[LETTERHEAD OF XXXXXX XXXXXXX]
December 4, 1997
Board of Directors
Xxxx, Inc.
000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Members of the Board:
We understand that Xxxx, Inc. ("Xxxx" or the "Company"), The BFGoodrich Company
("BFGoodrich" or the "Buyer") and Midwest Acquisition Corporation, a wholly
owned subsidiary of BFGoodrich ("Acquisition Sub") have entered into an
Agreement and Plan of Merger dated as of September 22, 1997 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Acquisition Sub with and into Xxxx. Pursuant to the Merger, the Company will
become a wholly-owned subsidiary of BFGoodrich and each outstanding share of
common stock, par value of $1 per share ("Xxxx Common Stock"), of Xxxx, other
than shares held in treasury or by the Buyer or any subsidiary of the Company or
the Buyer, shall be converted into the right to receive 0.7 of a share (the
"Exchange Ratio") of common stock, par value $5 per share, of BFGoodrich
("BFGoodrich Common Stock"). The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to the holders of shares
of Xxxx Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Xxxx and BFGoodrich, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning Xxxx and BFGoodrich prepared by the
managements of Xxxx and BFGoodrich, respectively;
(iii) analyzed certain financial projections prepared by the managements
of Xxxx and BFGoodrich, respectively;
[LETTERHEAD OF XXXXXX XXXXXXX]
Board of Directors
December 4, 1997
Page 2
(iv) discussed the past and current operations and financial condition
and the prospects of Xxxx with senior executives of Xxxx;
(v) discussed the past and current operations and financial condition
and the prospects of BFGoodrich with senior executives of BFGoodrich
and analyzed the pro forma impact of the Merger on BFGoodrich's
earnings per share and other financial ratios;
(vi) reviewed the reported prices and trading activity for Xxxx Common
Stock and BFGoodrich Common Stock;
(vii) compared the financial performance of Xxxx and BFGoodrich and the
prices and trading activity of Xxxx Common Stock and BFGoodrich
Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(ix) discussed with senior executives of Xxxx and BFGoodrich their
estimates of certain strategic, financial and operational benefits
expected to result from the Merger;
(x) participated in discussions and negotiations among representatives
of Xxxx and XXXxxxxxxx and their financial and legal advisors;
(xi) reviewed the Merger Agreement; and
(xii) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including estimates of the
strategic, financial and operational benefits expected to result from the
Merger, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of Xxxx and BFGoodrich. In addition, we have assumed that
the Merger will be treated as a "pooling-of-interests" business combination in
accordance with U.S. Generally Accepted Accounting Principles and will qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986. We have also assumed that the Merger will be consummated
in accordance with the terms set forth in the Merger Agreement. We have not made
any independent valuation or appraisal of the assets or liabilities of the
Company, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on economic,
[LETTERHEAD OF XXXXXX XXXXXXX]
Board of Directors
December 4, 1997
Page 3
market and other conditions as in effect on, and the information made available
to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of Xxxx.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Xxxxxx Xxxxxxx & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company, the Buyer and certain
of the Buyer's affiliates, and have received fees for the rendering of these
services.
It is understood that this letter is for the information of the Board of
Directors of Xxxx and may not be used for any other purpose without our prior
written consent. In addition, this opinion does not in any manner address the
prices at which BFGoodrich will trade following the consummation of the merger
and we express no opinion and make no recommendation as to how the holders of
Xxxx Common Stock should vote at the stockholders' meeting held in connection
with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date hereof
that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of shares of Xxxx Common Stock.
Very truly yours,
XXXXXX XXXXXXX & CO. INCORPORATED
By: /s/ XXXXXX X. XXXX
-------------------------------
Xxxxxx X. Xxxx
Managing Director
