As filed with the Securities and Exchange Commission on June 6, 1995
Registration No. 33-
______________________________________________________________________________ 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION Washington,ON APRIL 19, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________---------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act ofUNDER
THE SECURITIES ACT OF 1933
---------------------
ILLINOIS TOOL WORKS INC.
(Exact name of registrant as specified in its charter)
_______________
Delaware 308 36-1258310
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classi----------------------
DELAWARE 3089 36-1258310
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
fication Code)
3600 West Lake Avenue
Glenview, Illinois 60025
(708)WEST LAKE AVENUE
GLENVIEW, ILLINOIS 60025-5811
(847) 724-7500
(Address, including zip code,Zip Code, and telephone number, including area code, of
registrant's principal executive offices)
________________
Stewart---------------------
STEWART S. Hudnut
Senior Vice President, General Counsel and SecretaryHUDNUT, ESQ.
ILLINOIS TOOL WORKS INC.
3600 West Lake Avenue
Glenview, Illinois 60025
(708)WEST LAKE AVENUE
GLENVIEW, ILLINOIS 60025-5811
(847) 724-7500
(Name, address, including zip code,Zip Code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale of the securities to
the public: From time to time---------------------
COPIES TO:
CHARLES J. MCCARTHY, ESQ. JOSEPH D. MASTERSON, ESQ.
JENNER & BLOCK QUARLES & BRADY
ONE IBM PLAZA 411 EAST WISCONSIN AVENUE
CHICAGO, ILLINOIS 60611 MILWAUKEE, WISCONSIN 53202
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration
Statement.registration statement and
certain other conditions under the Agreement and Plan of Merger are met or
waived.
If the securities being registered on this Formform are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. __
| |
|__|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. __
|X |
| |
--
_______________box: / /
CALCULATION OF REGISTRATION FEE
_______________________________________________________________________
| | |Proposed | |
| |Proposed |maximum |Amount |
Title
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Common Stock, without par value... 1,230,175 shares(1) $51.59(2) $63,465,823(2) $21,885(2)(3)
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(1) Estimated, based on the maximum aggregate number of each class | |maximum |aggregate |of reg- |shares of securitiesIllinois Tool
Works Inc. ("ITW") common stock issuable pursuant to be |Amountthe proposed merger
(the "Merger") of a wholly owned subsidiary of ITW with Medalist
Industries, Inc. ("Medalist") assuming (i) 4,473,362 shares of common stock
of Medalist outstanding (and shares issuable with respect to be|offering price|offering |istra- |
registered |registered |per share(1) |price(1) |tion fee|
| | | | |
Common Stock, | 10,000,000 | $49.5625 |$495,625,000|$170,905|
without par value | | | | |
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(1) The amounts are estimates madeoutstanding
options and convertible debentures) immediately prior to the Merger, and
(ii) the Merger conversion ratio is one Medalist common share for 0.275 of
a share of ITW common stock, the applicable fraction of a share of ITW
common stock for the Merger conversion ratio if the applicable average
closing price of ITW common stock is $52.70, the lowest average closing
price in the range set forth in the second paragraph of the first page of
the Proxy Statement/Prospectus forming a part of this Registration
Statement.
(2) Estimated solely for the purpose of determiningcalculating the registration fee and
computed pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act
of 1933 based on $14 3/16 per Medalist share, the average of the high and
low prices of Medalist Common Stock (the securities to be received by ITW)
on the Nasdaq Stock Market on April 17, 1996.
(3) Pursuant to Rule 457(b) of the Securities Act of 1933, the registration fee
is offset by the $12,972 filing fee previously paid in connection with the
filing by Medalist of the preliminary proxy materials on February 1, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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2
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K AND RULE 404(A) SHOWING
LOCATION IN PROXY STATEMENT/PROSPECTUS OF INFORMATION REQUIRED BY FORM S-4
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page; Outside Front Cover Page of
Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information
(a)........................................ Summary -- The Companies
(b)........................................ Summary -- The Companies
(c)........................................ Summary -- The Merger Agreement
(d)........................................ Summary -- Selected Historical and Pro
Forma Financial Data
(e)........................................ Summary -- Selected Historical and Pro
Forma Financial Data
(f)........................................ Summary -- Selected Historical and Pro
Forma Financial Data
(g)........................................ Summary -- Market Price Data
(h)........................................ Summary -- Shareholder and Regulatory
Approvals
(i)........................................ Summary -- Shareholder and Regulatory
Approvals
(j)........................................ Summary -- Dissenter's Rights
(k)........................................ Summary -- Certain Federal Income Tax
Consequences
4. Terms of the Transaction
(a)(1)..................................... The Merger Agreement
(2)........................................ Special Factors -- Reasons for the Merger,
Recommendation of the Company's Board of
Directors; -- Opinion of Robert W. Baird
& Co. Incorporated
(3)........................................ *
(4)........................................ Comparison of Shareholder Rights;
Description of ITW Capital Stock
(5)........................................ The Merger Agreement -- Accounting
Treatment
(6)........................................ The Merger Agreement -- Certain Federal
Income Tax Consequences
(b)........................................ Special Factors -- Opinion of Robert W.
Baird & Co. Incorporated
3
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
(c)........................................ The Merger Agreement -- General
5. Pro Forma Financial Information............ *
But see, Unaudited Pro Forma Condensed
Financial Information
6. Material Contacts with the Company Being
Acquired................................. Special Factors -- Background; The Merger
Agreement
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel..... Legal Opinions
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants
(a)........................................ Incorporation of Certain Documents by
Reference
(b)........................................ *
11. Incorporation of Certain Information by
Reference
(a)........................................ Incorporation of Certain Documents by
Reference
(b)........................................ Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies................................ *
16. Information with Respect to S-2 or S-3
Companies................................ Special Factors -- Background; Summary --
Market Price Data; -- Dividend Policy; --
Selected Historical and Pro Forma
Financial Data; Certain Information
Regarding Medalist; Medalist Financial
Information; Incorporation of Certain
Documents by Reference
17. Information with Respect to Companies Other
Than S-2 or S-3.......................... *
D. VOTING AND MANAGEMENT INFORMATION
4
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
18. Information if Proxies, Consents or
Authorizations are to be Solicited
(a)(1)..................................... Notice of Special Meeting; Summary -- Time,
Place and Date of Special Meeting
(2)........................................ Notice of Special Meeting;
Summary -- Purpose of Special Meeting, Vote
Required and Quorum
(3)........................................ Summary -- Dissenter's Rights; Rights of
Dissenting Shareholders
(4)........................................ Solicitation of Proxies
(5)(i)..................................... Special Factors -- Interests of Certain
Persons in the Merger
(ii)....................................... Summary -- Record Date, Voting Rights;
Certain Information Regarding Medalist --
Stock Ownership of Management and
Principal Shareholders
(6)........................................ Summary -- Purpose of Special Meeting, Vote
Required and Quorum
(7)........................................ Incorporation of Certain Documents by
Reference
(b)........................................ Incorporation of Certain Documents by
Reference
19. Information if Proxies, Consents or
Authorizations are not to be Solicited in
an Exchange Offer........................ *
- ---------------
* Omitted, or Item is inapplicable or answer is negative.
5
MEDALIST INDUSTRIES, INC.
10850 WEST PARK PLACE, SUITE 150
MILWAUKEE, WISCONSIN 53224
(414) 359-3000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1996
You are invited to attend a Special Meeting of Shareholders (the "Special
Meeting") of Medalist Industries, Inc., a Wisconsin corporation ("Medalist" or
the "Company"), to be held on Wednesday, May 29, 1996 at 10:00 a.m. (Central
Standard Time) at the Milwaukee Hilton, 509 West Wisconsin Avenue, Milwaukee,
Wisconsin, 53203.
The purpose of the Special Meeting is to consider and vote upon:
(1) A proposal to approve and adopt the Agreement and Plan of Merger
dated as of January 8, 1996 (the "Merger Agreement") among Medalist,
Illinois Tool Works Inc., a Delaware corporation ("ITW") and ITW ACQ. Inc.,
a newly formed Wisconsin corporation ("Newco") which is a wholly owned
subsidiary of ITW. Pursuant to the Merger Agreement, (i) Newco will be
merged with and into Medalist (the "Merger"), (ii) Medalist will continue
as the surviving corporation and a wholly owned subsidiary of ITW, and the
separate existence of Newco will cease, and (iii) each of the shares of
Common Stock of the Company (the "Shares") outstanding at the effective
time of the Merger (other than Shares held in the Company's treasury or by
ITW, Newco or another direct or indirect wholly owned subsidiary of ITW)
will be valued at $14.50 per share and will be converted into the
equivalent value of ITW Common Stock based on the average closing price of
ITW Common Stock as reported on the New York Stock Exchange Composite
Transactions listing for the ten trading days ending on the second trading
day before the Merger, all as more fully described in the accompanying
Proxy Statement/Prospectus.
(2) Such other matters relating to the foregoing as may be properly
brought before the meeting or any adjournment or postponement thereof.
The Company's Board of Directors has approved the Merger as being in the
best interests of the Company and its shareholders and unanimously recommends
that you vote FOR adoption of the Merger Agreement. All properly executed
proxies received prior to the date and time of the Special Meeting will be voted
in accordance with the directions thereon.
The Board of Directors has fixed the close of business on April 11, 1996 as
the record date for determining the shareholders entitled to notice of and to
vote at the Special Meeting and any adjournment thereof. Only shareholders of
record at the close of business on that date will be entitled to notice and to
vote.
A proxy, which is solicited on behalf of the Board of Directors, is
enclosed, together with a return envelope which requires no postage if mailed in
the United States. The affirmative vote of the holders of at least two-thirds of
the outstanding Shares is required to approve the Merger Agreement. It is
important that your Shares be represented at the Special Meeting. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO INDICATE YOUR VOTING
DIRECTIONS, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED POSTPAID
ENVELOPE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME
BEFORE THE VOTING BY GIVING WRITTEN NOTICE OF REVOCATION TO THE CORPORATE
SECRETARY, BY SUBMITTING A LATER DATED PROXY TO THE CORPORATE SECRETARY, OR BY
GIVING ORAL NOTICE TO THE PRESIDING OFFICER DURING THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
William C. O'Loughlin,
Secretary
Milwaukee, Wisconsin
April 23, 1996
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
6
PROSPECTUS
ILLINOIS TOOL WORKS INC.
PROXY STATEMENT
MEDALIST INDUSTRIES, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 29, 1996
---------------------
This Proxy Statement/Prospectus is being furnished to the shareholders of
Medalist Industries, Inc., a Wisconsin corporation ("Medalist" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of Medalist for use at the Special Meeting of Shareholders of Medalist
to be held on Wednesday, May 29, 1996, including any adjournment or postponement
thereof (the "Special Meeting"). At the Special Meeting, the Medalist
shareholders will be asked to approve and adopt an Agreement and Plan of Merger
dated as of January 8, 1996, as it may be amended from time to time (the "Merger
Agreement"), among Medalist, Illinois Tool Works Inc., a Delaware corporation
("ITW"), and ITW ACQ. Inc., a newly formed Wisconsin corporation ("Newco") which
is a wholly owned subsidiary of ITW.
The Merger Agreement provides that, subject to the approval of the Merger
Agreement at a Special Meeting of Shareholders to be held on Wednesday, May 29,
1996 by the holders of at least two-thirds of the outstanding shares of Medalist
Common Stock and subject to satisfaction of the other conditions contained in
the Merger Agreement, Newco will be merged with and into Medalist (the
"Merger"), and each outstanding share of Medalist Common Stock (the "Shares")
other than any Shares then held by ITW, Newco or another direct or indirect
wholly owned subsidiary of ITW (the "ITW Buying Group") will be valued at $14.50
per share and converted into the equivalent value of ITW Common Stock based on
the average closing price of ITW Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Transactions listing for the ten trading days ending
on the second trading day before the Merger (the "Merger Consideration"). See
"THE MERGER AGREEMENT -- The Merger." ITW and its subsidiaries currently own no
Medalist shares and do not expect to acquire any prior to the Merger. Although
the precise exchange ratio will depend upon the average closing price of ITW
Common Stock shortly before the Merger, each Medalist share would be converted
into approximately 0.220 of an ITW share if the applicable average closing price
for ITW stock is $65.875 per ITW share (the ITW closing price on April 17,
1996), and the conversion ratio would range from approximately 0.275 to
approximately 0.183 of an ITW share per Medalist share if the applicable average
closing price of ITW Common Stock varies by up to 20% at the time of the Merger
(i.e., if ITW average closing price is between approximately $52.70 and
approximately $79.05 per share). Although the Merger Agreement does not include
any limit on the range of ITW closing prices, this Proxy Statement/Prospectus
will be supplemented or updated prior to the Special Meeting (as adjourned or
postponed, if applicable), or a new Special Meeting will be called to approve
the Merger following disclosure of the appropriate range, if the actual exchange
ratio falls outside of the range described above.
This Proxy Statement/Prospectus also constitutes a Prospectus of ITW under
the Securities Act of 1933, as amended and are based on(the "Securities Act"), with respect to
the Tool Works Inc. as reported by The Wall Street
Journal as New Yorkshares of ITW Common Stock Exchange - Composite Transactions for June 1, 1995.
The Registrant hereby amends this Registration Statement on such date
or dates as mayto be necessaryissued to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)shareholders of Securities Act of 1933 or until this Registration Statement shall become
effective on such date asMedalist
(other than the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429, the Prospectus used in connection with this
Registration Statement also relates to shares registered on Form S-4
Registration Statement No. 33-22403.
ILLINOIS TOOL WORKS INC.
Cross-Reference Sheet showing the locationITW Buying Group) in the Prospectus of informa-
tion required to be included in the Prospectus pursuant to Item 501(b) of
Regulation S-K.
Item Number and Caption Location in Prospectus
----------------------- ----------------------
A. Information about the Transaction
1. Forepart of Registration State- Facing page of Form S-4; this
ment and Outside Front Cover Page cross-reference sheet; Outside
of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back "Available Information";
Cover Pages of Prospectus "Information Concerning ITW"
3. Risk Factors, Ratio of Earnings Outside Front Cover Page of
to Fixed Charges and Other Infor- Prospectus
mation
4. Terms of the Transaction Outside Front Cover Page of
Prospectus; "Securities
Covered by this Prospectus";
"Information Concerning ITW"
5. Pro Forma Financial Information *
6. Material Contacts With the *
Company Being Acquired
7. Additional Information Required *
for Reoffering by Persons and
Parties Deemed To Be Underwriters
8. Interests of Named Experts and
Counsel "Experts"; "Legal Matters"
9. Disclosure of Commission Position *
on Indemnification for Securities
Act Liabilities
B. Information about the Registrant
10. Information With Respect to S-3 "Information Concerning ITW"
Registrants "Information
Concerning ITW"
11. Incorporation of Certain "Information ConcerningMerger.
ITW -
Information by Reference Information Incorporated by
Reference"
12. Information With Respect to S-2 *
or S-3 Registrants
13. Incorporation of Certain *
Information by Reference
14. Information With Respect to *
Registrants Other Than S-2 or S-3
C. Information about the Company Being Acquired
15. Information With Respect to S-3 *
Companies
16. Information With Respect to S-2 *
17. Information With Respect to *
Companies Other Than S-2 or
S-3 Companies
D. Voting and Management Information
18. Information if Proxies, *
Consents or Authorizations
Are to Be Solicited
19. Information if Proxies, *
Consents or Authorizations
Are Not To Be Solicited in
an Exchange Offer
___________________________________
* Information in repsonse to this Item is not included in the Prospectus
since the Item is inapplicable or the answer thereto is in the negative.
Subject to completion dated June 6, 1995
PROSPECTUS
10,900,228 Shares
ILLINOIS TOOL WORKS INC.
COMMON STOCK
No Par Value
_______________________
This Prospectus relates to the offer and sale from time to
time by Illinois Tool Works Inc., a Delaware corporation
("ITW" or the "Company"), of 10,900,228 shares of its Common
Stock, no par value (the "Common Stock"), in exchange for
shares of capital stock of other companies, or in exchange for
assets used in or related to the business of such companies.
See "Securities Covered by This Prospectus."
This Prospectus also has been prepared for use, with ITW's
prior written consent, by persons who have received or will
receive shares of Common Stock in connection with acquisitions
and who wish to offer and sell such shares under circumstances
requiring or making desirable its use. See "Securities
Covered by This Prospectus."
The Common Stock is listed and traded on the New York StockNYSE and the Chicago Stock ExchangesExchange under
the symbol "ITW."ITW. On April 17, 1996 the closing sale price for ITW Common Stock on
the NYSE was $65.875 per share.
This Proxy Statement/Prospectus is first being sent on or about April 23,
1996 to shareholders of Medalist of record on April 11, 1996 (the "Record
Date"). On the Record Date 3,898,281 shares of Medalist Common Stock were
outstanding. On the Record Date for the Special Meeting, Medalist's executive
officers and directors owned 238,762 (6.1%) of the outstanding Shares, and all
of them have expressed an intention to vote for the Merger.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY MEDALIST, ITW OR NEWCO OR THEIR RESPECTIVE AFFILIATES. THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED HEREBY OR THE
SOLICITATION OF A PROXY WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER
OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION WOULD BE UNLAWFUL.
The information contained in this Proxy Statement/Prospectus concerning
Medalist has been supplied by Medalist, and the information concerning ITW and
Newco has been supplied by ITW.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________---------------------
The date of this Proxy Statement/Prospectus is June , 1995.
SIDE: [Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time ther registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.]April 23, 1996.
No individual has been authorized to give any information or to
make any representations not contained or incorporated by
reference in this Prospectus or any Prospectus Supplement. If
given or made, such information or representations must not be
relied upon as having been authorized by ITW. Neither this
Prospectus nor any Prospectus Supplement constitutes an offer to
sell or a solicitation of an offer to buy, the shares of Common
Stock offered hereby, in any jurisdiction where, or to any person
to whom, it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any Prospectus
Supplement nor any sale made hereunder shall, under any
circumstances, create any implication that there has not been any
change in the facts set forth or incorporated by reference in
this Prospectus or any Prospectus Supplement or in the affairs of
ITW since such date.7
AVAILABLE INFORMATION
Medalist and ITW isare each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith filesfile reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports,The Common Stock of
Medalist is traded in the over-the-counter market and quoted on the Nasdaq Stock
Market's National Market ("Nasdaq National Market") under the trading symbol
"MDIN." ITW Common Stock is listed on the New York Stock Exchange and on the
Chicago Stock Exchange under the symbol "ITW." Reports, proxy statements and
other information filed by Medalist and ITW can be inspected at such exchanges
and can be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional officesRegional Offices of the Commission:
14th Floor, Northwestern AtriumMidwest Regional Office, Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661; and 13th Floor, SevenNortheast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, proxy statements and other
information also can be inspected20549 at the offices of the exchanges
on which ITW's Common Stock is listed, The New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, and
the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605.prescribed rates.
ITW has filed with the Commission a registration statementRegistration Statement on Form S-4
(together with allany amendments, schedules and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of ITW Common
Stock.Stock to be issued in the Merger. This Proxy Statement/Prospectus which constitutes a part of the Registration
Statement, does not
contain all of the information set forthcontained in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement is available for inspection and copying
as set forth above. Statements madecontained in this Proxy Statement/Prospectus or
in any document incorporated by reference into this Proxy Statement/Prospectus
as to the contents of any contract agreement or other document referred to herein or
therein are not necessarily complete; with respectcomplete, and in each instance reference is made to
eachthe copy of such contract
agreement or other document filed as an exhibit or schedule to the
Registration Statement reference is made to the exhibit or schedule, as applicable, for a more complete description of the
matter involved, andsuch other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
HEREIN BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST DIRECTED IN THE CASE OF DOCUMENTS RELATING TO MEDALIST,
TO THE COMPANY, 10850 WEST PARK PLACE, SUITE 150, MILWAUKEE, WISCONSIN 53224,
ATTENTION: WILLIAM C. O'LOUGHLIN (TELEPHONE NUMBER (414) 359-3000), AND IN THE
CASE OF DOCUMENTS RELATING TO ITW, TO ITW, 3600 WEST LAKE AVENUE, GLENVIEW,
ILLINOIS 60025, ATTENTION: STEWART S. HUDNUT, SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY, TELEPHONE (847) 724-7500. IN ORDER TO ENSURE TIMELY
DELIVERY OF REQUESTED DOCUMENTS, REQUESTS SHOULD BE MADE AS EARLY AS POSSIBLE,
AND IN ANY EVENT BY MAY 22, 1996.
The following documents have been filed with the Commission by Medalist
(Commission File No. 1-6322) pursuant to the Exchange Act and are incorporated
by reference and made a part of this Proxy Statement/Prospectus: (a) Medalist's
Annual Report on Form 10-K for the year ended December 31, 1995; and (b)
Medalist's Current Report on Form 8-K dated January 8, 1996.
The following documents have been filed with the Commission by ITW
(Commission File No. 1-4797) pursuant to the Exchange Act and are incorporated
by reference and made a part of this Proxy Statement/Prospectus: (a) ITW's
Annual Report on Form 10-K (as amended by its Form 10-K/A) for the year ended
December 31, 1995; and (b) ITW's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 3, 1996. In lieu of incorporating by reference
the description of ITW capital stock contained in a registration statement (or
amendment thereto) or report filed under the Exchange Act, such description is
included in this Proxy Statement/Prospectus under the caption "Description of
ITW Capital Stock."
All other documents and reports filed by Medalist or ITW pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
hereof and prior to the date of the Special Meeting shall also be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
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TABLE OF CONTENTS
PAGE
----
SUMMARY............................................................................... 5
The Companies....................................................................... 5
Time, Place and Date of the Special Meeting......................................... 5
Record Date; Voting Rights.......................................................... 5
Purpose of Special Meeting, Vote Required and Quorum................................ 5
The Merger Agreement................................................................ 6
Dissenter's Rights.................................................................. 6
Opinion of Robert W. Baird & Co. Incorporated....................................... 6
Recommendation of the Company's Board of Directors.................................. 6
Certain Conditions to the Merger; Termination and Amendment......................... 7
Shareholder and Regulatory Approvals................................................ 7
Termination Fee..................................................................... 7
Certain Effects of the Merger....................................................... 7
Effective Time...................................................................... 8
Procedures for Exchange of Certificates............................................. 8
Interests of Certain Persons in the Merger; Conflicts of Interest................... 8
Certain Federal Income Tax Consequences............................................. 8
Anticipated Accounting Treatment.................................................... 9
Restrictions on Resales by Affiliates............................................... 9
Comparison of Shareholder Rights.................................................... 9
Market Price Data................................................................... 9
Dividend Policy..................................................................... 9
Selected Historical and Pro Forma Financial Data.................................... 10
SPECIAL FACTORS....................................................................... 12
Background.......................................................................... 12
Reasons for the Merger, Recommendation of the Company's Board of Directors.......... 15
Opinion of Robert W. Baird & Co. Incorporated....................................... 17
Interests of Certain Persons in the Merger.......................................... 21
Certain Effects of the Merger....................................................... 22
THE MERGER AGREEMENT.................................................................. 22
The Merger.......................................................................... 22
Required Vote....................................................................... 23
Exchange of Shares.................................................................. 23
Conditions of the Merger............................................................ 24
Representations and Warranties...................................................... 24
Covenants........................................................................... 25
Indemnification of Officers and Directors........................................... 25
No Solicitation..................................................................... 25
Amendment........................................................................... 26
Termination......................................................................... 26
Termination Fee and Expenses........................................................ 26
Certain Federal Income Tax Consequences............................................. 27
Resale of ITW Common Stock.......................................................... 28
Accounting Treatment................................................................ 29
RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 29
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PAGE
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COMPARISON OF SHAREHOLDER RIGHTS...................................................... 29
Authorized Shares of Capital Stock.................................................. 29
Voting Rights and Voting Power...................................................... 30
Certain Statutory Provisions........................................................ 30
Certain Charter and Bylaw Provisions................................................ 31
Directors........................................................................... 31
Special Meetings of Shareholders; Shareholder Action by Written Consent............. 31
Certain Business Combinations....................................................... 32
DESCRIPTION OF ITW CAPITAL STOCK...................................................... 32
ITW Common Stock.................................................................... 32
ITW Preferred Stock................................................................. 33
EXPERTS............................................................................... 33
SOLICITATION OF PROXIES............................................................... 34
LEGAL OPINIONS........................................................................ 34
CERTAIN INFORMATION REGARDING ITW AND NEWCO........................................... 34
Business of ITW..................................................................... 34
Newco............................................................................... 34
Information Incorporated by Reference............................................... 34
CERTAIN INFORMATION REGARDING MEDALIST................................................ 35
Business of Medalist................................................................ 35
Stock Ownership of Management and Principal Shareholders............................ 35
MEDALIST FINANCIAL INFORMATION........................................................ 37
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION................................... 53
MEDALIST INFORMATION INCORPORATED BY REFERENCE........................................ 57
OTHER MATTERS......................................................................... 57
PROPOSALS BY HOLDERS OF MEDALIST STOCK................................................ 57
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. This summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus and the Exhibits hereto.
Capitalized terms used but not defined in this Summary shall have the meanings
given to them elsewhere in this Proxy Statement/Prospectus. Shareholders are
urged to read this Proxy Statement/Prospectus and the Exhibits in their
entirety.
THE COMPANIES
Medalist designs, manufactures and distributes industrial fasteners and
related hardware, and also provides quality assured, just-in-time inventory
management systems to other manufacturers. It has approximately 900 employees.
Its principal executive offices are located at 10850 West Park Place, Milwaukee,
Wisconsin 53224, and its phone number is (414) 359-3000.
ITW is a multinational manufacturer of highly engineered components and
industrial systems, with approximately 345 operations in 34 countries and
approximately 23,000 employees. Newco is a wholly owned subsidiary of ITW
created to facilitate the Merger. ITW's principal executive offices are located
at 3600 West Lake Avenue, Glenview, Illinois 60025, and its phone number is
(847) 724-7500.
TIME, PLACE AND DATE OF THE SPECIAL MEETING
The Special Meeting will be held at 10:00 a.m., Central Standard Time, on
Wednesday, May 29, 1996 at the Milwaukee Hilton, 509 West Wisconsin Avenue,
Milwaukee, Wisconsin, 53203.
RECORD DATE; VOTING RIGHTS
The close of business on April 11, 1996 has been fixed as the Record Date
for the determination of those shareholders entitled to notice of and to vote at
the Special Meeting. On such date, there were 3,898,281 shares of Medalist
Common Stock outstanding, each of which is entitled to one vote. As of the
Record Date, there were approximately 1,150 record holders of Common Stock. The
Company has no other classes of equity securities outstanding.
PURPOSE OF SPECIAL MEETING, VOTE REQUIRED AND QUORUM
At the Special Meeting, holders of Shares will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement. Holders of a
majority of the Shares, represented in person or by proxy, will constitute a
quorum. Abstentions and broker non-votes are counted as represented for the
purpose of establishing a quorum. Under the Wisconsin Business Corporation Law
(the "WBCL") and the Company's Articles of Incorporation, and assuming that ITW
does not become a "significant shareholder" of Medalist under Section 180.1130
of the WBCL, the affirmative vote of the holders of two-thirds of the Medalist
shares outstanding on the Record Date will be required to approve and adopt the
Merger Agreement. Votes will be tabulated by an inspector at the meeting. See
"THE MERGER AGREEMENT -- Required Vote."
Shares represented by properly executed and unrevoked proxies will be voted
at the Special Meeting in accordance with the directions contained therein. If
no direction is made in a properly executed and unrevoked proxy, the Shares
represented by such proxy will be voted FOR the approval and adoption of the
Merger Agreement. If a shareholder does not return a signed proxy card, or does
not instruct the broker holding such shares in street name, or if a shareholder
elects to abstain on a signed proxy card submitted by such shareholder, that
shareholder's Shares will not be voted, which will have the same effect as a
vote against the Merger Agreement and the transactions contemplated thereby. Any
shareholder is empowered to revoke a proxy at any time before its exercise by
filing with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by giving oral notice to the presiding officer at
the Special Meeting. Any shareholder may attend the Special Meeting and vote in
person, whether or not such shareholder has previously given a proxy.
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THE MERGER AGREEMENT
The Company, ITW and Newco have entered into the Merger Agreement, a copy
of which is attached hereto as Exhibit A. Generally, the Merger Agreement
provides that, subject to the satisfaction or waiver of certain conditions to
the Merger, Newco will be merged with and into the Company and the Company will
be the surviving corporation in the Merger, then as a wholly owned subsidiary of
ITW. Upon the effectiveness of the Merger, each Share (other than Shares held in
the Company's treasury or by ITW, Newco or another direct or indirect wholly
owned subsidiary of ITW) will be converted into a portion of a share of ITW
Common Stock equal to that fraction (the "Per Share Conversion Ratio") of which
the numerator is $14.50 (the "Company Valuation") and the denominator is the
average per share closing price of ITW Common Stock as reported on the NYSE
Composite Transactions listing for the ten consecutive trading days ending on
the second trading day prior to the effective date of the Merger (the "Average
Closing Price"). Fractional ITW shares will not be issued; instead, the holder
will be paid in cash based on the Average Closing Price of ITW shares. If the
Merger is approved, the Medalist shares will be converted into shares
representing approximately 0.7% of ITW's outstanding Common Stock (assuming an
Average Closing Price of approximately $65.875 per ITW share). See "THE MERGER
AGREEMENT -- The Merger" and Exhibits A and C to this Proxy
Statement/Prospectus.
Each employee or director stock option for Medalist shares which is
outstanding on the effective date of the Merger will be converted into ITW
shares based on the product of the Per Share Conversion Ratio and a fraction,
the numerator of which is the excess of the Company Valuation over the option
exercise price and the denominator of which is the Company Valuation. The
Company's outstanding 7 1/2% Convertible Subordinated Debentures (the
"Debentures"), which are currently convertible into Medalist Common Stock at a
conversion price of $18.75 per share, will be modified to entitle their holders
to acquire instead the number of ITW shares into which such Medalist shares
would have been converted in the Merger. ITW intends to redeem the Debentures
for cash at par shortly after the Merger.
DISSENTER'S RIGHTS
ITW has no present intention to acquire any Medalist shares before the
Merger. In that case there will be no dissenter's rights available to Medalist
shareholders in connection with the Merger because Wisconsin law does not
provide dissenter's rights to shareholders of companies listed on the Nasdaq
National Market (such as Medalist) except in certain transactions with
controlling shareholders. ITW will not be a controlling shareholder unless it
acquires 10% or more of the outstanding Medalist shares. See "RIGHTS OF
DISSENTING SHAREHOLDERS."
OPINION OF ROBERT W. BAIRD & CO. INCORPORATED
Robert W. Baird & Co. Incorporated (sometimes referred to as "Baird") was
retained by the Board of Directors of Medalist to render its opinion as to
whether or not the Merger Consideration is fair, from a financial point of view,
to the holders of Medalist shares (other than ITW, Newco and their respective
affiliates). On January 8, 1996, Baird rendered its opinion to the Board of
Directors of Medalist to the effect that, as of such date, the Merger
Consideration was fair, from a financial point of view, to the holders of
Medalist shares (other than ITW, Newco and their respective affiliates). A copy
of the written opinion of Baird, dated January 8, 1996, which sets forth the
assumptions made, the matters considered, the scope and limitations of the
review undertaken and the procedures followed by Baird in rendering its opinion,
is attached hereto as Exhibit B. Holders of Medalist shares should read the
opinion of Baird carefully and in its entirety. See "SPECIAL FACTORS -- Opinion
of Robert W. Baird & Co. Incorporated."
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Company's Board of Directors has approved and adopted the Merger
Agreement. THE COMPANY'S BOARD OF DIRECTORS HAS CONCLUDED THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDED A VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AGREEMENT. The Medalist Board believes that the Merger Consideration provides a
higher value to Medalist's
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shareholders than is likely to be realizable through continued operations or
from other available alternatives. See "SPECIAL FACTORS -- Reasons for the
Merger, Recommendation of the Company's Board of Directors." If the Merger is
not approved, the Board currently intends that the Company will continue to
operate as an independent company as though the proposal for the Merger had not
occurred.
CERTAIN CONDITIONS TO THE MERGER; TERMINATION AND AMENDMENT
The obligations of the Company, ITW and Newco to consummate the Merger are
subject to a number of conditions, including (among others): (i) the approval of
the Merger Agreement by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Medalist's Common Stock; (ii) the
listing on the NYSE of the ITW shares to be issued in the Merger; (iii) the
absence of certain litigation or court orders; and (iv) the absence of any
significant material adverse change (as defined in the Merger Agreement) in the
business or financial condition of Medalist. In addition to the foregoing, the
Merger Agreement may be terminated by mutual written consent of ITW and Medalist
and by either ITW or Medalist if the Merger shall not have been consummated by
June 1, 1996, or under certain other circumstances. The Merger Agreement may be
amended by mutual consent of Medalist, ITW and Newco at any time prior to the
Merger, except that, after approval of the Merger Agreement by Medalist's
shareholders, no amendment that changes the consideration payable in the Merger
or adversely affects the rights of Medalist's shareholders under the Merger
Agreement may be made without the further approval of such shareholders. See
"THE MERGER AGREEMENT -- Conditions to the Merger," "-- Amendment" and
"-- Termination."
SHAREHOLDER AND REGULATORY APPROVALS
The Merger is subject to the approval of Medalist shareholders, but does
not require the approval of ITW shareholders. The affirmative vote, in person or
by proxy, of the holders of at least two-thirds ( 2/3) of the Medalist shares
outstanding on the Record Date is required for approval of the transaction. ITW
and its subsidiaries currently own no Medalist shares and they do not expect to
own any prior to the Merger; if ITW were to become a 10% shareholder of Medalist
before the Merger, however, 80% of Medalist's outstanding Shares would be
required to approve the Merger, subject to certain exceptions. As of the Record
Date, directors and executive officers of Medalist beneficially owned 238,762
(6.1%) of the outstanding Shares entitled to vote at the Special Meeting
(excluding Shares which such persons have the right to acquire upon the exercise
of stock options), all of whom have indicated that they will vote in favor of
the Merger. The directors and executive officers of ITW beneficially own no such
Shares and ITW and its subsidiaries own no such Shares. See "SPECIAL
FACTORS -- Interests of Certain Persons in the Merger," "THE MERGER
AGREEMENT -- Required Vote," and "CERTAIN INFORMATION REGARDING MEDALIST --
Stock Ownership of Management and Principal Shareholders."
In addition, certain regulatory approvals or reviews are required in
connection with consummation of the Merger. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
has now expired. See "THE MERGER AGREEMENT -- Conditions of the Merger."
TERMINATION FEE
The Company has agreed that if the Merger is not consummated and certain
other conditions are satisfied (such as a breach of Medalist's representations
and warranties or the existence of a tender offer or merger proposal for
Medalist at a higher price) Medalist (a) will pay ITW a termination fee of
$1,650,000, and (b) will reimburse ITW for its fees and expenses (up to an
aggregate of $300,000) incurred in connection with the Merger. See "THE MERGER
AGREEMENT -- Termination Fees and Expenses."
CERTAIN EFFECTS OF THE MERGER
Upon the effectiveness of the Merger, shareholders of the Company, other
than the ITW Buying Group, will no longer have any continuing interest as
shareholders in the surviving corporation in the Merger, but will instead become
shareholders in ITW. The Shares will no longer be traded in the over-the-counter
market, price quotes will not be available in the Nasdaq National Market, the
registration of the Shares under the
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Exchange Act will be terminated and the Company will not be required to continue
to comply with periodic reporting requirements under the Exchange Act. See
"SPECIAL FACTORS -- Certain Effects of the Merger."
