THMD Thermadyne Hldgs Corp (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the registrant þ

Filed by a party other than the registrant o

Check the appropriate box:

o		Preliminary proxy statement.
o		Confidential, for use of the Commission only (as permitted by Rule 14A- 6(e)(2) ).
þ		Definitive proxy statement.
o		Definitive additional materials.
o		Soliciting material pursuant to §240.14a-12

Thermadyne Holdings Corporation

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of filing fee (Check the appropriate box):

o		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies.
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

þ		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

 

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 2, 2010

 

November 1, 2010

 

DEAR STOCKHOLDERS:

 

You are cordially invited to attend a special meeting of stockholders of Thermadyne Holdings Corporation, a Delaware corporation, to be held at 10:00 a.m., Eastern time, on December 2, 2010 at the Hilton New York, 1335 Avenue of the Americas, New York, NY 10019, U.S.A.

 

At the special meeting, you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger, dated as of October 5, 2010 (the “merger agreement”), that we entered into with Razor Holdco Inc. (“Parent”) and Razor Merger Sub Inc., its wholly-owned subsidiary (“Merger Subsidiary”). If the merger agreement is adopted and the merger is consummated, each share of our common stock (other than shares held by us or owned by Parent or any of its subsidiaries, or by stockholders who properly exercise their appraisal rights under Delaware law for such shares) will be cancelled and converted automatically into the right to receive $15.00 in cash, without interest. Pursuant to the terms of the merger agreement, Merger Subsidiary will be merged with and into us, and we will continue as the surviving corporation. All of the outstanding shares of Merger Subsidiary will be converted into equity interests in the surviving corporation. As a result of the merger, we will be privately owned and controlled by Irving Place Capital, a private equity firm. A copy of the merger agreement is included as Annex A to the accompanying proxy statement.

 

On October 5, 2010, our board of directors, after considering the factors described herein, unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interests of us and our stockholders, and approved the merger agreement and the merger. In arriving at their recommendation of the merger agreement, our board of directors carefully considered a number of factors which are described in the accompanying proxy statement and consulted with its financial and legal advisors. Our board of directors unanimously recommends that you vote “FOR” the approval of the proposal to adopt the merger agreement .

 

When you consider the recommendation of our board of directors to adopt the merger agreement, you should be aware that some of our directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally.

 

Regardless of the number of shares you own, your vote is very important. The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of a majority of the outstanding shares of our common stock. If you fail to vote on the approval of the proposal to adopt the merger agreement, the effect will be the same as a vote “AGAINST” adoption of the merger agreement for purposes of calculating whether a majority of the outstanding shares have voted to adopt the merger agreement. If you do not vote in favor of the adoption of the merger agreement and you fulfill the procedural requirements that are summarized in the accompanying proxy statement, Delaware law entitles you to a judicial appraisal of the fair value of your shares.

 

Please do not send your Company common stock certificates to us at this time. If the merger is completed, you will be sent instructions regarding surrender of your certificates.

 

Once you have read the accompanying proxy statement, please vote on the proposals submitted to stockholders at the special meeting, whether or not you plan to attend the meeting, by signing, dating and mailing the enclosed proxy card or by voting your shares by telephone or Internet using the instructions on your proxy card. If you have

any questions or need assistance voting your shares, please call MacKenzie Partners, Inc. , which is assisting us in the solicitation of proxies, toll-free at 1-800-322-2885 .

 

If you receive more than one proxy card because you own shares that are registered differently, please vote all of your shares shown on all of your proxy cards. If your shares are held in “street name” by your broker, your broker will be unable to vote your shares without instructions from you. You should instruct your broker to vote your shares, following the procedures provided by your broker. Failure to instruct your broker to vote your shares will have the same effect as voting “AGAINST” the approval of the proposal to adopt the merger agreement .

 

If you are a stockholder of record, voting by proxy will not prevent you from voting your shares in person in the manner described in the accompanying proxy statement if you subsequently choose to attend the special meeting.

 

On behalf of our board of directors, thank you for your cooperation and support.

 

Sincerely,

 

 

 

Paul D. Melnuk
Chairman of the Board of Directors

 

The accompanying proxy statement is dated November 1, 2010, and it and the proxy card are first being mailed to stockholders on or about November 2, 2010.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, OR PASSED UPON THE FAIRNESS OR MERITS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER OR THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THE ENCLOSED PROXY STATEMENT. ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE.

 

THERMADYNE HOLDINGS CORPORATION
16052 SWINGLEY RIDGE ROAD, SUITE 300
ST. LOUIS, MISSOURI 63017

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD DECEMBER 2, 2010

 

 

 

 

 

 

 

We urge you to read the entire proxy statement carefully. Whether or not you plan to attend the special meeting, please vote by promptly completing the enclosed proxy card and then signing, dating and returning it in the postage-paid (if mailed in the United States) envelope provided so that your shares may be represented at the special meeting. Alternatively, you may vote your shares of stock through the Internet or by telephone, as indicated on the proxy card. Prior to the vote, you may revoke your proxy in the manner described in the proxy statement. Your failure to vote will have the same effect as a vote “AGAINST” the adoption of the merger agreement.

 

By order of the board of directors,

 

 

 

Nick H. Varsam
Vice President, General Counsel and
Corporate Secretary

 

St. Louis, Missouri

November 1, 2010

 

TABLE OF CONTENTS

 

 

SUMMARY TERM SHEET

	•	to approve the proposal to adopt the merger agreement,
	•	to approve the proposal to adjourn the special meeting to a later date, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement, and
	•	to transact such other business as may properly come before the special meeting or any adjournment or postponement of the special meeting.

	•	pay our stockholders (and holders of our other equity-based interests and long-term incentive cash awards) the amounts due to them under the merger agreement, which, based upon the shares (and our other equity-based interests) outstanding as of October 29, 2010 would be approximately $214.7 million;

	•	refinance outstanding indebtedness, which, as of October 29, 2010, was approximately $185.8 million; and

	•	pay fees and expenses related to the merger and the debt that will finance the merger,

	•	equity contributions to be provided or secured as described below by Irving Place Capital Partners III, L.P. (an investment fund affiliated with Irving Place Capital) or other parties to whom it assigns a portion of its commitment;
	•	the issuance of senior secured notes (or, to the extent those notes are not issued at or prior to the closing of the merger, by a senior secured bridge credit facility);

	•	subject to availability, borrowings under a senior secured revolving credit facility; and
	•	cash on hand of the Company.

	•	the accelerated vesting of all unvested stock options and restricted shares of Company common stock held by our directors and executive officers;
	•	the accelerated vesting and payment of all outstanding unvested long-term and restricted cash awards issued to our executive officers pursuant to our long-term incentive award program;
	•	the payment of severance benefits (pursuant to employment agreements with certain of our executive officers) in connection with certain qualifying terminations of employment that may occur following the merger;
	•	the payment of retention bonuses to certain executive officers; and
	•	the expected ownership of equity interests in Parent or its affiliates by certain executive officers after the completion of the merger.

	•	Common Stock.   Each share of Company common stock outstanding immediately prior to the effective time of the merger (other than shares held by us or owned by Parent or any of its subsidiaries, or by stockholders who properly exercise their appraisal rights under Delaware law for such shares) will be converted at the effective time of the merger into the right to receive cash in the amount of $15.00 per share, without interest and less any applicable withholding taxes.
	•	Options.   At the effective time of the merger, each option to acquire shares of our common stock that is outstanding immediately prior to the effective time of the merger, whether vested or unvested, will vest (if unvested) and will be cancelled as of the effective time of the merger in exchange for the right to receive, as soon as reasonably practicable after the effective time of the merger (but in any event, no later than the earliest of (a) three business days after the effective time of the merger, (b) the end of the year in which the effective time of the merger occurs, or (c) the expiration of the original term of such option outstanding as of the effective time of the merger) a cash payment equal to the number of shares of our common stock subject to the option, multiplied by the excess, if any, by which $15.00 exceeds the exercise price of the option, less any applicable withholding taxes. Each option for which the exercise price per share of our common stock equals or exceeds $15.00 will be cancelled and have no further effect with no right to receive any consideration therefor.
	•	Restricted Shares.   At or immediately prior to the effective time, each outstanding Company restricted share will vest and become free of any restrictions and, as of the effective time of the merger, will be cancelled and converted into the right to receive $15.00 per restricted share less any applicable withholding taxes, without interest.

	•	solicit, initiate or take any action to knowingly facilitate or encourage the submission of any Acquisition Proposal (as defined on page 67) or any proposal that is reasonably likely to lead to any Acquisition Proposal;

	•	enter into, continue or participate in any discussions or negotiations with, furnish any information relating to the Company or any of its subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its subsidiaries to any third party that to the Company’s knowledge is seeking to make, or has made, an Acquisition Proposal or any proposal that is reasonably likely to lead to an Acquisition Proposal;

	•	make an Adverse Recommendation Change (as defined on page 66); or

	•	enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement or other similar instrument that constitutes or relates to an Acquisition Proposal or enter into any agreement that requires the Company to abandon, terminate or fail to consummate the transactions contemplated by the merger agreement or breach its obligations under the merger agreement.

	•	by either Parent or the Company, if:

	•	the merger has not been consummated by April 5, 2011 (however, this right to terminate the merger agreement will not be available to any party whose breach of the merger agreement results in the failure of the merger to be consummated by April 5, 2011);
	•	our stockholders meeting has been held and completed and our stockholders have not adopted the merger agreement at such meeting or any adjournment or postponement of such meeting; or
	•	there is a permanent legal prohibition to completing the merger.

	•	by Parent, if:

	•	an Adverse Recommendation Change (as defined on page 66) has occurred;

	•	the Company has willfully breached in any material respect any of its obligations under the non-solicitation provisions set forth in the merger agreement;

	•	a third party commences a tender offer or exchange offer for Company common stock that constitutes an Acquisition Proposal (as defined on page 67) or an Acquisition Proposal is publicly announced and, within ten business days after the public announcement of such Acquisition Proposal, the Company fails to publicly reaffirm the Company’s board of director recommendation for approval of the proposal to adopt the merger agreement;

	•	the Company fails to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against any Acquisition Proposal subject to Regulation 14D under the Exchange Act of 1934 within ten business days after the commencement of such Acquisition Proposal (including, for these purposes, by taking no position with respect to the acceptance by the Company’s stockholders of a tender offer or exchange offer within such period, which shall constitute a failure to recommend against such offer);
	•	the Company fails to include the Company board recommendation in the proxy statement;
	•	a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company set forth in the merger agreement has occurred that would cause the condition to closing relating to the accuracy of the representations and warranties of the Company or compliance by the Company with its obligations under the merger agreement not to be satisfied and such breach or failure is not cured by the earlier of April 5, 2011 or thirty days following the Company’s receipt of written notice of such breach or failure, provided that, at the time of the delivery of such notice, Parent is not in material breach of its obligations under the merger agreement; or

	•	a material adverse effect on the Company shall have occurred since the date of the merger agreement that is not capable of being cured prior to April 5, 2011.

	•	by the Company, if:

	•	at any time prior to the adoption of the merger agreement by our stockholders, (i) our board of directors authorizes the Company to enter into an alternative acquisition agreement concerning an acquisition proposal that the board of directors determines in good faith (after consultation with a financial advisor of nationally recognized reputation and outside legal counsel) constitutes a Superior Proposal (as defined on page 67), provided that (A) prior to termination, the Company gives Parent written notice of its intention to terminate the merger agreement, (B) during a three business day period following Parent’s receipt of such notice, the Company offers to negotiate (and, if accepted, negotiated in good faith) with Parent in making adjustments to the terms and conditions of the merger agreement, (C) the board of directors determines in good faith after such three business day period that the alternative transaction continues to be a Superior Proposal and (D) the board of directors shall have determined in good faith, after consulting with and receiving the advice of outside counsel, that failure to terminate the merger agreement would reasonably be expected to be inconsistent with its fiduciary duty; (ii) concurrently with the termination of the merger agreement, we enter into a definitive alternative acquisition agreement with respect to a Superior Proposal and (iii) prior to, or concurrently with, such termination, we pay to an affiliate of Parent the termination fee discussed under “The Merger Agreement — Termination Fees and Expenses;”

	•	a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Parent or Merger Subsidiary set forth in the merger agreement has occurred that would cause the condition to closing relating to the accuracy of the representations and warranties of Parent or Merger Subsidiary or compliance by Parent or Merger Subsidiary with their obligations under the merger agreement not to be satisfied and such breach or failure is not cured by the earlier of April 5, 2011 or thirty days following Parent’s receipt of written notice of such breach or failure, provided that, at the time of delivery of such written notice, the Company is not in material breach of its obligations under the merger agreement; or
	•	if at least 5 business days have passed since the Company has notified Parent that it believes the conditions to closing have been satisfied, all the closing conditions to the merger agreement (other than those conditions that by their nature are to be satisfied by actions taken at closing) have been satisfied or, to the extent permissible, waived by the party entitled to the benefit of such conditions, and Parent and Merger Subsidiary fail to consummate the merger within two business days following the date on which the closing should have occurred.

	•	the Company may be obligated to pay to an affiliate of Parent a termination fee of $6,440,000, plus the documented reasonable out-of-pocket fees and expenses incurred by Parent and Merger Subsidiary in connection with the merger agreement up to an aggregate of $2,000,000; or
	•	Parent may be obligated to pay the Company the Parent fee of $25,000,000. The guarantor has agreed to guarantee the obligation of Parent to pay the Parent fee of $25,000,000 pursuant to the limited guarantee.

	•	submit a written demand for appraisal to the Company before the vote is taken on the proposal to adopt the merger agreement;
	•	not submit a proxy or otherwise vote in favor of the proposal to adopt the merger agreement; and
	•	continuously hold your Company common stock, from the date you make the demand for appraisal through the closing of the merger.

