certain financial information and the business and prospects of the
Company with Curtis's senior management; (e) reviewed the reported historical
and recent market prices and trading volumes of the Curtis Common Shares; (f)
reviewed the listing status of the Company's Common Shares and the potential
impact of delisting on the value of the Company's Common Shares; (g) compared
the financial, operating and stock price performance of Curtis with certain
other companies deemed comparable; (h) reviewed the financial terms, to the
extent publicly available, of certain other acquisition transactions deemed
comparable; and (i) made such other analyses and examinations as we deemed
necessary or appropriate. We also have taken into account our assessment of
economic, market and financial conditions generally and within the industry in
which Curtis is engaged.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all information supplied or otherwise made available to us by
Curtis or obtained by us from other sources, and we have relied upon the
representations of senior management of the Company that they are unaware of any
information or facts that would make the information provided to us incomplete
or misleading. We have not independently verified such information, undertaken
an independent appraisal of the assets or liabilities (contingent or otherwise)
of Curtis nor have we been furnished with any such appraisals. In addition, we
have relied on representations from senior management of Curtis (a) that the
distribution to be made to each holder of Common Shares of Curtis will be made
as promptly after closing as is practicable; and (b) that the Common Shares of
Curtis will continue to be traded in the over-the-counter market until such
distribution. With respect to our discussions pertaining to future prospects and
our analysis of the available financial forecasts of the Company which we have
reviewed, we have relied on the representations of the senior management of
Curtis that such available forecasts are reasonable, reflect the best currently
available estimates and judgments of senior management of Curtis as to the
future financial position of the Company and that: (a) as to the respective
forecasts, they are unaware of any facts that would make such information
incomplete, in any material respect, or misleading; and (b) there have been no
material developments in the business (financial or otherwise) or prospects of
the Company, since February 28, 2001.
Our opinion is necessarily based on economic, market and other conditions
as they exist, and the information made available to us, as of the date hereof.
We disclaim any undertaking or obligation to advise any person of any change in
any fact or matter affecting our opinion that may come or be brought to our
attention after the date of this opinion. In the performance of our financial
advisory services, we were not engaged to solicit, and did not solicit, interest
from any party with respect to the acquisition of Curtis or any of its assets.
No limitations were imposed upon us by Curtis with respect to the investigations
to be made or procedures to be followed by us in rendering our opinion.
The opinion expressed herein does not constitute a recommendation as to
any action the Board of Directors of Curtis or any shareholder of Curtis should
take in connection with the Transaction. Further, we express no opinion herein
as to the structure, terms or effect of any other aspect of the Transaction,
including, without limitation, the tax consequences thereof.
It is understood that this letter is for the information of the Board of
Directors of Curtis in connection with its evaluation of the fairness, from a
financial point of view, as of the date hereof, of the distribution to be made
to the holders of Curtis Common Shares pursuant to the Transaction and
for inclusion in the Offer to Purchase. Without limiting the foregoing, in
rendering this opinion, we have not been engaged to act as an agent or fiduciary
for the Company's common shareholders or any other third party.
Based on and subject to the foregoing, we are of the opinion that the sum
of $0.80 per share, is fair to the Company's shareholders, excluding the Herzog
Group, from a financial point of view.
Very truly yours,
RODMAN & RENSHAW, INC.
By: /s/ John J. Borer
--------------------------------
John J. Borer, III
Senior Managing Director
- --------------------------------------------------------------------------------
Exhibit (A)(8)
Presentation to:
Board of Directors of Curtis International Ltd.
April 30, 2001
This fairness analysis, as presented to Curtis International Ltd.'s ("Curtis" or
the "Company") Board of Directors (the "Board") on April 30, 2001, has been
prepared by Rodman & Renshaw, Inc. ("Rodman") in support of our opinion as to
the fairness from a financial point of view of the consideration to be paid to
the minority shareholders of Curtis by the Company in connection with the Herzog
Group's acquisition of the remaining shares of Curtis not already owned by the
Herzog Group. This analysis is for the confidential use of the Board only in
their evaluation of the proposed transaction. Any other use of this analysis or
any publication of this analysis without Rodman's prior written consent is
strictly prohibited, provided, however, that Rodman hereby consents to the
inclusion of and references to this analysis in its entirety in the Schedule TO
and Schedule 13E-3 relating to the proposed transaction.
In the preparation of this analysis, Rodman reviewed business and financial
information of Curtis as provided by the Company and discussed this information
with management of the Company. Rodman has not independently verified the
completeness or accuracy of any of the information it has relied upon and has
assumed that the information reflects management's best estimates and judgment.
Rodman has not undertaken an independent appraisal of the assets or liabilities
(contingent or otherwise) of Curtis nor have we been furnished with any such
appraisals.
In arriving at its conclusion, Rodman did not attribute any particular weight to
the analyses or factors it considered, but rather made qualitative judgments as
to the significance and relevancy of each piece of analysis and factor. For the
purposes of this analysis, Rodman chose not to review the Company's projections;
accordingly, we did not perform a discounted cash flow analysis. Our opinion,
this analysis, and any conclusions drawn therefrom, do not constitute a
recommendation as to any action the Board or any shareholder of Curtis should
take in connection with the proposed transaction. Further, we express no opinion
herein as to the structure, terms or effect of any other aspect of the
transaction, including, without limitation, the tax consequences thereof. Our
opinion, this analysis, and any conclusions drawn therefrom, are necessarily
based on economic, market and other conditions as they exist, and the
information made available to us, as of the date hereof.
Table of Contents
- --------------------------------------------------------------------------------
Section:
I. Executive Summary
II. Situation Analysis
III. Valuation Analysis
Exhibits:
A. Premiums Paid Analysis
B. Comparable Company Analysis
C. Comparable Transaction Analysis
I. EXECUTIVE SUMMARY
Transaction Summary
- --------------------------------------------------------------------------------
o Rodman & Renshaw, Inc. ("Rodman") is pleased to present to the Board of
Directors of Curtis International Ltd. ("Curtis" or the "Company") an
analysis of the proposed tender offer (the "Transaction")
o The terms of the Transaction are:
- Curtis is offering to purchase all outstanding shares of the
Company's common stock (the "Common Shares"), excluding the Common
Shares owned by Aaron Herzog, Jacob Herzog, the A&E Herzog Family
Trust and the Herzog Family Trust (collectively, the "Herzog
Group"), for $0.80 per share in cash (the "Transaction Price")
- The Herzog Group will found a new company, Curtis Acquisition Corp.
("Curtis Acquisition"), to be 100% owned by the Herzog Group, which
will be merged with the Company, with the merged companies forming a
new entity ("Newco")
- Any Common Shares not tendered will be converted into redeemable,
non-voting, preferred shares of Newco, which will immediately be
redeemed for $0.80 per share
Company History
- --------------------------------------------------------------------------------
o Curtis designs, distributes and markets value-priced consumer electronic
products, including telephones, answering machines, caller ID systems, CD
and cassette systems, portable televisions and computer accessories
- The Company's products are sold under the Curtis and CTP Worx brand
names
o The Company's customers consist of mass merchandisers, drug store chains,
specialty marketers, consumer electronics retailers and appliance and
department stores
- Recently, several of the Company's customers have filed for
bankruptcy, resulting in a negative impact on the Company's current
operations and future prospects
o Curtis completed its initial public offering of 1,650,000 Common Shares at
$5.00 per share on November 12, 1998
- The lead manager was Joseph Stevens & Company, Inc. and the
co-manager was Royce Investment Group, Inc.
- To the best of Rodman's knowledge, the Company has never been
covered by any research analyst
o The Herzog Group currently holds approximately 67% of the outstanding
Common Shares
o The closing price of the Common Shares on April 27, 2001 was $0.44
Valuation Summary
- --------------------------------------------------------------------------------
o The Transaction Price represents a premium of 81.8% over the closing price
of the Common Shares on April 27, 2001
Current Market Valuation
Current Price Per Share as of 4/27/01 $ 0.44
Fully Diluted Shares Outstanding:
Common Stock 5,263,245
Dilutive Securities (a) --
----------
Total 5,263,245
Total Market Value $2,315,828
Less Cash 1,124,995
----------
Total Market Capitalization $1,190,833
Implied Company Valuation
Transaction Price Per Share $ 0.80
Fully Diluted Shares Outstanding:
Common Stock 5,263,245
Dilutive Securities (a) --
----------
Total 5,263,245
Total Market Value $4,210,596
Less Cash 1,124,995
----------
Total Market Capitalization $3,085,601
- ----------
(a) Calculated using treasury method. All outstanding options and warrants
have exercise prices of $1.75 or greater.