EFFECTIVE TIME
The Merger will be effective as of the date and time (the "Effective Time")
that Articles of Merger are filed with the Wisconsin Secretary of State in
accordance with the WBCL. If the Merger is approved by Medalist's shareholders
at the Special Meeting, it is currently anticipated that the Merger will become
effective as soon as practical after the date of the approval and adoption of
the Merger Agreement by the shareholders (subject to compliance with or waiver
of the other conditions contained in the Merger Agreement). See "THE MERGER
AGREEMENT -- The Merger" and Exhibits A and C to this Proxy
Statement/Prospectus.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, a letter of transmittal and instructions
for surrendering stock certificates evidencing shares of the Company's Common
Stock will be mailed to each holder of the Company's Common Stock for use in
exchanging such holder's stock certificates for the Merger Consideration to
which such holder is entitled as a result of the Merger. SHAREHOLDERS SHOULD NOT
SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS. A holder of Medalist Common
Stock will not be entitled to any of the rights of a holder of ITW shares until
such holder exchanges the Medalist shares for ITW shares. See "THE MERGER
AGREEMENT -- Exchange of Shares."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the Merger, shareholders should be aware that in addition to
continuing to receive ordinary compensation and benefits from the Company
through the date of the Merger, certain Company officers will receive severance
or other benefits as a result of continuing to serve and assist Medalist and ITW
through the consummation of the Merger and a transition period thereafter, which
may present them with inherent conflicts of interest in connection with the
Merger. Officers, directors and key employees who hold outstanding Medalist
options will also receive ITW shares valued at the amount by which the Company
Valuation exceeds the exercise price of these options, whether or not the
options are currently exercisable. See "SPECIAL FACTORS -- Interests of Certain
Persons in the Merger" and "CERTAIN INFORMATION REGARDING MEDALIST -- Stock
Ownership of Management." The Company's Board of Directors was aware of these
interests and considered them among the other matters described under "SPECIAL
FACTORS -- Background of the Merger" and "SPECIAL FACTORS -- Reasons for the
Merger, Recommendation of the Company's Board of Directors."
ITW has agreed in the Merger Agreement that, after the Merger, the Company
will continue to indemnify the Company's present and former directors and
officers against certain liabilities. See "THE MERGER
AGREEMENT -- Indemnification of Officers and Directors." Under the terms of the
Merger Agreement, existing directors of the Company will no longer serve as
directors of the Company following the Merger. It is not anticipated that
existing executive officers of Medalist will continue in those capacities beyond
a transition period following consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to be a tax-free reorganization so that no gain or
loss would be recognized by ITW or Medalist and no gain or loss would be
recognized by Medalist's shareholders, except in respect of cash received in
lieu of fractional ITW shares. However, no request has been or will be made for
a ruling from the Internal Revenue Service. Medalist shareholders are urged to
consult their own tax advisors regarding all tax consequences of the Merger. See
"THE MERGER -- Certain Federal Income Tax Consequences."
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ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling-of-interests" for
accounting and financial reporting purposes. See "THE MERGER -- Anticipated
Accounting Treatment."
RESTRICTIONS ON RESALES BY AFFILIATES
As a condition of the Merger, each affiliate of Medalist will have agreed
not to sell ITW shares received pursuant to the Merger except in compliance with
Rule 145 under the Securities Act or otherwise in compliance with the Securities
Act and not to sell the ITW shares received in the Merger until after financial
results that include at least 30 days of post-Merger operations have been
publicly disclosed. Affiliates are also required to indicate that they have no
present plan or intention to sell the ITW shares received pursuant to the
Merger. See "THE MERGER AGREEMENT -- Resale of ITW Common Stock."
COMPARISON OF SHAREHOLDER RIGHTS
See "COMPARISON OF SHAREHOLDER RIGHTS" for a summary of the material
differences between the rights of holders of ITW Common Stock and Medalist
Common Stock.
MARKET PRICE DATA
ITW Common Stock is traded principally on the NYSE under the symbol ITW.
Medalist Common Stock is traded on the Nasdaq National Market under the symbol
MDIN. The following table sets forth, for the fiscal quarter indicated, the high
and low sale prices of ITW Common Stock, as reported on the NYSE Composite
Transactions listing, and the high and low sale prices of MDIN Common Stock, as
reported on the Nasdaq National Market.
ITW MEDALIST
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
Year Ended December 31, 1994
First Quarter............................................... 45.125 37.00 15.75 12.00
Second Quarter.............................................. 42.25 36.75 14.50 6.50
Third Quarter............................................... 44.875 37.00 8.50 5.25
Fourth Quarter.............................................. 45.50 39.625 7.50 5.00
Year Ended December 31, 1995
First Quarter............................................... 48.875 39.75 8.50 5.50
Second Quarter.............................................. 55.625 46.00 7.00 5.00
Third Quarter............................................... 65.50 54.25 7.87 5.62
Fourth Quarter.............................................. 64.25 54.50 7.25 5.25
Year Ended December 31, 1996
First Quarter............................................... 69.50 51.875 14.50 6.00
Second Quarter through April 17, 1996....................... 66.125 61.00 14.625 14.125
Pursuant to the Merger Agreement, each Medalist Share will be converted
into ITW Common Stock with a value (based on the average closing price during
the ten consecutive trading days ending on the second trading day preceding the
Merger) of $14.50. On January 8, 1996, the last trading day prior to the
announcement by Medalist of the terms of the proposed Merger, the closing sale
prices of ITW Common Stock and Medalist Common Stock were $57.125 and $6.75 per
share, respectively. On April 17, 1996, the closing sale prices of ITW Common
Stock and Medalist Common Stock were $65.875 and $14.125 per share,
respectively.
DIVIDEND POLICY
Medalist has not paid any dividends on its Common Stock since 1990, and its
current debt arrangements prohibit payment of cash dividends. ITW paid quarterly
dividends of $0.13 the first three quarters of 1994,
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$0.15 per share for the fourth quarter of 1994 and the first three quarters of
1995, and $0.17 per share for the fourth quarter of 1995 and the first quarter
of 1996.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical financial information of ITW and Medalist
has been derived from their respective historical financial statements, and
should be read in conjunction with such financial statements and the notes
thereto, some of which are included in or incorporated by reference into this
Proxy Statement/Prospectus. The selected pro forma financial information of ITW
and Medalist is derived from their respective condensed financial statements.
Historical and pro forma information for certain periods is derived from
financial statements not included in or incorporated herein by reference. ForAll
information shown is in thousands except per share amounts.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
HISTORICAL -- ITW
Operating revenues................... $2,639,650 $2,811,645 $3,159,181 $3,461,315 $4,152,170
Operating income..................... 304,518 341,301 369,493 475,310 626,512
Net income........................... 180,559 192,080 206,570 277,783 387,608
Total assets at end of period........ 2,257,139 2,204,187 2,336,891 2,580,498 3,667,018
Long-term debt at end of period...... 307,082 251,979 375,641 272,987 615,557
Per share data:
Book value......................... 10.88 11.96 11.12 13.53 16.27
Cash dividends per share........... 0.40 0.45 0.49 0.54 0.62
Net income......................... 1.62 1.72 1.83 2.45 3.29
HISTORICAL -- MEDALIST
Net sales from continuing
operations......................... $ 55,007 $ 79,885 $ 131,498 $ 133,531 $ 126,016
Operating income (loss) from
continuing operations.............. 4,076 (671) 8,001 3,726 5,752
Income (loss) from continuing
operations......................... 1,544 (3,223) 4,625 69 1,729
Total assets at end of period........ 63,026 89,629 93,379 93,704 87,987
Long-term debt at end of period(1)... 9,205 8,841 40,423 39,949 33,376
Per share data:
Book value......................... 9.16 5.69 7.71 7.73 8.16
Income (loss) from continuing
operations...................... 0.66 (1.26) 1.20 0.02 0.45
PRO FORMA COMBINED ITW AND MEDALIST
Operating revenue.................... $3,290,679 $3,594,846 $4,278,186
Operating income..................... 377,494 479,036 632,264
Income from continuing operations.... 211,195 277,852 389,337
Total assets at end of period(4)..... 2,430,270 2,674,202 3,754,650
Long-term debt at end of period(1)... 416,064 312,936 648,933
Per share data:
Book value(4)...................... 16.42
Income from continuing
operations(2)................... 1.86 2.43 3.28
Per equivalent Medalist share(3):
Book value......................... 3.61
Income from continuing
operations...................... .41 .53 .72
Cash dividends per share........... .11 .12 .14
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- ---------------
(1) Long-term debt includes noncurrent obligations under capital leases and
subordinated debentures.
(2) Pro forma income from continuing operations per share has been calculated
based on an ITW Average Closing Price of $65.875, the closing price on
April 17, 1996, as reported on the New York Stock Exchange Composite
Transactions listing.
(3) Shows the pro forma combined ITW and Medalist amounts per Medalist share
prior to the Merger, assuming that ITW's Average Closing Price (as defined
in the Merger Agreement) equals $65.875 per share (and therefore that each
Medalist share is converted into approximately 0.220 of an ITW share).
(4) Pro forma amounts reflect transaction costs which will be expensed at the
time of the Merger.
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SPECIAL FACTORS
BACKGROUND
The terms of the Merger Agreement are the result of arms-length
negotiations between representatives of ITW and Medalist. The following is a
brief discussion of the events that led to the negotiations, the Merger
Agreement and related transactions.
In early October 1995, Thomas J. Hansen, President of the Shakeproof
Businesses division of ITW, contacted James S. Dahlke, President and Chief
Executive Officer of Medalist, and expressed an interest in discussing the
possibility of a friendly acquisition of Medalist by ITW. He also expressed a
desire to review certain confidential Medalist information in order to
facilitate those discussions. Mr. Dahlke relayed this information to the
Medalist Board of Directors in connection with a meeting of the Medalist Board
on October 24, 1995. Although the Board was not seeking such a transaction and
had not solicited indications of interest from ITW or any other potential
acquiror, the Board instructed Mr. Dahlke to ask that ITW send Medalist a letter
indicating the nature and extent of its interest in acquiring Medalist. Mr.
Dahlke communicated that request to Mr. Hansen. In addition, on October 31, 1995
Medalist provided to ITW, and on November 7, 1995 ITW signed and returned, a
confidentiality agreement permitting ITW to receive and review certain
evaluation material regarding Medalist sales, inventories, material contracts,
environmental matters and product liability experience for purposes of
evaluating a possible transaction.
In the meantime, on November 2, 1995, Frank S. Ptak, Executive Vice
President of ITW, sent a letter to Mr. Dahlke confirming ITW's interest in a
possible acquisition of Medalist and inviting the parties to continue and expand
their discussions on the mutual benefits of such a transaction. On November 13
and 14, 1995, the Medalist Board of Directors held a previously scheduled
meeting for the primary purpose of reviewing 1996 business plans with the
managers of each of Medalist's divisions. Noting continued uncertainties
regarding the degree of ITW's actual interest and the possible consideration to
Medalist's shareholders, as well as the serious business disruptions that could
arise from takeover rumors even if nothing developed, the Board instructed Mr.
Dahlke to decline any further discussions unless ITW was able to provide
assurances that an attractive transaction might actually be available.
On December 4, 1995, Mr. Ptak sent another letter to the Medalist Board of
Directors affirming ITW's continued interest in a transaction and indicating
that, based on ITW's preliminary review, it would consider a possible
combination with Medalist which would result in Medalist's shareholders
receiving consideration in the range of $14 to $15 per Medalist share. The
letter indicated that the valuation was preliminary and would be subject to
further due diligence review and to the execution of a definitive agreement, and
it invited both companies to enter into good faith negotiations toward that end.
The letter requested that the discussions be considered strictly confidential
pending further developments.
On December 6, 1995, the Medalist Board of Directors held a meeting by
conference telephone to consider the December 4, 1995 letter from Mr. Ptak. The
Board concluded that discussions with ITW should be pursued and directed that a
committee of directors, Company executives and outside counsel should meet with
ITW. On December 14, 1995, representatives of Medalist met with representatives
of ITW for the purpose of assessing the level of ITW's seriousness and interest
in acquiring Medalist, the general structure of the business combination
transaction ITW had in mind, the additional information pertainingand due diligence
investigations ITW would require, whether ITW's interest was conditioned upon a
prompt and confidential negotiation without inquiries of other potential
purchasers for Medalist, and similar matters. At this meeting, ITW expressed an
interest in a stock-for-stock merger to be accomplished as expeditiously and
confidentially as possible, consistent with ITW's requirements for further due
diligence. While requesting prompt resolution and confidential treatment of the
discussions, ITW indicated a willingness to include in the proposed Merger
Agreement a right for the Medalist Board of Directors to provide information to
other potential bidders or even terminate the agreement if the Board's fiduciary
duties compelled it to do so because a higher offer came to light after the
Merger Agreement was signed and before consummation of the Merger, subject to a
breakup fee and expense reimbursement. ITW also requested that Medalist grant
ITW an option for approximately 19% of Medalist's outstanding stock. ITW
indicated that its anticipated offer would result in consideration to
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Medalist shareholders of approximately $14 per share, but Medalist
representatives asked for the opportunity to show ITW that a higher amount of
consideration per share could be warranted. The parties agreed to continue their
discussions.
As part of the Board's responsibilities, from time to time it has reviewed
the Company's strategic and competitive positions within the fastener industry,
and discussed various courses of action and their anticipated risks and rewards.
Based on these reviews, the course charted by the Board did not include an
intention to sell or break up the Company at the time ITW's unsolicited offer
was received. Instead, the Board was then focusing the Company's efforts on
rebuilding its presence in the fastener marketplace. Given the Board's strategy
for the Company, the potential adverse effects that a sudden redirection of that
strategy could have on the Company and the need to investigate the quality and
extent of ITW's offer, Medalist and ITW agreed to keep their negotiations
confidential and exclusive until a definitive agreement between the parties
could be reached or until their discussions proved unsuccessful. Any attempt by
the Medalist Board to solicit other offers or to "auction" the Company would
have resulted in the need to disclose confidential and proprietary information
to additional strategic buyers already in the industry and, in the Board's
judgment, would have committed the Company to a course of action that was not in
the Board's contemplation at the time of ITW's bid and that could have been
irrevocable in the event the ITW discussions failed. Because of its decision and
agreement with ITW to keep their negotiations confidential and exclusive,
Medalist would have been able to continue with its original business plan
without damage to its customer, employee or financial base or disclosing
confidential information to the market as a whole if a definitive agreement with
ITW had not been reached.
On December 16, 1995, representatives of ITW conducted due diligence and
investigations at the executive offices of Medalist. On December 18, 1995, ITW
advised Medalist that a merger consideration higher than $14 per share, perhaps
as high as $15 per share, might be available if the transaction could be
structured as a tax free sale of assets followed by a liquidation of Medalist
rather than a merger. In a telephone meeting on December 20, 1995, the Medalist
Board gave careful consideration to the advantages and risks of a tax free sale
of assets and corporate liquidation as compared with a merger, including the
risk that Medalist shareholders might be subject to liabilities for corporate
level taxes as well as taxes on the gain from the corporate liquidation if all
of the requirements for tax free treatment were not satisfied. The Board
directed a committee of Medalist directors to advise ITW that Medalist had
serious reservations about that structure and would prefer to focus on a merger
transaction instead.
On December 22, 1995, ITW representatives conducted additional due
diligence investigations at Medalist's offices. Also on that date Medalist
received a first draft of the Merger Agreement from ITW. On December 27, 1995, a
special committee of the Medalist Board consisting of Messrs. Dodson, Howenstine
and Secrist (together with Mr. Dahlke as CEO) met to review their comments and
reactions to the draft agreement and then met with representatives of ITW to
share those comments. The parties also discussed ITW's plans and expectations
regarding operations of each of Medalist's divisions following a transaction,
its expected treatment of outstanding options and debentures, and various
provisions of the draft agreement.
Subsequent to the December 27 meeting the parties and their respective
counsel continued to conduct their respective factual investigations, to
exchange information and to make comments and suggest revisions to the draft
Merger Agreement. The special committee of Medalist directors retained the
services of Robert W. Baird & Co. Incorporated to assist the Board in evaluating
the proposed transaction and its fairness to Medalist shareholders from a
financial point of view. Those discussions and negotiations ultimately resulted
in tentative agreement by the committee and ITW on the fundamental terms of the
Merger Agreement, except with respect to the Company Valuation, subject to
approval by the Medalist Board of Directors and the receipt of Baird's opinion.
As the quality, seriousness and sincerity of ITW's interest and offer
became apparent, the Board considered the size of that offer, its fairness to
shareholders, and its relation to the anticipated results (and the expected time
to achieve those results) of alternative courses of action (including continuing
with its business plan in effect prior to ITW's offer), and determined that
accepting the ITW offer was in the best interests of Medalist's shareholders.
The Board took customary and appropriate steps to publicize the ITW Merger
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Agreement after it was executed, thereby not only advising Medalist shareholders
and the market of this development but also alerting other potential bidders who
might be inclined to improve on the ITW bid. The Merger Agreement gives the
Board the ability to acknowledge and entertain such bids in the exercise of its
fiduciary duties.
A total of four drafts of the Merger Agreement were prepared and exchanged
during the course of the negotiations. The initial draft reflected earlier
negotiations among the parties about certain of its terms. Further negotiations
concerning the terms of the Merger Agreement were conducted at the December 27
meeting described above, and among counsel to the parties which met a number of
times by telephone to discuss various revisions and express the views of their
respective clients. In addition to investigating and revising proposed factual
representations and creating a mechanism to update certain representations after
the Merger Agreement was executed and publicly announced, the primary
negotiations over and revisions to the drafts of the Merger Agreement related
to: (i) the valuation per Medalist share for purposes of the per share
conversion ratio and the method for determining the value of a share of ITW
Common Stock for purposes of the conversion; (ii) the scope and conditions of
the Medalist Board of Directors' right to withdraw, modify or amend its
recommendation of the Merger or to terminate the Merger Agreement itself under
certain conditions (the "fiduciary out"); (iii) the conditions for payment and
amount of the termination fee and special expense reimbursement payable to ITW
in certain events; (iv) the monetary threshold constituting an adverse change in
the financial condition, business or results of operations of Medalist which
would entitle ITW to terminate the Merger Agreement (ultimately set at $2
million); and (v) the timing for the redemption of the outstanding debentures of
Medalist (i.e., soon after the Merger rather than before the Merger).
On January 8, 1996, a special meeting of the Medalist Board of Directors
was held for the purpose of considering the proposed Merger Agreement. After a
careful review of the principal terms of the Merger Agreement, including the
favorable recommendation of the special committee of the Board and the opinion
of Robert W. Baird & Co. Incorporated that the Merger Consideration is fair to
Medalist shareholders from a financial point of view, the Medalist Board
approved the Merger Agreement on January 8, 1996, and it was executed late that
day.
Immediately thereafter, Medalist issued the following press release:
"The Medalist Industries, Inc. Board of Directors today approved
merger plans with Illinois Tool Works Inc. The stock for stock transaction
is subject to certain conditions and shareholder approval.
Under the merger agreement, each share of Medalist Industries common
stock will be valued at $14.50 per share and will be converted into the
equivalent value of ITW common stock based on the ten day average closing
price of ITW common stock preceding the merger. Additionally, ITW has
indicated that it intends to redeem outstanding debentures soon after the
merger. The Board of Directors has determined that the merger is fair and
in the best interest of Medalist shareholders and has recommended that the
shareholders approve the merger at a special shareholders meeting, which is
expected to be held in late March 1996.
ITW is a multi-national manufacturer of highly engineered components
and industrial systems. The company has approximately 290 operations in 34
countries with 21,000 employees.
Medalist Industries, Inc. designs, manufactures and distributes
industrial fasteners and related hardware, and also provides quality
assured, just-in-time inventory management systems to other manufacturers.
Medalist shares trade over-the-counter on the NASDAQ National Market System
under the symbol MDIN."
Medalist filed a copy of the Merger Agreement and the press release as
exhibits to a Current Report on Form 8-K dated January 8, 1996.
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REASONS FOR THE MERGER, RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The special committee and the Company's Board of Directors as a whole
believe that the Merger Agreement is fair to, and in the best interests of, the
Company and its shareholders, and therefore unanimously recommend that the
shareholders vote FOR approval of the Merger Agreement. In reaching these
conclusions, various factors were considered by the Board of Directors. The
material factors considered were:
1. The financial condition, indebtedness, historical earnings and
operations of the Company and prospects for future growth in its earnings,
and the corresponding attributes of ITW.
2. The Board's knowledge of the fastener industry, including
information concerning the industry's current limited growth, substantial
domestic and foreign competition, overcapacity and industry consolidations.
3. The limited liquidity of the Medalist Common Stock as compared with
the stock of ITW.
4. The premium represented by the Merger Consideration in relation to
recent prices for the Company's Common Stock.
5. Various analyses performed by Baird, partly based on information
and projections prepared by the Company. See "Opinion of Robert W. Baird &
Co. Incorporated."
6. The opinion of Robert W. Baird & Co. Incorporated that the Merger
Consideration to be received by holders of the Shares (other than the ITW
Buying Group) pursuant to the Merger Agreement is fair to such holders from
a financial point of view. See "Opinion of Robert W. Baird & Co.
Incorporated" and Exhibit B hereto.
7. A sale of assets followed by a liquidation of Medalist could have
potentially extended the time period to reach closure due to the complexity
of the requirements of such a transaction. Additional risk in the form of
double taxation to Medalist shareholders could have occurred if the
requirements of tax free treatment were not satisfied.
8. The requirement in the Merger Agreement and the WBCL that the
Merger receive the approval of the holders of two-thirds of the outstanding
shares of Medalist Common Stock. See "THE MERGER AGREEMENT -- Required
Vote."
9. The terms of the Merger Agreement preventing solicitation of other
offers but permitting the Board of Directors to withdraw its approval or
recommendation of the Merger Agreement or the Merger and to provide
information to other prospective acquirors to the extent required by its
fiduciary duties under applicable law. See "THE MERGER AGREEMENT -- No
Solicitation."
10. The absence in the final Merger Agreement of any "lock up" stock
option to ITW, and the sharesamounts of Common Stock
offered hereby, referencethe termination fee and expense
reimbursement in the Merger Agreement, which the Board of Directors
believed was reasonable under the circumstances and would not unduly limit
the possibility of a transaction at a higher price with any other potential
acquiror. See "THE MERGER AGREEMENT -- Termination Fee and Expenses."
No specific relative weight was given by the Board of Directors to any one
of the various factors considered in reaching its determination to recommend the
proposed transaction, although the premium represented by the Merger
Consideration in light of the prospects for future growth in the Company's
earnings received special emphasis in the analysis.
Although the factors are interrelated, the Board believes that factors 1-6
generally support the fairness of the $14.50 Company valuation, that factor 7
supports the proposed structure of the transaction, and that factors 8-10 tend
to help assure that shareholders will be presented with any other available
alternatives and will have an opportunity to make an informed choice among them.
The Board of Directors also believes that all of the factors support its
recommendation that the shareholders approve the Merger. The information
considered by the Board of Directors and its evaluations which support these
conclusions are described in the
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following paragraphs and under the heading, "Opinion of Robert W. Baird & Co.
Incorporated," which reflects the analysis and conclusions of Baird that the
Board generally adopted as its own.
The Medalist Board of Directors considered that Medalist has significant
indebtedness and within the past two years had experienced disappointing
earnings and operational difficulties, including difficulties in complying with
its bank loan obligations. Although corrective actions were promptly taken and
the Company believes it is madeon track for substantial improvements in its
earnings, operational efficiencies and financial condition, the Board believed
that the Company's future earnings and sales growth would be limited to some
extent by its significant indebtedness and that its stock price would be
adversely influenced for a time by the former difficulties. In comparison, ITW
has a record of consistently strong earnings growth with modest indebtedness, so
the Medalist Board believes ITW may have better opportunities to improve
shareholder value over the long run. (See factor 1.)
In the fall of 1995 (prior to considering the ITW inquiry that led to the
Registration StatementMerger Agreement), Medalist's management and its Board of Directors had reviewed
the Company's business plans in the context of the status of the overall United
States fastener industry, which is characterized by limited overall growth,
substantial domestic and foreign competition, excess manufacturing capacity for
common fasteners, and significant consolidation as larger companies acquire
smaller ones and weaker companies go out of business. The trend toward
consolidation is reinforced by the desire of many manufacturers to reduce their
number of fastener suppliers. In the opinion of the Board, Medalist's moderate
size in relation to the overhead necessary to manage a public company properly,
its substantial indebtedness, and its lack of proprietary products place
Medalist at a competitive disadvantage in providing the pricing and quality that
the market demands, and make it difficult for the Company to provide efficiently
the full range of fasteners its customers may seek. In these respects, the
Medalist Board of Directors believed that ITW may be better positioned to
respond to the challenges and opportunities that lay ahead in the fastener
industry. (See factor 2.)
The Board also considered the significant premium that the $14.50 Merger
Consideration represented as compared with then recent closing prices for
Medalist stock, as well as the other financial analyses performed by Baird. The
Board also considered the anticipated improvement in shareholder value to be
expected from the increased earnings that Medalist is now achieving and that the
Board believes it can be expected to achieve over the next several years. Of
course, future results are always uncertain and will depend to a significant
extent upon factors that are not entirely within Medalist's control and that may
be unforeseen or unforeseeable at the present time. Although Medalist has
addressed the problems that led to its recent operating difficulties, the Board
believed that, in light of the challenges of significantly increasing sales and
earnings without significant new capital investments, it would require several
years at the earliest before Medalist earnings could be expected to result in a
stock price approaching $14.50 per share (if ever). On the other hand, the
Merger (if successful) would provide immediate value of approximately $14.50 per
Medalist share in a tax-free transaction in which shareholders could own stock
in one of the industry leaders or, if they chose, could easily and efficiently
liquidate their investment through the public markets. (See factors 3, 4, and
5.) Baird's opinion that the Merger Consideration to be received by Medalist
shareholders is fair to such holders (other than ITW and its affiliates) from a
financial point of view (see factor 6) also supported the conclusion that the
proposed transaction is in the best interest of the Medalist shareholders.
The Board also carefully evaluated the terms of the Merger Agreement from
the perspective of Medalist shareholders. Although the Merger Agreement
prohibits Medalist from soliciting for a higher price from other potential
acquirors (which is a disadvantage), the Board believed that the absence of a
"lock up" stock option to ITW and the exhibits and schedules thereto, which may be examined or
copied at the locations described above.
2
SECURITIES COVERED BY THIS PROSPECTUS
The shares of Common Stock covered by this Prospectus are
available for use in future acquisitions of other businesses or
properties, which may be similar or dissimilar to ITW's present
activities. The consideration offered by ITW in such
acquisitions, in addition to the shares of Common Stock offered
hereby, may include cash, debt or other securities (which may be
convertible into shares of Common Stock covered by this
Prospectus), or assumption by ITW of liabilitiessize of the business
being acquired, ortermination fee and expense
reimbursement in the Merger Agreement would not unduly limit the possibility of
a combination thereof. It is contemplatedtransaction at a higher price should any other potential acquiror make an
offer after the Merger Agreement was announced. The Board also noted that the
terms of acquisitionsthe Merger Agreement specifically permitted the Board to withdraw its
approval or recommendation of the Merger Agreement, and to provide confidential
information to other prospective acquirors, to the extent required by the
Medalist Board's fiduciary duties under applicable law. These factors, plus the
lower tax risk to the Medalist shareholders from a stock-for-stock merger as
compared with a sale of assets followed by a liquidation of Medalist, supported
the Board's determination that the Merger Agreement was in the best interests of
the Company and its shareholders. (See factors 7, 9, and 10.)
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Finally, the Board also considered the requirement in both the Merger
Agreement and the WBCL that the Merger would occur only if it received the
approval of holders of two-thirds of the outstanding shares of Medalist common
stock after disclosure of the material facts in this Proxy Statement/Prospectus.
This requirement tends to assure that the transaction will be consummated only
if more than a mere majority of Medalist shareholders perceive it to be in their
best interests after they have the opportunity to consider the relevant
information about the transaction and any alternative proposals that may come to
light prior to the Special Meeting. (See factor 8.)
In the judgment of the Board of Directors, the Merger offers holders of
Medalist common stock their best available opportunity to realize an appropriate
value on their investment in the Company. If the Merger is not approved, the
Board currently intends that the Company will continue to operate as an
independent company as though the proposal for the Merger had not occurred.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.
OPINION OF ROBERT W. BAIRD & CO. INCORPORATED
The Board of Directors of Medalist retained Baird to render its opinion as
to whether or not the Merger Consideration is fair, from a financial point of
view, to the holders of Medalist shares (other than ITW, Newco and their
respective affiliates). On January 8, 1996, Baird rendered its opinion to the
Board of Directors of Medalist to the effect that, as of such date, the Merger
Consideration was fair, from a financial point of view, to the holders of
Medalist shares (other than ITW, Newco and their respective affiliates).
THE FULL TEXT OF BAIRD'S OPINION, DATED JANUARY 8, 1996, 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 EXHIBIT B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. BAIRD'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, AS OF
JANUARY 8, 1996 AND FROM A FINANCIAL POINT OF VIEW, OF THE MERGER CONSIDERATION
TO THE HOLDERS OF MEDALIST SHARES (OTHER THAN ITW, NEWCO AND THEIR RESPECTIVE
AFFILIATES) AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MEDALIST SHAREHOLDER
AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT.
BAIRD DID NOT MAKE RECOMMENDATIONS TO MEDALIST CONCERNING THE AMOUNT OF
CONSIDERATION TO BE PAID TO MEDALIST'S SHAREHOLDERS OR PARTICIPATE IN THE
NEGOTIATION OF THE MERGER CONSIDERATION. THE SUMMARY OF BAIRD'S OPINION SET
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION ATTACHED AS EXHIBIT B. SHAREHOLDERS ARE URGED TO READ THE OPINION
CAREFULLY IN ITS ENTIRETY.
In conducting its investigation and analysis in arriving at its opinion
attached as Exhibit B, Baird reviewed such information and took into account
such financial and economic factors as it deemed relevant under the
circumstances. In that connection, Baird among other things (i) reviewed certain
internal information, primarily financial in nature, including projections,
concerning the business and operations of Medalist furnished to Baird by or on
behalf of Medalist for purposes of its analysis, as well as publicly available
information including but not limited to Medalist's recent filings with the
Securities and Exchange Commission, and equity analyst research reports prepared
by various investment banking firms including Baird; (ii) reviewed certain
internal information, primarily financial in nature, concerning the business and
operations of ITW furnished to Baird by or on behalf of ITW for the purposes of
its analysis, as well as publicly available information including, but not
limited to, ITW's recent filings with the Commission and equity analyst research
reports prepared by various investment banking firms including Baird; (iii)
reviewed the Agreement and the draft of this Proxy Statement/Prospectus relating
to the Merger in the form proposed to be filed with the Commission; (iv)
compared the historical market prices and trading activity of Medalist Common
Stock and ITW Common Stock with those of certain other publicly traded companies
Baird deemed
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relevant; (v) compared the financial position and operating results of Medalist
and ITW with those of other publicly traded companies Baird deemed relevant; and
(vi) compared the proposed financial terms of the Merger with the financial
terms of certain other business transactions that it considered relevant to its
inquiry. Baird held discussions with certain members of Medalist's and ITW's
respective senior management concerning Medalist's and ITW's historic and
current financial condition and operating results as well as the future
prospects of Medalist and ITW respectively. Baird also considered such other
information, financial studies, analysis and investigations and financial,
economic and market criteria which it deemed relevant for the preparation of its
opinion. Baird was not requested to, and did not, solicit third party
indications of interest in acquiring all or any part of Medalist. The Merger
Consideration was determined by negotiations
betweenMedalist and ITW in arm's-length negotiations.
Medalist did not place any limitation upon Baird with respect to the procedures
followed or factors considered by Baird in rendering its opinion.
In arriving at its opinion, Baird assumed and relied upon the accuracy and
completeness of all of the financial and other information provided to it by or
on behalf of Medalist and ITW, or publicly available, and were not engaged, and
did not attempt, to verify any such information. With respect to projections,
Baird assumed that they had been reasonably prepared and represented the best
available estimates and judgments of Medalist management as to the future
performance of Medalist. No financial forecasts with respect to the future
performance of ITW were made available to Baird and accordingly, with the
consent of the Board of Directors of Medalist, Baird relied upon financial
forecasts with respect to ITW's future performance reported by recognized
investment banking firms. In conducting its review, Baird did not make nor
obtain an independent valuation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Medalist or ITW, nor did Baird make a physical
inspection of the properties or facilities of Medalist or ITW. Baird's opinion
was based upon economic, monetary and market conditions as they existed on and
to the extent they could be evaluated as of the date of such opinion and did not
predict or take into account any changes which may occur or information which
may become available thereafter.
In connection with preparing its opinion on January 8, 1996, Baird
conducted a variety of financial analyses summarized below with respect to
Medalist and ITW.
Analysis of Medalist Valuation Premiums. Baird calculated the premium to
holders of Medalist shares of the Per Share Conversion Ratio, with each Medalist
share representing a value of $14.50 (the "Implied Price"), to the closing stock
prices for a Medalist share on January 4, 1996 (two business days prior to the
rendering of the opinion) and on the dates one month, three months and six
months prior thereto, as well as to the daily average closing stock price for
Medalist shares during the latest twelve months and to each of the 52-week high
and low closing prices for Medalist shares. Based upon the Implied Price, Baird
calculated premiums to holders of Medalist shares equal to 136.7% of the closing
stock price for a Medalist share of $6.125 on January 4, 1996; 127.5% of the
closing stock price for a Medalist share of $6.38 one month earlier; 100.0% of
the closing stock price for a Medalist share of $7.25 three months earlier;
134.3% of the closing stock price for a Medalist share of $6.19 six months
earlier; 115.5% of the latest twelve months average closing price for a Medalist
share of $6.73; and 70.6% and 190.0% of the 52-week high and low closing prices,
respectively, for a Medalist share of $8.50 and $5.00.
Analysis of Medalist's Valuation Multiples. Baird calculated multiples of
the "Implied Consideration" (i.e., $86.9 million, obtained by multiplying the
Implied Price by the total number of outstanding Medalist shares and options,
less net proceeds from such stock options) to Medalist's latest twelve months
("LTM") net income (adjusted for a normal tax rate) and its projected net income
(adjusted for a normal tax rate) for calendar years 1995 and 1996 (based on
management's estimates) and multiples of Medalist's "Adjusted Market
Capitalization" (defined as the market value of the common equity plus the book
value of total debt, less excess cash, cash equivalents and an estimated value
for other nonoperating assets) to its LTM revenues, its LTM operating income
before depreciation and amortization, interest and taxes ("EBITDA") and its LTM
operating income ("EBIT"). For this purpose, LTM represents the twelve month
period ended November 30, 1995. The calculations resulted in ratios of the
Implied Consideration to fully taxed net income ("P/E Ratios") of 54.8x based on
LTM results; 53.6x based on projected 1995 results; and 20.2x based on projected
1996 results. Based on the Implied Consideration, the ratio of Adjusted Market
Capitalization to
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LTM revenues was 0.7x, the ratio of Adjusted Market Capitalization to LTM EBITDA
was 8.8x and the ratio of Adjusted Market Capitalization to LTM EBIT was 15.3x.
