1
[PLAYCORE LOGO]
April 20, 2000
Dear Stockholders:
On behalf of the Board of Directors of PlayCore, Inc. (the "Company"), I am
pleased to inform you that on April 13, 2000 the Company entered into a
definitive Agreement and Plan of Merger (the "Merger Agreement") with PlayCore
Holdings, Inc. ("Parent") and Jasdrew Acquisition Corp., a wholly owned
subsidiary of Parent ("Acquisition Company"), pursuant to which the Company and
Acquisition Company have today commenced a tender offer to purchase all of the
outstanding shares (the "Shares") of the Company's common stock at $10.10 per
Share in cash without interest (the "Offer").
Consummation of the Offer is subject to, among other things, (1) at least
1,367,947 Shares, which number of Shares constitutes a majority of the Shares
outstanding and Shares issuable upon conversion of Company debentures (excluding
any Shares owned by any officer, director or affiliate of the Company, shares
which are issuable upon exercise of options and warrants, and Shares issuable
upon the conversion of convertible debentures held by affiliates of the Company)
being validly tendered and not withdrawn prior to the expiration of the Offer
and (2) receipt of funds from executed financing agreements and Parent's capital
contribution to Acquisition Company sufficient to, among other things, purchase
the Shares tendered in the Offer, pay for any non-tendered Shares in the Merger
and pay for securities to be acquired pursuant to the related agreements
executed in connection with the Merger Agreement. Concurrently with the
execution of the Merger Agreement, the Company, Parent and Acquisition Company
entered into a definitive Stock Purchase Agreement with GreenGrass Holdings, the
Company's majority stockholder, pursuant to which GreenGrass has agreed to sell
to Acquisition Company all of its Shares and other Company securities
immediately following the closing of the Offer.
Following the successful completion of the Offer, upon approval by a
stockholder vote, if required, Acquisition Company will be merged with and into
the Company (the "Merger"), and all Shares not purchased pursuant to the Offer
or in related transactions will be converted into the right to receive $10.10
per Share in cash without interest (except any Shares as to which the holder has
properly exercised appraisal rights).
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT THERETO.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed Offer to Purchase, which
has been filed with the Securities and Exchange Commission, including, among
other things, the opinion, dated April 13, 2000, of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, the Company's financial advisor, that, as of such date
and subject to the assumptions, limitations and qualifications set forth in the
opinion, the $10.10 per Share cash consideration to be received by the holders
of Shares in the Offer and the Merger is fair to such holders from a financial
point of view.
In addition to the attached Offer to Purchase, also enclosed are various
materials relating to the Offer, including a Letter of Transmittal to be used
for tendering your Shares in the Offer. These documents state the terms and
conditions of the Offer and the Merger and provide instructions on how to tender
your Shares. I urge you to read these documents carefully in making your
decision on whether to tender your Shares pursuant to the Offer.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chairman of the Board
2
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PLAYCORE, INC.
AT
$10.10 NET PER SHARE
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, L.L.C.
AND BY
PLAYCORE, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF APRIL 13, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG PLAYCORE, INC. (THE
"COMPANY"), JASDREW ACQUISITION CORP. ("ACQUISITION COMPANY"), AND PLAYCORE
HOLDINGS, INC. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY OF THE SHARES
OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE COMPANY'S 10% CONVERTIBLE
DEBENTURES (EXCLUDING ANY SHARES OWNED BY ANY OFFICER, DIRECTOR OR AFFILIATE OF
THE COMPANY, SHARES ISSUABLE UPON EXERCISE OF COMPANY OPTIONS (AS DEFINED
HEREIN) AND WARRANTS (AS DEFINED HEREIN), AND SHARES ISSUABLE UPON THE
CONVERSION OF THE COMPANY'S 10% CONVERTIBLE DEBENTURES HELD BY AFFILIATES OF THE
COMPANY) AND (2) THE COMPANY AND/OR ACQUISITION COMPANY HAVING RECEIVED OR
HAVING AVAILABLE THE PROCEEDS FROM THE FINANCING CONTEMPLATED BY THE FINANCING
AGREEMENTS (AS DEFINED HEREIN) AND THE PROCEEDS FROM THE CAPITAL CONTRIBUTION
(AS DEFINED HEREIN), INCLUDING, BUT NOT LIMITED TO, PROCEEDS SUFFICIENT TO (A)
FINANCE THE PURCHASE OF THE SHARES THAT THE COMPANY AND ACQUISITION COMPANY ARE
AGREEING TO PURCHASE PURSUANT TO THE OFFER, (B) PAY THE MERGER CONSIDERATION (AS
DEFINED HEREIN) PURSUANT TO THE MERGER (AS DEFINED HEREIN), (C) PURCHASE CERTAIN
SECURITIES OF THE COMPANY PURSUANT TO THE PLAYCORE PURCHASE AGREEMENTS (AS
DEFINED HEREIN), (D) REDEEM THE COMPANY'S THEN OUTSTANDING 10% CONVERTIBLE
DEBENTURES AND REPAY THE OTHER OUTSTANDING INDEBTEDNESS OF THE COMPANY AND ITS
SUBSIDIARIES AND (E) PAY THE FEES AND EXPENSES REQUIRED TO BE PAID BY THE
COMPANY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS DESCRIBED IN
THIS OFFER TO PURCHASE AND IN THE RELATED LETTER OF TRANSMITTAL.
3
IMPORTANT
If you wish to tender all or any part of the shares of common stock
registered in your name, you should carefully follow the instructions described
in "THE TENDER OFFER -- Procedures for Tendering Shares," including completing a
Letter of Transmittal in accordance with the instructions in the Letter of
Transmittal and delivering it, along with your share certificates and any other
required items, to First Chicago Trust Company of New York, the Depositary. If
your shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you desire to tender your shares, then you
should contact the nominee and request that the nominee tender the shares for
you.
Any stockholder who desires to tender shares and whose certificates for
such shares are not immediately available or cannot be delivered to the
Depositary or who cannot comply with the procedure for book-entry transfer or
whose other required documents cannot be delivered to the Depositary by the
expiration of the offer, must tender the shares pursuant to the guaranteed
delivery procedure set forth in "THE TENDER OFFER -- Procedures for Tendering
Shares."
To properly tender shares, you must validly complete the Letter of
Transmittal. You may request additional copies of this Offer to Purchase, the
Letter of Transmittal or the Notice of Guaranteed Delivery from X.X. Xxxx & Co.,
Inc., which is acting as the Information Agent, at its address and telephone
numbers set forth on the back cover of this Offer to Purchase.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES IN THIS
OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR
REPRESENTATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR
AUTHORIZATION AS HAVING BEEN AUTHORIZED BY THE OFFERORS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction or passed upon the
fairness or merits of this transaction or upon the accuracy or adequacy of the
disclosure contained in this document. Any representation to the contrary is
unlawful and a criminal offense.
The Information Agent for the Offering:
X.X. XXXX & CO., INC.
April 20, 2000
ii
4
SUMMARY TERM SHEET
This summary term sheet highlights certain information from this offer to
purchase. To understand the offer fully and for a more complete description of
the terms of the offer, we urge you to carefully read this entire offer to
purchase and the related letter of transmittal. We have included page references
parenthetically to direct you to a more complete description of the topics in
this summary.
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER
Q: Who is offering to buy my securities? (Page 1)
A: PlayCore Holdings, L.L.C., PlayCore Holdings, Inc., Jasdrew Acquisition
Corp. (which we refer to in this section as Acquisition Company) and
PlayCore, Inc. (which we refer to in this section as PlayCore) are making a
joint offer to purchase your securities. However, you will only tender your
shares to a single depositary which will receive payment from either
Acquisition Company or PlayCore. PlayCore Holdings, L.L.C., PlayCore
Holdings, Inc. and Acquisition Company are all newly formed entities
created by Chartwell Investments II LLC to effect the offer.
In the event that the shares tendered in the offer, plus shares acquired by
Acquisition Company from (1) PlayCore, (2) certain security holders of
PlayCore and (3) certain current and former members of management of
PlayCore, constitute greater than 90% of the outstanding shares,
Acquisition Company will purchase all tendered shares. If this requirement
is not met, but all of the conditions to the Offer have been waived or met,
PlayCore will purchase all shares tendered in excess of 425,439 shares.
Q: What are the classes and amounts of securities sought in the offer? (Page
1)
A: We are offering to purchase all of the outstanding shares of PlayCore
common stock, or any lesser number of shares that stockholders properly
tender in the offer.
Q: How much are the bidders offering to pay me and what is the form of
payment? (Page 1)
A: We are offering to pay you $10.10 per share in cash, without interest.
Q: Do the bidders have the financial resources to pay me for my shares? (Page
37)
A: We expect we will have sufficient funds to purchase the tendered shares. We
have entered into financing agreements with senior secured financing,
subordinated debt financing and equity financing sources. In these
financing agreements, the financing sources have committed, subject to
certain conditions, to provide the financing necessary to purchase all
shares that are tendered in the offer. The offer, however, is conditioned
upon our obtaining these funds, and there is the possibility that we will
not obtain these funds due to the various conditions in the financing
agreements not being met.
Q: Is the financial condition of the bidders relevant to my decision on
whether to tender in the offer? (Page 53)
A: No. We do not believe that the financial condition of any bidder is
important to your decision since we are paying you cash for your shares and
we are offering to purchase all outstanding shares of PlayCore's common
stock.
Q: When does the offer expire? (Page 44)
A: The offer expires on May 18, 2000, at 5:00 p.m., New York City time, unless
we extend it. If you cannot deliver everything that is required in order to
make a valid tender by that time, you may be able to use a guaranteed
delivery procedure. This procedure is described later in this offer to
purchase.
Q: Can the offer be extended and under what circumstances? (Page 44)
Yes. We may extend the offer at any time, subject to the terms of the
merger agreement. However, we cannot assure you that the offer will be
extended or, if extended, for how long. If we extend the
iii
5
offer, we will make a public announcement of the new expiration date not
later than 9:00 A.M., New York City time, on the day after the day on which
the offer was scheduled to expire.
Q: How do I tender my shares? (Page 46)
A: If you hold your shares "of record," you can tender your shares by sending
the enclosed letter of transmittal to First Chicago Trust Company of New
York, at the address listed on the enclosed letter of transmittal. The
letter of transmittal must be received by First Chicago Trust Company of
New York no later than the time and date on which the offer expires.
If your broker holds your shares in "street name" for you, you must direct
your broker to tender your shares.
If your share certificates are not immediately available for delivery to
First Chicago Trust Company of New York, you must comply with the
guaranteed delivery procedure described in the offer prior to the date the
offer expires.
If you have any questions, you should contact the information agent or your
broker for assistance.
Q: What is the purpose of the offer? (Page 14)
A: Our offer to purchase your securities is one part of a multi-step
transaction that will result in PlayCore Holdings, Inc. owning all
outstanding shares of PlayCore. As a result of this transaction, PlayCore
will no longer be a publicly-traded company.
Q: What are the most significant conditions to the offer? (Page 56)
A: Our obligation to pay for any tendered shares depends upon a number of
conditions, including:
- There being validly tendered and not withdrawn prior to the
expiration of the offer at least 1,367,947 shares (not counting
shares owned by any officer, director or affiliate of PlayCore,
including GreenGrass Holdings, the majority stockholder of PlayCore,
shares issuable upon the exercise of certain PlayCore options and
warrants and shares issuable upon the conversion of PlayCore's
convertible debentures held by GreenGrass Holdings).
- Obtaining sufficient equity and debt financing: (1) to purchase the
shares tendered in the offer, (2) to pay for any non-tendered shares
in the merger, (3) to pay for any securities of the Company to be
acquired pursuant to the various agreements executed in connection
with the merger agreement, (4) to refinance PlayCore's existing
indebtedness and (5) to pay for the various fees and expenses
incurred in connection with the merger and the offer.
- There being no legal action pending, threatened or taken that might
adversely affect the offer or the merger.
- There being no breach of any representation or warranty in the
merger agreement by PlayCore which would have a material adverse
effect on PlayCore.
Q: Until what time can I withdraw previously tendered shares? (Page 48)
A: You may withdraw your tendered shares at any time before 5:00 p.m., New
York City time, on May 18, 2000 or, if the offer is extended, the last day
of the period for which it is extended. And, if we have not agreed by June
15, 2000 (or such later date as may apply if the offer is extended) to
accept your shares for payment, you can withdraw them at any time until we
accept shares for payment.
Q: How do I withdraw previously tendered shares? (Page 48)
A: You can withdraw shares that you have already tendered by sending a written
notice of withdrawal to First Chicago Trust Company of New York while you
still have the right to withdraw the shares.
Q: What does my board of directors think of the offer? (Page 9)
A: Your board of directors has unanimously approved the merger agreement, the
offer and the merger and has determined that the offer and the merger are
advisable, fair to, and in the best interests of the stockholders of
PlayCore. Your board of directors unanimously recommends that stockholders
accept the offer and tender their shares.
iv
6
Q: Did my board of directors receive any opinions, appraisals, or reports
regarding the fairness of the offer? (Page 11)
A: Yes. Your Board of Directors received a written opinion, dated April 13,
2000, from Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation to the
effect that, as of that date and based on and subject to the assumptions,
limitations and qualifications set forth in the opinion, the $10.10 per
share cash consideration to be received by holders of PlayCore's common
stock in the offer and the subsequent merger was fair to such holders from
a financial point of view. A complete copy of the DLJ opinion is attached
as Exhibit A to this offer to purchase.
Q: Will the Company continue as a public company? (Page 15)
A: No. Because we are purchasing PlayCore's common stock in a tender offer and
intend to engage in a merger which will result in the securities of
PlayCore being held by less than 300 persons of record, this offer is
considered the first step in a going-private transaction.
Q: Will the tender offer be followed by a merger if all common shares are not
tendered in the offer? (Page 14)
Yes. If the number of shares tendered in the offer, plus the number of
shares acquired by Acquisition Company pursuant to various agreements
entered into in connection with the merger agreement, constitute greater
than 90% of the outstanding shares, the merger will occur immediately
following the acquisition of such shares. If this requirement is not met,
but all of the conditions to the offer have been waived or met, PlayCore
will call a stockholders meeting to approve the merger. Since, at that
time, Acquisition Company will own more than 50% of the outstanding shares
of PlayCore stock, stockholder approval of the merger will be assured.
If we complete the merger, stockholders who did not tender their shares
into the offer will receive $10.10 in cash (or any higher price per share
that is paid in the offer) in the merger in exchange for each share of
PlayCore common stock which they own.
Q: If I decide not to tender, how will the offer affect my shares? (Page 14)
A: Stockholders not tendering in the offer will receive in the merger, if it
takes place, the same amount of cash per share which they would have
received had they tendered their shares in the offer.
Q: What is the market value of my shares as of a recent date? (Page 49)
A: On April 13, 2000, the last full trading day before we announced the offer
and merger, the reported closing sale price for one share of PlayCore's
common stock on the American Stock Exchange was $6 3/4. On April 19, 2000,
the last trading day before we commenced the offer, the reported closing
sale price for one share of PlayCore's common stock on the American Stock
Exchange was $9 3/4. We advise you to obtain a recent quotation for the
common stock in deciding whether to tender your shares.
Q: If I object to the price being offered, will I have appraisal rights? (Page
16)
A: Not in the offer, but you will have appraisal rights in the subsequent
merger. You may elect not to tender your shares in the offer, not vote in
favor of the merger, perfect your available appraisal rights under Delaware
law and have the "fair value" of your shares paid to you.
Q: Who can I talk to if I have questions about the tender offer?
A: If you have more questions about the tender offer, you should contact:
X.X. XXXX & CO., INC.
Banks and Brokers Call Collect:
(000) 000-0000
All Others Please Call Toll-Free:
(000) 000-0000
v
7
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER........ iii
INTRODUCTION................................................ 1
SPECIAL FACTORS............................................. 5
1. Background of the Transaction; Contacts with the
Company................................................. 5
2. Recommendation of the Board of Directors of the Company;
Fairness of the Offer and the Merger.................... 9
3. Opinion of the Company's Financial Advisor.............. 11
4. Purpose and Structure of the Transaction................ 14
5. Plans for the Company after the Transaction............. 15
6. Rights of Stockholders in the Offer and the Merger...... 16
7. The Merger Agreement and Related Documents.............. 18
8. Interests of Certain Persons in the Transaction......... 35
9. Financing of the Transaction............................ 37
10. Certain United States Federal Income Tax Consequences... 41
11. Fees and Expenses....................................... 42
THE TENDER OFFER............................................ 44
1. Terms of the Offer...................................... 44
2. Acceptance for Payment and Payment for Shares........... 45
3. Procedures for Tendering Shares......................... 46
4. Withdrawal Rights....................................... 48
5. Price Range of Shares................................... 49
6. Dividends and Distributions............................. 49
7. Certain Information Concerning the Company.............. 50
8. Certain Information Concerning Holdings, Parent and
Acquisition Company..................................... 53
9. Source and Amount of Funds.............................. 54
10. Effect of the Offer on the Market for the Common Stock;
Exchange Act Registration............................... 55
11. Conditions to the Offer................................. 56
12. Certain Legal Matters; Regulatory Approvals............. 57
13. Fees and Expenses....................................... 59
14. Miscellaneous........................................... 59
Schedule I -- Information Concerning the Directors, Executive Officers
and Certain Stockholders of PlayCore, Inc.
Schedule II -- Information Concerning the Directors and Executive
Officers of PlayCore Holdings, L.L.C. PlayCore Holdings,
Inc. and Jasdrew Acquisition Corp.
Schedule III -- Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1
Promulgated Thereunder
Exhibit A -- Opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation
Exhibit B -- Section 262 of the Delaware General Corporation Law
vi
8
To the Holders of Common Stock of
PlayCore, Inc.
INTRODUCTION
PlayCore Holdings, L.L.C., a Delaware limited liability company
("Holdings"), PlayCore Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of Holdings ("Parent"), Jasdrew Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Acquisition Company"), and
PlayCore, Inc., a Delaware corporation (the "Company"), hereby offer to purchase
any and all of the issued and outstanding Shares of common stock, par value
$0.01 per share, of the Company (the "Shares" or "Common Stock"), at a price of
$10.10 per Share, net to the seller in cash (such amount or any greater amount
per Share paid in the Offer being referred to as the "Offer Price"), without
interest thereon on the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, as each may
be amended and supplemented from time to time, together constitute the "Offer").
See "THE TENDER OFFER -- Conditions to the Offer." For the purposes of this
Offer, Holdings, Parent, Acquisition Company and the Company are collectively
referred to as the "Offerors" and Acquisition Company and the Company are
collectively referred to as the "Purchasers." Holdings, Parent and Acquisition
Company are all newly formed entities which were created by Chartwell
Investments II LLC ("Chartwell") to effect the transactions referred to herein.
Xxxxxxxxx is an advisor to, and manager of, private equity funds which invest in
growth financings and buy outs of middle market companies.
The Offer is a joint tender by Acquisition Company, Parent, Holdings and
the Company to purchase at the Offer Price all Shares tendered pursuant to the
Offer, with Acquisition Company to pay for and purchase no fewer than 425,439
Shares. In the event that the Shares tendered in the Offer, plus the Shares
acquired by Acquisition Company pursuant to the PlayCore Purchase Agreements (as
defined below) (including Shares issued upon the exercise or conversion of
derivative securities purchased thereunder), would constitute greater than 90%
of the outstanding Shares (the "Short Form Requirement") and permit the Merger
(as defined below) to be effected pursuant to Section 253 of the Delaware
General Corporation Law (the "DGCL"), Acquisition Company will purchase all
tendered Shares. If the number of tendered Shares, plus the Shares to be
acquired by Acquisition Company pursuant to the PlayCore Purchase Agreements
(including Shares issued upon the exercise or conversion of derivative
securities purchased thereunder) would not result in the Short Form Requirement
being met, but all of the conditions to the Offer have been waived or met, the
Company will purchase all Shares tendered in excess of 425,439 Shares.
Stockholders whose Shares are registered in their own name and who tender
directly to First Chicago Trust Company of New York, as Depositary (the
"Depositary"), will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Purchasers pursuant to the
Offer. The Company will pay all charges and expenses incurred in connection with
the Offer by the Depositary, and X. X. Xxxx & Co., Inc., as Information Agent
(the "Information Agent"). See "SPECIAL FACTORS -- Fees And Expenses" and "THE
TENDER OFFER -- Fees and Expenses."
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of April 13, 2000 (the "Merger Agreement"), by and among the Company, Parent
and Acquisition Company. The Merger Agreement provides that, among other things,
as promptly as practicable after consummation of the Offer and the satisfaction
of the other conditions contained in the Merger Agreement, Acquisition Company
will be merged (the "Merger") with and into the Company, with the Company
continuing as the surviving corporation (the "Surviving Corporation"). At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
Acquisition Company, in the treasury of the Company and by holders who perfect
their appraisal rights in accordance with the DGCL), will, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled and
be converted into the right to receive an amount per share (the "Merger
Consideration") equal to the Offer Price, without interest.
9
As of April 13, 2000, there were 7,960,304 Shares issued and outstanding,
3,634,385 Shares held in the treasury of the Company, 1,514,590 Shares reserved
for issuance upon conversion of the Company's 10% Subordinated Convertible
Debentures due February 15, 2004 (the "Debentures"), 50,000 Shares reserved for
issuance upon exercise of a warrant to purchase Shares held by GreenGrass
Holdings, a Delaware general partnership and the majority stockholder of the
Company ("GreenGrass"), dated March 13, 1997 (the "GreenGrass Warrant"), 635,379
Shares reserved for issuance upon exercise of warrants to purchase Shares held
by Massachusetts Mutual Life Insurance Company ("MassMutual") and certain other
parties related to MassMutual (the "MM Warrant Holders") and 1,287,893 Shares
issuable upon the exercise of outstanding options granted under the Company's
stock option plans ("Company Options").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY OF THE SHARES
OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE DEBENTURES (EXCLUDING ANY
SHARES OWNED BY ANY OFFICER, DIRECTOR OR AFFILIATE OF THE COMPANY, SHARES
ISSUABLE UPON EXERCISE OF COMPANY OPTIONS AND WARRANTS, AND SHARES ISSUABLE UPON
THE CONVERSION OF DEBENTURES HELD BY GREENGRASS) (THE "MINIMUM CONDITION") AND
(2) THE COMPANY AND/ OR ACQUISITION COMPANY HAVING RECEIVED OR HAVING AVAILABLE
THE PROCEEDS FROM THE FINANCING CONTEMPLATED BY THE FINANCING AGREEMENTS AND THE
PROCEEDS FROM THE CAPITAL CONTRIBUTION, INCLUDING, BUT NOT LIMITED TO, PROCEEDS
SUFFICIENT TO (A) FINANCE THE PURCHASE OF THE SHARES THAT THE COMPANY AND
ACQUISITION COMPANY ARE AGREEING TO PURCHASE PURSUANT TO THE OFFER, (B) PAY THE
MERGER CONSIDERATION PURSUANT TO THE MERGER, (C) PURCHASE SECURITIES OF THE
COMPANY PURSUANT TO THE PLAYCORE PURCHASE AGREEMENTS, (D) REDEEM THE COMPANY'S
THEN OUTSTANDING DEBENTURES AND REPAY OTHER OUTSTANDING INDEBTEDNESS OF THE
COMPANY AND ITS SUBSIDIARIES AND (E) PAY THE FEES AND EXPENSES REQUIRED TO BE
PAID BY THE COMPANY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT (THE "RECEIPT OF FUNDS CONDITION"). THE OFFER IS ALSO
CONDITIONED UPON THE SATISFACTION OF CERTAIN OTHER CONDITIONS DESCRIBED IN "THE
TENDER OFFER -- CONDITIONS OF THE OFFER." THE SHORT FORM REQUIREMENT IS NOT A
CONDITION TO THE OFFER.
The consummation of the Merger is subject to the satisfaction of certain
conditions, including the approval of the Merger Agreement by the requisite vote
of the Company's stockholders if the Short Form Requirement is not met.
Concurrently with the execution of the Merger Agreement, and as an
inducement to Acquisition Company and Parent to enter into the Merger Agreement,
(i) the Company has entered into a Stock Purchase Agreement (the "Stock
Agreement") with Parent, GreenGrass and Acquisition Company pursuant to which
GreenGrass has agreed, among other matters, immediately after the closing of the
Offer (the "Offer Closing"), to sell to Acquisition Company all of its
securities of the Company as follows: (a) in the case of Shares, for
consideration equal to the Offer Price for each Share and (b) in the case of the
GreenGrass Warrant and Debentures held by GreenGrass, for consideration on an as
exercised or converted basis equal to the Offer Price per Share, less any
conversion or exercise price thereof; (ii) the MM Warrant Holders have entered
into a Purchase, Waiver and Consent Agreement with the Company, PlayCore
Wisconsin, Inc., a Wisconsin corporation and a wholly-owned subsidiary of the
Company ("PlayCore Wisconsin"), and Acquisition Company (the "MM Agreement"),
pursuant to which, among other matters, the MM Warrant Holders have agreed to
sell all of their warrants to purchase Shares (the "MM Warrants" which together
with the GreenGrass Warrant are collectively referred to herein as the
"Warrants") immediately after the Offer Closing to Acquisition Company (if the
Short Form Requirement is met) or the Company (if the Short Form Requirement is
not met) for consideration equal to the Offer Price per Share less the exercise
price thereof; and (iii) certain holders (the "Option Holders") of Company
Options have entered into Option Exercise/
2
10
Cancellation Agreements with the Company and Acquisition Company (the "Option
Exercise Agreements"), pursuant to which, among other matters, the Option
Holders have agreed (x) (1) if the Short Form Requirement is met, to exercise
all of their Company Options immediately after the Offer Closing and to sell to
Acquisition Company all of the Shares issued upon such exercise (collectively,
the "Option Exercise Shares") for consideration equal to the Offer Price per
Share, or (2) if the Short Form Requirement is not met, not to exercise their
Company Options and to exchange their Company Options in the Merger as provided
in the Merger Agreement and (y) to tender in the Offer all Shares then owned by
them (excluding any Option Exercise Shares) and (iv) the Company has granted to
Acquisition Company an option (the "Acquisition Company Option") pursuant to a
Stock Option Agreement (the "Stock Option Agreement") to acquire from the
Company in certain circumstances a sufficient number of Shares (the "Acquisition
Company Option Shares") that, when taken together with all other outstanding
Shares to be acquired by Acquisition Company pursuant to the Offer and the
agreements outlined in clauses (i) through (iii) of this paragraph (such
agreements, collectively with the Stock Option Agreement, the "PlayCore Purchase
Agreements"), allow the Short Form Requirement to be met.
The Offer, the consummation of the transactions contemplated by the
PlayCore Purchase Agreements and the Merger are sometimes collectively referred
to herein as the "Transaction."
In the event that the number of Shares tendered pursuant to the Offer, plus
the Shares purchased by Acquisition Company pursuant to the PlayCore Purchase
Agreements (including Shares issued upon the exercise or conversion of
derivative securities purchased thereunder), would be sufficient to satisfy the
Short Form Requirement, Acquisition Company will purchase all Shares tendered
pursuant to the Offer and consummate the Merger immediately thereafter. If a
lesser number of Shares are tendered pursuant to the Offer, then, assuming all
conditions to the Offer have been waived or met, (i) Acquisition Company will
purchase 425,439 of the Shares tendered and the Company will purchase the
balance, if any, of the Shares tendered pursuant to the Offer and (ii) the
Company will call a stockholder meeting after the closing of the Offer to
approve the Merger.
The terms and conditions of the Merger Agreement and the PlayCore Purchase
Agreements are more fully described in "SPECIAL FACTORS -- The Merger Agreement
and Related Documents."
Subject to the perfection of appraisal rights under the DGCL, Shares not
tendered in the Offer (other than Shares held by Acquisition Company and in the
treasury of the Company) will be cancelled in the Merger and converted into the
right to receive the Merger Consideration, without interest.
Stockholders who hold their Shares at the time of the Merger and who fully
comply with the statutory appraisal procedures set forth in the DGCL, the
relevant provisions of which are attached as Exhibit B of this Offer to
Purchase, will be entitled to perfect their appraisal rights under the DGCL and
have the fair value of their Shares (which may be more than, equal to, or less
than the Merger Consideration) judicially determined and paid to them in cash
pursuant to the procedures prescribed by the DGCL. NO APPRAISAL OR DISSENTERS
RIGHTS ARE AVAILABLE TO STOCKHOLDERS IN CONNECTION WITH THE OFFER. See "SPECIAL
FACTORS -- Rights of Stockholders in the Offer and the Merger."
The Company's Board of Directors (the "Board"), by unanimous vote of all
directors, (i) approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, (ii) determined that the Offer and
the Merger are advisable, fair to, and in the best interests of the stockholders
of the Company and (iii) recommends to the Company's stockholders that such
stockholders accept the Offer and tender their Shares pursuant thereto.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ"), financial
advisor to the Board, has delivered to the Board its written opinion, dated
April 13, 2000, to the effect that, as of that date and based on and subject to
the assumptions, limitations and qualifications set forth in such opinion, the
$10.10 per Share cash consideration to be received in the Offer and the Merger
by holders of Shares was fair to such holders from a financial point of view. A
copy of the DLJ Opinion (defined below), which sets forth the assumptions made,
matters considered and limits of the review by DLJ in connection with such
opinion, is attached hereto as Exhibit A. Holders of Shares are urged to read
the opinion carefully in its entirety.
3
11
Pursuant to the Credit Agreement, dated as of April 13, 2000, among
PlayCore Wisconsin, as borrower, and the Company, Acquisition Company and
Heartland Industries, Inc. (DE), a Delaware corporation and wholly-owned
subsidiary of PlayCore Wisconsin ("Heartland"), as guarantors, and the lenders
signatory thereto from time to time (the "Lenders"), General Electric Capital
Corporation, as Administrative Agent and a Lender ("GE"), and Credit Agricole
Indosuez, as Documentation Agent and a Lender (the "Credit Agreement" or "Senior
Credit Facility"), the Lenders, subject to certain conditions, have agreed to
provide to PlayCore Wisconsin a $115 million senior secured credit facility. The
Senior Credit Facility will be comprised of (i) $85 million of term loans to be
divided into two primary tranches in amounts to be determined, and (ii) $30
million of revolving credit facilities. Pursuant to the Purchase Agreement among
PlayCore Wisconsin, as issuer, the Company, Parent and Heartland, as guarantors,
and GS Mezzanine Partners II, L.P. and GS Mezzanine Partners Offshore II, L.P.
(together "GS"), dated as of April 13, 2000 (the "Subordinated Note Agreement"),
GS has agreed, subject to certain conditions, to purchase $30 million of senior
subordinated notes of PlayCore Wisconsin (the "Sub Notes" or "Notes"). The
Senior Credit Facility and Subordinated Note Agreement are collectively referred
to herein as the "Financing Agreements." A portion of the proceeds from the
Financing Agreements will be loaned by PlayCore Wisconsin to Acquisition Company
(if the Short Form Requirement is met) or the Company (if the Short Form
Requirement is not met) pursuant to the terms of a Loan Agreement among Company,
Acquisition Company and PlayCore Wisconsin dated as of April 13, 2000 (the
"PlayCore/Acquisition Company Loan Agreement"). The remainder of the funds
necessary for Acquisition Company to consummate the transactions contemplated by
the Merger Agreement and the PlayCore Purchase Agreements will be in the form of
a capital contribution from Parent to Acquisition Company of $72.5 million (the
"Capital Contribution"). The Offerors believe that the proceeds, if obtained,
from the Credit Agreement, Subordinated Note Agreement and the Capital
Contribution will be sufficient to satisfy the Receipt of Funds Condition. See
"SPECIAL FACTORS -- Financing of the Transactions" and "THE TENDER
OFFER -- Conditions to the Offer."
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
4
12
SPECIAL FACTORS
1. BACKGROUND OF THE TRANSACTION; CONTACTS WITH THE COMPANY.
In 1998, the Board and GreenGrass expressed concern that the trading price
on The American Stock Exchange (the "AMEX") of the Common Stock did not
adequately reflect the financial performance or prospects of the Company. The
range of high and low sales prices for the Common Stock in 1998 was a high of
$5 1/4 and a low of $3 3/8, and for the first two quarters of 1999 was a high of
$6 1/2 and a low of $4 1/4. In 1998, the Company retained a financial public
relations firm to assist the Company in its relations with the financial media,
institutional investors and buy-side analysts. Additionally, in 1998 and early
1999, the Company reviewed various acquisition candidates, held discussions with
some of those candidates, both domestic and foreign, but was unable to effect a
transaction, other than Heartland. As to certain of the acquisition candidates,
it was apparent that a capital infusion into the Company would be required. In
the early spring of 1999, it became increasingly clear to the Board and
GreenGrass that the foregoing efforts, in light of the overall state of the
small cap markets generally, were not likely to generate an appropriate market
valuation for the Company.
Based on these concerns, from March through May 1999, XxxxxXxxxx
interviewed four international investment banking firms to obtain their views on
value enhancing strategies for the Company. After these interviews, XxxxxXxxxx
recommended to the Board that it consider a proposal by DLJ to act as a
financial advisor to the Company for the purposes of considering alternatives to
enhance stockholder value, including a possible sale of the Company.
A meeting with DLJ was held on July 7, 1999, that included Board member and
Chief Executive Officer Xxxxxxxx X. Xxxxxxx, Chairman of the Board Xxxxxxx X.
