INDUSTRIAL DISTRIBUTION GROUP, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
þ Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by Rule
o Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a 12
Industrial Distribution Group, Inc.
(Name of Registrant as Specified
In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
o
|
No fee required.
|
|
þ
|
Fee computed on table below per Exchange Act
Rules 14a 6(i)(l) and 0 11.
|
|
|
|
|
(1)
|
Title of each class of securities to which transaction applies:
Common Stock
|
|
|
|
|
(2)
|
Aggregate number of securities to which transaction applies:
9,791,368
|
|
|
|
|
(3)
|
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0 11 (set forth
the amount on which the filing fee is calculated and state how
it was determined): $12.10 per share plus the assumption of
debt
|
|
|
|
|
(4)
|
Proposed maximum aggregate value of transaction:
$131,000,000
|
|
|
|
|
(5)
|
Total fee paid: $5,148.30
|
|
|
o
|
Fee paid previously with preliminary materials.
|
|
o
|
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0 11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
|
|
|
|
|
(1)
|
Amount Previously Paid:
|
$
|
|
|
|
(2)
|
Form, Schedule or Registration Statement No.:
|
INDUSTRIAL DISTRIBUTION GROUP, INC.
May [16], 2008
To Our Stockholders:
On behalf of the Board of Directors and management of Industrial
Distribution Group, Inc., I cordially invite you to attend a
Special Meeting of Stockholders, to be held on June
[18], 2008, beginning at 11:00 a.m., Eastern
Time, at 1100 Peachtree Street, 28th Floor, South
Conference Room, Atlanta, Georgia 30309. As you are aware, we
did not hold the Special Meeting that was previously scheduled
to occur on May 1, 2008.
At the Special Meeting, stockholders will be asked to consider
and vote on a proposal to adopt the Agreement and Plan of
Merger, which we refer to as the merger agreement,
dated as of April 25, 2008, among Eiger Holdco, LLC
(Eiger), Eiger Merger Corporation (Merger
Sub), a wholly-owned subsidiary of Eiger, and Industrial
Distribution Group, Inc. (IDG, we,
us, or our), providing for the
acquisition of IDG by Eiger. If the merger is completed, IDG
will become a wholly-owned subsidiary of Eiger, and you will
receive $12.10 in cash, without interest and less any applicable
withholding taxes, for each share of common stock that you own,
and you will cease to have an ownership interest in IDG. A copy
of the merger agreement is attached as Annex A to the
accompanying proxy statement. You are encouraged to read it in
its entirety.
After careful consideration, our board of directors has
withdrawn its earlier recommendation for adopting the merger
agreement with affiliates of Platinum Equity, terminated that
agreement, and unanimously approved the new merger agreement
with Eiger and determined and declared that the Eiger merger and
merger agreement are advisable and in the best interest of our
stockholders. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR ADOPTION OF THE EIGER MERGER AGREEMENT.
The proxy statement accompanying this letter provides you with
information about the merger and the Special Meeting. Please
read the entire proxy statement carefully. You may also obtain
additional information about us from documents we filed with the
Securities and Exchange Commission.
Your Vote is Very Important. The merger cannot be
completed unless IDG stockholders holding a majority of the
outstanding shares entitled to vote at the Special Meeting vote
to adopt the merger agreement. If you do not vote, it will
have the same effect as a vote against the adoption of the
merger agreement.
Whether or not you plan to attend the Special Meeting in person,
please complete, sign, date and return promptly the enclosed
proxy card. If you hold shares through a broker or other
nominee, you should follow the procedures provided by your
broker or nominee. These actions will not limit your right to
vote in person if you wish to attend the Special Meeting and
vote in person.
If you have any questions or need assistance voting your shares,
please call MacKenzie Partners, Inc., which is assisting us with
obtaining proxies for the Special Meeting. Stockholders should
call toll-free at
(800) 322-2885;
banks and brokers may call collect at
(212) 929-5500.
I thank you in advance for your cooperation and continued
support.
Sincerely,
Charles A. Lingenfelter
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
This proxy
statement is dated May [16], 2008 and is first being
mailed to stockholders on or about May [19], 2008.
INDUSTRIAL
DISTRIBUTION GROUP, INC.
950 EAST PACES FERRY ROAD
SUITE 1575
ATLANTA, GEORGIA 30326
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE [18], 2008
To the Stockholders of
Industrial Distribution Group, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders of Industrial Distribution Group, Inc. will be held
at 11:00 a.m., Eastern Time on June [18],
2008, at 1100 Peachtree Street, 28th Floor, South
Conference Room, Atlanta, Georgia 30309, for the following
purposes:
1. Adoption of the Merger Agreement with
Eiger. To consider and vote on a proposal to
adopt the Agreement and Plan of Merger, dated as of
April 25, 2008, among Eiger, Merger Sub and Industrial
Distribution Group, Inc.
2. Adjournment or Postponement of the Special
Meeting. To consider and vote on a possible
proposal to adjourn or postpone the Special Meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the meeting to adopt the
merger agreement.
3. Other Matters. To transact such other
business as may properly come before the Special Meeting or any
adjournment or postponement thereof.
Only stockholders of record of our common stock as of the close
of business on May [8], 2008, are entitled to
notice of, and to vote at, the Special Meeting and any
adjournment or postponement of the Special Meeting.
Your vote is important, regardless of the number of shares of
common stock you own. The adoption of the merger agreement
requires the affirmative vote of the holders of a majority of
the outstanding shares of common stock entitled to vote at the
Special Meeting. Even if you plan to attend the Special Meeting
in person, we request that you complete, sign, date and return
the enclosed proxy card and thus ensure that your shares will be
represented at the Special Meeting if you are unable to attend.
If you sign, date and mail your proxy card without indicating
how you wish to vote, your vote will be counted as a vote
FOR the adoption of the merger agreement,
FOR any proposal to adjourn or postpone the
Special Meeting, if necessary or appropriate, in order to permit
further solicitation of proxies, and in accordance with the
discretion of the persons named as proxies on any other matters
properly brought before the Special Meeting for a vote.
If you fail to vote by proxy or in person, it will have the same
effect as a vote against the adoption of the merger agreement,
but will not affect any adjournment or postponement vote to
permit further solicitation of proxies. If you wish to vote in
person at the Special Meeting, you may withdraw your proxy, if
previously given, and vote in person.
Under the Delaware General Corporation Law, holders of our
common stock who do not vote in favor of adopting the merger
agreement will have the right to seek appraisal of the fair
value of their shares as determined by the Delaware Court of
Chancery if the merger is completed, but only if (i) they
submit a written demand for an appraisal prior to the vote on
the adoption of the merger agreement, (ii) they do not vote
or otherwise submit a proxy in favor of the merger agreement,
and (iii) they comply with the procedures under the
Delaware General Corporation Law explained in the accompanying
proxy statement. See the section captioned Appraisal
Rights.
Please carefully read the proxy statement and other material
concerning our company, the merger and related matters enclosed
with this notice for a more complete statement regarding the
matters to be acted upon at the Special Meeting.
PLEASE DO
NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
BY ORDER OF THE BOARD OF DIRECTORS,
Jack P. Healey
Secretary
May [16], 2008
INDUSTRIAL
DISTRIBUTION GROUP, INC.
950 EAST PACES FERRY ROAD
SUITE 1575
ATLANTA, GEORGIA 30326
PROXY
STATEMENT
SPECIAL
MEETING OF STOCKHOLDERS
TO BE HELD JUNE [18], 2008
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
1
|
|
|
|
|
6
|
|
|
|
|
12
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
14
|
|
|
|
|
14
|
|
|
|
|
15
|
|
|
|
|
15
|
|
|
|
|
15
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
24
|
|
|
|
|
27
|
|
|
|
|
34
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
37
|
|
|
|
|
38
|
|
|
|
|
39
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
|
|
41
|
|
|
|
|
41
|
|
|
|
|
42
|
|
|
|
|
43
|
|
|
|
|
43
|
|
|
|
|
44
|
|
|
|
|
45
|
|
|
|
|
46
|
|
|
|
|
51
|
|
|
|
|
52
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
A-1
|
|
|
|
|
|
|
|
|
|
B-1
|
|
|
|
|
|
|
|
|
|
C-1
|
|
SUMMARY
This summary highlights selected information from this proxy
statement and may not contain all of the information that is
important to you. To understand the merger fully, and for a more
complete description of the legal terms of the merger, you
should carefully read this entire proxy statement, the annexes
to this proxy statement and the documents to which we refer. The
Agreement and Plan of Merger, which we refer to as the
merger agreement, dated as of April 25, 2008,
among Eiger, Merger Sub and Industrial Distribution Group, Inc.,
is included as Annex A to this proxy statement. We have
included page references in parentheses to direct you to the
appropriate place in this proxy statement for a more complete
description of the topics presented in this summary.
The
Parties to the Merger Agreement
(Page )
Industrial Distribution Group, Inc. (IDG,
we, us, or our) is a
Delaware corporation headquartered in Atlanta, Georgia. IDG is a
nationwide distributor of products and services that create
competitive advantages for its customers, including a full line
of maintenance, repair, operating and production (MROP)
products. IDG has a strong reputation as a specialty distributor
with considerable technical and product application expertise
with respect to its more specialized product lines, including
cutting tools, hand and power tools, abrasives, material
handling equipment, coolants, lubricants, and safety products.
Eiger Holdco, LLC (Eiger) is a Delaware limited
liability company headquartered in Fort Worth, Texas. Eiger
has been formed by LKCM Private Discipline Master Fund, SPC
(LKCM) for the purpose of acquiring IDG. LKCM, which
owns approximately 14.9% of our outstanding common stock, is a
private investment fund that was formed in May 2006 by Luther
King Capital Management Corporation, an investment adviser
registered with the SEC. Luther King Capital Management
Corporation provides investment management services to
investment companies, foundations, endowments, employee benefit
plans, and high net worth individuals. As of March 31,
2008, Luther King Capital Management Corporation had
approximately $7.3 billion in assets under management.
Eiger Merger Corporation (Merger Sub) is a
newly-incorporated Delaware corporation and a direct,
wholly-owned subsidiary of Eiger. Merger Sub was formed by Eiger
exclusively for the purpose of effecting the merger, and has no
other business.
LKCM, while not party to the merger agreement, has committed to
fund the payment obligations of Eiger under the merger
agreement. Eiger has represented to us that it will have
sufficient cash at closing to pay the merger consideration and
consummate the merger.
The
Merger (Page )
The merger agreement provides for IDG to be acquired by Eiger.
The legal structure for that transaction is that Merger Sub will
be merged with and into IDG, with IDG as the surviving
corporation and thereby becoming a wholly-owned subsidiary of
Eiger. As a result of the merger, therefore, IDG will cease to
be a publicly traded company.
Merger
Consideration (Page )
Each holder of shares of common stock outstanding immediately
prior to the merger will be entitled to receive $12.10 per share
in cash, without interest and less applicable withholding taxes,
for such shares (other than shares owned by us, Eiger or Merger
Sub or any subsidiary thereof and other than shares owned by
stockholders properly demanding appraisal rights).
Effect on
Stock Options and Restricted Stock
(Page )
Each option to purchase shares of common stock outstanding
immediately prior to the merger, whether or not then exercisable
or vested, will be deemed automatically exercised and converted
into the right to receive a cash payment equal to the excess, if
any, of $12.10 per share over the exercise price per share of
the option, multiplied by the number of shares subject to the
option, without interest and less any applicable withholding tax.
1
All shares of common stock that are subject to vesting or
forfeiture or other restrictions (which we refer to as
restricted stock) outstanding immediately prior to
the merger (except for 123,333 shares under our May 2007
incentive award to our chief executive officer) will become
fully vested and (other than any such shares owned by
stockholders properly demanding appraisal rights) will be
converted into the right to receive $12.10 per share in cash,
without interest and less any applicable withholding tax.
Termination
of Prior Agreement with Platinum Equity
(Page )
On February 20, 2008, we executed a merger agreement with
affiliates of Platinum Equity Advisors, LLC (Platinum
Equity) for IDG to be acquired for a price of $10.30 per
share in cash to our stockholders (the Platinum Merger
Agreement). In connection with that proposed transaction,
our board of directors called and gave notice of a special
meeting of stockholders then scheduled for May 1, 2008 to
consider and vote upon that proposed transaction. As discussed
in more detail under The Merger Background
of the Merger, we subsequently received unsolicited
offers from other parties to pay a higher price to our
stockholders for our company, the highest of which was the
$12.10 per share offer from Eiger, which we received on
April 22, 2008. After allowing Platinum Equity its option
to match or exceed the Eiger offer (which Platinum Equity chose
not to exercise), our board of directors determined unanimously
to terminate the Platinum Merger Agreement in order to accept
the Eiger offer and execute the merger agreement with Eiger that
is now being submitted to you for a vote. As a result of the
above, the previously scheduled stockholders meeting was
canceled, and this new special meeting of stockholders has been
called for you to consider and vote on the Eiger merger
agreement at a price of $12.10 per share in cash to you, rather
the Platinum Merger Agreement at a lower price to you.
Conditions
to the Merger (Page )
We and Eiger will not complete the merger unless a number of
conditions are satisfied or (to the extent permitted) waived, as
applicable, including:
|
|
|
|
|
adoption by our stockholders of the merger agreement;
|
|
|
|
our delivery to Eiger of a certificate with respect to our
satisfaction of certain conditions set forth in the merger
agreement, and each of Eigers and Merger Subs
delivery to us of a certificate with respect to the satisfaction
by each of certain conditions set forth in the merger agreement;
|
|
|
|
expiration or termination of any applicable waiting period (and
any extension thereof) under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we refer
to as the HSR Act;
|
|
|
|
consummation of the transactions under the merger agreement
shall not have been made illegal by governmental order, decree
or ruling; and
|
|
|
|
receipt of all material consents, approvals and authorizations
legally required to consummate the transactions under the merger
agreement.
|
Special
Meeting; Quorum; Merger Vote (Page )
We will hold the Special Meeting at 1100 Peachtree Street,
28th Floor, South Conference Room, Atlanta, Georgia 30309
on June [18], 2008, beginning at 11:00 a.m.,
Eastern Time. The holders of a majority of our outstanding
shares of common stock entitled to vote must be present, either
in person or by proxy, to constitute a quorum at the Special
Meeting. The vote required to approve adoption of the merger
agreement (Proposal 1) is the affirmative vote of the
holders of a majority of the shares of common stock entitled to
vote at the Special Meeting, whether or not present at the
Special Meeting. If it becomes necessary to vote on an
adjournment or postponement of the Special Meeting in order to
solicit additional proxies (Proposal 2), approval of that
matter would require the affirmative vote of a majority of the
shares of common stock present at the Special Meeting (in person
or by proxy) and voting with respect to the proposal.
2
Recommendation
of Our Board of Directors (Page )
Our board of directors has unanimously approved the merger
agreement and determined and declared that the merger and the
merger agreement are advisable and in the best interest of our
stockholders. Accordingly, our board of directors unanimously
recommends that you vote FOR adoption of the
merger agreement.
Effective
Time of the Merger (Page )
The closing of the merger will occur as soon as practicable, but
no later than the second business day, after the satisfaction or
(to the extent permitted by law) waiver of all of the closing
conditions provided in the merger agreement, or on such other
date as IDG and Eiger may agree in writing. On the closing date,
a certificate of merger will be filed with the Secretary of
State of the State of Delaware that will state whether the
merger will become effective immediately upon acceptance of that
filing, or at such later time as the parties may have agreed and
specified in the certificate of merger. We refer to such time,
in either case, as the effective time of the merger.
Termination
of the Merger Agreement (Page )
The merger agreement describes the circumstances under which
Eiger or we may terminate the merger agreement. In addition, the
merger agreement provides that, upon termination of the merger
agreement under certain special circumstances (including our
consideration of a competing acquisition proposal), we may be
required to pay Eiger a termination fee of 3% of the aggregate
merger consideration, or approximately $3.5 million. If the
merger agreement is terminated by us in certain circumstances
due to the failure of Eiger to perform its obligations, and
provided all other conditions to the merger have been satisfied,
Eiger may be required to pay us a termination fee of 3% of the
aggregate merger consideration, or approximately
$3.5 million and reimburse us for the termination fee of
approximately $3.0 million we paid to Platinum.
Acquisition
Proposals (Page )
The merger agreement contains provisions that prohibit us from
soliciting, and restrict us from engaging in discussions or
negotiations regarding, a competing proposal to the merger.
There are exceptions to these provisions that permit our board
of directors to exercise its fiduciary duties under corporate
law if we receive a superior proposal from a third party under
certain circumstances set forth in the merger agreement.
Reasons
for the Merger (Page )
In making its recommendation that you vote
FOR adoption of the merger agreement, our
board of directors considered a number of factors, including,
among other things, the following:
|
|
|
|
|
the $12.10 per share in cash to be paid as merger consideration
represents in addition to a 17.5% premium to the
purchase price of $10.30 per share originally offered by
Platinum Equity that the board of directors was previously
recommending a 32.2% premium to the closing trading
price of $9.15 on July 27, 2007 (the trading day just prior
to the date on which we announced formation of a special
committee to explore our strategic alternatives), and a 31.4%
premium to the closing trading price of $9.21 on
February 19, 2008 (the trading day just prior to the date
on which we announced the execution of the Platinum Merger
Agreement, notwithstanding the general decline in the stock
prices of our publicly traded competitors (and the overall
decline in certain broader stock market indices) since
July 27, 2007;
|
|
|
|
the merger consideration will be paid in cash, which provides
certainty and immediate value to our stockholders;
|
|
|
|
consummation of the merger is not subject to a financing
condition;
|
|
|
|
the historically relatively limited public float and
low trading volume for our common stock, which effectively
limits our stockholders ability to trade significant
amounts of shares without depressing our stock price;
|
3
|
|
|
|
|
the financial and other terms of the merger agreement, which,
among other things, permit our board of directors to exercise
its fiduciary duties under corporate law to consider unsolicited
acquisition proposals and to change its recommendation with
respect to the merger;
|
|
|
|
Eigers obligation to pay us a termination fee and
reimburse us for the termination fee of approximately
$3.0 million we paid to Platinum under certain
circumstances if it breaches the merger agreement or fails to
timely meet material obligations under the merger agreement;
|
|
|
|
the substantial costs and implications for our profitability of
remaining independent as a public company, in light of the
relatively small size and scale of our operations for the
foreseeable future;
|
|
|
|
the increasing level of uncertainties associated with our
business as a result of actual and anticipated deteriorating
general economic conditions affecting our industry and capital
markets;
|
|
|
|
the attractiveness of the merger compared to other strategic
alternatives reasonably available to us;
|
|
|
|
the results of the confidential but extensive solicitation of
proposals to acquire our company, which was conducted by the
Strategic Alternatives Review Committee established by our board
of directors in July 2007 (the Special Committee)
and its financial advisor, Robert W. Baird & Co.
Incorporated, or Baird, prior to our February 20, 2008
execution of the Platinum Merger Agreement, and the subsequent
consideration of unsolicited additional acquisition proposals
that we received after announcing the Platinum Merger
Agreement; and
|
|
|
|
the financial analyses reviewed and discussed by Baird with our
board of directors, and the respective opinions of
Baird as of February 20, 2008 with respect to
the $10.30 per share price offered by Platinum Equity and as of
April 25, 2008 in confirmation of the board of
directors assessment of the $12.10 per share now payable
by Eiger with respect to the fairness, from a
financial point of view, to the holders of our common stock of
the consideration to be received by them in these respective
transactions.
|
Opinion
of Baird (Page and Annex B)
On February 20, 2008, Baird, serving as financial advisor
to our board of directors, delivered to our board of directors
its written opinion to the effect that the $10.30 per share of
consideration to be received by the holders of our common stock
pursuant to the Platinum Merger Agreement was fair, from a
financial point of view, to such holders. In connection with our
board of directors consideration of subsequent offers at
higher prices over the following two months, Baird discussed
with our board of directors Bairds belief and expectation
that it could deliver a favorable fairness opinion with respect
to the consideration to the holders of our common stock
reflected in the highest such offer that our board of directors
may otherwise determine to be substantially equivalent to the
transaction in the Platinum Merger Agreement.
Following our board of directors determination on
April 22, 2008 that the $12.10 per share offer (and related
proposed merger agreement) from Eiger was superior to both the
original $10.30 per share price and revised $11.80 per share
offer from Platinum Equity, Baird delivered its written opinion
to our board of directors to the effect that, as of
April 25, 2008, the consideration to be received by the
holders of our common stock pursuant to the merger agreement
with Eiger was fair, from a financial point of view, to such
holders. Bairds opinion only addressed the fairness of the
merger, from a financial point of view, to the holders of our
common stock of the merger consideration, and not any other
aspect or implication of the merger. The summary of Bairds
opinion in this proxy statement is qualified in its entirety by
reference to the full text of the written opinion, which is
included as Annex B to this proxy statement and sets forth
the procedures followed, assumptions made, qualifications and
limitations on the review undertaken, and other matters
considered by Baird in preparing its opinion. However, neither
Bairds opinion, nor the summary of it and the related
analyses set forth in this proxy statement, are intended to be,
and do not constitute, advice or a recommendation to you by
Baird as to how you should vote or act on any matter relating to
the merger.
4
Material
United States Federal Income Tax Consequences of the Merger
(Page )
For U.S. federal income tax purposes, the merger will be
treated as a sale of shares of common stock for cash by each of
our stockholders. As a result, in general, each stockholder will
recognize gain or loss equal to the difference, if any, between
the amount of cash received in the merger and such
stockholders adjusted tax basis in the shares surrendered.
Such gain or loss will be capital gain or loss if the shares of
common stock surrendered are held as a capital asset by the
stockholder, and will be long-term capital gain or loss if they
have been held for more than one year at the time of the merger.
Stockholders are urged to consult their own tax advisors as to
the particular tax consequences to them of the merger.
Interests
of Our Directors and Executive Officers in the Merger
(Page )
Our directors and executive officers may have interests in the
merger that are different from, or in addition to, yours,
including the following:
|
|
|
|
|
our executive officers and directors will receive cash
consideration for their vested and unvested stock options and
certain of their shares of restricted stock;
|
|
|
|
one of our executive officers, along with certain non-management
personnel, will be entitled to certain payments for remaining
with our company if the merger (or another change in control
transaction) is consummated; and
|
|
|
|
the merger agreement provides for indemnification and liability
insurance arrangements for each of our current and former
directors and officers.
|
Our board of directors was aware of these interests and
considered them, among other matters, in making its decisions.
None of our executive officers has entered into an employment
agreement or arrangement with Eiger or its affiliates. Eiger has
not indicated that it or its affiliates intends to propose
employment arrangements with any members of our management team.
Appraisal
Rights (Page and Annex C)
Under the Delaware General Corporation Law, holders of our
common stock who do not vote in favor of adopting the merger
agreement will have the right to seek appraisal of the fair
value of their shares as determined by the Delaware Court of
Chancery, if the merger is completed, but only if they submit a
written demand for an appraisal prior to the vote on the
adoption of the merger agreement, do not vote or otherwise
submit a proxy in respect of the merger agreement and comply
with the procedures under the Delaware General Corporation Law,
which are described in this proxy statement and set forth in
Annex C hereto. After the merger, these shares will not
represent any interest in the surviving corporation other than
the right to receive that cash payment.
If you validly demand appraisal of your shares in accordance
with Delaware law and do not withdraw your demand or otherwise
forfeit your appraisal rights, you will not receive the merger
consideration. Instead, after completion of the merger, a court
will determine the fair value of your shares exclusive of any
value arising from the completion or the expectation of the
merger. This appraisal amount could be more than, the same as,
or less than the amount you would otherwise be entitled to
receive under the terms of the merger agreement.
Appraisal rights will not apply if the merger is not completed
for any reason.
Regulatory
Approvals (Page )
No regulatory filings or applications, including under the HSR
Act, are required to be made in respect of the consummation of
the merger.
5
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
While most of the following information is discussed elsewhere
in more detail in this proxy statement, this questions and
answers format is intended as a convenient way to address some
commonly asked questions regarding the Special Meeting and the
proposed merger. These questions and answers may not address all
matters that may be important to you. Please refer to the more
detailed information contained elsewhere in this proxy
statement, the annexes to this proxy statement and the documents
referred to in this proxy statement.
|
|
|
Q: |
|
What is the date, time and place of the Special Meeting? |
|
A: |
|
The Special Meeting will be held at 1100 Peachtree Street, 28th
Floor, South Conference Room, Atlanta, Georgia 30309 on June
[18], 2008, beginning at 11:00 a.m., Eastern
Time. |
|
Q: |
|
Who is soliciting my proxy? |
|
A: |
|
This proxy is being solicited by the board of directors of IDG.
We have engaged MacKenzie Partners, Inc. to assist in our
solicitation. |
|
Q: |
|
What am I being asked to vote on? |
|
A: |
|
You are being asked to consider and vote on the following: |
|
|
|
|
|
Proposal 1 adoption of the merger agreement;
|
|
|
|
Proposal 2 possible adjournment or postponement
of the Special Meeting, if necessary or appropriate, in order to
solicit additional proxies if there are insufficient votes at
the time of the meeting to adopt the merger agreement; and
|
|
|
|
the transaction of any other business that may properly come
before the Special Meeting or any adjournments or postponements
of the Special Meeting.
|
|
|
|
Q: |
|
Why are you sending me another proxy statement in addition to
the March 31, 2008 proxy statement? |
|
A: |
|
We are sending you this proxy statement because, on
April 25, 2008, IDG terminated the February 20, 2008
merger agreement with affiliates of Platinum Equity to which
that March 31, 2008 proxy statement related, in order to
enter into a new merger agreement with Eiger that will pay a
higher price to you and other stockholders. As a result, we were
required to cancel the earlier meeting to which the
March 31, 2008 proxy statement related, schedule a new
meeting and provide you with a new proxy statement to inform you
of the re-scheduled meeting date and to furnish information
about the terms of the new transaction with Eiger that our board
of directors has unanimously approved and recommends. |
|
Q: |
|
What are IDGs reasons for entering into the merger
agreement with Eiger and terminating the previous agreement with
Platinum Equity? |
|
A: |
|
In short, the Eiger merger agreement will pay our stockholders
$12.10 per share in cash, whereas the previous agreement with
Platinum Equity (as Platinum Equity proposed to amend it to
increase the price from $10.30 per share) would have paid our
stockholders only $11.80 per share in cash. Please see the
sections entitled Reasons for the Merger and
Recommendation of the Board of Directors beginning
on page for discussions of the reasons why our
board of directors reached its decisions. |
|
Q: |
|
What will I receive in this merger? |
|
A: |
|
Pursuant to the merger agreement, each share of IDG common stock
that you hold will now be converted into the right to receive
$12.10 in cash, without interest and less any applicable
withholding taxes. |
|
Q: |
|
What are the significant differences between the merger
agreement and the previous merger agreement? |
|
A: |
|
The terms of merger agreement are described beginning on
page of this proxy statement under
Summary of the Merger Agreement. The merger
agreement increases the merger consideration to be paid to our
stockholders by $1.80 per share, or 17.5%, to $12.10 per share
from $10.30 per share. |
6
|
|
|
Q: |
|
What is the proposed transaction? |
|
A: |
|
If the merger agreement is adopted by our stockholders and the
other closing conditions are satisfied or waived, IDG will merge
with Merger Sub, a direct wholly-owned subsidiary of Eiger, and
Eiger will become the sole stockholder of IDG. Each holder of
shares of IDG common stock outstanding immediately prior to the
merger (except for shares of unvested restricted stock) will
receive $12.10 per share in cash, without interest and less any
applicable withholding tax, for each share of common stock they
own (other than shares owned by us, Eiger or Merger Sub, or any
subsidiary thereof, and other than shares owned by stockholders
properly demanding appraisal rights). |
|
Q: |
|
When do you expect the merger to be completed? |
|
A: |
|
We are working to complete the merger as quickly as possible,
but we cannot predict the exact timing. The closing of the
merger will occur as soon as practicable, but no later than the
second business day, after the satisfaction or (to the extent
permitted by law) waiver of all of the closing conditions
provided in the merger agreement, or on such other date as IDG
and Eiger may agree in writing. On the closing date, a
certificate of merger will be filed with the Secretary of State
of the State of Delaware that will state whether the merger will
become effective immediately upon acceptance of that filing, or
at such later time as the parties may have agreed and specified
in the certificate of merger. |
|
Q: |
|
How does our board of directors recommend that I vote? |
|
A: |
|
Our board of directors unanimously recommends that you vote: |
|
|
|
|
|
FOR Proposal 1 adoption of
the merger agreement; and
|
|
|
|
FOR Proposal 2 approval to
adjourn or postpone the Special Meeting, if necessary or
appropriate, to solicit additional proxies if there are
insufficient votes at the time of the meeting to approve the
merger agreement.
|
|
|
|
Q: |
|
What vote of our stockholders is required to adopt the
proposals? |
|
A: |
|
The votes required to adopt the proposals are as follows: |
|
|
|
|
|
Proposal 1 adoption of the merger
agreement requires the affirmative vote of the
holders of a majority of our outstanding shares of common stock
entitled to vote at the Special Meeting, whether or not the
shares are present at the Special Meeting; and
|
|
|
|
Proposal 2 adjournment or postponement of the
Special Meeting, if necessary or appropriate, in order to
solicit additional proxies requires the affirmative
vote of a majority of our shares of common stock, present at the
Special Meeting (in person or by proxy) and voting with respect
to the proposal.
|
|
|
|
Q: |
|
Who is entitled to vote at the Special Meeting? |
|
A: |
|
Only stockholders of record as of the close of business on May
[8], 2008, the record date for the Special
Meeting, are entitled to receive notice of and to vote at the
Special Meeting. You will have one vote at the Special Meeting
for each share of common stock you owned at the close of
business on the record date. On the record date,
[ ] shares
of common stock, held by approximately
[ ]
holders of record, were outstanding and are entitled to be
voted at the Special Meeting. |
|
Q: |
|
How many shares must be present or represented at the Special
Meeting in order to conduct business? |
|
A: |
|
Holders of a majority of the shares of common stock entitled to
vote must be present, in person or represented by proxy, before
we may transact business at the Special Meeting. This is called
a quorum. Both abstentions and broker non-votes
(which are discussed below) are counted for the purpose of
determining the presence of a quorum. |
|
Q: |
|
What do I need to do now? How do I vote? |
|
A: |
|
We urge you to read this proxy statement, including its annexes
and the documents referred to in this proxy statement,
carefully, and to consider how the merger affects you. If you
are a stockholder of record, then you can |
7
|
|
|
|
|
ensure that your shares are voted at the Special Meeting by
submitting your proxy by telephone or via the Internet, or by
completing, signing, dating and mailing each proxy card
accompanying this proxy statement and returning it in the
envelope provided. |
Please do NOT send in your stock certificates at this
time.
If your shares of common stock are held in street
name by your broker, be sure to give your broker
instructions on how you want to vote your shares because your
broker will not be able to vote on the merger proposal without
instructions from you. See the question below If my
broker holds my shares in street name, will my
broker vote my shares for me?
|
|
|
Q: |
|
What if I already voted using the proxy that you sent to me
earlier with the March 31, 2008 proxy statement? |
|
A: |
|
You will need to cast your vote again, following the
instructions in this proxy statement, because your earlier proxy
will be disregarded. You should discard the proxy statement
dated March 31, 2008 and related materials that you
previously received. Then carefully read and consider the
information contained in this proxy statement, including the
annexes, and vote again by following the instructions in this
proxy statement. |
|
Q: |
|
How are votes counted? |
|
A: |
|
For Proposal 1 adoption of the merger
agreement you may vote FOR,
AGAINST or ABSTAIN. An
abstention will not count as a vote cast on Proposal 1, but
will count for the purpose of determining whether a quorum is
present. As a result, if you ABSTAIN, it has
the same effect as a vote AGAINST adoption of
the merger agreement. For Proposal 2 approval
of the adjournment or postponement of the meeting, if necessary
or appropriate, to solicit additional proxies you
may vote FOR, AGAINST or
ABSTAIN. An abstention will not count as a
vote cast with respect to Proposal 2, but will count as a
present vote for the purpose of determining whether a quorum is
present. If you submit a proxy card pursuant to which you
ABSTAIN from voting on Proposal 2, you
will be deemed not to have cast a vote for the purpose of voting
on that matter (though you will be deemed present for the
purpose of the quorum needed to bring the matter to a vote) and,
therefore, your abstention will have no effect on the outcome of
the vote with respect to an adjournment or postponement. |
If you sign and return your proxy card, but do not indicate how
you want to vote, your proxy will be voted
FOR Proposal 1 and
FOR Proposal 2, and will be voted in
accordance with the discretion of the persons named as proxies
as to any other matters properly brought before the Special
Meeting for a vote.
|
|
|
Q: |
|
If my broker holds my shares in street name, will
my broker vote my shares for me? |
|
A: |
|
No, unless you provide specific instructions to
your broker on how to vote. Therefore, you must give
instructions to your broker if you want your shares to be voted.
You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.
Unless you follow the instructions, your shares will not be
voted. If your broker does not vote your shares because you fail
to provide voting instructions, the effect will be a vote
AGAINST Proposal 1, because adoption of
Proposal 1 requires the affirmative vote of a majority of
our outstanding shares of common stock, and will not affect the
outcome of the vote on Proposal 2, because adoption of
Proposal 2 requires an affirmative vote cast by a majority
of shares entitled to vote and present at the Special Meeting. |
|
Q: |
|
May I vote in person? |
|
A: |
|
Yes. Shares held in your name as the stockholder of
record may be voted in person at the Special Meeting.
Shares owned beneficially by you, but held of record
for you in street name by your broker, a trustee or another
nominee may be voted in person by you only if you obtain a
legal proxy from the broker, trustee or other nominee
who holds your shares of record giving you the right
to vote the shares at the Special Meeting. |
|
|
|
Even if you plan to attend the Special Meeting, we recommend
that you also submit your proxy card or voting instructions as
described below so that your vote will be counted if you later
decide not to attend the meeting. |
8
|
|
|
Q: |
|
What is the difference between holding shares as a
stockholder of record and as a beneficial owner? |
|
A: |
|
Most of our stockholders hold their shares through a broker,
trustee or other nominee (such as a bank) rather than directly
in their own name. As summarized below, there are some
distinctions between shares owned of record and those owned
beneficially. |
|
|
|
|
|
Stockholder of Record. If your shares are
registered directly in your name with our transfer agent,
American Stock Transfer & Trust Company, you are
considered to be the stockholder of record with respect to those
shares, and these proxy materials are being sent directly to
you. As the stockholder of record, you have the right to grant
your proxy directly to us or to vote in person at the Special
Meeting. We have enclosed a proxy card for you to use.
|
|
|
|
Beneficial Owner. If your shares are held in a
brokerage account, by a trustee or by another nominee (such as a
bank), you are considered the beneficial owner of shares held in
street name, but the shares are considered to be
held of record by such broker, trustee or other
nominee. In that case, we initially sent these proxy materials
to that other person as the stockholder of record, and they have
been forwarded to you by that person, together with a voting
instruction card. As the beneficial owner, you have the right to
direct your broker, trustee or nominee how to vote, and you are
also invited to attend the Special Meeting.
|
|
|
|
|
|
Since a beneficial owner is not the stockholder of record,
however, you may not vote your shares in person at the Special
Meeting, unless you obtain a legal proxy from the
broker, trustee or nominee who holds your shares of record,
giving you the right to vote the shares at the meeting. Your
broker, trustee or other nominee should have enclosed or
provided voting instructions for you to use in directing the
broker, trustee or nominee to vote your shares. If not, you
should immediately contact the broker, trustee or other nominee
to request such instructions; you may also contact our proxy
solicitation firm, MacKenzie Partners, Inc., to request
assistance or information. |
|
Q: |
|
May I attend the Special Meeting? |
|
A: |
|
You are entitled to attend the Special Meeting only if you were
a stockholder as of the close of business on the record date, or
if you hold a valid proxy for the Special Meeting. You should be
prepared to present photo identification for admittance. If you
are a stockholder of record, your name will be verified against
the list of stockholders of record on the record date prior to
your being admitted to the Special Meeting. |
|
|
|
If you are not a stockholder of record but own shares
beneficially that are held in street name through a
broker, trustee or other nominee, you should provide proof of
beneficial ownership on the record date, such as an account
statement covering the record date, a copy of the voting
instruction card provided to you by your broker, trustee or
nominee, or other similar evidence of ownership. If you do not
provide photo identification or comply with the procedures
outlined above, you might not be admitted to the Special Meeting. |
|
|
|
The meeting will begin promptly at 11:00 a.m., Eastern
Time. Check-in will begin at 10:00 a.m., Eastern Time, and
you should allow ample time for the check-in procedures. |
|
Q: |
|
When should I return my proxy card? |
|
A: |
|
You should return your proxy card as soon as possible, in order
to ensure that it is received in time for your shares to be
voted at the Special Meeting. |
|
Q: |
|
May I change my vote? |
|
A: |
|
Yes. You may change your vote at any time before the shares of
common stock reflected on your proxy card are voted at the
Special Meeting. If your shares are registered in your name, you
may do this in any of three ways: |
|
|
|
|
|
first, you may deliver to our Secretary a written notice (dated
later than the date of your proxy card) stating that you would
like to revoke your proxy;
|
|
|
|
second, you may submit by telephone, the Internet or mail, in
each case, a new, later-dated proxy for the same shares,
provided the new proxy is received before the polls close at the
Special Meeting; or
|
|
|
|
third, you may attend the meeting and vote in person.
|
9
Any written notice of revocation should be delivered to our
Secretary at or before the taking of the vote at the Special
Meeting. Revocation of your proxy without any further action
will mean your shares will not be voted at the Special Meeting
or counted toward satisfying the quorum requirements. Your
attendance at the Special Meeting will not revoke your proxy
unless you specifically request to vote at the Special Meeting.
If you have instructed your broker or other street
name holder to vote your shares, you must follow
directions received from your broker to change your vote. You
cannot vote shares held in street name by returning
a proxy card directly to us or by voting in person at the
Special Meeting, unless you obtain a legal proxy from your
broker or other street name holder.
Remember, however, that if the only vote you cast was in
connection with the March 31, 2008 proxy statement and
related materials, you must vote again using this proxy
statement and materials.
|
|
|
Q: |
|
Should I send in my stock certificate(s) now? |
|
A: |
|
No. If and when the merger is completed, you will receive
written instructions, including a document called a letter
of transmittal, for exchanging your shares of common stock
for the merger consideration. |
|
Q: |
|
Who will bear the cost of the solicitation? |
|
A: |
|
The expense of soliciting proxies for use by our board of
directors will be borne by IDG. We have retained MacKenzie
Partners, Inc. to aid in the solicitation of proxies for the
Special Meeting at a cost of approximately $10,000 plus
reimbursement of out-of-pocket fees and expenses. In addition,
we may reimburse brokers, banks and other custodians, nominees
and fiduciaries representing beneficial owners of shares for
their expenses in forwarding soliciting materials to such
beneficial owners. Proxies may also be solicited by certain of
our directors, officers and employees, personally or by
telephone, facsimile or other means of communication. No
additional compensation will be paid to these individuals for
such services. |
|
Q: |
|
What does it mean if I receive more than one proxy card? |
|
A: |
|
You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your
shares in more than one brokerage account, you may receive a
separate voting instruction card for each brokerage account in
which you hold shares. If you are a stockholder of record and
your shares are registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date
and return each proxy card and voting instruction card that you
receive. |
|
Q: |
|
How can I obtain a separate set of voting materials? |
|
A: |
|
If you share an address with another stockholder, you may
receive only one set of proxy materials, unless you have
provided contrary instructions. However, each stockholder will
receive his or her own proxy card. If you wish to receive a
separate set of proxy materials, please call MacKenzie Partners,
Inc. toll-free at
(800) 322-2885
(banks and brokers may call collect at
(212) 929-5500)
to request a separate copy of these materials. You will be
provided with a separate copy of the materials, free of charge,
if you request them. In addition, stockholders who share a
single address but receive multiple copies of the proxy
materials may request that, if additional materials are provided
in the future, they receive a single copy, by contacting
MacKenzie Partners, Inc. at the phone number set forth above. |
|
Q: |
|
What happens if I sell my shares before the Special
Meeting? |
|
A: |
|
The record date for the Special Meeting is earlier than the date
of the Special Meeting and earlier than the date on which the
merger is expected to be completed. If you transfer your shares
of common stock after the record date but before the Special
Meeting, you will retain your right to vote at the Special
Meeting, but you will have transferred the right to receive the
merger consideration if the merger agreement is adopted by our
stockholders and the merger is completed. Therefore, in order to
receive the merger consideration of $12.10 per share, you must
hold your shares through the effective time of the merger. |
10
|
|
|
Q: |
|
When will I receive the merger consideration for my
shares? |
|
A: |
|
If and when the merger is completed, you will receive written
instructions, including a letter of transmittal, that will
explain how to exchange your shares for the merger
consideration. When you properly complete and return the
required documentation described in the written instructions,
you will receive payment of the merger consideration for your
shares from the paying agent. If you are the beneficial owner of
shares of common stock that are held in street name,
the broker, trustee or other nominee that holds the shares of
record for you will complete the letter of transmittal with
respect to your shares and receive payment of the merger
consideration on your behalf. The merger consideration with
respect to such shares will be credited to your account with
such broker, trustee or other nominee promptly following such
payment after the merger. |
|
Q: |
|
Am I entitled to exercise appraisal rights instead of
receiving the merger consideration for my shares? |
|
A: |
|
Yes. As a holder of our common stock, you are entitled to seek
appraisal of the fair value of your shares under the Delaware
General Corporation Law if the merger is completed, but only if
you satisfy certain conditions, which conditions are described
in this proxy statement under the caption Appraisal
Rights beginning on page . The
judicially determined fair value of your shares could be greater
than, equal to or less than the $12.10 in cash per share that
you would otherwise be entitled to receive under the terms of
the merger agreement. |
|
Q: |
|
Who can help answer my other questions? |
|
A: |
|
If you have additional questions about the Special Meeting or
the merger, including the procedures for voting your shares, or
if you would like additional copies, without charge, of this
proxy statement, you should contact our proxy solicitor,
MacKenzie Partners, Inc., toll-free at
(800) 322-2885
(banks and brokers may call collect at
(212) 929-5500).
If your broker holds your shares, you may also call your broker
for additional information. |
11
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking
statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, about our plans, objectives,
expectations and intentions. Forward-looking statements include
information concerning expected operating results and future
performance of our company, the expected completion and timing
of the merger and other information relating to the merger.
Generally, the words looking forward,
believe, expect, intend,
estimate, anticipate,
likely, project, may,
will and similar expressions identify or indicate
forward-looking statements. You should read statements that
contain these words carefully. They discuss our future
expectations or state other forward-looking information, and may
involve known or unknown risks and uncertainties over which we
have no control. Such risks and uncertainties include, but are
not limited to:
|
|
|
|
|
our ability to compete successfully in the highly competitive
and diverse maintenance, repair, operating, and production
(MROP) market;
|
|
|
|
our ability to renew profitable contracts;
|
|
|
|
the availability to us of key personnel for employment;
|
|
|
|
our reliance upon the expertise of our senior management;
|
|
|
|
our reliance upon our information systems;
|
|
|
|
the uncertainty of customers demand for products and
services offered by us;
|
|
|
|
our relationships with and dependence upon third-party suppliers
and manufacturers;
|
|
|
|
discontinuance of our distribution rights with certain of our
vendors;
|
|
|
|
failure to successfully implement efficiency
improvements; and
|
|
|
|
other risks detailed in our current filings with the SEC,
including Item I Risk Factors in our
Annual Report on
Form 10-K
for our fiscal year ended December 31, 2007. See
Where You Can Find More Information on
page .
|
We believe that the assumptions on which our forward-looking
statements are based are reasonable. However, we cannot assure
you that the actual results or developments we anticipate will
be realized or, if realized, that they will have the expected
effects on our business or operations. All subsequent written
and oral forward-looking statements concerning the merger or
other matters addressed in this proxy statement and attributable
to us or any person acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained or
referred to in this section. Forward-looking statements speak
only as of the date of this proxy statement or the date of any
document incorporated by reference in this document. Except as
required by applicable law or regulation, we do not undertake to
update publicly these forward-looking statements, whether as a
result of future events, new information or otherwise.