Analysis of Selected Publicly Traded Medalist Comparable Companies. Baird
reviewed certain publicly available financial information as of the most
recently reported period and stock market information as of January 4, 1996 for
certain selected publicly traded companies which Baird deemed relevant. Such
comparable companies consisted of: Arden Industrial Products, Inc.; Banner
Aerospace, Inc.; Barnes Group, Inc.; Black & Decker Corporation; Chicago Rivet &
Machine Company; Devlieg-Bullard, Inc.; Fastenal Company; Federal Screw Works;
W.W. Grainger, Inc.; Hughes Supply, Inc.; Illinois Tool Works Inc.; Lawson
Products, Inc.; Park-Ohio Industries, Inc.; Penn Engineering & Manufacturing
Corporation; Secom General Corporation; Snap-On, Inc.; SPS Technologies, Inc.;
The Stanley Works; Sun Distributors, L.P.; Textron, Inc.; and Trimas
Corporation. For each comparable company, Baird calculated multiples as of
January 4, 1996 of Adjusted Market Capitalization (defined as the market value
of the common equity plus the book value of total debt, less excess cash and
cash equivalents) to LTM revenues, LTM EBITDA and LTM EBIT. Baird then compared
these multiples to the relevant Medalist multiples based on the Implied Price.
An analysis of the multiples of Adjusted Market Capitalization to LTM revenues,
LTM EBITDA and LTM EBIT yielded 0.7x, 8.8x and 15.3x, respectively, for Medalist
compared to medians of 0.9x, 8.1x and 11.2x, respectively, for Medalist's
comparable companies. For Medalist and each comparable company, Baird also
calculated P/E ratios as of January 4, 1996 based on market stock prices as of
such date and LTM earnings per share and estimated earnings per share (derived
from equity research analysts' reports) for calendar years 1995 and 1996. An
analysis of the P/E Ratios based on earnings per share for LTM, 1995 and 1996
yielded 54.8x, 53.6x, and 20.2x, respectively, for Medalist on a fully taxed
basis compared to medians of 13.4x, 14.2x and 12.9x, respectively, for
Medalist's comparable companies. In rendering its opinion, Baird noted, among
other items, the fact that using the Implied Price the Medalist multiples
compare favorably in that multiples based on Adjusted Market Capitalization were
generally higher, and the Medalist P/E Ratios were significantly higher, than
the corresponding median multiples of the comparable companies.
Analysis of Selected Publicly Traded ITW Comparable Companies. In order to
assess the relative public market valuation of the ITW Common Stock to be
received by Medalist shareholders, Baird reviewed certain financial information
for the twelve months ended September 30, 1995 and stock market information as
of January 4, 1996 for ITW and the ownerscertain publicly available financial information
as of the business or properties to be
acquired, withmost recently reported period and stock market information as of
January 4, 1996 for certain selected publicly traded companies which Baird
deemed relevant. Such comparable companies consisted of: Acme Metals, Inc.;
Dover Corporation; Loctite Corporation; Mead Corporation; Nordson Corporation;
Owens-Illinois, Inc.; Park-Ohio Industries, Inc.; SPS Technologies, Inc.; The
Stanley Works; TRW, Inc.; and Textron, Inc. For ITW taking into accountand each comparable company,
Baird calculated multiples of Adjusted Market Capitalization (defined as the
quality of management,
the past and potential earning power and growthmarket value of the common equity plus the book value of total debt, less excess
cash and cash equivalents) to LTM revenues, LTM EBITDA and LTM EBIT. An analysis
of the multiples of Adjusted Market Capitalization to LTM revenues, LTM EBITDA
and LTM EBIT yielded 1.8x, 9.1x and 11.2x, respectively, for ITW, compared to
medians of 1.0x, 8.1x and 10.8x, respectively, for ITW's comparable companies.
For ITW and each comparable company, Baird also calculated P/E Ratios as of
January 4, 1996 based on market stock prices as of such date and LTM earnings
per share and estimated earnings per share (derived from equity research
analysts' reports) for calendar years 1995 and 1996. An analysis of the P/E
Ratios based on earnings per share for LTM, 1995 and 1996 yielded 18.2x, 17.3x
and 15.3x, respectively, for ITW, compared to medians of 15.9x, 15.2x and 13.5x,
respectively, for ITW's comparable companies. In rendering its opinion, Baird
noted, among other items, the fact that the ITW multiples and P/E Ratios were
generally higher than the medians, but well within the range, of the multiples
of ITW's comparable companies.
Analysis of Selected Comparable Acquisition Transactions. Baird reviewed
selected transactions involving the acquisition of all or part of companies in
businesses which Baird deemed relevant. Such comparable acquisition
transactions, which were consummated between October 1992 and October 1995,
consisted of (acquiror/acquired company): E.I. Textron, Inc./Elco Industries,
Inc.; ADU Inc./Amdura Corporation; Park-Ohio Industries, Inc./RB&W Corporation;
Allegheny Ludlum Corporation/Athlone Industries; and Medalist/Pioneer Screw &
Nut Company. Such transactions were chosen based on a review of acquired
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companies which possessed general business, or propertiesoperating and financial
characteristics representative of companies in the industry in which Medalist
operates. For each comparable transaction, Baird calculated the multiples of
Adjusted Market Capitalization (based on the actual consideration paid for the
equity of the acquired company plus the book value of total debt, less excess
cash and cash equivalents) to be acquired,LTM revenues, LTM EBITDA and otherLTM EBIT; calculated
P/E Ratios based on LTM earnings per share; and calculated the premium paid for
the equity in these transactions over the public market value of the equity at
various times prior to the announcement of such transaction. Baird then compared
those multiples and premiums to the relevant factors,Medalist multiples and it
is anticipated thatpremiums
based on the Implied Price. For the transactions selected, these calculations
yielded multiples of Adjusted Market Capitalization to LTM revenues, LTM EBITDA
and LTM EBIT of 0.7x, 8.8x and 15.3x, respectively, for Medalist, compared to
medians of 0.8x, 7.8x and 11.7x, respectively, for the comparable acquisition
transactions. An analysis of the P/E Ratios based on LTM results yielded 54.8x
for Medalist on a fully taxed basis compared to a median of 24.7x for the
comparable acquisition transactions. An analysis of the Implied Price to the
market value of Medalist shares as of Common Stock issuedJanuary 4, 1996, 30 days and 90 days prior
thereto, compared to the prices paid for the equity in acquisitions
will be valued at a price reasonably relatedeach comparable
acquisition transaction relative to the market value of the equity 1 day, 30
days and 90 days prior to the announcement date of each such transaction,
yielded premiums of 136.7%, 127.5% and 100.0%, respectively, for Medalist,
compared to median premiums of 45.6%, 59.3% and 67.4%, respectively, for the
comparable acquisition transactions. In rendering its opinion, Baird noted,
among other items, the fact that using the Implied Price the Medalist multiples
compare favorably in that multiples based on Adjusted Market Capitalization were
generally higher, and the Medalist P/E Ratios and price premiums were
significantly higher, than the corresponding median multiples and premiums paid
in the comparable acquisition transactions.
Discounted Cash Flow Analysis. Baird performed a discounted cash flow
analysis of Medalist on a stand alone basis using Medalist management's
projections of future EBIT and free cash flow without taking into account cost
savings and synergies which may be realized following the Merger. In such
analysis, Baird assumed terminal value multiples of 7.0x to 9.0x EBIT in the
year 2000 and discount rates of 12% to 14%. In addition, based on estimates
provided by Medalist management, Baird calculated a range of per share value of
certain non-operating net assets (consisting of net operating loss carryforward
and overfunded pension liabilities, net of product liabilities and liabilities
associated with discontinued operations) of $0.64 to $1.75. Such analyses
produced implied values of Medalist shares ranging from $10.11 to $16.77 with a
median value of $13.34.
Pro Forma Merger Analysis. Baird prepared pro forma analyses of the
financial impact of the Merger. Using earnings estimates for ITW (derived from
equity research analysts' estimates) and Medalist (prepared by Medalist's
management) for the year 1996, Baird compared the earnings per share of ITW
Common Stock, on a stand-alone basis, to the earnings per share of the common
stock of the combined companies on a pro forma basis. Baird performed this
analysis based on a price of $57.25 per share of ITW Common Stock (the price of
such stock on January 4, 1996) under a scenario assuming no cost savings and
under a scenario assuming cost savings from the elimination of Medalist's
corporate office expenses. Both analyses indicated that the proposed transaction
would not be dilutive to ITW's stockholders on an earnings per share basis in
fiscal year 1996. Such analysis did not consider the impact associated with
accounting adjustments, transaction related charges or reserves which ITW may
recognize as a result of the Merger.
Exchange Ratio Profile. Baird performed an analysis of the ratio of the
market price of a Medalist Share to the market price of an ITW share during the
period from January 1991 through the first week of January 1996. Baird
calculated the ratio of the Medalist Share closing price for the last trading
day of each week during that five year period to the ITW Share closing price for
such day. These ratios were compared with the implied exchange ratio of 0.25 ITW
Shares to be received for each Medalist Share, based on the Implied Price and an
ITW stock price of $57.25 on January 4, 1996. This analysis yielded an exchange
ratio during the five year period ranging from a low of 0.10 ITW Shares for each
Medalist Share to a high of 0.41 ITW Shares for each Medalist Share, with an
average during the period of 0.24 ITW Shares for each Medalist Share. Baird also
calculated the ratio of the closing price on January 4, 1996 of a Medalist Share
($6.125 per share) to the closing price on such day of an ITW Share ($57.25 per
share). This yielded an exchange ratio of 0.11 ITW Shares for each Medalist
Share.
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Other Factors. In rendering its opinion, Baird considered certain other
factors, of which the material factors included, analyses of the maximum price
an acquiror could pay for Medalist (i) in a leveraged transaction, based on the
achievement of benchmark returns for debt and equity investors and financing
terms generally available in the current market environment and (ii) in a
cash-for-stock taxable transaction, without incurring earnings dilution in 1996.
Each of these analyses did not take into account cost savings and/or synergies
that might be available to a new owner of Medalist. In each case, the Implied
Price exceeded the values generated by these analyses.
The foregoing summary does not purport to be a complete description of the
analyses performed by Baird or of its presentations to the Medalist Board. The
preparation of financial analyses and a fairness opinion is a complex process
and is not necessarily susceptible to partial analysis 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 of the
factors considered by Baird, without considering all of such analyses and
factors, could create an incomplete view of the processes underlying the
analyses conducted by Baird and its opinion. Baird did not attempt to assign
specific weights to particular analyses. Any estimates contained in Baird's
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.
Baird, as part of its investment banking business, is continually 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. Medalist retained Baird
because of its experience and expertise in the valuation of businesses and their
securities in connection with mergers and acquisitions. In the ordinary course
of business, Baird may from time to time trade equity securities of Medalist and
ITW for its own account and for accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
Compensation. Pursuant to an engagement letter agreement dated December
28, 1995 between Medalist and Baird, Medalist agreed to pay Baird a retainer fee
of $25,000 and a fee of $125,000, payable upon delivery of its opinion,
regardless of the conclusions reached by Baird in such opinion and regardless of
whether any transaction is consummated. Medalist has also agreed to reimburse
Baird for its reasonable out-of-pocket expenses, including reasonable fees and
disbursements of counsel. Medalist has also agreed to indemnify Baird, its
affiliates and their respective directors, officers, employees and agents and
controlling persons against certain liabilities relating to or arising out of
its engagement, including liabilities under the federal securities laws. In the
past, Baird has provided investment banking services to Medalist, including
acting as lead manager in connection with the public offering of Medalist Common
Stock in 1993, for which Baird received customary compensation.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Medalist Board of Directors with
respect to the Merger, shareholders should be aware that certain members of the
Board of Directors and the Company's management have interests which may present
them with actual or potential conflicts of interest.
Medalist has an employment agreement with James S. Dahlke, its President
and CEO and a member of its Board of Directors, which provides that in the event
of termination without cause or on a "Change of Control of the Board" (as
defined in the agreement), in exchange for a release Mr. Dahlke will have the
right to receive continued medical benefits plus an amount equal to his base
salary (currently $225,000) for one year following his termination (or in the
case of termination without cause, the later of May 15, 1997 or one year
following his termination). Medalist also has an agreement with William C.
O'Loughlin, its Vice President and Secretary, pursuant to which Mr. O'Loughlin
is entitled to receive severance benefits equal to one year's base salary in the
event of a change in control of Medalist, such as the Merger, and either athis
termination of employment within eighteen months of the change in control or his
resignation with Good Reason (as defined in the agreement). Mr. O'Loughlin's
current salary is $98,385. The Company interprets its
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agreements with Messrs. Dahlke and O'Loughlin to also require payment for any
unused vacation time and any unpaid 1995 compensation. Messrs. John T. Paprocki
and James G. Gumm are each parties to a Continuing Employment and Severance
Agreement with the Company. Those agreements provide that in exchange for a
release (a) if the executive does not voluntarily terminate employment prior to
any Business Combination Transaction as defined therein (such as the Merger)
plus, if requested by an acquiror, an additional transition period of up to 90
days, (b) if such a Business Combination Transaction occurs before June 14,
1996, and (c) if the executive's employment is terminated for any reason within
90 days thereafter, each executive will be entitled to severance benefits in an
amount equal to one year's annual salary (currently $137,500 and $98,900 for
Messrs. Paprocki and Gumm, respectively) plus medical and dental benefits,
unused vacation time and any 1995 incentive compensation. The agreements with
Messrs. Dahlke and O'Loughlin were entered into prior to any consideration of
the Merger. The agreements with Messrs. Paprocki and Gumm were entered into by
Medalist after negotiations with ITW had begun in order to give them an
incentive to remain with the Company throughout the negotiations and pendency of
any merger and through an appropriate transition period thereafter.
In addition to these interests, the Company's directors and executive
officers each hold options to acquire Medalist stock. Under the terms of the
Merger Agreement, holders of options will be entitled to receive an amount of
ITW Common Stock valued (in accordance with the Merger Agreement and on the same
basis as outstanding Medalist shares) at the amount by which the Company
Valuation of $14.50 per share exceeds the exercise price of their options. These
amounts are payable for all options outstanding on the Effective Time of the
Merger, whether or not the options are fully vested and currently exercisable.
The Company's outside directors hold options for an aggregate of 44,214 shares
with an aggregate "spread" (based on the $14.50 Merger Consideration) of
approximately $253,400. Medalist's executives and key employees currently hold
options for an aggregate of 117,000 shares with an aggregate "spread" of
approximately $810,125.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, Medalist's current shareholders will not have an
opportunity to continue their equity interest in the Company as an ongoing
corporation, but they will have an opportunity to participate in the earnings
and growth of ITW through their receipt and ownership of ITW shares pursuant to
the Merger.
Upon consummation of the Merger, ITW will own all of the outstanding shares
of Medalist and will be entitled to all the benefits and be subject to all the
risks that will result from such ownership. Upon consummation of the Merger,
Medalist shares will no longer be traded on the Nasdaq National Market and the
registration of Medalist shares under the Exchange Act will be terminated.
Additionally, upon termination of the registration of the Medalist shares under
the Exchange Act, the Medalist shares will no longer constitute "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached as Exhibit A to this Proxy Statement/Prospectus. Such
summary is qualified in its entirety by reference to the full text of the Merger
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.
THE MERGER
The Merger Agreement provides that, subject to the approval by the holders
of two-thirds of Medalist's Shares outstanding on the Record Date, and upon the
satisfaction or waiver of certain other conditions set forth in the Merger
Agreement, Newco will be merged with and into Medalist, which will be the
surviving corporation of the Merger and will become a wholly owned subsidiary of
ITW. At the Effective Time, each outstanding share of Medalist Common Stock,
other than shares held by the ITW Buying Group and shares held by the Company as
treasury stock, will be converted into the right to receive the Merger
Consideration upon surrender of the certificate representing such share. Cash
will be paid in lieu of fractional ITW shares. At the Effective Time, each
Medalist share held by the ITW Buying Group (if any) will be canceled and will
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cease to exist without payment of any consideration therefor. Subject to the
receipt of any necessary consents from the holders thereof, each outstanding
employee and director option for Medalist shares (whether or not then
exercisable) will be canceled and converted into the right to receive ITW shares
valued at the difference between the Company Valuation of $14.50 per share and
the price per share payable upon the exercise of such option. At the Effective
Time, each outstanding share of Common Stock of Newco will be converted into one
share of Common Stock of the surviving corporation to the Merger.
If the Merger Agreement is approved by the required vote of the
shareholders and if the other conditions to the Merger are satisfied or waived,
the Merger will become effective when Articles of Merger are filed with the
Secretary of State of Wisconsin. It is currently contemplated that such
Effective Time will be as soon as practicable after the approval and adoption of
the Merger Agreement by the Company's shareholders (subject to compliance with,
or waiver of, the other conditions contained in the Merger Agreement).
REQUIRED VOTE
Except as described in the next paragraph, under the Company's Articles of
Incorporation and the Wisconsin Business Corporation Law the Merger will be
approved only if it receives the affirmative vote of the holders of at least
two-thirds ( 2/3) of the outstanding shares of Medalist Common Stock. No vote of
ITW shareholders is required, or will be sought, to consummate the transaction.
Notwithstanding the general rule described above, Sections 180.1130 to
180.1134 of the WBCL require that certain business combinations with a
"significant shareholder" (i.e., a person that beneficially owns 10% or more of
the voting power of the outstanding shares) must either (a) satisfy certain
conditions relating to the price and form of consideration paid by the
significant shareholder or (b) be approved by at least 80% of the votes required
to be cast by the outstanding voting shares, including at least two-thirds
( 2/3) of the votes entitled to be cast by holders who are not affiliated with
the significant shareholder. This provision will apply to the Merger only if ITW
becomes a "significant shareholder" as defined above before the Merger is
consummated. ITW currently owns no Medalist shares and has indicated that it has
no present intention to acquire any Medalist shares, and in particular that it
does not intend to become a "significant shareholder," such that the Merger
would be subject to these statutory provisions.
As of both January 8, 1996 and April 11, 1996, directors and officers of
Medalist and their affiliates beneficially owned 6.1% of the outstanding Shares
entitled to vote at the Special Meeting (excluding shares which such persons
have the right to acquire upon the exercise of stock options). See "CERTAIN
INFORMATION REGARDING MEDALIST -- Stock Ownership of Management and Principal
Shareholders." All of such persons have indicated that they intend to vote FOR
the Merger. The directors and executive officers of ITW and their affiliates
beneficially owned no such Shares, and ITW and its subsidiaries owned no such
Shares.
EXCHANGE OF SHARES
Promptly after the Effective Time of the Merger, Harris Trust Company of
New York, the Exchange Agent under the Merger Agreement (the "Exchange Agent")
will mail to each record holder of an outstanding certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Medalist Common Stock (the "Certificates"), a form letter of transmittal and
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing ITW stock plus cash in lieu of fractional shares.
SHAREHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES WITH THEIR PROXY CARDS.
Upon surrender to the Exchange Agent of a Certificate, together with such letter
of transmittal duly executed and any other required documents, the holder of
such Certificate will be entitled to receive in exchange therefor that number of
whole shares of ITW Common Stock into which such holder's shares of Medalist
Common Stock were converted and, if applicable, payment for any fractional
shares in cash (without interest) in an amount equal to the Average Closing
Price multiplied by the fraction of a share of ITW Common Stock the holder would
otherwise be entitled to receive. Until so surrendered for exchange, each
Certificate shall represent for all purposes solely the right to receive the
Merger Consideration, without any interest thereon. One Hundred and Eighty (180)
days after the Effective Time all shares of ITW Common Stock, and all
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dividends and other distributions on ITW Common Stock, which have been received
by the Exchange Agent and shall not have been distributed to the former
shareholders of Medalist, will be returned to ITW or its agent, after which time
former shareholders of Medalist, subject to applicable law, shall look only to
ITW for the exchange of shares, the amount (without interest) of any dividends
or distributions which may have become payable and the amount (without interest)
of any payment due on account of fractional shares of ITW stock.
After the close of business on the day prior to the Effective Time, there
shall be no transfers on the stock transfer books of Medalist of the outstanding
Shares. If, after the Effective Time, Certificates are presented to the
surviving corporation, they shall be canceled in exchange for ITW stock (and
cash in lieu of fractional shares) as provided above.
CONDITIONS OF THE MERGER
The Merger will occur only if the Merger Agreement and all other matters
necessary to effect the transactions provided for therein are approved at the
Special Meeting by the requisite vote of shareholders of the Company, in
accordance with applicable law. In addition, the obligations of ITW, on the one
hand, and Medalist, on the other, to consummate the transactions contemplated by
the Merger Agreement are subject to the satisfaction of certain conditions (any
of which may be waived by the party or parties entitled to the benefit thereof),
including (i) the absence of any order or injunction directing that the
transactions contemplated by the Merger Agreement not be consummated, (ii) the
receipt of all necessary governmental consents and approvals required for
consummation of the Merger and the transactions contemplated thereby, and the
waiting periods under the HSR Act having expired or been terminated, (iii) the
continued effectiveness of the registration statement covering the ITW shares to
be issued pursuant to the Merger and the absence of any stop order by the
Commission with respect thereto, (iv) the approval for listing on the NYSE of
the shares of ITW Common Stock to be issued pursuant to the Merger, (v) the
accuracy of the representations and warranties of each party to the Merger
Agreement, (vi) the performance by the other party in all material respects of
all obligations required to be performed by it under the Merger Agreement, (vii)
the execution and delivery of a supplemental indenture with respect to
Medalist's outstanding Debentures, (viii) the receipt of certain tax and
securities representation letters by affiliates of Medalist and (ix) the receipt
of certain customary closing certificates and legal opinions.
The HSR Act provides that certain transactions may not be consummated
unless certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied. The consummation of the Merger is subject to such requirements. The
regulations promulgated by the FTC under the HSR Act require that Notification
and Report Forms (the "Forms") be filed by Medalist and ITW with the Antitrust
Division and the FTC with respect to the Merger, which may not be consummated
until thirty days after receipt of the Forms by the Antitrust Division and the
FTC, unless the thirty-day waiting period is earlier terminated or extended by
the FTC or the Antitrust Division. ITW and Medalist filed the Forms with the FTC
and the Antitrust Division relating to the Merger on January 26, 1996, and early
termination of the required waiting period was granted on February 7, 1996.
Except as described above, Medalist is not aware of any license or
regulatory permit that is material to its business that might be adversely
affected by the Merger, nor of any approval or other action by any governmental,
administrative or regulatory agency or authority that would be required prior to
the Merger, other than certain filings under state securities laws required for
the registration of the ITW Common Stock to be issued pursuant to the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations, warranties, covenants and
agreements by each of the parties regarding, among other things, their
organization, authority to enter the transaction, requisite consents and
approvals. In addition, Medalist makes certain representations and warranties
regarding, among other things, its capitalization, the contents and submission
of forms and reports, litigation, employment agreements, employee benefit plans,
tax matters, compliance with applicable laws, title to its properties and
environmental
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matters. The representations and warranties of each of the parties to the Merger
Agreement will expire upon consummation of the Merger.
COVENANTS
In the Merger Agreement, the Company has agreed that it will conduct its
business in the ordinary course, seek to preserve its current business
organization, seek to keep available the services of its current officers and
employees, and seek to preserve its relationships with customers and suppliers.
In addition, the Company has agreed to a number of specific limitations
respecting its activities prior to the Effective Time of the Merger. Except as
contemplated by or provided in the Merger Agreement or as otherwise agreed by
ITW, Medalist has promised that it will not, among other things, issue or sell
any shares or other securities convertible into shares, redeem, purchase or
otherwise acquire outstanding shares, pay any dividend, adopt any plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, or recapitalization, adopt any amendments to its Articles of
Incorporation or Bylaws or alter in any other fashion its corporate structure,
make any material acquisition, grant any material increases in the compensation
of its directors, officers or key employees, or incur any indebtedness for
borrowed money or guarantee any indebtedness or become obligated under any new
pension or other employee benefit plan, except in each case actions taken in the
ordinary course of business and in accordance with past practice.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
In the Merger Agreement, the parties have agreed that the Bylaws of the
surviving corporation in the Merger will contain the provisions with respect to
indemnification set forth in Medalist Bylaws as of the date of the Merger
Agreement, which provisions may not be amended, repealed or modified for a
period of four (4) years after the Effective Time of the Merger in any manner
which would adversely affect the rights of persons who prior to the Effective
Time of the Merger were officers or directors of Medalist in respect of actions
or omissions occurring prior to the Effective Time of the Merger, except as may
be required by law, and that if any claim or claims are tentatively agreed uponasserted within that
four year period, all rights to indemnification in respect of those claims will
continue until disposition thereof. ITW also promised to cause to be maintained
on behalf of Medalist's present or former directors and officers for not less
than three years the policies of director and officer liability and fiduciary
liability insurance with respect to matters occurring at or aboutprior to the
timeEffective Time which are no less advantageous in any material respect than the
current policies.
NO SOLICITATION
The Merger Agreement provides that the Company and its officers may not
initiate or timescontinue discussions or negotiations in respect of deliveryany of the
shares.
Withfollowing events (a "Third Party Acquisition"): (i) the acquisition of Medalist
by merger, consolidation or other business combination transactions by anyone
other than ITW or its affiliates (a "Third Party"); (ii) the acquisition by any
Third Party of, or any divestiture or other transaction resulting in Medalist
owning less than, fifty percent (50%) or more (in book value or market value) of
its total assets as of the date of the Merger Agreement; (iii) the acquisition
by a Third Party of fifty percent (50%) or more of the outstanding shares of
Medalist, whether by tender offer, exchange offer or otherwise; or (iv) the
adoption by the Company of a plan of liquidation or recapitalization or the
declaration of payment of any extraordinary dividend. Medalist may, however,
furnish information and access in response to requests that were not solicited
by Medalist after the date of the Merger Agreement to any entity pursuant to
confidentiality agreements and may participate in discussions and negotiate with
such entities or groups concerning any merger, sale of assets, sales of stock or
similar transactions involving the Company or a division of the Company if (a)
that entity or group has submitted a bona fide written proposal to Medalist's
Board of Directors relating to the transaction and (b) Medalist's Board of
Directors determines, in its good faith reasonable judgment after consultation
with Medalist's counsel, that failing to take such action would be a breach of
the Board of Directors' fiduciary duties to the Company shareholders or other
constituencies under applicable law. Medalist is required to notify promptly ITW
of any such proposal or offer, or inquiry or contact, indicating in reasonable
detail the identity of the offeror and the terms and conditions of any proposal,
and to keep ITW promptly advised of developments which could reasonably be
expected to culminate in the
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Board of Directors withdrawing, modifying or amending its recommendation of the
Merger to the shareholders.
AMENDMENT
Subject to the provisions of the WBCL, the Merger Agreement may be amended
by the written agreement of the parties at any time prior to the Effective Time.
After approval of the Merger Agreement by Medalist shareholders, however, the
Merger Agreement may not be amended to change the consideration payable to
Medalist shareholders in the Merger or in any way which would adversely affect
their rights without further approval of such shareholders.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after approval by
Medalist shareholders, by the mutual written consent of ITW and Medalist. In
addition, the Merger Agreement may be terminated and the Merger may be
abandoned:
(i) by either Medalist or ITW if any court of competent jurisdiction
or any other governmental body or regulatory authority has acted to
permanently restrain, enjoin or otherwise prohibit the Merger and such
action has become final and nonappealable;
(ii) by either Medalist or ITW, if the Merger shall not have become
effective prior to June 1, 1996;
(iii) by either Medalist or ITW, in the event that the other fails to
perform in any material respect any of its material obligations and the
failure cannot be cured prior to June 1, 1996;
(iv) by either Medalist or ITW, in the event that the representations
or warranties of the other shall not have been true and correct except, in
any case, such failures which in the aggregate do not have a significantly
material adverse effect regarding Medalist (i.e., $2 million or more) or
are not reasonably likely to adversely affect the ability of ITW or Newco
to complete the Merger, provided that such failure is incapable of being
cured prior to June 1, 1996; or
(v) by either party, if Medalist's Board of Directors withdraws or
materially modifies or changes its favorable recommendation of the Merger,
provided that Medalist may terminate on this Prospectus may alsobasis only if there exists at
such time a proposal for a Third Party Acquisition and the Medalist Board
of Directors after consultation with Medalist counsel determines that the
failure to take such action would be useda breach of its fiduciary duties to
the Company's shareholders or other constituencies under applicable law,
and provided that Medalist has paid to ITW a termination fee of $1,650,000
and has paid ITW $300,000 for its expenses (provided that ITW agrees to
refund any excess of such amount for expenses over actual expenses).
TERMINATION FEE AND EXPENSES
The Merger Agreement provides that if it is terminated because the Merger
has not become effective prior to June 1, 1996 or if it is terminated by either
party because Medalist's Board of Directors has withdrawn its favorable
recommendation of the Merger, and within twelve months thereafter a Third Party
Acquisition occurs or there is a letter of intent or public announcement of
intent to effect a Third Party Acquisition, or if any person or group effects a
tender or exchange offer which will result in such persons or group owning more
than twenty percent (20%) of the outstanding shares or substantially all of the
assets for a consideration greater than $14.50 per Medalist Share and the
agreement shall have been terminated for one of the reasons specified above,
Medalist is required to pay ITW promptly a fee of $1,650,000, plus all of ITW's
out-of-pocket expenses and fees up to $300,000 in the aggregate.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Quarles & Brady, counsel to Medalist, has given its opinion concerning
certain tax consequences of the Merger, a copy of which has been filed as an
Exhibit to the Registration Statement. The opinion does not address the tax
consequences of the Merger to a holder of Debentures or of the conversion of
Debentures. The opinion does not address the federal income tax consequences
applicable to special classes of taxpayers including, without limitation,
foreign persons, tax-exempt entities, retirement plans, financial institutions,
persons holding options to purchase Medalist Common Stock under Medalist's 1990
and 1994 Stock Option Plans, and persons who acquired their shares of Medalist
Common Stock pursuant to the exercise of employee options or otherwise as
compensation. The opinion also does not address any state, local or foreign
income, property, transfer or other tax consequences of the Merger. The tax
opinion is based upon certain customary representations and assumptions
(including satisfaction of the continuity of interest requirement). The
obligation of the parties to consummate the Merger is not subject to the receipt
of a tax opinion in respect thereof. No rulings have receivedbeen or will receivebe requested
from the Internal Revenue Service as to the federal income tax consequences of
the Merger. The opinion of counsel is not binding on the Internal Revenue
Service and the Internal Revenue Service is not precluded from taking a
different position. The opinion is based on the federal income tax laws in
effect on the date of the opinion, and there can be no assurance that future
legislation, regulations, administrative rulings or pronouncements or court
decisions will not adversely affect the accuracy of the opinions contained
therein.
According to the opinion of Quarles & Brady, the Merger will qualify as a
"reorganization" for federal income tax purposes under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code, and as a result thereof:
(a) the Merger will not result in recognition of gain or loss by
Medalist, ITW or Newco;
(b) no gain or loss will be recognized by a Medalist shareholder who
receives solely shares of ITW Common Stock coveredin exchange for shares of
Medalist Common Stock;
(c) the aggregate basis of the shares of ITW Common Stock received by
this Prospectusa Medalist shareholder in the transaction (including any fractional share
interest) will be the same as the basis of the shares of Medalist Common
Stock surrendered in exchange therefor;
(d) the holding period of the shares of ITW Common Stock received by a
Medalist shareholder in the exchange (including any fractional share
interest) will include the holding period for the shares of Medalist Common
Stock exchanged therefor, provided the Medalist shares are held as capital
assets as of the Effective Date;
(e) a Medalist shareholder who receives cash in the Merger in lieu of
fractional share interests in ITW Common Stock will be treated for federal
income tax purposes as if the fractional shares were issued in the
transaction and then redeemed by ITW. These cash payments will be treated
as having been received as distributions in full payment in exchange for
the stock redeemed as provided in Section 302(a) of the Code. A Medalist
shareholder will recognize capital gain or by prospectuses under
other registration statementsloss thereon, provided the
shares of Medalist Common Stock surrendered for such fractional share
interests are held as capital assets as of the Effective Date, in an amount
equal to the difference between the amount of cash received and the portion
of such shareholder's adjusted tax basis in the shares of Medalist Common
Stock allocable to such fractional share interests. Such capital gain or
loss will be long-term capital gain or loss if the holding period for such
shares is more than one year.
The following summary also discusses certain federal income tax
consequences of the Merger. This summary is provided for general information
only and is also based upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the applicable regulations thereunder, judicial
authority and current administrative rulings and practices as of the date
hereof.
Medalist has outstanding 7 1/2% Convertible Subordinated Debentures due
July 1, 2001 which are convertible into shares of Medalist Common Stock at
$18.75 per share (the "Debentures"). Pursuant to the First Supplemental
Indenture, to be executed in connection with acquisitions and
who may wishthe Merger, the Debentures will
entitle their holders to sell such stock under circumstances requiring or
making desirable its use. ITW's consent to such use may be
conditioned upon such persons' agreeing not to offer more than a
specifiedacquire, in lieu of shares of Medalist Common Stock,
the number of shares following amendments to this
Prospectus,of ITW Common Stock
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into which ITW may agree to use its best efforts to
prepare and file at certain intervals. ITW may require that any
such offering be effectedthe shares of Medalist Common Stock would have been converted in an organized manner through
securities dealers. Sales by means of this Prospectusthe
Merger. This change may be made privately from time to time at pricesconsidered a deemed exchange for federal income tax
purposes of the Debentures for new convertible securities. If the change is
considered to be individually
negotiated witha deemed exchange, such exchange should be considered a tax-
free exchange pursuant to Section 354 of the purchasersCode, provided that the Debentures
are "securities" within the meaning of Section 354 of the Code. A deemed
exchange of the Debentures for new convertible debentures may have other federal
income tax consequences to the holders of the Debentures, such as the creation
of original issue discount. If after the Merger a holder of Debentures exercises
the right to exchange such Debentures into ITW Common Stock, such holder will
recognize gain or publicly through transactionsloss on the New York or Chicagoexchange equal to the difference between the fair
market value of such ITW Common Stock Exchanges (which may involve
crosses and block transactions) orsuch holder's adjusted basis in the
over-the-counterexchanged Debentures. If Medalist or ITW purchases some or all of the Debentures
after the Merger, each holder of such Debentures will recognize gain or loss on
the sale equal to the difference between the amount realized by the holder and
the holder's adjusted basis in the redeemed Debentures. The amount realized by
each such holder of Debentures will equal the sum of the cash received and the
fair market value of any other property received in the sale.
The applicable Treasury Regulations require a Medalist shareholder who
receives shares of ITW Common Stock in the Merger to include in the
shareholder's tax return for the taxable year in which the Merger occurs a
complete statement of all facts pertinent to the shareholder's nonrecognition of
gain or loss in the Merger, including the basis in the shares of Medalist Common
Stock surrendered in the Merger and the amount of shares of ITW Common Stock
received in the Merger. In addition, the Medalist shareholder must keep
permanent records in order to determine gain or loss on the subsequent
disposition of the shares of ITW Common Stock received in the Merger.
Backup withholding at prices reasonably relatedthe rate of 31% may apply to market pricesthe proceeds from the
taxable sale, exchange or other disposition by a Medalist shareholder of shares
of Medalist Common Stock or fractional share interests of ITW Common Stock,
unless the shareholder is a corporation or other exempt recipient or provides
certain certifications, including a correct taxpayer identification number.
Backup withholding is not an additional tax; rather, the amount withheld is
creditable against the shareholder's federal income tax liability.
THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED ABOVE DEPEND UPON EACH
MEDALIST SHAREHOLDER'S PARTICULAR TAX STATUS, AND FURTHER DEPEND ON FEDERAL
INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE SUBJECT TO CHANGE
(WHICH CHANGES MAY BE RETROACTIVE IN EFFECT). ACCORDINGLY, EACH MEDALIST
SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR FOR A
COMPLETE DESCRIPTION OF THE TAX CONSEQUENCES TO SUCH SHAREHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME, PROPERTY,
TRANSFER OR OTHER TAX LAWS.