Xxxxxx and Company legal counsel Xxxxxxxx X. Xxxxxx, III of Xxxxx & Xxxxxxx,
along with Chairman of the Executive Committee of the Board Xxxxx X. Xxxxx and
Board member Xxxxxx X. Xxxx. At this meeting, DLJ reviewed various strategic
alternatives to enhance stockholder value. After a discussion and consideration
of the alternatives, Xx. Xxxxxx recommended that the alternatives and the
question of whether to engage an investment banking firm be presented to the
full Board.
On August 17, 1999, the Board met by telephone conference to consider
alternatives to enhance stockholder value. Xxxx ("Xxxx") Xxxxx from DLJ reviewed
with the Board materials previously distributed to the Board on August 11, 1999.
Xx. Xxxxx first reviewed the favorable current mergers and acquisitions
environment, the various valuation methods used to produce the range of expected
enterprise values to be achieved in the sale of the Company, and the timing of
the sale process. Next, Xx. Xxxxx reviewed the risks compared to benefits of
certain possible acquisitions the Company was evaluating, concluding that the
relative risks offset the possible improvement to stockholder value. Xx. Xxxxx
also noted that the Company's current capital structure would make it difficult
to consummate potential acquisitions.
Following a discussion of Xx. Xxxxx'x presentation and the various
alternatives, the Board authorized the engagement of DLJ and GreenGrass as
financial advisors to assist management and the Board in exploring ways to
maximize stockholder value, including specifically selling the Company.
On September 20, 1999, the Company publicly announced the engagement of DLJ
and began the process of identifying candidates that might be interested in
acquiring or making a strategic investment in the Company. Over the next month,
DLJ contacted one hundred nineteen (119) potential buyers, including Chartwell,
comprised of ninety (90) financial buyers and twenty-nine (29) strategic buyers.
Of the parties contacted, fifty-one (51) financial buyers, including Chartwell,
and five (5) strategic buyers executed confidentiality agreements. Each of these
parties received a Confidential Information Memorandum developed by management,
GreenGrass and DLJ describing the Company, its businesses, products, markets,
assets, employees, financial performance and forecasts. Based on the
Confidential Information Memorandum, twelve (12) parties, including Chartwell,
submitted preliminary indications of interest in early November 1999.
On November 15, 1999, the Board met by telephone conference to review a
report by DLJ distributed to the Board prior to the meeting summarizing the
process and reviewing the indications of interest received from
5
13
the potential buyers. After a discussion, and although no decision was reached
by the Board at the meeting to sell the Company, the Board authorized the
financial advisors and management to continue the process.
Beginning in late November and concluding in early December, eight (8)
interested parties attended management presentations and were provided access to
a data room, which included the Company's material agreements and other
financial and due diligence information. Based on the management presentations
and access to the data room, these parties were asked to submit proposals on
December 3, 1999.
On December 6, 1999, the Board met by telephone conference to review the
eight (8) proposals received on December 3, 1999, copies of which had been
previously provided to the Board. Xxxxx Xxxxxxx from DLJ reviewed the proposals.
Xx. Xxxxxxx reported that the values associated with the proposals were at the
lower end of the value range due to concern expressed by the interested parties
regarding a possible recession, conservative financial structures included in
the proposals of the potential buyers, impact of the Hechinger Company
bankruptcy in 1999, limited prospects for growth in the core consumer products
business, and the fact that the Company's Heartland subsidiary had been operated
by the Company for only a limited period of time. Xx. Xxxxxxx reviewed the
background of each of the interested parties submitting proposals, noting
particularly the financial ability and historical record of the party in
consummating a transaction. Based on this review and the submitted proposals,
the financial advisors recommended that four (4) of the interested parties,
including Chartwell, be selected to continue in the process, which would include
facility tours, additional due diligence and providing comments to the draft
Merger Agreement previously distributed by Xxxxx & Xxxxxxx. After a discussion,
and although no decision was reached by the Board at the meeting to sell the
Company, the Board authorized the financial advisors to continue the process
with the four selected parties.
Between December 6, 1999 and January 14, 2000, Xxxxxxxxx and one other
party (the "Other Party") conducted additional due diligence, visited the
Company's key manufacturing facilities and reviewed the Merger Agreement. The
two other parties declined to move forward in the process. As requested by the
Company, Xxxxxxxxx provided a proposed letter of intent on January 14, 2000.
Pursuant to this letter of intent, Xxxxxxxxx proposed a transaction consisting
of a tender offer at $10.00 per share subject to satisfactory completion of its
due diligence and a number of other conditions. In order to structure the
transaction as a recapitalization for accounting purposes, Xxxxxxxxx proposed
that approximately $4.2 million of GreenGrass equity be rolled-over into common
stock of the surviving corporation. Xxxxxxxxx's proposal included committed
financing from GE as senior lender and GS for the subordinated note financing,
and a memorandum from its legal counsel, Xxxx, Gump, Xxxxxxx, Xxxxx & Xxxx, LLP
("Akin Gump"), regarding comments to the Merger Agreement. In order to proceed,
the Chartwell proposal also required that the Company deal exclusively with
Chartwell for ninety (90) days.
On January 17, 2000, the Other Party provided its proposed letter of intent
to the Company. Although unclear from the language of the letter of intent, the
Other Party's per share acquisition price was less than $10.00 based on required
adjustments on the closing date based on the level of working capital, total
indebtedness and costs, bonuses and expenses incurred in connection with the
sale of the Company. The Other Party structured the transaction as a cash
merger, with no provision for a tender offer. Senior financing was provided GE.
Subordinated note financing was also proposed. The Other Party required that the
Company deal exclusively with it for six (6) weeks.
On January 17 and 18, 2000, DLJ had numerous discussions with Xxxxxxxxx and
the Other Party regarding their respective proposals. On January 20, 2000, the
Company's financial advisors reviewed with the Executive Committee of the Board
the proposed letters of intent and provided an update on the progress made with
these parties. DLJ indicated that the Other Party was unwilling to commence a
tender offer or commit to a fixed per share price without additional due
diligence. DLJ further indicated that the Other Party had completed
substantially less accounting, business and legal due diligence than had been
completed by Chartwell. Finally, DLJ expressed the view that the Other Party's
subordinated note financing letter was not a customary commitment letter.
Xxxxxxxxx, in discussions with DLJ, had agreed to increase its per share
offer to $10.10. Xxxxxxxxx had also completed substantial due diligence and had
obtained committed financing from GE and GS. However,
6
14
Chartwell conditioned its offer and its willingness to move forward on the
parties agreeing to a recapitalization structure whereby GreenGrass was required
to roll-over up to $4.2 million worth of equity. After Xx. Xxxxx canvassed the
other Board members for their concurrence, the financial advisors were
instructed to continue negotiating with Xxxxxxxxx and explore ways to increase
Xxxxxxxxx's offer and remove the differential consideration occasioned by the
roll-over interest required by the recapitalization structure.
Accordingly, the Company began negotiating an agreement with Xxxxxxxxx on
January 30, 2000, whereby the Company would agree to deal exclusively with
Xxxxxxxxx and not solicit additional acquisition proposals for a specified
period of time (the "no-shop" agreement). On February 3 and 4, 2000, the Board
was updated by Messrs. Xxxxx and Xxxxxx regarding the negotiations on the "no
shop" agreement and certain other issues unresolved with Chartwell. On February
4, 2000, negotiations with Xxxxxxxxx regarding the "no-shop" agreement and a
possible transaction were terminated because the parties could not agree on (1)
the length of the "no-shop" time period, (2) the conditions upon which the
"no-shop" period could be extended, (3) the ability of the Company to provide
non-public information to unsolicited third parties, and (4) the conditions upon
which Xxxxxxxxx would be reimbursed its transaction expenses.
After termination of negotiations with Xxxxxxxxx, DLJ sent a Confidential
Information Memorandum to two parties initially contacted by DLJ for possible
investment in, or purchase of, the Company. Both parties declined to move
forward with a transaction.
On February 16, 2000, Xx. Xxxxxxx of DLJ reinitiated discussions with
Xxxxxxxxx and communicated the Board's position regarding the timing of the
transaction and the firmness of the $10.10 per share offer price. On February
18, 2000, after several discussions between DLJ, Xxxxx & Xxxxxxx, Xxxxxxxxx and
Xxxx Xxxx, the parties agreed to a "no-shop" agreement providing that: (1) the
Company would deal exclusively with Chartwell and not solicit third party
proposals until March 31, 2000, with no right to extend, (2) DLJ could
communicate with parties making unsolicited proposals, and (3) if the Company
terminated the "no shop" agreement, it would pay Xxxxxxxxx's transaction
expenses (exclusive of commitment fees) not to exceed $2,500,000. On February
18, 2000, the Executive Committee of the Board met by telephone conference and
approved the "no-shop" agreement.
During the week of February 21, 2000, after a discussion between legal
counsel and Xxxxxxxxx's accounting firm, the proposed structure of the
transaction was modified to require a joint-tender offer by the Company and a
newly-formed Chartwell entity in order to obtain recapitalization accounting
treatment for the transaction and GreenGrass' roll-over equity requirement was
reduced to $1.6 million.
On February 28, 2000, Xxxx Xxxx provided Xxxxx & Xxxxxxx a draft Merger
Agreement, providing for (1) the roll-over equity by GreenGrass, (2) the ability
of Chartwell to force a merger if the tender offer was not consummated, (3)
broad conditions to closing, including a 90% tender of shares as a condition to
closing, (4) the right of Chartwell to unilaterally extend the tender offer, (5)
significant restrictions on the Company's ability to address acquisition
proposals after signing of the Merger Agreement; and (6) several events
requiring the payment of a termination fee and expenses upon termination. Xxxx
Xxxx also provided an initial draft of the Stock Agreement and a Stockholders'
and Registration Rights Agreement to GreenGrass and its legal counsel, Xxxxxx &
Xxxxxxx.
On March 16, 2000, after receipt by Xxxx Xxxx of a re-draft to the Merger
Agreement from Xxxxx & Xxxxxxx, representatives of the parties and their
counsels met in New York City at the offices of DLJ to negotiate the open issues
on the agreements. At this meeting, Xxxxxxxxx agreed to (1) eliminate the
differential consideration caused by the recapitalization structure and provide
all stockholders $10.10 per Share in cash, (2) the Minimum Condition, and (3)
the ability of the Company to provide non-public information to an unsolicited
third-party and negotiate for a period of time with such party without violating
the "no-shop" covenant in the Merger Agreement. The Company also agreed to grant
Chartwell an option to purchase Shares to satisfy the Short Form Requirement, if
needed, upon the consummation of the Offer pursuant to an option agreement. Also
at this meeting, subject to Board approval, a termination fee of $2,300,000 and
expense reimbursement not to exceed $2,500,000 payable to Chartwell by the
Company was agreed to by Chartwell and the Company for limited circumstances.
The Offer Price was confirmed at $10.10 per Share, and Chartwell indicated its
unwillingness to increase its offer. On March 20, 2000, Akin
7
15
Xxxx provided revised drafts of the Merger Agreement and Stock Agreement and
Xxxxx & Xxxxxxx provided an initial draft of the Stock Option Agreement.
On March 22, 2000, the Board met by telephone conference to receive an
update regarding the negotiations. Xx. Xxxxxxx from DLJ reviewed the history of
the negotiations and the revised structure. Xx. Xxxxx and Xx. Xxxxx from Xxxxx &
Xxxxxxx reviewed the open issues on the Merger Agreement. After a discussion,
and although no decision was made to sell the Company, the Board authorized
continued negotiations with Chartwell.
From March 22 to March 31, 2000, the Company and Chartwell and their
respective legal counsel negotiated the Merger Agreement and Stock Option
Agreement, and GreenGrass and Chartwell and their respective legal counsel
negotiated the terms of the Stock Agreement.
On March 26, 2000, Xxxxx & Xxxxxxx distributed to the members of the Board
a written summary of the transaction and the transaction agreements, as well as
current drafts of the Merger Agreement, Stock Agreement, Stock Option Agreement
and Offer materials.
On March 29, 2000, the Board met by telephone conference. Legal counsel for
the Company reviewed the status of negotiations on the terms of the Merger
Agreement and other transaction agreements and the various resolved and
unresolved issues.
On March 31, 2000, the Board met at the offices of DLJ in New York City.
Legal counsel for the Company reviewed the status of the negotiations on the
terms of the Merger Agreement and other transaction agreements and the various
resolved and unresolved issues, including the status of the Financing
Agreements, and the amount of the termination fee and the maximum dollar amount
of expenses of Chartwell that would be payable by Company in the event that the
transactions contemplated by the Merger Agreement were not consummated for
specific reasons. DLJ reviewed in detail with the Board its preliminary analysis
of the proposed transaction. DLJ orally expressed its view that the price of
$10.10 per Share of cash being offered in the Offer and to be received in the
Merger was fair, from a financial point of view, to the Company's stockholders.
The Board instructed its legal counsel and financial advisors to continue
negotiations with respect to the terms of the Merger Agreement.
From March 31 to April 10, 2000, the Company and Chartwell and their legal
counsel negotiated the terms of the Merger Agreement and Stock Option Agreement
and Chartwell and GreenGrass and their respective legal counsel negotiated the
terms of the Stock Agreement.
On April 7, 2000, Xxxxx & Xxxxxxx distributed to members of the Board
updated summaries of the transaction and the transaction agreements, current
drafts of the Merger Agreement and the other transaction agreements and proposed
resolutions regarding the transaction.
On April 10, 2000, the Board met at the offices of DLJ in New York City.
Xx. Xxxxx and Company legal counsel reported that they had satisfactorily
concluded negotiation of the unresolved issues related to the Merger Agreement,
except one issue relating to the consequences of the Company exceeding its
estimated expenses in the proposed transaction. DLJ stated that it was prepared
to issue to the Board its written opinion to the effect that, as of the date of
the opinion and based on and subject to the assumptions, limitations and
qualifications set forth therein, the $10.10 per Share cash consideration to be
received by holders of Shares in the Offer and the Merger is fair to such
holders from a financial point of view. The Company's legal counsel provided a
detailed summary of the proposed terms of the Transaction, the Merger Agreement,
the Stock Agreement, the Financing Agreements and the Stock Option Agreement and
reviewed the proposed Board resolutions. After discussion and analysis, the
Board unanimously determined that the Offer and the Merger and the terms and
provisions of the Merger Agreement, the Stock Agreement and Stock Option
Agreement were advisable, fair to and in the best interests of the Company's
stockholders, and unanimously recommended that stockholders of the Company
accept the Offer and tender their shares pursuant to the Offer, subject only to
receipt by the Company of an amendment to its current credit facility.
8
16
On April 13, 2000, legal counsel to Chartwell and the Company resolved the
remaining open issue and the Company executed an amendment to its current credit
facility. That same day, the parties executed the Merger Agreement and the
ancillary agreements contemplated thereby, including the Financing Agreements.
On April 14, 2000, the Company issued a press release announcing the
execution of the Merger Agreement.
2. RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY; FAIRNESS OF THE
OFFER AND THE MERGER.
In evaluating the Offer and the Merger, the Board relied upon its knowledge
of the business, financial condition and prospects of the Company as well as the
advice of financial advisors and legal counsel. In reaching its decision to
recommend and approve the Offer and the Merger and authorize the Merger
Agreement and the transactions contemplated thereby, the Board considered a
number of factors, including the following:
(i) The historical market prices and recent trading activity of the
Shares, including the fact that the $10.10 per Share cash consideration to
be paid in the Offer and the Merger represents a substantial premium over
the recent trading price of the Shares.
(ii) The fact that the purchase of Shares by the Company and/or
Acquisition Company is fully financed by executed Financing Agreements with
GE and GS and the Capital Contribution.
(iii) The fact that the Merger Agreement and the transactions
contemplated thereby were the product of arms-length negotiations between
Acquisition Company, Parent and the Board (and their respective advisors).
(iv) The fact that the Minimum Condition requires a majority of the
Shares (including Shares issuable upon conversion of all Debentures other
than those held by GreenGrass) not owned by GreenGrass or Company
management to be tendered in the Offer.
(v) The structure of the transaction which is designed, among other
things, to result in the receipt by stockholders at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the per Share consideration to be paid to all parties in the Offer and
the Merger is the same.
(vi) The fact that the Company's ability to grow through strategic
acquisitions is limited by its current capital structure.
(vii) The fact that GreenGrass would be receiving the Offer Price with
respect to all of its Shares and therefore its interests are aligned with
the interests of the public stockholders of the Company.
(viii) The written opinion of DLJ dated April 13, 2000 to the effect
that, as of that date and based on and subject to the assumptions,
limitations and qualifications set forth in the opinion, the $10.10 per
Share cash consideration to be received in the Offer and the Merger by the
holders of Shares was fair to such holders from a financial point of view.
The full text of the DLJ Opinion is attached as Exhibit A to this Offer to
Purchase. The summary of the DLJ Opinion set forth in this Offer to
Purchase is qualified in its entirety by reference to the full text of the
DLJ Opinion. The Company's stockholders are urged to read the DLJ Opinion
carefully and in its entirety for the procedures followed, assumptions
made, other matters considered and limits of the review by DLJ in
connection with such opinion. The DLJ Opinion was prepared for the Board
and was directed only to the fairness to the holders of Shares from a
financial point of view, as of the date thereof, of the consideration to be
received by such holders in the Offer and the Merger. The DLJ Opinion does
not constitute a recommendation to any of the Company's stockholders as to
whether such stockholder should tender his Shares or how such stockholder
should vote on the Merger.
(ix) The conclusion that the Offer Price and Merger Consideration
represent the highest price that an acquisition party would be willing to
pay in acquiring the Shares. This determination was the result of the
thorough auction process conducted by the Board and the Board's arms-length
negotiations with acquisition parties in an attempt to obtain the highest
possible price.
9
17
(x) The terms of the Merger Agreement, including (a) the provision
providing that the Board may, in the exercise of its fiduciary duties,
furnish or provide access to information concerning the Company to, and
engage in discussions and negotiate with, third parties who make a bona
fide unsolicited request or inquiry that the Board believes may lead to an
acquisition proposal that would pay more than the Offer Price and (b) the
ability of the Board, in the exercise of its fiduciary duties, to terminate
the Merger Agreement in order to permit the Company to enter into an
alternative transaction with a third party.
(xi) The relatively few regulatory approvals or consents required to
consummate the Offer and the Merger, and the favorable prospects for
receiving such approvals and consents.
(xii) The availability of rights of appraisal under Delaware law with
respect to the Merger.
(xiii) The financial projections prepared by the Company's management.
See "THE TENDER OFFER -- Certain Information Concerning the
Company -- Certain Projections."
(xiv) The Company's business, financial condition, results of
operations and prospects and the nature of the industries in which the
Company operates.
(xv) The relatively thin trading market and the lack of liquidity of
the Common Stock.
(xvi) The possibility that if a merger transaction with Acquisition
Company is not consummated, and the Company remained a publicly-owned
corporation, the price that might be received by the holders of the Shares
in the open market or in a future transaction might be less than $10.10 per
Share.
(xvii) The fact that, under the terms of DLJ's engagement letter, a
portion of DLJ's fee was structured as an incentive fee, providing DLJ an
additional incentive to negotiate, on behalf of the Company, the highest
possible price. See "SPECIAL FACTORS -- Opinion of the Company's Financial
Advisor."
(xviii) The fact that all of the directors approved the Offer and the
Merger.
In addition to the factors listed above, the Board considered the fact that
the consummation of the Offer and the Merger would eliminate the possibility of
the Company's stockholders (other than Acquisition Company and Company
management) from participating in any future growth in the value of the Company,
and believed that this loss of opportunity was appropriately reflected in the
price of $10.10 per Share to be paid in the Offer and Merger.
The Board also considered the potential risks of the Offer and the Merger,
including (1) the fact that the fees and expenses required to be paid by the
Company by the terms of the Merger Agreement upon certain terminations of the
Merger Agreement would make it more costly for another potential bidder to
propose an acquisition of the Company on a basis that would be superior to that
contemplated by the Merger Agreement, and (2) the possibility that the
conditions set forth in the Financing Agreements to the obligations of the
financing sources to provide the funding necessary to consummate the Offer and
the Merger may not be fulfilled or waived.
In light of the number and variety of factors that the Board considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to quantify or otherwise assign relative weights to the
foregoing factors, and, accordingly, the Board did not do so. In addition,
individual members of the Board may have given different weights to different
factors. The Board viewed their positions and recommendations as being based on
the totality of the information presented to and considered by it.
THE BOARD (1) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (2) HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS AND (3) RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
10
18
3. OPINION OF THE COMPANY'S FINANCIAL ADVISOR.
The Company asked DLJ, in its role as financial advisor to the Company, to
render an opinion to the Board as to the fairness, from a financial point of
view, to the holders of Shares of the consideration to be received by such
holders pursuant to the Offer and the Merger.
On April 10, 2000, DLJ delivered to the Board its oral opinion,
subsequently confirmed in writing on April 13, 2000 (the "DLJ Opinion"), to the
effect that, as of such date, based on and subject to the assumptions,
limitations and qualifications set forth in the DLJ Opinion, the consideration
to be received by the holders of Shares pursuant to the Offer and the Merger was
fair to such holders from a financial point of view.
THE FULL TEXT OF THE DLJ OPINION IS ATTACHED AS EXHIBIT A TO THIS OFFER TO
PURCHASE. THE SUMMARY OF THE DLJ OPINION SET FORTH IN THIS OFFER TO PURCHASE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DLJ OPINION. THE
COMPANY'S STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION CAREFULLY AND IN ITS
ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED
AND LIMITS OF THE REVIEW BY DLJ IN CONNECTION WITH SUCH OPINION.
The DLJ Opinion was prepared for the Board and was directed only to the
fairness to the holders of the Common Stock from a financial point of view, as
of the date thereof, of the consideration to be received by such holders. The
DLJ Opinion did not address the relative merits of the Offer or the Merger or
any other business strategies considered by the Board nor did it express any
opinion as to the Board's decision to proceed with the Offer and the Merger. The
DLJ Opinion does not constitute a recommendation to any of the Company's
stockholders as to whether such stockholder should tender his shares or how such
stockholder should vote on the Merger.
The Company selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. In addition, DLJ, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
was not retained as an advisor or agent to the stockholders of the Company or
any person other than the Company.
In arriving at its opinion, DLJ:
- reviewed the Merger Agreement and the annex thereto containing the
conditions to the Offer;
- reviewed financial and other information that was publicly available or
furnished to it by the Company, including information provided during
discussions with the Company's management. Included in the information
provided during discussions with the Company's management were certain
financial projections of the Company for the period beginning January 1,
2000 and ending December 31, 2002 prepared by the management of the
Company, which are the same projections as those included in the
Confidential Offering Memorandum supplied to potential buyers in the
auction process (the "Management Projections");
- compared certain financial and securities data of the Company with
various other companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of the Company
common stock;
- reviewed prices paid in certain other business combinations; and
- conducted other financial studies, analyses and investigations as it
deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
DLJ from public sources, that was provided to DLJ by the Company or their
representatives, or that was otherwise reviewed by DLJ, and DLJ assumed that the
Company was not aware of any information prepared by it or its advisors that
might be material to DLJ's
11
19
opinion that was not made available to DLJ. With respect to the financial
projections supplied to DLJ, DLJ relied on representations that they were
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. DLJ did not assume any
responsibility for making any independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by DLJ. The consideration to be received by the holders of Common Stock
was determined in arm's length negotiations between the Company and Chartwell,
in which DLJ advised the Company.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. Although subsequent developments may
affect its opinion, DLJ does not have any obligation to update, revise or
reaffirm its opinion.
Summary of Financial Analyses Performed by DLJ. The following is a summary
of the financial analyses presented by DLJ to the Board in connection with the
preparation of the DLJ Opinion. The order of analyses, and results thereof,
described do not represent relative importance or weight given to these
analyses, or results thereof, by DLJ. No company or transaction used in the
analyses described below is directly comparable to the Company or the Offer or
the Merger. In addition, mathematical analysis such as determining the average
is not in itself a meaningful method of using selected company or transaction
data. The analyses performed by DLJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by these analyses.
Comparable Publicly Traded Company Analysis. DLJ analyzed the market values
and trading multiples of seven publicly traded recreation and leisure products
companies that DLJ believed were reasonably comparable to the Company. These
comparable companies consisted of:
- Brunswick Corporation;
- K2 Inc.;
- Cannondale Corporation;
- First Years Inc.;
- Escalade Incorporated;
- Koala Corporation; and
- Safety First, Inc.
DLJ examined the enterprise and equity values of each of the comparable
companies as of April 13, 2000 as derived from such companies' public filings
and published research analysts' reports prepared by investment banking firms
including DLJ. DLJ defined enterprise value as the value of fully-diluted common
equity plus long-term debt and the liquidation value of outstanding preferred
stock, if any, minus cash, the proceeds, if any, from the exercise of
outstanding options and warrants and the value of certain other non-core assets,
including minority interests in other entities. In examining these comparable
companies, DLJ analyzed, among other things, the enterprise value of the
companies as a multiple of each company's respective LTM sales, LTM EBITDA, and
LTM EBIT. EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization; EBIT is defined as earnings before interest
expense and income taxes. LTM means the last twelve-month period for which
financial data for the company at issue has been reported. DLJ's analysis of the
comparable companies yielded the following:
- enterprise value as a multiple of LTM sales ranged from 0.4x to 3.0x for
the comparable companies with an average of 0.6x, excluding highs and
lows;
- enterprise value as a multiple of LTM EBITDA ranged from 3.8x to 10.9x
for the comparable companies with an average of 5.8x, excluding highs and
lows; and
- enterprise value as a multiple of LTM EBIT ranged from 4.3x to 20.5x for
the comparable companies with an average of 7.1x, excluding highs and
lows.
12
20
DLJ noted that the enterprise value contemplated in the transactions
resulted in the following multiples for the Company: 1.0x LTM sales, 6.8x LTM
EBITDA and 8.7x LTM EBIT.
Comparable Transaction Analysis. DLJ reviewed five selected transactions or
proposed transactions involving companies that DLJ believed to be reasonably
comparable to the Company. These transactions were divided between selected
transactions, which DLJ refers to as "selected transactions," and transactions
involving Company or Company affiliates, which DLJ refers to as "PlayCore
Transactions." Collectively, the selected transactions and PlayCore Transactions
are referred to as "Comparable Transactions."
Selected transactions:
- True Temper Sports, Inc./Cornerstone Equity Investors; and
- ERO Inc./Xxxxxxxx Corporation.
PlayCore transactions:
- GameTime, Inc./Swing N Slide Corp.;
- Heartland Industries, Inc. (DE)/PlayCore, Inc.; and
- Swing N Slide Corp./GreenGrass Holdings.
In examining these transactions, DLJ compared, among other things, the
enterprise value of the acquired company implied by each of these transactions
as a multiple of LTM revenue, LTM EBITDA, and LTM EBIT as obtained by DLJ from
various public and industry sources, including the Company. DLJ's analysis of
the Comparable Transactions yielded the following:
- enterprise value as a multiple of LTM revenue ranged from 0.2x to 2.3x
with an average of 1.1x.
- enterprise value as a multiple of LTM EBITDA ranged from 3.5x to 9.1x
with an average of 6.2x
- enterprise value as a multiple of LTM EBIT ranged from 4.2x to 14.8x with
an average of 8.8x.
DLJ's analysis of enterprise value as a multiple of LTM revenue of the
PlayCore Transactions yielded an average multiple of 0.6x. Based on LTM XXXXXX,
the PlayCore Transactions yielded an average multiple of 4.8x. and based on LTM
EBIT of the analysis yielded an average multiple of 7.9x.
DLJ noted that the enterprise value contemplated in the transaction
resulted in the following multiples for the Company: 1.0x LTM Revenues, 6.8x LTM
EBITDA and 8.7x LTM EBIT.
Leveraged Buyout Analysis. DLJ also performed a leveraged buyout analysis
of the Company. DLJ performed an analysis of the financial sponsors' return on
fully diluted equity, assuming incentive options of 10% of fully diluted equity.
DLJ used the Management Projections for the years 2000 through 2002 and assumed
a 5% revenue growth rate thereafter, which is consistent with the Company's
historical growth rate for the period 1996 through 1999 (treating all
acquisitions as if they occurred on January 1, 1996), with stable margins. DLJ
noted that the Management Projections did not account for the potential impact
of a recession on the business of the Company, the lack of historical growth
rate when compared to management forecasts and the variability of actual Company
performance versus its plan in 1999. Assuming terminal values at the end of the
fifth year equal to a range of 5.5x to 6.5x EBITDA, this methodology indicated
that a leveraged buyout transaction could earn the financial sponsors a return
of 21.6% to 27.0% on their investment. DLJ also performed an analysis of the
Company's coverage ratios using 1999 financial information on a pro forma basis.
This analysis resulted in ratios of EBITDA to cash interest expense equal to
1.87x and long-term debt less cash to EBITDA equal to 4.55x.
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow
analysis of the projected cash flows of the Company for the years 2000 through
2002, using the Management Projections for the years 2000 through 2002 and
assuming a 5% revenue growth rate thereafter, which is consistent with the
Company's historical growth rate for the period 1996 through 1999 (treating all
acquisitions as if they occurred on
13
21
January 1, 1996), with stable margins. DLJ noted that the Management Projections
did not account for the potential impact of a recession on the business of the
Company, the lack of historical growth rate when compared to management
forecasts and the variability of actual Company performance versus its plan in
1999. The discounted cash flows for the Company were estimated using discount
rates ranging from 13% to 17%, based on estimates of and judgments related to
the weighted average costs of capital of the Company, and terminal multiples of
EBITDA for the Company ranging from 5.5x to 6.5x. Based on this analysis, DLJ
estimated an enterprise value and an equity value per Share ranging from $174.2
million to $233.5 million, and $8.96 to $14.20, respectively.
The above summary describes, in summary form, the material elements of the
presentation made by DLJ to the Board on April 10, 2000. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the Offer and the
Merger and to add to the total mix of information available. DLJ did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness from a financial point
of view. Rather, in reaching its conclusions DLJ considered the results of the
analyses in light of each other and ultimately reached its opinion based on the
results of all analyses undertaken in connection with its opinion taken together
as a whole. Accordingly, notwithstanding the separate factors summarized above,
DLJ has indicated to the Company that it believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. The
analyses performed by DLJ are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by these analyses. A copy of the presentation made by DLJ to the Board on April
10, 2000 is attached as Exhibit c(2) to the Schedule TO.
Engagement Letter. Under the terms of an engagement agreement dated August
19, 1999, the Company agreed to pay DLJ a fee of approximately $1.8 million, a
substantial portion of which is contingent upon consummation of the Offer and a
portion of which was structured as an incentive fee. In addition, the Company
agreed to reimburse DLJ, upon request by DLJ from time to time, for all
out-of-pocket expenses, including the reasonable fees and expenses of counsel,
incurred by DLJ in connection with its engagement, and to indemnify DLJ and
related persons against certain liabilities and expenses arising out of the
tender offer and the subsequent merger, if any, or the transactions in
connection with the tender offer and the subsequent merger, if any, including
liabilities under United States federal securities laws. DLJ and the Company's
management negotiated the terms of the fee arrangement.
Other Relationships. In the ordinary course of business, DLJ and its
affiliates may own or actively trade the securities of the Company for their own
accounts and for the accounts of their customers and, accordingly, may at any
time hold a long or short position in the Company securities. Certain entities
affiliated with DLJ own limited partnership interests in one of the funds
providing a portion of the $72.5 million of equity financing to Holdings, the
result of which is that such entities will beneficially own, indirectly, in the
aggregate, less than 1% of the common equity of Holdings. DLJ also has been
engaged by an affiliate of Chartwell to provide investment banking services,
including exploring strategic alternatives such as the possible sale or
recapitalization of such affiliate.
4. PURPOSE AND STRUCTURE OF THE TRANSACTION.
The purpose of the Transaction is to enable Parent to acquire the entire
equity interest in the Company in a transaction in which the holders of Shares
(other than Acquisition Company) are entitled to have their equity interest in
the Company purchased or extinguished in exchange for cash in the amount of
$10.10 per Share. The Offer, which is the first step in the Transaction, is
structured as a joint tender offer by Holdings, Parent, Acquisition Company and
the Company to purchase, at the Offer Price, all Shares validly tendered and not
withdrawn pursuant to the Offer. Pursuant to the Merger Agreement, Acquisition
Company has agreed to pay for and purchase all Shares tendered pursuant to the
Offer, provided that the Short Form Requirement is met. If the Short Form
Requirement is not met, but all conditions to the Offer have been
14
22
waived or met, then Acquisition Company will purchase 425,439 Shares and the
Company will purchase the balance of the Shares tendered pursuant to the Offer.
The second step in the Transaction is for Acquisition Company or the Company to
purchase Shares and other securities of the Company exercisable or convertible
into Shares pursuant to the PlayCore Purchase Agreements. All Shares and other
securities of the Company purchased pursuant to the PlayCore Purchase Agreements
will be at a per Share price equal to the Offer Price (determined on an as
exercised or converted basis with respect to such Company securities, less any
conversion or exercise price thereof). The third step in the Transaction, the
Merger, will be consummated as soon as practicable following the consummation of
the Offer and the transactions contemplated by the PlayCore Purchase Agreements
and is structured to merge Acquisition Company with and into the Company so that
the Company is the Surviving Corporation. Pursuant to the Merger, each then
outstanding Share (other than Shares held by Acquisition Company, held in the
treasury of the Company or held by stockholders who perfect any applicable
appraisal rights under the DGCL) will be converted into the right to receive the
Merger Consideration, which is equal to the Offer Price. Pursuant to the Merger,
the Shares purchased by the Company pursuant to the Offer will be cancelled with
no consideration paid therefor, and each Share held by Parent or Acquisition
Company will be converted into Shares of the Surviving Corporation. Upon
consummation of the Merger, the Surviving Corporation will be a wholly-owned
subsidiary of Parent.