12
THE
SPECIAL MEETING OF STOCKHOLDERS
This proxy statement is furnished in connection with the
solicitation of proxies in connection with a Special Meeting of
our stockholders.
Date,
Time and Place
We will hold the Special Meeting at 1100 Peachtree Street,
28th Floor, South Conference Room, Atlanta, Georgia 30309
on June [18], 2008, beginning at 11:00 a.m.,
Eastern Time.
Purpose
of the Special Meeting
At the Special Meeting, (1) we will ask you to adopt the
merger agreement and (2) if necessary or appropriate, we
may ask you to approve the adjournment or postponement of the
Special Meeting in order to solicit additional proxies if there
are insufficient votes at the time of the meeting to approve the
merger agreement. In addition, you may be asked to vote on other
business that is properly brought before the Special Meeting. We
are not currently aware of any additional business that may come
before the Special Meeting.
Recommendation
of Our Board of Directors
Our board of directors unanimously approved the merger agreement
after it determined and declared that the merger and the merger
agreement are advisable and in the best interest of our
stockholders. Accordingly, our board of directors unanimously
recommends that you vote FOR adoption of the
merger agreement and FOR approval of any
proposal to adjourn or postpone the Special Meeting, if
necessary or appropriate, in order to solicit additional proxies
if there are insufficient votes at the time of the meeting to
approve the merger agreement.
Record
Date; Stock Entitled To Vote; Quorum
Only holders of record of our common stock at the close of
business on May [8], 2008, the record date, are
entitled to notice of and to vote at the Special Meeting. On the
record date,
[ ] shares
of common stock were issued and outstanding and held by
approximately
[ ]
holders of record. Each holder of record of our common stock
will be entitled to one vote per share at the Special Meeting.
The holders of a majority of our outstanding shares of common
stock entitled to vote must be present, either in person or by
proxy, to constitute a quorum at the Special Meeting. We will
count abstentions, either in person or by proxy, and broker
non-votes (discussed below) for the purpose of establishing a
quorum. If a quorum is not present, in person or by proxy, at
the Special Meeting, the holders of a majority of the common
stock represented at the Special Meeting may adjourn the
meeting, in order to solicit additional proxies. If a quorum is
not present at the Special Meeting, it is expected that the
meeting will be adjourned or postponed, in order to solicit
additional proxies.
If you hold shares beneficially in street name and
do not provide your broker with voting instructions, your shares
will constitute broker non-votes. Broker non-votes
occur on a matter when a broker is not permitted to vote on that
matter without instructions from the beneficial owner and such
instructions are not given. A broker non-vote with respect to
Proposal 1 will have the same effect as a vote against
Proposal 1, because adoption of Proposal 1 requires
the affirmative vote of a majority of our outstanding shares of
common stock entitled to vote at the Special Meeting. A broker
non-vote will not affect the outcome of the vote on
Proposal 2, because adoption of Proposal 2 requires an
affirmative vote of the holders of a majority of our outstanding
shares of common stock entitled to vote at the Special Meeting
and cast in person or by proxy.
Vote
Required
The adoption of the merger agreement
(Proposal 1) requires the affirmative vote of the
holders of a majority of the shares entitled to vote on the
adoption of the merger agreement at the Special Meeting, whether
or not present at the Special Meeting. If you abstain from
voting, either in person or by proxy, or do not instruct your
broker or other nominee how to vote your shares, it will have
the same effect as a vote against the adoption of the merger
agreement. Adjournment or postponement of the Special Meeting in
order to solicit additional proxies if there are insufficient
13
votes at the time of the meeting to adopt the merger agreement
(Proposal 2) requires the affirmative vote of the
holders of a majority of the shares of common stock present at
the Special Meeting (in person or by proxy) and voting with
respect to the proposal. If you abstain from voting, either in
person or by proxy, or do not instruct your broker or other
nominee how to vote your shares, it will have no effect on the
outcome of the vote because adoption of Proposal 2 requires
the affirmative vote of the holders of a majority of the shares
of common stock present at the Special Meeting (in person or by
proxy) and voting with respect to the proposal.
Voting of
Proxies
If you hold your shares in record name, you may vote your shares
as follows:
Voting by Mail. You can vote your proxy by
mail. If you choose to vote by mail, simply mark your proxy,
date and sign it, and return it in the postage-paid envelope
provided.
Voting via the Internet. You can vote your
proxy via the Internet. The website for Internet voting is
http://www.voteproxy.com.
Instructions on how to vote via the Internet are located on the
proxy card enclosed with this proxy statement. Have your proxy
card in hand when you access the Website. You will be prompted
to enter the control number printed on your proxy card and to
follow the instructions to obtain your records and create an
electronic voting form. Voting by Internet is available
24 hours a day until 11:59 PM Eastern Time on June
[17], 2008. If you vote via the Internet, you
should not return your proxy card.
Voting by Telephone. You can vote your proxy
by telephone by calling the toll-free number 1-800-PROXIES
(1-800-776-9437).
You will then be prompted to enter the control number printed on
your proxy card and to follow the subsequent instructions.
Voting by telephone is available 24 hours a day until
11:59 PM Eastern Time on June [17], 2008. If
you vote by telephone, you should not return your proxy card.
Voting in Person. You can vote by appearing
and voting in person at the Special Meeting.
Stockholders who hold their shares of common stock in
street name meaning in the name of a
broker, trustee or other nominee who is the record
holder should follow the directions provided by the
nominee regarding how to instruct such nominee to vote their
shares.
We do not expect that any matter other than the matters
discussed in this proxy statement will be brought before the
Special Meeting. If, however, any other matters are properly
presented, the persons named as proxies will vote in accordance
with their judgment as to matters that they believe to be in the
best interest of our stockholders.
DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. A
LETTER OF TRANSMITTAL WITH INSTRUCTIONS FOR THE SURRENDER
OF YOUR STOCK CERTIFICATES WILL BE MAILED TO YOU AS SOON AS
PRACTICABLE IF AND WHEN THE MERGER IS COMPLETED.
Revocability
of Proxies
If you hold your shares in your name and have not delivered an
irrevocable proxy, you have the unconditional right to revoke
your proxy at any time prior to its exercise by employing any of
the following four methods:
|
|
|
|
|
first, you may deliver to our Secretary, at our principal
executive offices located at 950 East Paces Ferry Road,
Suite 1575, Atlanta, Georgia 30326, a written notice (dated
later than the date of your proxy card) stating that you would
like to revoke your proxy;
|
|
|
|
second, you may submit a new proxy via the Internet or by
telephone;
|
|
|
|
third, you may complete, execute and deliver to our Secretary a
new, later-dated proxy card for the same shares, provided the
new proxy card is received before the polls close at the Special
Meeting; or
|
|
|
|
fourth, you may attend the Special Meeting and vote in person.
|
Any written notice of revocation should be delivered to our
Secretary at or before the taking of the vote at the Special
Meeting. Revocation of your proxy, without any further action,
will mean your shares will not be voted at
14
the Special Meeting or counted towards satisfying the quorum
requirements. Your attendance at the Special Meeting will not
revoke your proxy unless you specifically request to vote at the
Special Meeting.
If you have instructed your broker to vote your shares, you must
follow directions received from your broker to change your vote.
You cannot vote shares held in street name by
returning a proxy card directly to us or by voting in person at
the Special Meeting, unless you obtain a legal proxy from your
broker or other street name holder.
Solicitation
of Proxies
The board of directors of IDG is soliciting your proxy. In
addition to the solicitation of proxies by use of the mail, our
directors, officers and other employees may solicit the return
of proxies by personal interview, telephone,
e-mail or
facsimile. We will not pay additional compensation to any of
these individuals for their solicitation efforts, but we will
reimburse them for any
out-of-pocket
expense they incur in their solicitation efforts. We will
request that brokerage houses and other custodians, nominees and
fiduciaries forward solicitation materials to the beneficial
owners of stock registered in their names. We will bear all
costs of preparing, assembling, printing and mailing the notice
of the Special Meeting, this proxy statement, the enclosed proxy
cards and any additional materials, as well as the cost incurred
by brokers or other nominees in forwarding solicitation
materials to the beneficial owners of stock and all other costs
of solicitation.
We have retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies for the Special Meeting. MacKenzie
Partners, Inc. will receive a base fee of $10,000, plus
reimbursement of
out-of-pocket
fees and expenses, and may receive additional amounts depending
upon the extent of assistance we require and request.
Information
or Other Assistance
Stockholders who have questions regarding the materials, need
assistance voting their shares or require additional copies of
the proxy statement or proxy card, should contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
(212) 929-5500
(Call Collect)
(800) 322-2885
(Toll free)
Other
Business
We are not currently aware of any business to be acted upon at
the Special Meeting other than the matters discussed in this
proxy statement. If other matters do properly come before the
Special Meeting, or any adjournment or postponement of the
Special Meeting is proposed, we intend that shares of common
stock represented by properly submitted proxies will be voted by
the persons named as proxies on the proxy card in accordance
with their discretion. In addition, the grant of a proxy will
confer discretionary authority on the persons named as proxies
on the proxy card to vote in accordance with their best judgment
on procedural matters incident to the conduct of the Special
Meeting.
If the persons named as proxies on the proxy card are asked to
vote for one or more adjournments or postponements of the
meeting for matters incidental to the conduct of the meeting,
such persons will have the authority to vote in their discretion
on such matters. However, if the persons named as proxies on the
proxy card are asked to vote for one or more adjournments or
postponements of the meeting in order to permit further
solicitation of proxies if there are not sufficient votes at the
time of the meeting to adopt the merger agreement, they will
only have the authority to vote on such matter as instructed by
you or your proxy or, if no instructions are provided, in favor
of such adjournment or postponement. Any adjournment or
postponement of the Special Meeting for the purpose of
soliciting additional proxies will allow our stockholders who
have already granted their proxies to revoke them at any time
prior to their use. Any adjournment or postponement may be made
without notice by an announcement made at the Special Meeting.
15
THE
MERGER
The
Parties to the Merger Agreement
Industrial Distribution Group, Inc. IDG is a
Delaware corporation with executive offices located at 950 East
Paces Ferry Road, Suite 1575, Atlanta, Georgia 30326. Our
telephone number is
(404) 949-2100.
IDG is a nationwide distributor of products and services that
create competitive advantages for its customers, including a
full line of maintenance, repair, operating and production
(MROP) products. We have a strong reputation as a specialty
distributor with considerable technical and product application
expertise found in our more specialized lines that include
cutting tools, hand and power tools, abrasives, material
handling equipment, coolants, lubricants, and safety products.
Currently, we serve over 12,000 active customers, representing a
diverse group of large and mid-sized national and international
corporations including PPG Industries, Danaher Corporation,
BorgWarner, Inc., Kennametal, Inc., Honeywell, The Boeing
Company, Corning Incorporated, Case New Holland, and Duracell.
We currently have a presence in 43 of the top 75 industrial
markets in the United States.
Eiger Holdco, LLC. Eiger is a Delaware limited
liability company headquartered in Fort Worth, Texas. Eiger
has been formed by LKCM Private Discipline Master Fund, SPC
(LKCM) for the purpose of acquiring IDG. LKCM, which
owns approximately 14.9% of our outstanding common stock, is a
private investment fund that was formed in May 2006 by Luther
King Capital Management Corporation, an investment adviser
registered with the SEC. Luther King Capital Management
Corporation provides investment management services to
investment companies, foundations, endowments, employee benefit
plans, and high net worth individuals. As of March 31,
2008, Luther King Capital Management Corporation had
approximately $7.3 billion in assets under management. The
principal business address of Eiger, LKCM, and Luther King
Capital Management Corporation is 301 Commerce Street,
Suite 1600, Fort Worth, Texas 76102. Their telephone
number is
(817) 332-3235.
Eiger Merger Corporation. Merger Sub is a
newly-incorporated Delaware corporation and a direct,
wholly-owned subsidiary of Eiger. Its address is 301 Commerce
Street, Suite 1600, Fort Worth, Texas 76102. Its
telephone number is
(817) 332-3235.
Merger Sub was formed exclusively for the purpose of effecting
the merger. Merger Sub has not engaged in any business except in
anticipation of the merger.
Background
of the Merger
We entered into the merger agreement with Eiger and Merger Sub
on April 25, 2008, upon the unanimous approval of our board
of directors, following nearly a month-long de facto auction
process that commenced after we announced our February 20,
2008 merger agreement with affiliates of Platinum Equity (the
Platinum Merger Agreement). While the Platinum
Merger Agreement was binding and prohibited us from soliciting
or encouraging other acquisition proposals, it allowed our board
of directors to consider unsolicited proposals that were bona
fide and credible, and that our board of directors determined
could reasonably lead to a superior proposal. We received three
separate unsolicited proposals, two of which our board of
directors determined met those conditions. A de facto auction
process was established, facilitated by Baird as financial
advisor to the board of directors, which resulted in Eiger
putting forth a proposal that neither Platinum Equity nor the
other bidder, WESCO Distribution, Inc. (WESCO), were
willing to match or exceed. As result, our board of directors
determined to accept the Eiger merger agreement as the superior
outcome for our stockholders and to terminate the previously
approved Platinum Merger Agreement. The general context for the
initial decision by our board of directors to sell our company
to Platinum Equity, and the subsequent developments that led to
the decision to execute and recommend the merger agreement with
Eiger, are summarized below.
Our common stock has been publicly traded since
September 24, 1997, when we completed our initial public
offering in tandem with our formation through the simultaneous
combination of nine previously private and unaffiliated MROP
companies. The initial public offering price for our common
stock was $17.00 per share, and our common stock subsequently
traded as high as $22.56 per share in October 1997. Since that
time, the trading price for our common stock declined to an
all-time low of $1.19 per share in 2001, and we faced potential
delisting from the New York Stock Exchange (NYSE).
(While we successfully rehabilitated our listing status with the
NYSE, we nonetheless moved the listing for our common stock in
May 2004 from the NYSE to the Nasdaq Stock Market in an effort
to improve the trading profile for our common stock.) Between
October 2001 and May 2004, the trading
16
price for our common stock fluctuated between $1.19 and $8.55
per share, reaching or exceeding the $8.00 per share level in
March 2004, for the first time since January 1999. In July 2005,
the trading price reached the $10.00 per share level for the
first time in seven years. The trading prices for our common
stock continued to fluctuate widely, however, as it declined
three months later (in October 2005) to a new low in that
time period of $6.58 per share before reaching its new five-year
high of $13.60 per share in May 2007, from which it again
declined to $9.15 per share on July 27, 2007, which was the
last trading date prior to the announcement that our board had
decided to form its Strategic Alternatives Review Committee (the
Special Committee), comprised of three independent
directors, to identify and evaluate potential options to enhance
our business and unlock realizable value for our stockholders.
Throughout the five-year period preceding the formation of the
Special Committee, the trading volume for our common stock had
been consistently low, with a daily average of
35,652 shares; during that period, the public
float for our common stock which is the number
of shares owned by non-affiliates ranged between
approximately 6.3 million and 8.2 million shares. On
July 27, 2007, our public float was 7.8 million shares
and the daily average trading volume for our common stock had
been 11,429 shares and 21,111 shares for the preceding
30 and
90-day
trading periods, respectively. As a result of our small public
float and low-volume or thin trading profile, the
trading price for our common stock has been subject to wide
fluctuations on the basis of very modest trading activity. For
example, on June 11, 2007, the trading price for our common
stock declined 3.82% from $11.25 per share at market close on
the prior day to $10.82 per share on the basis of
21,931 shares trading that day; on June 25, 2007, the
trading price increased 4.36%, from $10.33 per share at market
close on the prior day to $10.78 per share on the basis of
6,035 shares trading; on July 18, 2007, the trading
price declined 2.52% from $10.72 per share at market close on
the prior day to $10.45 per share on the basis of
15,478 shares trading.
Those examples are illustrative of the highly unstable market
conditions that had been confronting investors more generally in
considering trades in our common stock. These conditions
indicated that the trading market for our common stock was not
sufficiently active or stable to provide our stockholders with
meaningful liquidity for their investment. It was not possible,
as a practical matter, for a large number of stockholders (or a
stockholder with a significant holding) to realize the value of
an investment in our common stock, by accessing the public
market to make significant trades, without depressing our stock
price. Moreover, because there was no research coverage of us by
the professional analyst community, the trading profile of our
common stock and its inevitable illiquidity
consequences for our stockholders was not likely to
improve significantly in the absence of an extraordinary
development.
Our board was concerned about the above circumstances, and it
was also concerned about the implications for our profitability
(and related earnings per share performance) of the substantial
expenses associated with public company securities law
compliance obligations for a company of our size and scale of
operations. For fiscal year 2006, we had paid third parties
approximately $2.1 million for such expenses, and we were
estimating at least that amount for fiscal year 2007. The board
recognized that the confluence of these circumstances and
factors was also adversely affecting our ability to plan and
implement successfully our strategic initiatives for future
growth and improved profitability, as well as our
stockholders ability, as a practical matter, to realize
the enhancement in value that we were seeking to create. The
board was also aware in July 2007 that several of our
significant stockholders were concerned about those matters and
were interested in our consideration of potential alternatives
for creating enhanced and realizable value for all stockholders.
Upon considering these matters, the board reached three primary
conclusions: (i) that a comprehensive review and assessment
of potential strategic alternatives was the prudent and proper
path to take in order to address the above concerns;
(ii) that the review should be conducted through a process
that would be facilitated and assisted by an independent
professional financial advisor; and (iii) that such a
process was an essential predicate for the board to confirm or
revise its then strategic analysis of our prospects and options.
In deciding to undertake such a review, the board also concluded
that it would be advisable to have the initial work conducted by
a committee of independent directors, which would have the time
and flexibility to focus in depth on the details of the
broad-ranging scope of information and activities that a
comprehensive strategic alternatives review process would
require. The board thus formed the Special Committee and gave it
broad authority and unrestricted access to our resources to
conduct the review process, and charged it to develop
recommendations on how the board and we should proceed in order
to enhance and unlock realizable value for our stockholders. On
July 30, 2007, the board announced that it had established
the Special Committee to conduct such a comprehensive review and
analysis of strategic alternatives potentially available to our
company. The members of
17
the Special Committee were Richard M. Seigel (Chairman), David
K. Barth and William R. Fenoglio, each of whom was and is an
independent director and, each being a former business
executive, could devote substantial time and bring business
insights to the process. No limits were imposed on the range of
possible alternatives the Special Committee could consider, and
the Special Committee was authorized to engage professional
advisors as it considered necessary to assist in the review and
evaluation of potential alternatives.
On August 20, 2007, following its consideration and
interviews of several investment banking firms, the Special
Committee selected and engaged Robert W. Baird & Co.
Incorporated, or Baird, as independent financial advisor to the
Special Committee. In connection with the engagement, and in
instructing Baird on its initial work, the Special Committee
confirmed with Baird that the broad scope of its charge was to
investigate, review and evaluate potential strategic
alternatives that might enhance and unlock value for our
stockholders. The Special Committee also determined that, while
it wanted to proceed as expeditiously as prudent, its overriding
objective was to conduct a comprehensive review process in order
to make one or more recommendations to our board of directors.
The Special Committee also determined that the process should be
conducted with maximum possible confidentiality, and that it did
not intend to provide interim public updates during the course
of the review process.
On September 11, 2007, Baird met with the Special Committee
and discussed Bairds preliminary review and assessment of
potentially available strategic alternatives, which included the
following: continuing as an independent company and investing in
the organic growth of our business; continuing as an independent
company and pursuing an enhanced share repurchase program;
continuing as an independent company and pursuing growth through
one or more strategic acquisitions; enhancing equity capital,
through a follow-on public offering or one or more private
offerings of equity (PIPE) transactions, in order to fund
potential growth alternatives; continuing as an independent
company and pursuing divestiture of one or more business lines
in order to sharpen strategic focus on the most profitable
business lines; engaging in variations and combinations of
certain of the above alternatives; and exploring a sale of our
company.
Upon considering and discussing preliminary materials and other
information with Baird at the September 11, 2007 meeting,
the Special Committee determined unanimously that, in order to
conduct a comprehensive analysis of potential alternatives, it
should authorize Baird to explore confidentially the level and
nature of potential interests by third parties in an acquisition
of our company. In addition to requiring confidentiality
agreements with prospective purchasers, the Special Committee
also wanted to ensure that any person who received material
non-public information in the process would not use that
information to trade in our stock. The Special Committee
authorized Baird to establish an appropriate process to solicit
such information and assess the quality of interests received,
while emphasizing that its authorization of that process did not
constitute any assessment of the desirability of a sale option
relative to other options being considered.
On October 28, 2007, the Special Committee met (which was
its fifth formal meeting), in order to consider and discuss a
preliminary report from Baird on the indications of interest in
possibly acquiring our company that Baird had received. Baird
contacted 151 prospective buyers, 75 of whom signed a
confidentiality and standstill agreement and received a
confidential information package providing information about our
company. From that group, 12 had submitted written preliminary
indications of interest. At the conclusion of that meeting, the
Special Committee authorized Baird to arrange meetings with 11
of the 12 prospective buyers to allow them to begin to conduct
more focused due diligence reviews of our company and to
consider making a firmer proposal with respect to an acquisition
of our company. (The prospective buyer excluded from that
process had indicated a substantially lower proposed price range
and a substantially longer time frame than those proposed by the
other 11 prospects.)
Consistent with our quarterly routine, on October 30, 2007,
we reported our results of operations for the quarter ended
September 30, 2007 and conducted an earnings conference
call to discuss our results for that quarter, to provide a
strategy update and to review other general business matters.
Consistent with the Special Committees earlier
determination, we did not provide an interim report on the
ongoing strategic alternatives review process. We later filed
our quarterly report on Form l0-Q for that quarter with the SEC
on November 9, 2007.
The meetings to which the 11 prospects were invited (10 of the
11 prospects accepted the invitation) consisted of a series of
individual sessions with each prospect, at which detailed
information about our company was presented by our senior
management including Charles A. Lingenfelter, our
president and chief executive officer, and Jack P. Healey, our
executive vice president and chief financial officer
together with representatives
18
of Baird. The meetings were held between November 6 and
November 15, 2007; following the last such meeting, each
prospect was requested by Baird, if it remained interested in a
possible acquisition of our company, to submit a proposed final
bid by Friday, November 30, 2007 that included detailed
information about proposed financing sources (and commitments
therefor), proposed due diligence and a proposed timetable for
completing a transaction, as well as proposed revisions to the
form of merger agreement that had been prepared by the
companys legal counsel.
Five of the 10 prospects who participated in the above meetings
indicated a continued interest in making a proposal for the
acquisition of our company, and four of them submitted new
written proposals. The fifth prospect confirmed verbally to
Baird that it remained interested, but was, among other things,
not able to meet the requested timetable. All four proposals
reflected an all-cash purchase price, at prices from $9.31 to
$11.56 per share, including a bid of $11.50 per share by
Platinum Equity. The Special Committee met on December 4,
2007 to review and discuss these proposals and the overall
results to date of the acquisition exploration phase of the
strategic review process. Following its consideration of those
results, the Special Committee authorized Baird to
follow-up
with each of the four prospects to solicit their best and
highest bid offers and revised proposals by December 10,
2007.
Baird received three revised proposals on December 10,
2007, including an increased bid to $12.00 per share by Platinum
Equity. The Special Committee met on December 11, 2007 to
review and discuss the three revised proposals received, after
which it authorized Baird to proceed with further negotiations
to seek possible enhancements of the price and other terms of
the bidders proposals.
On December 13, 2007, Baird received an increased bid offer
of $12.50 per share from one of the three prospects
(Bidder A) whose offer price had been $11.00
per share on both December 4 and December 10. On
December 14, 2007, the Special Committee met to review the
remaining bids, which included the $12.00 per share price
offered by Platinum Equity and the new $12.50 per share price
proposed by Bidder A. The Special Committee determined that
it was not appropriate at that time to grant Platinum Equity an
exclusivity period (which it had requested) and authorized Baird
to follow-up
with each of the three bidders to determine the strength of
their commitment to their respective bids and their willingness
to offer more favorable terms to acquire our company.
Additionally, the Special Committee authorized Baird to enter
into a letter of intent with Platinum Equity if it both
requested a letter of intent (as it had done earlier in the
process) and meaningfully increased its proposed price.
Baird received written proposals from each of the three bidders.
Bidder A initially informed Baird that it remained
committed to its proposed price of $12.50 per share, but that it
was not able (or willing) to accelerate its proposed transaction
timeline (which anticipated not being able to complete due
diligence and execute a definitive agreement until April 2008,
as compared to an anticipated signing of a definitive agreement
in early January 2008 by Platinum Equity), and that it could not
eliminate several factors that created significant risks with
respect to its proposed financing of an acquisition of our
company using funding from outside sources. Platinum Equity
informed Baird that it remained committed to and desirous of
completing an acquisition of our company (on an accelerated
timeline and without an outside source financing contingency),
but that it was not willing to increase its offer of $12.00 per
share. The remaining bidder (Bidder B) informed
Baird that it was not in a position to increase its offer, which
was at $11.75 per share and also included an outside source
financing contingency to fund the purchase price.
On December 17, 2007, the Special Committee met to review
its instructions to Baird in light of the developments arising
out of Bairds
follow-up
communications with each of the bidders. The Special Committee
determined that, in light of Platinum Equitys offer price
of $12.00, its apparent ability to complete a transaction in an
expeditious fashion without outside financing contingency, its
depth of knowledge of our company derived from the significant
amount of due diligence it had conducted, its ownership of
Strategic Distribution, Inc. (a company also involved in the
industrial MROP business), and its willingness to proceed
without an exclusivity arrangement, Platinum Equitys
proposal was more favorable to our stockholders than the
respective bids submitted by Bidder A and Bidder B.
The Special Committee then authorized Baird, together with the
companys legal counsel, to work with Platinum Equity to
develop a final proposal, including a proposed executable merger
agreement. However, the Special Committee also concluded that it
would remain open to a
follow-up
proposal from Bidder A if it could commit to more
substantial terms for funding the payment of its proposed
purchase price and to a more accelerated timeline. The Special
Committee was increasingly concerned about the heightened levels
of uncertainties in the financial community and capital markets
as a result of the increasingly negative lending environment and
19
predictions of a general economic downturn that could adversely
affect our industry and business prospects. As a result, the
Special Committee was intensely focused on each bidders
financial wherewithal to consummate its asserted interest in an
acquisition of our company and the extent to which its interest
had been or was being substantiated by detailed due diligence on
our company and its industry.
Between December 17, 2007 and January 14, 2008,
Platinum Equity and its representatives and advisors continued
their financial and operational due diligence investigation of
our company, including a series of meetings between January 8
and 11, 2008 with our management and representatives of Baird.
During this period, the terms of the Platinum Merger Agreement,
other than the merger consideration, were negotiated by legal
counsel and financial advisors representing Platinum Equity and
our company, respectively.
On January 14, 2008, the Special Committee met with Baird
and company legal counsel to review and consider the status of
the proposal by Platinum Equity and the financial analyses and
report Baird had prepared on the basis of Platinum Equitys
proposal and its then price of $12.00 per share. At that
meeting, the Special Committee received a report from our
management and legal counsel concerning the terms of the
Platinum Merger Agreement as then proposed. Baird delivered to
the Special Committee its comprehensive written report on all of
the strategic alternatives that Baird had considered and
discussed with the Special Committee as potentially available to
our company. Baird also reviewed its preliminary financial
analyses with respect to the proposed merger and the substance
of its proposed opinion with respect to the fairness, from a
financial point of view, of the merger consideration that would
be received by the holders of our common stock pursuant to a
merger with Platinum Equity as then proposed. The members of the
Special Committee determined that, with the above materials and
information, they had sufficient information for the Special
Committee to complete its review and develop its recommendations
to our board of directors.
The Special Committee, which had then been considering strategic
alternatives for over four months, and had met formally on eight
occasions with Baird after its engagement of Baird as its
financial advisor (and discussed various issues among
themselves, and with representatives of Baird and legal counsel,
informally on numerous other occasions), engaged in a
then-anticipated final round of discussions with Baird and legal
counsel to complete its deliberations. Thereafter, the Special
Committee developed recommendations for delivery to our board of
directors to approve the then-proposed Platinum Merger Agreement
with Platinum Equity at a price of $12.00 per share, scheduled a
meeting of our full board of directors for January 17, 2008
to consider those recommendations, and instructed Baird and
legal counsel to deliver their respective materials to our other
directors for them to begin consideration in preparation for the
January 17 meeting. Baird and legal counsel sent those
materials which included Bairds financial
analyses and report on the strategic alternatives review
progress, the proposed Platinum Merger Agreement and legal
counsels analysis of its principal provisions, and legal
counsels analysis of applicable fiduciary duties and legal
standards for the directors in considering the Special
Committees recommendations and related matters
for next-day
delivery on January 15. The Special Committee gave
immediate email notice to the other directors of the meeting and
its purpose.
On the morning of January 15, 2008, Platinum Equity
contacted Baird to inform it that Platinum Equity was reducing
its proposed purchase price to $10.00 per share, citing risk in
improving the MROP business, risk in the storeroom management
business, including customer risk, and the overall decline in
the industrial economy. Platinum Equity confirmed its reduced
price, and its continued interest in completing an acquisition
at that price, in a new written proposal delivered later that
morning. Upon learning about that development, the Special
Committee convened a meeting on the afternoon of January 16 with
Baird and legal counsel to assess the situation and determine
its next steps.
The Special Committee determined (i) to cancel the meeting
of our board of directors that had been scheduled for January 17
to consider the recommendations that had been developed at the
Special Committees January 14 meeting, (ii) to
withdraw those recommendations as moot in light of the price
reduction by Platinum Equity, and (iii) to resume the
strategic review process, including by renewing discussions with
the other bidders who continued to be interested in an
acquisition of our company. As is customary, none of the other
bidders had been informed of the identity of (or the specific
status of negotiations with) Platinum Equity. The Special
Committee instructed Baird to contact each of the five remaining
highest bidders, which included Bidder A and Bidder B;
a bidder (Bidder C) that had not yet commenced
any meaningful amount of due diligence, but that had indicated
an interest above the
20
$10.00 per share reduced price by Platinum Equity; another
bidder, WESCO, that had expressed verbally a significant level
of interest in a potential acquisition, but whose time frame for
conducting a detailed due diligence review and commencing
specific negotiations had previously been considered too remote
to meet the Special Committees timetable for completing
its review and making recommendations to our board of directors;
and Platinum Equity.
Over the ensuing three weeks, Baird contacted each of these five
bidders, and we provided each with additional and updated
information about our company and held additional meetings with
them to facilitate follow-on due diligence analyses and a new
round of bid proposals. Platinum Equity was not requested to
make any further proposal during this period.
By February 11, 2008, Baird had received new written
proposals from each of Bidder B (at a price of $9.08 per
share, significantly reduced from its earlier proposed price of
$11.75 per share); Bidder C (at a price of $8.69 per share,
significantly reduced from its earlier written proposed price
range of $9.31 to $10.04 per share and its earlier verbal
indication of no higher than $11.00 per share); and WESCO (at a
price range of $10.49 to $10.98 per share, with no price having
been proposed since its initial preliminary indication of
interest in October 2007 of $11.06 to $11.54 per share).
Bidder A did not submit a new proposal. The time frame for
anticipated completion of due diligence and readiness to execute
a definitive agreement continued to be much longer for each of
these bidders than the time frame Platinum Equity had proposed.
In addition, WESCOs proposal also reflected significant
uncertainties with respect to its execution because it was
conditioned upon the identification (as part of its detailed
financial due diligence, which had not been commenced) of
$30 million or more of sustainable SG&A savings and
sales synergies to be realized from its acquisition of our
company.
On February 12, 2008, the Special Committee met to review
and consider these developments with Baird and legal counsel. In
analyzing the significantly reduced purchase prices reflected in
the new proposals, the Special Committee considered with Baird
the possible implications of the deteriorating lending
environment and general economic conditions, the general decline
in the stock prices of our competitors, and the overall decline
in certain broader market indices. The Special Committee
determined that these factors were likely affecting the new
reduced price levels being proposed by each of the bidders; that
each had potential for further eroding effects on the prices
that might be proposed to acquire our company; and that the
current trading price level for our common stock was likely
being favorably influenced by the ongoing strategic review
process. The Special Committee determined to continue and
accelerate its exploration of the option for a possible
acquisition of our company, and it instructed Baird to continue
negotiations with each of Bidders B and C and WESCO, and to
re-approach Platinum Equity to confirm its continued interest
and to seek an increase in its price.
On February 15, 2008, following further discussions with
Baird after the Special Committees February 12, 2008
meeting, Platinum Equity submitted a revised proposal at a price
of $10.20 per share, and confirmed its preparedness to complete
its final due diligence within days and to execute a definitive
merger agreement in substantially the form that had been nearly
completed on January 14, 2008. The Special Committee met on
Saturday morning, February 16, 2008, to consider the
revised proposal from Platinum Equity and to discuss with Baird
its preliminary assessment of the potential fairness to our
stockholders of the $10.20 per share proposed price. The Special
Committee also considered again the pros and cons of the
proposals from the other bidders, including from a standpoint of
likely execution without changes in their respective price
levels during the period over which those bidders would be
conducting (and, in some cases, commencing) detailed due
diligence and negotiating a definitive acquisition agreement,
and without significant risks or uncertainties in financing the
ultimate purchase price. The Special Committee instructed Baird
to seek further price enhancement from Platinum Equity, in
addition to specific confirmation of its timeline for executing
definitive documents and its ability to fund the purchase price
without outside financing.
During the afternoon of Saturday, February 16, 2008,
Platinum Equity submitted a revised written proposal at $10.30
per share, along with the form of equity commitment letter from
three of its sponsored investment funds with respect to funding
the purchase price to our stockholders at $10.30 per share, and
funding any termination fee obligation that those Platinum
Equity affiliates might have, under the Platinum Merger
Agreement.
In the wake of the above developments, and drawing upon the
analyses and deliberations it had conducted as part of its
January 14 meeting, the Special Committee concluded that it was
prepared to receive and consider an
21
updated version of Bairds final analyses and report, to
complete its work on the strategic alternatives review, and to
develop an updated set of recommendations for our board. The
Special Committee scheduled a meeting (its twelfth formal
meeting) for February 19, 2008 with Baird, legal counsel
and our senior management to consider Bairds final report
and complete the Special Committees strategic review
process, and it requested that the regularly scheduled meeting
of our full board of directors for February 20, 2008, be
converted into a meeting to discuss the Special Committees
recommendations.
At the February 19, 2008 meeting, the Special Committee
received a report from our management and legal counsel
concerning the terms and readiness of the Platinum Merger
Agreement. Baird delivered to the Special Committee its
comprehensive written report on all of the strategic
alternatives that Baird had considered and discussed with the
Special Committee as potentially available to our company. Baird
also reviewed its financial analyses with respect to the
proposed merger and the substance of its proposed opinion with
respect to the fairness, from a financial point of view, of the
$10.30 per share merger consideration that would be received by
the holders of our common stock pursuant to a merger with a
Platinum Equity affiliate if it were to be approved. The members
of the Special Committee determined that, with the above
materials and information, they had sufficient information for
the Special Committee to complete its review and develop its
recommendations to our board of directors. The Special
Committee, which at that point had been considering strategic
alternatives for over five months, and had held ten formal
meetings with Baird (the other two formal meetings had been held
before Baird was engaged) (and discussed various issues among
themselves, and with representatives of Baird and legal counsel,
informally on numerous occasions), engaged in a final round of
discussions with Baird and legal counsel and completed its
deliberations, leading to its recommendation to our board of
directors that it approve the Platinum Merger Agreement and
recommend its adoption by our stockholders.
In connection with planning for the subsequently canceled
January 17, 2008 meeting of our board that had been called
to consider the earlier Platinum Equity proposal, Baird and
legal counsel had delivered to all of our other directors the
financial and legal analyses that had been prepared with respect
to the strategic alternatives review process at that time. While
those materials were not used in connection with a formal
meeting or discussions with the other directors, they or their
contents formed the basis for earlier informal updates by the
Special Committee to our other directors on the progress of the
strategic review process, the targeted timing for its
completion, and the consideration by the Special Committee of a
sale of our company as a likely recommendation. The Special
Committees recommendations and supporting materials were
delivered to all of the other members of our board of directors
on the afternoon of February 19, 2008, and the directors,
senior management and legal counsel convened informally to
preview the materials and prepare for our boards
February 20, 2008 meeting with Baird.
Our board of directors met on February 20, 2008, at which
meeting it considered and deliberated formally on the
recommendations of the Special Committee, along with the written
report by Baird that had been considered by the Special
Committee in developing its recommendation and the proposed
execution version of the Platinum Merger Agreement. The Special
Committee reviewed its recommendation, Baird presented its
report, and the members of our board of directors discussed the
recommendation and related matters among themselves and with
Baird and legal counsel. Baird also presented to our board of
directors the final version of its written fairness opinion with
respect to the merger consideration, following our board of
directors engagement of Baird as financial advisor to the
board of directors for that purpose.
After these deliberations, our board of directors unanimously
accepted the recommendation of the Special Committee to approve
the Platinum Merger Agreement, determined and declared that the
merger and the Platinum Merger Agreement were advisable and in
the best interest of our stockholders, and recommended the
adoption of the Platinum Merger Agreement by our stockholders.
Pursuant to authority given by our board of directors, the
Platinum Merger Agreement was finalized and executed by us, an
affiliate of Platinum Equity and the subsidiary of such
affiliate later that day, following which we issued a press
release to announce its execution. On March 20, 2008, the
parties executed an amendment to the Platinum Merger Agreement,
to be effective from and as of February 20, 2008, in order
to clarify certain information.
On March 20, 2008, the Special Committee and our board of
directors received a letter from an officer of WESCO indicating
that WESCO would be willing to offer to acquire our company at a
price of $11.00 per share, subject to due diligence and possible
unspecified conditions relating to our operating performance
potential, and
22
without any indication of other critical factors, including
whether WESCOs board of directors had approved or
authorized the apparent proposal or whether financing would be
assured or contingent. The Special Committee, continuing to act
under authorization from our board of directors, met later on
March 20, 2008 to consider this indication of interest from
WESCO in light of our contractual obligations under the Platinum
Merger Agreement, which permitted our board of directors to
consider future offers as required by its fiduciary duties. The
Special Committee determined that the WESCO letter was a bona
fide acquisition proposal under the Platinum Merger
Agreement, but that, because it did not address several
significant matters to which a formal and potentially binding
offer would be subject, the letter was not sufficiently credible
to be considered reasonably likely to lead to superior
proposal, as required to avoid violating the Platinum
Merger Agreement. Although not required under the Merger
Agreement, the Special Committee determined to provide notice to
Platinum Equity on March 21, 2008 of receipt of the
acquisition proposal from WESCO. We also responded to WESCO,
informing it that its March 20, 2008 letter was not a
sufficiently credible acquisition proposal for the board of
directors to consider under the Platinum Merger Agreement, and
that we would continue moving forward with Platinum Equity.
In addition to delivering letters to Platinum Equity and WESCO
on March 21, 2008, we also filed with the SEC the
preliminary proxy statement for a meeting to approve the
Platinum Merger Agreement. The
ten-day
period allowed for possible notification of SEC review of the
proxy statement expired on March 31, 2008, without review
or comment by the SEC. On that same day, we received a second
letter from WESCO, reiterating the $11.00 per share level of
interest set forth in its March 20 letter, but providing more
detail about its possible offer, including that its offer would
be subject to only the completion of confirmatory due diligence
and that WESCOs board of directors had authorized the
proposal. The Special Committee determined that our full board
of directors, and not the Special Committee alone, should meet
to consider and evaluate WESCOs March 31 letter.
Our board of directors met on April 2, 2008 and, in
consultation with Baird and company legal counsel, unanimously
agreed that WESCOs enhanced March 31 letter comprised a
bona fide and credible acquisition proposal that could
reasonably lead to a superior proposal. The board of directors
authorized Baird to permit WESCO personnel to access the virtual
data room and set up meetings with our management in order to
begin its confirmatory due diligence process.
On April 3, 2008, we delivered a letter to WESCO reminding
it of our obligations to Platinum Equity and informing it that
its March 31 letter, while it was credible and reasonably could
lead to a superior proposal, would require additional elements
to qualify as a superior proposal under the Platinum Merger
Agreement. We also notified Platinum Equity of WESCOs
enhanced letter and the board of directors determination
that the letter was a bona fide and credible acquisition
proposal that reasonably could lead to a superior proposal.
On Friday evening, April 4, 2008, we received a letter from
LKCM Private Discipline Master Fund, SPC (LKCM), who
had become our largest stockholder (at approximately 14.9%) by a
series of recent purchases of our common stock, offering to
acquire our company at a price of $11.70 per share in cash. The
board of directors met on Sunday, April 6, 2008 to consider
the LKCM letter and, in consultation with Baird and company
legal counsel, determined unanimously that the LKCM letter was a
bona fide and credible acquisition proposal that reasonably
could lead to a superior proposal relative to the Platinum
Merger Agreement. The board of directors also determined that we
should publicly announce both the LKCM offer and the WESCO
proposal, which we did in a press release on April 7, 2008.
As a condition to allowing LKCM to proceed with its due
diligence, we required LKCM to enter into a confidentiality and
standstill agreement substantially similar to the
confidentiality agreements that all other bidders had been
required to sign, which was delivered to us on April 7,
2008. LKCM and its affiliates were then permitted access to the
virtual data room and to our management to conduct due diligence.
Each bidder and its representatives and advisors conducted due
diligence investigations of our company, including a series of
meetings with our management and representatives of Baird
through April 15, 2008. WESCO had begun its confirmatory
due diligence on April 3, 2008, and LKCM began its due
diligence on April 7, 2008.
On April 15, 2008, WESCO submitted a definitive offer of
$11.75 per share (increased from its earlier proposal of $11.00
per share), accompanied by an executed merger agreement that was
substantially similar to the Platinum
23
Merger Agreement. The WESCO offer provided a $1.45 per share
increase (approximately 14.1%) over the price provided in the
Platinum Merger Agreement, with payment ability supported by a
letter from one of WESCOs third-party lenders, and a
demonstrated ability to act quickly. WESCO indicated that its
offer would expire at 5:00 p.m., Eastern Time, on
April 23, 2008. Our board of directors met later on the
afternoon of April 15, 2008 to review and consider the
definitive offer submitted by WESCO, and, in consultation with
Baird and company legal counsel, determined that WESCOs
definitive offer constituted a superior proposal under the
Platinum Merger Agreement. Our board of directors authorized us
to notify Platinum Equity and LKCM of WESCOs definitive
offer of $11.75 per share, and that we would permit LKCM to
continue to evaluate our company.
On the next day, April 16, 2008, we formally notified
Platinum Equity of the superior proposal received from WESCO and
informed Platinum Equity that it should respond by
5:00 p.m., Eastern Time, on Monday, April 21, 2008.