RESALE OF ITW COMMON STOCK
The shares of ITW Common Stock to be issued to shareholders of Medalist in
the Merger have been registered under the Securities Act and may be freely
traded by shareholders who, at the time of sale orthe Special Meeting, are not
"affiliates" of Medalist (and are not affiliates of ITW at negotiated prices. Broker-dealers participating in
such transactionsthe time of a
proposed resale).
Under the Securities Act, ITW shares received by affiliates of Medalist may
act as agent or as principal and, when
acting as agent, may receive commissions from the purchasers as
well as from the sellers (if also acting as agent for the
purchasers). ITW may indemnify any broker-dealer participating
in transactions against certain liabilities, including
liabilitiesbe resold by them only (i) pursuant to a further registration under the
Securities Act. Profits, commissions and
discounts on sales by personsAct of the shares to be sold, (ii) in conformity with the resale
provisions of Rule 145, or (iii) in accordance with another available exemption
from the registration requirements. ITW's obligation to consummate the Merger is
conditioned upon the receipt of an executed Affiliate Agreement to comply with
such resale restrictions from each person who may be deemed to be underwritersan "affiliate"
of Medalist within the meaning of the Securities Act may be
deemed underwriting compensation under that Act.
Stockholders may also offerand Rule 145 and to whom
shares of stockITW Common Stock are issued in past and
future acquisitions by means of prospectusesthe Merger. An "affiliate" is defined
under other
registration statements orthe rules promulgated pursuant to exemptions from the
registration requirements of the Securities Act including sales
which meetas a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, Medalist. For this purpose, ITW
will treat each executive officer and each director of Medalist as an
"affiliate," and shares of ITW Common Stock issued to such persons in the requirementsMerger
will be transferable only in compliance with the Affiliate Agreement. ITW is not
obligated to register ITW Common Stock owned by affiliates of Rule 145(d)Medalist under the
Securities Act for resale. Those persons who have been identified as affiliates
of Medalist have been so advised.
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ACCOUNTING TREATMENT
The Agreement contemplates that the Merger will be treated as a "pooling of
interests" for accounting purposes.
RIGHTS OF DISSENTING SHAREHOLDERS
The Wisconsin Business Corporation Law generally does not afford
dissenter's rights to the holders of shares that are quoted on the Nasdaq
National Market, such as the Medalist. However, if the Merger is a business
combination subject to the adequacy of price provisions of Section 180.1130 to
180.1134 of the WBCL described below under the heading "COMPARISON OF
SHAREHOLDER RIGHTS -- Certain Statutory Provisions," dissenter's rights will be
available to Company shareholders who comply with certain procedural
requirements and stockholders should seekwill entitle them to receive the advice"market value" of their shares
as defined in the statute. In the case of the Merger, "market value" would mean
the highest closing sales price per share of Medalist stock quoted on the Nasdaq
National Market during the 30-day period proceeding the Merger "date on which
market value is to be determined."
ITW has indicated that it does not intend to acquire, directly or
indirectly, beneficial ownership of any Medalist stock before the Merger, in
which event the adequacy of price provisions will not apply and dissenter's
rights will not be available. In the unlikely event that the Merger becomes
subject to the adequacy of price provisions, this Proxy Statement/Prospectus
will be supplemented to describe those developments and the dissenter's rights
then available. Holders of Medalist stock will receive an additional proxy card
with such supplement, and the shareholders meeting will be adjourned or
postponed if necessary to provide at least 15 days' notice of this development
during which shareholders may reconsider the options then available to them.
COMPARISON OF SHAREHOLDER RIGHTS
ITW is incorporated in the State of Delaware under the Delaware General
Corporation Law ("DGCL") and Medalist is incorporated in the State of Wisconsin
under the Wisconsin Business Corporation Law ("WBCL"). Medalist shareholders
will, upon consummation of the Merger, become shareholders of ITW and their
rights will be governed by ITW's Restated Certificate of Incorporation (the "ITW
Certificate") and By-laws (the "ITW By-laws"). Neither the directors nor the
executive officers of ITW will change as a result of the transaction.
Certain material differences between the rights of shareholders of ITW and
Medalist are set forth below. This summary is not intended to be relied upon as
an exhaustive list or detailed description of the provisions discussed and is
qualified entirely by the DGCL, the WBCL, the ITW Certificate, ITW By-laws, the
Medalist Amended and Restated Articles of Incorporation (the "Medalist
Articles") and the Medalist Amended and Restated Bylaws (the "Medalist Bylaws")
to which Medalist shareholders are referred.
AUTHORIZED SHARES OF CAPITAL STOCK
The ITW Certificate authorizes the issuance of (i) 150,000,000 shares of
Common Stock without par value, (ii) 300,000 shares of Preferred Stock, none of
which have been issued. As of March 5, 1996, there were outstanding (a)
122,395,312 shares of ITW Common Stock, and (b) employee options to purchase an
aggregate of 2,498,318 shares of Common Stock.
The authorized capital stock of Medalist consists of (a) 10,000,000 shares
of Common Stock, par value $1.00 per share, (b) 10,000 shares of Preferred
Stock, $100 par value, and (c) 20,000 shares of Preferred Stock, $50 par value.
As of the Record Date (April 11, 1996), 3,898,281 shares of Medalist Common
Stock and no shares of Medalist Preferred Stock were issued and outstanding. In
addition, as of that date 161,214 shares of Medalist Common Stock were reserved
for issuance pursuant to outstanding stock options and 413,867 shares of
Medalist Common Stock were reserved for issuance upon conversion of outstanding
convertible debentures.
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Based upon the number of shares outstanding as noted above and the effect
of current ITW market prices and the $14.50 Company Valuation on the conversion
ratio for Medalist shares in the Merger, upon consummation of the Merger former
shareholders are expected to own counselapproximately 0.7% of the outstanding ITW
Common Stock.
VOTING RIGHTS AND VOTING POWER
Pursuant to the Medalist Articles and except as otherwise provided by
Section 180.1150(2) of the WBCL (described below), each holder of Medalist
Common Stock is entitled to one vote on all matters voted on by shareholders.
Holders of ITW Common Stock are entitled to one vote per share in the election
of directors and on any other question arising at any shareholders meeting,
voting as a single class.
CERTAIN STATUTORY PROVISIONS
Section 180.1150(2) of the WBCL provides that the voting power of shares of
public corporations, such as Medalist, which are held by any person holding in
excess of 20% of the voting power of such company, shall be limited to such 20%
plus 10% of the voting power of shares in excess of 20%. This statutory voting
restriction is not applicable to shares acquired from Medalist, shares as to
which the shareholders vote to restore the full voting power, and under certain
other circumstances more fully described in section 180.1150(3). The DGCL does
not have a comparable provision and thus this restriction will not apply to ITW
Common Stock acquired in the Merger.
Sections 180.1130 to 180.1134 of the WBCL provide that certain business
combinations not meeting specified adequacy-of-price standards must be approved
by the vote of at least 80% of the votes entitled to be cast by shareholders and
by two-thirds ( 2/3) of the votes entitled to be cast by shareholders other than
a significant shareholder who is a party to the transaction (or the significant
shareholder's affiliates). The term "business combination" is defined to
include, subject to certain exceptions, a merger or consolidation of the public
company (or any subsidiary) with, or the sale or other disposition of
substantially all assets of the public company to, any significant shareholder
or affiliate thereof. "Significant shareholder" is defined generally to include
a person that is the beneficial owner of 10% or more of the voting power of the
common stock, excluding shares subject to an option issued by the public
company. Any acquisitions by ITW or its affiliates of 10% or more of the
Medalist Common Stock would trigger these provisions. Although the DGCL does not
contain a corresponding supermajority provision, the ITW Certificate contains a
supermajority and "fair price" provision as described below.
Sections 180.1140 to 180.1145 of the WBCL provide that a "resident domestic
corporation" such as Medalist may not engage in a "business combination" with an
"interested stockholder" (a person beneficially owning 10% or more of the
aggregate voting power of the stock of Medalist) for three years after the date
(the "stock acquisition date") the interested stockholder acquired his 10% or
greater interest, unless the business combination (or the acquisition of the 10%
or greater interest) was approved before the stock acquisition date by
Medalist's board of directors. The Merger was so approved. After the three-year
period, a business combination that was not so approved can be consummated under
the WBCL only if it is approved by a majority of the outstanding voting shares
not held by the interested stockholder or is made at a specified formula price
intended to provide a fair price for the shares held by noninterested
stockholders. Section 203 of the DGCL contains substantially comparable
provisions. Unlike the WBCL, however, the DGCL permits an "interested
stockholder" to proceed with a "business combination" if, upon consummation of
the transaction which resulted in the stockholder becoming an "interested
stockholder," the stockholder owns at least 85% of the outstanding voting stock,
excluding shares owned by directors and officers and certain other shares. Also,
among other differences, the DGCL does not have approval or "fair price"
requirements after the three-year period.
In addition to provisions in the WBCL, Wisconsin has a Corporate Take-Over
Law (Wisconsin Statutes Ch. 552) ("WTL") which applies to any corporation: (i)
incorporated in Wisconsin or having its principal office in Wisconsin; (ii)
which has substantial assets in Wisconsin; (iii) which has stock registered
under certain provisions of Wisconsin law or under Section 12 of the Exchange
Act; and (iv) which has, as
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Wisconsin residents, either 5% or more of the record holders of its registered
securities or at least 100 such holders. Medalist is subject to the WTL. Any
persons acquiring 5% or more of the equity securities of a corporation subject
to the WTL must file a statement with the Wisconsin Commissioner of Securities
within 10 days of the acquisition containing essentially the same information
required under Section 13(d) of the Exchange Act (a Federal Schedule 13D may be
filed with the State to satisfy the requirement). An amendment must be filed
upon occurrence of any material change. Additionally, a tender offer must be
registered, but generally only if 51% of the target's registered securities are
held by Wisconsin residents or if 33% of the target's registered securities are
held by Wisconsin residents and its principal office is in Wisconsin and its
business or operations have a substantial economic effect in Wisconsin. The
Wisconsin Commissioner of Securities may summarily delay the effective date of a
tender offer required to be registered if the Commissioner determines that the
required information has not been provided. Also, the Commissioner or the target
company may call a hearing relating to the tender offer (to determine the
adequacy of disclosures, equal treatment of shareholders, etc.). Soliciting
materials published by the offeror or target company must be filed with the
State. The WTL also contains provisions covering fraudulent and deceptive
practices, pricing (e.g., equal treatment for Wisconsin and non-Wisconsin
residents, etc.), injunctive relief, and criminal and civil penalties. Neither
the DGCL nor other Delaware statutes contain comparable provisions.
CERTAIN CHARTER AND BYLAW PROVISIONS
Although it is not practical to compare all of the provisions of the ITW
Certificate and the ITW By-laws with the Medalist Articles and Medalist Bylaws,
the following is a summary of a comparison of certain provisions which may be
important to Medalist shareholders.
DIRECTORS
ITW. The ITW Certificate provides that the Board of Directors of ITW shall
consist of not less than three nor more than twenty directors (subject to any
rights of the holders of shares of any series of ITW Preferred Stock to elect
additional directors), with the initial number of directors being fixed at
thirteen. The exact number of directors within such range may be changed from
time-to-time by an amendment to the ITW By-laws duly adopted in accordance with
the ITW Certificate. Pursuant to such authority the current number of directors
of ITW has been established at fifteen.
The ITW Certificate does not provide for a classified Board of Directors,
nor does the ITW Certificate provide for cumulative voting, which is not
otherwise required by the DGCL. Accordingly, the holders of a majority of the
outstanding shares of ITW Common Stock may elect all of the directors of ITW.
Subject to the rights of any series of Preferred Stock, the ITW Certificate
and ITW By-laws provide that any vacancies existing on the Board of Directors,
as well as any newly created directorships resulting from any increase in the
number of directors, shall be filled only by the Board of Directors, acting by a
majority of the directors then in office although less than a quorum, and any
directors so chosen shall hold office until the next annual election of
directors and until their successors shall be elected and qualified.
Medalist. The Medalist Articles and Bylaws provide for the election of
directors by classes. The Medalist Board currently consists of eight persons,
with two or three directors being elected annually for three-year terms. The
Medalist Articles do not provide for cumulative voting, which is not otherwise
required by the WBCL. The Medalist Bylaws provide that directors can be removed
only for cause and that any vacancies, including vacancies resulting from an
increase in the number of directors, can be filled either by the shareholders or
by a majority of the directors then in office.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
ITW. Under the ITW Certificate and ITW By-laws and subject to the rights
of the holders of any series of ITW Preferred Stock, stockholders may not call a
special meeting of stockholders. Special meetings of the stockholders may only
be called by the Chairman of the Board, the President or a majority of the Board
of Directors.
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The DGCL provides that, unless specifically prohibited by the certificate
of incorporation, any action required or permitted to be taken by the
stockholders of a corporation may be taken without a meeting, without prior
notice and without a stockholder vote, if a written consent or consents setting
forth the action to be taken is signed by the holders of outstanding shares of
capital stock having the requisite number of votes that would be necessary to
authorize or take such action at a meeting of stockholders. The ITW Certificate
expressly provides that no action shall be taken by the stockholders of ITW
except at an annual or special meeting of stockholders, and no action may be
taken by the written consent of the stockholders.
Medalist. Under the WBCL and the Medalist Bylaws, although shareholders
may not call special meetings of shareholders (only the President or the Board
of Directors may call such meetings), a special meeting must be called upon
written demand describing one or more purposes for which a special meeting is to
be held by the holders of shares with at least 10% of the votes entitled to be
cast on any issue proposed to be considered at the meeting.
The WBCL provides that shareholders may take any action by unanimous
written consent. The WBCL also provides that, if specifically permitted by the
articles of incorporation, shareholders may take any action by the written
consent of the holders of shares with sufficient voting power to adopt the
action at a meeting at which all outstanding shares were represented and voted.
The Medalist Articles do not contain such a provision, so action by shareholders
is possible only at an annual or special meeting of shareholders or by unanimous
written consent.
CERTAIN BUSINESS COMBINATIONS
ITW. The ITW Certificate provides that certain mergers, consolidations,
sales or other transfers of assets of, issuances or reclassifications of
securities of, or adoptions of plans of liquidation by, ITW (individually, a
"Business Combination") must be approved by the affirmative vote of the holders
of not less than 66 2/3% of the voting power of the Voting Stock (as defined in
the ITW Certificate), voting as a single class, when such action involves a
person (a "Substantial Stockholder") who, together with all affiliates or
associates of such Substantial Stockholder, beneficially owns 10% or more of the
voting power of the outstanding Voting Stock, excluding Voting Stock
beneficially owned by such Substantial Stockholder on March 2, 1984. The
affirmative vote of a majority of the voting power held by stockholders other
than the Substantial Stockholder is also required. Such stockholder vote is not
required if (i) the Business Combination is approved in writing by not less than
two-thirds of the Continuing Directors (as defined in the ITW Certificate); (ii)
the Business Combination is approved by a duly adopted resolution of the Board
of Directors prior to the Substantial Stockholder becoming a Substantial
Stockholder; (iii) the Business Combination is between ITW and a 50% or more
owned direct or indirect subsidiary of ITW, or (iv) certain fair price
provisions are satisfied.
The affirmative vote of the holders of 66 2/3% or more of the voting power
of the then outstanding shares of ITW Voting Stock, voting as a single class, is
required to amend, alter or repeal the foregoing provisions of the ITW
Certificate relating to certain business combinations.
DESCRIPTION OF ITW CAPITAL STOCK
ITW COMMON STOCK
Dividend Rights. Holders of ITW Common Stock are entitled to dividends
when and as declared by the Board of Directors of ITW out of funds legally
available therefor. Since 1932, ITW has regularly paid dividends, its quarterly
cash dividend being currently at the rate of $0.17 per share. The continued
declaration of dividends by the Board of Directors of ITW is subject to, among
other things, ITW's earnings, financial condition and capital requirements and
such other factors as the Board of Directors of ITW may deem relevant.
Voting Rights. Except as otherwise provided by law or by resolution of the
Board of Directors providing for the issuance of any series of ITW Preferred
Stock, the voting power of ITW is vested exclusively in the ITW Common Stock,
each holder of shares of ITW Common Stock being entitled to one vote for each
share
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held. Holders of ITW Common Stock are not entitled to cumulative voting rights
and, therefore, holders of a majority of shares voting in the election of
directors may elect the entire Board of Directors.
Liquidation and Other Rights. Except as otherwise provided by resolution
of the Board of Directors of ITW providing for the issuance of any series of ITW
Preferred Stock, in the event of any liquidation, dissolution or winding up of
ITW, whether voluntary or involuntary, after payment shall have been made to the
holders of any such series of ITW Preferred Stock of the full amount to which
they shall be entitled pursuant to such resolution providing for the issuance of
such series, the holders of shares of ITW Common Stock shall be entitled, to the
exclusion of the holders of ITW Preferred Stock of any and all series, to share,
ratably according to the number of shares of ITW Common Stock held by them, in
all remaining assets of ITW available for distribution to its stockholders.
No holder of ITW Common Stock has any preemptive or preferential right to
purchase or subscribe for shares of ITW stock of any class. The ITW Common Stock
is not liable to assessment or further call.
ITW PREFERRED STOCK
The Board of Directors of ITW is authorized by the ITW Certificate to issue
up to 300,000 shares of ITW Preferred Stock in series, without any action on the
part of stockholders, and to determine the designation of each series, dividend
rates, redemption provisions, liquidation preferences, any conversion
privileges, any sinking fund provisions and all other rights pertaining to the
ITW Preferred Stock, to the extent permitted by the DGCL (including voting
rights, if any). ITW Preferred Stock would rank senior to ITW Common Stock, with
the result that the dividend, voting, liquidation and other rights of the
holders of the ITW Common Stock could be adversely affected by the rights,
preference and privileges of the ITW Preferred Stock. The Board has not
authorized the issuance of any ITW Preferred Stock and no shares of ITW
Preferred Stock are issued and outstanding.
The 300,000 shares of ITW Preferred Stock currently authorized by the ITW
Certificate are available for future issuance without further stockholder
approval. The shares of Preferred Stock may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporation acquisitions. Stockholders should be aware
that the shares could also be issued to persons friendly to current management
with terms that could render more difficult or discourage attempts to gain
control of ITW by means of a merger, tender offer, proxy contest or otherwise
and thereby protect the continuity of current management. The shares could also
be used to dilute the stock ownership of persons seeking to obtain control of
ITW.
EXPERTS
The audited consolidated financial statements and related schedules of ITW
and subsidiary companies as of December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995, incorporated by reference or
included in ITW's Annual Report on Form 10-K (as amended by its Form 10-K/A) for
the year ended December 31, 1995, incorporated by reference in this Proxy
Statement/ Prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as experts
in giving said reports.
The consolidated financial statements and related schedule of Medalist at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, included herein or incorporated by reference in the Medalist
Annual Report on Form 10-K for the year ended December 31, 1995, incorporated by
reference in this Proxy Statement/Prospectus, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports with respect thereto,
and are included herein and incorporated by reference herein in reliance upon
such reports given upon the authority of said firm as experts in accounting and
auditing. Representatives of Ernst & Young LLP will be at the Special Meeting,
will have an opportunity to make a statement, and will be available to respond
to appropriate questions.
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SOLICITATION OF PROXIES
The cost of soliciting proxies from holders of Medalist shares will be
borne by Medalist. Medalist has retained Morrow & Co., Inc. as its proxy
solicitor in connection with the Special Meeting, for which it will receive a
fee of $4,000, plus disbursements, expenses, a charge of $3.50 for each
solicitation of a non-objecting beneficial owner, and a charge of $5.00 per
check for processing and preparing checks to pay broker/nominee invoices for
proxy mailing services. In addition to soliciting proxies by mail, officers and
employees of Medalist, without receiving additional compensation therefor, also
may solicit proxies by telephone, by telegram or in person. Medalist will also
make arrangements with brokerage firms and other custodians, nominees and
fiduciaries to send proxy materials to their principals.
LEGAL OPINIONS
Certain legal requirementsmatters in connection with the Merger will be passed upon by
Stewart S. Hudnut, Senior Vice President, General Counsel and Secretary for such sales.
3
INFORMATION CONCERNING ITW,
Businessand by Quarles & Brady, Milwaukee, Wisconsin, counsel for Medalist. Quarles &
Brady will also give its opinion as to certain tax consequences of the Merger.
John S. Sammond, who is a partner in Quarles & Brady, is a director of Medalist.
Quarles & Brady attorneys (including Mr. Sammond) own an aggregate of
approximately 9,000 shares of Medalist Common Stock and approximately $52,000
principal amount of Medalist Debentures, as well as Mr. Sammond's director
options for 8,256 shares of Medalist Common Stock. Quarles & Brady attorneys
also own an aggregate of 1,700 shares of ITW Common Stock. Mr. Hudnut holds
1,500 shares of ITW aCommon Stock and holds options to acquire an additional
35,000 shares of its stock.
CERTAIN INFORMATION REGARDING ITW AND NEWCO
BUSINESS OF ITW
ITW was incorporated in Delaware corporation,in 1912. ITW manufactures and markets a
variety of products and systems that provide specific, problem-solving solutions
for a diverse customer base worldwide. ITW, with revenues in 1995 of $4.15
billion, has more
than 260approximately 345 operations in 33 countries.34 countries and approximately
23,000 employees. ITW's business units are divided into two segments: Engineered
Components, and Industrial Systems and Consumables. Products in ITW's Engineered
Components segment include short lead-time plastic and metal components,
fasteners and assemblies; industrial fluids and adhesives; and
fastening tools and
welding equipment. Industrial Systems and Consumables' products include longer
lead-time systems and related consumables for consumer and industrial packaging;
industrial spray coating equipment and systems and quality assurance applicationsapplication
equipment and systems.
ITW has long been a supplier of certain products for various Medalist
divisions. In 1995 ITW sold approximately $1,100,000 of stamping and finished
fastener products to the C-Tech and IFD divisions of Medalist.
The principal executive offices of ITW are located at 3600 West Lake
Avenue, Glenview, Illinois 60025, and its telephone number is (708)(847) 724-7500.
Information Incorporated by ReferenceNEWCO
Newco, a recently formed Wisconsin corporation, is a wholly owned
subsidiary of ITW. Newco was organized solely to effect the proposed Merger with
Medalist and has had no operations. The current principal office of Newco is
also located at 3600 West Lake Avenue, Glenview, Illinois 60025, and its
telephone number is (847) 724-7500.
INFORMATION INCORPORATED BY REFERENCE
ITW's Annual Report on Form 10-K (as amended by its Form 10-K/A) for the
year ended December 31, 1994,1995 and Quarterly ReportITW's Proxy Statement for its Annual Meeting of
Stockholders to be held on Form 10-Q for the period ended March 31, 1995,May 3,
34
40
1996, previously filed with the Commission, are incorporated by reference in
this Proxy Statement/Prospectus. AllIn addition, all documents filed by ITW
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement/Prospectus and prior to the terminationdate of the offering of the shares of
Common Stock made herebySpecial
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the respective dates of filing
of such documents.document. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Proxy
Statement/Prospectus, shall be deemed to be modified or superseded for purposes
of this Proxy Statement/Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
This prospectus incorporatesThe ITW documents incorporated herein by reference which are not presented
herein or delivered herewith. These documentsherewith are available upon request from Stewart S. Hudnut,
Senior Vice President, General Counsel and Secretary, Illinois Tool Works Inc.,
3600 West Lake Avenue, Glenview, Illinois 60025, at (708)telephone number (847)
724-7500.
4CERTAIN INFORMATION REGARDING MEDALIST
BUSINESS OF MEDALIST
Medalist designs, manufactures, and distributes industrial fasteners and
related hardware, and also provides quality assured, just-in-time inventory
management systems to other manufacturers. Medalist shares trade
over-the-counter on the Nasdaq National Market under the symbol MDIN.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of Common Stock of Medalist as of April 11, 1996 by each of Medalist's
directors and executive officers, by all directors and executive officers as a
group, and by each person or entity believed by Medalist to beneficially own
more than five percent of Medalist's outstanding Common Stock. Except as
otherwise indicated, each listed person or entity has sole voting and investment
power for the shares listed, except for 26,398 shares, included in the total for
Messrs. Gumm, O'Loughlin and Paprocki and for all directors and executive
officers, which is owned by the Medalist Salaried Pension Trust for which those
officers are trustees.
DIRECTORS AND EXECUTIVE RIGHTS TO ACQUIRE TOTAL PERCENT OF
OFFICERS POSITION BENEFICIAL OWNERSHIP BENEFICIALLY OWNED CLASS
- ---------------------------- ----------------------- -------------------- ------------------ ----------
James S. Dahlke............. President, CEO and 45,000 49,000 1.2
Director
Harry S. Burker, Jr......... Director 8,255 11,256 .3
James D. Dodson............. Director 2,934 105,434 2.7
Peter A. Fischer............ Director 8,256 24,556 .6
John B. Howenstine.......... Director 8,256 68,256 1.8
John S. Sammond............. Director 10,549 17,549 .5
Roger E. Secrist............ Director 8,256 8,356 .2
Mark Train.................. Director -0- -0-
John T. Paprocki............ Vice President and CFO 30,000 67,898 1.9
James G. Gumm............... Vice President 19,000 48,101 1.2
Administration
35
41
DIRECTORS AND EXECUTIVE RIGHTS TO ACQUIRE TOTAL PERCENT OF
OFFICERS POSITION BENEFICIAL OWNERSHIP BENEFICIALLY OWNED CLASS
- ---------------------------- ----------------------- -------------------- ------------------ ----------
William C. O'Loughlin....... Vice President and 6,000 38,139 1.0
Corporate Secretary
All Directors and Executive
Officers as a Group
(11 persons).............. 146,987 385,749 9.9
5% BENEFICIAL OWNERS
Heartland Advisors, Inc.................................................... 661,250(1) 16.9
790 North Milwaukee Street
Milwaukee, WI 53202
State of Wisconsin Investment Board........................................ 377,800(2) 9.7
P. O. Box 7842
Madison, WI 53707
Brinson Partners, Inc...................................................... 352,544(3) 9.1
209 South LaSalle Street
Chicago, IL 60604
- ---------------
(1) As indicated in its amendment to Schedule 13G dated March 7, 1996, Heartland
Advisors, Inc. has sole dispositive power for 661,250 shares, including
46,400 shares issuable upon conversion of $870,000 of the Company's
Debentures, and has sole voting power for 628,470 shares.
(2) As indicated in its amendment to Schedule 13G dated February, 1996, State of
Wisconsin Investment Board has sole voting and dispositive power over
377,800 shares.
(3) As indicated in its amendment to Schedule 13G dated February 15, 1996,
Brinson Partners, Inc. and its affiliates share voting and dispositive
power over 352,544 shares.
36
42
MEDALIST FINANCIAL INFORMATION
The Medalist Management's Discussion and Analysis of Financial Condition
and Results of Operations and its balance sheet at December 31, 1995 and 1994
and related statements of operations and cash flows for each of the three years
in the period ended December 31, 1995 (together with related notes thereto) are
set forth below.
MEDALIST INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- PERCENT OF NET SALES
To assist in the analysis of the results of operations, the following table
comparing key statement of operations categories as a percent of net sales has
been prepared:
CONTINUING OPERATIONS -- PERCENT OF NET SALES
1995 1994 1993
----- ----- -----
Net sales....................................................... 100.0 100.0 100.0
Cost of goods sold.............................................. 74.2 75.6 73.8
Selling, general and administrative expenses.................... 21.2 21.8 20.1
Gain on sale of a portion of a line of business................. 0.0 0.2 0.0
Operating income................................................ 4.6 2.8 6.1
Interest expense................................................ 3.1 2.7 2.6
Income before income taxes...................................... 1.5 0.1 3.5
Provision for income taxes...................................... 0.1 0.0 0.0
Income.......................................................... 1.4 0.1 3.5
Minimal provisions for income taxes were recorded for the years 1993
through 1995 as the Company continued to utilize its operating loss
carryforward. During 1993, the Company adopted Financial Accounting Standards
No. 109, the cumulative effect of which resulted in a benefit to income in 1993
of $1.8 million.
1995 RESULTS COMPARED TO 1994
1995 results reflect the continuing improvement in financial performance
resulting from the turnaround efforts initiated in May, 1994. Net sales were off
5.6% from the $134 million recorded in 1994. Sales in the Industrial Fastener
Division (IFD) of $78.4 million in 1995 were down 3.4% from the $81.2 million in
1994 despite increased sales in the primary automotive sector, while operating
profits improved dramatically. Even though sales to domestic auto manufacturers
were up 4.8% over 1994, sales to IFD's other customers decreased as a result of
IFD failing to meet customer schedules in 1994. The C-Tech Division recorded
sales of $40 million which represented a growth of 6.5% in 1995, well below the
1994 and 1993 growth pace. C-Tech signed agreements with 10 new customers in
1995, but did not receive the full sales impact of these new customers' activity
during the year.
Gross margins improved to 25.8% versus 24.4% reported in 1994. Margin
improvements resulted from significant operational changes in the IFD factories,
increased material control, and reduced staffing levels of non-critical
personnel. IFD was also able to increase its prices on new parts, primarily due
to the technical assistance provided to customers.
Total cost of goods sold decreased as all divisions continued to focus on
elimination of the causes of scrap and the reduction in slow-moving inventories.
The Company believes that the portion of its inventory classified as slow-moving
is significantly improved as compared to prior years.
Selling, general and administrative expenses dropped to 21.2% of net sales
from 21.8% for 1994. The Company made additional reductions in staffing at all
divisions by consolidating functions and eliminating non-essential positions
company-wide. 1995 head-counts were down 7% from 1994.
37
43
Interest expense continued to run higher than previous years despite
reductions in inventories and other working capital assets. Interest rate
increases in 1995 were the single contributing factor to the larger interest
expense. While the Company experienced several violations in covenants under its
loan agreement in 1995, waivers were obtained from its bank group for these
violations at no additional cost to the Company.
1994 RESULTS COMPARED TO 1993
The Company's 1994 net sales grew 1.5% during the year to $134 million. The
increase was directly attributable to the C-Tech Division, which experienced
sales of $37.5 million, a growth of 34% over 1993 sales of $28 million. C-Tech's
sales growth was due to the increase in business with existing customers. IFD
1994 revenues of $81.2 million were down 6.4% from 1993 sales of $86.7 million
due to the loss of orders and customer service disruptions arising from the
consolidation of the former Lewis, Champion and Pioneer facilities in the third
quarter of 1993.
IFD sales to the automotive sector were up 17% over 1993, but gross margins
on this business were lower than those earned with distributor or other
industrial customers.
Cost of goods sold rose as a percent of net sales as IFD experienced
operating inefficiencies early in 1994. These inefficiencies, which impacted the
valuation of slow-moving inventories, have been the subject of close scrutiny
and ongoing corrective actions, which have focused on production planning and
control. Specific actions to improve operations have been discussed in the 1995
results compared to 1994. The provision for slow-moving and obsolete inventories
was $1.8 million in 1994, or $1.3 million greater than the expense recorded in
1993. The provision increased as a result of the decrease in volume; production
planning was slow to react to the loss of orders and, as a result, customer
specific parts were produced in excess of demand.
Selling, general and administrative expenses were up 10% over 1993,
primarily due to severance expenses of approximately $600,000 for three
executives of the Company, outside consulting fees, and bank fees related to a
new credit agreement.
During the fourth quarter of 1994, the Company sold the Redi-Bolt operation
of the Hardware Division. The sale generated a profit of $212,000.
Interest expense in 1994 was up over 1993 as the Company renegotiated with
its banks to obtain additional availability under its credit facility. Higher
rates of interest on a larger debt base resulted in increased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Major balance sheet captions as a percentage of total assets at December
31, 1995 and 1994 are presented as follows:
1995 1994
----- -----
Percent of Total Assets
Current assets...................................................... 53.7% 53.6%
Current liabilities................................................. 22.4% 21.8%
Working capital..................................................... 31.3% 31.8%
Long term debt, including current maturities........................ 41.4% 45.9%
Shareholders' equity................................................ 36.0% 31.7%
Debt to equity ratio.................................................... 51.3% 57.4%
During 1995, all of the Company's operations were focused on managing their
use of working capital and increasing not only profits but cash flow via
improved asset turnover velocity. Receivable and inventory balances declined
from the year-end balances at December 31, 1994. However, inventories, the
Company's primary area of focus from a working capital perspective, fell 3.4%
from their 1994 level ($29.0 million versus $30.1 million).
38
44
Cash flows from reduced working capital investments were applied towards
the Company's bank and subordinated debt. Bank debt declined $6.1 million in
1995 as part of the Company's strategy to shift its debt to equity ratio to a
lower, more acceptable, level. In 1995, debt as a percent of total assets fell
8.5% with 1996 plans projecting further debt reductions. Under terms of the
Company's subordinated debt, an annual sinking fund payment of $518,000 is due
through the year 2000.
The Company has reviewed its credit facility and operating plans for 1996
with its bank group. As previously mentioned, there were several covenant
violations under the 1995 loan agreement which were waived by the bank group.
Given the Company's performance and 1996 plans, covenants for 1996 have been
revised and the credit facility has been extended through January 14, 1998.
Negotiated reductions in loan interest charges should favorably impact
operations in calendar 1996. As of February 29, 1996, the Company had $8.2
million available under its credit facility. Borrowings under the revolving loan
bear interest at LIBOR (5.3%) plus 2.5% or prime (8.25%) plus 0.5%, and
borrowings under the term loan bear interest at LIBOR plus 3% or prime plus 1%.
Capital investments for 1995 totaled $1.1 million versus $3.1 million in
1994. Capital investments in 1995 consisted primarily of expenditures to
maintain the quality of the operating plants, whereas 1994 capital investments
also included expenditures to broaden the Company's product lines. Capital
investments for 1996 are estimated at $3.3 million, with plans calling for IFD
and Hardware capacity expansion and C-Tech service oriented upgrades.
The Company believes that cash generated from operations and its capacity
for borrowing will be sufficient to fund current business operations, annual
sinking fund requirements under the subordinated debt, and anticipated future
capital investments.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 that requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company will adopt Statement No. 121 in the first quarter
of 1996 and, based on current circumstances, there will not be any effect from
the adoption of Statement No. 121.
The Company presents its financial statements on a historic cost basis,
which does not account for inflation effects. However, the Company's inventories
are valued using LIFO, which generally reflects current costs. Steel is the
primary raw material commodity used by the Company. Steel is purchased on firm
quotes from suppliers, and the Company expects to offset any price or inflation
effects through price increases to customers and cost containment programs
already in place.
39
45
MEDALIST INDUSTRIES, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
Net sales.................................................. $ 126,016 $ 133,531 $ 131,498
Cost of goods sold....................................... 93,476 100,895 97,070
Selling, general and administrative expenses............. 26,788 29,122 26,427
Gain on sale of a portion of a line of business (Note
4).................................................... 0 212 0
---------- ---------- ----------
Operating income........................................... 5,752 3,726 8,001
Interest expense......................................... 3,948 3,657 3,376
---------- ---------- ----------
Income before income taxes................................. 1,804 69 4,625
Provision for income taxes............................... 75 0 0
---------- ---------- ----------
Income..................................................... 1,729 69 4,625
Cumulative effect of accounting change (Note 9).......... 0 0 1,814
---------- ---------- ----------
Net income....................................... $ 1,729 $ 69 $ 6,439
========= ========= =========
Earnings per share
Primary
Income................................................ $ 0.45 $ 0.02 $ 1.20
Cumulative effect of accounting change................ 0.00 0.00 0.47
---------- ---------- ----------
Net income....................................... $ 0.45 $ 0.02 $ 1.67
========= ========= =========
Assuming full dilution
Income................................................ $ 0.45 $ 0.02 $ 1.21
Cumulative effect of accounting change................ 0.00 0.00 0.41
---------- ---------- ----------
Net income....................................... $ 0.45 $ 0.02 $ 1.62
========= ========= =========
Average shares outstanding -- Primary...................... 3,864,909 3,841,297 3,867,255
Average shares outstanding -- Full Dilution................ 3,864,909 3,841,297 4,384,644
The accompanying notes to financial statements are an integral part of these
statements.