As described above, the Board has approved the Merger and the Merger
Agreement and the transactions contemplated thereby in accordance with the DGCL.
Under the DGCL, the approval of the Board and, if the Short Form Requirement is
not met, the affirmative vote of the holders of a majority of the outstanding
Shares, is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. If the Short Form
Requirement is met, Acquisition Company will be able to effect the Merger
pursuant to a Short-Form Merger under Section 253 of the DGCL without any action
by any stockholder of the Company. In such event, Acquisition Company intends to
effect a Short-Form Merger as promptly as practicable following the purchase of
Shares in the Offer.
In the event that the Short Form Requirement is not met, the Company has
agreed to convene a meeting of its stockholders as soon as practicable following
the consummation of the Offer for the purpose of adopting the Merger Agreement
and has agreed to include in any proxy or information statement required for
such meeting a recommendation of the Board that the Company's stockholders vote
in favor of the adoption of the Merger Agreement. IF (1) THE MINIMUM CONDITION
IS SATISFIED, (2) THE SHARES ARE PURCHASED IN THE OFFER BY ACQUISITION COMPANY
AND, IF NECESSARY, THE COMPANY AND (3) ACQUISITION COMPANY ACQUIRES GREENGRASS'
SECURITIES PURSUANT TO THE STOCK AGREEMENT, A FAVORABLE VOTE TO APPROVE THE
MERGER WILL BE ASSURED SINCE ACQUISITION COMPANY WILL OWN MORE THAN A MAJORITY
OF THE SHARES ENTITLED TO VOTE XXXXXXX.
5. PLANS FOR THE COMPANY AFTER THE TRANSACTION.
Pursuant to the terms of the Merger Agreement, the Company, Acquisition
Company and Parent intend to effect the Merger in accordance with the Merger
Agreement as soon as practicable following completion of the Offer. Following
the Effective Time, the Board will be reconstituted to consist of Xxxx X.
Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxxx and Xxxxxxx X.
Xxxxxxx and the officers of the Surviving Corporation will be the officers of
the Company immediately prior to the Effective Time. See "SPECIAL FACTORS -- The
Merger Agreement and Related Documents."
It is currently expected that the business and operations of the Surviving
Corporation will be continued substantially as they are currently being
conducted by the Company. Except as otherwise indicated in this Offer or as
contemplated by the Merger Agreement, none of the Offerors has any present plans
or proposals involving the Company that relate to or would result in an
extraordinary corporate transaction such as a merger, reorganization or
liquidation, or a sale or transfer of a material amount of the Company's assets,
or any material change in the Company's present dividend policy, indebtedness or
capitalization, or any other material change in the Company's corporate
structure or business. However, after the Merger, the Surviving Corporation's
management and board of directors will review proposals or may propose the
acquisition or disposition of assets or other changes in the Surviving
Corporation's business, corporate structure, capitaliza-
15
23
tion, businesses, management, operations or dividend policy that they consider
to be in the best interests of the Surviving Corporation and its stockholders.
Upon consummation of the Merger, the Company will be owned solely by
Parent, and Parent will be entitled to all benefits resulting from its sole
ownership of the Company, including all income generated by the Company's
operations and any future increase in the Company's value. Similarly, Parent
will also bear the risk of losses generated by the Company's operations and any
future decrease in the value of the Company after the Merger. Subsequent to the
Merger, no other stockholder will have the opportunity to participate in the
earnings and growth of the Company, and no other stockholder will have a right
to vote on corporate matters. Similarly, such stockholders will not face the
risk of losses generated by the Company's operations or any decrease in the
value of the Company after the consummation of the Transaction.
The Shares are currently traded on AMEX. Following the consummation of the
Transaction, the Shares will no longer be quoted on AMEX. In addition, the
registration of the Shares under the Exchange Act of 1934, as amended (the
"Exchange Act") will be terminated. Accordingly, following the consummation of
the Transaction, there will be no public market for the Shares. Moreover, the
Company will no longer be required to file periodic reports with the Securities
and Exchange Commission (the "Commission") under the Exchange Act, and will no
longer be required to comply with the proxy rules of Regulation 14A under
Section 14 promulgated under the Exchange Act. In addition, the Company's
officers, directors and 10% stockholders will be relieved of the reporting
requirements and restrictions on "short-swing" trading contained in Section 16
of the Exchange Act with respect to the Shares. See "THE TENDER OFFER -- Effect
of the Offer on the Market for the Common Stock; Exchange Act Registration."
It is expected that, if the Transaction is not consummated, then the
Company's current management, under the general direction of the Board, will
continue to manage the Company as an ongoing business.
6. RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER.
No dissenters' or appraisal rights are available to stockholders in
connection with the Offer. If the Merger is consummated, however, record
stockholders of the Company who have not validly tendered their Shares or voted
in favor of the Merger will have certain rights under the DGCL to an appraisal
of, and to receive payment in cash of the fair value of, their Shares (the
"Appraisal Shares"). Stockholders who perfect appraisal rights by complying with
the procedures set forth in Section 262 of the DGCL ("Section 262"), a copy of
which is attached as Exhibit B to this Offer to Purchase, will have the fair
value of their Appraisal Shares (exclusive of any element of value arising from
the accomplishment or expectation of the Merger) determined by the Delaware
Court of Chancery and will be entitled to receive from the Surviving Corporation
a cash payment equal to such fair value. Any such judicial determination of the
fair value of Shares could be based upon any valuation method or combination of
methods the court deems appropriate. The value so determined could be more or
less than the Offer Price and Merger Consideration. In addition, stockholders
who invoke appraisal rights may be entitled to receive payment of a fair rate of
interest from the Effective Time on the amount determined to be the fair value
of the Appraisal Shares. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS
REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Under Section 262, if the Merger is submitted to a vote of the Company's
stockholders at a meeting thereof, then the Company must, not less than 20 days
prior to the meeting held for the purpose of obtaining stockholder approval of
the Merger, notify each of the Company's stockholders entitled to appraisal
rights that such rights are available. If the Merger is accomplished by a
Short-Form Merger, the Company, either before the Effective Time or within ten
days thereafter, must notify each of the stockholders entitled to appraisal
rights of the Effective Time and that appraisal rights are available. In either
case, the notice must include a copy of Section 262.
If the Merger is not a Short-Form Merger, a holder of Appraisal Shares
wishing to exercise appraisal rights will be required to deliver to the Company
before the taking of the vote on the Merger or within 20 days after the date of
mailing the notice described in the preceding paragraph, a written demand for
appraisal of such holder's Appraisal Shares. A holder of Appraisal Shares
wishing to exercise such holder's appraisal rights
16
24
must be the record holder of such Appraisal Shares on the date the written
demand for appraisal is made and must continue to hold of record such Appraisal
Shares through the Effective Time. Accordingly, a holder of Appraisal Shares who
is the record holder of Appraisal Shares on the date the written demand for
appraisal is made, but who thereafter transfers such Appraisal Shares prior to
the Effective Time, will lose any right to appraisal in respect of such
Appraisal Shares.
If the Merger is a Short-Form Merger, a holder of Appraisal Shares wishing
to exercise appraisal rights will be required to deliver to the Company, within
20 days after the date of mailing the notice by the Company described above, a
written demand for appraisal of such holder's Appraisal Shares.
A demand for appraisal must be executed by or on behalf of the stockholder
of record and must reasonably inform the Company of the identity of the
stockholder of record and that such stockholder intends thereby to demand an
appraisal of such Appraisal Shares.
A person having a beneficial interest in Appraisal Shares that are held of
record in the name of another person, such as a broker, fiduciary, depository or
other nominee, will have to act to cause the record holder to execute the demand
for appraisal and to follow the requisite steps properly and in a timely manner
to perfect appraisal rights. If Appraisal Shares are owned of record by more
than one person, as in joint tenancy or tenancy in common, the demand will have
to be executed by or for all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute a demand for appraisal for a
stockholder of record, provided that the agent identifies the record owner and
expressly discloses, when the demand is made, that the agent is acting as agent
for the record owner. If a stockholder owns Appraisal Shares through a broker
who in turn holds the Appraisal Shares through a central securities depository
nominee such as CEDE & Co., a demand for appraisal of such Appraisal Shares will
have to be made by or on behalf of the depository nominee and must identify the
depository nominee as Appraisal Shares' record holder.
A record holder, such as a broker, fiduciary, depository or other nominee,
who holds Appraisal Shares as a nominee for others, will be able to exercise
appraisal rights with respect to the Appraisal Shares held for all or less than
all of the beneficial owners of those Appraisal Shares as to which such person
is the record owner. In such case, the written demand must set forth the number
of Shares covered by the demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Appraisal Shares standing in
the name of such record owner.
Within 120 days after the Effective Time, but not thereafter, the Company
or any stockholder who has complied with the statutory requirements summarized
above and who is otherwise entitled to appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
such holders' Appraisal Shares. There is no present intention on the part of
Acquisition Company or, to the Offerors' knowledge, GreenGrass, to file an
appraisal petition on behalf of the Company, and stockholders who seek to
exercise appraisal rights should not assume that the Company will file such a
petition or that the Company will initiate any negotiations with respect to the
fair value of Appraisal Shares. Accordingly, it will be the obligation of the
stockholders seeking appraisal rights to initiate all necessary action to
perfect any appraisal rights within the time prescribed in Section 262. Within
120 days after the Effective Time, any stockholder who has theretofore complied
with the provisions of Section 262 will be entitled, upon written request, to
receive from the Company a statement setting forth the aggregate number of
Shares not voting in favor of the Merger (if applicable) and with respect to
which demands for appraisal were received as well as the number of holders of
such Shares. Such statement must be mailed within ten days after the written
request therefor has been received by the Company.
If a petition for appraisal is timely filed, after a hearing on such
petition the Delaware Court of Chancery will determine the stockholders entitled
to appraisal rights and will appraise the fair value of their Appraisal Shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value from the Effective Time.
The costs of the proceeding may be determined by the Delaware Court of
Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. However, costs do not
17
25
include attorneys' fees or expert witness fees. Upon application of a
stockholder, the Delaware Court of Chancery may also order all or a portion of
the expenses incurred by any stockholder, including reasonable attorneys' fees
and the fees and expenses of experts, to be charged pro rata against the value
of all of the Appraisal Shares entitled to appraisal.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw its demand for appraisal and to accept the Merger
Consideration. After this period, the stockholder may withdraw such holder's
demand for appraisal only with the consent of Acquisition Company. If any
stockholder who properly demands appraisal of such holder's Appraisal Shares
under Section 262 fails to perfect, or effectively withdraws or loses, such
holder's right to appraisal as provided in the DGCL, the Appraisal Shares of
such stockholder will be converted into the right to receive the Merger
Consideration. A stockholder will fail to perfect, or effectively lose or
withdraw, such stockholder's right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after the Effective Time or if
the stockholder delivers to the Company a written withdrawal of such
stockholder's demand for appraisal.
Several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in two
cases, Xxxxxxxxxx v. UOP, Inc. and Rabkin v. Xxxxxx X. Xxxx Chemical Corp., that
the remedy ordinarily available to minority stockholders in a cash-out merger is
the right to appraisal described above. However, a damages remedy or injunctive
relief may be available if a merger is found to be the product of procedural
unfairness, including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS WISHING TO PERFECT
THEIR APPRAISAL RIGHTS UNDER THE DGCL DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE
ANY SUCH RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE
STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. A COPY OF SECTION 262
OF THE DGCL IS ATTACHED HERETO AS EXHIBIT B AND THE FOREGOING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT B.
7. THE MERGER AGREEMENT AND RELATED DOCUMENTS.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT
AND RELATED DOCUMENTS. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE MERGER AGREEMENT AND SUCH RELATED DOCUMENTS, ALL OF WHICH ARE INCORPORATED
HEREIN BY REFERENCE AND HAVE BEEN INCLUDED AS EXHIBITS TO THE SCHEDULE TO. THE
MERGER AGREEMENT AND SUCH RELATED DOCUMENTS MAY BE INSPECTED AT, AND COPIES MAY
BE OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH IN "THE TENDER
OFFER -- CERTAIN INFORMATION CONCERNING THE COMPANY."
The Merger Agreement.
The Offer. The Merger Agreement requires the Offerors to commence the Offer
on or prior to the fifth business day following public announcement of the
Offer. The obligation of the Offerors to commence the Offer and to accept for
payment, and to pay for, any Shares of Common Stock tendered pursuant to the
Offer, is subject to the satisfaction of certain conditions that are set forth
below the caption "THE TENDER OFFER -- Conditions of the Offer" (such
conditions, the "Offer Conditions"). Parent may waive certain of the Offer
Conditions without the prior consent of the Company or Acquisition Company. The
Company and Acquisition Company have agreed that, without the prior written
consent of Parent, no changes may be made that (i) increase or decrease the
Offer Price, (ii) decrease the number of Shares subject to the Offer,
18
26
(iii) amend or waive the Offer Conditions, (iv) impose any additional conditions
or amend any other term of the Offer or (v) extend the expiration date of the
Offer. Under the terms of the Merger Agreement, the Company and Acquisition
Company shall, upon request of Parent, extend the Offer if, at the then
scheduled expiration date of the Offer, any of the Offer Conditions have not
been satisfied or waived until the earlier of (i) the later of (A) May 19, 2000
and (B) such later date which is ten business days after the Company terminates
certain third party discussions or (ii) such time as all such conditions shall
have been satisfied or waived; provided that the Company and Acquisition Company
believe, in their reasonable judgment, that such Offer Conditions can be
satisfied or waived prior to May 19, 2000; and provided further that the Company
is permitted, but not required, to extend the Offer if Parent or Acquisition
Company has materially breached the Merger Agreement. In addition, each of the
Company and Acquisition Company has the right by mutual agreement to extend the
Offer until May 19, 2000 (or such earlier date as the Minimum Condition is
satisfied) if all Offer Conditions other than the Minimum Condition and receipt
of the proceeds from the Financings and the Capital Contribution have been
satisfied or waived as of the original expiration date of the Offer. If at the
scheduled expiration date of the Offer, or at the end of any extension thereof,
all of the Offer Conditions have been satisfied, the Purchasers are required to
immediately accept and promptly pay for all Shares tendered (assuming the
Minimum Condition is met). See "THE TENDER OFFER -- Terms of the Offer."
The Merger Agreement also provides that, subject to the terms and
conditions provided therein, the Company and Acquisition Company will each use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, and to assist and cooperate with the other parties to
the Merger Agreement in doing, all necessary, proper or advisable things under
applicable laws and regulations to consummate the Offer.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer and from time to time thereafter until
the Effective Time, Parent shall be entitled to designate such number of
directors equal to the greater of (a) a majority of the Board plus one and (b)
the product of (i) the number of directors on the Board and (ii) the percentage
that the number of Shares owned by Acquisition Company bears to the number of
Shares outstanding less the number of Independent Directors (as defined below).
The Company has agreed, upon request by Xxxxxx, to promptly increase the size of
the Board and/or use its reasonable efforts to secure the resignations, or the
removal, of such number of directors as is necessary to enable Acquisition
Company's designees to be elected to the Board and to cause Acquisition
Company's designees to be so elected. The Company's obligations to appoint
designees to the Board are subject to Section 14(f) of the Exchange Act and the
rules promulgated thereunder (Schedule III hereto contains the information
required under Rule 14f-1 promulgated under the Exchange Act). In addition, the
Merger Agreement requires the Company to have at all times prior to the
Effective Time two members on the Board who were members of the Board on the
date of the Merger Agreement and who are not employees of the Company
("Independent Directors"). Following the election or appointment of the
designees of Parent to the Board, but prior to the Effective Time, any permitted
termination of the Merger Agreement by the Company, any amendment of the Merger
Agreement or the Company's certificate of incorporation or by-laws requiring
action by the Board, any extension of time for the performance of any of the
obligations or other acts of Parent, and any waiver of compliance with any of
the agreements or conditions contained in the Merger Agreement must by
authorized by a majority of the Independent Directors as well as a majority of
all Board members.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions set forth in the Merger Agreement and the applicable provisions of
the DGCL, Acquisition Company will be merged with and into the Company at the
Effective Time and the separate existence of Acquisition Company will cease. All
of the properties, rights, privileges, powers and franchises of the Company and
Acquisition Company will vest in the Company, and all debts, liabilities and
duties of the Company and Acquisition Company will become the debts, liabilities
and duties of the Company. Subject to the provisions of the Merger Agreement and
applicable provisions of the DGCL, the closing of the Merger will occur promptly
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of the conditions to the Merger set forth in the Merger
Agreement.
19
27
Effect on Capital Stock. At the Effective Time: (a) each Share that is
owned by the Company as treasury stock shall be automatically cancelled and
retired and no consideration shall be delivered in exchange therefor; (b) each
Share, other than Shares held by Parent, Acquisition Company or by stockholders
who perfect any applicable appraisal rights under the DGCL, shall be converted
into the right to receive, in cash, the Offer Price without interest; and (c)
each Share held by Parent or Acquisition Company shall be converted into the
right to receive 725,000 fully paid and nonassessable Shares of Surviving
Corporation.
Payment of Offer Price and Merger Consideration. The Merger Agreement
requires that prior to the commencement of the Offer, the Company and
Acquisition Company shall appoint a United States bank or trust company to act
as payment agent (the "Payment Agent") for the payment of the Offer Price and
the Merger Consideration. Prior to the payment time thereof, the Company and
Acquisition Company are required to deposit with the Payment Agent in a separate
fund established for the benefit of the holders of Shares, for payment upon
surrender of the certificates for exchange in accordance with (i) the Offer to
Purchase, in the case of the Offer and (ii) the Merger Agreement, in the case of
the Merger, through the Payment Agent (in the case of the Offer, the "Offer
Fund" and in the case of the Merger, the "Merger Fund" and collectively with the
Offer Fund, the "Payment Fund"), immediately available funds in amounts
necessary to make the payments to holders of Shares. The Payment Agent shall pay
the Offer Price out of the Offer Fund and the Merger Consideration out of the
Merger Fund.
As soon as reasonably practicable after the Effective Time, the Surviving
Corporation or the Payment Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares of Common Stock entitled to receive the Merger
Consideration (the "Certificates"): (i) a form of letter of transmittal which
shall: (x) specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Payment Agent; (y) contain a representation in a form reasonably
satisfactory to Parent as to the good and marketable title of the Shares held by
such holder free and clear of liens of any kind; and (z) contain such other
customary provisions as the Company and Acquisition Company may reasonably
specify; and (ii) instructions for use in surrendering such Certificates and
receiving the aggregate Merger Consideration, in respect thereof. Upon the
surrender of each Certificate and subject to applicable withholding, the Payment
Agent shall (subject to applicable abandoned property, escheat and similar laws)
pay the holder of such Certificate the Merger Consideration multiplied by the
number of Shares formerly represented by such Certificate, and such Certificate
shall forthwith be cancelled. Until so surrendered, each such Certificate (other
than Certificates representing Dissenting Shares) shall represent solely the
right to receive the aggregate Merger Consideration relating thereto. No
interest or dividends shall be paid or accrued on the Merger Consideration. If
the Merger Consideration is to be delivered to any person other than the person
in whose name the Certificate formerly representing such Shares is registered,
it is a condition to receiving the Merger Consideration that the Certificate so
surrendered be properly endorsed or otherwise be in proper form for transfer and
that the person surrendering such Certificates pay to the Payment Agent any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered, or establish to the satisfaction of the Payment Agent or the
Company, as applicable, that such tax has been paid or is not applicable. The
Payment Agent is entitled to deduct and withhold from the consideration
otherwise payable pursuant to the Merger Agreement to any stockholder of the
Company such amounts as the Company reasonably and in good faith determines are
required to be deducted and withheld with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law.
Treatment of Stock Options. The Merger Agreement provides that all options
to acquire Shares outstanding under any stock option plan or agreement
(individually, an "Option" and collectively, the "Options") which have not been
exercised pursuant to an Option Exercise Agreement (as discussed below) and are
outstanding immediately prior to the Effective Time, whether or not then vested
or exercisable, shall be canceled at the Effective Time and in exchange
therefor, each holder of a cancelled Option will receive an amount in cash equal
to product of (i) the excess, if any, of the Merger Consideration over the per
Share exercise price thereof and (ii) the number of Shares subject thereto, in
full settlement of the Company's (and the Surviving Corporation's) obligations
under each Option. To the extent that the per Share exercise price of
20
28
any Option equals or exceeds the Merger Consideration, at the Effective Time,
such Option will be cancelled and the holder of such Option will not receive or
be entitled to receive any consideration from Acquisition Company or the
Surviving Corporation. All amounts payable in respect of Options shall be
subject to all applicable withholding of taxes.
Treatment of Warrants. The Merger Agreement provides that any Warrants
outstanding at the Effective Time that are owned of record by a person or entity
other than the Company, Parent or Acquisition Company shall be cancelled in the
Merger, and each holder of any Warrants shall receive an amount in cash, if any,
equal to the product of (i) the excess, if any, of the Merger Consideration over
the per Share exercise price thereof and (ii) the number of Shares subject
thereto.
Treatment of Debentures. The Merger Agreement provides that, except for
holders who hold Debentures subject to the Stock Agreement (as discussed below),
within two business days after the closing of the Offer, the Company shall send
a notice of redemption to all holders, if any, of outstanding Debentures.
Stockholder Meeting. The Merger Agreement provides that, in accordance with
applicable law and provided that the Short Form Requirement has not been met,
the Company, acting through the Board of Directors and after the Offer Closing,
shall (i) call a special meeting of its stockholders (the "Stockholder Meeting")
for the purpose of considering and voting on the Merger and Merger Agreement,
(ii) hold the Stockholder Meeting as soon as practicable after the purchase of
Shares pursuant to the Offer, (iii) file with the SEC a proxy statement or
information statement relating to the Merger Agreement and the Merger, and (iii)
unless taking such action would be inconsistent with the fiduciary duties of the
Board, recommend to the Company's stockholders the approval of the Merger
Agreement. The Company will use its reasonable best efforts to solicit from the
stockholders of the Company proxies in favor of the approval and adoption of the
Merger Agreement and the transactions contemplated thereby, unless otherwise
required by applicable fiduciary duties. Parent has agreed to vote or cause to
be voted all the Shares then owned by it, Acquisition Company or any other of
its subsidiaries in favor of the Merger at the Stockholder Meeting.
Notwithstanding the foregoing, if the Short Form Requirement is met, Acquisition
Company, the Company and Parent have agreed to take all actions necessary to
effect the Merger as a short-form merger pursuant to Section 253 of the DGCL,
without a meeting of the Company's stockholders.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to (i) the due
organization, existence and the qualification, good standing, corporate power
and authority of the Company and its subsidiaries; (ii) delivery and accuracy of
certain corporate documents and records; (iii) the capitalization of the Company
and its subsidiaries; (iv) the due authorization, execution, and delivery of the
Merger Agreement and the authorization of the consummation of the transactions
contemplated thereby, and the validity and enforceability of the Merger
Agreement; (v) certain agreements entered into by the Company relating to its
indebtedness and the employment of certain Company employees; (vi) subject to
certain exceptions and limitations, the absence of consents and approvals
necessary for consummation by the Company of the Offer and Merger and the
absence of any violations, breaches or defaults which would result from
compliance by the Company with any provision of the Merger Agreement; (vii)
subject to certain exceptions and limitations, the compliance by the Company and
its subsidiaries with all applicable foreign, federal, state or local laws,
statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees
of any foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority, or any court, arbitration, board
or tribunal; (viii) compliance by the Company with the Securities Act of 1933,
as amended (the "Securities Act") and the Exchange Act and the reports and
financial information required to be filed thereunder since January 1, 1997;
(ix) certain recent financial information of the Company and its subsidiaries;
(x) subject to certain exceptions and limitations, the absence of certain
liabilities of the Company and its subsidiaries; (xi) subject to certain
exceptions and limitations, the absence of pending or (to the knowledge of the
Company) threatened claims, actions, suits or proceedings; (xii) certain tax
matters; (xiii) certain employee benefit and ERISA matters; (xiv) certain
environmental matters; (xv) the absence of certain changes or effects since
December 31, 1999 which could result in a material adverse effect; (xvi) the
patents, trademarks and other intellectual property of the Company and its
subsidiaries; (xvii) the real property owned and leased by the Company and its
subsidiaries; (xviii) state takeover statutes; (xix) broker's
21
29
fees; (xx) the DLJ Opinion; (xxi) the Company's inventory; (xxii) the
stockholder vote required for the Merger; (xxiii) title to and condition of
tangible assets of the Company and its subsidiaries; (xxiv) certain material
contracts of the Company and its subsidiaries, including non-compete agreements;
(xxv) year 2000 compliance issues; (xxvi) compliance with applicable laws;
(xxvii) the Company's accounts receivable; (xxviii) customers, suppliers, sales
representatives, dealers and distributors of the Company and its subsidiaries;
(xxvix) certain labor and employment matters; (xxx) certain fees and expenses in
connection with the transactions contemplated by the Merger Agreement; (xxxi)
subject to certain limitations, the possession by the Company and its
subsidiaries of necessary franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders;
(xxxii) certain insurance policy matters; (xxxiii) product warranty and
liability; and (xxxiv) transactions with affiliates.
Parent and Acquisition Company have also made certain representations and
warranties in the Merger Agreement, including with respect to (i) the due
incorporation, existence, good standing and corporate power and authority of
Acquisition Company and Parent; (ii) the due authorization, execution and
delivery of the Merger Agreement, the Stock Option Agreement and the Stock
Agreement and the authorization of the consummation of the transactions
contemplated thereby, and the validity and enforceability of the Merger
Agreement, the Stock Option Agreement and the Stock Agreement; (iii) the absence
of consents and approvals necessary for consummation of the transactions
contemplated by the Merger Agreement by Parent and Acquisition Company and the
absence of any violations, breaches or defaults which would result from
compliance by Parent and Acquisition Company with any provision of the Merger
Agreement; (iv) broker's and broker fees; (v) the sufficiency of funds available
to Parent and Acquisition Company for the consummation of the Offer and the
Merger; (vi) absence of any material misstatements or omissions made by Parent
and Acquisition Company in this Offer to Purchase, the Schedule TO and the
exhibits thereto; and (viii) no knowledge of Company breaches; and (ix) the
sophistication of Parent and Acquisition Company.
Conduct Until the Merger. The Company has agreed that from the date of the
Merger Agreement until the earlier of the date the Shares are purchased in the
Offer or the termination of the Merger Agreement, unless Parent has consented in
writing thereto, the Company will, and will cause each of its subsidiaries to:
(i) conduct its operations according to its ordinary course of business
consistent with past practice, and (ii) use its commercially reasonable efforts
to preserve in all material respects its business organization and its existing
relationships with its customers, suppliers, employees and business associates.
The Company has also agreed that from the date of the Merger Agreement
until the earlier of the date the Shares are purchased in the Offer or the
termination of the Merger Agreement, unless Parent has consented in writing
thereto, the Company will not, and will not permit any of its subsidiaries to:
(a) amend its certificate of incorporation or by-laws;
(b) acquire, sell, lease or dispose of any assets in excess of
$500,000, other than in the ordinary and usual course of business and
consistent with past practice;
(c) incur or modify any funded indebtedness, other than in the
ordinary and usual course of business and consistent with past practice;
(d) issue, reissue or sell or authorize the issuance, reissuance or
sale of (i) any shares of capital stock (other than issuances of Shares in
respect of any exercise of the Warrants or Company Options or the
conversion of the Debentures outstanding on the date of the Merger
Agreement), (ii) any shares convertible into capital stock of any class, or
(iii) any rights, calls, commitments, warrants or options to acquire any
shares of capital stock, or shares convertible into capital stock;
(e) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests (other than such payments between the Company and
its subsidiaries);
(f) split, combine, subdivide, reclassify or, directly or indirectly,
redeem, purchase or otherwise acquire, recapitalize or reclassify, or
propose to redeem or purchase or otherwise acquire, any shares of its
capital stock or liquidate in whole or in part;
22
30
(g) except as required by law or actions taken in the ordinary course
and consistent with past practice (i) enter into, amend or extend any
employment, collective bargaining, severance or termination agreement, (ii)
grant any increase in severance or termination pay to, any officers,
directors or employees, (iii) increase the compensation of any of its
directors or officers, or increase the compensation of any other employees
outside the ordinary course of business consistent with past practice, (iv)
adopt, amend, modify, or terminate any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of
its directors, officers, and employees (or take any such action with
respect to any other employee benefit plan agreement or arrangement), or
(v) make any other change in employment terms for any of its directors,
officers, and employees;
(h) (i) except as may be required or contemplated by the Merger
Agreement, assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity (other than the Company's
subsidiaries), except in the ordinary and usual course of business and
consistent with past practices, (ii) make any loans, advances or capital
contributions to, or investments in, any other person or entity (other than
to its subsidiaries), other than in the ordinary and usual course of
business or (iii) make capital expenditures in excess of an aggregate of
$750,000;
(i) change any accounting methods, principles or practices materially
affecting their assets, liabilities or business, except insofar as may be
required by a change in generally accepted accounting principles;
(j) make any material tax election or settle or compromise any
material income tax liability;
(k) settle or compromise any claim (including any arbitration) or
litigation involving payments by the Company in excess of $125,000
individually, or $350,000 in the aggregate, which is not subject to
insurance reimbursement;
(l) enter into any contract (or series of related contracts) either
involving more than $250,000 or outside the ordinary course of business
consistent with past practice;
(m) postpone the payment of accounts payable and other liabilities
outside the ordinary course of business consistent with past practice;
(n) enter into any transaction with any affiliate (other than the
Management Agreements); or
(o) authorize or agree in writing or otherwise to take any of the
foregoing actions.
Access to Information. Under the Merger Agreement, from the date of the
Merger Agreement until the earlier of the termination of the Agreement or the
Effective Time, the Company has agreed, and has agreed to cause its subsidiaries
and their respective directors, employees, agents and advisors to, (i) provide
Parent and Acquisition Company and their authorized representatives access, upon
reasonable notice and during normal business hours, to the offices and other
facilities and to the books, records, financial statements and other documents
and materials relating to the financial condition, assets and liabilities of the
Company and its subsidiaries and permit Parent and Acquisition Company to make
such inspections thereof as they may reasonably request, (ii) furnish Parent and
Acquisition Company, to the extent available, with such information with respect
to the business of the Company and its subsidiaries as Parent and Acquisition
Company may from time to time reasonably request and (iii) confer and consult
with Parent and Acquisition Company on operational, financial and general status
of ongoing business operations of the Company as Parent and Acquisition Company
may reasonably request; provided, however, that all requests for such access,
inspection, information or consultations shall be made through Xxxxx X. Xxxxx,
Chairman of the Executive Committee of the Board (or such other persons as he
shall designate). Parent and Acquisition Company have agreed to hold all
information furnished by or on behalf of the Company or any of its subsidiaries
in confidence.
Filings; Further Assurances. Each of the parties to the Merger Agreement
has agreed to use its reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things
23
31
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including, without limitation, the Offer, the Merger and the
financings contemplated by the Financing Agreements. The parties have also
agreed that each shall (i) take or cause to be taken all such necessary action,
including, without limitation, the execution and delivery of such further
instruments and documents as may be reasonably requested by the other party for
such purposes or otherwise to consummate and make effective the transactions
contemplated in the Merger Agreement; and (ii) promptly inform the other party
of any event or circumstance relating to either the Company or Acquisition
Company or Parent or any of their respective subsidiaries which should be set
forth in an amendment to this Offer to Purchase and promptly take all steps
necessary to cause this Offer to Purchase as so corrected to be filed with the
SEC and to be disseminated to the shareholders of the Company, in each case as
to the extent required by applicable law. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
the Merger Agreement, including the execution of additional instruments, the
proper officers and directors of each party to the Merger Agreement, as the case
may be, shall take all such necessary action.
Consents. The Merger Agreement requires each of Parent, Acquisition Company
and the Company to use its commercially reasonable best efforts to obtain as
promptly as practicable all consents from any person or entity required in
connection with the consummation of the Offer and the Merger. Parent,
Acquisition Company and the Company are also required to take all actions
necessary to file as soon as practicable all notifications, filings, and other
documents required to obtain all consents or waivers, including, without
limitation, under the HSR Act, and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission, the Antitrust Division of
the Department of Justice and any other governmental entity for additional
information or documentation in connection with the Offer or the Merger.
Publicity. The Merger Agreement requires that the initial press releases
with respect to the execution of the Merger Agreement shall be acceptable to
Parent and the Company and that so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release with respect to the Offer or the Merger
without the prior consultation of the other parties, except as may be required
by law.
Employee Matters. The Merger Agreement requires that the Surviving
Corporation shall honor, in accordance with their terms, and shall make required
payments when due under, all employee benefit plans or agreements maintained or
contributed to by the Company or any of its subsidiaries (including, but not
limited to, employment, incentive and severance agreements and arrangements),
that are applicable with respect to any employee, director or stockholder of the
Company or any of its subsidiaries (whether current, former or retired) or their
beneficiaries. After the date of the Merger Agreement, employees of the Company
will not have the opportunity to purchase additional Shares from the Company
except pursuant to the exercise of an Option.