 

The following questions and answers are intended to address some commonly asked questions regarding the merger, merger agreement and the special meeting. These questions and answers may not address all of the questions that may be important to you as one of our stockholders. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written instruments made or to be made by us, contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the appearance in such a statement of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “foresee,” “likely,” “future” or “will” and similar expressions, which appear in a number of places in this proxy statement (and the documents to which we refer you in this proxy statement) and include, but are not limited to, all statements relating directly or indirectly to the timing or likelihood of completing the merger to which this proxy statement relates, plans for future growth and other business development activities as well as capital expenditures, financing sources and the effects of regulation and competition and all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers. Investors are cautioned that such forward-looking statements are not assurances for future performance or events and involve risks and uncertainties that could cause actual results and developments to differ materially from those covered in such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including our most recent filings on Forms 10-Q and 10-K, facts and matters contained in this document, and the following factors:

 

 

 

 

 

Consequently, all of the forward-looking statements we make in this document are qualified by the information contained herein, including, but not limited to (a) the information contained under this heading and (b) the information contained under the headings “Risk Factors” and “Business” and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-Q and 10-K (see “Where You Can Find More Information” beginning on page 84).

 

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are not guarantees of performance or results. There can be no assurance that forward looking statements will prove to be accurate. Stockholders should also understand that it is not possible to predict or identify all risk factors and that neither this list nor the factors identified in our SEC filings should be considered a complete statement of all potential risks and uncertainties. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof except as required by law.

 

Thermadyne Holdings Corporation

 

16502 Swingley Ridge Road, Suite 300

St. Louis, Missouri 63017

(636) 728-3000

 

The Company is a Delaware corporation with its headquarters in St. Louis, Missouri. We are a leading global designer and manufacturer of gas and arc cutting and welding products, including equipment, accessories and consumables. See also “Where You Can Find More Information” beginning on page 84. Company common stock is publicly traded on Nasdaq under the symbol “THMD.”

 

Razor Holdco Inc.

 

c/o IPC Manager III, L.P.

277 Park Avenue, 39th Floor

New York, New York 10172

 

Parent is a Delaware corporation that was formed by Irving Place Capital solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and related financing transactions. IPC is a private equity firm focused on making equity investments in middle-market companies in the form of buyouts, recapitalizations and growth capital investments. Since its formation in 1997, IPC has been an investor in more than 50 companies and has raised over $4.0 billion of equity capital, including its current $2.7 billion institutional fund. Following consummation of the merger, Parent will own all of our outstanding common stock and we will be a direct wholly-owned subsidiary of Parent.

 

Razor Merger Sub Inc.

 

c/o IPC Manager III, L.P.

277 Park Avenue, 39th Floor

New York, New York 10172

 

Merger Subsidiary is a Delaware corporation that was formed by Parent solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and the related financing transactions. Merger Subsidiary is a wholly-owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon completion of the merger, Merger Subsidiary will cease to exist and the Company will continue as the surviving corporation.

 

The special meeting will be held at 10:00 a.m., Eastern time, on December 2, 2010 at the Hilton New York, located at 1335 Avenue of the Americas, New York, NY 10019. We are sending this proxy statement to you in connection with the solicitation of proxies for use at the special meeting and any adjournments or postponements of the special meeting.

 

At the special meeting, stockholders will be asked to:

 

 

Our stockholders must approve the proposal to adopt the merger agreement in order for the merger to occur. If our stockholders fail to approve the proposal to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully in its entirety.

 

The board of directors has unanimously determined that the merger agreement and the merger are advisable, fair to and in the best interests of us and our unaffiliated stockholders and has unanimously approved the merger, the merger agreement and the transactions contemplated thereby. The board of directors unanimously recommends that you vote “FOR” adoption of the merger agreement and “FOR” the adjournment of the special meeting to a later date, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

We have fixed the close of business on October 29, 2010 as the record date for the special meeting, and only holders of record of Company common stock on the record date will be entitled to vote at the special meeting or any adjournment or postponement of the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. On the record date, there were 13,556,813 shares of Company common stock outstanding and entitled to vote. Each share of Company common stock entitles its holder to one vote on all matters properly presented at the special meeting. Votes may be cast at the special meeting in person or by proxy.

 

A majority of the shares of Company common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common stock for which a stockholder directs an “abstention” from voting, as well as broker non-votes, will be counted for purposes of establishing a quorum. A quorum is necessary to transact business at the special meeting. Once a share of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and at any adjourned special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

 

Only stockholders of record or their duly authorized proxies have the right to attend the special meeting. To gain admittance, you must present valid photo identification, such as a driver’s license or passport. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, please bring to the special meeting a copy of your brokerage statement evidencing your beneficial ownership of Company common stock and valid photo identification. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are the representative of such stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.

 

The merger cannot be completed unless the adoption of the merger agreement is approved by the affirmative vote of a majority of the outstanding shares of our common stock. For the proposal to adopt the merger agreement, you may vote “ FOR ,” “ AGAINST ” or “ ABSTAIN .” Abstentions will not be counted as votes cast in favor of the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Banks, brokerage firms or other nominees who hold shares in street name for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposal to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-routine matters. These broker non-votes will be counted for purposes of determining a quorum, but will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Approval of the adjournment of the meeting to a later date, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock present, in person or by proxy, and entitled to vote at the special meeting on that matter, even if less than a quorum. For the proposal to adjourn the special meeting, you may vote “ FOR ,” “ AGAINST ” or “ ABSTAIN .”

 

For purposes of this proposal, if your shares of Company common stock are present at the special meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have the same effect as if you voted “AGAINST” the proposal. If you fail to submit a proxy or vote in person at the special meeting, or there are broker non-votes on the issue, as applicable, the shares of Company common stock not voted, will not be counted in respect of, and will not have an effect on, the proposal to adjourn the special meeting.

 

If you are a stockholder of record, in order to vote, you should simply indicate on your proxy card how you want to vote, and sign and mail your proxy card in the enclosed return envelope as soon as possible so that your shares will be represented at the special meeting. You may also vote your shares by telephone or Internet using the instructions on your proxy card. If you receive more than one proxy card, it means that you have multiple accounts at the transfer agent and/or with brokers, banks or other nominees. Please sign and return all the proxy cards you have received to ensure that all your shares are voted.

 

If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.

 

Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you choose to vote by mailing a proxy card, your proxy card must be filed with our Secretary by the time the special meeting begins. Please do not send in your stock certificates with your

proxy card. When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the per share merger consideration in exchange for your stock certificates.

 

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, or your proxies, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

 

If you have any questions or need assistance voting your shares, please call MacKenzie Partners, Inc., our proxy solicitor, toll-free at 1-800-322-2885.

 

It is important that you vote your shares of Company common stock promptly. Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or the internet. Stockholders who attend the special meeting may revoke their proxies by voting in person.

 

As of October 29, the record date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 351,987 shares of Company common stock (excluding any shares of Company common stock deliverable upon exercise or conversion of any options or restricted shares), representing 2.6% of our outstanding shares on the record date. Our directors and executive officers have informed us that they currently intend to vote all of their shares of our common stock “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

Shares of our common stock represented by duly executed and unrevoked proxies in the form of the enclosed proxy card received by the Secretary of the Company will be voted at the special meeting in accordance with specifications made therein by the stockholders, unless authority to do so is withheld. If no specification is made, shares represented by duly executed and unrevoked proxies in the form of the enclosed proxy card will be voted “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting to a later date, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or vote in person at the special meeting, or abstain, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

The board of directors does not know of any matters other than those described in the notice of the special meeting that are expected to come before the special meeting. However, if any other matters are properly presented at the special meeting for consideration, the persons named in the proxy card and acting thereunder generally will have discretion to vote on such matters in accordance with their best judgment unless authority is specifically withheld.

 

Any holder of shares of our common stock giving a proxy with respect to such shares may revoke it at any time prior to its exercise at the special meeting by sending us a written notice of such revocation or completing and submitting a new proxy card bearing a later date to our Secretary at our executive offices, or attending the special meeting and voting in person. You may also submit a later-dated proxy using the telephone or Internet voting procedures on the proxy card so long as you do so before the deadline of 11:59 p.m., Eastern time, on December 1,

2010. Attendance at the special meeting will not, by itself, constitute revocation of a proxy. If your shares are held in “street name” and you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote or to vote at the special meeting.

 

The Company has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay MacKenzie Partners, Inc. a fee of approximately $9,000. The Company will reimburse MacKenzie Partners, Inc. for reasonable out-of-pocket expenses and will indemnify MacKenzie Partners, Inc. and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common stock for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person, but they will not be paid any additional amounts for soliciting proxies.

 

Although it is not currently expected, the special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the special meeting. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

 

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call MacKenzie Partners, Inc., our proxy solicitor, toll-free at 1-800-322-2885.

 

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A . You should read the entire merger agreement carefully as it is the legal document that governs the merger.

 

The merger agreement provides that Merger Subsidiary will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation.

 

The board of directors of the Company, or the “board of directors,” in the ordinary course of business continually reviews the Company’s business, strategic direction, performance and prospects in the context of developments in our industry and the competitive landscape in the markets in which the Company operates. Our board of directors has from time to time held discussions on strategic alternatives focused on exploring ways to enhance stockholder value.

 

In late 2005 and early 2006, the Company engaged in a marketing process for one of its product lines. A competitor of the Company in several of its product lines (“Party A”) submitted the highest range of valuation in a non-binding offer. Following extensive due diligence, Party A substantially lowered its offer price, and the Company terminated the process.

 

In June 2007, the Company engaged a financial advisor to explore possible strategic alternatives. The Company’s financial advisor approached a number of potential financial and strategic buyers from July 2007 to September 2007, but did not initially approach any of the Company’s competitors due to concerns regarding the risks of competitive harm. In October 2007, potential buyers that had been approached by the Company’s financial advisor and expressed interest in acquiring the Company all withdrew their interest.

 

In October 2007, Party A approached the Company to engage in negotiations regarding an acquisition of the Company by Party A. In late 2007 and early 2008, the Company and Party A engaged in negotiations regarding the purchase of the Company by Party A and entered into a confidentiality agreement allowing for the limited exchange of information between the parties’ respective antitrust counsel for the purpose of assessing risk of review and likelihood of approval by antitrust authorities. After exchanging and reviewing such information, Party A expressed serious concern about the potential U.S. antitrust risk in a potential transaction and made clear its unwillingness to move forward with any transaction that was not fully conditional on receiving antitrust approval on an unconditional basis, and in March 2008, the negotiations between the Company and Party A terminated.

 

During the second half of 2009, representatives of the Company had preliminary discussions with a competitor of the Company that had expressed interest in acquiring certain businesses of the Company. During this period, the Company also engaged in discussions with a private equity firm (“Party B”) regarding various potential strategic transactions, including the acquisition of the Company by Party B and the possibility of entering into certain strategic combinations between the Company and certain competitors of the Company.

 

In March 2010, a financial advisor to Party A contacted Mr. Paul Melnuk, our Chairman of the board, about the possibility of Party A’s acquisition of the Company. Mr. Melnuk, based on past experiences with Party A, advised that the Company had concerns about Party A’s interest and ability to execute a transaction on terms acceptable to the Company.

 

On March 23, 2010, Mr. Melnuk and Company management met with Party B. The parties re-engaged to discuss the possibility of pursuing an acquisition of the Company by Party B. Additionally, management presented certain confidential information to Party B during and following this meeting.

 

At a March 31, 2010 special meeting of the board of directors, Mr. Melnuk reported on Party B’s interest in pursuing a strategic transaction with the Company. The board of directors discussed engagement of a financial advisor and outside counsel and related process considerations.

In early April 2010, Party A’s financial advisor advised Mr. Melnuk of Party A’s interest in acquiring the Company and its willingness to divest one of the overlapping businesses in the event of any concerns raised by antitrust authorities.

 

On April 23, 2010, Party B submitted a written proposal to acquire the Company for a purchase price of $10.00 per share, subject to a 45-day period of exclusivity to allow Party B to perform its due diligence as contemplated in a draft exclusivity agreement.

 

At an April 26, 2010 special meeting of the board of directors, the board of directors considered presentations by three investment banking firms, including Oppenheimer & Co., Inc. (“Oppenheimer”) in connection with the potential engagement of a financial advisor by the Company.

 

The following day, the board of directors held a regular meeting in conjunction with the 2010 annual stockholders meeting. Armstrong Teasdale LLP (“Armstrong Teasdale”), counsel to the Company, and Bryan Cave LLP (“Bryan Cave”), counsel to the board of directors, were also present and participated in the meeting. The board of directors discussed the adequacy of Party B’s expression of interest and its requirement for a 45-day exclusivity period. The board of directors also discussed the prospects of the Company on a stand-alone basis. The board of directors directed Mr. Melnuk to inform Party B that its proposed price was not compelling, and that the Company was engaging a financial advisor to assist the board of directors in evaluating the Company’s strategic alternatives.

 

On May 11, 2010, the Company entered into an engagement letter with Oppenheimer, as its exclusive financial advisor.

 

On May 25, 2010, Party B submitted a revised proposal, which included a price of $11.50 per share and required a 45-day exclusivity period. Party B also proposed that the Company would reimburse Party B for expenses of up to $1.5 million it would incur under certain circumstances in connection with its investigation of a potential transaction.

 

On May 25, 2010, Mr. Melnuk called the Chief Executive Officer of Party A to inform him that the board of directors had decided to evaluate strategic alternatives. Mr. Melnuk informed Party A of the importance to the board of directors of pursuing a transaction that provided a high level of certainty of completion and that the Company would not accept a proposal from Party A contingent upon receiving unconditional antitrust approval.

 

At a May 25, 2010 special meeting of the board of directors, Mr. Melnuk reported that Oppenheimer and Company management were drafting a Confidential Information Memorandum using information provided by Company management for use in a potential marketing process. The board of directors reviewed the updated proposal from Party B. Mr. Melnuk also reported that in his recent discussions with Party A, Party A indicated a willingness to accept antitrust risk if the parties were to re-engage in discussions regarding a transaction, including divestiture of product lines if necessary. The board of directors directed Oppenheimer to contact Party B to explore its proposal and Party A’s financial advisors to facilitate next steps with Party A.