40
46
MEDALIST INDUSTRIES, INC.
BALANCE SHEET
DECEMBER 31
-------------------
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
ASSETS (NOTE 5)
Current assets
Cash................................................................... $ 434 $ 1,765
Accounts receivable, net............................................... 14,997 15,501
Inventories............................................................ 29,030 30,066
Prepaid expenditures and other......................................... 2,772 2,880
------- -------
Total current assets........................................... 47,233 50,212
Plant and equipment, at cost
Land and buildings..................................................... 593 590
Machinery and equipment................................................ 27,010 25,983
------- -------
Plant and equipment.................................................... 27,603 26,573
Less accumulated depreciation.......................................... 13,205 10,330
------- -------
Net plant and equipment........................................ 14,398 16,243
Other assets
Goodwill, net.......................................................... 17,872 18,381
Other intangibles, net................................................. 2,810 3,493
Other noncurrent assets................................................ 5,674 5,375
------- -------
Total other assets............................................. 26,356 27,249
------- -------
Total assets................................................... $87,987 $93,704
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable....................................................... $10,231 $10,967
Accrued income taxes................................................... 183 0
Accrued liabilities.................................................... 6,258 6,448
Current maturities of long-term debt................................... 3,017 3,030
------- -------
Total current liabilities...................................... 19,689 20,445
Long-term liabilities
Long-term debt......................................................... 26,134 32,189
Convertible subordinated debentures.................................... 7,242 7,760
Other liabilities...................................................... 3,234 3,631
------- -------
Total long-term liabilities.................................... 36,610 43,580
Commitments and contingencies (Notes 6 and 10)
Shareholders' equity
Common stock ($1 par value), authorized 10,000,000 shares, issued
3,881,025 shares in 1995 and 3,837,054 shares in 1994............... 3,881 3,837
Capital in excess of par value......................................... 17,170 16,934
Retained earnings...................................................... 10,637 8,908
------- -------
Total shareholders' equity..................................... 31,688 29,679
------- -------
Total liabilities and shareholders' equity..................... $87,987 $93,704
======= =======
The accompanying notes to financial statements are an integral part of these
statements.
41
47
MEDALIST INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Cash flows from operating activities
Income from continuing operations......................... $ 1,729 $ 69 $ 4,625
Adjustments to reconcile income from continuing operations
to cash provided by continuing operations
Depreciation........................................... 2,964 2,618 2,358
Amortization........................................... 1,192 1,479 1,465
(Gain) loss on disposal of plant and equipment......... (5) (2) 26
Gain on sale of a portion of a line of business........ 0 (212) 0
Provision for losses on accounts receivable............ 75 361 908
Changes in
Accounts receivable.................................. 429 (1,520) 16
Inventories.......................................... 1,036 (678) (2,126)
Prepaid expenditures................................. 50 (164) (239)
Income taxes recoverable and accrued income taxes.... 183 284 124
Accounts payable and accrued liabilities............. (1,221) 1,386 (3,562)
Noncurrent assets and liabilities.................... (696) (1,482) (2,690)
--------- --------- ---------
Cash provided by continuing operations............... 5,736 2,139 905
Cash flows from discontinued operations..................... 353 132 602
Cash flows from investing activities
Purchases of plant and equipment.......................... (1,143) (3,150) (3,245)
Proceeds from disposal of assets.......................... 29 1,554 869
Purchase of C-Tech Division, net of acquired cash......... 0 0 (115)
--------- --------- ---------
Cash used by investing activities......................... (1,114) (1,596) (2,491)
Cash flows from financing activities
Long-term debt borrowings................................. 136,470 137,495 156,381
Repayments of long-term debt.............................. (142,525) (137,451) (124,281)
Net short-term debt increase (decrease)................... (13) 900 (30,638)
Retirement of debentures.................................. (518) (510) (417)
Proceeds from sale of common stock........................ 280 184 43
--------- --------- ---------
Cash provided (used) by financing activities.............. (6,306) 618 1,088
--------- --------- ---------
Net increase (decrease) in cash............................. (1,331) 1,293 104
Cash at beginning of year................................... 1,765 472 368
--------- --------- ---------
Cash at end of year......................................... $ 434 $ 1,765 $ 472
========= ========= =========
Cash paid (recovered) for
Interest.................................................. $ 3,910 $ 3,373 $ 2,991
Taxes..................................................... (199) (81) (38)
The accompanying notes to financial statements are an integral part of these
statements.
42
48
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. DESCRIPTION OF CAPITALBUSINESS AND ACCOUNTING PRINCIPLES
The Company designs, manufactures, and distributes fasteners and related
products used by automotive, electronics, consumer-durables, and other
manufacturers in their assembly operations. The Company also provides
quality-assured, just-in-time inventory management services to manufacturers.
Sales to the automotive industry (primarily Chrysler, Ford and General Motors)
account for approximately 24.7%, 22.0% and 21.3% of the Company's sales in 1995,
1994, and 1993, respectively, with Chrysler being the largest at 11.1%, 9.9% and
9.1% of sales in 1995, 1994, and 1993, respectively. Trade receivables from
Chrysler represented 18% and 19% of outstanding receivables as of December 31,
1995 and 1994, respectively.
While concentrated in the Midwest, sales are delivered throughout the
United States and are direct to manufacturers and independent distributors.
There are no foreign operations, and export sales were less than 5.3% of net
sales in each of the three years in the period ending December 31, 1995.
Raw materials used in the manufacturing process are readily available from
a number of domestic and foreign suppliers. The loss of any one supplier would
not be material to the continued operations of the Company.
The financial statements include the accounts of the Company and its
divisions. The preparation of the Company's financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Depreciation is provided on a straight line basis to amortize the cost of
plant and equipment during their estimated lives.
Identifiable intangible assets consist of customer relationships, assembled
work force, engineering drawings, noncompete agreements and trade names, and are
amortized over their estimated lives, which range from 3 to 15 years.
Amortization expense was $684,000 in 1995, $955,000 in 1994, and $941,000 in
1993.
Goodwill is amortized over forty years. Amortization expense was $508,000
in 1995, $524,000 in 1994, and $524,000 in 1993. Goodwill is reviewed for
impairment whenever events or circumstances provide evidence that suggest that
the carrying amount of the asset may not be recoverable. Impairment is
determined by using identifiable cash flows over the remaining amortization
period.
The Company has applied Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for its stock option
plans. Accordingly, no compensation cost has been recognized. No decision has
been reached as to how the Company will apply, beginning in 1996, recently
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", which permits the Company to continue accounting for
stock options in the same manner, with fair value disclosures, or measure
compensation cost by the fair value of stock options granted after January 1,
1995.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 that requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company will adopt Statement No. 121 in the first quarter
of 1996 and, based on current circumstances, there will not be any effect from
the adoption of Statement No. 121.
All interest incurred during 1995, 1994, and 1993 was expensed.
The Company recognizes revenue upon shipment of product to the customer.
Primary earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding and issuable under
dilutive stock options. Earnings per common share,
43
49
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
assuming full dilution, are computed by dividing net income (adjusted for
interest net of income taxes on the subordinated debentures) by the weighted
average number of shares of common stock, dilutive stock options, and common
shares issuable upon the conversion of the subordinated debentures when such
conversions would dilute primary earnings per share.
At December 31, 1995 and 1994, inventories at LIFO approximated current
costs. Exhibit 1 shows inventory components at such dates.
EXHIBIT 1
INVENTORY COMPONENTS
DECEMBER 31
-----------------
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Raw materials.............................................................. $ 4,108 $ 3,955
Work in process............................................................ 4,525 4,425
Finished goods............................................................. 20,397 21,686
------- -------
Total inventory.................................................. $29,030 $30,066
======= =======
2. SHAREHOLDERS' EQUITY
In addition to common stock, the Company has authorized preferred stock of
10,000 shares of $100 par value preferred, and 20,000 shares of $50 par value
preference, neither of which have been issued. At December 31, 1995, 816,427
shares of common stock were reserved for conversion of the subordinated
debentures and issuance of stock options.
In January 1993, the Company acquired the minority interest in the C-Tech
Division in exchange for 133,000 shares of the Company's common stock and
$115,000. In October of 1993, the Company retired 177,152 shares of treasury
stock. Exhibit 2 shows changes in the Company's shareholders' equity accounts
during the years ended December 31, 1995, 1994 and 1993.
EXHIBIT 2
CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31
---------------------------
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
Capital in excess of par value
Beginning balance............................................... $16,934 $16,771 $15,777
Shares issued for C-Tech acquisition......................... 0 0 1,866
Stock options exercised...................................... 5 15 38
401K plan purchases.......................................... 231 148 0
Retirement of treasury stock................................. 0 0 (910)
------- ------- -------
Ending balance.................................................. $17,170 $16,934 $16,771
======= ======= =======
Retained earnings
Beginning balance............................................... $ 8,908 $ 8,839 $ 4,502
Retirement of treasury stock................................. 0 0 (2,102)
Net income................................................... 1,729 69 6,439
------- ------- -------
Ending balance.................................................. $10,637 $ 8,908 $ 8,839
======= ======= =======
44
50
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. STOCK GeneralOPTIONS
In 1990 and 1994, the Company adopted Stock Option Plans for employees and
directors. The plans are limited to a total of 350,000 shares of common stock.
Options may be granted at prices of 90 percent of market or higher at date of
grant. Options expire no more than 10 years from date of grant. For employees,
option prices, vesting provisions, and life of the option are determined at date
of grant by the Compensation Committee of the Board of Directors. Each
non-employee director receives an annual option equal to his annual retainer
divided by the fair value of a share of common stock on the date of grant.
Transactions for 1995, 1994, and 1993 are as follows:
EXHIBIT 3
OPTION PLAN TRANSACTIONS
1995 1994 1993
--------- -------- --------
Options outstanding on January 1...................... 188,468 173,610 169,010
Changes during year
Granted (per share)
1995 -- $6.00 to $7.88........................... 118,246 -- --
1994 -- $13.50 to $14.00......................... -- 66,358 --
1993 -- $10.25 to $13.00......................... -- -- 12,540
Exercised (per share)
1995 -- $6.00.................................... (1,000) -- --
1994 -- $8.75.................................... -- (2,000) --
1993 -- $8.75 to $10.25.......................... -- -- (4,440)
Canceled............................................ (187,500) (49,500) (3,500)
--------- -------- --------
Net increase (decrease)............................. (70,254) 14,858 4,600
--------- -------- --------
Options outstanding on December 31.................... 118,214 188,468 173,610
========= ======== ========
Other December 31 information
Option price range.................................. $ 6.00 to $7.75 to $7.75 to
$14.00 $14.00 $13.00
Options exercisable................................. 118,214 187,136 137,277
Options available for grant......................... 224,346 155,092 71,950
In 1994, an employee, as part of an employment agreement, was granted
options totaling 15,000 shares at $14.00 per share. One-third of these options
became exercisable in 1995 and one-third become exercisable in 1996 and 1997. No
portion of this option has been exercised. In 1995, an employee, as part of an
employment agreement, was granted options totaling 45,000 shares at $6.125 per
share. One third of these options are exercisable in each of 1996, 1997 and
1998.
4. DIVESTITURE
During the fourth quarter of 1994, the Company sold the Redi-Bolt operation
of the Hardware Division for cash and notes totaling $1.5 million. This
operation had revenues of $6,934,000 and $7,468,000 in 1994 and 1993,
respectively.
5. INDEBTEDNESS
The Company's credit agreement provides a revolving loan of up to
$27,600,000 through January, 1998 (with options to renew through May, 2000) and
an original term loan of $12,400,000. The term loan requires quarterly principal
payments of $620,000, with final payment of the unpaid balance due January 1998
(or such
45
51
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
later date as the revolving loan is renewed). Borrowings under the revolving
loan and term loan are $18,663,000 and $9,920,000, respectively, at December 31,
1995 ($26,370,000 and $8,250,000, respectively, at December 31, 1994). The
credit agreement provides restrictive monthly covenants regarding interest
coverage, leverage ratio, current ratio and tangible net worth and prohibits the
payment of dividends.
Commitments under the credit agreement are shared equally by three lenders.
Both parts of the credit agreement are asset-based: the availability under the
term portion is based on fixed assets and the availability under the revolver is
limited to the sum of eligible accounts receivable and inventories. Borrowings
are secured by substantially all assets of the Company.
Interest on the term loan is at LIBOR (5.9% at December 31, 1995) plus 4%
or prime (8.5% at December 31, 1995) plus 2%; interest on borrowings under the
revolver is at LIBOR plus 3.5% or prime plus 1.5%, at the Company's option. An
amendment (dated December 29, 1995) to the loan agreement provides for interest
on the term loan at LIBOR plus 3% or prime plus 1% and interest on borrowings
under the revolver at LIBOR plus 2.5% or prime plus 0.5% as of January 1, 1996.
The credit agreement requires a quarterly commitment fee of 0.25 percent per
annum on the average unused amount of the revolving credit commitment.
Under the terms of the 7.5 percent convertible subordinated debentures, and
after reflecting conversions and repurchases to date, an annual sinking fund
payment of $518,000 is due each July 1, with a final payment of $5,170,000 due
July 1, 2001. The debentures can be redeemed at par value. The debentures are
convertible into shares of common stock of the Company at the rate of $18.75 of
the face amount of the debentures for each share of common stock. The indenture
agreement for the debentures limits the payment of cash dividends and repurchase
of common stock to an amount equal to the cumulative net income since January 1,
1986, plus $2,000,000. Therefore, the Company must earn $10,902,000 subsequent
to December 31, 1995, before any common stock can be repurchased. The debentures
are unsecured and subordinate to all current and future senior debt of the
Company.
Aggregate maturities of long-term debt, including the convertible
subordinated debentures and capital leases for periods subsequent to December
31, 1995, are: $3,017,000 in 1996, $3,017,000 in 1997, $24,153,000 in 1998
(assuming the credit agreement is not renewed), $518,000 in 1999, $518,000 in
2000; and thereafter, $5,170,000.
The Company has no formal compensating balance requirements. It pays the
cost of services provided by its banks by either providing balances or paying
fees for the services.
6. LEASE COMMITMENTS
The Company leases certain plants, warehouses, offices and machinery and
equipment under operating leases. The total rental expense of all operating
leases was $2,365,000 in 1995, $2,260,000 in 1994 and $2,079,000 in 1993.
Future payments for operating leases for periods subsequent to December 31,
1995, are $11,223,000: $2,404,000 in 1996, $2,345,000 in 1997, $2,151,000 in
1998, $1,706,000 in 1999, $964,000 in 2000, and thereafter $1,653,000.
7. EMPLOYEE BENEFIT PLANS
Since January 1, 1994, the Company has sponsored a defined contribution
plan covering substantially all employees. Company contributions match the first
one percent and one-half of the next five percent of payroll dollars for each
employee contributing to the plan. Company contributions vest after 5 years of
service. The Company's contribution to this plan was $566,000 in 1995 and
$662,000 in 1994.
46
52
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1992, the Company assumed responsibility for three defined
contribution plans related to acquired companies. The Company's contributions to
these plans was $275,000 in 1993. These plans were merged into the Company's
defined contribution plan effective January 1, 1994.
The Company has a defined benefit plan covering certain employees. This
plan is noncontributory and provides pension benefits based on the employee's
earnings during the years of employment prior to December 31, 1993. Effective
December 31, 1993, the Company suspended this plan. Employees do not earn
additional defined benefits for future service, although future service may be
counted toward vesting of benefits accumulated based on service prior to the
suspension date. As a result of the suspension of this defined benefit plan, the
Company recognized a curtailment gain of $552,000 during 1993. Pension assets
consist of pooled funds invested by insurance companies, and stocks and bonds of
publicly held companies. The components of net pension costs for 1995, 1994, and
1993 are shown in Exhibit 7.1.
EXHIBIT 7.1
NET PENSION COSTS
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
----- -------- -------
(DOLLARS IN THOUSANDS)
Service cost-benefits earned during the period..................... $ 0 $ 0 $ 360
Interest cost on projected benefit obligation...................... 660 675 682
Return on assets................................................... (886) (1,151) (1,064)
Amortization and deferral.......................................... 19 (225) (328)
----- -------- -------
Net pension income................................................. $(207) $ (701) $ (350)
===== ======== =======
Actuarial assumptions
Discount rate.................................................... 8% 7.75% 8%
Compensation increase............................................ N/A N/A 6%
Long-term return on assets....................................... 8% 9% 9%
The actuarial assumptions used in calculating net pension costs are
developed in consultation with the Company's outside actuaries and evaluated in
light of the Company's pension plan's investment performance.
47
53
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Exhibit 7.2 sets forth the plan's funded status and amounts recognized in
the Company's balance sheet at December 31, 1995 and 1994.
EXHIBIT 7.2
COMPONENTS OF PREPAID PENSION COSTS
DECEMBER 31
-----------------
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Actuarial present value of benefit obligations
Vested benefit........................................................... $ 8,585 $ 8,957
======= =======
Accumulated benefit...................................................... $ 8,695 $ 9,194
======= =======
Funding status
Plan assets.............................................................. $11,526 $13,562
Projected benefit........................................................ 8,695 9,194
------- -------
Over funding............................................................. $ 2,831 $ 4,368
======= =======
Balance sheet recognition of over funding.................................. $ 2,831 $ 4,368
Unrecognized net (gain) loss............................................... 1,612 (94)
Prior service cost not yet recognized in net periodic pension cost......... 67 29
------- -------
Prepaid pension cost recognized in balance sheet........................... $ 4,510 $ 4,303
======= =======
8. ADDITIONAL BALANCE SHEET INFORMATION
At December 31, 1995 and 1994, accounts receivable are net of an allowance
for doubtful accounts of $704,000 and $1,229,000, respectively, goodwill is net
of accumulated amortization of $2,442,000 and $1,934,000, respectively, and
other intangibles are net of accumulated amortization of $3,034,000 and
$2,350,000, respectively.
In December 1994, the Company's Board of Directors determined that the
employment contract of its former Chairman, President, and CEO would not be
renewed and amended his contract to provide for severance and benefits for up to
one year after his termination date. An accrual for these costs of $370,000 was
made in the fourth quarter of 1994 and was included in selling, general and
administrative expenses.
9. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). The cumulative effect of adopting FAS 109 as of January 1,
1993 was to increase net income by $1,814,000.
A reconciliation between taxes computed at the Federal statutory rate on
income before income taxes and the provision for income taxes is shown in
Exhibit 9.1. The components of the provision for deferred income taxes are
presented in Exhibit 9.2, and the components of the liability for deferred
income taxes are presented in Exhibit 9.3.
48
54
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXHIBIT 9.1
RECONCILIATION OF STATUTORY AND EFFECTIVE TAX RATES
YEAR ENDED DECEMBER 31
------------------------
1995 1994 1993
------ ----- -------
(DOLLARS IN THOUSANDS)
Income before income taxes........................................... $1,804 $ 69 $ 4,625
====== ===== =======
Income tax expense at federal statutory rate of 34%.................. $ 613 $ 23 $ 1,573
Adjustments
State income taxes, net of federal income tax benefits............. 36 0 0
Goodwill amortization.............................................. 173 178 114
Change in valuation allowance...................................... (932) (309) (1,689)
Other.............................................................. 185 108 2
------ ----- -------
Total adjustments.......................................... (538) (23) (1,573)
------ ----- -------
Income tax provision................................................. $ 75 $ 0 $ 0
====== ===== =======
The income tax provision of $75,000 in 1995 consists of $20,000 federal and
$55,000 state. For income tax purposes, the operating loss carry forwards are
approximately $16,000,000 and expire between 2006 and 2009. The use of the carry
forwards in future years will be limited by the Internal Revenue Code should the
Company merge with Illinois Tool Works (see Note 12).
EXHIBIT 9.2
PROVISION FOR DEFERRED INCOME TAXES
YEAR ENDED DECEMBER 31
-------------------------
1995 1994 1993
----- ------- -------
(DOLLARS IN THOUSANDS)
Components of deferred tax provision
Depreciation and basis differences................................ $(156) $ (13) $ (450)
LIFO basis difference............................................. 0 0 (232)
Pensions.......................................................... 81 271 364
Intangible asset basis differences................................ 9 170 194
Restructuring of operations....................................... 89 159 1,479
Discontinued operations........................................... 674 545 446
Inventories....................................................... (459) 24 (130)
Self-insurance reserves........................................... 114 132 156
Bad debts......................................................... 206 (10) (44)
Deferred compensation............................................. 35 44 29
Net operating loss carryforwards.................................. 143 (1,211) 295
Other............................................................. 196 (317) 126
----- ------- -------
Total..................................................... 932 (206) 2,233
Change in valuation allowance..................................... (932) 206 (2,233)
----- ------- -------
Provision for deferred income taxes............................... $ 0 $ 0 $ 0
===== ======= =======
49
55
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXHIBIT 9.3
NET LIABILITY FOR DEFERRED INCOME TAXES
DECEMBER 31
-------------------
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
Deferred tax liabilities
Depreciation and basis differences..................................... $ 2,956 $ 3,112
LIFO basis difference.................................................. 2,033 2,033
Pensions............................................................... 1,467 1,386
Intangible asset basis differences..................................... 906 897
Prepaid expenditures basis difference.................................. 431 431
-------- --------
Total deferred liabilities..................................... 7,793 7,859
Deferred tax assets
Restructuring of operations............................................ (134) (223)
Discontinued operations................................................ (828) (1,502)
Inventories............................................................ (2,079) (1,620)
Self-insurance reserves................................................ (393) (507)
Bad debts.............................................................. (276) (482)
Deferred compensation.................................................. (282) (317)
Net operating loss carryforwards....................................... (6,122) (6,265)
Other.................................................................. (526) (722)
-------- --------
(10,640) (11,638)
Valuation allowance...................................................... 5,101 6,033
-------- --------
Total deferred assets.......................................... (5,539) (5,605)
-------- --------
Net deferred income taxes (included in other long-term
liabilities).................................................. $ 2,254 $ 2,254
======== ========
For financial accounting purposes, a valuation allowance has been
recognized to offset deferred tax assets related to net operating loss
carryforwards and other temporary differences. The tax benefit for these items
will be used to reduce current tax expense when realized.
10. OTHER COMMITMENTS AND CONTINGENCIES
The Company is involved in various lawsuits and claims which are normal to
the Company's business. In the opinion of management, the amount of losses which
might be sustained, if any, is not likely to materially affect the Company's
financial position or results of operations.
The Company has been self-insured for a portion of its product liability
claims since November 1, 1976. Accordingly, the Company has recognized estimated
liabilities which management believes are adequate for estimated claim
settlements. Included in the December 31, 1995 and 1994 balance sheet within
"other long-term liabilities" are $802,000 and $1,093,000, respectively, as
estimated liabilities for self-insurance.
11. DISCONTINUED OPERATIONS
During 1991, the Company decided to concentrate its efforts on fastener and
fastener-related businesses and to sell its unrelated operations. By 1993, the
Company had sold or exited all of its unrelated businesses. Net sales of the
discontinued operations were $1,218,000 in 1993. During 1993, the operating loss
from the discontinued businesses totaled $918,000 and was charged to the reserve
for the estimated loss on disposal of operations. Exhibit 11 presents the cash
flows from the discontinued operations.
50
56
MEDALIST INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXHIBIT 11
CASH FLOWS FROM DISCONTINUED OPERATIONS
YEAR ENDED DECEMBER 31
-------------------------
1995 1994 1993
----- ------- -------
(DOLLARS IN THOUSANDS)
Cash flows from operating activities
Loss from discontinued operations................................. $ 0 $ 0 $ 0
Reconciling adjustments
Depreciation................................................... 20 93 263
Loss on asset disposals........................................ 63 105 276
Current assets/liabilities changes.................................. (397) (1,706) (1,673)
Proceeds from asset disposals....................................... 667 1,640 2,121
Debt retirement..................................................... 0 0 (385)
----- ------- -------
Cash provided by discontinued operations.......................... $ 353 $ 132 $ 602
===== ======= =======
12. SUBSEQUENT EVENT
The Company has filed a proxy statement relating to the merger of Illinois
Tool Works Inc. (ITW) and the Company as publicly announced on January 8, 1996.
Under the terms of the merger, each share of Medalist stock would be valued at
$14.50 and converted into the appropriate number of ITW shares, based upon an
average closing price for ITW shares for the ten day period just prior to the
closing date of the merger.
The merger requires a 66 2/3% affirmative vote by Medalist shareholders of
record. Management of the Company is not aware of any material adverse issues
which might prevent this merger from being completed.
51
57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Medalist Industries, Inc.
We have audited the accompanying balance sheet of Medalist Industries, Inc.
as of December 31, 1995 and 1994, and the related statements of operations and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Medalist Industries, Inc. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 9 to the financial statements, the Company changed its
method of accounting for income taxes effective January 1, 1993.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
February 2, 1996
52
58
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information should be
read in conjunction with the audited financial statements, including the notes
thereto, of ITW and Medalist that are incorporated by reference or appear
elsewhere in this Proxy Statement/Prospectus. The pro forma condensed balance
sheet as of December 31, 1995 combines the balance sheets of ITW and Medalist as
of December 31, 1995. The pro forma condensed statements of income for the years
ended December 31, 1995, 1994 and 1993 combine the results of operations of ITW
and Medalist for each of these years.
The unaudited pro forma condensed financial information set forth on the
following pages gives effect to the Merger under the pooling-of-interests method
of accounting as if the Merger had occurred as of the beginning of the earliest
period presented and assumes that the Merger qualifies as a tax-free
reorganization under Section 368(a)(1)(A) of the Code.
ILLINOIS TOOL WORKS INC. & MEDALIST INDUSTRIES, INC.
COMBINED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
COMBINED
PRO FORMA
ILLINOIS TOOL
WORKS INC.
ILLINOIS MEDALIST & MEDALIST
TOOL WORKS INC. INDUSTRIES, INC. INDUSTRIES, INC.
---------------- ---------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues................................... $4,152,170 $126,016 $4,278,186
Cost of revenues................................... 2,717,076 93,476 2,810,552
Selling, administrative and research and
development expenses............................ 776,583 25,596 802,179
Amortization of goodwill and other intangible
assets.......................................... 25,031 1,192 26,223
Amortization of retiree health care................ 6,968 0 6,968
---------------- ---------------- ----------------
Operating Income..................................... 626,512 5,752 632,264
Interest expense................................... (31,581) (3,948) (35,529)
Other income....................................... 28,777 0 28,777
---------------- ---------------- ----------------
Income Before Income Taxes........................... 623,708 1,804 625,512
Income taxes....................................... 236,100 75 236,175
---------------- ---------------- ----------------
Net Income........................................... $ 387,608 $ 1,729 $ 389,337
============ =========== ===========
Net Income Per Share................................. $ 3.29 $ 0.45 $ 3.28(1)
============ =========== ===========
- ---------------
(1) Pro forma net income per share calculated based on an Illinois Tool Works
Inc. stock price of $65.875, the closing price on April 17, 1996, as
reported on the NYSE Composite Transactions listing.
53
59
ILLINOIS TOOL WORKS INC. & MEDALIST INDUSTRIES, INC.
COMBINED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
COMBINED
PRO FORMA
ILLINOIS TOOL
WORKS INC.
ILLINOIS MEDALIST & MEDALIST
TOOL WORKS INC. INDUSTRIES, INC. INDUSTRIES, INC.
--------------- ---------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues.................................... $ 3,461,315 $133,531 $3,594,846
Cost of revenues.................................... 2,290,117 100,895 2,391,012
Selling, administrative and research and development
expenses......................................... 666,576 27,431 694,007
Amortization of goodwill and other intangible
assets........................................... 22,344 1,479 23,823
Amortization of retiree health care................. 6,968 0 6,968
--------------- ---------------- ----------------
Operating Income...................................... 475,310 3,726 479,036
Interest expense.................................... (26,943) (3,657) (30,600)
Other income........................................ 1,916 0 1,916
--------------- ---------------- ----------------
Income Before Income Taxes............................ 450,283 69 450,352
Income taxes........................................ 172,500 0 172,500
--------------- ---------------- ----------------
Net Income............................................ $ 277,783 $ 69 $ 277,852
============ =========== ===========
Net Income Per Share.................................. $ 2.45 $ 0.02 $ 2.43(1)
============ =========== ===========
- ---------------
(1) Pro forma net income per share calculated based on an Illinois Tool Works
Inc. stock price of $65.875, the closing price on April 17, 1996, as
reported on the NYSE Composite Transactions listing.
54
60
ILLINOIS TOOL WORKS INC. & MEDALIST INDUSTRIES, INC.
COMBINED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
COMBINED
PRO FORMA ILLINOIS
TOOL WORKS INC.
ILLINOIS MEDALIST & MEDALIST
TOOL WORKS INC. INDUSTRIES, INC. INDUSTRIES, INC.
--------------- ---------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating Revenues................................. $ 3,159,181 $131,498 $3,290,679
Cost of revenues................................. 2,122,286 97,070 2,219,356
Selling, administrative and research and
development expenses.......................... 638,560 24,962 663,522
Amortization of goodwill and other intangible
assets........................................ 21,874 1,465 23,339
Amortization of retiree health care.............. 6,968 0 6,968
--------------- ---------------- ------------------
Operating Income................................... 369,493 8,001 377,494
Interest expense................................. (35,025) (3,376) (38,401)
Other income..................................... 1,402 0 1,402
--------------- ---------------- ------------------
Income Before Income Taxes......................... 335,870 4,625 340,495
Income taxes..................................... 129,300 0 129,300
--------------- ---------------- ------------------
Income Before Cumulative Effect of
Accounting Change................................ $ 206,570 $ 4,625 $ 211,195
============ =========== =============
Per share:
Income before cumulative effect of accounting
change........................................... $ 1.83 $ 1.20 $ 1.86(1)
============ =========== =============
- ---------------
(1) Pro forma income per share calculated based on an Illinois Tool Works Inc.
stock price of $65.875, the closing price on April 17, 1996, as reported on
the NYSE Composite Transactions listing.
55
61
ILLINOIS TOOL WORKS INC. & MEDALIST INDUSTRIES, INC.
COMBINED PRO FORMA STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 1995
COMBINED
PRO FORMA
ILLINOIS TOOL
WORKS INC.
ILLINOIS MEDALIST PRO FORMA & MEDALIST
TOOL WORKS INC. INDUSTRIES, INC. ADJUSTMENT(1) INDUSTRIES, INC.
--------------- ---------------- ------------- ----------------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash & equivalents..................... $ 116,600 $ 434 $(355) $ 116,679
Trade receivables...................... 741,327 14,997 0 756,324
Inventories............................ 518,964 29,030 0 547,994
Deferred income taxes.................. 80,005 0 0 80,005
Prepaid expenses & other current
assets.............................. 75,594 2,772 0 78,366
--------------- ---------------- ------------- ----------------
Total current assets........... 1,532,490 47,233 (355) 1,579,368
--------------- ---------------- ------------- ----------------
Plant & Equipment:
Cost................................... 1,620,584 27,603 0 1,648,187
Accumulated depreciation............... (925,643) (13,205) 0 (938,848)
--------------- ---------------- ------------- ----------------
Net plant & equipment............... 694,941 14,398 0 709,339
--------------- ---------------- ------------- ----------------
Investments.............................. 504,820 0 0 504,820
Goodwill................................. 518,747 17,872 0 536,619
Deferred Income Taxes.................... 194,613 0 0 194,613
Other Assets............................. 221,407 8,484 0 229,891
--------------- ---------------- ------------- ----------------
$ 3,667,018 $ 87,987 $(355) $3,754,650
============ =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt........................ $ 176,188 $ 3,017 $ 0 $ 179,205
Accounts payable....................... 221,497 10,231 0 231,728
Accrued expenses....................... 391,702 6,258 0 397,960
Cash dividends payable................. 20,100 0 0 20,100
Income taxes payable................... 41,445 183 0 41,628
--------------- ---------------- ------------- ----------------
Total current liabilities...... 850,932 19,689 0 870,621
--------------- ---------------- ------------- ----------------
Non-current Liabilities:
Long-term debt......................... 615,557 33,376 0 648,933
Other.................................. 276,292 3,234 0 279,526
--------------- ---------------- ------------- ----------------
Total non-current
liabilities.................. 891,849 36,610 0 928,459
--------------- ---------------- ------------- ----------------
Stockholders' Equity:
Preferred stock........................ 0 0 0 0
Common stock........................... 239,688 21,051 0 260,739
Income reinvested in the business...... 1,673,320 10,637 (355) 1,683,602
Common stock held in treasury.......... (1,866) 0 0 (1,866)
Cumulative translation adjustment...... 13,095 0 0 13,095
--------------- ---------------- ------------- ----------------
Total stockholders' equity..... 1,924,237 31,688 (355) 1,955,570
--------------- ---------------- ------------- ----------------
$ 3,667,018 $ 87,987 $(355) $3,754,650
============ =========== =========== ===========
- ---------------
(1) Reflects the transaction costs which will be expensed at the time of the
Merger.
56
62
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed financial statements have
been prepared from historical data of ITW and Medalist. The pro forma condensed
financial statements do not give effect to any synergies or nonrecurring costs
which may occur due to the integration of the ITW and Medalist operations.
2. ADJUSTMENTS
a. Income per share -- Pro forma income per share for each period is based
on the weighted average number of common shares and equivalents outstanding,
after adjusting for the issuance of 869,000 ITW shares.
b. Transaction costs -- the transaction costs which will be expensed at the
time of the Merger have been reflected as an adjustment to the pro forma
statement of financial position.
MEDALIST INFORMATION INCORPORATED BY REFERENCE
Information regarding the names, ages, positions and business background of
the directors and executive officers of Medalist, as well as additional
information, including executive compensation, security ownership of certain
beneficial owners and management and certain relationships and related
transactions, is incorporated by reference to its Annual Report on Form 10-K for
the year ended December 31, 1995.
OTHER MATTERS
Medalist knows of no other business that will be presented for action by
the shareholders at the Special Meeting. The Board of Directors of Medalist has
approved the contents and mailing of this Proxy Statement/Prospectus.
PROPOSALS BY HOLDERS OF MEDALIST STOCK
In the event the Merger is not consummated for any reason, proposals of
shareholders intended to be presented at the 1996 annual meeting of shareholders
must be received by the Company at its principal executive offices not later
than June 7, 1996, for inclusion in the Company's Proxy Statement and form of
proxy relating to that meeting. Shareholders should mail any proposal by
certified mail-return receipt requested.
57
63
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ILLINOIS TOOL WORKS INC.,
ITW ACQ. INC.
AND
MEDALIST INDUSTRIES, INC.