No Solicitation. Under the Merger Agreement, the Company may not, and may
not authorize or permit any of its subsidiaries or any of its or its
subsidiaries' officers, directors, employees or agents to, directly or
indirectly, solicit, participate in or initiate discussions or negotiations
with, or provide any non-public information to any person or entity (other than
Parent, Acquisition Company or any of their affiliates or representatives) (a
"Third Person") concerning any proposal or inquiry relating to any merger,
consolidation, tender offer, exchange offer, sale of all or substantially all of
the Company's assets, sale of Shares of capital stock or similar business
combination transaction involving the Company or any principal operating or
business unit of the Company or its subsidiaries (an "Acquisition Proposal"). In
the event that, after the date of the Merger Agreement and prior to the purchase
of the Shares pursuant to the Offer, the Board receives an unsolicited written
Acquisition Proposal and the Board determines, in good faith and after
consultation with its financial advisors and legal counsel, that the Acquisition
Proposal may lead to a Superior Proposal (as defined below), the Board is
permitted to do any or all of the following: (a) withdraw, modify or change the
Board's approval or recommendation of the Merger Agreement, the Offer or the
Merger, (b) approve or recommend to the Company's stockholders an Acquisition
Proposal, (c) engage in discussions and negotiations with respect to an
Acquisition Proposal and (d) terminate this Agreement. The Board may not,
however, take any
24
32
action described in clauses (a)-(d) above until after the Board has given Parent
written notice stating the Board's proposed conduct and setting forth certain
information with respect to such Acquisition Proposal.
The Board is also permitted, after notice to Parent, to furnish information
to a Third Person which has made a bona fide Acquisition Proposal that the Board
reasonably determines may lead to a Superior Proposal and that was not solicited
in violation of the Merger Agreement, provided that, with respect to any person
or entity that is not currently party to a confidentiality agreement with the
Company, such person or entity has executed an agreement with confidentiality,
standstill and other provisions substantially similar to those then in effect
between the Company and Acquisition Company. For purposes of the Merger
Agreement, "Superior Proposal" means any proposal made by a Third Person to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the equity securities of the Company entitled to vote
generally in the election of directors or all or substantially all the assets of
the Company, if and only if, the Board reasonably determines (after consultation
with its financial advisor and counsel) (i) that the proposed transaction would
be more favorable from a financial point of view to its stockholders than the
Offer and the Merger and the transactions contemplated by the Merger Agreement,
taking into account at the time of determination any changes to the terms of the
Merger Agreement which as of that time had been proposed by Acquisition Company,
and (ii) that the person or entity making such Acquisition Proposal is capable
of consummating such Acquisition Proposal (based upon, among other things, the
availability of financing and the degree of certainty of obtaining financing,
the expectation of obtaining required regulatory approvals and the identity and
background of such person).
Nothing contained in the Merger Agreement prohibits the Company or its
Board from taking and disclosing to the Company's stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act or from making such disclosure
to the Company's stockholders or otherwise which, in the judgment of the Board
after consultation with its legal counsel, is necessary under applicable law or
the rules of any stock exchange or if failure so to disclose would be
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law.
The Merger Agreement requires the Company to promptly, but in any event
within three business days, advise Parent in writing of any Acquisition Proposal
or any inquiry regarding the making of an Acquisition Proposal, including any
request for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry and the identity of the person or entity making
such request, Acquisition Proposal or inquiry. The Merger Agreement requires the
Company to keep Acquisition Company reasonably informed of the status and
details, including any amendments or proposed amendments, of any such request,
Acquisition Proposal or inquiry.
The Merger Agreement provides that if, within 10 business days after giving
notice to Parent of discussions or negotiations relating to an Acquisition
Proposal, the Company has not terminated such discussions or negotiations,
Parent may terminate the Merger Agreement if it has provided the Company with at
least 48 hours prior written notice to terminate such negotiations or
discussions (a "Failure to Terminate Negotiations").
Indemnification and Insurance. Under the Merger Agreement, Parent and
Acquisition Company agree that for a period of six years from the Effective
Time, the Surviving Corporation will maintain all rights to indemnification now
existing in favor of the current or former directors, officers, employees and
fiduciaries of the Company as provided in the Company's certificate of
incorporation and by-laws or otherwise in effect under any agreement on the date
of the Merger Agreement. In addition, under the Merger Agreement, Parent and
Acquisition Company agree that the certificate of incorporation and by-laws of
the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Company's certificate of incorporation and
by-laws on the date of the Merger Agreement and that such provisions shall not
be amended, repealed or otherwise modified for a period of six years after the
Acceptance Date in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omission occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement), unless such modification is required by
law.
25
33
The Merger Agreement requires the Surviving Corporation to at all times
exercise the powers granted to it by its certificate of incorporation, its
by-laws, and by applicable law to indemnify and hold harmless to the fullest
extent permitted by applicable law present or former directors, officers,
employees and fiduciaries and agents of the Company against any threatened or
actual claim, action, suit, proceeding or investigation made against them
arising from their service in such capacities (or service in such capacities for
another enterprise at the request of the Company) prior to and including the
Effective Time, including, without limitation, with respect to matters relating
to the Merger Agreement.
The Merger Agreement also requires the Surviving Corporation to maintain in
effect for not less than six years from the Effective Time the current policies
of the directors', officers' and controlling stockholders' liability insurance
maintained by the Company (including all riders thereto) with respect to matters
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement); provided, that, the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous; and
provided, that, such substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation is not required to pay an
annual premium in excess of 300% of the last annual premium paid by the Company
prior to the date of the Merger Agreement and if the Surviving Corporation is
unable to obtain such insurance for such premium, it will obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
Matters Relating to the Financing Agreements. Under the Merger Agreement,
the Company has agreed that Parent is primarily responsible for any matter with
respect to the financing to be provided under the Financing Agreements;
provided, however, that (i) the Company shall have received prior notice of, and
shall be kept reasonably informed of the ongoing status of, any such matters,
(ii) the Company shall take all such actions as are reasonably requested by
Parent in connection with any such negotiations that are consistent with the
Merger Agreement, and (iii) Parent shall conduct any such matters reasonably and
in good faith. The Merger Agreement requires Parent to use its commercially
reasonable efforts to close the Financing on terms consistent with the Financing
Agreements. The Merger Agreement requires the Company and Parent to use
commercially reasonable efforts to satisfy on or before the expiration of the
Offer all requirements of the Financing Agreements which are conditions to
obtaining the cash proceeds thereunder.
Upon receipt by either the Company or Parent, or any of their respective
affiliates, of any written or oral communication to the effect that any lender
is contemplating not providing the Financing or is terminating or canceling or
modifying in any material respect the Financing Agreements, or that the
Financing is unlikely to be obtained, the Merger Agreement requires that the
Company or Parent, as the case may be, to immediately communicate such event to
the other party and provide such other party with a true and complete copy of
any such written communication.
Company Expenses. The Merger Agreement provides that the Company shall not,
without the prior written consent of Parent (i) amend, terminate or otherwise
modify or waive any provision of the Option Exercise/Cancellation Agreements,
the MM Agreement, the Fleet Consent, the Financing Agreements or the expense
agreements entered into with certain service providers in connection with the
Offer and Merger (the "Expense Agreements") or enter into any new agreements
which are the subject thereof, or (ii) incur or pay any expenses in connection
with the Offer and Merger (the "Company Expenses") the result of which would be
the Company Expenses exceed the aggregate limit of those expenses represented by
the Company (the "Company Expense Cap"), provided the Company may incur $500,000
worth of expenses above the Company Expense Cap relating solely to circumstances
arising after April 13, 2000 beyond the reasonable control of the Company. To
the extent subparagraph (ii) above is breached by the Company, Parent may
terminate the Merger Agreement, but shall not be entitled to reimbursement of
Parent Expenses as defined below.
Survival of Representations, Warranties and Agreements. The Merger
Agreement provides that the representations, warranties and agreements in the
Merger Agreement shall survive the Offer Closing and the Merger, provided, that,
no stockholder or affiliate of the Company, nor any stockholder, partner,
officer,
26
34
director, employee, agent or representative of any of the foregoing, shall have
any liability for any breach or inaccuracy of any of the representations and
warranties of the Company.
Conditions to the Merger. The respective obligations of each party under
the Merger Agreement to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions: (i) the closing of the
Offer shall have occurred; (ii) the approval by the Company's stockholders of
the Merger and Merger Agreement shall have been obtained, if necessary; (iii)
all necessary waiting periods applicable to the Merger under the HSR Act shall
have expired or been earlier terminated; and (iv) no temporary restraining
order, preliminary or permanent injunction or other order issued by any
governmental entity or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior to
invoking this condition, the party so invoking this condition has complied with
its obligations described in "Consents" above and has used its reasonable best
efforts to lift or remove such order, injunction, restraint or prohibition.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
stockholders of the Company approve the Merger at the Stockholders' Meeting:
(a) By mutual written consent of the Company, Parent and Acquisition
Company.
(b) By either the Company, on the one hand, or Parent, on the other
hand if any governmental entity issues an order or takes any other action,
in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order
becomes final and nonappealable.
(c) By the Company acting through the Board prior to the consummation
of the Offer if it receives an Acquisition Proposal that may lead to a
Superior Proposal and has complied with all applicable terms of the Merger
Agreement, including the payment of the Termination Fee (as defined below)
and confirmation of its agreement to pay expenses of Parent and its
Affiliates.
(d) By the Company (acting through the Board):
(i) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder;
provided, that, the failure of the Company to fulfill any obligation
under the Merger Agreement has not been the cause of, or resulted in,
the failure to purchase Shares pursuant to the Offer; or
(ii) if there is a breach or failure to perform on the part of
Acquisition Company or Parent of any of their representations,
warranties, covenants or agreements contained in the Merger Agreement
and such breach or failure to perform has a material adverse effect on
the ability of Acquisition Company or Parent to consummate the Offer or
the Merger, and, with respect to any such breach or failure to perform
that is reasonably capable of being remedied within the time periods set
forth below, the breach or failure to perform is not remedied prior to
the earlier of (x) 10 days after the Company has furnished Parent with
written notice of such breach or failure to perform or (y) two business
days prior to the date on which the Offer expires.
(e) By Acquisition Company or Parent:
(i) if the Board (x) shall withdraw, modify or change its
recommendation so that it is not in favor of the Merger Agreement, the
Offer or the Merger or shall have resolved to do any of the foregoing,
(y) shall approve or have recommended to the Company's stockholders an
Acquisition Proposal, or (z) takes any public position or makes any
disclosure to the Company's stockholders which has the effect of doing
either of the foregoing;
(ii) (x) if the Company shall have materially breached any of its
obligations under the Merger Agreement relating to an Acquisition
Proposal or (y) upon a Failure to Terminate Negotiations;
(iii) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder;
provided, that, the failure of Parent to fulfill any obligation
27
35
under this Agreement has not been the cause of, or resulted in, the
failure to purchase Shares pursuant to the Offer; or
(iv) if prior to the consummation of the Offer, the representations
and warranties of the Company set forth in the Merger Agreement shall
not be true and accurate in all material respects, in each instance as
of the date of consummation of the Offer as though made on or as of such
date and the effect thereof is a Company Material Adverse Effect (as
defined below), or the Company shall have breached or failed to perform
or comply in any material respect with any obligation, agreement or
covenant required by the Merger Agreement to be performed or complied
with by it, and, with respect to any such breach or failure to perform
that is reasonably capable of being remedied within the time periods set
forth below, the breach or failure to perform is not remedied prior to
the earlier of (x) 10 days after Acquisition Company has furnished the
Company with written notice of such breach or failure to perform or (y)
two business days prior to the date on which the Offer expires.
For purposes of the Merger Agreement, the term "Company Material Adverse
Effect" means any event, change, occurrence, effect, fact or circumstance
(except for events, changes, occurrences, effects, facts or circumstances
resulting (i) from general economic or financial market conditions, (ii) actions
taken by any party in accordance with the Merger Agreement or (iii) public
announcements relating to the transactions contemplated by the Merger Agreement,
or conditions previously disclosed to Parent in the Merger Agreement) having, or
which could reasonably be expected to have, a material adverse effect on (a) the
ability of the Company to perform its material obligations under the Merger
Agreement or to consummate the transactions contemplated thereby or (b) the
business, results of operations, condition (financial or otherwise), assets,
liabilities (actual or contingent), properties, or cash flows or assets of the
Company and its subsidiaries, taken as a whole.
Fees, Expenses and Other Payments; Effect of Termination. Except as
otherwise described in the following paragraphs, the Merger Agreement requires
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants and other out-of-pocket expenses,
incurred or to be incurred by the parties to the Merger Agreement in connection
with the Offer, the Merger and the Merger Agreement, to be borne solely and
entirely by the party which has incurred such costs and expenses. The Merger
Agreement requires all costs and expenses related to the filing, printing and
mailing of this Offer to Purchase, the Schedule TO and the proxy statement or
information statement required to be filed with the SEC to consummate the Merger
to be borne by the Company.
The Merger Agreement requires the Company to pay to Parent $2,300,000 (the
"Termination Fee") plus expenses of Parent and its affiliates in connection with
the Transaction not to exceed $2,500,000 ("Parent Expenses") in the event that
the Merger Agreement is terminated (i) by the Company due to accepting an
Acquisition Proposal or (ii) by Acquisition Company due to the Company: (a)
withdrawing its recommendation of the Offer (except, in certain circumstances,
as a result of the failure to obtain the Financing), (b) recommending an
Acquisition Proposal to its stockholders or (c) materially breaching its no
solicitation covenant.
In addition, the Merger Agreement requires the Company to pay the
Termination Fee and Parent Expenses to Acquisition Company, in the event that
(1) the Company enters into a definitive agreement with a Third Person within
one year of termination of the Merger Agreement and an Acquisition Proposal had
been publicly disclosed prior to termination and (2) the Merger Agreement is
terminated either (a) by the Company pursuant to the Offer expiring or
terminating in accordance with its terms without any Shares being purchased
thereunder solely as a result of the Minimum Condition failing to be satisfied
by the Expiration Date (other than as a result of a material or willful breach
by Parent or Acquisition Company of their obligations under the Merger
Agreement), or (b) by Acquisition Company pursuant to the Offer expiring or
terminating in accordance with its terms without any Shares being purchased
thereunder solely as a result of the Minimum Condition failing to be satisfied
by the Expiration Date of the Offer (other than as a result of a breach by the
Company of its no solicitation obligations). In the event that the Merger
Agreement is terminated as a result of the Minimum Condition failing to be
satisfied by the Expiration Date, and an
28
36
Acquisition Proposal had been publicly disclosed prior to the termination, the
Company is required to pay $1.0 million of Parent Expenses to Parent upon such
termination of the Merger Agreement, and the balance of such Parent Expenses
(not to exceed an additional $1.5 million) if and when the Termination Fee
becomes due.
The Merger Agreement also requires the Company to pay the Termination Fee
to Acquisition Company if the Merger Agreement is terminated by Acquisition
Company upon a Failure to Terminate Negotiations and, within one year after such
a termination, the Company enters into a definitive agreement with respect to,
or consummates a merger, consolidation or other business combination with any
Third Person (or any other person or entity acting in concert with such Third
Person) with whom the Company was holding discussions or negotiations at the
time of termination of the Merger Agreement.
The Merger Agreement requires Company to pay Parent, at its request at any
time after Effective Time, in cash all expenses incurred by or on behalf of
Parent relating to the Offer and the Merger, including a transaction fee payable
to Chartwell.
In addition, the Merger Agreement requires the Company, in the event that
the Merger Agreement is terminated (a) by the Company or Parent because the
Company or Parent has been advised by the Financing sources that they will not
provide the Financing contemplated by the Financing Agreements or by Parent, in
each case, on account of a material breach of the Merger Agreement by Company
(in the case of breaches of representations and warranties only if such breaches
would individually or in the aggregate have a Company Material Adverse Effect)
or (b) by Parent upon a Failure to Terminate Negotiations, to pay to Parent all
actual and reasonably documented expenses incurred by or on behalf of
Acquisition Company, its members or Parent in connection with or in anticipation
of the Offer, the Merger, the Merger Agreement, the Stock Agreement and the
consummation of the transactions contemplated by the Merger Agreement and in the
Stock Agreement (including all fees and expenses of outside counsel, experts,
Financing sources, investment bankers, accountants and consultants incurred by
Acquisition Company in connection with or related to the due diligence,
authorization, preparation, negotiation, execution and performance of the
transactions contemplated hereby and by the Stock Agreement) not to exceed
$2,500,000; provided, however, that the payment of such expenses shall be
limited to $1.0 million in the event that such termination is due solely to a
Company Material Adverse Effect arising out of events occurring after the date
of the Merger Agreement other than as a result of an intentional act or omission
by the Company, its subsidiaries, officers, directors or affiliates as to which
the consequences thereof would be reasonably foreseeable to be a Company
Material Adverse Effect. Under no circumstances will the Parent Expenses
reimbursed to Parent by Company pursuant to the Merger Agreement exceed $2.5
million.
The Stock Agreement.
Agreement Not to Tender; Sale of Securities. Concurrently with the
execution of the Merger Agreement, Parent and Acquisition Company entered into a
Stock Agreement with the Company and GreenGrass. Pursuant to the Stock
Agreement, GreenGrass has agreed (i) not to tender its Shares in the Offer and
(ii) to sell to Acquisition Company all outstanding securities of the Company
owned by it (the "Purchased Securities") at a purchase price equal to the amount
that GreenGrass would have received had it exercised or converted all of its
derivative Purchased Securities into Shares and tendered all of its Shares in
the Offer (or any higher price paid per Share in the Merger other than in
connection with exercise of appraisal rights or settlement of litigation).
Irrevocable Proxy for Purchased Shares. Pursuant to the Stock Agreement,
GreenGrass also granted to Acquisition Company an irrevocable proxy to vote,
until the earlier of the Effective Time or the termination of the Merger
Agreement, at any meeting of the stockholders, all Purchased Securities: (a) in
favor of the Merger and the execution and delivery of the Merger Agreement and
the Stock Agreement and the transactions contemplated thereby, (b) against any
action, any failure to act or any agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or the Stock Agreement and (c) against each
of the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (i) any extraordinary
29
37
corporate transaction such as a merger or a consolidation or other business
combination involving the Company or any of its subsidiaries; (ii) declaration
of any dividend or issuance of any equity securities (other than upon exercise
or conversion of the Debentures, Warrants and Company Options); (iii) any sale,
lease or transfer of material assets of the Company; (iv) any reorganization,
dissolution or liquidation of the Company; (v) any change in the majority of the
persons constituting the Board; (vi) any change in the present capitalization of
the Company or amendment of the Company's certificate of incorporation or
by-laws; (vii) any other material change in the Company's corporate structure or
business; or (viii) any other action which could reasonably be expected to
impede, interfere with, delay, postpone or materially adversely affect the
Merger and transactions contemplated by the Merger Agreement and the Stock
Agreement.
Covenants. GreenGrass has agreed that, except as contemplated by the Stock
Agreement, it shall not (i) offer for sale, sell or otherwise transfer, tender,
pledge, encumber, assign or otherwise dispose of or agree to dispose of any of
its Purchased Securities, (ii) grant any proxies or powers of attorney, deposit
into a voting trust or enter into a voting agreement with respect to any
Purchased Securities, (iii) take any action that would make any representation
or warranty of GreenGrass untrue or incorrect or prevent it from performing its
obligations under the Stock Agreement, or (iv) acquire any Shares (other than
upon conversion or exercise of the Purchased Securities).
Representations and Warranties. GreenGrass also makes representations and
warranties to Parent and Acquisition Company in the Stock Agreement relating to:
(i) ownership of and title to its Purchased Securities; (ii) voting and
disposition power; (iii) legal capacity, power and authority; (iv) valid
execution and delivery and enforceability of the Stock Agreement; (v) subject to
certain exemptions and qualifications, the absence of any conflicts and the
making or obtaining applicable filings, permits authorizations and consents;
(vi) liens and encumbrances on its Purchased Securities; (vii) no solicitation
of and response to third party acquisition proposals involving the Company;
(viii) restrictions on transfer of the Purchased Securities and granting of
liens or security interests with respect to the Purchased Securities; (ix)
waiver of rights of appraisal or rights to dissent from the Merger with respect
to its Shares; and (x) broker's and finder's fees.
Permission to Disclose. GreenGrass has also agreed that it will permit
Parent and Acquisition Company to publish and disclose, in any documents filed
with any governmental or regulatory agency in connection with the Merger, its
ownership of Shares and other securities of the Company, and the nature of its
commitments, arrangements and understandings under the Stock Agreement.
Termination. The covenants, agreements and proxy contained in the Stock
Agreement will terminate upon the earlier of (i) the Effective Time and (ii) the
termination of the Merger Agreement.
The Stock Option Agreement.
Grant of Stock Option. Pursuant to the Stock Option Agreement and subject
to the terms and conditions thereof, the Company granted to Acquisition Company
the Acquisition Company Option to purchase the Acquisition Company Option Shares
at the Offer Price.
Exercise of Stock Option. The Stock Option Agreement provides that, subject
to the conditions set forth in the Stock Option Agreement and any additional
requirements of law, the Acquisition Company Option may be exercised by
Acquisition Company, in whole but not in part, at any one time after the
occurrence of a Top-Up Exercise Event (as defined below) and prior to the
Termination Date (as defined below) and that Acquisition Company will exercise
the Acquisition Company Option if the results thereof would permit the Short
Form Requirement to be met. For the purpose of the Stock Option Agreement, a
"Top-Up Exercise Event" occurs upon the Purchasers' acceptance for payment
pursuant to the Offer of Shares satisfying the Minimum Condition, and the
"Termination Date" occurs upon the first to occur of the following: (i) the
Effective Time, (ii) the date which is five business days after the occurrence
of a Top-Up Exercise Event (or such later date on which the closing of the
purchase of the Acquisition Company Option Shares may be consummated pursuant to
the Stock Option Agreement); and (iii) the termination of the Merger Agreement.
Conditions to Closing. The Stock Option Agreement provides that the
obligation of the Company to deliver Acquisition Company Option Shares upon the
exercise of the Acquisition Company Option is subject
30
38
to the following conditions: (i) all waiting periods, if any, under the HSR Act
applicable to the issuance of the Acquisition Company Option Shares have expired
or have been terminated, (ii) there being no injunction or other final
non-appealable judgment by a court of competent jurisdiction preventing or
prohibiting the exercise of the Acquisition Company Option or the delivery of
the Acquisition Company Option Shares; and (v) such exercise not violating the
AMEX rules then applicable to the Company.
Representations and Warranties. The Stock Option Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to the Company's corporate organization, authority relative to
the Stock Option Agreement and authority to issue the Acquisition Company Option
Shares, the absence of any conflicts and the making or obtaining of all
applicable filings and consents.
Covenants of the Company. Pursuant to the Stock Option Agreement, the
Company has agreed (i) that it will not by any voluntary act avoid or seek to
avoid the observance or performance of any covenants, stipulations or conditions
of the Stock Option Agreement and (ii) promptly to take all actions as may from
time to time be required to permit Acquisition Company to exercise the Top-Up
Option and the Company to issue Shares pursuant thereto.
Management Agreements.
In connection with entering into the Merger Agreement, Acquisition Company
entered into an employment agreement with Xxxxxxxx Xxxxxxx, the Company's chief
executive officer, and into severance agreements with nine other executives of
the Company. These agreements replace the prior agreements between the Company
(or PlayCore Wisconsin) and those executives.
Xxxxxxx Employment Agreement. Acquisition Company entered into a five-year
employment agreement with Xx. Xxxxxxx that provides for his continued employment
as PlayCore Wisconsin's President and Chief Executive Offer. The agreement also
provides that both Xx. Xxxxxxx and one other individual designated by him will
be elected to the board of directors of PlayCore Wisconsin. The term of the
agreement commences at the Effective Time and will automatically be extended
from year to year thereafter, unless terminated by either party upon 6 months
prior notice of the end of the initial term or any renewal term. Xx. Xxxxxxx'x
initial base salary is set at $450,000 per year, and may be increased by up to
10% annually by the compensation committee of the board of directors, based upon
Xx. Xxxxxxx'x performance in the previous year. Xx. Xxxxxxx also is eligible for
an incentive bonus of up to 200% of his annual base salary, based on PlayCore
Wisconsin's achievement of certain EBITDA targets set by the board. Xx. Xxxxxxx
will also be entitled to certain other benefits, including the use of an
automobile, life insurance, a country club membership, and reimbursement of
certain professional services. He will be entitled to participate in the
employee pension benefit plans which PlayCore Wisconsin maintains for its
employees generally and PlayCore Wisconsin will make annual contributions to a
supplemental executive retirement plan. If any payment or reimbursement (other
than salary and bonus) is subject to any income tax, those amounts will be
"grossed-up" to cover the applicable taxes.
Under the terms of the agreement, Xx. Xxxxxxx will receive, at the closing
of the Merger, nonqualified options to purchase 29,000 shares of common stock of
Parent at an exercise price of $10.10 per share. Immediately following the
effectiveness of the Merger, Xx. Xxxxxxx also will receive a cash bonus in the
amount of $500,000 and a grant of 4,848 shares of phantom stock of Parent. Xx.
Xxxxxxx has agreed to purchase an equity interest in Holdings in an amount not
less than $500,000 in connection with the closing of the Offer.
In the event Xx. Xxxxxxx'x employment agreement is terminated by PlayCore
Wisconsin without "cause" (as defined therein) or by Xx. Xxxxxxx for "good
reason" (as defined therein), Xx. Xxxxxxx is entitled to receive (a) salary
continuation for two years at his annual base salary then in effect, (b)
continuation for two years of any benefits available to Xx. Xxxxxxx under the
terms of the applicable benefit plans and programs in which Xx. Xxxxxxx
participates on the termination date, and (c) a monthly bonus amount for two
years equal to 1/12th the average incentive bonus paid to Xx. Xxxxxxx for the
two years preceding his termination. In the event the agreement is terminated
upon Xx. Xxxxxxx'x disability, Xx. Xxxxxxx is entitled to salary continuation
31
39
and continuation of any benefits available to him under the terms of the
applicable benefit plans and programs in which Xx. Xxxxxxx participates on the
termination date for one year. The severance amounts payable to Xx. Xxxxxxx in
the event he is terminated will be reduced dollar for dollar by the greater of
(a) the value of the grant of phantom shares to Xx. Xxxxxxx on the date the
agreement becomes effective or (b) the value of such phantom shares on the
termination date.
Xx. Xxxxxxx will be deemed to terminate his employment agreement with "good
reason" in the event there is: (a) any material adverse changes in his job
title, status or responsibility including diminution of duties, (b) any
reduction in his base salary and aggregate benefits, (c) a material breach of
the agreement by PlayCore Wisconsin, (d) a relocation of Xx. Xxxxxxx'x primary
place of employment following a "change of control" (as defined therein) to a
location more than 35 miles away, or (e) the removal of Xx. Xxxxxxx as a member
of the Board of Directors, except if such removal is for "cause" or upon
voluntary termination of employment by Xx. Xxxxxxx, or due to death or
disability. In addition, in the event a change of control occurs, Xx. Xxxxxxx
will be deemed to have been terminated without cause if the agreement is not
extended through December 31, 2007.
The agreement contains standard non-competition, confidentiality and
non-solicitation clauses that apply during the period of his employment and for
a period of two years thereafter. The agreement provides that any intellectual
property developed by Xx. Xxxxxxx during the term of his employment will be the
sole and exclusive property of PlayCore Wisconsin. It also provides that
PlayCore Wisconsin will indemnify Xx. Xxxxxxx against damages and expenses in
connection with any action or proceeding to which he is made or threatened to be
made a party by reason of the fact that he is an employee or director of the
company (with certain specified exceptions). The new employment agreement
supersedes and replaces the existing employment agreement between Xx. Xxxxxxx
and PlayCore, Inc., but will be null and void if the Merger is not consummated.
Severance Agreements. In connection with entering into the Merger
Agreement, Acquisition Company also entered into new severance agreements with
Messrs. Xxxxxxx, Xxxxxxxxxx, Xxxxxxxxx, Xxxxxxxx, xxx xxx Xxxxxx, Xxxxxxxx,
Xxxx, Xxxxxx, and Xxxx. Under the terms of these agreements, six of the
executives are to receive cash payments ranging from $30,000 to $150,000
immediately following the effectiveness of the merger, and all of the executives
will receive a grant of phantom common stock of Parent.
Generally, the severance agreements provide that if the executive is
terminated within 18 months after a "change of control" (as defined therein) by
PlayCore Wisconsin other than for "just cause" (as defined therein), due to the
executive's permanent disability, or by the executive for "good reason" (as
defined therein), the executive is entitled to the following: (a) continuation
of his salary for 12 months (in the case of four of the executives) or 18 months
(in the case of the other five executives); (b) continuation of coverage under
the health and welfare plans maintained by PlayCore Wisconsin at the discounted
employee cost for 12 months or 18 months, as the case may be; and (c) in the
case of the four executives who are entitled to the shorter severance period,
payment of an amount equal to one-half (or 100% in the case of one executive) of
the performance bonus, if any, received by such executive for the prior fiscal
year. Notwithstanding the above, the agreements provide that if the executive's
employment with PlayCore Wisconsin is terminated within 18 months after a change
of control by PlayCore Wisconsin other than with "just cause" or by the
executive for "good reason", the executive will be entitled to receive the
greater of (a) the severance benefits provided for in these new severance
agreements and (b) the severance benefits provided for in the executive's prior
severance agreement with the Company or PlayCore Wisconsin less the "transaction
benefit," which is defined as the greater of the value of the executive's grant
of phantom common stock on the date of the agreement and the value of such grant
on the termination date. The executive will be deemed to resign with "good
reason" in the event of (a) his removal from or the failure to reappoint him to
any positions held by him on or after the change of control, and (b) a good
faith determination by the executive that there has been a significant adverse
change in his working conditions or status.
The agreements also provide that if the executive's employment with
PlayCore Wisconsin is terminated by PlayCore Wisconsin other than for "just
cause", because of the executive's permanent disability, or, in the case of five
of the executives, by the executive for "good reason", and such termination
occurs at any time
32
40
other than during the 18 month period following a change of control, the
executive is entitled to the same benefits but for a shorter period -- 6 months
in the case of four of the executives and 12 months for the other five
executives. However, if such termination occurs prior to a "change of control",
the amount of the severance payment will be reduced by the "transaction
benefit".
Each of the agreements also provides a standard non-competition clause,
pursuant to which each of the executives agrees not to compete with PlayCore
Wisconsin during the period of his employment and for a period of 1 or 2 years
thereafter, and a standard confidentiality clause that applies during the period
of the executive's employment and for five years thereafter.
These new severance agreements supersede and replace the existing severance
agreements between each of these executives and the Company or PlayCore
Wisconsin but will be null and void if the Merger is not consummated.
Other Arrangements. In addition to Xx. Xxxxxxx, certain other members of
management will receive at the closing of the Merger, non-qualified options to
purchase an aggregate of 43,500 shares of common stock of Holdings at an
exercise price of $10.10 per share and 5,341 shares of phantom stock of Parent.
Option Exercise/Cancellation Agreements.
In connection with the Merger Agreement and in addition to the employment
and severance agreements discussed above, the Company and Acquisition Company
also entered into Option Exercise Agreements with Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxxx, Xxxx Xxxxxx and Xxxxxx Xxxx, directors of the Company who hold Company
Options, and Xxxxxxxx Xxxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxx, Xxxxxxx Xxxxxxx,
Xxxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxx, Xxxxxx Xxxxxx,
Xxxxxx Xxxxxxxxxx and Xxxxxx xxx xxx Xxxxxx, officers or key employees of the
Company or its subsidiaries who own Company Options.
Exercise of Options and Sale of Option Shares. Pursuant to the Option
Exercise Agreements, each Option Holder has agreed that upon consummation of the
Offer, if requested by Acquisition Company, such Option Holder will exercise all
options (the "Holder Options") granted to the Option Holder by the Company
pursuant to the Company's 1992 Stock Program and 1996 Incentive Stock Plan
(collectively, the "Plans") that have a per Share exercise price (the "Exercise
Price") less than the Offer Price ("In-the-Money Options") and sell to
Acquisition Company the shares issued upon exercise of the In-the-Money Options
(the "Option Exercise Shares"). The aggregate exercise price the Option Holder
will pay for the Option Exercise Shares will be paid in the form of (i) a cash
payment in an amount equal to the product of (a) the number of Option Exercise
Shares and (b) the par value of the such Option Exercise Shares (the "Cash
Exercise Price") and (ii) a promissory note in a principal amount equal to (x)
the number of Option Exercise Shares multiplied by the Exercise Price minus the
Cash Exercise Price. Acquisition Company will pay for the Option Exercise Shares
with a promissory note in a principal amount equal to the product of the Offer
Price multiplied by the number of Option Exercise Shares purchased.
Cancellation of Options. Pursuant to the Option Exercise Agreements, the
Company will, upon consummation of the Merger, cancel all of the Option Holder's
Options that are not In-the-Money Options ("Out-of-the-Money Options") and all
remaining In-the-Money-Options, if any. In exchange for agreeing to the
cancellation of such Holder Options, the Option Holder will receive a cash
payment equal to the product, for each Holder Option, of (a) the Offer Price
less the Exercise Price per Share for each Holder Option cancelled and (b) the
number of Shares subject to such Holder Option.