In response to WESCOs definitive offer, Platinum Equity
submitted a revised definitive offer on the afternoon of
April 21, 2008, in the form of an executed amendment to the
Platinum Merger Agreement, increasing its purchase price to
$11.80 per share. This revised offer price represented a $1.50
per share, or 14.5%, increase over the $10.30 per share price in
the Platinum Merger Agreement and was set to expire at
5:00 p.m., Eastern Time, on April 22, 2008. Our board
of directors met on the evening of April 21, 2008 to
consider the Platinum Equity revised offer, as well as the
respective positions of WESCO and LKCM. Our board of directors
determined that Platinum Equitys offer was superior to
WESCOs offer and authorized us to execute the amendment to
the Platinum Merger Agreement if neither WESCO nor LKCM acted to
make a superior proposal before 3:00 p.m., Eastern Time, on
April 22, 2008, in light of the 5:00 p.m. deadline set
by Platinum Equity for its offer.
On the morning of April 22, 2008, WESCO issued a press
release indicating that it would not continue to pursue an
acquisition of our company.
Prior to April 20, 2008, counsel for LKCM submitted a draft
merger agreement and draft equity commitment letter to our
counsel. Our counsel negotiated LKCMs drafts with counsel
for LKCM. Before 3:00 p.m. on April 22, 2008, LKCM
submitted a definitive offer to acquire our company for $12.10
per share, by delivering an executed merger agreement on terms
that had been negotiated by our respective counsel. LKCMs
offer was accompanied by an equity commitment letter in support
of the payment obligations of Eiger under the merger agreement.
The equity commitment letter was in the form negotiated between
our respective counsel. LKCM indicated that its offer of $12.10
per share would expire at 12:00 p.m., Eastern Time, on
Saturday, April 26, 2008.
Our board of directors met at 3:30 p.m., Eastern Time, on
the afternoon of April 22, 2008, to review and consider the
definitive offer submitted by LKCM. Our board of directors
determined that LKCMs definitive offer constituted a
superior proposal under the Platinum Merger Agreement and
authorized us to execute the merger agreement presented by LKCM
if Platinum Equity did not exercise its right to match or top
the LKCM definitive offer within the three business days
allotted under the Platinum Merger Agreement. We notified
Platinum Equity of LKCMs superior proposal, and indicated
that Platinum Equitys three
business-day
right to match or exceed LKCMs offer would expire at
5:00 p.m., Eastern Time, on Friday, April 25, 2008.
On April 25, 2008, Platinum Equity informed us that it
would not match LKCMs $12.10 per share offer and requested
the payment of the termination fee that would be owed to it if
we terminated the Platinum Merger Agreement in order to accept
the offer from LKCM. On the evening of April 25, 2008,
following receipt of Platinum Equitys decision not to
match the price offered by LKCM for Eiger to acquire our
company, we executed the merger agreement with Eiger that had
been presented by LKCM, and on April 28, 2008, we paid the
termination fee of approximately $3.0 million to Platinum
Equity.
Reasons
for the Merger
In determining that the merger with Eiger is advisable and in
the best interest of our stockholders, our board of directors
proceeded from the basis of the extensive analyses and
considerations that had been performed in connection with its
decision to recommend the sale of our company for cash pursuant
to the Platinum Merger Agreement, which had included the
recommendation of the Special Committee following its six-month
strategic alternatives review process. From that basis, our
board of directors considered the subsequent offers of
purportedly
24
superior proposals as summarized above, and it also discussed
relevant matters with members of our senior management, legal
counsel and Baird as its financial advisor. The following
describes material reasons, factors and information taken into
account by our board of directors (or by the Special Committee
in making its earlier recommendation to our board of directors
as discussed above) in deciding to approve and adopt the merger
agreement and the transactions contemplated thereby and to
recommend that our stockholders adopt the merger agreement:
|
|
|
|
|
Merger Consideration Premium. Our board of
directors considered the fact that the merger consideration
represents a premium of 32.2% to our common stocks closing
trading price of $9.15 on July 27, 2007 (the last trading
day prior to our announcement that the Special Committee had
been formed to review potential strategic alternatives for the
company), and a premium of 31.4% to our common stocks
closing trading price of $9.21 on February 19, 2008 (the
trading day just prior to the date on which our board of
directors approved our execution of the Platinum Merger
Agreement), and the opportunity for our stockholders to realize
currently such premium in cash. Our board of directors also
considered these premium amounts in light of the general decline
in the stock prices of our publicly traded competitors (and the
overall decline in certain broader stock market indices) since
July 27, 2007; the likelihood that the trading price of our
common stock on February 19, 2008 was being favorably
affected by the conduct of the strategic review process; and the
fact that the trading price of our common stock between
February 20, 2008 and April 22, 2008 (following the
February 20, 2008 announcement of the Platinum Merger
Agreement) correlated directly with that announcement and
subsequent announced developments. For example, between
July 27, 2007 and February 15, 2008, there had been a
20.6% decline in the stock prices of the group of our publicly
held competitors that was being used as an industrial
distribution index for the strategic review process, and
there had been a 7.5% decline in the Standard &
Poors 500 Index.
|
|
|
|
Trading Profile and Illiquidity of Our Common
Stock. Our board of directors considered the
historically consistent thin trading profile of our
common stock, which has resulted in widely fluctuating trading
prices based on a small number of shares and the unavailability
of the public trading market as a source of meaningful liquidity
for our stockholders. In light of our small public float and the
absence of research coverage on our common stock by the
professional analysts community, our board of directors was
concerned that a significant improvement in the liquidity of our
common stock, in order to permit our stockholders to realize
stable or predictable value for their shares through the public
trading market, was not likely in the absence of an
extraordinary development beyond our ability to control or
influence in the foreseeable future.
|
|
|
|
Costs of Remaining Public. Our board of
directors considered the significant costs of our continuing as
a public company and the implications of such costs for our
future profitability and the trading prices of our common stock
in light of our relatively small size. The merger will allow us
to save approximately $2 million annually in
administrative, accounting and legal expenses associated with
disclosure and reporting requirements under SEC rules and
regulations, including the Sarbanes-Oxley Act of 2002 and the
Securities Exchange Act of 1934, as amended. Similarly, the
merger will allow us to save a less tangible, but significant,
expenditure of managements time and attention to such
disclosure and reporting requirements, as well as to
unaffiliated stockholder concerns.
|
|
|
|
Uncertainties of General Economic
Conditions. Our board of directors considered the
potential risks and other implications for our business of the
declining general economic conditions and prospects for our
industry that had been exacerbated in recent months as the
impact of the increasingly negative lending environment expanded
and deepened. Our board of directors was concerned that these
conditions would hamper our ability to achieve significant
improved operating results and enhanced profitability, despite
our strategic initiatives to do so.
|
|
|
|
Terms of the Merger Agreement. Our board of
directors considered the financial and other terms and
conditions of the merger agreement, by themselves and in
comparison to the terms of agreements in other similar
transactions, including:
|
|
|
|
|
|
the all-cash nature of the merger consideration, which provides
our stockholders immediate liquidity and certainty of value for
their shares;
|
25
|
|
|
|
|
the right of our board of directors to discharge its fiduciary
duties to our stockholders and consider unsolicited acquisition
proposals, if they offer superior value to our stockholders, and
to furnish information to and conduct negotiations with third
parties who may make such a superior acquisition proposal prior
to the effective time of the merger;
|
|
|
|
the ability of our board of directors to change its
recommendation with respect to the merger if we receive an
unsolicited acquisition proposal that our board of directors
determines to be superior to the merger;
|
|
|
|
Eigers obligation to pay us a termination fee of 3% of the
aggregate merger consideration, or approximately
$3.5 million and reimburse us for the termination fee of
approximately $3.0 million we paid to Platinum, if Eiger
fails to timely meet certain material obligations under the
merger agreement or commits a material breach of the merger
agreement;
|
|
|
|
our board of directors understanding, after consultation
with its financial advisor and legal counsel, that our
obligation to pay a termination fee of 3% of the aggregate
merger consideration, or approximately $3.5 million, to
Eiger (and the circumstances when such fee and reimbursement is
payable) is reasonable and customary in light of the benefits of
the merger, commercial practice and transactions of this size
and nature;
|
|
|
|
Eigers obligation to complete the merger not being subject
to any financing contingencies, and Eigers demonstration,
through an equity commitment letter from LKCM Private Discipline
Master Fund, SPC, of its ability to pay the merger consideration
on the contemplated closing date; and
|
|
|
|
the likelihood of satisfying the other conditions to
Eigers obligations to complete the merger and the
likelihood that the merger will be completed.
|
|
|
|
|
|
Extensive Consideration of Other Alternatives for Our
Stockholders. After an extensive review by the
Special Committee (conducted over a six-month period, with the
assistance of Baird as independent financial advisor) of other
strategic alternatives possibly available to us
which included, among others, continuing as an independent
company and investing in the organic growth of our business;
continuing as an independent company and pursuing an enhanced
share repurchase program; continuing as an independent company
and pursuing growth through one or more strategic acquisitions;
enhancing equity capital, through a follow-on public offering or
one or more PIPE transactions, in order to fund potential growth
alternatives; and continuing as an independent company and
pursuing divestiture of one or more business lines
our board of directors determined that an acquisition of our
company would be more favorable to our stockholders than any
other alternative reasonably available to us in the foreseeable
future. Our board of directors then used its fiduciary
out rights to consider and accept the highest price that
was subsequently offered following the February 20, 2008
announcement of the $10.30 per share Platinum Merger Agreement.
|
|
|
|
Financial Analysis and Opinion of Robert W. Baird &
Co. Incorporated. Our board of directors
considered the financial analyses prepared for and reviewed and
discussed with the Special Committee and our board of directors
by Baird in connection with the wide range of strategic
alternatives considered, along with the respective opinions of
Baird as of February 20, 2008 with respect to
the original $10.30 per share price offered by Platinum Equity,
and as of April 25, 2008 in confirmation of the board of
directors assessment of the $12.10 per share price payable
by Eiger with respect to the fairness, from a
financial point of view, to our stockholders of the
consideration to be received by them in the merger. See
The Merger Opinion of Robert W.
Baird & Co. Incorporated beginning on
page .
|
Our board of directors also considered a variety of risks and
other potentially negative factors relating to the merger in its
deliberations, including:
|
|
|
|
|
Becoming a Non-Public Wholly-Owned
Subsidiary. We will no longer exist as an
independent, publicly-traded company, and our stockholders will
no longer participate in any of our future earnings or growth
and will not benefit from any appreciation in our value.
|
|
|
|
Taxation. Gains realized from an all-cash
transaction would generally be taxable to our stockholders for
U.S. federal income tax purposes.
|
26
|
|
|
|
|
Disruptions. The potential impact of the
announcement and pendency of the merger, including the potential
impact of the merger on our employees and customers and the
potential risk of diverting management focus and resources from
other strategic opportunities and from operational matters while
working to negotiate and close the merger with Eiger, which
could potentially impair our prospects as an independent company
if the merger is not consummated.
|
|
|
|
Operating Restrictions. Pursuant to the merger
agreement, we must generally conduct our business in the
ordinary course, and we are subject to a variety of other
restrictions on the conduct of our business prior to closing of
the merger (or termination of the merger agreement) without the
consent of Eiger, which may delay or prevent us from pursuing
business opportunities that may arise or preclude actions that
would be advisable if we were to remain an independent company
because the merger was not consummated.
|
|
|
|
Failure to Close. Generally, the risks and
costs to us if the merger does not close for any reason,
including the diversion of management and employee attention,
employee attrition and the effect on customer and vendor
relationships.
|
|
|
|
No Solicitation; Termination Fee. Under the
terms of the merger agreement, we cannot solicit other
acquisition proposals or, except under certain special
circumstances, terminate the merger agreement in connection with
other acquisition proposals, and we must pay to Eiger a
termination fee of 3% of the aggregate merger consideration, or
approximately $3.5 million, if the merger agreement is
terminated under certain circumstances, which might have the
effect of discouraging other parties from proposing an
alternative transaction that might be more advantageous to our
stockholders than the merger.
|
|
|
|
Officers and Directors. The interests of our
executive officers and directors in the merger may appear to be
different from, or in addition to, the interests of our
stockholders generally. See Interests of Our Directors
and Executive Officers in the Merger beginning on
page .
|
The foregoing discussion is not intended to be exhaustive; it
only summarizes certain material factors considered by our board
of directors in connection with the merger. After considering
these factors and consulting with legal counsel and its
financial advisor, our board of directors concluded that the
positive factors relating to the merger and the merger agreement
outweighed the negative factors. In view of the wide variety of
factors it considered, our board of directors did not find it
practicable to quantify or otherwise assign relative weights to
the foregoing factors. Our board of directors unanimously
approved the merger agreement and determined and declared that
the merger and the merger agreement are advisable and in the
best interest of our stockholders. Our board of directors
recommends that our stockholders adopt the merger agreement
based upon the totality of the information presented to and
considered by it.
Opinion
of Robert W. Baird & Co. Incorporated
Our board of directors (and its Special Committee) retained
Robert W. Baird & Co. Incorporated, or Baird, as its
financial advisor in connection with processes that culminated
in the merger agreement, including to deliver an opinion to our
board of directors as to the fairness, from a financial point of
view, of the consideration to be received by the holders of our
common stock in a transaction that our board of directors might
approve. Following our board of directors determination on
April 22, 2008 that the $12.10 per share offer (and related
merger agreement) from LKCM was superior to both the original
$10.30 per share price and revised $11.80 per share offer from
Platinum Equity, Baird delivered its written opinion to our
board of directors to the effect that, as of April 25,
2008, subject to the contents of such opinion, including the
various assumptions and limitations set forth therein, the
consideration of $12.10 in cash per share of common stock (the
Consideration) to be received by the holders of our
common stock pursuant to the merger agreement was fair, from a
financial point of view, to our holders of common stock.
Bairds opinion was approved by a fairness committee, all
of whose members were not involved in providing financial
advisory services on behalf of Baird to us in connection with
the merger.
27
The full text of Bairds written opinion, in its letter
dated May 1, 2008 with respect to its opinion as of
April 25, 2008, which sets forth the assumptions made,
general procedures followed, matters considered and limitations
on the scope of review undertaken by Baird in rendering its
opinion, is attached as Annex B to this proxy statement and
is incorporated herein by reference. Baird provided its opinion
for the information and assistance of our board of directors in
connection with confirming its assessment of the merger. The
opinion is not directed to any other person and is directed only
to the fairness, as of the date of the opinion and from a
financial point of view, to the holders of our common stock of
the Consideration to be received by them and does not constitute
a recommendation to any stockholder as to how such stockholder
should vote with respect to the merger. Baird expresses no
opinion about the fairness of the amount or nature of the
compensation to any of our officers, directors or employees, or
class of such persons, relative to the Consideration to be
received by our stockholders. The summary of Bairds
opinion set forth below is qualified in its entirety by
reference to the full text of such opinion attached as
Annex B to this proxy statement. You are urged to read the
opinion carefully in its entirety.
In conducting its investigation and analyses and in arriving at
its opinion herein, Baird reviewed such information and took
into account such financial and economic factors, investment
banking procedures and considerations as it deemed relevant
under the circumstances. In that connection, Baird has, among
other things:
|
|
|
|
|
reviewed certain of our audited consolidated financial
statements and internal information, primarily financial in
nature, including financial forecasts that were provided to
Baird by us and not publicly available (the
Forecasts), concerning our business and operations
furnished to Baird for purposes of its analysis;
|
|
|
|
reviewed publicly available information including, but not
limited to, our recent filings with the Securities and Exchange
Commission;
|
|
|
|
reviewed certain pro forma adjustments related to us, as well as
certain normalizing adjustments related to non-recurring items,
that were provided to Baird by us;
|
|
|
|
reviewed current and historical market prices of our common
stock;
|
|
|
|
reviewed the merger agreement dated April 25, 2008 (the
Merger Agreement) in the form presented to the board
of directors;
|
|
|
|
reviewed publicly available financial and stock market data with
respect to certain other companies Baird believed to be
generally relevant;
|
|
|
|
compared our financial and operational results with those of
certain publicly traded companies Baird deemed relevant and
considered the market trading multiples of such companies;
|
|
|
|
compared the transaction multiples implied by the Consideration
with the corresponding acquisition transaction multiples in
certain business combinations Baird deemed relevant; and
|
|
|
|
considered the present values of our forecasted cash flows.
|
Baird held discussions with members of our senior management
concerning our historical and current financial condition and
operating results, as well as our future prospects. As a part of
its engagement, Baird was requested to and did solicit third
party indications of interest in acquiring all or any part of
our company and held discussions with certain of these parties
prior to the date hereof. Baird also considered such other
information, financial studies, analyses and investigations and
financial, economic and market criteria that it deemed relevant
for the preparation of its opinion.
In arriving at its opinion, Baird assumed and relied upon the
accuracy and completeness of all of the financial and other
information that was publicly available or provided by us, or on
our behalf, to Baird. Baird did not independently verify any
information supplied to it by us or LKCM that formed a
substantial basis for its opinion. Baird was not engaged to
independently verify, and it did not assume any responsibility
to verify, any such
28
information, and Baird assumed that we were not aware of any
information that we or our advisors prepared that might be
material to Bairds opinion that had not been provided to
Baird. Baird assumed that:
|
|
|
|
|
all of our material assets and liabilities (contingent or
otherwise, known or unknown) were as set forth in our financial
statements;
|
|
|
|
the financial statements that we provided to Baird presented
fairly our results of operations, cash flows and financial
condition for the periods indicated and were prepared in
conformity with U.S. generally accepted accounting
principles consistently applied;
|
|
|
|
the Forecasts were reasonably prepared on bases reflecting the
best available estimates and good faith judgments of our senior
management as to our future performance, and Baird relied upon
such Forecasts in the preparation of its opinion;
|
|
|
|
the merger will be consummated in accordance with the terms and
conditions of the Merger Agreement without any amendment thereto
and without waiver by any party of any of the conditions to
their respective obligations thereunder;
|
|
|
|
in all respects material to its analysis, the representations
and warranties contained in the Merger Agreement are true and
correct and that each party will perform all of the covenants
and agreements required to be performed by it
thereunder; and
|
|
|
|
all material corporate, governmental, regulatory or other
consents and approvals required to consummate the merger have
been or will be obtained.
|
Baird has relied as to all legal matters regarding the merger on
the advice of our legal counsel. In conducting its review, Baird
did not undertake nor obtain an independent evaluation or
appraisal of any of our assets or liabilities (contingent or
otherwise) nor did it make a physical inspection of the
properties or facilities of our company. Baird did not consider
any strategic, operating or cost benefits that might result from
the merger or any expenses relating to the merger. In each case,
Baird made the above assumptions with our consent.
Bairds opinion necessarily is based upon economic,
monetary and market conditions as they existed and could be
evaluated on the date of such opinion, and its opinion does not
predict or take into account any changes that may occur, or
information that may become available, after the date of such
opinion. Baird has no responsibility for updating, revising or
reaffirming its opinion on circumstances or events occurring
after the date of the opinion.
Bairds opinion was prepared at the request and for the
information of our board of directors, and may not be relied
upon, used for any other purpose or disclosed to any other party
without Bairds prior written consent; provided, however
that Bairds opinion may be reproduced in full in this
proxy statement. Bairds opinion is limited to the
fairness, from a financial point of view, of the Consideration
to be received by our stockholders in the proposed merger, and
Baird has expressed no opinion as to the fairness of the
proposed merger to, or any consideration of, creditors or other
constituencies or our underlying decision to engage in the
merger. Accordingly, Bairds opinion does not address the
relative merits of: (i) the merger, the merger agreement or
any other agreements or other matters provided for or
contemplated by the merger agreement; (ii) any other
transactions that may be or might have been available as an
alternative to the merger; or (iii) the merger compared to
any other potential alternative transactions or business
strategies considered by our board of directors and,
accordingly, Baird relied upon its discussions with the Special
Committee and our senior management with respect to the
availability and consequences of any alternatives to the merger.
At our direction, Baird was not asked to, and Baird did not,
offer any opinion as to the terms, other than the Consideration
to the extent expressly specified herein, of the Merger
Agreement or the form of the merger. Baird expressed no opinion
as to the price at which our common stock will trade at any time
in the future, whether before or after the closing of the
transactions contemplated by the merger agreement. BAIRDS
OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE
MERGER.
Analysis
The following is a summary of the material financial analyses
performed by Baird in connection with rendering its opinion,
which is qualified in its entirety by reference to the full text
of such opinion attached as
29
Annex B to this proxy statement and to the other
disclosures contained in this section. The following summary,
however, does not purport to be a complete description of the
financial analyses performed by Baird. The order of analyses
described does not represent relative importance or weight given
to the analyses performed by Baird. Some of the summaries of the
financial analyses include information presented in a tabular
format. These tables must be read together with the full text of
each summary and alone are not a complete description of
Bairds financial analyses. Except as otherwise noted, the
following quantitative information is based on market and
financial data as it existed on or before April 25, 2008
and is not necessarily indicative of current market
conditions.
Implied Valuation, Transaction Multiples and Transaction
Premiums. Based on the cash consideration of
$12.10 net per share of our common stock (the Per
Share Equity Purchase Price) Baird calculated the implied
equity purchase price (defined as the Per Share
Equity Purchase Price multiplied by our total number of diluted
common shares outstanding, including gross shares issuable upon
the exercise of stock options, less assumed option proceeds) to
be $121.5 million. In addition, Baird calculated the
implied total purchase price (defined as the equity
purchase price plus the book value of our total debt and
preferred stock, less cash, cash equivalents and marketable
securities) to be $130.8 million. Baird then calculated the
multiples of the total purchase price to our earnings before
interest, taxes, depreciation and amortization
(EBITDA) and earnings before interest and taxes
(EBIT), for the last twelve months (LTM)
ended February 29, 2008 and as projected for the year
ending December 31, 2008, as provided by our senior
management. Baird also calculated the multiples of the equity
purchase price to our LTM and projected December 31,
2008 net income as provided by our senior management. These
transaction multiples are summarized in the table below.
IMPLIED
MERGER TRANSACTION MULTIPLES
|
|
|
|
|
|
|
|
|
|
|
LTM February 29,
|
|
FYE December 31,
|
|
|
2008
|
|
2008E
|
|
EBITDA
|
|
|
12.6
|
x
|
|
|
8.5
|
x
|
EBIT
|
|
|
14.2
|
|
|
|
9.2
|
|
Net Income
|
|
|
26.9
|
|
|
|
15.6
|
|
Baird reviewed the historical price and trading activity of our
common stock and noted that the high, low and average closing
prices for our common stock were $13.60, $8.40 and $10.48,
respectively, over the last twelve months and $13.60, $6.58 and
$9.61, respectively, over the last three years ending
April 25, 2008. Baird also noted that our common stock
price declined 7.2% over the last twelve months and increased
41.1% over the last three years ending April 25, 2008.
Baird noted that our common stock price increased 31.0% between
July 27, 2007 (the last trading date prior to our public
announcement that our board of directors had formed the Special
Committee to conduct the strategic alternatives review) and
April 25, 2008.
Baird also calculated the premiums that the Per Share Equity
Purchase Price represented over the closing market price of our
common stock for various time periods ranging from
1-day to
180-days
prior to April 25, 2008. These premiums, along with
comparable acquisition premiums of 241 public target completed
transactions with an enterprise value between $50 and
$250 million between January 2003 and December 2007, are
summarized in the table below.
SELECTED
ACQUISITION ANALYSIS TRANSACTION PREMIUMS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 4/25/08
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Merger
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Transaction
|
|
Selected Acquisition Premiums
|
|
|
Price
|
|
Premium
|
|
Low
|
|
Average
|
|
Median
|
|
High
|
|
1-Day Prior
|
|
$
|
11.97
|
|
|
|
1.1
|
%
|
|
|
(63.6
|
)%
|
|
|
31.7
|
%
|
|
|
25.8
|
%
|
|
|
260.0
|
%
|
7-Days Prior
|
|
|
11.69
|
|
|
|
3.5
|
%
|
|
|
(60.0
|
)%
|
|
|
34.3
|
%
|
|
|
27.2
|
%
|
|
|
239.6
|
%
|
30-Days Prior
|
|
|
10.04
|
|
|
|
20.5
|
%
|
|
|
(66.7
|
)%
|
|
|
38.0
|
%
|
|
|
30.5
|
%
|
|
|
352.4
|
%
|
90-Days Prior
|
|
|
10.11
|
|
|
|
19.7
|
%
|
|
|
(88.0
|
)%
|
|
|
46.7
|
%
|
|
|
39.9
|
%
|
|
|
365.7
|
%
|
180-Days
Prior
|
|
|
10.80
|
|
|
|
12.0
|
%
|
|
|
(90.6
|
)%
|
|
|
55.7
|
%
|
|
|
43.7
|
%
|
|
|
542.8
|
%
|
30
Selected Publicly Traded Company
Analysis. Baird reviewed certain publicly
available financial information and stock market information for
certain publicly traded companies that Baird deemed relevant.
The group of selected publicly traded companies reviewed is
listed below.
|
|
|
|
|
Applied Industrial Technologies, Inc.
|
|
|
|
Barnes Group, Inc.
|
|
|
|
DXP Enterprises, Inc.
|
|
|
|
Interline Brands, Inc.
|
|
|
|
Lawson Products, Inc.
|
|
|
|
Park-Ohio Holdings Corp.
|
|
|
|
Watsco, Inc.
|
|
|
|
WESCO International, Inc.
|
Baird chose these companies based on a review of publicly traded
companies that possessed general business, operating and
financial characteristics representative of companies in the
industry in which we operate. Baird noted that none of the
companies reviewed is identical to us and that, accordingly, the
analysis of such companies necessarily involves complex
considerations and judgments concerning differences in the
business, operating and financial characteristics of each
company and other factors that affect the public market values
of such companies.
For each company, Baird calculated the equity market
value (defined as the market price per share of each
companys common stock multiplied by the total number of
diluted common shares outstanding of such company, including net
shares issuable upon the exercise of stock options and
warrants). In addition, Baird calculated the enterprise
value (defined as the equity market value plus the book
value of each companys total debt, preferred stock and
minority interests, less cash, cash equivalents and marketable
securities). Baird calculated the multiples of each
companys enterprise value to its most recently disclosed
LTM and projected calendar year 2008 EBITDA and EBIT. Baird also
calculated multiples of each companys equity value to its
LTM and projected calendar year 2008 net income. Baird then
compared the transaction multiples implied in the merger with
the corresponding trading multiples for the selected companies.
Stock market and historical financial information for the
selected companies was based on publicly available information
as of April 25, 2008, and projected financial information
was based on publicly available research reports as of such
date. A summary of the implied multiples is provided in the
table below.
SELECTED
COMPANY ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Selected Company Multiples
|
|
|
Multiple
|
|
Low
|
|
Average
|
|
Median
|
|
High
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
|
12.6
|
x
|
|
|
5.1
|
x
|
|
|
7.5
|
x
|
|
|
7.3
|
x
|
|
|
10.6
|
x
|
2008E
|
|
|
8.5
|
|
|
|
6.4
|
|
|
|
7.6
|
|
|
|
7.1
|
|
|
|
10.8
|
|
EBIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
|
14.2
|
x
|
|
|
6.1
|
x
|
|
|
8.7
|
x
|
|
|
8.8
|
x
|
|
|
11.2
|
x
|
2008E
|
|
|
9.2
|
|
|
|
7.1
|
|
|
|
8.6
|
|
|
|
8.4
|
|
|
|
11.5
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
|
26.9
|
x
|
|
|
7.0
|
x
|
|
|
11.8
|
x
|
|
|
12.1
|
x
|
|
|
17.8
|
x
|
2008E
|
|
|
15.6
|
|
|
|
7.5
|
|
|
|
11.2
|
|
|
|
11.4
|
|
|
|
18.2
|
|
31
In addition, Baird calculated the implied per share equity
values of our common stock based on the trading multiples of the
selected public companies. The implied per share equity values,
based on the multiples that Baird deemed relevant, are
summarized in the table below.
SELECTED
COMPANY ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Equity Value per Share
|
|
|
|
Low
|
|
|
Average
|
|
|
Median
|
|
|
High
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
$
|
4.53
|
|
|
$
|
6.95
|
|
|
$
|
6.77
|
|
|
$
|
10.02
|
|
2008E
|
|
|
8.99
|
|
|
|
10.73
|
|
|
|
10.08
|
|
|
|
15.49
|
|
EBIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
$
|
4.83
|
|
|
$
|
7.18
|
|
|
$
|
7.21
|
|
|
$
|
9.39
|
|
2008E
|
|
|
9.22
|
|
|
|
11.25
|
|
|
|
11.00
|
|
|
|
15.24
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM
|
|
$
|
3.05
|
|
|
$
|
5.18
|
|
|
$
|
5.32
|
|
|
$
|
7.79
|
|
2008E
|
|
|
5.70
|
|
|
|
8.48
|
|
|
|
8.60
|
|
|
|
13.81
|
|
Median
|
|
$
|
5.27
|
|
|
$
|
7.83
|
|
|
$
|
7.90
|
|
|
$
|
11.92
|
|
Baird compared the implied per share equity values in the table
above with the $12.10 per share implied in the merger in
concluding that the Consideration was fair to our stockholders
from a financial point of view.
Selected Acquisition Analysis. Baird reviewed
certain publicly available financial information concerning
completed or pending acquisition transactions that Baird deemed
relevant. The group of selected acquisition transactions is
listed below.
|
|
|
Target
|
|
Acquiror
|
|
ORS Nasco, Inc.
|
|
United Stationers Inc.
|
Precision Industries
|
|
DXP Enterprises, Inc.
|
ACR Group, Inc.
|
|
Watsco, Inc.
|
Valley National Gases, Inc.
|
|
Caxton-Iseman Capital, Inc.
|
WYKO Holdings Limited
|
|
ERIKS group NV
|
American Sanitary Incorporated
(AmSan)
|
|
Interline Brands, Inc.
|
J&L Industrial Supply
|
|
MSC Industrial Direct Co., Inc.
|
ORS Nasco, Inc.
|
|
Brazos Private Equity Partners, LLC
|
Carlton-Bates Company
|
|
WESCO International, Inc.
|
Infast Group plc
|
|
Anixter International, Inc.
|
Noland Company
|
|
WinWholesale, Inc.
|
Southwest Power, Inc. and Western States
Electric, Inc.
|
|
Hughes Supply, Inc.
|
Baird chose these acquisition transactions based on a review of
completed and pending acquisition transactions involving target
companies that possessed general business, operating and
financial characteristics representative of companies in the
industry in which we operate. Baird noted that none of the
acquisition transactions or subject target companies reviewed is
identical to the merger or our company, respectively, and that,
accordingly, the analysis of such acquisition transactions
necessarily involves complex considerations and judgments
concerning differences in the business, operating and financial
characteristics of each subject target company and each
acquisition transaction and other factors that affect the values
implied in such acquisition transactions.
For each transaction, Baird calculated the implied equity
purchase price (defined as the purchase price per share of
each target companys common stock multiplied by the total
number of diluted common shares outstanding of such company,
including gross shares issuable upon the exercise of stock
options and warrants, less assumed option and warrant proceeds,
or alternatively defined as the value attributable to the equity
of a target company). In
32
addition, Baird calculated the implied enterprise
value (defined as the equity purchase price plus the book
value of each target companys total debt, preferred stock
and minority interests, less cash, cash equivalents and
marketable securities). Baird calculated the multiples of each
target companys implied enterprise value to its most
recently disclosed LTM EBITDA and LTM EBIT. Baird also
calculated multiples of each target companys implied
equity purchase price to its LTM net income.
SELECTED
ACQUISITION ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Selected Acquisition Multiples
|
|
|
Multiple
|
|
Low
|
|
Average
|
|
Median
|
|
High
|
|
EBITDA (LTM)
|
|
|
12.6
|
x
|
|
|
6.6
|
x
|
|
|
8.5
|
x
|
|
|
8.3
|
x
|
|
|
11.7
|
x
|
EBIT (LTM)
|
|
|
14.2
|
|
|
|
7.3
|
|
|
|
11.2
|
|
|
|
10.9
|
|
|
|
14.6
|
|
Net Income (LTM)
|
|
|
26.9
|
|
|
|
14.2
|
|
|
|
18.1
|
|
|
|
17.8
|
|
|
|
22.7
|
|
In addition, Baird calculated the implied per share equity
values of our common stock based on the acquisition transaction
multiples of the selected acquisition transactions. The implied
per share equity values, based on the multiples that Baird
deemed relevant, are summarized in the table below.
SELECTED
ACQUISITION ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Equity Value per Share
|
|
|
Low
|
|
Average
|
|
Median
|
|
High
|
|
EBITDA (LTM)
|
|
$
|
6.06
|
|
|
$
|
7.97
|
|
|
$
|
7.71
|
|
|
$
|
11.18
|
|
EBIT (LTM)
|
|
|
5.87
|
|
|
|
9.34
|
|
|
|
9.11
|
|
|
|
12.45
|
|
Net Income (LTM)
|
|
|
6.24
|
|
|
|
7.94
|
|
|
|
7.82
|
|
|
|
9.93
|
|
Median
|
|
$
|
6.06
|
|
|
$
|
7.97
|
|
|
$
|
7.82
|
|
|
$
|
11.18
|
|
Baird compared the implied per share equity values in the above
table with the $12.10 per share implied in the merger in
concluding that the Consideration was fair to our stockholders
from a financial point of view.
Discounted Cash Flow Analysis. Baird performed
a discounted cash flow analysis utilizing our projected
unlevered free cash flows (defined as net income excluding
after-tax net interest, plus depreciation and amortization, less
capital expenditures and increases in net working capital,
plus/minus changes in other operating and investing cash flows)
from 2008 to 2012, as provided by our management. In such
analysis, Baird calculated the present values of the unlevered
free cash flows from 2008 to 2012 by discounting such amounts at
rates ranging from 15% to 17%. Baird calculated the present
values of the free cash flows beyond 2012 by assuming terminal
values ranging from 6.0x to 8.0x year 2012 EBITDA and based on
unlevered free cash flow growth rates ranging from 4% to 6% and
discounting the resulting terminal values at rates ranging from
15% to 17%. The summation of the present values of the unlevered
free cash flows and the present values of the terminal values
produced equity values ranging from $7.16 to $13.79 per share
with an average of $10.21 per share and a median of $10.19 per
share. Baird compared these implied per share equity values with
the $12.10 per share implied in the merger in concluding that
the Consideration was fair to our stockholders from a financial
point of view.
Valuation Summary. A summary of the valuation
statistics from the analyses presented above is provided in the
table below.
SUMMARY
EQUITY VALUATION PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Equity Value per Share
|
|
|
Low
|
|
Average
|
|
Median
|
|
High
|
|
Selected Company Analysis
|
|
$
|
5.27
|
|
|
$
|
7.83
|
|
|
$
|
7.90
|
|
|
$
|
11.92
|
|
Selected Transaction Analysis
|
|
|
6.06
|
|
|
|
7.97
|
|
|
|
7.82
|
|
|
|
11.18
|
|
Discounted Cash Flow Analysis
|
|
|
7.16
|
|
|
|
10.21
|
|
|
|
10.19
|
|
|
|
13.79
|
|
Median
|
|
$
|
6.06
|
|
|
$
|
7.97
|
|
|
$
|
7.90
|
|
|
$
|
11.92
|
|
33
The foregoing summary does not purport to be a complete
description of the analyses performed by Baird or its
presentations to our board of directors. The preparation of
financial analyses and a fairness opinion is a complex process
and is not necessarily susceptible to partial analyses or
summary description. Baird believes that its analyses (and the
summary set forth above) must be considered as a whole and that
selecting portions of such analyses and factors considered by
Baird, without considering all of such analyses and factors,
could create an incomplete view of the processes and judgments
underlying the analyses performed and conclusions reached by
Baird and of its opinion. Baird did not attempt to assign
specific weights to particular analyses or factors considered by
it and did not form an opinion as to whether any individual
analysis or factor (positive or negative), considered in
isolation, supported or failed to support its opinion. Any
estimates contained in Bairds analyses are not necessarily
indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Estimates of values of
companies do not purport to be appraisals or necessarily to
reflect the prices at which companies may actually be sold.
Because such estimates are inherently subject to uncertainty,
Baird does not assume responsibility for their accuracy. None of
the public companies used in the comparable company analysis
described above are identical to our company, and none of the
precedent merger and acquisition transactions used in the
precedent transactions analysis described above are identical to
the merger. Such analyses involve complex considerations and
judgments concerning differences in financial and operational
characteristics of the companies involved and other factors that
could affect the companies compared to us and the transactions
compared to the merger.
Other
Matters
As part of its investment banking business, Baird is engaged in
the evaluation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for
estate, corporate and other purposes. Pursuant to an engagement
letter dated August 20, 2007 and extended on
February 20, 2008, Baird will receive a transaction fee of
approximately $2.0 million for its services, a significant
portion of which is contingent upon the consummation of the
merger. Pursuant to such engagement letter, we paid Baird an
aggregate non-refundable fee of $800,000 for the delivery of its
February 20, 2008 and April 25, 2008 opinions
($400,000 for each opinion); while non-refundable, regardless of
whether the merger is consummated, the fee is creditable against
the transaction fee described above that is contingent upon the
consummation of the merger. In addition, we have agreed to
reimburse Baird for certain expenses and to indemnify Baird
against certain liabilities that may arise out of its
engagement, including liabilities under the federal securities
laws. Baird will not receive any other significant payment or
compensation contingent upon the successful completion of the
merger. Baird is a full service securities firm. As such, in the
ordinary course of its business, Baird may from time to time
trade our securities for its own account or the accounts of its
customers and, accordingly, may at any time hold long or short
positions or effect transactions in such securities.
Certain
Effects of the Merger
If the merger agreement is adopted by our stockholders and the
other conditions to the closing of the merger are either
satisfied or properly waived, Merger Sub, a direct wholly-owned
subsidiary of Eiger created solely for the purpose of engaging
in the transactions contemplated by the merger agreement, will
be merged with and into us, and we will be the surviving
corporation. When the merger is completed, we will cease to be a
publicly-traded company and will instead be a wholly-owned
subsidiary of Eiger.
When the merger is completed:
|
|
|
|
|
each holder of shares of unrestricted common stock outstanding
immediately prior to the merger will be entitled to receive
$12.10 per share in cash, without interest and less applicable
withholding taxes, for such shares (other than shares owned by
us, Eiger or Merger Sub or any subsidiary thereof and other than
shares owned by stockholders properly demanding appraisal
rights);
|
|
|
|
each option to purchase shares of common stock outstanding
immediately prior to the merger, whether or not then exercisable
or vested, will be deemed automatically exercised and converted
into the right to receive a cash payment equal to the excess, if
any, of $12.10 per share over the exercise price per share of
the option,
|
34
|
|
|
|
|
multiplied by the number of shares subject to the option,
without interest and less any applicable withholding
tax; and
|
|
|
|
|
|
all shares of common stock that are subject to vesting or
forfeiture or other restrictions (which we refer to as
restricted stock) outstanding immediately prior to
the merger (except for 123,333 shares under our May 2007
incentive award to our chief executive officer) will become
fully vested and (other than any such shares owned by
stockholders properly demanding appraisal rights) will be
converted into the right to receive $12.10 per share in cash,
without interest and less any applicable withholding tax.
|
At the effective time of the merger, our stockholders will have
the right to receive the merger consideration but will cease to
have ownership interests in us or rights as our stockholders.
Therefore, our stockholders will not participate in our future
earnings or growth and will not benefit from any appreciation in
our value.
Our common stock is currently registered under the Securities
Exchange Act of 1934, as amended, which we refer to as the
Exchange Act, and is traded on the Nasdaq Global
Market under the symbol IDGR. As a result of the
merger, we will be a wholly-owned subsidiary of Eiger, which
means that Eiger will then own all of our common stock. As a
result, our common stock will cease to be traded on the Nasdaq
Global Market, the registration of our common stock under the
Exchange Act will be terminated and we will no longer be
required to file periodic reports with the SEC. Of course, you
will no longer own any of our common stock.
When the merger becomes effective, the directors and officers of
Merger Sub will be the directors and officers, respectively, of
the surviving corporation. Also at the effective time of the
merger, the certificate of incorporation and bylaws of Merger
Sub will be the certificate of incorporation and bylaws of the
surviving corporation until amended in accordance with
applicable law.
Effects
on Us if the Merger is Not Completed
If the merger agreement is not adopted by our stockholders, or
if the merger is not completed for any other reason, our
stockholders will not receive any payment for their shares.
Instead, we will remain an independent public company, and our
common stock will continue to be traded on the Nasdaq Global
Market, our common stock will continue to be registered under
the Exchange Act, and we will continue to be required to file
periodic reports with the SEC. In addition, if the merger is not
completed, we expect that management will operate our business
in a manner similar to that in which it is being operated today,
and that our stockholders will continue to be subject to the
same risks and opportunities to which they are currently subject.
Accordingly, if the merger is not consummated, there can be no
assurance as to the effect of these risks and opportunities on
the future value of your shares of common stock. If the merger
is not completed, our board of directors will continue to
evaluate and review our business operations, properties,
dividend policy and capitalization, among other things, and will
make such changes as are deemed appropriate. Our board of
directors will also continue to consider strategic alternatives
that may be or become available for our company. However, there
can be no assurance that any other transaction acceptable to us
will be offered or available or that our business prospects or
results of operations will not be adversely impacted.
If the merger agreement is terminated under certain
circumstances involving a competing proposal, we may be
obligated to pay a termination fee of approximately
$3.5 million to Eiger. In addition, if the merger agreement
is terminated in circumstances due to the failure of Eiger to
timely satisfy its material obligations under the merger
agreement or a material breach of the merger agreement by Eiger,
Eiger may be required to pay us a termination fee of
approximately $3.5 million and reimburse us for the
termination fee of approximately $3.0 million we paid to
Platinum. For a description of the circumstances triggering
payment of the termination fees, see
Proposal 1 The Merger
Agreement Termination Fees on
page .
Interests
of Our Directors and Executive Officers in the Merger
In addition to their interests in the merger as stockholders,
certain of our directors and executive officers have interests
in the merger that differ from, or are in addition to, your
interests as a stockholder. In considering the unanimous
recommendation of our board of directors to vote
FOR the adoption of the merger agreement, you
should be aware of these interests. Our board of directors was
aware of, and considered the interests of, our directors
35
and executive officers in approving and adopting the merger
agreement. Except as described below, such persons have, to our
knowledge, no material interests in the merger that differ from
your interests generally.
Stock
Options
The merger agreement requires us to take all actions (including
obtaining any required consents) necessary to provide that each
option to purchase our common stock that is outstanding
immediately prior to the effective time of the merger, whether
or not then exercisable or vested, will become fully exercisable
and vested. At the effective time of the merger, each such
option will be deemed automatically exercised and converted into
the right to receive a cash payment equal to the excess, if any,
of $12.10 per share over the exercise price per share of the
option, multiplied by the number of shares subject to the
option, without interest and less any applicable withholding tax.