Premium Paid
Date Price Premium
- ----------------- ------ -------
Current (4/27/01) $ 0.44 81.8%
One Day Prior $ 0.44 81.8%
One Week Prior $ 0.57 40.4%
One Month Prior $ 0.63 28.0%
II.SITUATION ANALYSIS
Historical Income Statement Comparison
- --------------------------------------------------------------------------------
o Curtis experienced a significant downturn in its operating results in the
third quarter of fiscal 2001, causing an erosion of book value
Q4 1999 Q1 2000 Q2 2000 Q3 2000
----------- ----------- ----------- -----------
Revenue $ 6,011,615 $10,413,498 $18,624,623 $ 7,175,725
Gross Profit 1,436,145 1,910,827 3,010,234 1,290,856
Gross Margin 23.9% 18.3% 16.2% 18.0%
EBIT 794,905 1,063,526 1,681,285 304,724
EBIT Margin 13.2% 10.2% 9.0% 4.2%
EBITDA 816,347 1,078,373 1,697,909 338,927
EBITDA Margin 13.6% 10.4% 9.1% 4.7%
Net Income 156,280 442,899 818,818 212,584
Net Margin 2.6% 4.3% 4.4% 3.0%
Q4 2000 Q1 2001 Q2 2001 Q3 2001
----------- ----------- ----------- -----------
Revenue $ 6,398,360 $10,285,677 $22,276,262 $ 3,311,221
Gross Profit 1,458,676 1,846,747 3,574,236 542,733
Gross Margin 22.8% 18.0% 16.0% 16.4%
EBIT 342,319 803,270 2,061,061 (272,077)
EBIT Margin 5.4% 7.8% 9.3% -8.2%
EBITDA 439,279 829,490 2,087,995 (245,507)
EBITDA Margin 6.9% 8.1% 9.4% -7.4%
Net Income 174,804 356,167 (618,233) (181,732)
Net Margin 2.7% 3.5% -2.8% -5.5%
Daily Stock Price and Volume
- --------------------------------------------------------------------------------
o Curtis' stock price has declined by over 90% from its initial public
offering price of $5.00 on November 12, 1998
- --------------------------------------------------------------------------------
CURT Stock Price and Volume
CURT Volume
---- ------
Nov-98 5.25 83600
Nov-98 5.188 97700
Nov-98 5.375 37600
Nov-98 5.313 112500
Nov-98 5.438 62400
Nov-98 5.375 47200
Nov-98 5.375 17600
Nov-98 5.438 35200
Nov-98 5.375 60900
Nov-98 5.438 11200
Nov-98 5.375 6500
Nov-98 5.75 29000
Dec-98 5.375 21800
Dec-98 5.375 32700
Dec-98 5.375 13500
Dec-98 5.5 78400
Dec-98 5.625 13500
Dec-98 5.5 27700
Dec-98 5.5 25100
Dec-98 5.5 65100
Dec-98 5.5 63500
Dec-98 5.5 43900
Dec-98 5.5 164700
Dec-98 6.063 111700
Dec-98 5.75 85100
Dec-98 5.75 53700
Dec-98 5.75 21000
Dec-98 5.875 60200
Dec-98 5.813 59300
Dec-98 6 7300
Dec-98 5.75 45600
Dec-98 5.75 24900
Dec-98 5.5 10400
Dec-98 5.5 9000
Jan-99 5.75 10200
Jan-99 5.5 10600
Jan-99 5.5 37200
Jan-99 5.5 16400
Jan-99 5.625 32000
Jan-99 5.375 8800
Jan-99 5.25 17100
Jan-99 5.25 11100
Jan-99 5.875 28100
Jan-99 5.875 80900
Jan-99 5.75 19000
Jan-99 5.875 37400
Jan-99 5.5 16000
Jan-99 5.563 37900
Jan-99 5.563 38400
Jan-99 5.75 60700
Jan-99 5.875 27700
Jan-99 6.125 25700
Jan-99 5.875 34100
Feb-99 5.875 9400
Feb-99 5.75 23500
Feb-99 5.75 5900
Feb-99 5.75 13200
Feb-99 5.75 9200
Feb-99 5.75 23000
Feb-99 5.75 32700
Feb-99 5.75 36700
Feb-99 6 24200
Feb-99 5.75 14600
Feb-99 5.75 9700
Feb-99 5.75 38400
Feb-99 5.75 17500
Feb-99 6 14500
Feb-99 6 70600
Feb-99 5.75 45400
Feb-99 5.75 9700
Feb-99 5.5 33700
Feb-99 5.625 27600
Mar-99 5.625 15400
Mar-99 5.625 19700
Mar-99 5.875 42300
Mar-99 5.625 4200
Mar-99 5.813 32200
Mar-99 5.625 9300
Mar-99 5.625 5000
Mar-99 5.875 8800
Mar-99 5.75 21900
Mar-99 5.625 9000
Mar-99 5.625 40000
Mar-99 5.875 38200
Mar-99 5.5 32100
Mar-99 5.5 10000
Mar-99 5.5 6900
Mar-99 5.5 33400
Mar-99 5.625 6500
Mar-99 5.5 3200
Mar-99 5.5 15000
Mar-99 5.625 12100
Mar-99 5.625 7900
Mar-99 5.875 11000
Mar-99 5.5 13600
Apr-99 5.5 3900
Apr-99 5.75 3100
Apr-99 5.5 13500
Apr-99 5.5 24100
Apr-99 5.875 7000
Apr-99 5.875 6300
Apr-99 5.688 6100
Apr-99 5.688 4100
Apr-99 5.688 7500
Apr-99 5.75 2700
Apr-99 5.75 14500
Apr-99 5.5 20700
Apr-99 5.5 7800
Apr-99 5.594 38800
Apr-99 5.594 8500
Apr-99 5.625 3700
Apr-99 5.75 36700
Apr-99 6.125 30600
Apr-99 5.875 4400
Apr-99 6.125 21100
Apr-99 6 13700
May-99 6 33600
May-99 6 11400
May-99 6.063 25400
May-99 6.063 32900
May-99 6 5100
May-99 6.063 15800
May-99 6.188 18200
May-99 6.063 19100
May-99 6 12100
May-99 6.063 11200
May-99 6 27700
May-99 6 9300
May-99 6 63500
May-99 6 26200
May-99 6 12900
May-99 6.125 26100
May-99 6.125 21000
May-99 6 3800
May-99 6.25 33000
May-99 6 101500
Jun-99 6 8200
Jun-99 6 21300
Jun-99 6 15400
Jun-99 6 27200
Jun-99 6 2000
Jun-99 6.063 23300
Jun-99 6.063 20000
Jun-99 6 8900
Jun-99 6 11500
Jun-99 6.063 4100
Jun-99 6.313 65300
Jun-99 6.438 139800
Jun-99 6.438 54100
Jun-99 6.438 33100
Jun-99 6.438 56000
Jun-99 6.625 144800
Jun-99 6.563 105700
Jun-99 7 123500
Jun-99 7.125 184900
Jun-99 7 64200
Jun-99 7.125 32700
Jun-99 6.5 74800
Jul-99 7 50100
Jul-99 6.875 27800
Jul-99 6.75 29000
Jul-99 6.875 55000
Jul-99 7 31300
Jul-99 7 5200
Jul-99 6.75 15600
Jul-99 6.75 13700
Jul-99 6.75 6000
Jul-99 6.75 5900
Jul-99 7.125 16400
Jul-99 6.75 9800
Jul-99 6.75 11500
Jul-99 6.75 24200
Jul-99 5.969 92100
Jul-99 5.875 11600
Jul-99 5.875 7100
Jul-99 5.875 25500
Jul-99 5.75 8100
Jul-99 5.5 17700
Jul-99 5.5 3000
Aug-99 5.5 7100
Aug-99 5 23200
Aug-99 4.313 24600
Aug-99 4.375 5500
Aug-99 4.25 7200
Aug-99 4.25 11500
Aug-99 4.25 5000
Aug-99 4.125 7800
Aug-99 4.5 10700
Aug-99 4 20000
Aug-99 3.75 11900
Aug-99 4 4500
Aug-99 3.875 9200
Aug-99 3.75 9600
Aug-99 4.125 3200
Aug-99 3.75 13400
Aug-99 3.875 43000
Aug-99 3.75 29200
Aug-99 3.75 55700
Aug-99 3.75 16700
Aug-99 3.063 37000
Aug-99 2.938 21500
Sep-99 2.406 150100
Sep-99 2.25 184900
Sep-99 2.25 38800
Sep-99 2.031 87200
Sep-99 2.406 133500
Sep-99 2.5 63700
Sep-99 2.594 64800
Sep-99 2.438 26800
Sep-99 2.5 44600
Sep-99 2.688 36400
Sep-99 2.5 16900
Sep-99 2.25 8800
Sep-99 2.313 15400
Sep-99 2.313 35800
Sep-99 2.25 36300
Sep-99 2.25 68400
Sep-99 2.031 10300
Sep-99 2.25 33100
Sep-99 2 27600
Sep-99 1.75 29700
Sep-99 1.875 2800
Oct-99 1.875 5400
Oct-99 1.938 29200
Oct-99 1.75 37400
Oct-99 1.813 21200
Oct-99 1.844 10000
Oct-99 1.625 19000
Oct-99 1.813 5400
Oct-99 1.875 14700
Oct-99 1.688 18100
Oct-99 1.938 28600
Oct-99 1.969 11900
Oct-99 1.813 27900
Oct-99 2 4400
Oct-99 1.813 9700
Oct-99 1.813 400
Oct-99 1.875 7800
Oct-99 1.875 52600
Oct-99 1.75 30000
Oct-99 1.813 19000
Oct-99 1.813 4400
Oct-99 1.75 27200
Nov-99 1.844 1800
Nov-99 1.938 19400
Nov-99 1.75 16500
Nov-99 1.875 51800
Nov-99 1.75 21100
Nov-99 1.75 16900
Nov-99 1.75 5800
Nov-99 1.75 18200
Nov-99 1.688 36500
Nov-99 1.531 9600
Nov-99 1.563 26700
Nov-99 1.563 12600
Nov-99 1.688 19500
Nov-99 1.75 14500
Nov-99 1.875 27400
Nov-99 1.688 86100
Nov-99 1.719 22400
Nov-99 1.688 12400
Nov-99 1.563 11500
Nov-99 1.563 28700
Nov-99 1.75 15600
Dec-99 1.813 20200