Agreement to Tender Shares. Each Option Holder has agreed to validly tender
(and not withdraw) any Shares (other than the Option Exercise Shares) owned by
such Option Holder in accordance with the terms and pursuant to the Offer
(provided that the Offer is commenced and not amended in a manner adverse to the
Option Holder) not later than the Expiration Date.
Waiver and Release. By executing the Option Exercise Agreements, each
Option Holder has acknowledged the effects of and consented to the exercise
and/or cancellation of the Holder Options, and upon exercise and/or cancellation
of the Options waives all rights and benefits associated with the Holder
Options. Each Option Holder has also unconditionally released and discharged the
Company, Acquisition Company,
33
41
Parent and their respective directors, officers, employees agents and assigns
from all liabilities arising out of or related to the Plans or the Holder
Options.
Representations, Warranties and Covenants. The Option Exercise Agreements
contain various representations, warranties and covenants of the parties
thereto, including representations by each Option Holder as to the Option
Holder's ownership of the Holder Options and the Shares, authority relative to
the Option Exercise Agreements, the absence of any conflicts and the absence of
any encumbrances on the Option Holder's securities. Each Option Holder has also
agreed not to transfer any of the Option Holder's securities, not to grant any
proxies or enter into any voting agreements with respect to the Option Holder's
securities, not to take any action inconsistent with the representations or
warranties in the Option Exercise Agreements and not to acquire any of the
Company's securities. In addition, each Option Holder has waived any appraisal
rights with respect to the Merger.
Purchase, Waiver and Consent Agreement.
In connection with the Merger Agreement, the Company, PlayCore Wisconsin
and Acquisition Company executed the MM Agreement with the MM Warrant Holders.
Waiver of Notices. Pursuant to the MM Agreement, each MM Warrant Holder,
the Company and PlayCore Wisconsin have waived any and all notices required
under those Securities Purchase Agreements dated March 13, 1997 by and among the
Company, PlayCore Wisconsin and the MM Warrant Holders (the "Securities Purchase
Agreements"), the MM Warrants and all notes (the "MM Notes") and guarantees (the
"MM Guarantees") associated with the Securities Purchase Agreements (the "MM
Notes Documents").
Sale of the MM Warrants. Pursuant to the MM Agreement, the MM Warrant
Holders have agreed that, upon request of Acquisition Company and satisfaction
of the conditions set forth in the MM Agreement, the MM Warrant Holders shall
sell to Acquisition Company or the Company the MM Warrants for an aggregate
purchase price equal to $6,416,693. In connection with the sale of the MM
Warrants, the MM Warrant Holders have agreed to waive any rights they may have
under any anti-dilution provisions set forth in the MM Warrants relating to the
transactions contemplated by the Merger Agreement.
Redemption of Notes. Pursuant to the MM Agreement, the MM Warrant Holders
and PlayCore Wisconsin have agreed that, upon satisfaction of the conditions set
forth in the MM Agreement, PlayCore Wisconsin shall redeem the MM Notes held by
the MM Warrant Holders for an amount equal to (i) the principal amount of such
notes plus all accrued but unpaid interest thereon and (ii) a pre-payment fee of
$500,000 (as determined in accordance with the terms of the Securities Purchase
Agreements).
Consents; Waiver of Rights. The MM Warrant Holders have consented to the
Offer and the Merger and the execution and delivery by the Company and PlayCore
Wisconsin of the Merger Agreement, the Credit Agreement and the Subordinated
Note Agreement and have waived any and all rights and remedies the MM Warrant
Holders may have relating to any breach of any of the MM Notes Documents caused
by the Offer, the Merger, the execution or delivery of the Merger Agreement or
the consummation of the transactions contemplated thereby.
Conditions. The purchase of the MM Warrants and the redemption of the MM
Notes are conditioned upon (i) the first to occur of (a) the consummation of the
Offer and the purchase by Acquisition Company and/or Parent of the Shares
tendered thereunder and (b) the consummation of the Merger and (ii) the absence
of an injunction or other final, non-appealable judgment preventing or
prohibiting the sale of the MM Warrants or the redemption of the MM Notes.
Representations and Warranties. The MM Agreement contains various
representations and warranties of the parties thereto, including representations
by each MM Warrant Holder as to the MM Warrant Holder's ownership of the MM
Warrants, authority relative to the MM Agreement and the absence of any
conflicts. Each MM Warrant Holder has also agreed that upon consummation of the
sale of the MM Warrants, such MM Warrant Holder shall acknowledge and agree that
no obligations or liabilities shall be outstanding under or with respect to the
MM Warrants or the MM Notes. The Company and PlayCore Wisconsin agreed that all
34
42
provisions under the Securities Purchase Agreements indemnifying the MM Warrant
Holders shall remain in full force and effect and survive the sale of the MM
Warrants and the redemption of the MM Notes.
Waiver, Consent and Agreement.
In connection with the Merger Agreement, the Company and PlayCore Wisconsin
executed a Waiver, Consent and Agreement with Fleet National Bank (the "Fleet
Consent"), as a lender and as agent for itself and the other lenders
(collectively, the "Existing Lenders") who are parties to that certain Restated
Credit Agreement, dated as of February 16, 1999, as amended from time to time
(the "Fleet Credit Agreement").
Waiver. Pursuant to the Fleet Consent, Fleet and the Existing Lenders
consent to the execution and delivery of the Merger Agreement, the Credit
Agreement, the Subordinated Note Agreement and the ancillary documents and
agreements relating thereto. Fleet and the Existing Lenders have also agreed
that upon the payment of the credit obligations ("Fleet Credit Obligations")
outstanding between the Company, PlayCore Wisconsin and Heartland, on the one
hand, and Fleet and the Existing Lenders on the other hand, any and all defaults
under the Fleet Credit Agreement caused by the Offer or the Merger will be
waived.
Payment. Pursuant to the Fleet Consent, PlayCore Wisconsin has agreed that
contemporaneously with the consummation of the Offer and the closing and funding
of the initial loans provided by GE, PlayCore Wisconsin shall pay in full all
outstanding Fleet Credit Obligations and cash collateralize all outstanding
letters of credit or arrange for the support for such letters of credit by means
of guaranties or backup letters of credit reasonably acceptable to Fleet.
8. INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION.
In considering the recommendations of the Board, the stockholders should be
aware that GreenGrass and certain directors and officers of the Company have
interests in the Transaction different from those of stockholders generally
which may present such persons with certain potential conflicts of interest.
These interests are described below.
GreenGrass Holdings. XxxxxXxxxx owns a majority of the Shares of Company
and has the ability to elect all members of the Board. Currently, three of the
Company's seven directors are officers or directors of GreenGrass or one of its
affiliates. The general partners of GreenGrass consist of GreenGrass Capital,
L.L.C., a Delaware limited liability company ("GGC"), GreenGrass Capital II,
L.L.C., a Delaware limited liability company ("GGCII"), and GreenGrass
Management, L.L.C., a Delaware limited liability company ("GGM"). The members of
GGC include Glencoe Fund Partners and Equity-Linked Investors-II, a New York
limited partnership ("XXX-II") and certain trusts established by the State of
Michigan Retirement System (the "Michigan Trusts"). The members of GGCII include
Glencoe Growth Closely-Held Business Fund, L.P. ("Glencoe Growth"), XXX-XX, the
Michigan Trusts, and MassMutual and certain of its affiliates. The investment
advisor of XXX-XX is Xxxxx Capital Management Incorporated ("DCMI").
Xxxxx X. Xxxxx, a director of the Company, is the President and Chief
Executive Officer of Glencoe Investment Corporation and Glencoe Capital, L.L.C.,
both of which are affiliates of Glencoe Fund Partners and Glencoe Growth. Xxxxxx
X. Xxxx, a director of the Company, is a Principal and Chief Financial Officer
of Glencoe Capital, L.L.C. Xxxxxxx X. Xxxxxxxx, a director of the Company, is a
Senior Vice President of DCMI. Xxxxxxx X. Xxxxxxx, the Company's Chief Financial
Officer, and Xxxxx X. Xxxxxxxxx, the Company's Vice President of Human
Resources, are members of GGM and Xx. Xxxxxxx is the sole manager of GGM.
As of April 13, 2000, GreenGrass beneficially owned an aggregate of
5,345,905 Shares and had the right to acquire an additional 1,426,750 Shares
through exercising the GreenGrass Warrant and converting the Debentures held by
GreenGrass on that date. GreenGrass will be entitled to receive approximately
$68.2 million for its securities of the Company upon consummation of the
Transaction. Immediately upon consummation of the Offer, all Shares held by
GreenGrass, the GreenGrass Warrant and Debentures held by GreenGrass will be
purchased by Acquisition Company for the same consideration received by the
public stockholders for their Shares (with the purchase price for the GreenGrass
Warrant and such Debentures
35
43
determined on an as if exercised or converted basis, less the exercise or
conversion price to be paid thereunder).
In addition, the Company and GreenGrass entered into a Letter Agreement,
dated August 17, 1999 (the "GreenGrass Fee Agreement"), pursuant to which the
Company is obligated to pay GreenGrass $748,800 as an investment advisory fee in
cash upon consummation of the Transaction and reimburse GreenGrass for its
expenses and fees (including attorneys fees) incurred with respect to the
Transaction (the "GreenGrass Fee"). The Company is also obligated to indemnify
GreenGrass under the GreenGrass Fee Agreement from certain liabilities in
connection with the services it is providing under the GreenGrass Fee Agreement.
Glencoe Capital, L.L.C. is also party to an agreement with GreenGrass
pursuant to which GreenGrass has agreed to pay certain fees and reimburse
certain expenses of Glencoe Capital, L.L.C. in consideration of Glencoe Capital,
L.L.C. providing assistance to XxxxxXxxxx in providing financial advisory
services to the Company under the GreenGrass Fee Agreement. The agreement also
provides for indemnification of Glencoe Capital, L.L.C. by GreenGrass upon terms
substantially similar to those provided in the GreenGrass Fee Agreement.
The consideration GreenGrass will receive in the Transaction plus the
GreenGrass Fee is referred to herein as the "GreenGrass Consideration".
Directors and Executive Officers of the Company. As of April 13, 2000, the
directors and executive officers of the Company, as a group, actually owned an
aggregate of 16,528 Shares (representing less than 1% of the then outstanding
Shares). Their beneficial ownership is more fully described on Schedule I
hereto. All such directors and executive officers will receive in the
Transaction the same per Share consideration for their Shares as the public
stockholders will receive for their Shares in the Offer and the Merger. In the
aggregate, the directors and executive officers of the Company will be entitled
to receive approximately $167,000 for their Shares actually owned upon
consummation of the Transaction.
As of April 13, 2000, the directors and executive officers of the Company,
as a group, had Company Options to acquire an aggregate of 957,827 Shares. All
directors and executive officers of the Company will receive in the Transaction
the same consideration for such Company Options as if they exercised such
Company Options and tendered them in the Offer. In the aggregate, the directors
and executive officers of the Company will be entitled to receive approximately
$4.17 million for their Company Options, upon consummation of the Transaction.
In addition, Messrs. Xxxxxxx and Xxxxxxxxx own approximately 66.7% and
8.7%, respectively, of the membership interests of GGM. This will entitle them
to approximately .67% and .09%, respectively, of the GreenGrass Consideration
distributed to the partners of GreenGrass.
Xxxxxxxx X. Xxxxxxx, the Chief Executive Officer of the Company, and
certain other members of management will receive at the closing of the Merger
non-qualified options to purchase an aggregate of 43,500 shares of common stock
of Holdings at an exercise price of $10.10 per share and 5,341 shares of phantom
stock of Holdings. In addition, the aggregate amount of cash bonuses to be
received by executive officers of the Company upon consummation of the
Transaction under the management agreements described in "SPECIAL FACTORS -- The
Merger Agreement and Related Documents" is $1 million.
Indemnification. The Merger Agreement provides that the Surviving
Corporation will, for a period of six years following the Effective Time,
maintain all rights to indemnification in favor of the Company's current or
former officers, directors, employees and fiduciaries, and GreenGrass, to the
same extent provided in the Company's certificate of incorporation, by-laws or
indemnification agreements as in effect as of the date of the Merger Agreement
(including the GreenGrass Fee Agreement). The Surviving Corporation is also
required, from and after the Effective Time, to indemnify, defend and hold
harmless the present and former officers and directors of the Company in
connection with any claims relating to such person serving as a director,
officer, employee or agent of the Company or any of its subsidiaries or at the
request of the Company or any of its subsidiaries of any other entity to the
full extent permitted under applicable law or the Company's certificate of
incorporation and by-laws. In addition, the Merger Agreement requires that the
Surviving Corporation's certificate of incorporation and by-laws contain the
provisions with respect to indemnification set forth in the
36
44
Company's certificate of incorporation and by-laws on the date of the Merger
Agreement and that such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the date on which the Shares are
purchased by the Company pursuant to the Offer in any manner that would
adversely affect the rights thereunder of persons who at anytime prior to the
Effective Time were directors or officers of the Company with respect to actions
or omissions occurring at or prior to the Effective Time, unless such
modification is required by applicable law. The Merger Agreement also provides
that the Surviving Corporation will, for a period of six years after the
Effective Time, maintain in effect, without any lapses in coverage, policies of
directors' and officers' liability insurance for the benefit of those persons
who are covered by the Company's directors' and officers' liability insurance
policies at the Effective Time (including GreenGrass and its members), providing
coverage with respect to matters occurring prior to the Effective Time that is
at least equal to the coverage provided under the Company's current directors'
and officers' liability insurance policies, to the extent that such liability
insurance can be maintained at an annual cost to the Surviving Corporation of
not greater than 300% of the premium for the current Company directors' and
officers' liability insurance, provided that if such insurance cannot be so
maintained at such cost, the Surviving Corporation will maintain as much of such
insurance as can be so maintained at a cost equal to 300% of the current annual
premiums of the Company for such insurance. See "SPECIAL FACTORS -- The Merger
Agreement and Related Documents."
Board's Awareness of Potential Conflicts of Interest. The Board was aware
of the actual and potential conflicts of interest described above and considered
them along with the other matters described under "SPECIAL
FACTORS -- Recommendation of the Board of Directors of the Company; Fairness of
the Offer and the Merger."
9. FINANCING OF THE TRANSACTION.
The Offerors estimate that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger, to
acquire all securities of the Company pursuant to the PlayCore Purchase
Agreements, to refinance approximately $87 million of existing indebtedness
(assuming the conversion of all Debentures into Common Stock) of the Company and
its subsidiaries, and to pay all related costs and expenses will be
approximately $207.5 million. The Purchasers expect to obtain these funds from
borrowings by PlayCore Wisconsin under the Senior Credit Facility, the issuance
by PlayCore Wisconsin of the Sub Notes and the capitalization of Acquisition
Company through the Capital Contribution of $72.5 million by Parent. Parent will
obtain the funds for the Capital Contribution from Holdings.
Senior Credit Facility.
The Senior Credit Facility is comprised of (i) a six-year $30 million
revolving credit facility (the "Revolving Credit Facility"), (ii) a $25 million
six-year amortizing term loan facility (the "A Term Loan") and (iii) a $60
million seven-year amortizing term loan facility (the "B Term Loan" and,
together with the A Term Loan, the "Term Loans").
The Term Loans may only be incurred upon the consummation of the Offer and
may only be used to directly or indirectly refinance existing debt and finance
the Offer and the costs, fees and expenses associated therewith. The Term Loans
are to be repaid on a quarterly basis, and to the extent repaid, Term Loans may
not be reborrowed.
Borrowings under the Revolving Credit Facility after the Offer Closing may
be used to fund the Merger, for ordinary working capital and other general
corporate needs of PlayCore Wisconsin and its subsidiaries. The Revolving Credit
Facility will have a six-year term. The Revolving Credit Facility will be made
available to PlayCore Wisconsin in the form of revolving credit loans (the
"Revolving Loans") with sublimits available thereunder for letters of credit and
swingline loans.
Interest Rate and Fees. Until PlayCore Wisconsin delivers to the
administrative agent its financial statements for the fiscal quarter ending
after the closing of the Senior Credit Facility (the "Senior Credit Facility
Closing Date"), the Revolving Credit Facility and the A Term Loan will bear
interest at a rate per annum equal to, at PlayCore Wisconsin's election, (i) the
applicable LIBOR rate, plus a margin equal to
37
45
3.50%, or (ii) the higher of (a) the prime rate as reported by The Wall Street
Journal or (b) the overnight federal funds rate plus 0.50% (such higher rate,
the "Base Rate"), plus a margin equal to 1.75%. The B Term Loan will bear
interest at a rate per annum equal to, a floating rate equal to, at PlayCore
Wisconsin's election, (i) the applicable LIBOR rate, plus a margin equal to
4.00%, or (ii) the Base Rate plus a margin equal to 2.25%.
Upon PlayCore Wisconsin's delivery to the administrative agent of its
financial statements for the fiscal quarter ending after the Senior Credit
Facility Closing Date, the applicable margins for each of the Revolving Credit
Facility, the A Term Loan and the B Term Loan will be adjusted (upwards only),
based on PlayCore Wisconsin's consolidated financial performance for the
trailing four quarters most recently ended.
From and after delivery of PlayCore Wisconsin's financial statements for
the fiscal quarter ending after the first six months following the Senior Credit
Facility Closing Date, the Revolving Credit Facility and the A Term Loan will
bear interest at a rate per annum equal to, at PlayCore Wisconsin's election,
(i) the applicable LIBOR rate, plus a margin ranging from 2.75% to 3.75%, based
on PlayCore Wisconsin's consolidated financial performance for the trailing four
quarters most recently ended, or (ii) the Base Rate, plus a margin ranging from
1.00% to 2.00%, based on PlayCore Wisconsin's consolidated financial performance
for the trailing four quarters most recently ended. The B Term Loan will bear
interest at a rate per annum equal to, at PlayCore Wisconsin's election, (i) the
applicable LIBOR rate, plus a margin ranging from 3.75% to 4.25%, based on
PlayCore Wisconsin's consolidated financial performance for the trailing four
quarters most recently ended, or (ii) the Base Rate, plus a margin ranging from
2.00% to 2.50%, based on PlayCore Wisconsin's consolidated financial performance
for the trailing four quarters most recently ended.
If there is a continuing event of default under the Senior Credit Facility,
the applicable interest rates and letter of credit fees shall be increased by
two percent per annum above the rates of interest or the rate of the letter of
credit fees otherwise applicable, and all outstanding obligations shall bear
interest at this default rate, as applicable.
PlayCore Wisconsin will pay certain fees in connection with the Senior
Credit Facility, including, without limitation, (i) arrangement fees, (ii)
agency fees, (iii) letter of credit fees and (iv) commitment fees. The
commitment fees will accrue on the unutilized total commitments under the Senior
Credit Facility at a per annum rate of 0.50%.
Scheduled Amortization. The A Term Loans will amortize quarterly over six
years with payments commencing on October 1, 2000, with total annual
amortization to be $2,500,000 initially, and increasing pursuant to a schedule
up to $5,250,000 in the last two years of the A Term Loan. The B Term Loan will
amortize quarterly over seven years with payments commencing on October 1, 2000,
with total annual amortization to be $600,000 over the first five years and
$28,500,000 total amortization in the last two years of the B Term Loan.
Mandatory Prepayments. Subject to certain standard exceptions, mandatory
prepayments of the Term Loans (and after the Term Loans have been repaid in
full, mandatory reductions to the commitments under the Revolving Credit
Facility) will be required to be made (i) with 75% of all excess cash flow,
which percentage will be reduced to 50% whenever the debt to EBITDA leverage
ratio of PlayCore Wisconsin is less than 3.5:1.0, (ii) with 100% of certain
permitted new debt or equity issuances (net of commissions, expenses and other
costs), (iii) with 100% of permitted asset sales (net of commissions, expenses
and other costs) (other than the sale of inventory in the ordinary course and
certain other exceptions), and (iv) subject to exceptions for repairs and
replacements, all net insurance proceeds or other awards payable in connection
with the loss, destruction or condemnation of any assets of the Company,
PlayCore Wisconsin or any of its subsidiaries.
Conditions Precedent to Closing of Senior Credit Facility. The availability
of the Senior Credit Facility is subject to the satisfaction of conditions
precedent typical for this type of facility, including, but not limited to, the
following: (i) the administrative agent shall have received an executed pay-off
letter confirming that all of the obligations to prior lenders (other than the
Company's Debentures held by non-affiliates and certain other indebtedness) will
be repaid in full from the proceeds of the Term Loans and the initial Revolving
Loan and
38
46
all liens in favor of prior lenders will be terminated immediately upon such
payment (with certain agreed exceptions for existing indebtedness), (ii) all
necessary material governmental and third party waivers, consents and approvals
in connection with the Senior Credit Facility and the Offer shall have been
obtained and remain in effect, (iii) there shall not have occurred any material
adverse change in the consolidated financial condition of the Company and its
subsidiaries from the historical financial information provided to the Lenders,
(iv) each of the loans under the Senior Credit Facility shall have been rated by
a nationally recognized rating agency, (v) the Offer and each of the other
transactions contemplated thereby (other than the Merger) shall have been
consummated or will be contemporaneously consummated on the closing date, (vi)
Acquisition Company shall have received at least $70 million of equity on terms
acceptable to the administrative agent and PlayCore Wisconsin shall have issued
the Notes, and (vii) since January 14, 2000, there shall have been no material
change in loan syndication, financial or capital market conditions that, in the
judgment of the administrative agent, would impair the syndication of the loans.
Guaranty. All obligations of PlayCore Wisconsin under the Senior Credit
Facility are unconditionally guaranteed by each of the Company, PlayCore
Wisconsin's wholly owned subsidiary Heartland, and each of PlayCore Wisconsin's
future subsidiaries (collectively, the "Guarantors").
Security. The obligations of PlayCore Wisconsin and the Guarantors under
the Senior Credit Facility will be secured by a first priority perfected
security interest (subject to certain permitted liens agreed upon) in (i) 100%
of the capital stock of PlayCore Wisconsin and each Guarantor (other than the
Company) and (ii) all other available assets of PlayCore Wisconsin and each
Guarantor, other than exceptions customary for transactions of this type.
Representations and Warranties. The Senior Credit facility contains
representations and warranties customary for such types of facilities. These
representations and warranties address subjects including, but not limited to,
the following: (i) taxes, (ii) environmental matters, (iii) financial condition,
(iv) solvency, (v) litigation, and (vi) status of properties and business.
Financial Covenants. The Senior Credit Facility contains financial
covenants customary for transactions of this type including, but not limited to,
the following: (i) limits on capital expenditures, (ii) minimum EBITDA, and
(iii) a maximum funded debt to EBITDA ratio.
Other Covenants. The Senior Credit Facility contains covenants typical for
such types of facilities. Such covenants include, but are not limited to, the
following: (i) restrictions on indebtedness and liens, (ii) restrictions on
mergers, acquisitions and dispositions of assets, (iii) restrictions on
investments, (iv) restrictions on dividends and other restricted payments, (v)
restrictions on transactions with affiliates and (vi) a negative pledge.
Events of Default. The Senior Credit Facility contains events of default
typical for these types of facilities. Such events of default include, but are
not limited to, the following: (i) non-payment of amounts under the Senior
Credit Facility, (ii) any material misrepresentation in any of the agreements
related to the Senior Credit Facility, (iii) covenant defaults, (iv)
cross-defaults to other indebtedness, (v) judgment defaults, (vi) insolvency or
bankruptcy proceedings, and (vii) a change of control of the Company, in each
case, subject to specified grace periods, exceptions and/or thresholds.
Subordinated Note Agreement.
Under the terms of the Subordinated Note Agreement, GS Mezzanine Partners
II, L.P. and GS Mezzanine Partners II Offshore, L.P., investment funds
affiliated with The Xxxxxxx Xxxxx Group, Inc., have agreed to purchase $30
million in original principal amount of PlayCore Wisconsin's 18% Senior
Subordinated Notes due 2008 (such notes and any notes issued in exchange or
replacement therefor, the "Sub Notes"). The proceeds from the Sub Notes may only
be used to finance the Offer and the Merger and to pay any fees and expenses
incurred in connection with these matters.
The Sub Notes will be subordinated in right of payment to the indebtedness
under the Senior Credit Facility and will be senior in right of payment to all
subordinated debt of PlayCore Wisconsin and its
39
47
subsidiaries. The Sub Notes will be guaranteed by the Company and by Heartland
and all future subsidiaries of PlayCore Wisconsin that are guarantors of the
Senior Credit Facility.
Interest. Interest on the Sub Notes will accrue at a rate of 18% per annum.
For the first four years, interest will be payable in cash semi-annually in
arrears at the rate of 14%, and the remaining 4% will be added to the
outstanding principal amount of the Sub Notes semi-annually in arrears. After
the fourth year, all of the interest will be payable in cash semi-annually in
arrears.
Optional Prepayments. At PlayCore Wisconsin's option, the Sub Notes may be
prepaid in whole at any time after the third anniversary of the issuance, at
premiums (ranging from 107% after year three to 100% after year six) multiplied
by the principal amount, plus accrued interest to the date of prepayment
(provided that no premium is payable with respect to any interest that has been
added to the principal amount of the Sub Notes). In addition, PlayCore Wisconsin
may prepay up to 35% of the principal amount of the Sub Notes with the proceeds
of an initial public offering of common stock at a price of 114% multiplied by
the principal amount of the Sub Notes, plus accrued interest to the date of
prepayment (provided that no premium is payable with respect to any interest
that has been added to the principal amount of the Sub Notes).
Mandatory Prepayments/Change of Control. Upon a change of control, PlayCore
Wisconsin will be required to offer to purchase the Sub Notes in whole at a
price equal to 101% of the principal amount of the Sub Notes as of the purchase
date, plus accrued interest to the date of prepayment (provided that no premium
is payable with respect to any interest that has been added to the principal
amount of the Sub Notes).
Conditions Precedent to Purchase of the Sub Notes. GS's obligations to
purchase the Sub Notes in connection with the closing of the Offer are subject
to satisfaction of conditions precedent typical for this type of facility,
including the following: (i) all of the conditions precedent to the consummation
of the Offer being satisfied in all material respects, (ii) the Offer being
consummated concurrently with the sale of the Sub Notes, (iii) the outstanding
indebtedness of the Company and its subsidiaries (other than the Company's
Debentures held by non-affiliates and certain other specified indebtedness)
being refinanced concurrently with the sale of the Sub Notes, (iv) Acquisition
Company having purchased shares of the Company's common stock for the aggregate
purchase price of $72,500,000 and Parent having made an equity contribution to
Acquisition Company of not less than 30% of the Company's and Parent's total
capitalization, (v) Acquisition Company owning not less than 85% of the
Company's outstanding common stock after giving effect to the Offer and the
other transactions contemplated by the Merger Agreement (other than the Merger),
(vi) the Senior Credit Facility being in full force and effect, and (vii) there
not having occurred any material adverse change in the consolidated business or
condition of the Company and its subsidiaries since December 31, 1999 and (viii)
certain other conditions customary for financings of this type.
Representations and Warranties. The Subordinated Note Agreement contains
representations and warranties customary for financing of this type. These
representations and warranties address subjects including, but not limited to,
the following: (i) taxes, (ii) environmental matters, (iii) financial condition,
(iv) solvency, (v) litigation, and (vi) employee benefit plans.
Covenants. The Sub Notes will contain customary covenants for financings of
this type, that, among other things, will limit the ability of PlayCore
Wisconsin and its subsidiaries to incur debt, create liens, pay cash dividends
on or repurchase capital stock, enter into agreements prohibiting the creation
of liens or restricting the ability of a subsidiary to pay money or transfer
assets to PlayCore Wisconsin, enter into certain transactions with affiliates,
dispose of certain assets and engage in mergers and consolidations.
Events of Default. The Sub Notes will contain events of default typical for
these types of financings. Such events of default include the following: (i)
failure to make interest or principal payments, (ii) bankruptcy or insolvency,
(iii) cross-acceleration or cross-payment default at maturity of other debt in
an aggregate outstanding amount of $5,000,000, (v) judgments in excess of
$5,000,000 in the aggregate, (vi) violation of covenants, and (vii) material
inaccuracy of representations and warranties. In the event that a default in the
payment of the Sub Notes or an event of default occurs, the interest rate on the
Sub Notes shall increase by 200 basis points above the otherwise applicable rate
for any period that includes such a default or event of default that remains
uncured. If an event of default under the Subordinated Note Agreement occurs,
40
48
the principal, interest and all other amounts payable under all the Notes may be
declared due and payable in the manner and with the effect provided in the
Subordinated Note Agreement.
Exchange Rights. GS will have the right to exchange all or part of the
outstanding Sub Notes for one or more series of new notes (the "Replacement
Notes") having identical terms, provided that the different series of
Replacement Notes may differ as to relative ranking, interest rate or yield, as
long as the aggregate interest cost to PlayCore Wisconsin is not increased.
Registration Rights. GS will have demand registration rights with respect
to the outstanding Sub Notes or Replacement Notes, exercisable on or after the
earlier to occur of (i) an initial public offering of common stock and (ii) the
fifth anniversary of the issuance of the Sub Notes.
Resale. At any time after the first anniversary of the issuance of the Sub
Notes, PlayCore Wisconsin will take all actions necessary to enable GS to sell
the Sub Notes and Replacement Notes without registration under Rule 144A of the
Securities Act and, if requested by GS will agree to make an exchange offer not
involving registration under the Securities Act that will permit purchasers in
such Rule 144A transactions to exchange their Sub Notes for identical and freely
transferable notes. In addition, the Sub Notes and Replacement Notes can be
sold, pledged or otherwise transferred by GS on any other private market basis
at any time in accordance with applicable securities laws.
Capital Contribution.
Seventy-two million five hundred thousand dollars of the funds necessary
for Acquisition Company to fund the Transaction will be in the form of the
Capital Contribution from Parent. Parent will receive the funds necessary for
the Capital Contribution from a capital contribution from Holdings. Holdings
will be capitalized with $72.5 million of equity provided by investment funds
sponsored by affiliates of Chartwell, members of management of the Company and
certain other institutions.
PlayCore/Acquisition Company Loan Agreement.
A portion of the proceeds from the Financing Agreements will be loaned by
PlayCore Wisconsin to Acquisition Company (if the Short Form Requirement is met)
or the Company (if the Short Form Requirement is not met) pursuant to the terms
of the PlayCore/Acquisition Company Loan Agreement. Interest shall accrue on the
principal amount of the PlayCore/Acquisition Company Loan Agreement at 10% per
annum. The entire unpaid principal balance and all interest thereon is due and
payable in the event the Merger Agreement is terminated. The entire principal
balance and all interest thereon will be deemed paid in full immediately
following consummation of the Merger.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE RECEIPT OF FUNDS
CONDITION. See "THE TENDER OFFER -- Conditions to the Offer." The Offerors
believe that the proceeds, if obtained by the Purchasers, from the Senior Credit
Facility, the Sub Notes and the Capital Contribution will be sufficient to
satisfy the Receipt of Funds Condition. The Offerors, however, do not have any
alternative financing arrangements or plans to obtain sufficient funds to
purchase the Shares tendered in the Offer and to consummate the Merger if the
Purchasers are unable to obtain funds from the Credit Agreement, the Sub Notes
and the Capital Contribution.
10. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of certain U.S. federal income tax
consequences of the Offer and the Merger relevant to beneficial holders whose
Shares are purchased pursuant to the Offer or whose Shares are converted into
the right to receive cash in the Merger. This discussion is for general
information only and does not purport to consider all aspects of U.S. federal
income taxation that may be relevant to holders of Shares. The summary is based
on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable current and proposed United States Treasury Regulations issued
thereunder, judicial authority and administrative rulings and practice, all of
which are subject to change, possibly with retroactive effect, at any time and,
therefore, the following statements and conclusions could be altered or
modified. The discussion
41
49
does not address holders of Shares in whose hands Shares are not capital assets,
nor does it address holders who hold Shares as part of a hedging, "straddle,"
conversion or other integrated transaction, or who received Shares upon
conversion of securities or exercise of warrants or other rights to acquire
Shares or pursuant to the exercise of employee stock options or otherwise as
compensation, or to holders of Shares who are in special tax situations (such as
insurance companies, tax-exempt organizations, financial institutions, qualified
plans, individual retirement accounts, United States expatriates or non-U.S.
persons). Furthermore, the discussion does not address the tax treatment of
holders who perfect appraisal rights in the Merger, nor does it address any
aspect of foreign, state or local taxation or estate and gift taxation.
Because individual circumstances may differ, each holder of Shares should
consult such holder's own tax advisor to determine the applicability of the
rules discussed below to such stockholder and the particular tax effects of the
Offer and the Merger, including the application and effect of state, local and
other income tax laws.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes under the Code (and also
may be a taxable transaction under applicable state, local, foreign and other
income tax laws). In general, for federal income tax purposes, a holder of
Shares will recognize gain or loss in an amount equal to the difference between
its adjusted tax basis in the Shares sold pursuant to the Offer or converted
into the right to receive cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss and will be long-term gain or loss if, on the date of sale
(or, if applicable, the Effective Time), the Shares were held for more than one
year.
Under the United States federal income tax backup withholding rules,
payments in connection with the Offer or the Merger may be subject to "backup
withholding" at a rate of 31%. To avoid backup withholding, each tendering
stockholder, unless an exemption applies, must provide the Depositary with such
stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to such backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service. Refunds are not available from the Company. Certain persons
generally are entitled to exemption from backup withholding, including
corporations, financial institutions and certain foreign individuals. Each
stockholder should consult with such holder's own tax advisor as to such
holder's qualification for exemption from backup withholding and the procedure
for obtaining such exemption.