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TABLE OF CONTENTS
PAGE
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ARTICLE I CERTAIN COMPANY ACTION....................................................... 1
1.1 Certain Company Action......................................................... 1
ARTICLE II THE MERGER; EFFECTIVE TIME; CLOSING......................................... 1
2.1 The Merger..................................................................... 1
2.2 Effective Time................................................................. 1
2.3 Closing........................................................................ 2
ARTICLE III SURVIVING CORPORATION...................................................... 2
3.1 Articles of Incorporation...................................................... 2
3.2 By-Laws........................................................................ 2
3.3 Directors...................................................................... 2
3.4 Officers....................................................................... 2
3.5 Further Assurances............................................................. 2
ARTICLE IV CONVERSION OF SHARES IN THE MERGER.......................................... 2
4.1 Share Consideration for the Merger; Conversion of Shares in the Merger......... 2
4.2 Exchange of Certificates; No Fractional Shares; Return of Certificates......... 3
4.3 Transfer of Shares After the Effective Time.................................... 4
4.4 Company Stock Options.......................................................... 4
4.5 No Dissenting Shares........................................................... 4
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 4
5.1 Corporate Organization and Qualification....................................... 5
5.2 Capitalization................................................................. 5
5.3 Authority Relative to Agreement................................................ 5
5.4 Consents and Approvals; No Violation........................................... 6
5.5 SEC Reports; Financial Statements; Absence of Liabilities...................... 6
5.6 Absence of Certain Changes or Events........................................... 7
5.7 Litigation..................................................................... 7
5.8 Property....................................................................... 8
5.9 Patents, Trademarks and Like Assets............................................ 8
5.10 Existing Contracts or Commitments.............................................. 8
5.11 Inventories.................................................................... 9
5.12 Accounts Receivable............................................................ 9
5.13 Vital Parent Statistics........................................................ 9
5.14 Insurance...................................................................... 9
5.15 Minute Book and Stock Ledger................................................... 9
5.16 Sales Agency and Distribution Agreements....................................... 9
5.17 Taxes.......................................................................... 10
5.18 Employee Benefit Plans; Labor Matters.......................................... 11
5.19 Compliance With Laws and Regulations........................................... 11
5.20 Brokers and Finders............................................................ 13
5.21 Opinions of Financial Advisors................................................. 13
5.22 Certain Agreements............................................................. 13
5.23 Merger Proxy Statement......................................................... 13
5.24 Accuracy of Information........................................................ 13
5.25 Representations and Warranties................................................. 13
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO.......................... 14
6.1 Corporate Organization and Qualification....................................... 14
6.2 Capitalization................................................................. 14
6.3 Authority Relative to Agreement................................................ 14
6.4 Consents and Approvals; No Violation........................................... 14
6.5 SEC Reports; Financial Statements.............................................. 15
6.6 Merger Consideration........................................................... 15
6.7 Information Supplied........................................................... 15
6.8 Interim Operations of Newco.................................................... 15
6.9 Brokers and Finders............................................................ 15
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS........................................ 15
7.1 Conduct of Business of the Company............................................. 15
7.2 Acquisition Proposals.......................................................... 17
7.3 Best Efforts................................................................... 17
7.4 Access to Information.......................................................... 18
7.5 Publicity...................................................................... 18
7.6 Indemnification of Directors and officers...................................... 18
7.7 Employees...................................................................... 18
7.8 NYSE Listing................................................................... 19
7.9 Merger Proxy Statement and Registration Statement.............................. 19
7.10 Agreements of Affiliates....................................................... 20
7.11 Tax Representation Letter of Parent and Newco; No Disqualifying Action......... 20
7.12 Tax Representation Letters of Holders of Shares................................ 20
7.13 Tax Representation Letter of the Company; No Disqualifying Action.............. 20
7.14 Supplemental Indenture of 7 1/2% Convertible Subordinated Debentures........... 20
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER.................................. 20
8.1 Conditions to Each Party's Obligations to Effect the Merger.................... 20
8.2 Additional Conditions to the Obligations of Parent and Newco................... 20
8.3 Additional Conditions to the Obligations of the Company........................ 22
ARTICLE IX TERMINATION; AMENDMENT; WAIVER.............................................. 22
9.1 Termination by Mutual Consent.................................................. 22
9.2 Termination by Either Parent or the Company.................................... 22
9.3 Termination by Parent.......................................................... 23
9.4 Termination by the Company..................................................... 23
9.5 Effect of Termination.......................................................... 23
9.6 Extension; Waiver.............................................................. 23
9.7 Special Fees and Expenses...................................................... 24
ARTICLE X MISCELLANEOUS AND GENERAL.................................................... 25
10.1 Payment of Expenses............................................................ 25
10.2 Survival of Representations and Warranties; Survival of Confidentiality........ 25
10.3 Modification or Amendment...................................................... 25
10.4 Waiver of Conditions........................................................... 25
10.5 Counterparts................................................................... 25
10.6 Governing Law.................................................................. 25
10.7 Notices........................................................................ 26
10.8 Entire Agreement: Assignment................................................... 26
10.9 Parties in Interest............................................................ 26
10.10 Certain Definitions............................................................ 26
10.11 Obligation of Parent........................................................... 26
10.12 Validity....................................................................... 26
10.13 Captions....................................................................... 26
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 8,
1996, by and among Illinois Tool Works Inc., a Delaware corporation ("Parent"),
ITW ACQ. Inc., a Wisconsin corporation and a direct wholly owned subsidiary of
Parent ("Newco"), and Medalist Industries, Inc., a Wisconsin corporation (the
"Company"),
RECITALS
WHEREAS, the Board of Directors of the Company has, subject to the
conditions of this Agreement, determined that the Merger (as defined below) is
in the best interests of the shareholders of the Company and approved and
adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, each of the parties hereto intends that the Merger shall qualify
as a tax-free reorganization under Section 368(a) of the Code (defined below).
WHEREAS, Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Newco and the Company hereby agree as follows:
ARTICLE I
CERTAIN COMPANY ACTION
1.1 Certain Company Action. The Company hereby represents that the Board of
Directors, at a meeting duly called and held, has, subject to the terms and
conditions set forth herein, (i) approved this Agreement and the transactions
contemplated hereby, including the Merger, and that such approval constitutes
approval of this Agreement and the Merger for purposes of Section 180.1141 of
the WBCL with the effect that any "business combinations" (as defined in Section
180.1140 involving the Company and Parent or Newco is not delayed for the
three-year period specified therein and (ii) resolved to recommend that the
shareholders of the Company approve and adopt this Agreement and the Merger;
provided, that such recommendation may be withdrawn, modified or amended if
there exists at such time a proposal for a Third Party Acquisition (defined in
Section 9.7) and in the judgment of the Board of Directors, after consultation
with Company counsel, such withdrawal, modification or amendment is required by
its fiduciary duties to the Company's shareholders or other constituencies under
applicable law.
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING
2.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 2.2), the Company and Newco shall
consummate a merger (the "Merger") in which (a) Newco shall be merged with and
into the Company and the separate corporate existence of Newco shall thereupon
cease, (b) the Company shall be the successor or surviving corporation in the
Merger and shall continue to be governed by the laws of the State of Wisconsin,
and (c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation." The Company and Newco are sometimes
collectively referred to herein as the "Constituent Corporations". The Merger
shall have the effects set forth in the WBCL.
2.2 Effective Time. Parent, Newco and the Company will cause appropriate
Articles of Merger (the "Articles of Merger") to be executed and filed on the
date of the Closing (as defined in Section 2.3) (or on such other date as Parent
and the Company may agree) as provided in the WBCL. The Merger shall become
effective on the date on which the Articles of Merger have been duly filed with
the Secretary of State of the
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State of Wisconsin or such time as is agreed upon by the parties and specified
in the Articles of Merger, and such time is hereinafter referred to as the
"Effective Time".
2.3 Closing. The closing of the Merger (the "Closing") shall take place (a)
at the offices of Jenner & Block, One IBM Plaza, Chicago, Illinois, at 10:00
a.m. on the first business day following the date on which the last of the
conditions set forth in Article VIII hereof shall be fulfilled or waived in
accordance with this Agreement or (b) at such other place, time and date as
Parent and the Company may agree. The date on which the Closing occurs is
referred to herein as the "Closing Date."
ARTICLE III
SURVIVING CORPORATION
3.1 Articles of Incorporation. The Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation.
3.2 By-Laws. The By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation.
3.3 Directors. The directors of Newco at the Effective Time shall, from and
after the Effective Time, be the initial directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and By-Laws.
3.4 Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the initial officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws.
3.5 Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out and effectuate the purposes of this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the
Constituent Corporations or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out and effectuate the purposes of this
Agreement.
ARTICLE IV
CONVERSION OF SHARES IN THE MERGER
4.1 Share Consideration for the Merger; Conversion of Shares in the
Merger. At the Effective Time, by virtue of the Merger and without any action on
the part of the holders of capital stock of the Company or of capital stock of
Newco:
(a) Each share of common stock, par value $1.00 per share, of the
Company (singly, "Share" and plural "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent,
Newco, or any direct or indirect wholly owned subsidiary of Parent
(collectively, "Parent Companies") or any of the Company's direct or
indirect wholly owned subsidiaries or held in the treasury of the Company)
shall, by virtue of the Merger and without any action on the part of Newco,
the Company or the holder thereof, be converted into a fraction of a share
of common stock, without par value, of Parent ("Parent Common Stock") equal
to that fraction (the "Per Share Conversion Ratio") of
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which the numerator is $14.50 (the "Company Valuation") and the denominator
is the average per share closing price on the New York Stock Exchange (the
"NYSE") of Parent Common Stock (as reported on the NYSE Composite Index)
during the 10 consecutive trading days ending on the second trading day
prior to the Effective Time (the "Average Closing Price"). The fraction of
a share of Parent Common Stock into which a Share is converted pursuant to
the Merger is referred to herein as the "Merger Consideration").
(b) At the Effective Time, each Share issued and outstanding and owned
by any of the Parent Companies or any of the Company's direct or indirect
wholly owned subsidiaries or authorized but unissued shares held by the
Company immediately prior to the Effective Time shall cease to be
outstanding, be cancelled and retired without payment of any consideration
therefor and cease to exist.
(c) At the Effective Time, each share of common stock of Newco issued
and outstanding immediately prior to the Effective Time shall be converted
into one validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
(d) If, between the date of this Agreement and the Effective Time, the
outstanding Shares or the Parent Common Stock shall have been changed into
a different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of
shares or readjustment, or with respect to any such event there be declared
a record date within said period with a distribution date after the
Effective Time or a stock dividend on the Shares or the Parent Common Stock
shall be declared with a record date within said period, the Per Share
Conversion Ratio shall be appropriately adjusted.
4.2 Exchange of Certificates; No Fractional Shares; Return of Certificates.
(a) Except as set forth in Section 4.1 above, from and after the
Effective Time, each holder of a certificate which immediately prior to the
Effective Time represented outstanding Shares shall be entitled to receive
in exchange therefor, upon surrender thereof to a bank or trust company
selected by Parent (the "Exchange Agent"), a certificate or certificates
representing the number of shares of Parent Common Stock into which such
holder's Shares were converted and, if applicable, payment for any
fractional shares in accordance with Section 4.2(b). No holder of a
certificate or certificates which immediately prior to the Effective Time
represented Shares shall be entitled to receive any dividend or other
distribution from Parent until surrender of such holder's certificate or
certificates for a certificate or certificates representing shares of
Parent Common Stock. Upon such surrender, there shall be paid to the holder
thereof the amount of any dividends or other distributions (without
interest) which theretofore became payable, but which were not paid by
reason of the failure to surrender such certificates, with respect to the
number of whole shares of Parent Common Stock represented by the
certificates issued upon such surrender. From and after the Effective Time,
Parent shall, however, be entitled to treat such certificates for Shares
which have not yet been surrendered for exchange as evidencing the
ownership of that number of shares of Parent Common Stock into which the
Shares represented by such certificates shall have been converted,
notwithstanding any failure to surrender such certificates. If any
certificate for shares of Parent Common Stock is to be issued in a name
other than that in which the certificate for Shares surrendered in exchange
therefor is registered, it shall be a condition of such issuance that the
person requesting such issuance shall pay any transfer or other tax
required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of
the certificate surrendered, or shall establish to the satisfaction of
Parent or the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither Parent, Newco nor the
Company shall be liable to any holder of Shares for any shares of Parent
Common Stock (or dividends or distributions with respect thereto),
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(b) No fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of certificates which prior to the Effective
Time shall have represented Shares; no dividend or other distribution of
Parent shall relate to any fractional share and such fractional share
interests will not entitle the owner thereof to vote or to any rights as a
stockholder of Parent. In lieu of any fractional shares, each
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holder of certificates formerly representing Shares who would otherwise be
entitled to receive a fraction of a share of Parent Common Stock upon
surrender of all of the certificates formerly representing Shares
registered in the name of such holder shall be paid by the Exchange Agent
an amount of cash (without interest) equal to the Average Closing Price
multiplied by the fraction of a share of Parent Common Stock the holder
would otherwise be entitled to receive.
(c) One hundred eighty (180) days after the Effective Time all shares
of Parent Common Stock, and all dividends or other distributions on Parent
Common Stock which have been received by the Exchange Agent and have not
been distributed as hereinbefore provided, shall be returned to Parent or
its agent and the duties of the Exchange Agent with respect thereto shall
thereupon terminate; thereafter, subject to applicable law, any holder of
Shares who has not theretofore surrendered the holder's certificate or
certificates formerly representing Shares in exchange for the Merger
Consideration shall be entitled upon surrender of such certificate or
certificates to Parent or its agent to receive a certificate for the number
of whole shares of Parent Common Stock into which the holder's Shares shall
have been converted pursuant to the Merger, the amount (without interest
thereon) of all dividends and other distributions which have theretofore
become payable with respect to such shares of Parent Common Stock and the
amount (without interest thereon) of any payment due the holders on account
of fractional shares, if any, of Parent Common Stock.
4.3 Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.
4.4 Company Stock Options. After the Effective Time, each option ("Option")
to purchase shares which has been granted under the Company's 1990 Stock Option
Plan and the Company's 1994 Stock Option Plan (together, the "Option Plans") and
is outstanding at the Effective Time, whether or not then exercisable, will
automatically be converted into that number of shares of Parent Common Stock
determined by multiplying the number of Shares subject to such Option at the
Effective Time by a fraction equal to (a) the amount by which the Company
Valuation exceeds the option exercise price divided by (b) the Company
Valuation, and then (c) multiplying the quotient by the Per Share Conversion
Ratio. The Company will use its best efforts to obtain an agreement from each
holder of an Option, in form and substance satisfactory to Parent, to the effect
that (i) the Option holder consents to the conversion of the respective Option
in accordance with this Section 4.4, (ii) the conversion satisfies all
obligations of the Company and of Parent under the Option, and (iii) upon
receipt of Parent Common Stock (net of applicable tax withholding) pursuant to
the conversion, neither the Company nor Parent shall have any obligations to the
holder under the Option.
4.5 No Dissenting Shares. The parties hereto acknowledge that under the
WBCL the shareholders of the Company are not entitled to dissent from the Merger
and require appraisal of their Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The schedules called for by the Company's representations and warranties in
this Article V have been prepared by Company management without full involvement
of non-management personnel because of the confidential nature of this
Agreement. Although management believes all of the information is accurate and
(except in respect to lists of intellectual property, permits and contracts)
complete, the Company shall have the right to complete or supplement Schedules
5.9, 5.10, 5.16 and 5.19 within five business days after public announcement of
this Agreement (the "Schedule Supplement"). Parent shall have the right to
terminate this Agreement by written notice to the Company within three business
days after receipt of the Schedule Supplement if Parent in its sole discretion
determines that the information contained in the schedules as supplemented
constitutes, or is likely to have, a Significantly Material Adverse Effect
(defined in Section 10.10). In the event Parent terminates this Agreement
pursuant to the foregoing provision, this Agreement shall become null and void
and have no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders, except that the Confidentiality
Agreement shall survive and
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each party shall pay its own expenses incurred in connection with this
Agreement. In the event Parent does not terminate this Agreement pursuant to the
foregoing provision, the Schedule Supplement shall be deemed delivered as of the
date of this Agreement and made a part of the Company's schedules to this
Agreement.
Subject to the foregoing paragraph, the Company hereby represents and
warrants to Parent and Newco that:
5.1 Corporate Organization and Qualification. Each of the Company and its
subsidiaries (as hereinafter defined in Section 10.10) is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is qualified and in good standing
as a foreign corporation in each jurisdiction where the properties owned, leased
or operated, or the business conducted, by it require such qualification. Each
of the Company and its subsidiaries has all requisite power and authority
(corporate or otherwise) to own its properties and to carry on its business as
it is now being conducted. The Company has heretofore made available to Parent
complete and correct copies of its Articles of Incorporation and By-Laws. Set
forth in Schedule 5.1 is a list of all subsidiaries of the Company and the
jurisdictions in which the Company and each of its subsidiaries are qualified or
otherwise authorized to do business.
5.2 Capitalization. The authorized capital stock of ITWthe Company consists of
150,000,000(i) 10,000,000 Shares of which, as of the date of this Agreement, 3,873,398
Shares are issued and outstanding and (ii) 10,000 shares of Common Stock, nopreferred stock, par
value and 300,000 shares$100.00 per share, none of Preferred Stock, no par value. As of March 31, 1995, there were
114,113,070 shares of Common Stock issued and outstanding. No
Preferred Stockwhich is issued or outstanding.
Common Stock
Holders of Common Stock are entitled to one vote for each share
held of record, in person or by proxy, at all meetings of the
stockholdersoutstanding, and on all propositions presented to such meetings
(other than the election of any directors who may be elected by
vote of the Preferred Stock voting as a class). The Common Stock
does not entitle holders to cumulative voting rights in the
election of directors. Holders of Common Stock do not have
preemptive rights.
All outstanding(iii)
20,000 shares of Common Stock are fully paid and
nonassessable. Dividends may be paid on the Common Stock when
and if declared by the Boardpreferred stock, par value of Directors out$50.00 per share, none of funds legally
available therefor. Upon liquidation, dissolution, or winding up
of the affairs of ITW, its assets remaining, after provision for
payment of creditors and holders of Preferred Stock, are
distributable pro rata among holders of its Common Stock.
The Common Stockwhich
is listed and traded on the New York and Chicago
Stock Exchanges. The transfer agent and registrar of the Common
Stock is Harris Trust and Savings Bank, Chicago, Illinois.
Preferred Stock
ITW's Preferred Stock is issuable in series. The Preferred Stock
is senior to the Common Stock, both as to payment of dividends
and distribution of assets. The designation, preferences and
rights of each series may be established by the Board of
Directors, including voting rights, dividends, redemption
features, payments on liquidation and sinking fund provisions, if
any. The Preferred Stock may be utilized for a variety of
corporate purposes, including future public offerings to raise
additional capital or to finance acquisitions. The Preferred
Stock also could be issued to persons friendly to current
management with terms that could render more difficult or
discourage attempts to gain control of ITW by means of a merger,
tender offer, proxy contest or otherwise and thereby protect the
continuity of current management. The Preferred Stock also could
be used to dilute the stock ownership of persons seeking to
obtain control of ITW.
Special Charter and By-Law Provisions
ITW's Restated Certificate of Incorporation, as amended, and its
By-Laws contain
5
provisions which could render more difficult a merger, tender offer, proxy
or contest attempt to gain control of Board of Directors, or which could
the dilute the voting control of a holder of a large block of stock.
The Restated Certificate of Incorporation, as amended, provides
that an affirmative vote of the holders of not less than two-
thirdsoutstanding. All of the outstanding shares of capital stock entitledof the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. As of the date of this Agreement, 180,214 Shares were reserved
for issuance upon exercise of outstanding options pursuant to votethe Option Plans
and 413,867 Shares were reserved for issuance on conversion of the Company's
7 1/2% Convertible Subordinated Debentures Due 2001. Except as set forth on
Schedule 5.2, as of the date hereof all outstanding shares of capital stock of
the Company's subsidiaries are owned by the Company or a direct or indirect
wholly owned subsidiary of the Company, free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except as set forth above and on
Schedule 5.2, there are not as of the date hereof any outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character which the Company or any of its
subsidiaries is a party to, or may be bound by, requiring it to issue, transfer,
sell, purchase, redeem or acquire any shares of capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock of the Company or any of its
subsidiaries.
5.3 Authority Relative to Agreement.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval and adoption of this Agreement by the
shareholders of the Company in accordance with the WBCL). This Agreement
has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of
Parent and Newco, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that
the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding
in equity or at law).
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board
of Directors for the consummation of the transactions (including the
Merger) contemplated herein, including but not limited to, all actions
required to render the provisions of Section 180.1141 of the WBCL
restricting business combinations with "Interested Shareholders"
inapplicable to such transactions.
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5.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the respective Articles of Incorporation or By-Laws of the
Company or any of its subsidiaries; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) pursuant to the applicable requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), and the Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "Exchange Act"), (iii) the
filing of the Articles of Merger pursuant to the WBCL and appropriate documents
with the relevant authorities of other states in which the Company or any of its
subsidiaries is authorized to do business, (iv) in connection with any state or
local tax which is attributable to the beneficial ownership of the Company's or
its subsidiaries' real property, if any (collectively, the "Gains Taxes"), (v)
as may be required by any applicable state securities or "blue sky" laws or
state takeover laws, (vi) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, or (vii) such filings, consents,
approvals, orders, registrations and declarations as may be required under the
laws of any foreign country in which the Company or any of its subsidiaries
conducts any business or owns any assets; (c) except as set forth in Schedule
5.4(c), result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any material
note, license, agreement or other instrument or obligation to which the Company
or any of its subsidiaries or any of their assets may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) as to which requisite
waivers or consents have been obtained or shall be obtained prior to the
Effective Time; or (d) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 5.4 are duly
and timely obtained or made and, with respect to the Merger, the approval of
this Agreement by the Company's shareholders has been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its subsidiaries or to any of their respective assets.
5.5 SEC Reports; Financial Statements; Absence of Liabilities.
(a) Prior to the date of this Agreement the Company has filed all
forms, reports and documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") since December 31, 1991 pursuant to the
federal securities laws and the SEC rules and regulations thereunder, all
of which, as of their respective dates, complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act
(collectively, the "Company SEC Reports"). None of the Company SEC Reports,
including, without limitation, any financial statements or schedules
included therein, as of their respective dates contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related statements of
consolidated income, shareholders' equity and cash flows (including the
related notes thereto) of the Company included in the Company SEC Reports
complied in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods (except as
otherwise noted therein), and present fairly the consolidated financial
position of the Company and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and
their cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end
adjustments).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at September 30, 1995, including
the notes thereto, contained in the Company SEC Reports (the "Company
9/30/95 Balance Sheet"), neither the Company nor any of its subsidiaries
has any
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liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a
balance sheet or in the notes thereto prepared in accordance with generally
accepted accounting principles, except for liabilities or obligations
incurred in the ordinary course of business since September 30, 1995, or
which would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(d) Except as may be set forth on Schedule 5.5, neither the Company
nor any of its subsidiaries has any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) under any contract, order or
commitment expected to be or previously performed at a loss or other
contingent liability except for (i) expected losses and contingent
liabilities known to the Company for which adequate reserves are reflected
in the Company 9/30/95 Balance Sheet, (ii) those arising in the ordinary
course of business subsequent to the date of the Company 9/30/95 Balance
Sheet, or (iii) those which would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
5.6 Absence of Certain Changes or Events. As of the date of this Agreement,
except as disclosed in the Company SEC Reports, as set forth on Schedule 5.6 or
contemplated by this Agreement, since December 31, 1994: (i) the business of the
Company has been carried on only in the ordinary and usual course and in a
manner consistent with past practices; (ii) the Company has not suffered any
Material Adverse Effect; (iii) neither the Company nor any of its subsidiaries
has incurred any material liabilities (direct, contingent or otherwise) or
engaged in any material transaction or entered into any material agreement
outside the ordinary course of business; (iv) there has not been any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Company or any of its subsidiaries which would reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect;
(v) there has not been any revaluation by the Company of any of its material
assets, including but not limited to writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business; (vi) there has not been any entry by the Company or any of its
subsidiaries into any commitment or transactions material to the Company taken
as a whole other than those in the ordinary course of business; (vii) there has
been no change by the Company in accounting principles, practices or methods;
(viii) any declaration, setting aside or payment of any dividend or other
distribution in respect of the Shares or any direct or indirect redemption,
purchase or other acquisition by the Company of any of its shares of capital
stock; (ix) there has not been any increase in the compensation payable or to
become payable by the Company or its subsidiaries to any of their respective
officers, or any significant increase in the compensation payable to other
employees or agents of the Company or any of its subsidiaries or any adoption of
any bonus, pension, retirement, profit sharing, or stock option plan,
arrangement or agreement made to or with any of such officers or employees; (x)
there has not been any labor strike or threat thereof or labor trouble or other
business event or condition which is likely to have a Material Adverse Effect;
and (xi) neither the Company nor any of its subsidiaries has engaged in any
transaction of a kind that would be prohibited after execution and delivery
hereof pursuant to the second sentence of Section 7.1 hereof.
5.7 Litigation. Schedule 5.7 sets forth a list of all suits, actions,
claims, proceedings, disputes and complaints involving potential loss or
liability of $10,000 or more. Except as set forth in Schedule 5.7, neither the
Company nor any of its subsidiaries has received notice or complaints of
noncompliance with any laws or rules and regulations promulgated thereunder
relating to occupational safety, environmental matters, equal opportunity, fair
employment, product labeling or similar laws or regulations affecting its
business and operations which have not been finally resolved. The Company SEC
Reports accurately disclose in all material respects as of the date of this
Agreement all actions, claims, suits, proceedings and governmental
investigations pending or, to the knowledge of the Company, threatened, which
are required to be disclosed therein by the Securities Act and the Exchange Act.
Except as disclosed in Schedule 5.7, there is no action, suit, proceeding at law
or in equity, or any arbitration or any administrative or other proceeding by or
before (or to the knowledge of the Company any investigation by) any
governmental or other instrumentality or agency, pending, or, to the best
knowledge of the Company, threatened, against or affecting the Company or any of
its subsidiaries, or any of their properties or rights. Except as disclosed in
Schedule 5.7, neither the Company nor any of its subsidiaries is subject to any
judgment, injunction, order, award or decree entered in any lawsuit or
proceeding which has or is reasonably expected to have a Material Adverse
Effect.
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5.8 Property.
(a) The Company and its subsidiaries have good and marketable title to
all of the properties and other assets reflected in the Company 9/30/95
Balance Sheet (except as since sold or otherwise disposed of in the
ordinary course of business) and except as shown in Schedule 5.8, their
properties are not subject to any mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, including leasehold interests, except for
liens securing specified liabilities as set forth on the Company 9/30/95
Balance Sheet (with respect to which no default exists), liens for current
taxes not in default, and minor imperfections in title, which are not
substantial in amount, do not materially detract from the value of the
property subject thereto, or materially impair their operations. All real
estate leases of the Company and its subsidiaries are listed on Schedule
5.8.
(b) The Company and its subsidiaries conduct their business in those
buildings and upon that land (the "Real Property") listed in Schedule 5.8,
which Real Property is adequate for conducting present and currently
planned future operations. To the Company's knowledge, there are no claims
made by any municipal or other authorities in connection with the Real
Property for any violation of any applicable law, ordinance or regulation
which is likely to have a Material Adverse Effect. Any buildings included
in the Real Property are in good operating condition and in a reasonable
state of repair and the same conform in all material respects with all
applicable ordinances and regulations and building zoning, and other laws.
(c) All of the machinery and equipment owned or leased by the Company
and its subsidiaries and used in the conduct of their business is in good
working order and repair, reasonable wear and tear excepted, and is in
substantial conformity with all applicable ordinances, regulations and
other laws. Other than minor office equipment leases, there are no leases
of machinery and equipment, except as shown on Schedule 5.8.
(d) Except as set forth in Schedule 5.8, the assets owned or leased by
the Company or its subsidiaries constitute all of the assets which are
being used in their business; all such tangible assets are in good repair
(reasonable wear and tear excepted) and serviceable condition and suitable
for the uses for which they are intended, and no notice of any violation of
applicable ordinances or regulations relating to such assets or their use
has been received.
(e) The Company and its subsidiaries are in compliance with, and not
in default under, their obligations under their leases for real and
personal property and to the knowledge of the Company the other parties to
such leases are not in default thereunder.
5.9 Patents, Trademarks and Like Assets. All trademarks, trade names,
copyrights and patents and applications therefor owned by or used by the Company
or any of its subsidiaries in its business are listed and described in Schedule
5.9 hereto. No proceedings have been instituted or are pending or, to the
knowledge of the Company, threatened, which challenge the validity or the
ownership of such trademarks, trade names, copyrights, patents and applications
except as set forth in Schedule 5.9. The Company or any of the subsidiaries has
no knowledge of the use or the infringement of any of such trademarks, trade
names, copyrights, patents and applications by any other person except as set
forth in Schedule 5.9. Neither the Company nor any of its subsidiaries, has
entered into any patent or trademark license, technology transfer, or
non-competition agreement relating to its business except as set forth in
Schedule 5.9. The Company and its subsidiaries own (or possess adequate and
enforceable licenses or other rights to use) all trademarks, trade names,
copyrights, patents, inventions and processes now used in the conduct of their
business and to the knowledge of the Company no such use or any other practice
with respect to the business of the Company and its subsidiaries conflicts or
has conflicted with the rights of others except as set forth in Schedule 5.9.
5.10 Existing Contracts or Commitments. Except as listed on Schedule 5.10,
neither the Company nor any of its subsidiaries has any:
(i) presently existing employment agreements, or bonus labor contract,
or agreement for the purchase or sale of supplies, materials, services or
finished products, other than agreements in the ordinary course of
business, none of which individually or in the aggregate are material; or
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(ii) material contract or commitment extending beyond the Closing
which is not cancelable on ninety (90) days or less notice to the other
parties thereto; or
(iii) contract, commitment or other arrangement involving the payment
by or to it of more than $100,000; or
(iv) contract or instrument, charter or other corporate restriction,
materially and adversely affecting its business, property, assets,
operations or condition, financial or otherwise.
True and complete copies of the agreements, plans, commitments and arrangements
listed in Schedule 5.10 have been delivered to Parent, and the Company and its
subsidiaries are currently in substantial compliance with all of the provisions
of each of the same and of all other contracts or commitments to which they are
parties.
5.11 Inventories. The inventories of supplies, raw materials, work in
progress and finished goods of the Company and its subsidiaries ("Inventories")
as reflected in the Company 9/30/95 Balance Sheet are valued on a basis
consistent with generally accepted accounting principles. All inventories of the
Company and its subsidiaries as of the Closing will be good and merchantable at
customary prices in the ordinary course of business and of a quality and
quantity usable in ordinary limits as determined by past practice except to the
extent reflected in appropriate reserves on the Company 9/30/95 Balance Sheet.
5.12 Accounts Receivable. The accounts receivable relating to the Company
and its subsidiaries arose for products or services delivered or performed and
are collectible in the ordinary course of business, except for a maximum
aggregate reserve for or allowance for uncollectible accounts of $653,077.
5.13 Vital Parent Statistics. The Company and its subsidiaries have
delivered to Parent true and complete lists as set forth in Schedule 5.13 as of
the date of this Agreement, showing:
(i) the names of all directors and officers of the Company and each of
its subsidiaries and the trustees or administrative committee members of
any pension or profit sharing plan of which the Company or any of its
subsidiaries is the settlor;
(ii) the names of all persons whose rate of compensation from the
Company or any of its subsidiaries for their current fiscal year will be
equal to or exceed $60,000;
(iii) the name of each bank in which the Company, or any of its
subsidiaries has an account, or safety deposit box, and the names of all
persons authorized to draw thereon, or to have access thereto.
5.14 Insurance. A true and complete list of all policies of insurance owned
by or in which the Company or any of its subsidiaries has an interest is set
forth in Schedule 5.14. The list also contains all claims for insurance losses
in excess of $25,000 per occurrence, filed by the Company or any of its
subsidiaries during the three-year period immediately preceding the Closing,
including but not limited to workman's compensation, automobile and general and
product liability.
5.15 Minute Book and Stock Ledger. The minute books of the Company and each
of its subsidiaries contain full and complete minutes of all annual, special and
other meetings of the Board of Directors and shareholders since February of
1982, and any consents in lieu thereof of the respective entity, and the
signatures therein are the true signatures of the persons purporting to have
signed them. The stock ledgers of the Company and each of its subsidiaries are
complete and all documentary stamp taxes, if any, required in connection with
the issuance and transfer of the shares of the Company and each of its
subsidiaries, have been affixed and cancelled.
5.16 Sales Agency and Distribution Agreements. Except as set forth in
Schedule 5.16, neither the Company nor any of its subsidiaries is a party to any
sales agency or distributorship agreement or franchise which is not cancelable
at any time and without cause. The Company has delivered to Parent a copy of
each written, and a written summary of each oral, sales representative and
distributor agreements currently in effect. To the knowledge of the Company,
there is no pending or threatened claim against the Company or any of its
subsidiaries based upon the termination thereof. To the knowledge of the
Company, all of such agreements are valid, binding and in full force and effect,
and there exists no default thereunder by the
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Company or any of its subsidiaries nor has any event occurred which with the
passage of time or giving of notice would constitute such a default thereunder.
5.17 Taxes.
(a) The Company and its subsidiaries have filed when due all federal,
state, local and foreign returns for Taxes (defined below) that any of them
is required to approve mergersfile ("Tax Returns") and have paid all taxes shown to be due
on those returns. The Company's Federal income tax returns for the periods
up to and including December 31, 1989 have been audited by the Internal
Revenue Service. The Company has delivered to Parent true and complete
copies of its federal income tax returns for each of the three years ended
December 31, 1992, 1993 and 1994. The Tax Returns reflect accurately all
liability for Taxes for the periods covered thereby. All Taxes payable by,
or consolidations between ITW (or its subsidiaries) and a
Substantial Stockholder, transfers of a substantial amount of
assets or stockdue from, ITW to a Substantial Stockholder or vice
versa, adoption of a Substantial Stockholder's proposal to
dissolve ITW,the Company or any transaction relating to ITW's stock which
resultsof its subsidiaries have been fully paid or
adequately disclosed and provided for on the financial statements of the
Company and its subsidiaries in a Substantial Stockholder's proportionate share being
increased. The Restated Certificate of Incorporation, as
amended, also requiresaccordance with generally accepted
accounting principles. Without limiting the approvalgenerality of the foregoing,
transactions(i) no material claim for unpaid Taxes (x) to the best knowledge of the
Company, has become a lien or encumbrance of any kind against the property
of the Company or any of its subsidiaries or (y) is being asserted against
the Company or any of its subsidiaries; (ii) no audit of any Tax Return of
the Company or any of its subsidiaries is being conducted by a Tax
authority; (iii) no extension of time is in effect with respect to the
filing of any Tax Returns, the payment of Taxes by the Company or any of
its subsidiaries or any limitations period on the assessment of any Taxes
of the Company or any of its subsidiaries; (iv) there is no Tax deficiency
or to the knowledge of the Company any substantive basis on which any Tax
deficiency might be asserted against the Company or any of its subsidiaries
in excess of the reserve for Taxes set forth in the financial statements of
the Company and its subsidiaries as of the respective dates thereof; and
(v) there are no claims for refunds of Taxes of the Company or any of its
subsidiaries pending.
(b) Except for the group of which Company is presently the common
parent corporation, neither the Company nor any of its subsidiaries has
been a member of an affiliated group of corporations, within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Neither the Company nor any of its subsidiaries is a party to or
bound by any tax indemnity, tax sharing, tax allocation or similar
agreement. Neither the Company nor any of its subsidiaries is a party to
any joint venture, partnership or other arrangement or contract which could
be treated as a partnership for federal income tax purposes. All material
elections with respect to Taxes affecting the Company or any of its
subsidiaries as of the date hereof are set forth on Schedule 5.17. After
the date hereof, no election with respect to Taxes will be made without the
written consent of Parent.
(c) The net operating loss carryovers of the Company for federal
income tax purposes at December 31, 1994 of approximately $16,000,000
represent actual taxable losses incurred by the Company and/or its
liquidated subsidiaries. These losses are available, within restrictions
relating to the change of the Company's stock ownership under Section 382
of the Code, and the Separate Return Limitation Year rules under Section
1502 of the Code, to be offset against future profits of the Company or its
successor in determining the amount of income subject to federal income
tax. The utilization of these losses expire in 2006 to 2009 and management
of the Company believes that as of the date of this Agreement there has not
been a technical change of control under the Code or regulations thereunder
which would adversely affect the utilization of these losses.