The following table sets forth (i) the number of options
(if any) held by our directors and officers that would be
accelerated for vesting as a result of the merger agreement and
the amount that would be payable to them because of that
acceleration, as well as (ii) the total amounts that would
be payable to our directors and executive officers (before
applicable withholding tax) in settlement of all of their
respective options, if the merger is completed, in all cases
based on the number and exercise prices of options held by them
on April 25, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Merger
|
|
|
of Merger
|
|
|
Total
|
|
|
Merger
|
|
|
|
|
|
Accelerated
|
|
|
Accelerated
|
|
|
Number
|
|
|
Value of
|
|
|
|
|
|
Vesting
|
|
|
Vesting
|
|
|
of All
|
|
|
All Stock
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Options
|
|
Name of Beneficial Owner
|
|
Capacity
|
|
Options
|
|
|
Options ($)
|
|
|
Options
|
|
|
($)
|
|
|
Charles A. Lingenfelter
|
|
President, Chief Executive
Officer and Director
|
|
|
0
|
|
|
|
0.00
|
|
|
|
57,167
|
|
|
|
493,564.10
|
|
Jack P. Healey
|
|
Executive Vice President,
Chief Financial Officer and Secretary
|
|
|
0
|
|
|
|
0.00
|
|
|
|
56,933
|
|
|
|
500,429.90
|
|
David K. Barth
|
|
Director
|
|
|
1,667
|
|
|
|
6,968.06
|
|
|
|
45,000
|
|
|
|
307,030.00
|
|
William R. Fenoglio
|
|
Director
|
|
|
1,667
|
|
|
|
6,968.06
|
|
|
|
45,000
|
|
|
|
307,030.00
|
|
William T. Parr
|
|
Director
|
|
|
1,667
|
|
|
|
6,968.06
|
|
|
|
45,000
|
|
|
|
307,030.00
|
|
Ajita G. Rajendra
|
|
Director
|
|
|
0
|
|
|
|
0.00
|
|
|
|
0
|
|
|
|
0
|
|
George L. Sachs, Jr.
|
|
Director
|
|
|
1,667
|
|
|
|
6,968.06
|
|
|
|
55,000
|
|
|
|
363,650.00
|
|
Richard M. Seigel
|
|
Director
|
|
|
1,667
|
|
|
|
6,968.06
|
|
|
|
70,000
|
|
|
|
448,580.00
|
|
All Directors and Officers as a Group (8 persons)
|
|
|
8,335
|
|
|
|
34,840.30
|
|
|
|
374,100
|
|
|
|
2,727,314.00
|
|
Restricted
Stock
The merger agreement requires us to take all actions necessary
to provide that each share of unvested restricted stock that is
outstanding immediately prior to the merger (except for
123,333 shares under our May 2007 incentive award to our
chief executive officer) will become fully vested and (other
than any such shares owned by stockholders properly demanding
appraisal rights) will be converted into the right to receive a
cash payment equal to $12.10 per share (the merger
consideration), without interest and less applicable withholding
taxes. The following table sets forth the number of shares of
unvested restricted stock (if any) held on April 25, 2008
by our directors and executive officers that would be
accelerated for vesting as a result of the merger agreement, and
the amount (before applicable withholding tax) that would be
payable to them because of that acceleration, in
36
settlement of their respective restricted stock awards for those
shares, if the merger is completed, except for shares that have
otherwise vested automatically between April 25, 2008 and
the record date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Merger Value of
|
|
|
|
|
|
Merger Accelerated
|
|
|
Merger Accelerated
|
|
|
|
|
|
Vesting Restricted
|
|
|
Restricted Stock
|
|
|
|
|
|
Stock Awards
|
|
|
Awards Shares
|
|
Name of Beneficial Owner
|
|
Capacity
|
|
Shares
|
|
|
($)
|
|
|
Charles A. Lingenfelter
|
|
President, Chief Executive
Officer and Director
|
|
|
91,424
|
|
|
|
1,106,230.40
|
|
Jack P. Healey
|
|
Executive Vice President,
Chief Financial Officer and Secretary
|
|
|
11,978
|
|
|
|
144,933.80
|
|
David K. Barth
|
|
Director
|
|
|
5,591
|
|
|
|
67,651.10
|
|
William R. Fenoglio
|
|
Director
|
|
|
5,591
|
|
|
|
67,651.10
|
|
William T. Parr
|
|
Director
|
|
|
5,591
|
|
|
|
67,651.10
|
|
Ajita G. Rajendra
|
|
Director
|
|
|
5,005
|
|
|
|
60,560.50
|
|
George L. Sachs, Jr.
|
|
Director
|
|
|
5,591
|
|
|
|
67,651.10
|
|
Richard M. Seigel
|
|
Director
|
|
|
5,591
|
|
|
|
67,651.10
|
|
All Directors and Officers as a Group (8 persons)
|
|
|
136,362
|
|
|
|
1,649,980.20
|
|
Post-Closing
Payment for Continued Employment
One of our executive officers, along with certain non-management
personnel, will be entitled to certain payments for remaining
with our company if the merger (or another change in control
transaction) is consummated.
Post-Closing
Continuation of Compensation and Benefits
The merger agreement contains provisions that are applicable to
our employees generally relating to the continuation by Eiger of
certain benefits arrangements for a certain period of time
following consummation of the merger. Such provisions may
benefit certain of our executive officers.
Directors
and Officers Indemnification and Insurance
The surviving corporation is required to honor and maintain, for
a period of six years after the completion of the merger, all
rights to exculpation, indemnification and advancement of
expenses of our current or former directors and officers, in
respect of liabilities for acts or omissions occurring at or
prior to the completion of the merger, no less favorable than
those provided in our organizational documents or other
agreements in effect on the date of the merger agreement. During
such six-year period, the surviving corporation will be required
to obtain the affected individuals consent in order to
amend, appeal or otherwise modify any agreements or provisions
if the result of such change adversely affects individuals
rights under such agreements and or provisions.
In addition, for six years after completion of the merger, the
surviving corporation is required to maintain in effect the
directors and officers liability insurance and
fiduciary insurance coverage with respect to claims arising from
acts or omissions occurring on or before the completion of the
merger on terms no less favorable than those in effect on the
date of the merger agreement. However, the surviving corporation
may (i) substitute the existing directors and
officers liability insurance with directors and
officers liability and fiduciary liability policies of
another insurance company, provided that the substitute
insurance carrier has the same or better credit ratings than the
existing insurance carrier, and provided that the material terms
of the substitute policies are no less favorable than the
material terms of the existing policies; or (ii) request
that we obtain extended reporting period coverage, which we must
use reasonable best efforts to do prior to the effective time of
the merger. Eiger has agreed to cause the surviving corporation
to perform its obligations described above.
Delisting
and Deregistration of Our Common Stock
If the merger is completed, our common stock will be
deregistered under the Exchange Act, we will no longer file
periodic reports with the SEC, and our common stock will no
longer be traded on the Nasdaq Global Market.
37
Material
United States Federal Income Tax Consequences of the
Merger
The following is a discussion of the material United States
federal income tax consequences of the merger to
U.S. holders whose shares of common stock are converted
into the right to receive cash in the merger. The discussion is
based upon the Internal Revenue Code, Treasury regulations, IRS
rulings and judicial and administrative decisions in effect as
of the date of this proxy statement, all of which are subject to
change (possibly with retroactive effect) or to different
interpretations. The following discussion does not purport to
consider all aspects of U.S. federal income taxation that
might be relevant to our stockholders. This discussion applies
only to stockholders who, on the date on which the merger is
completed, hold shares of common stock as a capital asset.
The following discussion does not address taxpayers subject to
special treatment under U.S. federal income tax laws, such
as insurance companies, financial institutions, dealers in
securities, tax-exempt organizations, mutual funds, real estate
investment trusts, investors in pass-through entities,
S corporations and taxpayers subject to the alternative
minimum tax. In addition, the following discussion may not apply
to stockholders who acquired their shares of common stock upon
the exercise of employee stock options or otherwise as
compensation for services or through a tax-qualified retirement
plan or who hold their shares as part of a hedge, straddle,
conversion transaction or other integrated transaction. If our
common stock is held through a partnership, the
U.S. federal income tax treatment of a partner in the
partnership will generally depend upon the status of the partner
and the activities of the partnership. Partnerships that are
holders of our common stock and partners in such partnerships
are urged to consult their own tax advisors regarding the tax
consequences to them of the merger.
The following discussion does not address potential foreign,
state, local and other tax consequences of the merger. All
stockholders are urged to consult their own tax advisors
regarding the U.S. federal income tax consequences, as well
as the foreign, state and local tax consequences, of the
disposition of their shares as a result of the merger.
For purposes of this summary, a U.S. holder is
a holder of shares of our common stock who or that, for
U.S. federal income tax purposes, is:
|
|
|
|
|
an individual who is a citizen or resident of the United States;
|
|
|
|
a corporation (or other entity taxable as a corporation) created
or organized in or under the laws of the United States, any
state of the United States or the District of Columbia;
|
|
|
|
an estate the income of which is subject to U.S. federal
income tax regardless of its source; or
|
|
|
|
a trust if (i) a U.S. court is able to exercise
primary supervision over the trusts administration and one
or more U.S. persons are authorized to control all
substantial decisions of the trust; or (ii) it was in
existence on August 20, 1996 and has a valid election in
place to be treated as a domestic trust for U.S. federal
income tax purposes.
|
Except with respect to the backup withholding discussion below,
this discussion does not discuss the tax consequences to any
stockholder who or that, for U.S. federal income tax
purposes, is not a U.S. holder.
For U.S. federal income tax purposes, the merger will be
treated as a sale of our common stock for cash by each of our
stockholders. Accordingly, in general, the U.S. federal
income tax consequences to a stockholder receiving cash in the
merger will be as follows:
|
|
|
|
|
The stockholder will recognize a capital gain or loss for
U.S. federal income tax purposes upon the disposition of
the stockholders shares of common stock pursuant to the
merger.
|
|
|
|
The amount of capital gain or loss recognized by each
stockholder will be measured by the difference, if any, between
the amount of cash received by the stockholder in the merger and
the stockholders adjusted tax basis in the shares of
common stock surrendered in the merger. Gain or loss will be
determined separately for each block of shares (i.e., shares
acquired at the same cost in a single transaction) surrendered
for cash in the merger.
|
|
|
|
The capital gain or loss, if any, will be long-term with respect
to shares of common stock that have a holding period for tax
purposes in excess of one year at the time of the merger.
Long-term capital gains of individuals are eligible for reduced
rates of taxation. There are limitations on the deductibility of
capital losses.
|
38
Cash payments made pursuant to the merger will be reported to
our stockholders and the Internal Revenue Service to the extent
required by the Internal Revenue Code and applicable Treasury
regulations. These amounts ordinarily will not be subject to
withholding of U.S. federal income tax. However, backup
withholding of the tax at applicable rates will apply to all
cash payments to which a U.S. holder is entitled pursuant
to the merger agreement if such holder (i) fails to supply
the paying agent with the stockholders taxpayer
identification number (Social Security number, in the case of
individuals, or employer identification number, in the case of
other stockholders), certify that such number is correct, and
otherwise comply with the backup withholding rules,
(ii) has received notice from the Internal Revenue Service
of a failure to report all interest and dividends required to be
shown on the stockholders U.S. federal income tax
returns, or (iii) is subject to backup withholding in
certain other cases. Accordingly, unless an exemption applies
and is established in a manner satisfactory to the paying agent,
each U.S. holder will be asked to complete and sign a
Substitute
Form W-9,
which is to be included in the appropriate letter of transmittal
for the shares of common stock, in order to provide the
information and certification necessary to avoid backup
withholding or to otherwise establish an exemption from backup
withholding tax. Stockholders who are not U.S. holders
should complete and sign a
Form W-8BEN
(or other applicable tax form) and return it to the paying agent
in order to provide the information and certification necessary
to avoid backup withholding tax or otherwise establish an
exemption from backup withholding tax. Certain of our
stockholders will be asked to provide additional tax information
in the appropriate letter of transmittal for the shares of
common stock.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowed as a
refund or a credit against your U.S. federal income tax
liability, provided the required information is timely furnished
to the Internal Revenue Service.
The foregoing discussion of material U.S. federal income
tax consequences is included for general informational purposes
only. We urge you to consult your own tax advisor to determine
the particular tax consequences to you (including the
application and effect of any state, local or foreign income and
other tax laws) of the receipt of cash in exchange for shares of
common stock pursuant to the merger.
Regulatory
Approvals
Under the merger agreement, we and Eiger agreed to make all
necessary applications or filings required to be made by us or
Eiger with respect to the HSR Act or other applicable laws and
to comply as promptly as practicable with any request we or
Eiger may receive under the HSR Act or any other applicable law
for additional information or material received by us or Eiger
from the applicable governmental entity in connection with such
applications or filings. However, no regulatory filings or
applications, including under the HSR Act, are required to be
made in respect of the consummation of the merger.
If any administrative or judicial action or proceeding is
instituted, or is threatened to be instituted, by any
governmental entity challenging the transactions contemplated by
the merger agreement as being in violation of any applicable
law, each of the parties is required under the merger agreement
to cooperate and use its reasonable best efforts to contest and
resist such action or proceeding.
39
PROPOSAL 1
THE MERGER AGREEMENT
The merger agreement is the legal document that governs the
merger. This section of the proxy statement describes the
material provisions of the merger agreement, but may not contain
all of the information about the merger agreement that is
important to you. The merger agreement is included as
Annex A to this proxy statement and is incorporated into
this proxy statement by reference. We encourage you to read the
merger agreement in its entirety. The merger agreement
establishes and governs the legal relations between us and Eiger
with respect to the transactions described in this proxy
statement. It is not intended to be a source of factual,
business or operational information about us or Eiger. The
representations, warranties and covenants made by us and Eiger
are qualified and subject to important limitations agreed to by
us and Eiger in connection with negotiating the terms of the
merger agreement. Furthermore, the representations and
warranties may be subject to standards of materiality applicable
to us and Eiger that may be different from those which are
applicable to you. These representations and warranties may or
may not have been accurate as of any specified date and do not
purport to be accurate as of the date of this proxy statement.
Accordingly, you should not rely on the representations and
warranties as characterizations of the actual state affects at
the time they were made or otherwise.
Form of
the Merger
Subject to the terms and conditions of the merger agreement and
in accordance with the Delaware General Corporation Law, at the
effective time of the merger, Merger Sub will merge with and
into IDG. The separate corporate existence of Merger Sub will
cease, and IDG will continue as the surviving corporation, but
will then be a wholly-owned subsidiary of Eiger.
Effective
Time of the Merger
The closing of the merger will occur as soon as practicable, but
no later than the second business day, after the satisfaction or
(to the extent permitted by law) waiver of all of the closing
conditions provided in the merger agreement, or on such other
date as IDG and Eiger may agree in writing. On the closing date,
a certificate of merger will be filed with the Secretary of
State of the State of Delaware that will state whether the
merger will become effective immediately upon acceptance of that
filing, or at such later time as the parties may have agreed and
specified in the certificate of merger. We refer to such time,
in either case, as the effective time of the merger.
Directors
and Officers of the Surviving Corporation
The directors and officers of Merger Sub immediately prior to
the effective time of the merger will be the initial directors
and officers, respectively, of the surviving corporation. The
directors and officers will serve in accordance with the
certificate of incorporation and bylaws of the surviving
corporation until their respective successors are duly elected
or appointed and qualified or until the earlier of their death,
resignation or removal.
Certificate
of Incorporation and Bylaws of the Surviving
Corporation
At the effective time of the merger:
|
|
|
|
|
the certificate of incorporation of Merger Sub will be the
certificate of incorporation of the surviving corporation until
amended in accordance with applicable law; and
|
|
|
|
the bylaws of Merger Sub will be the bylaws of the surviving
corporation until amended in accordance with applicable law.
|
Merger
Consideration
At the effective time of the merger, each outstanding share of
common stock, other than (1) shares owned by Eiger or
Merger Sub or any of their subsidiaries, (2) shares owned
directly by us or any of our subsidiaries and (3) shares
held by stockholders who properly demand appraisal rights in
accordance with the Delaware General Corporation Law, will be
converted into the right to receive $12.10 per share in cash,
without interest. Shares owned by Eiger, Merger Sub or us or any
subsidiary thereof will be cancelled at the effective time of
the merger without any payment. Our stockholders will receive
the merger consideration after exchanging their stock
certificates in
40
accordance with the instructions contained in the letter of
transmittal to be sent to our stockholders promptly after
completion of the merger.
Eiger, Merger Sub, the surviving corporation and the paying
agent will be entitled to deduct and withhold from the
consideration otherwise payable to any holder of shares of
common stock, stock options, or shares of restricted stock such
amounts that it is required to deduct and withhold with respect
to making such payment under the Internal Revenue Code, or any
other applicable state, local or foreign tax law.
Effect on
Stock Options and Restricted Stock
Prior to the effective time of the merger, we will have taken
all necessary action such that, immediately prior to the
effective time of the merger, (1) all outstanding options
to purchase shares of common stock will, to the extent not then
vested, accelerate and become fully vested and exercisable and
(2) all unvested shares of our restricted stock will become
fully vested and the restrictions and forfeiture provisions will
lapse.
At the effective time of the merger, each outstanding option to
purchase shares of common stock will be deemed exercised and
automatically converted into the right to receive a cash payment
equal to the excess, if any, of $12.10 per share over the
exercise price per share of the option, multiplied by the number
of shares subject to the option, without interest and less any
applicable withholding tax.
All shares of restricted stock issued and outstanding
immediately prior to the effective time of the merger (except
for 123,333 shares under our May 2007 incentive award to
our chief executive officer), other than any such shares owned
by stockholders properly demanding appraisal rights, will be
converted into the right to receive $12.10 per share in cash,
without interest and less any applicable withholding tax.
Payment
Procedures
Prior to the effective time of the merger, Eiger will designate
a bank or trust company to act as the paying agent under the
merger agreement. At the effective time of the merger, Eiger
will deposit, or cause to be deposited, in trust with the paying
agent cash in an amount equal to the aggregate consideration
payable in the merger. Promptly after the effective time of the
merger, the paying agent will mail to each holder of record of
outstanding shares of common stock immediately prior to the
effective time, a letter of transmittal and instructions for use
in effecting the surrender of any certificates or instruments
representing shares or the rights to shares of common stock in
exchange for cash. The letter of transmittal will specify that
delivery will be effected, and the risk of loss and title to
such certificates or instruments will pass, only upon actual
delivery of the certificates or instruments to the paying agent.
You should not return your certificates or other instruments
with the enclosed proxy card. Certificates and instruments
evidencing ownership in or rights to shares of common stock
should not be surrendered before the effective time of the
merger and should not be forwarded without a letter of
transmittal. Upon surrender to the paying agent of evidence of
ownership in or rights to shares of our common stock, together
with a properly completed and executed letter of transmittal and
any other required documents, you will be entitled to receive
from the paying agent $12.10 in cash, without interest and less
any applicable withholding tax, for each share represented by
the stock certificate, and the certificate or instrument
surrendered will be cancelled. No interest will be paid or
accrue on any merger consideration payable upon the surrender of
such certificates or instruments.
The cash consideration for shares of common stock may be paid to
a person other than the person in whose name the surrendered
certificate or instrument is registered if the certificate or
instrument is properly endorsed or otherwise in proper form for
transfer. The person surrendering such certificate or instrument
must pay all transfer and other applicable taxes or establish to
the satisfaction of the surviving corporation that such taxes
either have been paid or are not applicable.
The surviving corporation may demand any funds unclaimed by
former stockholders (including interest and other income in
respect of such funds) at any time beginning six months after
the effective time of the merger. Any former holders of our
common stock who have not complied with the above-described
procedures may thereafter look only to the surviving corporation
(subject to abandoned property, escheat or other similar laws)
for payment of the merger consideration, without interest, to
which they are entitled upon surrender of the certificates or
instruments held by them.
41
If any share certificate for common stock has been lost, stolen
or destroyed, then before the owner will be entitled to receive
the merger consideration, the owner of such certificate must
sign an affidavit claiming such certificate has been lost,
stolen or destroyed and, if required by the surviving
corporation, post a bond in an amount as Eiger may direct as
indemnity against any claim that may be made against the
surviving corporation, Eiger or the paying agent with respect to
that certificate.
The procedures described above will be set forth in a letter of
transmittal that will be mailed to you promptly following the
effective time of the merger. You should read the letter of
transmittal carefully and in its entirety.
Conditions
to the Merger
Conditions
to Each Partys Obligation
Each partys obligation to complete the merger is subject
to the satisfaction or waiver (to the extent permitted by law)
of the following conditions:
|
|
|
|
|
the adoption by our stockholders of the merger agreement;
|
|
|
|
the expiration or termination of any applicable waiting period
(and any extension thereof) under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we refer
to as the HSR Act;
|
|
|
|
the consummation of the transactions under the merger agreement
shall not have been made illegal by governmental order or
decree; and
|
|
|
|
the obtaining of all material consents, approvals and
authorizations legally required to consummate the transactions
under the merger agreement.
|
Additional
Conditions to Our Obligations
Our obligation to complete the merger is subject to the
satisfaction by Eiger, or waiver by us, of the following
conditions:
|
|
|
|
|
the representations and warranties of Eiger and Merger Sub
contained in the merger agreement (disregarding all
qualifications as to materiality or material respects or similar
qualifications) shall have been true and correct as of the
effective time of the merger as though made on and as of the
effective time (except where expressly made as of an earlier
date) in all material respects;
|
|
|
|
Eiger and Merger Sub shall have performed in all material
respects the obligations, and complied in all material respects
with the agreements and covenants, required to be performed by
or complied with by them at or prior to the effective time of
the merger; and
|
|
|
|
an executive officer of each of Eiger and Merger Sub shall have
delivered to us a certificate to the effect that the foregoing
conditions to our obligations to complete the merger have been
satisfied.
|
Additional
Conditions to Eigers and Merger Subs
Obligations
The obligations of Eiger and Merger Sub to complete the merger
are subject to the satisfaction by us, or waiver by Eiger, of
the following conditions:
|
|
|
|
|
our representations and warranties regarding the absence of
material adverse effects shall have been true and correct as of
the date of the merger agreement, and as of the effective time
as though made on and as of the effective time of the merger,
our representations and warranties regarding our capitalization
shall have been true and correct in all respects except to a de
minimis extent, as of the date of the merger agreement, and as
of the effective time as though made on or as of the effective
time of the merger (except to the extent expressly made as of an
earlier date, in which case as of such earlier date) and our
other representations and warranties contained in the merger
agreement (disregarding all qualifications as to knowledge,
materiality or material adverse effects, or similar
qualifications) shall have been true and correct as of the
effective time of the merger as though made on and as of the
effective time of the merger (except to the extent expressly
made as
|
42
|
|
|
|
|
of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties
to be true and correct would not have a material adverse effect;
|
|
|
|
|
|
we shall have performed in all material respects each of the
obligations, and complied in all material respects with each of
the agreements and covenants, required to be performed by or
complied by us at or prior to the effective time of the
merger; and
|
|
|
|
one of our executive officers shall have delivered a certificate
to Eiger to the effect that the foregoing conditions to
Eigers and Merger Subs obligations to complete the
merger have been satisfied.
|
As a result of the conditions to the completion of the merger,
even if the requisite stockholder approval is obtained, there is
no assurance that the merger will be completed. In addition,
until the earlier to occur of the effective time of the merger
and the termination of the merger agreement, we are required to
promptly notify Eiger in writing of any event, condition, fact
or circumstance that would make the timely satisfaction of any
of the conditions to closing impossible or unlikely.
Material
Adverse Effect
For purposes of the merger agreement, certain of our
representations and certain of the conditions to complete the
merger are qualified by a material adverse effect
clause, which means, with respect to us, any change,
circumstance, effect, event or occurrence (an
Effect) that, individually or when taken together
with all Effects: is or would be reasonably likely to be
materially adverse to the assets, liabilities, business,
financial condition or results of operations of IDG and our
subsidiaries, taken as a whole.
However, no Effects resulting from any of the following will be
deemed to be or constitute a material adverse
effect, and no Effects resulting from the following will
be taken into account when determining whether a material
adverse effect with respect to us has occurred or is
reasonably likely to exist:
|
|
|
|
|
changes in any industry or industries in which we operate to the
extent that such changes do not have a materially
disproportionate effect on us and our subsidiaries, taken as a
whole;
|
|
|
|
changes in general economic conditions in the United States, in
any country in which any of our subsidiaries conducts business
or in the global economy as a whole to the extent that such
conditions do not have a materially disproportionate effect on
us and our subsidiaries, taken as a whole;
|
|
|
|
any generally applicable change in tax law or generally accepted
accounting principles to the extent that such conditions do not
have a materially disproportionate effect on us and our
subsidiaries, taken as a whole;
|
|
|
|
effects primarily related to the announcement of the execution
of the merger agreement and the pendency of the merger; and
|
|
|
|
compliance with the terms of, or taking any action required by,
the merger agreement to obtain approval or authorization under
applicable antitrust or competition laws.
|
Termination
of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time of the merger,
whether before or after the Special Meeting, if any of the
following events occur:
|
|
|
|
|
Eiger and IDG agree to terminate by mutual written consent;
|
|
|
|
a court of competent jurisdiction or other governmental entity
issues a final, non-appealable order, decree or ruling or taken
or failed to take any action that has become final and makes the
merger illegal or otherwise prevents or prohibits the
transactions contemplated by the merger agreement;
|
|
|
|
the merger is not consummated on or prior to August 31,
2008; or
|
|
|
|
the transaction fails to receive stockholder approval.
|
43
In addition, Eiger may terminate the merger agreement if:
|
|
|
|
|
our board of directors withdraws (or modifies, changes or amends
in a manner adverse to Eiger) its recommendation that our
stockholders adopt the merger agreement or its approval of the
merger agreement and the merger, or we fail to comply in a
material respect with our non-solicitation and related
obligations with respect to acquisition proposals; or
|
|
|
|
we breach any representation, warranty, covenant or agreement in
the merger agreement in a manner that would give rise to the
failure of a closing condition and such breach is not, or is
incapable of being, cured within 30 days after receipt by
us of notice thereof from Eiger.
|
In addition, we may terminate the merger agreement if:
|
|
|
|
|
Eiger or Merger Sub breaches any of its representations,
warranties, covenants or agreements in the merger agreement in a
manner that would give rise to the failure of a closing
condition and such breach is not, or is incapable of being,
cured within 30 days after receipt by Eiger of notice from
us; or
|
|
|
|
prior to obtaining stockholder approval, simultaneously with our
termination of the merger agreement, we enter into a definitive
agreement with respect to a superior proposal, provided that:
|
|
|
|
|
|
we did not receive the superior proposal as a result of a breach
by us of our obligation not to solicit, facilitate or accept any
acquisition proposal from a third party except under certain
circumstances;
|
|
|
|
we do not otherwise breach the terms of the merger agreement in
connection with the superior proposal; and
|
|
|
|
we pay to Eiger a termination fee of 3% of the aggregate merger
consideration, or approximately $3.5 million.
|
Termination
Fees
Generally, all fees and expenses incurred in connection with the
merger agreement, the merger and the other transactions
contemplated by the merger agreement will be paid by the party
incurring such fees and expenses, whether or not the merger is
completed.
IDG
Termination Fee
We will be required to pay a termination fee of 3% of the
aggregate merger consideration, or approximately
$3.5 million, under the following circumstances:
|
|
|
|
|
Eiger terminates the merger agreement in response to either a
material breach of our non-solicitation and related covenants,
or our board of directors withdrawing (or modifying, changing or
amending in a manner adverse to Eiger) its recommendation that
our stockholders adopt the merger agreement or its approval of
the merger agreement and the merger;
|
|
|
|
we terminate the merger agreement and, simultaneously with our
termination of the merger agreement, we enter into a definitive
agreement with respect to a superior proposal; provided that we
did not receive the superior proposal as a result of a breach by
us of our obligation not to solicit, facilitate or accept any
acquisition proposal from a third party except under certain
circumstances; and further provided that we do not otherwise
breach the terms of the merger agreement in connection with the
superior proposal;
|
|
|
|
either we or Eiger terminate the merger agreement because of the
failure to obtain stockholder approval where, subsequent to the
date of the merger agreement but prior to the stockholders
meeting, (i) an acquisition proposal was made to our
stockholders, any person publicly announced an intention to
acquire our company or an acquisition proposal was made public
(where such proposal was not withdrawn prior to the
stockholders meeting), and (ii) within one year
following such termination, we recommend to our stockholders an
acquisition proposal or exchange offer, enter into a definitive
agreement regarding an acquisition proposal, or consummate a
transaction that was an acquisition proposal; or
|
44
|
|
|
|
|
either we or Eiger terminate the merger agreement because the
merger was not consummated on or before August 31, 2008 and
(i) the stockholders meeting was not held or
(ii) no vote of the stockholders on the merger was taken at
the stockholders meeting and, in either such case,
subsequent to the date of the merger agreement, (A) an
acquisition proposal was made to our stockholders, any person
publicly announced an intention to acquire our company, or an
acquisition proposal was made public (where such proposal was
not withdrawn prior to the stockholders meeting), and
(B) within one year following such termination, we
recommend to our stockholders an acquisition proposal or
exchange offer, enter into a definitive agreement regarding an
acquisition proposal, or consummate a transaction that was an
acquisition proposal.
|
Eiger
Termination Fee
Eiger will be required to pay a termination fee of 3% of the
aggregate merger consideration, or approximately
$3.5 million and reimburse us for the termination fee of
approximately $3.0 million we paid to Platinum, upon a
termination by us under the following circumstances:
|
|
|
|
|
the merger is not consummated on or before August 31, 2008,
and we have satisfied all of our obligations to closing and all
other conditions to Eigers obligation to close have been
satisfied; or
|
|
|
|
Eiger or Merger Sub breaches any of its representations,
warranties, covenants or agreements in the merger agreement in a
manner that would give rise to the failure of a closing
condition and such breach is not cured, or is incapable of being
cured, within 30 days after receipt by Eiger of notice from
us.
|
Representations
and Warranties
The merger agreement contains representations and warranties by
each of the parties. These representations and warranties relate
to the following subject matters with respect to each party:
|
|
|
|
|
corporate existence and good standing;
|
|
|
|
corporate power and authorization to enter into and carry out
the obligations of the merger agreement and the enforceability
of the merger agreement and the absence of any conflict with or
violation of organizational documents, third party contracts or
laws as a result of entering into and carrying out the
obligations of the merger agreement;
|
|
|
|
consents, approvals, or authorizations from or notices to
governmental authorities with respect to entering into or
carrying out the obligations of the merger agreement;
|
|
|
|
litigation;
|
|
|
|
accuracy of the information supplied for inclusion in this proxy
statement; and
|
|
|
|
fees payable to brokers, finders and investment bankers.
|
We also make additional representations and warranties with
respect to the following additional subject matters:
|
|
|
|
|
our subsidiaries;
|
|
|
|
our capitalization;
|
|
|
|
our boards approval of the merger agreement and
recommendation to stockholders to adopt the merger agreement;
|
|
|
|
our compliance with laws and reporting requirements and our
internal control over financial reporting and disclosure
controls and procedures;
|
|
|
|
our filings and reports with the SEC and our financial
statements;
|
|
|
|
the absence of undisclosed liabilities or specified changes or
events with respect to us and our subsidiaries;
|
|
|
|
employee benefit plans and compliance with the Employee
Retirement Income Security Act of 1974, as amended
(ERISA);
|
45
|
|
|
|
|
labor and employment matters and labor relations;
|
|
|
|
real property and assets;
|
|
|
|
intellectual property;
|
|
|
|
tax matters;
|
|
|
|
environmental matters;
|
|
|
|
contracts, including certain key contracts;
|
|
|
|
insurance;
|
|
|
|
the inapplicability of any takeover laws to the
merger agreement and the merger transactions with affiliates;
|
|
|
|
the absence of transactions between us and any of our
subsidiaries;
|
|
|
|
our customers and suppliers;
|
|
|
|
our bonds, guarantees and letters of credit; and
|
|
|
|
the receipt of Bairds fairness opinion.
|
Eiger and Merger Sub also made representations and warranties
related to the following additional subject matters:
|
|
|
|
|
availability of sufficient committed financing to complete the
merger;
|
|
|
|
the operations and capitalization of Merger Sub;
|
|
|
|
not being an interested stockholder of IDG (as such
term is defined in the Delaware General Corporation
Law); and
|
|
|
|
the solvency of Eiger and Merger Sub.
|
Covenants
Under the Merger Agreement
Conduct
of Business Pending the Merger
Until the merger is completed or the merger agreement is
terminated, we and our subsidiaries must conduct our business in
all material respects in the ordinary course consistent with
past practice and use reasonable best efforts to preserve
substantially intact our current business organizations and
preserve our relationships with our customers, suppliers and
other persons with whom we have a significant business
relationship.
During the same period, we are prevented from taking, unless
consented to by Eiger, the following actions (subject to certain
limited, identified exceptions):
|
|
|
|
|
the amendment or other modification of our organizational
documents;
|
|
|
|
the issuance, sale, pledge, disposal, granting or encumbrance of
any shares of our or our subsidiaries capital stock or of
securities convertible into or exchangeable for shares of our
capital stock or any of our material assets or those of our
subsidiaries;
|
|
|
|
the declaration, setting aside or payment of any dividend or
other distribution payable in cash, stock
and/or
property;
|
|
|
|
the reclassification, combination, split, subdivision,
redemption or purchase of any shares of capital stock of our
company or any of our subsidiaries;
|
|
|
|
the merger, consolidation, license, lease, acquisition or
disposition of any entity or division with an aggregate value of
more than $1,000,000;
|
|
|
|
the repurchase, repayment, cancellation or incurrence of any
indebtedness, with certain exceptions;
|
46
|
|
|
|
|
the granting of any lien in, on or to any material asset to
secure any indebtedness, with certain exceptions;
|
|
|
|
the issuance of any debt securities or the assumption,
endorsement or making of loans other than to or for our
subsidiaries;
|
|
|
|
the incurrence of capital expenditures in excess of $250,000
individually or $1,000,000 in the aggregate for us or our
subsidiaries, unless otherwise reflected in our capital
expenditure budget as provided to Eiger;
|
|
|
|
the entrance into a new line of business outside of our existing
business segments;
|
|
|
|
the investment in business activities not in the ordinary course
of our existing business;
|
|
|
|
except with respect to the merger, the adoption of a plan of
liquidation, dissolution, restructuring, recapitalization or
other reorganization of our company or any of our subsidiaries;
|
|
|
|
the increase in compensation or benefits payable to any of our
current or former directors or executive officers;
|
|
|
|
the granting of any retention, severance or termination pay to,
or the entering of any employment, bonus, change of control or
severance agreement with, any of our current or former directors
or executive officers;
|
|
|
|
the establishment, adoption, entrance into, termination or
material amendment of any collective bargaining agreement or
benefit plan, with certain exceptions;
|
|
|
|
the establishment, adoption or entrance into any plan,
agreement, program, policy, trust, fund or other arrangement
that might be deemed to be a benefit plan;
|
|
|
|
the taking of certain actions with respect to taxes, other than
in the ordinary course of business, consistent with past
practice;
|
|
|
|
the making of any changes in accounting policies or procedures,
subject to certain exceptions;
|
|
|
|
the payment, discharge, waiver, settlement or satisfaction of
any material claims, litigation, investigation or arbitration
made or pending against us or any of our subsidiaries or any of
our properties or assets, other than payments, discharges,
waivers, settlements or satisfactions in accordance with the
terms of claims disclosed in our most recent financial
statements;
|
|
|
|
the amendment, modification, cancellation or consenting to
termination of any material contract under the merger agreement,
other than in the ordinary course of business; and
|
|
|
|
the entrance into any agreement or commitment to do any of the
foregoing.
|
Access
to Information
Until the merger is completed or the merger agreement is
terminated, we must afford Eiger and its representatives
reasonable access, during normal business hours, to our books
and records, personnel, offices and other facilities, and will
furnish promptly to Eiger all financial, operating and other
data and information as Eiger may reasonably request.
No
Solicitation
We have agreed that we will not, and we will cause our
subsidiaries, affiliates and representatives not to:
|
|
|
|
|
solicit, initiate, propose or knowingly encourage any inquiries
with respect to, or the submission of, an acquisition
proposal (as defined below), or participate or engage in
any discussions or negotiations, or furnish information with
respect thereto;
|
|
|
|
withdraw, modify or change the approval or recommendation of the
merger agreement in a manner adverse to Eiger;
|
|
|
|
approve, adopt or recommend an acquisition proposal; or
|
|
|
|
approve or recommend, or enter into any letter of intent,
acquisition agreement or similar agreement with respect to, or
reasonably expected to result in, an acquisition proposal.
|
We have also agreed to immediately cease and terminate any
solicitations, discussions or negotiations with any third party
that were conducted by us or any of our subsidiaries or
representatives with respect to an acquisition proposal prior to
the execution of the merger agreement.
47
However, this covenant does not prohibit us from
(i) furnishing information regarding our company and our
subsidiaries to a third party making an unsolicited acquisition
proposal (subject to the execution of a confidentiality
agreement no less restrictive than that applicable to Eiger) or
(ii) participating in negotiations or discussions with such
third party regarding such acquisition proposal if: our board of
directors determines in good faith, after consultation with
(a) its independent financial advisor, that such
acquisition proposal is credible and is, or could reasonably be
expected to lead to, a superior proposal (as defined below) and
(b) its outside legal counsel, that the failure to take
such action would be inconsistent with our board of
directors fiduciary duties to our stockholders under
applicable law.
We are required to promptly (and in any event within three
business days) notify Eiger of any acquisition proposal that we
receive or of any bona fide inquiries, proposals or offers, or
any request for information or request for discussions or
negotiations that we receive relating to an acquisition
proposal, including the identity of the offeror, the material
terms of the inquiry, proposal or offer and any written
materials that the offeror may have provided us. We are also
required to promptly notify Eiger of any material developments
with regards to any such inquiries, proposals or offers.
If our board of directors determines in good faith (after
consultation with its independent financial advisor and outside
legal counsel and after considering in good faith any
counteroffer or proposal made by Eiger during the Notice Period,
as defined below) that the failure to take action would
reasonably be a breach of our boards fiduciary duties to
our stockholders under applicable law, our board may withdraw
(or modify or change in a manner adverse to Eiger) its
recommendation that our stockholders adopt the merger agreement.
Our board of directors may not, however, in connection with or
related to any acquisition proposal, withdraw (or modify or
change in a manner adverse to Eiger) its recommendation to our
stockholders to adopt the merger agreement unless:
|
|
|
|
|
our board of directors has received an acquisition proposal that
constitutes a superior proposal and has not resulted in a breach
or violation of our non-solicitation obligations under the
merger agreement;
|
|
|
|
we have provided prior written notice to Eiger at least three
business days in advance (the Notice Period) of the
boards intention to withdraw (or modify or change in a
manner adverse to Eiger) its recommendation to our stockholders
to adopt the merger agreement;
|
|
|
|
during the Notice Period, we have given Eiger the opportunity to
meet with us and our representatives and, at Eigers
request, have negotiated in good faith regarding the terms of
possible revisions to the merger agreement; and
|
|
|
|
Eiger shall not have made, within the Notice Period, an offer
that our board of directors determines in good faith (after
consultation with its independent financial advisor and outside
legal counsel) to be at least as favorable to our stockholders
as the applicable superior proposal.
|
If there are any material revisions to any applicable superior
proposal, we will be required to deliver a new written notice to
Eiger and to comply with the requirements described above with
respect to the new written notice.
We are not entitled to enter into any contract (other than an
acceptable confidentiality agreement) with respect to a superior
proposal unless the merger agreement has been or is concurrently
terminated by its terms, and we have paid to Eiger the
termination fee of 3% of the aggregate merger consideration, or
approximately $3.5 million.
As long as we comply with the restrictions described above, the
merger agreement does not prohibit us from (i) taking and
disclosing to our stockholders a position contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act or (ii) making any
required disclosure to our stockholders if, in each case, in the
good faith judgment of our board of directors, after
consultation with its independent financial advisor and outside
legal counsel, it is required to disclose such information in
order to not breach its fiduciary duties to our stockholders
under applicable law.
48
Definition
of Acquisition Proposal and Superior
Proposal
Acquisition Proposal. As used in the merger
agreement and this proxy statement, acquisition
proposal means any proposal or offer (including any
proposal from or to our stockholders) by any third party other
than Eiger or any affiliate of Eiger relating to:
(i) any direct or indirect acquisition or purchase, in a
single transaction or series of transactions by such third party
or group acting in concert, of:
|
|
|
|
|
more than 20% of the fair market value (as determined in good
faith by our board of directors) of our assets (including
capital stock of our subsidiaries) and our consolidated
subsidiaries, taken as a whole, or a portion of our business
representing 20% of the fair market value (as determined in good
faith by our board of directors) of our net revenues or net
income; or
|
|
|
|
over 20% of any class of our equity securities (including any
tender offer or exchange offer); or
|
(ii) any merger, consolidation, reorganization, business
combination, recapitalization, share exchange, liquidation,
dissolution or other similar transaction involving us or our
subsidiaries which would result in a third party or group acting
in concert acquiring assets, securities or businesses as
described in the bullets immediately above.
Superior Proposal. As used in the merger
agreement and this proxy statement, superior
proposal means any unsolicited bona fide written
acquisition proposal (except, for purposes of this definition,
the references to 20% in the definition of acquisition proposal
are changed to 50%) that is on terms that our board of directors
determines in its good faith judgment (after consultation with
its independent financial advisor and outside legal counsel, and
after taking into account all the terms and conditions of the
acquisition proposal and the merger agreement, including the
probability of the acquisition proposal being consummated) are
more favorable to our stockholders than the merger agreement
(after taking into account any alterations to the merger
agreement agreed to in writing by Eiger in response to such
acquisition proposal).
Further
Action; Reasonable Best Efforts
Subject to the terms and conditions of the merger agreement, we,
Eiger and Merger Sub have agreed to use our reasonable best
efforts to take or do, or cause to be taken or done, all
appropriate actions and all things necessary, proper or
advisable under applicable law to consummate the transactions
contemplated by the merger agreement. Without limiting the
foregoing, the parties have agreed to:
|
|
|
|
|
obtain any consents, licenses, permits, waivers, approvals,
authorizations or orders from governmental entities as may be
required for the authorization, execution and delivery of the
merger agreement;
|
|
|
|
make the required notifications or filings, [if
any], and otherwise promptly comply, with respect to the
HSR Act, the FTC, the DOJ, any other governmental entity, or any
other applicable laws in connection with the consummation of the
transactions contemplated by the merger agreement;
|
|
|
|
coordinate and cooperate with each other in connection with
making such notifications or filings; and
|
|
|
|
use reasonable best efforts to obtain any third party consents
necessary or advisable to consummate the transactions
contemplated by the merger agreement.
|
Directors
and Officers Indemnification and Insurance
For a period of six years after the effective time of the
merger, the surviving corporation is required to honor and
fulfill our obligations (and the obligations of our
subsidiaries) to the fullest extent permissible under applicable
provisions of the Delaware General Corporation Law, under our
organizational documents (and the organizational documents of
our subsidiaries) or under any indemnification or similar
agreement between us (or any of our subsidiaries) and the
current and former directors, officers and other employees of
our company or any of our subsidiaries arising out of or
relating to actions or omissions in their capacity as directors,
officers or employees, in each case as in effect on
February 20, 2008, occurring at or prior to the effective
time of the merger, including in connection with the approval of
the merger agreement and the merger. In addition, for a period
of six years after the
49
effective time, the certificate of incorporation and bylaws of
the surviving corporation will contain provisions no less
favorable with respect to indemnification, advancement of
expenses and exculpation of directors, officers and employees of
our company or any of our subsidiaries for periods prior to and
including the effective time that are no less favorable than are
currently set forth in our amended and restated certificate of
incorporation and bylaws.
The merger agreement requires the surviving corporation to
maintain and extend all existing directors and
officers liability insurance (or substantially equivalent
policies) for a period of not less than six years after the
effective time of the merger with respect to matters arising
from actions, omissions, facts or events that actually or
allegedly occurred on or before the effective time. However, the
surviving corporation may (i) substitute the existing
directors and officers liability insurance with
directors and officers liability and fiduciary
liability policies of another insurance company, provided that
the substitute insurance carrier has the same or better credit
ratings than the existing insurance carrier, and provided that
the material terms of the substitute policies are no less
favorable than the material terms of the existing policies; or
(ii) request that we obtain extended reporting period
coverage, which we must use reasonable best efforts to do prior
to the effective time. Eiger has agreed to cause the surviving
corporation to perform its obligations described above.