All stockholders surrendering Shares pursuant to the Offer should complete
and sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification necessary
to avoid backup withholding (unless an applicable exemption exists and is proved
in a manner satisfactory to Acquisition Company and the Depositary).
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 12 to the Letter of Transmittal.
11. FEES AND EXPENSES.
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Transaction, the Merger Agreement and the other transactions
contemplated thereby 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, the
Schedule TO and the proxy statement, if any.
The Company has engaged DLJ as financial advisor in connection with the
Transaction, and will pay to DLJ approximately $1.8 million upon consummation of
the Transaction plus reasonable out-of-pocket expenses and fees (including
attorneys fees) incurred by DLJ for services rendered by it in connection with
the consummation of the Transaction. The Company has agreed to indemnify DLJ
against certain liabilities in
42
50
connection with the Transaction, including certain liabilities under the federal
securities laws. The fees and expenses of DLJ are also described in "SPECIAL
FACTORS -- Opinion of the Company's Financial Advisor."
The Company has engaged GreenGrass as financial advisor in connection with
the Transaction pursuant to the GreenGrass Fee Agreement, and will pay to
GreenGrass, upon the consummation of the Transaction, a transaction fee of
$748,800, plus reasonable out-of-pocket expenses and fees (including attorneys
fees) incurred by GreenGrass for services rendered by it in connection with the
consummation of the Transaction and the Company has agreed thereunder to
indemnify GreenGrass in connection with the services it is providing under the
GreenGrass Fee Agreement.
Acquisition Company and Chartwell entered into a Letter Agreement, dated
April 13, 2000 (the "Chartwell Fee Agreement"), pursuant to which Acquisition
Company is, and immediately following the effectiveness of the Merger, PlayCore
Wisconsin will be, obligated to pay Chartwell an advisory fee equal to 1% of the
total capitalization of Acquisition Company and the Company (including the
funded debt under the Senior Credit Facility, the Sub Notes and the Capital
Contribution), plus reimbursement for fees and expenses (including attorneys
fees) incurred with respect to the Transaction, in cash upon consummation of the
Transaction.
The Purchasers have retained X.X. Xxxx & Co., Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward Offer materials to beneficial owners. The Information Agent will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain reasonable out-of-pocket expenses. The Company
also has agreed to indemnify the Information Agent against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws.
First Chicago Trust Company of New York has been retained by the Purchasers
to act as the Depositary in connection with the Offer. The Depositary has not
been retained to make solicitations or recommendations in its role as
Depositary. The Depositary will receive reasonable and customary compensation
for services relating to the Offer and will be reimbursed for certain reasonable
out-of-pocket expenses. The Company has also agreed to indemnify the Depositary
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The following table presents the estimated fees and expenses to be incurred
by the Offerors in connection with the Offer and the Merger:
Financing Fees.............................................. $ 3,200,000
Financial Advisors Fees and Expenses........................ 4,968,800
Legal Fees and Expenses..................................... 2,874,000
Accounting and Other Professional Fees and Expenses......... 730,000
Printing and Mailing........................................ 60,000
Filing Fees................................................. 5,805
Depositary Fees............................................. 30,000
Information Agent Fees...................................... 15,000
Miscellaneous............................................... 445,000
-----------
Total............................................. $12,328,605
===========
Except as set forth above, the Offerors will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request only, be reimbursed by the Offerors for customary
mailing and handling expenses incurred by them in forwarding material to their
customers. Assuming consummation of the Offer and the Merger, the Company is
responsible for all of the foregoing fees and expenses.
43
51
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
extension or amendment), either Acquisition Company or the Company will accept
for payment and pay for any and all Shares validly tendered prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth in
"THE TENDER OFFER -- Withdrawal Rights" as soon as practicable after the
Expiration Date. The term "Expiration Date" means 5:00 p.m., New York City time,
on May 18, 2000 unless and until the Offerors, in their sole discretion (but
subject to the terms of the Merger Agreement), shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Offerors, shall expire.
The Offer is subject to certain conditions (the "Offer Conditions"),
including, among other things, the Minimum Condition and the Receipt of Funds
Condition. Such conditions are set forth in "THE TENDER OFFER -- Conditions to
the Offer." If the Offer Conditions are not satisfied or waived or any of the
events specified in "THE TENDER OFFER -- Conditions to the Offer" have occurred
or are determined by the Offerors to have occurred prior to the Expiration Date,
the Offerors may either, subject to the terms of the Merger Agreement, extend
the Offer or terminate the Offer. If the Offerors terminate the Offer, the
Purchasers shall not accept for payment any Shares and return all tendered
Shares to tendering stockholders.
The Company and Acquisition Company have agreed that, without the prior
written consent of Parent, no change may be made to the Offer by the Company or
the Acquisition Company that (i) reduces the number of Shares subject to the
Offer, (ii) increases or decreases the Offer Price, (iii) amends or modifies the
Offer Conditions in any manner, (iv) imposes any additional conditions or amend
any other term of the Offer or (v) extends the expiration date of the Offer
beyond the Expiration Date.
The Offerors, in their sole discretion, but subject to the terms of the
Merger Agreement, may extend, delay, terminate or amend the Offer, in any manner
at any time prior to the Expiration Date. Any such extension, delay, termination
or amendment will be followed, as promptly as practicable, by public
announcement thereof, with such announcement in the case of an extension to be
made no later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14e-l of the Exchange Act. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to
stockholders in a manner reasonably designed to inform them of such changes) and
without limiting the manner in which the Company may choose to make any public
announcement, 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 Xxxxx News Service or as otherwise may be required by
applicable law.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer, or if they waive a material Offer Condition,
the Purchasers will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. Pursuant to these rules, the minimum
period during which an offer must remain open following material changes in the
terms of the offer or information concerning the offer, other than a change in
price or a change in the percentage of securities sought, will depend upon the
facts and circumstances then existing, including the relative materiality of the
changed terms or information. With respect to a change in price or a change in
the percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to stockholders and
investor response.
During any extensions of the Offer by the Offerors, all Shares previously
tendered and not withdrawn will remain subject to the Offer. Tendering
stockholders will continue to have the right to withdraw any tendered Shares
during such extension. See "THE TENDER OFFER -- Withdrawal Rights." Under no
circumstances will interest be paid on the purchase price for tendered Shares,
whether or not the Offer is extended.
44
52
This Offer to Purchase, the Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares whose names appear on the
Company's list of stockholders and will be furnished, for subsequent transmittal
to beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's list of stockholders or, where applicable, who are
listed as participants in the security position listing of The Depository Trust
Company.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchasers will purchase, by accepting for payment,
and will pay for, all Shares validly tendered prior to the Expiration Date (and
not properly withdrawn in accordance with "THE TENDER OFFER -- Withdrawal
Rights") as promptly as practicable after the Expiration Date, with Acquisition
Company agreeing to accept for payment and pay for all Shares validly tendered,
provided that the Shares validly tendered (and not withdrawn) pursuant to the
Offer plus the Shares acquired by Acquisition Company pursuant to the PlayCore
Purchase Agreements (including Shares issuable upon the exercise or conversion
of derivative securities purchased thereunder) constitute at least 90% of the
outstanding Shares. If the foregoing requirement is not met, but all conditions
to the Offer are met, Acquisition Company has agreed to accept for payment and
pay for the first 425,439 Shares validly tendered and the Company has agreed to
accept for payment and pay for all Shares validly tendered in excess of such
425,439 Shares, in each case as promptly as practicable after the Expiration
Date. Subject to applicable rules of the Commission and the terms of the Merger
Agreement, the Purchasers expressly reserve the right, in their discretion, to
delay acceptance for payment of, or payment for, Shares in order to comply, in
whole or in part, with any applicable law. See "THE TENDER OFFER -- Terms of the
Offer," and "THE TENDER OFFER -- Certain Legal Matters; Regulatory Approvals."
The reservation by the Purchasers of the right to delay the acceptance or
purchase of, or payment for, the Shares is subject to the provisions of Rule
14e-1(c) under the Exchange Act, which requires the Purchasers to pay the
consideration offered or to return the Shares deposited by, or on behalf of,
stockholders, promptly after the termination or withdrawal of the Offer.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after such Shares are validly tendered and not properly withdrawn
prior to the Expiration Date. See "THE TENDER OFFER -- Procedures for Tendering
Shares" for a complete discussion of how Shares can be validly tendered.
For purposes of the Offer, the Purchasers will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the applicable Purchaser gives oral or written notice
to the Depositary of its acceptance for payment of such Shares. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted pursuant
to the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchasers and transmitting payments to such
tendering stockholders whose Shares have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID
BY THE PURCHASERS, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT OR EXTENSION
OF THE EXPIRATION DATE.
If any validly tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if the certificates for
tendered Shares are submitted evidencing more Shares than are tendered,
certificates evidencing Shares not purchased will be returned, without expense,
to the tendering stockholder, or such other person or entity as the tendering
stockholder shall specify in the Letter of Transmittal, as promptly as
practicable following the expiration, withdrawal or termination of the Offer. In
the case of Shares tendered by book-entry transfer into the Depositary's Account
at The Depositary Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in "THE TENDER OFFER -- Procedures for Tendering
Shares," such Shares will be credited to such account at the Book-Entry Transfer
Facility as promptly as practicable following the expiration, withdrawal or
termination of the Offer.
45
53
IF, PRIOR TO THE EXPIRATION DATE, THE OFFERORS INCREASE THE CONSIDERATION
TO BE PAID PER SHARE PURSUANT TO THE OFFER, THE PURCHASERS WILL PAY SUCH
INCREASED CONSIDERATION FOR ALL SUCH SHARES PURCHASED PURSUANT TO THE OFFER,
WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
Subject to the terms of the Merger Agreement, the Purchasers reserve the
right to assign to Acquisition Company, or to any other direct or indirect
wholly-owned subsidiary of Holdings, Parent or Acquisition Company, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such assignment will not relieve the Purchasers of their obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, a stockholder must, prior to the Expiration Date, either (i)
deliver to the Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase (a) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantees or an Agent's Message (as defined below) in connection with a
book-entry transaction, (b) the certificates representing Shares to be tendered
(the "Certificates") or timely confirmation of a book-entry transfer of Shares
into the Depositary's account at the Book-Entry Transfer Facility and (c) any
other documents required to be included with the Letter of Transmittal under the
terms and subject to the conditions thereof and of this Offer to Purchase, and,
if applicable, cause such stockholder's broker, dealer, commercial bank or trust
company to tender applicable Shares pursuant to the procedures for book-entry
transfer described below or (ii) comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for 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 Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by (i) causing such securities to be
transferred in accordance with the Book-Entry Transfer Facility's procedures
into the Depositary's account and (ii) causing the Letter of Transmittal to be
delivered to the Depositary by means of an Agent's Message. Although delivery of
Shares may be effected through book-entry transfer, either the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND
ANY OTHER DOCUMENTS OR INSTRUCTIONS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
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 the
conformation of a book-entry transfer of Shares into the Depositary's account at
the Book-Entry Transfer Facility, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from a participant in the
Book-Entry Transfer Facility tendering the
46
54
Shares that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Purchasers may enforce such agreement
against such participant.
Signature Guarantee. All signatures on a Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other firm which is a bank, broker, dealer, credit
union or savings association (each of the foregoing being referred to as an
"Eligible Institution" and collectively as "Eligible Institutions"), unless the
Shares tendered thereby are tendered (i) by the registered holder of Shares
(which term, for the purposes of this document, shall include any participant in
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) who has not completed the box labeled "Special
Delivery Instructions" or the box labeled "Special Payment Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
If a Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a
Certificate not accepted for payment or not tendered is to be returned to, a
person other than the registered holder(s), then the Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the Certificate,
with the signature(s) on such certificate or stock powers guaranteed as
described above. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Certificates are not immediately available or
time will not permit all required documents to reach the Depositary on or prior
to the Expiration Date or the procedures for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company, is received by
the Depositary as provided below prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) all tendered Shares in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantee (or, in the
case of a book-entry transfer, an Agent's Message) and any other documents
required by such Letter of Transmittal, are received by the Depositary
within three Trading Days after the date of execution of the Notice of
Guaranteed Delivery. A "Trading Day" is any day on which the AMEX is open
for business.
Any Notice of Guaranteed Delivery may be delivered by hand, transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
Tender Constitutes an Agreement. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchasers on the terms and subject to the
conditions of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including, but not limited to, time of receipt) and acceptance for
payment of any tendered Shares pursuant to any of the procedures described above
will be determined by the Purchasers, in their sole discretion, whose
determination will be final and binding on all parties. The Purchasers reserve
the absolute right to reject any or all tenders of any Shares determined by them
not to be in proper form or if the acceptance for payment of, or payment for,
such Shares may, in the opinion of the Company's counsel, be unlawful. The
Purchasers also reserve the absolute right, in their sole discretion, to waive
any of the Offer Conditions (subject to the terms of the Merger Agreement) or
any defect or irregularity in any tender with respect to Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
47
55
None of the Offerors or any of their respective affiliates, the Depositary, the
Information Agent 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.
The Purchasers' interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
Appointment as Proxy. By executing a Letter of Transmittal (or delivering
an Agent's Message) as set forth above, a tendering stockholder irrevocably
appoints the Purchasers' designees as such stockholder's attorney-in-fact and
proxy, with full power of substitution, to vote in such manner as such
attorney-in-fact and proxy (or any substitute thereof) shall deem proper in its
sole discretion, and to otherwise act (including pursuant to written consent) to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by the Purchasers (and any and all
dividends, distributions, rights or other securities issued in respect of such
Shares on or after April 13, 2000). All such proxies shall be considered coupled
with an interest in the tendered Shares and shall be irrevocable. This
appointment will be effective if, when, and only to the extent that, the
Purchasers accept such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares and other securities will, without further action, be revoked,
and no subsequent proxies may be given (and, if given, will not be deemed
effective). The designees of the Purchasers will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's stockholders, by written consent in lieu of any such
meeting or otherwise. The Purchasers reserve the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, such Purchaser must be able to exercise
all rights (including, without limitation, all voting rights) with respect to
such Shares and receive all dividends and distributions.
Backup Withholding. Under United States federal income tax law, the amount
of any payments made by the Depositary to stockholders (other than corporate and
certain other exempt stockholders) pursuant to the Offer may be subject to
backup withholding tax at a rate of 31%. To avoid such backup withholding tax
with respect to payments made pursuant to the Offer, a non-exempt, tendering
stockholder must provide the Depositary with such stockholder's correct taxpayer
identification number and certify under penalties of perjury that such
stockholder is not subject to backup withholding tax by completing the
Substitute Form W-9 included as part of the Letter of Transmittal. If backup
withholding applies with respect to a stockholder or if a stockholder fails to
deliver a completed Substitute Form W-9 to the Depositary or otherwise establish
an exemption, the Depositary is required to withhold 31% of any payments made to
such stockholder. See "SPECIAL FACTORS -- Certain United States Federal Income
Tax Consequences" and the information set forth under the heading "Important Tax
Information" contained in the Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchasers pursuant to the Offer,
may also be withdrawn at any time after June 15, 2000, or at such later time as
may apply if the Offer is extended.
If the Purchasers extend the Offer, are delayed in their acceptance for
payment of Shares or are unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchasers' rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchasers, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described below. Any
such delay will be an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by 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 name of the person who tendered the Shares to be
withdrawn, the
48
56
number of Shares to be withdrawn, and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
Certificates, the serial numbers shown on such Certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution, unless such Shares have been tendered for
the account of an Eligible Institution. Shares tendered pursuant to the
procedure for book-entry transfer as set forth in "THE TENDER
OFFER -- Procedures for Tendering Shares" may be withdrawn only by means of the
withdrawal procedures made available by the Book-Entry Transfer Facility, must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and must otherwise comply with the
Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded without the Purchasers'
consent and any Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchasers in their sole discretion, which determination will be final and
binding. None of the Offerors or any of their affiliates, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn may be re-tendered at any time prior to the
Expiration Date by following any of the procedures described in "THE TENDER
OFFER -- Procedures for Tendering Shares."
5. PRICE RANGE OF SHARES.
The market for the Shares is AMEX. The ticker symbol for the Shares is
"PCO." The following table sets forth, for the periods indicated, the high and
low sales prices per share of Common Stock on AMEX:
HIGH LOW
---- ---
1998:
First Quarter............................................. 4 3/8 3 3/8
Second Quarter............................................ 4 15/16 3 5/8
Third Quarter............................................. 4 1/2 3 11/16
Fourth Quarter............................................ 5 1/4 3 1/2
1999:
First Quarter............................................. 5 5/8 4 1/4
Second Quarter............................................ 6 1/2 4 3/4
Third Quarter............................................. 9 5 3/8
Fourth Quarter............................................ 10 3/4 6 3/8
2000:
First Quarter............................................. 9 3/4 6 3/8
Second Quarter (through April 19, 2000)................... 9 5/8 9 3/4
On April 13, 2000, the last full trading day prior to the public
announcement of the Offer and the execution of the Merger Agreement, the
reported closing sales price of the Common Stock on AMEX was $6 3/4 per Share.
On April 19, 2000, the last trading day prior to the date of this Offer to
Purchase, the last reported sales price of the Common Stock on AMEX was $9 3/4
per Share. Stockholders are urged to obtain current market quotations for the
Common Stock.
6. DIVIDENDS AND DISTRIBUTIONS.
The Company has not paid any dividends with respect to the Shares at any
time during the past two years. Pursuant to the Merger Agreement, without
Acquisition Company's written consent, the Company will not, and will cause each
of its subsidiaries not to, (i) with certain exceptions, issue, sell or pledge
any Shares of its capital stock or other ownership interest in the Company or
any subsidiary, or any securities convertible into or exchangeable for any such
Shares or ownership interest, or any rights, warrants or options to acquire or
49
57
with respect to any such Shares of capital stock, ownership interest, or
convertible or exchangeable securities (or derivative instruments in respect of
the foregoing); (ii) effect any stock split or otherwise change its
capitalization as it exists on the date hereof, or directly or indirectly
redeem, purchase or otherwise acquire any Shares of its capital stock or capital
stock of any subsidiary of the Company; or (iii) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any Shares of
its capital stock or other ownership interests (other than any such payments to
the Company by any of its subsidiaries).
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company. The information concerning the Company contained in this Offer
to Purchase, including financial information, has been furnished by the Company
or has been taken from or is based upon publicly available documents and records
on file with the Commission and other public sources. None of Holdings, Parent,
Acquisition Company or the Information Agent or any of their affiliates assumes
any responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
them.
The Company is a Delaware corporation. The address of the Company's
principal executive offices is Riverfront Centre, Suite 000, 00 Xxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxxx. The telephone number of the Company at such
offices is (000) 000-0000. The Company is a leading designer, manufacturer and
marketer of commercial and consumer playground equipment and backyard products.
The Company's commercial playground systems are primarily sold under the
brand name GameTime. GameTime is one of the leading manufacturers and marketers
of modular and custom commercial outdoor playground equipment in the world.
GameTime markets its playground systems and components to municipalities,
schools, park districts and other playground equipment users through a network
of independent representatives.
The Company's consumer playground systems are primarily sold under the
brand name Swing-N-Slide. The Swing-N-Slide product line is marketed through
hardware and home center customers. The Swing-N-Slide do-it-yourself wooden
playground equipment is sold worldwide through more than 6,000 home center,
building supply and hardware stores.
On February 16, 1999, the Company acquired all of the capital stock of
Heartland, a maker of wooden storage buildings. Heartland has a national network
of company-owned sales branches and independent dealers to sell its products,
which include yard barns and custom-built garages.
Historical Financial Information. Certain financial information relating to
the Company is hereby incorporated by reference to (i) the audited financial
statements for the Company's 1999 and 1998 fiscal years set forth in Item I of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999 filed with the Commission on March 30, 2000 (the "1999 10-K"); and (ii) the
three month and nine month fiscal periods ended September 30, 1999 set forth in
Part I of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 filed with the Commission on November 12, 1999. These reports
may be inspected at, and copies may be obtained from, the same places and in the
manner set forth below.
50
58
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been derived from the
financial statements contained in the 1999 10-K. More comprehensive financial
information is included in these reports and other documents filed by the
Company with the Commission. The financial information that follows is qualified
in its entirety by reference to these reports and other documents, including the
financial statements and related notes contained therein.
PLAYCORE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
----------------- -----------------
OPERATING DATA:
Net Sales................................................. $114,792 $191,936
Operating income.......................................... 15,574 21,159
Net earnings.............................................. 4,676 7,086
Basic net earnings per share.............................. 0.59 0.89
Diluted net earnings per share............................ 0.51 0.73
BALANCE SHEET DATA:
(At End of Period)
Total assets.............................................. $103,440 $140,311
Total liabilities......................................... 87,064 116,680
Stockholders' equity...................................... 16,376 23,631
Book value per share...................................... 2.07 2.98
Ratio of earnings to fixed changes........................ 1.90x 2.06x
Financial Projections. The Company does not, as a matter of course, make
public forecasts or projections as to its future financial performance.
Nevertheless, the Company prepared the Management Projections for inclusion in
the Confidential Offering Memorandum provided to potential buyers in the auction
process. In addition, the Company assisted Xxxxxxxxx in preparing financial
projections through 2009 for possible lenders so as to enable Xxxxxxxxx to
obtain the financing (the "Financing Projections"). These projections were
provided to the Board and its financial and legal advisors and are set forth
below.
THE PROJECTIONS BELOW WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
IN COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC REGARDING PROJECTIONS OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS.
THE OFFERORS INTEND THAT THE PROJECTIONS ARE "FORWARD-LOOKING STATEMENTS"
INTENDED TO QUALIFY FOR THE SAFE HARBORS FROM LIABILITY ESTABLISHED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE PROJECTIONS, WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED ON MYRIAD ESTIMATES AND
ASSUMPTIONS AND INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
ECONOMIC AND COMPETITIVE CONDITIONS, INFLATION RATES, AND FUTURE BUSINESS
CONDITIONS. THESE ESTIMATES AND ASSUMPTIONS MAY NOT BE REALIZED AND ARE
INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, AND COMPETITIVE
UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS BELOW WILL PROVE TO BE RELIABLE
ESTIMATES OF PROBABLE FUTURE PERFORMANCE. IT IS QUITE LIKELY THAT ACTUAL RESULTS
WILL VARY MATERIALLY FROM THESE ESTIMATES. IN LIGHT OF THE UNCERTAINTIES
INHERENT IN PROJECTIONS OF ANY KIND, THE INCLUSION OF PROJECTIONS IN THIS OFFER
SHOULD NOT BE REGARDED AS A REPRESENTATION BY ANY PARTY THAT THE ESTIMATED
RESULTS WILL BE REALIZED. THERE CAN BE NO ASSURANCES IN THIS
51
59
REGARD. THE PROJECTIONS WERE NOT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND WERE NOT AUDITED OR REVIEWED BY ANY INDEPENDENT
ACCOUNTING FIRM, NOR DID ANY INDEPENDENT ACCOUNTING FIRM PERFORM ANY OTHER
SERVICES WITH RESPECT TO THESE PROJECTIONS. NONE OF THE OFFERORS OR ANY OTHER
PERSON ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH PROJECTIONS.
MANAGEMENT PROJECTIONS
PROJECTED FISCAL YEAR ENDED
DECEMBER 31,
---------------------------
2000 2001 2002
------- ------- -------
Revenues.................................................... $223.6 $256.5 $290.2
Cost of Goods Sold.......................................... 125.1 142.2 160.5
------ ------ ------
GROSS PROFIT................................................ $ 98.5 $114.3 $129.7
Selling , General and Admin. Expenses....................... $ 63.9 $ 72.8 $ 81.7
Corporate Expense........................................... 4.2 4.4 4.6
Amortization................................................ 2.7 2.7 2.7
------ ------ ------
EBIT........................................................ $ 27.7 $ 34.4 $ 40.7
Depreciation & Amortization................................. $ 6.4 $ 6.7 $ 6.8
------ ------ ------
EBITDA...................................................... $ 34.1 $ 41.1 $ 47.5
Capital Expenditures........................................ $ 5.9 $ 6.3 $ 6.5
====== ====== ======
FINANCING PROJECTIONS
PROJECTED FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Revenues................... $223.5 $243.8 $261.8 $279.1 $296.3 $314.1 $333.3 $354.1 $376.4 $400.6
Cost of Goods Sold......... 127.6 138.6 147.6 156.2 165.1 174.4 184.3 195.0 206.6 219.0
GROSS PROFIT............. 95.9 105.2 114.1 122.9 131.1 139.7 149.0 159.0 169.9 181.6
SG&A Expenses.............. 59.7 64.2 68.6 72.9 77.2 81.8 86.6 91.8 97.4 103.4
Corporate Expenses......... 3.7 3.7 3.9 4.1 4.4 4.7 4.9 5.1 5.4 5.7
EBITDA................... $ 32.6 $ 37.2 $ 41.6 $ 45.8 $ 49.5 $ 53.3 $ 57.5 $ 62.0 $ 67.0 $ 72.4
Total Depreciation......... 3.5 3.6 3.7 3.8 3.8 3.8 3.8 3.8 3.8 3.8
Amortization of Existing
Goodwill................. 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Amortization of New
Goodwill................. 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9
EBIT..................... 22.2 26.8 31.1 35.1 38.8 42.6 46.8 52.3 57.3 62.7
Certain Other Information. Except as set forth in this Offer to Purchase,
neither Company, any of its affiliates nor, to the best knowledge of Company,
any of the persons listed on Schedule I, or any associate or majority owned
subsidiary of any of the foregoing, beneficially owns or has a right to acquire
any Shares, and neither Company, nor, to the best of knowledge of Company, any
of the persons or entities referred to above, or any of the respective executive
officers, directors or subsidiaries of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither Company, any of its
affiliates nor, to the best knowledge of Company, any of the persons listed on
Schedule I, has any contracts, arrangements, understandings or relationships
with any other person or entity with respect to any securities of the Company,
including, but not limited to, any contract, arrangement understanding or
relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
52
60
Except as set forth in this Offer to Purchase, neither Company, any of its
affiliates, nor, to the best knowledge of Company, any of the persons listed on
Schedule I, has had, since the second fiscal year preceding the date of this
Offer to Purchase, any business relationships or transactions with the Company
or any of its executive officers, directors or affiliates that would be required
to be reported under the rules of the Commission. Except as set forth in this
Offer to Purchase, since the second fiscal year preceding the date of this Offer
to Purchase there have been no contracts, negotiations or transactions between
Company, any of its affiliates or, to the best knowledge of Company, any of the
persons listed on Schedule I, and the Company or its affiliates concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets.
During the last five years, neither Company, any of its affiliates nor, to
the best knowledge of Company, any of the persons listed on Schedule Ihereto,
have 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 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.
Certain information concerning the directors, executive officers and
certain stockholders of the Company is set forth in Schedule I hereto.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and is required to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interests of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission at 000 Xxxxx Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 000 Xxxxx Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000.
The Commission also maintains a Xxxxxxx on the internet at xxxx://xxx.xxx.xxx
that contains reports, proxy statements and other information relating to the
Company which have been filed via the Commission's XXXXX System.
8. CERTAIN INFORMATION CONCERNING HOLDINGS, PARENT AND ACQUISITION COMPANY.
Acquisition Company and Parent are Delaware corporations and Holdings is a
Delaware limited liability company. Each such entity was organized in connection
with the Offer and Merger and has not carried on any significant activities
other than in connection with the Offer and Merger. Until immediately prior to
the time Acquisition Company purchases Shares pursuant to the Offer, it is not
anticipated that any of Acquisition Company, Parent or Holdings will have any
significant assets or liabilities or engage in any significant activities other
those incident to its formation and capitalization and the transactions
contemplated by the Offer and the Merger.
The principal offices of Acquisition Company, Parent and Holdings are
located at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The telephone number of
Acquisition Company, Parent and Holdings at such location is (000) 000-0000.
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent, Holdings nor, to the best knowledge of Acquisition Company, Parent and
Holdings, any of the persons listed on Schedule II, or any associate or majority
owned subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any Shares, and neither Acquisition Company, Parent, Holdings nor, to
the best of knowledge of Acquisition Company, Parent and Holdings any of the
persons or entities referred to above, or any of the respective executive
officers, directors or subsidiaries of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
53
61
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent nor Holdings has any contracts, arrangements, understandings or
relationships with any other person or entity with respect to any securities of
the Company, including, but not limited to, any contract, arrangement
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies.
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent, Holdings, any of their affiliates, nor, to the best knowledge of
Acquisition Company, Parent and Holdings, any of the persons listed on Schedule
II, has had, since the second fiscal year preceding the date of this Offer to
Purchase, any business relationships or transactions with the Company or any of
its executive officers, directors or affiliates that would be required to be
reported under the rules of the Commission. Except as set forth in this Offer to
Purchase, since the second fiscal year preceding the date of this Offer to
Purchase there have been no contracts, negotiations or transactions between
Acquisition Company, Parent and Holdings, any of their affiliates or, to the
best knowledge of Acquisition Company, Parent and Holdings, any of the persons
listed on Schedule II, and the Company or its affiliates concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets.
During the last five years, neither Acquisition Company, Parent, Holdings
nor, to the best knowledge of Acquisition Company, Parent and Holdings, any of
the persons listed on Schedule II hereto, have 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 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.
Certain information concerning the directors and executive officers of
Holdings, Parent and Acquisition Company is set forth in Schedule II hereto.
Available Information. Each of Acquisition Company, Parent and Holdings is
a privately-held company and is generally not the subject of the information
filing requirements of the Exchange Act, and is generally not required to file
reports, proxy statements and other information with the Commission relating to
its businesses, financial condition and other matters. However, pursuant to Rule
14d-3 under the Exchange Act, Acquisition Company, Parent and Holdings filed
with the Commission a Schedule TO, together with exhibits, including this Offer
to Purchase and the Merger Agreement, which provides certain additional
information with respect to the Offer and regarding Acquisition Company, Parent
and Holdings. The Schedule TO and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable at the public
reference facilities of the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx,
X.X. 00000. Copies of such information should also be obtainable (i) by mail,
upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, XX. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and Citicorp Center, 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 and (ii) by accessing the
Commission's website on the Internet at xxxx://xxx.xxx.xxx.
9. SOURCE AND AMOUNT OF FUNDS.
The Offer is conditioned upon the Purchasers receiving the proceeds under
the Financing Agreements and Capital Contribution necessary to purchase all of
the outstanding Shares pursuant to the Offer, to pay the Merger Consideration,
to refinance approximately $87 of existing indebtedness (assuming conversion of
all Debentures into Shares) of the Company and its subsidiaries, to purchase the
securities to be sold pursuant to the PlayCore Purchase Agreements and to pay
related fees and expenses. The total amount of funds necessary to accomplish the
foregoing is expected to be approximately $207.5 million. The Purchasers
anticipate that they will obtain such funds from borrowings by PlayCore
Wisconsin under the Senior Credit Facility, the proceeds from the issuance of
the Sub Notes by PlayCore Wisconsin and the Capital Contribution. The purchase
of the Purchased Securities by Acquisition Company from GreenGrass will be
funded solely by the Capital Contribution. The Company has executed the
Financing Agreements. See "SPECIAL FACTORS --
54
62
Financing of the Transaction" for a more complete discussion of how the
Purchasers intend to finance the Offer and the Merger.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System place restrictions on the amount of credit that may be extended
for the purposes of purchasing margin stock, including if such credit is secured
directly or indirectly by margin stock. The Purchasers believe that the
financing of the acquisition of the Shares pursuant to the Merger and the Offer
will be in full compliance with the margin regulations.
10. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON STOCK; EXCHANGE ACT
REGISTRATION.
Market for Shares. The purchase of Shares pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Shares held by the
public.
Stock Quotation. The Shares are traded on AMEX. The Shares might no longer
be eligible for quotation on AMEX if, among other things, the number of Shares
publicly held were less than 200,000, there were fewer than 300 holders of round
lots, the aggregate market value of the publicly held Shares was less than
$1,000,000. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Company, as of April 13, 2000,
there were 78 holders of record of Shares (not including beneficial holders of
Shares in street name), and as of April 13, 2000, there were 7,960,304 shares
outstanding.
If the Shares were to cease to be quoted on the AMEX, the market for the
Shares could be adversely affected. It is possible that the Shares would be
traded or quoted on other securities exchanges or in the over-the-counter
market, and that price quotations would be reported by such exchanges, or
through Nasdaq or other sources. The extent of the public market for the Shares
and the availability of such quotations would, however, depend upon the number
of stockholders and/or the aggregate market value of the Shares remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by 300 or more holders of record.
Termination of registration under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a
proxy statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings, the related requirement of furnishing an annual report
to stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act may be impaired or eliminated. The Company intends to apply for
termination of registration of the Common Stock under the Exchange Act as soon
after the consummation of the Offer as the requirements for such termination are
met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the regulations of the Federal Reserve Board, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of the Shares. Depending upon factors similar to those described
above regarding listing and market quotations, it is possible that, following
the Offer, the Shares would no longer constitute "margin securities" for the
purposes of the margin regulations of the Federal Reserve Board and
55
63
therefore could no longer be used as collateral for loans made by brokers. In
any event, the Shares will cease to be "margin securities" if registration of
the Shares under the Exchange Act is terminated.
11. CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, and subject to the
provisions of the Merger Agreement, the Purchasers are not required to accept
for payment or, subject to any applicable rules and regulations of the SEC
(including those relating to the obligation of the Purchasers to pay for, or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for any Shares pursuant to the Offer, and the Purchasers may delay their
acceptance for payment of or, subject to the restriction referred to above, its
payment for, any tendered Shares, and, subject to the provisions of the Merger
Agreement, the Purchasers may amend or terminate the Offer and not accept for
payment any tendered Shares, if: (a) any applicable waiting period or approval
under the HSR Act and any applicable foreign antitrust law, regulation or rule
has not expired or been terminated or obtained, (b) the Minimum Condition has
not been satisfied, (c) the Purchasers have not received or have available the
proceeds of the financing contemplated by the Financing Agreements and the
Capital Contribution, including but not limited to funds sufficient to: (i)
purchase the Shares tendered pursuant to the Offer, (ii) pay the Merger
Consideration pursuant to the Merger, (iii) refinance approximately $87 million
of the Company's and its subsidiaries outstanding indebtedness (assuming the
conversion of the Debentures into Shares), (iv) to purchase the securities to be
sold pursuant to the PlayCore Purchase Agreements and (v) pay the fees and
expenses required to be paid by the Company in connection with the transactions
contemplated by the Merger Agreement, (d) either Purchaser is not reasonably
satisfied that the Merger Agreement, the PlayCore Purchase Agreements, the MM
Agreement, and the Fleet Consent are then in full force and effect, or (e) at
any time on or after the date of the Merger Agreement and prior to the
acceptance of Shares for payment pursuant to the Offer, any of the following
events shall occur:
(a) there shall be instituted or pending or threatened by any
governmental entity any suit, action or proceeding which (i) seeks to
impose material limitations on the ability of the Purchasers to, or renders
the Purchasers unable to, accept for payment, pay for or purchase some or
all of the Shares pursuant to the Offer or the Merger, (ii) seeks to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the transactions contemplated by the Merger
Agreement, (iii) seeks to obtain from any Purchaser any damages (including
damages against any Purchaser's directors or officers for which they may
seek indemnification from a Purchaser) that would reasonably be expected to
have a Company Material Adverse Effect, or (iv) challenges the acquisition
by the Purchasers of any Shares pursuant to the Offer;
(b) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted or issued by
any governmental entity applicable to the Offer or the Merger other than
the application of the waiting period provision of the HSR Act to the Offer
or the Merger which is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate in all respects, in each
instance as of the date of consummation of the Offer as though made on or
as of such date (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period), and the effect thereof, either
individually or in the aggregate, is a Company Material Adverse Effect, or
the Company shall have breached or failed to perform or comply in any
material respect with any obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it, and, with respect
to any such breach or failure to perform that is reasonably capable of
being remedied within the time periods set forth below, the breach or
failure to perform is not remedied prior to the earlier of (x) 10 days
after Parent or Acquisition
56
64
Company has furnished the Company with written notice of such breach or
failure to perform or (y) two business days prior to the date on which the
Offer expires;
(e) the Purchasers shall not have received by the Expiration Date such
certificates of officers of the Company and/or opinions of nationally
recognized valuation and/or appraisal firms (in form and substance
reasonably satisfactory to the Purchasers) as their respective Boards may
reasonably require, substantially to the effect that the value of the
Company's assets shall exceed its liabilities following the consummation of
the Offer and the Merger and that the Offer and the Merger shall not impair
the Company's capital within the meaning of Section 160 of the DGCL or
impair the ability of the Company to pay its obligations as they come due;
(f) there shall have occurred (i) any general suspension of trading in
securities on the New York Stock Exchange, which suspension or limitation
shall continue for at least three consecutive trading days, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving the United States that would reasonably be
expected to have a material adverse impact on the capital markets of the
United States, (iv) any limitation (whether or not mandatory) by any United
States governmental entity on the extension of credit generally by banks or
other lending institutions, (v) a change in general financial, bank or
capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans, (vi) a decline of at least 30% in the Standard & Poor's
500 Index from the close of business on the date of the Merger Agreement,
or (vii) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof; or
(g) the failure of Parent to make the Capital Contribution to
Acquisition Company.
which, in the judgment of either Purchaser, subject to the terms of the Merger
Agreement 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, purchase of, or payment for Shares.
The foregoing conditions are for the sole benefit of the Purchasers, and,
subject to the provisions of the Merger Agreement, may be waived by them at any
time. The failure by the Purchasers at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any right, and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, the Offerors are not aware
of (i) any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the acquisition of Shares by the Purchasers pursuant to
the Offer or the Merger or otherwise or (ii) 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 Shares by
the Purchasers as contemplated herein. Should any such approval or other action
be required, the Purchasers currently contemplate that they would seek such
approval or action. The Purchasers' obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See "THE TENDER
OFFER -- Conditions to the Offer." Although, except as described in this Offer
to Purchase, the Purchasers do not currently intend to delay the acceptance for
payment of Shares tendered pursuant to the Offer pending the outcome of any such
matter, there can be no assurance that any such approval or action, if needed,
would be obtained or would be obtained without substantial conditions, that
adverse consequences might not result to the business of the Company or that
certain parts of the businesses of the Company might not have to be disposed of
in the event that such approvals were not obtained or any other actions were not
taken such approval or other action. If certain types of adverse action are
taken with respect to the matters discussed below, the Purchasers could decline
to accept for payment, or pay for, any Shares tendered. See "THE TENDER
OFFER -- Conditions to the Offer" for certain conditions to the Offer, including
conditions with respect to government actions.
57
65
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to the date the interested stockholder became
an interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became an interested stockholder. Section 203 of the DGCL, however,
does not, according to subsection (b) thereof, apply if the corporation's
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203. The Company's certificate of incorporation contains
such an express provision. In addition, the Company has represented to Parent
and Acquisition Company in the Merger Agreement that the Board has taken all
necessary action so that the restrictions contained in Section 203 of the DGCL
applicable to a "business combination" will not apply to the execution, delivery
or performance of the Merger Agreement, the Offer, the Merger or the
transactions contemplated by the Merger Agreement.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In XXXXX x. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. v. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of holders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchasers do not believe that any state takeover statutes
apply to the Offer. Neither the Company nor the Acquisition Company has
currently complied with any state takeover statute or regulation. The Purchasers
reserve the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or the Merger, the Purchasers might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchasers might be unable to accept for payment any
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer and the Merger. In such case, the Purchasers may not be
obligated to accept for payment any Shares tendered. See "THE TENDER
OFFER -- Conditions of the Offer."
Antitrust. Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules that have been promulgated thereunder
by the Federal Trade Commission (the "FTC"), certain transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice and the FTC and certain waiting period
requirements have been satisfied. The Offerors have concluded that a filing
under the HSR Act and the rules promulgated thereunder by the FTC is not
required for the Transaction.
In the event that a filing is required to be made under the HSR Act and the
rules promulgated thereunder by the FTC, the Offerors would promptly file
Notification and Report Forms under the HSR Act. The waiting period under the
HSR Act, with respect to Shares acquired pursuant to the Offer, if applicable,
will expire at 11:59 p.m., New York City time, on the fifteenth day after the
date on which the forms are filed, unless early termination of the waiting
period is granted. The DOJ or the FTC may extend the fifteen day waiting period
by requesting additional information or documentary material from the
Purchasers. If such a request is made,
58
66
such waiting period will expire at 11:59 p.m., New York City time, on the tenth
day after substantial compliance with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Acquisition Company. In practice, complying with a
request for additional information or material can take a significant amount of
time. In addition, if the DOJ or the FTC raises substantive issues in connection
with a proposed transaction, the parties frequently engage in negotiations with
the relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. If a filing under the HSR Act is required, the Purchasers
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to the
Offer have been satisfied.
The FTC and the DOJ routinely review the legality under the HSR Act of
transactions such as the proposed acquisition of Shares by the Purchasers. Even
if a filing is not required under the HSR Act, at any time before or after the
purchase by the Purchasers of Shares, either of the DOJ or the FTC could take
such action under the federal antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or seeking the divestiture of Shares purchased by the
Purchasers or the divestiture of substantial assets of the Company. Private
parties and state governments may also bring legal action under certain
circumstances.
Although the Offerors believe that the acquisition of Shares pursuant to
the Offer would not violate the HSR Act or other antitrust statutes, there can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made or, if such a challenge is made, what the outcome will be. See "THE TENDER
OFFER -- Conditions to the Offer" for certain conditions to the Offer, including
conditions with respect to litigation and certain government actions.
13. 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 related to
the filing, printing and mailing of the documents in connection with the Offer
and the Schedule TO, and Company will pay for all fees and expenses of the
Offerors upon consummation of the Offer and the Merger. See "SPECIAL
FACTORS -- Fees and Expenses" for a more complete discussion and listing of the
fees and expenses incurred by the Offerors with respect to the Offer and the
Merger.
14. MISCELLANEOUS.
The Offerors are 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 Offerors become aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Offerors will make a good faith effort to comply with such state
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Offerors cannot comply with any such state
statute, the Offer will not be made to (and tenders will not be accepted from or
on behalf of) the stockholders in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the Offerors
by one or more registered brokers or dealers which are licensed under the laws
of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offerors not contained in this Offer to Purchase
or in the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Offerors filed with the Commission the Schedule TO, together with
exhibits, pursuant to Sections 13(e) and 14(d)(1) of the Exchange Act and Rules
13e-3 and 14d-3 promulgated thereunder, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. The
Schedule TO and any amendments thereto, including exhibits, may be inspected at,
and copies may be obtained from, the same places and in the manner set forth in
"THE TENDER OFFER -- Certain Information Concerning the Company" (except that
they will not be available at the regional offices of the Commission).
59
67
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN STOCKHOLDERS OF PLAYCORE, INC.
DIRECTORS AND EXECUTIVE OFFICERS
1. Certain Information.
The name, position with the Company, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Company, together with the names, principal businesses
and addresses of any corporations or other organizations in which such principal
occupations are conducted, are set forth below. Unless otherwise indicated, each
individual is a United States citizen and each individual's business address is
c/o PlayCore, Inc., Riverfront Centre #000, 00 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxx. Unless otherwise indicated, to the knowledge of the
Company, no director or executive officer of the Company has been convicted in a
criminal proceeding during the last five years (excluding traffic violations or
similar misdemeanors) and no director or executive officer of the Company was a
party to any judicial or administrative proceeding during the last five years
(except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Xxxxxxx X. Xxxxxx.................... Chairman. Xx. Xxxxxx has served as a director of the Company
since September 1992 and Chairman since September 1997. He
served as Acting Chief Executive Officer of the Company from
September 1997 to January 1998. Xx. Xxxxxx was Chairman and
Chief Executive Officer of Xxxxxxx Outdoors Inc. (f/k/a
Xxxxxxx Worldwide Associates, Inc.) from 1986 until January
1994, which is principally engaged in the business of
manufacturing and distributing outdoor recreational equip-
ment and has a business address of 0000 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxx.
Xxxxxxxx X. Xxxxxxx.................. President, Chief Executive Officer and Director. Xx. Xxxxxxx
has served as President and Chief Executive Officer and a
director of the Company since January 1998. He was President
of Anchor Hocking Plastics and Plastics, Inc., divisions of
Xxxxxx Companies from January 1993 to January 1998, which is
principally engaged in the business of manufacturing and
distributing consumer home products and has a business
address of 00 X Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxxxx.
Xxxxx X. Xxxxx....................... Director. Xx. Xxxxx has served as a director of the Company
since February 1996. He has been President and Chief
Executive Officer of Glencoe Investment Corporation ("GIC")
since March 1993 and a Principal and Chief Executive Officer
or Glencoe Capital, L.L.C. since September 1997, both of
which are principally engaged in the business of merchant
banking and private equity investing and have a business
address of 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx.
Xxxxxx X. Xxxxxxx.................... Director. Xx. Xxxxxxx has served as a director of the
Company since February 1996. He was Director of
International Sales of Masco Corporation from 1982 to
January 2000, which is principally engaged in the business
of manufacturing products for the building and home improve-
ment industry and has a business address of 00000 Xxx Xxxx
Xxxx, Xxxxxx, Xxxxxxxx.
I-1
68
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Xxxxxxx X. Xxxxxxxx.................. Director. Xx. Xxxxxxxx has served as a director of the
Company since April 1996. He has been Senior Vice President
of Xxxxx Capital Management Incorporated since May 1992,
which is principally engaged in the business of
institutionally funded private equity investing and has a
business address of 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx.
Xxxx X. Xxxxxx....................... Director. Xx. Xxxxxx has served as a director of the Company
since September 1996. He has been Vice
President -- Logistics of Boise Cascade Office Products
since September 1997, which is principally engaged in the
business of selling and distributing a wide range of office
products and has a business address of 000 Xxxx Xxxx Xxxx
Xxxxxx, Xxxxxx, Xxxxxxxx. Xx. Xxxxxx was an independent
consultant from August 1995 to September 1997.
Xxxxxx X. Xxxx....................... Director. Xx. Xxxx has been a director of the Company since
February 1999. He has been Executive Vice President and
Chief Operating Officer of Glencoe Capital, L.L.C. since
January 1999, which is principally engaged in the business
of merchant banking and private equity investing and has a
business address of 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx. Xx. Xxxx was Executive Vice President of
the Pritzker Family Business Office from 1990 to January
1999, which is principally engaged in the business of
private equity investing and asset management and has a
business address of 000 Xxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx.
Xxxxx X. Xxxxxxxxx................... Vice President -- Human Resources & Administration. Xx.
Xxxxxxxxx joined the Company as Director of Human Resources
in 1993 and was promoted to his current position in 1995.
Xxxxxxx X. Xxxxxxx................... Vice President -- Finance, Chief Financial Officer and
Secretary. Xx. Xxxxxxx joined the Company as Controller in
1989 and was promoted to his current position in 1991.
Xxxx X. Xxxxxxxx..................... President of PlayCore's Swing-N-Slide business unit. Xx.
Xxxxxxxx joined the Company in December 1996 in the same
capacity. He was President of the Retail Business Unit of
Xxxxxx Industries from May 1992 to November 1996, which is
principally engaged in the business of distributing hardware
and automotive products and has a business address of 0000
Xxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxx.
Xxxxxx X. Xxxxxxxxxx................. President of PlayCore's GameTime business unit. Xx.
Xxxxxxxxxx joined the Company in May 1998 in the same
capacity. He was Executive Vice President, Marketing and
Product Management of the Pfaltzgraff Company from February
1993 to April 1998, which is principally engaged in the
business of manufacturing and marketing consumer tabletop
products and has a business address of 000 Xxxx Xxxxxx,
Xxxx, Xxxxxxxxxxxx.
Xxxxxx xxx xxx Xxxxxx................ President of PlayCore's Heartland Industries business unit.
Mr. xxx xxx Xxxxxx joined the Company in June 1999 in the
same capacity. He was President of TC MiraDRI, a business
unit of Royal Ten Cate, from January 1994 to March 1999,
which is principally engaged in the business of
manufacturing commercial and residential building products
and has a business address of 0000 Xxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxx.
I-2
69
2. Beneficial Ownership of Shares.
The following table sets forth certain information known to the Company
with respect to beneficial ownership of Shares as of March 31, 2000 by (i) each
director of the Company and (ii) each executive officer of the Company. Except
as otherwise noted, the persons named in this table have sole voting and
investment power with respect to all Shares.
SHARES BENEFICIALLY OWNED
--------------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENT(1)
------------------------ ----------- ------------
Xxxx X. Xxxxxxxx(2)......................................... 82,028 1.0%
Xxxxxxxx X. Xxxxxxx(3)...................................... 280,400 3.4%
Xxxxx X. Xxxxx(4)........................................... 6,772,655 72.1%
Xxxxxx X. Xxxxxxxxxx(5)..................................... 20,000 *
Xxxxx X. Xxxxxxxxx(6)....................................... 75,395 *
Xxxxxx X. Xxxxxxx(7)........................................ 20,000 *
Xxxxxxx X. Xxxxxxxx(8)...................................... 6,772,655 72.1%
Xxxxxxx X. Xxxxxx(9)........................................ 62,181 *
Xxxx X. Xxxxxx(10).......................................... 15,000 *
Xxxxxxx X. Xxxxxxx(11)...................................... 141,448 1.8%
Xxxxxx xxx xxx Xxxxxx....................................... -- *
Xxxxxx X. Xxxx(12).......................................... 5,000 *
---------------
* Less than 1%
(1) Excludes Company Options which are currently not vested but will become
vested upon consummation of the Offer pursuant to a resolution of the
Board. The number of Shares certain directors and executive officers would
receive upon exercise of such Company Options and the percentage of
outstanding Shares each such director and executive officer would
beneficially own following such exercise (if greater than 1%) is as
follows: Xx. Xxxxxxxx 20,000 (1.3%); Xx. Xxxxxxx, 50,000 (4.0%); Xx.
Xxxxxxxxxx, 40,000; Mr. Xxxxxxxxx, 17,500 (1.2%); Xx. Xxxxxxx, 38,750
(2.2%); Mr. xxx xxx Xxxxxx, 50,000.
(2) Includes 80,000 Shares issuable upon the exercise of Company Options which
are currently exercisable.
(3) Includes 275,000 Shares issuable upon the exercise of Company Options that
are currently exercisable.
(4) As one of the three persons appointed to the Members Operating Board of
GGC, Xx. Xxxxx has shared control of the voting and investment making
decisions of GreenGrass which owns 5,345,905 Shares, Debentures convertible
into 1,376,750 Shares, and the GreenGrass Warrant to purchase 50,000
Shares. Of such securities, Xx. Xxxxx would be entitled to receive from
GreenGrass Holdings 7,078 Shares, Debentures convertible into 1,545 Shares
and a warrant to purchase 86 Shares under certain circumstances as a result
of his ownership of a limited partnership interest in Glencoe Fund Partners
and Glencoe, and his ownership of stock in GIC.
(5) Includes 10,000 Shares issuable upon the exercise of Company Options that
are currently exercisable.
(6) Consists of 75,395 Shares issuable upon the exercise of Company Options
which are currently exercisable. Excludes 4,290 Shares and Debentures
convertible into 1,705 Shares held by GreenGrass which securities, as a
member of GGM, Xx. Xxxxxxxxx may be deemed to beneficially own because he
would receive such securities under certain circumstances (including upon
termination of his employment). Xx. Xxxxxxxxx expressly disclaims
beneficial ownership of any other securities of Company held by GreenGrass
because he neither is a controlling member of GGM nor has investment
control of the portfolio securities of either GGM or GreenGrass.
(7) Consists of 20,000 Shares issuable upon exercise of Company Options which
are currently exercisable.
(8) As one of the three persons appointed to the Members Operating Board of
GGC, Xx. Xxxxxxxx has shared control of the voting and investment making
decisions of GreenGrass which owns 5,345,905 Shares, Debentures convertible
into 1,376,750 Shares, and the GreenGrass Warrant to purchase 50,000
Shares.
I-3
70
(9) Includes 61,934 Shares issuable upon the exercise of Company Options which
are currently exercisable.
(10) Consists of 15,000 Shares issuable upon the exercise of Company Options
which are currently exercisable.
(11) Consists of 141,448 Shares issuable upon the exercise of Company Options
which are currently exercisable. Excludes 49,035 Shares and Debentures
convertible into 19,485 Shares which Xx. Xxxxxxx may be deemed to
beneficially own as sole manager and the controlling member of GCM, which
indirectly beneficially owns such securities as a general partner of
GreenGrass Holdings, including 32,673 Shares and Debentures convertible
into 12,985 Shares held by GreenGrass Holdings which securities, as a
member of GGM, Xx. Xxxxxxx may be deemed to beneficially own because Xx.
Xxxxxxx would receive such securities under certain circumstances
(including upon termination of his employment). Xxxxxxx disclaims
beneficial ownership of these securities except to the extent of his
pecuniary interest therein.
(12) Consists of 5,000 Shares issuable upon exercise of Company Options which
are currently exercisable.
CERTAIN STOCKHOLDERS OF PLAYCORE, INC.
1. Certain Information.
GreenGrass is a Delaware general partnership organized on January 4, 1996
for the purposes of purchasing, holding and selling Company securities and has
not carried on any other significant activities. GreenGrass' only assets are the
Company securities currently owned by it; GreenGrass has no significant
liabilities.
Pursuant to its Amended and Restated Partnership Agreement dated March
1997, partners owning a majority of the partnership interests of GreenGrass have
the ability to direct the control of GreenGrass. GGC currently owns a majority
of the partnership interests in GreenGrass and therefore is deemed to control
GreenGrass. GGC is a Delaware limited liability company organized on December
27, 1995 to act as an investment vehicle for a number of institutional investors
for an investment in GreenGrass. GGC's only assets are its partnership interests
in GreenGrass; GGC has no significant liabilities.
Pursuant to GGC's Operating Agreement dated February 15, 1996, all actions
taken by GGC are determined by GGC's Member Operating Board. The Member
Operating Board is comprised of appointees chosen by each of Glencoe Investment
Corporation, XXX-II and the Michigan Trusts (each a "GGC Board Member"). The GGC
Board Members are Xxxxx X. Xxxxx, appointed by Glencoe Investment Corporation,
Xxxxxxx Xxxxxxxx, appointed by XXX-XX, and Xxxxxx Xxxxxxxx, appointed by the
Michigan Trusts.
The principal offices of GreenGrass and GGC are located at 000 Xxxxx
XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx. The telephone number of
GreenGrass and GGC at such location is (000) 000-0000.
2. Information Regarding GGC Board Members.
Certain information regarding Xxxxx X. Xxxxx and Xxxxxxx Xxxxxxxx is set
forth in this Schedule I under the heading "Directors and Executive
Officers -- Certain Information".
Xx. Xxxxxxxx has been a Senior Analyst at the Alternative Investments
Division of the Michigan Department of Treasury (the "Division") for over five
years, which is principally engaged in the business of private equity and direct
leveraged investments for the Michigan Trusts. The business address of the
Division is 0000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxxxx, Xxxxxxxx 00000.
Xx. Xxxxxxxx is a United States citizen. To the knowledge of the Company,
Xx. Xxxxxxxx has not been convicted in a criminal proceeding during the last
five years (excluding traffic violations or similar misdemeanors) and Xx.
Xxxxxxxx has not been a party to any judicial or administrative proceeding
during the last five years (except for any matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal
securities laws.
I-4
71
3. Beneficial Ownership of Shares.
GreenGrass, and GGC through its control of GreenGrass, each beneficially
own 6,772,655 Shares as of April 13, 2000, which constitutes 72.1% of the
outstanding Shares as of such date (including Debentures convertible into
1,376,750 Shares and the GreenGrass Warrant to purchase 50,000 Shares).
The number of Shares beneficially owned by Xxxxx X. Xxxxx and Xxxxxx
Xxxxxxxx as GGC Board Members is described in this Schedule I under the heading
"Directors and Executive Officers -- Beneficial Ownership of Shares." Xxxxxx
Xxxxxxxx, as a GGC Board Member, also has shared control of the voting and
investment-making decisions of XxxxxXxxxx and is therefore deemed to
beneficially own 6,772,655 Shares as of April 13, 2000, which constitutes 72.1%
of the outstanding Shares as of such date (including Debentures convertible into
1,376,750 Shares and the GreenGrass Warrant to purchase 50,000 Shares).
I-5
72
SCHEDULE II
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PLAYCORE HOLDINGS, L.L.C.,
PLAYCORE HOLDINGS, INC. AND JASDREW ACQUISITION CORP.
DIRECTORS AND EXECUTIVE OFFICERS
The name, business address, position with each of Holdings, Parent and
Acquisition Company, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Holdings,
Parent and Acquisition Company, together with the names, principal businesses
and addresses of any corporations or other organizations in which such principal
occupations are conducted, are set forth below. Each individual is a United
States citizen and each individual's business address is 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. To the knowledge of Holdings, Parent and
Acquisition Company, no director or executive officer of Holdings, Parent or
Acquisition Company has been convicted in a criminal proceeding during the last
five years (excluding traffic violations or similar misdemeanors) and no
director or executive officer of Holdings, Parent or Acquisition Company was a
party to any judicial or administrative proceeding during the last five years
(except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Xxxx X. Xxxxxx....................... Director and President of each of Parent and Acquisition
Company and Manager of Holdings. Xx. Xxxxxx is a co-founder
and President of Chartwell, an advisor to, and manager of,
private equity funds which invest in growth financings and
buyouts of middle market companies. He has served as a
director of MMH Holdings, Inc. and a director of its wholly
owned subsidiary, Xxxxxx Material Handling, Inc., a manufac-
turer, distributor and service provider of "through-the-air"
material handling equipment, since March 1998; as Chairman
of the Board of Xxxxxxxx Consumers Company, one of the
nation's largest independent distributors of heating oil and
other petroleum products, from December 1994 until February
1999; as Chairman of Xxxx Xxxx, Inc., the leading operator
of gas stations and convenience stores in the Delmarva
peninsula (Delaware, Maryland, Virginia), from December 1994
until February 1999; and as a director of Petro Stopping
Centers, L.P., a leading operator of large, full-service
truck stops, from January 1997 until July 1999. Xx. Xxxxxx
has been with Chartwell, Chartwell Investments Inc. or its
predecessor since 1992. He received his A.B. from Brown
University and an M.B.A. from Columbia University Graduate
School of Business.
II-1
73
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
Xxxxxxx X. Xxxxx..................... Director and Vice President, Secretary and Treasurer of each
of Parent and Acquisition Company and Manager of Holdings.
Xx. Xxxxx is a Managing Director and co-founder of
Chartwell. He has served as a director and Vice President of
MMH Holdings, Inc. and a director of its wholly-owned
subsidiary, Xxxxxx Material Handling, Inc., a manufac-
turer, distributor and service provider of "through-the-air"
material handling equipment, since March 1998; a director of
Xxxxxxxx Consumers Company, one of the nation's largest
independent distributors of heating oil and other petroleum
products, from December 1994 until February 1999; a director
of Xxxx Xxxx, Inc., the leading operator of gas stations and
convenience stores in the Delmarva peninsula (Delaware,
Maryland, Virginia), from December 1994 until February 1999;
and a director of Petro Stopping Centers, L.P., a leading
operator of large, full-service truck stops, from January
1997 until July 1999. Xx. Xxxxx has been with Chartwell,
Chartwell Investments Inc. or its predecessor since 1992.
Xx. Xxxxx received a X.X. xxxxx cum laude from The Xxxxxxx
School at the University of Pennsylvania.
Xxxxxxx X. Xxxxxx.................... Vice President and Assistant Secretary of each of Parent and
Acquisition Company. Xx. Xxxxxx has been an associate with
Xxxxxxxxx since September 1999. From July 1997 to July 1999,
Xx. Xxxxxx was an analyst in the Leveraged Finance Group of
the Investment Banking Division of Xxxxxxx, Xxxxx & Co.,
which has a business address of 00 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000. Xx. Xxxxxx received an A.B. magna cum laude
in Economics from Princeton University.
BENEFICIAL OWNERSHIP OF SHARES
Xx. Xxxxxx and Xx. Xxxxx, as managers of Holdings, Holdings, Parent and
Acquisition Company each may be deemed the beneficial owners of the securities
of the Company which Acquisition Company has the right to purchase pursuant to
the terms of the PlayCore Purchase Agreements. Acquisition Company has the right
and obligation to acquire, subject to certain conditions, up to 90% of the
outstanding Shares after giving effect to the exercise and conversion of certain
derivative securities of the Company in accordance with the terms of the
PlayCore Purchase Agreements. The address of each of Xx. Xxxxxx, Xx. Xxxxx,
Holdings, Parent and Acquisition Company is c/o Chartwell Investments II LLC,
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
II-2
74
SCHEDULE III
PLAYCORE, INC.
RIVERFRONT CENTRE
SUITE 000
00 XXXX XXXXXXXXX XXXXXX
XXXXXXXXXX, XX 00000
---------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 PROMULGATED THEREUNDER
This Information Statement (the "Information Statement") is being mailed on
or about April 20, 2000 as part of the Offer to Purchase, dated April 20, 2000
(the "Offer to Purchase"), to the holders of the common stock of PlayCore, Inc.
(the "Company"). Capitalized terms used and not otherwise defined herein shall
have the meaning set forth in the Offer to Purchase. You are receiving this
Information Statement in connection with the possible election of persons
designated by Acquisition Company to a majority of the seats on the Board of
Directors of the Company (the "Board"). The Merger Agreement requires the
Company to cause Acquisition Company's designees to be elected to the Board
under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Offerors commenced the Offer on April
20, 2000. The Offer is scheduled to expire at 5:00 p.m., New York City time, on
Thursday, May 18, 2000, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Acquisition Company
and the Acquisition Company Designees (as defined below) has been furnished to
the Company by either Parent or Acquisition Company, and the Company assumes no
responsibility for the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of the close of business on April 13,
2000, there were 7,960,304 Shares (including restricted stock) issued and
outstanding, 1,710,000 Shares reserved for issuance pursuant to the Company's
stock option plans (of which 1,287,893 are subject to outstanding Company
Options), 1,514,590 Shares reserved for issuance upon conversion of the
Debentures and 685,379 Shares reserved for issuance upon exercise of the
Company's warrants. The Board currently consists of seven members. Each director
holds office until such director's successor is duly elected and qualified or
until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE ACQUISITION COMPANY DESIGNEES
Pursuant to the Merger Agreement, promptly upon the Offer Closing and from
time to time thereafter until the Effective Time, Acquisition Company will be
entitled to designate such number of directors (the "Acquisition Company
Designees") equal to the greater of (a) a majority of the Board plus one
director and (b) the product of (i) the number of directors on the Board and
(ii) the percentage that the number of Shares owned by Acquisition Company bears
to the number of Shares outstanding less the number of Independent
III-1
75
Directors. In furtherance thereof, the Company has agreed, upon request by
Acquisition Company, either to increase the size of the Board or use reasonable
efforts to secure the resignations of, or failing that, to remove such number of
directors as is necessary to enable the Acquisition Company Designees to be
elected or appointed to the Board and use its best efforts to cause the
Acquisition Company Designees to be so elected or appointed.
The Company's obligation to appoint the Acquisition Company Designees is
subject to Rule 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company is required to take all action necessary to effect
any such election and to include in this Information Statement the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The foregoing notwithstanding, the Merger Agreement further provides
that at least two directors who are not employees of the Company or any of its
subsidiaries ("Independent Directors") shall continue to serve on the Board
until the effectiveness of the Merger. Following the election or appointment of
the Acquisition Company Designees to the Board, but prior to the Effective Time,
any permitted termination of the Merger Agreement by the Company, any amendment
of the Merger Agreement or the Company's certificate of incorporation or by-laws
requiring action by the Board, any extension of time for the performance of any
of the obligations or other acts of Parent and any waiver of compliance with any
of the agreements or conditions contained in the Merger Agreement must be
authorized by a majority of the Independent Directors as well as a majority of
all Board members.
Acquisition Company has informed the Company that it will choose the
Acquisition Company Designees from the persons listed below and that each of the
people below has consented to act as a director, if so designated. The names of
the potential Acquisition Company Designees, their ages as of March 18, 2000 and
certain other information about them are set forth below.
XXXX X. XXXXXX, age 42, is the founder and President of Chartwell
Investments II LLC ("Chartwell"), an advisor to, and manager of, private equity
funds which invest in growth financings and buy outs of middle market companies.
He has served as a director of MMH Holdings, Inc. and a director of its
wholly-owned subsidiary, Xxxxxx Material Handling, Inc., a manufacturer,
distributor and service provider of "through-the-air" material handling
equipment, since March 1998; as Chairman of the board of Xxxxxxxx Consumers
Company, one of the nation's largest independent distributors of heating oil and
other petroleum products, from December 1994 until February 1999; as Chairman of
Xxxx Xxxx, Inc., the leading operator of gas stations and convenience stores in
the Delmarva peninsula (Delaware, Maryland, Virginia), from December 1994 until
February 1999; and as a director of Petro Stopping Centers, L.P., a leading
operator of large, full-service truck stops, from January 1997 until July 1999.
Xx. Xxxxxx has been with Chartwell, Chartwell Investments Inc. or its
predecessor since 1992. He received his A.B. from Brown University and an M.B.A.
from Columbia University Graduate School of Business.
XXXXXXX X. XXXXXX, age 25, has been an associate with Xxxxxxxxx since
September 1999. From July 1997 to July 1999, Xx. Xxxxxx was an analyst in the
Leveraged Finance Group of the Investment Banking Division of Xxxxxxx, Xxxxx &
Co. Xx. Xxxxxx received an A.B. magna cum laude in Economics from Princeton
University.
XXXXXXX X. XXXXXXX, age 56, has been a Senior Managing Director of
Chartwell Investment Advisors, a provider of investment and consulting services
that is unaffiliated with Xxxxxxxxx, since April 1, 2000. Previously, Xx.
Xxxxxxx was a Managing Director of Xxxxxxx Xxxxx & Co. since April 1977.
XXXXXXX X. XXXXX, age 36, is a Managing Director and co-founder of
Chartwell. He has served as a director and Vice President of MMH Holdings, Inc.
and a director of its wholly-owned subsidiary, Xxxxxx Material Handling, Inc., a
manufacturer, distributor and service provider of "through-the-air" material
handling equipment, since March 1998; a director of Xxxxxxxx Consumers Company,
one of the nation's largest independent distributors of heating oil and other
petroleum products, from December 1994 until February 1999; a director of Xxxx
Xxxx (Delaware, Maryland, Virginia), from December 1994 until February 1999; and
a director of Petro Stopping Centers, L.P., a leading operator of large,
full-service truck stops, from January 1997 until July 1999. Xx. Xxxxx has been
with Chartwell, Chartwell Investments Inc. or its predecessor since
III-2
76
1992. Xx. Xxxxx received a X.X. xxxxx cum laude from The Xxxxxxx School at the
University of Pennsylvania.