(d) As used in this Agreement, "Tax" or "Taxes" shall mean any tax or
taxes of any kind, including but not limited to those imposed on or
measured by or referred to as income, gross receipts, capital, capital
gains, sales, ad valorem, franchise, profits, license withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign.
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5.18 Employee Benefit Plans; Labor Matters.
(a) With respect to all pension, profit sharing, bonus, disability,
welfare or group insurance, deferred compensation, stock option, paid
vacation and all other employee benefit plans, programs and arrangements
maintained or contributed to by the Company or any of its subsidiaries (the
"Company Plans"), except as set forth in Schedule 5.18 or the Company SEC
Reports and except as would not in the aggregate have a Material Adverse
Effect: (i) each pension or profit sharing plan is qualified under Section
401(a) of the Code and each related trust is exempt from taxation pursuant
to Section 501 of the Code; (ii) each Company plan of the type and nature
so required is in material compliance with the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), has complied
in all material respects with the reporting and disclosure requirements of
applicable federal and state laws and regulations; (iii) no pension plan
has any unfunded past service cost other than, if any, in accordance with
and as set forth in its most recent actuarial evaluation nor has any
incurred any "accumulated funding deficiency" as defined in ERISA; (iv) no
employee benefit plan or related trust has had a "reportable event" as such
term is defined in ERISA nor has any such plan or any "fiduciary" or
"party-in-interest" or "disqualified person" entered into any "prohibited
transaction" as such terms are defined in ERISA or the Code; (v) there are
no actions, suits, or claims (other than routine claims for benefits)
pending or, to the knowledge of the Company, any facts which could give
rise to any such actions, suits or claims against any employee benefit plan
or the assets thereof; (vi) neither the Company nor any of its subsidiaries
is a participating employer in any multiemployer plan as defined in 3(37)
of ERISA or Section 471 of the Code; (vii) neither the Company nor any of
its subsidiaries maintains a plan which provides post-retirement health,
medical or life insurance benefits for retired employees; (viii) each
Company Plan required to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(the "IRS") that it is so qualified and nothing has occurred since the date
of such letter that could reasonably be expected to affect the qualified
status of such Company Plan; (ix) each Company Plan has been operated in
all material respects in accordance with its terms and the requirements of
applicable law; and (x) neither the Company nor any of its subsidiaries has
incurred any direct or indirect liability under, arising out of or by
operation of Title IV of ERISA, in connection with the termination of, or
withdrawal from, any Company Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected to give rise
to any liability. Except as set forth in Schedule 5.18 or the Company SEC
Reports, the aggregate accumulated benefit obligations of each Company Plan
subject to Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Company Plan) do not exceed the fair market
value of the assets of such Company Plan (as of the date of such
valuation). Schedule 5.18 includes a list of, and the Company has delivered
to Parent a copy of, (i) all Company Plans, as amended to the date hereof,
(ii) each summary plan description and statements of material modification,
(iii) Form 5500, if required, together with audited financial statements,
if any, for the most recent fiscal year of each such plan, (iv) each
Internal Revenue Service determination letter (and related request
therefor) with respect to each plan, (v) any trust agreements, insurance
policies or administrative contracts with respect to such plans and, (vi)
in the case of a pension plan, the latest actuarial evaluation.
(b) The Company has delivered to Parent a copy of all collective
bargaining or other labor union contracts to which the Company or any of
its subsidiaries is a party applicable to persons employed by the Company
or its subsidiaries as of the date of this Agreement. As of the date of
this Agreement, there is no pending or threatened in writing labor dispute,
strike or work stoppage against the Company or any of its subsidiaries
which may interfere with the respective business activities of the Company
or its subsidiaries, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect.
5.19 Compliance With Laws and Regulations.
(a) Except as disclosed in Schedule 5.19, the Company and its
subsidiaries are in compliance in all material respects with all applicable
laws, regulations, orders, judgments and decrees. Without limiting the
generality of the foregoing, as of the date of this Agreement, except as
disclosed in Schedule 5.19,
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(i) the Company and each of its subsidiaries is in compliance in all
material respects with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or safety
or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata). The Company and
each of its subsidiaries is in compliance in all material respects with all
applicable federal, state and local laws and regulations with respect to
the conduct of its business and maintenance and operation of their
property, including but not limited to matters relating to the employment
of labor, including the provisions thereof related to wages, hours,
collective bargaining, equal employment opportunity and the payment of
social security taxes.
(b) Except as disclosed in Schedule 5.19 or in any other agreement
contemporaneously entered into by the parties, to the knowledge of the
Company: (i) each of the Company and its subsidiaries holds all permits,
licenses, variances, exemptions, and approvals from governmental
authorities and has made all notifications, reports and applications to
governmental authorities which are legally required for the operation of
the business or the ownership of the properties and assets of the Company
and its subsidiaries (with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect)
(collectively "Permits"); (ii) the Company and its subsidiaries are in full
compliance with the terms of all Permits; (iii) Schedule 5.19 lists all
unexpired Permits currently held or applied for by the Company or its
subsidiaries; and (iv) the business of the Company and its subsidiaries has
not been and is not being conducted in violation of any law, ordinance,
rule, regulation or other legal requirement.
(c) The Company and its subsidiaries have not, except as detailed in
Schedule 5.19, filed or made any notifications to any governmental
authority respecting, and the Company and its subsidiaries have not been
and are not, except as detailed in Schedule 5.19: (i) burying or dumping,
or to the knowledge of the Company there has not been any leaking, tank
failure, spillage, excessive evaporation, underground injection, or similar
disposition of, any contaminants, oil, chemical product, or other pollutant
in, on or upon premises owned, leased, or operated by any of them; (ii) or
to the knowledge of the Company there has not been any discharge of
pollutants, whether solid, gaseous, or liquid, from its manufacturing
operations which has caused or may cause harm to human health or the
environment; or (iii) to the knowledge of the Company there are no
reasonable grounds for a claim against the Company or its subsidiaries,
whether asserted or unasserted, based on any discharge of oil, chemical
product, or other pollutant.
(d) Schedule 5.19 lists, by company facility, all off-site locations
or facilities to which each waste has been transported or conveyed for
treatment, storage, disposal, re-use, recycling or other disposition during
the last five years.
(e) To the knowledge of the Company, there are no pending or
threatened claims nor any reasonable basis for claims against the Company
or its subsidiaries under any federal, state or local law or the common law
relating to health, safety or the environment, except as detailed in
Schedule 5.19.
(f) Except as detailed in Schedule 5.19, after reasonable inquiry and
to the knowledge of the Company, the Company and its subsidiaries do not
own, possess, or control any polychlorinated biphenyls ("PCB") or PCB
contaminated fluids or equipment, nor does any facility owned, leased or
operated by the Company or its subsidiaries contain in or on its premises
any waste, scrap, raw material, work-in-process, inventory, product,
residue or other material or substance containing PCB.
(g) Except as detailed in Schedule 5.19, after having made reasonable
inquiry and to the knowledge of the Company, the Company and its
subsidiaries do not own, possess or control any asbestos or asbestos
containing materials, nor does any facility owned or operated by the
Company or its subsidiaries contain in or on its premises any waste, scrap,
raw material, work-in-process, inventory, product, residue, structural
members, insulation, roofing material, building components, or other
material or substance containing asbestos. Schedule 5.19 also sets forth
the locations of any asbestos or asbestos containing material identified in
response to the immediately preceding sentence of this paragraph.
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(h) Schedule 5.19 lists all hazardous substances owned, used, stored,
or otherwise maintained on the premises of the Company or its subsidiaries,
currently, or in the past three years, and, with respect to each such
substance sets forth the approximate period of use, the average annual
inventory maintained during such period, and the purpose or purposes for
which such hazardous substance was used.
(i) To the knowledge of the Company, there are no known pending or
proposed environmental regulations, rules, ordinances, orders or other
official actions of any authority which would have a material adverse
effect on the business or operations of the Company or its subsidiaries.
5.20 Brokers and Finders. Except as set forth in Section 5.21, the Company
has not employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to any investment banking, brokerage, finder's or
similar fee or commission in connection with this Agreement or the transactions
contemplated hereby.
5.21 Opinions of Financial Advisors. The Company has received the opinion
of Robert W. Baird & Co. Incorporated ("Baird") to the effect that the Merger
Consideration to be received by the shareholders of the Company pursuant to the
Merger is fair to such shareholders from a financial point of view (the
"Fairness Opinion"), a copy of which opinion will be delivered to Parent upon
receipt of the formal written opinion. The Company will include a copy of the
Fairness Opinion in the Merger Proxy Statement (defined in Section 7.9) and
Baird has authorized the inclusion of the Fairness Opinion in the Merger Proxy
Statement. The Company has disclosed to Parent the amounts paid or payable to
Baird in connection with the Fairness Opinion.
5.22 Certain Agreements. Except as disclosed in Schedule 5.22, neither the
Company nor any of its subsidiaries is party to any (i) agreements with any
executive officer or other key employee of the Company or any of its
subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its subsidiaries of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee extending for a period longer than one year, or (C) providing
severance benefits or other benefits (which are conditioned upon a change of
control) after the termination of employment of such employee regardless of the
reason for such termination of employment or (ii) agreement or plan, including,
without limitation, any incentive or bonus plan, stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be materially increased, or the vesting of benefits of which will be
materially accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
5.23 Merger Proxy Statement.
(a) Any proxy or similar materials distributed to the Company's
shareholders in connection with the Merger, including the Merger Proxy
Statement (and any amendments or supplements thereto) will comply in all
material respects with applicable federal securities laws and laws of
Wisconsin and at the time that they or any amendments or supplements
thereto, are filed with the SEC and are first published or sent or given to
holders of at leastShares, contain any untrue statement of a majoritymaterial 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 were made, not misleading, except that no representation is made
by the Company with respect to information supplied by Newco or Parent for
inclusion in the Merger Proxy Statement.
5.24 Accuracy of Information. To knowledge of the Company, none of the
information included in this Agreement or the schedules or other documents
furnished or to be furnished by the Company or any of its authorized
representatives to Parent or any of its representatives pursuant to this
Agreement is or will on the Closing Date be false or misleading or make an
omission as to any material fact required to be stated to make any of the
statements therein made not misleading.
5.25 Representations and Warranties. The representations and warranties of
the Company contained in this Agreement in the aggregate, disregarding all
qualifications and exceptions contained therein relating to
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materiality or Material Adverse Effect, are true and correct with only such
exceptions as would not in the aggregate reasonably be expected to have a
Significantly Material Adverse Effect (defined in Section 10.10).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
AND NEWCO
Each of Parent and Newco represent and warrant jointly and severally to the
Company that:
6.1 Corporate Organization and Qualification. Each of Parent and its
Significant Subsidiaries and Newco is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and is qualified and in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification. Each of Parent and its
Significant Subsidiaries has all requisite power and authority (corporate or
otherwise) to own its properties and to carry on its business as it is now being
conducted. Parent and Newco have heretofore made available to the Company
complete and correct copies of their respective Certificates of Incorporation
and By-Laws.
6.2 Capitalization. The authorized capital stock of Parent consists of (i)
150,000,000 shares of common stock, without par value of which, as of November
30, 1995, 117,576,714 shares were issued and outstanding and (ii) 300,000 shares
of preferred stock, without par value per share, of which, as of the date of
this Agreement, none are issued and outstanding. All of the outstanding shares
of capital stock of Parent have been duly authorized and validly issued and are
fully paid and nonassessable.
6.3 Authority Relative to Agreement. Each of Parent and Newco has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
consummation by Parent and Newco of the transactions contemplated hereby have
been duly and validly authorized by the respective Boards of Directors of Parent
and Newco and by Parent as sole shareholder of Newco, and no other corporate
proceedings on the part of Parent and Newco are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of Parent and Newco
and, assuming this Agreement constitutes a valid and binding agreement of the
Company, constitutes a valid and binding agreement of each of Parent and Newco,
enforceable against each of them in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors, rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
6.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by Parent and Newco of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the Certificate of Incorporation or the By-Laws,
respectively, of Parent or Newco; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) in connection with the applicable
requirements of the HSR Act, (ii) pursuant to the applicable requirements of the
Securities Act, the Exchange Act and rules and regulations under such acts,
(iii) the filing of the Articles of Merger pursuant to the WBCL and appropriate
documents with the relevant authorities of other states in which Parent is
authorized to do business, (iv) as may be required by any applicable state
securities or "blue sky" laws or state takeover laws, (v) such filings,
consents, approvals, orders, registrations, declarations and filings as may be
required under the laws of any foreign country in which Parent or any of its
subsidiaries conducts any business or owns any assets, or (vi) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement; (c)
except as set forth in Schedule 6.4(c), result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or lien or
other charge or encumbrance) under any of the terms, conditions or provisions of
any note, license, agreement or other instrument or obligation to which Parent
or
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any of its Significant Subsidiaries may be bound, except for such violations,
breaches and defaults (or rights of termination, cancellation or acceleration or
lien or other charge or encumbrance) as to which requisite waivers or consents
have been obtained; or (d) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 6.4 are duly
and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its subsidiaries or
to any of their respective assets.
6.5 SEC Reports; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed by it with the SEC since December 31, 1991 pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which
as of their respective dates complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act
(collectively, the "Parent SEC Reports"). None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules
included therein, as of their respective dates contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related statements of
consolidated income, shareholders equity and cash flows (including the
related notes thereto) of Parent included in the Parent SEC Reports
complied in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods (except as
otherwise noted therein), and present fairly the consolidated financial
position of Parent and its consolidated subsidiaries as of their respective
dates, and the consolidated results of their operations and their cash
flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
6.6 Merger Consideration. The shares of Parent Common Stock to be issued as
Merger Consideration pursuant to the Merger upon issuance will be validly
issued, fully paid and nonassessable shares of Parent Common Stock.
6.7 Information Supplied. None of the information supplied by Parent or
Newco in writing for inclusion in the Merger Proxy Statement will at the
respective times that the Merger Proxy Statement, or any amendments or
supplements thereto, is filed with the SEC and is first published or sent or
given to holders of Shares for the Shareholders Meeting or at the Effective
Time, 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.
6.8 Interim Operations of Newco. Newco was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
6.9 Brokers and Finders. Parent has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to vote for directors, excluding those
shares ownedany investment
banking, brokerage, finder or similar fee or commission in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1 Conduct of Business of the Company.
(a) The Company agrees that during the period from the date of this
Agreement to the Effective Time (unless the other party shall otherwise
agree in writing and except as otherwise contemplated by a Substantial Stockholder. The special voting
requirements dothis Agreement),
the Company will, and will cause each of its subsidiaries to, conduct its
operations
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according to its ordinary and usual course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organizations, keep available the
service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that goodwill and ongoing businesses shall not apply to (i) transactions approved by not
less than two-thirdsbe
impaired in any material respect at the Effective Time. Without limiting
the generality of ITW'sthe foregoing, and except as otherwise permitted in this
Agreement (including actions which may be required in the judgment of the
Company's Board of Directors, after consultation with Company counsel, in
order to comply with the Board of Director's fiduciary duties to the
Company's shareholders and other constituencies under applicable law) prior
to the Effective Time, neither the Company nor any of its subsidiaries
will, without the prior written consent of Parent (which consent shall not
unreasonably be withheld):
(i) except for shares to be issued or delivered pursuant to the
Option Plans, issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or
pledge or other encumbrance of (A) any additional shares of capital
stock of any class (including the Shares), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for any shares of capital stock, or any rights, warrants, options,
calls, commitments or any other agreements of any character to purchase
or acquire any shares of capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock, or (B) any other securities in respect
of, in lieu of, or in substitution for, Shares outstanding on the date
hereof;
(ii) transactions approvedexcept pursuant to the Company's stock-based employee benefit
plans, redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding Shares;
(iii) split, combine, subdivide or reclassify any Shares or
declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any Shares or
otherwise make any payments to shareholders in their capacity as such,
other than the declaration and payment of regular quarterly cash
dividends in accordance with past dividend policy and per share amount
and except for dividends by a wholly-owned subsidiary of the Company;
(iv) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger);
(v) adopt any amendments to its Articles of Incorporation or
By-Laws or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any subsidiary not constituting an inactive subsidiary of
the Company;
(vi) except as set forth on Schedule 7.1(a)(vi), make any material
acquisition, by means of merger, consolidation or otherwise, or material
disposition, of assets or securities;
(vii) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or guarantee
any such indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person, other than to the
Company or any wholly-owned subsidiary of the Company;
(viii) grant any material increases in the compensation of any of
its directors, officers or key employees, except in the ordinary course
of business and in accordance with past practice;
(ix) except as set forth on Schedule 7.1(a)(ix), pay or agree to
pay any pension, retirement allowance or other employee benefit not
required or contemplated by any of the existing benefit, severance,
termination, pension or employment plans, agreements or arrangements as
in effect on the date hereof to any such director or officer, whether
past or present;
(x) enter into any new or materially amend any existing employment
or severance or termination agreement with any such director or officer;
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(xi) except as set forth on Schedule 7.1(a)(xi) and except in the
ordinary course of business consistent with past practice or as may be
required to comply with applicable law, become obligated under any new
pension plan, welfare plan, multiemployer plan, employee benefit plan,
severance plan, benefit arrangement, or similar plan or arrangement,
which was not in existence on the date hereof, or amend any such plan or
arrangement in existence on the date hereof if such amendment would have
the effect of materially enhancing any benefits thereunder; or
(xii) authorize, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
7.2 Acquisition Proposals. The Company and its subsidiaries and their
respective officers, directors, employees, representatives and agents will
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any proposal for a Third Party
Acquisition (as hereinafter defined in Section 9.7(d)). The Company may,
directly or indirectly, furnish information and access, in each case only in
response to requests which were not solicited by the Company after the date of
this Agreement, to any corporation, partnership, person or other entity or group
pursuant to confidentiality agreements, and may participate in discussions and
negotiate with such entity or group concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
subsidiary or division of the Company, if (a) such entity or group has submitted
a bona fide written proposal to the Board of Directors priorrelating to any such
time as the Substantial Stockholder became a Substantial
Stockholder, (iii) transactions between ITWtransaction, and its majority-
owned subsidiaries, or (iv) transactions in which a minimum price
is received by ITW stockholders. A Substantial Stockholder is
defined in the Restated Certificate of Incorporation, as amended,
as a beneficial owner of more than 10% of the capital stock of
ITW entitled to vote for directors, excluding shares owned on
March 2, 1984.
The Restated Certificate of Incorporation, as amended, also
prohibits stockholder action by written consent, permits only(b) the Board of Directors determines, in its good faith
reasonable judgment after consultation with Company counsel, that failing to
fill vacancies on the Board, whether
created by an increase in the number of directors or otherwise,
and requires that the holders of two-thirdstake such action would be a breach of the voting power
of ITW, andBoard's fiduciary duties to the
Company's shareholders or other constituencies under applicable law. The Company
shall promptly notify Parent, if there is a Substantial Stockholder, the holders of
a majority of the voting power (other than that of the
Substantial Stockholder), approve any amendment to,proposal or repeal of,offer, or any of the foregoing provisions.
EXPERTS
The audited financial statements and schedules incorporated by
reference in this Prospectus have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their
reportsinquiry or
contact with any person with respect thereto, is made and have been so incorporatedshall, in relianceany such
notice to Parent, indicate in reasonable detail the identity of the offeror and
the terms and conditions of any proposal or offer, or any such inquiry or
contact. The Company shall keep Parent promptly advised of all developments
which could reasonably be expected to culminate in the Board of Directors
withdrawing, modifying or amending its recommendation of the Merger and other
transactions contemplated by this Agreement. Except as set forth in this Section
7.2, neither the Company or any of its affiliates, nor any of its or their
respective officers, directors, employees, representatives or agents, shall,
directly or indirectly, knowingly encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Newco, any affiliate or associate of Parent and Newco, or any designees of
Parent or Newco) concerning any merger, sale of assets, sale of shares of
capital stock or similar transactions (including an exchange of stock or assets)
involving the Company or any subsidiary or division of the Company.
7.3 Best Efforts.
(a) Subject to the terms and conditions provided in this Agreement,
each of the parties hereto shall use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including
using its commercially reasonable best efforts (i) to obtain all necessary
or appropriate waivers, consents and approvals, (ii) to effect all
necessary registrations, filings and submissions (including, but not
limited to, (A) filings under the Securities Act and under the Exchange
Act, (B) filings under the HSR Act and any other submissions requested by
the Federal Trade Commission or Department of Justice and (C) such filings,
consents, approvals, orders registrations and declarations as may be
required under the laws of the State of Wisconsin or of any other state or
foreign country in which the Company or any of its subsidiaries conducts
any business or owns any assets) and (iii) to lift any injunction or other
legal bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible), subject, however, to the requisite votes of the
shareholders of any or all of the Company, Newco and Parent.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to use its commercially reasonable best efforts or take any action pursuant
to this Section 7.3 if in the judgment of the Board of Directors after
consultation with Company counsel such actions would be a breach of the
Board's fiduciary duties to the Company's shareholders or other
constituencies under applicable law.
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7.4 Access to Information. Upon reasonable notice, the Company shall (and
shall cause each of its subsidiaries to) afford to officers, employees, counsel,
accountants and other authorized representatives of Parent ("Representatives"),
in order to evaluate the transactions contemplated by this Agreement, reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to its properties, books and records and, during such period,
shall (and shall cause each of its subsidiaries to) furnish promptly to such
Representatives all information concerning its business, properties and
personnel as may reasonably be requested. Parent agrees that it will not, and
will cause its Representatives not to, use any information obtained pursuant to
this Section 7.4 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. The Confidentiality Agreement,
dated October 31, 1995 (the "Confidentiality Agreement"), by and between the
Company and Parent shall apply with respect to information furnished by the
Company, its subsidiaries and the Company's officers, employees, counsel,
accountants and other authorized representatives hereunder.
7.5 Publicity. The parties will consult with each other and will mutually
agree upon any press releases or public announcements pertaining to the Merger
and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use its
reasonable efforts to consult in good faith with the other party before issuing
any such press releases or making any such public announcements.
7.6 Indemnification of Directors and officers.
(a) The By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the By-Laws of the
Company on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of four years after
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by this Agreement), unless such modification
is required by law; provided, that in the event any claim or claims are
asserted or made within such four-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims.
(b) Parent shall cause to be maintained in effect for the Indemnified
Parties (as defined below) for not less than three years the current
policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company and the Company's
subsidiaries with respect to matters occurring at or prior to the Effective
Time (including, without limitation, the transactions contemplated by this
Agreement); provided, that Parent may substitute therefor policies of, or
self insure on, substantially the same coverage containing terms and
conditions which are no less advantageous, in any material respect, to the
Company's present or former directors and officers (the "Indemnified
Parties").
(c) This Section 7.6 is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of Parent, Newco, the
Company and the Surviving Corporation. Parent hereby guarantees the
performance by the Surviving Corporation of the indemnification obligations
pursuant to this Section 7.6.
7.7 Employees.
(a) Except as set forth on Schedule 7.7(a), for a period of six months
following the Effective Time, Parent agrees to cause to be provided
employee benefit plans, programs, arrangements and policies for the benefit
of employees of the Company and its subsidiaries that in the aggregate are
no less favorable to such employees than the Company Plans.
(b) Parent acknowledges that the Surviving Corporation will honor the
employment agreements, severance agreements and individual benefit
arrangements listed on Schedule 7.7(b), all as in effect at the Effective
Time.
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7.8 NYSE Listing. Parent shall use its best efforts to list, prior to the
Effective Time, on the New York Stock Exchange, subject to official notice of
issuance, the shares of Parent Common Stock to be issued to the shareholders of
the Company pursuant to the Merger.
7.9 Merger Proxy Statement and Registration Statement.
(a) As soon as reasonably practicable after the date hereof, the
Company shall:
(i) duly call, give notice of, convene and hold a special meeting
of its shareholders (the "Shareholders Meeting"), to be held as soon as
practicable after the date hereof for the purpose of considering and
taking action upon the authorityMerger;
(ii) prepare in accordance with the applicable provisions of said firmthe
federal securities laws and Wisconsin laws a proxy statement for the
Shareholders Meeting (the "Merger Proxy Statement") and include in the
Merger Proxy Statement the recommendation of the Board of Directors that
shareholders of the Company vote in favor of the approval and adoption
of this Agreement and the Merger unless there exists at such time a
proposal for a Third Party Acquisition and in the judgment of the Board
of Directors after consultation with Company counsel, the inclusion of
such recommendation would be a breach of its fiduciary duties to the
Company's shareholders or other constituencies under applicable law; and
(iii) use its reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Merger Proxy Statement
and, after consultation with Parent and Newco, respond promptly to any
comments made by the SEC with respect to the Merger Proxy Statement and
any preliminary version thereof and cause the Merger Proxy Statement to
be mailed to its shareholders at the earliest practicable time after the
date hereof (subject to the effectiveness of the Registration Statement
(defined in Section 7.9(b) below)) and (B) obtain the necessary
approvals by its shareholders of this Agreement and the transactions
contemplated hereby unless there exists at such time a proposal for a
Third Party Acquisition and, in the judgment of the Board of Directors
after consultation with Company counsel, obtaining such approvals would
be a breach of its fiduciary duties to the Company's shareholders or
other constituencies under applicable law.
(b) As soon as expertspracticable after the date hereof, Parent shall prepare
a registration statement (the "Registration Statement"), of which the
Merger Proxy Statement shall be a part, under the Securities Act with
respect to the shares of Parent Common Stock to be issued pursuant to the
Merger and file the Registration Statement with the SEC.
(c) In connection with the Merger Proxy Statement and the Registration
Statement:
(i) the Company and Parent shall comply fully with the requirements
of the Securities Act, the Exchange Act and the rules and regulations of
the SEC under such acts applicable to the offering and sale of Parent
Common Stock in giving
said reports.
LEGAL MATTERS
The validityconnection with the Merger and the solicitation of
proxies for the Shareholders Meeting;
(ii) if either Parent or the Company shall reasonably request to
include in the Merger Proxy Statement or omit therefrom any statement in
order that the Merger Proxy Statement will not include 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
therein not misleading, the Merger Proxy Statement shall not be mailed
to any shareholders of the Company without the mutual agreement of
counsel for Parent and counsel for the Company that such statement need
not be included in or need not be omitted from the Merger Proxy
Statement; and
(iii) each party shall furnish to the other such information
relating to it and its affiliates and the transactions contemplated by
this Agreement and such further and supplemental information as may be
necessary or as may be reasonably requested by the other party, in light
of developments occurring after the date hereof, to ensure that the
statements regarding the parties hereto and their affiliates and such
transactions contained in the Merger Proxy Statement, as so
supplemented, will not on the effective date of the Registration
Statement or the date of the Shareholders Meeting or at
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the Effective Time include any untrue statement of a material fact or
omit to state a material fact required to be stated therein in order to
make the statements therein not misleading.
(d) Parent shall take any action required to be taken under any
applicable state blue sky or securities laws in connection with the
issuance of the shares of Parent Common Stock offeredto be issued in connection
with the Merger and the Company shall furnish all information concerning
the Company and the holders of Shares and other assistance as Parent may
reasonably request in connection with any such action.
7.10 Agreements of Affiliates. Promptly after the Merger is submitted to a
vote of the shareholders of the Company, the Company shall deliver to Parent a
letter identifying all persons who are at the time of such vote, "affiliates" of
the Company for purposes of Rule 145 under the Securities Act. The Company shall
use its reasonable best efforts to cause each person who is identified as an
"affiliate" in the letter referred to above to deliver to the Company on or
prior to the Effective Time a written agreement in form and substance as
previously approved by Parent or such other form approved by Parent providing
that each such person will agree not to sell, pledge, transfer or otherwise
dispose of the shares of Parent Common Stock acquired by such person except in
compliance with the applicable provisions of the Securities Act and the
applicable rules and regulations thereunder.
7.11 Tax Representation Letter of Parent and Newco; No Disqualifying
Action. Parent and Newco shall execute and deliver, at the Closing, the
representation letter for tax purposes in the form previously approved by the
Company or such other form approved by the Company. Neither Parent nor Newco
will take any action that would cause the Merger to fail to qualify as a
tax-free reorganization under Section 368(a) of the Code.
7.12 Tax Representation Letters of Holders of Shares. The Company shall use
its reasonable best efforts to have the holders of Shares listed on Schedule
7.12 execute and deliver, at the Closing, a representation letter for tax
purposes in the form previously approved by Parent and the Company or such other
form approved by Parent and Company.
7.13 Tax Representation Letter of the Company; No Disqualifying Action. The
Company shall execute and deliver, at the Closing, the certificate and the
representation letter for tax purposes in the form previously approved by
Parent. The Company will not take any action that would cause the Merger to fail
to qualify as a tax-free reorganization under Section 368(a) of the Code.
7.14 Supplemental Indenture of 7 1/2% Convertible Subordinated
Debentures. At the Closing Parent, Newco and the Company shall enter into a
supplemental indenture (the "Supplemental Indenture") with the trustee under the
Indenture (the "Indenture") dated as of July 1, 1986 between the Company and The
Marine Trust Company N.A., as Trustee, relating to the Company's 7 1/2%
Convertible Subordinated Debentures Due 2001 (the "Convertible Subordinated
Debentures"). The Supplemental Indenture shall provide for the right after the
Effective Time to convert Convertible Subordinated Debentures into Parent Common
Stock as contemplated by Section 10.15 of the Indenture. The Company shall
timely make all appropriate notices required under the Indenture with respect to
the Merger and the Supplemental Indenture.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) To the extent required by applicable law, this Agreement shall
have been duly approved by the shareholders of the Company in accordance
with applicable law and the Articles of Incorporation of the Company.
(b) There shall not be in effect any statute, rule, regulation,
executive order, decree, ruling or injunction or other order of a court or
governmental or regulatory agency of competent jurisdiction directing that
the transactions contemplated herein not be consummated; provided, however,
that prior to
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invoking this condition each party shall use its reasonable efforts to have
any such decree, ruling, injunction or order vacated.
(c) All governmental consents, orders and approvals legally required
for the consummation of the Merger and the transactions contemplated hereby
shall have been obtained and be in effect at the Effective Time, except
where the failure to obtain any such consent would not reasonably be
expected to have a Material Adverse Effect on Parent (assuming the Merger
had taken place), and the waiting periods under the HSR Act shall have
expired or been terminated.
(d) The Registration Statement covering shares of Parent Common Stock
to be issued pursuant to the Merger shall have been declared effective by
the SEC and no stop order with respect thereto shall be in effect.
(e) The shares of Parent Common Stock to be issued pursuant to the
Merger shall have been approved for listing on the New York Stock Exchange
subject to official notice of issuance.
8.2 Additional Conditions to the Obligations of Parent and Newco. The
obligations of Parent and Newco to consummate the Merger are subject to the
satisfaction, unless waived in writing by Parent, of the following further
conditions:
(a) The representation and warranty of the Company set forth in
Section 5.25 are true and correct both when made and as of the Closing as
if made, at and as of such time.
(b) the representations and warranties of the Company (excluding those
in Section 5.25) shall have been true and accurate both when made and
(except for those representations and warranties that address matters only
as of a particular date or only with respect to a specific period of time
which need only be true and accurate as of such date or with respect to
such period) as of the Closing as if made, at and as of such time other
than changes resulting from actions expressly contemplated by this
Agreement, unless such representations and warranties which are not true
and accurate would not in the aggregate have a Significantly Material
Adverse Effect;
(c) the Company shall have performed its obligations hereunder
required to be performed by it at or prior to the Closing;
(d) all actions by or in respect of or filings with any governmental
entity (other than the filing of the Articles of Merger), required to
permit the consummation of the Merger shall have been obtained or
completed;
(e) since the date of this Agreement there shall not have occurred or
be threatened any change in the financial condition, properties, businesses
or results of operations of the Company or any of its subsidiaries that has
or is reasonably likely to have a Significantly Material Adverse Effect,
and Parent shall not have become aware of any fact (including, but not
limited to, such change) that has or is reasonably likely to have a
Significantly Material Adverse Effect;
(f) Parent shall have received the executed letters of affiliates of
the Company as contemplated by Section 7.10;
(g) Parent shall have received a copy of each of the representation
letters of certain shareholders of the Company as contemplated by Section
7.12;
(h) Parent shall have received a copy of the certificate and of the
representation letter of the Company as contemplated by Section 7.13;
(i) the Company and the trustee under the Indenture shall have
executed and delivered the Supplemental Indenture;
(j) Parent shall have received from the Company such certificate
evidencing satisfaction of the conditions set forth in Section 8.2 as
Parent may reasonably request; and
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(k) Parent shall have received the written opinion of Quarles & Brady
substantially as set forth in Exhibit A hereto.
8.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (unless waived in writing by the Company) of the following further
conditions;
(a) the representations and warranties of Parent and Newco shall have
been true and accurate both when made and (except for those representations
and warranties that address matters only as of a particular date or only
with respect to a specific period of time, which need only be true and
accurate as of such date or with respect to such period) as of the Closing
as if made at and as of such time other than changes resulting from actions
expressly contemplated by this Agreement, unless such representations and
warranties which are not true and accurate would not have a material
adverse effect on Parent and its Significant Subsidiaries taken as a whole;
(b) Parent and Newco shall have performed all of their obligations
hereunder required to be performed by them at or prior to Closing;
(c) since the date of this Agreement, there shall not have occurred or
be threatened any change in the financial condition, properties,
businesses, or results of operations of Parent or any of its significant
Subsidiaries that has or is reasonably likely to have a material adverse
effect on Parent and its significant Subsidiaries taken as a whole, and the
Company shall not have become aware of any fact (including, but not limited
to, such change) that has or is reasonably likely to have a material
adverse effect on Parent and its Significant Subsidiaries taken as a whole
or the value of the Parent Common Stock;
(d) the Company shall have received the representation letter of
Parent and Newco as contemplated by Section 7.11;
(e) the Company shall have received from Parent and Newco such
certificate evidencing satisfaction of the conditions set forth in Section
8.3 as the Company may reasonably request;
(f) the Company shall have received the written opinion of Stewart S.
Hudnut, Esq., the General Counsel of Parent, substantially as set forth in
Exhibit B hereto; and
(g) Parent, Newco and the trustee under the Indenture shall have
executed and delivered the Supplemental Indenture.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
9.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by the mutual
written consent of Parent and the Company.
9.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by Parent or the Company if
(i) any court of competent jurisdiction in the United States or any
other governmental body or regulatory authority shall have issued an order,
decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable or
(ii) the Merger shall not have become effective prior to June 1, 1996;
provided, that the right to terminate this Agreement pursuant to this ProspectusSection
9.2 shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement results in such failure to purchase.
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9.3 Termination by Parent. This Agreement may be terminated by Parent if
(i) the Company shall have failed to perform in any material respect
any of its material obligations under this Agreement to be performed at or
prior to such date of termination, which failure to perform is incapable of
being cured prior to June 1, 1996;
(ii) either (a) the representation and warranty set forth in Section
5.25 shall not be true and correct or (b) any representation or warranty of
the Company contained in this Agreement (except for those in Section 5.25)
shall not be true and correct (except for changes permitted or contemplated
by this Agreement and those representations which address matters only as
of a particular date, which shall remain true and correct as of such date),
except, in any case, such failures to be true and correct which in the
aggregate are not reasonably likely to a have a Significantly Material
Adverse Effect; provided, that such failure to be true and correct is
incapable of being cured prior to June 1, 1996; or
(iii) the Board of Directors of the Company withdraws or materially
modifies or changes its favorable recommendation of this Agreement or the
Merger.