Public
Announcements
We and Eiger have agreed to consult with the other party prior
to issuing any public release or making any public statement
with respect to the merger or the merger agreement, except for
such releases or public statements that may be required by law
or the rules and regulations of the Nasdaq Global Market. With
respect to releases or public statements that are required by
law or the rules and regulations of the Nasdaq Global Market,
the issuing party shall use its reasonable best efforts to
consult with the other party and to reasonably consider any
input received from the other party prior to issuing such
release or public statement.
Eiger
Financing
Eiger has represented to us that it will have sufficient cash at
closing to pay the merger consideration and consummate the
merger. In any event, Eigers obligation to complete the
merger and pay the merger consideration is not subject to any
contingency.
We have agreed to provide, to cause our subsidiaries to provide,
and to use our reasonable best efforts to cause our and our
subsidiaries representatives to provide, such cooperation
in connection with consummating Eigers financing
arrangements as may be reasonably requested by Eiger and Merger
Sub including:
|
|
|
|
|
participation in meetings, presentations, road shows, due
diligence sessions and sessions with rating agencies;
|
|
|
|
assisting Eiger and Merger Sub in the preparation of materials
for rating agency presentations, offering documents, private
placement memoranda, bank information memoranda, prospectuses
and other similar materials;
|
|
|
|
furnishing Eiger, Merger Sub and its financing sources with
financial and other pertinent information regarding us and our
subsidiaries; and
|
|
|
|
facilitating the entrance into one or more credit or other
agreements that are satisfactory to Eiger.
|
Employee
Benefit Matters
Eiger has agreed to provide, or cause the surviving corporation
to provide, during the six-month period following the
consummation of the merger, each of our employees
(i) employee benefits and incentive compensation
opportunities (other than equity based compensation) that are
not less favorable in the aggregate, except to a de minimis
extent, that those provided to our employees prior to the
effective time of the merger and (ii) medical and life
insurance benefits to retirees substantially similar to such
coverage maintained by us immediately prior to the effective
time of the merger. To the extent permitted by third-party
benefit providers, Eiger has agreed that our employees (and
those of any of our subsidiaries) will receive credit, for
purposes of eligibility to participate, vesting, benefit accrual
and eligibility to receive benefits under any employee benefit
plan, program or arrangement
50
offered by Eiger immediately after the effective time of the
merger for service accrued or deemed accrued with us or any of
our subsidiaries prior to the effective time of the merger,
except that such crediting of service will not operate to
duplicate any benefit or the funding of any such benefit.
Amendment
and Waiver
The merger agreement may be amended at any time, before the
effective time of the merger, by agreement of all of the parties
to the extent permitted by law and under the rules and
regulations of the Nasdaq Global Market.
Prior to the effective time of the merger, any party may:
|
|
|
|
|
extend the time for the performance of any of the obligations or
other acts of the other parties that are owed to the extending
party;
|
|
|
|
waive any inaccuracies in the representations and warranties
contained in the merger agreement, or in any document delivered
pursuant to the merger agreement, made or delivered to the
waiving party; and
|
|
|
|
waive compliance with any of the agreements or conditions
contained for the benefit of such party.
|
51
APPRAISAL
RIGHTS
Under the Delaware General Corporation Law, holders of our
common stock who do not vote in favor of adopting the merger
agreement will have the right to seek appraisal of the fair
value of their shares as determined by the Delaware Court of
Chancery, which we refer to as the Chancery Court,
if the merger is completed, but only if they comply with the
procedures under the Delaware General Corporation Law explained
below. The failure to follow exactly the procedures specified
under Delaware law will result in the loss of appraisal rights.
In order to exercise appraisal rights, a holder must demand and
perfect the rights in accordance with Section 262 of the
Delaware General Corporation Law.
The following description is intended as a brief summary of the
material provisions of the Delaware statutory procedures
required to be followed in order to perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the Delaware General
Corporation Law, the full text of which appears in Annex C
to this proxy statement.
Section 262 of the Delaware General Corporation Law
requires that stockholders on the record date for the Special
Meeting be notified not less than 20 days before the
Special Meeting that appraisal rights will be available. A copy
of Section 262 of the Delaware General Corporation Law must
be included with the notice. This proxy statement constitutes
our notice to the holders of shares of common stock of the
availability of appraisal rights in connection with the merger
in compliance with the requirements of Section 262 of the
Delaware General Corporation Law. If you wish to consider
exercising your appraisal rights, you should carefully review
the text of Section 262 of the Delaware General Corporation
Law contained in Annex C to this proxy statement, since
failure to timely and properly comply with the requirements of
Section 262 of the Delaware General Corporation Law will
result in the loss of your appraisal rights under Delaware law.
If you elect to demand appraisal of your shares, you must:
|
|
|
|
|
be a holder of record of shares of common stock on the date of
such demand;
|
|
|
|
deliver to us a written demand for appraisal of your shares of
common stock prior to the vote on adoption of the merger
agreement;
|
|
|
|
not vote or otherwise submit a proxy in favor of the merger
agreement; and
|
|
|
|
continuously hold your shares of common stock through the
effective date of the proposed merger.
|
None of voting (in person or by proxy) against, abstaining from
voting on, or failing to vote on the proposal to adopt the
merger agreement will constitute a written demand for appraisal
within the meaning of Section 262 of the Delaware General
Corporation Law. The written demand for appraisal must be in
addition to and separate from any proxy or vote. If the written
demand for appraisal is made in accordance with the requirements
of Delaware law, the failure to vote against the merger (i.e.,
abstaining) will not operate as a waiver of the
stockholders appraisal rights.
Only a holder of record of shares of common stock is entitled to
assert appraisal rights for the shares of common stock
registered in that holders name. A demand for appraisal
must be executed by or on behalf of the holder of record, fully
and correctly, as his, her or its name appears on his, her or
its certificate(s) or other instrument(s) evidencing an interest
in shares of our common stock, and must state that such person
intends thereby to demand appraisal of his, her or its shares of
common stock in connection with the proposed merger. If the
shares of common stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution
of the demand must be made in that capacity, and if the shares
of common stock are owned of record by more than one person, as
in a joint tenancy and tenancy in common, the demand must be
executed by or on behalf of all joint owners. An authorized
agent, including an agent for two or more joint owners, may
execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the
agent is acting as agent for such owner or owners. Stockholders
who hold their shares of common stock in brokerage accounts or
other nominee forms, and who wish to exercise appraisal rights,
are urged to consult with their brokers or such other nominee to
determine the appropriate procedures for the making of a demand
for appraisal by such a nominee.
52
All demands for appraisal should be made in writing and
addressed to the Secretary of IDG at 950 East Paces Ferry Road,
Suite 1575, Atlanta, Georgia 30326, and must be received,
prior to the vote on the adoption of the merger agreement. The
demand must reasonably inform us of the identity of the holder
and the intention of the holder to demand appraisal of his, her
or its shares of common stock. If your shares of common stock
are held through a broker, trustee or other nominee, and you
wish to demand appraisal rights, you must act promptly to
instruct the applicable broker, trustee or other nominee to
follow the steps summarized in this section.
Within 10 days after the effective date of the merger, the
surviving corporation in the merger must give written notice of
the date the merger became effective to each holder who has
properly filed a written demand for appraisal and has not voted
in favor of the merger. Within 120 days after the effective
date of the merger, either the surviving corporation in the
merger or any holder who has complied with the requirements of
Section 262 of the Delaware General Corporation Law and who
is otherwise entitled to appraisal rights may file a petition in
the Chancery Court demanding a determination of the fair value
of the shares of common stock held by all holders entitled to
appraisal. Neither IDG nor the other parties to the merger
agreement have any intention or obligation to file such a
petition. Accordingly, the failure of a holder to file a
petition in the Chancery Court demanding a determination of the
fair value of the shares within 120 days after the
effective date of the merger could nullify the holders
previously written demand for appraisal. Within 120 days
after the effective date of the merger, any holder of our common
stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to
receive from the surviving corporation in the merger a statement
setting forth the aggregate number of shares not voted in favor
of the merger and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. The statement must be mailed to each such holder within
10 days after a written request for the statement has been
received by the surviving corporation in the merger.
If a petition for appraisal is duly filed by a holder and a copy
of the petition is delivered to the surviving corporation in the
merger, the surviving corporation will then be obligated, within
20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list
containing the names and addresses of all holders who have
demanded an appraisal of their shares of common stock and with
whom agreements as to the value of their shares of common stock
have not been reached by the surviving corporation. After notice
to holders of our common stock who have demanded appraisal of
the time and place of the hearing of the petition, the Chancery
Court is empowered to conduct a hearing at which the Chancery
Court will determine those holders who have complied with
Section 262 of the Delaware General Corporation Law and who
have become entitled to appraisal rights. The Chancery Court may
require the holders who have demanded an appraisal for their
shares of common stock to submit their certificate(s) or other
instrument(s) evidencing an interest in shares of our common
stock to the Register in Chancery for notation of the pendency
of the appraisal proceedings, and if any stockholder fails to
comply with that direction, the Chancery Court may dismiss the
proceedings as to that holder.
After the court determines the stockholders entitled to
appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Chancery Court. Through such
proceeding, the Chancery Court will determine the fair value of
the shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with
interest, if any. Unless the Chancery Court, in its discretion,
determines otherwise for good cause shown, interest from the
effective date of the merger through the date of payment of the
judgment shall be compounded quarterly and shall accrue at 5%
over the Federal Reserve discount rate (including any surcharge)
as established from time to time during the period between the
effective date of the merger and the date of payment of the
judgment. When the fair value is determined, the Chancery Court
will direct the payment of the value, with interest, if any, to
the holders entitled to receive payment, upon surrender by such
holders of the certificate(s) or other instrument(s)
representing the applicable shares of our common stock.
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware
that the fair value of your shares of common stock as determined
under Section 262 of the Delaware General Corporation Law
could be more, the same, or less than the amount that you are
entitled to receive under the terms of the merger agreement.
In Weinberger v. UOP, Inc., the Delaware Supreme Court
discussed the factors that could be considered in determining
fair value in an appraisal proceeding, stating that proof
of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise
admissible in court should be
53
considered and that [f]air price obviously requires
consideration of all relevant factors involving the value of a
company. The Delaware Supreme Court has stated that, in
making this determination of fair value, the court must consider
market value, asset value, dividends, earnings prospects, the
nature of the enterprise and any other facts that could be
ascertained as of the effective date of the merger that throw
any light on future prospects of the merged company.
Section 262 of the Delaware General Corporation Law
provides that fair value is to be exclusive of any element
of value arising from the accomplishment or expectation of the
merger. In Cede & Co. v. Technicolor,
Inc., the Delaware Supreme Court stated that such exclusion
is a narrow exclusion [that] does not encompass known
elements of value, but which rather applies only to the
speculative elements of value arising from such accomplishment
or expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 of the Delaware General Corporation
Law to mean that elements of future value, including the
nature of the enterprise, which are known or susceptible of
proof as of the date of the merger and not the product of
speculation, may be considered.
Costs of the appraisal proceeding may be imposed upon the
parties participating in the appraisal proceeding by the
Chancery Court as it deems equitable in the circumstances. Costs
do not include attorneys fees or expert witness fees or
expenses; however, upon the application of a holder, the
Chancery Court may order all or a portion of the expenses
incurred by any holder in connection with the appraisal
proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
Any holder who has demanded appraisal rights will not, from and
after the effective date of the merger, be entitled to vote
shares of common stock subject to that demand for any purpose or
to receive payments of dividends or any other distribution with
respect to those shares, other than dividends or other
distribution payable to our stockholders of record at a date
prior to the effective date. However, an appraisal demand may be
withdrawn by a stockholder within 60 days after the
effective date of the merger without the approval of the
corporation surviving the merger, or thereafter with the
approval of the surviving corporation; provided that the
stockholder shall not have commenced an appraisal proceeding
with respect to such stockholders shares or joined such a
proceeding as a named party. Upon the effective withdrawal of an
appraisal demand by a stockholder, such stockholder will be
entitled to receive the merger consideration. No appraisal
proceeding in the Chancery Court will be dismissed as to any
stockholder without the approval of the Chancery Court, and such
approval may be subject to such conditions as the Chancery Court
deems just; provided, however, that any stockholder who has not
commenced an appraisal proceeding as to such stockholders
shares, or joined such an appraisal proceeding as a named party,
will retain the right to withdraw his or her demand for
appraisal within 60 days after the effective date of the
merger and to accept the merger consideration. If the
stockholder fails to perfect, effectively withdraws or otherwise
loses the appraisal right, the stockholders shares will be
converted into the right to receive the merger consideration.
In view of the complexity of Section 262 of the Delaware
General Corporation Law, holders of shares of common stock who
may wish to pursue appraisal rights should promptly consult
their legal advisors.
54
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
common stock by each director, each executive officer and all
directors and executive officers as a group, as of May
[8], 2008 [RECORD DATE], and by
beneficial owners of more than 5% of our common stock as of the
dates indicated in the footnotes. The address for each of the
directors and executive officers is:
c/o Industrial
Distribution Group, Inc., 950 East Paces Ferry Road,
Suite 1575, Atlanta, Georgia 30326.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
|
|
Capacity
|
|
Owned(1)
|
|
|
Class Owned(2)
|
|
|
Luther King Capital Management Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
LKCM Private Discipline Master Fund SPC
|
|
|
|
|
|
|
|
|
|
|
|
|
LKCM Private Discipline Management, L.P.
|
|
(3)
|
|
Beneficial owner
|
|
|
1,434,000
|
|
|
|
14.9
|
%
|
LKCM Alternative Management, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Luther King, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bryan King
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalton, Greiner, Hartman, Maher & Co LLC(4)
|
|
|
|
Beneficial owner
|
|
|
843,133
|
|
|
|
8.7
|
%
|
Dimensional Fund Advisors LP(5)
|
|
|
|
Beneficial owner
|
|
|
818,502
|
|
|
|
8.5
|
%
|
Heartland Advisors, Inc.
William J. Nasgovitz
|
|
(6)
|
|
Beneficial owner
|
|
|
501,000
|
|
|
|
5.2
|
%
|
Charles A. Lingenfelter(7)
|
|
|
|
President, Chief Executive Officer and
Director
|
|
|
473,357
|
|
|
|
4.9
|
%
|
Jack P. Healey(8)
|
|
|
|
Executive Vice President, Chief
Financial Officer and Secretary
|
|
|
149,936
|
|
|
|
1.6
|
%
|
David K. Barth(9)
|
|
|
|
Director
|
|
|
87,826
|
|
|
|
*
|
|
William R. Fenoglio(10)
|
|
|
|
Director
|
|
|
57,760
|
|
|
|
*
|
|
William T. Parr(11)
|
|
|
|
Director
|
|
|
53,960
|
|
|
|
*
|
|
Ajita G. Rajendra(12)
|
|
|
|
Director
|
|
|
5,005
|
|
|
|
*
|
|
George L. Sachs, Jr.(13)
|
|
|
|
Director
|
|
|
133,994
|
|
|
|
1.4
|
%
|
Richard M. Seigel(14)
|
|
|
|
Director
|
|
|
118,760
|
|
|
|
1.2
|
%
|
Directors and Executive Officers as a Group (8 persons)(15)
|
|
|
|
|
1,080,598
|
|
|
|
10.3
|
%
|
|
|
|
* |
|
Individual is the beneficial owner of less than one percent (1%)
of our outstanding common stock. |
|
(1) |
|
Except as indicated in the footnotes to this table, the
individuals or entities listed have sole voting and investment
power with respect to all shares of common stock beneficially
owned by them. |
|
(2) |
|
The percentage of common stock beneficially owned is based on
[9,791,368] shares of common stock
outstanding on May [8], 2008, but is increased,
for each person and group listed, by the number(s) of shares of
common stock deemed owned by such holder pursuant to
Rule 13d-3
under the Exchange Act, assuming the exercise of options or
other rights held by such holder that are exercisable within
60 days of May [8], 2008. |
|
(3) |
|
LKCM Private Discipline Master Fund SPC, LKCM Private
Discipline Management, L.P., LKCM Alternative Management, LLC,
J. Luther King, Jr. and J. Bryan King are affiliates of each
other and share beneficial ownership of these shares. Each of
their address is 301 Commerce Street, Suite 1600,
Fort Worth, Texas 76102. |
|
(4) |
|
According to the Schedule 13G filing for this entity,
Dalton, Greiner, Hartman, Maher & Co LLC claims voting
power with respect to only 824,633 of these shares, but claims
investment power with respect to all 843,133 shares. The
address for Dalton, Greiner, Hartman, Maher & Co LLC
is 565 Fifth Avenue, Suite 2101, New York, New York
10022. The beneficial ownership amount set forth is based upon
its Schedule 13G/A filed with the SEC on February 8,
2008. |
|
(5) |
|
The address for Dimensional Fund Advisors LP is 1299 Ocean
Avenue, Santa Monica, California 90401. The beneficial ownership
amount set forth is based upon its Schedule 13G/A filed
with the SEC on February 6, 2008. |
55
|
|
|
(6) |
|
According to the Schedule 13G filing of this individual and
entity, Heartland Advisors, Inc. and William J. Nasgovitz
completed a joint filing pursuant to certain SEC staff
positions, but do not comprise a group with respect to the
beneficial ownership of these shares. The address for them is
789 North Water Street, Milwaukee, WI 53202. The beneficial
amount set forth is based upon their Schedule 13G filed
with the SEC on February 8, 2008. |
|
(7) |
|
Includes 214,757 shares that are restricted and subject to
possible forfeiture, including 185,000 shares for which the
restriction contains future performance as well as time vesting
elements (123,333 of which shares will not vest in the merger).
Includes 57,167 shares subject to exercisable options. |
|
(8) |
|
Includes 11,978 shares that are restricted and subject to
possible forfeiture. Includes 56,933 shares subject to
exercisable options. |
|
(9) |
|
Includes 5,591 shares that are restricted and subject to
possible forfeiture. Includes 45,000 shares subject to
exercisable options. |
|
(10) |
|
Includes 5,591 shares that are restricted and subject to
possible forfeiture. Includes 45,000 shares subject to
exercisable options. |
|
(11) |
|
Includes 5,591 shares that are restricted and subject to
possible forfeiture. Includes 45,000 shares subject to
exercisable options. Does not include an aggregate of
1,200 shares owned by Mr. Parrs wife, with
respect to which Mr. Parr disclaims beneficial ownership. |
|
(12) |
|
Includes 5,005 shares that are restricted and subject to
possible forfeiture. |
|
(13) |
|
Includes 5,591 shares that are restricted and subject to
possible forfeiture. Includes 55,000 shares subject to
exercisable options. |
|
(14) |
|
Includes 5,591 shares that are restricted and subject to
possible forfeiture. Includes 70,000 shares subject to
exercisable options. |
|
(15) |
|
Includes for each director and executive officer the respective
amounts of shares included above that are restricted and subject
to possible forfeiture or that are subject to exercisable
options. |
56
PROPOSAL 2
ADJOURNMENT OR POSTPONEMENT TO CONTINUE SOLICITATION
If we fail to receive a sufficient number of votes to adopt the
merger agreement, we may propose to adjourn or postpone the
Special Meeting, if a quorum is present, for a period of not
more than 120 days for the purpose of soliciting additional
proxies to adopt the merger agreement. We currently do not
intend to propose adjournment or postponement of the Special
Meeting if there are sufficient votes to adopt the merger
agreement. Adoption of the proposal to adjourn or postpone the
Special Meeting for the purpose of soliciting additional proxies
requires the affirmative vote of the holders of a majority of
the shares of common stock present at the Special Meeting (in
person or by proxy) and voting with respect to the proposal.
Our board of directors unanimously recommends that you vote
FOR the proposal to adjourn or postpone the
Special Meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the meeting to adopt the merger agreement.
OTHER
MATTERS
Other
Business at the Special Meeting
Our board of directors currently knows of no other business that
will be presented for consideration at the Special Meeting.
Nevertheless, should any business other than that set forth in
the Notice of the Special Meeting of Stockholders properly come
before the meeting, the enclosed proxy card confers
discretionary authority to vote with respect to such matters,
including matters that the board of directors does not know (a
reasonable time before the proxy solicitation) are to be
presented at the meeting. If any of these matters are presented
at the meeting, then the persons named as proxies in the
enclosed proxy card will vote in accordance with their judgment.
FUTURE
STOCKHOLDER PROPOSALS
If the merger is completed, we will no longer have public
stockholders, and there will be no public participation in any
future meetings of our stockholders. However, if the merger is
not completed, our stockholders will continue to be entitled to
attend and to participate in our stockholder meetings. We intend
to hold an annual stockholders meeting in 2008 only if the
merger is not completed, or if we are required to do so by law.
Stockholder
Proposals
If we hold a 2008 annual meeting of stockholders in accordance
with our traditional schedule, which we do not currently expect
to do, any stockholder proposal intended to be presented at our
2008 annual meeting of stockholders pursuant to
Rule 14a-8
of the Exchange Act should have been received by
December 4, 2007 for consideration for inclusion in the
proxy statement for the meeting.
Copy of
Bylaw Provisions
You may contact our Secretary at our principal executive offices
for a copy of the relevant bylaw provisions regarding the
requirements for making stockholder proposals.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
reports, statements or other information that we file with the
SEC at its Public Reference Room,
57
100 F Street, N.E., Washington, D.C. 20549, at
prescribed rates. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room.
Our public filings are also available to the public from
document retrieval services and at the Internet site maintained
by the SEC at www.sec.gov.
If you have any questions about this proxy statement, the
Special Meeting or the merger, or need assistance with the
voting procedures, you should contact our proxy solicitor,
MacKenzie Partners, Inc. toll-free at
(800) 322-2885
(banks and brokers may call collect at
(212) 929-5500).
You should only rely on information provided in this proxy
statement. No persons have been authorized to give any
information or to make any representations other than those
contained in this proxy statement and, if given or made, such
information or representations must not be relied upon as having
been authorized by us or any other person. You should not assume
that the information contained in this proxy statement is
accurate as of any date other than the date of this proxy
statement, and the mailing of this proxy statement to
stockholders shall not create any implication to the contrary.
58
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I THE MERGER
|
|
|
1
|
|
|
Section 1.01.
|
|
|
The Merger
|
|
|
1
|
|
|
Section 1.02.
|
|
|
Closing
|
|
|
1
|
|
|
Section 1.03.
|
|
|
Effective Time
|
|
|
1
|
|
|
Section 1.04.
|
|
|
Effect of the Merger
|
|
|
1
|
|
|
Section 1.05.
|
|
|
Certificate of Incorporation; Bylaws
|
|
|
1
|
|
|
Section 1.06.
|
|
|
Directors and Officers
|
|
|
2
|
|
ARTICLE II CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES
|
|
|
2
|
|
|
Section 2.01.
|
|
|
Conversion of Securities
|
|
|
2
|
|
|
Section 2.02.
|
|
|
Treatment of Options and Other Equity Awards
|
|
|
2
|
|
|
Section 2.03.
|
|
|
No Further Rights; Stock Transfer Books
|
|
|
3
|
|
|
Section 2.04.
|
|
|
Exchange of Certificates
|
|
|
3
|
|
|
Section 2.05.
|
|
|
Appraisal Rights
|
|
|
5
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
|
|
|
5
|
|
|
Section 3.01.
|
|
|
Organization and Qualification; Subsidiaries
|
|
|
5
|
|
|
Section 3.02.
|
|
|
Charter Documents
|
|
|
6
|
|
|
Section 3.03.
|
|
|
Capitalization
|
|
|
6
|
|
|
Section 3.04.
|
|
|
Corporate Authority Relative to This Agreement
|
|
|
7
|
|
|
Section 3.05.
|
|
|
No Conflict; Required Filings and Consents
|
|
|
8
|
|
|
Section 3.06.
|
|
|
Permits; Compliance
|
|
|
8
|
|
|
Section 3.07.
|
|
|
SEC Filings; Financial Statements; Undisclosed Liabilities
|
|
|
9
|
|
|
Section 3.08.
|
|
|
Absence of Certain Changes or Events
|
|
|
10
|
|
|
Section 3.09.
|
|
|
Absence of Litigation
|
|
|
10
|
|
|
Section 3.10.
|
|
|
Employee Benefit Plans
|
|
|
10
|
|
|
Section 3.11.
|
|
|
Labor and Employment Matters
|
|
|
11
|
|
|
Section 3.12.
|
|
|
Real Property
|
|
|
11
|
|
|
Section 3.13.
|
|
|
Intellectual Property
|
|
|
12
|
|
|
Section 3.14.
|
|
|
Taxes
|
|
|
12
|
|
|
Section 3.15.
|
|
|
Environmental Matters
|
|
|
13
|
|
|
Section 3.16.
|
|
|
Material Contracts
|
|
|
14
|
|
|
Section 3.17.
|
|
|
Insurance
|
|
|
15
|
|
|
Section 3.18.
|
|
|
Company Rights Agreement
|
|
|
15
|
|
|
Section 3.19.
|
|
|
Takeover Statutes
|
|
|
15
|
|
|
Section 3.20.
|
|
|
Affiliate Transactions
|
|
|
15
|
|
|
Section 3.21.
|
|
|
Customers and Suppliers
|
|
|
15
|
|
|
Section 3.22.
|
|
|
Guarantees, Bonds and Letters of Credit
|
|
|
16
|
|
|
Section 3.23.
|
|
|
Opinion of Financial Advisor
|
|
|
16
|
|
|
Section 3.24.
|
|
|
Brokers
|
|
|
16
|
|
|
Section 3.25
|
|
|
Platinum Merger Agreement
|
|
|
16
|
|
-i-
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER CO
|
|
|
16
|
|
|
Section 4.01.
|
|
|
Organization
|
|
|
16
|
|
|
Section 4.02.
|
|
|
Authority Relative to This Agreement
|
|
|
17
|
|
|
Section 4.03.
|
|
|
No Conflict; Required Filings and Consents
|
|
|
17
|
|
|
Section 4.04.
|
|
|
Absence of Litigation
|
|
|
17
|
|
|
Section 4.05.
|
|
|
Operations of Merger Co.
|
|
|
17
|
|
|
Section 4.06.
|
|
|
Financing
|
|
|
18
|
|
|
Section 4.07.
|
|
|
Capitalization of Merger Co
|
|
|
18
|
|
|
Section 4.08.
|
|
|
No Vote of Parent Stockholders
|
|
|
18
|
|
|
Section 4.09.
|
|
|
Finders or Brokers
|
|
|
18
|
|
|
Section 4.10.
|
|
|
Lack of Ownership of Company Common Stock
|
|
|
18
|
|
|
Section 4.11.
|
|
|
No Additional Representations
|
|
|
18
|
|
|
Section 4.13.
|
|
|
Solvency
|
|
|
18
|
|
ARTICLE V COVENANTS OF BUSINESS PENDING
MERGER
|
|
|
19
|
|
|
Section 5.01.
|
|
|
Conduct of Business by the Company Pending the Merger
|
|
|
19
|
|
|
Section 5.02.
|
|
|
Conduct of Business by Parent and Merger Co Pending the Merger
|
|
|
20
|
|
|
Section 5.03.
|
|
|
No Control of Other Partys Business
|
|
|
20
|
|
ARTICLE VI ADDITIONAL AGREEMENTS
|
|
|
20
|
|
|
Section 6.01.
|
|
|
Proxy Statement; Other Filings
|
|
|
20
|
|
|
Section 6.02.
|
|
|
Information Supplied
|
|
|
21
|
|
|
Section 6.03.
|
|
|
Company Stockholders Meeting
|
|
|
22
|
|
|
Section 6.04.
|
|
|
Access to Books and Records; Confidentiality
|
|
|
22
|
|
|
Section 6.05.
|
|
|
No Solicitation of Transactions
|
|
|
23
|
|
|
Section 6.06.
|
|
|
Directors and Officers Indemnification, Advancement
of Expenses and Insurance
|
|
|
25
|
|
|
Section 6.07.
|
|
|
Employee Benefits Matters
|
|
|
26
|
|
|
Section 6.08.
|
|
|
Notification of Certain Matters
|
|
|
27
|
|
|
Section 6.09.
|
|
|
Further Action; Reasonable Best Efforts
|
|
|
27
|
|
|
Section 6.10.
|
|
|
Public Announcements
|
|
|
28
|
|
|
Section 6.11.
|
|
|
Resignations
|
|
|
28
|
|
|
Section 6.12.
|
|
|
State Takeover Statutes
|
|
|
28
|
|
ARTICLE VII CONDITIONS TO THE MERGER
|
|
|
29
|
|
|
Section 7.01.
|
|
|
Conditions to the Obligations of Each Party
|
|
|
29
|
|
|
Section 7.02.
|
|
|
Conditions to the Obligations of Parent and Merger Co
|
|
|
29
|
|
|
Section 7.03.
|
|
|
Conditions to the Obligation of the Company
|
|
|
29
|
|
|
Section 7.04.
|
|
|
Frustration of Closing Conditions
|
|
|
30
|
|
ARTICLE VIII TERMINATION, AMENDMENT AND
WAIVER
|
|
|
30
|
|
|
Section 8.01.
|
|
|
Termination
|
|
|
30
|
|
|
Section 8.02.
|
|
|
Effect of Termination
|
|
|
31
|
|
|
Section 8.03.
|
|
|
Fees and Expenses
|
|
|
31
|
|
|
Section 8.04.
|
|
|
Amendment
|
|
|
33
|
|
|
Section 8.05.
|
|
|
Waiver
|
|
|
33
|
|
-ii-
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE IX GENERAL PROVISIONS
|
|
|
33
|
|
|
Section 9.01.
|
|
|
Non-Survival of Representations, Warranties and Agreements
|
|
|
33
|
|
|
Section 9.02.
|
|
|
Notices
|
|
|
33
|
|
|
Section 9.03.
|
|
|
Certain Definitions
|
|
|
34
|
|
|
Section 9.04.
|
|
|
Severability
|
|
|
37
|
|
|
Section 9.05.
|
|
|
Disclaimer of Other Representations and Warranties; Company
Disclosure Schedules
|
|
|
37
|
|
|
Section 9.06.
|
|
|
Entire Agreement; Assignment
|
|
|
38
|
|
|
Section 9.07.
|
|
|
Parties in Interest
|
|
|
38
|
|
|
Section 9.08.
|
|
|
Governing Law
|
|
|
38
|
|
|
Section 9.09.
|
|
|
Waiver of Jury Trial
|
|
|
38
|
|
|
Section 9.10.
|
|
|
Headings
|
|
|
38
|
|
|
Section 9.11.
|
|
|
Counterparts
|
|
|
38
|
|
|
Exhibit A
|
|
|
Form of Certificate of Merger
|
|
|
|
|
-iii-
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of
April 25, 2008 (this Agreement), is by
and among Eiger Holdco, LLC, a Delaware limited liability
company (Parent), Eiger Merger Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent
(Merger Co), and Industrial Distribution
Group, Inc., a Delaware corporation (the
Company).
WHEREAS, the Company has duly terminated the Agreement
and Plan of Merger dated as of February 20, 2008 (as
amended, the Platinum Merger Agreement) among
Project Athena Holding Corporation, a Delaware corporation
(Platinum), Project Athena Merger
Corporation, a Delaware corporation, and the Company in
accordance with the terms thereof;
WHEREAS, the respective Boards of Directors of each of
the Company, Parent and Merger Co deem it in the best interests
of their respective companies and stockholders to consummate the
merger (the Merger), on the terms and subject
to the conditions set forth in this Agreement, of Merger Co with
and into the Company, and each such Board of Directors has
adopted this Agreement (and, in the case of the Board of
Directors of the Company (the Company Board),
recommended that this Agreement be approved by the
Companys stockholders); and
WHEREAS, in order to induce Parent and Merger Co to enter
into this Agreement, the directors and certain of the executive
officers of the Company have entered into and delivered to
Parent and Merger Co, concurrently with the execution and
delivery of this Agreement, support agreements.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending
to be legally bound hereby, Parent, Merger Co and the Company
hereby agree, subject to the conditions herein contained, as
follows:
ARTICLE I THE
MERGER
Section 1.01. The
Merger. Upon the terms and subject to the
conditions set forth in Article VII, and in
accordance with the Delaware General Corporation Law (the
DGCL), at the Effective Time, Merger Co shall
be merged with and into the Company, the separate corporate
existence of Merger Co shall cease and the Company shall
continue as the surviving corporation of the Merger (the
Surviving Corporation).
Section 1.02. Closing. Unless
this Agreement shall have been terminated in accordance with
Section 8.01, and subject to the satisfaction or
waiver of the conditions set forth in Article VII,
the closing of the Merger (the Closing) will
take place at 11:00 A.M., Eastern Time, on a date to be
specified by the parties, which shall be no later than the
second Business Day following the satisfaction or waiver of the
conditions set forth in Article VII (other than
those that by their terms are to be satisfied or waived at the
Closing, but subject to satisfaction or waiver of those
conditions), at the offices of Kaye Scholer LLP, 425 Park
Avenue, New York, New York 10022, unless another time, date
and/or place
is agreed to in writing by Parent and the Company (the date on
which the Closing occurs, the Closing Date).
Section 1.03. Effective
Time. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, the
parties shall (a) file a certificate of merger in such form
as is required by, and executed and acknowledged in accordance
with, the relevant provisions of the DGCL, in substantially the
form attached hereto as Exhibit A (the
Certificate of Merger), and (b) make all
other filings or recordings required under the DGCL to effect
the Merger. The Merger shall become effective at such date and
time as is specified in the Certificate of Merger. The date and
time at which the Merger becomes effective is referred to in
this Agreement as the Effective Time.
Section 1.04. Effect
of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions
of the DGCL and this Agreement.
Section 1.05. Certificate
of Incorporation; Bylaws.
(a) Certificate of Incorporation. At the
Effective Time, the Certificate of Incorporation of Merger Co,
as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with the provisions
thereof and as provided by law.
1
(b) Bylaws. At the Effective Time, the
Bylaws of Merger Co, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
Section 1.06. Directors
and Officers. At the Effective Time, (a) the
directors of Merger Co shall be the directors of the Surviving
Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving
Corporation, and (b) the officers of Merger Co shall be the
officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and
qualified or until the earlier of their death, resignation or
removal.
ARTICLE II CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion
of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Co,
the Company or the holders of any of the following securities,
the following shall occur:
(a) Conversion of Company Common
Stock. Each share of the common stock, par value
$0.01 per share, of the Company (the Company Common
Stock) (all issued and outstanding shares of Company
Common Stock being hereinafter collectively referred to as the
Shares) issued and outstanding immediately
prior to the Effective Time (other than any Shares to be
cancelled pursuant to Section 2.01(b) and any
Dissenting Shares) shall be cancelled and shall be converted
automatically into the right to receive $12.10 per share in
cash, without interest (the Per Share Merger
Consideration), payable in the manner provided in
Section 2.04. (The result of (i) the
number of Shares entitled to payment pursuant to this
Section 2.01(a) times (ii) the Per Share Merger
Consideration is referred to herein from time to time as the
Merger Consideration.)
(b) Cancellation of Treasury Stock, Parent-Owned Stock
and Unvested Stock. The following Shares shall
automatically be cancelled at the Effective Time without any
conversion thereof, and no payment or distribution shall be made
with respect thereto: (i) Each Share held in the treasury
of the Company; (ii) each Share directly owned by Parent,
Merger Co or any direct or indirect wholly-owned subsidiary of
Parent, Merger Co or the Company immediately prior to the
Effective Time; and (iii) each Share held by the persons
listed on Schedule 3.03(a) that, in accordance with
the terms of the agreement pursuant to which such Shares were
issued, has not vested prior to, and will not vest as of, the
Effective Time.
(c) Capital Stock of Merger Co. Each
share of common stock, par value $0.01 per share, of Merger Co
issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation. Following the Effective
Time, each certificate evidencing ownership of shares of Merger
Co common stock shall evidence ownership of such shares of the
Surviving Corporation.
(d) Adjustments. If, between the date of
this Agreement and the Effective Time, there is a
reclassification, recapitalization, stock split, stock dividend,
subdivision, combination or exchange of shares with respect to,
or rights issued in respect of, the Shares, the Per Share Merger
Consideration shall be adjusted accordingly, without
duplication, to provide the holders of Shares the same economic
effect as contemplated by this Agreement prior to such event.
Section 2.02. Treatment
of Options and Other Equity Awards.
(a) Options. As of the Effective Time,
each option then outstanding to purchase shares of Company
Common Stock (each, a Company Stock Option)
granted under any plan, arrangement or agreement, including
without limitation those set forth in
Schedule 3.03(a) (collectively, the Company
Stock Option Plans), regardless of whether vested or
exercisable, shall fully vest and be deemed to be exercised and
cancelled. Each holder of a Company Stock Option with respect to
which the exercise price therefor is less than the Per Share
Merger Consideration (an In-the-Money Option)
shall be entitled to receive, in consideration of the deemed
exercise and cancellation of such In-the-Money Option, a payment
of an amount of cash, without interest, equal to the product of
(i) the total number of shares of Company Common Stock
subject to
2
such In-the-Money Option multiplied by (ii) the excess, if
any, of the Per Share Merger Consideration over the exercise
price per share of such In-the-Money Option, less applicable
Taxes, if any, required to be withheld with respect to such
payment. Any Company Stock Option that is not an In-the-Money
Option shall not be entitled to any payment in respect thereof.
(b) Restricted Shares. As of the
Effective Time, each Share then subject to vesting or other
restrictions pursuant to any Company Stock Option Plan or
pursuant to any agreement with the Company (collectively,
Restricted Shares) shall become vested or
unrestricted to the extent provided in the agreement pursuant to
which such Restricted Shares were issued. The Restricted Shares
that so vest shall be converted into the right to receive the
Per Share Merger Consideration under
Section 2.01(a), less any required withholding
Taxes; the Restricted Shares that do not so vest prior to or as
of the Effective Time shall be cancelled as provided in
Section 2.01(b).
(c) Company Action. Prior to the
Effective Time, the Company shall take or cause to be taken all
actions necessary to (i) effectuate the treatment of the
Company Stock Options and Restricted Shares set forth in this
Section 2.02 (which shall include, with respect to
Company Stock Options, delivery of at least 15 days
prior written notice of the treatment described in
Section 2.02(a)), and (ii) terminate each of
the Company Stock Option Plans (in each case, to the extent not
already terminated) effective as of or prior to the Effective
Time. Parent shall cause the Surviving Corporation to pay to the
holders of the Company Stock Options the cash payments to which
they are entitled pursuant to this Section 2.02
prior to the later of (x) five (5) Business Days
following the Effective Time and (y) the next regularly
scheduled payroll date of the Surviving Corporation.
Section 2.03. No
Further Rights; Stock Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers
on the records of the Company of Shares issued and outstanding
immediately prior to the Effective Time. From and after the
Effective Time, the holders of Certificates representing Shares
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such Shares, except as
otherwise provided in this Agreement or by law. On or after the
Effective Time, any Certificates presented to the Paying Agent
or Parent for any reason shall be cancelled against delivery of
the Per Share Merger Consideration to which the holders thereof
are entitled pursuant to Section 2.01(a), without
interest.
Section 2.04. Exchange
of Certificates.
(a) Paying Agent. Prior to the Effective
Time, Parent shall enter into a paying agent agreement, in form
and substance reasonably acceptable to the Company, with a bank
or trust company reasonably acceptable to the Company to act as
agent for the stockholders of the Company in connection with the
Merger (the Paying Agent). At the Closing,
Parent shall deposit with the Paying Agent, for the benefit of
the holders of Shares, cash in an amount sufficient to pay the
aggregate Merger Consideration required to be paid pursuant to
Section 2.01(a) (such cash being hereinafter
referred to as the Exchange Fund). The
Exchange Fund shall not be used for any other purpose. The
Exchange Fund shall be invested by the Paying Agent as directed
by Parent; provided, however, that: (i) no
such investment or losses thereon shall affect the Per Share
Merger Consideration payable to the holders of Company Common
Stock entitled thereto, and, following any losses, Parent shall
promptly provide additional funds to the Paying Agent for the
benefit of the stockholders of the Company in the amount of any
such losses; and (ii) such investments shall be in
obligations of or guaranteed by the United States of America or
any agency or instrumentality thereof and backed by the full
faith and credit of the United States of America, in commercial
paper obligations rated
A-1 or
P-1 or
better by Moodys Investors Service, Inc. or
Standard & Poors Corporation, respectively, or
in certificates of deposit, bank repurchase agreements or
bankers acceptances of commercial banks with capital
exceeding $10 billion (based on the most recent financial
statements of such bank that are then publicly available). Any
net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Corporation
or Parent, as Parent directs.
(b) Exchange Procedures for Shares. As
promptly as practicable, but no later than three
(3) Business Days, after the Effective Time, Parent shall
cause the Paying Agent to mail to each Person who was, at the
Effective Time, a holder of Shares entitled to receive the Per
Share Merger Consideration pursuant to
3
Section 2.01(a): (i) a letter of transmittal
(which shall be in customary form and shall specify that
delivery shall be effected, and risk of loss and title to the
certificates evidencing such Shares (collectively, the
Certificates) shall pass, only upon proper
delivery of the Certificates to the Paying Agent); and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Per Share Merger Consideration.
Upon surrender to the Paying Agent of a Certificate for
cancellation, together with such letter of transmittal, duly
completed and validly executed in accordance with the
instructions thereto, and such other documents as may be
required pursuant to such instructions (or, if such Shares are
held in book-entry or other uncertificated form, upon the entry
through a book-entry transfer agent of the surrender of such
Shares on a book-entry account statement (it being understood
that any references herein to Certificates shall be
deemed to include references to book-entry account statements
relating to the ownership of Shares)), the holder of such
Certificate shall be entitled to receive in exchange therefor
the amount of cash that such holder has the right to receive in
respect of the Shares formerly represented by such Certificate
pursuant to Section 2.01(a), and the Certificate so
surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Shares that are not registered in the
transfer records of the Company, payment of the Per Share Merger
Consideration with respect thereto may be made to a Person other
than the Person in whose name the Certificate so surrendered is
registered if the Certificate representing such Shares is
properly endorsed or otherwise in proper form for transfer, and
the Person requesting such payment pays any transfer or other
taxes required by reason of the payment of the Per Share Merger
Consideration applicable to such Shares to a Person other than
the registered holder of such Certificate or establishes to the
reasonable satisfaction of Parent that such tax has been paid or
is not applicable. Until surrendered as contemplated by this
Section 2.04(b), each Certificate shall be deemed at
all times after the Effective Time to represent only the right
to receive upon such surrender the Per Share Merger
Consideration to which the holder of such Certificate is
entitled pursuant to this Article II. No
interest shall be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this
Article II.
(c) Termination of Exchange Fund. Any
portion of the Exchange Fund that remains undistributed to the
holders of Shares on the date that is six (6) months after
the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Shares who have not
theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for, and the
Surviving Corporation shall remain liable for, payment of their
respective claims for the Per Share Merger Consideration. Any
portion of the Exchange Fund remaining unclaimed by holders of
Shares as of a date which is immediately prior to such time that
such amounts would otherwise escheat to or become property of
any Governmental Entity shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation
free and clear of any claims or interest of any Person
previously entitled thereto.
(d) No Liability. None of the Paying
Agent, Parent, Merger Co or the Surviving Corporation shall be
liable to any holder of Shares or Company Stock Options for any
such Shares or Company Stock Options (or dividends or
distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or
similar law.
(e) Withholding Rights. Each of the
Paying Agent, the Surviving Corporation and Parent shall be
entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement to any holder of Shares or
Company Stock Options such amounts as it is required to deduct
and withhold with respect to such payment under all applicable
Tax laws and pay such withholding amount over to the appropriate
taxing authority. To the extent that amounts are so properly
withheld by the Paying Agent, the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder of the Shares or Company Stock Options in respect
of which such deduction and withholding was made by the Paying
Agent, the Surviving Corporation or Parent, as the case may be.