Dec-99 1.563 21300
Dec-99 1.75 28700
Dec-99 1.875 25100
Dec-99 1.875 15400
Dec-99 1.813 28300
Dec-99 1.969 41800
Dec-99 2 30500
Dec-99 2.969 291700
Dec-99 3.125 322900
Dec-99 2.875 63700
Dec-99 2.969 58100
Dec-99 2.563 50500
Dec-99 2.375 37900
Dec-99 2.313 43800
Dec-99 2.5 20000
Dec-99 2.25 31800
Dec-99 2.594 85900
Dec-99 2.813 118400
Dec-99 2.781 33100
Dec-99 2.5 56700
Dec-99 2 60100
Jan-00 2.469 45800
Jan-00 2.375 32100
Jan-00 2.375 21300
Jan-00 2.438 18100
Jan-00 2.375 19300
Jan-00 2.375 23700
Jan-00 2.5 61500
Jan-00 2.5 41900
Jan-00 2.625 18500
Jan-00 2.5 18700
Jan-00 2.625 51300
Jan-00 2.875 60100
Jan-00 2.906 75700
Jan-00 3 97400
Jan-00 3 141200
Jan-00 3.125 37100
Jan-00 3.219 46000
Jan-00 3.188 36200
Jan-00 2.875 21100
Jan-00 2.875 11000
Feb-00 2.75 5100
Feb-00 2.5 42100
Feb-00 2.5 3500
Feb-00 2.531 32400
Feb-00 2.688 13000
Feb-00 2.781 13200
Feb-00 2.719 10400
Feb-00 2.625 23900
Feb-00 2.438 43300
Feb-00 2.625 36200
Feb-00 2.375 8500
Feb-00 2.625 24100
Feb-00 2.5 4100
Feb-00 2.438 18600
Feb-00 2.25 74500
Feb-00 2.313 5900
Feb-00 2.219 19600
Feb-00 2.063 8700
Feb-00 2.188 30200
Feb-00 2.063 2200
Mar-00 1.875 96700
Mar-00 2.25 28400
Mar-00 2.219 34200
Mar-00 2.063 8100
Mar-00 2.063 22700
Mar-00 2.031 2200
Mar-00 2.031 27300
Mar-00 2.063 23300
Mar-00 2 74700
Mar-00 2 15400
Mar-00 2.188 57900
Mar-00 2.188 32700
Mar-00 2.125 11900
Mar-00 2.313 69600
Mar-00 2.125 39200
Mar-00 2.188 9400
Mar-00 2.25 28400
Mar-00 2.125 48400
Mar-00 2.125 18000
Mar-00 2 20600
Mar-00 2 27400
Mar-00 2 47300
Mar-00 1.875 34000
Apr-00 1.813 38800
Apr-00 1.75 52600
Apr-00 1.781 12900
Apr-00 1.938 36700
Apr-00 1.969 1100
Apr-00 1.969 14100
Apr-00 1.813 35600
Apr-00 1.5 46400
Apr-00 1.563 17400
Apr-00 2 48100
Apr-00 1.5 42300
Apr-00 1.375 44800
Apr-00 1.406 15300
Apr-00 1.531 19900
Apr-00 1.5 16800
Apr-00 1.438 41000
Apr-00 1.25 5100
Apr-00 1.375 6600
Apr-00 1.375 23500
May-00 1.531 23900
May-00 1.375 19600
May-00 1.625 20200
May-00 1.5 4700
May-00 1.406 3400
May-00 1.5 32800
May-00 1.5 12100
May-00 1.406 51400
May-00 1.375 6300
May-00 1.313 16500
May-00 1.375 4300
May-00 1.281 22000
May-00 1.438 6800
May-00 1.313 9600
May-00 1.438 3800
May-00 1.188 36500
May-00 1.031 115800
May-00 1.188 8700
May-00 1.25 29400
May-00 1.25 11000
May-00 1.313 13300
May-00 1.25 9300
Jun-00 1.25 12100
Jun-00 1.25 8900
Jun-00 1.313 13300
Jun-00 1.25 18300
Jun-00 1.25 1000
Jun-00 1.188 1600
Jun-00 1.188 17300
Jun-00 1.188 900
Jun-00 1.25 11200
Jun-00 1.25 7000
Jun-00 1.25 23200
Jun-00 1.313 8700
Jun-00 1.188 26000
Jun-00 1.125 9600
Jun-00 1.125 33500
Jun-00 1 26200
Jun-00 1.063 2300
Jun-00 1.063 8700
Jun-00 1 1500
Jun-00 0.938 3200
Jun-00 1 1900
Jun-00 1.094 25000
Jul-00 1.094 7400
Jul-00 1.219 11600
Jul-00 1.125 30500
Jul-00 1.156 5200
Jul-00 1.094 7800
Jul-00 1.125 35800
Jul-00 1.031 9400
Jul-00 1.094 25700
Jul-00 1.063 9400
Jul-00 1 8700
Jul-00 1.031 23100
Jul-00 1.031 700
Jul-00 1.031 6900
Jul-00 1.188 5400
Jul-00 1.188 11700
Jul-00 1 44500
Jul-00 1.063 28300
Jul-00 1.031 40500
Jul-00 1 3200
Jul-00 0.969 29000
Aug-00 1.031 11100
Aug-00 0.938 41800
Aug-00 1 7100
Aug-00 0.969 13100
Aug-00 1.031 7000
Aug-00 1.031 3800
Aug-00 1 25600
Aug-00 0.969 298000
Aug-00 1 16800
Aug-00 1 24900
Aug-00 1 16400
Aug-00 1 19100
Aug-00 1 15000
Aug-00 0.906 5200
Aug-00 1 7300
Aug-00 0.938 23100
Aug-00 1.031 4400
Aug-00 1 4200
Aug-00 1.031 9200
Aug-00 1.063 74100
Aug-00 1.063 22900
Aug-00 1.313 147500
Aug-00 1.313 88400
Sep-00 1.25 15800
Sep-00 1.375 52500
Sep-00 1.438 48000
Sep-00 1.531 15900
Sep-00 1.625 66100
Sep-00 1.625 19200
Sep-00 1.625 900
Sep-00 1.688 47900
Sep-00 1.563 5500
Sep-00 1.563 30400
Sep-00 1.406 15000
Sep-00 1.438 44000
Sep-00 1.313 24600
Sep-00 1.438 16800
Sep-00 1.375 2900
Sep-00 1.25 10400
Sep-00 1.25 34000
Sep-00 1.313 49800
Sep-00 1.313 14600
Sep-00 1.281 4000
Oct-00 1.25 18500
Oct-00 1.25 0
Oct-00 1.313 3000
Oct-00 1.219 19900
Oct-00 1.188 10100
Oct-00 1.063 53100
Oct-00 1 21600
Oct-00 1 69200
Oct-00 1 20700
Oct-00 0.969 8300
Oct-00 1.031 2300
Oct-00 0.938 20800
Oct-00 0.938 9700
Oct-00 0.938 25900
Oct-00 0.938 8000
Oct-00 0.938 4000
Oct-00 0.938 5900
Oct-00 0.938 7400
Oct-00 0.875 12400
Oct-00 0.875 47400
Oct-00 0.781 14900
Oct-00 0.875 86500
Nov-00 0.813 8200
Nov-00 0.813 3000
Nov-00 0.938 7100
Nov-00 0.969 22700
Nov-00 1 12100
Nov-00 1.031 4600
Nov-00 0.969 13500
Nov-00 0.938 17000
Nov-00 0.813 10700
Nov-00 0.813 7500
Nov-00 0.781 4400
Nov-00 0.938 8600
Nov-00 0.844 6200
Nov-00 0.875 3000
Nov-00 0.781 6900
Nov-00 0.75 33800
Nov-00 0.75 5700
Nov-00 0.75 11400
Nov-00 0.75 44200
Nov-00 0.656 27800
Nov-00 0.719 23500
Dec-00 0.813 75400
Dec-00 0.813 25500
Dec-00 0.813 24900
Dec-00 0.875 4600
Dec-00 0.688 22600
Dec-00 0.688 5700
Dec-00 0.719 5200
Dec-00 0.625 29500
Dec-00 0.656 3900
Dec-00 0.75 8600
Dec-00 0.75 14300
Dec-00 0.688 10600
Dec-00 0.656 32600
Dec-00 0.625 19300
Dec-00 0.625 9700
Dec-00 0.625 17700
Dec-00 0.625 42600
Dec-00 0.656 9200
Dec-00 0.625 31600
Dec-00 0.625 27500
Jan-01 0.688 400
Jan-01 0.625 3200
Jan-01 0.625 3200
Jan-01 0.625 8800
Jan-01 0.625 1100
Jan-01 0.625 2400
Jan-01 0.625 2000
Jan-01 0.656 8400
Jan-01 0.688 14500
Jan-01 0.734 18800
Jan-01 0.688 14500
Jan-01 0.688 34700
Jan-01 0.688 3200
Jan-01 0.719 5000
Jan-01 0.719 5800
Jan-01 0.688 6000
Jan-01 0.688 0
Jan-01 0.688 9700
Jan-01 0.688 18600
Jan-01 0.75 5000
Jan-01 0.75 8000
Feb-01 0.688 10300
Feb-01 0.688 0
Feb-01 0.688 3200
Feb-01 0.688 1500
Feb-01 0.625 13100
Feb-01 0.688 4800
Feb-01 0.641 3700
Feb-01 0.625 4100
Feb-01 0.625 300
Feb-01 0.688 21300
Feb-01 0.688 25400
Feb-01 0.688 700
Feb-01 0.656 1000
Feb-01 0.656 5000
Feb-01 0.656 9500
Feb-01 0.625 400
Feb-01 0.625 1200
Feb-01 0.594 19800
Feb-01 0.563 17400
Mar-01 0.563 0
Mar-01 0.625 6600
Mar-01 0.531 10600
Mar-01 0.531 200
Mar-01 0.656 19300
Mar-01 0.625 16000
Mar-01 0.531 1500
Mar-01 0.531 9300
Mar-01 0.563 7300
Mar-01 0.531 7900
Mar-01 0.594 2700
Mar-01 0.563 1000
Mar-01 0.625 15300
Mar-01 0.625 0
Mar-01 0.625 0
Mar-01 0.531 2500
Mar-01 0.531 100
Mar-01 0.625 2900
Mar-01 0.625 2000
Mar-01 0.563 1500
Mar-01 0.563 0
Mar-01 0.531 11400
Apr-01 0.563 14100
Apr-01 0.563 0
Apr-01 0.625 200
Apr-01 0.5 14400
Apr-01 0.5 0
Apr-01 0.5 2300
Apr-01 0.55 100
Apr-01 0.55 2000
Apr-01 0.6 4100
Apr-01 0.78 37800
Apr-01 0.62 56600
Apr-01 0.59 28700
Apr-01 0.57 900
Apr-01 0.57 0
Apr-01 0.47 14100
Apr-01 0.48 8800
Apr-01 0.46 1000
Apr-01 0.44 500
Apr-01 0.44 0
Apr-01 0.49 26400
- --------------------------------------------------------------------------------