Acquisition Company has advised the Company that to the best knowledge of
Acquisition Company, none of the potential Acquisition Company Designees
currently is a director of, or holds any position with the Company, and except
as disclosed in the Offer to Purchase (including Schedule II thereto), none of
the potential Acquisition Company Designees beneficially owns any securities (or
rights to acquire any securities) of the Company or has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates that are required to be disclosed pursuant to the rules of the
Securities and Exchange Commission (the "SEC"), except as may be disclosed in
the Offer to Purchase. None of the Acquisition Company Designees has any family
relationship with any director or executive officer of the Company.
Acquisition Company has advised the Company that none of the persons listed
above has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and 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 or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The names of the Company's current directors, their ages as of March 31,
2000 and certain other information about them are set forth below. As indicated
above, some of the directors may resign effective immediately following the
consummation of the Offer.
XXXXXXX X. XXXXXX, age 70, has served as a director of the Company since
September 1992 and Chairman since September 1997. Xx. Xxxxxx served as Acting
Chief Executive Officer of the Company from September 1997 to January 1998. Xx.
Xxxxxx was Chairman and Chief Executive Officer of Xxxxxxx Outdoors Inc. (f/k/a
Xxxxxxx Worldwide Associates, Inc.) (international manufacturer and marketer of
outdoor recreational products) from 1986 until his retirement in January 1994.
XXXXXXXX X. XXXXXXX, age 49, has served as a director of the Company and as
President and Chief Executive Officer of the Company since January 1998. Xx.
Xxxxxxx was President of Anchor Hocking Plastics and Plastics, Inc., divisions
of Newell Companies (diversified manufacturers of consumer home products), from
January 1993 to January 1998. Xx. Xxxxxxx served as Vice
President -- Merchandising for Xxxxxx Xxxxxxx'x glass division from May 1988 to
January 1993.
XXXXX X. XXXXX, age 36, has served as a director of the Company since
February 1996. Xx. Xxxxx has been President and Chief Executive Officer of
Glencoe Investment Corporation (private equity investing) since March 1993.
Prior to such date, Xx. Xxxxx was a Merchant Banking/Mergers and Acquisitions
Specialist at Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation (full service
investment banking) from 1988 to March 1993.
XXXXXX X. XXXXXXX, age 66, has served as a director of the Company since
February 1996. Xx. Xxxxxxx was Director of International Sales of Masco
Corporation (diversified manufacturer of home products) from 1982 until his
retirement in January 2000.
XXXXXXX X. XXXXXXXX, age 37, has served as director of the Company since
April 1996. Xx. Xxxxxxxx has been Senior Vice President of Xxxxx Capital
Management Incorporated (institutionally funded private equity investment firm)
since May 1992. From 1989 to May 1992, he was an associate at Entrecanales, Inc.
(private equity investing). Xx. Xxxxxxxx is also a director of several privately
held companies.
XXXX X. XXXXXX, age 60, has served as a director of the Company since
September 1996. Xx. Xxxxxx has been Vice President -- Logistics of Boise Cascade
Office Products since September 1997. From August 1995
III-3
77
to September 1997, Xx. Xxxxxx was an independent consultant. Previously, Xx.
Xxxxxx was a Senior Vice President of Ply-Gem Industries (building products
manufacturer) from February 1994 to August 1995. From 1989 to February 1994, Xx.
Xxxxxx was Vice President -- Operations Specialty Packaging of Packaging Corp.
of America (packaging manufacturer).
XXXXXX X. XXXX, age 40, has served as a director of the Company since
February 1999. Xx. Xxxx has been a Principal and Chief Financial Officer of
Glencoe Capital, L.L.C. since January 1999. Prior to such date, Xx. Xxxx was
Executive Vice President of the Pritzker Family Business Office (investment
management) from 1990 to January 1999.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board currently has three standing committees: the Audit Committee, the
Compensation Committee and the Executive Committee. The Board does not currently
have a standing Nominating Committee. The members and functions of the standing
committees are described briefly below.
AUDIT COMMITTEE
The Audit Committee is currently comprised of Messrs. Xxxxxxx and Xxxxxx
(Chairman). The Audit Committee makes recommendations to the Board of Directors
regarding the independent auditors to be retained to audit the Company's
accounts and reviews the independence of such auditors, approves the scope of
the annual audit activities of the independent auditors, approves the audit fee
payable to the independent auditors and review such audit results. Ernst & Young
LLP presently serves as the independent auditors of the Company. The Audit
Committee met one time during 1999.
COMPENSATION COMMITTEE
The Compensation Committee is currently comprised of Messrs. Xxxxx
(Chairman), Xxxxxx and Xxxx. The Compensation Committee reviews and makes
recommendations as to compensation, bonuses, stock plans and other benefits and
policies respecting such matters for the officers and employees of the Company.
The Compensation Committee met two times during 1999.
EXECUTIVE COMMITTEE
The Executive Committee is currently comprised of Messrs. Xxxxxxx, Xxxxx,
Xxxxxxxx and Xxxxxx. The Executive Committee has the authority to exercise all
of the powers of the Board during intervals between meetings of the Board. The
Executive Committee met four times during 1999.
DIRECTORS' ATTENDANCE
The Board of Directors of PlayCore held five meetings in 1999. Each
director attended not less than 75% of the total number of meetings of (1) the
Board of Directors and (2) all committees of the Board on which he served,
during the period that he served.
DIRECTOR COMPENSATION
Each non-employee director of the Company who is not an employee of
GreenGrass Capital, L.L.C., a Delaware limited liability company that is an
affiliate of a principle stockholder of the Company ("GGC"), or any of GGC's
affiliates ("Non-affiliated Directors"), receives an annual retainer of $15,000
paid in quarterly installments of $3,750 and options to purchase 5,000 shares of
Common Stock with a per share exercise price equal to the fair market value of a
share of Common Stock on the day after the annual meeting of stockholders. In
addition, any Non-affiliated Director who serves as the Chairman of the Board
receives an annual retainer of $5,000, as chairman of a standing committee of
the Board receives an annual retainer of $3,000 and as a committee member of a
standing committee of the Board receives an annual retainer of $1,000. All
directors are reimbursed for out-of-pocket costs related to the Company's
business. No additional compensation is paid to directors for serving on
PlayCore Wisconsin's Board of Directors.
III-4
78
EXECUTIVE OFFICERS OF THE COMPANY
The following paragraphs set forth certain information, as of March 31,
2000, about the other current executive officers of the Company who are not
directors. Such officers serve at the pleasure of the Board.
NAME AGE POSITION
---- --- --------
Xxxx X. Xxxxxxxx..................... 56 President of the Swing-N-Slide Division of PlayCore
Wisconsin since December 1996. From 1990 to November
1996, Xx. Xxxxxxxx was the President of the Retail
Division of Xxxxxx Industries Inc. (manufacturer of
nuts, bolts and keys).
Xxxxxx X. Xxxxxxxxxx................. 49 President of the GameTime Division of PlayCore Wisconsin
since May 1998. From February 1993 to April 1998, Xx.
Xxxxxxxxxx was the Executive Vice President Marketing
and Product Manager of Pfaltzgraff Company (ceramics
manufacturing).
Xxxxxxx X. Xxxxxxx................... 39 Vice President -- Finance, Secretary and Treasurer since
January 1992 and Chief Financial Officer since June
1992.
Xxxxx X. Xxxxxxxxx................... 44 Vice President Human Resources and Administration since
July 1995 and prior to such date was Director of Human
Resources and Administration since October 1993.
Director of Human Services of Xxxxx Xxx Xxxxxx, Andes
Candies Division (candy manufacturing) from October 1992
through October 1993 and Employee Relations Manager of
Pepsico, Frito-Lay division (snack food manufacturing)
from 1984 through September 1992.
III-5
79
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to Company
compensation earned in the last three completed fiscal years by Xx. Xxxxxxx,
Chief Executive Officer, Xx. Xxxxxxxx, President of the Swing-N-Slide Division
of PlayCore Wisconsin, Xx. Xxxxxxxxxx, President of the GameTime Division of
PlayCore Wisconsin, Xx. Xxxxxxxxx, Vice President -- Human Resources and
Administration and Xx. Xxxxxxx, Vice President -- Finance and Chief Financial
Officer, the only executive officers whose salary and bonus exceeded $100,000
during the most recently completed fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMP. OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- ---- -------- -------- ------ ------------ ------------
Xxxxxxxx X. Xxxxxxx.................... 1999 $329,257 $452,925 (1) -- $ 56,404(2)
Chief Executive Officer 1997 288,462 585,000 (1) 375,000 7,625
1997 -- -- (1) -- --
Xxxx X. Xxxxxxxx....................... 1999 $176,781 $123,930 (1) -- $ 41,457(3)
President of the Swing-N-Slide
Division 1998 170,000 35,000 (1) -- 16,595
of PlayCore Wisconsin 1997 159,423 -- (1) 100,000 63,728
Xxxxxx X. Xxxxxxxxxx................... 1999 $179,808 $ 8,576 (1) -- $ 67,231(4)
President of the GameTime Division 1998 111,154 117,823 (1) 50,000 9,594
of PlayCore Wisconsin 1997 -- -- (1) -- --
Xxxxx X. Xxxxxxxxx..................... 1999 $110,000 $ 73,150 (1) -- $ 20,329(5)
Vice President -- Human Resources 1998 105,000 95,550 (1) -- 3,874
and Administration 1997 93,961 7,893 (1) 78,219 3,947
Xxxxxxx X. Xxxxxxx..................... 1999 $120,000 $ 79,800 (1) -- $ 22,002(6)
Vice President -- Finance and Chief 1998 115,000 104,650 (1) -- 4,371
Financial Officer 1997 104,077 8,706 (1) 164,046 4,695
---------------
(1) The Company also provides its Named Executive Officers certain additional
non-cash benefits that are not described in this Proxy Statement because
such compensation is below the SEC's required disclosure thresholds.
(2) The compensation reported is comprised of $6,400 of matching contributions
made by the Company pursuant to its 401(k) plan and $50,004 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
(3) The compensation reported is comprised of $6,400 of matching contributions
made by the Company pursuant to its 401(k) plan and $35,057 of relocation
expenses paid by the Company in connection with Xx. Xxxxxxxx'x December 1996
employment by the Company.
(4) The compensation reported is comprised of $1,423 of matching contributions
made by the Company pursuant to its 401(k) plan, $25,528 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan and
$40,280 of relocation expenses paid by the Company in connection with Xx.
Xxxxxxxxxx'x May 1998 employment with the Company.
(5) The compensation reported is comprised of $4,250 of matching contributions
made by the Company pursuant to its 401(k) plan and $16,079 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
III-6
80
(6) The compensation reported is comprised of $4,462 of matching contributions
made by the Company pursuant to its 401(k) plan and $17,540 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
AGGREGATE OPTIONS EXERCISED IN 1999 AND 1999 YEAR-END OPTION VALUE
Set forth below is certain information regarding the number and value of
unexercised stock options held by the Named Executive Officers at the end of
1999. No options were exercised by the Named Executive Officers in 1999.
AGGREGATE FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Xxxxxxxx X. Xxxxxxx........................ 225,000 150,000 $928,125 $618,750
Xxxx X. Xxxxxxxx........................... 55,000 45,000 $ 76,825 $ 17,275
Xxxxxx X. Xxxxxxxxxx....................... 10,000 40,000 $ 34,375 $137,500
Xxxxx X. Xxxxxxxxx......................... 57,895 35,000 $123,185 --
Xxxxxxx X. Xxxxxxx......................... 63,948 116,250 $159,939 --
---------------
(1) For valuation purposes the amounts shown are based upon the December 31,
1999, $8.125 closing price per share of the Common Stock on the American
Stock Exchange.
AGREEMENTS WITH EXECUTIVE OFFICERS
New Management Agreements. Acquisition Company entered into an Employment
Agreement with Xx. Xxxxxxx and Xxxxxxxxx, Change of Control and Noncompetition
Agreements with nine officers of the Company, including Messrs. Xxxxxxxx,
Xxxxxxxxx, Xxxxxxxxxx and Xxxxxxx. Each of the these agreements is described in
the section captioned "Special Factors -- Section 7 (The Merger Agreement and
Related Documents)" of the Offer to Purchase accompanying this Information
Statement and is incorporated herein by reference.
Existing Employment and Severance Agreements. Set forth below is a
description of the employment and/or severance agreements currently existing
between the Company and its Named Executive Officers.
The Company entered into an Employment Agreement in January 1998 with Xx.
Xxxxxxx that sets forth certain terms and conditions of his employment with the
Company. The Employment Agreement runs for three years and automatically extends
from year to year thereafter unless terminated prior to any such extension. The
Employment Agreement provides for an annual base salary of $300,000, subject to
increases each year at the discretion of the Board, and for an annual bonus
based generally upon increases in the Company's earnings before interest, taxes,
depreciation and amortization ("EBITDA"). The Employment Agreement also provides
for the grant of options shown on the "Option Grants in Last Fiscal Year" table.
In the event Xx. Xxxxxxx is terminated without cause, in addition to certain
other benefits, (i) his annual base salary continues for a minimum of two years
if such termination occurs before July 1999, and a minimum of one year, subject
to extension to up to two years if certain financial goals have been achieved by
the Company, after July 1999, and (ii) he is entitled to certain bonus
replacement payments if certain levels of EBITDA have been achieved prior to
such termination. If such termination occurs in connection with a change of
control, in certain circumstances Xx. Xxxxxxx may be entitled to certain
additional payments, the amount of which are generally based upon the bonus paid
to Xx. Xxxxxxx in the previous year. The Employment Agreement also provides for
certain perquisites and benefits commensurate with Xx. Xxxxxxx'x employment as
President and Chief Executive Officer of the Company. The Employment Agreement
contains provisions requiring Xx. Xxxxxxx to keep certain information with
respect to the Company confidential during his employment and for two years
thereafter and provisions providing that Xx. Xxxxxxx will not compete with the
Company's business for 18 months following any termination of his employment.
III-7
81
In December 1996, the Company entered into a Severance and Change of
Control Agreement with Xx. Xxxxxxxx. Under the terms of such Severance and
Change of Control Agreement, in the event that Xx. Xxxxxxxx is terminated
without cause within one year after a change of control of the Company, he shall
be entitled to receive an amount based upon a multiple of his last month's base
salary. Xx. Xxxxxxxx shall also be entitled to receive an amount based upon a
multiple of his last month's base salary if he remains employed during the
one-year period after such change of control and elects to terminate employment
within 30 days of the end of such one-year period.
In June 1998, the Company entered into a Severance and Change of Control
Agreement with Xx. Xxxxxxxxxx. Under the terms of such Severance and Change of
Control Agreement, in the event that Xx. Xxxxxxxxxx is terminated without cause
within one year after a change of control of the Company, he shall be entitled
to receive an amount based upon a multiple of his last month's base salary.
In February 1999, the Company entered into Severance and Change of Control
Agreements with Messrs. Xxxxxxxxx and Xxxxxxx. Under the terms of such Severance
and Change of Control Agreements, in the event that any such employee is
terminated without cause within one year after a change of control of the
Company, such employee shall be entitled to receive an amount based upon a
multiple of his last month's base salary. Each such employee shall also be
entitled to receive an amount based upon a multiple of his last month's base
salary if the employee remains employed during the one-year period after such
change of control and the employee elects to terminate employment within 30 days
of the end of such one-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Xxxxx, Xxxxxx
and Xxxx. No present or former executive officer of the Company serves as a
member of the Compensation Committee. Furthermore, there are no interlocking
relationships between any executive officer of the Company and any entity whose
directors or executive officers serve on the Compensation Committee.
Xx. Xxxxx is a stockholder and director and the President and Chief
Executive Officer of Glencoe Investment Corporation ("GIC"), which is an
affiliate of an institutional investor in GGC and an institutional investor in
GreenGrass Capital II LLC, a Delaware limited liability company ("GGCII"). GGC
and GGCII are two of the three partners of GreenGrass Holdings, a Delaware
general partnership ("GreenGrass Holdings"), which beneficially owns
approximately 72% of the outstanding shares of Common Stock. Xx. Xxxxx is also
one of the three persons appointed to the Members Operating Board of GGC, which
entity controls voting and investment making decisions of GreenGrass Holdings,
and one of the three persons appointed to the Members Operating Board of GGCII.
AGREEMENT WITH RESPECT TO CONSULTING SERVICES
Under the terms of the Management Consulting Agreement, dated February 16,
1996, the Company pays to GIC and Xxxxx Capital Management Incorporated
("DCMI"), affiliates of two GGC institutional investors, consulting fees in the
aggregate amount of $300,000 per year, payable in quarterly installments of
$75,000, plus reimbursement of reasonable expenses incident to their consulting
services. The Management Consulting Agreement is automatically renewed for
successive one-year terms unless either party gives notice to the other of its
intention not to renew the agreement. The consulting fee is reviewed annually by
the Board.
AGREEMENT WITH RESPECT TO ACQUISITION ADVISORY SERVICES
Under the terms of an engagement letter dated September 6, 1996, GIC and
DCMI agreed to act as acquisition advisors to the Company with respect to two
potential acquisitions (the "Acquisitions"). In this regard, GIC and DCMI agreed
to provide advice to the Company with respect to valuation, due diligence,
negotiation, financing techniques and alternatives, and related matters
involving the Acquisitions. The initial term of the engagement is for one year
with automatic renewal for successive one-year periods unless either party
provides notice of its desire not to renew at least 30 days before the renewal
date. As compensation for such services, the Company agreed to pay to GIC and
DCMI a fee equal to 4.0% of the gross proceeds from
III-8
82
any new equity raised, plus 1.125% of any senior loan financing related to the
Acquisitions (less fees paid to other parties) plus 1.0% of the transaction of
value for either of the Acquisitions consummated by the Company. The Company
also agreed to reimburse GIC and DCMI for certain expenses incurred by them in
performing such services.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the matters described under the heading "Compensation
Committee Interlocks and Insider Participation," the Company has been party to
certain other related party transactions which are described below.
AGREEMENT WITH RESPECT TO ELECTION OF DIRECTORS
Under the terms of a Transaction Agreement dated January 4, 1996, as
amended, pursuant to which GreenGrass Holdings acquired it's equity holdings in
the Company, GreenGrass Holdings is entitled to designate five members of the
Board (Xx. Xxxxxxx is not counted as one of such five directors). To date,
GreenGrass Holdings has designated four current directors, Messrs. Xxxxx,
Xxxxxxx, Xxxxxxxx and Xxxx.
REGISTRATION RIGHTS
Under certain agreements, Code Xxxxxxxx & Simons Limited Partnership,
formerly a significant investor in the Company, GreenGrass Holdings and certain
of their associates, and various officers and directors and, in some cases,
their spouses or trusts for their benefit or the benefit of their children, were
granted certain rights to have shares of Common Stock registered and/or included
in registrations initiated by the Company or its stockholders (the "registration
rights"). Expenses incurred in connection with the exercise of such registration
rights shall be, subject to limited exceptions, borne by the Company.
III-9
83
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
31, 2000, except as otherwise noted, by (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director of the Company, (iii) the Named Executive Officers, and (iv) all
executive officers and directors as a group. Except as otherwise noted, the
persons named in this table have sole voting and investment power with respect
to all shares of Common Stock.
SHARES BENEFICIALLY
OWNED
-------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------- --------- -------
Xxxx X. Xxxxxxxx(2)......................................... 82,028 1.0%
Xxxxxxxx X. Xxxxxxx(3)...................................... 280,400 3.4%
Xxxxx X. Xxxxx(4)........................................... 6,772,655 72.1%
Xxxxxx X. Xxxxxxxxxx(5)..................................... 20,000 *
GreenGrass Holdings and Related Parties(6).................. 6,772,655 72.1%
GGC (4,851,774 shares -- 51.6%)(7)(9)(10)
GGCII (1,852,361 shares -- 19.7%)(8)(9)(10)
GGM (68,520 shares -- 0.7%)(11)
Xxxxx X. Xxxxxxxxx(12)...................................... 75,395 *
Xxxxxx X. Xxxxxxx(13)....................................... 20,000 *
Xxxxxxx X. Xxxxxxxx(14)..................................... 6,772,655 72.1%
Xxxxxxx X. Xxxxxx(15)....................................... 62,181 *
Massachusetts Mutual Life Ins. Co.(16)...................... 781,201 9.4%
Xxxx X. Xxxxxx(17).......................................... 15,000 *
Xxxxxxx X. Xxxxxxx(18)...................................... 141,448 1.8%
Xxxxxx xxx xxx Xxxxxx....................................... -- --
Xxxxxx X. Xxxx(19).......................................... 5,000 *
All executive officers and directors as a group (12
persons)(20).............................................. 7,464,107 74.1%
---------------
* Less than 1%
(1) Except as otherwise indicated, the address of each stockholder is c/o
PlayCore, Inc., Riverfront Centre, 00 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxxx 00000.
(2) Includes 80,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(3) Includes 275,000 shares issuable upon the exercise of stock options that
are currently exercisable.
(4) As one of the three persons appointed to the Members Operating Board of
GreenGrass Capital LLC, a Delaware limited liability company ("GGC"), Xx.
Xxxxx has shared control of the voting and investment making decisions of
GreenGrass Holdings, which owns 5,345,905 shares of Common Stock,
Debentures convertible into 1,376,750 shares of Common Stock, and a warrant
to purchase 50,000 shares of Common Stock. Of such securities, Xx. Xxxxx
would be entitled to receive from GreenGrass Holdings 7,078 shares of
Common Stock, Debentures convertible into 1,545 shares of Common Stock, and
a warrant to purchase 86 shares of Common Stock under certain circumstances
as a result of his ownership of a limited partnership interest in Glencoe
Fund Partners and Glencoe Growth, and his ownership of stock in GIC. The
address of Xx. Xxxxx is c/o Glencoe Investment Corporation, 000 Xxxxx
XxXxxxx Xx., Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000.
(5) Includes 10,000 shares issuable upon the exercise of stock options which
currently exercisable.
(6) The address of GreenGrass Holdings, a Delaware general partnership
("GreenGrass Holdings"), is c/o Glencoe Investment Corporation, 000 Xxxxx
XxXxxxx Xx., Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000. Includes 5,345,905 shares
of Common Stock, Debentures convertible into 1,376,750 shares of Common
Stock, and a warrant to purchase 50,000 shares of Common Stock. The general
partners of GreenGrass Holdings consist of GGC, GreenGrass Capital II LLC,
a Delaware limited liability company
III-10
84
("GGCII"), and Green Grass Management LLC, a Delaware limited liability
company ("GGM"). Of the 5,345,905 shares of Common Stock owned by
GreenGrass Holdings, 3,494,509 shares are beneficially owned by GGC,
1,802,361 shares are beneficially owned by GGCII, and 49,035 shares are
beneficially owned by GGM. Of the 1,376,750 shares which GreenGrass
Holdings would receive upon conversion of Debentures, 1,357,265 shares
would be beneficially owned by GGC and 19,485 shares would be beneficially
owned by GGM. The 50,000 shares which GreenGrass Holdings would receive
upon exercise of the warrant would be beneficially owned by GGCII.
(7) The members of GGC are the following institutional investors: Glencoe Fund,
Equity-Linked Investors -- II, a New York limited partnership ("XXX-II"),
the State Treasurer of the State of Michigan, as Custodian for the Michigan
Public School Employee's Retirement System, the State Employees' Retirement
System, the Michigan State Police Retirement System and the Michigan Judges
Retirement System, each a trust organized by the State of Michigan to
provide pension benefits to eligible retirees (collectively, the "Michigan
Trusts"), Crescent/MACH I Partners, L.P., a Delaware limited partnership
("Crescent"), Sahara Enterprises, Inc., a Delaware corporation ("Sahara")
and Xxxxxxx & Xxxxx Insurance Company, an Indiana corporation ("Xxxxxxx").
(8) The members of GGCII are the following institutional investors: Glencoe
Growth Closely-Held Business Fund, L.P. ("Glencoe Growth"), XXX-XX,
Xxxxxxx, the Michigan Trusts, and Massachusetts Mutual Life Insurance
Company and certain of its affiliates ("MassMutual").
(9) XXX-XX is a member of both GGC and GGCII. The general partner of XXX-XX is
Xxxxx X. Xxxxx Associates-II ("RMDA-II"). RMDA-II is a New York general
partnership and Xxxxx X. Xxxxx is the managing partner of XXXX-XX. The
investment advisor of XXX-XX is Xxxxx Capital Management Incorporated
("DCMI"). XXX-XX may be deemed to beneficially own 2,457,781 shares of
Common Stock held by Green Grass Holdings (which represents approximately
26.2% of the outstanding Common Stock and which includes 1,926,290 shares
of Common Stock held by GreenGrass Holdings, 514,824 shares of Common Stock
issuable upon conversion of Debentures held by GreenGrass Holdings, and
16,667 shares of Common Stock issuable upon the exercise of the warrant
held by GreenGrass Holdings which it may be entitled to receive under
certain circumstances as a member of GGC and GGCII). XXXX-XX (as the
general partner of XXX-XX), DCMI (as the investment advisor to XXX-XX), and
Xxxxx X. Xxxxx each may be deemed to be the beneficial owner of securities
beneficially owned by XXX-XX. The address of XXX-II and its affiliates
identified above is 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000.
(10) The Michigan Trusts are members of both GGC and GGCII. As a result, the
Michigan Trusts may be deemed to beneficially own 2,457,781 shares of
Common Stock held by GreenGrass Holdings (which represents approximately
26.2% of the outstanding shares of Common Stock and includes 1,926,290
shares of Common Stock held by GreenGrass Holdings, 514,824 shares of
Common Stock issuable upon conversion of Debentures held by GreenGrass
Holdings, and 16,667 shares of Common Stock issuable upon the exercise of
the warrant held by GreenGrass Holdings which they may be entitled to
receive under certain circumstances as members of GGC and XXXXX). The
address of the Michigan Trusts is 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000.
(11) The members of GGM are the following former and current officers of
PlayCore: Messrs. Xxxxxxx, Xxxx, Xxxxxxxxx, Xxxxx and Xxxxx.
(12) Consists of 75,395 shares of Common Stock issuable upon the exercise of
stock options which are currently exercisable. Excludes 4,290 shares of
Common Stock and Debentures convertible into 1,705 shares of Common Stock
held by GreenGrass Holdings which securities, as a member of GGM may be
deemed to beneficially own because Xx. Xxxxxxxxx would receive such
securities under certain circumstances (including upon termination of his
employment). Xx. Xxxxxxxxx expressly disclaims beneficial ownership of any
other securities of PlayCore held by GreenGrass Holdings because he neither
is a controlling member of GGM nor has investment control of the portfolio
securities of either GGM or GreenGrass Holdings.
(13) Consists of 20,000 shares of Common Stock issuable upon exercise of stock
options which are currently exercisable.
III-11
85
(14) As one of the three persons appointed to the Members Operating Board of
GGC, Xx. Xxxxxxxx has shared control of the voting and investment making
decisions of GreenGrass Holdings, which owns 5,345,905 shares of Common
Stock, Debentures convertible into 1,376,750 shares of Common Stock, and a
warrant to purchase 50,000 shares of Common Stock. The address of Xx.
Xxxxxxxx is c/x Xxxxx Capital Management Incorporated, 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(15) Includes 61,934 shares issuable upon the exercise of stock options which
are currently exercisable.
(16) The address of Massmutual is 0000 Xxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000-0000.
Includes 297,834 shares of Common Stock issuable upon the exercise of
warrants which are currently exercisable, and 41,271 shares issuable upon
the exercise of a warrant held by MassMutual Corporate Value Partners
Limited (of which an affiliate of MassMutual is a Partner), which warrant
is currently exercisable. Also includes 430,163 shares of Common Stock and
11,933 shares issuable upon the exercise of a warrant held by GreenGrass
Holdings which securities, as a member of GGCII, MassMutual may be deemed
to beneficially own because it would receive such securities under certain
circumstances. MassMutual disclaims beneficial ownership of any other
securities of PlayCore held by GreenGrass Holdings because it neither is a
controlling member of GGCII nor has investment control of the portfolio
securities of either GGCII or GreenGrass Holdings. Also excludes 296,274
shares issuable upon the exercise of warrants held by certain of its
affiliates, including MassMutual Corporate Investors, MassMutual
Participating Investors, and MassMutual Corporate Value Partners Limited,
because the investments of such affiliates are held for the benefit of
unrelated third parties.
(17) Consists of 15,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(18) Consists of 141,448 shares of Common Stock issuable upon the exercise of
stock options which are currently exercisable. Excludes 49,035 shares of
Common Stock and Debentures convertible into 19,485 shares of Common Stock
which Xx. Xxxxxxx may be deemed to beneficially own as sole manager and the
controlling member of GCM, which indirectly beneficially owns such
securities as a general partner of GreenGrass Holdings, including 32,673
shares of Common Stock and Debentures convertible into 12,985 shares of
Common Stock held by GreenGrass Holdings which securities, as a member of
GGM, Xx. Xxxxxxx may be deemed to beneficially own because Xx. Xxxxxxx
would receive such securities under certain circumstances (including upon
termination of his employment). Xx. Xxxxxxx disclaims beneficial ownership
of these securities except to the extent of his pecuniary interest therein.
(19) Consists of 5,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(20) This group is comprised of the following executive officers: Messrs.
Xxxxxxxx, Xxxxxxx, Xxxxxxxxxx, Xxxxxxxxx, Xxxxxxx and Xxx xxx Xxxxxx; and
the following non-employee directors: Messrs. Xxxxx, Xxxxxxx, Xxxxxxxx,
Xxxxxx, Xxxxxx and Xxxx. Includes Debentures convertible into 1,376,750
shares of Common Stock and a warrant to purchase 50,000 shares of Common
Stock, all of which are held by GreenGrass Holdings, and 785,127 shares
issuable to certain executive officers and directors upon the exercise of
stock options which are currently exercisable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires PlayCore's
executive officers, directors, and more than 10 percent stockholders to file
with the Securities and Exchange Commission reports on prescribed forms of their
ownership and changes in ownership of Common Stock and furnish copies of such
forms to the Company. The Company believes that during and with respect to the
fiscal year ended December 31, 1999, all reports required by Section 16(a) to be
filed by the Company's officers, directors and more than 10 percent stockholders
were filed on a timely basis.
III-12
86
EXHIBIT A
[XXXXXXXXX, XXXXXX & XXXXXXXX XXXXXXXXXX]
April 13, 2000
Board of Directors
PlayCore Inc.
00 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $0.01 per share ("Company Common
Stock"), of PlayCore, Inc. (the "Company") of the consideration to be received
by such holders pursuant to the terms of the Agreement and Plan of Merger, dated
as of April 13, 2000 (the "Agreement"), by and among the Company, PlayCore
Holdings, Inc., a Delaware corporation ("Parent") and Jasdrew Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary Parent ("Acquisition
Company") pursuant to which Acquisition Company will be merged (the "Merger")
with and into the Company.
Pursuant to the Agreement, Acquisition Company and the Company will
commence a tender offer (the "Tender Offer") for all outstanding shares of
Company Common Stock at a price of $10.10 per share. The Tender Offer is to be
followed by the Merger in which the shares of all holders who did not tender
will be converted into the right to receive $10.10 per share in cash.
In arriving at our opinion, we have reviewed the Agreement and the annex
thereto, the Conditions to the Offer. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company
including information provided during discussions with the Company's management.
Included in the information provided during discussions with management were
certain financial projections of the Company for the period beginning January 1,
2000 and ending December 31, 2002 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
with various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of Company Common
Stock, reviewed prices paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company, or that was
otherwise reviewed by us and have assumed that the Company is not aware of any
information prepared by it or its advisors that might be material to our opinion
that has not been made available to us. With respect to the financial
projections supplied to us, we have relied on representations that they have
been reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation any assets or liabilities or
for making any independent verification of any of the information reviewed by
us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer and Merger or any other business strategies being
considered by the Company's Board of Directors, nor does it address the Board's
decision to proceed with the Tender Offer and Merger. Our opinion does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender into the Tender Offer or how such stockholder should vote on any
proposed Merger.
A-1
87
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the holders of the
Company Common Stock pursuant to the Tender Offer and/or Merger is fair to such
holders from a financial point of view.
Very truly yours,
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
By: /s/ XXXXX X. XXXXXXX
----------------------------------
Xxxxx X. Xxxxxxx
Senior Vice President
A-2
88
EXHIBIT B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
B-1
89
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
B-2
90
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
B-3
91
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-4
92
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Overnight Delivery: By Hand Delivery:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2569 000 Xxxxxxxxxx Xxxx, 3rd Floor Reporting Services, Inc.
Jersey City, NJ 07303-2569 Jersey City, NJ 07310 Attn: Corporate Actions
000 Xxxxxxx Xxxxxx, Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile Transmission:
(000) 000-0000
or
(000) 000-0000
Confirm Receipt of Facsimile by Telephone:
(000) 000-0000
FOR ADDITIONAL INFORMATION, PLEASE CALL FIRST CHICAGO TRUST COMPANY OF NEW YORK
AT (000) 000-0000.
Questions or requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent at its location and telephone numbers set
forth below. Stockholders may also contact their broker, dealer, commercial bank
or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
X. X. XXXX & CO., INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Banks and Brokers Call Collect:
(000) 000-0000
All Others Please Call Toll-Free:
(000) 000-0000