(f) Lost Certificates. If any Certificate
has been lost, stolen, defaced or destroyed, upon the making of
an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen, defaced or destroyed and, if
required by the Surviving Corporation, the posting by such
Person of a bond, in such reasonable amount as the Surviving
Corporation may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, the Paying
Agent shall pay in respect of such lost, stolen, defaced or
destroyed Certificate the Per Share Merger Consideration to
which the holder thereof is entitled pursuant to
Section 2.01(a), without interest.
4
Section 2.05. Appraisal
Rights.
(a) Treatment of Dissenting
Shares. Notwithstanding any provision of this
Agreement to the contrary and to the extent available under the
DGCL, Shares that are outstanding immediately prior to the
Effective Time and that are held by any stockholder who is
entitled to exercise, and who properly exercises, appraisal
rights with respect to such Shares (the Dissenting
Shares) pursuant to, and who complies in all respects
with, the provisions of Section 262 of the DGCL, shall not
be converted into, exchangeable for or represent the right to
receive, the Per Share Merger Consideration. Any such
stockholder shall instead be entitled to receive payment of the
fair value of such stockholders Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL;
provided, however, that all Dissenting Shares held
by any stockholder who shall have failed to perfect or who
otherwise shall have withdrawn, in accordance with
Section 262 of the DGCL, or lost such stockholders
rights to demand payment in respect of such Shares under
Section 262 of the DGCL, shall thereupon be deemed to have
been converted into, and to have become exchangeable for, as of
the Effective Time, the right to receive the Per Share Merger
Consideration, without any interest thereon, upon surrender of
the Certificate or Certificates that formerly evidenced such
Shares. At the Effective Time, any holder of Dissenting Shares
shall cease to have any rights with respect thereto other than
as provided in Section 262 of the DGCL.
(b) Notice and Participation. The Company
shall give Parent: (i) prompt notice of any such demands
received by the Company for payment for Dissenting Shares,
withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company; and
(ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands
for payment under the DGCL. The Company shall not, except with
the prior written consent of Parent, make any payment or agree
to make any payment with respect to any such demands for payment
or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent and Merger Co concurrently with the execution
and delivery of this Agreement (the Company Disclosure
Schedule), the Company hereby represents and warrants
to Parent and Merger Co as follows:
Section 3.01. Organization
and Qualification; Subsidiaries.
(a) Organization and Qualification. Each
of the Company and each subsidiary of the Company (each, a
Subsidiary) is a corporation, limited
partnership, limited liability company or other legal entity
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization (except, in the
case of good standing, for legal entities organized under the
laws of any jurisdiction that does not recognize such concept)
and has the requisite corporate or entity power and authority to
own, lease and operate its properties and to carry on its
business as it is now being conducted. Each of the Company and
each Subsidiary is duly qualified or licensed to do business,
and is in good standing (where such concept is recognized and
applicable), in each jurisdiction where the character of the
properties owned, leased or operated by it, or the nature of its
business, makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed and in
good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each
of the jurisdictions where the character of the properties
owned, leased or operated by the Company or a Subsidiary, or the
nature of its business, makes such qualification or licensing
necessary, is set forth in Schedule 3.01(a).
(b) List of Subsidiaries. A true and
complete list of all Subsidiaries of the Company is set forth in
Schedule 3.01(b), together with a description of
each Subsidiarys (i) jurisdiction of organization,
(ii) outstanding capital stock (or other equity,
membership, partnership or economic interest) and the holders
thereof, and (iii) officers and directors. Except as set
forth in Schedule 3.01(b), neither the Company nor
any Subsidiary directly or indirectly owns, beneficially or of
record, any capital stock (or other equity, membership,
partnership or economic interest) in any Person.
(c) The term Material Adverse Effect
means any change, circumstance, effect, event or occurrence that
is or would be reasonably likely to be, individually or in the
aggregate, materially adverse to the assets,
5
liabilities, business, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole,
other than any such change, circumstance, effect, event or
occurrence that the Company is able to demonstrate resulted
directly from (i) changes in general economic conditions
affecting any geographic market in which the Company operates,
(ii) general changes or developments in the industries in
which the Company or the Subsidiaries operate, (iii) the
announcement of this Agreement and the transactions contemplated
hereby, including any termination of, reduction in or similar
negative impact on relationships, contractual or otherwise, with
any customers, suppliers, distributors, partners or employees of
the Company or the Subsidiaries to the extent due to the
announcement or performance of this Agreement or the identity of
the parties to this Agreement, or the performance of this
Agreement and the transactions contemplated hereby, including
compliance with the covenants set forth herein, (iv) any
actions required under this Agreement to obtain any approval or
authorization under applicable antitrust or competition laws for
the consummation of the Merger, or (v) changes in any tax
laws or regulations or applicable accounting regulations or
principles, unless, in the case of the foregoing clauses (i),
(ii) and (v), such changes referred to therein have a
materially disproportionate effect on the Company and the
Subsidiaries taken as a whole relative to other participants in
the industries or markets, as the case may be, in which the
Company and the Subsidiaries operate.
Section 3.02. Charter
Documents. The Company has made available to
Parent a complete and correct copy of the certificate of
incorporation and the bylaws (or comparable organizational or
charter documents), each as amended to date, of the Company and
each Subsidiary. Such certificate of incorporation and bylaws
(or comparable organizational or charter documents) are in full
force and effect. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its certificate of
incorporation or bylaws (or comparable organizational or charter
documents).
Section 3.03. Capitalization.
(a) Generally. The authorized capital
stock of the Company consists of (i) 50,000,000 shares
of Company Common Stock and (ii) 10,000,000 shares of
preferred stock, par value $0.10 per share (Company
Preferred Stock). As of April 21, 2008 (the
Measurement Date),
(i) 9,791,368 shares of Company Common Stock are
issued and outstanding (excluding shares of Company Common Stock
held in the treasury of the Company and including
123,333 shares of Company Common Stock issued to Charles A.
Lingenfelter that are subject to restriction, do not vest and
will be cancelled and not paid upon the consummation of the
transactions contemplated in this Agreement), all of which are
duly authorized, validly issued, fully paid and nonassessable
and were issued free of preemptive (or similar) rights,
(ii) no shares of Company Common Stock are held in the
treasury of the Company, (iii) no shares of Company Common
Stock are held by the Subsidiaries,
(iv) 619,951 shares of Company Common Stock are
reserved for issuance upon exercise of Company Stock Options
outstanding as of the Measurement Date and
(v) 1,082,815 shares of Company Common Stock are
reserved for future grants under the Company Stock Option Plans.
Since the Measurement Date, other than in connection with the
issuance of Shares pursuant to the exercise of Company Stock
Options outstanding as of the Measurement Date, there has been
no change in the number of shares of outstanding capital stock
of the Company or the number of outstanding Company Stock
Options. Schedule 3.03(a) sets forth, as of the
Measurement Date, the number of shares of Company Common Stock
issuable upon exercise of outstanding Company Stock Options
granted under each Company Stock Option Plan and the holder,
expiration date and exercise price for each.
Schedule 3.03(a) also sets forth, as of the
Measurement Date, the number of Restricted Shares outstanding as
of the Measurement Date, the number of such Restricted Shares
that are vested as of the Measurement Date, the vesting schedule
for all such Restricted Shares and the number of such Restricted
Shares that will vest at the Effective Time. No shares of
Company Preferred Stock are issued and outstanding.
(b) Other Rights. Except as set forth in
Section 3.03(a) and except for the rights (the
Rights) issued pursuant to the Rights
Agreement, dated as of August 28, 2000 (the
Company Rights Agreement), between the
Company and American Stock Transfer &
Trust Company, a New York corporation, as rights agent, in
respect of which no Distribution Date (as defined in the Company
Rights Agreement) has occurred, there are no
(i) subscriptions, calls, contracts, options, warrants or
other rights, agreements, arrangements, understandings,
restrictions or commitments of any character to which the
Company or any Subsidiary is a party or by which the Company or
any Subsidiary is bound relating to the issued or unissued
capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital
stock of,
6
other equity interests in or debt securities of, the Company or
any Subsidiary, (ii) securities of the Company or
securities convertible, exchangeable or exercisable for shares
of capital stock or voting securities of the Company, or
(iii) equity equivalents, restricted stock units, stock
appreciation rights, phantom stock, ownership interests in the
Company or any Subsidiary or similar rights. All shares of
Company Common Stock subject to issuance in connection with the
Company Stock Option Plans (all of which are reflected on
Schedule 3.03(a)) upon issuance on the terms and
conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully
paid and nonassessable and free of preemptive (or similar)
rights. There are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise
acquire any outstanding securities of the Company or any
Subsidiary, to vote or to dispose of any shares of Company
Common Stock or any capital stock of any Subsidiary or to make
any investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other Person. None of the
Company or any Subsidiary is a party to any stockholders
agreement, voting trust agreement or registration rights
agreement relating to any equity securities of the Company or
any Subsidiary or any other Contract relating to disposition,
voting or dividends with respect to any equity securities of the
Company or of any Subsidiary. No dividends on the Company Common
Stock have been declared or have accrued from December 31,
2006 through the date hereof. To the knowledge of the Company,
all of the Shares have been issued by the Company in compliance
with applicable federal securities laws.
(c) Validity of Issuance. Each
outstanding share of capital stock (or other equity interest) of
each Subsidiary is duly authorized, validly issued, fully paid
and nonassessable and was issued free of preemptive (or similar)
rights, and each such share is owned by the Company or another
Subsidiary free and clear of all options, rights of first
refusal, agreements, limitations on the Companys or any
Subsidiarys voting, dividend or transfer rights, charges
and other encumbrances or Liens of any nature whatsoever.
Section 3.04. Corporate
Authority Relative to This Agreement.
(a) Corporate Authority. The Company has
all necessary corporate power and authority to execute and
deliver this Agreement, and, subject to the receipt of
Stockholder Approval, to consummate the Merger and the other
transactions contemplated by this Agreement (the Other
Contemplated Transactions) to be consummated by the
Company.
(b) Approval of Agreement by Company
Board. The execution and delivery of this
Agreement and the consummation of the Merger and the Other
Contemplated Transactions have been duly and validly authorized
by the Company Board, pursuant to the recommendation of the
Strategic Alternatives Review Committee of the Company Board
(the Independent Committee) and, except for
(i) Stockholder Approval and (ii) the filing of the
Certificate of Merger with the Secretary of State of the State
of Delaware, no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the
consummation of the Merger and the Other Contemplated
Transactions. The Independent Committee has determined and
resolved (i) that the Merger is fair to, and in the best
interests of, the Company and its stockholders and (ii) to
recommend that the Company Board approve this Agreement, propose
this Agreement to the Companys stockholders for adoption
thereby and recommend that the Companys stockholders adopt
this Agreement and the transactions contemplated hereby (the
Independent Committee Recommendation). The
Company Board has determined and resolved (i) that the
Merger is fair to, and in the best interests of, the Company and
its stockholders, (ii) to propose this Agreement for
adoption by the Companys stockholders, and (iii) to
recommend that the Companys stockholders adopt this
Agreement and the transactions contemplated by this Agreement
(the Company Board Recommendation and,
together with the Independent Committee Recommendation, the
Recommendation), all of which determinations
and resolutions have not been rescinded, modified or withdrawn
in any way as of the date of this Agreement. This Agreement has
been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery of this
Agreement by Parent and Merger Co, constitutes the valid and
binding agreement of the Company, enforceable against the
Company in accordance with its terms.
(c) Required Stockholder Vote. The only
vote of the holders of any class or series of capital stock or
other securities of the Company necessary to adopt this
Agreement or consummate the Merger is the
7
affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock in favor of the adoption of this
Agreement (the Stockholder Approval).
Section 3.05. No
Conflict; Required Filings and Consents.
(a) No Conflict. The execution and
delivery by the Company of this Agreement does not, and, except
as described in Schedule 3.05(a), the consummation
of the Merger and the Other Contemplated Transactions and
compliance with the provisions of this Agreement will not,
(i) result in any violation of, conflict with or default
(with or without notice or lapse of time, or both) under, or
give rise to a right of termination, modification, amendment,
cancellation or acceleration of any obligation or to the loss of
a benefit under, or require any consent, waiver, approval,
authorization or permit of, action by, registration, declaration
or filing with or notification to any Person pursuant to, any
loan, guarantee of indebtedness or credit agreement, note, bond,
mortgage, indenture, lease, sublease, assignment of lease or
occupancy agreement, contract, obligation, arrangement,
understanding, undertaking, instrument, permit, franchise or
license agreement, or other material agreement, whether oral or
written (collectively, Contracts) binding
upon the Company or any of the Subsidiaries, or to which any of
them is a party or any of their respective properties or assets
are bound, or result in the creation of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities,
options, rights of first refusal, or charges of any kind
whatsoever (including any limitation on voting, sale, transfer
or other disposition, or exercise of any other attribute of
ownership) (each, a Lien) upon any of the
Shares or any of the properties or assets of the Company or any
of the Subsidiaries; (ii) conflict with or result in any
violation of any provision of the certificate of incorporation
or bylaws or other equivalent organizational or charter
document, in each case as amended, of the Company or any of the
Subsidiaries; or (iii) except as described in
Section 3.05(b), conflict with or violate any
applicable Laws, other than, in the case of clauses (i) and
(iii), any such violation, conflict, default, termination,
modification, amendment, cancellation, acceleration, loss or
Lien that would not have, individually or in the aggregate, a
Material Adverse Effect.
(b) Consents and Approvals. Other than
(i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the
DGCL, (ii) such filings as are required pursuant to the
Securities Exchange Act of 1934, as amended (the
Exchange Act), (iii) the filing of a
pre-merger notification form pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), (iv) any filings required to be made with
the Nasdaq Global Market, Inc. (Nasdaq), and
(v) the approvals set forth on Schedule 3.05(b)
(collectively, the Company Approvals), and
subject to the accuracy of the representations and warranties of
Parent and Merger Co in Section 4.03 hereof, no
authorization, consent, permit, action or approval of, or filing
with, or notification to, any United States federal, state or
local or foreign government or regulatory agency, commission,
court, body, entity, arbitral panel or authority (each, a
Governmental Entity) is necessary, under
applicable Law, in connection with the execution, delivery and
performance of this Agreement or the consummation by the Company
of the Merger and Other Contemplated Transactions, except for
authorizations, consents, permits, actions, approvals,
notifications or filings that, if not obtained or made, would
not have, individually or in the aggregate, a Material Adverse
Effect.
Section 3.06. Permits;
Compliance.
(a) Permits. Each of the Company and each
Subsidiary is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for each such entity to own, lease
and operate its properties or to carry on its business as it is
now being conducted (collectively, the Company
Permits), except where the failure to have, or the
suspension or cancellation of, any Company Permit would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect. To the knowledge of the Company,
neither it nor any Subsidiary has received any written
notification from any Governmental Entity threatening to revoke
any material Company Permit. Notwithstanding anything contained
in this Section 3.06(a), no representation or
warranty shall be deemed to be made in this
Section 3.06(a) in respect of the matters
specifically covered in Section 3.15.
(b) Compliance with Law. The Company and
each Subsidiary is, and since January 1, 2007 has been, in
compliance with any Law applicable to such entity or by which
any property or asset of such entity is bound or affected,
except (i) where the failure to be in such compliance would
not, individually or in the aggregate,
8
reasonably be expected to have a Material Adverse Effect, and
(ii) for compliance with Environmental Law, which
compliance is covered exclusively in Section 3.15.
(c) Compliance with the Sarbanes-Oxley
Act. The Company and, to the knowledge of the
Company, each of its officers and directors are in compliance
with, and have complied in all material respects with, all
applicable provisions of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act).
(d) Compliance with Economic and Trade
Sanctions. (i) Each of the Company and the
Subsidiaries is in material compliance with United States and
international economic and trade sanctions, including those
administered by the Office of Foreign Asset Control
(OFAC) within the United States Department of
Treasury; and (ii) each of the Company and the Subsidiaries
is in material compliance with the anti-boycott regulations
administered by the United States Department of Commerce, the
Foreign Corrupt Practices Act, and all laws and regulations
administered by the Bureau of Customs and Border Protection in
the United States Department of Homeland Security.
(e) Compliance with OFAC Listings. To the
knowledge of the Company, no director, officer or employee of
the Company or any of the Subsidiaries is identified on any of
the following documents: (i) the OFAC list of
Specially Designated Nationals and Blocked Persons
(SDNs); (ii) the Bureau of Industry and
Security of the United States Department of Commerce
Denied Persons List; or (iii) the Office of
Defense Trade Controls of the United States Department of State
List of Debarred Persons. Neither the Company nor
any of the Subsidiaries are involved in business arrangements or
otherwise engage in transactions with or involving sanctioned
countries or SDNs in violation of the regulations maintained by
the OFAC.
Section 3.07. SEC
Filings; Financial Statements; Undisclosed Liabilities.
(a) SEC Filings. The Company has filed
all forms, reports, statements, schedules and other documents
required to be filed by it with the Securities and Exchange
Commission (the SEC) since January 1,
2007 (collectively, the SEC Reports). The SEC
Reports (i) were prepared in accordance with all of the
then material applicable requirements of the Securities Act of
1933, as amended (the Securities Act), the
Exchange Act, the Sarbanes-Oxley Act and, in each case, the
rules and regulations promulgated thereunder, and (ii) did
not, at the time they were filed, or, if amended, as of the date
of such amendment, or in the case of registration statements and
proxy statements as of the respective dates of effectiveness or
mailing thereof, as applicable, contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading (including any financial statements or
other documentation incorporated by reference therein). No
Subsidiary is required to file any form, report or other
document with the SEC.
(b) Financial Statements. Each of the
consolidated financial statements (including, in each case, any
notes thereto) contained in the SEC Reports was prepared in
accordance with United States generally accepted accounting
principles (GAAP) applied on a consistent
basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by the SEC) and each fairly presents,
in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject, in the
case of unaudited statements, to normal and recurring year-end
adjustments and, in the case of any pro forma financial
statements, to the qualifications stated therein). All of the
Subsidiaries are consolidated for accounting purposes.
(c) No Undisclosed Liabilities. Neither
the Company nor any of the Subsidiaries has any liabilities of a
nature required by GAAP to be reflected in a consolidated
balance sheet or the notes thereto, except liabilities that
(i) are accrued or reserved against in the most recent
financial statements or the notes thereto included in the SEC
Reports filed prior to the date hereof, (ii) were incurred
in the ordinary course of business since the date of such
financial statements or otherwise in accordance with
Section 5.01, (iii) are incurred pursuant to or
as expressly contemplated by this Agreement, (iv) have been
discharged or paid in full prior to the date of this Agreement
in the ordinary course of business consistent with past
practice, or (v) as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect.
9
Section 3.08. Absence
of Certain Changes or Events.
(a) Material Adverse Effect. Since
September 30, 2007, there has not been any Material Adverse
Effect in the business of the Company and the Subsidiaries.
(b) Certain Changes or Events. Since
September 30, 2007 and prior to the date hereof, except as
expressly contemplated by this Agreement, (i) the Company
and the Subsidiaries have conducted their businesses only in the
ordinary course of business and in a manner consistent with past
practice, and (ii) neither the Company nor any Subsidiary
has: (A) suffered any damage, destruction or loss
(regardless of whether covered by insurance), other than in the
ordinary course of business, that has had or would be reasonably
expected to have a Material Adverse Effect; or (B) taken
any action that would be prohibited by Section 5.01
if taken after the date hereof.
Section 3.09. Absence
of Litigation. Schedule 3.09 lists
each litigation, suit, claim, action, proceeding, hearing,
arbitration, petition or investigation (an
Action) pending or, to the knowledge of the
Company, threatened in writing against the Company or any
Subsidiary, or any property or asset of the Company or any
Subsidiary, before any Governmental Entity or arbitrator. As of
the date of this Agreement, to the knowledge of the Company, no
executive officer or director of the Company is a defendant in
any Action in connection with his or her status as an executive
officer or director of the Company or any Subsidiary. Neither
the Company nor any Subsidiary nor any property or asset of the
Company or any Subsidiary is subject to any continuing order of,
consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of the Company, continuing
investigation by, any Governmental Entity, or any order, writ,
judgment, injunction, decree, determination or award of any
Governmental Entity.
Section 3.10. Employee
Benefit Plans.
(a) Benefit
Plans. Schedule 3.10(a) lists:
(i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA)) and all bonus,
stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance,
supplemental retirement, severance, retention, stay or other
benefit plans, programs or arrangements; and (ii) all
employment, termination, severance, retention, stay or other
contracts, agreements or commitments to which the Company or any
Subsidiary is a party, with respect to which the Company or any
Subsidiary has or may reasonably be expected to have any
material obligation or that are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, consultant, officer or director
of the Company or any Subsidiary (collectively, the
Plans). The Company has made available to
Parent a complete and correct copy (where applicable) of
(A) each Plan (or, where a Plan has not been reduced to
writing, a summary of all material Plan terms of such Plan),
(B) each trust or funding arrangement prepared in
connection with each such Plan, (C) the most recently filed
annual report on Internal Revenue Service
(IRS) Form 5500, (D) the most
recently received IRS determination letter for each such Plan,
(E) the most recently prepared actuarial report and
financial statement in connection with each such Plan, and
(F) the most recent summary plan description, any summaries
of material modifications and employee handbooks.
(b) Pension Plans; Multiemployer
Plans. None of the Company or any Subsidiary or
any other Person that, together with the Company or any
Subsidiary, is or was treated as a single employer under
Section 414(b), (c), (m) or (o) of the United
States Internal Revenue Code of 1986, as amended (the
Code) (each, together with the Company and
any Subsidiary, an ERISA Affiliate), has now
or at any time within the past three years (and in the case of
any such other Person, only during the period within the past
three years that such other Person was an ERISA Affiliate)
contributed to, sponsored, or maintained (i) a pension plan
(within the meaning of Section 3(2) of ERISA) subject to
Section 412 of the Code or Title IV of ERISA;
(ii) a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a
Multiemployer Plan); or (iii) a single
employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which an ERISA Affiliate
would reasonably be expected to incur liability under
Section 4063 or 4064 of ERISA (a Multiple Employer
Plan).
(c) Change in Control
Agreements. Schedule 3.10(c) lists
each Plan (each, a Change in Control
Agreement) that would reasonably be expected to result
in the payment to any present or former employee,
10
director or consultant of the Company or any Subsidiary of any
money or other property or accelerate or provide any other
rights or benefits to any current or former employee, director
or consultant of the Company or any Subsidiary as a result of
the consummation of the Merger or any other transaction
contemplated by this Agreement (whether alone or in connection
with any other event). Except as set forth on
Schedule 3.10(c), there is no contract, plan or
arrangement (written or otherwise) covering any current or
former employee of the Company or any Subsidiary that,
individually or collectively, would reasonably be expected to
give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the
Code.
(d) Qualified Plans. Each Plan that is
intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS that
the Plan is so qualified or has adopted a prototype plan with an
IRS opinion letter, and, to the knowledge of the Company, no
fact or circumstance exists that would reasonably be expected to
result in the revocation of such letter.
(e) Compliance. Each Plan has been
established and administered in accordance with its terms, and
in material compliance with the applicable provisions of ERISA,
the Code and other applicable laws.
(f) Actions. With respect to any Plan,
(i) no Actions (other than routine claims for benefits in
the ordinary course) are pending or, to the knowledge of the
Company, threatened, (ii) to the knowledge of the Company,
no facts or circumstances exist that would reasonably be
expected to give rise to any such Actions, and (iii) no
administrative investigation, audit or other administrative
proceeding by the Department of Labor, the IRS or other
Governmental Entity is pending, in progress or, to the knowledge
of the Company, threatened.
Section 3.11. Labor
and Employment Matters. Except as set forth on
Schedule 3.11, neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or
other labor union agreements applicable to persons employed by
the Company or any Subsidiary, nor to the knowledge of the
Company, are there any formal activities or proceedings of any
labor union to organize any such employees. Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, there are no unfair labor practice
complaints pending against the Company or any Subsidiary before
the National Labor Relations Board or any other Governmental
Entity or any current union representation questions involving
employees of the Company or any Subsidiary. There is no strike,
controversy, slowdown, work stoppage or lockout, or, to the
knowledge of the Company, threatened in writing, by or with
respect to any employees of the Company or any Subsidiary.
Section 3.12. Real
Property.
(a) Owned Real
Property. Schedule 3.12(a) lists each
parcel of real property owned by the Company or any Subsidiary
(the Owned Real Property). The Company or any
Subsidiary has good, valid and marketable title to all of the
Owned Real Property, in each case free and clear of all Liens,
other than (i) Liens for current taxes and assessments not
yet past due, (ii) inchoate mechanics and
materialmens Liens for construction in progress,
(iii) workmens, repairmens, warehousemens
and carriers Liens arising in the ordinary course of
business of the Company or such Subsidiary consistent with past
practice, and (iv) all Liens and other imperfections of
title (including matters of record) and encumbrances that do not
materially interfere with the conduct of the business of the
Company and the Subsidiaries, taken as a whole, or, individually
or in the aggregate, have a Material Adverse Effect
(collectively, Permitted Liens).
(b) Leased Real
Property. Schedule 3.12(b) lists by
address each parcel or tract of real property leased or
subleased by the Company or any Subsidiary that is currently
used or held for use in the conduct of the business of the
Company and the Subsidiaries (collectively, the Leased
Real Properties), with the name of the lessor and the
title and date of the lease or sublease, any guaranty given by
the Company or any Subsidiary in connection therewith and each
material amendment to any such lease or sublease. Except as set
forth on Schedule 3.12(b), each of the Leased Real
Properties is subject to a written lease or sublease to which
the Company or a Subsidiary, as applicable, is party as a lessee
or sublessee (each, a Real Property Lease),
and all such Real Property Leases are valid and in full force
and effect, in accordance with their terms. There is not, with
respect to any Real Property Lease: (i) any default by the
Company or a Subsidiary, as the case may be, or any event of
default or event that with notice or lapse of time, or both,
would constitute a default by the Company or a Subsidiary, as
the case may be; or (ii) to the knowledge of the Company,
any existing default by
11
any other party to any Real Property Lease, or event of default
or event that with notice or lapse of time, or both, would
constitute a default by any other party to any Real Property
Lease.
(c) Use of Real Property. Neither the
Company nor any Subsidiary occupies or uses, or has any
inventory located at, any parcel or tract of real property other
than (i) the Owned Real Property, (ii) the Leased Real
Properties and (iii) the real properties listed on
Schedule 3.12(c) (which listing shall include the
address thereof and the name of the owner or lessee or sublessee
thereof, and shall identify the use thereof, e.g., customer
location, bailee, warehouseman, etc.).
Section 3.13. Intellectual
Property. Except as set forth on
Schedule 3.13: (a) the Company and the
Subsidiaries own (free and clear of all Liens other than
Permitted Liens) or have the right to use all patents,
inventions, copyrights, software, trademarks, service marks,
brand names, logos, domain names, trade dress, trade secrets,
know-how, confidential or proprietary information (and all
applications, registrations, continuations, divisionals,
renewals and reissues relating thereto) and all other
intellectual property rights of any kind or nature arising under
U.S. or foreign law (Intellectual
Property) as are necessary or appropriate and material
for their businesses as currently conducted; (b) to the
knowledge of Company, such Intellectual Property does not
infringe, dilute or misappropriate the Intellectual Property of
any third party and is not being infringed, misappropriated or
diluted by any third party; (c) neither the Company nor any
of the Subsidiaries is a party to any claim, suit or other
action, and to the knowledge of the Company, no claim, suit or
other action is threatened, that challenges the validity,
enforceability, ownership, or right to use, sell or license
their Intellectual Property; and (d) to the knowledge of
the Company, neither the Company or any of the Subsidiaries have
suffered any material violation of the security of their systems
or software.
Section 3.14. Taxes.
(a) Payment and Filings. Except as set
forth on Schedule 3.14, (i) the Company and the
Subsidiaries have timely filed or caused to be filed or will
timely file or cause to be filed (taking into account any
extension of time to file granted or obtained) all Tax Returns
required to be filed by them, and any such filed Tax Returns are
true, correct and complete; (ii) the Company and the
Subsidiaries have timely paid or will timely pay any Taxes due
and payable, except to the extent that such Taxes are being
contested in good faith and for which the Company or the
appropriate Subsidiary has set aside adequate reserves in
accordance with GAAP; and (iii) without taking into account
any transactions contemplated by this Agreement and based upon
activities to date, adequate reserves in accordance with GAAP
have been established by the Company and the Subsidiaries for
all Taxes not yet due and payable in respect of taxable periods
ending on the date hereof. All material amounts of Tax required
to be withheld by the Company and the Subsidiaries have been or
will be timely withheld and paid over to the appropriate
Governmental Entity.
(b) Deficiencies; Liens. No deficiency
for any material amount of Tax has been asserted or assessed by
any Governmental Entity in writing against the Company or any
Subsidiary (or, to the knowledge of the Company, has been
threatened or proposed), except for deficiencies that have been
satisfied by payment, settled or been withdrawn or that are
being contested in good faith and are Taxes for which the
Company or the appropriate Subsidiary has set aside adequate
reserves in accordance with GAAP. There are no liens for a
material amount of Taxes, other than liens for current Taxes and
assessments not yet past due or that are being contested in good
faith and for which the Company or the appropriate Subsidiary
has set aside adequate reserves in accordance with GAAP, on the
assets of the Company or any Subsidiary.
(c) Audits and
Examinations. (i) There are no pending or,
to the knowledge of the Company, threatened audits,
examinations, investigations or other proceedings in respect of
a material amount of Taxes of the Company or any Subsidiary with
respect to which the Company or a Subsidiary has been notified
in writing; and (ii) neither the Company nor any Subsidiary
has waived any statute of limitations in respect of a material
amount of Taxes or agreed to any extension of time with respect
to an assessment or deficiency for a material amount of Taxes
(other than pursuant to extensions of time to file Tax Returns
obtained in the ordinary course).
(d) Tax Sharing. Neither the Company nor
any Subsidiary is a party to any indemnification, allocation or
sharing agreement with respect to Taxes (other than agreements
among the Company and the Subsidiaries
12
and other than customary Tax indemnifications contained in
credit or other commercial agreements the primary purpose of
which does not relate to Taxes).
(e) Listed Transactions. Neither the
Company nor any Subsidiary is required to make any disclosure to
the Internal Revenue Service with respect to a listed
transaction pursuant to
Section 1.6011-4(b)(2)
of the Treasury Regulations promulgated under the Code.
(f) Tax Matters Definitions. For purposes
of this Agreement:
(i) Tax or Taxes
means any and all federal, state, local and foreign income,
gross receipts, payroll, employment, excise, stamp, customs
duties, capital stock, franchise, profits, withholding, social
security, unemployment, real property, personal property, sales,
use, transfer, value added, alternative or add-on minimum,
estimated, or other taxes (together with interest, penalties and
additions to tax imposed with respect thereto) imposed by any
Governmental Entity.
(ii) Tax Returns means returns,
declarations, claims for refund, or information returns or
statements, reports and forms relating to Taxes filed or
required to be filed with any Governmental Entity (including any
schedule or attachment thereto) with respect to the Company or
the Subsidiaries, including any amendment thereof.
Section 3.15. Environmental
Matters.
(a) Compliance with Environmental
Laws. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect: (i) none of the Company or any of the Subsidiaries
is in violation of any applicable Environmental Law or, except
for any violation that has been fully resolved, has violated in
the past any applicable Environmental Law; (ii) there is
and has been no release of Hazardous Substances that requires
response action under applicable Environmental Law at, on or
under any of the properties currently owned, leased or operated
or, to the knowledge of the Company, otherwise occupied by the
Company or any of the Subsidiaries or, during the period of the
Companys or the Subsidiaries ownership, lease or
operation thereof, formerly owned, leased or operated by the
Company or any of the Subsidiaries, that would reasonably be
expected to result in a liability to the Company or any of the
Subsidiaries; (iii) the Company and the Subsidiaries have
obtained and are in compliance with all required Environmental
Permits and, except for any noncompliance that has been fully
resolved, have been in the past in compliance with such permits;
and (iv) there are no written claims or notices pending or,
to the knowledge of the Company, issued to or threatened against
the Company or any of the Subsidiaries alleging violations of or
liability under any Environmental Law or otherwise concerning
the release or management of Hazardous Substances.
(b) Environmental Matters
Definitions. For purposes of this Agreement:
(i) Environmental Laws means any laws
(including common law) of the United States or any state or
local Governmental Entity within the United States, relating to:
(A) releases or threatened releases of Hazardous Substances
or materials containing Hazardous Substances; (B) the
manufacture, handling, transport, use, treatment, storage,
emission, discharge or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) pollution or
protection of the environment or of human health and safety as
such is affected by Hazardous Substances or materials containing
Hazardous Substances.
(ii) Environmental Permits means any
permit, license, registration, approval, notification or any
other authorization required pursuant to applicable
Environmental Law.
(iii) Hazardous Substances means:
(A) those substances, materials or wastes defined as toxic,
hazardous, acutely hazardous, pollutants or contaminants in, or
regulated under, the following United States federal statutes
and any analogous foreign or state statutes, and all regulations
thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the
Clean Water Act, the Safe Drinking Water Act, the Atomic Energy
Act, the Federal Insecticide, Fungicide, and Rodenticide Act and
the Clean Air Act; (B) petroleum and petroleum products,
including crude oil and any fractions thereof; (C) natural
gas, synthetic gas, and any mixtures thereof; and
(D) polychlorinated biphenyls, asbestos,
13
molds that would reasonably be expected to have an adverse
effect on human health and urea formaldehyde foam insulation.
Section 3.16. Material
Contracts.
(a) Status of Material Contracts. Except
as set forth on Schedule 3.16, (i) each
Material Contract is a legal, valid and binding obligation of
the Company or a Subsidiary, as applicable, in full force and
effect and enforceable against the Company or a Subsidiary in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including all laws relating
to fraudulent transfers), reorganization, moratorium or similar
laws affecting creditors rights generally and subject to
the effect of general principles of equity; (ii) the
Company has not received written notice, and has no reason to
believe, that any Material Contract is not a legal, valid and
binding obligation of the counterparty thereto, in full force
and effect and enforceable against such counterparty in
accordance with its terms; (iii) neither the Company nor
any of the Subsidiaries is and, to the Companys knowledge,
no counterparty is in breach or violation of, or default under,
any Material Contract; (iv) none of the Company or any of
the Subsidiaries have received any claim of default under any
Material Contract; and (v) to the Companys knowledge,
no event has occurred that would result in a breach or violation
of, or a default under, any Material Contract (in each case,
with or without notice or lapse of time or both).
(b) Listing of Material Contracts. For
purposes of this Agreement, the term Material
Contract means any of the following Contracts
(together with all amendments, supplements, exhibits and
schedules thereto) to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary or any of their
respective properties or assets are bound or affected as of the
date hereof:
(i) any limited liability company agreement, joint venture
or other similar agreement or arrangement relating to the
formation, creation, operation, management or control of any
partnership or joint venture that is material to the business of
the Company and the Subsidiaries, taken as a whole, other than
any such limited liability company, partnership or joint venture
that is a Subsidiary and which has been made available to Parent
pursuant to Section 3.02;
(ii) any Contract (other than with or between or among
consolidated Subsidiaries) relating to (A) indebtedness for
borrowed money and having an outstanding principal amount in
excess of $500,000 or (B) conditional sale arrangements,
obligations secured by a Lien, or interest rate or currency
hedging activities, in each case in connection with which the
aggregate actual or contingent obligations of the Company or a
Subsidiary, as the case may be, under such Contract are greater
than $500,000;
(iii) any Contract filed or required to be filed as an
exhibit to the Companys registration statements under the
Securities Act or periodic or current reports under the Exchange
Act pursuant to items (1), (2), (4), (9), (10) or
(99) of the Exhibit Table to Item 601 of
Regulation S-K
under the Securities Act, other than Plans disclosed in
Schedule 3.10(a);
(iv) any Contract that purports to limit the right of the
Company or the Subsidiaries (A) to engage or compete in any
line of business or (B) to compete with any Person or
operate in any location in any respect material to the business
of the Company and the Subsidiaries, taken as a whole;
(v) any Contract that has resulted in, or would be
reasonably likely over a twelve (12) month period to result
in, aggregate payments to the Company and any Subsidiary under
such Contract of more than $200,000 that (A) contains most
favored customer pricing provisions or (B) grants any
exclusive rights, rights of first refusal, rights of first
negotiation or similar rights to any Person;
(vi) any Contract for the acquisition or disposition,
directly or indirectly (by merger or otherwise), of assets or
capital stock or other equity interests of another Person for
aggregate consideration under such Contract in excess of,
individually or in the aggregate with all such other Contracts,
$1,000,000 with respect to which the Company or any Subsidiary
has any remaining liabilities or obligations of any nature;
(vii) any Contract that by its terms calls for aggregate
payments by the Company and any Subsidiary under such Contract
of more than $1,000,000 over the remaining term of such Contract;
14
(viii) any Contract with an executive officer or director
of the Company (or, other than on arms length terms in the
ordinary course of business, any Person in which such executive
officer or director, or to the knowledge of the Company, any
immediate family member of such executive officer or director,
has over a 10% interest) or between or among the Company or a
Subsidiary, on the one hand, and any of their respective
affiliates (other than the Company or any Subsidiary), on the
other hand, that involves amounts of more than $100,000;
(ix) any Contract that has resulted in, or would be
reasonably likely over a twelve (12)-month period to result in,
aggregate payments to the Company and any Subsidiary under such
Contract of more than $3,000,000 from any customer of the
flexible procurement solutions business of the Company and the
Subsidiaries (the FPS Customers) or more than
$500,000 from any customer of the maintenance, repair, operating
and products business of the Company and the Subsidiaries (the
MROP Customers) over a twelve (12)-month
period, or that is not terminable at will by the Company on
ninety (90) days notice or less without
penalty; and
(x) any Contract required to be identified in Schedule
3.10(a) or Schedule 3.12(b).
Set forth in Schedule 3.16(b), as of the date
hereof, is a true and complete list of the Material Contracts
described in subsections (i) through (vii), (viii) (other
than employment Contracts) and (ix) above, except for
Material Contracts filed prior to the date hereof as an exhibit
to an SEC Report.
Section 3.17. Insurance. With
respect to each insurance policy owned or held by the Company
and each Subsidiary, except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect: (a) the policy is legal, valid, binding and
enforceable in accordance with its terms and, except for
policies that have expired under their terms in the ordinary
course, is in full force and effect; (b) neither the
Company nor any Subsidiary is in material breach or default
(including any such breach or default with respect to the
payment of premiums or the giving of notice), and, to the
Companys knowledge, no event has occurred which, with
notice or the lapse of time, would constitute such a breach or
default, or permit termination or modification, under the
policy; (c) to the knowledge of the Company, no insurer on
the policy has been declared insolvent or placed in
receivership, conservatorship or liquidation; and (d) no
written or, to the knowledge of the Company, oral notice of
cancellation or termination has been received other than in
connection with ordinary renewals. Schedule 3.17
lists all of the insurance policies of the Company and the
Subsidiaries and the material terms thereof.
Section 3.18. Company
Rights Agreement. The Company has taken all
action necessary to prevent the execution and delivery of this
Agreement and consummation of the Merger and the Other
Contemplated Transactions from resulting in the grant of any
rights to any Person under the Company Rights Agreement or
enabling or requiring the Rights therein to be exercised,
distributed or triggered and to cause the Rights to cease to be
outstanding immediately prior to the Effective Time without the
payment of any consideration to the holders thereof.
Section 3.19. Takeover
Statutes. Assuming the accuracy of the
representations and warranties of Parent and Merger Co set forth
in Article IV, no fair price,
moratorium, control share acquisition,
business combination or other similar anti-takeover
statute or regulation enacted under state or federal laws in the
United States (collectively, the Takeover
Laws) applicable to the Company is applicable to the
Merger or the Other Contemplated Transactions.
Section 3.20. Affiliate
Transactions. There are no transactions,
agreements, arrangements or understandings between (a) the
Company or any of the Subsidiaries, on the one hand, and
(b) any affiliate of the Company (other than any of the
Subsidiaries), on the other hand, of the type that would be
required to be disclosed under Item 404 of
Regulation S-K
under the Securities Act that has not been disclosed in the
Companys Proxy Statement for its 2007 Annual Meeting of
Stockholders (such transactions referred to herein as
Affiliate Transactions).
Section 3.21. Customers
and Suppliers.
(a) Customers. Schedule 3.21(a)
sets forth a true, correct and complete list of the twenty
(20) largest FPS Customers and the twenty (20) largest
MROP Customers, in each case based on revenues for the
12-month
period ended December 31, 2007, respectively, together with
the volume of revenue derived from such
15
customers during such period. No such customer, nor any other
material customer of the Company and the Subsidiaries
(collectively, Customers) has cancelled or
otherwise terminated, or threatened in writing to cancel or
otherwise terminate, its relationship with the Company or any
Subsidiary. No Customer has notified the Company or any
Subsidiary of its intention to decrease or materially limit the
purchase of services, supplies or materials sold or furnished by
the Company or such Subsidiary to such Customer, or to
re-negotiate pricing, close or change the location of any site,
or otherwise materially and adversely change the relationship
between the parties.
(b) Suppliers. Schedule 3.21(b)
sets forth a true, correct and complete list of the twenty
(20) largest suppliers or vendors of both the flexible
procurement systems business and the maintenance, repair,
operating and production business of the Company and the
Subsidiaries, in each case based on payables for the
12-month
period ended December 31, 2007, together with the volume of
payables to such suppliers or vendors during such period. No
such vendor or supplier, nor any other material vendor or
supplier of the Company and the Subsidiaries (collectively,
Suppliers) has cancelled or otherwise
terminated, or threatened in writing to cancel or otherwise
terminate, its relationship with the Company or any Subsidiary.
No Supplier has notified the Company or any Subsidiary of its
intention to decrease or materially limit the services, supplies
or materials sold or furnished to the Company or such Subsidiary
by such Supplier, or to re-negotiate pricing or otherwise
materially and adversely change the relationship between the
parties.
Section 3.22. Guarantees,
Bonds and Letters of Credit. Schedule 3.22 sets
forth a complete and accurate list of all guarantees,
performance bonds, surety bonds, standby letters of credit and
similar arrangements that (a) are issued and outstanding in
support of the business of the Company and the Subsidiaries, or
(b) that would or could be required to be issued under any
proposals, bids or other commitments outstanding as of the date
hereof, in each case indicating the contract or agreement or
situation requiring the provision thereof, together with the
issuer, amount, principal terms and conditions, beneficiaries
and expiration date thereof (or, in the case of bonds, letters
of credit and similar arrangements that may be required under
pending proposals, bids or other commitments outstanding as of
the date hereof, the anticipated amount, principal terms and
conditions, beneficiaries and term thereof).
Section 3.23. Opinion
of Financial Advisor. The Company has received
the opinion of Robert W. Baird & Co. Incorporated to
the effect that, as of the date of the opinion and subject to
the matters referred to therein, the Per Share Merger
Consideration to be received by the holders of Shares pursuant
to this Agreement is fair to such holders from a financial point
of view.
Section 3.24. Brokers. No
broker, finder or investment banker other than Robert W.
Baird & Co. Incorporated is entitled to any brokerage,
finders or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by
or on behalf of the Company.
Section 3.25. Platinum
Merger Agreement. The Company has duly terminated
the Platinum Merger Agreement in accordance with
Section 8.01(d)(ii) thereof. The Company Termination Fee
(as defined in the Platinum Merger Agreement) paid or payable to
Platinum by reason of such termination is referred to herein as
the Platinum Fee.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER CO
Parent and Merger Co hereby jointly and severally represent and
warrant to the Company that:
Section 4.01. Organization. Each
of Parent and Merger Co is a corporation or limited liability
company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has
the requisite corporate or entity power and authority and all
necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing
or in good standing or to have such power, authority and
governmental approvals would not, individually or in the
aggregate, prevent or materially delay consummation of the
Merger or Other Contemplated Transactions, or otherwise prevent
or materially delay Parent or Merger Co from performing their
respective obligations under this Agreement.