Comparative Returns
- --------------------------------------------------------------------------------
o Curtis' stock price has significantly underperformed both the Russell 2000
index and an index of comparable companies since its initial public
offering
Comparative Stock Performance
Comp Russell
CURT Index 2000
---- ----- ----
Nov-98 100 100 100
Nov-98 98.81905 106.2547 99.27588
Nov-98 102.381 101.6206 99.54615
Nov-98 101.2 101.3662 99.29373
Nov-98 103.581 101.2945 99.9796
Nov-98 102.381 98.7489 100.5533
Nov-98 102.381 103.6475 100.5329
Nov-98 103.581 98.63085 101.5171
Nov-98 102.381 103.0332 101.1219
Nov-98 103.581 97.89856 101.8154
Nov-98 102.381 102.3009 102.5217
Nov-98 109.5238 101.2622 101.4151
Dec-98 102.381 101.6867 101.6675
Dec-98 102.381 96.97787 101.3488
Dec-98 102.381 97.06222 100.7139
Dec-98 104.7619 96.46766 101.5732
Dec-98 107.1429 96.21188 102.2871
Dec-98 104.7619 95.78739 102.3661
Dec-98 104.7619 100.5819 102.4885
Dec-98 104.7619 95.70168 101.0964
Dec-98 104.7619 100.4118 100.8083
Dec-98 104.7619 95.70168 98.91382
Dec-98 104.7619 95.36154 99.32942
Dec-98 115.4857 96.14586 99.40082
Dec-98 109.5238 96.48599 100.4029
Dec-98 109.5238 105.2146 101.331
Dec-98 109.5238 104.7044 102.4554
Dec-98 111.9048 114.7276 102.05
Dec-98 110.7238 109.8391 103.2101
Dec-98 114.2857 110.0091 103.4064
Dec-98 109.5238 110.0091 104.0999
Dec-98 109.5238 110.0091 104.643
Dec-98 104.7619 111.7098 105.0255
Dec-98 104.7619 118.1289 107.588
Jan-99 109.5238 115.3333 107.4095
Jan-99 104.7619 115.3088 107.6211
Jan-99 104.7619 114.7986 109.0745
Jan-99 104.7619 115.0452 109.0847
Jan-99 107.1429 120.5374 109.9516
Jan-99 102.381 116.3292 110.436
Jan-99 100 120.5374 108.9648
Jan-99 100 116.4473 108.3274
Jan-99 111.9048 115.9371 107.1137
Jan-99 111.9048 122.0081 108.8858
Jan-99 109.5238 116.3917 109.8649
Jan-99 111.9048 115.8435 109.796
Jan-99 104.7619 114.5349 108.1209
Jan-99 105.9619 115.2152 107.7104
Jan-99 105.9619 109.9105 107.6262
Jan-99 109.5238 116.2876 108.4472
Jan-99 111.9048 115.6074 107.3738
Jan-99 116.6667 112.8863 108.1005
Jan-99 111.9048 110.5053 108.9291
Feb-99 111.9048 105.7384 108.6384
Feb-99 109.5238 105.9085 107.5293
Feb-99 109.5238 111.2896 108.0418
Feb-99 109.5238 112.7542 106.5247
Feb-99 109.5238 112.5321 105.232
Feb-99 109.5238 113.3825 104.8776
Feb-99 109.5238 116.9441 102.7868
Feb-99 109.5238 111.0676 101.4686
Feb-99 114.2857 111.4077 103.5594
Feb-99 109.5238 111.4077 101.591
Feb-99 109.5238 110.2032 101.0709
Feb-99 109.5238 107.6859 99.32177
Feb-99 109.5238 104.1002 99.71698
Feb-99 114.2857 105.3287 100.0255
Feb-99 114.2857 103.76 101.4329
Feb-99 109.5238 105.1066 101.7364
Feb-99 109.5238 103.59 100.7802
Feb-99 104.7619 106.8679 100.1249
Feb-99 107.1429 103.76 100.0153
Mar-99 107.1429 101.9033 100.5584
Mar-99 107.1429 98.19128 100.5686
Mar-99 111.9048 104.0018 99.93626
Mar-99 107.1429 102.9097 100.464
Mar-99 110.7238 97.96919 101.4814
Mar-99 107.1429 97.62905 102.0041
Mar-99 107.1429 98.80552 101.7848
Mar-99 111.9048 102.7396 102.2743
Mar-99 109.5238 107.5341 102.2642
Mar-99 107.1429 111.1421 101.5757
Mar-99 107.1429 107.6719 102.203
Mar-99 111.9048 127.1743 101.7772
Mar-99 104.7619 115.3084 101.5885
Mar-99 104.7619 127.0042 101.874
Mar-99 104.7619 121.341 101.1168
Mar-99 104.7619 124.6513 100.255
Mar-99 107.1429 119.5166 97.7486
Mar-99 104.7619 119.5166 98.01122
Mar-99 104.7619 120.1829 100.2014
Mar-99 107.1429 123.6168 100.4386
Mar-99 107.1429 122.2563 101.9276
Mar-99 111.9048 116.2853 101.6777
Mar-99 104.7619 114.8727 101.3845
Apr-99 104.7619 119.6673 101.6675
Apr-99 109.5238 109.3966 102.5727
Apr-99 104.7619 110.9849 102.2642
Apr-99 104.7619 110.1944 101.4202
Apr-99 111.9048 111.9852 101.9607
Apr-99 111.9048 116.9222 103.4829
Apr-99 108.3429 112.9977 105.13
Apr-99 108.3429 119.1387 106.3845
Apr-99 108.3429 116.6114 106.4227
Apr-99 109.5238 122.1383 106.5196
Apr-99 109.5238 117.5138 107.4911
Apr-99 104.7619 119.4506 105.1606
Apr-99 104.7619 119.0064 105.9001
Apr-99 106.5524 117.986 108.7634
Apr-99 106.5524 120.0874 109.3447
Apr-99 107.1429 119.9834 110.079
Apr-99 109.5238 115.2746 110.9052
Apr-99 116.6667 115.1889 110.9536
Apr-99 111.9048 115.1889 110.538
Apr-99 116.6667 115.1889 110.3646
Apr-99 114.2857 116.4694 110.3544
May-99 114.2857 118.038 110.4742
May-99 114.2857 119.4366 110.2983
May-99 115.4857 118.5862 110.7267
May-99 115.4857 118.9644 110.4997
May-99 114.2857 118.3698 111.1958
May-99 115.4857 113.9915 112.6594
May-99 117.8667 114.5017 113.924
May-99 115.4857 113.4096 114.5487
May-99 114.2857 113.7498 114.9516
May-99 115.4857 107.8448 112.9857
May-99 114.2857 113.9338 112.5319
May-99 114.2857 113.3716 112.8123
May-99 114.2857 113.1172 113.7532
May-99 114.2857 114.4117 114.2325
May-99 114.2857 115.0063 114.5181
May-99 116.6667 112.2906 112.2871
May-99 116.6667 111.5063 110.7726
May-99 114.2857 110.722 111.0173
May-99 119.0476 110.4675 110.3825
May-99 114.2857 115.1763 111.8511
Jun-99 114.2857 110.0937 111.54
Jun-99 114.2857 110.0093 111.3565
Jun-99 114.2857 105.2909 111.1627
Jun-99 114.2857 110.1977 112.7817
Jun-99 114.2857 110.93 113.8832
Jun-99 115.4857 106.7218 113.1464
Jun-99 115.4857 106.2116 113.511
Jun-99 114.2857 106.5518 112.7664
Jun-99 114.2857 106.7218 111.6803
Jun-99 115.4857 106.3817 110.028
Jun-99 120.2476 105.1729 110.6604
Jun-99 122.6286 105.3851 112.4936
Jun-99 122.6286 104.695 113.0495
Jun-99 122.6286 104.9831 113.4753
Jun-99 122.6286 109.7015 114.5946
Jun-99 126.1905 109.6172 114.0566
Jun-99 125.0095 105.5454 113.9827
Jun-99 133.3333 105.2052 112.9934
Jun-99 135.7143 101.261 112.9806
Jun-99 133.3333 110.0937 114.383
Jun-99 135.7143 110.0937 115.7777
Jun-99 123.8095 105.2052 116.6956
Jul-99 133.3333 110.3818 115.8644
Jul-99 130.9524 105.6634 116.3972
Jul-99 128.5714 105.6634 116.4074
Jul-99 130.9524 106.0035 115.4233
Jul-99 133.3333 101.209 115.9485
Jul-99 133.3333 101.209 116.7721
Jul-99 128.5714 101.209 117.1086
Jul-99 128.5714 107.7042 116.8052
Jul-99 128.5714 106.4811 117.6594
Jul-99 128.5714 105.2906 118.7659
Jul-99 135.7143 109.1505 118.6283
Jul-99 128.5714 103.2498 117.6364
Jul-99 128.5714 101.4648 115.6425
Jul-99 128.5714 106.2593 115.9179
Jul-99 113.6952 101.3791 115.1173
Jul-99 111.9048 101.3791 114.3243
Jul-99 111.9048 106.9579 112.9194
Jul-99 111.9048 107.5862 113.8399
Jul-99 109.5238 107.284 113.873
Jul-99 104.7619 102.9997 112.5905
Jul-99 104.7619 102.0453 113.4039
Aug-99 104.7619 100.6848 112.8582
Aug-99 95.2381 100.6004 111.2392
Aug-99 82.15238 113.9719 109.5614