9.4 Termination by the Company. This Agreement may be terminated by the
Company and the Merger may be abandoned at any time prior to the Effective Time
if;
(i) Newco or Parent shall have failed to perform in any material
respect any of their material obligations under this Agreement to be
performed at or prior to such date of termination, which failure to perform
is incapable of being cured prior to June 1, 1996;
(ii) any representation or warranty of Newco or Parent contained in
this Agreement shall not be true and correct (except for changes permitted
by this Agreement and those representations which address matters only as
of a particular date, which shall remain true and correct as of such date),
except, in any case, such failures to be true and correct which in the
aggregate are not reasonably likely to adversely affect Parent's or Newco's
ability to complete the Merger; provided, that such failure to be true and
correct is incapable of being cured prior to June 1, 1996; or
(iii) the Board of Directors of the Company withdraws or materially
modifies or changes its favorable recommendation of this Agreement or the
Merger if there exists at such time a proposal for a Third Party
Acquisition and the Board of Directors of the Company after consultation
with Company counsel determines that the failure to take such action would
be a breach of the Board's fiduciary duties to the Company's shareholders
or other constituencies under applicable law; provided, however, that such
termination under this Section 9.4(iii) shall not be effective until the
Company has made payment to Parent of the Fee (as defined in Section
9.7(a)) required to be paid pursuant to Section 9.7(a) and has paid to
Parent $300,000 for Expenses (as defined in Section 9.7(b)) (the Parent
hereby agrees to refund any excess of such amount over actual Expenses).
9.5 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Article IX, upon written notice to the other party
given by the party entitled under Article IX to terminate this Agreement, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or its affiliates, directors, officers or
shareholders, other than the provisions of this Section 9.5 and the provisions
of Sections 9.7, 10.1 and 10.2 and the last two sentences of Section 7.4.
Nothing contained in this Section 9.5 shall relieve any party from liability for
any breach of this Agreement.
9.6 Extension; Waiver. At any time prior to the Effective Time, each of
Parent, Newco and the Company may (i) extend the time for the performance of any
of the obligations or other acts of the other party, (ii) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension
or waiver shall be valid only if set forth in any instrument in writing signed
on behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
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9.7 Special Fees and Expenses.
(a) In the event that:
(i) this Agreement shall have been terminated pursuant to Section
9.2(ii), 9.3(iii) or 9.4(iii) and within 12 months of such termination
(x) a Third Party Acquisition shall occur, or (y) there is a letter of
intent or similar instrument or other agreement between the Company and
a Third Party (defined in Section 9.7(d)) for a Third Party Acquisition,
or a public announcement by the Company of the Company's intention or
plans to effect a Third Party Acquisition; or
(ii) any person or group (other than Parent or an affiliate of
Parent) shall have commenced, publicly proposed or communicated to the
Company a proposal that is publicly disclosed for a tender or exchange
offer for more than 20% (or which, assuming the maximum amount of
securities which could be purchased, would result in any person or group
beneficially owning more than 20%) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all
or substantially all of its assets for a per Share consideration having
a value greater than the Per Share Amount, and this Agreement shall have
been terminated pursuant to Section 9.2(ii), 9.3(iii) or 9.4(iii); or
(iii) this Agreement is terminated pursuant to Section 9.3(iii) or
9.4(iii); then, in any such event, the Company shall pay the Parent
promptly (but in no event later than one business day after the first of
such events shall have occurred) a fee of $1,650,000 (the "Fee"), which
amount shall be payable in immediately available funds, plus all
Expenses; provided that, in the case described in clause (ii) of this
Section 9.7(a), if (x) the Parent has terminated this Agreement and (y)
the Board of Directors of the Company (A) shall not have withdrawn or
modified in a manner adverse to Newco or the Parent its approval or
favorable recommendation of this Agreement or the Merger, (B) shall not
have approved or recommended the proposal of the person or group
referred to in clause (ii) and (C) shall not have resolved to do any of
the foregoing, the Company shall pay to the Company on such termination
all Expenses and shall pay the Fee only if, within 12 months of such
termination, a Third Party Acquisition shall occur.
(b) "Expenses" means all out-of-pocket expenses and fees up to
$300,000 in the aggregate (including, without limitation, legal fees and
expenses, fees and expenses payable to all banks, investment banking firms,
other financial institutions and other persons and their respective agents
and counsel for arranging, committing to provide or providing any financing
or services for the Merger and any transactions contemplated thereby or
structuring the transactions, and all fees of counsel, accountants,
experts, consultants and soliciting or information firms to Parent and
Newco, and all printing, mailing and advertising expenses) actually
incurred or accrued by any of them or on their behalf in connection with
the transactions, including, without limitation, any litigation related
thereto and the financing thereof, and actually incurred or accrued by
banks, investment banking firms, other financial institutions and other
persons and assumed by Parent or Newco in connection with the negotiation,
preparation, execution and performance of this Agreement, the structuring
and financing of the Merger and any transactions contemplated hereby and
thereby and any litigation and any financing commitments or agreements
relating thereto.
(c) In the event that the Company shall fail to pay the Fee or any
Expenses when due, the term "Expenses" shall be deemed to include the costs
and expenses actually incurred or accrued by the Parent and Newco
(including, without limitation, fees and expenses of counsel) in connection
with the collection under and enforcement of this Section 9.7, together
with interest on such unpaid Fee and Expenses, commencing on the date that
the Fee or such Expenses became due, at a rate equal to the rate of
interest publicly announced by Morgan Guaranty Trust Company of New York,
from time to time, in the City of New York, as such bank's Prime Rate plus
1.00%.
(d) "Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger,
consolidation or other business combination transaction by any person other
than the Parent, Newco or any affiliate thereof (a "Third Party"); (ii) the
acquisition by any
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Third Party of, or any divestiture or other transaction resulting in the
Company owning less than, 50% or more (in book value or market value) of
the total assets of the Company and its subsidiaries, taken as a whole as
of the date hereof; (iii) the acquisition by a Third Party of 50% or more
of the outstanding Shares whether by tender offer, exchange offer or
otherwise; or (iv) the adoption by the Company of a plan of liquidation or
a plan of recapitalization or the declaration or payment of an
extraordinary dividend.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1 Payment of Expenses. Except as provided under Article IX, whether or
not the Merger shall be consummated, each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, provided
that the Surviving Corporation shall pay, with funds of the Company and not with
funds provided by any of Parent Companies, any and all property or transfer
taxes imposed on the Surviving Corporation or any Gains Taxes.
10.2 Survival of Representations and Warranties; Survival of
Confidentiality. The representations and warranties made herein shall not
survive beyond the earlier of (i) termination of this Agreement or (ii) the
Effective Time. This Section 10.2 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time. The Confidentiality Agreement shall survive any termination of
this Agreement, and the provisions of such Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
10.3 Modification or Amendment. Subject to the applicable provisions of the
WBCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after any
required approval of this Agreement by the shareholders of the Company, no
amendment shall be made which changes the consideration payable in the Merger or
adversely affects the rights of the Company's shareholders hereunder without the
approval of such shareholders.
10.4 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof, applicable to contracts made and to be
performed in that state, except (i) for Articles II, III and IV hereof and
Section 7.9(a) which shall be governed by and construed in accordance with the
laws of the State of Wisconsin and (ii) any other provisions relating to the
internal governance of the Company and Newco or other corporate matters or
actions which are taken pursuant to or in reliance on the statutory or judicial
authority of Wisconsin, on the one hand, or Parent, on the other hand, shall be
governed by the laws of the States of Wisconsin and Delaware, respectively.
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10.7 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:
(a) IF to the Company, to
Medalist Industries, Inc.
Two Park Plaza, Suite 150
Milwaukee, Wisconsin 53224
Attention: President
(414) 359-3000 (telephone)
(414) 359-3005 (telecopier)
with a copy to:
Joseph D. Masterson
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 277-5169 (telephone)
(414) 271-3552 (telecopier)
(b) If to Parent or Newco, to
Illinois Tool Works Inc.
3600 West Lake Avenue
Glenview, Illinois 60025-5811
Attention: Corporate Secretary
(708) 657-4074 (telephone)
(708) 657-4392 (telecopier)
with a copy to:
Charles J. McCarthy
Jenner & Block
37th Floor
One IBM Plaza
Chicago, Illinois 60611
(312) 222-9350 (telephone)
(312) 527-0484 (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
10.8 Entire Agreement: Assignment. This Agreement and the Confidentiality
Agreement (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, and (b) shall not be assigned by operation
of law or otherwise.
10.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article IV hereof is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the provisions of Section 7.6 shall inure to the benefit
of and be enforceable by the Indemnified Parties.
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10.10 Certain Definitions. As used herein:
(a) "Acquisition Proposal" means any proposal or offer for a merger,
asset acquisition or other business combination involving a person or any
proposal or offer to acquire a significant equity interest in, or a
significant portion of the assets of, such person other than the
transactions contemplated by this Agreement.
(b) "Counsel". Any reference herein to "counsel" shall mean legal
counsel.
(c) "Knowledge of the Company". Any reference to "knowledge of the
Company" shall mean the actual knowledge of an officer or director of the
Company or of a subsidiary of the Company.
(d) "Material Adverse Effect" shall mean any adverse change in the
financial condition, business or results of operations of the Company or
any of its subsidiaries which is material to the Company and its
subsidiaries, taken as a whole, other than any change or effect arising out
of general economic conditions; for purposes of determining "material"
within the meaning of the foregoing definition an amount in excess of
$75,000 shall be deemed material.
(e) "Significant Subsidiary" shall have the meaning ascribed to it
under Rule 1-02 of Regulation S-X of the SEC.
(f) "Subsidiary" shall mean, when used with reference to any entity,
any corporation a majority of the outstanding voting securities of which
are owned directly or indirectly by such former entity.
(g) "Significantly Material Adverse Effect" shall mean an adverse
effect on the financial condition, business, assets or results of
operations of the Company and its subsidiaries taken as a whole in the
amount of $2,000,000 or more.
10.11 Obligation of Parent. Whenever this Agreement requires Newco to take
any action, such requirement shall be deemed to include an undertaking on the
part of Parent to cause Newco to take such action and a guarantee of the
performance thereof.
10.12 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.13 Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ILLINOIS TOOL WORKS INC.
By: /s/ FRANK S. PTAK
------------------------------------
Name: Frank S. Ptak
Title: Executive Vice President
ITW ACQ. Inc.
By: /s/ THOMAS J. HANSEN
------------------------------------
Name: Thomas J. Hansen
Title: President
MEDALIST INDUSTRIES, INC.
By: /s/ JAMES S. DAHLKE
------------------------------------
Name: James S. Dahlke
Title: President & CEO
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[ROBERT W. BAIRD & CO. LETTERHEAD]
EXHIBIT B
January 8, 1996
Board of Directors
Medalist Industries, Inc.
Two Park Plaza
Suite 150
10850 West Park Place
Milwaukee, Wisconsin 53224
Gentlemen:
Medalist Industries, Inc. (the "Company") proposes to enter into an
Agreement and Plan of Merger (the "Agreement") with Illinois Tool Works Inc.
("Parent") and ITW ACQ. Inc., a direct wholly-owned subsidiary of Parent
("Newco"). Pursuant to the Agreement, at the Effective Time (as defined in the
Agreement), Newco will be passedmerged with and into the Company (the "Merger") and
each outstanding share of common stock, par value $1.00 per share ("Company
Common Stock") of the Company (other than shares owned by Parent, Newco or any
wholly-owned subsidiary of either of Parent or the Company, or shares held in
the Company's treasury) will be converted solely into the right to receive the
number of shares of common stock, no par value ("Parent Common Stock") of Parent
equal to the Exchange Ratio (as hereinafter defined). The "Exchange Ratio" means
the fraction of (i) 14.50, divided by (ii) the average per share closing price
of Parent Common Stock as reported on the New York Stock Exchange Composite
Transactions listing for the ten consecutive trading days ending on the second
trading day prior to the Effective Time. You have requested our opinion as to
the fairness, from a financial point of view, to the holders of Company Common
Stock (other than Parent, Newco and their respective affiliates) of the Exchange
Ratio.
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment
banking business, 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.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of the Company furnished to us by the Company for
purposes of our analysis, as well as publicly available information including
but not limited to the Company's recent filing with the Securities and Exchange
Commission (the "SEC") and equity analyst research reports prepared by various
investment banking firms including Baird; (ii) reviewed certain internal
information, primarily financial in nature, as well as publicly available
information including but not limited to, Parent's recent filings with the SEC
and equity analyst research reports prepared by various investment banking firms
including Baird; (iii) reviewed the Agreement and the draft Proxy
Statement/Prospectus relating to the Merger in the form proposed to be filed
with the SEC; (iv) reviewed the historical market prices and trading activity of
the Company Common Stock and the Parent Common Stock and compared such price and
trading histories with those of certain other publicly traded companies we
deemed relevant; (v) compared the financial position and operating results of
the Company and Parent with those of other publicly traded companies we deemed
relevant; and (vi) compared the proposed financial terms of the Merger with the
financial terms of certain other business combinations we deemed relevant. We
have held discussions with certain members of the Company's and Parent's senior
management concerning the Company's and Parent's respective historical and
current financial condition and operating results, as well as the future
prospects of the Company and Parent, respectively. We have also considered such
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other information, financial studies, analysis and investigations and financial,
economic and market criteria which we deemed relevant for the preparation of
this opinion. We have not been requested to, and did not, solicit third party
indications of interest in acquiring all or any part of the Company.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided us by or
on behalf of the Company and Parent, or publicly available, and have not
attempted independently to verify any such information. With respect to
projections, we assumed that they have been reasonably prepared and represent
the best available estimates and good faith judgments of the Company's
management's as to future performance of the Company. No financial forecasts
with respect to the future performance of Parent have been made available to us
and accordingly, with your consent, we have relied upon financial forecasts
reported by recognized investment banking firms. In conducting our review, we
have not made nor obtained an independent valuation or appraisal of any of the
assets or liabilities of the Company or Parent nor have we made a physical
inspection of the properties or facilities of the Company or Parent. Our opinion
necessarily is based upon economic, monetary and market conditions as they exist
and can be evaluated on the date hereof, and 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
Company's Board of Directors, and shall not be reproduced, summarized, described
or referred to without the prior written consent of Baird; provided, however,
that this letter may be reproduced in full in the Proxy Statement/Prospectus.
This opinion does not address the relative merits of the Merger and any other
potential transactions or business strategies considered by the Company's Board
of Directors, and does not constitute a recommendation to any shareholder of the
Company as to how any such shareholder should vote with respect to the Merger.
Baird will receive a fee for rendering this opinion. In the past, we have
provided investment banking services to the Company, including acting as lead
manager in connection with the public offering of the Company's common stock in
1993, for which we have received our customary compensation.
In the ordinary course of our business, we may from time to time trade the
securities of the Company or Parent for our own account or the accounts of our
customers and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of Company Common Stock (other than Parent, Newco and their
respective affiliates).
Very truly yours,
ROBERT W. BAIRD & CO. INCORPORATED
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EXHIBIT C
ARTICLES OF MERGER OF
ITW ACQ. INC.
WITH AND INTO
MEDALIST INDUSTRIES, INC.
The undersigned corporation, pursuant to Section 180.1101 of the Wisconsin
Business Corporation Law, for the purpose of merging ITW ACQ. INC., a Wisconsin
corporation, into Medalist Industries, Inc., a Wisconsin corporation and the
surviving corporation in such merger, hereby executes the following Articles of
Merger:
1. The plan of merger is set forth in the Plan of Merger attached
hereto as Appendix I, which is made a part hereof.
2. The Plan of Merger was approved in accordance with Section 180.1103
of the Wisconsin Business Corporation Law.
3. The effective date and time of the merger shall be the close of
business on , 1996.
IN WITNESS WHEREOF, the undersigned corporation has caused these Articles
of Merger to be executed as of the day of , 1996.
MEDALIST INDUSTRIES, INC.
By:
James S. Dahlke,
President
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APPENDIX I
PLAN OF MERGER OF
ITW ACQ. INC
WITH AND INTO
MEDALIST INDUSTRIES, INC.
THIS PLAN OF MERGER is made and entered into this day of , 1996
by Stewart S. Hudnut, Senior Vice President, General Counsel and between ITW ACQ. Inc., a Wisconsin corporation ("Newco") and Medalist
Industries, Inc., a Wisconsin corporation ("Medalist"), both of said
corporations being hereinafter sometimes referred to collectively as the
"Constituent Corporations."
RECITALS:
WHEREAS, the Board of Directors of each of the Constituent Corporations
deems it advisable and generally to the advantage and welfare of each of the
Constituent Corporations and their respective shareholders that Newco be merged
with and into Medalist on the terms and conditions hereinafter set forth, and in
accordance with the applicable provisions of the laws of the State of Wisconsin;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, conditions and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that Newco shall be merged with and into
Medalist (the "Merger"), and that the terms and conditions of the Merger, the
mode of carrying the same into effect and such other matters as are required or
permitted to be set forth in the case of a merger pursuant to the laws of the
State of Wisconsin are as follows:
ARTICLE I
MERGER
On the Effective Date of the Merger (as hereinafter defined), Newco and
Medalist shall be merged into a single corporation, in accordance with the
applicable provisions of the laws of the State of Wisconsin, by Newco merging
with and into Medalist, which shall be the surviving corporation (the "Surviving
Corporation").
ARTICLE II
EFFECTIVE DATE
The Effective Date of the Merger is hereby designated as the close of
business on , 1996.
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
The manner of converting the shares of each of the Constituent Corporations
shall be as follows:
(a) At the Effective Date of the Merger, each share of Common Stock of
Newco then issued and outstanding shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation.
(b) At the Effective Date of the Merger, each share of One Dollar
($1.00) par value Common Stock of Medalist then issued and outstanding
shall be converted into of a share of Common Stock of Illinois Tool Works
Inc., provided that fractional shares shall not be issued but instead shall
be paid in cash at the rate of $ per whole share.
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ARTICLE IV
ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS
4.1 The Articles of Incorporation and Bylaws of Medalist, as in effect
immediately prior to the Effective Date of the Merger, shall remain the Articles
of Incorporation and Bylaws of the Surviving Corporation until amended in
accordance with law.
4.2 The directors of Newco immediately prior to the Effective Date of the
Merger shall be the initial directors of the Surviving Corporation, to hold
office until their successors are duly elected or as otherwise provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation or pursuant to
applicable law.
4.3 The officers of Medalist immediately prior to the effective time of the
merger shall remain the officers of the Surviving Corporation until their
successors have been duly elected or appointed or as otherwise provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation or pursuant to
applicable law.
ARTICLE V
EFFECT OF MERGER
The effect of the Merger shall be as provided in Section 180.1106 of the
Wisconsin Business Corporation Law.
ARTICLE VI
SHAREHOLDER APPROVAL
6.1 This Plan of Merger shall be submitted for the approval of the
shareholders of each of the Constituent Corporations as provided by the
applicable laws of the State of Wisconsin.
6.2 If this Plan of Merger is duly adopted by the required votes of such
shareholders and the Merger is not abandoned, Articles of Merger setting forth
this Plan of Merger shall be executed and acknowledged in compliance with the
provisions of applicable law and shall be filed with the Office of the Secretary
of ITW. Mr. Hudnut owns 400State of Wisconsin, at such time as may be deemed appropriate by the officers
of Medalist.
ARTICLE VII
TERMINATION AND ABANDONMENT
At any time prior to the Effective Date of the Merger, this Plan of Merger
may be terminated and abandoned by the Board of Directors of either of the
Constituent Corporations. In the event of such termination and abandonment of
this Plan, this Plan shall become void and of no effect.
ARTICLE VIII
MISCELLANEOUS
8.1 The Surviving Corporation shall pay all expenses of carrying this Plan
of Merger into effect and accomplishing the Merger.
8.2 If at any time the Surviving Corporation shall consider or be advised
that any further assignments or assurances in law are necessary or desirable to
vest or to perfect or to confirm of record in the Surviving Corporation the
title to any property or rights of Newco, or otherwise to carry out the
provisions hereof, the proper officers and directors of Newco as of the
Effective Date of the Merger shall execute and deliver any and all proper deeds,
assignments and assurances in law, and do all things necessary or proper to
vest, perfect or
I-2
99
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the provisions of this Plan of Merger.
8.3 The Constituent Corporations intend this Plan of Merger to be a Plan of
Reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended.
IN WITNESS WHEREOF, pursuant to the approval and authority duly given by
the resolutions adopted by the respective Boards of Directors, this Plan of
Merger has been signed on behalf of both of the Constituent Corporations by a
duly authorized officer all as of the date and year first above written.
ITW ACQ. INC.
By:
--------------------------------------
MEDALIST INDUSTRIES, INC.
By:
------------------------------------
James S. Dahlke,
President
I-3
100
PROXY MEDALIST INDUSTRIES, INC. PROXY
10850 West Park Place
Suite 150
Milwaukee, Wisconsin 53224
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James S. Dahlke and William C.
O'Loughlin, and each or both of them, proxies with full power of substitution,
to represent and to vote all shares of stock which the undersigned is entitled
to vote at the Special Meeting of shareholders of Medalist Industries, Inc.
(the "Company"), to be held at the Milwaukee Hilton Hotel, 509 W. Wisconsin
Avenue, Milwaukee, Wisconsin, 53203 on Wednesday, May 29, 1996 at 10:00 a.m., or
at any adjournment thereof, hereby revoking any proxy previously given.
(Continued and to be signed on reverse side.)
PROXY MEDALIST INDUSTRIES, INC. PROXY
10850 West Park Place
Suite 150
Milwaukee, Wisconsin 53224
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James S. Dahlke and William C.
O'Loughlin, and each or both of them, proxies with full power of substitution,
to represent and to vote all shares of stock which the undersigned is entitled
to vote at the Special Meeting of shareholders of Medalist Industries, Inc.
(the "Company"), to be held at the Milwaukee Hilton Hotel, 509 W. Wisconsin
Avenue, Milwaukee, Wisconsin, 53203 on Wednesday, May 29, 1996 at 10:00 a.m., or
at any adjournment thereof, hereby revoking any proxy previously given.
(Continued and to be signed on reverse side.)
PROXY MEDALIST INDUSTRIES, INC. PROXY
10850 West Park Place
Suite 150
Milwaukee, Wisconsin 53224
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James S. Dahlke and William C.
O'Loughlin, and each or both of them, proxies with full power of substitution,
to represent and to vote all shares of stock which the undersigned is entitled
to vote at the Special Meeting of shareholders of Medalist Industries, Inc.
(the "Company"), to be held at the Milwaukee Hilton Hotel, 509 W. Wisconsin
Avenue, Milwaukee, Wisconsin, 53203 on Wednesday, May 29, 1996 at 10:00 a.m., or
at any adjournment thereof, hereby revoking any proxy previously given.
(Continued and to be signed on reverse side.)
101
MEDALIST INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
For Against Abstain
1. Proposal to Approve and Adopt the Agreement and / / / / / /
Plan of Merger pursuant to which the Company
would become a wholly-owned subsidiary of
Illinois Tool Works Inc. ("ITW") and each share
of the Company Common Stock would be converted
into a fraction of a share of ITW Common Stock
valued at $14.50
2. In their discretion on such other business as may properly come before the
meeting or any adjournment thereof.
When properly executed, this proxy will be voted as directed by
the undersigned shareholder. If no direction is given, this proxy
will be voted FOR Proposal 1.
Date: _____________________________________________________, 1996
__________________________________________________________________
Signature
__________________________________________________________________
Signature
Please sign exactly as name appears hereon. For joint accounts, all
tenants should sign. Administrators, Trustee, etc., should so indicate
when signing.
MEDALIST INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
For Against Abstain
1. Proposal to Approve and holds optionsAdopt the Agreement and / / / / / /
Plan of Merger pursuant to acquire an additional 20,000 shareswhich the Company
would become a wholly-owned subsidiary of
Illinois Tool Works Inc. ("ITW") and each share
of the Company Common Stock.
6Stock would be converted
into a fraction of a share of ITW Common Stock
valued at $14.50
2. In their discretion on such other business as may properly come before the
meeting or any adjournment thereof.
When properly executed, this proxy will be voted as directed by
the undersigned shareholder. If no direction is given, this proxy
will be voted FOR Proposal 1.
Date: _____________________________________________________, 1996
__________________________________________________________________
Signature
__________________________________________________________________
Signature
Please sign exactly as name appears hereon. For joint accounts, all
tenants should sign. Administrators, Trustee, etc., should so indicate
when signing.
MEDALIST INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
[ ]
For Against Abstain
1. Proposal to Approve and Adopt the Agreement and / / / / / /
Plan of Merger pursuant to which the Company
would become a wholly-owned subsidiary of
Illinois Tool Works Inc. ("ITW") and each share
of the Company Common Stock would be converted
into a fraction of a share of ITW Common Stock
valued at $14.50
2. In their discretion on such other business as may properly come before the
meeting or any adjournment thereof.
When properly executed, this proxy will be voted as directed by
the undersigned shareholder. If no direction is given, this proxy
will be voted FOR Proposal 1.
Date: _____________________________________________________, 1996
__________________________________________________________________
Signature
__________________________________________________________________
Signature
Please sign exactly as name appears hereon. For joint accounts, all
tenants should sign. Administrators, Trustee, etc., should so indicate
when signing.
102
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ItemITEM 20. Indemnification of Directors and OfficersINDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that the CompanyITW
may, and in some circumstances must, indemnify the directors and officers of
the CompanyITW against liabilities and expenses incurred by any such person by reason of
the fact that such person was serving in such capacity, subject to certain
limitations and conditions therein set forth. Substantially similar provisions
that require such indemnification are contained in Article V of the Company'sITW's By-Laws.
Article Thirteenth of the Company'sITW's Restated Certificate of Incorporation, as amended,
also contains provisions limiting the liability of the Company'sITW's directors in certain
instances.circumstances. In addition, the CompanyITW has purchased insurance as permitted by
Delaware law on behalf of directors and officers employees or
agents,indemnifying then against
certain civil liabilities, which may cover liabilities under the Securities Act
of 1933, as amended (the "Securities Act").1933.
For the undertakings with respect to indemnification see Item 22 of
this Part II.
ITEM 21. Exhibits and Financial Statement SchedulesEXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Registration Statement:
NUMBER DESCRIPTION OF EXHIBIT
Exhibit -------
Number Description2 Agreement and Plan of Merger among Medalist
Industries, Inc., Illinois Tools Works Inc. and ITW
ACQ. Inc. dated as of January 8, 1996 is set forth in
full in Exhibit ------ ----------------------A to the Proxy Statement/Prospectus
which is part of this Registration Statement.
Exhibit 3(i) Restated Certificate of Incorporation of Illinois
ToolTools Works Inc., filed as Exhibit 4(a) to the Company'sITW's
Registration State-
mentStatement on Form S-8 (Registration StatementS-8(Registration No.
33-53517) filed with the Securities and Exchange
Commis- sionCommission on May 6, 1994 and incorporated herein by
reference.
Exhibit 3(ii) By-Laws of Illinois ToolTools Works Inc., as
amended, filed as
Exhibit 3(b) to the
Company'sITW's Annual Report on Form 10-K for
the fiscal year ended December 31, 19941995 (Commission
File No. 1-4797) and incorporate
5incorporated herein by
reference.
Exhibit 5 Opinion of Stewart S. Hudnut, Senior Vice President,
General Counsel and Secretary of the CompanyITW regarding the
validity of the shares of Common Stock being
registered.
Exhibit 8 Opinion of Quarles & Brady as to Tax Matters
Exhibit 23.1 Consent of Arthur Andersen LLP.Anderson LLP
Exhibit 23.2 Consent of Ernst & Young LLP
Exhibit 23.3 Consent of Stewart S. Hudnut (included in Exhibit 5).
24 Powers
Exhibit 23.4 Consent of Quarles & Brady (included in Exhibit 8)
Exhibit 24.1 Power of Attorney of directors and certain officersJulius W. Becton, Jr.
Exhibit 24.2 Power of the Company are included on the signature page.Attorney of Silas S. Cathcart
Exhibit 24.3 Power of Attorney of Susan Crown
Exhibit 24.4 Power of Attorney of H. Richard Crowther
II-1
Item103
NUMBER DESCRIPTION OF EXHIBIT
Exhibit 24.5 Power of Attorney of W. James Farrell
Exhibit 24.6 Power of Attorney of L. Richard Flury
Exhibit 24.7 Power of Attorney of Richard M. Jones
Exhibit 24.8 Power of Attorney of George D. Kennedy
Exhibit 24.9 Power of Attorney of Richard H. Leet
Exhibit 24.10 Power of Attorney of Robert C. McCormack
Exhibit 24.11 Power of Attorney of John D. Nichols
Exhibit 24.12 Power of Attorney of Phillip B. Rooney
Exhibit 24.13 Power of Attorney of Harold B. Smith
Exhibit 24.14 Power of Attorney of Ormand J. Wade
Exhibit 24.15 Power of Attorney of Calvin A. H. Waller
Exhibit 24.16 Power of Attorney of Michael W. Gregg
ITEM 22. Undertakings
The undersigned RegistrantUNDERTAKINGS
(1) ITW hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendmentundertakes to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(d)That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(e) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this
Registration Statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other Items of the applicable form.
II-2
(f) Every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is
used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(g) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to ItemsItem 4, 10(b), 11 or
13 of this Form S-4form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of responding
to the request.
(h) To(2) ITW hereby undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
(3) ITW hereby undertakes: (1) to file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b), if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; (iii) to include any material
information with respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such information in the
Registration Statement; (2) that, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; (3) to remove from registration by
means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) ITW hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of ITW's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
104
(5) ITW hereby undertakes as follows: that prior to any public reoffering
of the securities registered hereunder through use of a prospectus which is a
part of this Registration Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(6) ITW undertakes that every prospectus: (i) that is filed pursuant to
paragraph (5) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the RegistrantITW
pursuant to the foregoing
provisions referred to in Item 20 hereof, or otherwise, the RegistrantITW has
been advised that in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the RegistrantITW of expenses incurred or
paid by a director, officer or controlling person of the RegistrantITW in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the RegistrantITW will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF GLENVIEW,
STATE OF ILLINOIS ON THE 18th DAY OF April, 1996.
ILLINOIS TOOL WORKS INC.
BY: /s/ W. James Farrell
-------------------------------------
W. JAMES FARRELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this
Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Glenview, State of
Illinois, on June 6, 1995.
ILLINOIS TOOL WORKS INC.
By:/s/ Stewart S. Hudnut
_________________________________
Title: Stewart S. Hudnut, Senior
Vice President, General
Counsel and Secretary
POWER OF ATTORNEY
The undersigned officers and directors of Illinois Tool Works
Inc. hereby severally constitute John D. Nichols, Harold B.
Smith, Stewart S. Hudnut and each of them singly our true and
lawful attorneys with full power to them and each of them singly,
to sign for us, in our names in the capacities indicated below,
any and all amendments to this Registration Statement, including
post-effective amendments, to file the same with all exhibits
thereto, and other documentation in connection therewith, with
the Securities and Exchange Commission and generally to do all
such things in our name and on our behalf in our capacities as
officers and directors to enable Illinois Tool Works Inc. to
comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys, or any one of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statementregistration statement has been signed by the following persons on behalf of
the registrant and in the capacities indicated on June , 1995.
Signature Titlethe 18th day of
April, 1996.
/s/ Micheal W. Gregg
- --------- -----
/s/ John D. Nichols Chairman and Chief Executive
_________________________________ Officer; Director
John D. Nichols
President; Director
_________________________________
W. James Farrell
/s/ Michael W. Gregg----------------------------------- Senior Vice President and Controller,
_________________________________Michael W. Gregg Accounting (Principal Accounting
and Michael W. Gregg Financial Officer)
II-4
/s/
Julius W. Becton, Jr. Director
_________________________________
Julius W. Becton, Jr.
/s/ Silas S. Cathcart Director
_________________________________
Silas S. Cathcart
/s/ Susan Crown Director
_________________________________
Susan Crown
/s/H. Richard Crowther Director
_________________________________
H.W. James Farrell Director
L. Richard Crowther
/s/Flury Director
Richard M. Jones Director
_________________________________
Richard M. Jones
/s/ George D. Kennedy Director
_________________________________
George D. Kennedy
/s/ Richard H. Leet Director
_________________________________
Richard H. Leet
/s/ Robert C. McCormack Director
_________________________________
Robert C. McCormack
/s/John D. Nichols Director
Phillip B. Rooney Director
_________________________________
Phillip B. Rooney
/s/II-3
105
Harold B. Smith Director
_________________________________
Harold B. Smith Director
/s/ Ormand J. Wade Director
_________________________________
Ormand J. Wade
/s/ Calvin A. H.A.H. Waller Director
_________________________________
Calvin A. H. WallerBY: /s/ W. James Farrell
-------------------------------------
W. James Farrell (Individual
and as Attorney-in-Fact)
Original powers of attorney authorizing W. James Farrell to sign this
registration statement on Form S-4 and amendments thereto on behalf of the
above-named directors of the registrant have been filed with the Securities and
Exchange Commission as part of this registration statement on Form S-4.
II-4
106
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
NUMBER DESCRIPTION OF EXHIBIT
Exhibit -------
Number Description2 Agreement and Plan of Merger among Medalist
Industries, Inc., Illinois Tools Works Inc. and ITW
ACQ. Inc. dated as of January 8, 1996 is set forth in
full in Exhibit ------ ----------------------A to the Proxy Statement/Prospectus
which is part of this Registration Statement.
Exhibit 3(i) Restated Certificate of Incorporation of Illinois
ToolTools Works Inc., filed as Exhibit 4(a) to the Company'sITW's
Registration State-
mentStatement on Form S-8 (Registration StatementS-8(Registration No.
33-53517) filed with the Securities and Exchange
Commis- sionCommission on May 6, 1994 and incorporated herein by
reference.
Exhibit 3(ii) By-Laws of Illinois ToolTools Works Inc., as
amended, filed as
Exhibit 3(b) to the
Company'sITW's Annual Report on Form 10-K for
the fiscal year ended December 31, 19941995 (Commission
File No. 1-4797) and incorporateincorporated herein by
reference.
Exhibit 5 Opinion of Stewart S. Hudnut, Senior Vice President,
General Counsel and Secretary of the CompanyITW regarding the
validity of the shares of Common Stock being
registered.
Exhibit 8 Opinion of Quarles & Brady as to Tax Matters
Exhibit 23.1 Consent of Arthur Andersen LLP.Anderson LLP
Exhibit 23.2 Consent of Ernst & Young LLP
Exhibit 23.3 Consent of Stewart S. Hudnut (included in Exhibit 5).
24 Powers
Exhibit 23.4 Consent of Quarles & Brady (included in Exhibit 8)
Exhibit 24.1 Power of Attorney of directors and certain officersJulius W. Becton, Jr.
Exhibit 24.2 Power of the Company are included on the signature page.Attorney of Silas S. Cathcart
Exhibit 24.3 Power of Attorney of Susan Crown
Exhibit 24.4 Power of Attorney of H. Richard Crowther
Exhibit 24.5 Power of Attorney of W. James Farrell
Exhibit 24.6 Power of Attorney of L. Richard Flury
Exhibit 24.7 Power of Attorney of Richard M. Jones
Exhibit 24.8 Power of Attorney of George D. Kennedy
Exhibit 24.9 Power of Attorney of Richard H. Leet
Exhibit 24.10 Power of Attorney of Robert C. McCormack
Exhibit 24.11 Power of Attorney of John D. Nichols
Exhibit 24.12 Power of Attorney of Phillip B. Rooney
Exhibit 24.13 Power of Attorney of Harold B. Smith
Exhibit 24.14 Power of Attorney of Ormand J. Wade
Exhibit 24.15 Power of Attorney of Calvin A. H. Waller
Exhibit 24.16 Power of Attorney of Michael W. Gregg