16
Section 4.02. Authority
Relative to This Agreement. Parent and Merger Co
have all necessary corporate or other power and authority to
execute and deliver this Agreement, to perform their obligations
hereunder and to consummate the Merger. The execution, delivery
and performance of this Agreement by Parent and Merger Co, and
the consummation by them of the Merger, have been duly and
validly authorized by all necessary corporate or other action,
and no other corporate or other proceedings on the part of
Parent or Merger Co are necessary to authorize this Agreement or
to consummate the Merger or Other Contemplated Transactions.
This Agreement has been duly and validly executed and delivered
by each of Parent and Merger Co and, assuming due authorization,
execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Co,
enforceable against each of them in accordance with its terms.
Section 4.03. No
Conflict; Required Filings and Consents.
(a) No Conflict. The execution and
delivery by Parent and Merger Co of this Agreement does not, and
the consummation of the Merger and the Other Contemplated
Transactions and compliance with the provisions of this
Agreement will not, (i) result in any violation of,
conflict with or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
modification, amendment, cancellation or acceleration of any
obligation or to the loss of a benefit under, or require any
consent, waiver, approval, authorization or permit of, action
by, registration, declaration or filing with or notification to
any Person pursuant to, any Contract binding upon Parent or
Merger Co, or to which any of them is a party or any of their
respective properties or assets are bound, or result in the
creation of any Lien upon any of the properties or assets of
Parent or Merger Co; (ii) conflict with or result in any
violation of any provision of the Certificate or Articles of
Incorporation or bylaws or other equivalent organizational or
charter document, in each case as amended, of Parent or Merger
Co; or (iii) except as described in
Section 3.05(b), conflict with or violate any
applicable Laws, other than, in the case of clauses (i) and
(iii), any such violation, conflict, default, termination,
modification, amendment, cancellation, acceleration, loss or
Lien that would not, individually or in the aggregate, prevent
or materially delay consummation of the Merger or otherwise
prevent or materially delay Parent or Merger Co from performing
its respective material obligations under this Agreement.
(b) Consents and Approvals. Other than
(i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the
DGCL, (ii) such filings as are required pursuant to the
Exchange Act and (iii) the filing of a pre-merger
notification form pursuant to the HSR Act (collectively, the
Parent Approvals), and subject to the
accuracy of the representations and warranties of the Company
and the Subsidiaries in Section 3.05 hereof, no
authorization, consent, permit, action or approval of, or filing
with, or notification to, any Governmental Entity is necessary,
under applicable Law, in connection with the execution, delivery
and performance of this Agreement or the consummation by Parent
and Merger Co of the transactions contemplated by this
Agreement, except for authorizations, consents, permits,
actions, approvals, notifications or filings that, if not
obtained or made, would not, individually or in the aggregate,
prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay Parent or Merger Co from
performing its respective material obligations under this
Agreement.
Section 4.04. Absence
of Litigation. As of the date of this Agreement,
there is no Action pending or, to the knowledge of the officers
of each of Parent and Merger Co, threatened, against Parent,
Merger Co or any of their respective affiliates before any
Governmental Entity that would or seeks to materially delay or
prevent the consummation of the Merger and Other Contemplated
Transactions. As of the date of this Agreement, neither Parent,
Merger Co nor any of their respective affiliates is subject to
any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of
the officers of each of Parent and Merger Co, continuing
investigation by, any Governmental Entity, or any order, writ,
judgment, injunction, decree, determination or award of any
Governmental Entity that would or seeks to materially delay or
prevent the consummation of the Merger and Other Contemplated
Transactions.
Section 4.05. Operations
of Merger Co. Merger Co is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations
only as contemplated by this Agreement.
17
Section 4.06. Financing. Parent
will have at Closing cash sufficient to enable it to pay the
Merger Consideration and to consummate the transactions
contemplated hereby, and Parent has concurrently herewith
furnished to the Company an equity commitment letter from an
affiliate of Parent.
Section 4.07. Capitalization
of Merger Co. As of the date of this Agreement,
the authorized capital stock of Merger Co consists of
1,000 shares of common stock, par value $0.01 per share,
100 of which are validly issued and outstanding. All of the
issued and outstanding capital stock of Merger Co is, and at the
Effective Time will be, owned by Parent or a direct or indirect
wholly-owned subsidiary of Parent. Merger Co has outstanding no
option, warrant, right, or any other agreement pursuant to which
any Person other than Parent may acquire any equity security of
Merger Co. Merger Co has not conducted any business prior to the
date of this Agreement and has, and prior to the Effective Time
will have, no assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to this
Agreement and the Merger and the Other Contemplated Transactions.
Section 4.08. No
Vote of Parent Stockholders. No vote of the
stockholders of Parent or the holders of any other securities of
Parent (equity or otherwise) is required by any applicable Law,
or the Certificate or Articles of Incorporation or bylaws, or
similar organizational or charter documents, of Parent, in order
for Parent to consummate the transactions contemplated by this
Agreement.
Section 4.09. Finders
or Brokers. Neither Parent nor any of its
subsidiaries has employed any investment banker, broker or
finder in connection with the transactions contemplated by this
Agreement that is entitled to any fee or any commission in
connection with or upon consummation of the Merger.
Section 4.10. Lack
of Ownership of Company Common Stock. Neither
Parent nor any of its subsidiaries beneficially owns, directly
or indirectly, any shares of Company Common Stock or other
securities convertible into, exchangeable into or exercisable
for shares of Company Common Stock. There are no voting trusts
or other agreements, arrangements or understandings to which
Parent or any of its subsidiaries is a party with respect to the
voting of the capital stock or other equity interest of the
Company or any of the Subsidiaries, nor are there any
agreements, arrangements or understandings to which Parent or
any of its subsidiaries is a party with respect to the
acquisition, divestiture, retention, purchase, sale or tendering
of the capital stock or other equity interest of the Company or
any of the Subsidiaries. Neither Parent nor Merger Co, nor any
of their affiliates or associates has been an interested
stockholder of the Company within the last three years
prior to the date of this Agreement as such term is used in
Section 203 of DGCL. Company Common Stock owned by certain
Affiliates of Parent is disclosed in a Schedule 13D, as
amended, filed by Luther King Capital Management Corporation
with the SEC.
Section 4.11. No
Additional Representations.
(a) Parent acknowledges that, to its knowledge, as of the
date hereof, it and its Representatives have received access to
such books and records, facilities, equipment, contracts and
other assets of the Company that it and its Representatives, as
of the date hereof, have requested to review, and that it and
its Representatives have had full opportunity to meet with the
management of the Company and to discuss the business and assets
of the Company.
(b) Parent acknowledges that neither the Company nor any
Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information
(including any estimates, projections, forecasts, plans or
budgets for the Company or the Subsidiaries) regarding the
Company furnished or made available to Parent and its
Representatives, except as expressly set forth in
Article III (which includes the Company Disclosure
Schedule).
Section 4.13. Solvency. Assuming
(a) the satisfaction of the conditions to the obligation of
Parent and Merger Co to consummate the Merger and (b) the
accuracy of the representations and warranties of the Company
set forth in Article III hereof, then immediately
after giving effect to the transactions contemplated by this
Agreement (including any financing in connection with the
transactions contemplated by this Agreement, the payment of the
Merger Consideration and the consideration in respect of the
Company Stock Options and the payment of all related fees and
expenses), the Surviving Corporation will be Solvent. For
purposes of this Section 4.13, the term
Solvent with respect to the Surviving
Corporation means that, as of immediately after the Effective
Time, (a) the amount of the fair saleable value of the
assets of the Surviving Corporation and its subsidiaries, taken
as a whole, exceeds, as of such date, the sum of the value of
all liabilities of the Surviving Corporation and its
subsidiaries, taken as a whole
18
and (b) the Surviving Corporation and its subsidiaries,
taken as a whole, will be able to pay its liabilities, including
contingent and other liabilities, as they mature.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01. Conduct
of Business by the Company Pending the
Merger. The Company agrees that, between the date
of this Agreement and the earlier of the Effective Time and the
Termination Date, except as contemplated by this Agreement, as
required by law, as set forth in Schedule 5.01 or as
approved by Parent in writing (which approval shall not be
unreasonably withheld or delayed), the business of the Company
and the Subsidiaries shall be conducted in the ordinary course
of business, and the Company and the Subsidiaries shall use
their reasonable best efforts to preserve substantially intact
their business organization, and to preserve their present
relationships with customers, suppliers and other Persons with
which any of them has significant business relations. Without
limiting the generality of the foregoing, except as expressly
contemplated by any other provision of this Agreement, as
required by law, or as set forth in Schedule 5.01,
neither the Company nor any Subsidiary shall, during such
period, without the prior written consent of Parent (which
consent shall not be unreasonably withheld or delayed):
(a) amend or otherwise change its certificate of
incorporation or bylaws (or comparable organizational or charter
documents);
(b) issue, sell, pledge, dispose of, grant, or encumber:
(i) any shares of any class of capital stock of the Company
or any Subsidiary, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of
such capital stock, Rights, or any other ownership interest
(including any phantom interest), of the Company or any
Subsidiary, except for the issuance of Shares and associated
Rights issuable pursuant to Company Stock Options and other
contractual rights outstanding on the date hereof and set forth
in the Company Disclosure Schedules pursuant to
Article III hereof; or (ii) any material assets
of the Company or any Subsidiary, except for sales of inventory
and encumbrances on the assets of the Company or any Subsidiary
in the ordinary course of business and in a manner consistent
with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for dividends
by any direct or indirect wholly-owned Subsidiary to the Company
or any other Subsidiary;
(d) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any
capital stock of the Company or any Subsidiary, other than in
connection with the exercise of Company Stock Options or other
contractual rights existing on the date hereof and set forth in
the Company Disclosure Schedules pursuant to
Article III hereof;
(e) (i) acquire or dispose of (including by merger,
consolidation, license, lease, acquisition or disposition of
stock or assets or any other business combination) any
corporation, partnership, other business organization or any
division thereof having a value (including the amount of any
assumed indebtedness) in excess of $1,000,000, individually or
in the aggregate; (ii) repurchase, repay, cancel or incur
any indebtedness for borrowed money, other than (A) in
connection with permitted acquisitions or (B) scheduled
payments in the ordinary course of business consistent with past
practice and in connection with currently outstanding capital
leases and indebtedness for borrowed money; (iii) grant any
Lien in, on or to any of its material assets to secure any
indebtedness for borrowed money, except in connection with such
indebtedness permitted under the preceding clause (ii);
(iv) issue any debt securities or assume, endorse, or
otherwise become responsible for, the obligations of any Person
other than a Subsidiary, or make any loans or advances to any
Person other than a Subsidiary; (v) except to the extent
the amount is reflected in the Companys capital
expenditure budget on the date hereof (a copy of which has been
provided to Parent), authorize, or make any commitment with
respect to, any single capital expenditure that is in excess of
$250,000 or capital expenditures which are, in the aggregate, in
excess of $1,000,000 for the Company and the Subsidiaries taken
as a whole; (vi) enter into any new line of business
outside of its existing business segments; or (vii) make
investments in Persons other than Subsidiaries, other than
ordinary course investments in cash and cash equivalents made
consistent with past practice and in accordance with the
Companys existing investment policy;
19
(f) adopt or enter into a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or
other reorganization of the Company (other than the Merger) or
any Subsidiary;
(g) (i) increase the compensation payable or to become
payable or the benefits provided to any current or former
director or executive officer; (ii) grant any retention,
severance or termination pay to, or enter into any employment,
bonus, change of control or severance agreement with, any
current or former director or executive officer;
(iii) establish, adopt, enter into, terminate or materially
amend any collective bargaining agreement or Plan (other than
individual contracts, agreements or commitments with employees
who are not directors or executive officers); or
(iv) establish, adopt or enter into any plan, agreement,
program, policy, trust, fund or other arrangement that would be
such a Plan if it were in existence as of the date of this
Agreement, except as required by law or as required under any
existing Plan or Contract disclosed in the Company Disclosure
Schedule;
(h) (i) except as required by law or the Treasury
Regulations promulgated under the Code, make any change (or file
any such change) in any method of Tax accounting for a material
amount of Taxes or (ii) make, change or rescind any
material Tax election, settle or compromise any material Tax
liability, file any amended Tax Return involving a material
amount of additional Taxes (except as required by law), enter
into any closing agreement relating to a material amount of
Taxes, or waive or extend the statute of limitations in respect
of Taxes (other than pursuant to extensions of time to file Tax
Returns obtained in the ordinary course of business), other
than, in each case, in the ordinary course of business and
consistent with past practice;
(i) make any material change to its methods of accounting
in effect at December 31, 2006, except (i) as required
by changes in GAAP (or any interpretation thereof) or
Regulation S-X
under the Exchange Act, (ii) as may be required by a change
in applicable law, (iii) as disclosed in an SEC Report
filed prior to the date hereof or (iv) as required by a
Governmental Entity or quasi-Governmental Entity (including the
Financial Accounting Standards Board or any similar
organization);
(j) pay, discharge, waive, settle or satisfy any material
claim (which shall include, but not be limited to, any pending
or threatened material Action), other than a payment, discharge,
waiver, settlement or satisfaction, in accordance with their
terms, of claims disclosed in the most recent financial
statements (or the notes thereto) of the Company included in an
SEC Report filed prior to the date hereof;
(k) other than in the ordinary course of business, amend,
modify, cancel or consent to the termination of any Material
Contract; or
(l) agree to take any of the actions described in
Sections 5.1(a) through 5.1(k) above.
Section 5.02. Conduct
of Business by Parent and Merger Co Pending the
Merger. Parent and Merger Co agree that, between
the date of this Agreement and the earlier of the Effective Time
and the Termination Date, they shall each use their reasonable
best efforts to not, directly or indirectly, take any action
that would reasonably be likely to prevent or materially delay
the satisfaction of the conditions contained in
Section 7.01 or 7.03 or the consummation of
the Merger or Other Contemplated Transactions.
Section 5.03. No
Control of Other Partys Business. Nothing
contained in this Agreement shall give Parent, directly or
indirectly, the right to control or direct the Companys or
the Subsidiaries operations prior to the Effective Time,
and nothing contained in this Agreement shall give the Company,
directly or indirectly, the right to control or direct
Parents or its subsidiaries operations prior to the
Effective Time. Prior to the Effective Time, each of the Company
and Parent shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision
over its and its subsidiaries respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Proxy
Statement; Other Filings. As promptly as
practicable, and in any event within thirty (30) days,
following the date of this Agreement, (a) the Company shall
prepare and file with the SEC the preliminary version of the
proxy statement relating to the approval of this Agreement by
the Companys stockholders (as amended or supplemented from
time to time, the Proxy Statement), and
(b) each of the Company, Parent and Merger Co shall, or
shall cause their respective affiliates to, prepare and file
with the SEC all
20
Other Filings that are required to be filed by such party in
connection with the transactions contemplated hereby. Each of
the Company, Parent and Merger Co shall furnish all information
concerning itself and its affiliates that is required to be
included in the Proxy Statement or, to the extent applicable,
any other document filed by the Company with the SEC in
connection with the Merger (the Other
Filings), or that is customarily included in proxy
statements or other filings prepared in connection with
transactions of the type and scope contemplated by this
Agreement. Each of the Company, Parent and Merger Co shall use
its reasonable best efforts to respond as promptly as
practicable to any comments of the SEC with respect to the Proxy
Statement or the Other Filings, and the Company shall use its
reasonable best efforts to cause the definitive Proxy Statement
to be mailed to the Companys stockholders as promptly as
reasonably practicable after the date of this Agreement. Each
party shall promptly notify the other party upon the receipt of
any comments from the SEC or its staff or any request from the
SEC or its staff, for amendments or supplements to the Proxy
Statement or the Other Filings, and shall provide the other
party with copies of all correspondence between it and its
Representatives, on the one hand, and the SEC and its staff, on
the other hand, relating to the Proxy Statement or the Other
Filings. If at any time prior to the Company Stockholders
Meeting, any information relating to the Company, Parent, Merger
Co or any of their respective affiliates, officers or directors,
should be discovered by the Company, Parent or Merger Co that
should be set forth in an amendment or supplement to the Proxy
Statement or the Other Filings, so that the Proxy Statement or
the Other Filings shall not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading, the party that discovers such information
shall promptly notify the other parties, and an appropriate
amendment or supplement describing such information shall be
filed with the SEC and, to the extent required by applicable
law, disseminated to the stockholders of the Company.
Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement or filing the Other
Filings (or, in each case, any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto,
the party responsible for filing or mailing such document shall
provide the other party a reasonable opportunity to review and
comment on such document or response (which comments shall be
reasonably considered by the filing or mailing party).
Section 6.02. Information
Supplied.
(a) Information Supplied by the
Company. None of the information included or
incorporated by reference in the Proxy Statement or the Other
Filings will, in the case of the Proxy Statement, at the date it
is first mailed to the Companys stockholders or at the
time of the Company Stockholders Meeting or at the time of
any amendment or supplement thereof, or, in the case of any
Other Filing, at the date it is first mailed to the
Companys stockholders or at the date it is first filed
with the SEC, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading,
except that no representation is made by the Company with
respect to information supplied by Parent, Merger Co or any
affiliate of Parent or Merger Co in connection with the
preparation of the Proxy Statement or the Other Filings for
inclusion or incorporation by reference therein. The Proxy
Statement and the Other Filings that are filed by the Company
will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
(b) Information Supplied by Parent and Merger
Co. None of the information supplied by Parent,
Merger Co or any affiliate of either Parent or Merger Co for
inclusion or incorporation by reference in the Proxy Statement
or the Other Filings will, in the case of the Proxy Statement,
at the date it is first mailed to the Companys
stockholders or at the time of the Company Stockholders
Meeting or at the time of any amendment or supplement thereof,
or, in the case of any Other Filing, at the date it is first
mailed to the Companys stockholders or, at the date it is
first filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. No representation is made by Parent or
Merger Co with respect to information supplied by the Company in
connection with the preparation of the Proxy Statement or the
Other Filings for inclusion or incorporation by reference
therein. All Other Filings, if any, that are filed by Parent or
Merger Co will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
21
Section 6.03. Company
Stockholders Meeting. The Company shall
duly call, give notice of, convene and hold a meeting of its
stockholders (the Company Stockholders
Meeting), as promptly as practicable after the date of
this Agreement, for the purpose of voting upon the approval of
this Agreement. Unless this Agreement shall have been terminated
in accordance with Section 8.01, the Company shall
hold the Company Stockholders Meeting regardless of
whether the Company Board has effected a Change in Board
Recommendation. Subject to Section 6.05(c), the
Company Board shall recommend to holders of the Shares that they
approve this Agreement, and the Company shall include such
recommendation in the Proxy Statement and use its reasonable
best efforts to obtain Stockholder Approval. Nothing contained
in this Section 6.03 shall be deemed to prevent the
Company or the Company Board from taking any action it is
permitted to take under, and in compliance with,
Section 6.05.
Section 6.04. Access
to Books and Records; Confidentiality.
(a) Access to Books and Records. Except
as otherwise prohibited by applicable Law, the terms of any
Contract entered into prior to the date hereof or any other duty
of confidentiality owed to another Person, or as would be
reasonably expected to violate any attorney-client privilege (it
being understood that the parties shall each use reasonable best
efforts to cause such information to be provided in a manner
that does not result in such violation), from the date of this
Agreement until the earlier of the Effective Time and the
Termination Date, the Company shall (and shall cause the
Subsidiaries to): (i) provide to Parent and to the
officers, directors, members, partners, managers, employees,
accountants, consultants, legal counsel, financing sources,
agents and other representatives (collectively,
Representatives) of Parent reasonable access,
during normal business hours and upon reasonable prior notice by
Parent, to the officers, employees, agents, properties, offices
and other facilities of the Company and the Subsidiaries and to
the books and records thereof; and (ii) furnish promptly to
Parent such information concerning the business, properties,
contracts, assets, liabilities, personnel and other aspects of
the Company and the Subsidiaries as Parent or its
Representatives may reasonably request. Notwithstanding the
foregoing, the Company may impose reasonable restrictions and
limitations on access to such officers, employees, agents,
properties, offices, facilities, books and records and
information, and Parent shall, and shall cause its
Representatives to, use their reasonable best efforts to conduct
any such investigation or consultation in such a manner as not
to interfere unreasonably with the business or operations of the
Company or the Subsidiaries or otherwise result in any
unreasonable interference with the prompt and timely discharge
by such employees of their normal duties. Neither the Company
nor any of the Subsidiaries shall be required to provide access
to or to disclose information where such access or disclosure
would jeopardize the attorney-client privilege of the Company or
the Subsidiaries or could reasonably be deemed to contravene any
law, Contract entered into prior to the date of this Agreement
or any other duty of confidentiality owed to another Person (it
being agreed that the parties shall use their reasonable best
efforts to cause such information to be provided in a manner
that does not cause such violation or jeopardy). In addition to
the foregoing, the Company shall provide to Parent, and shall
cause the Subsidiaries to, and shall use its reasonable best
efforts to cause the Companys and the Subsidiaries
respective officers, employees, Representatives and advisors,
including legal and accounting, to, provide to Parent all
cooperation reasonably requested by Parent in connection with
its financing and the other transactions contemplated by this
Agreement and the Other Contemplated Transactions, including the
following: (i) participation in meetings, presentations,
road shows, due diligence sessions and sessions with rating
agencies; (ii) assisting with the preparation of materials
for rating agency presentations, offering documents, private
placement memoranda, bank information memoranda, prospectuses
and similar documents; (iii) furnishing Parent and its
financing sources with financial and other pertinent information
regarding the Company and the Subsidiaries, if subject to
confidentiality and use restrictions reasonably satisfactory to
the Company; and (iv) facilitating the entrance into one or
more credit or other agreements satisfactory to Parent,
provided that, in all cases with respect to the above,
the Company and the Subsidiaries shall incur no cost or expense
that is not promptly reimbursed by Parent upon demand if the
Closing does not occur and shall not be obligated to become a
party to (or otherwise bound by) any agreement or other document
prior to the Closing. The Company hereby consents to the use of
its and the Subsidiaries logos in connection with
Parents
22
financing; provided that such logos are used solely in a manner
that is not intended to nor reasonably likely to harm or
disparage the Company or any of the Subsidiaries.
(b) Confidentiality. All materials,
documents and information obtained by Parent or its
Representatives pursuant to this Section 6.04 shall
be kept confidential and otherwise dealt with in accordance with
the confidentiality agreement, dated April 7, 2008 (the
Confidentiality Agreement), between Luther
King Capital Management Corporation and the Company, which
agreement shall remain in full force and effect, notwithstanding
the execution and delivery or termination of this Agreement.
Section 6.05. No
Solicitation of Transactions.
(a) Non-Solicitation. The Company shall
not, and shall cause the Subsidiaries not to, nor shall the
Company authorize or permit, and shall cause the Subsidiaries
not to authorize or permit, the Representatives of the Company
or the Subsidiaries to, directly or indirectly,
(i) solicit, initiate, propose or knowingly encourage
inquiries with respect to, or the submission of, any Acquisition
Proposal, or (ii) participate in any discussions or
negotiations regarding, or furnish to any Person (other than
Parent or its Representatives) any access to the properties,
books and records or confidential or material non-public
information or data of the Company or any Subsidiary in
connection with, any Acquisition Proposal; provided,
however, that until such time as Stockholder Approval is
obtained, nothing contained in this Agreement shall prevent the
Company or the Company Board from furnishing information to, or
engaging in negotiations or discussions with, any Person (and
such Persons Representatives) in connection with an
unsolicited Acquisition Proposal by such Person received after
the date hereof (and prior to the date of Stockholder Approval),
if and only to the extent that, prior to taking such action, the
Company Board (or any committee thereof) (A) determines in
good faith (after consultation with its independent financial
advisor) that such Acquisition Proposal is credible and is, or
could reasonably be expected to lead to, a Superior Proposal and
(after consultation with and upon the advice of its outside
legal counsel) that the failure to furnish such information to,
or engage in negotiations or discussions with, such Person (and
such Persons Representatives) would be inconsistent with
the Company Boards fiduciary duties under applicable law,
and (B) (1) has received prior to the date hereof an
executed confidentiality agreement from such Person in
connection with such Persons consideration of making an
Acquisition Proposal, or (2) hereafter receives from such
Person an executed confidentiality agreement, the
confidentiality terms of which are no less favorable to the
Company than those contained in the Confidentiality Agreement.
The Company shall, and shall direct each of its Representatives
to, cease immediately upon execution of this Agreement
(x) any solicitations, discussions or negotiations with any
Person (other than Parent and its Representatives) that has made
or indicated an intention to make an Acquisition Proposal as of
or prior to the date of this Agreement and (y) any other
solicitations, discussions or negotiations relating to a
transaction of the type referred to in the definition of
Acquisition Proposal.
(b) Notification and Related Matters. The
Company shall notify Parent as promptly as practicable, and in
any event within three (3) Business Days, of the receipt by
the Company or any of the Subsidiaries, or any of its or their
respective Representatives, of any bona fide inquiries,
proposals or offers, requests for information or requests for
discussions or negotiations regarding any Acquisition Proposal,
(i) specifying the identity of the offeror and the material
terms and conditions of such inquiry, proposal or offer, and
(ii) attaching any written materials submitted in
connection with such inquiry, proposal or offer
and/or a
written summary of any such oral inquiries, proposals or offers.
The Company shall also notify Parent as promptly as practicable
of any material developments with respect to any such inquiries,
proposals or offers. Promptly upon determination by the Company
Board that an unsolicited Acquisition Proposal constitutes a
Superior Proposal, the Company shall deliver to Parent a written
notice advising it that the Company Board has made such
determination, specifying the material terms and conditions of
such Superior Proposal and the identity of the Person making
such Superior Proposal, and attaching such written Superior
Proposal or a written summary of any such oral Superior Proposal
(such notice, a Notice of Superior Proposal).
The Company agrees that neither it nor any of the Subsidiaries
shall modify, amend, terminate, waive or release any
confidentiality or standstill agreement to which the Company or
any Subsidiary is a party and that relates to a business
combination involving the Company or any Subsidiary or the
assets of the Company or any Subsidiary without Parents
prior written consent, which shall not be unreasonably withheld,
conditioned or delayed, except that Parents prior written
consent shall not be required in connection with any such action
if the Company Board (or any committee
23
thereof) determines in good faith (after consultation with its
independent financial advisor and upon the advice of its outside
legal counsel) that it is required to do so in order to comply
with its fiduciary duties under applicable law and it provides
concurrent notice of such action to Parent.
(c) Change in Recommendation. Except as
set forth in this Section 6.05(c), the Company Board
and the Independent Committee shall not (i) withdraw, or
modify or change in a manner adverse to Parent and Merger Co,
the approval or recommendation of this Agreement or the Merger
by the Company Board (or any committee thereof);
(ii) approve, adopt or recommend any Acquisition Proposal;
or (iii) approve or recommend, or allow the Company or any
Subsidiary to enter into, any letter of intent, acquisition
agreement or other similar agreement with respect to, or that is
reasonably expected to result in, any Acquisition Proposal
(other than a confidentiality agreement expressly permitted by
Section 6.05(b)). Notwithstanding the foregoing,
(x) in response to the receipt of an unsolicited
Acquisition Proposal, if the Company Board (or any committee
thereof) (A) determines in good faith (after consultation
with its independent financial advisor) that such Acquisition
Proposal is credible and is a Superior Proposal and
(B) determines in good faith (after consultation with its
outside legal counsel) that it is required to do so in order to
comply with its fiduciary duties to the stockholders of the
Company under applicable law, then the Company Board may approve
and recommend such Superior Proposal and, in connection with
such Superior Proposal, withdraw, or modify or change in a
manner adverse to Parent and Merger Co, the Company Board
Recommendation, provided, however, that
(1) the Company shall have first provided at least three
(3) Business Days prior written notice to Parent of
its intent to take such action, and Parent does not make, after
being provided with reasonable opportunity to negotiate with the
Company and its Representatives, within three (3) Business
Days of receipt of such written notification, an offer that the
Company Board determines, in good faith (after consultation with
its independent financial advisor and legal counsel), is at
least as favorable to the Company and its stockholders as the
applicable Acquisition Proposal, (2) during such three
(3)-Business Day period, the Company shall negotiate in good
faith with Parent (to the extent Parent wishes to negotiate) to
enable Parent to make such an offer, and (3), in the event of
any amendment to the financial or other material terms of such
Superior Proposal, the Company Board shall deliver to Parent an
additional written Notice of Superior Proposal, and the three
(3)-Business Day period referenced above shall be extended for
an additional three (3) Business Days after Parents
receipt of such additional Notice of Superior Proposal, and
(y) other than in connection with an Acquisition Proposal,
if the Company Board determines in good faith (after first
providing Parent with at least three (3) Business
Days notice of its intent to take such action, including
the reasons therefor, and consultation with its independent
financial advisor and upon the advice of its outside legal
counsel) that it is required to do so in order to comply with
its fiduciary duties under applicable law, then the Company
Board may withdraw, or modify or change in a manner adverse to
Parent and Merger Co, the Company Board Recommendation (either
event described in the foregoing clauses (x) and (y), a
Change in Board Recommendation). Any action
by the Company Board or a committee thereof that is or becomes
disclosed publicly that is intended to indicate that the Company
Board (or any committee thereof) does not unconditionally
support adoption of this Agreement by the stockholders of the
Company or does not believe that the Merger and the Agreement
are in the best interests of the stockholders of the Company
shall be deemed for all purposes of this Agreement to be a
Change in Board Recommendation.
(d) Certain Disclosures. Nothing
contained in this Agreement shall prohibit the Company or the
Company Board from taking and disclosing to its stockholders a
position contemplated by
Rules 14d-9
and 14e-2(a)
promulgated under the Exchange Act or from making any legally
required disclosure to the Companys stockholders in
connection with an Acquisition Proposal if the Company Board (or
any committee thereof) determines in good faith (after
consultation with its independent financial advisor and upon the
advice of its outside legal counsel) that it is required to do
so under applicable law; provided, however, that
in no event shall this Section 6.05(d) affect the
obligations of the Company specified in
Sections 6.05(b) and 6.05(c). If
Company Board fails to recommend against acceptance of a tender
or exchange offer for any Shares that constitutes an Acquisition
Proposal (other than by Parent or any of its Affiliates),
including, for these purposes, by remaining neutral and
expressing no opinion or stating that it is for any reason
unable to take a position with respect to the acceptance of such
tender or exchange offer by its stockholders, within ten
(10) Business Days after commencement thereof (or prior to
the date of the Company Stockholder Meeting, if
24
sooner), such failure shall be deemed for all purposes of this
Agreement to be a Change in Board Recommendation.
(e) Acquisition
Proposal Definition. For purposes of this
Agreement, Acquisition Proposal means any
proposal or offer (including any proposal from or to the
Companys stockholders) from any Person or group other than
Parent or any affiliate of Parent relating to (i) any
direct or indirect acquisition or purchase, in a single
transaction or series of transactions by such Person or group
acting in concert, of (A) more than 20% of the fair market
value (as determined in good faith by the Company Board) of the
assets (including capital stock of the Subsidiaries), or of a
portion of the business representing 20% of the fair market
value (as determined in good faith by the Company Board) of the
net revenues or net income, of the Company and its consolidated
Subsidiaries, taken as a whole, or (B) over 20% of any
class of equity securities of the Company (including any tender
or exchange offer that, if consummated, would have such a
result); or (ii) any merger, consolidation, reorganization,
business combination, recapitalization, share exchange,
liquidation, dissolution or other similar transaction involving
the Company or any of the Subsidiaries, as a result of which any
Person or group acting in concert would acquire the assets,
securities or businesses described in any of clauses (A) or
(B) above.
Section 6.06. Directors
and Officers Indemnification, Advancement of Expenses and
Insurance.
(a) Certificate of Incorporation and
Bylaws. Parent and Merger Co agree that all
rights to exculpation, indemnification and advancement of
expenses now existing in favor of the current or former
directors or officers of the Company or the Subsidiaries as
provided in their respective certificate of incorporation or
bylaws or other similar organizational or charter documents or
in any agreement with any such person that shall survive the
Merger and shall continue in full force and effect for a period
of six (6) years from the Effective Time. For a period of
six (6) years from the Effective Time, the Surviving
Corporation shall maintain in effect exculpation,
indemnification and advancement of expenses provisions no less
favorable than those of the Companys and any
Subsidiarys certificate of incorporation and bylaws or
similar organizational or charter documents in effect
immediately prior to the Effective Time, shall honor and fulfill
in all respects the obligations of the Company or any of the
Subsidiaries under any and all such provisions and under any and
all indemnification agreements of the Company or the
Subsidiaries with any of their respective directors or officers
in effect immediately prior to the Effective Time, and shall not
amend, repeal or otherwise modify any such provisions or
agreements during such six-year period in any manner that would
adversely affect the rights thereunder of any individuals who at
the Effective Time were current or former directors or officers
of the Company or any of the Subsidiaries absent such
individuals consent. Parent and Merger Co agree that all
rights to indemnification in respect of any Action pending or
asserted or any claim made within such period shall continue
until the disposition of such Action or resolution of such claim.
(b) Indemnification. The Surviving
Corporation shall, to the fullest extent permitted under
applicable Law, indemnify and hold harmless (and advance funds
in respect of each of the foregoing) each current and former
director or officer of the Company or any of the Subsidiaries
and each person who served as a director, officer, member,
trustee or fiduciary of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or
enterprise at the request of the Company or any of the
Subsidiaries, in each case, in and to the extent of their
capacities as such and not as stockholders
and/or
equity holders of the Company or the Subsidiaries or otherwise
(each, together with such persons heirs, executors or
administrators, an Indemnified Party) against
any costs or expenses (including advancing attorneys fees
and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to
the fullest extent permitted by Law), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in
connection with any Action arising out of, relating to or in
connection with any action or omission occurring or alleged to
have occurred whether before or after the Effective Time
(including acts or omissions in connection with such persons
serving as an officer, director or other fiduciary in any entity
if such service was at the request of or for the benefit of the
Company or any of the Subsidiaries); provided,
however, that the Surviving Corporation will not be
liable for any settlement effected without the Surviving
Corporations prior written consent (such consent not to be
unreasonably withheld, conditioned or delayed). In the event of
any such Action, the Surviving Corporation shall cooperate with
the Indemnified Party in the defense of any such Action.
25
(c) Insurance. For a period of six
(6) years from the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current
policies of directors and officers liability
insurance and fiduciary liability insurance maintained by the
Company and the Subsidiaries with respect to matters arising on
or before the Effective Time for the benefit of the current or
former directors and officers that are covered by such policies;
provided, however, that the Surviving Corporation
may (i) substitute therefor policies of an insurance
company (such insurance company to be an insurance carrier with
the same or better credit ratings as the Companys current
insurance carrier with respect to directors and
officers liability insurance and fiduciary liability
insurance) the material terms of which, including coverage and
amount, are no less favorable to such directors and officers
than the Companys existing policies as of the date hereof
or (ii) request that the Company obtain such extended
reporting period coverage under its existing insurance programs
(to be effective as of the Effective Time), and, if so requested
by Parent, the Company shall use its reasonable best efforts to
obtain such coverage prior to the Effective Time.
(d) Surviving Obligations. If Parent or
the Surviving Corporation, or any of their respective successors
or assigns, (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or
(ii) transfers all or substantially all of its properties
and assets to any Person, then, and in any such case, Parent or
the Surviving Corporation shall use its reasonable best efforts
to ensure that proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation,
as the case may be, shall succeed to the obligations set forth
in this Section 6.06.
(e) Obligation of Parent; Etc. From and
after the Effective Time, Parent shall cause the Surviving
Corporation to perform all of the obligations of the Surviving
Corporation under this Section 6.06. The
rights of each Indemnified Party under this
Section 6.06 shall be in addition to any right such
individual might have under the Companys Certificate of
Incorporation and Bylaws, the certificate of incorporation and
the by-laws of the Surviving Corporation or any comparable
organizational or charter documents of their Subsidiaries, or
under any agreement of any Indemnified Party with the Company,
the Surviving Corporation or any of their Subsidiaries. The
provisions of this Section 6.06 shall survive the
consummation of the Merger and are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified
Parties, their respective heirs and representatives.
Section 6.07. Employee
Benefits Matters.
(a) Obligations with Respect to
Employees. During the six-month period following
the Effective Time, Parent shall, or shall cause the Surviving
Corporation and the Subsidiaries to, ensure that (i) any
employee benefits and incentive compensation opportunities
(other than equity-based compensation) offered by Parent after
the Effective Time, if any (Parent Benefit
Programs), to employees of the Company and the
Subsidiaries as of the Effective Time (each, an
Employee), when taken together with the other
employee benefits and incentive compensation opportunities
(other than equity-based compensation) of the Company and its
Subsidiaries, are no less favorable, except to a de minimis
extent, in the aggregate than those provided to the
Employees immediately prior to the Effective Time; and
(ii) any medical and life insurance benefits for retirees
(including Employees who become eligible for such retiree
coverage during such period) offered by Parent after the
Effective Time, if any (Parent Retiree Medical
Programs), when taken together with the other retiree
coverage of the Company and its Subsidiaries, are substantially
similar in the aggregate to the coverage maintained by the
Company immediately prior to the Effective Time. From and after
the Effective Time, Parent shall cause the Surviving Corporation
and its subsidiaries to honor in accordance with their terms
(including terms that provide for amendment or termination), all
contracts, agreements, arrangements, policies, plans and
commitments of the Company and the Subsidiaries as in effect
immediately prior to the Effective Time that are applicable to
any current or former employees or directors of the Company or
any Subsidiary. Nothing herein shall be deemed to be a guarantee
of employment for any Employee, or to restrict the right of the
Surviving Corporation to terminate any Employee.
(b) Eligibility. Employees shall, to the
extent permitted by any applicable third party providers,
receive credit for all service with the Company, any Subsidiary,
or any of their predecessors, for all purposes (including for
purposes of eligibility to participate, vesting, benefit accrual
and eligibility to receive benefits) under any
26
Parent Benefit Programs offered immediately after the Effective
Time to the same extent such service would be recognized by the
Company or any of the Subsidiaries under comparable Plans
immediately prior to the Effective Time; provided,
however, that such crediting of service shall not operate
to duplicate any benefit or the funding of any such benefit.
Such Parent Benefit Programs shall, to the extent permitted by
any applicable third party providers, credit each such Employee
for service accrued or deemed accrued on or prior to the
Effective Time with the Company or any Subsidiary;
provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any
such benefit.
(c) Welfare Plans. With respect to any
welfare benefit plans, programs and arrangements maintained,
sponsored or contributed to by Parent immediately after the
Effective Time (Parent Welfare Benefit
Plans), Parent shall (i) waive, or use
commercially reasonable efforts to cause its insurance carrier
to waive, all limitations as to preexisting and at-work
conditions, if any, with respect to participation and coverage
requirements applicable to each Employee under any such Parent
Welfare Benefit Plan to the same extent waived under a
comparable Plan, and (ii) provide, to the extent permitted
by any applicable third party providers, credit to each Employee
for any co-payments, deductibles and out-of-pocket expenses paid
by such Employee under the Plans during the relevant plan year,
up to and including the Effective Time.
(d) Change in Control and Employment
Agreements. From and after the Effective Time,
except as otherwise agreed by Parent or the Surviving
Corporation and any such individuals, Parent shall cause
Surviving Corporation to honor, in accordance with their terms
(including the amendment and termination provisions thereof),
those Change in Control Agreements and other employment
agreements, in each case with the current and former employees
of the Company or the Subsidiaries, expressly identified in the
Company Disclosure Schedule.
(e) No Plan Amendment. Nothing in this
Section 6.07 shall be construed as an amendment to any
employee benefit plan for any purpose.
Section 6.08. Notification
of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the
Company, of (a) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which could
reasonably be expected to cause any condition to the obligations
of any party hereunder not to be satisfied, and (b) any
failure of the Company, Parent or Merger Co to comply with or
satisfy any covenant or agreement to be complied with or
satisfied by it hereunder; provided, however, that
the delivery or non-delivery of any notice pursuant to this
Section 6.08 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
In addition, the Company shall give prompt written notice to
Parent, and Parent shall give prompt written notice to the
Company, of any notice or other communication (c) from any
Person and the response thereto of the Company or the
Subsidiaries or Parent, as the case may be, or its or their
Representatives, alleging that the consent of such Person is or
may be required in connection with this Agreement or the Merger,
or (d) from any Governmental Entity and the response
thereto of the Company or the Subsidiaries or Parent, as the
case may be, or its or their Representatives, in connection with
this Agreement or the Merger.
Section 6.09. Further
Action; Reasonable Best Efforts.
(a) Further Action. Upon the terms and
subject to the conditions of this Agreement, each of the parties
agrees to use its reasonable best efforts to (i) take, or
cause to be taken, all appropriate action, and to do, or cause
to be done, all things necessary, proper or advisable under
applicable law or otherwise to consummate the Merger,
(ii) obtain from Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders
required to be obtained by Parent, Merger Co or the Company or
any of their respective subsidiaries in connection with the
authorization, execution and delivery of this Agreement, and
(iii) promptly make all necessary filings, and thereafter
make any other required submission, with respect to this
Agreement and the Merger required under the HSR Act or any other
applicable antitrust, competition or fair trade laws with
respect to the Merger. Subject to appropriate confidentiality
protections, the parties shall have a reasonable opportunity to
review and comment on drafts of all applications, notices,
petitions, filings and other documents made or prepared in
connection with the items described in clauses (i) through
(iii) above, which comments shall be considered by the
other party in good faith, shall cooperate with each other in
connection with the prompt making of all such filings, shall
furnish to the other party such necessary information and
assistance as such other party may reasonably request with
respect to the foregoing, and shall
27
provide the other party copies of all filings made by such party
with any applicable Governmental Entity, and, upon request, any
other information supplied by such party to a Governmental
Entity in connection with this Agreement and the Merger.
(b) HSR Act Compliance.
(i) Parent, Merger Co and the Company shall file as soon as
practicable after the date of this Agreement, and in any event
within twenty (20) Business Days thereafter, all required
or advisable notifications under, or relating to, the HSR Act
and any antitrust, competition or fair trade law of any
applicable United States or
non-United
States governmental antitrust authority and shall respond as
promptly as practicable to all inquiries or requests for
additional information received from a Governmental Entity in
relation to such filings or notices for additional information
or documentation. Parent and Merger Co agree to take whatever
action may be necessary to resolve any objections that may be
asserted under the HSR Act or any other applicable antitrust,
competition or fair trade laws with respect to the Merger.
(ii) Without limiting the generality of the foregoing and
for the avoidance of doubt: (A) Parent shall use its
reasonable best efforts to timely comply with all restrictions
and conditions, if any, specified or imposed by any governmental
antitrust authority with respect to the HSR Act and any
antitrust, competition or fair trade law of any applicable
United States or
non-United
States governmental antitrust authority as a requirement for
granting any necessary clearance or terminating any applicable
waiting period; provided, however, that such
efforts shall not be deemed to require Parent or the Surviving
Corporation to agree to hold separate, divest, license or cause
a third party to purchase, assets
and/or
businesses of Parent, the Company or any of the Companys
Subsidiaries; (B) if any governmental antitrust authority
initiates an Action seeking to restrain, enjoin or prohibit the
Merger, Parent and the Company shall each use its respective
reasonable best efforts to prevent the entry of any order
restraining, enjoining or prohibiting the Merger and to
otherwise prevail in any such Action, including by retaining all
appropriate expert witnesses and consultants, and each party
shall permit the other party to reasonably participate in all
aspects of the defense of any such Action; and (C) neither
party shall agree with any governmental antitrust authority to
delay the Closing or to provide advance notice of the Closing to
any governmental antitrust authority, in each case without the
consent of the other party.