Aug-99 83.33333 108.8648 109.5742
Aug-99 80.95238 104.9228 109.1382
Aug-99 80.95238 107.8563 108.59
Aug-99 80.95238 107.4318 107.8072
Aug-99 78.57143 111.9464 109.1764
Aug-99 85.71429 112.2866 109.3371
Aug-99 76.19048 108.0576 110.6706
Aug-99 71.42857 107.8875 110.6119
Aug-99 76.19048 110.0532 111.1678
Aug-99 73.80952 110.761 110.4284
Aug-99 71.42857 110.9311 110.3442
Aug-99 78.57143 118.0304 110.7547
Aug-99 71.42857 111.9899 111.4865
Aug-99 73.80952 111.9899 111.4533
Aug-99 71.42857 113.0103 111.642
Aug-99 71.42857 117.8665 111.1729
Aug-99 71.42857 111.9899 110.2626
Aug-99 58.34286 111.6498 108.9648
Aug-99 55.9619 116.3682 109.0847
Sep-99 45.82857 111.3097 109.8904
Sep-99 42.85714 117.4266 108.9801
Sep-99 42.85714 112.5902 111.1601
Sep-99 38.68571 110.4593 111.7389
Sep-99 45.82857 110.7011 111.1423
Sep-99 47.61905 110.1052 111.6191
Sep-99 49.40952 110.4453 112.4911
Sep-99 46.4381 111.2957 112.0984
Sep-99 47.61905 109.9491 111.7389
Sep-99 51.2 110.1572 111.2519
Sep-99 47.61905 103.8601 109.7017
Sep-99 42.85714 102.9009 110.7726
Sep-99 44.05714 108.6302 110.4539
Sep-99 44.05714 105.0732 108.7455
Sep-99 42.85714 103.8827 109.0082
Sep-99 42.85714 103.7126 107.1418
Sep-99 38.68571 108.0263 106.3463
Sep-99 42.85714 108.313 107.5625
Sep-99 38.09524 103.5946 106.7032
Sep-99 33.33333 100.2872 107.4758
Sep-99 35.71429 101.4763 108.9495
Oct-99 35.71429 98.16893 107.9883
Oct-99 36.91429 98.01287 108.7736
Oct-99 33.33333 97.36017 108.6206
Oct-99 34.53333 93.59614 109.5767
Oct-99 35.12381 94.28685 109.156
Oct-99 30.95238 104.4574 109.0541
Oct-99 34.53333 100.2352 109.6864
Oct-99 35.71429 105.4638 108.2815
Oct-99 32.15238 106.4042 106.9148
Oct-99 36.91429 101.7898 106.9123
Oct-99 37.50476 100.9395 105.7369
Oct-99 34.53333 101.1096 104.258
Oct-99 38.09524 99.83475 104.7756
Oct-99 34.53333 104.2974 105.5431
Oct-99 34.53333 103.7872 105.6272
Oct-99 35.71429 104.5575 106.7542
Oct-99 35.71429 99.07444 106.5171
Oct-99 33.33333 104.7276 106.0148
Oct-99 34.53333 105.0017 106.2647
Oct-99 34.53333 100.369 107.8047
Oct-99 33.33333 104.9496 109.2912
Nov-99 35.12381 106.1781 110.102
Nov-99 36.91429 106.5183 110.2473
Nov-99 33.33333 108.6828 111.795
Nov-99 35.71429 111.3759 112.1622
Nov-99 33.33333 111.4602 112.8021
Nov-99 33.33333 110.7616 113.4804
Nov-99 33.33333 115.6405 113.7889
Nov-99 33.33333 116.4341 114.411
Nov-99 32.15238 111.5539 114.0974
Nov-99 29.1619 111.5263 114.6583
Nov-99 29.77143 116.1263 115.4946
Nov-99 29.77143 116.1263 116.4916
Nov-99 32.15238 116.7466 116.54
Nov-99 33.33333 117.3412 117.8072
Nov-99 35.71429 118.3892 117.6109
Nov-99 32.15238 112.8868 117.4834
Nov-99 32.74286 113.0845 115.872
Nov-99 32.15238 114.1049 116.2494
Nov-99 29.77143 113.6804 117.0168
Nov-99 29.77143 109.2408 116.5094
Nov-99 33.33333 109.633 115.7777
Dec-99 34.53333 109.4109 115.6731
Dec-99 29.77143 114.5215 117.3993
Dec-99 33.33333 111.7118 118.4549
Dec-99 35.71429 115.816 118.7532
Dec-99 35.71429 111.6078 118.7404
Dec-99 34.53333 110.7574 119.5411
Dec-99 37.50476 112.8503 118.5365
Dec-99 38.09524 107.4275 118.998
Dec-99 56.55238 113.5826 119.9337
Dec-99 59.52381 112.236 117.9883
Dec-99 54.7619 113.5826 117.6237
Dec-99 56.55238 108.0558 118.6283
Dec-99 48.81905 111.5558 118.8705
Dec-99 45.2381 111.6078 119.1203
Dec-99 44.05714 109.751 121.3131
Dec-99 47.61905 109.9211 121.8613
Dec-99 42.85714 105.1266 123.0061
Dec-99 49.40952 108.9667 123.5237
Dec-99 53.58095 104.48 124.5487
Dec-99 52.97143 105.8155 126.7236
Dec-99 47.61905 108.4762 126.6165
Dec-99 38.09524 103.6817 128.6971
Jan-00 47.02857 105.2869 126.5732
Jan-00 45.2381 99.89649 121.9735
Jan-00 45.2381 104.1808 122.0882
Jan-00 46.4381 99.55635 121.1984
Jan-00 45.2381 105.2012 124.5054
Jan-00 45.2381 100.2366 127.9679
Jan-00 47.61905 109.8353 125.6017
Jan-00 47.61905 106.9919 124.9465
Jan-00 50 106.9399 127.7894
Jan-00 47.61905 107.3841 129.4136
Jan-00 50 107.5542 130.9179
Jan-00 54.7619 107.6062 132.5905
Jan-00 55.35238 107.3518 134.4416
Jan-00 57.14286 102.5896 136.1397
Jan-00 57.14286 101.9093 133.3376
Jan-00 59.52381 107.096 132.9908
Jan-00 61.31429 107.9739 132.8506
Jan-00 60.72381 107.3841 131.8256
Jan-00 54.7619 107.2477 128.6639
Jan-00 54.7619 107.3518 126.5247
Feb-00 52.38095 102.4195 128.4421
Feb-00 47.61905 116.3868 130.0076
Feb-00 47.61905 126.2399 133.001
Feb-00 48.20952 130.108 133.9929
Feb-00 51.2 125.8998 135.7445
Feb-00 52.97143 120.9352 137.0449
Feb-00 51.79048 125.4416 136.665
Feb-00 50 120.595 138.2483
Feb-00 46.4381 115.3664 136.9454
Feb-00 50 120.425 137.6696
Feb-00 45.2381 125.5273 137.746
Feb-00 50 120.7651 139.6634
Feb-00 47.61905 120.425 142.3814
Feb-00 46.4381 125.2195 139.1331
Feb-00 42.85714 125.6116 137.9271
Feb-00 44.05714 125.4838 140.2116
Feb-00 42.26667 121.4735 141.2647
Feb-00 39.29524 122.9296 141.9531
Feb-00 41.67619 117.545 142.1928
Feb-00 39.29524 127.7902 147.2998
Mar-00 35.71429 129.1691 150.0127
Mar-00 42.85714 125.1344 148.9138
Mar-00 42.26667 133.0511 152.4426
Mar-00 39.29524 137.1654 153.4013
Mar-00 39.29524 128.1627 151.8281
Mar-00 38.68571 132.711 151.6267
Mar-00 38.68571 133.2732 154.5258
Mar-00 39.29524 129.4432 153.9546
Mar-00 38.09524 130.4481 150.4691
Mar-00 38.09524 130.278 146.0964
Mar-00 41.67619 129.9254 142.4962
Mar-00 41.67619 121.9092 146.4151
Mar-00 40.47619 126.7038 146.5502
Mar-00 44.05714 126.2041 140.0306
Mar-00 40.47619 129.5978 140.9459
Mar-00 41.67619 124.6249 145.6374
Mar-00 42.85714 119.5086 146.3004
Mar-00 40.47619 120.8031 146.3565
Mar-00 40.47619 120.8031 146.2647
Mar-00 38.09524 119.7307 142.5395
Mar-00 38.09524 124.6194 138.4498
Mar-00 38.09524 119.2725 135.5354
Mar-00 35.71429 114.1605 137.4528
Apr-00 34.53333 114.3122 131.5757
Apr-00 33.33333 109.5081 129.0464
Apr-00 33.92381 109.9339 132.0857
Apr-00 36.91429 114.2925 135.7726
Apr-00 37.50476 113.9279 138.4472
Apr-00 37.50476 113.1555 132.2438
Apr-00 34.53333 113.1555 130.0688
Apr-00 28.57143 117.1937 125.8134
Apr-00 29.77143 117.1937 124.7374
Apr-00 38.09524 109.39 115.6859
Apr-00 28.57143 106.853 117.0984
Apr-00 26.19048 107.3632 123.9393
Apr-00 26.78095 109.0499 123.975
Apr-00 29.1619 109.0499 122.8557
Apr-00 28.57143 102.2286 119.4646
Apr-00 27.39048 102.4843 124.6889
Apr-00 23.80952 107.385 123.4676
Apr-00 26.19048 107.9591 126.104
Apr-00 26.19048 110.2805 129.0796
May-00 29.1619 110.4821 132.3126
May-00 26.19048 111.3705 128.8501
May-00 30.95238 116.2035 126.3539
May-00 28.57143 110.8083 127.973
May-00 26.78095 110.3824 130.7598
May-00 28.57143 110.9967 127.5064