 

On May 28, 2010, Mr. Melnuk contacted the Chief Executive Officer of Party A to discuss a meeting scheduled for June 3, 2010. Party A indicated concern about receiving certain foreign antitrust approval and indicated that Party A had engaged foreign antitrust counsel to assess potential antitrust issues in any possible strategic transaction between Party A and the Company. Mr. Melnuk directed the Company also to engage foreign antitrust counsel to review a potential combination in preparation for the meeting.

 

At a June 1, 2010 special meeting of the board of directors, Oppenheimer reported on its meetings with Party B and Party A’s financial advisors. The board of directors instructed Oppenheimer to share certain financial and other information with Party B and other potential buyers. The board of directors discussed the issues to be addressed at the June 3, 2010 meeting with Party A, including its position on potential antitrust issues. The board of directors also discussed the activities and timing of a marketing process with respect to a potential sale of the Company.

 

On June 1, 2010, Mr. Melnuk, Mr. Varsam, general counsel of the Company, and Armstrong Teasdale had a conference call with the Company’s foreign antitrust counsel, regarding potential antitrust issues in the context of a potential transaction with Party A. Armstrong Teasdale also continued its review of potential U.S. antitrust considerations.

On June 3, 2010, the Company and Party A met together with their respective advisors. The parties discussed the Confidential Information Memorandum (a copy of which had been provided to Party A the previous day), and developments in the Company’s business since the last exchange of information in 2007. Mr. Melnuk noted that the parties’ previous exploration of a possible strategic combination ended with a disagreement regarding the allocation of antitrust risk and reiterated that, in light of concerns of the board of directors, any proposal from Party A should not be contingent on receiving antitrust approval in any jurisdiction. After discussion, the parties agreed to have their respective legal counsels share additional data and update their assessment of the potential antitrust risks associated with a combination. Party A’s CEO agreed to endeavor to provide two separate indications of interest within the following week, one of which would include a proposal with respect to the acquisition of the entire Company and the other which would include a proposal for the acquisition of the entire Company but exclude certain of the Company’s foreign operations.

 

At a June 8, 2010 special meeting of the board of directors, Mr. Melnuk and Oppenheimer reported on the June 3, 2010 meeting with Party A, and noted their view that Party A had not prepared any substantive analysis of a proposed transaction for that meeting. The board of directors discussed its continuing concerns with Party A based on the June 3, 2010 meeting and its prior unproductive interactions with Party A. The board of directors instructed Oppenheimer to communicate to Party A that it would be beneficial to Party A to provide the requested indications of interest along with its position on antitrust considerations prior to the meeting of the board of directors scheduled to occur the following week.

 

The board of directors considered the ongoing discussions with Party A and Party B, and assessed the interest and willingness of each party to consummate a transaction on terms acceptable to the board of directors. Oppenheimer provided its perspective on proceeding with one or both of the existing proposals and noted the advantages of continuing to pursue the broader marketing process that the board of directors had been considering. Following discussion with Oppenheimer regarding possible approaches, the board of directors instructed Oppenheimer to continue pursuing discussions with Party B to seek to improve the financial terms of its proposal and to further clarify the parameters of, and possible exceptions to, its exclusivity request. Bryan Cave provided to the board of directors a review of the directors’ fiduciary duties, particularly in context of the ongoing discussions and actions being taken by the board of directors. The board of directors also discussed with Oppenheimer other potential financial and strategic buyers for the Company, and authorized Oppenheimer to begin contacting potential buyers. The board of directors also directed Oppenheimer to continue discussions with Party A on a parallel path.

 

Following the June 8, 2010 board of directors meeting, Oppenheimer began contacting potential buyers in addition to continuing discussions with Party A and Party B. Of the 55 additional potential buyers contacted between June 8, 2010, and July 20, 2010, 15 were strategic buyers and 40 were financial buyers, including Irving Place Capital, which we sometimes refer to as “IPC.” Confidentiality agreements were executed with 33 of those potential buyers, including IPC, and Oppenheimer delivered a Confidential Information Memorandum to each of them. Oppenheimer communicated to the potential buyers that preliminary indications of interest were due during a timeframe from late June to early July.

 

At a June 10, 2010 special meeting of the board of directors, Oppenheimer reported on its contact with potential financial and strategic buyers. Oppenheimer also discussed its recent contact with Party A’s financial advisors regarding Party A’s level of interest in a transaction and its outstanding request that Party A provide an indication of interest. Oppenheimer also reported it had, per the board of directors’ instructions, advised Party B that the Company would not continue to engage in discussions with Party B without an updated indication of interest with a price of at least $12.50 per share and that the Company expected to engage in a marketing process while Party B was conducting its due diligence. Party B indicated its offer would remain at $11.50 if the Company engaged in a marketing process but that it could increase the price to $12.50 per share if the Company entered into an exclusivity agreement with Party B.

 

From June 10 through June 23, 2010, Armstrong Teasdale and Party A’s antitrust counsel negotiated a confidentiality agreement between the parties’ antitrust counsel to share information to facilitate antitrust analysis. On June 24, 2010, the confidentiality agreement was executed, and on June 25, 2010, antitrust counsel for the Company and Party A exchanged relevant information.

At special meetings of the board of directors on June 15, 2010, June 18, 2010 and June 22, 2010, Oppenheimer reported on the status of the marketing process and Mr. Melnuk reported on the recent discussions with Party A regarding potential U.S. and foreign antitrust risk.

 

At a June 29, 2010 special meeting of the board of directors, Oppenheimer reported that Party B had withdrawn its indication of interest and was no longer interested in pursuing a transaction with the Company. Oppenheimer informed the board of directors of the details of the three preliminary indications of interest it had received to date, with indications of value of between $10.65 and $15.00 per share. The board of directors discussed the scope and timing of the process and the status of the active financial and strategic buyers. Mr. Quinn, the President of the Company, and Armstrong Teasdale provided information to the board of directors about the process of gathering and exchanging information with Party A to assess potential antitrust concerns in the United States and certain foreign jurisdictions.

 

At a July 6, 2010 special meeting of the board of directors, Oppenheimer provided to the board of directors an update on potential buyers contacted by Oppenheimer, including three additional parties who had submitted indications of interest with preliminary value ranges between $12.50 and $13.55 per share. The board of directors discussed the timetable for management presentations and submissions of final proposals, and, with input from legal counsel, considered valuation, execution risk and anticipated timing of a transaction with potential strategic buyers as compared with financial buyers. Mr. Melnuk reported on recent communications with Party A, indicating that the parties were continuing to exchange information regarding certain foreign markets, and that he expected Party A to submit the previously requested proposal the following week.

 

Throughout early and mid-July, the Company’s antitrust counsel continued to analyze potential foreign antitrust issues and engaged in discussions with Party A’s foreign antitrust counsel.

 

At a July 13, 2010 special meeting of the board of directors, Oppenheimer described to the board of directors three additional indications of interest received from potential financial buyers, with preliminary value ranges between $10.00 and $14.00 per share, including a preliminary indication of interest from IPC, with a range of $13.00 to $14.00. Mr. Melnuk reported that Party A had not submitted a proposal, but instead had informed him that its foreign counsel had concluded there was a high likelihood that a proposed transaction would be reviewed and not approved in certain foreign jurisdictions, and therefore it was unwilling to accept certain foreign antitrust risk. Mr. Melnuk also reported that the Company’s foreign antitrust counsel was instructed to contact Party A’s foreign antitrust counsel to discuss the perceived risk in connection with a potential transaction.

 

From July 15, 2010 through August 11, 2010, management presentations took place with eight of the nine bidders who had submitted preliminary indications of interest deemed to be acceptable. No strategic bidders submitted indications of interest during such period. On July 23, 2010, each of those eight bidders was provided access to an online data room.

 

On July 28, 2010, Party A submitted a data request to Oppenheimer on certain foreign operations. Party A’s financial advisor communicated to Oppenheimer that it was considering an offer for the Company, excluding certain foreign operations, and wanted information to be able to value such operations.

 

At a July 29, 2010 regular meeting of the board of directors, Oppenheimer provided a status report on the marketing process, noting the relative levels of activity of the potential bidders in the process. Oppenheimer also updated the board of directors on the data request received from Party A on July 28, 2010.

 

On August 4, 2010, after discussions between Company management and Party A regarding its information request from July 28, 2010, Company management delivered to Party A certain information that Company management considered not to be competitively sensitive.

 

At an August 10, 2010 special meeting of the board of directors, Oppenheimer provided an update on the active discussions that were occurring with the potential bidders. Oppenheimer and Mr. Melnuk reported that Party A continued to express its interest in submitting a bid. The board of directors discussed the next steps of the process, including distribution of a process letter to potential bidders and the potential final bid date of September 14, 2010.

 

On August 18, 2010, Oppenheimer contacted Party A’s financial advisors to inquire about the timing of delivery of the previously discussed indication of interest from Party A. Oppenheimer explained that, if Party A

were still interested in submitting an indication of interest, it should do so as soon as possible, as other interested bidders were moving forward in the process.

 

On August 25, 2010, Party A sent Mr. Melnuk an indication of interest to acquire all of the Company’s shares for $16.25 per share, subject to due diligence. Party A’s proposal provided that it would be willing to divest any business segment(s) with less than $50 million in net sales in 2009 in order to facilitate U.S. and certain foreign antitrust approval, and that if the transaction did not receive approval from either U.S. or certain foreign antitrust authorities, Party A could terminate the transaction, in which event it would reimburse the Company for up to $2 million in out-of-pocket expenses.

 

At an August 26, 2010 special meeting of the board of directors, Oppenheimer reviewed the recent conversations with the potential bidders regarding ongoing due diligence. In addition, Bryan Cave reviewed and discussed with the board of directors the terms of the proposed merger agreement to be provided to the bidders. Oppenheimer also reviewed Party A’s proposal. Mr. Melnuk reported that he had spoken to Party A’s CEO, who confirmed that Party A would require the Company to share antitrust risk in connection with a proposed transaction. The board of directors discussed the terms of Party A’s proposal, and its view that it created significantly more uncertainty compared with other proposals the Company was considering.

 

On August 27, 2010, the Company posted to the data room the proposed form of merger agreement.

 

On August 27, 2010, at the board of directors’ direction, Oppenheimer contacted Party A’s financial advisors to discuss Party A’s indication of interest. Party A’s financial advisors indicated that Party A believed that a transaction structure that excluded certain of the Company’s foreign operations was unattractive from an operational and tax perspective. Party A’s financial advisors also explained that Party A’s foreign counsel believed the combination was not likely to receive antitrust approval in certain jurisdictions and Party A therefore required a transaction structure conditioned on receipt of antitrust approval. Oppenheimer informed Party A’s financial advisor that Oppenheimer would continue to discuss the indication of interest with the board of directors. Oppenheimer noted again that the sale process for the Company was proceeding and final bids were due September 14, 2010.

 

On August 29, 2010, Oppenheimer contacted Party A’s financial advisors to further discuss Party A’s indication of interest. During this discussion, Oppenheimer indicated that Party A’s proposal was inadequate in three areas — financial consideration, assumption of potential anti-trust risk, and compensation for transaction termination. Nonetheless, Oppenheimer, at the board of directors’ direction, gave Party A an opportunity to continue its due diligence and offered to provide selected information in the data room so that Party A could submit an improved bid by the September 14, 2010 deadline. Following this conversation, Oppenheimer sent a data room index to Party A’s financial advisor and requested that they provide a list of requested priority items in the data room. Party A’s financial advisors stated their intention to respond promptly.

 

At an August 30, 2010 special meeting of the board of directors, Oppenheimer informed the board of directors that it had communicated to Party A’s financial advisor that the board of directors was concerned that Party A’s current proposal still had significant transaction uncertainty, that other potential bidders continued to engage in due diligence, and that the September 14, 2010 bid deadline was approaching. Mr. Melnuk reported that he had provided the same message to Party A’s CEO.

 

The Company’s foreign antitrust counsel presented to the board of directors the history of its exchange of information with Party A’s foreign antitrust counsel, as well as its analysis of potential foreign antitrust risk. The Company’s foreign antitrust counsel believed that it was highly likely that a certain foreign jurisdiction would review the potential anticompetitive effect of the proposed transaction in such jurisdiction, and possibly require divestiture or enjoin the transaction. The board of directors discussed the delays, uncertainties and negative impact on the Company’s ongoing business that would likely arise in connection with such foreign antitrust review. Armstrong Teasdale described the process of assessing the potential U.S. antitrust risk, taking into account Party A’s willingness, as expressed in its indication of interest, to divest a business segment(s) of up to $50 million in annual sales, if necessary. The board of directors discussed the product segments most likely to receive attention from the FTC or DOJ and reviewed Armstrong Teasdale’s analysis.

 

The board of directors discussed possible next steps and timing necessary to complete a transaction for Party A and other bidders. Bryan Cave advised the directors about their fiduciary duties in this context and the ability of the

board of directors, in the discharge of its fiduciary duties, to consider the risk of non-consummation of a transaction and the risk of delay and uncertainty in bids it may receive. Oppenheimer reviewed the history of the discussions with Party A over the past three months, including Party A’s repeated delays in following through on agreed upon next steps, as well as Party A’s unacceptable position on antitrust risk. The board of directors also discussed potential adverse consequences to the Company of non-consummation of a transaction.

 

On September 5, 2010, Oppenheimer contacted Party A’s financial advisor to request an update on their activities, as Oppenheimer still had not received a response to the data room index that they had provided to Party A’s financial advisor on August 29, 2010. Party A’s financial advisor informed Oppenheimer that Party A intended to provide a response that day or the next day. Party A’s financial advisor submitted their request list on September 7, 2010, and Oppenheimer and the Company contacted Party A’s financial advisor to discuss the request list. Following this conversation, on September 7, 2010, the Company provided Party A with data room access to certain information Party A had requested.