(c) Consents. The Company, Parent and
Merger Co shall, and the Company shall cause the Subsidiaries
to, use their respective reasonable best efforts to obtain any
third party consents set forth on Schedule 6.09(c).
Section 6.10. Public
Announcements. The initial press release relating
to this Agreement shall be a joint press release, the text of
which has been agreed to by each of Parent and the Company.
Thereafter, each of Parent and the Company shall, prior to the
earlier of the Effective Time and the Termination Date, consult
with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or
the Merger, except to the extent public disclosure is required
by applicable Law or the requirements of Nasdaq, in which case
the issuing party shall use its reasonable best efforts to
consult with the other party before issuing any such release or
making any such public statement, and to reasonably consider any
comments received from the other party in connection with such
consultation.
Section 6.11. Resignations. The
Company shall use its reasonable best efforts to obtain and
deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation, effective as of the
Effective Time, of each director and officer of the Company and
any Subsidiary, except to the extent otherwise designated by
Parent to the Company in writing at least ten (10) Business
Days prior to the Closing.
Section 6.12. State
Takeover Statutes. Parent, the Company and their
respective Boards of Directors shall use their respective
commercially reasonable efforts to (a) take all reasonable
action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to this
Agreement or the transactions provided for in this Agreement,
and (b) if any state takeover statute or similar statute
becomes applicable to this Agreement or the transactions
contemplated by this Agreement, take all reasonable action
necessary to ensure that the transactions provided for in this
Agreement may be consummated as promptly as practicable on the
terms
28
contemplated by this Agreement and otherwise to minimize the
effect of such statute or regulation on this Agreement or the
transactions provided for in this Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01. Conditions
to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Co to consummate the Merger
are subject to the satisfaction or waiver in writing (where
permissible) of the following conditions:
(a) Company Stockholder Approval. The
Stockholder Approval shall have been obtained.
(b) Antitrust Approvals and Waiting
Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under
applicable United States and
non-United
States antitrust or competition laws, including the HSR Act,
shall have expired or been terminated, and any approvals
required thereunder shall have been obtained.
(c) No Order. No Governmental Entity
shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary,
preliminary or permanent) which is then in effect and has the
effect of making consummation of the Merger illegal or otherwise
preventing or prohibiting consummation of the Merger.
(d) Governmental Consents. All material
consents, approvals and authorizations legally required to be
obtained to consummate the Merger shall have been obtained from
all Governmental Authorities.
Section 7.02. Conditions
to the Obligations of Parent and Merger Co. The
obligations of Parent and Merger Co to consummate the Merger are
subject to the satisfaction or waiver in writing (where
permissible) of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of the Company (i) in
Section 3.08(a) shall be true and correct in all
respects as of the date hereof and as of the Effective Time as
though made on and as of the Effective Time, (ii) in
Section 3.03(a) shall be true and correct in all
respects except to a de minimis extent as of the date
hereof and as of the Effective Time as though made on and as of
the Effective Time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), and
(iii) contained in this Agreement (other than those in
Section 3.03(a) and in Section 3.08(a))
shall be true and correct (without giving effect to any
limitation on any representation or warranty indicated by the
words knowledge, material or
Material Adverse Effect) as of the Effective Time,
as though made on and as of the Effective Time (except to the
extent expressly made as of an earlier date, in which case as of
such earlier date), except in the case of clause (iii)
where the failure of such representations and warranties to be
so true and correct (without giving effect to any limitation on
any representation or warranty indicated by the words
knowledge, material or Material
Adverse Effect) would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(b) Agreements and Covenants. The Company
shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective
Time.
(c) Officers Certificate. The
Company shall have delivered to Parent a certificate, dated the
date of the Closing, signed by an officer of the Company and
certifying as to the satisfaction of the conditions specified in
Sections 7.02(a) and 7.02(b).
Section 7.03. Conditions
to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject
to the satisfaction or waiver in writing (where permissible) of
the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Parent and Merger Co contained
in this Agreement shall be true and correct (without giving
effect to any limitation on any representation or warranty
indicated by the words in all material respects or
in any material respect)
29
as of the Effective Time, as though made on and as of the
Effective Time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), in all
material respects.
(b) Agreements and Covenants. Parent and
Merger Co shall have performed or complied in all material
respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior
to the Effective Time.
(c) Officers Certificates. Each of
Parent and Merger Co shall have delivered to the Company a
certificate, dated the date of the Closing, signed by an officer
thereof, certifying as to the satisfaction of the conditions
specified in Sections 7.03(a) and 7.03(b).
Section 7.04. Frustration
of Closing Conditions. Neither the Company nor
Parent may rely, either as a basis for not consummating the
Merger or for terminating this Agreement and abandoning the
Merger, on the failure of any condition set forth in
Section 7.01, Section 7.02, or
Section 7.03, as the case may be, to be satisfied if
such failure was primarily caused by such partys breach of
any provision of this Agreement or failure to use its reasonable
best efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by and subject to
Section 6.09.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time by action taken or
authorized by the Board of Directors of the terminating party or
parties, notwithstanding any Stockholder Approval, and whether
before or after the Company Stockholders Meeting, as
follows (the date of any such termination, the
Termination Date):
(a) Termination by Mutual Consent. By
mutual written consent of Parent and the Company.
(b) Termination by Parent or the
Company. By either Parent or the Company:
(i) if the Effective Time shall not have occurred on or
before August 31, 2008; provided, however,
that the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to the
party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date;
(ii) if any Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any injunction, order, decree
or ruling or taken any other action (including the failure to
have taken an action) that, in either such case, has become
final and non-appealable and has the effect of making
consummation of the Merger illegal or otherwise preventing or
prohibiting consummation of the Merger; provided,
however, that the right to terminate this Agreement
pursuant to this Section 8.01(b)(ii) shall not be
available to the party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
imposition of such injunction, order, decree, ruling or other
action or the failure of such injunction, order, decree, ruling
or other action to be resisted, resolved or lifted, as
applicable; or
(iii) if this Agreement shall fail to receive the
Stockholder Approval at the Company Stockholders Meeting
(as such may be postponed or adjourned).
(c) Termination by Parent. By Parent:
(i) if it and Merger Co are not in breach of their
obligations under this Agreement, and if (A) any of the
representations and warranties of the Company herein would fail
to be true and correct as of the Effective Time, as though made
on and as of the Effective Time, such that
Section 7.02(a) would not be satisfied, or
(B) there has been a breach on the part of the Company of
any of its covenants or agreements herein such that
Section 7.02(b) would not be satisfied, and, in
either such case, written notice of an intent to terminate based
on such failure or breach has been provided to the Company and
such failure or breach has not been, or cannot be, cured within
30 days after notice thereof to the Company; or
(ii) if the Company Board or any committee thereof shall
have (A) effected a Change of Board Recommendation (it
being understood and agreed that any
stop-look-and-listen communication by the
30
Company Board to the stockholders of the Company pursuant to
Rule 14d-9(f)
of the Exchange Act, or any substantially similar communication
to the stockholders of the Company in connection with the
commencement of a tender offer or exchange offer, shall not be
deemed to constitute a Change of Board Recommendation),
(B) taken any of the actions described in clauses (i)
through (iii) of Section 6.05(c) or
(C) failed to comply with its obligations under
Section 6.05 in any material respect.
(d) Termination by the Company. By the
Company:
(i) if it is not in material breach of its obligations
under this Agreement, and if (A) any of the representations
and warranties of Parent or Merger Co would fail to be true and
correct as of the Effective time, as though made on and as of
the Effective Time, such that Section 7.03(a) would not
be satisfied, or (B) there has been a breach on the part of
either Parent or Merger Co of any of their covenants or
agreements herein such that Section 7.03(b) would
not be satisfied, and, in either such case, written notice of an
intent to terminate based on such failure or breach has been
provided to Parent and such failure or breach has not been, or
cannot be, cured within 30 days after notice thereof to
Parent;
(ii) prior to obtaining Stockholder Approval, if the
Company Board (or any committee thereof) determines in
accordance with clause (x) of Section 6.05(c)
that an Acquisition Proposal is a Superior Proposal;
provided, however, that any such purported
termination pursuant to this Section 8.01(d)(ii)
shall be void and of no force or effect unless the Company
concurrently with such termination pays the Company Termination
Fee as directed by Parent in writing in accordance with
Section 8.03.
For purposes of this Agreement, Superior
Proposal means any unsolicited bona fide written
Acquisition Proposal (with all of the percentages included in
the definition of Acquisition Proposal increased to 50%) that is
on terms that the Company Board determines in its good faith
judgment (after consultation with its independent financial
advisor and outside legal counsel, and after taking into account
all the terms and conditions of the Acquisition Proposal and
this Agreement, including without limitation the probability of
such Acquisition Proposal being consummated, the legal,
financial, regulatory, timing and similar aspects of the
Acquisition Proposal, and the Person making the Acquisition
Proposal) are more favorable to the Companys stockholders
(in their capacities as stockholders) than this Agreement
(taking into account any alterations to this Agreement agreed to
in writing by Parent in response thereto).
Section 8.02. Effect
of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void and have no effect, and
there shall be no liability under this Agreement on the part of
any party hereto (except that the provisions of
Section 6.04(a), this Section 8.02,
Section 8.03 and Article IX shall
survive any such termination); provided, however,
that, except to the extent expressly set forth in
Section 8.03(f), no party shall be relieved or
released from any liabilities or damages arising out of fraud or
its willful and material breach of any provision of this
Agreement.
Section 8.03. Fees
and Expenses.
(a) Expenses. Except as otherwise set
forth in this Section 8.03 or in
Section 6.04(a), all Expenses incurred in connection
with this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Expenses, as used in this Agreement, shall
include all reasonable out-of-pocket documented expenses
(including all fees and expenses of counsel, accountants,
investment bankers, financing sources, hedging counterparties,
experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf (or with respect to Parent
or Merger Co, incurred by their respective stockholders or
affiliates or on their behalf) in connection with or related to
the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing
and mailing of the Proxy Statement, the solicitation of
stockholder approval, financing and all other matters related to
the closing of the Merger.
(b) Company Termination Fee. The Company
agrees that if this Agreement shall be terminated:
(i) by Parent pursuant to Section 8.01(c)(ii),
then (so long as Parent was not in breach of any of its
representations, warranties or covenants in this Agreement such
that the applicable condition to the Companys obligation
to consummate the Merger would not have been satisfied as of the
Termination Date) the Company shall pay the Company Termination
Fee as directed by Parent in writing;
31
(ii) by the Company pursuant to
Section 8.01(d)(ii), then the Company shall pay the
Company Termination Fee (which Company Termination Fee shall be
paid concurrently with such termination) as directed by Parent
in writing;
(iii) by either Parent or the Company pursuant to
Section 8.01(b)(iii) and at any time after the date of
this Agreement and prior to the Stockholders Meeting, or any
postponement or adjournment thereof, an Acquisition Proposal
shall have been made directly to the Companys stockholders
or any Person shall have publicly announced an intention to make
an Acquisition Proposal, or an Acquisition Proposal shall have
otherwise become publicly known, and in each case such
Acquisition Proposal shall have not been withdrawn prior to the
date of the Stockholders Meeting, then, if within one year after
such termination, the Company shall have made a communication to
its stockholders contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act (or any similar communication
to stockholders in connection with the making or amendment of a
tender offer or exchange offer (other than any communication in
which the Company rejects such tender or exchange offer)), with
regard to, entered into a definitive agreement with respect to,
or consummated, any transaction that would qualify as an
Acquisition Proposal under this Agreement, or any transaction of
the type referred to in the definition of Acquisition Proposal
shall be consummated, then, in any such event, the Company shall
pay to Parent an amount equal to the Company Termination Fee,
such payment to be made upon the earliest of the date of such
communication or of the entering into of such an agreement
providing for, or consummating, such a transaction or the date
on which such a transaction is consummated; or
(iv) by either Parent or the Company pursuant to Section
8.01(b)(i) if the Company Stockholders Meeting had not
been held or was held without taking a vote on the Stockholder
Approval and at any time after the date of this Agreement an
Acquisition Proposal shall have been made directly to the
Companys stockholders or any Person shall have publicly
announced an intention to make an Acquisition Proposal, or an
Acquisition Proposal shall have otherwise become publicly known,
and in each case such Acquisition Proposal shall have not been
withdrawn prior to the date of the Stockholders Meeting (if
held) or the date specified in Section 8.01(b)(i)
(if the Stockholders Meeting was not held), then, if within one
year after such termination, the Company shall have made a
communication to its stockholders contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act (or any similar communication
to stockholders in connection with the making or amendment of a
tender offer or exchange offer (other than any communication in
which the Company rejects such tender or exchange offer)), with
regard to, entered into a definitive agreement with respect to,
or consummated, any transaction that would qualify as an
Acquisition Proposal under this Agreement, or any transaction of
the type referred to in the definition of Acquisition Proposal
shall be consummated, then, in any such event, the Company shall
pay to Parent an amount equal to the Company Termination Fee,
such payment to be made upon the earliest of the date of such
communication or of the entering into of such an agreement
providing for, or consummating, such a transaction or the date
on which such a transaction is consummated.
(c) Payment of Company Termination
Fee. The Company Termination Fee shall be paid by
the Company as directed by Parent in writing in immediately
available funds (i) concurrently with and as a condition to
the effectiveness of a termination of this Agreement by the
Company pursuant to Section 8.01(d)(ii) and
(ii) within two (2) Business Days after the date of
the event giving rise to the obligation to make such payment in
all other circumstances.
(d) Company Termination Fee. For purposes
of this Agreement, Company Termination Fee
means an amount equal to 3.00% of the Merger Consideration.
(e) Parent Termination Fee; Reimbursement of Platinum
Fee. Parent agrees that, if the Company shall
terminate this Agreement (i) pursuant to
Section 8.01(b)(i) and, at the time of such
termination, the conditions set forth in
Section 7.01 and Sections 7.02(a) and
(b) have been satisfied, or (ii) pursuant to
Section 8.01(d)(i), then in either such case Parent
shall pay to the Company (x) a fee of 3.00% of the Merger
Consideration (the Parent Termination Fee)
and (y) an amount equal to the Platinum Fee paid by the
Company in immediately available funds no later than two
(2) Business Days after written notice from the Company of
such termination.
32
(f) Agreements Regarding Termination
Fees. Each of the Company, Parent and Merger Co
acknowledges that the agreements contained in this
Section 8.03 are an integral part of the
transactions contemplated by this Agreement. If the Company
shall fail to pay the Company Termination Fee when due, or
Parent shall fail to pay the Parent Termination Fee when due,
the Company or Parent, as the case may be, shall reimburse the
other party for all reasonable costs and expenses actually
incurred or accrued by such other party (including reasonable
fees and expenses of counsel) in connection with the collection
under and enforcement of this
Section 8.03. Notwithstanding anything to
the contrary in this Agreement, the Companys right to
receive payment of the Parent Termination Fee and an amount
equal to the Platinum Fee paid by the Company pursuant to and on
the terms and conditions set forth in this
Section 8.03 shall be the exclusive remedy of the
Company and the Subsidiaries against Parent, Merger Co or any of
their respective stockholders, partners, members, directors,
officers or agents, or any other of their respective
Representatives, for the loss suffered as a result of (and no
decree of specific performance or any other equitable remedy
shall be available to the Company or any Subsidiary in respect
of) a breach of any of the representations and warranties, or
covenants and agreements, of Parent or Merger Co under this
Agreement, the termination of this Agreement, or the failure of
the Merger to be consummated, and upon payment of the Parent
Termination Fee and an amount equal to the Platinum Fee paid by
the Company in accordance with this Section 8.03,
none of Parent, Merger Co or the Company, or any of their
respective stockholders, partners, members, directors, officers
or agents, or any other of their respective Representatives, as
the case may be, shall have any further liability or obligation
relating to or arising out of this Agreement or the transactions
contemplated by this Agreement (except that Parent also shall be
obligated with respect to the first sentence of this
Section 8.03(f) and the provisions of
Section 6.04(b), it being understood that no other
person shall have any liability or obligation under or with
respect to such provisions).
Section 8.04. Amendment. This
Agreement may be amended at any time prior to the Effective Time
to the extent permitted by law and the applicable rules and
regulations of Nasdaq. Any amendment may be effected only by an
instrument in writing signed by the Company, Parent and Merger
Co.
Section 8.05. Waiver. At
any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any
inaccuracy in the representations and warranties of any other
party contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any agreement of any
other party or any condition to its own obligations contained
herein. Any such extension or waiver shall be valid if set forth
in an instrument in writing signed by the party or parties to be
bound thereby. The failure or delay of any party to assert any
of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. No
Survival of Representations, Warranties and
Agreements. The representations and warranties in
this Agreement and in any certificate delivered pursuant hereto
shall terminate at the Effective Time. This
Section 9.01 shall not limit any covenant or
agreement of the parties that by its terms contemplates
performance in whole or in part at any time after the Effective
Time.
Section 9.02. Notices. All
notices, requests, claims, demands and other communications
hereunder shall be in writing and, subject to the requirements
of the following sentence with respect to certain notices, shall
be deemed given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the
date of dispatch if delivered by a nationally recognized
next-day
courier service, (c) on the date of the next Business Day
following the date indicated on the return receipt if delivered
by registered or certified mail (postage prepaid, return receipt
requested) or (d) if sent by facsimile transmission, when
receipt is confirmed by the intended recipient. All notices
under Section 6.05 or Article VIII shall
be delivered personally or by courier and facsimile transmission
to the respective parties at the addresses provided in
accordance with this Section 9.02. All
other notices hereunder
33
may be delivered to the respective parties at the following
addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this
Section 9.02):
if to Parent or Merger Co:
c/o Luther
King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, Texas 76102
Facsimile No.:
(817) 332-4630
Attention: Jacob D. Smith, Esq.
with a copy to:
Kaye Scholer LLP
425 Park Avenue
New York, New York
10022-3653
Facsimile No.:
(212) 836-8211
Attention: Joel I. Greenberg, Esq.
if to the Company:
Industrial Distribution Group, Inc.
950 East Paces Ferry Road
Suite 1575
Atlanta, Georgia 30326
Facsimile No.:
(404) 949-2040
Attention: Jack P. Healey
with a copy to:
Kilpatrick Stockton LLP
1001 West Fourth Street
Winston-Salem, North Carolina
27101-2400
Facsimile No.:
(336) 734-2665
Attention: W. Randy Eaddy
Section 9.03. Certain
Definitions.
(a) Definitions. For purposes of this
Agreement:
Affiliate of a specified Person means a
person who, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
Business Day means any day on which the
principal offices of the SEC in Washington, D.C. are open
to accept filings, or, in the case of determining a date when
any payment is due, any day on which banks are not required or
authorized to close in the City of New York.
control (including the terms
controlled by and under common
control with) means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, as trustee
or executor, by contract or credit arrangement or otherwise.
knowledge of the Company or
Companys knowledge means the actual
knowledge, after reasonable inquiry, of an executive officer of
the Company.
Law means any ordinance, regulation or
statute of any Governmental Entity.
Person means an individual, corporation,
partnership, limited partnership, limited liability company,
syndicate, person (including a Person as defined in
Section 13(d)(3) of the Exchange Act), trust, trustee or
executor, association or entity or government, political
subdivision, agency or instrumentality of a government.
34
subsidiary or subsidiaries
of the Company, the Surviving Corporation, Parent, Merger Co or
any other Person means an affiliate controlled by such Person,
directly or indirectly, through one or more intermediaries, and,
without limiting the foregoing, includes any entity in respect
of which such Person, directly or indirectly, beneficially owns
50% or more of the voting securities or equity.
(b) Other Defined Terms. The following
terms have the meaning set forth in the Sections set forth below:
|
|
|
Defined Term
|
|
Section
|
|
Acquisition Proposal
|
|
6.05(e)
|
Action
|
|
3.09
|
Affiliate Transactions
|
|
3.20
|
Agreement
|
|
Preamble
|
Certificate of Merger
|
|
1.03
|
Certificates
|
|
2.04(b)
|
Change in Board Recommendation
|
|
6.05(c)
|
Change in Control Agreement
|
|
3.10(c)
|
Closing
|
|
1.02
|
Closing Date
|
|
1.02
|
Code
|
|
3.10(b)
|
Company
|
|
Preamble
|
Company Approvals
|
|
3.05(b)
|
Company Board
|
|
Recitals
|
Company Board Recommendation
|
|
3.04(b)
|
Company Common Stock
|
|
2.01(a)
|
Company Disclosure Schedule
|
|
Article III
|
Company Permits
|
|
3.06(a)
|
Company Preferred Stock
|
|
3.03(a)
|
Company Rights Agreement
|
|
3.03(b)
|
Company Stock Option
|
|
2.02(a)
|
Company Stock Option Plans
|
|
2.02(a)
|
Company Stockholders Meeting
|
|
6.03
|
Company Termination Fee
|
|
8.03(d)
|
Confidentiality Agreement
|
|
6.04(b)
|
Contracts
|
|
3.05(a)
|
Customers
|
|
3.21(a)
|
DGCL
|
|
1.01
|
Dissenting Shares
|
|
2.05(a)
|
Effective Time
|
|
1.03
|
Employee
|
|
6.07(a)
|
Environmental Laws
|
|
3.15(c)(i)
|
Environmental Permits
|
|
3.15(c)(ii)
|
ERISA
|
|
3.10(a)
|
ERISA Affiliate
|
|
3.10(b)
|
Exchange Act
|
|
3.05(b)
|
Exchange Fund
|
|
2.04(a)
|
Expenses
|
|
8.03(a)
|
FPS Customers
|
|
3.16(b)(ix)
|
35
|
|
|
Defined Term
|
|
Section
|
|
GAAP
|
|
3.07(b)
|
Governmental Entity
|
|
3.05(b)
|
Hazardous Substances
|
|
3.15(c)(iii)
|
HSR Act
|
|
3.05(b)
|
Indemnified Party
|
|
6.06(b)
|
Independent Committee
|
|
3.04(a)
|
Independent Committee Recommendation
|
|
3.04(b)
|
Intellectual Property
|
|
3.13
|
In-the-Money Option
|
|
2.02(a)
|
IRS
|
|
3.10(a)
|
Leased Real Properties
|
|
3.12(b)
|
Lien
|
|
3.05(a)
|
Material Adverse Effect
|
|
3.01(c)
|
Material Contract
|
|
3.16(b)
|
Measurement Date
|
|
3.03(a)
|
Merger
|
|
Recitals
|
Merger Co
|
|
Preamble
|
Merger Consideration
|
|
2.01(a)
|
MROP Customers
|
|
3.16(b)(ix)
|
Multiemployer Plan
|
|
3.10(b)
|
Multiple Employer Plan
|
|
3.10(b)
|
Nasdaq
|
|
3.05(b)
|
Notice of Superior Proposal
|
|
6.05(b)
|
OFAC
|
|
3.06(d)
|
Other Filings
|
|
6.01
|
Other Contemplated Transactions
|
|
3.04(a)
|
Owned Real Property
|
|
3.12(a)
|
Parent
|
|
Preamble
|
Parent Approvals
|
|
4.03(b)
|
Parent Benefit Programs
|
|
6.07(a)
|
Parent Retiree Medical Programs
|
|
6.07(a)
|
Parent Termination Fee
|
|
8.03(e)
|
Parent Welfare Benefit Plans
|
|
6.07(c)
|
Paying Agent
|
|
2.02(a)
|
Per Share Merger Consideration
|
|
2.01(a)
|
Permitted Liens
|
|
3.12(a)
|
Plans
|
|
3.10(a)
|
Platinum
|
|
Recitals
|
Platinum Fee
|
|
3.25
|
Platinum Merger Agreement
|
|
Recitals
|
Proxy Statement
|
|
6.01
|
Real Property Lease
|
|
3.12(b)
|
Recommendation
|
|
3.04(b)
|
Representatives
|
|
6.04(a)
|
36
|
|
|
Defined Term
|
|
Section
|
|
Restricted Shares
|
|
2.02(b)
|
Rights
|
|
3.03(b)
|
Sarbanes-Oxley Act
|
|
3.06(c)
|
SDNs
|
|
3.06(e)
|
SEC
|
|
3.07(a)
|
SEC Reports
|
|
3.07(a)
|
Securities Act
|
|
3.07(a)
|
Shares
|
|
2.01(a)
|
Solvent
|
|
4.12
|
Stockholder Approval
|
|
3.04(c)
|
Subsidiary
|
|
3.01(a)
|
Superior Proposal
|
|
8.01
|
Suppliers
|
|
3.21(b)
|
Surviving Corporation
|
|
1.01
|
Takeover Laws
|
|
3.19
|
Tax or Taxes
|
|
3.14(f)(i)
|
Tax Returns
|
|
3.14(f)(ii)
|
Termination Date
|
|
8.01
|
(c) Certain References and Interpretation of
Terms. When a reference is made in this Agreement
to an Article or Section, Schedule or Exhibit, such reference
shall be to an Article, Section, Schedule or Exhibit of this
Agreement, respectively, unless otherwise indicated. Whenever
the words include, includes or
including are used in this Agreement, they shall be
deemed to be followed by the words without
limitation. The words hereof,
herein and hereunder and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this
Agreement. The words date hereof shall refer to the
date of this Agreement. The term or is not
exclusive. The word extent in the phrase to
the extent shall mean the degree to which a subject or
thing extends, and such phrase shall not mean simply
if. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms. References to the Agreement include the
Company Disclosure Schedule. References to a Person are also to
its permitted successors and assigns. Whenever the context may
require, any pronoun includes the corresponding masculine,
feminine and neuter forms.
Section 9.04. Severability. If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect, so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner
in order that the transactions contemplated hereby may be
consummated as originally contemplated to the fullest extent
possible.
Section 9.05. Disclaimer
of Other Representations and Warranties; Company Disclosure
Schedules.
(a) Parent, Merger Co and the Company each acknowledges and
agrees that, except for the representations and warranties
expressly set forth in this Agreement, (i) no party makes,
and has not made, any representations or warranties relating to
itself or its businesses or otherwise in connection with the
Merger, (ii) no Person has been authorized by any party to
make any representation or warranty relating to itself or its
businesses or otherwise in connection with the Merger and, if
made, such representation or warranty must not be relied upon as
having been authorized by such party, and (iii) any
estimates, projections, predictions, data, financial
information, memoranda, presentations or any other materials or
information provided or addressed to any party or any of its
Representatives are not and shall not be deemed to be or to
include representations or warranties unless any such materials
or information is the subject of a representation or warranty
expressly set forth in this Agreement.
37
(b) The representations and warranties contained in
Article III are qualified by reference to the
Company Disclosure Schedule. Each of Parent and Merger Co
acknowledges that (i) the Company Disclosure Schedule may
include items or information that the Company is not required to
disclose under this Agreement; (ii) disclosure of such
items or information shall not affect, directly or indirectly,
the scope of the disclosure obligation of the Company under this
Agreement; and (iii) inclusion of information in the
Company Disclosure Schedule shall not be construed as an
admission that such information is material to the Company and
the Subsidiaries. Similarly, in such matters where a
representation or warranty is given or other information is
provided, the disclosure of any matter in the Company Disclosure
Schedule shall not imply that any other undisclosed matter
having a greater value or other significance is material. Each
of Parent and Merger Co further acknowledges that
(iv) headings have been inserted on Sections of the Company
Disclosure Schedule for the convenience of reference only and
shall not affect the construction or interpretation of any of
the provisions of this Agreement or the Company Disclosure
Schedule, (v) cross references that may be contained in
Sections of the Company Disclosure Schedule to other Sections of
the Company Disclosure Schedule are not all-inclusive of all
disclosures contained on such referenced Sections of the Company
Disclosure Schedule and (vi) information contained in
various Sections of the Company Disclosure Schedule may be
applicable to other Sections of the Company Disclosure Schedule;
accordingly, every matter, document or item referred to, set
forth or described in one Section of the Company Disclosure
Schedule shall be deemed to be disclosed under each and every
part, category, heading or subheading of such Section and all
other Sections of the Disclosure Schedule and shall be deemed to
qualify the representations and warranties of the Company in
this Agreement, to the extent such matter, document or item may
apply if (A) a cross-reference to such other Section of the
Company Disclosure Schedule is made or (B) the relevance of
such disclosure to such other Section of the Company Disclosure
Schedule is readily apparent.
Section 9.06. Entire
Agreement; Assignment. This Agreement and the
Confidentiality Agreement constitute the entire agreement among
the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof. This Agreement
shall not be assigned (whether pursuant to a merger, by
operation of law or otherwise); provided, however,
that this Agreement may be assigned by Parent upon delivery of
written notice thereof to the Company, without abrogating
Parents obligations hereunder, to any Affiliate of Parent.
Section 9.07. Parties
in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement,
other than as expressly contemplated by Section 6.06
(which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
Section 9.08. Governing
Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that
State. All Actions arising out of or relating to this Agreement
shall be heard and determined exclusively in the Chancery Court
of the State of Delaware or any federal court sitting in
Delaware, unless the parties shall agree in writing to a court
in another jurisdiction. The parties hereby (a) submit to
such exclusive jurisdiction of the Chancery Court of the State
of Delaware or any federal court sitting in Delaware, for the
purpose of any Action arising out of or relating to this
Agreement brought by any party hereto, and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution,
that the Action is brought in an inconvenient forum, that the
venue of the Action is improper, or that this Agreement or the
Merger may not be enforced in or by any of the above-named
courts.
Section 9.09. Waiver
of Jury Trial. Each of the parties hereby waives
to the fullest extent permitted by applicable law any right it
may have to a trial by jury with respect to any litigation
directly or indirectly arising out of, under or in connection
with this Agreement or the Merger. Each of the parties
acknowledges that it and the other parties have been induced to
enter into this Agreement and the Merger, as applicable, by,
among other things, the mutual waivers and certifications in
this Section 9.09.
Section 9.10. Headings. The
descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 9.11. Counterparts. This
Agreement may be executed and delivered (including by electronic
or facsimile transmission) in one or more counterparts, and by
the different parties in separate counterparts, each of which
when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
38
IN WITNESS WHEREOF, the Company, Parent and Merger Co have
caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
Company
INDUSTRIAL DISTRIBUTION GROUP, INC.
|
|
|
|
By:
|
/s/ Charles
A. Lingenfelter
|
Charles A. Lingenfelter
President and Chief Executive Officer
Parent
EIGER HOLDCO, LLC
J. Bryan King
President
Merger Co
EIGER MERGER CORPORATION
J. Bryan King
President
39
EXHIBIT A
FORM OF
CERTIFICATE OF MERGER
CERTIFICATE
OF MERGER
OF
EIGER
MERGER CORPORATION
(a Delaware corporation)
INTO
INDUSTRIAL
DISTRIBUTION GROUP, INC.
(a Delaware corporation)
Pursuant to Title 8, Section 251(c) of the Delaware
General Corporation Law, the undersigned corporation executed
the following Certificate of Merger:
1. The name of the surviving corporation is Industrial
Distribution Group, Inc., a Delaware corporation (the
Surviving Entity).
2. The name of the corporation being merged with and into
the Surviving Entity is Eiger Merger Corporation, a Delaware
corporation (the Merging Entity).
3. An Agreement and Plan of Merger has been approved,
adopted, certified, executed and acknowledged by the Surviving
Entity and the Merging Entity.
4. The Certificate of Incorporation of the Merging Entity
shall be the Certificate of Incorporation of the Surviving
Entity.
5. The merger is to become effective at 4:01 p.m.
eastern time on the date of filing hereof, or if later, at the
time of filing hereof, with the Delaware Secretary of State.
6. The Agreement and Plan of Merger is on file at
950 E. Paces Ferry Road, Suite 1575, Atlanta,
Georgia 30326, the place of business of the Surviving Entity.
7. A copy of the Agreement and Plan of Merger will be
furnished by the Surviving Entity on request, without cost, to
any stockholder of the Surviving Entity and the Merging Entity.
IN WITNESS WHEREOF, the Surviving Entity has caused this
Certificate of Merger to be signed by an authorized officer,
this day
of ,
2008.
INDUSTRIAL DISTRIBUTION GROUP, INC.
Name:
|
|
Investment
Banking |
ANNEX B |
May 1, 2008
Board of Directors
Industrial Distribution Group, Inc.
950 East Paces Ferry Road
Suite 1575
Atlanta, GA 30326
Members of the Board of Directors:
We understand that Industrial Distribution Group, Inc., a
Delaware corporation (the Company), has entered into
an agreement whereby Eiger Holdco, LLC, a Delaware limited
liability company (Parent), Eiger Merger
Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent (Merger Co) (collectively,
including Parent, the Luther King Companies), will
effect a merger involving the Company. Pursuant to the terms of
such Agreement and Plan of Merger dated as of April 25,
2008 (the Agreement), among Parent, the Company and
Merger Co, Merger Co will merge with and into the Company and
the Company will become a wholly owned subsidiary of Parent (the
Merger). In the Merger, each of the issued and
outstanding shares of common stock of the Company, par value
$0.01 per share (Company Common Stock), (other than
shares of Company Common Stock already owned by Parent, Merger
Co, or any other direct or indirect wholly owned subsidiary of
Parent or the Company immediately prior to the Effective Time
(as defined in the Agreement) (collectively, the Excluded
Shares)) will be converted into the right to receive cash
of $12.10 (the Consideration). The terms and
conditions of the Merger are more fully set forth in the
Agreement.
In connection with your consideration of the proposed Merger,
you have requested our opinion as to the fairness, from a
financial point of view, to the holders of Company Common Stock
(other than the Excluded Shares) of the Consideration to be
received by such holders in the Merger. Pursuant to your
request, we have only considered the fairness of the
Consideration payable to such holders of Company Common Stock in
the Merger and we express no opinion about the fairness of the
amount or nature of the compensation to any of the
Companys officers, directors or employees, or class of
such persons, relative to the Consideration to be received by
the holders of Company Common Stock.
As part of our investment banking business, we are engaged in
the evaluation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for
estate, corporate and other purposes.
Robert W. Baird & Co.
401 East Jackson Street,
Suite 2900
Tampa FL 33602
Direct 813
273-8200
Toll Free 888
238-2672
Fax 813
273-8279
www.rwbaird.com
B-1
In conducting our investigation and analyses and in arriving at
our opinion herein, we have reviewed such information and have
taken into account such financial and economic factors,
investment banking procedures and considerations as we have
deemed relevant under the circumstances. In that connection, we
have, among other things: (i) reviewed certain audited
consolidated financial statements of the Company and internal
information, primarily financial in nature, including financial
forecasts that were provided to us by the Company and not
publicly available (the Forecasts), concerning the
business and operations of the Company furnished to us for
purposes of our analysis; (ii) reviewed publicly available
information including, but not limited to, the Companys
recent filings with the Securities and Exchange Commission;
(iii) reviewed certain pro forma adjustments related to the
Company, as well as certain normalizing adjustments related to
non-recurring items, that were provided to us by the Company;
(iv) reviewed current and historical market prices of
Company Common Stock; (v) reviewed the Agreement in the
form presented to the Board of Directors; (vi) reviewed
publicly available financial and stock market data with respect
to certain other companies we believe to be generally relevant;
(vii) compared the financial and operational results of the
Company with those of certain publicly traded companies we
deemed relevant and considered the market trading multiples of
such companies; (viii) compared the transaction multiples
implied by the Consideration with the corresponding acquisition
transaction multiples in certain business combinations we deemed
relevant; and (ix) considered the present values of the
forecasted cash flows of the Company. We have held discussions
with members of the Companys senior management concerning
the Companys historical and current financial condition
and operating results, as well as the future prospects of the
Company. As a part of our engagement, we were requested to and
did solicit third party indications of interest in acquiring all
or any part of the Company and held discussions with certain of
these parties prior to the date hereof. We have also considered
such other information, financial studies, analyses and
investigations and financial, economic and market criteria which
we deemed relevant for the preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of all of the financial and other
information that was publicly available or provided to us by or
on behalf of the Company. We have not independently verified any
information supplied to us by the Company or the Luther King
Companies that formed a substantial basis for our opinion. We
have not been engaged to independently verify, and have not
assumed any responsibility to verify, any such information, and
we 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 provided to us. We have assumed that:
(i) all material assets and liabilities (contingent or
otherwise, known or unknown) of the Company are as set forth in
the Companys financial statements; (ii) the financial
statements of the Company provided to us present fairly the
results of operations, cash flows and financial condition of the
Company for the periods indicated and were prepared in
conformity with U.S. generally accepted accounting
principles consistently applied; (iii) the Forecasts were
reasonably prepared on bases reflecting the best available
estimates and good faith judgments of the Companys senior
management as to the future performance of the Company and we
have relied upon such Forecasts in the preparation of this
opinion; (iv) the Merger will be consummated in accordance
with the terms and conditions of the Agreement without any
amendment thereto and without waiver by any party of any of the
conditions to their respective obligations thereunder;
(v) in all respects material to our analysis, the
representations and warranties contained in the Agreement are
true and correct and that each party will perform all of the
covenants and agreements required to be performed by it under
such Agreement; and (vi) all material corporate,
governmental, regulatory or other consents and approvals
required to consummate the Merger have been or will be obtained.
We have relied as to all legal matters regarding the Merger on
the advice of legal counsel to the Company. In conducting our
review, we have not undertaken nor obtained an independent
evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of the Company nor have we made a
physical inspection of the properties or facilities of the
Company. We also have not considered any strategic, operating or
cost benefits that might result from the Merger or any expenses
relating to the Merger. In each case, we have made the
assumptions above with your consent.
B-2
Our opinion necessarily is based upon economic, monetary and
market conditions as they exist and can be evaluated on the date
hereof, and our opinion does not predict or take into account
any changes which may occur, or information which may become
available, after the date hereof.
Our opinion has been prepared at the request and for the
information of the Board of Directors, and may not be relied
upon, used for any other purpose or disclosed to any other party
without our prior written consent; provided, however, that this
letter may be reproduced in full in the Proxy Statement to be
provided to the Companys stockholders in connection with
the Merger. Any reference to us or our opinion in the Proxy
Statement (or any other publicly available document), however,
shall be subject to our prior review and approval. This opinion
does not address the relative merits of: (i) the Merger,
the Agreement or any other agreements or other matters provided
for or contemplated by the Agreement; (ii) any other
transactions that may be or might have been available as an
alternative to the Merger; or (iii) the Merger compared to
any other potential alternative transactions or business
strategies considered by the Companys Board of Directors
and, accordingly, we have relied upon our discussions with the
senior management of the Company with respect to the
availability and consequences of any alternatives to the Merger.
At your direction, we have not been asked to, and we do not,
offer any opinion as to the terms, other than the Consideration
to the extent expressly specified herein, of the Agreement or
the form of the Merger. This opinion does not constitute a
recommendation to any stockholder of the Company as to how any
such stockholder should vote with respect to the Merger.
We have acted as financial advisor to the Strategic Alternatives
Review Committee of the Board of Directors of the Company, and
as financial advisor to the Board of Directors of the Company,
in connection with the Merger and will receive a fee (a
Transaction Fee) for our services, a significant
portion of which is contingent upon the consummation of the
Merger. We will also receive a fee for rendering this opinion,
which fee is not contingent upon the consummation of the Merger
but is fully creditable against the Transaction Fee (if paid).
In addition, the Company has agreed to reimburse our expenses
and to indemnify us against certain liabilities that may arise
out of our engagement. We will not receive any other significant
payment or compensation contingent upon the successful
completion of the Merger.
We are a full service securities firm. As such, in the ordinary
course of our business, we may from time to time trade the
securities of the Company
and/or
affiliates of the Luther King Companies for our own account or
the accounts of our customers and, accordingly, may at any time
hold long or short positions or effect transactions in such
securities. Our firm may also prepare equity analyst research
reports from time to time regarding affiliates of the Luther
King Companies.
Our opinion was approved by a fairness committee, a majority of
the members of which were not involved in providing financial
advisory services on our behalf to the Company in connection
with the Merger.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the
opinion that, as of the date hereof, the Consideration to be
received by the holders of Company Common Stock is fair, from a
financial point of view, to the holders of Company Common Stock.
Very truly yours,
|
|
|
|
|
/s/ ROBERT
W. BAIRD & CO. INCORPORATED
|
ROBERT W. BAIRD & CO. INCORPORATED
B-3
ANNEX C
Section 262
of
the Delaware General Corporation Law
§
262. Appraisal rights.
(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 § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders 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
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 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 (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
§ 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
§§ 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 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 § 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.
(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
C-1
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 stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders 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 stockholders
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
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 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. 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 holders 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 holders 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 holders 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.
(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) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing 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 who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to
C-2
withdraw such stockholders 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) of this
section 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 stockholders
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) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(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 the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with 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. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. 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, proceed to trial upon the appraisal
prior to the final determination of the stockholders 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
stockholders 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.
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 Courts decree may be enforced as 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.
C-3
(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 attorneys 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 stockholders 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;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(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. (8 Del. C. 1953,
§ 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,
§ 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70 Del.
Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16.)
C-4
INDUSTRIAL DISTRIBUTION GROUP, INC.
950 EAST PACES FERRY ROAD
SUITE 1575
ATLANTA, GEORGIA 30326
Proxy for the Special Meeting of Stockholders to be Held June [18], 2008,
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having received Notice of the Special Meeting of the Stockholders and
revoking all prior proxies, hereby appoints CHARLES A. LINGENFELTER and JACK P. HEALEY, and each of
them, attorneys or attorney of the undersigned, with full power of substitution in each of them,
for and in the name of the undersigned, to attend the Special Meeting of Stockholders of Industrial
Distribution Group, Inc., to be held at 1100 Peachtree Street, 28th Floor, South Conference Room,
Atlanta, Georgia 30309, on June [18], 2008 at 11:00 a.m. Eastern Time, and any adjournment or
postponement thereof, and to vote and act upon the following matters in respect to all shares of
common stock of the Company that the undersigned will be entitled to vote or act upon, with all
powers the undersigned would possess, if personally present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS SET FORTH
BELOW, AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED BELOW, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH BELOW.
Please complete, sign, date and return this proxy promptly in the enclosed reply envelope,
addressed to MacKenzie Partners, Inc., 105 Madison Avenue, New York, New York, 10016. Do not send
your stock certificates with this proxy.
x Please mark your votes as in this example.
1. Adoption of the Agreement and Plan of Merger, dated as of April 25, 2008, among Eiger
Holdco, LLC (Eiger), Eiger Merger Corporation (Merger Sub), a wholly-owned subsidiary of Eiger,
and Industrial Distribution Group, Inc. (the Merger Agreement):
o FOR adoption of the Merger Agreement
o AGAINST adoption of the Merger Agreement
o ABSTAIN with respect to adoption of the Merger Agreement
2. Adjournment or postponement the Special Meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the
Merger Agreement (Adjournment or Postponement):
o FOR Adjournment or Postponement
o AGAINST Adjournment or Postponement
o ABSTAIN with respect to Adjournment or Postponement
3. In accordance with their best judgment with respect to any other matters that may properly
come before the meeting.
At this time, the Board of Directors does not know of any other matters to be presented at the Special Meeting.
|
|
|
|
|
|
|
|
|
|
|
Stockholder:
|
|
____________________
|
|
Dated:
|
|
__________ |
|
|
|
|
|
|
|
|
|
|
|
Signature(s):
|
|
____________________
|
|
Dated:
|
|
__________ |
PLEASE BE SURE TO DATE THE PROXY.
Please sign exactly as name appears on this Proxy. Joint
owners each should sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give the full title. If signing in the name of a
corporation or partnership, please sign full corporate
or partnership name and indicate title of authorized
signatory.