May-00 28.57143 116.1593 125.1555
May-00 26.78095 116.8395 120.9281
May-00 26.19048 121.5497 124.7807
May-00 25.00952 116.129 125.1759
May-00 26.19048 122.5561 126.9276
May-00 24.4 118.134 129.0107
May-00 27.39048 118.134 127.3993
May-00 25.00952 118.5262 125.1785
May-00 27.39048 114.422 122.31
May-00 22.62857 115.3581 120.2626
May-00 19.6381 115.188 117.0347
May-00 22.62857 114.9322 117.7307
May-00 23.80952 120.9847 116.3106
May-00 23.80952 122.7359 116.6165
May-00 25.00952 119.1096 121.5451
May-00 23.80952 113.6151 121.4125
Jun-00 23.80952 119.1096 125.566
Jun-00 23.80952 123.828 130.8083
Jun-00 25.00952 125.481 130.8771
Jun-00 23.80952 119.246 130.4564
Jun-00 23.80952 124.2202 131.7032
Jun-00 22.62857 119.416 131.1933
Jun-00 22.62857 119.416 133.3656
Jun-00 22.62857 120.7755 129.6558
Jun-00 23.80952 139.8742 130.9918
Jun-00 23.80952 135.0079 129.9516
Jun-00 23.80952 127.2613 130.6094
Jun-00 25.00952 127.2613 130.9893
Jun-00 22.62857 131.7157 133.2968
Jun-00 21.42857 131.5456 134.0362
Jun-00 21.42857 131.3755 134.5258
Jun-00 19.04762 127.8156 131.3131
Jun-00 20.24762 130.3936 130.1402
Jun-00 20.24762 126.4494 131.6573
Jun-00 19.04762 130.3936 129.5461
Jun-00 17.86667 125.9392 132.8378
Jun-00 19.04762 115.9652 130.6935
Jun-00 20.8381 126.6421 131.8791
Jul-00 20.8381 124.119 133.6155
Jul-00 23.21905 119.4946 132.1392
Jul-00 21.42857 124.119 133.4319
Jul-00 22.01905 119.4378 134.6813
Jul-00 20.8381 128.9508 135.3468
Jul-00 21.42857 129.1208 135.0688
Jul-00 19.6381 124.4868 137.7486
Jul-00 20.8381 130.0954 138.3886
Jul-00 20.24762 134.1336 138.3554
Jul-00 19.04762 134.1336 139.0056
Jul-00 19.6381 145.3679 136.7364
Jul-00 19.6381 141.9383 134.5895
Jul-00 19.6381 144.5223 136.3463
Jul-00 22.62857 144.7781 133.2738
Jul-00 22.62857 141.9627 131.1193
Jul-00 19.04762 141.6838 131.1397
Jul-00 20.24762 141.5981 131.0071
Jul-00 19.6381 140.3281 127.8965
Jul-00 19.04762 141.5045 124.9924
Jul-00 18.45714 140.9943 127.6492
Aug-00 19.6381 136.2759 126.9174
Aug-00 17.86667 141.2304 127.5421
Aug-00 19.04762 142.1848 127.3457
Aug-00 18.45714 142.629 128.4115
Aug-00 19.6381 142.4406 130.0025
Aug-00 19.6381 147.2351 129.7093
Aug-00 19.04762 144.3297 129.3983
Aug-00 18.45714 172.3062 127.9067
Aug-00 19.04762 171.4559 130.1045
Aug-00 19.04762 167.1633 131.178
Aug-00 19.04762 167.2251 130.0178
Aug-00 19.04762 167.0887 130.7343
Aug-00 19.04762 161.2458 131.6828
Aug-00 17.25714 170.503 131.4406
Aug-00 19.04762 202.3752 131.6803
Aug-00 17.86667 212.144 131.9378
Aug-00 19.6381 216.9385 132.0449
Aug-00 19.04762 225.0898 133.4268
Aug-00 19.6381 234.9429 133.8883
Aug-00 20.24762 254.9106 134.2376
Aug-00 20.24762 283.1937 135.0408
Aug-00 25.00952 292.8767 135.7292
Aug-00 25.00952 269.0563 137.1469
Sep-00 23.80952 254.995 138.1719
Sep-00 26.19048 259.459 137.435
Sep-00 27.39048 245.5678 136.7466
Sep-00 29.1619 250.7107 138.4039
Sep-00 30.95238 240.3291 136.5885
Sep-00 30.95238 235.2705 136.0581
Sep-00 30.95238 235.695 135.7547
Sep-00 32.15238 217.1793 136.155
Sep-00 29.77143 231.7508 137.4834
Sep-00 29.77143 226.8623 135.3595
Sep-00 26.78095 217.3494 131.7389
Sep-00 27.39048 228.431 133.4294
Sep-00 25.00952 223.1599 132.95
Sep-00 27.39048 227.9545 131.1448
Sep-00 26.19048 233.3194 132.2845
Sep-00 23.80952 252.261 131.4074
Sep-00 23.80952 246.7582 130.0076
Sep-00 25.00952 247.1504 129.5589
Sep-00 25.00952 241.774 133.5569
Sep-00 24.4 238.6242 132.9347
Oct-00 23.80952 233.4375 130.4615
Oct-00 23.80952 227.0256 128.6767
Oct-00 25.00952 230.6924 129.3957
Oct-00 23.21905 227.8504 128.1668
Oct-00 22.62857 228.3269 125.1963
Oct-00 20.24762 229.3333 124.8164
Oct-00 19.04762 223.2583 122.8021
Oct-00 19.04762 215.6738 121.0454
Oct-00 19.04762 215.47 118.0444
Oct-00 18.45714 219.2631 122.486
Oct-00 19.6381 223.6533 122.8327
Oct-00 17.86667 224.1832 120.0612
Oct-00 17.86667 227.2714 118.8705
Oct-00 17.86667 226.6571 122.718
Oct-00 17.86667 230.2511 124.2861
Oct-00 17.86667 244.3885 124.9261
Oct-00 17.86667 237.6332 124.3881
Oct-00 17.86667 238.9812 121.1652
Oct-00 16.66667 230.3537 122.3253
Oct-00 16.66667 239.1914 122.3483
Oct-00 14.87619 261.1844 123.0801
Oct-00 16.66667 285.843 126.8944
Nov-00 15.48571 278.9094 126.257
Nov-00 15.48571 278.9937 129.2631
Nov-00 17.86667 274.1148 129.462
Nov-00 18.45714 279.7809 128.4957
Nov-00 19.04762 297.0483 129.0184
Nov-00 19.6381 298.5818 127.6594
Nov-00 18.45714 311.8308 126.2953
Nov-00 17.86667 304.0171 122.616
Nov-00 15.48571 250.6939 121.5069
Nov-00 15.48571 249.7337 124.1484
Nov-00 14.87619 256.0111 125.3927
Nov-00 17.86667 254.3786 122.8047
Nov-00 16.07619 248.3746 123.052
Nov-00 16.66667 241.4492 119.898
Nov-00 14.87619 232.219 119.0184
Nov-00 14.28571 221.5605 116.7517
Nov-00 14.28571 238.3963 120.3136
Nov-00 14.28571 241.6792 120.2703
Nov-00 14.28571 245.7139 117.0372
Nov-00 12.49524 237.5277 115.9102
Nov-00 13.69524 230.3383 113.7022
Dec-00 15.48571 229.8098 116.4814
Dec-00 15.48571 227.0127 114.8368
Dec-00 15.48571 238.5075 120.1351
Dec-00 16.66667 232.5283 118.1897
Dec-00 13.10476 237.0767 117.5676
Dec-00 13.10476 229.2626 122.1494
Dec-00 13.69524 225.4609 124.23
Dec-00 11.90476 236.8836 121.8154
Dec-00 12.49524 235.0409 119.8139
Dec-00 14.28571 222.023 117.7511
Dec-00 14.28571 212.5101 116.7848
Dec-00 13.10476 216.052 118.1158
Dec-00 12.49524 200.3898 116.976
Dec-00 11.90476 189.4722 113.1566
Dec-00 11.90476 190.8557 113.9801
Dec-00 11.90476 195.8203 118.0495
Dec-00 11.90476 201.5591 118.9776
Dec-00 12.49524 190.108 122.2081
Dec-00 11.90476 199.3762 125.9638
Dec-00 11.90476 200.715 123.2866
Jan-01 13.10476 195.4421 117.922
Jan-01 11.90476 173.1581 123.5059
Jan-01 11.90476 180.9786 121.6726
Jan-01 11.90476 189.9813 118.0877
Jan-01 11.90476 176.3767 117.7053
Jan-01 11.90476 181.933 118.2942
Jan-01 11.90476 201.1486 121.2264
Jan-01 12.49524 202.1873 123.3707
Jan-01 13.10476 213.6611 123.8526
Jan-01 13.98095 221.6054 125.7726
Jan-01 13.10476 216.6649 125.8185
Jan-01 13.10476 227.1842 126.1168
Jan-01 13.10476 226.792 124.4493
Jan-01 13.69524 226.792 124.9745
Jan-01 13.69524 217.4492 128.0112
Jan-01 13.10476 218.7957 128.0597
Jan-01 13.10476 215.0216 127.231
Jan-01 13.10476 222.4432 127.1494
Jan-01 13.10476 222.9704 129.5028
Jan-01 14.28571 214.3055 130.4589
Jan-01 14.28571 225.5991 129.6124
Feb-01 13.10476 246.7136 129.7654
Feb-01 13.10476 232.5048 127.8684
Feb-01 13.10476 235.484 127.6747
Feb-01 13.10476 235.3085 128.9546
Feb-01 11.90476 236.603 129.2912
Feb-01 13.10476 233.1344 128.2228
Feb-01 12.20952 237.0387 126.7338