 

At a September 7, 2010 special meeting of the board of directors, Oppenheimer updated the board of directors on its discussions with Party A’s financial advisors, and provided the board of directors an update on the activities of other potential buyers who were likely to submit proposals by the September 14, 2010 deadline.

 

On September 14, 2010, three financial bidders delivered definitive bids. The other four financial bidders in the process did not deliver definitive bids, and no strategic bidders submitted bids. Party C offered $13.00 per share, subject to a period of approximately three weeks for further due diligence, and provided financing commitments for approximately $230 million, which together with equity commitments would be sufficient to pay the balance of the purchase price and associated transaction expenses. Party C also provided a revised draft of the merger agreement. Party D offered $14.00 per share, subject to a 20-day period for additional due diligence but did not include a revised draft of the merger agreement. Party D’s proposal included financing commitments for approximately $135 million, but noted a significant portion of its financing commitment package had been recently withdrawn by a potential lender. IPC offered $13.75 per share, subject to no further due diligence, and provided a revised draft of the merger agreement and included financing commitments in the amount of approximately $235 million, which together with equity commitments would be sufficient to pay the balance of the purchase price and associated transaction expenses. In addition, IPC’s and Party C’s bids contemplated entering into a voting agreement with Angelo, Gordon & Co., L.P., as investment manager for certain stockholders of the Company who beneficially own approximately 33% of the outstanding shares of Company common stock, to support the merger.

 

On September 15, 2010, Party A submitted a proposal to the Company with two alternative structures. One structure contained an offer of $18.50 per share contingent on obtaining certain foreign regulatory approval and an alternative structure proposed $14.00 per share which was not contingent on foreign approval. Under either alternative, the transaction would be contingent on receipt of U.S. regulatory approvals, provided Party A would accept an obligation to divest any business segment(s) with 2009 sales of less than $30 million. Under the $18.50 per share alternative, if U.S. regulatory approval required the divestiture of any segment with 2009 sales of $30 million or more, the transaction could be terminated by Party A and Party A would obligated to reimburse the Company for expenses of up to $2 million. Under the $14.00 per share alternative, if U.S. regulatory authorities required the divestiture of any segment with reported 2009 sales of $30 million or more, the transaction could be terminated with a termination fee of 3% of the transaction value payable to the Company. The proposal was subject to both completion of final due diligence and negotiation of transaction documents over a 30-day period following acceptance of the offer. Under either alternative, Party A’s proposal required that the parties jointly approach U.S. and certain foreign antitrust authorities during its 30-day due diligence period to conduct an “informal review” of the proposed transaction. Party A did not submit a mark-up of the merger agreement as part of its proposal.

 

At a September 15, 2010 special meeting of the board of directors, the board of directors discussed the bids received from IPC and from Parties A, C and D, and noted that except for the proposal from IPC, all of the proposals included a request for additional time to complete due diligence. Oppenheimer noted that IPC’s bid was the closest to execution and therefore Oppenheimer believed it offered the highest degree of certainty of completion. The board of directors expressed concern about providing Party A and others with two to four weeks for additional due diligence and the potential negative impact the delay could have on IPC’s proposal. The board of directors also discussed its concern regarding Party A’s intention to discuss the transaction with U.S. and foreign regulatory

authorities during its due diligence period, and the impact the results of those discussions could have on Party A’s willingness to enter into a definitive agreement. The board of directors also discussed next steps and Oppenheimer’s proposed communications to potential buyers.

 

Following the receipt of the definitive bids, Oppenheimer communicated with Party C and Party D to clarify certain aspects of their bids, including with respect to price, financing, other terms and remaining due diligence and with Party D, the gap in its financing commitments.

 

On September 17, 2010, Oppenheimer communicated to IPC the need for IPC to improve the financial terms of its proposal. In response to such request, IPC asked for updated financial information, which was provided later that day. IPC then had a call with members of the Company’s management to discuss this updated financial information. Later that day, IPC delivered an updated bid letter to the board of directors, increasing its per share offer to $15.00.

 

On September 20, 2010, Party A submitted a revised proposal to the Company with a two-tier offer of $18.50 per share if the transaction was approved by antitrust authorities in all foreign jurisdictions and $15.00 if divestiture was required in any foreign jurisdiction. In addition, the revised proposal still provided that if U.S. regulatory authorities required the divestiture of any segment(s) with 2009 sales of $30 million or more, the transaction could be terminated with a termination fee of 3% of the transaction value payable to the Company. The proposal was subject to both completion of due diligence and negotiation of transaction documents over a 30-day period following acceptance of the offer. Party A did not submit a revised draft of the merger agreement as part of its revised proposal.

 

At a September 21, 2010 special meeting of the board of directors, Oppenheimer reviewed with the board of directors the background of the sale process and the terms of the final bids submitted. Oppenheimer noted that it had contacted a wide range of both financial and strategic buyers. Oppenheimer also reviewed valuation ranges of the Company under multiple valuation methodologies. Oppenheimer also reviewed the implied equity and enterprise values of each of the bids, as well as their respective premiums to the Company’s current and historical stock prices.

 

Oppenheimer described in detail the revised proposal from Party A. The board of directors again discussed the potential risks that could occur as a result of a delay in process. Additionally, the board of directors discussed the possibility of Party A withdrawing from the process without liability to the Company if any antitrust authority indicated that a remedy unacceptable to Party A might be necessary. Mr. Melnuk added that Party A’s CEO called him the previous day to advise that the 30-day due diligence requirement was not negotiable.

 

Oppenheimer also reported to the board of directors on the updated proposal received on September 17, 2010 from IPC, which included a purchase price of $15.00 per share. The board of directors discussed the advantages and disadvantages of the various proposals, taking into consideration advice and perspectives of its financial and legal advisors, and the board of directors concluded that the IPC offer was the most favorable of the proposals received given its combination of price, terms, financing and greater certainty of transaction completion. The board of directors discussed the issues with IPC’s markup of the merger agreement and its financing arrangements, and Oppenheimer and Bryan Cave were directed to negotiate various high level issues and an increase to offer price with IPC and then to present to the board of directors a more detailed report of remaining issues.

 

Oppenheimer contacted IPC later that evening and proposed an increase to the per share offer price of $15.00. Oppenheimer also addressed various high level issues with IPC’s proposal, primarily involving provisions in its financing commitments and in its markup of the merger agreement impacting deal certainty, including whether the Company would have the right to specific performance to enforce the merger agreement, the amount of the termination fee payable by IPC under certain circumstances and whether IPC would have a marketing period for its financing after stockholder approval of the merger.

 

Following its discussion with Oppenheimer, IPC raised several questions regarding the financial information presented to it on September 17, 2010, and in order to expeditiously address IPC’s questions, IPC, Oppenheimer and the Company’s management met on September 24, 2010 and September 25, 2010 to discuss the updated financial information and related matters.

 

On September 24, 2010, each of Oppenheimer and Mr. Melnuk received a letter from Party A informing them that Party A was withdrawing its bid to acquire the Company.

On September 27, 2010, IPC delivered an updated bid letter to the board of directors reaffirming its offer price of $15.00 per share and indicating that it was prepared to proceed quickly to complete the transaction.

 

At a September 27, 2010 special meeting of the board of directors, Oppenheimer described the ongoing discussions with IPC, which led to the updated bid letter received from IPC earlier that day. Oppenheimer reviewed the status of the open issues identified in IPC’s original bid package, and updated the board of directors on the ongoing discussions with representatives of IPC and its advisors regarding those issues, which included whether the Company would have the right to specific performance to enforce the merger agreement, the amount of the termination fee payable by IPC under certain circumstances and whether IPC would have a marketing period for its financing after stockholder approval of the merger. The board of directors also discussed the process and timetable with respect to completing a transaction with IPC, and authorized Oppenheimer and Bryan Cave to continue negotiating the terms of the transaction with IPC and its advisors.

 

On September 28, 2010, IPC’s legal advisors sent to Bryan Cave an initial draft of a voting agreement, which Bryan Cave forwarded to representatives of Angelo, Gordon & Co., L.P.

 

On September 29, 2010, IPC had an initial meeting with Martin Quinn, Terry Downes, Terry A. Moody and Steven A. Schumm, each a member of the Company’s management, to begin discussions regarding post-transaction employment arrangements. At this meeting, IPC provided each of Messrs. Downes, Moody, Quinn and Schumm with a draft term sheet and subscription agreement, which included, among other things, terms for their post-transaction equity investment in Parent and option awards. From September 30, 2010 through October 4, 2010, IPC and its legal advisors and Messrs. Downes, Moody, Quinn and Schumm and their legal advisors negotiated the subscription agreement, which included, among other things, amendments to each of their respective employment agreements.

 

At a September 30, 2010 special meeting of the board of directors, Oppenheimer and Bryan Cave updated the board of directors on the status of IPC’s debt financing and the remaining open issues in merger agreement.

 

At an October 1, 2010 special meeting of the board of directors, Oppenheimer and Bryan Cave updated the board of directors on the discussions with IPC since the board of directors meeting the day before, and the status of the remaining open issues.

 

The Company’s financial and legal advisors continued negotiations with IPC and its advisors to finalize the remaining open issues in the merger agreement, limited guarantee, financing documents and other related agreements. In addition, representatives of IPC and its legal advisors contacted representatives of Angelo, Gordon & Co., L.P. and its legal advisors to discuss the terms of the voting agreement.

 

At an October 4, 2010 special meeting of the board of directors in the offices of Bryan Cave in New York, Bryan Cave reviewed and discussed with the board of directors the key terms of the merger agreement, and the board of directors discussed the remaining open issues in the merger agreement, debt and equity commitments and the limited guarantee. Oppenheimer delivered to the board of directors a review of the sale process and its financial analysis. As there remained a few important open issues to negotiate, the board of directors authorized Oppenheimer and Bryan Cave to proceed to finalize those remaining issues, and the meeting was adjourned until the following morning.

 

The Company and its advisors and IPC and its advisors continued to negotiate and finalize the transaction documents during the course of the day and into the morning of October 5, 2010.

 

On October 5, 2010, the board of directors reconvened its meeting with its financial and legal advisors and reviewed the resolution of the remaining open issues. Oppenheimer delivered its oral opinion to the board of directors (which was subsequently confirmed in writing), to the effect that, as of the date of its opinion and based upon and subject to the various assumptions, qualifications and limitations set forth in its opinion, the per share merger consideration to be received in cash by the holders of the Company common stock in the merger was fair, from a financial point of view, to such holders. After careful evaluation of the transactions and consideration of the factors discussed below under “— The Merger — Reasons for the Merger; Recommendations of the Board of Directors,” the board of directors unanimously determined that the merger agreement, the merger and the other

transactions related to the merger are advisable, fair to and in the best interests of the Company and the Company’s stockholders.

 

On October 5, 2010, the Company and Parent entered into the merger agreement, Parent and investment funds managed by Angelo, Gordon & Co., L.P. entered into the voting agreement and Parent entered into subscription agreements with each of Messrs. Downes, Moody, Quinn and Schumm. Shortly thereafter, the Company and IPC issued a joint public announcement regarding the merger.

 

The board of directors, at a meeting held on October 4-5, 2010, unanimously determined that the merger is fair to, and in the best interests of, the Company and its stockholders and approved and declared advisable the merger agreement, the merger and other transactions contemplated by the merger agreement. The board of directors resolved that the merger agreement be submitted for consideration by the stockholders of the Company at a special meeting of the stockholders, and recommended that the stockholders of the Company vote to adopt the merger agreement. The merger agreement was finalized and executed on behalf of the Company on October 5, 2010. Thereafter, the Company issued a press release announcing the execution of the merger agreement.

 

In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the board of directors consulted with our senior management team, as well as our outside legal and financial advisors, and considered a number of factors, including the following material factors (not in any relative order of importance):

 

 

 

 

 

 

 

 

 

The board of directors also considered a variety of potentially negative factors in its deliberations concerning the merger agreement and the merger, including the following (not in any relative order of importance):

 

 

 

 

The foregoing discussion of the information and factors considered by the board of directors is not intended to be exhaustive, but includes the material factors considered by the board of directors. In view of the variety of factors considered in connection with its evaluation of the merger, the board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The board of directors based its recommendation on the totality of the information presented.

 

The board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, yours. The board of directors was aware of and considered these interests, among

other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of the Company. See the section entitled “The Merger — Interests of Our Directors and Executive Officers” beginning on page 44.

 

The Company has engaged Oppenheimer as its financial advisor in connection with the merger. In connection with this engagement, the Company’s board of directors requested that Oppenheimer evaluate the fairness, from a financial point of view, of the $15.00 per share cash merger consideration to be received by holders of Company common stock as provided for in the merger agreement. On October 4-5, 2010, at a meeting of the Company’s board of directors held to evaluate the merger, Oppenheimer rendered to the Company’s board of directors an oral opinion, which was confirmed by delivery of a written opinion dated October 5, 2010, to the effect that, as of that date and based upon and subject to the matters described in its opinion, the $15.00 per share cash consideration to be received in the merger by holders of Company common stock was fair, from a financial point of view, to such holders.

 

The full text of Oppenheimer’s written opinion, dated October 5, 2010, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex C. Oppenheimer’s opinion was provided to the Company’s board of directors in connection with its evaluation of the merger consideration from a financial point of view and does not address any terms or other aspects or implications of the merger. Oppenheimer expressed no view as to, and its opinion does not address, the underlying business decision of the Company to proceed with or effect the merger or the relative merits of the merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. Oppenheimer’s opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger or otherwise. The summary of Oppenheimer’s opinion described below is qualified in its entirety by reference to the full text of its opinion.