Feb-01 11.90476 228.1559 128.8501
Feb-01 11.90476 233.2287 128.1413
Feb-01 13.10476 229.5599 128.3758
Feb-01 13.10476 228.4882 129.7425
Feb-01 13.10476 230.8627 127.3024
Feb-01 12.49524 225.9661 125.2269
Feb-01 12.49524 220.3714 123.2815
Feb-01 12.49524 228.7269 121.6879
Feb-01 11.90476 226.8697 121.7364
Feb-01 11.90476 229.2891 124.5054
Feb-01 11.31429 224.6331 122.0678
Feb-01 10.72381 222.8363 120.951
Mar-01 10.72381 220.9741 120.6782
Mar-01 11.90476 215.0691 121.591
Mar-01 10.11429 217.3598 121.3131
Mar-01 10.11429 218.1765 122.6747
Mar-01 12.49524 216.896 123.6206
Mar-01 11.90476 210.3868 122.7664
Mar-01 10.11429 214.0074 120.7675
Mar-01 10.11429 213.7943 116.8791
Mar-01 10.72381 217.3059 117.8633
Mar-01 10.11429 216.4929 115.6782
Mar-01 11.31429 217.7268 115.2881
Mar-01 10.72381 215.519 112.6466
Mar-01 11.90476 216.4411 115.0612
Mar-01 11.90476 215.9112 113.3299
Mar-01 11.90476 215.7411 111.1015
Mar-01 10.11429 210.9205 110.3519
Mar-01 10.11429 212.1048 113.0214
Mar-01 11.90476 212.7307 114.0694
Mar-01 11.90476 216.9891 115.4717
Mar-01 10.72381 211.5372 112.7486
Mar-01 10.72381 206.3346 112.5778
Mar-01 10.11429 212.8561 114.8725
Apr-01 10.72381 200.8016 112.1265
Apr-01 10.72381 199.9475 108.8628
Apr-01 11.90476 194.7366 108.5518
Apr-01 9.52381 204.7624 113.3937
Apr-01 9.52381 209.687 110.8261
Apr-01 9.52381 207.7976 112.6135
Apr-01 10.47619 213.6595 115.2065
Apr-01 10.47619 207.7143 114.5461
Apr-01 11.42857 220.0991 116.0173
Apr-01 14.85714 226.3589 114.9669
Apr-01 11.80952 215.8342 116.1601
Apr-01 11.2381 222.7597 118.947
Apr-01 10.85714 234.2193 120.4488
Apr-01 10.85714 227.4996 118.998
Apr-01 8.952381 226.1039 117.5599
Apr-01 9.142857 224.6283 117.8863
Apr-01 8.761905 227.2327 120.5354
Apr-01 8.380952 228.0717 121.7644
Apr-01 8.380952 241.4263 123.3988
- --------------------------------------------------------------------------------
III. VALUATION ANALYSIS
Valuation Issues
- --------------------------------------------------------------------------------
o Although Rodman did not review the Company's projections, management
sees a depressed operating environment for the foreseeable future
- The Company's revenue for the third quarter of 2001 declined by 54%
over the comparable period of 2000
- Net margin declined for each of the last four quarters over the
prior comparable period
- Book value of equity declined by $0.22 per share, or approximately
10%, during the second and third quarters of 2001
- Further losses will result in a continued erosion in book value
o The Company's Common Shares suffer from illiquidity and a lack of
visibility in the investment community
- The average daily trading volume for 2001 has been 7,651 shares
- The Company has no current research analyst coverage
o There have been no acquisitions of micro-capitalization consumer
electronics manufacturers since March 1999
Valuation Methodologies
- --------------------------------------------------------------------------------
Premiums Paid (see Exhibit A)
o The twenty transactions reflect an average premium of 55.3% over the stock
price from one week prior to the announcement of the transaction
- The Transaction Price represents a premium of 81.8% over the closing
price of the Company's Common Stock one week ago
Comparable Company (see Exhibit B)
o Curtis is trading at a substantial discount to its universe of comparable
companies
- The negative outlook for Curtis is reflected in the Company's public
market valuation
Comparable Transaction (see Exhibit C)
o There has been only one transaction involving a comparable company since
the beginning of 1999
- Polk Audio was taken private at $12.00 per share in March 1999, a
premium of 6.7%
Conclusion
o Based on the foregoing analysis, it is our conclusion that the Transaction
Price of $0.80 per share is fair, from a financial point of view
EXHIBIT A
PREMIUMS PAID ANALYSIS
Premiums Paid Analysis
- --------------------------------------------------------------------------------
Transaction Date Target
- -------------------- Shares Target Transaction
Announced Effective Target Name Acquiror Name Outstanding Market Cap. Price
- --------- --------- --------------------------- ------------------------------ ----------- --------------- -----------
01/18/00 04/19/00 Conning Corp Metropolitan Life Insurance Co 13,753,539 $ 131,518,217 $12.500
01/31/00 04/28/00 Metrika Systems Corp Thermo Instrument Systems Inc 7,418,128 71,399,482 9.000
01/31/00 04/13/00 ONIX Systems Inc Thermo Instrument Systems Inc 14,357,524 125,628,335 9.000
01/31/00 04/07/00 Thermedics Detection Inc Thermedics 19,316,684 153,326,179 8.000
01/31/00 04/14/00 Thermo BioAnalysis Thermo Instrument Systems Inc 20,627,761 381,613,579 28.000
01/31/00 05/12/00 Thermo Optek Corp Thermo Instrument Systems Inc 51,092,456 740,840,612 15.000
01/31/00 03/31/00 Thermo Sentron Inc Thermedics 9,435,651 136,231,929 15.500
01/31/00 05/12/00 ThermoQuest Corp Thermo Instrument Systems Inc 50,563,080 632,038,500 17.000
03/17/00 09/15/00 Vastar Resources Inc BP Amoco PLC 97,645,490 6,975,598,515 83.000
03/21/00 04/20/00 Travelers Property Casualty Citigroup Inc 385,151,552 12,974,985,484 41.950
03/23/00 06/08/00 Homestead Village Inc Security Capital Group Inc 120,031,477 330,086,562 4.100
03/27/00 06/27/00 Hartford Life Hartford Fin Svcs Group Inc 139,934,517 5,956,032,847 50.500
04/24/00 07/17/00 Cherry Corp Investor Group 10,041,950 130,545,350 26.400
07/20/00 11/16/00 JLK Direct Distribution Inc Kennametal Inc 24,510,410 143,998,659 8.750
08/28/00 09/27/00 800-JR Cigar Inc Investor Group 11,862,299 127,519,714 13.000
09/01/00 11/08/00 Minolta-QMS Inc Minolta Investments Co 13,266,131 39,798,393 6.000
10/17/00 11/29/00 Trex Medical Corp Thermo Electron Corp 31,948,597 33,945,384 2.150
10/25/00 12/22/00 pcOrder.com Trilogy Software Inc 16,883,989 58,038,712 6.375
10/27/00 03/16/01 Azurix Corp Enron Corp 117,333,765 418,001,538 8.375
12/20/00 04/12/01 Vitaminshoppe.com Inc Vitamin Shoppe Industries Inc 20,359,074 6,362,211 1.000
- --------------------------------------------------------------------------------------------------------------------------------
Mean
Median
- --------------------------------------------------------------------------------------------------------------------------------
Stock Price Before Announcement Premium Paid
Transaction Date ------------------------------------- ---------------------------------
- -------------------- 52 Wk. 52 Wk.