 

In arriving at its opinion, Oppenheimer:

 

 

 

In rendering its opinion, Oppenheimer relied upon and assumed, without independent verification or investigation, the accuracy and completeness of all of the financial and other information provided to or discussed with Oppenheimer by the Company and its employees, representatives and affiliates or otherwise reviewed by Oppenheimer. The management of the Company provided to Oppenheimer two alternative sets of financial forecasts and estimates relating to the Company and prepared by the management of the Company, identified to Oppenheimer as “Base Case” and “Growth Case,” as described under “The Merger — Financial Projections” beginning on page 40. At the direction of the management of the Company, and with the Company’s consent, Oppenheimer assumed, without independent verification or investigation, that such forecasts and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the management of the Company as to the future financial condition and operating results of the Company. The Company informed Oppenheimer of the greater risks and uncertainties inherent in achieving the results of the Growth Case forecasts and estimates in the amounts and at the times contemplated thereby. Oppenheimer also assumed, with the Company’s consent, that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance in all material respects with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the merger.

 

Oppenheimer neither made nor obtained any independent evaluations or appraisals of the assets or liabilities, contingent or otherwise, of the Company. Oppenheimer did not express any opinion as to the underlying valuation, future performance or long-term viability of the Company or the price at which shares of Company common stock would trade at any time. Oppenheimer also expressed no view as to, and its opinion did not address, the solvency of the Company under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. In addition, Oppenheimer expressed no view as to, and its opinion did not address, any terms or other aspects or implications of the merger (other than the $15.00 per share cash merger consideration to the extent expressly specified in its opinion) or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the merger or otherwise or the fairness of the amount or nature of, or any other aspect relating to, the compensation to be received by any individual officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration or otherwise. In addition, Oppenheimer expressed no view as to, and its opinion did not address, the Company’s underlying business decision to proceed with or effect the merger nor did its opinion address the relative merits of the merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. Oppenheimer’s opinion was necessarily based on the information available to it and general economic, financial and stock market conditions and circumstances as they existed and could be evaluated by Oppenheimer on the date of its opinion. The credit, financial and stock markets have been experiencing unusual volatility and Oppenheimer expressed no opinion or view as to the potential effects, if any, of such volatility on the Company, Parent or the proposed merger. Although subsequent developments may affect its opinion, Oppenheimer does not have any obligation to update, revise or reaffirm its opinion.

 

Except as described above, the Company imposed no other instructions or limitations on Oppenheimer with respect to the investigations made or the procedures followed by it in rendering its opinion. This summary is not a complete description of Oppenheimer’s opinion or the financial analyses performed and factors considered by Oppenheimer in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Oppenheimer arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Oppenheimer believes that its analyses and this summary must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of

the analyses, could create a misleading or incomplete view of the processes underlying Oppenheimer’s analyses and opinion.

 

In performing its analyses, Oppenheimer considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the Company’s control. No company, business or transaction used in the analyses is identical to the Company or the merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.

 

The assumptions and estimates contained in Oppenheimer’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the assumptions and estimates used in, and the results derived from, Oppenheimer’s analyses are inherently subject to substantial uncertainty.

 

Oppenheimer was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined through negotiation between the Company and Irving Place Capital, and the decision to enter into the transaction was solely that of the Company’s board of directors. Oppenheimer’s opinion and financial presentation were only one of many factors considered by the Company’s board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the Company’s board of directors or management with respect to the merger or the merger consideration.

 

The following is a summary of the material financial analyses reviewed with the Company’s board of directors in connection with Oppenheimer’s opinion dated October 5, 2010. The financial analyses summarized below include information presented in tabular format. In order to fully understand Oppenheimer’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Oppenheimer’s financial analyses.

 

Selected Companies Analysis

 

Oppenheimer reviewed financial and stock market information of the Company and the eight selected publicly held companies with operations in the cutting & welding and industrial hand tools industry, which is the industry in which the Company operates, referred to as the Peer Group. Oppenheimer determined that businesses of two of the selected companies in the Peer Group were primarily focused on cutting & welding, referred to as the Focus Group. The following is a list of the selected companies in the Peer Group and in the Focus Group:

 

Peer Group:

 

 

Focus Group:

 

 

Oppenheimer reviewed, among other things, enterprise values of the selected companies, calculated as fully diluted market value based on closing stock prices on October 1, 2010, plus debt and less cash, as multiples of revenue and as multiples of earnings before interest, taxes, depreciation and amortization, but excluding stock-based compensation and non-recurring charges, referred to as Adjusted EBITDA. The selected companies’ revenue and Adjusted EBITDA were measured over the last twelve months and for estimated calendar years 2010 and 2011. Oppenheimer also reviewed closing stock prices of the selected companies on October 1, 2010 as multiples of net income, adjusted for discontinued operations and non-recurring charges, per fully-diluted share outstanding of the selected companies, measured over the last twelve months and for estimated calendar years 2010 and 2011. Financial data for the selected companies were based on certain publicly available research analysts’ estimates, public filings and other publicly available information.

 

Oppenheimer then calculated the median of each of the foregoing multiples derived from the Peer Group and from the Focus Group over each of the last twelve months and estimated calendar years 2010 and 2011. Oppenheimer then selected the following ranges, representing plus and minus 15 percent around each applicable median multiple:

 

Selected Multiple Ranges

 

Oppenheimer then applied the selected ranges to corresponding data of the Company, to determine the following per share equity reference ranges:

 

Per Share Equity Reference Ranges

 

 

Financial data for the Company were based on publicly available information and the financial forecasts and estimates relating to the Company prepared by the management of the Company.

 

Oppenheimer then calculated an implied per share equity reference range for each of the Peer Group and the Focus Group equal to the average of each per share reference range for the applicable group. This analysis indicated the following implied per share equity reference ranges for the Company, as compared to the $15.00 per share cash merger consideration:

 

Implied Per Share Equity Reference Ranges

 

Selected Precedent Transactions Analysis

 

Oppenheimer reviewed the transaction values of the following 19 transactions involving companies with operations in the general industrials and machinery industry:

 

 

 

Oppenheimer reviewed, among other things, transaction values, calculated as the purchase prices paid for the target companies in the selected transactions, plus debt and less cash, as multiples of such target companies’ last 12 months’ revenue and Adjusted EBITDA publicly available at the time of the announcement of the relevant transaction; applicable Adjusted EBITDA information was not publicly available for the target company in three of the selected transactions and accordingly was not reviewed. Financial data for the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Oppenheimer then applied the selected ranges provided below of last 12 months’ revenue and Adjusted EBITDA multiples derived from the selected transactions to the Company’s last 12 months (as of June 30, 2010) revenue and Adjusted EBITDA, respectively, to determine per share equity reference ranges.

 

Oppenheimer then calculated the median of the foregoing last twelve months’ revenue and Adjusted EBITDA multiples. Oppenheimer then selected the following ranges, representing plus and minus 15 percent around each applicable median multiple:

 

Selected Multiple Ranges

 

 

Oppenheimer then applied the selected ranges to corresponding data of the Company, to determine the following per share equity reference ranges:

 

Per Share Equity Reference Ranges

 

Financial data for the Company were based on publicly available information.

 

Oppenheimer then calculated an implied per share reference range equal to the average of the foregoing per share reference ranges. This analysis indicated the following implied per share equity reference ranges for the Company, as compared to the $15.00 per share cash merger consideration:

 

Average Implied Per Share
Equity Reference Range

 

$8.95 — $16.74

 

Discounted Cash Flow Analysis

 

Oppenheimer performed a discounted cash flow analysis on the Company using the Base Case and Growth Case prepared by the Company’s management. Oppenheimer calculated implied net present value per share of Company common stock as of June 30, 2010 based on unlevered, after-tax free cash flows that the Company forecasted to generate during the second half of fiscal year 2010 through the full fiscal year 2014. Oppenheimer calculated a range of terminal values for the Company by applying a range of perpetuity growth rates of 2.3% to 4.3%, which were based upon the historical world crude steel production average annual growth rate of 3.3%, to the fiscal year 2014 estimated unlevered, after-tax estimated free cash flow. Oppenheimer also calculated a range of estimated present values for the tax shield from net operating loss (“NOL”) carryforwards anticipated by the Company’s management to be utilized by the Company. The present values of the unlevered, after tax free cash flows, terminal values and NOL carryforward tax shields were calculated using discount rates ranging from 14.5% to 16.5%, reflecting estimates of the Company’s weighted average cost of capital calculated using the capital asset pricing model and assuming that the Peer Group average capital structure represents the optimal capital structure.

 

Oppenheimer then calculated an implied net present value per share of Company common stock as of June 30, 2010 by adding together the corresponding estimated net present values of the unlevered, after tax free cash flows, terminal values and NOL tax shields. This analysis indicated the following implied per share equity reference ranges for the Company, the Company’s NOL tax shields, and the total for the Company and the Company’s NOL tax shields, based on the Base Case and Growth Case, as compared to the $15.00 per share cash merger consideration:

 

Implied Per Share Equity Reference Ranges

 

 

Other Factors

 

Oppenheimer also reviewed, for informational purposes, certain other factors, including:

 

 

Miscellaneous

 

The Company has agreed to pay Oppenheimer for its financial advisory services in connection with the merger an aggregate fee of approximately $4.8 million, a portion of which was payable in connection with Oppenheimer’s engagement, a portion of which was payable upon delivery of Oppenheimer’s opinion and a significant portion of which is contingent upon consummation of the merger. The Company also has agreed to reimburse Oppenheimer for its reasonable expenses, including reasonable fees and expenses of its legal counsel, and to indemnify Oppenheimer and related parties against liabilities, including liabilities under the federal securities laws, relating to, or arising out of, its engagement. In the ordinary course of business, Oppenheimer and its affiliates may actively trade the securities of the Company and its and Irving Place Capital’s respective affiliates for Oppenheimer’s and its affiliates’ own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

 

The Company selected Oppenheimer to act as its financial advisor in connection with the merger based on Oppenheimer’s reputation and experience and its familiarity with the Company and its business. Oppenheimer is an internationally recognized investment banking firm and, as a part of its investment banking business, is regularly engaged in valuations of businesses and securities in connection with acquisitions and mergers, underwritings, secondary distributions of securities, private placements and valuations for other purposes. The issuance of Oppenheimer’s opinion was approved by an authorized committee of Oppenheimer.

 

We do not as a matter of course publicly disclose long-term forecasts or internal projections as to future performance, revenues, earnings or financial condition. However, certain prospective financial information, which we refer to as the Management Forecast, was prepared by our management and reviewed with and discussed among members of the board of directors and Oppenheimer. Our management provided two alternative sets of the Management Forecast, to which we refer as the “Base Case” and the “Growth Case,” to Oppenheimer and the board of directors, as such information is discussed more fully in “The Merger—Opinion of Our Financial Advisor,” on page 33. Management made available to Parent the prospective financial information included in the Growth Case to facilitate the due diligence review by Parent and its advisors. Management’s key assumptions supporting the Base Case and Growth Case are discussed below.

 

We have included the material portions of the Management Forecast below in order to give our stockholders access to this information as well. The inclusion of the prospective financial information below should not be regarded as an indication that the Company, our management team, the board of directors or Parent, or any of their respective representatives considered, or now considers, the Management Forecast to be predictive of actual future results.

 

Management’s internal financial forecasts, upon which the prospective financial information set forth below is based, are subjective in many respects. The prospective financial information set forth below reflects numerous assumptions with respect to industry performance, competition, general business, economic, geo-political, currency, market and financial conditions, the costs of raw materials and components, and other matters, all of which are difficult to predict and beyond our control.

 

The prospective financial information set forth below also reflects numerous estimates and assumptions related to our business that are inherently subject to significant economic, political and competitive uncertainties, all of which are difficult to predict and many of which are beyond our control. As a result, although the prospective financial information set forth below was prepared in good faith based on assumptions believed to be reasonable at the time the information was prepared, there can be no assurance that the assumptions made in preparing such information will prove accurate or that the projected results reflected therein will be realized.

 

The prospective financial information set forth below was not prepared with a view toward public disclosure. Accordingly, the prospective financial information set forth below was not prepared with a view toward complying with the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or U.S. generally accepted accounting principles (“GAAP”). Some of the projections present financial metrics that

were not prepared in accordance with GAAP. Neither our independent auditor nor any other independent accountants have compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the prospective financial information.

 

The prospective financial information set forth below does not take into account any circumstances or events occurring since the date such information was prepared or which may occur in the future, and, in particular, does not take into account any revised prospects of our business, changes in general business, geo-political or economic conditions, competition or any other transaction or event that has occurred since the date on which such information was prepared or which may occur in the future.

 

Prospective financial information are forward-looking statements and are based on estimates and assumptions that are inherently subject to factors such as industry performance, competition, general business, economic, regulatory, geo-political, market and financial conditions, as well as changes to the business, financial condition or results of operation of the Company, including the factors described under “Cautionary Statement Regarding Forward-Looking Information” beginning on page 15, and other risk factors as disclosed in our filings with the SEC that could cause actual results to differ materially from those shown below. Since the prospective financial information set forth below covers multiple years, such information by its nature is subject to greater uncertainty with each successive year. In addition, the projections do not take into account any of the transactions contemplated by the merger agreement, including the merger, which might also cause actual results to differ materially.

 

We have made publicly available our actual results for the first two quarters of the 2010 fiscal year ended March 31, 2010 and June 30, 2010. You should review our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010, respectively, to obtain this information. See “Where You Can Find More Information” beginning on page 84. You are cautioned not to place undue reliance on the specific portions of the prospective financial information set forth in the Management Forecast. No one has made or makes any representation to any stockholder regarding the information included in the prospective financial information set forth in the Management Forecast.

 

For the foregoing reasons, as well as the bases and assumptions on which the prospective financial information set forth in the Management Forecast was compiled, the inclusion of the prospective financial information in this proxy statement should not be regarded as an indication that such information will be predictive of actual future results or events, and it should not be relied on as such. Except as required by applicable securities laws, we have not updated nor do we intend to update or otherwise revise the prospective financial information set forth below, including, without limitation, to reflect circumstances existing after the date such information was prepared or to reflect the occurrence of future events, including, without limitation, changes in general economic, geo-political or industry conditions, even in the event that any or all of the assumptions underlying the prospective financial information is shown to be in error.

 

Our management employed the following key assumptions in preparing the “Base Case” projections summarized in the table below:

 

 

 

“Base Case”
(dollars in millions, except per share amounts)

 

 

 

 

Our management employed the following key assumptions in preparing the “Growth Case” projections summarized in the table below:

 

 

“Growth Case”
(dollars in millions, except per share amounts)

 

 

 

 

 

If the merger is consummated, Merger Subsidiary will be merged with and into the Company, and the Company will continue as the surviving corporation. Following the consummation of the merger, all of the Company’s issued and outstanding common stock will be owned by Parent.

 

Upon consummation of the merger, each share of Company common stock (and each restricted share of Company common stock) outstanding immediately prior to the effective time of the merger (other than shares held by us or owned by Parent or any of its subsidiaries, or by stockholders who properly exercise their appraisal rights under Delaware law for such shares) will be cancelled and converted automatically into the right to receive $15.00 in cash, without interest and less any applicable withholding taxes. At the effective time of the merger, each option to acquire shares of our common stock that is outstanding immediately prior to the effective time of the merger, whether vested or unvested, will vest (if unvested) and will be cancelled as of the effective time of the merger in exchange for the right to receive a cash payment equal to the number of shares of our common stock subject to the option, multiplied by the excess, if any, by which $15.00 exceeds the exercise price of the option, less any applicable withholding taxes. Each option for which the exercise price per share of our common stock equals or exceeds $15.00 will be cancelled and have no further force or effect without any right to receive any consideration therefor.

 

If the merger is consummated, our stockholders will have no interest in the Company’s net book value or net earnings after the merger.

 

The Company’s common stock is currently registered under the Exchange Act, and is quoted on the Nasdaq under the symbol “THMD.” As a result of the merger, the Company, as the surviving corporation, will become a privately held corporation. The Company common stock will be delisted from the Nasdaq and deregistered under the Exchange Act and cease to be publicly traded. As a result, after the merger the Company common stock will cease to be quoted on the Nasdaq, and price quotations with respect to sales of shares of the Company common stock in the public market will no longer be available.

 

At the effective time of the merger, our certificate of incorporation, as in effect immediately prior to the merger, will be amended and will become the certificate of incorporation of the surviving corporation in the form attached to the merger agreement, until thereafter amended in accordance with its terms and applicable law. The bylaws of Merger Subsidiary, as in effect immediately prior to the merger, will become the bylaws of the surviving corporation until thereafter amended in accordance with their terms and applicable law. The board of directors of the surviving corporation will, from and after the effective time of the merger, consist of the directors of Merger Subsidiary until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation. Except as determined by Parent or Merger Subsidiary prior to the effective time of the merger, the officers of the Company will, from and after the effective time of the merger, be the 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 certificate of incorporation and bylaws of the surviving corporation.

 

In connection with the execution of the merger agreement, Angelo, Gordon & Co., L.P., as investment manager for certain stockholders of the Company (each, an “Angelo, Gordon Stockholder”) entered into a voting agreement with Parent (attached as Annex D ). Each Angelo, Gordon Stockholder has agreed to vote shares of Company common stock (representing approximately 33% of the outstanding shares of Company common stock as of the record date (the “Angelo, Gordon Shares”)) at any meeting of the stockholders of the Company however called (or any action by written consent in lieu of a meeting) or any adjournment thereof in favor of the adoption of the merger agreement, the approval of the transactions contemplated thereby and approval of any proposal to adjourn or postpone any meeting of the stockholders to a later date if there are not sufficient votes for approval of the proposal to adopt the merger agreement on the date on which such meeting is held.

 

Each Angelo, Gordon Stockholder also agreed to vote such any Angelo, Gordon Shares held by such stockholder against the following actions:

 

 

 

Each Angelo, Gordon Stockholder also appointed Parent as his, her or its proxy and attorney-in-fact (with full power of substitution) to vote all of such person’s shares (at any meeting of stockholders of the Company however called or any adjournment thereof), or to execute one or more written consents in respect of such shares, (i) in favor of the adoption of the merger agreement, the approval of the transactions contemplated thereby and approval of any proposal to adjourn or postpone such meeting to a later date if there are not sufficient votes for approval of the foregoing on the date on which such meeting is held and (ii) against the actions listed in the two bullet points above; provided, however, that each Angelo, Gordon Stockholder’s grant of the proxy shall be effective if, and only if, (a) such Angelo, Gordon Stockholder has not delivered to the Secretary of the Company at least ten business days prior to such meeting a duly executed proxy card previously approved by Parent voting such Angelo, Gordon Stockholder’s shares in the manner specified above or (b) in the event such proxy card has been thereafter modified or revoked or otherwise fails to provide evidence of such Angelo, Gordon Stockholder’s compliance with its obligations under the voting agreement in form and substance reasonably acceptable to Parent. The proxy granted is irrevocable until termination of the voting agreement, as described below.

 

Each Angelo, Gordon Stockholder further agreed not to, directly or indirectly:

 

 

Each Angelo, Gordon Stockholder also agrees to comply with, and not to take any action prohibited by, the non-solicitation provisions in the merger agreement. See “The Merger Agreement — No Solicitations of Competing Proposals” beginning on page 65.

 

The voting agreement and the proxy granted by each Angelo, Gordon Stockholder shall terminate on the first to occur of (a) the effective time of the merger, (b) termination of the merger agreement in accordance with its terms, (c) the effectiveness of any amendment, modification, supplement to, or waiver under, the merger agreement which amendment, modification, supplement or waiver would reduce the amount or change the form of the merger consideration payable in the merger unless consented to in writing by each Angelo, Gordon Stockholder, and (d) the mutual written consent of Parent and each Angelo, Gordon Stockholder.

 

When considering the unanimous recommendation of the board of directors that you vote to approve the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, those of our stockholders generally. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of the Company. For the purposes of all of the agreements and plans described below, the completion of the transactions contemplated by the merger agreement will constitute a change in control.

 

Equity Compensation Awards

 

Pursuant to the terms of the Amended and Restated 2004 Stock Incentive Plan and the 2004 Non-Employee Director Stock Option Plan and the applicable award agreements thereunder (collectively, the “Stock Plans”), upon the consummation of the merger, all outstanding unvested stock options will vest and all restrictions on outstanding restricted stock awards will lapse, including with respect to those stock options and restricted stock awards held by our directors and executive officers. In accordance with the merger agreement, these awards will be subject to the following treatment:

 

 

Based on the Company’s equity compensation holdings as of October 29, 2010, and assuming that each of the directors and executive officers continue to hold such restricted stock and stock options until the completion of the merger, (i) the number of outstanding and unexercised options, vested or unvested (with exercise prices ranging from $4.79 to $14.88) held by our directors and executive officers (as a group) that would entitle the holder to receive an amount in cash in exchange for such options is 654,216 (with such options having a total “in-the-money” value of approximately $2,480,998, based upon a $15.00 per share stock price) and (ii) the number of shares of restricted stock held by the directors and executive officers that would entitle the holder to a cash payment equal to $15.00 per share is 187,665 (with such shares of restricted stock having a total value of approximately $2,814,975, based upon a $15.00 per share stock price).

 

The following table reflects the merger consideration to be provided to each of our directors and executive officers upon the completion of the merger, based upon each director’s and officer’s ownership of stock options and restricted stock as of October 29, 2010, and assuming that each of the directors and executive officers will hold the same number of stock options and restricted stock (including the same number of unvested stock options and restricted stock) at the completion of the merger:

 

 

 

 

Long-Term and Restricted Cash Awards

 

At the effective time, all outstanding unvested long-term and restricted cash awards issued pursuant to our Long Term Incentive Award Program, including awards held by our executive officers, will vest and will be payable in full to holders of such awards as promptly as practicable following the effective time (but in no event later than the date of payment in respect of Company stock options). The outstanding unvested cash awards held by our executive officers under the Long Term Incentive Award Program as of October 29, 2010 are as follows: Martin Quinn — $217,233, Terry Downes — $182,285, Terry A. Moody — $119,937, and Steven A. Schumm — $120,800. The outstanding unvested cash awards held by Paul D. Melnuk, a director and our Chairman of the Board, in the amount of $198,900 will also vest and be payable in full following the effective time (but in no event later than the date of payment in respect of Company stock options).

 

2010 Cash Bonuses

 

The amounts payable under the Company’s 2010 annual incentive plan to each employee of the Company or its subsidiaries, including the executive officers, will be paid at the time bonuses would otherwise be paid under such plan, with the estimated bonus pool for 2010 and allocation thereof and the methodology and procedures for determining such amounts, to be determined in accordance with the methodology and procedures set forth in the merger agreement. See “The Merger Agreement — “Employee Benefit Matters” beginning on page 71.

 

Director Deferred Fee Plan

 

As of the effective time of the merger, Parent will assume each stock unit in respect of a share of Company common stock issued under the Company’s Non-Employee Directors’ Deferred Fee Plan (the “Director Deferred Fee Plan”) and cash payments in respect of each such share will be distributable in accordance with, and in the time and manner set forth under, the terms of the Director Deferred Fee Plan. The amount of distributions shall be based on the fair market value of Company common stock on the date of distribution, which value may be different

depending on whether the merger is consummated. One director, Mr. Adorjan, pursuant to an election form dated December 2006, elected to receive a lump sum distribution of his account balance on the earlier to occur of December 31, 2010 and a change in control. The estimated amount payable to Mr. Adorjan, assuming a $15.00 value per share, upon a change in control is $263,098.20. The number of stock units held by the directors as of October 29, 2010 was as follows: Joseph Adorjan — 17,539.888, Andrew Berger — 17,539.888, James Gamache — 17,539.888, Marnie Gordon 2,241.101, and Christopher Hartman — 2,241.101.

 

Retention Bonus

 

Each of Martin Quinn, Terry Downes, Terry Moody and Steven Schumm (our executive officers) will be entitled to receive a retention payment equal to $100,000, respectively, six months after consummation of the merger so long as such executive officer does not resign or is not terminated for cause prior to such date, and subject to the other terms and conditions of each executive officer’s retention bonus agreement. Certain other key employees will be entitled to retention bonus payments not to exceed $550,000 in the aggregate under the same terms and conditions.

 

Employment Agreements

 

The employment agreements with Mr. Melnuk (our chairman) and Messrs. Quinn, Downes, Moody and Schumm (our executive officers) do not contain specific change in control provisions. Rather, the employment agreements with each of the executive officers provide for certain severance payments and benefits to the officers in the event of certain qualifying terminations of employment. If the surviving corporation following the merger does not assume our obligations under the employment agreements, if it terminates the employment of one of our executive officers without “cause,” or if it makes certain changes in an executive officer’s compensation or duties that would be deemed to be a “constructive termination” under the terms of the applicable employment agreement, then, subject to the execution of a release of claims and continued compliance with certain restrictive covenants, the executive officer would be entitled to receive certain payments and benefits in accordance with the terms of the applicable employment agreement, which payments and benefits generally would include:

 

 

In addition, the employment agreements with Messrs. Melnuk, Quinn and Downes provide that any payments under their employment agreements that constitute “parachute payments” (as defined in section 280G of the Code) and that exceed 2.99 times their respective “base amounts” (as defined in section 280G of the Code) will be reduced to 2.99 times the applicable base amount. The employment agreement with Mr. Schumm contains a Code section 280G gross-up provision.

 

Parent and each of Messrs. Quinn, Downes, Moody and Schumm have agreed that their employment agreements will be amended effective upon the consummation of the merger, and will continue, as amended, to govern the employment relationships of the executive officers with the surviving corporation. A general summary of the amendments to their employment agreements is set forth below.

 

 

 

Arrangements with the Surviving Corporation

 

The employees of the Company, including the executive officers, will be entitled to continue to receive certain benefits from the surviving corporation. See “The Merger Agreement — “Employee Benefit Matters” beginning on page 71.

 

Subscription Agreements

 

Following the merger, Messrs. Downes, Moody, Quinn and Schumm, each of whom we refer to as a “Parent Investor,” will beneficially own shares of common stock and preferred stock of Parent. Pursuant to the terms of a subscription agreement between Parent and each of the Parent Investors, following the closing of the merger, Parent will sell and each Parent Investor will purchase shares of common stock and preferred stock of Parent equal to the lesser of (a) a specified dollar threshold and (b) a percentage of the net after-tax cash proceeds each Parent Investor receives from stock options and restricted stock grants granted under the Company’s 2004 Stock Incentive Plan or long-term cash incentive arrangements, in connection with the transactions contemplated by the merger agreement. Parent and each Parent Investor will use reasonable efforts so that the subscription amount due under each subscription agreement will be deducted from amounts that would otherwise be payable to each Parent Investor under the Company’s 2004 Stock Incentive Plan or long-term cash incentive arrangements in connection with the merger and will be transferred directly to Parent; Mr. Schumm is also permitted under certain circumstances to rollover his unrestricted shares of Company common stock to shares of Parent on a tax-free basis.

 

Each Parent Investor will purchase the common shares and preferred shares under the subscription agreements in the same ratio as such stock is purchased by affiliates of IPC and at the same price per share paid by IPC at or around the closing of the merger. Following the closing of the merger and as a result of these purchases, Messrs. Downes, Moody, Quinn and Schumm are expected to beneficially own approximately 0.2%, 0.1%, 0.2% and 0.2%, respectively, of the outstanding common stock of Parent (excluding any stock options that may be granted pursuant to an equity incentive plan) and approximately 0.2%, 0.1%, 0.2% and 0.2%, respectively, of the outstanding preferred stock of Parent.