Announced Effective Target Name 1 Day Week Month High 1 Day Week Month High
- --------- --------- --------------------------- ------- ------- ------- ------- ------ ------ ------ ------
01/18/00 04/19/00 Conning Corp $ 9.563 $ 9.375 $ 8.625 $19.125 30.7% 33.3% 44.9% -34.6%
01/31/00 04/28/00 Metrika Systems Corp 9.625 9.000 6.000 9.625 -6.5% 0.0% 50.0% -6.5%
01/31/00 04/13/00 ONIX Systems Inc 8.750 7.750 6.125 8.750 2.9% 16.1% 46.9% 2.9%
01/31/00 04/07/00 Thermedics Detection Inc 7.938 7.938 6.750 10.625 0.8% 0.8% 18.5% -24.7%
01/31/00 04/14/00 Thermo BioAnalysis 18.500 18.000 18.375 26.063 51.4% 55.6% 52.4% 7.4%
01/31/00 05/12/00 Thermo Optek Corp 14.500 15.813 11.375 15.813 3.4% -5.1% 31.9% -5.1%
01/31/00 03/31/00 Thermo Sentron Inc 14.438 14.500 14.500 15.500 7.4% 6.9% 6.9% 0.0%
01/31/00 05/12/00 ThermoQuest Corp 12.500 11.563 10.313 16.250 36.0% 47.0% 64.8% 4.6%
03/17/00 09/15/00 Vastar Resources Inc 71.438 61.500 50.500 71.438 16.2% 35.0% 64.4% 16.2%
03/21/00 04/20/00 Travelers Property Casualty 33.688 30.063 31.063 41.313 24.5% 39.5% 35.0% 1.5%
03/23/00 06/08/00 Homestead Village Inc 2.750 2.625 2.063 4.375 49.1% 56.2% 98.8% -6.3%
03/27/00 06/27/00 Hartford Life 42.563 36.000 34.438 55.000 18.6% 40.3% 46.6% -8.2%
04/24/00 07/17/00 Cherry Corp 13.000 12.625 15.781 24.000 103.1% 109.1% 67.3% 10.0%
07/20/00 11/16/00 JLK Direct Distribution Inc 5.875 4.500 5.000 11.625 48.9% 94.4% 75.0% -24.7%
08/28/00 09/27/00 800-JR Cigar Inc 10.750 10.938 10.000 11.000 20.9% 18.9% 30.0% 18.2%
09/01/00 11/08/00 Minolta-QMS Inc 3.000 3.000 3.000 4.438 100.0% 100.0% 100.0% 35.2%
10/17/00 11/29/00 Trex Medical Corp 1.063 1.063 1.375 4.938 102.4% 102.4% 56.4% -56.5%
10/25/00 12/22/00 pcOrder.com 3.438 3.063 4.000 71.000 85.5% 108.2% 59.4% -91.0%
10/27/00 03/16/01 Azurix Corp 3.563 3.563 4.313 14.063 135.1% 135.1% 94.2% -40.4%
12/20/00 04/12/01 Vitaminshoppe.com Inc 0.313 0.469 0.438 11.625 220.0% 113.3% 128.6% -91.4%
- --------------------------------------------------------------------------------------------------------------------------------
Mean 52.5% 55.3% 58.6% -14.7%
Median 33.4% 43.6% 54.4% -5.7%
- --------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B
COMPARABLE COMPANY ANALYSIS
Comparable Company Analysis
- --------------------------------------------------------------------------------
Operating Statistics
(data in thousands)
Latest Twelve Months
------------------------------------
Fiscal Financial Net Gross Gross
Company Ticker Year End Data As Of Revenues Profit Margin
- ----------------------------------------------------------------------------------------------------------------------
Curtis International Ltd. (as reported) CURT 31-May 2/28/01 $ 42,272 $ 7,422 17.6%
Curtis International Ltd. (adjusted) CURT 31-May 2/28/01 42,272 7,422 17.6%
Boston Acoustics, Inc. BOSA 25-Mar 12/30/00 117,995 34,167 29.0%
Emerson Radio Corp. MSN 31-Mar 12/31/00 284,500 42,674 15.0%
Koss Corporation KOSS 30-Jun 12/31/00 37,881 14,913 39.4%
- ----------------------------------------------------------------------------------------------------------------------
Averages (e): 27.8%
- ----------------------------------------------------------------------------------------------------------------------
Latest Twelve Months
------------------------------------------------------------------------------------------
EBIT EBITDA Net Net
Company EBIT(a) Margin EBITDA(b) Margin Income Margin
- ------------------------------------------------------------------------------------------------------------------------------------
Curtis International Ltd. (as reported) $ (718)(c) NM $ (541)(c) NM $ (269)(c) NM
Curtis International Ltd. (adjusted) 2,118(c) 5.0% 2,295(c) 5.4% 1,440(c) 3.4%
Boston Acoustics, Inc. 10,589 9.0% 13,675 11.6% 6,253 5.3%
Emerson Radio Corp. 17,333 6.1% 18,639(d) 6.6% 13,094 4.6%
Koss Corporation 7,334 19.4% 7,932 20.9% 5,390 14.2%
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Averages (e): 11.5% 13.0% 8.0%
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- ----------
(a) Earnings before interest and taxes.
(b) EBIT plus depreciation and amortization.
(c) Excludes $2.8 million of bad debt expense.
(d) Reflects depreciation expense for the year ended March 31, 2000.
(e) Averages exclude Curtis International Ltd.
Comparable Company Analysis
- --------------------------------------------------------------------------------
Market and Book Value Statistics
(data in thousands, except per share amounts)
Market Value Data Market Capitalization Data
52-Week ----------------------------------- --------------------------------
----------------- Price @ Tot. Shares Market Total Cash and Total Market
Company High Low 04/26/01 Out.(a) Value(b) Debt(c) Equiv.(d) Cap.(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Curtis International Ltd. (as reported) $ 2.00 $ 0.44 $ 0.44 5,263 $ 2,316 $ 285 $ 1,125 $ 1,476
Curtis International Ltd. (adjusted) 2.00 0.44 0.44 5,263 2,316 285 1,125 1,476
Boston Acoustics, Inc. 15.68 9.00 10.47 4,930 51,621 13,110 1,926 62,806
Emerson Radio Corp. 2.93 0.62 1.45 31,275 45,349 20,844 10,856 55,337
Koss Corporation 37.24 13.00 37.24 2,112 78,637 -- 427 78,210
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Averages (g):
- ----------------------------------------------------------------------------------------------------------------------------------
Book Value Statistics
----------------------------------
Common Total Cap.
Equity at at Book Total Debt/
Company Book Value Value(f) Total Cap.
- -------------------------------------------------------------------------------
Curtis International Ltd. (as reported) $10,846 $11,131 2.6%
Curtis International Ltd. (adjusted) 10,846 11,131 2.6%
Boston Acoustics, Inc. 40,926 54,035 24.3%
Emerson Radio Corp. 14,264 35,108 59.4%
Koss Corporation 18,335 18,335 0.0%
- -------------------------------------------------------------------------------
Averages (g): 27.9%
- -------------------------------------------------------------------------------
- ----------
(a) Total shares outstanding as of latest SEC filing.
(b) Market value equals current stock price times total shares outstanding.
(c) Total debt equals long-term debt (including capitalized leases), minority
interest, current maturities and other short-term borrowings.
(d) Includes cash, short-term restricted cash and short-term marketable
securities.
(e) Total market capitalization (enterprise value) equals market value plus
total debt plus preferred stock and minority interest less cash.
(f) Total capitalization equals total debt plus book value of stockholders'
equity as of the latest SEC filing.
(g) Averages exclude Curtis International Ltd.
Comparable Company Analysis
- --------------------------------------------------------------------------------
Market Multiples
Latest Twelve Months CY2001E CY2002E CY2003E
-------------------- ------------ ------------ ------------
Company EPS P/E EPS(a) P/E EPS(a) P/E EPS(a) P/E
- -------------------------------------------------------------------------------------------------------------------
Curtis International Ltd. (as reported) $(0.05) NM N/A NM N/A NM N/A NM
Curtis International Ltd. (adjusted) $ 0.28 1.6x N/A NM N/A NM N/A NM
Boston Acoustics, Inc. $ 1.29 8.1x N/A NM N/A NM N/A NM
Emerson Radio Corp. $ 0.31 4.7x N/A NM N/A NM N/A NM
Koss Corporation $ 2.38 15.6x N/A NM N/A NM N/A NM
- -------------------------------------------------------------------------------------------------------------------
Averages (c): 9.5x NM NM NM
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5-Year
Total Market Cap./LTM Projected
---------------------------- Mkt. Value/ EPS
Company Revenues EBIT EBITDA Book Value Growth(b)
- ------------------------------------------------------------------------------------------------
Curtis International Ltd. (as reported) 0.0x NM NM 0.2x N/A
Curtis International Ltd. (adjusted) 0.0x 0.7x 0.6x 0.2x N/A
Boston Acoustics, Inc. 0.5x 5.9x 4.6x 1.3x N/A
Emerson Radio Corp. 0.2x 3.2x 3.0x 3.2x N/A
Koss Corporation 2.1x 10.7x 9.9x 4.3x N/A
- ------------------------------------------------------------------------------------------------
Averages (c): 0.9x 6.6x 5.8x 2.9x NM
- ------------------------------------------------------------------------------------------------
- ----------
(a) Estimates are from First Call and reflect December 31 year ends, unless
otherwise noted.
(b) Based on Zacks Earnings Estimates.
(c) Averages exclude Curtis International Ltd.
EXHIBIT C
COMPARABLE TRANSACTION ANALYSIS
Comparable Transaction Analysis
- --------------------------------------------------------------------------------
(data in thousands)
Announcement Equity Net Debt Total
Date Acquiror Target Value Assumed(a) Consideration
---- -------- ------ ----- ---------- -------------
TBA Curtis International Ltd. Curtis International Ltd. 4,211 (840) 3,371
3/24/99 Polk Audio, Inc. Polk Audio, Inc. 22,188 (3,196) 18,992
Total Consideration to
----------------------------------
Revenues EBIT EBITDA
-------- ---- ------
Curtis International Ltd. 0.1 x 1.6 x 1.5 x
Polk Audio, Inc. 0.3 x 3.0 x 2.2 x
------------------------------------------------------------------
Averages: 0.3 x 3.0 x 2.2 x
------------------------------------------------------------------
Latest Twelve Month Financial Data of Target
Announcement ----------------------------------------------------
Date Acquiror Target Revenues EBIT EBITDA Net Income CFFO(b)
---- -------- ------ -------- ---- ------ ---------- -------
TBA Curtis International Ltd. Curtis International Ltd. 42,272 2,118(c) 2,295(c) 1,440(c) 1,786(c)
3/24/99 Polk Audio, Inc. Polk Audio, Inc. 75,848 6,305 8,542 3,389 3,735
Equity Value to
-----------------
Net Income CFFO
---------- ----
Curtis International Ltd. 2.9 x 2.4 x
Polk Audio, Inc. 6.5 x 5.9 x
------------------------------------------------------------
Averages: 6.5 x 5.9 x
------------------------------------------------------------
Footnotes:
- ----------
(a) Represents total debt less cash and cash equivalents.
(b) CFFO is equal to net income plus depreciation and amortization.
(c) Excludes $2.8 million of bad debt expense.