 

In connection with the subscription agreements, Parent has agreed to adopt the 2010 Equity Incentive Plan and to grant each Parent Investor options (subject to certain vesting requirements) to purchase additional shares of Parent common stock on terms and conditions as further set forth in the subscription agreements, the 2010 Equity Incentive Plan and the option awards relating thereto. Additionally, Parent has agreed to amend the employment agreements as described above under “The Merger — Interests of Our Directors and Executive Officers — Employment Agreements.”

 

All equity interests of Parent held by each Parent Investor after the closing of the merger will be subject to the terms of a stockholders’ agreement that contains customary transfer restrictions, tag-along rights, drag-along rights, registration rights, preemptive rights and repurchase rights, all of which are applicable in specified circumstances.

 

Each subscription agreement will automatically terminate upon a termination of the merger agreement.

 

Indemnification and Insurance

 

The merger agreement contains provisions relating to the indemnification of and insurance for the Company’s and its subsidiaries’ directors and officers. Pursuant to the merger agreement, Parent has agreed that for six years after the effective time of the merger, it will cause the Company to indemnify and hold harmless the Company’s and its subsidiaries’ present and former directors and officers for acts or omissions occurring at or prior to the effective time of the merger to the fullest extent provided under applicable law or provided under the Company’s organizational documents (in each case, as in effect as of the date of the merger agreement), subject to any limitation imposed under applicable law.

 

Under the merger agreement, Parent will maintain for a period of six years after the effective time an insurance policy covering persons who were directors and officers of the Company and its subsidiaries prior to the merger for the actions taken by such directors and officers in their capacities as directors and officers of the Company and its subsidiaries prior to the merger on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date of the merger agreement, provided, however, that Parent will not be required to pay annual premiums in excess of 300% of the amount per annum the Company paid in its last full fiscal year. Alternatively, prior to the effectiveness of the merger, at the Company’s request, Parent may purchase a six year prepaid “tail policy” providing coverage benefits and terms no less favorable than the Company’s current policy, provided that Parent will not be required to pay annual premiums in excess of 300% of the amount per annum the Company paid in its last full fiscal year.

 

The present and former directors and officers of the Company and its subsidiaries will have the right to enforce provisions of the merger agreement relating to their indemnification and are express third party beneficiaries of the merger agreement solely for this purpose.

 

Parent has advised us that the total funds needed to complete the merger, including the funds needed to:

 

 

 

 

will be funded through a combination of:

 

 

 

Parent has obtained the equity commitment letter and the debt commitment letters described below. The funding under those commitment letters is subject to certain conditions, including conditions that do not relate directly to the merger agreement. We cannot assure you that the amounts committed under the commitment letters will be sufficient to complete the merger. Those amounts might be insufficient if, among other things, one or more of the parties to the commitment letters fails to fund the committed amounts in breach of such commitment letters or if the conditions to such commitments are not met. Although obtaining the proceeds of any financing, including any financing under the commitment letters, is not a condition to the completion of the merger, the failure of Parent and Merger Subsidiary to obtain any portion of the committed financing (or alternative financing) is likely to result in the failure of the merger to be completed. In that case, Parent may be obligated to pay the Company a fee of $25,000,000, or the “Parent fee,” as described under “The Merger Agreement — Termination Fees and Expenses” beginning on page 74. That obligation is guaranteed by the guarantor as described under “— Limited Guarantee” beginning on page 51.

 

Equity Financing

 

Parent has entered into the equity commitment letter with the guarantor, dated October 5, 2010, pursuant to which the guarantor has committed to make or secure capital contributions to Parent at or prior to the closing of the merger of up to $197,700,000 in the aggregate to fund the aggregate per share merger consideration and pay any and all fees and expenses related thereto. The guarantor may assign a portion of the equity commitment to co-investors, including any affiliates, as long as such allocation does not adversely affect or delay the completion of the debt financing and in such event, the guarantor’s commitment under the equity commitment letter will be reduced (on a dollar-for-dollar basis) by the amounts actually contributed to Parent by payment in cash by such co-investors on or before the closing for funding of the merger.

 

The guarantor’s obligation to make the equity contribution contemplated by the equity commitment letter is generally subject to (i) the satisfaction or waiver of the conditions to the closing of the merger (except those conditions which by their nature cannot be satisfied except at the time of closing, provided that such conditions are actually satisfied or validly waived at the time of closing); (ii) the funding of the debt financing and (iii) the substantially concurrent consummation of the merger in accordance with the terms of the merger agreement.

 

The obligations of the guarantor to fund its equity commitment will terminate automatically and immediately upon the earliest to occur of (i) the effective time of the merger; (ii) the termination of the merger agreement in accordance with its terms; and (iii) the commencement by the Company, any stockholder of the Company or any person acting at the direction of or on behalf of the Company, any stockholder of the Company or any of their respective affiliates, agents or representatives of any lawsuit or action asserting a claim under, or in respect of, or breach of the merger agreement, the equity commitment letter or the limited guarantee, or the transactions contemplated thereby against the guarantor, Parent or any related persons of the guarantor.

 

Debt Financing

 

In connection with the entry into the merger agreement, Parent received debt commitment letters, dated October 5, 2010 (the “debt commitment letters”), from (i) Jefferies Finance LLC and RBC Capital Markets for bridge loans under a senior secured bridge facility in the amount of up to $250,000,000 (the “bridge financing”) and (ii) GE Antares Capital Corporation for a senior secured asset-based revolving credit facility providing for borrowings, subject to availability, in an amount of up to $60,000,000 (the “revolving credit financing”).

 

The facilities contemplated by the debt commitment letters are subject to a number of customary closing conditions included in the debt commitment letters, including, without limitation:

 

 

 

The debt commitment letters with respect to the bridge financing contain “flex” provisions which would allow the lenders thereunder to modify the terms of such debt to the extent required for a successful syndication, subject the specified limitations. The debt commitment letters are subject to neither a due diligence nor a “market out” condition, which would allow the lenders not to fund their commitments if the financial markets are materially adversely affected. There is a risk that the conditions to the debt financing will not be satisfied and the debt financing may not be funded when required. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described in this proxy statement is not available as anticipated.

 

In the merger agreement, Parent and Merger Subsidiary have agreed to use their reasonable best efforts to obtain the debt financing on the terms and conditions described in the debt commitment letters. Parent and Merger Subsidiary may not amend, replace or supplement the debt commitment letters if such amendment, modification or waiver:

 

 

Parent has advised the Company that it is expected that at the consummation of the merger, senior secured notes will be issued and sold in a private placement in lieu of a portion or all of bridge financing described above. The merger agreement provides for a marketing period for such notes prior to the closing of the merger, which is described in more detail under “The Merger Agreement — Closing and Effective Time of the Merger; Marketing Period” beginning on page 58.

 

Pursuant to a limited guarantee delivered by the guarantor in favor of the Company, dated October 5, 2010, the guarantor has agreed to guarantee the observance, performance and discharge of the obligations of Parent to pay the Parent fee of $25,000,000, if it becomes due under the terms of the merger agreement.

 

The limited guarantee will terminate upon the earlier of: (a) the effective time of the merger, (b) the termination of the merger agreement in accordance with its terms under circumstances set forth in the merger agreement in which Parent would not be obligated to pay the Parent fee of $25,000,000, and (c) the payment to the Company by any combination of Parent and/or the guarantor of the full amount of the guarantor’s obligations.

 

The HSR Act and the regulations promulgated thereunder required the Company and Parent to file premerger notification and report forms with respect to the merger and related transactions with the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission. The Company filed its required premerger notification and report form on October 20, 2010, and Parent filed its required form on October 20, 2010.

 

Nevertheless, at any time before or after the completion of the merger, and before or after the expiration of the premerger waiting period under the HSR Act, the Antitrust Division of the U.S. Department of Justice or the Federal Trade Commission or any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger, to rescind the merger or to seek divestiture of particular assets. Private parties also may seek to take legal action under the antitrust laws under certain circumstances. Although there is no assurance that they will not do so, we do not expect any regulatory authority, state or private party to take legal action under the antitrust laws.

 

Although we do not expect these regulatory authorities to raise any significant concerns in connection with their review of the merger, there is no assurance that we will obtain all required regulatory approvals, or that those approvals will not include terms, conditions or restrictions that may have an adverse effect on the Company or, after the completion of the transaction, on Parent or the surviving corporation.

 

The merger may be subject to certain regulatory requirements of other municipal, state, federal and foreign governmental and self-regulatory agencies and authorities, including those relating to the offer and sale of securities. Together with Parent, we are currently working to evaluate and comply in all material respects with these requirements, as appropriate, and do not currently anticipate that they will hinder, delay or restrict completion of the merger. If any approval or action is needed, however, we may not be able to obtain it or any of the other necessary approvals. Even if we could obtain all necessary approvals, and the merger agreement is approved by our stockholders, conditions may be placed on the merger that could cause us to abandon it.

 

Unless Parent and the Company otherwise agree, the closing of the merger will take place on the later of (x) the third business day following the date on which the last of the conditions to closing of the merger (described under “The Merger Agreement — Conditions to the Merger” beginning on page 72) has been satisfied or waived (other than the conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or, to the extent permissible, the waiver of those conditions at the closing of the merger) and (y) the third business day following the final day of the marketing period (as described under “The Merger Agreement — Closing and Effective Time of the Merger; Marketing Period” beginning on page 58) or an earlier day as may be specified by Parent on no less than three business days’ prior notice to the Company.

 

Assuming timely satisfaction of the necessary closing conditions, we are targeting to complete the merger by the end of calendar year 2010; however, the parties cannot predict the exact timing of the completion of the merger or whether the merger will be completed at a later time as agreed to by the parties or at all. The effective time of the merger will occur as soon as practicable following the closing of the merger upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later date as we and Parent may agree and specify in the certificate of merger).

 

Each record holder of shares of Company common stock (other than holders of certain excluded shares) will be sent a letter of transmittal describing how such holder may exchange its shares of Company common stock for the per share merger consideration promptly, and in any event within two business days, after the completion of the merger.

 

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

You will not be entitled to receive the per share merger consideration until you deliver a duly completed and executed letter of transmittal to the paying agent. If your shares are certificated, you must also surrender your stock certificate or certificates to the paying agent. If ownership of your shares is not registered in the transfer records of the Company, a check for any cash to be delivered will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required by the Company to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

 

Our stockholders have the right under Delaware law to dissent from the approval and adoption of the merger agreement, to exercise appraisal rights and to receive payment in cash of the judicially determined fair value for their shares, plus interest, if any, on the amount determined to be the fair value, in accordance with Delaware law. The fair value of shares of our common stock, as determined in accordance with Delaware law, may be more or less than, or equal to, the merger consideration to be paid to non-dissenting stockholders in the merger. To preserve their rights, stockholders who wish to exercise appraisal rights must not vote in favor of the proposal to adopt the merger agreement and must follow the specific procedures provided under Delaware law for perfecting appraisal rights. Dissenting stockholders must precisely follow these specific procedures to exercise appraisal rights or their appraisal rights may be lost. These procedures are described in this proxy statement, and a copy of Section 262 of the Delaware General Corporation Law (the “DGCL”), which grants appraisal rights and governs such procedures, is attached as Annex B to this proxy statement. See “Appraisal Rights” beginning on page 80.

 

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

The following is a summary of certain material U.S. federal income tax consequences of the merger to holders whose shares of our common stock are exchanged for cash pursuant to the merger. This discussion does not describe all of the U.S. federal income tax consequences that may be relevant to holders in light of their particular circumstances or to holders subject to special treatment under the U.S. federal income tax laws (including, without limitation, insurance companies, dealers in securities or currencies, traders in securities who elect the mark-to-market method of accounting for their securities, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, tax-exempt organizations, holders subject to the U.S. federal alternative minimum tax, financial institutions, regulated investment companies, mutual funds, partnerships, S corporations or other pass through entities, controlled foreign corporations, passive foreign investment companies, certain expatriates, corporations that accumulate earnings to avoid U.S. federal income tax, holders who hold shares of our common stock as part of a hedge, straddle, constructive sale or conversion transaction, holders who acquired their shares of our common stock through the exercise of employee stock options or other compensation arrangements, or holders who exercise statutory appraisal rights).

 

The U.S. federal income tax consequences set forth below are based upon the Internal Revenue Code of 1986, as amended (the “Code”), applicable U.S. Treasury Regulations, court decisions, and rulings and pronouncements of the Internal Revenue Service (the “IRS”) all as in effect on the date hereof and, all of which are subject to change, possibly on a retroactive basis. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this discussion, and there can be no assurance that the IRS will agree with such statements and conclusions.

 

As used herein, the term “U.S. holder” means a beneficial owner of shares of our common stock, that is, for U.S. federal income tax purposes:

 

 

 

As used herein, the term “non-U.S. holder” means a beneficial owner of shares of our common stock that is neither a U.S. holder nor a partnership or an entity treated as a partnership for U.S. federal income tax purposes.

 

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of our common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A beneficial owner that is a partnership and partners in such a partnership should consult their tax advisors about the U.S. federal income tax consequences of the merger.

 

This discussion assumes that a holder holds the shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not address any tax consequences under any state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax that may apply to holders.

 

Holders are urged to consult their own tax advisors with respect to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules or under the laws of any state, local or foreign taxing jurisdiction or under any applicable tax treaty.

 

U.S. Holders

 

Merger Consideration

 

The receipt of cash for shares of our common stock pursuant to the merger by U.S. holders will be a taxable transaction for U.S. federal income tax purposes (and may also be a taxable transaction under applicable state, local and foreign tax laws). In general, for U.S. federal income tax purposes, a U.S. holder of shares of our common stock will recognize capital gain or loss equal to the difference between:

 

 

If the U.S. holder’s holding period in the shares of our common stock surrendered pursuant to the merger is greater than one year as of the date of the merger, the gain or loss will be long-term capital gain or loss. The deductibility of a capital loss is subject to limitations under the Code. If a U.S. holder acquired different blocks of shares of our common stock at different times and different prices, such holder must determine its adjusted tax basis and holding period separately with respect to each block of shares of our common stock.

 

Backup Withholding and Information Reporting

 

Generally, U.S. holders will be subject to information reporting on the cash received in the merger unless such U.S. holder is a corporation or other exempt recipient. In addition, unless a U.S. holder is a corporation or other exempt recipient, backup withholding (currently at a rate of 28%) may apply with respect to the amount of cash received if the U.S. holder:

 

 

 

Backup withholding is not an additional tax. Any amount withheld from a payment to a U.S. holder under backup withholding rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS in a timely manner.

 

Certain penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each holder should consult with such holder’s own tax advisor as to such holder’s qualification for exemption from backup withholding and the procedure for obtaining such exemption.

 

Non-U.S. Holders

 

Merger Consideration

 

Non-U.S. holders generally will not be subject to U.S. federal income tax on any gain realized on the disposition of shares of our common stock pursuant to the merger unless:

 

 

We believe we are not, have not been and do not anticipate becoming a “United States real property holding corporation” for U.S. federal income tax purposes.

 

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the merger as if it were a U.S. holder. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a U.S. person (as defined under the Code) and, in addition, may be subject to the “branch profits tax” on its earnings that are effectively connected with its United States trade or business, including earnings from the shares of our common stock. The “branch profits tax” is 30%, but may be reduced or eliminated by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.

 

Backup Withholding and Information Reporting

 

The payment of the merger proceeds to a non-U.S. holder is generally not subject to information reporting if the beneficial owner certifies the owner’s non-U.S. status under penalties of perjury (i.e., by providing the appropriate properly executed IRS Form W-8), or otherwise establishes an exemption. Backup withholding (currently at a rate of 28%) is required only on payments that are subject to the information reporting requirements, discussed above, and only if other requirements are satisfied. Backup withholding is not an additional tax. Any amount withheld from a payment to a non-U.S. holder under these rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished timely to the IRS.

 

We are aware of the following lawsuit related to the merger:

 

On October 19, 2010, Robert Israeli, a purported stockholder of the Company, filed a purported class action lawsuit in the Circuit Court of St. Louis County, Missouri against the Company, the Company’s directors, and Irving Place Capital. The complaint alleges, among other things, that the Company’s directors breached their fiduciary duties to the Company’s stockholders, including their duties of loyalty, good faith and independence, by entering into a merger agreement which provides for inadequate consideration to stockholders of the Company, and the Company and Irving Place Capital aided and abetted the Company’s directors’ alleged breaches of their fiduciary duties. The plaintiffs seek injunctive relief preventing the defendants from consummating the transactions contemplated by the merger agreement, or in the event the defendants consummate the transactions contemplated by the merger agreement, rescission of such transactions, and attorneys’ fees and expenses. The Company and the other defendants have not yet responded to the complaint. The Company believes that this lawsuit is without merit and intends to defend it.

 

The following summary describes the material terms of the merger agreement and is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which we incorporate by reference into this document. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. We encourage you to read carefully the merger agreement in its entirety because it, and not this proxy statement, is the legal document that governs the merger.

 

The merger agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Parent and Merger Subsidiary were qualified and subject to important limitations agreed to by the Company, Parent and Merger Subsidiary in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other parties prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement.

 

Subject to the terms and conditions of the merger agreement, and in accordance with Delaware law, at the effective time of the merger, Merger Subsidiary will be merged with and into the Company and, as a result of the merger, the separate corporate existence of Merger Subsidiary will cease and the Company will continue as the surviving corporation and become a wholly-owned subsidiary of Parent.

 

The board of directors of the surviving corporation will, from and after the effective time of the merger, consist of the directors of Merger Subsidiary until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation. Except as determined by Parent or Merger Subsidiary prior to the effective time of the merger, the officers of the Company immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the 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 certificate of incorporation and bylaws of the surviving corporation.

 

The certificate of incorporation of the surviving corporation will be in the form of the certificate of incorporation attached as an annex to the merger agreement, until amended in accordance with its terms or by applicable law. The bylaws of the surviving corporation will be the bylaws of Merger Subsidiary in effect immediately prior to the effective time of the merger until amended in accordance with its terms or by applicable law.

 

Following the completion of the merger, the Company common stock will be delisted from the Nasdaq and deregistered under the Exchange Act and cease to be publicly traded.

 

Unless Parent and the Company agree otherwise, the closing of the merger will take place on the later of (x) the third business day following the date on which the last of the conditions to the closing of the merger (described under “The Merger Agreement — Conditions to the Merger”) has been satisfied or waived (other than the conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or, to the extent permissible, the waiver of those conditions at the closing of the merger) and (y) the third business day following the final day of the marketing period (as described below) or an earlier day during the marketing period as may be specified by Parent on no less than three business days’ prior notice to the Company.

 

Assuming timely satisfaction of the necessary closing conditions, we are targeting a closing of the merger prior to the end of 2010; however, the parties cannot predict the exact timing of the completion of the merger or whether the merger will be completed at a later time as agreed to by the parties or at all. The effective time of the merger will occur as soon as practicable following the closing of the merger upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later date as the Company and Parent may agree and specify in the certificate of merger).

 

The merger agreement provides that the marketing period is the first period of twelve consecutive business days after October 5, 2010, throughout which (a) Parent has the required information described below and (b) the closing conditions relating to the adoption of the merger agreement by our stockholders, receipt of required regulatory approvals and absence of any law or order prohibiting the consummation of the merger have been satisfied, and nothing has occurred and no condition exists that would prevent any of the other conditions to the obligations of Parent and Merger Subsidiary to consummate the merger from being satisfied if the closing of the merger were to occur at any time during such twelve business day period. If the marketing period has not ended on or prior to December 15, 2010, it will not commence until January 3, 2011. In addition, the marketing period will not be deemed to have commenced if (i) before the completion of the marketing period, the Company’s accountants withdraw their audit opinion with respect to any financial statements, in which case the marketing period shall not commence until the time at which a new unqualified audit opinion is issued with respect to the financial statements for the applicable periods by the Company’s accountants, (ii) the Company shall have publicly announced any intention to restate any of its financial information contained in its documents filed with the SEC since January 1, 2007, in which case the marketing period shall not be deemed to commence until the time at which such restatement has been completed and such documents have been amended or the Company has announced that it has concluded that no restatement shall be required, or (iii) the Company shall have failed to file any report with the SEC by the date required under the Exchange Act containing any financial information that would be required, if such offering documents were a filed registration statement, to be contained therein or incorporated therein by reference, in which case the marketing period shall not be deemed to commence until the time at which all such reports have been filed. Further, the marketing period will end on any earlier date on which the debt financing is otherwise obtained.

 

“Required information” consists of, as of any date, (i) such financial statements, financial data, audit reports and other pertinent information regarding the Company and its subsidiaries of the type required by SEC Regulation S-X and SEC Regulation S-K under the Securities Act for registered offerings of debt securities of the type contemplated by the debt financing commitment, to the extent the same is of the type and form customarily included, under current market practice, in private placements under Rule 144A to consummate the offering (provided that certain information is excluded, such as subsidiary financial statements, compensation disclosure and analysis as required by Regulation S-K Item 402(b) or other information customarily excluded from a Rule 144A offering memorandum) and (ii) such other information as is otherwise necessary in order to receive customary “comfort” letters, including “negative assurance” comfort letters, from independent auditors with respect to the information referred to in clause (i) of this paragraph.

 

The merger agreement provides that each share of Company common stock outstanding immediately prior to the effective time of the merger (other than shares held by us or owned by Parent or any of its subsidiaries, or by stockholders who properly exercise their appraisal rights under Delaware law for such shares) will be converted at the effective time of the merger, by virtue of the merger, into the right to receive cash in the amount of $15.00 per

share, without interest and less any applicable withholding taxes. Any outstanding shares of Company common stock that are held by us or owned by Parent or any of its subsidiaries will be cancelled without any conversion into a right to payment.

 

Each share of common stock of Merger Subsidiary issued and outstanding immediately prior to the effective time of the merger will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the surviving corporation of the merger.

 

Stock Options

 

At the effective time of the merger, each option to acquire shares of Company common stock that is outstanding immediately prior to the effective time of the merger, whether vested or unvested, will vest (if unvested) and will be cancelled as of the effective time of the merger in exchange for the right to receive, as soon as reasonably practicable after the effective time of the merger (but in any event, no later than the earliest of (a) three business days after the effective time of the merger, (b) the end of the year in which the effective time of the merger occurs, or (c) the expiration of the original term of such option outstanding as of the effective time of the merger) a cash payment equal to the number of shares of Company common stock subject to the option, multiplied by the excess, if any, by which $15.00 exceeds the exercise price of the option, less any applicable withholding taxes. Each option for which the exercise price per share of Company common stock equals or exceeds $15.00 will be cancelled and have no further effect with no right to receive any consideration therefor.

 

Employee Stock Purchase Plan

 

The merger agreement provides that as soon as practicable following the date of the merger agreement, the board of directors or the compensation committee of the board of directors will adopt resolutions and take any other required actions to provide that with respect to the Employee Stock Purchase Plan (“ESPP”): (a) participants in the ESPP may not alter their payroll deductions from those in effect on the date of the merger agreement, (b) no new offering period will be commenced after the date of the merger agreement, (c) the ESPP will be terminated effective immediately prior to the effective time of the merger, and (d) the amount of the accumulated contributions of each participant under the ESPP as of immediately prior to the termination date of the ESPP will be refunded to such participant as promptly as practicable following the date on which the ESPP is terminated, without interest.

 

Company Restricted Shares

 

At or immediately prior to the effective time, each outstanding Company restricted share will vest and become free of any restrictions and, as of the effective time of the merger, will be cancelled and converted into the right to receive $15.00 per restricted share without interest.

 

At or prior to the effective time of the merger, Parent will deposit, or cause to be deposited, with the paying agent the aggregate consideration to be paid to holders of shares of Company common stock in the merger.

 

Promptly after the effective time, Parent will send, or will cause the paying agent to send, to each person who was a record holder of shares of Company common stock immediately prior to the effective time of the merger a letter of transmittal and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the certificates of Company common stock or transfer of uncertificated shares to the paying agent) for use in such payment. You should not send in your stock certificates until you receive the letter of transmittal and you must follow all instructions set forth in the letter of transmittal when submitting your stock certificates.

 

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

After the effective time of the merger, each holder of a certificate previously representing shares of issued and outstanding Company common stock will, upon surrender to the paying agent of a certificate, together with a properly completed letter of transmittal (or upon receipt by the paying agent of an “agent’s message” in the case of a book-entry transfer of uncertificated shares), be entitled to receive the applicable cash payment for each share of Company common stock represented by such certificate. Until so surrendered or transferred, as the case may be, each such certificate or uncertificated share will represent after the effective time only the right to receive the merger consideration. You will not be entitled to receive the per share merger consideration until you deliver a duly completed and executed letter of transmittal to the paying agent.

 

If payment is to be made to a person other than the person in whose name the common stock certificate surrendered (or the transferred uncertificated share) is registered, it will be a condition of payment that the certificate so surrendered be properly endorsed and otherwise in proper form for transfer (or that an uncertificated share be properly transferred) and that the person requesting such payment pay to the paying agent any transfer or other taxes required by reason of the payment to a person other than the registered holder of the certificate (or uncertificated share) of the amount due under the merger agreement, or that such person establish to the satisfaction of the paying agent that such tax has been paid or is not applicable.

 

From and after the effective time of the merger, there will be no transfers on our stock transfer books of shares of Company common stock that were outstanding immediately prior to the effective time of the merger. If, after the effective time of the merger, a certificate is presented to the surviving corporation, Parent or the paying agent for any reason, such certificate will be cancelled and, subject to compliance with the exchange procedures set forth in the merger agreement, exchanged for the cash amount to which such person is entitled pursuant to the merger agreement.

 

Any portion of the merger consideration made available to the paying agent unclaimed by our stockholders six months after the effective time of the merger will be delivered to Parent and any stockholders who have not properly exchanged their shares of Company common stock will thereafter look only to Parent for payment of the merger consideration in the amount due to them under the merger agreement (without interest).

 

If you have lost a certificate, or if it has been stolen or destroyed, then, before you will be entitled to receive the per share merger consideration, you will have to make an affidavit of the loss, theft or destruction, and, if required by Parent, post a bond in a customary amount as indemnity against any claim that may be made against it or the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.

 

The merger agreement contains customary representations and warranties made by the Company that are subject, in some cases, to specific exceptions and qualifications contained in the merger agreement and the matters contained in the disclosure schedule delivered by the Company in connection with the merger agreement. These representations and warranties relate to, among other things:

 

 

 

 

 

The merger agreement also contains customary representations and warranties made by Parent with respect to Parent and Merger Subsidiary that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. The representations and warranties of Parent relate to, among other things:

 

 

 

Many of the representations and warranties in the merger agreement are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, “material adverse effect” means, with respect to either the Company or Parent, as the case may be, any change, effect, development or event that has or would reasonably be expected to have a material adverse effect on the financial condition, business, assets or results of operations of such party and its subsidiaries, taken as a whole, other than any changes, effects, developments or events resulting from, arising out of or attributable to:

 

 

The representations and warranties of the parties contained in the merger agreement will expire at the effective time of the merger or termination of the merger agreement.

 

Interim Operations of the Company

 

From the date of the merger agreement until the earlier to occur of the effective time of the merger and the termination of the merger agreement, the merger agreement requires that the Company will, and will cause each of its subsidiaries to, conduct its business in the ordinary course consistent with past practice and in compliance with all material applicable laws and all material governmental authorizations, and use its reasonable best efforts to:

 

 

 

In addition, except as permitted by the merger agreement or by law or approved in writing by Parent and subject to certain exceptions set forth in the merger agreement and the matters contained in the disclosure schedules delivered by the Company in connection therewith or as required by applicable law, from the date of the merger agreement until the effective time of the merger, the Company will not, and will not permit any of its subsidiaries to, take any of the following actions: