sv4
As filed with
the Securities and Exchange Commission on December 17,
2010
Registration
No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ALL AMERICAN GROUP,
INC.
(Exact name of registrant as
specified in its charter)
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Indiana
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2452
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35-1101097
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(IRS Employer
Identification No.)
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SPECIALTY VEHICLES LIQUIDATING
TRUST
(Exact name of registrant as
specified in its charter)
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Delaware
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3711
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(IRS Employer
Identification No.)
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2831
Dexter Drive
Elkhart, Indiana 46514
(574) 266-2500
(Address, including zip code,
and telephone number,
including area code, of
registrants principal executive offices)
Richard
M. Lavers
Chief Executive Officer
All American Group, Inc.
2831 Dexter Drive
Elkhart, Indiana 46514
(574) 266-2500
(Name and address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies to:
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James A. Strain, Esq.
Taft Stettinius & Hollister LLP
One Indiana Square
Suite 3500
Indianapolis, Indiana 46204
Tel:
(317) 713-3500
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Jorge L. Freeland, Esq.
White & Case LLP
200 South Biscayne Boulevard
Suite 4900
Miami, Florida 33131-2352
Tel: (305) 371-2700
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Approximate date of commencement of proposed sale of
securities to the public: As soon as practicable
following the effectiveness of this Registration Statement and
the consummation of the merger described in the Agreement and
Plan of Merger, dated as of November 8, 2010 and filed as
Annex A to this Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company þ
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(Do not check if a smaller
reporting company)
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate Offering
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Amount of
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Securities to be Registered
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Registered(1)
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Per Unit(2)
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Price(2)
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Registration Fee(2)
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Units of Beneficial Interest
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36,757,069 units
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$0.0295
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$1,084,333,54
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$77.31
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(1)
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Maximum number of units issuable in
the transaction.
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(2)
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Estimated solely for the purpose of
calculating the amount of registration fee pursuant to
Rule 457(f)(1) and (f)(3) under the Securities Act of 1933,
as amended, based upon the product of (i) the remainder of
(A) the average of the high and low prices for All American
Group common shares as of December 10, 2010 ($0.2295) per
share) minus (B) the cash consideration of $0.20 per share
to be paid in the merger times (ii) 36,757,069 common
shares of All American Group, Inc. outstanding on
December 3, 2010.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement will
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
The
information in this proxy/statement/prospectus is not complete
and may be changed. All American Group, Inc., may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission, of which this proxy
statement/prospectus is a part, is effective. This proxy
statement/prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities described
in this proxy/prospectus, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction.
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SUBJECT TO COMPLETION, DATED
DECEMBER 17, 2010
ALL
AMERICAN GROUP, INC.
MERGER
PROPOSAL
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
shareholders of All American Group, Inc. (AAG) to be
held
on , ,
201 at : .m. local time
at .
At the Special Meeting, we will ask you to consider and vote
upon a proposal to adopt an Agreement and Plan of Merger dated
as of November 8, 2010, by and among All American Group
Holdings, LLC (Acquiror), All American Acquisition
Corporation (Acquisition Sub), AAG and Richard M.
Lavers (as Shareholders Representative), and approve the merger
contemplated thereby. If the merger is completed, Acquisition
Sub will merge with and into AAG (the Merger), AAG
(as the surviving corporation) will become a wholly owned
subsidiary of Acquiror and holders of the common shares, without
par value (the Common Shares), of AAG (other than
AAG, Acquiror and its affiliates, and shareholders that perfect
their dissenters rights under Indiana law) will be
entitled to receive $0.20 in cash (the Cash
Consideration) and all shareholders, other than
shareholders that perfect their dissenters rights under
Indiana law, will receive one unit of beneficial interest in a
liquidating trust (a trust unit) that will represent
a contingent right to receive proceeds from the potential sale
of AAGs Specialty Vehicles business in accordance with the
merger agreement (collectively, the Merger
Consideration), for each Common Share they own.
The attached Notice of Special Meeting of
Shareholders and Proxy Statement/Prospectus
explain the proposed Merger and the terms and conditions of the
merger agreement and provide specific information about the
Special Meeting. We encourage you to read the accompanying
proxy statement/prospectus and to consider carefully the risk
factors beginning on page 10 of the proxy
statement/prospectus before voting.
Adoption of the merger agreement and approval of the Merger
requires the affirmative vote of the holders of a majority of
the outstanding Common Shares entitled to vote at the Special
Meeting for the adoption of the merger agreement and the
approval of the Merger.
On behalf of the Board, I thank you for your support and
encourage you to vote FOR adoption of the merger agreement and
approval of the Merger.
Very truly yours,
Richard M. Lavers
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued in connection with the Merger, or
determined whether this proxy statement/prospectus is accurate
or complete. Any representation to the contrary is a criminal
offense.
This proxy statement/prospectus is
dated ,
201 , and is first being mailed to AAG shareholders
on or about that date.
THIS
PROXY STATEMENT/PROSPECTUS INCORPORATES ADDITIONAL
INFORMATION
This proxy statement/prospectus incorporates important business
and financial information about AAG from documents that are not
included in or delivered with this proxy statement/prospectus.
This information is available to you without charge upon written
or oral request. For a more detailed description of such
information and how you may obtain it, see Where You Can
Find More Information beginning on page 64 of this
proxy statement/prospectus.
AAG will provide you with copies of this information relating to
AAG without charge, upon written or oral request to:
All American Group, Inc.
2831 Dexter Drive
Elkhart, Indiana 46514
Attn: Secretary
(574) 266-2500
ABOUT
THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms a part of a
registration statement on
Form S-4
filed with the Securities and Exchange Commission, or SEC, by
AAG, constitutes a prospectus of Specialty Vehicles Liquidating
Trust under Section 5 of the Securities Act of 1933, or the
Securities Act, with respect to the units of beneficial interest
of the Specialty Vehicles Liquidating Trust to be issued to AAG
shareholders in connection with the Merger. This document also
constitutes a proxy statement under Section 14(a) of the
Securities Exchange Act of 1934, or the Exchange Act, and the
rules thereunder, and a notice of meeting with respect to the
special meeting of AAG shareholders to consider and vote upon
the proposal to approve the merger agreement and the Merger.
ALL AMERICAN GROUP,
INC.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD
ON ,
201
To the Shareholders of All American Group, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the
shareholders of All American Group, Inc., an Indiana corporation
(AAG), will be held
on , ,
201 at : .m. local time
at
(the Special Meeting) for the following purposes:
1. To consider and vote on a proposal to adopt an Agreement
and Plan of Merger, dated as of November 8, 2010, by and
among All American Group Holdings, LLC (Acquiror),
All American Acquisition Corporation (Acquisition
Sub), AAG and Richard M. Lavers (as Shareholders
Representative), and approve the merger contemplated thereby.
Subject to the terms and conditions of the merger agreement, at
the effective time of the merger, Acquisition Sub will merge
with and into AAG (the Merger), AAG (as the
surviving corporation) will become a wholly owned subsidiary of
Acquiror and each common share, without par value (the
Common Shares), of AAG (other than Common Shares
held by AAG, Acquiror and its affiliates, or shareholders that
perfect their dissenters rights under Indiana law) will be
automatically converted into the right to receive $0.20 in cash
(the Cash Consideration) and all shareholders, other
than shareholders that perfect their dissenters rights
under Indiana law, will receive one unit of beneficial interest
in a liquidating trust (a trust unit) that will
represent a contingent right to receive proceeds from the
potential sale of AAGs Specialty Vehicles business in
accordance with the merger agreement (collectively, the
Merger Consideration), for each Common Share they
own; and
2. To transact such other business as may properly come
before the Special Meeting or any adjournment or postponement
thereof.
The accompanying proxy statement/prospectus describes the merger
agreement (a copy of which is attached as Appendix A to the
proxy statement/prospectus), the proposed Merger and the actions
to be taken in connection with the Merger.
Only shareholders of record at the close of business
on ,
201 will receive notice of, and be entitled to vote
at, the Special Meeting and any adjournment or postponement
thereof.
The presence, in person or by proxy, of the holders of a
majority of the outstanding Common Shares entitled to vote at
the Special Meeting will constitute a quorum for the transaction
of business. In addition, adoption of the merger agreement and
approval of the Merger requires the affirmative vote of the
holders of a majority of the outstanding Common Shares entitled
to vote at the Special Meeting for the adoption of the merger
agreement and the approval of the Merger.
It is important that your Common Shares be represented at the
Special Meeting regardless of the number of Common Shares you
hold. Whether or not you are able to be present in person,
please vote electronically via the Internet or telephonically or
by completing, signing, dating and promptly returning the
enclosed proxy card, which requires no postage if mailed in the
United States. You may revoke your proxy in the manner described
in the accompanying proxy statement/prospectus at any time
before it is voted at the Special Meeting.
Shareholders that do not vote in favor of adopting the merger
agreement and approving the Merger, properly perfect their
dissenters rights and otherwise comply with the provisions
of Chapter 44 of the Indiana Business Corporation Law
(Indiana Code §§ 23-1-44-1 et seq.), will
have the right to dissent and seek a determination of the fair
value of their Common Shares and receive that fair value in lieu
of the Merger Consideration, if the Merger is consummated. See
the section of the accompanying proxy statement/prospectus
entitled RIGHTS OF DISSENTING SHAREHOLDERS and the
full text of Chapter 44 of the Indiana Business Corporation
Law, a copy of which is attached as Appendix C thereto, for
a description of the procedures that you must follow in order to
exercise your dissenters rights.
By Order of the Board of Directors,
Martin Miranda
Secretary
Elkhart, Indiana
,
201
ALL AMERICAN GROUP,
INC.
PROXY STATEMENT/PROSPECTUS FOR
SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD
ON ,
201
The date of this Proxy Statement/Prospectus
is ,
201 .
INTRODUCTION
All American Group, Inc., an Indiana corporation, is furnishing
this proxy statement/prospectus to holders of its common shares,
without par value (the Common Shares), in connection
with the solicitation of proxies by the Board of Directors of
AAG for use at the Special Meeting of its shareholders (the
Special Meeting), to be held
at
on , ,
201 at :00 .m. local time and
at any adjournment or postponement thereof. For purposes of this
proxy statement/prospectus and the enclosed proxy card,
references to AAG, we, us
and our refer to All American Group, Inc.
The Special Meeting has been called to consider and vote upon a
proposal to adopt an Agreement and Plan of Merger, dated as of
November 8, 2010, by and among All American Group Holdings,
LLC (Acquiror), All American Acquisition Corporation
(Acquisition Sub), AAG and Richard M. Lavers (as
Shareholders Representative), and approve the merger
contemplated thereby. Subject to the terms and conditions of the
merger agreement, at the effective time of the merger,
Acquisition Sub will merge with and into AAG (the
Merger), AAG (as the surviving corporation) will
become a wholly owned subsidiary of Acquiror and each common
share, without par value (the Common Shares), of AAG
(other than Common Shares held by AAG, Acquiror and its
affiliates, or shareholders that perfect their dissenters
rights under Indiana law) will be automatically converted into
the right to receive $0.20 in cash (the Cash
Consideration) and all shareholders, other than
shareholders that perfect their dissenters rights under
Indiana law , will receive one unit of beneficial interest in a
liquidating trust (a trust unit) that will represent
a contingent right to receive proceeds from the potential sale
of AAGs Specialty Vehicles business in accordance with the
merger agreement (collectively, the Merger
Consideration), for each Common Share they own.
On November 10, 2010, Mr. Lavers resigned as
Shareholders Representative under the merger agreement, and
pursuant to the merger agreement, was succeeded as Shareholders
Representative by Mr. William P. Johnson.
Acquiror is an affiliate of H.I.G. All American, LLC
(H.I.G. All American), AAGs largest
shareholder and an affiliate of H.I.G. Capital, LLC
(H.I.G. Capital). H.I.G. All American beneficially
owns approximately 55.7% of the outstanding Common Shares
entitled to vote at the Special Meeting. Acquiror is required
pursuant to the merger agreement to cause H.I.G. All American to
vote in favor of the approval of the merger agreement and the
Merger, so approval by the shareholders of AAG is assured.
The amount of the Merger Consideration was the result of
arms-length negotiations between Acquiror and a special
committee of the Board (the Special Committee).
Given Acquirors relationships with H.I.G. All American,
the Board formed the Special Committee to represent the
interests of AAGs shareholders other than H.I.G. All
American and its affiliates (the Minority
Shareholders).
TABLE OF
CONTENTS
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1
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1
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36
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ii
TABLE OF
APPENDICES
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A
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Agreement and Plan of Merger
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B
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Liquidating Trust Agreement
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C
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Chapter 44 of the Indiana Business Corporation Law
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D
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Opinion of Houlihan Lokey Financial Advisors, Inc.
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iii
SUMMARY
TERM SHEET
The following summary, together with the QUESTIONS AND
ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
immediately following this summary, are intended only to
highlight certain information contained elsewhere in this proxy
statement/prospectus. This summary and the following question
and answer section may not contain all the information that is
important to you and the other shareholders. To more fully
understand the proposed Merger and the terms of the merger
agreement, you should carefully read this entire proxy
statement/prospectus, all of its appendices and the documents
referenced in this proxy statement/prospectus before voting. For
instructions on obtaining more information, see the section
entitled WHERE YOU CAN FIND MORE INFORMATION. We
have included page number references in this summary to direct
you to a more complete description of the topics presented in
this summary.
The
Parties (see page 38)
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All American Group, Inc.
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AAG was incorporated under the laws of the State of Indiana on
December 31, 1964, as the successor to a proprietorship
established earlier that year. All references to AAG include its
wholly-owned subsidiaries and divisions. AAGs primary
businesses are housing and specialty vehicles. The housing
business manufactures and distributes system-built modules for
residential buildings (the Housing Business). The
Housing Business comprises one of the nations largest and
most recognized producers of system-built homes and residential
structures through its All American
Homes®,
Mod-U-Kraf®,
and All American Building
Systemstm
brands. The Specialty Vehicles business, through a joint venture
with ARBOC Mobility, manufactures a line of low floor buses that
comply with the Americans with Disabilities Act, under the
Spirit of Mobility brand name.
The mailing address and telephone number of AAGs principal
executive offices are 2831 Dexter Drive, Elkhart, Indiana 46514,
and
(574) 266-2500.
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All American Group Holdings, LLC
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Acquiror is a Delaware limited liability company and an
affiliate of H.I.G. All American. Acquiror was formed solely for
the purpose of entering into the merger agreement and has not
conducted any activities other than those incident to its
formation.
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All American Acquisition Corporation
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Acquisition Sub, an Indiana corporation, was incorporated solely
for the purpose of entering into the merger agreement and
consummating the Merger. Upon completion of the Merger,
Acquisition Sub will cease to exist. Acquisition Sub has not
conducted any activities to date other than those incident to
its formation and negotiating and entering into the merger
agreement.
The mailing address and telephone number of Acquiror and
Acquisition Subs principal executive offices are 1450
Brickell Avenue, Suite 3100, Miami, Florida, 33131, and
(305) 379-2322.
Required
Vote (see page 37)
The merger agreement must be adopted, and the Merger must be
approved, by the affirmative vote of the holders of a majority
of the outstanding Common Shares entitled to vote at the Special
Meeting for the adoption of the merger agreement and the
approval of the Merger.
H.I.G. All American beneficially owns 20,483,865 Common Shares,
or approximately 55.7% of the outstanding Common Shares entitled
to vote at the Special Meeting. Pursuant to the merger
agreement, Acquiror is required to cause H.I.G. All American to
vote in favor of the merger agreement and the Merger.
Accordingly, shareholder approval of the merger agreement and
the Merger is assured.
The
Merger Consideration (see page 47)
At the effective time of the Merger, each Common Share (other
than Common Shares held by AAG, Acquiror and its affiliates, or
shareholders that perfect their dissenters rights under
Indiana law) will be
1
automatically converted into the right to receive $0.20 in cash.
In addition, each Common Share (other than Common Shares held by
shareholders that perfect their dissenters rights under
Indiana law) will be converted into one unit of beneficial
interest in a liquidating trust that represents a contingent
right to receive proceeds from the potential sale of AAGs
Specialty Vehicles business upon satisfaction of certain
conditions in the merger agreement.
Treatment
of Options (see page 48)
Before the effective time of the Merger, AAG will (1) cause
all vested options to purchase Common Shares to be canceled
automatically and converted into the right to receive an amount
per share equal to the excess of the Cash Consideration over the
per share exercise price of the option and (2) pay such
amount (including units of beneficial interest in the Specialty
Vehicles Liquidating Trust) to the holders of the options.
Unvested options will be canceled without any consideration.
Interests
of Certain Persons in the Merger (see pages 31 and
54)
H.I.G.
All American
When considering the recommendation by the AAG board of
directors to vote FOR adoption of the merger agreement and
approval of the Merger, you should be aware that certain
directors of AAG are also employed by an affiliate of H.I.G. All
American. These members are Messrs. Matthew Sanford and
Fabian de Armas. Following the Merger, Messrs. Sanford and
de Armas will continue to be members of AAGs board of
directors and officers of AAG. Messrs. Sanford and de Armas
may have interests in addition to or different from yours.
Directors
and Executive Officers of AAG
Some of the directors and executive officers of AAG may have
interests in the Merger that are different from, or in addition
to, the interests of the Minority Shareholders. Certain of the
executive officers and directors of AAG will continue as
executive officers or directors of AAG after the Merger.
Procedures
for Exchange of Common Shares for Merger Consideration (see
pages 38 and 47)
Promptly after the effective time of the Merger, AAG will mail a
transmittal letter to each record holder of Common Shares as of
the effective time of the Merger containing instructions with
respect to how to exchange certificates representing Common
Shares and uncertificated Common Shares for the Merger
Consideration. Holders of Common Shares must wait until they
receive such instructions to exchange their certificates
representing Common Shares and uncertificated Common Shares for
the Merger Consideration. Such holders will need to review
carefully and complete such materials and return them as
instructed along with their certificates representing Common
Shares and uncertificated Common Shares. Holders of Common
Shares should not attempt to surrender any certificates
representing Common Shares or uncertificated Common Shares until
they receive these instructions. If your shares are held in
street name by your bank or broker, you will not
receive a letter of transmittal, but will receive instructions
from your bank or broker as to how to receive the Merger
Consideration in exchange for your Common Shares through your
bank or broker.
Do not attempt to surrender any certificates representing
Common Shares or uncertificated Common Shares until you receive
a letter of transmittal from AAG or a communication from your
bank or broker containing instructions for surrendering your
certificates representing Common Shares and uncertificated
Common Shares.
The
Special Committee (see page 16)
The Board formed the Special Committee of independent directors
to represent the interests of the Minority Shareholders in
connection with the Merger. The members of the Special Committee
are Mr. William P. Johnson, Mr. Robert Deputy and
Mr. Edwin Miller. Mr. Johnson is the chairman of the
Special Committee. The members of the Special Committee are not
employees or directors of Acquiror or Acquisition Sub and are
2
not employees of AAG. No member of the Special Committee has any
commercial relationship with Acquiror, Acquisition Sub or H.I.G.
All American. For more information, please see the sections
entitled SPECIAL FACTORS Background,
Recommendation of the Special Committee and
the Board, and Fairness of the Merger;
Reasons for the Recommendation of the Special Committee and the
Board.
Recommendation
of the Special Committee and the Board (see
page 22)
The Special Committee approved the merger agreement and the
Merger, determined that the merger agreement and the Merger are
advisable and fair to, and in the best interests of, AAG and the
Minority Shareholders and recommended to the Board that it
approve the merger agreement and the Merger and recommend that
you adopt the merger agreement and approve the Merger.
The Board, acting upon the recommendation of the Special
Committee, approved the merger agreement and the Merger and
determined that the merger agreement and the Merger are
advisable and fair to, and in the best interests of, AAG and the
Minority Shareholders.
The Board recommends that you vote FOR adoption of the merger
agreement and approval of the Merger.
Fairness
of the Merger; Reasons for the Recommendation of the Special
Committee and the Board (see page 23)
After careful consideration of various factors described in
detail elsewhere in this proxy statement/prospectus, the Special
Committee and the Board believe the Merger is both substantively
and procedurally fair to, and in the best interests of, the
Minority Shareholders.
Position
of Acquiror as to the Fairness of the Merger (see
page 25)
After careful consideration of various factors described in
detail elsewhere in this proxy statement/prospectus, Acquiror
believes the Merger is both substantively and procedurally fair
to, and in the best interests of, the Minority Shareholders.
Financing
of the Merger (see page 32)
Acquiror intends to pay the Cash Consideration out of available
funds. The completion of the Merger does not depend on financing
from a third party; however, Acquiror may obtain financing, if
available upon terms and conditions acceptable to it.
Description
of the Trust Units (see page 55)
Under the terms of the merger agreement, as a part of the Merger
Consideration the holder of each Common Share that is issued and
outstanding immediately prior to the effective time of the
Merger (other than dissenting shares) will receive one unit of
beneficial interest in a liquidating trust that represents a
contingent right to receive net proceeds in excess of
$5 million from the potential sale of AAGs Specialty
Vehicles business if certain conditions set forth in the merger
agreement occur. Some of those conditions are:
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the net proceeds, as defined in the merger agreement, from the
sale of the Specialty Vehicles business would be at least
$12 million;
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the sale occurs within nine months after the effective time of
the Merger or, if AAG has entered into a letter of intent with
respect to a sale, the sale closes within twelve months of the
effective time of the Merger; and
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the sale is not prohibited by law.
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Each trust unit will represent a contingent right to receive a
pro rata portion of such excess net proceeds, which portion is
based on the total number of trust units held by all
beneficiaries of the trust. No holder of trust units will have
any title in, right to, possession, management, or control of,
the underlying assets of the
3
trust except as expressly provided in the trust agreement. Trust
units will not be marketable nor will they be listed on any
securities exchange or quoted on any interdealer quotation
system. Trust units may not be assigned or otherwise transferred
to any other person or entity, other than by will or intestate
succession as personal property.
Material
Federal Income Tax Consequences (see page 32)
The receipt of the Merger Consideration by a United States
holder in exchange for cash and a trust unit should be a taxable
transaction for United Stated federal income tax purposes. The
amount of gain or loss a United States holder recognizes, and
the timing and potentially the character of a portion of such
gain or loss, depends on the United States federal income tax
treatment of the trust units, with respect to which there is
substantial uncertainty. A shareholders gain or loss will
also be determined by the shareholders tax basis in his
Common Shares. For a more complete description of the tax
consequences of the Merger, see the section entitled The
Merger Material United States Federal Income Tax
Consequences of the Merger beginning on page 32 of
this proxy statement/prospectus.
Tax matters are very complicated, and the tax consequence of
the Merger to a particular shareholder will depend in part on
such shareholders circumstances. Accordingly, you are
urged to consult your own tax advisor for a full understanding
of the tax consequence of the Merger to you, including the
applicability and effect of federal, state, local and foreign
income and other tax laws.
Conditions
to the Merger (see page 52)
The obligation of each of AAG, Acquisition Sub, and Acquiror to
complete the Merger is subject to the satisfaction of a number
of conditions, including the following:
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the absence of any applicable law prohibiting completion of the
Merger;
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the effectiveness of the registration statement on
Form S-4
and the absence of a stop order or any proceeding initiated or
threatened by the SEC for that purpose; and
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execution and delivery of the trust agreement.
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In addition, Acquirors and Acquisition Subs
obligation to complete the Merger is subject to the satisfaction
of the following conditions:
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AAG and its subsidiaries senior executives will have
entered employment related agreements that are satisfactory to
Acquiror and that replace and supersede their current agreements;
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delivery of all consents, approvals, orders, permits, and other
authorizations required by law, contract, or agreement;
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delivery of the proxy statement to each holder of Common Shares
as required by the merger agreement and applicable securities
laws and twenty (20) days have elapsed since delivery of
such proxy statement;
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accuracy of AAGs representations and warranties in the
merger agreement, subject to certain materiality thresholds, as
of the date of merger agreement and as of the effective time of
the Merger;
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AAGs performance of its covenants and agreements in the
merger agreement in all material respects; and
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AAGs delivery to Acquiror and Acquisition Sub of a closing
certificate certifying that the other conditions to
Acquirors and Acquisition Subs obligations to
consummate the Merger have been satisfied.
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In addition, AAGs obligation to complete the Merger is
subject to the satisfaction of the following conditions:
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AAGs shareholders have approved the merger agreement
pursuant to the Indiana Business Corporation Law;
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accuracy of Acquirors and Acquisition Subs
representations and warranties in the merger agreement, subject
to certain materiality thresholds, as of the date of merger
agreement and as of the effective time of the Merger;
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Acquirors and Acquisition Subs performance of their
covenants and agreements in the merger agreement in all material
respects; and
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Acquirors and Acquisition Subs delivery to AAG of a
closing certificate certifying that the other conditions to
Acquirors and Acquisition Subs obligations to
consummate the Merger have been satisfied.
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Termination
of the Merger Agreement (see page 53)
The merger agreement may be terminated and the Merger may be
abandoned before the effective time by mutual consent of AAG, on
the one hand, and Acquiror and Acquisition Sub, on the other
hand. In addition, either AAG or Acquiror and Acquisition Sub
may terminate the merger agreement if there is a nonappealable
order or any law, ruling or other action in effect permanently
restricting the acceptance of payment for the Common Shares
pursuant to the merger agreement or if any law, regulation or
other governmental action prohibits the Merger. None of AAG,
Acquiror or Acquisition Sub may terminate the merger agreement
if it has been a principal cause of the failure of any of the
conditions described in the previous sentence.
AAG or Acquiror and Acquisition Sub may also terminate the
merger agreement if the conditions precedent to such
partys obligations to consummate the Merger have not be
satisfied or waived prior to March 31, 2011, so long as the
terminating party is not in material breach of the merger
agreement at such time. If the merger agreement is properly
terminated, neither party will have any further obligations or
liability thereunder except for certain confidentiality
obligations and payment of its own expenses.
Expenses
of the Merger (see page 54)
Each party to the Merger will bear its own expenses, including,
without limitation, legal, financial advisory and accounting
fees, financing commitment fees, and printing and filing fees,
incurred in connection with their respective obligations under
the merger agreement. However, under certain circumstances a
party may be required to reimburse the other for the expenses
and costs it incurs in connection with the Merger.
5
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
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Q.
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When and
where is the Special Meeting?
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The Special Meeting to vote on the Merger will be held at
,
on ,
, 2011 at :00 .m. local time.
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Q.
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What
matters will be considered and voted on at the Special
Meeting?
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A. |
At the Special Meeting, you will be asked to consider and vote
upon a proposal to adopt the merger agreement and approve the
Merger.
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Q.
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What will
I receive in the Merger?
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A. |
For each Common Share owned, the Minority Shareholders will
receive $0.20 in cash and one unit of beneficial interest in the
Specialty Vehicles Liquidating Trust. H.I.G. All American will
also receive one trust unit for each Common Share it owns.
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Q.
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How does
the Board of Directors recommend that I vote on the merger
proposal?
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After careful consideration, the Board recommends that you vote
FOR the adoption of the merger agreement and approval of the
Merger. See the sections entitled SPECIAL
FACTORS Recommendation of the Special Committee and
the Board and Fairness of the Merger;
Reasons for the Recommendation of the Special Committee and the
Board.
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Q.
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How many
Common Shares must be present to hold the Special
Meeting?
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A. |
The presence, either in person or by proxy, of a majority of the
outstanding Common Shares entitled to vote at the Special
Meeting is necessary to constitute a quorum for the transaction
of business at the Special Meeting.
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Q.
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What vote
is required to approve the Merger?
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A. |
The adoption of the merger agreement and approval of the Merger
requires the affirmative vote of the holders of a majority of
the outstanding Common Shares entitled to vote at the Special
Meeting for the adoption of the merger agreement and the
approval of the Merger. H.I.G. All American beneficially owns
approximately 55.7% of the outstanding Common Shares entitled to
vote at the Special Meeting. Pursuant to the merger agreement,
Acquiror has agreed to cause H.I.G. All American to vote all the
Common Shares it beneficially owns in favor of adopting the
merger agreement and approving the Merger. Accordingly,
shareholder approval of the merger agreement and the Merger is
assured.
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Q.
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What do I
need to do now?
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A. |
Please vote electronically via the Internet or telephonically by
following the instructions on the enclosed proxy card or
complete, sign, date and promptly return the enclosed proxy card
to ensure that your Common Shares will be voted at the Special
Meeting.
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Q.
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What
rights do I have if I oppose the Merger?
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A. |
Shareholders that oppose the Merger may dissent and seek a
determination of the fair value of their Common Shares and
receive that fair value in lieu of the Merger Consideration, but
only if they comply with the procedures explained in the section
entitled RIGHTS OF DISSENTING SHAREHOLDERS and
Appendix C to this proxy statement/prospectus.
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Q.
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Who can
vote on the Merger?
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A. |
All shareholders of record as of the close of business
on ,
201 will be entitled to notice of, and to vote at,
the Special Meeting.
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Q.
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How do
the directors and executive officers of AAG intend to
vote?
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A. |
Six of the nine members of our Board of Directors,
Mr. Lavers, Mr. Johnson, Mr. Donald W. Hudler,
Mr. Geoffrey Bloom, Mr. Edwin Miller and Mr. John
Goebel, have informed us that they intend to vote their Common
Shares in favor of the approval of the merger agreement and the
Merger. Mr. Sanford and Mr. de Armas do not directly own
any Common Shares, but each of them is an employee of an
affiliate of H.I.G. All American. Acquiror has agreed to cause
H.I.G. All American to vote its Common Shares in favor of the
approval of the merger agreement and the Merger. One of our
directors, Mr. Robert J. Deputy, has informed us that he
intends to vote against approval of the merger agreement and the
Merger. Each of our executive officers has informed us that they
intend to vote in favor of the approval of the merger agreement
and the Merger.
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Q.
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If I am
in favor of the Merger, should I send my share certificates
now?
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A. |
No. If the Merger is consummated, AAG will send you a
transmittal form and written instructions for exchanging your
share certificates.
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Q.
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If my
Common Shares are held in street name by my bank or
broker, will my bank or broker vote my Common Shares for
me?
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A. |
Your bank or broker will vote your Common Shares ONLY if
you instruct your bank or broker on how to vote. You should
follow the voting instructions provided by your bank or broker
regarding how to vote your Common Shares.
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Q.
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May I
change my vote after I have submitted a proxy?
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Yes, you may change your vote after you have submitted a proxy
by (i) delivering a properly executed proxy card bearing a
later date, (ii) delivering a written revocation of your
proxy to AAGs Secretary at our corporate offices before
the start of the Special Meeting, (iii) submitting a
later-dated vote electronically via the Internet or
telephonically, or (iv) attending the Special Meeting and
voting in person. Attending the Special Meeting will not, in
itself, revoke a previously submitted proxy. To revoke a proxy
in person at the Special Meeting, you must obtain a ballot and
vote in person at the Special Meeting.
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Q.
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When is
the Merger expected to be completed?
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AAG is working toward completing the Merger as quickly as
possible and currently expects that the Merger will be completed
in
the
quarter of 2011. If the merger agreement is adopted and the
Merger is approved, AAG expects the closing will occur within
two business days following the satisfaction or waiver of all of
the conditions to the Merger contained in the merger agreement.
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Q.
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What are
the U.S. federal income tax consequences of the Merger to
me?
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A. |
The receipt of the Merger Consideration by a U.S. holder in
exchange for cash and a trust unit should be a taxable
transaction for United Stated federal income tax purposes. The
amount of gain or loss a U.S. holder recognizes, and the
timing of such gain or loss, depends in part on the United
States federal income tax treatment of the trust units, with
respect to which there is substantial uncertainty. An AAG
shareholders gain or loss will also be determined by the
shareholders tax basis in his, her or its Common Shares.
For a more complete description of the tax consequence of the
Merger, see the section entitled SPECIAL FACTORS-Material
United Stated Federal Income Tax Consequences of the
Merger beginning on page 32 of this proxy
statement/prospectus.
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Tax matters are very complicated, and the tax consequence of
the Merger to a particular shareholder will depend in part on
such shareholders circumstances. Accordingly, you are
urged to consult your own tax advisor for a full understanding
of the tax consequence of the Merger to you, including the
applicability and effect of federal, state, local and foreign
income and other tax laws.
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Q.
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Who can
answer my questions?
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A. |
If you have questions about the Merger or would like additional
copies of this proxy statement/prospectus you should contact All
American Group, Inc., 2831 Dexter Drive, Elkhart, Indiana 46514,
Attn: Martin Miranda, Secretary, or by phone at
(574) 266-2500.
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8
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this proxy statement/prospectus
contain forward-looking statements, which convey our plans,
beliefs and current expectations with respect to, among other
things, future events, including the Merger, and our financial
performance. AAG often identifies these forward-looking
statements by the use of words such as believe,
expect, continue, may,
will, could, would,
potential, anticipate,
estimate, project, plan,
intend or similar words and expressions, but the
absence of these words does not necessarily mean that a
statement is not forward-looking.
You are cautioned not to place undue reliance on such
forward-looking statements and that such forward-looking
statements are not guarantees of future performance. The
forward-looking statements included in this proxy
statement/prospectus and any expectations based on such
forward-looking statements are subject to risks and
uncertainties and other important factors that could cause
actual results to differ materially from the results
contemplated by the forward-looking statements. Moreover, AAG
operates in a continually changing business environment, and new
risks and uncertainties emerge from time to time. AAG cannot
predict these new risks or uncertainties, nor can it assess the
impact, if any, that such risks or uncertainties may have on
AAGs business or the extent to which any factor, or
combination of factors, may cause actual results to differ from
those projected in any forward-looking statement.
The forward-looking statements included in this proxy
statement/prospectus are made only as of the date of this proxy
statement/prospectus and AAG undertakes no obligation to
publicly update such forward-looking statements to reflect
subsequent events or circumstances. Notwithstanding the
foregoing, in the event of any material change in any of the
information previously disclosed, AAG will, where relevant and
if required by applicable law, (1) update such information
through a supplement to this proxy statement/prospectus and
(2) amend the Transaction Statement on
Schedule 13E-3
filed in connection with the Merger, in each case, to the extent
necessary.
Risks and uncertainties that may cause actual results to differ
from those contemplated by the forward-looking statements
contained in this proxy statement/prospectus include, without
limitation, that the Merger is not consummated, diversion of
management attention from the operations of the business as a
result of preparations for the proposed Merger, the risk that a
sale of the Specialty Vehicles business will not yield net
proceeds in excess of $12 million, and the
transaction-related expenses that are expected to be incurred
regardless of whether the Merger is consummated. In addition,
uncertainties and other factors arising from AAGs business
include, but are not limited to:
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liquidity;
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consumer confidence and the availability of consumer credit;
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the ability of AAG to obtain adequate bid and performance bonds
with reasonable collateral requirements;
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financing for, and the availability of, chassis utilized for bus
production;
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the availability of financing to AAGs customers;
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AAGs ability to introduce new homes and features that
achieve consumer acceptance;
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adverse weather conditions affecting home deliveries;
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tax law changes could make home ownership more expensive or less
attractive;
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the availability and cost of real estate for residential housing;
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the increased size and scope of work of major projects, as
compared to AAGs traditional single-family homes business,
with increased reliance on third parties for performance which
could impact AAG; and
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the over supply of existing homes and the inventory of
foreclosed properties within AAGs markets;
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The risks and uncertainties identified in this proxy
statement/prospectus are not intended to represent an exhaustive
list of the risks and uncertainties associated with AAGs
business or relating to the Merger and should be read in
conjunction with the other information in this proxy
statement/prospectus and AAGs other filings with the SEC.
9
RISK
FACTORS
You should carefully consider the risks described below
before voting your shares. If any of the events, circumstances
or contingencies described in the following risks actually
occur, the business and financial condition of the Specialty
Vehicles Liquidating Trust could be adversely affected, and the
value of the trust units may decline.
Risk
Relating to the Merger
Because
H.I.G. All American beneficially owns approximately 55.7% of the
outstanding Common Shares, and has agreed to vote its shares in
favor of the approval of the merger agreement and the Merger,
shareholder approval of the merger agreement and the Merger is
assured. Shareholders that do not believe that the Merger
Consideration is adequate will have only one remedy, the
perfection of dissenters rights of appraisal under Indiana
law.
In the merger agreement, Acquiror agreed to cause H.I.G. All
American to vote the Common Shares it beneficially owns
(approximately 55.7% of the outstanding Common Shares) in favor
of the approval of the merger agreement and the Merger. Neither
the merger agreement nor Indiana law requires that the merger
agreement be approved by a majority of the shareholders of AAG
other than H.I.G. All American. Accordingly, shareholder
approval of the merger agreement and the Merger are assured.
Shareholders that do not believe that the Merger Consideration
is adequate will have only one remedy, perfection of the
dissenters rights of appraisal under Indiana law, as
described elsewhere in this proxy statement/prospectus. The
value of the Common Shares determined in an appraisal will
depend on many factors, and we cannot assure you that the value
of the Common Shares determined in any such appraisal proceeding
will equal or exceed the Merger Consideration. Shareholders who
perfect their dissenters rights will not receive trust units.
Risks
Relating to Ownership of the Trust Units
The
trusts sole asset is a contingent right that may not
result in any proceeds to you.
The trusts sole asset is a contingent right to receive
certain proceeds from the sale of AAGs Specialty Vehicles
business (the excess sale proceeds) under the terms
of the merger agreement. The merger agreement provides that the
Special Committee of AAGs Board of Directors will appoint
two out of three members of a sale committee that will have the
authority to find a buyer for the Specialty Vehicles business
and negotiate the sale of such business (the sale
committee). The sale committee has
until ,
2011 to execute a letter of intent with a potential buyer, and
consummate the sale of the Specialty Vehicles business within
90 days thereafter, or the surviving corporation is not
required to sell the Specialty Vehicles business and distribute
any proceeds to the trust. In addition, the merger agreement
provides that the surviving corporation is not required to sell
the Specialty Vehicles business unless the net
proceeds to the surviving corporation are at least
$12 million. Net proceeds are defined in the merger
agreement to be the cash proceeds to the surviving corporation,
net of (i) taxes arising from the sale and taxes of the
Specialty Vehicles business accruing prior to the sale
(but only income taxes that cannot be immediately offset against
net operating losses), (ii) the costs and expenses of such
sale, and (iii) indebtedness of the Specialty Vehicles
business, which will include any additional investments made in
the Specialty Vehicles business after November 8, 2010. We
have a tax basis in the Specialty Vehicles business of
approximately $6.2 million, as of October 31, 2010.
The Specialty Vehicles business had no indebtedness as of
October 31, 2010 and AAG would expect the costs of selling
the business to be at least $0.75 million. Consequently,
the surviving corporation will need to receive at least
$12.75 million in gross sales price in order to receive net
proceeds of $12 million, based on AAGs estimate of
available net operating losses. In addition, the merger
agreement provides that the surviving corporation is not
required to sell the Specialty Vehicles business if it is
prohibited by law, which would include a court order, or if the
surviving corporation is required to indemnify the purchaser.
The sale committee will have the right to cause the trust to
provide indemnities to any purchaser, but such indemnification
will delay the distribution of sale proceeds to the holders of
trust units, as any funding of such indemnification will need to
be held by the trust for the time period of such
indemnification. In addition, should an indemnification claim be
successful, it may decrease the amount of funds available to the
trust to
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distribute. In the event the sale committee is unable to
consummate a sale of the Specialty Vehicles business on the
basis of such terms and conditions and realize net
proceeds in excess of $12 million, the sale may not
occur and the trust will not receive any funds to distribute to
you. The sale of the Specialty Vehicles business will be highly
dependent on a number of factors, including:
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the operating performance of the Specialty Vehicles business;
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general economic trends in mergers and acquisitions, as well as
the market for selling businesses in the specialty vehicle or
bus industries in particular;
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the ability of the sale committee to locate a suitable buyer and
consummate a sale transaction prior
to ,
2011;
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the availability of financing to a potential buyer to pay a cash
purchase price;
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the absence of contingent liabilities and other issues at the
Specialty Vehicles business that would induce potential buyers
to acquire the Specialty Vehicles business without
indemnification from the surviving corporation; and
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our successful resolution of a dispute with ARBOC Mobility, LLC,
the licensor of certain intellectual property used by the
Specialty Vehicles business.
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We cannot assure you that the sale committee will be successful
in consummating a sale of the Specialty Vehicles business upon
the terms and conditions of the merger agreement or, if a sale
is consummated, that the net proceeds will exceed
$12 million. If a sale is not consummated upon the terms
and conditions of the merger agreement or the net proceeds do
not exceed $12 million, the trust will terminate and our
shareholders will not receive any payments in connection with
their trust units.
The
value of the trust units may be taxable to you regardless of
whether you receive any proceeds from the trust.
The receipt of the Merger Consideration may be treated as either
a closed transaction or an open
transaction for United States federal income tax purposes
because of the issuance of the trust units. There is no
authority clearly addressing whether the sale of property (in
this case Common Shares) for, in whole or in part, contingent
value rights with characteristics similar to the trust units
should be taxed as an open transaction or a
closed transaction, and such question is inherently
factual in nature.
If the receipt of the Merger Consideration is treated as an
open transaction for United States federal income
tax purposes, a United States holder will generally recognize a
capital gain upon consummation of the Merger if and to the
extent (x) the sum of (i) the amount of cash, if any,
received and (ii) the fair market value of any other
property received (other than the trust units) exceeds
(y) such United States holders adjusted tax basis in
the Common Shares surrendered pursuant to the Merger. Subject to
certain treasury regulations, if the transaction is
open for United States federal income tax purposes,
the trust units would not be taken into account in determining
the holders taxable gain upon receipt of the Merger
Consideration and a United States holder would take no tax basis
in the trust units. A United States holder would recognize a
capital gain as payments with respect to the trust units are
made or deemed made in accordance with a United States
holders regular method of accounting for United States
federal income tax purposes, but only to the extent the sum of
such payments (and all previous payments under the trust units),
together with the amount received upon consummation of the
Merger discussed above, exceeds such United States holders
adjusted tax basis in the Common Shares surrendered pursuant to
the Merger.
If the value of the trust units can be reasonably
ascertained the transaction should generally be treated as
closed for United States federal income tax
purposes, in which event a United States holder generally should
recognize capital gain or loss for United States federal income
tax purposes upon consummation of the Merger equal to the
difference between (x) the sum of (i) the fair market
value of the trust units received, (ii) the amount of cash,
if any, received and (iii) the fair market value of any
other property received and (y) such United States
holders adjusted tax basis in the Common Shares
surrendered pursuant the Merger. Consequently, you may be taxed
on Merger Consideration that you do not receive.
11
If the transaction is treated as a closed
transaction, there is no direct authority with respect to
the tax treatment of holding and receiving payments with respect
to property similar to the trust units. It is possible that
payments received with respect to a trust unit, up to the amount
of the holders adjusted tax basis in the trust unit, may
be treated as a non-taxable return of a United States
holders adjusted tax basis in the trust unit, with any
amount received in excess of basis treated as gain from the
disposition of the trust unit. Additionally, a portion of any
payment received with respect to a trust unit may constitute
imputed interest or ordinary income under treasury rules. If not
treated as described above, payments with respect to a trust
unit may be treated as (i) payments with respect to a sale
of a capital asset, (ii) ordinary income or
(iii) dividends. See Material United States Federal
Income Tax Consequences of the Merger for a more detailed
description of potential tax consequences related to the Merger.
We and Acquiror urge you to consult with your tax advisor with
respect to proper characterization of the receipt of the trust
units.
The
trust units will not be transferable.
We do not intend to list the trust units on any securities
exchange or seek to have them eligible for quotation on any
interdealer quotation system. Trust units will not be
transferable, except by will or intestate succession. Therefore,
you must be prepared to hold your trust units for an indefinite
period of time.
H.I.G.
All American will own the majority of the trust units and
therefore may control the administration of the
trust.
H.I.G. All American and its affiliates will own a majority of
the trust units and therefore will have the ability to remove
and appoint the trustee and to amend various provisions of the
trust agreement. Because the trustee administers the trust,
subject to applicable law, Acquiror could determine when
payments are to be made to the holders of trust units, the
amount of trust assets that should be withheld to pay expenses
and whether or not to pursue a claim against any person, among
other things. Acquiror and its affiliates may have interests
that are additional to or different from yours and therefore may
consider such other interests in voting the trust units held by
them.
Risks
Relating to the Operation of the Specialty Vehicles
Business
We
depend on a small group of suppliers for some of our components,
and any business interruption among these suppliers could
adversely affect our production costs and
profitability.
The chassis and some of the seating and other components used in
the production of our buses are purchased in finished form. The
principal raw materials used in the manufacturing of our buses
are fiberglass, steel, aluminum, plywood, and plastic. We
purchase most of the raw materials and components from numerous
suppliers, while the chassis for the ARBOC bus is purchased only
from General Motors. In prior years, we obtained chassis
directly from General Motors under a converter pool arrangement
financed by GMAC, which meant we did not have to pay for the
chassis until we utilized the chassis. In October 2010, GMAC
notified us of its intent to terminate its financing agreement
with us as of December 14, 2010. GMAC has recently agreed
to reinstate the credit facility through March 31, 2011.
However we will be required to post additional letters of credit
to support the GMAC credit facility, and we will have to post
cash collateral to support the letters of credit. This will
increase our costs and utilizes more working capital than we
historically required, which may also require us to find
additional financing. We cannot assure you that we will be able
to obtain replacement financing adequate to obtain an adequate
number of chassis after March 31, 2011. Moreover, we
experienced production disruptions in 2009 and 2010 because of
the interruptions in the supply of chassis from General Motors.
The reinstatement of the GMAC credit facility does not assure
the timing of General Motors production of our chassis
orders. If we are unable to obtain chassis from General Motors
in a timely fashion and on a cost effective basis, we could
experience increased costs and production delays. While we do
not expect the current condition of the U.S. economy and
the auto industry, including the recent bankruptcy filing and
reorganization of General Motors, to have a significant impact
on our supply of chassis going forward, if availability of the
General Motors cutaway chassis is limited or interrupted for an
extended period, this could have a material impact on the sales
and earnings of our Specialty Vehicles business and the sale
committees ability to sell the Specialty Vehicles
business. Our inability to obtain adequate supplies of needed
components could negatively impact our revenues and
profitability.
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Increased
costs, including costs of component parts and labor may
adversely affect our profitability if such costs cannot be
offset because of market forces or price-protected
contracts.
Our financial results may be significantly adversely affected by
the availability and pricing of manufacturing components and
labor. We cannot assure you that decreases in the availability
and increases in the pricing of components and labor will not
have an adverse impact on the competitiveness of our products
and result in declining revenues. If we are unable to
successfully offset increases in manufacturing costs, this could
have a material adverse impact on margins, operating income and
cash flows. If we increase prices to offset higher manufacturing
costs, the benefit of such increases may lag behind the rise in
manufacturing costs.
A rise
in the frequency and size of product liability, wrongful death,
workers compensation and other claims against us may
result in a material adverse effect on our business, operating
results and financial condition.
In the ordinary course of business, we are subject to litigation
involving product liability and other claims related to personal
injury
and/or
property damage. Our self-insurance retention is currently
$250,000, and we maintain insurance coverage through our primary
insurance carrier, as well as excess carriers, above the
self-insurance retention. Any increase in the frequency or size
of claims below the self-insurance retention level may adversely
affect our financial results and insurability. In addition,
insurance is not available for some kinds of claims, such as
exposure to mold or formaldehyde, or punitive damages.
Occasionally, an insurance carrier may deny coverage to us
resulting in potential litigation expenses and additional
exposure to losses. Workers compensation insurance costs
are directly attributable to experience in the workplace. In the
past, AAG has experienced wrongful death claims and work
practices claims arising from alleged workplace injuries.
We cannot be certain that our insurance coverage will be
sufficient to cover all future claims against us. Any increase
in the frequency or size of such claims, as compared to our
experience in prior years, may cause our insurance premiums to
rise significantly. Further, sizable product liability claims
may damage our reputation among dealers and end purchasers that
may adversely affect our future operating and financial results.
Significant
warranty claims against us may result in a material adverse
effect on our business, operating results and financial
condition.
We provide customers of our products with a warranty covering
defects in material or workmanship. We record a liability based
on our estimate of the amounts necessary to settle future and
existing claims on products sold. Such costs are accrued at the
time products are sold and included in the cost of sales. Such
claims are generally not insurable. Should warranty claims arise
which exceed our historical experience and associated accrued
liabilities, such costs may have a material adverse effect on
our cost of sales and profitability.
New
product introductions may result in unanticipated expenses
resulting in reduced earnings.
The introduction of new products is critical to the success of
our Specialty Vehicles business. We incur additional costs to
introduce new products, such as research and development costs,
engineering costs, and initial labor or purchasing
inefficiencies. Additionally, we may incur unexpected expenses,
including those associated with unexpected engineering or design
flaws that could force a recall of a new product. We may
experience recalls that could result in temporary plant
shutdowns or disruptions of the supply of finished product to
the market. These types of costs could be substantial and could
have a significant adverse effect on our financial results.
Failure
to comply with environmental regulations could result in
significantly increased costs and capital
expenditures.
State and federal environmental laws also impact both the
production and operation of our products. We have an
Environmental Department dedicated to compliance with applicable
environmental regulations. Failure
13
to comply with present or future environmental regulations may
result in fines, potential civil and criminal liability, and
suspension of production or operations, alterations to the
manufacturing process, costly cleanup efforts or increased
capital expenditures.
Changes
in labor practices could adversely affect our labor costs and
profitability.
Currently, none of our employees are members of any union or
covered under any collective bargaining agreement. We attempt to
provide competitive wages and a variety of benefits to our
employees, including group life, dental, vision services,
hospitalization, and major medical plans, and a 401(k) plan,
although we suspended company matches to the 401(k) plan in
2008. While we consider our relations with employees to be good,
any material changes in labor costs or practices, including
those resulting from union activity may have a negative impact
on our profitability.
The
Specialty Vehicles business is competitive and some of our
competitors have significantly greater resources than we
do
The bus industry is highly competitive, and there are numerous
competitors and potential competitors for small and mid-size
buses. Many of our competitors have greater financial and other
resources than we do. The initial capital requirements for entry
into the manufacture of buses are not significant enough to
eliminate new market entrants. Moreover, some of our competitors
have begun to reduce their prices in response to the
introduction of our new ARBOC bus. Existing or new competitors
could develop products that are similar to, or have better
features than, our bus offerings, which could achieve better
consumer acceptance than those we offer. Therefore, we cannot
assure you that we will maintain or grow our current market
share.
Changes
to, or increases in, the regulations governing our businesses
could have a material impact on our operating and financial
results.
The Specialty Vehicles business is subject to extensive federal,
state and local regulations, including:
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National Traffic and Motor Vehicle Safety Act
(NTMVSA), and the Federal Motor Vehicle Safety
Standards included therein, and the regulations promulgated
under the NTMVSA, including Federal Motor Carrier Safety
Regulations;
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Safety standards for buses and bus components which have been
promulgated thereunder by the U.S. Department of
Transportation;
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laws regulating the operation of vehicles on highways;
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state and federal product warranty statutes; and
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state and local zoning laws and building codes.
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Amendments to any of these regulations and the implementation of
new regulations could significantly increase the costs of
manufacturing, purchasing, operating or selling our products and
could have a material adverse impact on our operating and
financial results. Any failure to comply with present or future
regulations could result in fines, potential civil and criminal
liability, suspension of sales or production, or cessation of
operations.
Reduced
availability of financing for bus dealers or end customers could
adversely affect our revenues and margins.
Bus dealers and commercial end customers generally secure
financing from third party lenders to buy our products. Any
reduction in the availability of such financing or significant
increase in the cost of such financing will have an adverse
effect on our business by decreasing the willingness of such
dealers to buy our buses. Availability of financing is dependent
on the lending practices of financial institutions, financial
markets, governmental policies and economic conditions, all of
which are beyond our control.
14
The
distribution channels within the bus industry are limited and
could have a material adverse effect on revenues and
profitability.
Several large dealers dominate the industry, which may result in
pressure to decrease prices and provide other accommodations
from the industry in general, and on us in particular. Our
customer base for the Specialty Vehicles business comprises
approximately 18 customers, of which four represent 64% of our
sales. In the event our customers are unwilling to pay the
prices we charge for our buses, or otherwise require
accommodations from us, our Specialty Vehicles business
revenues and profitability may suffer.
Financial
Risks Relating to the Operation of Our Business if the Merger is
not Completed
There
is substantial doubt about our ability to continue as a going
concern.
We lost $23.7 million for the nine months ended
September 30, 2010 and $4.7 million and
$69 million, for 2009 and 2008, respectively. We would have
lost $19.6 million in 2009 but for the favorable settlement
of litigation that earned us $14.9 million. Our independent
public accounting firms have issued opinions on our 2009 and
2008 consolidated financial statements that state that the
consolidated financial statements were prepared assuming we will
continue as a going concern and further note that our recurring
net losses and lack of current liquidity raise substantial doubt
about our ability to continue as a going concern. Our plans
concerning these matters are discussed in the notes in our
audited consolidated financial statements included elsewhere in
this proxy statement/prospectus. If we fail to successfully
implement our plans, we may not be able to continue as a going
concern and could potentially be forced to seek relief through a
filing under the U.S. Bankruptcy Code.
Our
business and our ability to continue as a going concern are
highly dependent on our ability to obtain financing or
additional capital.
Our ability to continue as a going concern is highly dependent
upon our ability to obtain financing or other sources of
capital. We are currently exploring various opportunities to
sell certain unused facilities and other assets; however, our
credit agreement requires us to use the proceeds to repay our
senior secured indebtedness. We are currently not in compliance
with the financial covenants that would allow us to access our
revolving credit facility and we do not expect to meet these
covenants for the foreseeable future. Our loan agreement with
H.I.G. All American requires us to have $0.6 million of
EBITDA for the nine months ended September 30, 2010, in
order to borrow up to $3.0 million on our revolving credit
facility under the loan agreement. The loan agreement requires
us to have $3.6 million of EBITDA in that period in order
to borrow over $3 million. Our EBITDA for that period was
($6.6 million). Moreover, H.I.G. All American has a lien on
substantially all of our assets. In order to obtain any new
significant financing, we would need to convince H.I.G. to
release its lien on the assets for the new financing and agree
that we can use the proceeds to finance our operations, both of
which are currently prohibited by our existing loan agreement.
We cannot assure you that we will be able to obtain any new
financing.
Our
Housing Business is highly dependent on the housing market,
which has declined significantly since 2006.
Housing sales in the United States, as measured by single family
housing starts, have fallen 68% since 2006. The deteriorating
economic and market conditions that have driven the drop in
housing sales, including declines in real estate values and
household incomes, rising unemployment, tightened credit
markets, and weakened consumer confidence, may not improve
significantly in the near term. To be profitable, our Housing
Business is dependent on a sales volume sufficient to cover the
fixed cost of operating our manufacturing facilities. The sales
volume of our Housing Business may decline more severely or take
longer to recover than we expect because of the uncertainties of
the U.S. economy and the U.S. housing market in
particular. If the U.S. housing market and our housing
sales do not improve to a level where we can be profitable, our
results of operations and financial condition will be adversely
affected.
Given the aforementioned shortfalls in the single family home
market, we have focused much of our recent marketing efforts on
larger commercial and multifamily projects. These large
projects, such as
15
dormitories, military barracks and apartments, typically have a
long incubation period, often requiring bonding and other costs,
and are subject to political, zoning and other risks. Further,
the per-project risks are higher for large-scale projects than
with single-family homes. These large-scale projects risks
include, but are not limited to, greater difficulties in meeting
contract specifications and timetables, increased liability from
possible larger claims, the design and construction of new
products with significantly different and more complex designs
than single-family homes, and the increased reliance on our
business partners and subcontractors. Our ability to obtain
larger projects is dependent on numerous factors, including the
availability of credit to our customers, our ability to obtain
performance bonds and working capital, the timing of government
funding of projects and the acceptability of prefabricated
buildings for such projects. Most of these risks are outside of
our control. If we fail to mitigate these risks, they may have a
material adverse effect on our revenues and profitability.
The
ability to attract and retain qualified senior managers may
adversely affect our operating results.
The current management team has largely been in place since late
2006. Over the last three years we have taken a number of
actions to reduce costs, which have resulted in lower salaries,
benefit program cuts and weakened our succession plans. As a
result, we cannot assure you that we will be able to attract and
retain effective senior managers. Any inability to attract and
retain qualified senior managers may adversely impact our
ability to execute current and future operating plans.
Inadequate
liquidity could materially adversely affect our business
operations in the future.
We require adequate liquidity to fund working capital needs,
particularly related to major projects and to run our normal
business operations. If we continue to operate with minimum cash
levels necessary to support our normal business operations, we
may be forced to curtail programs that are important to the
future success of our business. Our suppliers might respond to
an apparent weakening of our liquidity position by requesting
quicker payment of invoices or other assurances. If this were to
happen, our need for cash would be intensified, and we might be
unable to make payments to our suppliers timely.
We are committed to exploring all possible liquidity enhancement
options because there is no assurance regarding when the
industry or capital markets conditions will improve. Our
liquidity may be inadequate to operate our business unless the
Merger transaction is completed, economic and industry
conditions improve, we receive proceeds from asset sales, we
take more aggressive working capital initiatives, or we obtain
financing or other private sources of funding, or some
combination of these actions occurs. If we fail to obtain
sufficient liquidity for any reason, we may not be able to
continue as a going concern and could potentially be forced to
seek relief through a filing under the U.S. Bankruptcy Code.
The
credit crisis has significantly affected the financial markets
and the U.S. economy
The global credit crisis continues to significantly affect the
financial markets, and the U.S. economy and the housing
markets in particular. Conditions in the U.S. are likely to
affect the availability and cost of financing for the builders
and developers who buy our homes and for individual home buyers.
The lack of availability of credit to finance home purchases,
major projects or buses has a severe impact on our sales, which
in turn affects our cash flow and working capital. Additionally,
the selling prices of homes that we market in the U.S. are
adversely affected by competition from excess inventories of new
and pre-owned homes and from foreclosures. Similarly,
municipalities which have been the main customers of our
Specialty Vehicles bus are facing lower tax revenue and higher
costs, both of which limit their purchasing capacity.
SPECIAL
FACTORS
Background
In October 2009, H.I.G. All American, LLC entered into a
$20 million credit facility with AAG. The loan agreement
provided that H.I.G. All American would not enter into any
going private transaction with AAG that would have
the effect of AAG no longer being subject to the reporting
requirements of the Securities Exchange Act, without the
approval of a committee of disinterested directors. H.I.G. All
American
16
believed that beginning in December 2009, AAG failed to meet
certain financial covenants in the loan agreement with H.I.G.
All American and the parties negotiated a first amendment to the
loan agreement in March 2010 to reset the financial covenants
and provide AAG an opportunity to address its financial
difficulties. Thereafter, beginning in August of 2010, AAG again
failed to meet certain financial covenants in the loan agreement
and experienced significant operating losses. H.I.G. All
American and AAGs management had differing views on the
magnitude and significance of the losses as well as the best way
to remedy them. During this time, AAG also was having a dispute
with one of its shareholders over the proper election of
directors at AAGs annual meeting. H.I.G. All American
exercised its warrants to acquire a majority of the outstanding
Common Shares in August 2010 in an effort to resolve such
dispute in AAGs favor and eliminate the further cost of
such litigation.
By September 2010, H.I.G. All American had become frustrated
with AAGs failure to address its operating losses. In
H.I.G. All Americans view, AAG did not have the ability to
repay its loan or obtain alternative financing. On
September 9, 2010, H.I.G. All American presented an
indication of interest to William P. Johnson, Chairman of the
Board of AAG, expressing a desire to enter into a transaction to
acquire all of the outstanding Common Shares not owned by H.I.G.
All American as a means of implementing H.I.G. All
Americans own strategy as to the future of the business.
The term sheet attached to the indication of interest reflected
that the transaction would be in the form of a merger, that the
cash consideration would be in the range of $0.13 to $0.17 per
share, that there was no financing contingency and subject to
limited due diligence, provided that a transaction could be
effectuated in a timely fashion. Mr. Johnson forwarded the
indication of interest to the directors of AAG who were not
affiliated with H.I.G. All American.
On September 12, 2010 a financial advisor engaged at that
time by AAG delivered, at managements request, a
hypothetical Chapter 7 orderly liquidation analysis. The
liquidation analysis was provided to the Special Committee by
management and reviewed during a conference call between the
Special Committee, management and the financial advisor held on
September 13, 2010. The liquidation analysis was performed
utilizing AAGs projected balance sheet accounts as of
September 30, 2010 and wind down projections for AAGs
open production facilities and excluded AAGs Specialty
Vehicles business. The analysis was preliminary and subject to
refinement and change. No formal appraisals were provided for
any of AAGs various assets. The analysis indicated that
only 19% to 44% of unsecured creditor claims would be satisfied
in an orderly liquidation, with no proceeds available for
distribution to shareholders.
On September 13, 2010, the Board (without the participation
of the H.I.G. All American representatives on the Board) held a
meeting to discuss the H.I.G. All American indication of
interest. At this meeting, the Board determined that the
indication of interest should be seriously considered and
referred the matter to a special committee comprising
Mr. Johnson, Mr. Robert Deputy and Mr. Edwin
Miller. None of the members of the Special Committee was
affiliated with H.I.G. All American, none was an employee of
AAG, and none had any other interest in the Merger other than as
an AAG shareholder. The Board instructed the Special Committee
to retain independent advisors to assist the Special Committee
in reviewing H.I.G. All Americans proposal and gave the
Special Committee full authority to pursue any and all
alternatives it deemed appropriate.
On September 14, 2010, the Special Committee met by
telephone with the legal counsel it selected, Taft
Stettinius & Hollister LLP, referred to as Taft, to
discuss legal aspects of the indication of interest, procedures
and duties of the Special Committee. On September 15, 2010,
the Special Committee decided to engage Houlihan Lokey Financial
Advisors, Inc., referred to as Houlihan Lokey, to provide
certain financial advisory services to the Special Committee.
The Special Committee selected Houlihan Lokey because of the
reputation and experience of Houlihan Lokey, which is regularly
engaged to provide financial advisory services in connection
with mergers and acquisitions, financial restructurings and
other corporate transactions.
On September 29, 2010 and October 5, 2010, the Special
Committee met to consider H.I.G. All Americans indication
of interest. Representatives of Taft and Houlihan Lokey were
present at these meetings. Representatives of Houlihan Lokey
summarized for the Special Committee, in general terms, next
steps, including the financial review to be undertaken and the
types of valuation methodologies that typically would
17
be performed in evaluating a proposed purchase price, noting
that such methodologies would be based upon, among other things,
financial forecasts for AAG prepared by AAGs management.
On October 7, 2010, H.I.G. All American submitted a draft
merger agreement to the AAG Board. On October 8, 2010,
Mr. Matthew Sanford, one of H.I.G. All Americans
representatives on AAGs Board, called Mr. Johnson and
expressed frustration at not having received any response to
H.I.G. All Americans indication of interest.
On October 8, 2010, the Special Committee met with its
legal advisor to discuss the financial forecasts for AAG
prepared by AAGs management. Managements financial
forecasts reflected certain assumptions, including AAG having
access to sufficient liquidity to continue as a going concern,
eliminating public company costs if AAG were to be taken
private, closing certain plants, eliminating certain planned
openings of home stores and selling AAGs Zanesville, Ohio
facility.
On October 11, 2010, the Special Committee met to discuss
AAGs financial outlook. AAGs chief financial officer
and representatives of Taft and Houlihan Lokey were present at
this meeting. At this meeting, Houlihan Lokey discussed with the
Special Committee the status of its review of AAG and noted that
other publicly traded companies with operations in industries
similar to the industries in which AAG operates were materially
different given, among other factors, such companies
capital structures and access to capital. Houlihan Lokey then
left the meeting. The Special Committee discussed the various
methods that H.I.G. All American could employ to accomplish the
transaction and noted that a determination as to whether H.I.G.
All Americans indication of interest reflected fair value
for AAG would depend, in part, on whether AAG had sufficient
liquidity to continue to operate its business. The Special
Committee instructed Mr. Johnson to respond to H.I.G. All
American that the Special Committee could not accept H.I.G. All
Americans valuation and requested that Mr. Johnson
engage in negotiations with H.I.G. All American and review other
potential alternatives for AAG.
During this period, Mr. Johnson began soliciting other
indications of interest from third parties regarding a possible
transaction with AAG. Mr. Johnson contacted and had
discussions with a private equity firm that was interested in
AAGs Specialty Vehicles business, and a strategic buyer
that was potentially interested in acquiring all of AAG.
Mr. Johnson received a preliminary indication of interest
from the private equity firm to acquire AAGs Specialty
Vehicles business for approximately $15 to $18 million,
which was based on five or six times the Specialty Vehicles
business trailing 12 months earnings before interest,
taxes depreciation and amortization, using normalized expenses.
The Special Committee determined that H.I.G. All Americans
indication of interest was unacceptable in light of the interest
of potential customers at a recent trade show and the Special
Committees expectation that new orders would potentially
increase the value of AAG in 2011. The private equity
firms representative agreed to meet with Mr. Johnson
and AAG executives at the Specialty Vehicles production facility.
On October 12, 2010, Mr. Sanford and Mr. Johnson
discussed the companys projections and Mr. Johnston
relayed to Mr. Sanford that AAGs projections dictated
a higher price. Mr. Sanford noted that AAG had failed to
meet any of its monthly projections since the loan closed the
year before and therefore H.I.G. All American did not have any
further confidence in AAGs projections or AAG
managements ability to accurately assess AAGs future
results of operations or cash flow needs. He was upset that the
Special Committee had not formally responded to H.I.G. All
Americans offer or made a counter-offer. Mr. Sanford
also expressed disappointment in the fact that the Special
Committee had not given any significance to the premium
represented by H.I.G. All Americans proposed purchase
price relative to the recent trading price of the Common Shares.
The Special Committee did not believe that AAGs stock
price was relevant while H.I.G. All American considered it a
very relevant factor in light of the amount of trading that had
occurred. Finally, Mr. Sanford stated that if the Special
Committee did not respond to H.I.G. All Americans offer in
some fashion, there would be no deal.
On October 14, 2010, the Special Committee met with
AAGs chief financial officer. The purpose of the meeting
was to discuss the sales forecasts and projections prepared by
management in anticipation of a meeting with the H.I.G. All
American directors on October 15, 2010. At this meeting,
AAGs chief financial officer highlighted the concern
regarding AAGs liquidity, particularly as it related to
AAGs ability to
18
purchase bus chassis for its Specialty Vehicles business and the
need to secure bonds for two housing projects in Colorado.
On October 15, 2010, the Special Committee held a meeting
with Mr. Sanford and Mr. Fabian de Armas, H.I.G. All
Americans representatives on AAGs board of
directors. Mr. Sanford explained that H.I.G. All American
had no confidence in either AAGs housing or Specialty
Vehicles forecast for 2011 in light of AAGs failure to
meet its prior projections. He also stated that H.I.G. All
American believed that the market price for the Common Shares
was the best indicator of AAGs value because of the
relatively high volume of recent trading. After H.I.G. All
Americans representatives left the meeting, the Special
Committee discussed options that were potentially available to
AAG. The Special Committee discussed the fact that GMAC had
previously informed AAG that GMAC had elected to terminate
AAGs credit facility as of August 2010, although the
termination was later postponed to October 2010 and later to
December 14, 2010. Also in August 2010, GM informed AAG
that GM expected limited production capacity for AAGs
chassis orders, and suggested that AAG seriously consider
building chassis inventory at that time for spring production
needs. The Special Committee noted that this was placing
pressure on AAGs liquidity, and that without the ability
to obtain chassis the value of the Specialty Vehicles business
would be significantly reduced. In addition, the Special
Committee considered the need to secure a bond to support a
housing contract award in Denver, Colorado.
On October 18, 2010, Mr. Johnson convened a meeting of
all of the non-H.I.G. All American directors of AAGs
board to review the current status of discussions with H.I.G.
All American. The board members present discussed AAGs
financial outlook in light of current liquidity issues as
exacerbated by recent communications from GM and GMAC related to
the chassis pool. Mr. Johnson updated the other board
members as to the status of his discussions with a strategic
buyer that expressed interest in purchasing H.I.G. All
Americans Common Shares at the same price that H.I.G. All
American had proposed and, as part of such transaction, repaying
AAGs outstanding indebtedness owed to H.I.G. All American.
Mr. Johnson also informed the other directors present of
the possibility of selling the Specialty Vehicles business to
another buyer at a higher valuation than H.I.G. All
Americans proposed valuation for the business of
$5,000,000. The board members then discussed the possibility of
filing for protection under the bankruptcy laws. After
discussion, the non-H.I.G. All American directors, with
Mr. Lavers abstaining, unanimously directed
Mr. Johnson to pursue all potential options for AAG other
than bankruptcy.
On October 19, 2010, Mr. Johnson informed
Mr. Sanford that AAG management was preparing an updated
financial forecast for AAG that would take into account
AAGs current liquidity problems so that the Special
Committee could properly assess AAGs financial position.
On October 21, 2010, H.I.G. All American delivered to AAG a
notice of default under the loan agreement between H.I.G. All
American and AAG. AAG had failed to meet the financial covenants
in its loan agreement with H.I.G. All American since August 2010
and H.I.G. All American did not believe that AAG was making
adequate progress toward meeting the covenants. Under the rules
of the SEC, AAG was required to publicly disclose the receipt of
the default notice within four business days. On
October 22, 2010, Mr. Johnson sent a letter to
Mr. Sanford inquiring whether, given H.I.G. All
Americans negative assessment of AAGs projections
and Specialty Vehicles business and the current depressed
condition of the housing market, H.I.G. All American would
consider selling its Common Shares to a third party at a price
of $0.22 per share. In a
follow-up
telephone conversation, Mr. Sanford told Mr. Johnson
that the offer was not acceptable to H.I.G. All American because
H.I.G. All American believed that it effectively offered more
per share to the Minority Shareholders than it did to H.I.G. All
American and that H.I.G. All American would not participate in a
deal in which it received less than the Minority Shareholders.
On October 23, 2010, Mr. Sanford informed
Mr. Johnson that H.I.G. All American wanted assurances that
AAG would not go into bankruptcy unplanned in advance if H.I.G.
All American provided AAG with a forbearance letter with respect
to its notice of default. Mr. Sanford also outlined a
potential transaction in which certain shareholders might be
allowed to roll over their Common Shares and
minority shareholders would have dissenters rights of
appraisal. Mr. Sanford also proposed a transaction in which
AAG would be
19
provided with a short period to solicit indications of interest
from third parties with respect to the Specialty Vehicles
business to obtain a higher value for all shareholders.
On October 25, 2010, Mr. Johnson had a telephone call
with Mr. Sanford during which Mr. Sanford stated that
H.I.G. All American was proposing a merger transaction in which
the Minority Shareholders would have dissenters rights and
the five largest shareholders would have the right to roll over
their Common Shares. Mr. Sanford noted that, while the
transaction would be subject to a shareholder vote, approval of
the Merger would be assured given that H.I.G. All American owned
55.7% of the issued and outstanding Common Shares.
Mr. Johnson told Mr. Sanford that any discussion of a
proposed transaction would be moot without rescission of the
notice of default before AAGs public announcement
requirement, given that vendor reaction to the public
announcement of H.I.G. All Americans notice of default
could jeopardize AAGs viability. During this conversation,
Mr. Sanford asked whether a third party was still
interested in purchasing H.I.G. All Americans interests in
AAG and Mr. Johnson responded that he hoped to have a firm
proposal for H.I.G. All American soon.
On October 27, 2010, H.I.G. American rescinded the notice
of default it had issued on October 21, 2010. On
October 29, 2010, Mr. Sanford sent Mr. Johnson an
email stating that AAGs compliance certificate for the
period ended August 2010, which indicated negative EBITDA for
AAG of $5 million, was even worse than H.I.G. All American
had expected. Mr. Sanford also stated that H.I.G. All
American was unwilling to wait any longer for a response and
that H.I.G. All American would withdraw its indication of
interest unless it received a definitive response from AAG by
November 1, 2010 at 5:00 pm.
On November 1, 2010, Mr. Johnson informed
Mr. Sanford that he believed he could deliver a written
proposal to H.I.G. All American that would provide for the
repayment of AAGs outstanding indebtedness to H.I.G. All
American and purchase of H.I.G. All Americans Common
Shares and would provide AAG with the bond that AAG needed to
secure for a housing project in Denver, Colorado.
Mr. Sanford responded that, if Mr. Johnson could
provide such a written proposal, H.I.G. All American would
consider it. Mr. Sanford followed this conversation with an
email that expressed disappointment at the lack of a response
from the Special Committee with respect to H.I.G. All
Americans proposal and skepticism regarding the proposal
mentioned by Mr. Johnson. However, Mr. Sanford
indicated that H.I.G. All American would extend its deadline for
the Special Committees response by 24 hours in order
for H.I.G. All American to receive and consider such proposal.
On November 2, 2010, Mr. Johnson had another
conversation with the representative from the private equity
firm regarding the sale of the Specialty Vehicles business. The
private equity firm indicated that it was very interested, but
viewed the Specialty Vehicles business as an earlier stage
business than it typically would consider acquiring. The private
equity firm stated it was unwilling to consider the Specialty
Vehicles business projected earnings until the Specialty
Vehicles business had a longer history of operations.
Nonetheless, the private equity firm indicated interest in the
$14 to $15 million range for the Specialty Vehicles
business after taking into consideration chassis financing and
indicated that it would require approximately 90 days to
complete a transaction.
Also on November 2, 2010, having not yet received a written
proposal from the strategic buyer, Mr. Johnson communicated
to Mr. Sanford that the Special Committee believed that
$0.80 per share was a fair value for the Common Shares held by
the Minority Shareholders. Mr. Sanford rejected the Special
Committees counter-offer, noting that the last closing
price for the Common Shares was $0.12 per share and that more
than 1.1 million Common Shares had traded in the previous
two months at a volume-weighted price of $0.18 per share.
Mr. Sanford reiterated that H.I.G. All Americans
final proposal was $0.20 per share plus an earn-out based on the
sale of the Specialty Vehicles business. He again stated that
H.I.G. All American was willing to have a small number of major
shareholders roll over their Common Shares and informed
Mr. Johnson that H.I.G. All Americans proposal would
remain outstanding for an additional 24 hours.
In the morning of November 3, 2010, Mr. Johnson
received from the strategic buyer a written non-binding
indication of interest to purchase all of H.I.G. All
Americans Common Shares, repay certain secured debt and
accrued interest owed to H.I.G. All American in the amount of
approximately $12 million, provide sufficient capital for
AAGs business, including the bond necessary for the
housing project in Colorado and
20
the Specialty Vehicles business, plus $4 million and an
earn-out based on the net profits of the Specialty Vehicles
business for 2011 and 2012. The offer valued H.I.G. All
Americans Common Shares at $0.195 per share, plus a modest
percentage of the Specialty Vehicles Business net profits
for 2011 and 2012. Mr. Johnson subsequently forwarded the
indication of interest to Mr. Sanford. Shortly thereafter,
Mr. Sanford indicated that H.I.G. All American had no
interest in the proposal because he viewed it as inferior to the
offer H.I.G. All American had made to the Minority Shareholders,
it was subject to financing, due diligence and internal
approvals, and effectively offered more per share to the
Minority Shareholders than it did to H.I.G. All American.
Later on November 3, 2010, the non-HIG All American members
of AAGs board of directors held a meeting. The board
members present discussed the fact that H.I.G. All American had
rejected the proposal from the strategic buyer, the implications
of such rejection, the timing of the private equity firms
interest in the Specialty Vehicles business and AAGs
liquidity issues. Following discussion, the directors authorized
Mr. Johnson to continue to negotiate with H.I.G. All
American.
Later in the afternoon of November 3, 2010,
Mr. Johnson and Mr. Sanford had a telephone
conversation to further discuss H.I.G. All Americans
proposal. Mr. Johnson stated that the terms of the
agreement would need to be finalized and requested that a higher
per share price be paid. Mr. Sanford stated he would
discuss the matter further with H.I.G. All Americans board.
On November 4, 2010, AAG was notified by GMAC that it would
not extend further credit to AAG.
On November 7, 2010, the non-H.I.G. All American members of
AAGs board of directors held a meeting to discuss H.I.G.
All Americans proposal. Representatives of AAGs
management, Taft and Houlihan Lokey were present at the meeting.
Mr. Johnson expressed his view to the board members that
the proposed transaction with H.I.G. All American appeared to be
AAGs only alternative. Mr. Johnson stated that, after
a review of the projections and assumptions prepared by
management for 2011 and assuming the absence of liquidity, AAG
would be unable to continue as a going concern. Mr. Johnson
updated the other members on the solicitation process conducted
to date and indicated that no other credible indications of
interest for AAG had materialized. Mr. Johnson also
explained that H.I.G. All American was unwilling to advance
additional cash to AAG under the revolver provided in the loan
agreement in this liquidity crisis and that H.I.G. All American
was under no legal obligation to do so. At this meeting,
Houlihan Lokey informed the Special Committee that AAGs
management had advised Houlihan Lokey that management did not
believe AAG would have access to sufficient liquidity to perform
as projected in the financial forecasts, that there were
substantial doubts as to AAGs ability to continue to
operate as a going concern and, accordingly, that liquidation
was the likely alternative to the proposed transaction with
H.I.G. All American. Houlihan Lokey indicated that for purposes
of its opinion it would, therefore, rely on a liquidation
analysis prepared by AAGs management, which reflected
that, upon a liquidation of AAG, no amounts would be available
for distribution to holders of Common Shares. Following
discussion, a preliminary vote of the Special Committee was
taken and the Special Committee approved the transaction with
H.I.G. All American by a vote of two to one. However, the
meeting was suspended to await the results of a conversation
between Mr. Johnson and Mr. Sanford. The meeting was
reconvened later that day. At such reconvened meeting,
Mr. Johnson informed the directors that the transaction
terms were still not finalized and that H.I.G. All American had
indicated that it wanted the transaction either approved or
rejected before the opening of the market the following day.
Mr. Johnson emphasized that the transaction needed to be
finalized so that AAG could resolve its chassis financing and
bonding issues. The meeting was again recessed until 7:00 am the
following morning.
During the evening of November 7, 2010, Mr. Johnson
and Mr. Sanford further discussed the proposed transaction.
Mr. Sanford recalled the conversation as indicating that
H.I.G. All American proposed a purchase price of $0.20 per
shares plus a unit of a liquidating trust, but would be
receptive to a counteroffer at a slightly higher cash price if
the Special Committee and the board unanimously approved the
transaction. Mr. Johnson understood the conversation to
have been an offer by H.I.G. All American of $0.215 plus a unit
of the trust if the votes were unanimous, but understood that
the higher offer was subject to approval by
Mr. Sanfords partners.
21
In the morning of November 8, 2010 prior to the opening of
the stock market, the non-H.I.G. All American board members
reconvened their meeting. Mr. Johnson reported to the other
members that the terms of the transaction had been finalized and
that the proposed purchase price was $0.20 per share plus a unit
of a liquidating trust unless the Special Committee and the
board unanimously supported the transaction, in which case, the
cash portion of the purchase price would be $0.215 per share.
Mr. Johnson also stated that, if the merger agreement was
executed, H.I.G. All American would immediately seek to resolve
AAGs chassis financing and bond issues. Mr. Johnson
also noted that the trust units issuable as part of the Merger
Consideration would entitle holders of Common Shares to realize
the value, if any, from the sale of the Specialty Vehicles
business (net of expenses and certain interest and equity costs)
in excess of $5,000,000. If net proceeds from the sale of the
Specialty Vehicles business exceeded $12,000,000, all
shareholders, including H.I.G. All American, would participate
in the proceeds in excess of $5,000,000. Mr. Johnson again
expressed his view that, because of H.I.G. All Americans
secured debt and ownership positions, the transaction with
H.I.G. All American was the only option available to AAG other
than bankruptcy. Also at this meeting, Houlihan Lokey reiterated
to the Special Committee the basis for Houlihan Lokeys
opinion as discussed at the November 7, 2010 meeting and
rendered to the Special Committee an oral opinion, which was
confirmed by delivery of a written opinion dated
November 8, 2010, to the effect that, as of that date and
based on and subject to the matters described in its opinion,
the Merger Consideration to be received by holders of Common
Shares (other than H.I.G. Capital, Acquiror, Acquisition Sub and
their respective affiliates, including H.I.G. All American, and
holders of Common Shares that may enter into arrangements to
retain or obtain, directly or indirectly, an equity interest in
AAG or Acquiror following the consummation of the Merger and
their respective affiliates, collectively referred to as
excluded holders) was fair, from a financial point of view, to
such holders. After discussion, the Special Committee voted two
to one to recommend to the full board the transaction with
H.I.G. All American, with the Cash Consideration of $0.20 per
share. The independent board members, not including
Mr. Lavers and the two H.I.G. All American board members,
voted in favor of the transaction three to two. At this point in
the meeting, the H.I.G. All American board members were invited
into the meeting for the final vote. The transaction was
approved by a vote of six to two, with the independent directors
approving the transaction three to two. Mr. Goebel did not
participate in these meetings although he told Mr. Johnson,
both before and after the meetings, that he was in favor of the
transaction.
Following the meeting, AAG and H.I.G. All Americans
affiliates executed the merger agreement and issued a press
release announcing the transaction.
Mr. Deputy was the member of the Special Committee who
voted against the approval of the merger agreement and the
Merger. Mr. Deputy informed AAG that he believed that AAG
had other alternatives, not agreed to by H.I.G. All American,
that would have resulted in a greater return to the Minority
Shareholders than the Merger. Mr. Deputy also gave
credibility to managements projections that indicated that
AAG could return to profitability in 2011 if AAG had access to
credit. Mr. Donald W. Hudler was the other independent
director who voted against the approval. Mr. Hudler
informed AAG that he believed that H.I.G. All American had acted
throughout the process described above in its own best interests
and to the detriment of the other shareholders of AAG. Each of
Mr. Deputy and Mr. Hudler concluded that the Merger
Consideration was not adequate.
Recommendation
of the Special Committee and the Board
On November 8, 2010, the Special Committee, based on the
factors described in this proxy statement/prospectus and by a
vote of two to one, approved the merger agreement and the
Merger, determined that the merger agreement and the Merger are
advisable and fair to, and in the best interests of, AAG and the
Minority Shareholders and recommended to the Board that it
approve the merger agreement and the Merger and recommend that
the Minority Shareholders vote for the adoption of the merger
agreement and approval of the Merger.
The Board, acting upon the recommendation of the Special
Committee, by a vote of six to two (including a vote of three to
two of the independent directors), approved the merger agreement
and the Merger, determined that the merger agreement and the
Merger are advisable and fair to, and in the best interests of,
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AAG and the Minority Shareholders and recommends that the
Minority Shareholders vote for the adoption of the merger
agreement and approval of the Merger.
The Special Committee and the Board considered a number of
factors in determining to recommend that the Minority
Shareholders adopt the merger agreement and approve the Merger,
as more fully described above under the section entitled
SPECIAL FACTORS Background of the Merger
and below under the sections entitled SPECIAL
FACTORS Fairness of the Merger; Reasons for the
Recommendation of the Special Committee and the Board and
Fairness of the Merger.
The Board recommends that you vote FOR the adoption of the
merger agreement and approval of the Merger.
Fairness
of the Merger; Reasons for the Recommendation of the Special
Committee and the Board
The Special Committee and the Board considered the following
substantive factors in reaching their respective decisions and
determinations and making their respective recommendations
described above under the section entitled SPECIAL
FACTORS Recommendation of the Special Committee and
the Board. The Special Committee and the Board believe
that the following factors, which are not listed in any order of
relative importance, support their respective determinations,
decisions and recommendations:
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the value of the Merger Consideration to be paid to the Minority
Shareholders upon consummation of the Merger, of which the Cash
Consideration represents a 122% premium over the trading price
of the Common Shares immediately prior to the first public
announcement of the Merger;
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the fact that the receipt of trust units by the Minority
Shareholders as part of the Merger Consideration will afford
them an opportunity to realize additional consideration to the
extent the net proceeds of the sale of the Specialty Vehicles
business exceeds $5 million;
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the Special Committees belief that the Merger is more
favorable to the Minority Shareholders than any other
alternative reasonably available to AAG and its shareholders,
including the alternative of an orderly liquidation of AAG, in
light of a number of factors, including the risks and
uncertainty associated with these alternatives;
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the structure of the Merger will provide certainty of a minimum
value to the Minority Shareholders and a potential opportunity
to benefit from the net proceeds of a sale of the Specialty
Vehicles business;
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the fact that AAG would incur significant expenses by remaining
a public company, including legal, accounting, transfer agent,
printing and filing fees and expenses necessary to satisfy the
reporting obligations of the federal securities laws and such
expenses could adversely affect AAGs financial performance
and the value of the Common Shares;
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the fact that AAG had no liquidity and that, absent H.I.G. All
American providing liquidity, which H.I.G. All American
indicated, in light of AAGs failure to meet the financial
covenants in the loan agreement, it would only do if the merger
agreement was signed, AAG was facing bankruptcy or liquidation
that, as reflected in AAG managements liquidation
analysis, would likely result in the Minority Shareholders
receiving nothing;
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the fact that AAG had suffered losses in recent periods and was
unable to mitigate those losses absent adequate liquidity;
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the attempts by the Special Committee to find alternatives to
the Merger, each of which was rejected by H.I.G. All American;
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the terms of the merger agreement, including (1) the
conditions to the Merger, (2) the parties
representations, warranties and covenants, (3) the
shareholder approval requirements applicable to the merger
agreement and the Merger and (4) the ability of the
Minority Shareholders to assert dissenters rights of
appraisal; and
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the receipt by the Special Committee of an opinion, dated
November 8, 2010, from Houlihan Lokey as to the fairness,
from a financial point of view and as of the date of the
opinion, of the Merger Consideration to be received by holders
of Common Shares (other than excluded holders). The full text of
Houlihan Lokeys written opinion, dated November 8,
2010, to the Special Committee, which describes the procedures
followed, assumptions made, qualifications and limitations in
the review undertaken and other matters considered by Houlihan
Lokey in the preparation of its opinion, is attached to this
proxy statement/prospectus as Appendix D and is
incorporated herein by reference. The opinion should be read
carefully in its entirety. Houlihan Lokeys opinion was
furnished for the use and benefit of the Special Committee (in
its capacity as such) in connection with its evaluation of the
Merger Consideration, only addressed the fairness, from a
financial point of view, of the Merger Consideration and does
not address any other aspect or implication of the Merger.
Houlihan Lokeys opinion should not be construed as
creating any fiduciary duty on Houlihan Lokeys part to any
party nor does the opinion address the underlying business
decision of AAG, its security holders or any other party to
proceed with or effect the Merger, the relative merits of the
Merger as compared to any alternative business strategies that
might exist for AAG or any other party or the effect of any
other transaction in which AAG or any other party might engage.
Houlihan Lokeys opinion was not intended to be, and does
not constitute, a recommendation to the Special Committee, the
Board, any security holder or any other person as to how to act
or vote with respect to any matter relating to the Merger or as
to the specific consideration payable in the Merger, the type
and amount of which was determined through negotiation between
the Special Committee and Acquiror. The opinion was necessarily
based on financial, economic, market and other conditions as in
effect on, and the information made available to Houlihan Lokey
as of, the date of its opinion.
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The Special Committee and the Board also considered a variety of
risks and potentially negative factors concerning the merger
agreement and the Merger in reaching their respective decisions
and determinations and making their respective recommendations
described above, including the following factors, which are not
listed in any order of relative importance:
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the fact that the Minority Shareholders will have no ongoing
equity participation in AAG as the surviving corporation
following the Merger, other than an interest in the Specialty
Vehicles Liquidating Trust, and will not share in any cost
savings resulting from the Merger, any future earnings of the
business,
and/or the
proceeds of any future sale of AAGs assets or lines of
business, other than the sale of the Specialty Vehicles business
upon the terms in the merger agreement;
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the conditions to completion of the proposed Merger;
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the fact that the receipt of the Merger Consideration will be
taxable to AAGs shareholders for U.S. federal income
tax purposes; and
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the potential risks and costs to AAG if the Merger does not
close, including the potential effects on our relationships with
our business partners.
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The Special Committee and the Board also considered the
following procedural factors in reaching their respective
decisions and determinations and making their respective
recommendations described above. The Special Committee and the
Board believe the following procedural factors, which are not
listed in any order of relative importance, support their
respective determinations, decisions and recommendations and
establish that sufficient procedural safeguards were and are
present to ensure the fairness of the merger agreement and the
Merger to AAG and the Minority Shareholders and to permit the
Special Committee to represent effectively the interests of the
Minority Shareholders:
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the Special Committee consisted entirely of independent
directors appointed by the Board that are not employees of AAG,
H.I.G. All American or any of their respective subsidiaries and
have no financial interest in the Merger that is different from
that of the Minority Shareholders;
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the Special Committee retained and was advised by its own
independent legal counsel, and engaged an independent financial
advisor to assist the Special Committee in its evaluation of the
Merger Consideration from a financial point of view;
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the Special Committee engaged in extensive negotiations and
deliberations in evaluating the Merger and the Merger
Consideration;
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the Special Committee had the authority under AAGs loan
agreement with H.I.G. All American to reject the Merger or any
similar transaction with H.I.G. All American or its affiliates;
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the Merger Consideration and the other terms and conditions of
the merger agreement resulted from active negotiating between
the Special Committee and Acquiror;
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holders of the Common Shares that do not vote in favor of the
adoption of the merger agreement and approval of the Merger or
otherwise waive their dissenters rights will have the
right under Indiana law to dissent and seek a determination of
the fair value of their Common Shares and receive that fair
value in lieu of the Merger Consideration;
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the Special Committee approved the merger agreement and the
Merger; and
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the Board approved the merger agreement and the Merger, with a
majority of the disinterested directors voting in favor of
approval.
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The foregoing discussion summarizes the material factors
considered by the Special Committee and the Board in their
consideration of the substantive and procedural fairness of the
merger agreement and the Merger to AAG and the Minority
Shareholders. In determining the substantive and procedural
fairness of the Merger, the Board expressly adopted the Special
Committees analysis and conclusions. After considering
these substantive and procedural factors, the Special Committee
and the Board concluded that the positive factors related to the
merger agreement and the Merger outweighed the potential
negative factors, and the merger agreement and the Merger are
advisable and fair to, and in the best interests of, AAG and the
Minority Shareholders. In reaching such conclusion, the Board
and the Special Committee held discussions with our management
and the Special Committees advisors.
The Special Committee evaluated the net book value of AAG, but
ultimately did not consider AAGs net book value to be a
significant factor in determining the substantive fairness of
the transaction to the Minority Shareholders. In light of the
current state of the real estate market, the Special Committee
believes that net book value is not a material indicator of the
value of AAGs equity, but rather is indicative of
historical costs. The Special Committee believed that
liquidation was a likely result in the absence of the Merger and
considered the liquidation value of AAGs assets as
reflected in a liquidation analysis prepared by AAGs
management as indicative of AAGs value, which analysis
reflected that the Minority Shareholders would receive nothing
in a liquidation of AAG. The Special Committee did not consider
the going-concern value for AAG given AAGs liquidity
issues and the absence of reliable financial forecasts for AAG
beyond calendar year 2011. The Special Committee believes that
the factors it considered provided a proper basis for supporting
its determination as to the fairness of the Merger to the
Minority Shareholders.
The Special Committee did not consider prior purchases of Common
Shares by AAG or Acquiror in evaluating the fairness of the
Merger because there were only small purchases of Common Shares
during the past two years by AAG. The Special Committee does not
believe that such purchases are indicative of the value of the
Common Shares as they were either made at the closing market
price of the Common Shares on the date of the purchase or too
insignificant to provide a meaningful indication of the value of
AAG. Also, during the past two years, there has not been any
firm offer that H.I.G. All American, as the controlling
shareholder of AAG, indicated that it would be willing to
accept: (1) for a merger or consolidation of AAG with or
into another company, or vice versa; (2) for a sale of all
or any substantial part of the assets of AAG (other than the
sale of AAGs Specialty Vehicles business); or (3) to
purchase a number of Common Shares that would enable a purchaser
to exercise control of AAG. Accordingly, the Special Committee
did not consider any such offer in evaluating the fairness of
the Merger.
In addition to the alternative of remaining a public company,
the Special Committee considered alternatives to the Merger,
such as entering or acquiring strategically complementary
businesses or pursuing other strategic transactions with third
parties, but determined that such alternatives were not
reasonably
25
available given that they believed that H.I.G. All American,
which has a security interest in the assets of AAG, had
expressed its unwillingness to finance other strategic
transactions.
Given the wide variety of factors considered by the Special
Committee and the Board, and the complexity of these matters,
the Special Committee and the Board did not find it practicable,
and did not attempt, to quantify or otherwise assign relative
weights to any of the foregoing factors considered by the
Special Committee and the Board in their consideration of the
substantive and procedural fairness of the merger agreement and
the Merger to AAG and the Minority Shareholders. In addition,
individual members of the Special Committee and the Board may
have assigned different weights to various factors. Rather, each
of the Special Committee and the Board approved the merger
agreement and the Merger, determined that the merger agreement
and the Merger are advisable and fair to, and in the best
interests of, AAG and the Minority Shareholders and recommended
the adoption of the merger agreement and approval of the Merger
based on the totality of the information presented to and
considered by it.
The Board believed that there was no need to retain an
unaffiliated representative to act solely on behalf of the
Minority Shareholders because the independence of the members of
the Special Committee permitted the Special Committee to
effectively represent the interests of the Minority Shareholders.
Position
of Acquiror and H.I.G. All American as to the Fairness of the
Merger
The rules of the SEC require Acquiror and H.I.G. All American to
express their belief as to the fairness of the Merger to the
Minority Shareholders. Acquiror and H.I.G. All American believe
that the Merger is both procedurally and substantively fair to
the Minority Shareholders. Acquiror and H.I.G. All American base
this belief on the following factors, each of which, in their
judgment, supports their view as to the fairness of the Merger:
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as the Merger Consideration, Acquiror will pay $.20 in cash and
one trust unit for each of the outstanding Common Shares held by
the Minority Shareholders, and with respect to which
dissenters rights have not been properly exercised and
perfected under Indiana law. Acquiror and H.I.G. All American
believe that this is relevant to the following factors
supporting their view as to the fairness of the Merger:
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the aggregate value of the cash portion of Merger Consideration
of $.20 per share, as described above, represents a premium of:
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122% to the closing price of Common Shares on November 5,
2010, the last trading day prior to the date of the announcement
of the Merger;
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66.7% to the closing price of Common Shares on November 1,
2010, the last trading day one week prior to the date of the
announcement of the Merger;
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23.2% to the
30-day
average closing prices of Common Shares for the
30-day
period prior to the date of the announcement of the Merger;
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in addition to the Cash Consideration, the Minority Shareholders
will participate in their pro rata portion of the net proceeds
from the sale of the Specialty Vehicles business in excess of
$5 million if the sale meets the other requirements of the
merger agreement. These proceeds, if obtained, could exceed the
cash portion of the Merger Consideration;
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in light of AAGs losses of $23.7 million for the nine
months ended September 30, 2010 and $4.7 million and
$69 million for 2009 and 2008, respectively, as well as
AAGs liquidity issues and questions as to AAGs
ability to continue as a going concern, Acquiror and H.I.G. All
American considered the liquidation value of AAG and determined
that it was unlikely the Minority Shareholders would receive any
value in a liquidation of AAG;
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the cash portion of the Merger Consideration exceeded the cash
offered by the private equity firm to H.I.G. All American and
the trust units offer a greater value attributable to the
Specialty Vehicles
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26
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business than the private equity firm offered H.I.G. All
American, but most notably the private equity firms
proposal did not include consideration to the Minority
Shareholders; and
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the Merger is not subject to a financing condition, which limits
the execution risk attached to the completion of the Merger,
subject to the satisfaction of the conditions to the completion
of the Merger as described in this proxy statement/prospectus.
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In addition, Acquiror and H.I.G. All American believe that the
Merger is procedurally fair to the Minority Shareholders of AAG,
based on the following factors:
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the vote for approval of the proposal relating to the Merger
required the approval of the Special Committee in its sole
discretion under the loan agreement with H.I.G. All American,
which it could have elected not to provide;
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the AAG Board, by actions taken without the participation of the
two directors affiliated with H.I.G. All American and after
considering the majority recommendation of the Special Committee
(which is comprised entirely of independent directors and had
engaged independent legal and financial advisors to assist the
Special Committee) has approved and declared advisable the
merger agreement, has determined that it and the Merger are fair
to and in the best interests of AAG and the Minority
Shareholders, and has recommended that AAG shareholders vote for
approval of the proposal to adopt the merger agreement and the
Merger; and
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the AAG Special Committee requested and received from Houlihan
Lokey an opinion, dated November 8, 2010, as to the
fairness, from a financial point of view and as of the date of
the opinion, of the Merger Consideration to be received by
holders of Common Shares (other than excluded holders).
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Acquiror and H.I.G. All American also considered the following
factors, each of which they considered to be negative in their
considerations concerning the fairness of the terms of the
transaction:
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any AAG shareholders that receive Merger Consideration in the
form of cash and trust units in exchange for all of their AAG
Common Shares will cease to participate in the future earnings
or growth of AAG and its subsidiaries or benefit from increases,
if any, in the value of AAG and its subsidiaries, following
completion of the Merger, other than a contingent right to
receive a pro rata share of the net proceeds of a sale of the
Specialty Vehicles business, if the Specialty Vehicles business
is sold in accordance with the terms and conditions of the
merger agreement;
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as to the Merger Consideration, Acquiror and H.I.G. All
Americans interests are adverse to the financial interests
of AAGs Minority Shareholders. In addition, as described
under Interests of Certain Persons in the Merger,
certain executive officers of AAG may have actual or potential
conflicts of interest in connection with the Merger; and
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the value of the trust units may be indeterminate or ultimately
result in no value if the Specialty Vehicles business is not
sold in a manner to satisfy the requirements of the merger
agreement.
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Acquiror and H.I.G. All American did not find it practicable to
assign, nor did either of them assign, relative weights to the
individual factors considered in reaching their conclusion as to
fairness.
Further, net book value, which is an accounting concept, was not
considered as a factor because Acquiror and H.I.G. All American
believe that net book value is not a material indicator of the
value of AAG but rather is indicative of historical costs.
The foregoing discussion of the information and factors
considered and given weight by Acquiror and H.I.G. All American
is not intended to be exhaustive, but includes the factors
considered by Acquiror and H.I.G. All American that each
believes is material.
27
Purposes
and Structure of the Merger
The statements in this section are made solely for the purpose
of complying with the requirements of
Rule 13e-3
and related rules under the Exchange Act.
AAG
AAGs purpose for engaging in the transactions contemplated
by the merger agreement is to address AAGs critical
liquidity difficulties in a manner that results in some return
to the Minority Shareholders. AAG considered other possible
transactions, including the sale of certain assets of AAG or the
orderly liquidation of AAG, but concluded that other structures
were not practical, either because of AAGs inability to
obtain additional financing from H.I.G. All American or other
sources, or AAGs conclusion that the transaction would not
result in any return for the Minority Shareholders. The Merger
affords the Minority Shareholders an opportunity to dispose of
their shares at a premium over recent market prices. In making
this determination, the Board and the Special Committee
considered the facts that (i) no firm offer for a
transaction comparable to the Merger has previously been
available to the AAG and the Minority Shareholders and
(ii) the relatively thin trading volume of the Common
Shares has made it difficult for shareholders to liquidate
positions in Common Shares of a significant size without
depressing the market price of the Common Shares and,
consequently, receiving less than full value for their shares.
In light of the foregoing, the Board and the Special Committee
believe that the Merger is more favorable to the Minority
Shareholders than any reasonably available alternative,
including maintaining the status quo and remaining a public
company. Among other things, if AAG remains a public company,
the Minority Shareholders ability to receive returns on
their investments in the Common Shares as favorable as the
return offered by the Merger will be limited by the shares
then current price and limited trading value and volume, the
absence of viable suitors other than Acquiror, the likelihood of
either an orderly liquidation or bankruptcy, and the market
price of the Common Shares which recently had been substantially
lower than the Merger Consideration and is subject to
substantial uncertainties because it depends on, among other
things, AAGs performance and prospects, the performance of
the financial markets, and general industry and economic
conditions. For these reasons, and the reasons discussed under
Fairness of the Merger; Reasons for the
Recommendation of the Special Committee and the Board, the
Board has determined that the merger agreement and the Merger
are advisable and fair to, and in the best interests of, AAG and
the Minority Shareholders at this time.
Acquiror
Acquiror believes that the Merger will allow it to address
AAGs liquidity and profitability needs through its own
strategies that differ from AAGs current strategies. By
owning all of AAG, Acquiror will have control over the Board of
Directors and greater access to management and the operational
issues facing AAG. Acquiror will seek to eliminate the costs of
remaining a public company and the Merger should render certain
shareholder litigation moot. Acquiror believes that the Merger
would create a leaner, more agile business model, which will
provide a more stable platform for future growth and allow the
company to respond to changes in the marketplace faster.
Acquiror will look to streamline manufacturing and other
processes and reduce general and administrative costs. Further,
a successful sale of the Specialty Vehicles business will allow
AAGs management to focus more closely on the Housing
Business and avoid the distractions of operating disparate
businesses.
AAG
Management Liquidation Analysis
In connection with the Special Committees and the
Boards review and evaluation of the Merger, AAG management
prepared and provided the Special Committee and the Board with a
liquidation analysis of AAG. The liquidation analysis of AAG
also was provided to Houlihan Lokey and relied upon by Houlihan
Lokey for purposes of its opinion. In its liquidation analysis,
AAG management estimated potential realizable values for AAG
assets in an orderly liquidation and remaining amounts available
upon completion of such liquidation for distribution to holders
of Common Shares based on the book values as of
September 30, 2010 of AAGs assets and liabilities as
reported in AAGs public filings and internal estimates of
AAG management. AAG management discounted the book values as of
September 30, 2010 of AAGs assets by approximately 0%
to
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98.1% depending on asset type, which percentages reflected
managements assessments as to the portion of the book
value of such assets that management believed would not be
recovered in an orderly liquidation. AAG management further
reduced AAGs cash and cash equivalents by overhead costs
associated with an orderly liquidation of AAG as estimated by
AAG management. Based on the book value of AAGs
liabilities as of September 30, 2010 (as adjusted by AAG
management in the case of accrued expenses and long-term debt
and other long-term payables), the AAG management liquidation
analysis indicated that no amount would be available upon
completion of an orderly liquidation for distribution to holders
of Common Shares.
The assumptions and estimates contained in the AAG management
liquidation analysis and the results of such analysis are not
necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less
favorable than those suggested by such analysis. In addition,
the AAG management liquidation analysis does not purport to be
an appraisal or to reflect the prices at which assets,
businesses or securities actually may be sold. Accordingly, the
assumptions and estimates used in, and the results derived from,
the AAG management liquidation analysis are inherently subject
to substantial uncertainty.
Certain
Effects of the Merger
If the Merger is completed, Acquisition Sub will merge with and
into AAG, with AAG continuing as the surviving corporation and a
wholly owned subsidiary of Acquiror. At the effective time of
the Merger, the following will occur:
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each outstanding Common Share held by the Minority Shareholders
(other than Minority Shareholders that perfect their
dissenters rights under Indiana law) will be canceled and
cease to exist and will be automatically converted into the
right to receive the Merger Consideration;
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each outstanding Common Share held by Acquiror or its affiliates
will be canceled and cease to exist and will be automatically
converted into a right to receive one unit of the beneficial
interest of the Specialty Vehicles Liquidating Trust;
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each Common Share held by AAG or any of its subsidiaries,
including any Common Shares held as treasury stock, will be
canceled and cease to exist, and no payment will be made with
respect to those Common Shares;
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each Minority Shareholder that perfects its dissenters
rights under Indiana law will receive the fair value of its
Common Shares; and
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each common share of Acquisition Sub will be converted into and
become one fully paid and non-assessable common share, no par
value, of AAG, as the surviving corporation of the Merger, and
those shares will constitute the only outstanding shares of
capital stock of AAG.
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If the Merger is completed, the Minority Shareholders will no
longer have any interest in, and will not be shareholders of,
AAG. Accordingly, such shareholders will not benefit from any
future earnings and growth of AAG, any increases in the value of
AAG (other than as holders of units of beneficial interest in
the Specialty Vehicles Liquidating Trust) or any future
dividends that may be paid, and will no longer bear the risk of
any decreases in the value of AAG (other than as holders of
units of beneficial interest in the Specialty Vehicles
Liquidating Trust). Instead, each such shareholder (other than
shareholders that perfect their dissenters rights) will
have the right to receive, upon consummation of the Merger, the
Merger Consideration for each Common Share held. The benefit of
the Merger to the Minority Shareholders is the payment of a
premium, in cash, plus an interest in the Specialty Vehicles
Liquidating Trust. All shareholders (other than Acquiror and its
affiliates) will receive the same amount for their respective
Common Shares, rather than taking the risks associated with
attempting to sell their Common Shares in the open market.
If the Merger is completed, AAG will be owned directly by
Acquiror, which is an affiliate of H.I.G. All American.
Following the Merger, H.I.G. All American and its affiliates
will, by virtue of their ownership of Acquiror, benefit from any
future earnings and growth of AAG and also bear the risk of any
decrease in the
29
value of AAG. Holders of the trust units will also bear the risk
of a decrease in the value of the Specialty Vehicles business.
Acquirors interest in the net book value and net earnings
of the surviving corporation after the consummation of the
Merger will be 100%. The Minority Shareholders will no longer
hold any direct or indirect interest in the surviving
corporation and, therefore, will no longer own any interest in
its net book value or net earnings after the consummation of the
Merger, other than as holders of trust units in the Specialty
Vehicles Liquidating Trust.
Immediately after the consummation of the Merger, based on
AAGs unaudited financial statements for the quarterly
period ended September 30, 2010 and calculated based on the
net book value of AAG at September 30, 2010,
Acquirors 100% interest in the surviving
corporations net book value would equal approximately
$30,180,285 (assuming that the consummation of the Merger would
reduce the shareholders equity of AAG by $3,253,244), as
compared to a direct interest in AAGs net book value of
$18,635,275 at September 30, 2010.
The Common Shares are currently registered with the SEC under
the Exchange Act and quoted in the pink sheets in
the over-the-counter market under the symbol COHM.
As a result of the Merger, the registration of the Common Shares
under the Exchange Act will be terminated, price quotations for
the Common Shares will no longer be available, AAG will be
relieved of its obligation to comply with the proxy rules under
Section 14 of the Exchange Act, and AAGs officers,
directors and beneficial owners of more than 10% of its Common
Shares will be relieved of the reporting requirements and
restrictions on short-swing trading under Section 16 of the
Exchange Act. Further, AAG will not be subject to the periodic
reporting requirements of the Exchange Act and will not have to
file information with the SEC. Accordingly, significantly less
information will be required to be made publicly available than
is presently the case.
Upon the termination of the registration of the Common Shares
under the Exchange Act, the expenses related to compliance with
the requirements of the Exchange Act discussed above, as well as
the expenses of being a public company generally, will be
eliminated. Because Acquiror will be the only shareholder of AAG
after the consummation of the Merger, it, and not the Minority
Shareholders, will benefit from any net savings resulting from
the termination of AAGs Exchange Act registration.
Moreover, because the Common Shares will cease to be publicly
traded after the consummation of the Merger, Acquiror will bear
the risks associated with the lack of liquidity in its
investment in AAG.
Plans for
AAG after the Merger
If the Merger is completed, AAG will be merged with Acquisition
Sub, and AAG will be the surviving corporation. Following such
completion, Acquiror currently expects that the Housing Business
will be conducted as a stand alone business and the Specialty
Vehicles business will be put up for sale in accordance with the
merger agreement. As a result, Acquiror will seek to refinance
AAG without the Specialty Vehicles business to address its
liquidity needs. This may result in AAG having more indebtedness
outstanding after the Merger than it does today. Acquiror will
replace the current Board of Directors of AAG with its own
designees as provided in the merger agreement and will evaluate
which members of management will focus on the Housing Business
and which will focus on the Specialty Vehicles business.
Acquiror may bring in outside consultants and other vendors to
assist in this analysis and to facilitate an orderly transition
for management. Acquiror may in the future decide to sell assets
of AAG that it no longer considers to be vital to the Housing
Business, although Acquiror has no current plans to do so.
Acquiror has reviewed and will continue to review various
potential business strategies that it may consider in the event
that the Merger is completed. Acquiror may seek to find cost
savings for AAG by coordinating AAGs purchasing,
administrative and other departments with similar functions with
those of other portfolio companies of H.I.G. Capital and its
affiliates. Acquiror expects to continue to review AAGs
assets, corporate structure, capitalization, operations,
properties, policies, management and personnel to consider and
determine what other changes, if any, would be appropriate or
desirable. Acquiror expressly reserves the right to make any
changes it deems necessary, appropriate or convenient in light
of its review or future developments.
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Except as otherwise described in this proxy
statement/prospectus, Acquiror has no current plans or proposals
or negotiations that relate to or would result in: (i) an
extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving AAG or any of its
subsidiaries; (ii) any purchase, sale or transfer of a
material amount of assets of AAG or any of its subsidiaries;
(iii) any material change in the indebtedness or
capitalization of AAG; (iv) any change in the present board
of directors or management of AAG, including , but not limited
to, any plans or proposals to change the number or the term of
directors and to fill any existing vacancies on the AAG Board or
to change any material term of the employment contract of any
executive officer; or (v) any other material change in
AAGs corporate structure or business. See
Purposes and Structure of the Merger,
and THE MERGER AGREEMENT Acquirors Reasons
for the Merger, beginning on pages 27, and 84,
respectively, of this proxy statement/prospectus.
Conduct
of the Business of AAG if the Merger is Not
Consummated
If the Merger is not consummated, the Board expects that AAG
will continue to operate substantially as it is presently
operated.
Interests
of Certain Persons in the Merger
In considering the recommendation of our board of directors that
you vote for the merger agreement and approve the Merger, you
should be aware that some of our executive officers and
directors may have economic interests in the Merger that are
different from, or in addition to, those of our shareholders
generally. Our board of directors was aware of and considered
these interests, among other matters, in reaching its
determination that the merger agreement and the transactions
contemplated thereby, including the Merger, are advisable for,
and in the best interests of, us and our shareholders, in
approving the merger agreement and the transactions contemplated
thereby, including the Merger, and in making its recommendation
that our shareholders vote for the adoption of the merger
agreement and approval of the Merger. These interests include
the following:
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the surviving corporation will maintain and honor all
indemnification arrangements in place for all our past and
present directors and officers for acts or omissions occurring
at or before the effective time of the Merger;
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the surviving corporation will maintain and honor all
indemnification provisions and exculpation provisions in favor
of each of our present or former directors and officers that is
set forth in our certificate of incorporation or bylaws in
effect as of the date of the merger agreement; and
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the surviving corporation will purchase a directors and
officers liability insurance policy which will cover those
persons who are covered by our directors and
officers liability insurance policy for events occurring
before the effective time of the Merger on substantially the
same terms as those applicable to our current directors and
officers, subject to certain limitations.
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Mr. Lavers, our Chief Executive Officer, will hold the
office of President of AAG after the effective time of the
Merger. Ms. Colleen Zuhl, our Chief Financial Officer, will
hold the offices of Vice President and Treasurer of AAG after
the effective time of the Merger. One of the conditions to the
obligation of Acquiror and Acquisition Sub to consummate the
Merger is the entry by Mr. Lavers and Ms. Zuhl into
new employment arrangements with AAG satisfactory to Acquiror.
Mr. Sanford and Mr. de Armas will be the only directors of
AAG immediately after the effective time of the Merger.
Mr. Sanford and Mr. de Armas are employees of an affiliate
of H.I.G. All American.
Insurance
and Indemnification of AAG Officers and Directors.
The surviving corporations articles of incorporation and
bylaws will provide for indemnification and exculpation from
liability of directors and officers of the surviving corporation
that are no less favorable to such directors and officers, taken
as a whole, as the corresponding director and officer
indemnification provisions of our current articles of
incorporation and bylaws. In addition, the surviving corporation
will not amend its articles of incorporation or bylaws for four
years after the effective time of the Merger in any way that
would adversely affect the indemnification rights of our
officers and directors.
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The surviving corporation will indemnify and hold harmless our
present and former directors and officers against all
liabilities arising out of the actions or omissions of such
persons service, including the advancement of certain
expenses, for all actions arising before the effective time of
the Merger or in connection with the Merger.
The surviving corporation will also purchase a directors
and officers liability insurance policy which will cover
those persons who are covered by our directors and
officers liability insurance policy for events occurring
before the effective time of the Merger on substantially the
same terms as those applicable to our current directors and
officers, but the surviving corporation will not be obligated to
pay any insurance premium in excess of 200% of our current
premium for such policies.
Voting
Intentions of the Directors and Executive Officers of
AAG
Six of the nine members of our Board of Directors,
Mr. Lavers, Mr. Johnson, Mr. Donald W. Hudler,
Mr. Geoffrey Bloom, Mr. Edwin Miller and Mr. John
Goebel, have informed us that they intend to vote their Common
Shares in favor of the approval of the merger agreement.
Mr. Sanford and Mr. de Armas do not directly own any Common
Shares, but each of them is an employee of an affiliate of
H.I.G. All American. Acquiror has agreed to cause H.I.G. All
American to vote its Common Shares in favor of the approval of
the merger agreement and the Merger. One of our directors,
Mr. Robert J. Deputy, as informed us that he intends to
vote against approval of the merger agreement and the Merger.
Each of our executive officers has informed us that they intend
to vote in favor of the approval of the merger agreement and the
Merger.
Financing
of the Merger
Acquiror intends to pay the Cash Consideration out of available
funds. The completion of the Merger does not depend on financing
from a third party; however, Acquiror may obtain financing if
available upon terms and conditions acceptable to it.
Material
United States Federal Income Tax Consequences of the
Merger
The following is a summary of the Mergers material United
States federal income tax considerations applicable to AAG
shareholders. This summary is based upon the Internal Revenue
Code of 1986, as amended (the Code), Treasury
Regulations promulgated thereunder, administrative
pronouncements and judicial decisions, all as in effect and
available as of the date hereof and all of which are subject to
change or differing interpretations, possibly with retroactive
effect, which could affect the tax consequences described below.
Neither AAG nor Acquiror have sought, nor will they seek, a
ruling from the Internal Revenue Service (IRS)
regarding the federal income tax consequences of the Merger. As
such, there can be no assurance that the IRS will not take a
contrary position regarding the tax consequences of the Merger
described in this discussion or that any such contrary position
would not be sustained. This summary does not address all
aspects of United States federal income taxation which may be
relevant to particular shareholders in light of their individual
investment circumstances, such as shareholders subject to
special tax rules, including, without limitation, certain
financial institutions, dealers in securities or commodities,
financial institutions, insurance companies, broker-dealers, and
tax-exempt organizations or to S corporations, certain
former citizens or residents of the United States, persons who
are subject to alternative minimum tax, persons that have a
functional currency other than the United States
dollar, shareholders that acquired the Common Shares in
connection with the exercise of stock options, stock purchase or
restricted stock plans or in other compensatory transactions, or
as part of a straddle, hedge,
conversion, constructive sale, or other
integrated security transactions for United States federal
income tax purposes, all of whom may be subject to tax rules
that differ significantly from those discussed below.
This summary does not discuss any United States federal income
tax considerations to AAG shareholders that are not United
States holders (as defined below). If you are not a United
States holder you should consult with your own tax advisor as to
the United States federal, state and local tax laws and foreign
tax laws with respect to the Merger. In addition, this summary
does not discuss any United States federal income tax
considerations to AAG shareholders that exercise appraisal or
dissenters rights under Indiana state law. This
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summary is limited to AAG shareholders that hold their Common
Shares as a capital asset (generally, property held
for investment) under the Code. This summary also does not
address the state, local or foreign tax consequences of
participating in the Merger or any United States tax other than
federal income tax. You are urged to consult your own tax
advisors regarding the United States federal income tax
considerations of the Merger, as well as the effects of state,
local, and foreign tax laws.
For purposes of this summary, a United States holder
is an AAG shareholder that is, for United States federal income
tax purposes, (i) an individual who is a citizen or
resident of the United States; (ii) a corporation or other
entity taxable as a corporation that is created in, or organized
under the laws of, the United States or any state or political
subdivision thereof or any other entity treated as a
domestic corporation under the Code; (iii) an
estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its
source; or (iv) a trust (A) the administration of
which is subject to the primary supervision of a United States
court and which has one or more United States
persons, under the Code, who have the authority to control
all substantial decisions of the trust or (B) that has
otherwise elected to be treated as United States
person.
If a partnership holds Common Shares, the tax treatment of a
partner in such partnership will generally depend upon the
status of the partner and the activities of the partnership. If
you are a partner of a partnership holding Common Shares, you
should consult your tax advisor regarding the tax considerations
of the Merger.
This discussion is for general information only and should
not be construed as tax advice. It is a summary and does not
purport to be a comprehensive analysis or description of all
potential United States federal income tax consequences of the
Merger. We and Acquiror urge you to consult your tax advisor
with respect to the particular United States federal, state,
local or foreign tax consequences of the Merger to you.
General
The receipt of the Merger Consideration by a United States
holder in exchange for Common Shares should be a fully taxable
transaction for United States federal income tax purposes. The
amount of gain or loss a United States holder recognizes, the
timing, and potentially the character of a portion of such gain
or loss, depends in part on the United States federal income tax
treatment of the liquidating trusts units. The trust units
represent a contingent right to receive a pro rata portion of
the net proceeds of the sale of AAGs Specialty Vehicles
business under certain conditions, the occurrence of which are
substantially uncertain.
Because of the issuance of the trust units, the receipt of the
Merger Consideration may be treated as either a closed
transaction or an open transaction for United
States federal income tax purposes. There is no authority
directly on point addressing whether the sale of property (in
this case Common Shares) for, in whole or in part, contingent
value rights with characteristics similar to the trust units
should be taxed as an open transaction or a
closed transaction; and such question is inherently
factual in nature. Accordingly, holders are urged to consult
their tax advisors regarding this issue. On the eventual
reporting of gain, if any, on the receipt of the trust unit, the
installment method will not be available because Common Shares
are traded on an established securities market. The trust units
may be treated as debt instruments for United States federal
income tax purposes. Such treatment is unlikely, however, and
the discussion below does not address the tax consequences of
such potential characterization. The following sections discuss
the possible tax treatment if the receipt of the Merger
Consideration is treated as an open transaction or a closed
transaction. We and Acquiror urge you to consult your tax
advisor with respect to the proper characterization of the
receipt of the trust units.
Treatment
of Consideration Received Upon Consummation of the
Merger
Treatment as Open Transaction. The
receipt of the trust units would generally be treated as an
open transaction if the fair market value of the
trust units cannot be reasonably ascertained. If the
receipt of the Merger Consideration is treated as an open
transaction for United States federal income tax purposes,
a United States holder will generally recognize a capital gain
upon consummation of the Merger if and to the extent
(x) the sum of (i) the amount of cash, if any,
received and (ii) the fair market value of any other
33
property received (other than the trust units) exceeds
(y) such United States holders adjusted tax basis in
Common Shares surrendered pursuant the Merger.
Subject to the Section 483 Rules discussed below, if the
transaction is open for United States federal income
tax purposes, the trust units would not be taken into account in
determining the holders taxable gain upon receipt of the
Merger Consideration and a United States holder would take no
tax basis in the trust units. A United States holder would
recognize a capital gain as payments with respect to the trust
units are made or deemed made in accordance with a United States
holders regular method of accounting for United States
federal income tax purposes, but only to the extent the sum of
such payments (and all previous payments under the trust units),
together with the amount received upon consummation of the
Merger discussed above, exceeds such United States holders
adjusted tax basis in Common Shares surrendered pursuant the
Merger.
Subject to the Section 483 Rules discussed below, if the
transaction is open for United States federal income
tax purposes, a United States holder who does not receive
cumulative payments pursuant to the Merger with a fair market
value at least equal to such United States holders
adjusted tax basis in Common Shares surrendered pursuant the
Merger, will recognize a capital loss in the year that the
United States holders right to receive further payments
under the trust units terminates.
Gain or loss recognized in the transaction must be determined
separately for each identifiable block of Common Shares
surrendered in the Merger (i.e., Common Shares acquired at the
same cost in a single transaction). Any such gain or loss will
be long-term if Common Shares are held for more than one year
before such disposition. With respect to gain in taxable years
commencing before January 1, 2011, the maximum long-term
capital gain tax rate for an individual United States holder is
15%. For gain in taxable years after December 31, 2010,
under current law (though subject to change) the long-term
capital gain rate for an individual United States holder is 20%.
In addition, the deductibility of both long-term and short-term
capital losses is subject to certain limitations.
Treatment as Closed Transaction. If the
value of the trust units can be reasonably
ascertained the transaction should generally be treated as
closed for United States federal income tax
purposes, in which event a United States holder generally should
recognize capital gain or loss for United States federal income
tax purposes upon consummation of the Merger equal to the
difference between (x) the sum of (i) the fair market
value of the trust units received, (ii) the amount of cash,
if any, received and (iii) the fair market value of any
other property received and (y) such United States
holders adjusted tax basis in Common Shares surrendered
pursuant the Merger.
Basis and Holding Period. If the
transaction is closed for United States federal
income tax purposes, a United States holders initial tax
basis in the trust units will equal the fair market value of the
trust units on the date of the consummation of the Merger. The
holding period of the trust units will begin on the day
following the date of the consummation of the Merger.
Future
Payments on the Trust Units
Treatment as Open Transaction. If the
transaction is treated as an open transaction, a
payment pursuant to a trust unit, to a United States holder of a
trust unit, should be treated as a payment under a contract for
the sale or exchange of Common Shares to which Section 483
of the Code might apply (the Section 483
Rules). Under the Section 483 Rules, a portion of the
payment(s) made pursuant to a trust unit will be treated as
interest if such payment pursuant to a trust unit is due more
than six (6) months after the date a United States holder
becomes entitled to receive the Merger Consideration in exchange
for Common Shares. Any interest portion of a payment made
pursuant to a trust unit will be ordinary income to the United
States holder of a trust unit. The interest amount will equal
the excess of the amount received over its present value at the
consummation of the Merger, calculated using the applicable
federal rate as the discount rate. The United States holder of a
trust unit must include in the United States holders
taxable income interest pursuant to the Section 483 Rules
using such United States holders regular method of
accounting. The portion of the payment pursuant to a trust unit
that is not treated as interest under the Section 483 Rules
will generally be treated as a payment with respect to the sale
of Common Shares, as discussed above, in Treatment as an Open
Transaction.
34
Treatment as Closed Transaction. If the
transaction is treated as a closed transaction,
there is no direct authority with respect to the tax treatment
of holding and receiving payments with respect to property
similar to the trust units. It is possible that payments
received with respect to a trust unit, up to the amount of the
holders adjusted tax basis in the trust unit, may be
treated as a non-taxable return of a United States holders
adjusted tax basis in the trust unit, with any amount received
in excess of basis treated as gain from the disposition of the
trust unit. Additionally, a portion of any payment received with
respect to a trust unit may constitute imputed interest or as
ordinary income under the Section 483 Rules. If not treated
as described above, payments with respect to a trust unit may be
treated as (i) payments with respect to a sale of a capital
asset, (ii) ordinary income or (iii) dividends.
Due to the legal and factual uncertainty regarding the
valuation and tax treatment of the trust units, you are urged to
consult your tax advisors concerning the recognition of gain, if
any, resulting from the receipt of the trust units in the Merger
and the receipt of payments, if any, under the trust units after
the Merger.
Information
Reporting and Backup Withholding
Under United States federal income tax laws, any payments made
to a U.S. holder pursuant to the Merger in exchange for
Common Shares generally must be reported to the IRS, and
Acquiror may be required to backup withhold 28% of
any such payment. In addition, payments pursuant to the trust
units may be subject to
back-up
withholding and information reporting. To avoid such backup
withholding, a United States holder should provide the trustee
or other applicable person a properly completed
Form W-9
(or appropriate substitute form), signed under penalties of
perjury, including such holders current Taxpayer
Identification Number (TIN) and other
certifications. If the United States holder does not provide the
payment agent with a TIN and other required certifications, the
payment agent will backup withhold 28% of payments made to the
holder (unless the holder is an exempt recipient as described in
the next sentence and demonstrates this fact).
Certain United States holders (including, among others,
corporations) are exempt from these backup withholding and
reporting requirements. Exempt holders who are not subject to
backup withholding should indicate their exempt status on a
Form W-9
by entering their correct TIN, marking the appropriate box and
signing and dating the
W-9 in the
space provided.
Backup withholding is not an additional tax. To the extent
amounts withheld are in excess of a United States holders
actual tax liability, such U.S. holder should consult a tax
advisor concerning the procedure for obtaining a credit or
refund of such amounts withheld.
Anticipated
Accounting Treatment
In accordance with generally accepted accounting principles in
the United States, Acquiror will account for the Merger under
the acquisition method of accounting in accordance with
Statement of Financial Accounting Standards No. 141
(revised 2007), Business Combinations. Under the
acquisition method of accounting, the total estimated purchase
price is allocated to the net tangible and intangible assets of
AAG based on their estimated fair values. Management has made a
preliminary allocation of the estimated purchase price to the
tangible and intangible assets acquired and liabilities assumed
based on various preliminary estimates. A final determination of
these estimated fair values, which cannot be made before the
completion of the Merger, will be based on the actual net
tangible and intangible assets of AAG that exists as of the date
of completion of the Merger, and upon the final purchase price.
Fees and
Expenses
Whether or not the Merger is consummated and except as otherwise
provided in this proxy statement/prospectus or as set forth in
the merger agreement, each party to the merger agreement will
bear its respective fees and expenses incurred in connection
with the Merger. Estimated fees and expenses to be incurred in
35
connection with the Merger by AAG, on the one hand, and Acquiror
and Acquisition Sub, on the other hand, in connection with the
Merger are approximately as follows:
|
|
|
|
|
AAG:
|
|
|
|
|
Financial Advisor Fees
|
|
$
|
300,000
|
|
Legal Fees and Expenses
|
|
|
150,000
|
|
Special Committee Fees and Expenses
|
|
|
15,000
|
|
SEC Filing Fees
|
|
|
79
|
|
Accounting Fees
|
|
|
40,000
|
|
Printing and Mailing Expenses
|
|
|
40,000
|
|
Transfer Agent Fees and Expenses
|
|
|
35,500
|
|
Miscellaneous
|
|
|
25
|
|
Trustee Fees
|
|
|
______
|
|
Shareholder Meeting Fees and Expenses
|
|
|
5,000
|
|
|
|
|
|
|
Total
|
|
$
|
______
|
|
|
|
|
|
|
Acquiror and, Acquisition Sub:
|
|
|
|
|
Legal Fees and Expenses
|
|
$
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
INFORMATION
CONCERNING THE SPECIAL MEETING
Time,
Place and Date
AAG is furnishing this proxy statement/prospectus to holders of
Common Shares in connection with the solicitation of proxies by
the Board for use at the Special Meeting to be held
at
on ,
, 201 at :00 .m. local time
and at any adjournment or postponement of that meeting.
Purpose
of the Special Meeting
At the Special Meeting, you will be asked to consider and vote
upon a proposal to adopt the merger agreement and approve the
Merger. The Board, acting upon the recommendation of the Special
Committee, approved the merger agreement and the Merger,
determined that the merger agreement and the Merger are
advisable and fair to, and in the best interests of, AAG and the
Minority Shareholders and recommends that you vote FOR adoption
of the merger agreement and approval of the Merger.
The Board has fixed the close of business
on ,
201 as the record date to determine the holders of
Common Shares entitled to receive notice of, and to vote at, the
Special Meeting. Each outstanding Common Share is entitled to
one vote on all matters coming before the Special Meeting. The
presence, either in person or by proxy, of a majority of the
outstanding Common Shares entitled to vote at the Special
Meeting is necessary to constitute a quorum for the transaction
of business at the Special Meeting. H.I.G. All American is
obligated pursuant to the merger agreement to be represented at
the Special Meeting either in person or by proxy. Accordingly,
based on the beneficial ownership of H.I.G. All American, the
presence of a quorum at the Special Meeting is assured.
How to
Vote
Registered holders of Common Shares may vote by submitting a
proxy card, voting electronically via the Internet or
telephonically or voting in person at the Special Meeting. To
submit a proxy card, shareholders must complete, sign, date and
return the enclosed proxy card in time to be received by AAG
prior to the Special Meeting, or deliver a completed and signed
proxy card in person at the Special Meeting. Alternatively,
36
registered shareholders may vote electronically via the Internet
or telephonically by following the instructions on the enclosed
proxy card. The deadline for voting electronically via the
Internet or telephonically
is :00 .m.,
Time,
on ,
201 . There are no fees or charges associated with
voting electronically via the Internet or telephonically other
than fees or charges, if any, that shareholders pay for access
to the Internet or for telephone service. To vote in person at
the Special Meeting, a registered shareholder must attend the
Special Meeting and obtain and submit a ballot. Ballots for
voting in person will be available at the Special Meeting.
If your Common Shares are held in street name by a
bank or broker, your bank or broker should have forwarded these
proxy materials, as well as voting instructions, to you. Please
follow the voting instructions provided to vote your Common
Shares. If your Common Shares are held in street
name, you may not vote your Common Shares in person at the
Special Meeting unless you obtain a power of attorney or legal
proxy from the record holder of your Common Shares.
Required
Vote; Calculation of Vote; Abstentions and Broker
Non-Votes
The adoption of the merger agreement and approval of the Merger
requires the affirmative vote of the holders of a majority of
the outstanding Common Shares. H.I.G. All American beneficially
owns 20,483,865 Common Shares, or approximately 55.7% of the
outstanding Common Shares entitled to vote at the Special
Meeting, and Acquiror has agreed, pursuant to the merger
agreement, to cause H.I.G. All American to vote all the Common
Shares it beneficially owns in favor of the adoption of the
merger agreement and approval of the Merger. Accordingly,
shareholder approval of the merger agreement and the Merger is
assured.
At the Special Meeting, the results of shareholder voting will
be tabulated by the inspector of elections appointed for the
Special Meeting. All Common Shares represented at the Special
Meeting by properly executed proxies received prior to or at the
Special Meeting, unless previously revoked, will be voted at the
Special Meeting in accordance with the instructions on the
proxies. Except for broker non-votes, proxies submitted to AAG
that do not provide voting instructions will be voted FOR the
adoption of the merger agreement and approval of the Merger. As
explained below in the section entitled RIGHTS OF
DISSENTING SHAREHOLDERS, shareholders voting Common Shares
in favor of the adoption of the merger agreement and approval of
the Merger means that the shareholder owning those Common Shares
will not have the right to dissent or seek a determination of
the fair value of those Common Shares and receive that fair
value in lieu of the Merger Consideration.
Other than the proposed Merger, AAG does not know of any matters
that are to come before the Special Meeting. If any other
matters are properly presented at the Special Meeting for
action, the persons named in the enclosed proxy will have
discretion to vote on such matters in accordance with their best
judgment. Notwithstanding the foregoing, the persons named in
the proxies will not use their discretionary authority to use
proxies voting against the adoption of the merger agreement and
approval of the Merger to vote in favor of adjournment or
postponement of the Special Meeting.
Banks and brokers who hold Common Shares in street
name may, under the applicable rules of the exchange and
other self-regulatory organizations of which they are members,
sign and submit proxies for such Common Shares and may vote such
Common Shares on routine matters, but such banks and brokers may
not vote such Common Shares on non-routine matters, including
the proposal to adopt the merger agreement and approve the
Merger, without specific instructions from the beneficial owner
of such Common Shares. Proxies that are signed and submitted by
banks and brokers that have not been voted on certain matters as
described in the previous sentence are referred to as
broker non-votes. Properly executed proxies marked
abstain and broker non-votes will
(1) be counted for purposes of determining whether a quorum
has been achieved at the Special Meeting, (2) have the
effect of a vote against the adoption of the merger agreement
and approval of the Merger.
Revocation
of Proxy
If you are a registered shareholder, you may revoke your proxy
at any time before it is exercised at the Special Meeting by
delivering a properly executed proxy card bearing a later date
or a written revocation of
37
your proxy to AAGs Secretary at our corporate offices
before the start of the Special Meeting, submitting a
later-dated vote electronically via the Internet or
telephonically or attending the Special Meeting and voting in
person. Attending the Special Meeting will not, in itself,
revoke a previously submitted proxy. To revoke a proxy in person
at the Special Meeting, you must obtain a ballot and vote in
person at the Special Meeting. If your Common Shares are held in
street name, and you wish to revoke your proxy, you
should follow the instructions provided to you by your bank or
broker.
Proxy
Solicitation
The enclosed proxy is solicited on behalf of the Board. The cost
of preparing, assembling and mailing this proxy
statement/prospectus, the Notice of Special Meeting and the
enclosed proxy card will be borne by AAG. AAG will reimburse
banks, brokers and other nominees for their reasonable expense
in forwarding proxy materials to beneficial owners of Common
Shares. In addition to the solicitation of proxies by mail, the
directors, officers and employees of AAG and its subsidiaries
may solicit proxies by telephone, electronic mail, facsimile,
telegram or in person. Such directors, officers and employees
will not be additionally compensated for this solicitation, but
may be reimbursed for out-of-pocket expenses incurred.
AAG has not authorized any person to give any information or
make any representation not contained in this proxy
statement/prospectus. You should not rely on any such
information or representation as having been authorized.
Surrender
of Stock Certificates
If the merger agreement is adopted and the Merger is approved
and consummated, holders of Common Shares will be sent
instructions regarding the surrender of their certificates
representing Common Shares. Shareholders should not send their
stock certificates until they receive these instructions.
THE
PARTIES
All
American Group, Inc.
AAG was incorporated under the laws of the State of Indiana on
December 31, 1964, as the successor to a proprietorship
established earlier that year. All references to AAG include its
wholly-owned subsidiaries and divisions. AAGs primary
businesses are housing and specialty vehicles. The Housing
Business manufactures and distributes system-built modules for
residential buildings. The Housing Business comprises one of the
nations largest and most recognized producers of
system-built homes and residential structures through its All
American
Homes®,
Mod-U-Kraf®,
and All American Building
Systemstm
brands. The Specialty Vehicles business, through a joint venture
with ARBOC Mobility, manufactures a line of low floor buses that
are compliant with the Americans with Disabilities Act under the
Spirit of Mobility brand name.
On December 26, 2008, AAG completed the sale of
substantially all of the assets of AAGs RV business,
consisting of its recreational vehicle manufacturing and sales
business; therefore, these affected businesses are considered
discontinued operations and have been reported as such in the
financial statements appearing elsewhere in this proxy
statement/prospectus.
Housing
Business
The Housing Business consists of residential structures.
AAGs housing subsidiaries (the All American Homes Group,
All American Building Systems, LLC, and Mod-U-Kraf Homes,
LLC) produce system-built modules for single-family
residences, multi-family duplexes, apartments, condominiums,
hotels and specialized structures for military use.
All American
Homes®
and Mod-U-Kraf
Homes®
design, manufacture and market system-built housing structures.
All American Homes is one of the largest producers of
system-built homes in the United States and has four operations
strategically located in Colorado, Indiana, Iowa and North
Carolina. Mod-U-Kraf operates from a plant in Virginia. AAG
announced on March 10, 2009 the temporary curtailment of
production at the
38
North Carolina facility until backlogs warrant resuming
production. Together these plants serve approximately 383
independent builders in 27 states. System-built homes are
built to the same local building codes as site-built homes by
skilled craftsmen in a factory environment unaffected by weather
conditions during production. Production takes place on an
assembly line, with components moving from workstation to
workstation for framing, electrical, plumbing, drywall, roofing,
and cabinet setting, among other operations. An average
two-module home can be produced in just a few days. As nearly
completed homes when they leave the plant, home modules are
delivered to their final locations, typically in two to seven
sections, and are crane set onto a waiting basement or crawl
space foundation.
All American Building Systems, LLC (AABS) was established by AAG
to pursue opportunities beyond AAGs core single-family
residential housing business. AABS designs and markets
system-built living facilities such as single-family home
subdivisions, apartments, condominiums, townhouses, senior
housing facilities, hotels, dormitories, and military housing
facilities manufactured by AAGs housing plants. The
modules are delivered to the site location for final
installation.
Due to transportation requirements, system-built structures are
often built with more structural lumber than site-assembled
structures. Faster construction times, as
on-site and
in-factory work proceed simultaneously, also allow our customers
to occupy buildings much sooner when compared to site-built
buildings.
The Housing Business participates in the system-built or modular
subset of the overall housing market. Housing is marketed
directly to approximately 383 builders in 27 states who
will sell, rent or lease the buildings to the end-user. The
Housing Business regularly conducts builder meetings to review
the latest in new design options and component upgrades. These
meetings provide an opportunity for valuable builder input and
suggestions at the planning stage. The system-built traditional
homes business has historically been concentrated in the rural,
scattered-lot markets in the geographic regions served. AAG has
also launched initiatives to go direct in selected venues, with
residential home stores offering turn-key houses to
consumers. All American Home Stores are currently operating in
Indiana, Iowa, Ohio, Tennessee and Virginia, and a store will be
opening in Colorado soon.
AAG has also successfully launched initiatives to supply product
into additional markets, including various forms of single and
multi-family residential products for more urban-suburban
markets, group living facilities, military housing,
motels/hotels and other residential structures. All American
Building Systems is responsible for expanding sales into
additional markets through channels outside the traditional
builder/dealer network. Many of these markets are large
project markets such as dormitories, military barracks and
apartments that typically have a long incubation period, but can
result in contracts of a substantial size. Major projects have
become a core competency for AAG.
As a result of transportation costs, the effective distribution
range of system-built homes and residential buildings is
limited. The normal shipping area from each manufacturing
facility is typically 200 to 300 miles for system-built
homes. Major projects can often be shipped greater distances
cost effectively.
The overall strength of the economy and the availability and
terms of financing used by builders, general contractors and
end-users have a direct impact on the sales of the Housing
Business. Consequently, increases in interest rates and the
tightening of credit due to government action, economic
conditions or other causes have adversely affected the Housing
Business sales in the past and could do so in the future.
The Housing Business continued to face a challenging housing
market in 2010. The December 2009 figures on housing starts from
the U.S. Census Bureau showed a 28.7% year-to-year decline
in new single-family homes nationwide, following a 40.5% decline
in 2008.
Systems-built homes are financed and mortgaged using the same
criteria as conventional construction
sometimes with a construction loan pre-delivery. Builders often
maintain relationships with local banking institutions. As a
result of the tightening credit environment, during 2008 AAG
entered into a joint venture with American Home Bank to create
All American Choice Mortgage (AACM) to provide
consumers with a one-stop financing source to obtain
construction loan and permanent mortgage financing. There is no
recourse to the Housing Business from any homes financed through
AACM, and AACM provides a method for the Housing Business to
offer incentives to the consumer.
39
Competition in the system-built building industry is strong, and
the Housing Business competes with a number of entities, some of
which have greater financial and other resources than AAG. The
demand for system-built homes may be impacted by the ultimate
purchasers acceptance of system-built homes as an
alternative to site-built homes. To the extent that system-built
buildings become more widely accepted as an alternative to
conventional
on-site
construction, competition from local contractors and
manufacturers of other pre-engineered building systems may
increase. In addition to the competition from companies
designing and constructing
on-site
buildings, the Housing Business competes with numerous
system-built building manufacturers and manufactured home
producers that operate in particular geographical regions.
The Housing Business competes for orders from its customers
primarily on the basis of quality, design, timely delivery,
engineering capability, reliability and price. AAG is
particularly known for the quality of its product within the
housing industry. The Housing Business believes that the
principal basis on which it competes with
on-site
construction is the combination of: the timeliness of factory
versus
on-site
construction, the cost of its products relative to
on-site
construction, the quality and appearance of its buildings, its
ability to design and engineer buildings to meet unique customer
requirements, green and sustainable building techniques, and
reliability in terms of completion time. Manufacturing
efficiencies, quantity purchasing and generally lower labor
costs of factory construction, even with the added
transportation expense, result in the cost of system-built
buildings being equal to or lower than the cost of
on-site
construction of comparable quality. This process of
manufacturing the building modules in a controlled environment,
while the builder prepares the site, can significantly increase
the quality of the end product and reduce the time to completion
on a customers project. However, competition has been
especially fierce in the recession, with many competitors
reducing margins in an attempt to salvage cash flow.
Customers of the Housing Business are generally required to
obtain building installation permits from applicable
governmental agencies. Buildings completed by the Housing
Business are manufactured and installed in accordance with
applicable building codes set forth by the particular state or
local regulatory agencies.
State building code regulations applicable to system-built
buildings vary from state to state. Many states have adopted
codes that apply to the design and manufacture of system-built
buildings, even if the buildings are manufactured outside the
state and delivered to a site within that states
boundaries. Generally, obtaining state approvals is the
responsibility of the manufacturer. Some states require certain
customers to be licensed in order to sell or lease system-built
buildings. Additionally, certain states require a
contractors license from customers for the construction of
the foundation, building installation, and other
on-site
work. On occasion, the Housing Business has experienced
regulatory delays in obtaining the various required building
plan approvals. In addition to some of its customers, the
Housing Business actively seeks assistance from various
regulatory agencies in order to facilitate the approval process
and reduce the regulatory delays.
Competition in the major projects arena is comprised primarily
of traditional site builders and other system-built producers.
Major projects are typically awarded through a proposal or bid
process, and in the case of large government contracts, such as
military barracks projects, a larger prime contractor with
adequate bonding capacity will submit bids for all phases of the
contract. Once awarded, the prime contractor will arrange for
the construction of buildings for the project to various
subcontractors, including the Housing Business. Typically,
system-built producers have a cost advantage over site builders,
particularly relating to the Federal wage requirements of the
Davis-Bacon Act, speed of building completion and minimization
of weather-related construction delays. With non-government
contracts such as apartments and dormitories, the Housing
Business may act as a subcontractor or as the prime contractor
for the project. In such cases, advantages are held in the
overall cost of the project through the speed of completion
afforded by the Housing Businesss production methods.
The Housing Business is subject to the regulations promulgated
by the Occupational Safety and Health Administration
(OSHA). Our plants are periodically inspected by
federal agencies concerned with health and safety in the work
place. We believe that our products and facilities comply in all
material respects with applicable vehicle safety, environmental
and OSHA regulations.
40
Specialty
Vehicles Business
The Specialty Vehicles business currently consists of the
manufacture of ADA compliant buses. The Specialty Vehicles
business is in the early stages of manufacture and sale of other
specialty vehicles. We operate the Specialty Vehicles business
through All American Specialty Vehicles, LLC.
Through a joint venture with ARBOC Mobility, the Specialty
Vehicles business currently manufactures a line of low floor
buses compliant with the Americans with Disabilities Act under
the Spirit of Mobility brand name. The buses are sold to ARBOC
Mobility who in turn sells them to a network of 20 bus dealers
covering the United States, with the exception of Missouri, and
Canada. The buses manufactured by AAG consist of small and
mid-size products capable of seating 15 to 25 passengers. The
products AAG manufactures are ideal for use as mass transit,
airport shuttle and commercial ventures.
The Spirit of Mobility bus is a low-floor bus built on a
conventional GM cutaway chassis. Our low-floor is a rear wheel
drive bus without the use of an expensive dropbox. The manual
wheelchair ramp allows for easy loading and unloading through
the 39 clear door opening. The interior offers theater
seating for better viewing for all riders. The patent pending
Spirit of Mobility low-floor bus offers a full air-ride
suspension with a standard kneeling feature that allows an
entrance of less than 5 from the curb without deploying
the ramp.
The bus production facility in Middlebury, Indiana produces
buses on an assembly line basis. The vehicles are produced
according to specific orders which are obtained through the
joint venture and the network of approved dealers.
The chassis and some of the seating and other components used in
the production of the buses are purchased in finished form. The
principal raw materials used in the manufacturing of our buses
are fiberglass, steel, aluminum, plywood, and plastic. We
purchase most of the raw materials and components from numerous
suppliers, while the chassis for the Spirit of Mobility bus is
purchased only from General Motors. We believe that, except for
chassis, raw materials and components could be purchased from
other sources, if necessary, with no material impact on our
operations. While we do not expect the current condition of the
U.S. economy and the auto industry, including the recent
bankruptcy filing and reorganization of General Motors, to have
a significant impact on our supply of chassis going forward, if
availability of the General Motors cutaway chassis is limited or
interrupted for an extended period, this could have a material
impact on the sales and earnings of the Specialty Vehicles
business. AAG did experience production disruptions in 2009 and
2010 because of interruption of the supply of chassis. Further,
introduction of new products in the specialty vehicle field have
been delayed in 2009 and 2010 due to the limited availability of
chassis.
Our joint venture partner, ARBOC Mobility, is responsible for
the marketing of the Spirit of Mobility buses through a network
of 20 independent dealers in the United States (except for
Missouri) and Canada. ARBOC Mobility has established minimum
requirements for the independent dealers, including sales
expectations. Terms of sale are typically cash on delivery.
Beginning on January 1, 2010 and continuing through
December 31, 2010, AAG has the exclusive right to purchase
the ownership interest of the other party to the joint venture
(the ARBOC Group). The valuation of each partys ownership
interest is to be calculated using a discounted projected cash
flow valuation agreed to by each party. If no agreement is
reached, then valuation experts will be utilized as specified in
the joint venture agreement.
Effective January 1, 2011, the ARBOC Group has the right to
sell their ownership interest to a third party, while AAG has a
non-exclusive right to purchase their ownership interest and the
right to match the offer of any third party that makes a bona
fide offer to purchase the ownership interest of the ARBOC
Group.
The bus industry is highly competitive, and there are numerous
competitors and potential competitors for small and mid-size
buses, although we do not believe any of our competitors have
the full complement of features that we offer. Initial capital
requirements for entry into the manufacture of buses,
particularly low-floor units, are moderate; however, the patent
pending designs, codes, standards, testing and safety
requirements may act as deterrents to potential competitors.
Nonetheless, competitors have begun to reduce their prices in
response to the introduction of the multi-featured ARBOC bus.
41
As 2009 represented our first full year of production of the
Spirit of Mobility product line, market share statistics are not
yet available for the units we produce. Our competitors offer
lines of buses which compete with the Spirit of Mobility
product. Price, quality and delivery are all key competitive
factors, in addition to factors such as seating access, comfort
and ease of use for passengers with disabilities, up time and
maximum seat utilization.
As the manufacturer of the Spirit of Mobility buses, the
Specialty Vehicles business is subject to the provisions of the
NTMVSA and the safety standards for buses and bus components
which have been promulgated thereunder by the
U.S. Department of Transportation. Because of sales in
Canada, we are also governed by similar laws and regulations
issued by the Canadian government.
State and Federal environmental laws also impact both the
production and operation of the buses we manufacture. AAG has an
Environmental Department dedicated to efforts to comply with
applicable environmental regulations. To date, the Specialty
Vehicles business has not experienced any material adverse
effect from existing federal, state or local environmental
regulations. We rely upon certifications obtained by chassis
manufacturers with respect to compliance by our vehicles with
all applicable emission control standards.
ARBOC Mobility, LLC, has the exclusive license for certain
patents necessary for the design and manufacture of the Spirit
of Mobility products and has assigned its rights under the
exclusive license to AAG to manufacture the products. AAG has an
exclusive supply agreement with ARBOC Mobility to produce the
products through December 2012.
AAG also has the exclusive right to use the licensed patents to
make, use and sell other products (beyond buses) using the low
floor technology until the expiration of all the applicable
patents or the failure of AAG to maintain minimum royalty quotas.
Business
Segments
The table below sets forth the composition of AAGs net
sales from continuing operations for each of the last two years
(dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Housing
|
|
$
|
47.1
|
|
|
|
77.7
|
|
|
$
|
117.2
|
|
|
|
98.0
|
|
Specialty Vehicles
|
|
|
13.5
|
|
|
|
22.3
|
|
|
|
2.4
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
60.6
|
|
|
|
100.0
|
|
|
$
|
119.6
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information concerning business segments is included
in Note 3 of the Notes to Consolidated Financial
Statements.
Seasonality
Historically, AAG has experienced greater sales during the
second and third quarters with lesser sales during the first and
fourth quarters. This reflects the adverse impact of weather on
general construction for the system-built building applications.
Employees
At October 31, 2010, 2010, AAG employed 490 people,
163 of whom are salaried and involved in operations,
engineering, purchasing, manufacturing, service and warranty,
sales, distribution, marketing, human resources, accounting and
administration. AAG provides group life, dental, vision
services, hospitalization, and major medical plans under which
the employee pays a portion of the cost. In addition, employees
can participate in a 401(k) plan. AAG considers its relations
with employees to be good.
42
Research
and Development
During 2009, AAGs continuing operations spent
approximately $1.4 million on research related to the
development of new products and improvement of existing
products. The amount spent in 2008 was approximately
$2.2 million.
Properties
At December 31, 2009, AAG owned or leased
1,579,894 square feet of plant and office space, located on
392.9 acres, of which 1,287,156 square feet were used
for manufacturing, 196,414 square feet were available for
warehousing and distribution, and 96,324 square feet were
offices. Included in these numbers were 129,753 square feet
leased to others and 205,825 square feet available for sale
or lease. The properties that are shown as available for sale or
lease under the Housing Business are classified as real estate
held for sale in the consolidated financial statements but the
properties listed under Other as available for sale or lease is
not classified as real estate held for sale in the consolidated
financial statements as they do not meet the criteria for such
classification according to generally accepted accounting
principles. We believe that our present facilities, consisting
primarily of steel clad, steel frame or wood frame construction
and the machinery and equipment contained therein, are well
maintained and in good condition.
43
The following table indicates the location, number and size of
our properties by segment as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
|
Acreage
|
|
No. of Buildings
|
|
Building Area (Sq. Ft.)
|
|
Properties Owned and Used by Registrant:
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing Business
|
|
|
|
|
|
|
|
|
|
|
|
|
Milliken, Colorado
|
|
|
23.0
|
|
|
|
1
|
|
|
|
151,675
|
|
Decatur, Indiana
|
|
|
40.0
|
|
|
|
2
|
|
|
|
215,995
|
|
Dyersville, Iowa
|
|
|
20.0
|
|
|
|
1
|
|
|
|
168,277
|
|
Rutherfordton, North Carolina*
|
|
|
36.8
|
|
|
|
1
|
|
|
|
169,177
|
|
Rocky Mount, Virginia
|
|
|
44.7
|
|
|
|
6
|
|
|
|
137,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
164.5
|
|
|
|
11
|
|
|
|
842,817
|
|
Specialty Vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
Middlebury, Indiana
|
|
|
13.5
|
|
|
|
1
|
|
|
|
111,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
13.5
|
|
|
|
1
|
|
|
|
111,962
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Elkhart, Indiana
|
|
|
16.2
|
|
|
|
3
|
|
|
|
53,841
|
|
Fitzgerald, Georgia
|
|
|
12.6
|
|
|
|
2
|
|
|
|
103,600
|
|
Middlebury, Indiana
|
|
|
1.3
|
|
|
|
2
|
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
30.1
|
|
|
|
7
|
|
|
|
162,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total owned and used
|
|
|
208.10
|
|
|
|
19
|
|
|
|
1,117,020
|
|
Properties Leased by Registrant:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Chino, California
|
|
|
4.7
|
|
|
|
3
|
|
|
|
84,296
|
|
Elkhart, Indiana
|
|
|
2.8
|
|
|
|
1
|
|
|
|
43,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total leased
|
|
|
7.5
|
|
|
|
4
|
|
|
|
127,296
|
|
Properties Owned by Registrant and Available for Sale or
Lease:
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing Business
|
|
|
|
|
|
|
|
|
|
|
|
|
Decatur, Indiana
|
|
|
3.3
|
|
|
|
2
|
|
|
|
86,310
|
|
Zanesville, Ohio
|
|
|
23.0
|
|
|
|
2
|
|
|
|
129,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
26.3
|
|
|
|
4
|
|
|
|
216,063
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Crooksville, Ohio
|
|
|
10.0
|
|
|
|
2
|
|
|
|
39,310
|
|
Elkhart, Indiana
|
|
|
6.1
|
|
|
|
2
|
|
|
|
80,205
|
|
Pigeon Forge, Tennessee
|
|
|
2.1
|
|
|
|
0
|
|
|
|
0
|
|
Middlebury, Indiana
|
|
|
132.8
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
151
|
|
|
|
4
|
|
|
|
119,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total owned and available for sale or lease
|
|
|
177.3
|
|
|
|
8
|
|
|
|
335,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
|
392.9
|
|
|
|
31
|
|
|
|
1,579,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
AAG announced on March 10, 2009 the temporary curtailment
of production at the North Carolina facility until backlogs
warrant resuming production. |
44
Legal
Proceedings
On April 29, 2010, the day of AAGs annual shareholder
meeting, AAG filed a complaint in federal court seeking a
declaratory judgment that the Board of Directors
determination that the nominees proposed for the election of
directors by GAMCO Asset Management, Inc. (GAMCO)
were out of order and invalid. On May 28, 2010, GAMCO filed
a counterclaim seeking to have the court declare that its
nominees were entitled to be appointed to AAGs Board of
Directors. The parties participated in a court-ordered discovery
conference and have begun to exchange documents in response to
discovery requests.
On October 18, 2010, AAGs counsel requested that
GAMCO agree to the dismissal of the complaint and counterclaim
as moot because H.I.G. All American had the power as majority
shareholder to remove board members with or without cause
pursuant to Indiana law. On October 28, 2010, GAMCO issued
a counteroffer demanding that AAG appoint its nominees to the
Board and then allow H.I.G. All American to call for a new
election of directors to remove GAMCOs nominees. AAG
rejected GAMCOs proposal. After the public announcement of
the Merger, counsel for AAG and GAMCO discussed the effects of
the Merger on the litigation. AAGs counsel asserted that
the Merger rendered the litigation moot since Acquiror will be
the sole shareholder of AAG after the Merger. AAGs counsel
and GAMCOs counsel discussed the matter on Wednesday,
November 24, 2010, and GAMCO, through counsel, suggested
further discussions. If GAMCO refuses to voluntarily dismiss its
counterclaim, AAG intends to file a motion to dismiss
GAMCOs counterclaim and stay discovery pending the
courts ruling on the motion to dismiss.
AAG is involved in various legal proceedings, most of which are
ordinary disputes incidental to the industry and most of which
are covered in whole or in part by insurance. Management
believes that the ultimate outcome of these matters and any
liabilities in excess of insurance coverage and self-insurance
accruals will not have a material adverse impact on AAGs
consolidated financial position, future business operations or
cash flows.
All
American Group Holdings, LLC
Acquiror is a Delaware limited liability company and
wholly-owned subsidiary of H.I.G. All American, AAGs
majority shareholder. Acquiror was formed for the purpose of
entering into the merger agreement and has not conducted any
activities to date other than those incident to its formation.
All
American Acquisition Corporation
Acquisition Sub is an Indiana corporation and wholly-owned
subsidiary of Acquiror. Acquisition Sub was formed for the
purpose of entering into the merger agreement and has not
conducted any activities to date other than those incident to
its formation.
Specialty
Vehicles Liquidating Trust
Purpose
and Duration of the Trust
The Specialty Vehicles Liquidating Trust was formed for the sole
purpose of receiving certain contingent consideration that may
become payable to AAG shareholders (other than
shareholders that properly perfect their appraisal rights under
Indiana law) in connection with the Merger. The trust is not
permitted to engage in any trade or business and is intended to
be treated as a liquidating trust under Treasury Regulation
Section 301.7701-4(d)
and any analogous provision of state or local law.
Upon the consummation of the Merger, the trusts sole asset
will be a contingent right to receive the excess sale proceeds
from the sale of AAGs Specialty Vehicles business under
the terms of the merger agreement. The merger agreement provides
that the Special Committee of AAGs Board of Directors will
appoint two out of three members of a sale committee that will
have the authority to find a buyer for the Specialty Vehicles
business and negotiate the sale of such business. The sale
committee has nine months from the effective time of the Merger
to execute a letter of intent with a potential buyer, and
consummate the sale of the Specialty Vehicles business within
90 days thereafter, or the surviving corporation is not
required to sell the Specialty Vehicles business. In addition,
the merger agreement provides that the surviving corporation is
45
not required to sell the Specialty Vehicles business unless the
net proceeds to the surviving corporation are at
least $12 million. If the surviving corporation does sell
the Specialty Vehicle business upon the terms set forth in the
merger agreement, the trust will receive only those net
proceeds that exceed $5 million. Net proceeds are
defined in the merger agreement to be the cash proceeds to the
surviving corporation, net of (i) taxes arising from the
sale and taxes of the Specialty Vehicles business accruing
prior to the sale, (ii) the costs and expenses of such
sale, and (iii) indebtedness of the Specialty Vehicles
business, which will include any additional investments made in
the Specialty Vehicles business after November 8, 2010.
The trust will continue until the earliest of:
|
|
|
|
|
the distribution of all the excess sale proceeds according to
the terms of the merger agreement and the trust
agreement; or
|
|
|
|
the sale committees failure to consummate a sale of our
Specialty Vehicles business within the time period and pursuant
to the other terms set forth in the merger agreement.
|
THE
MERGER AGREEMENT
The following summary describes the material provisions of
the merger agreement but does not purport to describe all of the
provisions of the merger agreement. The following summary is
qualified in its entirety by reference to the complete text of
the merger agreement, which is attached as Appendix A to
this proxy statement/prospectus and incorporated herein by
reference. AAG urges you to read the merger agreement in its
entirety before deciding to adopt the merger agreement and
approve the Merger because it is the legal document that governs
the Merger.
The representations and warranties described in the summary
below and included in the merger agreement were made by AAG and
Acquiror to each other as of specific dates. The assertions
embodied in those representations and warranties were made
solely for purposes of the merger agreement and are subject to
important qualifications, limitations and exceptions agreed to
by AAG, Acquiror and Acquisition Sub in connection with
negotiating its terms, including information contained in a
confidential disclosure schedule that AAG provided to Acquiror
and Acquisition Sub in connection with the merger agreement.
None of AAG, Acquiror or Acquisition Sub is required under SEC
rules to disclose these disclosure schedules publicly. Moreover,
the representations and warranties may be subject to a
contractual standard of materiality that may be different from
what may be viewed as material to shareholders, or may have been
used for the purpose of allocating risk between AAG, Acquiror
and Acquisition Sub rather than establishing matters as facts.
The merger agreement is described in this proxy
statement/prospectus and included as Appendix A only to
provide you with information regarding its terms and conditions,
and not to provide any other factual information regarding AAG,
Acquiror and Acquisition Sub or their respective affiliates or
their respective businesses. Accordingly, you should not rely on
the representations and warranties in the merger agreement as
characterizations of the actual state of facts about AAG,
Acquiror and Acquisition Sub, and you should read the
information provided elsewhere in this proxy
statement/prospectus and in the documents incorporated by
reference into this proxy statement/prospectus for information
regarding AAG, Acquiror and Acquisition Sub and their respective
affiliates and their respective businesses.
The
Merger
At the effective time of the Merger, Acquisition Sub will be
merged with and into AAG, with AAG continuing as the surviving
corporation. Upon completion of the Merger, the directors of
AAG, except Messrs. Matthew Sanford and Fabian de Armas,
will be removed pursuant to the terms of the merger agreement.
The directors of AAG immediately after the Merger will be
Messrs. Matthew Sanford and Fabian de Armas. The officers
of AAG immediately after the Merger will be Mr. Richard M.
Lavers, as President, Ms. Colleen Zuhl, as Vice President
and Treasurer, and Mr. Fabian de Armas, as Vice President.
Not later than five days before the effective time of the
Merger, the Special Committee of our board of directors and
Acquiror will appoint a sale committee for the purpose of
conducting and negotiating a sale of the Specialty Vehicles
business. We will use our commercially reasonable efforts to
help the sale committee to
46
sell the Specialty Vehicles business before the outside sale
date. If a sale of the Specialty Vehicles business is
consummated upon the terms of the merger agreement, the excess
of any net proceeds of such sale over $5 million dollars
prior to the outside sale date will be delivered to the trust
and distributed to the beneficiaries of the trust. Such
beneficiaries are our former shareholders, with the exception of
dissenting shares, if the Merger is consummated.
Effective
Time of the Merger
The merger agreement provides that the Merger shall become
effective upon the filing of the Articles of Merger (or at such
later time reflected in such Articles of Merger as shall be
agreed to by Acquiror and AAG).
Manner
and Basis of Converting Shares
The merger agreement provides that:
|
|
|
|
|
Each of our Common Shares that is issued and outstanding
immediately prior to the effective time will cease to exist and
each such share:
|
|
|
|
|
|
(other than dissenting shares, treasury shares and shares owned
by Acquiror and its affiliates) will be converted into the right
to receive $0.20 per share;
|
|
|
|
(other than dissenting shares, but including shares owned by
Acquiror and its affiliates) will be converted into the right to
receive one unit of the trust; and
|
|
|
|
for which the holder has properly perfected appraisal rights
under
Chapter 23-1-44
of the Indiana Business Corporation Law (the IBCL),
will receive the fair value of such share.
|
|
|
|
|
|
Each share of Acquisition Sub that is issued and outstanding
immediately prior to the effective time will cease to exist and
be converted into the right to receive one Common Share of the
surviving corporation.
|
Each trust unit will represent the contingent right to receive a
pro rata share of the excess of any net proceeds from the sale
of AAGs Specialty Vehicles business over $5 million,
if such sale is consummated upon the terms and conditions in the
merger agreement. One such condition is that such sale occurs
prior to the outside sale date or, if we have entered into a
letter of intent prior to the outside sale date, within twelve
months after the effective time of the Merger. Not later than
five days before the effective time of the Merger, the Special
Committee of the board of directors of AAG and Acquiror will
appoint a sale committee for the purpose of conducting and
negotiating a sale of the Specialty Vehicles business. We will
use our commercially reasonable efforts to help the sale
committee to sell the Specialty Vehicles business before the
outside sale date. If the sale satisfies the conditions in the
merger agreement, including the condition that the net
proceeds to the surviving corporation are at least
$12 million, the excess of any such net proceeds over
$5 million dollars will be delivered to the trust and
distributed to the beneficiaries in accordance with the trust
agreement. Each trust unit will represent a contingent right to
receive a pro rata share of any excess sale proceeds.
The Merger Consideration will be adjusted to the extent
appropriate to reflect the effect of any stock split, division
or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or
other similar transaction with respect to our Common Shares
occurring or having a record date on or after the date of the
merger agreement and before the effective time of the Merger. No
such event, however, is expected to occur.
Acquiror will appoint a paying agent to receive funds in trust
in order to make payment of the Merger Consideration and AAG and
Acquiror will appoint a trustee to administer the trust. As soon
as practicable after the effective time the paying agent will
mail or make available to each record holder of our Common
Shares a customary notice of effectiveness of the Merger and a
letter of transmittal with instructions for surrendering to the
paying agent such certificate or certificates in exchange for
the Cash Consideration and the trustee will make a book entry
evidencing the issuance of the trust units. Each certificate
that previously
47
evidenced our Common Shares (other than dissenting shares and,
solely with respect to the Cash Consideration, our Common Shares
owned by Acquiror and its affiliates) will be deemed to be
evidence only of the right to receive, upon surrender, the
Merger Consideration, to the extent provided in the merger
agreement.
AAG Stock
Options and Warrants
All options that are not vested options will be cancelled
immediately prior to the effective time without any payment.
Each of our Common Shares that is subject to a vested option
will entitle the holder to (i) a cash payment equal to the
amount by which the Cash Consideration exceeds the per share
exercise price of such vested option and (ii) one trust
unit.
We have agreed to obtain the consents and releases necessary to
ensure that any options granted under any incentive plan or
other plan, program or arrangement or grant of any other
interest in respect of the capital shares of AAG or its
subsidiaries, other than vested options, will be cancelled or
terminated as of the effective time. We may withhold delivery of
the Merger Consideration to the holders of a vested option until
it has received all necessary consents and releases to ensure
the cancellation of such option.
Representations
and Warranties
The merger agreement contains customary representations and
warranties of AAG, Acquiror, and Acquisition Sub relating to,
among other things, certain aspects of the respective businesses
and assets of the parties and other matters. The representations
and warranties expire at the effective time of the Merger.
AAGs
Interim Operations
We have agreed that, except as expressly permitted or required
by the merger agreement or otherwise consented to in writing by
Acquiror, during the period commencing on November 8, 2010
and ending at the earlier of the closing date and the
termination of the merger agreement we and each of our
subsidiaries will conduct our operations in the ordinary and
usual course of our business consistent with past practice. We
have also agreed to use our reasonable efforts to preserve our
business and our subsidiaries respective businesses and maintain
satisfactory relationships with suppliers, distributors,
customers, and others having significant business relationships
with them.
In addition, neither AAG nor any of our subsidiaries are
permitted to:
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amend its governance documents;
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issue or sell, or authorize to issue or sell, any shares of its
capital stock or securities convertible or exchangeable into
shares of capital stock (except pursuant to the exercise of
vested options or the conversion of all or a portion of the
convertible note issued to Acquirors affiliate);
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sell or agree to sell, pledge or dispose of any capital stock or
other equity interest of any other person that is owned by it;
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declare, pay or set aside any dividend or other distribution or
payment with respect to, or split, combine, reclassify, purchase
or otherwise redeem or acquire, any shares of its capital stock
or its other securities (other than the convertible notes issued
to Acquirors affiliate), except by exercise of any
currently outstanding vested options;
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enter into any contract or commitment with respect to capital
expenditures for amounts that exceed the amounts budgeted in the
financial projections delivered to Acquiror by $50,000 or more
in the aggregate;
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acquire an equity interest in or a portion of the assets of any
business of any person, or otherwise acquire any assets of any
person (other than the purchase of assets in the ordinary course
of business and consistent with past practice);
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increase the compensation or fringe benefits of any of its
directors, officers or key employees, or grant any severance or
termination pay not currently required to be paid under existing
agreements or plans
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(except to the extent required under existing employee and
director benefit plans and written agreements in effect on
November 8, 2010);
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enter into any new agreements, or modify or terminate certain
existing agreements, with any present or former director,
officer or other employee of AAG or any of its subsidiaries;
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transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of, subject to any lien any material assets; or incur or
modify any indebtedness; or issue any debt securities; or
assume, guarantee or become responsible for the obligations of
any person; or make any loan or other extension of credit, other
than in the ordinary course of business consistent with past
practice;
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agree to settle or waive and material claim;
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file any amended returns or claims tax refunds;
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issue any press release or make any public announcements without
the review and consent of Acquiror, other than in the ordinary
course of business consistent with past practice;
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except as required by applicable law or generally accepted
accounting principles, make any material change in its
accounting practices, policies or procedures or any of its
methods of reporting income, deductions or other items for
income tax purposes;
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adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of AAG or any of its
subsidiaries, except as expressly permitted in the merger
agreement;
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incur, assume, guarantee or prepay any indebtedness or make any
loans, extensions of credit or advances to any other person,
other than to AAG or any of its wholly-owned subsidiaries,
except extensions of credit or advances constituting trade
payables in the ordinary course of business;
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accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred
compensation, option, insurance or other compensation or
benefits;
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pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction
claims, liabilities or obligations in the ordinary course of
business and consistent with past practice;
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enter into any material contract other than in the ordinary
course of business consistent with past practice;
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plan, announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other
program or effort concerning the termination of employment of
employees of AAG or its subsidiaries, other than routine
employee terminations for cause;
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take any action that would cause any of the representations or
warranties in the merger agreement to be untrue;
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take any action that would, directly or indirectly, restrict the
ability of Acquiror to vote or otherwise exercise the rights and
receive the benefits of a shareholder of AAG, or which would
permit any shareholder to acquire securities of AAG from us on a
basis not available to Acquiror or Acquisition Sub;
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materially modify, amend or terminate any material contract or
waive any of its material rights or claims;
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prepare any returns, statements, forms, or reports for taxes
required to be filed in a manner that is inconsistent with our
and our subsidiaries past practices; incur any material
liability for taxes other than in the ordinary course of
business; or enter into any settlement or closing agreement with
a taxing authority that does or may adversely affect our or our
subsidiaries tax liability for any period;
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fail to maintain insurance on its tangible assets and its
businesses consistent with past practice; or
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authorize, agree or announce an intention, in writing or
otherwise, to take any of the foregoing actions.
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Other
Covenants
Other
Covenants of AAG
Under the terms of the merger agreement, we have agreed that we
will, among other things, and subject to specified exceptions:
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upon reasonable notice allow Acquiror, Acquisition Sub, their
potential financing sources, and each of their respective
affiliates, employees, counsel, accountants, consultants and
other authorized representatives reasonable access to our and
our subsidiaries officers, directors, employees,
accountants, properties, books and records;
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furnish copies of filings made to the SEC and all information
concerning business, properties, personnel, financial data,
operating data, and any other information as requested;
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file and prepare with the SEC a proxy statement relating to the
Special Meeting of our shareholders and will use reasonable
efforts to respond to SEC comments with respect to the proxy
statement;
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within two days after the registration statement becomes
effective, mail the proxy statement to our shareholders;
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use reasonable efforts to provide information to Acquiror in
connection with the filing of the registration statement and
cause the registration statement filed with the SEC to become
effective;
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not supplement or amend the proxy statement or registration
statement without Acquirors approval;
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inform Acquiror if any event or circumstance arises that would
require an amendment or supplement to the registration statement
or proxy statement;
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set a record date for, call and establish a date for, and give
notice of, the Special Meeting of our shareholders, and hold
that meeting as soon as possible after the registration
statement becomes effective;
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obtain, file, and maintain until the effective time any material
authorizations, approvals, consents or filings with any
government authority;
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appoint two of our board members to serve on a three member
special committee to conduct and negotiate the sale of
AAGs Specialty Vehicles business;
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use our commercially reasonable efforts to assist the special
committee in selling the Specialty Vehicles business; and
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deliver to the liquidating trust any net proceed from the sale
of the Specialty Vehicles business in excess of $5 million
if (a) such sale occurs within nine months after the
effective time of the Merger, or if AAG has entered into a
letter of intent with respect to the sale within such nine-month
period and the sale closes within twelve months after the
effective time of the Merger, (b) the net proceeds of such
sale to the surviving corporation exceed $12 million, and
(c) the other conditions to such sale described in the
merger agreement are satisfied.
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Covenants
of Acquiror
Under the terms of the merger agreement, Acquiror has agreed
that it will, among other things, and subject to specified
exceptions:
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prepare and file with the SEC a registration statement on
Form S-4
for registration of the trust units to be issued to shareholders
in accordance with the merger agreement and the Merger;
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use reasonable efforts to provide information to us in
connection with the filing of the registration statement and
cause the registration statement filed with the SEC to become
effective;
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use reasonable efforts to respond to comments made by the SEC
with respect to the registration statement;
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not supplement or amend the proxy statement or registration
statement without our approval;
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inform us if any event or circumstance arises that would require
an amendment or supplement to the registration statement or
proxy statement;
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cause all shares of Common Shares owned by it or its affiliates
to be voted in favor of adopting the merger agreement and the
Merger; and
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not take any action that would reasonably be expected to prevent
holders of our Common Shares from exercising dissenters
rights to demand appraisal of their shares in connection with
the Merger.
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Covenants
of Shareholders Representative
Under the terms of the merger agreement, the Shareholders
Representative has agreed that he will, among other things, and
subject to specified exceptions, be the exclusive representative
of shareholders and holders of trust units and facilitate
implementation of the trust agreement.
Covenants
of AAG, Acquisition Sub, and Acquiror
Under the terms of the merger agreement, we, Acquiror and
Acquisition Sub have agreed that we will, among other things,
and subject to specified exceptions:
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hold in strict confidence all data and information obtained in
connection with the Merger, except for any information that was,
is now, or becomes generally available to the public, was known
to a party on a non-confidential basis prior to its disclosure;
is disclosed by a third party not subject to the duty of
confidentiality, or may be required to be disclosed by law;
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cooperate with each other party in connection with preparation,
filing, and clearance of this proxy statement and registration
statement and allow each other party, to the extent possible, to
participate in all communications with the SEC and its
staff; and
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use best efforts to satisfy the conditions precedent to the
consummation of the Merger.
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Indemnification;
Directors and Officers Insurance
We, as the surviving corporation of the Merger, will maintain in
our articles of incorporation and bylaws provisions providing
for indemnification and exculpation from liability of directors
and officers. These provisions will be no less favorable to
directors and officers as the current provisions of our articles
of incorporation and bylaws in existence on November 8,
2010. These provisions will not be modified, amended, or
repealed for a period of four (4) years from the effective
time or the Merger in any way that adversely affects those who
(on or prior to the effective time of the Merger) were directors
or officers of AAG, unless required by law. Additionally, we
will purchase tail directors and officers liability
insurance covering those persons that were covered as of
November 8, 2010, but we will not be required to spend more
than 200% of the current premiums for such directors and
officers liability policies.
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We and our successors will indemnify and hold harmless all
individuals that were covered by our directors and
officers liability insurance policies on November 8,
2010 to the fullest extent permitted under the IBCL with respect
to all acts and omissions arising out of such individuals
service as officers, directors, employees or agents of AAG or
any of our subsidiaries or as trustees or fiduciaries of any
plan for the benefit of our employees or any of our
subsidiaries, occurring prior to the effective time of the
Merger, including the transactions contemplated by the merger
agreement.
Obligations
of Our Board of Directors with Respect to its Recommendation and
Holding a Meeting of Shareholders
We agreed to set a record date for, call and establish a date
for, and give notice of, a Special Meeting (with the record date
and meeting date each set for a date as soon as reasonably
practicable and in consultation with Acquiror), and convene and
hold the Special Meeting as soon as reasonably practicable after
the date on which the registration statement becomes effective.
This is the same Special Meeting to which this proxy
statement/prospectus relates.
Conditions
to the Merger
Conditions
to the Obligations of Each Party
The merger agreement provides that our obligations and the
obligations of Acquiror and Acquisition Sub to effect the Merger
and the other transactions contemplated by the merger agreement
are subject to the satisfaction or waiver, at or before the
effective time of the Merger, of the following conditions, in
addition to the additional conditions applicable to each of the
parties described below:
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no temporary, preliminary or permanent order or injunction is
pending that prohibits the consummation of the Merger, and no
law, statute, code, ordinance, regulation, code, order,
judgment, writ, injunction, decision, ruling or decree that
prevents or prohibits consummation of the Merger shall have been
enacted since the date of the merger agreement;
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the registration statement on
Form S-4
shall have been declared effective by the SEC, and shall not be
subject to a stop order or any proceeding initiated or
threatened by the SEC for that purpose; and
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We and Acquiror have executed and delivered the trust agreement.
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Additional
Conditions to the Obligations of Acquiror and Acquisition
Sub
The merger agreement provides that Acquirors and
Acquisition Subs obligations to consummate the Merger and
the other transactions contemplated by the merger agreement are
subject to the satisfaction of the following conditions:
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we and our subsidiaries senior executives shall have entered
employment related agreements, satisfactory to Acquiror, that
replace and supersede their present agreements;
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we shall have delivered to Acquiror all consents, approvals,
orders, permits, and other authorizations required by law,
contract, or agreement;
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we shall have delivered the proxy statement to each holder of
our Common Shares as required by the merger agreement and
applicable securities law and twenty (20) days have elapsed
since delivery of the proxy statement;
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each of our representations and warranties set forth in the
merger agreement that (a) are not qualified by materiality
or material adverse effect shall be true and correct in all
material respects, (b) are qualified by materiality or
material adverse effect shall be true and correct, in each case,
on the date of the merger agreement and the effective time of
the Merger, except to the extent the representations and
warranties address matters only as of a particular earlier date,
then those representations and warranties will speak as to that
earlier date;
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there shall not have been any breach of our covenants and
agreements that either is not reasonably capable of being cured,
or if reasonably capable of being cured, has not been cured
within ten days after written notice to us of such
breach; and
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we have delivered a closing certificate to Acquiror and
Acquisition Sub certifying that the other conditions to
Acquirors and Acquisition Subs obligation to
consummate the Merger have been satisfied.
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Additional
Conditions to our Obligations
The merger agreement provides that our obligation to consummate
the Merger and the other transactions contemplated by the merger
agreement are subject to the satisfaction of the following
conditions:
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our shareholders have approved the merger agreement pursuant to
Section 23-1-40-3
of the IBCL;
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each of the representations and warranties of Acquiror and
Acquisition Sub set forth in the merger agreement that
(a) are not qualified by materiality or material adverse
effect shall be true and correct in all material respects,
(b) are qualified by materiality or material adverse effect
shall be true and correct, in each case, on the date of the
merger agreement and the effective time of the Merger, except to
the extent the representations and warranties address matters
only as of a particular earlier date, then those representations
and warranties will speak as to that earlier date;
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there shall not have been any breach of the covenants and
agreements of Acquiror or Acquisition Sub that either are not
reasonably capable of being cured, or if reasonably capable of
being cured, have not been cured within ten days after written
notice to Acquiror and Acquisition Sub of such breach; and
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Acquiror will have delivered a closing certificate to us
certifying that the other conditions to our obligations to
consummate the Merger have been satisfied.
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As used with respect to the merger agreement, material
adverse effect means a material adverse effect on
(a) the financial condition, business, performance,
operations or prospects of AAG and its subsidiaries taken as a
whole or (b) the legality, validity or enforceability of
the merger agreement or any of the other agreements or
transactions contemplated by the merger agreement.
Termination
of the Merger Agreement
The merger agreement may be terminated and the Merger may be
abandoned before the effective time by mutual consent of AAG, on
one hand, and Acquiror and Acquisition Sub, on the other hand.
In addition, either we or Acquiror and Acquisition Sub may
terminate the merger agreement if:
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any court of competent jurisdiction or any governmental
authority has issued a final and nonappealable order, decree, or
ruling or taken any action permanently restricting, enjoining or
restraining the acceptance of payment for the Common Shares
pursuant to the merger agreement;
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any action taken, law entered, enacted, issued or deemed
applicable that prohibits or makes illegal the consummation of
the Merger; or
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the conditions precedent to the consummation of the Merger
described in the two clauses above have not be satisfied on or
before March 31, 2011.
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None of AAG, Acquiror or Acquisition Sub may terminate the
merger agreement if they have been a principal cause of the
failure of any of the conditions listed above.
AAG or Acquiror may also terminate the merger agreement if the
conditions precedent to such partys obligations to
consummate the Merger have not be satisfied or waived prior to
March 31, 2011, so long as the terminating party is not in
material breach of the merger agreement at such time.
If the merger agreement is properly terminated, neither party
will have any further obligations or liability thereunder except
for certain confidentiality obligations and payment of its own
expenses.
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Fees and
Expenses
The merger agreement provides that, each party will pay its own
expenses and costs and expenses incurred in connection with the
merger agreement and the consummation of the Merger.
Amendment
The merger agreement may be amended any time before the
effective time of Merger. Any amendment must be approved by the
respective boards of directors of Acquiror, Acquisition Sub, and
us or, in the case of Acquiror and Acquisition Sub, by the
respective officers authorized by their respective board of
directors.
Acquirors
Reasons for the Merger
Acquiror believes that the Merger will allow it to address
AAGs liquidity and profitability needs through its own
strategies that differ from AAGs current strategies. By
owning all of AAG, Acquiror will have control over the Board of
Directors and greater access to management and the operational
issues facing AAG. Acquiror will seek to eliminate the costs of
remaining a public company and the Merger should render certain
shareholder litigation moot. Acquiror believes that the Merger
would create a leaner, more agile business model, which will
provide a more stable platform for future growth and allow the
company to respond to changes in the marketplace faster.
Acquiror will look to streamline manufacturing and other
processes and reduce general and administrative costs. Further,
a successful sale of the Specialty Vehicles business will allow
AAGs management to focus more closely on the housing
business and avoid the distractions of operating disparate
businesses.
Interests
of Our Executive Officers and Directors in the Merger
In considering the recommendation of our board of directors that
you vote for the merger agreement and approve the Merger, you
should be aware that some of our executive officers and
directors may have economic interests in the Merger that are
different from, or in addition to, those of our shareholders
generally. Our board of directors was aware of and considered
these interests, among other matters, in reaching its
determination that the merger agreement and the transactions
contemplated thereby, including the Merger, are advisable for,
and in the best interests of, us and our shareholders, in
approving the merger agreement and the transactions contemplated
thereby, including the Merger, and in making its recommendation
that our shareholders vote for the adoption of the merger
agreement and approval of the Merger. These interests include
the following:
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the surviving corporation will maintain and honor all
indemnification arrangements in place for all our past and
present directors and officers for acts or omissions occurring
at or before the effective time of the Merger;
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the surviving corporation will maintain and honor all
indemnification provisions and exculpation provisions in favor
of each of our present or former directors and officers that is
set forth in our certificate of incorporation or bylaws in
effect as of the date of the merger agreement; and
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the surviving corporation will purchase a directors and
officers liability insurance policy which will cover those
persons who are covered by our directors and
officers liability insurance policy for events occurring
before the effective time of the Merger on substantially the
same terms as those applicable to our current directors and
officers, subject to certain limitations.
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Mr. Lavers, our Chief Executive Officer, will hold the
office of President of AAG after the effective time of the
Merger. Ms. Colleen Zuhl, our Chief Financial Officer, will
hold the offices of Vice President and Treasurer of AAG after
the effective time of the Merger. One of the conditions to the
obligation of Acquiror and Acquisition Sub to consummate the
Merger is the entry by Mr. Lavers and Ms. Zuhl into
new employment arrangements with AAG satisfactory to Acquiror.
Mr. Sanford and Mr. de Armas will be the only directors of
AAG immediately after the effective time of the Merger.
Mr. Sanford and Mr. de Armas are employees of an affiliate
of H.I.G. All American.
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Insurance
and Indemnification of AAG Officers and Directors.
The surviving corporations articles of incorporation and
bylaws will provide for indemnification and exculpation from
liability of directors and officers of the surviving corporation
that are no less favorable to such directors and officers, taken
as a whole, as the corresponding director and officer
indemnification provisions of our current articles of
incorporation and bylaws. In addition, the surviving corporation
will not amend its articles of incorporation or bylaws for four
years after the effective time of the Merger in any way that
would adversely affect the indemnification rights of our
officers and directors.
The surviving corporation will indemnify and hold harmless our
present and former directors and officers against all
liabilities arising out of the actions or omissions of such
persons service, including the advancement of certain
expenses, for all actions arising before the effective time of
the Merger or in connection with the Merger.
The surviving corporation will also purchase a directors
and officers liability insurance policy which will cover
those persons who are covered by our directors and
officers liability insurance policy for events occurring
before the effective time of the Merger on substantially the
same terms as those applicable to our current directors and
officers, but the surviving corporation will not be obligated to
pay any insurance premium in excess of 200% of our current
premium for such policies.
Regulatory
Filings and Approvals Required to Complete the Merger
Neither AAG nor Acquiror are aware of any material governmental
or regulatory requirements that must be complied with regarding
the Merger, other than the effectiveness of the registration
statement of which this proxy statement/prospectus is a part and
compliance with applicable provisions of Indiana law, including
the filing of a certificate of merger.
Listing
of Units in the Liquidating Trust
The trust units held by our shareholders following the effective
time of the Merger will not be marketable nor will they be
listed on any securities exchange or quoted on any interdealer
quotation system. Additionally, trust units may not be assigned
or otherwise transferred other than by will or intestate
succession as personal property.
Delisting
and Deregistration of Our Common Shares
If the Merger is completed, our Common Shares will be delisted
from any interdealer quotation system and securities exchange
and deregistered under the Exchange Act. In addition, AAG will
cease to be a reporting company under the Exchange Act.
Liquidating
Trust Agreement
The following is a description of the trust that we will use to
distribute additional Merger Consideration to you and our other
shareholders (other than dissenters). The full text of the trust
agreement is attached as Appendix B to this proxy
statement/prospectus and is incorporated herein by reference.
You are encouraged to read the entire trust agreement and the
other exhibits to this proxy statement/prospectus.
Purpose
of the Trust
The merger agreement provides that all of our shareholders
(other than dissenters) will be entitled to receive any net
proceeds from the sale of AAGs Specialty Vehicles business
in excess of $5 million if certain conditions are met. One
such condition is that the sale must occur within nine months
after the effective time of the Merger, or if AAG has entered
into a letter of intent with respect to a sale, within twelve
months after the effective time of the Merger. If the Merger is
approved by the shareholders, we will establish a liquidating
trust for the sole purpose of receiving such net proceeds and
distributing them to our shareholders (other than dissenters).
The sale committee will have the right to cause the trust to
provide indemnification to any buyer of the Specialty Vehicles
business and may choose to do so if, in its judgment, such
indemnification is
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necessary to consummate the sale or would result in greater
proceeds to the trust. In such cases, the buyer will require the
trust to retain cash sufficient to fund the indemnification in
amounts and for such duration as are negotiated between the
buyer and the sale committee. The trust is not permitted to
engage in any trade or business and is intended to be treated as
a liquidating trust under Treasury
Regulation Section 301.7701-4(d)
and any analogous provision of state or local law.
Beneficiaries
and Beneficial Interests
A beneficiarys interest in the trust is represented by
trust units. Under the terms of the merger
agreement, the holder of each of our Common Shares that is
issued and outstanding immediately prior to the effective time
of the Merger (other than dissenting shares) will receive one
trust unit for each share owned by such holder. This means that
each beneficiary of the trust will have a pro rata interest in
the trusts net assets equivalent to his or her interest in
the Company immediately prior to the Closing, excluding shares
held by persons who properly perfect their dissenters
rights. Affiliates of Acquiror own approximately 55.7% of our
Common Shares and will receive an equivalent amount of trust
units. A beneficiarys interest will not be represented by
a certificate, but rather the trustee will maintain a ledger of
the trust units held by each beneficiary at the trustees
place of business. No beneficiary will have any title in, right
to, possession, management, or control of, the underlying assets
of the trust except as expressly provided in the trust agreement.
Limitations
on Transfer of Trust Units
Trust units may not be assigned or otherwise transferred to any
other person or entity, other than by will or intestate
succession as personal property. The trustee will not have any
duty to recognize any purported transfer other than as set forth
in the trust agreement.
Duration
and Termination of the Trust
The trust will continue until the earliest of:
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the distribution of all the excess sale proceeds according to
the terms of the merger agreement and the trust
agreement; or
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the special committees failure to consummate a sale of
AAGs Specialty Vehicles business within the time period
and pursuant to the other terms set forth in the merger
agreement.
|
Administration
of the Trust
A single trustee will be appointed to administer the trust. The
trustee will pay from the trust assets, if any, all expenses,
charges, obligations, and certain liabilities of the trust that
result from the administration and execution of the trust. The
trustee may in its discretion, or upon a vote of the holders of
a majority of trust units, make interim distributions of assets
of the trust, if any, but at least annually, the trustee must
distribute to the beneficiaries all cash proceeds from receipt
of the trust assets, if any, that are in excess of reasonable
amounts retained to satisfy liabilities and expenses of the
trust. Once the trustee determines that all liabilities, claims,
expenses, and obligations have been paid or discharged, and no
further excess sale proceeds are to be received, or that there
are no excess sale proceeds to be received, then the trustee
will distribute any remaining trust assets to the beneficiaries
in proportion to the trust units held by them.
Reporting
to Beneficiaries
As soon as practicable after the effective time of the Merger,
the trustee will mail to each beneficiary a notice stating how
many trust units such person beneficially owns and information
about how to contact the trustee. The trustee will provide
certain annual notices to the beneficiaries at the end of each
tax year and after the trust terminates. These notices will
include a written report and account showing assets and
liabilities of the trust, receipts and disbursements of the
trustee, changes in the trust assets and liabilities not
previously reported, statements of cash flow, and any action
taken by the trustee in performance of its duties which, in
56
the opinion of the trustee, materially affect the trust assets
or liabilities. The trustee will also mail to beneficiaries
interim reports whenever a material event relating to the trust
assets occurs, but may in its discretion, report these events in
an annual notice if that notice will be issued at approximately
the same time as the interim report would be issued.
General
Powers of the Trustee
The trustee will generally be responsible for the administration
of the trust. The trustees general powers include the
power to:
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collect and convert into cash the trust assets;
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|
retain and set aside funds and to use those funds to pay and
satisfy claims, expenses, charges, liabilities and obligations
existing with respect to the trust or trust assets;
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appoint or engage agents or representatives, for example,
accountants or attorneys, to assist the trustee in executing its
duties;
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take actions necessary to protect and conserve trust assets,
including instituting or defending actions or judgments for
relief in the name of the trust; and
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cancel, terminate or amend existing contracts, agreements, or
causes of action relating to or forming a part of the trust
assets and to execute new contracts, agreements, or causes of
action relating to the trust.
|
The preceding list does not include all enumerated powers of the
trustee. Other powers of the trustee may be authorized under the
trust agreement or under the laws of the State of Indiana. We
encourage you to review the trust agreement in its entirety.
Compensation
of the Trustee
The trustee will receive usual and customary fees based on fees
charged by trustees for administration of trusts of this type
and nature. The trustee will also be reimbursed for reasonably
incurred expenses in the performance of its duties. These fees
and expenses will be paid out of the trust assets. To facilitate
payment, we may advance funds to pay the trusts and the
trustees fees and expenses and recover such advances from
the net proceeds of the sale of the Specialty Vehicles business.
You will have no personal liability for any fees or expenses of
the trustee or the trust.
Number
and Qualifications of the Trustee
A single trustee will be appointed to administer the trust. That
person must be either a citizen and resident of a state of the
United States, or a corporation or other entity which is
incorporated or formed under the laws of a state of the United
States. If the trustee is a corporation, that corporation must
be authorized to act as a corporate fiduciary in the State of
Indiana or other jurisdiction determined by the trustee.
Resignation
or Removal and Appointment of a Successor Trustee
The trustee may resign by written notice to the beneficiaries.
Resignation becomes effective upon the earlier of the
appointment of a successor trustee or that successors
acceptance of appointment. A trustee may be removed at any time,
with or without cause, by the beneficiaries having a majority of
the total trust units held by all beneficiaries. If a trustee
resigns or is removed, or dies, becomes mentally incompetent or
incapable of action, or is adjudged bankrupt or insolvent, then
a successor trustee will be appointed by the beneficiaries
holding trust units representing at least a majority of the
total units consent.
Meetings
and Action by the Beneficiaries
A meeting of the beneficiaries may be called by the trustee or
the beneficiaries holding at least 33% of all the trust units.
The trustee may call a meeting by providing written notice
mailed to the beneficiaries not
57
more than 60 nor less than 5 days before such meeting. In
order for beneficiaries to call a meeting, the requisite
beneficiaries must provide a written request to the trustee
requesting a meeting of beneficiaries be called and specify, in
reasonable detail, the action proposed to be discussed at the
meeting. Within 30 days after the written request, the
trustee must call a meeting by providing the written notice
describe above. If the trustee fails to call a meeting within
the 30-day
period then the meeting may be called by the beneficiaries
holding at least 33% of the outstanding total trust units.
Beneficiaries are not entitled to vote at a meeting of
beneficiaries. To the extent the trust agreement provides for
actions to be taken by the holders of the majority of the trust
units, the action may only be taken by H.I.G. All American as
the holder of a majority of the trust units.
Amendments
The trustee must amend the trust agreement, subject to certain
limitations, at the direction of beneficiaries holding a
majority of the total trust units.
RIGHTS OF
DISSENTING SHAREHOLDERS
Shareholders are entitled to dissent from the Merger and obtain
payment of the fair value of their AAG shares under the IBCL.
Accordingly, by following the procedure described herein, any
AAG shareholder who opposes the Merger may choose to receive
payment representing the fair value of such persons shares.
A shareholder who wishes to assert dissenters rights
with respect to the Merger must deliver to AAG before the vote
is taken at the Special Meeting a written notice indicating the
shareholders intent to dissent and demand payment for his,
her or its shares, if the proposed approval of the merger
agreement and the Merger is effectuated. This notice must be
delivered to AAG before the vote is taken on the merger
agreement and the Merger at the Special Meeting, and the
shareholder must not vote his, her or its shares in favor of the
Merger or execute the proxy in favor of the Merger. A
shareholder who fails to deliver the demand notice or who
executes the proxy in favor of the Merger is not entitled to
dissenters rights for his, her or its shares under the
IBCL.
Following the Special Meeting, AAG must deliver a written
dissenters notice to all shareholders that notified AAG
that they intend to dissent and demand payment for their AAG
shares and who did not vote in favor of the merger agreement and
the Merger. This dissenters notice must be sent by AAG no
later than ten (10) days after the Special Meeting and must
(i) state where the payment demand must be sent and where
and when certificates representing AAG shares must be deposited,
(ii) inform holders of uncertificated AAG shares to what
extent transfer of AAG shares will be restricted after the
payment demand is received; (iii) supply a form for
demanding payment for the AAG shares that includes the date of
the first announcement to the news media or to the shareholders
of the terms of the Merger and requires that the shareholder
asserting dissenters rights certify whether or not the
beneficial ownership of AAG shares was acquired before that
date; (iv) set a date by which AAG must receive the payment
demand which must be between 30 and 60 days after the
dissenters notice is delivered; and (v) be
accompanied by a copy of IBCL
Chapter 23-1-44.
A dissenting shareholder must demand payment, certify whether
beneficial ownership of the AAG shares was acquired before the
date set forth in the dissenters notice and deposit his,
her or its share certificates in accordance with the terms of
such notice. A shareholder who fails to demand payment or
deposit share certificates as required by the dissenters
notice by the respective dates set forth therein is not entitled
to payment for the AAG shares (other than the shareholders
share of the Merger Consideration).
If a dissenting shareholder was the beneficial owner of AAG
shares on or prior to the date of the first announcement to the
news media (November 8, 2010) or to shareholders of
the terms of the proposed transaction (a Pre-Announcement
Shareholder), the IBCL requires AAG to pay such dissenting
shareholder the amount AAG estimates to be the fair value of
such dissenting shareholders AAG shares. Payment is to be
made upon receipt of the demand and must be accompanied by
AAGs most recent year-end and interim financial
statements, a statement of AAGs estimate of the fair value
of the AAG shares, and a statement of the dissenting
shareholders right to demand payment under IBCL
Section 23-1-44-18.
58
If a dissenting shareholder was not the beneficial owner of his
AAG shares prior to the date of the first announcement to news
media or to the shareholders of the terms of the proposed
transaction (a Post-Announcement Shareholder), AAG
may elect to withhold payment of the fair value of such
dissenting shareholders AAG shares. To the extent such
payment is withheld, AAG is required to estimate the fair value
of such dissenting shareholders AAG any shares and offer
to pay this amount to each Post- Announcement Shareholder who
agrees to accept it in full satisfaction of the dissenting
shareholders demand. The offer must be accompanied by a
statement of the AAGs estimate of value of the AAG shares
and a statement of the dissenting shareholders right to
demand payment under IBCL
Section 23-1-44-18.
IBCL
Section 23-1-44-18
provides that a dissenting shareholder may notify AAG in writing
of the dissenters own estimate of the fair value of his,
her or its AAG shares and demand payment of the amount of such
estimate (less any payment already made by AAG), or reject
AAGs offer (if a Post-Announcement Shareholder) and demand
payment of the fair value of his, her or its AAG shares if
(i) the dissenter believes the amount paid or offered is
less than the fair value of his, her or its AAG shares,
(ii) AAG fails to pay Pre-Announcement Shareholders within
60 days after the date set for demanding payment, or
(iii) if the proposed transaction is not consummated, AAG
fails to return the deposited certificates within 60 days
after the date set for demanding payment. In order to exercise
the rights granted by Indiana Code
Section 23-1-44-18,
a dissenter must notify AAG in writing within 30 days after
AAG made or offered payment for the dissenting
shareholders AAG shares. Shareholders should note that
investment banking opinions as to the fairness, from a financial
point of view, of the consideration payable in a sale
transaction, such as the Merger, are not opinions as to fair
value under IBCL
Section 23-1-44-18.
If a demand for payment by a dissenting shareholder under IBCL
Section 23-1-44-11
or
23-1-44-18
remains unsettled, AAG must commence a proceeding in the circuit
or superior court of the county where AAGs registered
office in Indiana is located (Marion County) within 60 days
after AAGs receipt of the payment demand, and petition the
court to determine the fair value of the subject AAG shares. If
such a proceeding is not commenced within the
60-day
period, AAG must pay each dissenting shareholder whose demand
remains unsettled the amount demanded. All dissenting
shareholders whose demands remain unsettled must be made parties
to the proceeding and must be served with a copy of the
petition. The court may appoint one or more persons as
appraisers to receive evidence and recommend a decision on the
question of fair value. In any such proceeding, each dissenting
shareholder made a party is entitled to a judgment in the amount
of the difference between the fair value found by the court and
the amount paid by AAG, plus interest on such difference, in the
case of a Pre-Announcement Shareholder; or the fair value, plus
accrued interest, of such dissenting shareholders AAG
shares for which AAG elected to withhold payment, in the case of
a Post-Announcement Shareholder. The court in an appraisal
proceeding has the authority to determine and assess the costs
of the proceeding, including the compensation and expenses of
court-appointed appraisers, in such amounts and against such
parties as it deems equitable. The court may also assess fees
and expenses of counsel and experts for the parties against AAG
if the court finds AAG did not substantially comply with the
requirements of IBCL
Sections 23-1-44-10
through 18, or against any party if the court finds that the
party acted arbitrarily, vexatiously, or not in good faith. The
IBCL also makes provision for compensation of counsel for any
dissenting shareholder whose services benefited other dissenting
shareholders similarly situated, to be paid out of the amounts
awarded the dissenting shareholders that were benefited, if not
assessed against AAG. The foregoing summary does not purport to
be a complete statement of the provisions of the IBCL relating
to the rights of dissenting shareholders and is qualified in its
entirety by the IBCL.
Each shareholder who perfects dissenters rights will not
receive his, her, or its portion of the Merger Consideration.
Such dissenting shareholders shares shall not be converted
into a right to receive any amounts with respect to the Merger
Consideration, and shall have only the rights described for
dissenters in the merger agreement.
59
COMPARATIVE
RIGHTS OF AAG SHAREHOLDERS AND SPECIALTY VEHICLES
LIQUIDATING TRUST UNIT HOLDERS
The following is a summary of the material differences
between the rights of our shareholders and beneficiaries under
the trust. This section does not include a complete description
of all differences between the rights of our shareholders and
beneficiaries under the trust nor does it include a complete
description of the specific rights of such holders. This summary
is qualified in its entirety by reference to the IBCL,
Title 30 of the Indiana Code as well as to the articles of
incorporation and bylaws of AAG and the trust agreement, which
are available upon request. See the section entitled Where
You Can Find More Information beginning on page 64 of
this proxy statement/prospectus.
We are an Indiana corporation governed by the IBCL. The trust
was formed by us and is governed by Title 30 of the Indiana
Code. Some difference between the rights of our shareholders and
the beneficiaries under the trust may arise from differences in
their respective governing law as well as the documents
governing their respective existences and administration.
Board of
Directors
AAG. Our bylaws provide for election of
directors at the annual meeting of the shareholders. Each
director elected will hold office for the term for which he is
elected and until his successor is elected and qualified.
Trust. The trust does not have a board of
directors, but rather is administered by a trustee initially
appointed by the Special Committee. The trustee will remain as
trustee until the trust is terminated or upon his or her
resignation or removal by beneficiaries having aggregate trust
units of at least a majority of the total trust units held by
all beneficiaries.
Meetings
and Voting Rights
AAG. Our bylaws provide for an annual meeting
of shareholders where shareholders will elect a board of
directors and transact other business properly before the
meeting. In addition, special meetings of the shareholders may
be called by the President, the Board of Directors or by the
Secretary on the written request of the holders of not less than
a majority of all shares entitled to vote at the meeting.
Shareholders are entitled to vote at these meetings according to
their outstanding shares.
Trust. No annual meeting of beneficiaries is
required under the trust agreement. A meeting of the
beneficiaries may be called by the trustee or the beneficiaries
holding at least 33% of all the trust units. In order for
beneficiaries to call a meeting, the requisite beneficiaries
must provide a written request to the trustee requesting a
meeting of beneficiaries be called and specify, in reasonable
detail, the action proposed to be discussed at the meeting.
Within 30 days after the written request, the trustee must
call a meeting by providing the written notice describe above.
If the trustee fails to call a meeting within the
30-day
period then the meeting may be called by the beneficiaries
holding at least 33% of the outstanding total trust units.
Beneficiaries are not entitled to vote at a meeting of
beneficiaries. Rather, any action that requires approval of
holders of a majority of the trust units may be taken only by
H.I.G. All American as the holder of a majority of the trust
units.
Ongoing
Operations
AAG. Our purpose is to operate as a going
concern engaged in the business determined by our board of
directors. We intend to generate profits and attempt to increase
shareholder value through the operation of our tangible and
intangible assets.
Trust. The trust is organized for the sole
purpose of receiving and distributing excess sale proceeds from
the sale of AAGs Specialty Vehicles business if the sale
occurs in accordance with the terms of the merger agreement. The
trust will not participate in the operating profit of the
Specialty Vehicles business and if the sale does not occur
within the time frame or result in net proceeds required by the
merger agreement, then the trust will receive nothing from a
sale of the Specialty Vehicles business. The trust is not
permitted to engage
60
in any trade or business and is intended to be treated as a
liquidating trust under Treasury Regulation
Section 301.7701-4(d)
and any analogous provision of state or local law.
Transferability
of Interest
AAG. Our Common Shares are freely transferable
in the market and quoted on an interdealer quotation system.
Trust. The trust units will not be marketable
nor will they be listed on any securities exchange or quoted on
any interdealer quotation system. Trust units may not be
transferred other than by will or intestate succession as
personal property.
FINANCIAL
INFORMATION
No separate financial information is provided for Acquiror
because Acquiror is a newly formed entity formed in connection
with the Merger and has no independent operations. No pro forma
data giving effect to the Merger has been provided. We do not
believe that such information is material to shareholders in
evaluating the proposed Merger and the merger agreement because
(1) the proposed Merger Consideration consists of cash and
the right to receive an interest in the Specialty Vehicles
Liquidating Trust, which may be reduced to cash upon sale of the
Specialty Vehicles business and (2) if the Merger is
consummated, the Common Shares will cease to be publicly traded.
Set forth below is certain unaudited financial information
relating to the Specialty Vehicles business:
All
American Specialty Vehicles
Statements
of Operations
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|
|
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Nine Months
|
|
|
Twelve Months
|
|
|
Twelve Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
19,147
|
|
|
$
|
13,493
|
|
|
$
|
2,405
|
|
Cost of sales
|
|
|
17,266
|
|
|
|
13,183
|
|
|
|
3,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
1,881
|
|
|
|
310
|
|
|
|
(635
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
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|
Selling
|
|
|
99
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,084
|
|
|
|
1,147
|
|
|
|
1
|
|
Loss on sale of assets, net
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190
|
|
|
|
1,147
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
691
|
|
|
|
(837
|
)
|
|
|
(636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense
|
|
|
33
|
|
|
|
19
|
|
|
|
|
|
Other (income) expense, net
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,517
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(826
|
)
|
|
|
(856
|
)
|
|
|
(636
|
)
|
Income taxes (credits)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(826
|
)
|
|
$
|
(856
|
)
|
|
$
|
(636
|
)
|
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|
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61
Book
Value Per Common Share
Our book value per Common Share as of September 30, 2010
was $0.91.
TRADING
MARKET AND PRICE FOR COMMON SHARES
The Common Shares are quoted in the pink sheets in
the over-the-counter market under the symbol COHM.
As of September 30, 2010, we had approximately
1,763 shareholders of record. The following table sets
forth the reported high and low sales prices for the Common
Shares in the pink sheets for each completed
quarterly period within the fiscal years ended December 31,
2010, 2009 and 2008.
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|
Price Range
|
Fiscal 2010
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
1.51
|
|
|
$
|
1.09
|
|
Second Quarter
|
|
|
1.45
|
|
|
|
0.47
|
|
Third Quarter
|
|
|
0.59
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
2.03
|
|
|
$
|
0.52
|
|
Second Quarter
|
|
|
1.45
|
|
|
|
0.25
|
|
Third Quarter
|
|
|
1.55
|
|
|
|
1.02
|
|
Fourth Quarter
|
|
|
1.55
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
6.01
|
|
|
$
|
2.75
|
|
Second Quarter
|
|
|
3.78
|
|
|
|
2.11
|
|
Third Quarter
|
|
|
2.64
|
|
|
|
1.65
|
|
Fourth Quarter
|
|
|
2.53
|
|
|
|
0.48
|
|
These prices may reflect inter-dealer prices without retail
mark-up,
markdown or commissions and may not represent actual
transactions. The trading volume for the Common Shares has
historically been relatively limited and a consistently active
trading market for the Common Shares may not occur in the
pink sheets.
Dividends
AAG has not paid dividends in the last two years. Future payment
of dividends is prohibited by AAGs loan agreements
RECENT
TRANSACTIONS
No transactions in Common Shares have been effected during the
past 60 days by (1) AAG or Acquiror or any of its
affiliates, or (2) any executive officer, director,
affiliate or subsidiary of AAG.
62
SECURITIES
OWNERSHIP
The Common Shares are our only outstanding class of voting
securities. The following table sets forth information regarding
the beneficial ownership of the Common Shares as
of ,
2010 by each person who beneficially owns more than 5% of the
Common Shares to the extent known to management.
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|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Percent of
|
Name and Address of Beneficial Owner
|
|
Beneficially Owned
|
|
Class
|
|
H.I.G. All American, LLC
|
|
|
41,640,523
|
(1)
|
|
|
71.9
|
%
|
c/o H.I.G.
Capital, LLC
1450 Brickell Avenue, 31st Floor
Miami, Florida 33131
|
|
|
|
|
|
|
|
|
GAMCO Investors, Inc.
|
|
|
2,840,900
|
|
|
|
7.7
|
%
|
One Corporate Center
Irvine, California 92614
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 21,156,658 shares that H.I.G. All American could
acquire on conversion of convertible debt or other rights as
of . |
The following table shows the number of Common Shares each
executive officer and director owned as
of ,
2010 including shares subject to stock options exercisable
within 60 days of that date. Please note that, as reported
in this table, beneficial ownership includes those shares each
individual has the power to vote or transfer, as well as shares
owned by immediate family members that reside in the same
household.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
Held in
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
401(k)
|
|
Total
|
|
|
|
|
Shares
|
|
Exercisable
|
|
Vesting
|
|
Plan as of
|
|
Shares
|
|
% of
|
|
|
Beneficially
|
|
Within
|
|
Within
|
|
Dec. 31,
|
|
Beneficially
|
|
Shares
|
Name
|
|
Owned
|
|
60 Days
|
|
60 Days
|
|
2009
|
|
Owned
|
|
Outstanding
|
|
R.J. Deputy
|
|
|
173,989
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
176,989
|
|
|
|
*
|
|
W.P. Johnson
|
|
|
142,815
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
145,815
|
|
|
|
*
|
|
R.M. Lavers
|
|
|
75,932
|
|
|
|
7,100
|
|
|
|
|
|
|
|
292
|
|
|
|
83,324
|
|
|
|
*
|
|
E.W. Miller
|
|
|
76,308
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
79,308
|
|
|
|
*
|
|
D.W. Hudler
|
|
|
75,070
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
78,070
|
|
|
|
*
|
|
G.B. Bloom
|
|
|
73,927
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
76,927
|
|
|
|
*
|
|
J.A. Goebel
|
|
|
67,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,138
|
|
|
|
*
|
|
R.J. Bedell
|
|
|
21,621
|
|
|
|
|
|
|
|
|
|
|
|
25,318
|
|
|
|
46,939
|
|
|
|
*
|
|
C.A. Zuhl
|
|
|
29,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,297
|
|
|
|
*
|
|
F. deArmas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
M. Sanford
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Directors and Executive Officers as a group
(11 persons)
|
|
|
736,097
|
|
|
|
22,100
|
|
|
|
|
|
|
|
25,610
|
|
|
|
783,807
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPERTS
The consolidated financial statements of All American Group,
Inc. and Subsidiaries (f/k/a Coachmen Industries, Inc. and
Subsidiaries) at December 31, 2009, and for the year then
ended, included in this Proxy Statement/Prospectus of All
American Group, Inc. and Specialty Vehicles Liquidating Trust,
which is referred to and made part of this Registration
Statement
(Form S-4)
have been audited by McGladrey & Pullen, LLP,
independent registered public accounting firm, and at
December 31, 2008, and for the year then ended, by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their respective reports (which
contain an explanatory paragraph describing conditions that
raise substantial doubt about the
63
Companys ability to continue as a going concern as
described in Note 2 to the consolidated financial
statements) appearing elsewhere herein, and are included in
reliance upon such reports given on the authority of such firms
as experts in accounting and auditing.
SHAREHOLDER
PROPOSALS
If the Merger is consummated, there will be no public
shareholders of AAG and no public participation in any future
meetings of shareholders of AAG.
However, if the Merger is not consummated, our public
shareholders will continue to be entitled to attend and
participate in our shareholder meetings. Shareholders wishing to
include proposals in AAGs proxy statement and form of
proxy for the 2011 Annual Meeting of Shareholders must have
submitted such proposals so that they were received by the
Secretary of AAG at the address indicated on page 10 by no
later than December 2, 2010.
AAGs Bylaws provide that notice of proposed shareholder
nominations for election of directors may be made by any
shareholder holding five percent (5%) or more of the outstanding
shares entitled to vote for the election of Directors, and must
be made in writing and either delivered or mailed by
first-class United States mail, postage prepaid, to the
Secretary of AAG, and in either case must be received by the
Secretary of AAG not less than 90 days prior to the month
and day of the anniversary of the last meeting of the
shareholders called for the election of directors. If there is
public participation in our 2011 annual meeting, nominations for
the 2011 meeting received after January 28, 2011 will be
considered untimely. SEC regulations may set different or
additional time requirements. The advance notice requirement
affords the Board of Directors the opportunity to consider the
qualifications of all proposed nominees and, to the extent
deemed necessary or desirable by the Board, inform shareholders
about such qualifications. The notice must contain certain
information about each proposed nominee, including their age,
business and residence addresses and principal occupation, the
number of shares of Common Shares beneficially owned by them and
such other information as would be required to be included in a
proxy statement soliciting proxies for the election of such
proposed nominee. If the chairman of the annual meeting of
shareholders determines that a nomination was not made in
accordance with the foregoing procedures, such nomination is
void.
For a shareholder to bring other business before the 2011 annual
meeting of shareholders, but not have it included in the proxy
statement, timely notice must be submitted in writing, either
delivered or mailed by first-class United States mail,
postage prepaid, to the Secretary of AAG, and in either case be
received by the Secretary of AAG not less than 60 days
prior to the month and day of the anniversary of the mailing of
the prior years proxy statement. The notice must identify
the proposing shareholder and
his/her
address, and contain a description of the proposed business and
such other information as would be required to determine the
appropriateness of including the proposal in a proxy statement.
Shareholder proposals for the 2011 annual meeting received after
January 31, 2011 will be considered untimely and the proxy
solicited by AAG for next years annual meeting may confer
discretionary authority to vote on such matters without a
description of them in the proxy statement for that meeting.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the filing requirements of the Exchange Act.
Accordingly, we are required to file annual, quarterly and
special reports, proxy statements and other information with the
SEC relating to its business, financial condition and other
matters. You can read and copy any materials we file with the
SEC at the public reference facilities maintained by the SEC at
Room 1580, 100 F Street, NE,
Washington, D.C. 20549. Copies of such materials may also
be obtained by mail, upon payment of the SECs customary
fees, by writing to the SECs principal office at
100 F Street, NE, Washington, D.C. 20549. You can
obtain information about the operation of the SECs public
reference facilities by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a web site that contains materials we
file electronically with the SEC, which you can access over the
Internet at
http://www.sec.gov.
64
AAG has filed a registration statement on
Form S-4
to register with the SEC the offering and sale of the trust
units to be issued to shareholders of AAG in the Merger. You
should rely only on the information contained in this proxy
statement/prospectus. You should not assume that the information
contained in this proxy statement/prospectus is accurate as of
any later date, and the mailing of this Proxy
Statement/Prospectus to you shall not create any implication to
the contrary. This proxy statement/prospectus is a part of such
registration statement and constitutes a prospectus and a proxy
statement of AAG for the special meeting of AAG shareholders.
This proxy statement/prospectus does not contain all of the
information set forth in the registration statement because
certain parts of the registration statement are omitted as
provided by the rules and regulations of the SEC. You may
inspect and copy the registration statement at the SECs
reference room or web addresses listed above.
Because the Merger is a going-private transaction,
AAG, Acquiror, and Acquisition Sub filed with the SEC a
Rule 13E-3
Transaction Statement on
Schedule 13E-3
under the Exchange Act with respect to the Merger. The
Schedule 13E-3,
including any amendments and exhibits filed or incorporated by
reference as part of it, is available for inspection as set
forth above.
OTHER
BUSINESS
Other than the matters discussed in this proxy
statement/prospectus, the Board does not know of any other
matters to be presented for action at the Special Meeting. If
any other business should properly come before the meeting, the
persons named in the accompanying proxy card intend to vote
thereon in accordance with their best judgment in light of the
conditions then prevailing.
By Order of the Board of Directors,
Martin Miranda
Secretary
Elkhart, Indiana
,
201
65
All
American Group, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,485
|
|
|
$
|
6,352
|
|
Restricted cash
|
|
|
8,052
|
|
|
|
10,191
|
|
Trade receivables, less allowance for doubtful receivables
2010 $414 and 2009 $1,234
|
|
|
2,712
|
|
|
|
3,163
|
|
Other receivables
|
|
|
1,691
|
|
|
|
1,426
|
|
Refundable income taxes
|
|
|
182
|
|
|
|
1,939
|
|
Inventories
|
|
|
17,096
|
|
|
|
21,566
|
|
Prepaid expenses and other
|
|
|
3,955
|
|
|
|
4,325
|
|
Assets held for sale
|
|
|
4,659
|
|
|
|
4,659
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
40,832
|
|
|
|
53,621
|
|
Property, plant and equipment, net
|
|
|
27,333
|
|
|
|
28,787
|
|
Cash value of life insurance, net of loans
|
|
|
72
|
|
|
|
515
|
|
Restricted cash
|
|
|
4,598
|
|
|
|
4,607
|
|
Other
|
|
|
1,554
|
|
|
|
2,519
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
74,389
|
|
|
$
|
90,049
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable, trade
|
|
$
|
9,314
|
|
|
$
|
9,132
|
|
Accrued income taxes
|
|
|
441
|
|
|
|
691
|
|
Accrued expenses and other liabilities
|
|
|
8,736
|
|
|
|
11,933
|
|
Fair value of derivative instruments
|
|
|
6,589
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
11,194
|
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
36,274
|
|
|
|
22,125
|
|
Long-term debt
|
|
|
2,248
|
|
|
|
2,828
|
|
Fair value of derivative instruments
|
|
|
|
|
|
|
13,030
|
|
Deferred income taxes
|
|
|
|
|
|
|
508
|
|
Postretirement deferred compensation benefits
|
|
|
2,369
|
|
|
|
2,753
|
|
Other
|
|
|
64
|
|
|
|
448
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
40,955
|
|
|
|
41,692
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 9)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Common shares, without par value: authorized
100,000 shares; issued 2010 41,751 shares
and 2009 21,257 shares
|
|
|
101,320
|
|
|
|
92,710
|
|
Additional paid-in capital
|
|
|
6,365
|
|
|
|
6,547
|
|
Retained earnings (deficit)
|
|
|
(17,558
|
)
|
|
|
6,195
|
|
Treasury shares, at cost, 2010 5,000 shares and
2009 5,074 shares
|
|
|
(56,693
|
)
|
|
|
(57,095
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
33,434
|
|
|
|
48,357
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
74,389
|
|
|
$
|
90,049
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-2
All
American Group, Inc. and Subsidiaries
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
15,993
|
|
|
$
|
15,064
|
|
|
$
|
54,845
|
|
|
$
|
41,857
|
|
Delivery and set
|
|
|
703
|
|
|
|
1,010
|
|
|
|
2,969
|
|
|
|
3,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,696
|
|
|
|
16,074
|
|
|
|
57,814
|
|
|
|
45,088
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
16,304
|
|
|
|
15,810
|
|
|
|
53,232
|
|
|
|
43,318
|
|
Delivery and set
|
|
|
981
|
|
|
|
1,208
|
|
|
|
3,247
|
|
|
|
3,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,285
|
|
|
|
17,018
|
|
|
|
56,479
|
|
|
|
47,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
(589
|
)
|
|
|
(944
|
)
|
|
|
1,335
|
|
|
|
(2,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
1,278
|
|
|
|
1,083
|
|
|
|
3,685
|
|
|
|
2,717
|
|
General and administrative
|
|
|
2,749
|
|
|
|
2,856
|
|
|
|
7,502
|
|
|
|
8,978
|
|
Gain on sale of assets, net
|
|
|
(79
|
)
|
|
|
(8
|
)
|
|
|
(90
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,948
|
|
|
|
3,931
|
|
|
|
11,097
|
|
|
|
11,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(4,537
|
)
|
|
|
(4,875
|
)
|
|
|
(9,762
|
)
|
|
|
(13,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
4,140
|
|
|
|
924
|
|
|
|
7,186
|
|
|
|
2,385
|
|
Debt extinguishment loss
|
|
|
|
|
|
|
|
|
|
|
7,289
|
|
|
|
|
|
Investment income
|
|
|
(194
|
)
|
|
|
(598
|
)
|
|
|
(727
|
)
|
|
|
(1,168
|
)
|
Other income, net
|
|
|
(112
|
)
|
|
|
(42
|
)
|
|
|
(357
|
)
|
|
|
(892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,834
|
|
|
|
284
|
|
|
|
13,391
|
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(8,371
|
)
|
|
|
(5,159
|
)
|
|
|
(23,153
|
)
|
|
|
(14,166
|
)
|
Income taxes, (credit)
|
|
|
(214
|
)
|
|
|
34
|
|
|
|
(214
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(8,157
|
)
|
|
|
(5,193
|
)
|
|
|
(22,939
|
)
|
|
|
(14,147
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations of discontinued entities (net of
taxes of $0)
|
|
|
(294
|
)
|
|
|
1,298
|
|
|
|
(814
|
)
|
|
|
382
|
|
Gain on sale of assets of discontinued entities (net of taxes of
$0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Income from legal settlement (net of taxes of $0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
(294
|
)
|
|
|
1,298
|
|
|
|
(814
|
)
|
|
|
15,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,451
|
)
|
|
$
|
(3,895
|
)
|
|
$
|
(23,753
|
)
|
|
$
|
1,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.40
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
(0.89
|
)
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
0.08
|
|
|
|
(0.04
|
)
|
|
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(0.41
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(1.16
|
)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of common shares used in the computation of earnings
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,564
|
|
|
|
16,024
|
|
|
|
20,559
|
|
|
|
15,946
|
|
Diluted
|
|
|
20,564
|
|
|
|
16,024
|
|
|
|
20,559
|
|
|
|
15,965
|
|
See Notes to Consolidated Financial Statements.
F-3
All
American Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(23,753
|
)
|
|
$
|
1,170
|
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,473
|
|
|
|
1,910
|
|
Amortization of discount on convertible debt
|
|
|
2,036
|
|
|
|
|
|
Fair value change in derivative instruments
|
|
|
2,161
|
|
|
|
|
|
PIK interest and penalties
|
|
|
2,510
|
|
|
|
|
|
Debt extinguishment loss
|
|
|
7,289
|
|
|
|
|
|
Net realized and unrealized losses on derivatives
|
|
|
|
|
|
|
22
|
|
Provision for doubtful receivables, net of recoveries
|
|
|
(213
|
)
|
|
|
(374
|
)
|
Gain on sale of properties and other assets, net
|
|
|
(90
|
)
|
|
|
(47
|
)
|
Increase in cash surrender value of life insurance policies
|
|
|
(2
|
)
|
|
|
(931
|
)
|
Deferred income tax
|
|
|
(508
|
)
|
|
|
|
|
Other
|
|
|
(547
|
)
|
|
|
(187
|
)
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
399
|
|
|
|
1,870
|
|
Inventories
|
|
|
4,470
|
|
|
|
3,166
|
|
Prepaid expenses and other
|
|
|
(2,263
|
)
|
|
|
651
|
|
Accounts payable, trade
|
|
|
182
|
|
|
|
(5,586
|
)
|
Income taxes accrued and refundable
|
|
|
1,507
|
|
|
|
(620
|
)
|
Accrued expenses and other liabilities
|
|
|
(3,197
|
)
|
|
|
(15,301
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(7,546
|
)
|
|
|
(14,257
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of properties and other assets
|
|
|
402
|
|
|
|
713
|
|
Investments in life insurance policies
|
|
|
445
|
|
|
|
771
|
|
Purchases of property and equipment
|
|
|
(561
|
)
|
|
|
(712
|
)
|
Release of restricted cash and other
|
|
|
3,112
|
|
|
|
2,301
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
3,398
|
|
|
|
3,073
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
|
|
|
|
2,345
|
|
Payments of short-term borrowings
|
|
|
|
|
|
|
(5,441
|
)
|
Proceeds from long-term debt
|
|
|
550
|
|
|
|
2,375
|
|
Payments of long-term debt
|
|
|
(276
|
)
|
|
|
(435
|
)
|
Proceeds from borrowings on cash value of life insurance policies
|
|
|
|
|
|
|
1,452
|
|
Issuance of common shares under stock incentive plans
|
|
|
7
|
|
|
|
19
|
|
Purchases of common shares for treasury
|
|
|
|
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
281
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(3,867
|
)
|
|
|
(10,916
|
)
|
CASH AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
6,352
|
|
|
|
15,745
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
2,485
|
|
|
$
|
4,829
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-4
All
American Group, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
(Unaudited)
|
|
1.
|
BASIS OF
PRESENTATION.
|
The condensed consolidated financial statements have been
prepared by All American Group, Inc. (the Company),
without audit, in accordance with accounting principles
generally accepted in the United States for interim financial
information and with the instructions to
Form 10-Q
and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted
in the United States for complete financial statements.
Management believes the disclosures made in this document are
adequate so as not to make the information presented misleading.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements, taken as a whole,
and read in conjunction with these notes, contain all
adjustments which are of a normal recurring nature necessary to
present fairly the financial position of the Company as of
September 30, 2010, and the results of its operations and
cash flows for the interim periods presented. Operating results
for the nine-month period ended September 30, 2010 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2010. Management recommends
that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the
Companys
Form 10-K
for the year ended December 31, 2009.
The Company has determined that its reportable segments are
those that are based on the Companys method of internal
reporting, which disaggregates its business by product category.
The Companys two reportable segments are Specialty
Vehicles and Housing. The Company evaluates the performance of
its segments based primarily on net sales and pre-tax income and
allocates resources to them based on performance. There are no
inter-segment revenues. The Company allocates certain corporate
expenses to these segments based on three dimensions: revenues,
subsidiary structure and number of employees. Differences
between reported segment amounts and corresponding consolidated
totals represent corporate income or expenses for administrative
functions and income, debt expenses, costs or expenses relating
to property and equipment that are not allocated to segments.
F-5
The table below presents information about the segments, used by
the chief operating decision maker of the Company for the three
and six-month periods ended September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
6,471
|
|
|
$
|
3,948
|
|
|
$
|
19,147
|
|
|
$
|
7,887
|
|
Housing
|
|
|
10,225
|
|
|
|
12,126
|
|
|
|
38,667
|
|
|
|
37,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
16,696
|
|
|
$
|
16,074
|
|
|
$
|
57,814
|
|
|
$
|
45,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
391
|
|
|
$
|
265
|
|
|
$
|
1,881
|
|
|
$
|
(330
|
)
|
Housing
|
|
|
(980
|
)
|
|
|
(1,202
|
)
|
|
|
(546
|
)
|
|
|
(1,814
|
)
|
Other reconciling items
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
(589
|
)
|
|
$
|
(944
|
)
|
|
$
|
1,335
|
|
|
$
|
(2,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
397
|
|
|
$
|
287
|
|
|
$
|
1,189
|
|
|
$
|
860
|
|
Housing
|
|
|
3,106
|
|
|
|
3,437
|
|
|
|
9,146
|
|
|
|
9,481
|
|
Other reconciling items
|
|
|
445
|
|
|
|
207
|
|
|
|
762
|
|
|
|
1,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
3,948
|
|
|
$
|
3,931
|
|
|
$
|
11,097
|
|
|
$
|
11,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
(6
|
)
|
|
$
|
(22
|
)
|
|
$
|
691
|
|
|
$
|
(1,190
|
)
|
Housing
|
|
|
(4,086
|
)
|
|
|
(4,639
|
)
|
|
|
(9,691
|
)
|
|
|
(11,296
|
)
|
Other reconciling items
|
|
|
(445
|
)
|
|
|
(214
|
)
|
|
|
(762
|
)
|
|
|
(1,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
(4,537
|
)
|
|
$
|
(4,875
|
)
|
|
$
|
(9,762
|
)
|
|
$
|
(13,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
6,898
|
|
|
$
|
6,715
|
|
Housing
|
|
|
38,610
|
|
|
|
42,461
|
|
Corporate and other reconciling items
|
|
|
28,881
|
|
|
|
40,873
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
74,389
|
|
|
$
|
90,049
|
|
|
|
|
|
|
|
|
|
|
F-6
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Raw materials
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
$
|
1,686
|
|
|
$
|
3,493
|
|
Housing
|
|
|
2,589
|
|
|
|
3,691
|
|
Other
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
4,275
|
|
|
|
7,198
|
|
Work in process
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
|
1,545
|
|
|
|
1,780
|
|
Housing
|
|
|
1,245
|
|
|
|
1,554
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
2,790
|
|
|
|
3,334
|
|
Improved lots
|
|
|
|
|
|
|
|
|
Housing
|
|
|
391
|
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
391
|
|
|
|
391
|
|
Finished goods
|
|
|
|
|
|
|
|
|
Specialty vehicles
|
|
|
85
|
|
|
|
483
|
|
Housing
|
|
|
9,555
|
|
|
|
10,160
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
|
9,640
|
|
|
|
10,643
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
17,096
|
|
|
$
|
21,566
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment
Property, plant and equipment consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Land and improvements
|
|
$
|
7,310
|
|
|
$
|
7,549
|
|
Buildings and improvements
|
|
|
31,860
|
|
|
|
31,777
|
|
Machinery and equipment
|
|
|
10,969
|
|
|
|
10,789
|
|
Transportation equipment
|
|
|
9,993
|
|
|
|
10,398
|
|
Office furniture and fixtures
|
|
|
14,335
|
|
|
|
14,138
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
74,467
|
|
|
|
74,651
|
|
Less, accumulated depreciation
|
|
|
47,134
|
|
|
|
45,864
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
27,333
|
|
|
$
|
28,787
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2010, and December 31, 2009, the
Company had $4.7 million classified in assets held for
sale. These assets were available and listed for sale. These
assets consisted of former Housing Segment property and
buildings, including the former manufacturing facility in
Zanesville, Ohio that was consolidated into a larger Indiana
manufacturing plant, plus a warehouse and office building in
Decatur, Indiana. Also included is a former RV paint facility
located in Elkhart, Indiana that the Company sold on
December 5, 2007 for $2.9 million consisting of cash
of $0.3 million and a $2.6 million secured note that
was due in full December 2008. Due to the default on the secured
note, the property reverted back to the Company during the third
quarter of 2009.
F-7
Joint
Venture Note Receivable
In December 2007, the Company entered into an agreement to
produce ADA compliant low floor accessible buses for ARBOC
Mobility, LLC, a marketer of specialized transit and shuttle
buses designed for users with mobility challenges. This bus
incorporates patent pending technologies provided by ARBOC
Mobility. In connection with the agreement with ARBOC Mobility,
LLC, the Company agreed to finance up to $1.0 million of
start up cash requirements. As of September 30, 2010, the
Company has a note receivable of $0.9 million due from
ARBOC Mobility, LLC for start up cash requirements. The note is
on a
month-by-month
basis and bears interest at the rate of 1% per month on the
principal balance. The note is included in other receivables on
the Consolidated Balance Sheet at a net amount of
$0.6 million after write-down for the Companys
portion of joint venture losses to date. The Company has a 30%
interest in this entity and therefore accounts for this
investment on the equity basis. Related party transactions with
ARBOC Mobility, LLC include sales of $6.0 million and
$18.0 million, respectively, for the three and nine-month
periods ending September 30, 2010 and of $3.8 million
and $7.0 million for the corresponding periods of 2009.
Outstanding accounts receivable were approximately
$1.7 million at September 30, 2010 and
December 31, 2009.
|
|
5.
|
ACCRUED
EXPENSES AND OTHER LIABILITIES.
|
Accrued expenses and other liabilities consist of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Wages, salaries, bonuses and commissions and other compensation
|
|
$
|
622
|
|
|
$
|
226
|
|
Warranty
|
|
|
2,081
|
|
|
|
4,162
|
|
Insurance-products and general liability, workers compensation,
group health and other
|
|
|
1,573
|
|
|
|
3,105
|
|
Customer deposits and unearned revenues
|
|
|
1,858
|
|
|
|
1,391
|
|
Interest
|
|
|
304
|
|
|
|
400
|
|
Sales and property taxes
|
|
|
862
|
|
|
|
778
|
|
Other current liabilities
|
|
|
1,436
|
|
|
|
1,871
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,736
|
|
|
$
|
11,933
|
|
|
|
|
|
|
|
|
|
|
Changes in the Companys warranty liability during the
three and nine-month periods ended September 30 were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Balance of accrued warranty at beginning of period
|
|
$
|
2,619
|
|
|
$
|
6,565
|
|
|
$
|
4,162
|
|
|
$
|
9,688
|
|
Warranties issued during the period and changes in liability for
pre- existing warranties
|
|
|
415
|
|
|
|
544
|
|
|
|
1,988
|
|
|
|
1,399
|
|
Settlements made during the period
|
|
|
(953
|
)
|
|
|
(1,678
|
)
|
|
|
(4,069
|
)
|
|
|
(5,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of accrued warranty at September 30
|
|
$
|
2,081
|
|
|
$
|
5,431
|
|
|
$
|
2,081
|
|
|
$
|
5,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2010 warranty reserves include estimated
amounts related to recreational vehicle warranty obligations
retained by the Company after the sale of the recreational
vehicle business in December 2008. The $10.0 million
indemnity escrow account created as a result of the recreational
vehicle business asset sale, which at September 30, 2010
has a balance of $2.8 million (see Note 11,
Restricted Cash) is included in restricted cash at
September 30, 2010, and is subject to reduction to pay for
the recreational vehicle warranty obligations retained by the
Company.
F-8
|
|
6.
|
COMPREHENSIVE
INCOME (LOSS).
|
The changes in the components of comprehensive income (loss) for
the three and nine months ended September 30 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net income (loss)
|
|
$
|
(8,451
|
)
|
|
$
|
(3,895
|
)
|
|
$
|
(23,753
|
)
|
|
$
|
1,170
|
|
Unrealized loss on securities
|
|
|
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
Unrealized gains on cash flow hedges, net of taxes
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(8,451
|
)
|
|
$
|
(3,945
|
)
|
|
$
|
(23,753
|
)
|
|
$
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2009 the accumulated other
comprehensive income, net of tax, relating to deferred losses on
cash flow hedges was ($53,000). In October 2009, the interest
rate swap agreement with a notional amount of $1.8 million
that was used to convert the variable interest rates on an
industrial development revenue bond to a fixed rate was
terminated and paid.
|
|
7.
|
EARNINGS
PER SHARE AND COMMON STOCK MATTERS.
|
Basic earnings per share are based on the weighted average
number of shares outstanding during the period. Diluted earnings
per common share are based on the weighted average number of
shares outstanding during the period, after consideration of the
dilutive effect of stock options and awards and shares held in
deferred compensation plans. Basic and diluted earnings per
share for the three and nine-month period ended September 30
were calculated using the average shares as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(8,451
|
)
|
|
$
|
(3,895
|
)
|
|
$
|
(23,753
|
)
|
|
$
|
1,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares outstanding, end of period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in basic EPS
|
|
|
20,564
|
|
|
|
16,024
|
|
|
|
20,559
|
|
|
|
15,946
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in dilutive EPS
|
|
|
20,564
|
|
|
|
16,024
|
|
|
|
20,559
|
|
|
|
15,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the quarters ending September 30, 2010 and 2009, 76,200
and 78,900 shares of outstanding stock options
respectively, were not included in the computation of diluted
earnings per share because their exercise price was greater than
the average market prices for the respective periods and their
inclusion would have been antidilutive.
Share
Repurchase Programs
Periodically, the Company has repurchased its common stock as
authorized by the Board of Directors. Under the repurchase
program, common shares are purchased from time to time,
depending on market conditions and other factors, on the open
market or through privately negotiated transactions. During
August 2006, the Company announced that the Board of Directors
had authorized a share repurchase of up to one million shares.
During the first quarter of 2009, the Company repurchased
24,914 shares for a total cost, including commissions, of
$46,993. At September 30, 2010, there are
931,071 shares remaining authorized for repurchase by the
Board of Directors.
F-9
As of the beginning of fiscal year 2010, the Company had
unrecognized tax benefits of $2.0 million including
interest and penalties. During the 1st quarter of 2010, the
Company reached a settlement with the IRS with respect to its
appeal of the disallowance of Federal Research &
Experimentation tax credits for the years 1999 to 2004. As a
result of this settlement, unrecognized tax benefits were
reduced $1.7 million. During the 3rd quarter of 2010
the Company determined as a result of this settlement
$0.3 million of state Research & Experimentation
credits from 1999 through 2004 were no longer available. Through
the nine-month period ending September 30, 2010 the Company
also recognized a net tax benefit in the amount of
$0.2 million resulting from several miscellaneous
adjustments such as federal and state tax payables and
receivables, and deferred tax liabilities.
The Company is subject to periodic audits by U.S. federal
and state taxing authorities. In 2006, the Internal Revenue
Service (IRS) commenced an examination of the Companys
U.S. income tax returns specifically for the purpose of
reviewing claims for Research and Experimentation credits for
the years 1999 through 2004. The audit of these claims has been
concluded and a settlement was concluded during the first
quarter. The settlement of this audit resulted in
$0.3 million in interest income being recorded in the first
quarter of 2010.
For the majority of tax jurisdictions, the Company is no longer
subject to U.S. federal, state and local, or
non-U.S. income
tax examinations by tax authorities for years prior to 2004.
The ability to use net operating loss carryforwards to offset
future taxable income is dependent on a number of factors and
complex regulations. Certain limitations may be placed on net
operating loss carryforwards as a result of changes in
control as defined in Section 382 of the Internal
Revenue Code. Generally, after a change in control, a
corporation cannot deduct NOL carryforwards in excess of the
Section 382 limitation. Due to these change in
ownership provisions, utilization of NOL carryforwards may
be subject to an annual limitation regarding their utilization
against taxable income in future periods. The Company has not
performed a Section 382 analysis, however management
believes that certain changes in control may have occurred which
may result in limitations on utilization of its net operating
loss carryforwards. The Company has established a full valuation
allowance against the deferred tax assets because, based on the
weight of available evidence including continued operating
losses, it is more likely than not that not all of the deferred
tax assets will be realized.
|
|
9.
|
COMMITMENTS
AND CONTINGENCIES.
|
Obligation
to Purchase Consigned Inventories
The Company obtains certain of its vehicle chassis for its bus
products directly from an automobile manufacturer under a
converter pool agreement. The agreement generally provides that
the manufacturer would provide a supply of chassis at the
Companys production facilities under the terms and
conditions as set forth in the agreement. Chassis are accounted
for as consigned inventory until assigned to a unit in the
production process. At that point, the Company is obligated to
purchase the chassis and it is recorded as inventory. The
Company also has a bailment agreement with an automobile dealer
providing for a similar consignment arrangement. At
September 30, 2010 and December 31, 2009, chassis
inventory, accounted for as consigned inventory, approximated
$2.9 million and $3.0 million, respectively.
Repurchase
Agreements
The Company was contingently liable at December 31, 2009 to
banks and other financial institutions on repurchase agreements
in connection with financing provided by such institutions to
most of the Companys former independent dealers in
connection with their purchase of the Companys
recreational vehicle products. These agreements provided for the
Company to repurchase its products from the financing
institution in the event that they have repossessed them upon a
dealers default. The estimated maximum contingent
liability, without offsets for resale, was approximately
$0.4 million at December 31, 2009. The Company was
subject to buy-back claims for a limited specific time period,
starting from the date of original wholesale sale. This
F-10
specified time period has expired, and at September 30,
2010, the Company is no longer liable for these repurchase
claims. Based on losses previously experienced under these
obligations, the Company had established a reserve for estimated
losses under repurchase agreements. At December 31, 2009,
$0.2 million was recorded as an accrual for estimated
losses under repurchase agreements.
The Company was also contingently liable at September 30,
2010 to a financial institution on repurchase agreements in
connection with financing provided by the institution to certain
of the Companys independent home builders in connection
with their purchase of the Companys housing products. This
agreement provides for the Company to repurchase its products
from the financing institution in the event that they have
repossessed them upon a builders default. Products
repurchased from builders under this agreement are accounted for
as a reduction in revenue and cost of sales at the time of
repurchase. Although the estimated contingent liability without
offsets for resale would be approximately $2.5 million at
September 30, 2010 ($4.0 million at December 31,
2009), is reduced by the resale value of the products
repurchased. The Company has evaluated the potential for losses
under this agreement and has recorded an accrual of
$0.1 million as of September 30, 2010 and
December 31, 2009 for estimated losses under the repurchase
agreement.
Corporate
Guarantees
The Company was contingently liable under guarantees to
financial institutions of their loans to independent dealers for
amounts totaling approximately $0.6 million at
September 30, 2010 and $1.5 million at
December 31, 2009. The Company had an agreement with a
financial institution to form a private-label financing program
to provide wholesale inventory financing to the Companys
former recreational vehicle dealers. The agreement provided for
a preferred program that provided financing subject to the
standard repurchase agreement described above. In addition, the
agreement provided for a reserve pool whereby the financial
institution made available an aggregate line of credit not to
exceed $40 million that provided financing for dealers that
may not otherwise qualify for credit approval under the
preferred program. No dealer being provided financing from the
reserve pool could receive an aggregate line of credit exceeding
$5 million. At September 30, 2010 the Company was
contingently liable to the financial institutions up to a
maximum of $2.0 million of aggregate losses, as defined by
the agreement, incurred by the financial institutions on
designated dealers with higher credit risks that were accepted
into the reserve pool financing program. The Company has
recorded a loss reserve of less than $0.1 million at
September 30, 2010 and December 31, 2009 associated
with these guarantees.
Litigation
During the second quarter of 2004, the Company entered into an
agreement to provide financing of up to $4.9 million to a
developer for the construction of a hotel for which the Company
was to provide modular units. As of September 30, 2010, the
Company provided $2.3 million in financing to the developer
under this arrangement. No funding has been provided since
December 2005. The loans are collateralized by a first priority
interest in all tangible and intangible property of the
borrower. The developer was unable to obtain a building permit,
so the Company has pursued its legal remedies through litigation
to recoup the financing extended to date. During the fourth
quarter of 2006, the Company obtained title to the real estate
that was partial collateral for this Note. On August 20,
2010, a judgment was entered in favor of the Company in the
principal amount of $2.3 million plus interest of
$0.3 million, plus additional interest accrued after
June 5, 2006, plus all costs, including attorneys
fees incurred by the Company in connection with the enforcement
of the Companys rights, plus the costs of the action. The
liable parties are a company that has since gone out of business
and an individual who was the principal owner of that business.
In February 2009 the Company received a favorable verdict
against Crane Composites, Inc. f/k/a Kemlite for breach of
contract and multiple warranty claims arising from the sale of
defective sidewall material to All American Group, Inc.
subsidiaries. All of the counts alleged in the original
complaint were found in favor of the Company. On April 17,
2009, the Company entered into a settlement agreement with Crane
Composites, Inc., f/k/a Kemlite, with respect to this verdict
rendered in favor of the Company and its subsidiaries, on the
liability portion of this lawsuit. Pursuant to the terms of the
settlement, Crane Composites paid the Company a total of
$17.75 million in three
F-11
installments, with the first installment of $10 million
paid on May 8, 2009, the second installment of
$3.875 million on June 1, 2009 and the final
installment of $3.875 million on July 1, 2009.
The settlement with Crane Composites, Inc. resulted in income of
$14.9 million net of contingent attorney fees recorded in
the first quarter of 2009. The parent Company acquired the
claims that were subject to the settlement for fair value from
its RV Group subsidiaries during the fourth quarter of 2008,
prior to trial. Because the settlement is related to damages
originally incurred by the recreational vehicle business,
accounting rules required the Company to record this income
under discontinued operations, even though the settlement is
owned by the parent Company and not the RV Group.
The Company was named as a defendant in a number of lawsuits
alleging that the plaintiffs were exposed to levels of
formaldehyde in FEMA-supplied trailers manufactured by the
Companys subsidiaries (and other manufacturers) and that
such exposure entitles plaintiffs to an award, including
injunctive relief, a court-supervised medical monitoring fund,
removal of formaldehyde-existing materials, repair and testing,
compensatory, punitive and other damages, including
attorneys fees and costs. The litigation proceeded through
the class certification process. In December 2008, class
certification was denied.
In the third quarter of 2008, as a result of the favorable
settlement of a lawsuit involving an insurance recovery, the
Company recorded income of approximately $0.4 million.
During the second quarter of 2008, as a result of the favorable
settlement of two lawsuits involving insurance recoveries, the
Company recorded income of approximately $1.0 million.
During the first quarter of 2008, the Company also recorded
income of approximately $1.0 million as a result of the
favorable settlement of two lawsuits involving insurance
recoveries. These favorable settlements are classified as a
reduction to general and administrative expenses on the
consolidated statement of operations.
The Company is involved in various other legal proceedings, most
of which are ordinary disputes incidental to the industry and
most of which are covered in whole or in part by insurance.
Management believes that the ultimate outcome of these matters
and any liabilities in excess of insurance coverage and
self-insurance accruals will not have a material adverse impact
on the Companys consolidated financial position, future
business operations or cash flows.
|
|
10.
|
STOCK-BASED
COMPENSATION.
|
The Company has not granted any stock option awards since 2003.
Compensation expense related to the Companys Employee
Stock Purchase Plan was not significant for 2010 or 2009.
Compensation expense related to prior year restricted stock
grants was not material for the three and nine-month periods
ended September 30, 2010 and 2009.
The Company had $12.7 million and $14.8 million of
restricted cash as of September 30, 2010 and
December 31, 2009, respectively.
Restricted cash amounts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash collateral for letters of credit(1)
|
|
$
|
8,553
|
|
|
$
|
8,550
|
|
Indemnity escrow account(2)
|
|
|
2,817
|
|
|
|
5,147
|
|
Cash collateral for workers compensation trust accounts
|
|
|
1,098
|
|
|
|
1,101
|
|
Other
|
|
|
182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restricted cash
|
|
$
|
12,650
|
|
|
$
|
14,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount classified as current assets is $5.1 million and
$5.0 million as of September 30, 2010 and
December 31, 2009. |
F-12
|
|
|
(2) |
|
The indemnity escrow account is related to the agreement for the
asset sale of the recreational vehicle business. |
On April 9, 2009, All American Group, Inc. and Lake City
Bank entered into an agreement for a $2 million three-year
note in exchange for cash loaned to the Company by Lake City
Bank. The note is fully collateralized by certain properties,
bears interest at the rate of 6.250% per annum, and has a
maturity date of April 9, 2012. At September 30, 2010
and December 31, 2009, the amount outstanding was
approximately $1.8 million and $1.9 million,
respectively.
On April 9, 2009, All American Group, Inc. gave a
promissory note to Lake City Bank in connection with the
banks provision of a $0.5 million working capital
line of credit. The note is fully collateralized by certain
properties, and borrowings against this line will bear interest
at a variable rate, with a minimum interest rate of 5% per
annum. This line of credit has a maturity date of March 31,
2012. At September 30, 2010, $0.5 million was
outstanding on this line, and at December 31, 2009, there
were no borrowings against this line of credit.
Convertible
Debt Loan Agreement
On October 27, 2009, the Company completed a two-year
$20.0 million loan agreement as borrowers with H.I.G. All
American, LLC (H.I.G.) for $10.0 million of senior secured
revolving notes and $10.0 million of convertible debt
(Secured Subordinated Convertible Tranche B Notes). This
loan agreement is collateralized by substantially all of the
assets of the Company. As part of the Secured Subordinated
Convertible Tranche B Notes, the Company also issued to
H.I.G. an aggregate of approximately 6.7 million Common
Stock Purchase Warrants exercisable at a price of $0.00001 per
share upon the occurrence of a triggering event (as defined in
the agreement) and prior to the tenth anniversary from the date
of the loan agreement. The revolving notes bear interest at a
rate equal to LIBOR plus 5%, payable in cash monthly. The
convertible debt bears interest at the rate of 20% per annum,
payable in either cash semiannually or as PIK interest that
accrues and increases the principal amount. All principal and
accrued interest on the Secured Subordinated Convertible
Tranche B Notes is convertible into shares of the
Companys common stock at the election of H.I.G. and is
exercisable at any time up until the end of the two-year term of
the notes at the conversion price of $0.979 per share, the
90-day
average stock price prior to the Letter of Intent. The warrants
and Tranche B Note both contain anti-dilution protection in
the event the Company issues in excess of 16,403,409 shares
of its common stock.
The Company recorded a debt discount on the convertible notes
for the full $10.0 million due to the issuance of the
Common Stock Purchase Warrants, as well as the existence of a
beneficial conversion feature. The interest due to H.I.G. on the
convertible debt on the March 30, 2010 due date was
$0.9 million, and was added to the Note balance as PIK
interest. As a result, at March 31, 2010, the
Tranche B Note could be converted into
11,082,737 shares and the Warrant could be exercised for
6,871,536 shares, due to the anti-dilution protection.
At March 31, 2010, the fair value adjustment to the
warrants and the beneficial conversion feature and the
additional shares resulting from the PIK interest resulted in an
additional $3.5 million being recorded as a liability and
an additional non-cash interest expense primarily as a result of
the increase in the Companys stock price between
December 31, 2009 and March 31, 2010.
During the first quarter of 2010, the Company failed to meet
certain financial covenants of the H.I.G. All American Credit
Agreement. H.I.G. did not declare the Company to be in default
of any covenant and on April 5, 2010, the Company and
H.I.G. All American, LLC (H.I.G.) entered into the First
Amendment to the Loan Agreement (the First
Amendment). In the First Amendment, H.I.G. waived
specified Events of Default that had occurred under the Loan
Agreement dated October 27, 2009 between the Company and
H.I.G. prior to April 5, 2010.
F-13
First
Amendment to the Loan Agreement
The Company and H.I.G. All American, LLC (H.I.G.) entered into
the First Amendment to the Loan Agreement (the First
Amendment) on April 5, 2010. The Company issued a new
warrant to purchase up to 9,557,939 shares of the
Companys common stock (the New Warrant)
exercisable at a price $0.00001 per share as consideration to
H.I.G. for entering into the First Amendment. The warrant
originally issued pursuant to the Loan Agreement (the
Original Warrant) and the Tranche B Note were
amended and restated to reflect the anti-dilution adjustments
that occurred as a result of the issuance of the New Warrant.
The Original Warrant, as amended, could be exercised for
10,925,926 shares, and the Tranche B Note now can be
converted into 17,728,758 shares (including PIK interest
due March 30, 2010). The amended and restated Original
Warrant, the New Warrant and the amended and restated
Tranche B Note all contain anti-dilution protection in the
event the Company issues in excess of 16,403,409 shares of
its common stock. The outstanding principal of the amended and
restated Tranche B Note (including PIK interest) is
convertible into shares of the Companys common stock at
the initial conversion price of $0.612 per share.
The First Amendment revised covenants and contains other
modifications to the credit agreement. As a result of the
modifications, the Company will only have partial access to the
$10 million revolving line of credit, for specified
purposes, until the Company is in compliance with the original
financial covenants of the loan agreement.
The First Amendment has been accounted for as a debt
extinguishment of the original debt in accordance with generally
accepted accounting principles. The Company determined that the
fair value of the new debt resulting from the First Amendment on
April 5, 2010 to be approximately $8.4 million, while
the face value of the debt continues to be $10.9 million.
In determining the fair value of the new debt, the Company used
a discount rate of 40%, representing the expected rate of return
adjusted for risk. The difference between the fair value of the
new debt and its previous carrying value and the unamortized
closing costs related to the old debt resulted in a charge of
$7.3 million being recorded as a loss on debt
extinguishment. The Company recorded a debt discount on the
convertible notes related to the First Amendment for the
difference between the face value of $10.9 million and the
fair value of $8.4 million. The amortization of the
$2.5 million in debt discounts will be reported as an
increase in debt and additional interest expense over the
remaining term of the loan agreement. Amortization of debt
discount on the original and First Amendment convertible notes
amounted to $0.4 million and $2.0 million for the
quarter and
year-to-date
periods ended September 30, 2010. The remaining unamortized
discount was $1.7 million at September 30, 2010.
The additional 6.6 million shares that the Tranche B
Note can be converted into along with the additional warrants to
purchase 13.6 million shares had a fair value of
approximately $26.8 million as of the April 5, 2010
agreement date, which increased the Companys derivative
instrument liabilities and increased additional non-cash
interest expense.
The fair value of the warrants and the beneficial conversion
feature were $10.4 million and $2.5 million,
respectively, at June 30, 2010, and $7.6 million and
$5.4 million, respectively, at December 31, 2009 and
are recorded as a liability on the Consolidated Balance Sheet.
At June 30, 2010, the fair value adjustment to the warrants
and the beneficial conversion feature resulted in
$30.3 million being recorded as a reduction to the
derivative instruments liability and a reduction in non-cash
interest expense primarily as a result of the decrease in the
Companys stock price between April 5, 2010 and
June 30, 2010.
For the second quarter of 2010, the net impact of the First
Amendment and fair value valuation adjustments resulted in a
reduction to net interest of $3.6 million.
Warrant
Exercise and New Warrant
On August 3, 2010, H.I.G. All American, LLC
(H.I.G.) exercised all of the warrants issued to
them up to that date to purchase 20,483,865 shares of the
Companys common stock for $204.84 in connection with the
Convertible Debt Loan Agreement dated October 27, 2009. As
a result of the shares purchased by H.I.G., as of
September 30, 2010, a total of 36,750,083 shares of
common stock are outstanding, of which H.I.G. holds 55.7%. The
exercise of the warrants resulted in a decrease to the
derivative liability related to the
F-14
warrants and an increase to common stock of $8.6 million.
The carrying value of the derivative liability related to the
warrants was $10.4 million on August 3, 2010, while
the fair value was $8.6 million, which resulted in a
reduction to the derivative instruments liability and a
reduction in non-cash interest expense of $1.8 million.
On August 5, 2010, in connection with the exercise of
warrants by H.I.G., the Company issued a new warrant (the
New Warrant) to H.I.G. that is exercisable for the
number of shares necessary to maintain H.I.G.s percentage
ownership of the Companys common shares if the Company
issues, on a fully diluted basis, more than 36,887,274 common
shares. The New Warrant was issued pursuant to anti-dilution
provisions contained in the original Loan Agreement dated
October 27, 2009. The Company has determined that the new
warrant is a derivative financial instrument. The Company has
valued this warrant at $9.0 million which represents the
fair value of the 25.6 million shares that would be
exercisable when the convertible debt is converted to common
shares. The Company does not believe, at this time, that any
additional shares will be issued under the new warrant agreement
during the remaining life of the debt agreement; and therefore,
no additional shares have been assumed to be issued under the
anti-dilution provision contained in the new warrant agreement.
Second
Amendment to the Loan Agreement
Operating results for the six-month period ended June 30,
2010 failed to meet the revised debt covenants set with H.I.G.
All American, LLC (H.I.G.) in the First Amendment to the Loan
Agreement. H.I.G. has waived the covenant defaults through
July 31, 2010 in exchange for a waiver fee and expenses of
$0.8 million representing the value of the penalties
prescribed in the First Amendment, plus expenses, and the
issuance on August 24, 2010 of the Second Amended and
Restated Tranche B Note (the Second Amendment).
The Second Amendment provides that the waiver fee and expenses,
plus accrued interest on the convertible debt thru
August 24, 2010 of $0.8 million, be added to the
principal amount of the convertible note. As a result of the
Second Amendment, the Tranche B Note has a face value of
$12.5 million. The Board of Directors and H.I.G. are
currently in discussions to work out mutually acceptable
agreements for the remaining term of the debt agreement. Since
the Company is not in compliance with the existing covenants,
the convertible note is recorded as a current liability in
current maturities of long-term debt and the fair value of
derivative instruments relating to the new warrant and
conversion feature was also recorded as a current liability.
In accordance with the anti-dilution provisions contained in the
original Loan Agreement dated October 27, 2009, as a result
of the Second Amendment of August 24, 2010, the
Tranche B Note can be converted into a total of
20.5 million shares, or an additional 2.8 million
shares. As of the Second Amendment date of August 24, 2010,
the additional 2.8 million shares associated with the
Tranche B Note and the maximum 25.6 million shares
related to the New Warrant that is exercisable to the extent
that the debt is converted had a fair value of
$9.1 million, which increased the Companys derivative
instrument liabilities and increased additional non-cash
interest expense.
The fair value of the new warrant and the beneficial conversion
feature were $5.9 million and $0.7 million,
respectively, at September 30, 2010, and $7.6 million
and $5.4 million, respectively, at December 31, 2009
and are recorded as a liability on the Consolidated Balance
Sheet. At September 30, 2010, the fair value adjustment to
the warrants and the beneficial conversion feature resulted in
$5.0 million being recorded as a reduction to the
derivative instruments liability and a reduction in non-cash
interest expense primarily as a result of the decrease in the
Companys stock price between July 1, 2010 and
September 30, 2010.
The interest due to H.I.G. on the convertible debt on the
October 30, 2010 payment date was $0.4 million, and
was added to the Note balance as PIK interest. At
October 30, 2010, as a result of the PIK interest and due
to the anti-dilution provisions, the Tranche B Note can be
converted into an additional 0.6 million shares and the
warrant that is exercisable to the extent the debt is converted
increases an additional 0.7 million shares.
F-15
Interest expense during the three and nine-month periods ended
September 30, 2010 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Interest on H.I.G. Tranche B Note
|
|
$
|
536
|
|
|
$
|
|
|
|
$
|
1,585
|
|
|
$
|
|
|
Additional warrants, conversion feature, penalty and
anti-dilution provisions from 1st and 2nd Amendments
|
|
|
9,965
|
|
|
|
|
|
|
|
36,727
|
|
|
|
|
|
Fair value adjustments of derivative instruments
|
|
|
(6,879
|
)
|
|
|
|
|
|
|
(33,746
|
)
|
|
|
|
|
Debt accretion
|
|
|
393
|
|
|
|
|
|
|
|
2,036
|
|
|
|
|
|
Amortization of loan fees
|
|
|
13
|
|
|
|
|
|
|
|
317
|
|
|
|
|
|
Interest on Lake City Bank notes
|
|
|
35
|
|
|
|
31
|
|
|
|
97
|
|
|
|
60
|
|
Interest on life insurance borrowings
|
|
|
|
|
|
|
784
|
|
|
|
2
|
|
|
|
2,231
|
|
Interest on retirement plans
|
|
|
30
|
|
|
|
54
|
|
|
|
90
|
|
|
|
18
|
|
Other interest expense
|
|
|
47
|
|
|
|
55
|
|
|
|
78
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
4,140
|
|
|
$
|
924
|
|
|
$
|
7,186
|
|
|
$
|
2,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company announced on November 8, 2010 that it has
agreed to be acquired by affiliates of All American Group
Holdings, LLC, which is an affiliate of H.I.G. All American,
LLC, in a merger that would result in the Companys
shareholders (other than H.I.G. and shareholders that perfect
their dissenters rights under Indiana law) receiving $0.20
per share in cash, and all shareholders (other than shareholders
that perfect their dissenters rights under Indiana law)
receiving an interest in a liquidating trust that will have a
contingent right to receive proceeds from the sale of the
Companys specialty vehicle business.
Upon closing of the merger, the specialty vehicle business will
be offered for sale. The surviving corporation is not required
to sell the specialty vehicles business unless the net proceeds
to the surviving corporation are at least $12 million. The
Company can make no assurance that this amount will be achieved
or that there will be a sale. The sale of the specialty vehicle
business will be negotiated on behalf of the Company by a sale
committee. The Special Committee of the Companys Board of
Directors will appoint two out of three members of the sale
committee that will have the authority to find a buyer for the
specialty vehicles business and negotiate the sale of such
business.
The sale committee has nine months from the effective time of
the merger to execute a letter of intent with a potential buyer
and consummate the sale of the specialty vehicles business
within 90 days thereafter. The excess sale proceeds, if
any, over $5 million will be deposited in the liquidating
trust for distribution to all former AAG shareholders pro rata
(in addition to the $0.20 per share to be paid to the non-HIG
Shareholders in connection with the closing of the merger). The
Company cannot give assurance that the sale of the assets will
be completed within the required time frame or that it will
bring a sufficient amount of net sale proceeds to provide the
shareholders any additional consideration.
F-16
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
All American Group, Inc. (f/k/a Coachmen Industries, Inc.)
We have audited the accompanying consolidated balance sheet of
All American Group, Inc. and subsidiaries as of
December 31, 2009, and the related consolidated statements
of operations, comprehensive income, shareholders equity,
and cash flows for the year then ended. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of All American Group, Inc. and subsidiaries as of
December 31, 2009, and the results of their operations and
their cash flows for the year then ended, in conformity with
U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and
continues to operate in an industry where economic recovery has
been very slow. This raises substantial doubt about the
Companys ability to continue as a going concern.
Managements plans in regard to these matters are also
described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
We were not engaged to examine managements assessment of
the effectiveness of All American Group, Inc. and subsidiaries
internal control over financial reporting as of
December 31, 2009, included in 9A(T) Controls
and Procedures and, accordingly, we do not express an opinion
thereon.
/s/ McGladrey &
Pullen LLP
Elkhart, Indiana
March 29, 2010
F-17
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
All American Group, Inc. and Subsidiaries (f/k/a Coachmen
Industries, Inc. and Subsidiaries)
We have audited the accompanying consolidated balance sheets of
All American Group, Inc. and subsidiaries (f/k/a Coachmen
Industries, Inc. and subsidiaries) (the Company) as of
December 31, 2008 and the related consolidated statements
of operations, shareholders equity, and cash flows for the
year ended December 31, 2008. These financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of All American Group, Inc. and subsidiaries
at December 31, 2008 and the consolidated results of their
operations and their cash flows for the year ended
December 31, 2008, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 2 to the financial statements, the
Companys recurring losses from operations and lack of
liquidity raise substantial doubt about its ability to continue
as a going concern. Managements plans as to these matters
also are described in Note 2. The 2008 financial statements
do not include any adjustments that might result from the
outcome of this uncertainty.
Grand Rapids, Michigan
March 23, 2009
F-18
All
American Group, Inc. and Subsidiaries
Consolidated
Balance Sheets
as of
December 31
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,352
|
|
|
$
|
15,745
|
|
Restricted cash
|
|
|
10,191
|
|
|
|
1,600
|
|
Trade receivables, less allowance for doubtful receivables
2009 $1,234 and 2008 $1,676
|
|
|
3,163
|
|
|
|
1,837
|
|
Other receivables
|
|
|
1,426
|
|
|
|
4,666
|
|
Refundable income taxes
|
|
|
1,939
|
|
|
|
1,559
|
|
Inventories
|
|
|
21,566
|
|
|
|
19,910
|
|
Prepaid expenses and other
|
|
|
4,325
|
|
|
|
4,390
|
|
Assets held for sale
|
|
|
4,659
|
|
|
|
2,913
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
53,621
|
|
|
|
52,620
|
|
Property, plant and equipment, net
|
|
|
28,787
|
|
|
|
30,922
|
|
Cash value of life insurance, net of loans
|
|
|
515
|
|
|
|
4,710
|
|
Restricted cash
|
|
|
4,607
|
|
|
|
17,321
|
|
Other
|
|
|
2,519
|
|
|
|
1,831
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
90,049
|
|
|
$
|
107,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable, trade
|
|
$
|
9,132
|
|
|
$
|
11,414
|
|
Accrued income taxes
|
|
|
691
|
|
|
|
1,470
|
|
Accrued expenses and other liabilities
|
|
|
11,933
|
|
|
|
31,127
|
|
Floorplan notes payable
|
|
|
|
|
|
|
3,096
|
|
Current maturities of long-term debt
|
|
|
369
|
|
|
|
819
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
22,125
|
|
|
|
47,926
|
|
Long-term debt
|
|
|
2,828
|
|
|
|
2,190
|
|
Fair value of derivative instruments
|
|
|
13,030
|
|
|
|
|
|
Deferred income taxes
|
|
|
508
|
|
|
|
457
|
|
Postretirement deferred compensation benefits
|
|
|
2,753
|
|
|
|
3,104
|
|
Other
|
|
|
448
|
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
41,692
|
|
|
|
54,715
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 13)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Common shares, without par value: authorized 60,000 shares;
issued 2009 21,257 shares and 2008
21,236 shares
|
|
|
92,710
|
|
|
|
92,688
|
|
Additional paid-in capital
|
|
|
6,547
|
|
|
|
7,213
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(75
|
)
|
Retained earnings
|
|
|
6,195
|
|
|
|
10,925
|
|
Treasury shares, at cost, 2009 5,074 shares and
2008 5,236 shares
|
|
|
(57,095
|
)
|
|
|
(58,062
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
48,357
|
|
|
|
52,689
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
90,049
|
|
|
$
|
107,404
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-19
All
American Group, Inc. and Subsidiaries
Consolidated
Statements of Operations
for the
years ended December 31
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
56,521
|
|
|
$
|
107,609
|
|
Delivery and set
|
|
|
4,102
|
|
|
|
11,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,623
|
|
|
|
119,596
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
Products
|
|
|
56,703
|
|
|
|
89,593
|
|
Delivery and set
|
|
|
4,956
|
|
|
|
12,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,659
|
|
|
|
102,217
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
(1,036
|
)
|
|
|
17,379
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling
|
|
|
3,633
|
|
|
|
7,077
|
|
General and administrative
|
|
|
11,155
|
|
|
|
13,018
|
|
Impairments
|
|
|
|
|
|
|
18,605
|
|
Gain on sale of assets, net
|
|
|
(67
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
14,721
|
|
|
|
38,656
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(15,757
|
)
|
|
|
(21,277
|
)
|
|
|
|
|
|
|
|
|
|
Nonoperating (income) expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
7,256
|
|
|
|
1,635
|
|
Investment income
|
|
|
(1,422
|
)
|
|
|
(1,094
|
)
|
Other income, net
|
|
|
(1,008
|
)
|
|
|
(1,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
4,826
|
|
|
|
(1,059
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(20,583
|
)
|
|
|
(20,218
|
)
|
Income taxes (credits)
|
|
|
(346
|
)
|
|
|
(1,539
|
)
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(20,237
|
)
|
|
|
(18,679
|
)
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Income (loss) from operations of discontinued entities (net of
taxes (credits) of $0 and $947, respectively)
|
|
|
597
|
|
|
|
(40,884
|
)
|
Loss on sale of assets of discontinued entities (net of taxes of
$0)
|
|
|
|
|
|
|
(9,439
|
)
|
Income from legal settlement (net of taxes of $0)
|
|
|
14,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
15,507
|
|
|
|
(50,323
|
)
|
Net loss
|
|
$
|
(4,730
|
)
|
|
$
|
(69,002
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share Basic
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.26
|
)
|
|
$
|
(1.18
|
)
|
Discontinued operations
|
|
|
0.97
|
|
|
|
(3.19
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
(0.29
|
)
|
|
|
(4.37
|
)
|
Earnings (loss) per share Diluted
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(1.26
|
)
|
|
|
(1.18
|
)
|
Discontinued operations
|
|
|
0.97
|
|
|
|
(3.19
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.29
|
)
|
|
$
|
(4.37
|
)
|
Number of common shares used in the computation of loss per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,073
|
|
|
|
15,799
|
|
Diluted
|
|
|
16,073
|
|
|
|
15,799
|
|
See Notes to Consolidated Financial Statements.
F-20
All
American Group, Inc. and Subsidiaries
Consolidated
Statements of Shareholders Equity
for the
years ended December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Comprehensive
|
|
|
Common
|
|
|
Shares
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Treasury
|
|
|
Shares
|
|
|
Shareholders
|
|
|
|
Income (Loss)
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
Earnings
|
|
|
Number
|
|
|
Amount
|
|
|
Equity
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Balance at January 1, 2008
|
|
|
|
|
|
|
21,180
|
|
|
$
|
92,552
|
|
|
$
|
7,856
|
|
|
$
|
(48
|
)
|
|
$
|
79,927
|
|
|
|
(5,402
|
)
|
|
$
|
(59,154
|
)
|
|
$
|
121,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(69,002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69,002
|
)
|
|
|
|
|
|
|
|
|
|
|
(69,002
|
)
|
Net unrealized (loss) on cash flow hedges
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(69,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares repurchased for the treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(55
|
)
|
|
|
(55
|
)
|
Issuance of common shares under employee stock purchase plan
|
|
|
|
|
|
|
56
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
Issuance (cancellations) of common shares from treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643
|
)
|
|
|
|
|
|
|
|
|
|
|
197
|
|
|
|
1,147
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
|
21,236
|
|
|
$
|
92,688
|
|
|
$
|
7,213
|
|
|
$
|
(75
|
)
|
|
$
|
10,925
|
|
|
|
(5,236
|
)
|
|
$
|
(58,062
|
)
|
|
$
|
52,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,730
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,730
|
)
|
Net realized gain on cash flow hedges
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(4,655
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares repurchased for the treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
(47
|
)
|
|
|
(47
|
)
|
Issuance of common shares under employee stock purchase plan
|
|
|
|
|
|
|
21
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
Issuance (cancellations) of common shares from treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(666
|
)
|
|
|
|
|
|
|
|
|
|
|
187
|
|
|
|
1,014
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
|
|
|
|
21,257
|
|
|
$
|
92,710
|
|
|
$
|
6,547
|
|
|
$
|
|
|
|
$
|
6,195
|
|
|
|
(5,074
|
)
|
|
$
|
(57,095
|
)
|
|
$
|
48,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
F-21
All
American Group, Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
for the
years ended December 31
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,730
|
)
|
|
$
|
(69,002
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,681
|
|
|
|
4,225
|
|
Amortization of discount on convertible debt
|
|
|
833
|
|
|
|
|
|
Fair value adjustment to derivative instruments
|
|
|
3,030
|
|
|
|
|
|
Provision for doubtful receivables
|
|
|
(407
|
)
|
|
|
1,140
|
|
Provision for write-down of assets to net realizable value
|
|
|
|
|
|
|
1,505
|
|
Net realized/unrealized gain (loss) on cash flow hedges
|
|
|
75
|
|
|
|
(27
|
)
|
Goodwill impairment charge
|
|
|
|
|
|
|
12,993
|
|
Impairment charges
|
|
|
|
|
|
|
6,264
|
|
Loss on sale of businesses
|
|
|
|
|
|
|
9,439
|
|
Gain on sale of properties and other assets, net
|
|
|
(104
|
)
|
|
|
(44
|
)
|
Increase in cash surrender value of life insurance policies
|
|
|
(766
|
)
|
|
|
(90
|
)
|
Deferred income tax provision (benefit)
|
|
|
51
|
|
|
|
(1,533
|
)
|
Other
|
|
|
(592
|
)
|
|
|
(3,993
|
)
|
Changes in certain assets and liabilities, net of effects of
acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
534
|
|
|
|
(116
|
)
|
Inventories
|
|
|
(1,656
|
)
|
|
|
35,819
|
|
Prepaid expenses and other
|
|
|
1,218
|
|
|
|
(777
|
)
|
Accounts payable, trade
|
|
|
(2,282
|
)
|
|
|
(3,628
|
)
|
Income taxes accrued and refundable
|
|
|
(1,159
|
)
|
|
|
1,003
|
|
Accrued expenses and other liabilities
|
|
|
(19,194
|
)
|
|
|
(2,786
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(22,469
|
)
|
|
|
(9,608
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of businesses
|
|
|
|
|
|
|
25,238
|
|
Proceeds from sale of properties and other assets
|
|
|
840
|
|
|
|
357
|
|
Proceeds from (investments in) marketable securities and cash
surrender value
|
|
|
3,509
|
|
|
|
(667
|
)
|
Purchases of property and equipment
|
|
|
(991
|
)
|
|
|
(2,088
|
)
|
Other
|
|
|
4,338
|
|
|
|
(7,154
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
7,696
|
|
|
|
15,686
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
2,345
|
|
|
|
16,813
|
|
Payments of short-term borrowings
|
|
|
(5,441
|
)
|
|
|
(37,906
|
)
|
Proceeds from long-term debt
|
|
|
2,584
|
|
|
|
|
|
Payments of long-term debt
|
|
|
(3,229
|
)
|
|
|
(853
|
)
|
Proceeds from borrowings on cash value of life insurance policies
|
|
|
1,452
|
|
|
|
48,983
|
|
Repayment of borrowings on cash value of life insurance policies
|
|
|
|
|
|
|
(19,000
|
)
|
Proceeds from issuance of convertible debt, net of financing
costs
|
|
|
7,694
|
|
|
|
|
|
Issuance of common shares under stock incentive plans
|
|
|
22
|
|
|
|
136
|
|
Purchases of common shares for treasury
|
|
|
(47
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
5,380
|
|
|
|
8,118
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(9,393
|
)
|
|
|
14,196
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
15,745
|
|
|
|
1,549
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
6,352
|
|
|
$
|
15,745
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
383
|
|
|
$
|
599
|
|
Cash paid (refunded) during the year for income taxes
|
|
|
816
|
|
|
|
(35
|
)
|
Operating cash received related to insurance settlement
|
|
|
(139
|
)
|
|
|
(988
|
)
|
Gain on sale of assets Continuing operations
|
|
|
(104
|
)
|
|
|
(44
|
)
|
(Gain) loss on sale of assets Discontinued operations
|
|
|
|
|
|
|
9,439
|
|
Cash received from legal settlement
|
|
$
|
(14,910
|
)
|
|
$
|
|
|
See Notes to Consolidated Financial Statements.
F-22
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
|
|
1.
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NATURE OF
OPERATIONS AND ACCOUNTING POLICIES.
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Nature of Operations All American Group, Inc.
and its subsidiaries (the Company) manufacture
system-built housing and specialty vehicles. The system-built
products (single-family homes, multi-family dwellings, military
housing, motels/hotels, group living facilities, and residential
subdivisions) are sold to builders/dealers or directly to the
end user for certain specialized structures. Through a joint
venture, the Company also manufactures a line of low floor
ADA-compliant buses.
In 2010, a majority of the shareholders of Coachmen Industries,
Inc. approved an amendment to the Companys articles of
incorporation to change the name of the Company to All American
Group, Inc. These financial statements have been changed to
reflect this name change.
Principles of Consolidation The accompanying
consolidated financial statements include the accounts of All
American Group, Inc. and its subsidiaries, all of which are
wholly or majority-owned. All intercompany transactions have
been eliminated in consolidation.
Use of Estimates The preparation of financial
statements in conformity with United States generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Revenue Recognition For the Housing Segment,
the shipping terms are either FOB shipping point or FOB
destination. For traditional home sales, shipping terms are
generally FOB destination and title and risk of ownership are
generally transferred when the Company completes installation of
the product. For traditional home sales with FOB destination
shipping terms, the Company generally recognizes the revenue at
the time delivery and installation are completed. Revenue from
final set-up
procedures, which are perfunctory, is deferred and recognized
when such
set-up
procedures are completed. Major projects shipping terms are
usually detailed in the contract, and title and risk of
ownership are transferred per the contract. In the case of these
major projects, the Company recognizes the revenue when title
and risk of ownership are transferred according to the terms of
the contract.
For the Specialty Vehicle Segment, the shipping terms are FOB
shipping point and title and risk of ownership are transferred
to the joint venture or independent dealers at that time.
Accordingly, sales are recognized as revenue at the time the
products are shipped.
Cash Flows and Non-cash Activities For
purposes of the consolidated statements of cash flows, cash and
cash equivalents include cash, cash investments and any highly
liquid investments purchased with original maturities of three
months or less.
Non-cash investing and financing activities are as follows (in
thousands):
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2009
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2008
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Issuance (cancellations) of common shares, at market value, in
lieu of cash compensation
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$
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101
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$
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234
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Restricted
Cash
The Company had $14.8 million and $18.9 million of
restricted cash as of December 31, 2009 and 2008,
respectively.
F-23
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Restricted cash amounts are as follows (in thousands):
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December 31,
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December 31,
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2009
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2008
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Cash collateral for letters of credit(1)
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$
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8,550
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$
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7,492
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Indemnity escrow account(2)
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5,147
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10,000
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Cash collateral for workers compensation trust accounts
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1,101
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1,429
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Total restricted cash
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$
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14,798
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$
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18,921
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(1) |
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The amount classified as current assets is $5.0 million and
$1.6 million as of December 31, 2009 and 2008,
respectively. |
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(2) |
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The indemnity escrow account is related to the agreement for the
asset sale of the recreational vehicle business (see
Note 12, Discontinued Operations). |
Concentrations of Credit Risk Financial
instruments that potentially subject the Company to credit risk
consist primarily of cash and cash equivalents and trade
receivables.
At December 31, 2009 and 2008, no cash and cash equivalents
were invested in money market accounts or certificates of
deposit.
At December 31, 2009 and 2008, restricted cash invested in
money market accounts or certificates of deposit were
$6.5 million and $0.0 million, respectively.
The Company has a concentration of credit risk in the housing
industry. A single major products customer accounted for
approximately 16.9% of the Companys consolidated net sales
in 2009 and 58.5% of trade accounts receivable at
December 31, 2009. This same major products customer
accounted for approximately 38% of the Companys
consolidated net sales in 2008 and 5% of trade receivables at
December 31, 2008. The Company performs ongoing credit
evaluations of its customers financial conditions and
sales to its traditional home builders are generally cash on
delivery whereby the Company is paid upon delivery or shortly
thereafter. Payments related to major projects are received in
accordance with the terms of the contract. Payments related to
buses are generally received within 30 days of delivery to
the joint venture entity. Future credit losses are provided for
currently through the allowance for doubtful receivables, and
actual credit losses are charged to the allowance when incurred.
Investment income from continuing operations consists of the
following for the years ended December 31 (in thousands):
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2009
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2008
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Interest income
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$
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345
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$
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288
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Increase in cash value of life insurance policies
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999
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1,255
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Dividend income on preferred stocks
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3
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7
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Net gain (loss) on investment in joint ventures
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75
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(456
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)
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Total
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$
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1,422
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$
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1,094
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Joint Venture In December 2007, the Company
entered into an agreement to produce ADA compliant low floor
accessible buses for ARBOC Mobility LLC, a marketer of
specialized transit and shuttle buses designed for users with
mobility challenges. This bus incorporates patent pending
technologies provided by ARBOC Mobility. In connection with the
agreement with ARBOC Mobility LLC, the Company agreed to finance
up to $1.0 million of start up cash requirements. As of
December 31, 2009 and 2008, the Company had a note
receivable of $0.9 million due from ARBOC Mobility LLC for
start up cash requirements. The note is on a
month-by-month
basis and bears interest at the rate of 1% per month on the
principal balance.
F-24
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The note is included in other receivables on the Consolidated
Balance Sheet at a net amount of $0.5 million and
$0.4 million at December 31, 2009 and 2008
respectively, after write-down for the Companys portion of
joint venture losses to date. The Company has a 30% interest in
this entity and therefore accounts for this investment on the
equity basis. Related party transactions with ARBOC Mobility LLC
include sales of $12.5 million in 2009 and
$2.4 million in 2008 and outstanding accounts receivable of
approximately $1.7 million at December 31, 2009 and
$1.0 million at December 31, 2008.
Deferred Financing Costs The Company
recognized deferred financing costs in connection with its
convertible debt transaction. These costs will be amortized over
the term of the debt and represent fees paid in connection with
the issuance of the debt.
Fair Value of Financial Instruments The
carrying amounts of cash and cash equivalents, receivables and
accounts payable approximated fair value as of December 31,
2009 and 2008, because of the relatively short maturities of
these instruments. The carrying amount of long-term debt,
including current maturities, approximated fair value as of
December 31, 2009 and 2008, based upon terms and conditions
currently available to the Company in comparison to terms and
conditions of the existing long-term debt. The Company also has
investments in life insurance contracts. At December 31,
2008, the carrying amount of life insurance policies, which
equaled their fair value, was $4.7 million
($51.7 million, less $47.0 million of policy loans).
Based on outside analysis, it was determined to be most
advantageous to surrender the majority of Company-owned life
insurance policies effective October 2009. As a result, the
Company received the cash surrender value of the policies
redeemed, and eliminated the related borrowings, associated
interest expense and future premium obligations on the policies.
Cash of $2.7 million was received related to the
surrendered policies in the fourth quarter. At December 31,
2009 the carrying amount of the remaining life insurance
policies, which equaled their fair value, was $0.5 million
($6.0 million less $5.5 million of policy loans).
The Company accounts for all derivative instruments on the
balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company has entered into various
interest rate swap agreements to manage the economic risks
associated with fluctuations in interest rates by converting a
portion of the Companys variable rate debt to a fixed rate
basis, thus reducing the impact of changes in interest rates on
future interest expense. These financial instruments were
designated as cash flow hedges, with changes in fair value being
included as a component of other comprehensive income (loss)
within shareholders equity. Hedge effectiveness is
evaluated by the hypothetical derivative method and any hedge
ineffectiveness is reported as interest expense. Hedge
ineffectiveness was not material in 2009 or 2008. As of
December 31, 2009 the Company had terminated all remaining
interest rate swaps and the related variable rate debt
instruments.
Inventories Inventories are valued at the
lower of cost
(first-in,
first-out method) or market.
Property, Plant and Equipment Property, plant
and equipment are carried at cost less accumulated depreciation.
Amortization of assets held under capital leases is included in
depreciation and amortized over the estimated useful life of the
asset. Depreciation is computed using the straight-line method
on the costs of the assets, at rates based on their estimated
useful lives as follows:
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Land improvements
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3-15 years
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Buildings and improvements
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10-30 years
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Machinery and equipment
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3-10 years
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Transportation equipment
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2-7 years
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Office furniture and fixtures, including capitalized computer
software
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2-10 years
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F-25
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Upon sale or retirement of property, plant and equipment,
including long-lived assets deemed held for sale and rental
properties, the asset cost and related accumulated depreciation
is removed from the accounts and any resulting gain or loss is
included in earnings.
Long-Lived Assets Long-lived assets held and
used by the Company, including property, plant and equipment and
intangible assets are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of an asset may
not be recoverable (see Note 12 for asset impairments
recorded in 2008, including impairments of intangible assets).
Goodwill represents the excess of the purchase price over the
fair value of net tangible and identifiable intangible assets of
acquired businesses. Goodwill assets deemed to have indefinite
lives are not amortized, but are subject to impairment tests at
least annually in accordance with generally accepted accounting
principles. The Company reviews the carrying amounts of goodwill
assets annually by segment to determine if such assets may be
impaired. If the carrying amounts of these assets are not
recoverable based upon a discounted cash flow analysis, such
assets are reduced by the estimated shortfall of fair value to
recorded value. At January 1, 2008, the Company had
$13.0 million of goodwill, all attributable to the Housing
reporting unit.
The Company conducted its annual goodwill impairment test during
the fourth quarter of 2008 and the results indicated that the
goodwill was fully impaired. Accordingly, the Company recorded a
non-cash goodwill impairment charge of $13.0 million in the
quarter ended December 31, 2008. The goodwill impairment
charges in 2008 were recorded at the corporate level because
this goodwill was carried at that level. The Company had no
remaining goodwill as of December 31, 2008 or 2009.
During 2008, the Company determined that certain notes
receivable and equity investments amounting to $4.6 million
were impaired based on our determination of the financial
condition of the corresponding entity. The related expense is
included in the Impairments line item on the consolidated
statement of operations.
The Companys review of its property plant and equipment
resulted in an asset impairment charge of approximately
$1.0 million in 2008 relating to a former Housing Business
manufacturing plant that is currently listed for sale. During
2007, this production facility located in Zanesville, Ohio had
been consolidated with a larger facility located in Decatur,
Indiana in order to increase capacity utilization at the Indiana
plant. This Zanesville, Ohio property and an unused warehouse
located in Decatur, Indiana are listed for sale and are
classified as real estate held for sale in the consolidated
financial statements.
At December 31, 2009 and 2008, the Company had
$4.7 million and $2.9 million, respectively,
classified in assets held for sale. These assets were available
and listed for sale. These assets consisted of former Housing
Segment property and buildings, including the former
manufacturing facility in Zanesville, Ohio that was consolidated
into a larger Indiana manufacturing plant, plus a warehouse and
office building in Decatur, Indiana. Additionally, included in
2009 is a former RV paint facility located in Elkhart, Indiana
that the Company sold on December 5, 2007 for
$2.9 million consisting of cash of $0.3 million and a
$2.6 million secured note that was due in full December
2008. Due to the default on the secured note, the property
reverted back to the Company during the third quarter of 2009.
Warranty Expense The Company provides to its
customers a variety of warranties on its products ranging from 1
to 2 years in length and up to ten years on certain
structural components. Estimated costs related to product
warranty are accrued at the time of sale and included in cost of
sales. General warranty reserves are based upon past warranty
claims and sales history and adjusted as required to reflect
actual costs incurred, as information becomes available.
Specific warranty reserves are based on specific identified
issues with the amounts accrued based on the estimated cost to
correct the problem. Warranty expense from continuing operations
totaled $1.9 million and $3.7 million in 2009 and
2008, respectively.
At December 31, 2009, warranty reserves include estimated
amounts related to recreational vehicle warranty obligations
retained by the Company. In December 2008, a $10.0 million
indemnity escrow account
F-26
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
was created as a result of the recreational vehicle business
asset sale. The escrow account, which was included in long-term
restricted cash at December 31, 2008, was established to
pay for the recreational vehicle warranty obligations retained
by the Company. At December 31, 2009, $5.1 million
remained in the escrow account and was included in current
restricted cash, to cover future recreational vehicle warranty
obligations.
Changes in the Companys warranty liability during the
years ended December 31, 2009 and 2008 were as follows (in
thousands):
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2009
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2008
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Balance of accrued warranty at January 1
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$
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9,688
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$
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8,123
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Warranties issued during the period and changes in liability for
pre-existing warranties
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1,782
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14,873
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Settlements made during the period
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(7,308
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(13,308
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)
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Balance of accrued warranty at December 31
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$
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4,162
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$
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9,688
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Stock-Based Compensation The Company measures
compensation cost for all stock-based awards at fair value on
date of grant and recognize compensation expense over the period
that the awards are expected to vest. Restricted stock and stock
options issued under the Companys equity plans, as well
as, stock purchases under the employee stock purchase plan are
subject to this accounting.
Stock options generally vest over a four-year service period.
The Company has not granted any stock option awards since 2003.
The remaining unvested stock options, net of forfeitures, at
December 31, 2009 and 2008 were not significant.
Compensation expense related to the Companys Employee
Stock Purchase Plan was not significant for the years ended
December 31, 2009 and 2008.
Recent
Accounting Pronouncements
In June 2009, Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS), The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles (SFAS No. 168).
SFAS No. 168 replaces the GAAP hierarchy with two
levels: authoritative and nonauthoritative. The FASB Accounting
Standards Codification (Codification) became the
single source of authoritative nongovernmental GAAP, except for
rules and interpretive releases of the Securities and Exchange
Commission (SEC). The Codification supersedes all
existing non-SEC accounting and reporting standards. All other
nongrandfathered, non-SEC accounting literature not included in
the Codification will become nonauthoritative.
Following the Codification, FASB will no longer issue new
standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead it will issue
Accounting Standards Updates (ASU), which will serve
to update the Codification, provide background information about
the guidance and provide the basis for conclusions on changes to
the Codification. GAAP is not intended to be changed as a result
of the FASBs Codification project, but it will change the
way guidance is organized and presented. The Company has adopted
the provisions of this guidance and as a result it will only
affect the specific references to GAAP literature in the notes
to our consolidated financial statements.
In December 2007, the FASB issued a new accounting standard
related to business combinations. The new standard expands the
definition of a business and a business combination; requires
recognition of assets acquired, liabilities assumed, and
contingent consideration at their fair value on the acquisition
date with subsequent changes recognized in earnings; requires
acquisition-related expenses and restructuring costs to be
recognized separately from the business combination and expensed
as incurred; requires in-process research and development to be
capitalized at fair value as an indefinite-lived intangible
asset; and requires that changes
F-27
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
in accounting for deferred tax asset valuation allowances and
acquired income tax uncertainties after the measurement period
be recognized as a component of provision for taxes. The new
guidance also establishes disclosure requirements to enable the
evaluation of the nature and financial effects of the business
combination. In April 2009, the FASB issued new guidance which
clarified the accounting for pre-acquisition contingencies. The
Company adopted the new business combination guidance in the
first quarter of fiscal 2009. The adoption did not have an
impact on the Company as it did not have any acquisitions.
In December 2007, the FASB issued a new accounting standard for
noncontrolling interests in consolidated financial statements.
The new standard establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other
than the parent, the amount of consolidated net income
attributable to the parent and to the noncontrolling interest,
changes in a parents ownership interest, and the valuation
of retained noncontrolling equity investments when a subsidiary
is deconsolidated. In addition, the guidance also establishes
disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the
noncontrolling owners. The guidance is effective for fiscal
years beginning after December 15, 2008, and was adopted by
the Company in the first quarter of fiscal year 2009. The
adoption of this guidance did not have a material effect on the
consolidated results of operations or financial condition.
In June 2009, the FASB issued a new accounting standard related
to the consolidation of variable interest entities. It
eliminates the quantitative approach previously required for
determining the primary beneficiary of a variable interest
entity and requires ongoing qualitative reassessments of whether
an enterprise is the primary beneficiary of a variable interest
entity. This new standard also requires additional disclosures
about an enterprises involvement in variable interest
entities. The Company does not expect the adoption of this
guidance in the first quarter of 2010 will have a material
effect on the consolidated results of operations or financial
condition.
In October, 2008, the FASB issued a new accounting standard
which establishes a framework for measuring the fair value of
assets and liabilities. This framework is intended to provide
increased consistency in how fair value determinations are made
under various existing accounting standards which permit, or in
some cases require, estimates of fair market value. The standard
also expands financial statement disclosure requirements about a
companys use of fair value measurements, including the
effect of such measures on earnings. The new accounting standard
was adopted as of January 1, 2008 for the Companys
financial assets and liabilities. The adoption in the first
quarter of fiscal year 2009 of this guidance related to
nonfinancial assets and nonfinancial liabilities did not have a
material effect on the consolidated results of operations or
financial condition.
In March 2008 the FASB issued new guidance which amended and
expanded the disclosure requirements of a previous FASB
accounting standard, requiring enhanced disclosures about the
Companys derivative and hedging activities. The new
guidance is effective for fiscal years beginning after
December 15, 2008. The adoption of this guidance is
disclosed in Note 7.
Research and Development Expenses Research
and development expenses charged to continuing operations were
$1.4 million and $2.2 million for the years ended
December 31, 2009 and 2008, respectively.
Shipping and Handling Costs The Company
records freight billed to customers as sales. The Company
records delivery expenses as a component of cost of sales.
Comprehensive Income (Loss) Comprehensive
income (loss) represents net earnings and any revenues,
expenses, gains and losses that, under accounting principles
generally accepted in the United States, are excluded from net
earnings and recognized directly as a component of
shareholders equity.
F-28
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Volume-Based Sales and Dealer Incentives The
Company nets certain builder incentives, including volume-based
bonuses, interest reimbursements and other rebates, against
revenue in accordance with generally accepted accounting
principles.
Income Taxes The Company accounts for
corporate income taxes in accordance with generally accepted
accounting principles, which requires the Company to evaluate
the need to establish a valuation allowance to reduce the
carrying value of its deferred tax assets on the balance sheet.
Deferred tax assets arise as a result of tax loss carryforwards
and various differences between the book value of assets and the
values used for income tax purposes. Generally accepted
accounting principles state that a valuation allowance is
generally required if a company has cumulative losses in recent
years. Given the losses incurred by the Company over the last
three years, noncash charges from continuing operations of
$0.8 million and $5.4 million were recorded as a
valuation allowance for the full value of its deferred tax
assets as of December 31, 2009 and 2008, respectively.
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2.
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BASIS OF
PRESENTATION.
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Going Concern The accompanying consolidated
financial statements have been prepared assuming that we will
continue as a going concern, which is managements
intention. The plan to do so contemplates the realization of
assets and the liquidation of liabilities in the normal course
of business. We have incurred significant losses from 2005
through 2009, attributable in 2005 through 2008 primarily to the
RV Group operations and in 2009 attributable to the worst
housing market since the Great Depression, characterized by lack
of mortgage financing, foreclosures at historic levels,
billowing home supply inventories, enormous drops in housing
starts, and falling home prices.
Our previous independent registered public accounting firm
included an explanatory paragraph in its audit report for our
2008 consolidated financial statements regarding our ability to
continue as a going concern. Our current independent registered
public accounting firm included a similar paragraph in its
report for our 2009 consolidated financial statements.
We have managed our liquidity during this time through a series
of cost reduction initiatives, sales of assets, utilization of
Company-owned life insurance policies, as well as with the
liquidity provided by the convertible debt transaction with HIG
All American, LLC (HIG) completed in the fall of 2009.
Our ability in 2008 and 2009 to obtain traditional bank
financing or sell additional assets was extremely limited. Our
lack of capital prevented the expansion of our home stores,
delayed development of new products, and absorbed inordinate
amounts of management attention in a necessary and constant
search for equity or bank financing. Throughout 2009, the
Company continued the search for capital in increasingly
distressed housing markets, and finally in October, closed on
the HIG transaction.
As of December 31, 2009, $14.8 million of the
Companys cash is held in various restricted cash accounts.
The Company believes that $3 million of the restricted cash
will be released in the first half of 2010, however, the exact
timing of that anticipated release is uncertain. We also believe
additional amounts currently restricted will be released,
although the amount and timing of such releases is also
currently uncertain.
We believe that, barring demands on our cash as a result of
modified vendor payment terms or to support bonds or letters of
credit, the Company will be able to meet its operating cash
needs through currently available cash, the release of
restricted cash and collection of various receivable balances.
An adequate level of unrestricted cash is required to provide
the necessary working capital to operate our businesses until
the economy recovers and our sales levels return to more
historical volume levels.
F-29
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The following is a summary of certain cost reduction and
restructuring actions of the Viability Plan:
Manufacturing Operations During 2009, we
temporarily placed our North Carolina facility on an extended
shutdown until a sustainable backlog can be obtained that would
support the reopening of this facility. Until then, production
to serve customers of the North Carolina plant has been shifted
to our subsidiary in Virginia.
In addition, during 2009 and continuing into 2010, the other 4
housing facilities are placed on short-term shutdowns, generally
1 or 2 weeks per month, based on production needs. During
these short-term shutdowns, in addition to the layoff of the
hourly production personnel, the majority of the salaried
employees are also placed on layoff to further reduce the
Companys overhead costs. Management will continue to
evaluate the capacity needs of the Company and whether any
additional extended shutdowns are warranted.
Labor Costs We have reduced salaried
employment levels by 72 employees or 29% between
January 1, 2009 and February 28, 2010. Management will
continue to review salaried employment levels and evaluate labor
costs with the objective of lowering our costs while ensuring
necessary functions are adequately staffed.
Asset Sales We have been actively marketing
certain assets for sale including a number of idled facilities
or vacant land.
The success of our Viability Plan is conditioned upon
maintaining a minimum level of financing for working capital
needs. The success of our Viability Plan and our ability to meet
our cash flow needs inherently depend on the economic conditions
and the level of housing sales.
Like many companies weathering this current economic downturn,
the Companys access to sufficient operating capital is
crucial to its efforts to maintain positive cash flow and return
to profitability. There can be no assurance that the
Companys efforts will be successful. The accompanying
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The Company has determined that its reportable segments are
those that are based on the Companys method of internal
reporting, which disaggregates its business by product category.
The Companys two reportable segments at December 31,
2009 are Specialty Vehicles and Housing. The Company evaluates
the performance of its segments based primarily on net sales and
pre-tax income and allocates resources to them based on
performance. The accounting policies of the segment are the same
as those described in Note 1 and there are no
inter-segment revenues. The Company allocates certain corporate
expenses to these segments based on three dimensions: revenues,
subsidiary structure and number of employees. In addition, the
data excludes the results of the discontinued operations (see
Note 12). Differences between reported segment amounts
and corresponding consolidated totals represent corporate and
other income or expenses for administrative functions and
income, costs or expenses relating to property and equipment
that are not allocated to the segments.
As discussed in Note 12, the Company sold
substantially all of the assets of its former RV Segment during
2008 and the operations of the RV Segment are included in
discontinued operations in the consolidated statement of
operations. Accordingly, the RV Segment is no longer deemed a
reportable segment, and as such the segment information
disclosed in the following tables exclude amounts pertaining to
the Companys former RV Segment.
F-30
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The table below presents information about the segments used by
the chief operating decision maker of the Company for the years
ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
47,130
|
|
|
$
|
117,191
|
|
Specialty Vehicles
|
|
|
13,493
|
|
|
|
2,405
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
60,623
|
|
|
$
|
119,596
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
(1,275
|
)
|
|
$
|
18,014
|
|
Specialty Vehicles
|
|
|
310
|
|
|
|
(635
|
)
|
Other reconciling items
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,036
|
)
|
|
$
|
17,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
12,484
|
|
|
$
|
16,551
|
|
Specialty Vehicles
|
|
|
1,147
|
|
|
|
1
|
|
Other reconciling items
|
|
|
1,090
|
|
|
|
22,104
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,721
|
|
|
$
|
38,656
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
(13,759
|
)
|
|
$
|
1,463
|
|
Specialty Vehicles
|
|
|
(837
|
)
|
|
|
(636
|
)
|
Other reconciling items
|
|
|
(1,161
|
)
|
|
|
(22,104
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(15,757
|
)
|
|
$
|
(21,277
|
)
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
(13,914
|
)
|
|
$
|
1,324
|
|
Specialty Vehicles
|
|
|
(856
|
)
|
|
|
(636
|
)
|
Other reconciling items
|
|
|
(5,813
|
)
|
|
|
(20,906
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(20,583
|
)
|
|
$
|
(20,218
|
)
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
42,461
|
|
|
$
|
43,456
|
|
Specialty Vehicles
|
|
|
6,715
|
|
|
|
1,031
|
|
Corporate and other reconciling items
|
|
|
40,873
|
|
|
|
62,917
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90,049
|
|
|
$
|
107,404
|
|
|
|
|
|
|
|
|
|
|
F-31
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The following specified amounts from continuing operations are
included in the measure of segment pre-tax income or loss
reviewed by the chief operating decision maker (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
171
|
|
|
$
|
159
|
|
Specialty Vehicles
|
|
|
19
|
|
|
|
|
|
Corporate and other reconciling items
|
|
|
7,066
|
|
|
|
1,476
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,256
|
|
|
$
|
1,635
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
1,749
|
|
|
$
|
2,000
|
|
Specialty Vehicles
|
|
|
166
|
|
|
|
9
|
|
Corporate and other reconciling items
|
|
|
488
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,403
|
|
|
$
|
2,321
|
|
|
|
|
|
|
|
|
|
|
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Raw materials
|
|
|
|
|
|
|
|
|
Housing
|
|
$
|
3,691
|
|
|
$
|
4,157
|
|
Specialty Vehicles
|
|
|
3,493
|
|
|
|
902
|
|
Other
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,198
|
|
|
|
5,059
|
|
Work in process
|
|
|
|
|
|
|
|
|
Housing
|
|
|
1,554
|
|
|
|
2,392
|
|
Specialty Vehicles
|
|
|
1,780
|
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,334
|
|
|
|
2,777
|
|
Improved lots
|
|
|
|
|
|
|
|
|
Housing
|
|
|
391
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
391
|
|
|
|
434
|
|
Finished goods
|
|
|
|
|
|
|
|
|
Housing
|
|
|
10,160
|
|
|
|
10,816
|
|
Specialty Vehicles
|
|
|
483
|
|
|
|
824
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,643
|
|
|
|
11,640
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,566
|
|
|
$
|
19,910
|
|
|
|
|
|
|
|
|
|
|
F-32
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
|
|
5.
|
PROPERTY,
PLANT AND EQUIPMENT.
|
Property, plant and equipment consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Land and improvements
|
|
$
|
7,549
|
|
|
$
|
7,700
|
|
Buildings and improvements
|
|
|
31,777
|
|
|
|
32,849
|
|
Machinery and equipment
|
|
|
10,789
|
|
|
|
10,637
|
|
Transportation equipment
|
|
|
10,398
|
|
|
|
11,035
|
|
Office furniture and fixtures
|
|
|
14,138
|
|
|
|
13,992
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
74,651
|
|
|
|
76,213
|
|
Less, accumulated depreciation
|
|
|
45,864
|
|
|
|
45,291
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
28,787
|
|
|
$
|
30,922
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 and 2008, the Company had
$4.7 million and $2.9 million, respectively,
classified in assets held for sale. These assets were available
and listed for sale. These assets consisted of former Housing
Segment property and buildings, including the former
manufacturing facility in Zanesville, Ohio that was consolidated
into a larger Indiana manufacturing plant, plus a warehouse and
office building in Decatur, Indiana. Additionally, included in
2009 is a former RV paint facility located in Elkhart, Indiana
that the Company sold on December 5, 2007 for
$2.9 million consisting of cash of $0.3 million and a
$2.6 million secured note that was due in full December
2008. Due to the default on the secured note, the property
reverted back to the Company during the third quarter of 2009.
|
|
6.
|
SHORT-TERM
BORROWINGS.
|
On August 2, 2006, the Company executed a $55 million,
five-year, secured Revolving Credit Facility with Bank of
America (formerly LaSalle Business Credit, LLC) to meet its
seasonal working capital needs. At December 31, 2008 this
bank line of credit had been fully paid and was terminated
except for outstanding letters of credit totaling
$7.5 million that were fully backed by cash collateral.
At December 31, 2008, the Company owed $3.1 million on
floorplan notes payable relating to the new and used
recreational vehicle inventory of the Companys former
owned dealership. This note payable was paid in full in January
2009.
On February 26, 2009, the Company entered into an agreement
with Forest River, Inc. with respect to certain financial
obligations under the Asset Purchase Agreement of
November 20, 2008 between the Company and Forest River.
Forest River agreed to accept a fully collateralized short-term
note from the Company. As of March 2, 2009, the outstanding
balance on the note was $2.3 million. The note was paid in
full on March 23, 2009.
On March 23, 2009, the Company and Robert J. Deputy, one of
the Companys directors, entered into an agreement for a
$2.3 million short-term note from the Company in exchange
for cash loaned to the Company by Mr. Deputy. The note was
collateralized by two properties, bore interest at a rate of 10%
per annum, and was on terms more favorable to the Company than
those offered by alternative sources of financing in commercial
markets. The note holder placed a demand for repayment on
June 1, 2009. The note was paid in full on June 4,
2009.
F-33
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
H.I.G. Convertible Debt (Tranche B Notes), net of discount
of $9,167
|
|
$
|
833
|
|
|
$
|
|
|
Note payable to Lake City Bank, interest at 6.25%, monthly
principal and interest payment of $23,000, matures April 2012
|
|
|
1,899
|
|
|
|
|
|
Obligations under industrial development revenue bonds, variable
rates (effective weighted-average interest rates of 1.3% at
December 31, 2008), paid in full in November 2009
|
|
|
|
|
|
|
2,850
|
|
Other
|
|
|
465
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3,197
|
|
|
|
3,009
|
|
Less, current maturities of long-term debt
|
|
|
369
|
|
|
|
819
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
2,828
|
|
|
$
|
2,190
|
|
|
|
|
|
|
|
|
|
|
Principal maturities of long-term debt during the four fiscal
years succeeding 2010 are as follows: 2011
$1,160,000; 2012 $1,622,000; 2013
$46,000; 2014 $0 and 2015 $0.
Additionally, the $9,167,000 debt discount on the convertible
debt will mature in 2011, if not converted.
In connection with the industrial development revenue bond
obligations, the Company obtained, as a credit enhancement for
the bondholders, irrevocable letters of credit in favor of the
bond trustees. Under the industrial revenue bond for the
Mod-U-Kraf Homes manufacturing facility in Virginia, the issuer
of the letter of credit holds a first lien and security interest
on that facility.
On April 9, 2009, the Company and Lake City Bank entered
into an agreement for a $2 million three-year note in
exchange for cash loaned to the Company by Lake City Bank. The
note is fully collateralized by certain properties, bears
interest at the rate of 6.250% per annum, and has a maturity
date of April 9, 2012. At December 31, 2009, the
amount outstanding was approximately $1.9 million.
On April 9, 2009, the Company gave a promissory note to
Lake City Bank in connection with the banks provision of a
$0.5 million working capital line of credit. The note is
fully collateralized by certain properties, and borrowings
against this line will bear interest at a variable rate, with a
minimum interest rate of 5% per annum. This line of credit has a
maturity date of March 31, 2012. At December 31, 2009,
there were no borrowings against this line of credit.
On October 27, 2009, the Company completed a two-year
$20.0 million loan agreement as borrowers with H.I.G. All
American, LLC (H.I.G.) for $10.0 million of senior secured
revolving notes and $10.0 million of convertible debt
(Secured Subordinated Convertible Tranche B Notes). This
loan agreement is collateralized by substantially all of the
assets of the Company. As part of the Secured Subordinated
Convertible Tranche B Notes, the Company also issued to
H.I.G. an aggregate of approximately 6.7 million Common
Stock Purchase Warrants exercisable at a price of $0.00001 per
share upon the occurrence of a triggering event (as defined in
the agreement) and prior to the tenth anniversary from the date
of the loan agreement. The revolving notes bear interest at a
rate equal to LIBOR plus 5%, payable in cash monthly. The
convertible debt bears interest at the rate of 20% per annum,
payable in either cash semiannually or as PIK interest that
accrues and increases the principal amount. All principal and
accrued interest on the Secured Subordinated Convertible
Tranche B Notes is convertible into shares of the
Companys common stock at the election of H.I.G. and is
exercisable at any time up until the end of the two-year term of
the notes at the conversion price of $0.979 per share, the
90-day
average stock price prior to the Letter of Intent.
Both the Warrant and the Tranche B Note contain
anti-dilution protection to the lender. In addition, the
Tranche B Note has a price protection feature that reduces
the conversion price if the
90-day
average price of the Companys common stock falls below
$0.979 at any time prior to April 27, 2010. The conversion
price of
F-34
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
the Tranche B Note is also subject to reduction if the
Company defaults on certain of its financial covenants contained
in the Loan Agreement.
On March 11, 2010, the Company learned that HIG All
American, LLC (HIG), its lender, and the Company had differing
interpretations of the definition of EBITDA for purposes of
covenant calculations under the HIG All American Credit
Agreement. HIG views the Companys calculations prior to
February of 2010 to have been erroneous and believes the Company
breached its financial covenants in December of 2009. The
Company disagrees. On March 25, 2010, the Company and HIG
agreed to a term sheet whereby HIG agreed to waive the covenants
for December 2009. The term sheet is subject to final
documentation as an amendment to the Credit agreement. If the
Company and HIG are unable to finalize the amendment, HIG would
have the rights accorded to them under the terms of the loan
agreement which include, among other rights, the right to
declare the Company in default of the agreement and demand
repayment of the $10 million note.
The Company recorded a debt discount on the convertible notes
for the full $10.0 million due to the issuance of the
Common Stock Purchase Warrants, as well as the existence of a
beneficial conversion feature. The fair value of the warrants
and the beneficial conversion feature were determined to be
$7.3 million and $5.4 million, respectively, and the
resulting $12.7 million has been recorded as a long-term
liability on the Consolidated Balance Sheet. The Company
recorded a debt discount on the convertible notes for the full
$10.0 million due to the issuance of the warrants and
beneficial conversion feature whose fair value exceeded the
value of the debt. The difference between the deferred debt
discount of $10.0 million and the fair value of the
warrants and the beneficial conversion feature of
$12.7 million resulted in $2.7 million being recorded
as a non-cash interest expense. At December 31, 2009, the
fair value adjustment to the warrants and the beneficial
conversion feature resulted in an additional $0.3 million
being recorded as a liability and an additional non-cash
interest expense. Future changes in the fair value of the
warrants and the beneficial conversion feature will result in
additional adjustments to this liability and non-cash interest
expense in future periods. The amortization of the
$10.0 million in debt discounts will be reported as an
increase in long-term debt and additional interest expense over
the two-year term of the loan agreement. Amortization of debt
discount on the convertible notes amounted to $0.8 million
for the year ended December 31, 2009. The remaining
unamortized discount was $9.2 million at December 31,
2009.
The Company incurred and recognized deferred financing costs of
$2.3 million in connection with its loan agreement with
H.I.G. These costs will be amortized over the term of the debt
and represent fees paid in connection with the issuance of this
debt.
In January of 2003, the Company entered into various interest
rate swap agreements that became effective beginning in October
of 2003. These swap agreements were designated as cash flow
hedges under generally accepted accounting principles and were
used to manage the economic risks associated with fluctuations
in interest rates by converting a portion of the Companys
variable-rate debt to a fixed-rate basis through November of
2011, thus reducing the impact of changes in interest rates on
future interest expense. Hedge effectiveness is evaluated by the
hypothetical derivative method. Any hedge ineffectiveness is
reported within the interest expense caption of the statements
of income. Hedge ineffectiveness was not material in 2009 or
2008. The fair value of the Companys interest rate swap
agreements represents the estimated receipts or payments that
would be made to terminate the agreements.
At December 31, 2008, the Company had one remaining
interest rate swap agreement with a notional amount of
$1.8 million that was used to convert the variable interest
rates on certain industrial development revenue bonds to fixed
rates. In accordance with the terms of the swap agreement, the
Company pays a 3.71% interest rate, and receives the Bond Market
Association Index (BMA), calculated on the notional amount, with
net receipts or payments being recognized as adjustments to
interest expense. The Company recorded a liability for the
potential early settlements of these swap agreements in the
amount of $75,000 at December 31, 2008. This exposure
represents the fair value of the swap instruments and has been
recorded in the balance
F-35
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
sheets in accordance with generally accepted accounting
principles as a noncurrent liability. The effective portion of
the cash flow hedge has been recorded, net of taxes, as a
reduction of shareholders equity as a component of
accumulated other comprehensive loss.
Concurrent with the loan agreement with HIG, the interest rate
swap agreement with a notional amount of $1.8 million that
was used to convert the variable interest rates on an industrial
development revenue bond to a fixed rate was terminated and
paid. Additionally, the associated industrial revenue bond of
$1.8 million, plus another industrial revenue bond in the
amount of $0.9 million were paid in full on
November 1, 2009 utilizing restricted cash held for that
purpose.
|
|
8.
|
ACCRUED
EXPENSES AND OTHER LIABILITIES.
|
Accrued expenses and other liabilities at year-end consist of
the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Wages, salaries, bonuses, commissions and other compensation
|
|
$
|
226
|
|
|
$
|
5,022
|
|
Dealer incentives, including volume bonuses, dealer trips,
interest reimbursement, co-op advertising and other rebates
|
|
|
173
|
|
|
|
989
|
|
Warranty
|
|
|
4,162
|
|
|
|
9,688
|
|
Insurance-products and general liability, workers compensation,
group health and other
|
|
|
3,105
|
|
|
|
6,320
|
|
Customer deposits and unearned revenues
|
|
|
1,391
|
|
|
|
2,545
|
|
Interest
|
|
|
400
|
|
|
|
395
|
|
Sales and property taxes
|
|
|
778
|
|
|
|
920
|
|
Deferred gain on sale of real estate
|
|
|
|
|
|
|
814
|
|
Repurchase liability
|
|
|
339
|
|
|
|
2,671
|
|
Other current liabilities
|
|
|
1,359
|
|
|
|
1,763
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,933
|
|
|
$
|
31,127
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
COMMON
STOCK MATTERS AND EARNINGS PER SHARE.
|
Stock
Option Plan
The Company has stock option plans, including the 2000 Omnibus
Stock Incentive Program (the 2000 Plan), which was
approved by the shareholders on May 4, 2000. The 2000 Plan
provides for 1.0 million common shares to be reserved for
grants under the Companys stock option and award plans.
The Companys stock option plan provides for the granting
of options to directors, officers and eligible key employees to
purchase common shares. The 2000 Plan permits the issuance of
either incentive stock options or nonqualified stock options.
Stock Appreciation Rights (SARs) may be
granted in tandem with stock options or independently of and
without relation to options. There were no SARs
outstanding at December 31, 2009 or 2008. The option price
for incentive stock options shall be an amount of not less than
100% of the fair market value per share on the date of grant and
the option price for nonqualified stock options shall be an
amount of not less than 90% of the fair market value per share
on the date the option is granted. No such options may be
exercised during the first year after grant, and are exercisable
cumulatively in four installments of 25% each year thereafter.
Outstanding options have terms of ten years.
F-36
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The following table summarizes stock option activity (number of
shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Weighted-Average
|
|
|
of Shares
|
|
Exercise Price
|
|
Outstanding, January 1, 2008
|
|
|
134
|
|
|
$
|
12.20
|
|
Granted
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(1
|
)
|
|
|
15.78
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008
|
|
|
133
|
|
|
|
12.18
|
|
Granted
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(54
|
)
|
|
|
12.10
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009
|
|
|
79
|
|
|
$
|
12.24
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2009 are exercisable at
prices ranging from $10.00 to $18.68 per share and have a
weighted-average remaining contractual life of 1.5 years.
The following table summarizes information about stock options
outstanding and exercisable at December 31, 2009 (in
thousands):
Options
Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
Number Outstanding at
|
|
Remaining
|
|
Weighted-Average
|
Range of Exercise Price
|
|
December 31, 2009
|
|
Contractual Life
|
|
Exercise Price
|
|
$10.00 - $12.00
|
|
|
52
|
|
|
|
1.1
|
|
|
$
|
10.19
|
|
$12.01 - $17.00
|
|
|
22
|
|
|
|
2.4
|
|
|
$
|
15.62
|
|
$17.01 - $18.68
|
|
|
5
|
|
|
|
2.3
|
|
|
$
|
18.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no options granted during 2009 or 2008. As of
December 31, 2009 and 2008, 1.0 and 1.2 million
shares, respectively, were reserved for the granting of future
stock options and awards.
Stock
Award Programs
The 2000 Plan also permits the granting of restricted and
unrestricted stock awards to the Companys key employees
and non-employee directors. In accordance with the provisions of
the 2000 Plan, the Board of Directors may grant shares of stock
to eligible participants for services to the Company. Restricted
shares vest over a period of time as determined by the Board of
Directors and are granted at no cost to the recipient. For
restricted shares that are not subject to pre-established
Company performance objectives, compensation expense is
recognized over the vesting period at an amount equal to the
fair market value of the shares on the grant date. Compensation
expense for discretionary unrestricted stock awards is
recognized at date of grant. There were 6,000 and 26,811,
restricted non-contingent stock awards granted at a
weighted-average per share grant-date fair value of $0.85 and
$3.70 in 2009 and 2008, respectively. Compensation expense of
$278,908 and $281,262, was recognized in the years ended
December 31, 2009 and 2008, respectively related to
restricted shares granted.
On January 4, 2008, the Company granted Restricted Stock
Awards to certain key employees as a means of retaining and
rewarding them for performance and to increase their ownership
in the Company. The awards are governed by the Companys
2000 Omnibus Stock Plan. Participants will earn the restricted
shares awarded to them based on attainment of certain
performance goals for the first quarter of 2008 and for the full
calendar
F-37
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
year 2008. If the Company meets the minimum or maximum target
levels of pre-tax profits, the participants earn corresponding
levels of awards. To the extent the Company meets the
performance goals for the first quarter
and/or the
full year, and the participant remains employed by the Company
during the vesting period, the earned restricted shares vest and
will be delivered to the participants over a three-year vesting
period: one-third on January 1, 2009, one-third on
January 1, 2010 and one-third on January 1, 2011. A
total of 237,375 shares, assuming 100% of the performance
goal is achieved, could be granted. At March 31, 2008, the
Company determined that the minimum target of the performance
goal for the first quarter of 2008 would be achieved; therefore,
compensation expense in the amount of $0.1 million was
recorded related to this plan for the year ended
December 31, 2008. As of December 31, 2008, the
Company determined that the performance conditions associated
with the restricted stock grants for the full calendar year 2008
were not achieved; therefore, no additional compensation expense
was recorded.
On November 25, 2008, the Compensation Committee of the
Companys Board of Directors granted restricted common
shares of the Company to certain executive officers. A total of
114,000 shares were granted. The grants were conditioned on
the closing of the Asset Sale of the recreational vehicle
business to Forest River, Inc. (see Note 12) and
will vest at the earliest of (i) two years from the date of
issuance, provided the employee remains continuously employed by
the Company, (ii) death, (iii) disability, or
(iv) a change of control. On October 27, 2009, in
connection with the series of transactions that occurred on that
date with H.I.G. All American, LLC, the restricted shares became
vested as the result of a change in control under the terms of
the grants.
On March 4, 2009, the Company granted Restricted Stock
Awards to certain key employees as a means of retaining and
rewarding them for performance and to increase their ownership
in the Company. The awards are governed by the Companys
2000 Omnibus Stock Plan. Participants will earn the restricted
shares awarded to them based on attainment of certain
performance goals for the full calendar year 2009. If the
Company meets the minimum or maximum target levels of pre-tax
profits, the participants will earn corresponding levels of
awards. To the extent the Company meets the performance goals
for the full year, and the participant remains employed by the
Company during the vesting period, the earned restricted shares
will vest and be delivered to the participants over a three-year
vesting period: one-third on January 1, 2010, one-third on
January 1, 2011 and one-third on January 1, 2012. A
total of 196,250 shares, assuming 100% of the performance
goal is achieved, could be granted. As of December 31,
2009, the Company determined that the performance conditions
associated with the restricted stock grants for the full
calendar year 2009 were not achieved; therefore, no compensation
expense related to these restricted stock awards was recorded.
Compensation expense related to prior year restricted stock
grants was not material for the years ended December 31,
2009 and 2008.
The following table summarizes the activity of the Performance
Based Restricted Stock Awards program (in thousands):
|
|
|
|
|
|
|
Number
|
|
|
of Shares
|
|
Nonvested at January 1, 2008
|
|
|
|
|
Granted
|
|
|
351,375
|
|
Forfeited
|
|
|
(205,187
|
)
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
146,188
|
|
Granted
|
|
|
196,250
|
|
Earned
|
|
|
(114,729
|
)
|
Forfeited
|
|
|
(209,791
|
)
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
17,918
|
|
|
|
|
|
|
F-38
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
The following table summarizes, by plan year, the number of
contingent shares awarded, earned, forfeited and the remaining
contingent shares outstanding as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Plan Year
|
|
|
2009
|
|
2008
|
|
Contingent shares awarded
|
|
|
196,250
|
|
|
|
351,375
|
|
Shares earned
|
|
|
|
|
|
|
114,729
|
|
Shares forfeited
|
|
|
196,250
|
|
|
|
218,728
|
|
|
|
|
|
|
|
|
|
|
Contingent shares outstanding as of December 31, 2009
|
|
|
|
|
|
|
17,918
|
|
|
|
|
|
|
|
|
|
|
Stock
Purchase Plan
The Company has an employee stock purchase plan under which a
total of 800,000 shares of the Companys common stock
are reserved for purchase by full-time employees through weekly
payroll deductions. Shares of the Companys common stock
are purchased quarterly by the employees at a price equal to 90%
of the market price. The market price is based on the market
price at the end of the quarter. As of December 31, 2009,
there were 38 employees actively participating in the plan.
Since its inception, a total of 536,097 shares have been
purchased by employees under the plan. The Company sold to
employees 16,000 and 58,000 shares at weighted average fair
values of $1.03 and $2.34 in 2009 and 2008, respectively.
Certain restrictions in the plan limit the amount of payroll
deductions an employee may make in any one quarter. There are
also limitations as to the amount of ownership in the Company an
employee may acquire under the plan. Compensation expense
related to the Companys Employee Stock Purchase Plan was
not significant for the years ended December 31, 2009 or
2008.
Earnings
Per Share
Basic earnings per share is based on the weighted-average number
of shares outstanding during the period. Diluted earnings per
common share is based on the weighted-average number of shares
outstanding during the period, after consideration of the
dilutive effect of stock options and awards and shares held in
deferred compensation plans. Basic and diluted earnings per
share were calculated using the average shares as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders
|
|
$
|
(4,730
|
)
|
|
$
|
(69,002
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Number of shares outstanding, end of period:
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares used in Basic EPS
|
|
|
16,073
|
|
|
|
15,799
|
|
Stock options and awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares used in Diluted EPS
|
|
|
16,073
|
|
|
|
15,799
|
|
|
|
|
|
|
|
|
|
|
As the Company reported a net loss for the years ended
December 31, 2009 and 2008, the dilutive effect of stock
options and awards did not enter into the computation of diluted
earnings per share because their inclusion would have been
antidilutive.
The Companys dilutive potential common shares at
December 31, 2009 were 6,654,855 shares consisting of
warrants issued in connection with the H.I.G. loan agreement
(see Note 7).
The sum of quarterly earnings per share may not equal
year-to-date
earnings per share due to rounding and changes in diluted
potential common shares.
F-39
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Shareholder
Rights Plan
On October 21, 1999, the Companys Board of Directors
adopted a new shareholder rights plan which became effective
January 12, 2000 (the Record Date), provides
for a dividend distribution of one common share purchase right
(the Rights) for each outstanding common share to
each shareholder of record on the Record Date. The Rights will
be represented by common share certificates and will not be
exercisable or transferable apart from the common shares until
the earlier to occur of (i) ten (10) business days
following a public announcement that a person or group of
persons (an Acquiring Person) has acquired, or
obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding common shares or (ii) ten
(10) business days following the commencement of (or
announcement of an intention to make) a tender offer or exchange
offer if, upon consummation thereof, such an Acquiring Person
would be the beneficial owner of 20% or more of the outstanding
common shares. Upon the occurrence of the certain events and
after the Rights become exercisable, each right would entitle
the rightholder (other than the Acquiring Person) to purchase
one fully paid and nonassessable common share of the Company at
a purchase price of $75 per share, subject to anti-dilutive
adjustments. The Rights are nonvoting and expire
February 1, 2010. At any time prior to a person or a group
of persons becoming an Acquiring Person, the Companys
Board of Directors may redeem the Rights in whole, but not in
part, at a purchase price $.01 per Right.
On October 27, 2009, the Companys Board of Directors
amended Section 1(a) of the Shareholder Rights Plan, to
declare that neither H.I.G. All American, LLC, nor its
affiliates, successors, assignees, or transferees would be
deemed an Acquiring Person as defined in the
Shareholder Rights Plan.
On February 1, 2010, all rights granted to shareholders
pursuant to the Companys Shareholder Rights expired
according to the terms thereof.
Share
Repurchase Programs
Periodically, the Company has repurchased its common stock as
authorized by the Board of Directors. Under the repurchase
program, common shares are purchased from time to time,
depending on market conditions and other factors, on the open
market or through privately negotiated transactions. During
August 2006, the Company announced that the Board of Directors
had authorized a share repurchase of up to one million shares.
During the fourth quarter of 2008, the Company repurchased
30,815 shares for a total cost, including commissions, of
$54,595. During the first quarter of 2009, the Company
repurchased 24,914 shares for a total cost, including
commissions, of $46,993. No shares were repurchased during the
second, third or fourth quarters of 2009. At December 31,
2009, there are 931,071 shares remaining authorized for
repurchase by the Board of Directors.
|
|
10.
|
COMPENSATION
AND BENEFIT PLANS.
|
Incentive
Compensation
The Company has incentive compensation plans for its officers
and other key personnel. The amounts charged to expense for the
years ended December 31, 2009 and 2008 was $0 for both
years.
Deferred
Compensation
The Company had established a deferred compensation plan for
executives and other key employees. The plan provides for
benefit payments upon termination of employment, retirement,
disability, or death. The Company recognizes the cost of this
plan over the projected service lives of the participating
employees based on the present value of the estimated future
payment to be made. The deferred compensation obligations, which
aggregated $2.7 million and $3.1 million at
December 31, 2009 and 2008, respectively, are included in
other non-current liabilities, with the current portion
($0.4 million and $2.9 million at December 31,
2009 and 2008, respectively) included in other current
liabilities.
F-40
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
In connection with the acquisition of Mod-U-Kraf Homes in 2000,
the Company assumed obligations under existing deferred
compensation agreements. The remaining liability recognized in
the consolidated balance sheet aggregated $32,000 and $34,000 at
December 31, 2009 and 2008, respectively.
The Company had established a supplemental deferred compensation
plan (Mirror Plan) for key employees as determined by the Board
of Directors. The plan allowed participants to defer
compensation only after they have deferred the maximum allowable
amount under the Companys 401(k) Plan. The participants
selected certain mutual fund investments and Company stock whose
performance is tracked by the Company. The Company matches a
certain level of participant contributions that vests over a
five-year period. Under the plan, the investments are not funded
directly, including the matching contributions and investments
in Company stock. Instead, the plan administrator tracks the
performance of investments in mutual funds and Company stock as
directed by the participant and a liability to the participants
is recorded by the Corporation based on the performance of the
phantom investments. Participant benefits are limited to the
value of the vested benefits recorded on their behalf.
The Company had also established a supplemental deferred
compensation plan (Executive Savings Plan) for certain key
executive management as determined by the Board of Directors.
This plan allowed participants to defer compensation without
regard to participation in the Companys 401(k) plan. The
participants select certain mutual funds investments and Company
stock whose performance is tracked by the Company. In addition,
the Company matches a certain level of participant contributions
that vests after a five-year period. Under the plan, the
investments are not funded directly, including the matching
contributions and investments in Company stock. Instead, the
plan administrator tracks the performance of investments in
mutual funds and Company stock as directed by the participant
and a liability to the participants is recorded by the
Corporation based on the performance of the phantom investments.
Participant benefits are limited to the value of the vested
benefits recorded on their behalf. Liabilities recorded on the
consolidated balance sheets related to these plans as of
December 31, 2009 and 2008 are $0.1 million and
$1.4 million, respectively.
On November 19, 2008, the Companys Board of Directors
adopted amendments to the Companys deferred compensation
plans, which were contingent on the sale of the Companys
recreational vehicle assets to Forest River, Inc. on or before
December 31, 2008 (see Note 12). These amendments
collectively froze all future contributions to the Plans as of
December 31, 2008; vested all participants in their account
balances as of December 31, 2008; and provided that the
balance of participant accounts in the Plans were to be paid to
the participants in a single lump sum no later than
January 15, 2009, unless the participants Payment
Event or Termination of Service occurred on or before
December 31, 2008. Payments to participants in 2009 as a
result of the Board adopted amendments totaled $2.8 million.
Employee
Benefit Plans
The Company sponsors a retirement plan (the Plan),
under Section 401(k) of the Internal Revenue Code (IRS)
that covers all eligible employees. The Plan is a defined
contribution plan and allows employees to make voluntary
contributions up to 20% of annual compensation. Effective
January 1, 2005, the Plan was amended to allow for
voluntary contributions of up to 50% of annual compensation, not
to exceed IRS limits. Under the Plan, the Company may make
discretionary matching contributions on up to 6% of
participants compensation, however the Company ceased
matching contributions in 2008. Expenses under the Plan
aggregated $0 million, and $0.4 million for the years
ended December 31, 2009 and 2008, respectively.
F-41
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Income taxes (benefit) attributable to continuing operations are
summarized as follows for the years ended December 31 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(459
|
)
|
|
$
|
(36
|
)
|
Deferred
|
|
|
51
|
|
|
|
(1,533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(408
|
)
|
|
|
(1,569
|
)
|
State:
|
|
|
|
|
|
|
|
|
Current
|
|
|
62
|
|
|
|
30
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(346
|
)
|
|
$
|
(1,539
|
)
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of the provision for income
taxes attributable to continuing operations computed at the
federal statutory rate (35% for all years presented) to the
reported provision for income taxes (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Computed federal income tax at federal statutory rate
|
|
$
|
(7,083
|
)
|
|
$
|
(7,076
|
)
|
Changes resulting from:
|
|
|
|
|
|
|
|
|
Decrease (increase) in cash surrender value of life insurance
contracts
|
|
|
(498
|
)
|
|
|
985
|
|
Redemption of life insurance contracts
|
|
|
5,159
|
|
|
|
|
|
Amortization of HIG Beneficial Ownership
|
|
|
168
|
|
|
|
|
|
Current year state income taxes, net of federal income tax
benefit
|
|
|
40
|
|
|
|
19
|
|
Valuation allowance for NOL, AMT, deferred tax assets and
general business credits
|
|
|
1,830
|
|
|
|
5,403
|
|
Recognition of deferred tax liability related to goodwill
impairment
|
|
|
|
|
|
|
(898
|
)
|
Other, net
|
|
|
38
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(346
|
)
|
|
$
|
(1,539
|
)
|
|
|
|
|
|
|
|
|
|
The Company accounts for corporate income taxes in accordance
with generally accepted accounting principles, which requires
the Company to evaluate the need to establish a valuation
allowance to reduce the carrying value of its deferred tax
assets on the balance sheet. Deferred tax assets arise as a
result of tax loss carryforwards and various differences between
the book value of assets and the values used for income tax
purposes. Generally accepted accounting principles state that a
valuation allowance is generally required if a company has
cumulative losses in recent years. Given the losses incurred by
the Company over the last three years, noncash charges from
continuing operations of $1.8 million and $5.4 million
were recorded as a valuation allowance for the full value of its
deferred tax assets as of December 31, 2009 and 2008,
respectively. At December 31, 2009 the Company had a tax
benefit of $38.3 million related to Federal net operating
loss carryforwards which may be utilized to offset future
taxable income, and if not utilized, $7.5 million will
expire in 2026, $14.0 million will expire in 2027,
$15.9 million will expire in 2028 and $0.9 million
will expire in 2029. Further, at December 31, 2009 the
Company had state tax benefits of certain state net operating
loss carryforwards in states that do not permit carrybacks of
net operating losses. These state net operating loss
carryforwards begin to expire in certain states after
5 years. At December 31, 2009,
F-42
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
the cumulative benefit of certain state net operating loss
carryforwards approximated $3.8 million, which have been
included as part of the valuation allowance referred to above.
The ability to use net operating loss carryforwards to offset
future taxable income is dependent on a number of factors and
complex regulations and is determined at the time of completion
of the annual tax returns.
The components of the net deferred tax assets (liabilities) are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Current deferred tax asset (liability):
|
|
|
|
|
|
|
|
|
Accrued warranty expense
|
|
$
|
1,582
|
|
|
$
|
3,098
|
|
Accrued self-insurance
|
|
|
1,180
|
|
|
|
1,769
|
|
Inventories
|
|
|
445
|
|
|
|
445
|
|
Receivables
|
|
|
469
|
|
|
|
511
|
|
Prepaid insurance
|
|
|
(289
|
)
|
|
|
(372
|
)
|
Litigation reserve
|
|
|
21
|
|
|
|
103
|
|
Other
|
|
|
250
|
|
|
|
1,241
|
|
Valuation allowance
|
|
|
(3,658
|
)
|
|
|
(6,795
|
)
|
|
|
|
|
|
|
|
|
|
Net current deferred tax asset
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax asset (liability):
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
$
|
1,179
|
|
|
$
|
2,786
|
|
Property and equipment and other real estate
|
|
|
(436
|
)
|
|
|
(414
|
)
|
Notes receivable
|
|
|
402
|
|
|
|
402
|
|
Federal net operating loss carryforwards
|
|
|
38,301
|
|
|
|
37,087
|
|
Impairments
|
|
|
7,697
|
|
|
|
7,890
|
|
Alternative minimum tax credit carryover
|
|
|
127
|
|
|
|
586
|
|
Federal and state research and development credit carryover
|
|
|
1,738
|
|
|
|
1,738
|
|
State net operating loss carryforwards
|
|
|
3,856
|
|
|
|
3,780
|
|
Other
|
|
|
1,079
|
|
|
|
662
|
|
Valuation allowance
|
|
|
(54,451
|
)
|
|
|
(54,974
|
)
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred tax liability
|
|
$
|
(508
|
)
|
|
$
|
(457
|
)
|
|
|
|
|
|
|
|
|
|
The valuation allowance decreased by $3,660 and increased by
$23,746 for the years ended December 31, 2009 and 2008,
respectively.
The Company or one of its subsidiaries files income tax returns
in the U.S. federal jurisdiction and various states
jurisdictions. With few exceptions, the Company is no longer
subject to U.S. federal or state income tax examinations by
tax authorities for years before 2004. In 2006, the Internal
Revenue Service (IRS) commenced an examination of the
Companys U.S. income tax returns specifically for the
purpose of reviewing claims for Research and Expenditure credits
for the years 1999 through 2004. The audit of these claims is
nearing its conclusion and the Company anticipates that a
settlement can be concluded within the next year. The Company
does not anticipate that any adjustments associated with the
settlement of this audit will result in a material change to its
financial position.
The Company adopted the provisions of FASB Interpretation
No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, on January 1, 2007. The
implementation of FIN 48 did not have a significant
F-43
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
impact on the Companys financial position or results of
operations. A reconciliation of the beginning and ending amount
of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2008
|
|
$
|
2,416
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
1,090
|
|
Reductions for tax positions of prior years
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
3,506
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
|
|
Reductions for tax positions of prior years
|
|
|
|
|
Settlements
|
|
|
(1,470
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
2,036
|
|
|
|
|
|
|
Recognition of unrecognized tax benefits that if recognized
would affect the effective tax rate by approximately
$2.0 million at December 31, 2009. The Company
recognizes interest and penalties related to unrecognized tax
benefits through interest and operating expenses, respectively.
The amounts accrued for interest and penalties as of
December 31, 2009 were not considered to be significant.
The above amount has been reduced to zero on the balance sheet
via the deferred tax valuation allowance.
|
|
12.
|
RESTRUCTURING
CHARGES AND DISCONTINUED OPERATIONS.
|
When describing the impact of these restructuring plans, all
determinations of the fair value of long-lived assets were based
upon comparable market values for similar assets.
On December 26, 2008, the Company completed the sale of
substantially all of the assets of the Companys RV
Segment, consisting of its recreational vehicle manufacturing
and sales business, to Forest River, Inc. The closing
consideration paid was approximately $40.6 million. Of the
closing consideration, approximately $11.5 million was paid
into two escrow accounts and is subject to reduction for
indemnification and certain other claims including warranty.
Proceeds were applied in accordance with the terms of the
purchase agreement and were reduced by $1.9 million to
settle a contingent liability of approximately
$11.0 million related to the Registrants bailment
chassis pool with Ford Motor Company and by $2.0 million to
purchase the required
5-year term
of tail insurance. The net proceeds after the escrow, contingent
liability settlement, purchase of insurance and closing costs
were approximately $25.2 million. This transaction resulted
in the sale of trade accounts receivable, inventory, and fixed
assets with net book values of $5.9 million,
$30.8 million, and $11.7 million, respectively. The
net selling price was $5.9 million for accounts receivable,
$22.8 million for inventory, and $10.8 million for
fixed assets resulting in a pre-tax (loss) of
$(7.9) million and $(0.9) million on the sale of
inventory and fixed assets, respectively, which are reflected in
discontinued operations in the statement of operations.
In accordance with generally accepted accounting principles, the
recreational vehicle operations qualified as a separate
component of the Companys business and as a result, the
operating results of the recreational vehicle business have been
accounted for as a discontinued operation. Financial results for
all periods presented have been adjusted to reflect this
business as a discontinued operation. Interest expense was
allocated between continuing operations and to discontinued
operations based on the debt that could be identified as
specifically attributable to those operations. Interest expense
allocated to discontinued operations for the recreational
vehicle business for the year ended December 31, 2008 was
$2.4 million. Net sales of the
F-44
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
recreational vehicle business for the year ended
December 31, 2008 was $212.3 million and the pre-tax
(loss) for the year ended December 31, 2008 was
$(50.3) million.
In connection with the sale of the assets of the RV business, a
liability of $1.6 million was established at
December 31, 2008 for existing but unused facilities
subject to operating leases that were part of the activities
which were exited and is included in the Impairments line of the
consolidated financial statements.
During the fourth quarter of 2008, the Company sold a former RV
production facility for $1.8 million, resulting in a
pre-tax (loss) of approximately $(0.8) million, which are
reflected in discontinued operations in the statement of
operations.
The following table shows an analysis of assets and liabilities
of discontinued operations as of December 31 ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Current assets
|
|
$
|
74
|
|
|
$
|
827
|
|
Properties and equipment
|
|
|
|
|
|
|
2,102
|
|
|
|
|
|
|
|
|
|
|
Total assets of discontinued operations
|
|
$
|
74
|
|
|
$
|
2,929
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
3,878
|
|
|
$
|
18,791
|
|
Long-term liabilities
|
|
|
671
|
|
|
|
986
|
|
|
|
|
|
|
|
|
|
|
Total liabilities of discontinued operations
|
|
$
|
4,549
|
|
|
$
|
19,777
|
|
|
|
|
|
|
|
|
|
|
Goodwill
Impairment
Goodwill represents the excess of the purchase price over the
fair value of net tangible and identifiable intangible assets of
acquired businesses. Goodwill assets deemed to have indefinite
lives are not amortized, but are subject to impairment tests at
least annually in accordance with generally accepted accounting
standards. The Company reviews the carrying amounts of goodwill
assets annually by segment to determine if such assets may be
impaired. If the carrying amounts of these assets are not
recoverable based upon a discounted cash flow analysis, such
assets are reduced by the estimated shortfall of fair value to
recorded value. At January 1, 2008, the Company had
$13.0 million of goodwill, all attributable to the Housing
reporting unit. The Company conducted its annual goodwill
impairment test during the fourth quarter of 2008 and the
results indicated that the goodwill was fully impaired.
Accordingly, the Company recorded a non-cash goodwill impairment
charge of $13.0 million in the quarter ended
December 31, 2008. The goodwill impairment charges in 2008
were recorded at the corporate level because this goodwill was
carried at that level. The Company had no remaining goodwill as
of December 31, 2008 or 2009.
|
|
13.
|
COMMITMENTS
AND CONTINGENCIES.
|
Lease
Commitments
The Company leases various manufacturing and office facilities
under non-cancelable agreements that expire at various dates
through November 2011. Several of the leases contain renewal
options and options to purchase and require the payment of
property taxes, normal maintenance and insurance on the
properties. Certain office and delivery equipment is also leased
under non-cancelable agreements that expire at various dates
through October 2012. The above-described leases are accounted
for as operating leases.
Future minimum annual operating lease commitments at
December 31, 2009 aggregated $1.2 million and are
payable during the next 3 years as follows:
2010 $0.6 million, 2011
$0.5 million, 2012 $0.1 million. Total
rental expense for the years ended December 31, 2009 and
2008 aggregated $0.6 million ($0.4 million of which
was related to continuing operations) and $2.1 million,
respectively. In connection with
F-45
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
the sale of the assets of the RV business, a liability of
$1.6 million was established for existing but unused
facilities subject to operating leases that were part of the
activities which were exited. At December 31, 2009,
$0.9 million of the $1.2 million lease commitment is
related to the former RV operations.
Obligation
to Purchase Consigned Inventories
The Company obtains vehicle chassis for its bus products
directly from an automobile manufacturer under a converter pool
agreement. The agreement generally provides that the
manufacturer will provide a supply of chassis at the
Companys production facility under the terms and
conditions as set forth in the agreement. Chassis received under
the converter pool agreement are accounted for as consigned
inventory until assigned to a unit in the production process. At
that point, the Company is obligated to purchase the chassis and
it is recorded as inventory. At December 31, 2009 and 2008,
chassis inventory, accounted for as consigned inventory,
approximated $3.0 million and $1.9 million,
respectively.
Repurchase
Agreements
The Company was contingently liable at December 31, 2009 to
banks and other financial institutions on repurchase agreements
in connection with financing provided by such institutions to
most of the Companys former independent dealers in
connection with their purchase of the Companys
recreational vehicle products. These agreements provide for the
Company to repurchase its products from the financing
institution in the event that they have repossessed them upon a
dealers default. Although the estimated maximum contingent
liability, without offsets for resale, would be approximately
$0.4 million at December 31, 2009 ($98 million at
December 31, 2008), the risk of loss resulting from these
agreements is spread over the Companys numerous former
dealers and is further reduced by the resale value of the
products repurchased. Further, as time goes on and the Company
does not sell additional recreational vehicles, this contingent
liability continually reduces because the period during which
the Company is subject to buy-back claims is limited to a
specific time period, starting from the date of original
wholesale sale. The maximum estimated contingent liability
reduced by 92% in 2009. Based on losses previously experienced
under these obligations and current market conditions, the
Company has established a reserve for estimated losses under
repurchase agreements. At December 31, 2009 and 2008,
$0.2 million and $2.5 million, respectively, were
recorded as an accrual for estimated losses under repurchase
agreements.
The Company was also contingently liable at December 31,
2009 to a financial institution on repurchase agreements in
connection with financing provided by the institution to certain
of the Companys independent home builders in connection
with their purchase of the Companys housing products. This
agreement provides for the Company to repurchase its products
from the financing institution in the event that they have
repossessed them upon a builders default. Products
repurchased from builders under this agreement are accounted for
as a reduction in revenue and cost of sales at the time of
repurchase. Although the estimated maximum contingent liability,
without offsets for resale, would be approximately
$4.0 million at December 31, 2009 ($6.1 million
at December 31, 2008), the risk of loss resulting from
these agreements is spread over the Companys numerous
builders and is further reduced by the resale value of the
products repurchased. The Company has evaluated the potential
for losses under this agreement and has recorded an accrual of
$0.1 million at December 31, 2009 and 2008 for
estimated losses under the repurchase agreements.
Corporate
Guarantees
The Company was contingently liable under guarantees to
financial institutions of their loans to independent
recreational vehicle dealers for amounts totaling approximately
$1.5 million at December 31, 2009 and
$6.3 million at December 31, 2008. The Company had an
agreement with a financial institution to form a private-label
financing program to provide wholesale inventory financing to
the Companys former recreational vehicle dealers. The
agreement provided for a preferred program that provided
financing subject
F-46
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
to the standard repurchase agreement described above. In
addition, the agreement provided for a reserve pool whereby the
financial institution made available an aggregate line of credit
not to exceed $40 million that provided financing for
dealers that may not otherwise qualify for credit approval under
the preferred program. No dealer being provided financing from
the reserve pool could receive an aggregate line of credit
exceeding $5 million. In addition to the standard
repurchase agreement described above, as of December 31,
2009 the Company was contingently liable to the financial
institutions up to a maximum of $2.0 million of aggregate
losses, as defined by the agreement, incurred by the financial
institutions on designated dealers with higher credit risks that
were accepted into the reserve pool financing program. The
Company has recorded a loss reserve of less than
$0.1 million at December 31, 2009 and
$0.1 million at December 31, 2008, associated with
these guarantees.
Financing
Obligation
During the second quarter of 2004, the Company entered into an
agreement to provide financing of up to $4.9 million to a
developer for the construction of a hotel for which the Company
was to provide modular units. The Company had provided
$2.3 million in financing to the developer under this
arrangement. No funding has been provided since December 2005.
The loans are collateralized by a first priority interest in all
tangible and intangible property of the borrower. The developer
was unable to obtain a building permit, so the Company is
pursuing its legal remedies through litigation to recoup the
financing extended to date. During the fourth quarter of 2006,
the Company obtained title to the real estate that was partial
collateral for this note. In the event the sale of the property
does not generate proceeds sufficient to cover the financing
previously provided, the Company will continue pursuing its
legal remedies to recover any shortfall. As of December 31,
2009, the Company has reserved an amount that Management
believes the Company may not recover; however, there is a
potential for exposure in excess of the amount reserved.
Change of
Control Agreements
On February 3, 2000, the Company entered into Change of
Control Agreements with key executives. The Agreements have
subsequently been amended, and the number of participants
reduced. Under the terms of these agreements, in the event of a
change in control of the Company, as defined, the Company would
be obligated to pay these key executives for severance and other
benefits. These agreements had aggregated obligations of
approximately $2.5 million and $4.6 million based on
salaries and benefits at December 31, 2009 and 2008,
respectively. In addition, in the event of a change of control
of the Company, all outstanding stock options and SARs
shall become immediately exercisable, restrictions are removed
from restricted stock, and all stock awards shall immediately be
deemed fully achieved.
Also on February 3, 2000, the Company established a rabbi
trust, which in the event of a change of control, as defined,
will be funded to cover the Companys obligations under its
Change of Control Agreements and its deferred compensation plan.
On October 27, 2009, in exchange for the payment of $500,
the key executives who have Change of Control Agreements with
the Company agreed to waive the terms of those Agreements with
respect to any change in control, as that term is
defined in the Agreements, in connection with the series of
transactions that occurred on that date with H.I.G. All
American, LLC.
Self-Insurance
The Company is self-insured for a portion of its product
liability and certain other liability exposures. Depending on
the nature of the claim and the date of occurrence, the
Companys maximum exposure ranges from $250,000 to $500,000
per claim. The Company accrues an estimated liability based on
various factors, including sales levels, insurance coverage and
the amount of outstanding claims. Management believes the
liability recorded (see Note 8) is adequate to cover the
Companys self-insured risk.
F-47
All
American Group, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements Continued
Litigation
In February 2009 the Company received a favorable verdict
against Crane Composites, Inc. f/k/a Kemlite for breach of
contract and multiple warranty claims arising from the sale of
defective sidewall material to Coachmen Industries, Inc. and
subsidiaries. All of the counts alleged in the original
complaint were found in favor of the Company. On April 17,
2009, the Company entered into a settlement agreement with Crane
Composites, Inc., f/k/a Kemlite, with respect to this verdict
rendered in favor of the Company and its subsidiaries, on the
liability portion of this lawsuit. Pursuant to the terms of the
settlement, Crane Composites paid the Company a total of
$17.75 million in three installments, with the first
installment of $10 million paid on May 8, 2009, the
second installment of $3.875 million on June 1, 2009
and the final installment of $3.875 million on July 1,
2009.
The settlement with Crane Composites, Inc. resulted in income of
$14.9 million net of contingent attorney fees recorded in
the first quarter of 2009. The parent Company acquired the
claims that were subject to the settlement for fair value from
its RV Group subsidiaries during the fourth quarter of 2008,
prior to trial. Because the settlement is related to damages
originally incurred by the recreational vehicle business,
accounting rules required the Company to record this income
under discontinued operations, even though the settlement is
owned by the parent Company and not the RV Group.
The Company was named as a defendant in a number of lawsuits
alleging that the plaintiffs were exposed to levels of
formaldehyde in FEMA-supplied trailers manufactured by the
Companys subsidiaries (and other manufacturers) and that
such exposure entitles plaintiffs to an award, including
injunctive relief, a court-supervised medical monitoring fund,
removal of formaldehyde-existing materials, repair and testing,
compensatory, punitive and other damages, including
attorneys fees and costs. The litigation proceeded through
the class certification process. In December 2008, class
certification was denied.
In the third quarter of 2008, as a result of the favorable
settlement of a lawsuit involving an insurance recovery, the
Company recorded income of approximately $0.4 million.
During the second quarter of 2008, as a result of the favorable
settlement of two lawsuits involving insurance recoveries, the
Company recorded income of approximately $1.0 million.
During the first quarter of 2008, the Company also recorded
income of approximately $1.0 million as a result of the
favorable settlement of two lawsuits involving insurance
recoveries. These favorable settlements are classified as a
reduction to general and administrative expenses on the
consolidated statement of operations.
The Company is involved in various other legal proceedings, most
of which are ordinary disputes incidental to the industry and
most of which are covered in whole or in part by insurance.
Management believes that the ultimate outcome of these matters
and any liabilities in excess of insurance coverage and
self-insurance accruals will not have a material adverse impact
on the Companys consolidated financial position, future
business operations or cash flows.
In May 2009, the Financial Accounting Standards Board (FASB)
established general standards of accounting for and disclosures
of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.
Specifically, this standard sets forth the period after the
balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements,
the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its
financial statements, and the disclosures that an entity should
make about events or transactions that occurred after the
balance sheet date. The Company has evaluated any subsequent
events through the date of this filing.
Subsequent to year-end, the Company failed to meet certain
financial covenants of the HIG All American Credit Agreement.
HIG did not declare the Company to be in default of any covenant
and on March 25, 2010,
F-48
the Company and HIG reached agreement (subject to final
documentation) on revised covenants and other modifications,
including the issue of additional warrants to HIG, to the credit
agreement. If the Company and HIG are unable to finalize the
amendment, HIG would have the rights accorded to them under the
terms of the loan agreement which include, among other rights,
the right to declare the Company in default of the agreement and
demand repayment of the $10 million note. As a result of
the modifications, the Company will only have partial access to
the $10 million revolving line of credit, for specified
purposes, until the Company is in compliance with the original
financial covenants of the loan agreement.
F-49
Appendix
A
AGREEMENT
AND PLAN OF MERGER
BY AND
AMONG
ALL
AMERICAN GROUP HOLDINGS, LLC
ALL
AMERICAN ACQUISITION CORPORATION
ALL
AMERICAN GROUP, INC.
AND
RICHARD
M. LAVERS, AS SHAREHOLDERS REPRESENTATIVE
Dated as of November 8, 2010
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I DEFINITIONS
|
|
A-1
|
Section 1.1
|
|
Definitions
|
|
A-1
|
|
|
|
ARTICLE II THE MERGER
|
|
A-9
|
Section 2.1
|
|
The Merger
|
|
A-9
|
Section 2.2
|
|
Conversion of Stock
|
|
A-9
|
Section 2.3
|
|
Dissenting Shares
|
|
A-10
|
Section 2.4
|
|
Surrender of Certificates
|
|
A-10
|
Section 2.5
|
|
Payment
|
|
A-11
|
Section 2.6
|
|
No Further Rights of Transfers
|
|
A-11
|
Section 2.7
|
|
Options, Incentive Plans and Other Plans
|
|
A-11
|
Section 2.8
|
|
Articles of Incorporation of the Surviving Corporation
|
|
A-12
|
Section 2.9
|
|
Bylaws of the Surviving Corporation
|
|
A-12
|
Section 2.10
|
|
Directors and Officers of the Surviving Corporation
|
|
A-12
|
Section 2.11
|
|
Closing
|
|
A-12
|
Section 2.12
|
|
Withholding Rights
|
|
A-12
|
Section 2.13
|
|
Further Assurances
|
|
A-13
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
|
|
A-13
|
Section 3.1
|
|
Corporate Existence; Power and Authority.
|
|
A-13
|
Section 3.2
|
|
Financial Statements; No Material Adverse Change
|
|
A-13
|
Section 3.3
|
|
Title to Properties
|
|
A-14
|
Section 3.4
|
|
Authorized Capital
|
|
A-15
|
Section 3.5
|
|
Tax Returns and Payments
|
|
A-15
|
Section 3.6
|
|
Litigation
|
|
A-15
|
Section 3.7
|
|
Compliance with Other Agreements and Applicable Laws
|
|
A-15
|
Section 3.8
|
|
Environmental Compliance
|
|
A-16
|
Section 3.9
|
|
Employee Benefits
|
|
A-16
|
Section 3.10
|
|
Intellectual Property
|
|
A-17
|
Section 3.11
|
|
Subsidiaries; Affiliates; Capitalization
|
|
A-18
|
Section 3.12
|
|
Labor Disputes.
|
|
A-18
|
Section 3.13
|
|
Restrictions on Subsidiaries
|
|
A-18
|
Section 3.14
|
|
Material Contracts
|
|
A-19
|
Section 3.15
|
|
Real Property
|
|
A-19
|
Section 3.16
|
|
Certain Fees
|
|
A-19
|
Section 3.17
|
|
Commission Filings
|
|
A-19
|
Section 3.18
|
|
Proxy Statement
|
|
A-19
|
Section 3.19
|
|
State Business Combination Statutes; Rights Agreement
|
|
A-20
|
Section 3.20
|
|
Voting Requirements
|
|
A-20
|
Section 3.21
|
|
Opinion of Financial Advisor
|
|
A-20
|
Section 3.22
|
|
Board Approval and Recommendation
|
|
A-20
|
Section 3.23
|
|
Survival of Warranties; Cumulative
|
|
A-20
|
Section 3.24
|
|
Accuracy and Completeness of Information
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION
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Section 4.1
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Due Organization, Good Standing and Corporate Power
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Section 4.2
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Authorization and Validity of Agreement
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Section 4.3
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Consents and Approvals; No Violations
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Section 4.4
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Brokers or Finders Fee
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Section 4.5
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Registration Statement
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Section 4.6
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Acquisitions Operations
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ARTICLE V COVENANTS
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Section 5.1
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Access to Information Concerning Properties and Records
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Section 5.2
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Confidentiality
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Section 5.3
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Conduct of the Business of the Corporation Pending the Closing
Date
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Section 5.4
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Registration Statement; Proxy Statement; Special Meeting
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Section 5.5
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Best Efforts to Satisfy Conditions Precedent
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Section 5.6
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Notification of Certain Matters
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Section 5.7
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Directors and Officers Insurance
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Section 5.8
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Public Announcements
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Section 5.9
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Subsequent Filings
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Section 5.10
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Material Consents and Waivers
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Section 5.11
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Financing Cooperation
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Section 5.12
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Shareholders Representative.
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Section 5.13
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Sale of Specialty Vehicle Business.
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Section 5.14
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Dissenters Rights
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ARTICLE VI CONDITIONS PRECEDENT
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Section 6.1
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Conditions Precedent to Each Partys Obligation to Effect
the Merger
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Section 6.2
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Condition Precedent to the Corporations Obligation to
Effect the Merger
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Section 6.3
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Conditions Precedent to the Parents and Acquisitions
Obligations to Effect the Merger
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ARTICLE VII TERMINATION AND ABANDONMENT
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Section 7.1
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Termination
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Section 7.2
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Effect of Termination
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ARTICLE VIII MISCELLANEOUS
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Section 8.1
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Fees and Expenses
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Section 8.2
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Representations and Warranties
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Section 8.3
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Extension; Waiver
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Section 8.4
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Notices
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Section 8.5
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Entire Agreement
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Section 8.6
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Binding Effect; Benefit; Assignment
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Section 8.7
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Amendment and Modification
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Section 8.8
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Time Is of the Essence
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Section 8.9
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Headings
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Section 8.10
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Counterparts
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Section 8.11
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Applicable Law
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Section 8.12
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Severability
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Section 8.13
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Interpretation
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Section 8.14
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Specific Enforcement
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Section 8.15
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Waiver of Jury Trial
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Exhibit A
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Liquidating Trust Agreement
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Exhibit 6.2
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Parent and Acquisition Closing Certificate
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Exhibit 6.3
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Corporation Closing Certificate
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-iii-
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 8, 2010
(this Agreement), by and among ALL AMERICAN
GROUP HOLDINGS, LLC, a Delaware limited liability company (the
Parent), ALL AMERICAN ACQUISITION
CORPORATION, an Indiana corporation and a wholly-owned
subsidiary of the Parent (Acquisition), ALL
AMERICAN GROUP, INC. (f/k/a Coachmen Industries, Inc.), an
Indiana corporation (the Corporation), and
Richard M. Lavers as Shareholders Representative.
W I T N E
S S E T H:
WHEREAS, the Corporation is a publicly traded company whose
shares of Common Stock are currently traded on the OTC
Bulletin Board under the symbol COHM;
WHEREAS, subject to the terms and conditions of this Agreement,
the parties hereto desire to merge Acquisition with and into the
Corporation, with the Corporation surviving as the Surviving
Corporation (the Merger);
WHEREAS, the Parent and Acquisition have negotiated the terms of
this Agreement with a special committee of the board of
directors of the Corporation comprised solely of directors who
are not Designated Directors (as defined in the bylaws of the
Corporation) or otherwise Affiliates of the Parent or
Acquisition (the Special Committee);
WHEREAS, the Special Committee, at a meeting thereof duly called
and held, has (i) determined that the Merger and the other
transactions contemplated herein are fair to, and in the best
interests of, the Corporation and the shareholders of the
Corporation, and has declared that the Merger is advisable,
(ii) approved the Merger and this Agreement and
(iii) recommended that the board of directors of the
Corporation approve and adopt the Merger and this Agreement and
call the Special Meeting;
WHEREAS, the board of directors of the Corporation, based in
part on the recommendation of the Special Committee, at a
meeting thereof duly called and held, has (i) determined
that the Merger and the other transactions contemplated herein
are fair to, and in the best interests of, the Corporation and
the shareholders of the Corporation, and declared that the
Merger is advisable and (ii) approved the Merger and this
Agreement;
WHEREAS, the respective boards of directors of the Parent and
Acquisition have approved this Agreement, the Merger and the
other transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements
herein contained, the parties intending to be legally bound,
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When
used in this Agreement, the following terms shall have the
respective meanings specified therefor below (such meanings to
be equally applicable to both the singular and plural forms of
the terms defined).
Acquisition has the meaning set forth in the
preamble hereto.
Affiliate means, with respect to a specified
Person, any other Person which directly or indirectly, through
one or more intermediaries, controls or is controlled by or is
under common control with such Person, and without limiting the
generality of the foregoing, includes (a) any Person which
beneficially owns or holds ten (10%) percent or more of any
class of Capital Stock of such Person or other equity interests
in such Person, (b) any Person of which such Person
beneficially owns or holds ten (10%) percent or more of any
class of Capital Stock or in which such Person beneficially owns
or holds ten (10%) percent or more of the equity interests and
(c) any director or executive officer of such Person. For
the purposes of this definition, the term control
(including with correlative meanings, the terms controlled
by and under common control
A-1
with), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of Capital Stock, by
agreement or otherwise.
Agreement has the meaning set forth in the
preamble hereto.
Articles of Merger has the meaning set forth
in Section 2.1(a).
Business Day means any day except a Saturday,
a Sunday or any other day on which commercial banks are required
or authorized to close in New York, New York.
Capital Expenditures means, with respect to
any Person for any period, the aggregate of all expenditures by
such Person during such period that in accordance with GAAP are
or should be included in property, plant and
equipment or in a similar fixed asset account on its
balance sheet, whether such expenditures are paid in cash or
financed and including all liabilities and obligations in
respect of Capital Leases paid or payable during such period.
Capital Leases means, as applied to any
Person, any lease of (or any agreement conveying the right to
use) any property (whether real, personal or mixed) by such
Person as lessee which in accordance with GAAP, is required to
be reflected as a liability on the balance sheet of such Person.
Capital Stock shall mean, with respect to any
Person, any and all shares, interests, participations or other
equivalents (however designated) of such Persons capital
stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights,
warrants or Options exchangeable for or convertible into such
capital stock or other interests (but excluding any debt
security that is exchangeable for or convertible into such
capital stock).
Certificates has the meaning set forth in
Section 2.4(a).
Claim means any action, suit, claim, lawsuit,
demand, inquiry, hearing, investigation, notice of a violation
or noncompliance, litigation, proceeding, arbitration, appeal or
other dispute, whether civil, criminal, administrative or
otherwise.
Closing has the meaning set forth in
Section 2.11.
Closing Date has the meaning set forth in
Section 2.11.
Code means the United States Internal Revenue
Code of 1986, as amended, and the regulations promulgated and
the rulings issued thereunder.
Commission means the Securities and Exchange
Commission.
Commission Filings has the meaning set forth
in Section 3.17.
Common Stock shall mean the issued and
outstanding common stock of the Corporation, no par value per
share.
Corporation has the meaning set forth in the
preamble hereto.
Corporation Disclosure Letter has the meaning
set forth in the preamble to Section 3.
Dissenting Shareholders has the meaning set
forth in Section 2.3.
Dissenting Shares has the meaning set forth
in Section 2.3.
Effective Time has the meaning set forth in
Section 2.1(a).
Environmental Laws means all foreign,
federal, state and local Laws (including common law),
legislation, rules, codes, licenses, permits (including any
conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between the
Corporation and any Governmental Authority, (a) relating to
pollution and the protection, preservation or restoration of the
environment (including air, water vapor, surface water, ground
water, drinking water, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to
the
A-2
exposure to, or the use, storage, recycling, treatment,
generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials or
(c) relating to all laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting
Hazardous Materials. The term Environmental
Laws includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
the Federal Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean
Water Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the
Federal Safe Drinking Water Act of 1974, (ii) applicable
state counterparts to such laws and (iii) any common law or
equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended from time to time, together
with all rules, regulations and interpretations thereunder or
related thereto.
ERISA Affiliate means any person (as defined
in Section 3(9) of ERISA) which together with the
Corporation or any of its Subsidiaries would be deemed to be a
single employer, or otherwise required to be
aggregated with the Corporation or any of its Subsidiaries,
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
ERISA Event means any one or more of the
following: (a) any reportable event, as defined
in Section 4043(c) of ERISA, with respect to a Plan, other
than events as to which the requirement of notice under
Section 4043(a) of ERISA has been waived in regulations by
the PBGC, (b) the failure to make a required contribution
to any Plan that would result in the imposition of a lien or
other encumbrance or the provision of security under
Section 412 or 430 of the Code or Section 302, 303, or
4068 of ERISA, or the arising of such a lien or encumbrance;
there being or arising any unpaid minimum required
contribution or accumulated funding deficiency
(as defined or otherwise set forth in Section 4971 of the
Code or Part 3 of Subtitle B of Title I of ERISA),
whether or not waived; or the filing of any request for or
receipt of a minimum funding waiver under Section 412 of
the Code with respect to any Plan or Multiemployer Plan, or that
such filing may be made, or a determination that any Plan is, or
is expected to be, in at-risk status under Title IV of
ERISA, (c) a complete or partial withdrawal by the
Corporation or any of its Subsidiaries, or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal, the reorganization or insolvency
under Title IV of ERISA of any Multiemployer Plan, or the
receipt by the Corporation or any of its Subsidiaries, or any
ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Corporation or any of its
Subsidiaries, or any ERISA Affiliate of any notice, that a
Multiemployer Plan is in endangered or critical status under
Section 305 of ERISA, (d) the filing of a notice of
intent to terminate any Plan, if such termination would require
material additional contributions in order to be considered a
standard termination within the meaning of Section 4041(b)
of ERISA, the filing under Section 4041(c) of ERISA of a
notice of intent to terminate any Plan, the termination of any
Plan under Section 4041(c) of ERISA, or the treatment of a
Plan amendment as a termination under Section 4041 or 4041A
of ERISA, (e) the commencement of proceedings, or the
occurrence of an event or condition which would reasonably be
expected to constitute grounds for the institute of proceedings,
by the PBGC under Section 4042 of ERISA to terminate, or
appoint a trustee to administer, any Plan, (f) engaging in
a non-exempt prohibited transaction within the meaning of
Section 4975 of the Code or Section 406 of ERISA,
(g) the imposition of any liability under Title IV of
ERISA, other than the PBGCs premiums due but not
delinquent under Section 4007 of ERISA, upon the
Corporation or any of its Subsidiaries, or any ERISA Affiliate
in excess of $100,000 and (h) any other event or condition
with respect to a Plan that could reasonably be expected to
result in liability of the Corporation or any of its
Subsidiaries, or any ERISA Affiliate in excess of $100,000.
Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
A-3
Excluded Shares means shares of Common Stock
which are held (a) by any wholly-owned Subsidiary of the
Corporation or in the treasury of the Corporation, or
(b) directly or indirectly by the Parent or any Affiliate
of the Parent.
Excess Sale Proceeds means the amount by
which the Net Sale Proceeds received from the Sale of the
Specialty Vehicle Business exceed Five Million Dollars
($5,000,000).
Existing Lenders shall mean the lenders to
the Corporation and its Subsidiaries listed on
Schedule 3.3(c) of the Corporation Disclosure Letter
and their respective predecessors, successors and assigns.
Financial Advisor has the meaning set forth
in Section 3.16.
GAAP means generally accepted accounting
principles in the United States of America as in effect from
time to time as set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which
are applicable to the circumstances as of the date of
determination consistently applied.
Government Contract means any bid, quotation,
proposal, contract, work authorization, lease, commitment or
sale or purchase order of the Corporation that is with the
United States government or any other Government Authority.
Governmental Authority means any nation or
government, any state, province, or other political subdivision
thereof, any central bank (or similar monetary or regulatory
authority) thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
Hazardous Materials means any hazardous,
toxic or dangerous substances, materials and wastes, including
hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos,
urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides
and any other kind
and/or type
of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag,
solvents
and/or any
other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become
regulated under any Environmental Law (including any that are or
become classified as hazardous or toxic under any Environmental
Law).
IBCL means the Indiana Business Corporation
Law.
Incentive Plans means (a) the
Corporations Supplemental Deferred Compensation Plan, as
amended and restated on January 1, 2003, (b) the
Corporations Executive Annual Performance Incentive Plan,
as amended on May 3, 2001, (c) the Corporations
Long Term Incentive Performance Based Restricted Stock Plan,
(d) the Corporations 2000 Omnibus Stock Incentive
Program and (e) all other agreements or plans providing for
the grant of any Option or other right to purchase Common Stock
to any current or former employee of the Corporation or any of
its Subsidiaries or any other Person, in each case as amended
from time to time.
Indebtedness means, with respect to any
Person, any liability, whether or not contingent, (a) in
respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or
similar instruments, (b) representing the balance deferred
and unpaid of the purchase price of any property or services
(other than an account payable to a trade creditor (whether or
not an Affiliate) incurred in the ordinary course of business of
such Person and payable in accordance with customary trade
practices so long as such accounts payable are paid within
60 days of their due date and are not being contested),
(c) all obligations as lessee under leases which have been,
or should be, in accordance with GAAP recorded as Capital
Leases, (d) any contractual obligation, contingent or
otherwise, of such Person to pay or be liable for the payment of
any indebtedness described in this definition of another Person,
including, without limitation, any such indebtedness, directly
or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation
or liability or any security therefor, or to provide funds for
the payment or discharge thereof, or to maintain solvency,
assets, level of income, or other financial condition,
(e) all obligations with respect to redeemable stock and
A-4
redemption or repurchase obligations under any Capital Stock or
other equity securities issued by such Person, (f) all
reimbursement obligations and other liabilities of such Person
with respect to surety bonds (whether bid, performance or
otherwise), letters of credit, bankers acceptances, drafts
or similar documents or instruments issued for such
Persons account, (g) all indebtedness of such Person
in respect of indebtedness of another Person for borrowed money
or indebtedness of another Person otherwise described in this
definition that is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage,
deed of trust, or other encumbrance on any asset of such Person,
whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of
such time, (h) all obligations, liabilities and
indebtedness of such Person (marked to market) arising under
swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency or commodity
values, (i) all obligations owed by such Person under
License Agreements with respect to non-refundable, advance or
minimum guarantee royalty payments, (j) indebtedness of any
partnership or joint venture in which such Person is a general
partner or a joint venturer to the extent such Person is liable
therefor as a result of such Persons ownership interest in
such entity, except to the extent that the terms of such
indebtedness expressly provide that such Person is not liable
therefor or such Person has no liability therefor as a matter of
law, (k) the principal and interest portions of all rental
obligations of such Person under any synthetic lease or similar
off-balance sheet financing where such transaction is considered
to be borrowed money for Tax purposes but is classified as an
operating lease in accordance with GAAP and (l) accounts
payable of such Person that have not been paid within sixty
(60) days of their due date and are not being contested in
good faith.
Indemnified Parties has the meaning set forth
in Section 5.7(b).
Initial Merger Consideration has the meaning
set forth in Section 2.2(a).
Intellectual Property means any U.S. and
non-U.S. (a) patents
and patent applications, (b) registered and unregistered
trademarks, service marks and other indicia of origin, pending
trademark and service mark registration applications, and
intent-to-use registrations or similar reservations of marks,
(c) registered and unregistered copyrights and mask works,
and applications for registration thereof, (d) internet
domain names, applications and reservations therefor, uniform
resource locators and the corresponding Internet sites,
(e) trade secrets, proprietary information and other
intangible property rights not otherwise listed in
(a) through (d) above, including, but not limited to,
unpatented inventions, invention disclosures, moral and economic
rights of authors and inventors (however denominated),
confidential information, technical data, customer lists,
corporate and business names, trade names, trade dress, brand
names, know-how, formulae, methods (whether or not patentable),
designs, processes, procedures, technology, source codes, object
codes, computer software programs, databases, data collections
and other proprietary information or material of any type, and
all derivatives, improvements and refinements thereof, howsoever
recorded, or unrecorded and (f) any good will associated
with any of the foregoing.
Law means any law, rule, code, statute,
regulation, ordinance, requirement, announcement, policy,
guideline, rule of common law, order, judgment, decree or other
binding action of or by a Governmental Authority and any
judicial interpretation thereof.
License Agreements has the meaning set forth
in Section 3.10.
Liquidating Trust means the All American
Group Liquidating Trust that is subject to that certain
Trust Agreement in the form of Exhibit A hereto.
Liquidating Trust Agreement shall mean
the agreement governing the terms and conditions of the
Liquidating Trust Agreement substantially in the form
attached hereto as Exhibit A.
Loan Agreement means the Loan Agreement,
dated October 27, 2009, by and among H.I.G. All American,
LLC, the Corporation and the direct and indirect Subsidiaries of
the Corporation party thereto, as amended on April 5, 2010,
as it may be further amended, restated, supplemented or
otherwise modified from time to time.
A-5
Material Adverse Effect means a material
adverse effect on (a) the financial condition, business,
performance, operations or prospects of the Corporation and its
Subsidiaries taken as a whole or (b) the legality, validity
or enforceability of this Agreement or any of the other
agreements contemplated hereunder or any of the transactions
contemplated hereunder or thereunder (including without
limitation the Merger).
Material Contract means (a) any contract
or other agreement (other than this Agreement and purchase
orders entered into in the ordinary course of business), written
or oral, of the Corporation or any of its Subsidiaries involving
monetary liability of or to any Person in an amount in excess of
$500,000 in any fiscal year, (b) any other contract or
other agreement (other than this Agreement), whether written or
oral, to which one or more of the Corporation or any of its
Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto would have
a Material Adverse Effect and (c) any contract filed as a
material contract in an exhibit to any Commission Filings.
Merger has the meaning set forth in the
recitals hereto.
Merger Consideration has the meaning set
forth in Section 2.2(a).
Multiemployer Plan means any
multiemployer plan as defined in
Section 4001(a)(3) of ERISA (a) (i) which is
contributed to by (or to which there is an obligation to
contribute of) the Corporation or any of its Subsidiaries, or
any ERISA Affiliate, and (ii) each such plan for the
five-year period immediately following the latest date on which
the Corporation or any of its Subsidiaries, or any ERISA
Affiliate contributed to or had an obligation to contribute to
such plan, or (b) with respect to which the Corporation or
any of its Subsidiaries, or any ERISA Affiliate may incur any
liability.
Net Sale Proceeds means the proceeds received
by the Surviving Corporation or its Subsidiaries in cash from
the Sale of the Specialty Vehicle Business, minus (a) taxes
and other amounts paid or payable by the Surviving Corporation
to government agencies as a result of such sale and for any
income of the Specialty Vehicle Business that accrues prior to
the sale, but only income taxes that cannot be immediately
offset against net operating losses of the Surviving
Corporation, (b) the costs and expenses of such sale
(including legal fees and sales and brokers commissions)
and (c) the Indebtedness of the Specialty Vehicle Business.
For purposes of this definition, (i) if any portion of the
sales proceeds are paid on a date after the closing of the sale
of the Specialty Vehicle Business, Net Sale Proceeds shall
include such amounts as and when received by the Surviving
Corporation, and (ii) Indebtedness of the Specialty Vehicle
Business means all (A) subject to the following sentence,
Indebtedness now outstanding or made hereafter, and
(B) equity invested after the date hereof, in each case, to
or for the benefit of the Specialty Vehicle Business whether
such Indebtedness or equity investment is made by the Surviving
Corporation, the Parent or any other Person. Indebtedness of the
Specialty Vehicle Business shall not include (1) the
Tranche B Note, (2) Indebtedness owed to Lake City
National Bank in the approximate amount of $2.2 million and
secured by that certain real property in Midddlebury, Indiana,
and (3) Indebtedness assumed by the purchaser of the
Specialty Vehicle Business and for which there is no lien or
encumbrance remaining on the Surviving Corporations or its
Subsidiaries assets. In determining Net Sale
Proceeds, accounts receivable owed to the Specialty
Vehicle Business from ARBOC Mobility, LLC may be transferred to
the Surviving Corporation to set off against Indebtedness owed
by the Specialty Vehicle Business to the Surviving Corporation
in the net amount of the receivables transferred.
Option means any options, subscriptions,
warrants, rights, profit participation or other arrangements, or
convertible or exchangeable securities (but excluding the
Tranche B Note) by which any Person has the right to
purchase Capital Stock, or any security convertible or
exchangeable into Capital Stock (but excluding the
Tranche B Notes) of another Person or by which a Person is
bound to issue Capital Stock.
Option Cash Payment has the meaning set forth
in Section 2.7.
Outside Sale Date means the nine
(9) month anniversary after the Effective Time.
Parent has the meaning set forth in the
preamble hereto.
Paying Agent has the meaning set forth in
Section 2.4(a).
Payment Fund has the meaning set forth in
Section 2.5.
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PBGC means the Pension Benefit Guaranty
Corporation established pursuant to Section 4002 of ERISA,
or any successor thereto.
Permits has the meaning set forth in
Section 3.7(b).
Permitted Encumbrances means, with respect to
the Corporation or any of its Subsidiaries, (a) the
security interests and liens granted pursuant to the Loan
Agreement and the other Transaction Documents (as defined in the
Loan Agreement), (b) liens securing the payment of Taxes,
either not yet overdue or the validity of which are being
contested in good faith by appropriate proceedings diligently
pursued and available to the Corporation or such Subsidiary, as
the case may be and with respect to which adequate reserves have
been set aside on its books in accordance with GAAP,
(c) non-consensual statutory liens (other than liens
securing the payment of Taxes) arising in the ordinary course of
the Corporations or such Subsidiarys business to the
extent (i) such liens secure Indebtedness which is not
overdue or (ii) such liens secure Indebtedness relating to
claims or liabilities which are fully insured and being defended
at the sole cost and expense and at the sole risk of the insurer
or being contested in good faith by appropriate proceedings
diligently pursued and available to the Corporation or such
Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books,
(d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of Real Property which do
not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of the Corporation
or such Subsidiary as presently conducted thereon or materially
impair the value of the Real Property which may be subject
thereto, (e) purchase money security interests in equipment
(including Capital Leases) and purchase money mortgages on Real
Property to secure purchase money Indebtedness (including
Capital Leases) arising after the date hereof and prior to the
Closing Date to the extent secured by purchase money security
interests in equipment (including Capital Leases) and purchase
money mortgages on Real Property that do not exceed $100,000 in
the aggregate at any time outstanding provided that such
security interests and mortgages do not apply to any property of
the Corporation or any Subsidiary other than the equipment or
Real Property so acquired, and the Indebtedness secured thereby
does not exceed the cost of the equipment or Real Property so
acquired, as the case may be, and (f) the security
interests and liens of the Existing Lenders on that certain real
property located at 10758 Greenfield Parkway, Middlebury,
Indiana 46540.
Permitted Investments has the meaning set
forth in Section 2.5.
Person means and includes an individual, a
partnership, a limited liability partnership, a joint venture, a
corporation, a limited liability company, a trust, an
unincorporated organization, a group and a Governmental
Authority.
Plan means (a)(i) an employee benefit
plan (as defined in Section 3(3) of ERISA), other
than a Multiemployer Plan, maintained or contributed to by the
Corporation or any of its Subsidiaries, or any ERISA Affiliate,
or to which the Corporation or any of its Subsidiaries or any
ERISA Affiliate has an obligation to contribute and
(ii) each such plan subject to the provisions of
Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA for the five-year period immediately
following the latest date on which the Corporation, any of its
Subsidiaries or any ERISA Affiliate maintained, contributed to
or had an obligation to contribute to (or is deemed under
Section 4069 of ERISA to have maintained or contributed to
or to have had an obligation to contribute to), or otherwise has
liability with respect to such plan and (b) each stock
option, stock appreciation right, restricted stock, stock
purchase, stock unit, performance share, incentive, bonus,
profit-sharing, savings, deferred compensation, health, medical,
dental, life insurance, disability, accident, employment,
severance or salary or benefits continuation or fringe benefit
plan, program, arrangement, agreement or commitment maintained
by the Corporation or any of its Subsidiaries or any ERISA
Affiliate or to which the Corporation or any of its Subsidiaries
or any ERISA Affiliate contributes (or has any obligation to
contribute), has any liability, or is a party.
Proxy Statement has the meaning set forth in
Section 5.4(a).
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Real Property means all now owned and
hereafter acquired real property of the Corporation or any of
its Subsidiaries, including leasehold interests, together with
all buildings, structures, and other improvements located
thereon and all licenses, easements and appurtenances relating
thereto, wherever located.
Registration Statement has the meaning set
forth in Section 5.4(a).
Returns has the meaning set forth in
Section 3.5.
Rights Agreement has the meaning set forth in
Section 3.19(b).
Sale Committee has the meaning set forth in
Section 5.13(a).
Sale of the Specialty Vehicle Business means
the sale of the Specialty Vehicle Business to any Person other
than the Parent or an Affiliate of the Parent, whether by sale
of assets, disposition of securities, merger, consolidation, or
otherwise.
Securities Act means the Securities Act of
1933, as amended.
Shareholders Representative shall initially
mean Mr. Richard M. Lavers and his successors and assigns.
Special Committee has the meaning set forth
in the recitals hereto.
Special Meeting means a special meeting of
the shareholders of the Corporation held for the purpose of
considering and taking action on this Agreement and the Merger.
Specialty Vehicles Business means the
Corporations and its Subsidiaries business division
relating to the manufacture and sale of buses and other
vehicles, including, without limitation, the business conducted
by All American Specialty Vehicles, LLC.
Subsequent Filings has the meaning set forth
in Section 5.9.
Subsidiary means, with respect to any Person,
any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust,
association or other business entity of which an aggregate of at
least a majority of the outstanding Capital Stock or other
interests entitled to vote in the election of the board of
directors (irrespective of whether, at the time, Capital Stock
of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons,
or an equivalent controlling interest therein, of such Person
is, at the time, directly or indirectly, owned by such Person
and/or one
or more subsidiaries of such Person; provided,
that, for purposes of this Agreement, neither the
Corporation nor any of its Subsidiaries shall be deemed a
Subsidiary of the Parent or Acquisition.
Surviving Corporation has the meaning set
forth in Section 2.1(b).
Tax or Taxes means all taxes,
assessments, charges, duties, fees, levies or other governmental
charges including all United States federal, state, local,
foreign and other income, franchise, profits, gross receipts,
capital gains, capital stock, transfer, property, sales, use,
value-added, occupation, property, excise, severance, windfall
profits, stamp, license, payroll, social security, withholding
and other taxes, assessments, charges, duties, fees, levies or
other governmental charges of any kind whatsoever (whether
payable directly or by withholding and whether or not requiring
the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest, and shall
include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or
affiliated group, or of a contractual obligation to indemnify
any Person or other entity.
Tranche B Notes means the Second Amended
and Restated Secured Subordinated Convertible Tranche B
Notes issued by the Corporation and certain of its direct and
indirect Subsidiaries to H.I.G. All American, LLC, together with
any and all
payment-in-kind
Secured Subordinated Convertible Tranche B Notes issued in
satisfaction of any interest or other obligations due H.I.G. All
American, LLC, and all replacements, renewals or other notes of
like tenor hereafter issued by the Corporation and such
Subsidiaries in substitution or exchange for any thereof.
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Unfunded Pension Liability of any Plan that
is an employee pension benefit plan (as such term is defined in
Section 3(2) of ERISA) shall mean the amount, if any, by
which the value of the accumulated plan benefits under such
Plan, determined on a plan termination basis in accordance with
actuarial assumptions at such time consistent with those
prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions).
Unit means a beneficial interest in the
Liquidating Trust equal to a fraction, the numerator of which is
one and the denominator of which is the number of shares of
Common Stock (other than Dissenting Shares) and Vested Options
outstanding immediately prior to the Effective Time. Each Unit
will be nontransferable by the holder thereof except pursuant to
the laws of descent and distribution.
Vested Options means all in-the-money Options
of the Corporation that by their terms are exercisable or become
exercisable at the Effective Time; provided, that,
any Option of the Corporation that is exercisable or becomes
exercisable at the Effective Time with respect to less than the
total number of shares subject to such Option shall be deemed to
be a Vested Option only with respect to such
exercisable portion of such Option.
ARTICLE II
THE
MERGER
Section 2.1 The
Merger.
(a) Upon the terms and subject to the conditions of this
Agreement, at the Closing, articles of merger (the
Articles of Merger) shall be duly prepared,
executed and acknowledged by Acquisition and the Corporation in
accordance with the IBCL and shall be filed with the Secretary
of State of Indiana in accordance with the provisions of the
IBCL. The Merger shall become effective upon the filing of the
Articles of Merger (or at such later time reflected in such
Articles of Merger as shall be agreed to by the Parent and the
Corporation). The date and time when the Merger shall become
effective is hereinafter referred to as the Effective
Time.
(b) On the terms and subject to the conditions set forth in
this Agreement and in accordance with the IBCL, at the Effective
Time, Acquisition shall be merged with and into the Corporation,
and the separate corporate existence of Acquisition shall cease,
and the Corporation shall continue as the surviving corporation
under the laws of the State of Indiana (the Surviving
Corporation).
(c) From and after the Effective Time, the Merger shall
have the effects set forth in
Section 23-1-40-6
of the IBCL.
Section 2.2 Conversion
of Stock. At the Effective Time:
(a) Each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than Excluded
Shares and Dissenting Shares) shall forthwith cease to exist and
be converted into and represent the right to receive (i) an
amount in cash, without interest, equal to $0.20 per share (the
Initial Merger Consideration), and
(ii) one Unit of the Liquidating Trust (together with the
Initial Merger Consideration, the Merger
Consideration), payable as provided in
Sections 2.4 and 2.5 and, with respect to the Unit of the
Liquidating Trust, Section 5.13 and the Liquidating
Trust Agreement.
(b) Each share of Common Stock issued and outstanding
immediately prior to the Effective Time that is (i) an
Excluded Share shall forthwith cease to exist and be converted
into and represent the right to receive one Unit of the
Liquidating Trust in exchange therefor and (ii) a
Dissenting Share shall cease to be outstanding and shall entitle
the holder thereof only to the rights set forth in
Section 2.3.
(c) Each share of common stock, no par value per share, of
Acquisition, then issued and outstanding, shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be converted into one fully paid and non-assessable
share of common stock, no par value per share, of the Surviving
Corporation.
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Section 2.3 Dissenting
Shares. Notwithstanding anything contained in
Section 2.2 to the contrary and notwithstanding any
conversion of Tranche B Notes, shares of Common Stock that
are issued and outstanding immediately prior to the Effective
Time and are held by Persons who comply with all of the
provisions of the IBCL concerning the right of such Persons to
demand appraisal of their shares of Common Stock in connection
with the Merger (such holders are Dissenting
Shareholders and such shares are Dissenting
Shares), shall not be converted into the right to
receive the Merger Consideration, but shall only become the
right to receive such consideration as may be determined to be
due such Dissenting Shareholder pursuant to the IBCL and other
applicable Laws of the State of Indiana; provided,
however, that if any Dissenting Shareholder who demands
appraisal of his or her shares of Common Stock under the IBCL
effectively withdraws or loses (through failure to perfect or
otherwise) his or her right to appraisal, then as of the
Effective Time, or the occurrence of such event, whichever
occurs later, such holders shares of Common Stock shall
thereupon be deemed to have been converted as of the Effective
Time into the right to receive the Merger Consideration, without
interest thereon, and such holder shall no longer be a
Dissenting Shareholder. The Corporation shall give the Parent
(a) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related
instruments received by the Corporation after the date hereof
and (b) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal. The
Corporation shall not voluntarily make any payment with respect
to any demands for appraisal and shall not, except with the
prior written consent of the Parent, settle or offer to settle
any such demand.
Section 2.4 Surrender
of Certificates.
(a) Prior to the Effective Time, the Parent shall designate
a bank or trust company located in the United States to act as
paying agent (the Paying Agent) to receive
funds in trust in order to make the payments contemplated by
Sections 2.2(a) and 2.7. As soon as practicable after the
Effective Time, the Parent shall cause the Paying Agent to mail
and/or make
available to each record holder of a certificate theretofore
evidencing shares of Common Stock (other than Excluded Shares) a
notice and letter of transmittal in customary form advising such
record holder of the effectiveness of the Merger and the
procedure for surrendering to the Paying Agent such certificate
or certificates which immediately prior to the Effective Time
represented outstanding Common Stock (the
Certificates) in exchange for the Merger
Consideration deliverable in respect thereof pursuant to this
Article II. Upon the surrender for cancellation to the
Paying Agent of such Certificates, together with a letter of
transmittal, duly executed and completed in accordance with the
instructions thereon, and any other items specified by the
letter of transmittal, the Parent shall cause (i) the
Paying Agent to promptly pay to the Person entitled thereto an
amount equal to the product of (A) the Initial Merger
Consideration and (B) the number of shares of Common Stock
represented by such Certificates, and (ii) the trustees of
the Liquidating Trust to deliver to each Person entitled thereto
one Unit of the Liquidating Trust in book entry form for each
share of Common Stock represented by such Certificates. Until so
surrendered, each Certificate shall be deemed, for all corporate
purposes, to evidence only the right to receive upon such
surrender the Merger Consideration deliverable in respect
thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect
of such cash payments.
(b) If any Merger Consideration (or any portion thereof) is
to be delivered to a Person other than the Person in whose name
the Certificates surrendered in exchange therefor are
registered, it shall be a condition to the payment of the Merger
Consideration that the Certificates so surrendered shall be
properly endorsed or accompanied by appropriate stock powers and
otherwise in proper form for transfer, and that the Person
requesting such transfer pay to the Paying Agent any transfer or
other Taxes payable by reason of the foregoing or establish to
the satisfaction of the Paying Agent that such Taxes have been
paid or are not required to be paid.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen
or destroyed, the Paying Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with
this Article II; provided, that such Person
to whom the Merger Consideration is delivered shall, as a
condition precedent to the delivery thereof, deliver to the
Surviving Corporation a bond in such sum as it may direct or, in
the sole discretion of the
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Surviving Corporation, otherwise indemnify the Surviving
Corporation in a manner satisfactory to it against any Claim
that may be made against the Surviving Corporation with respect
to the Certificate claimed to have been lost, stolen or
destroyed.
Section 2.5 Payment.
(a) Concurrently with or immediately prior to the Effective
Time, the Parent shall deposit or cause to be deposited in trust
with the Paying Agent cash in United States dollars in an
aggregate amount equal to the sum of (a) the product of
(i) the number of Common Stock shares outstanding
immediately prior to the Effective Time (excluding Excluded
Shares and shares known by the Parent to be Dissenting Shares at
the time of such deposit) and (ii) the Initial Merger
Consideration plus (b) all Option Cash Payments owed
in respect of Vested Options (such amount being hereinafter
referred to as the Payment Fund). The Payment
Fund shall be invested by the Paying Agent as directed by the
Parent (x) in direct obligations of the United States,
commercial paper of an issuer organized under the laws of a
state of the United States rated of the highest quality by
Moodys Investors Service, Inc. or Standard &
Poors Ratings Group, or certificates of deposit, bank
repurchase agreements or bankers acceptances of a United
States commercial bank having at least $1,000,000,000 in assets
(collectively, Permitted Investments), or
(y) in money market funds which are invested exclusively in
Permitted Investments. Any net earnings with respect to the
Payment Fund shall be paid to the Surviving Corporation as and
when requested by the Surviving Corporation.
(b) The Paying Agent shall, pursuant to irrevocable
instructions, make the payments referred to in
Sections 2.2(a) and 2.7 out of the Payment Fund and the
Payment Fund shall not be used for any other purpose. Promptly
following the date that is ninety (90) days after the
Effective Time, the Paying Agent shall return to the Surviving
Corporation all cash, certificates and other instruments in its
possession that constitute any portion of the Payment Fund, and
the Paying Agents duties shall terminate. Thereafter,
subject to applicable abandoned property, escheat and similar
Laws, each holder of (a) a Certificate (other than a
Certificate representing Excluded Shares or Dissenting Shares)
may surrender such Certificate to the Surviving Corporation and
receive in exchange therefor the Merger Consideration payable in
respect of such shares of Common Stock pursuant to
Section 2.2(a), without interest, and (b) a Vested
Option that was not previously cancelled in exchange for an
Option Cash Payment in accordance with Section 2.7 may
surrender such Vested Option to the Surviving Corporation and
receive in cancellation and settlement therefor the Option Cash
Payment payable pursuant to Section 2.7, without interest;
provided, that in no event shall any such holder
of a Certificate or Vested Option have any greater rights
against the Surviving Corporation than may be accorded to
general creditors of the Surviving Corporation under applicable
Law. Neither the Paying Agent nor any party hereto shall be
liable to a holder of shares of Common Stock or Vested Options
for any Merger Consideration or Option Cash Payments delivered
to a public official pursuant to applicable abandoned property,
escheat or similar Laws.
Section 2.6 No
Further Rights of Transfers. At and after the
Effective Time, each holder of Common Stock shall cease to have
any rights as a shareholder of the Corporation, except as
otherwise required by applicable Law and except for, in the case
of a holder of a Certificate (other than Certificates
representing Excluded Shares or Dissenting Shares), the right to
surrender his or her Certificate in exchange for payment of the
Merger Consideration or, in the case of a Dissenting
Shareholder, to perfect his or her right to receive payment for
his or her Dissenting Shares pursuant to the Laws of the State
of Indiana if such holder has validly perfected and not
withdrawn or otherwise lost his or her right to receive payment
for his or her Dissenting Shares, and no transfer of shares of
Common Stock shall be made on the stock transfer books of the
Surviving Corporation. Certificates presented to the Surviving
Corporation after the Effective Time shall be canceled and
exchanged for cash as provided in this Article II. At the
close of business on the day of the Effective Time the stock
ledger of the Corporation with respect to shares of Common Stock
shall be closed.
Section 2.7 Options,
Incentive Plans and Other Plans. Prior to the
Effective Time, the board of directors of the Corporation (or,
if appropriate, any committee thereof) shall obtain all
necessary consents and releases from all of the holders of
Options heretofore granted under any Incentive Plan or
otherwise, to (a) provide for the cancellation, effective
at the Effective Time, and subject only to Option Cash Payments
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being made and receipt of Units of the Liquidating Trust
delivered with respect to Vested Options, of all Options and
(b) terminate, as of the Effective Time, the Incentive
Plans and any other Plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the
Capital Stock of the Corporation or any of its Subsidiaries.
Immediately prior to the Effective Time, each Option shall no
longer be exercisable for the purchase of shares of Common
Stock. Each outstanding Vested Option shall entitle the holder
thereof, in cancellation and settlement therefor, to (i) a
cash payment (an Option Cash Payment) equal
to the product of (x) the total number of shares of Common
Stock subject to such Vested Option and (y) the amount by
which the Merger Consideration exceeds the exercise price per
share of Common Stock subject to such Vested Option, each such
Option Cash Payment to be paid from the Payment Fund at the
Effective Time, and (ii) one Unit of the Liquidating Trust
for each share of Common Stock subject to such Vested Option.
Each outstanding Option that is not a Vested Option, and any
outstanding stock appreciation rights or other rights or
interests in respect of Capital Stock of the Corporation or any
of its Subsidiaries, shall be canceled immediately prior to the
Effective Time without any payment therefor. The Corporation
shall take all steps to ensure that, immediately prior to the
Effective Time, neither it nor any of its Subsidiaries is or
shall be bound by any Options, warrants, rights or agreements
that would entitle any Person, other than the Parent or
Acquisition or their Affiliates, to own any Capital Stock of the
Corporation or any of its Subsidiaries or to receive any payment
in respect thereof other than pursuant to this Article II.
Notwithstanding any other provision of this Section 2.7 to
the contrary, payment of any Option Cash Payment may be withheld
with respect to any Vested Option until all necessary consents
and releases are obtained. For the avoidance of doubt, nothing
contained in this Section 2.7 or elsewhere in this
Agreement shall be deemed to cancel or terminate the
Tranche B Note or otherwise impair H.I.G. All American,
LLCs or its assignees rights therein in any manner.
Section 2.8 Articles
of Incorporation of the Surviving
Corporation. The articles of incorporation of
Acquisition, as in effect immediately prior to the Effective
Time and as set forth on Schedule 2.8 hereto, shall
be the articles of incorporation of the Surviving Corporation,
and shall be amended as of the Effective Time so that
Article I of the articles of incorporation of the Surviving
Corporation shall read in its entirety as follows: The
name of the Corporation is All American Group, Inc.
Section 2.9 Bylaws
of the Surviving Corporation. The bylaws of
Acquisition, as in effect immediately prior to the Effective
Time and as set forth on Schedule 2.9 hereto, shall
be the bylaws of the Surviving Corporation.
Section 2.10 Directors
and Officers of the Surviving Corporation. At
the Effective Time, the Persons set forth on
Schedule 2.10(a) hereto shall be appointed as the
board of directors of the Surviving Corporation, each of such
directors to hold office, subject to the applicable provisions
of the articles of incorporation and bylaws of the Surviving
Corporation, until their respective successors shall be duly
elected or appointed and qualified. At the Effective Time, the
persons set forth on Schedule 2.10(b) hereto shall
be appointed as the officers of the Surviving Corporation, each
such person holding the office or offices set forth opposite
their name on Schedule 2.10(b) hereto, until their
respective successors shall be duly elected or appointed and
qualified.
Section 2.11 Closing. Unless
this Agreement has been terminated and the transactions
contemplated hereby have been abandoned pursuant to
Article VII, and subject to the satisfaction or waiver of
all of the conditions set forth in Article VI, the closing
of the Merger (the Closing) shall take place
at 10:00 A.M. at the offices of White & Case LLP,
200 South Biscayne Boulevard, Suite 4900, Miami, Florida
33131, as soon as practicable, but in any event within three
(3) Business Days after the last of the conditions set
forth in Article VI hereof is satisfied or waived, or at
such other date, time or place as the parties hereto shall agree
in writing. Such date is herein referred to as the
Closing Date.
Section 2.12 Withholding
Rights. The Parent shall be entitled to
deduct and withhold, or cause to be deducted or withheld, from
(a) the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Common Stock or (b) any
Option Cash Payment otherwise payable pursuant to this
Agreement, such amounts as are required to be deducted and
withheld with respect to the making of such payment under the
Code, or any provision of applicable state, local or foreign Tax
Law. To the extent that amounts are so
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deducted and withheld, such deducted and withheld amounts shall
be treated for all purposes of this Agreement as having been
paid to such holders in respect of which such deduction and
withholding was made.
Section 2.13 Further
Assurances. If, at any time after the
Effective Time, the Surviving Corporation determines that any
deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper to
(a) vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to
or under any of the rights, privileges, powers, franchises,
properties or assets of either of the constituent corporations
in the Merger, or (b) otherwise carry out the purposes of
this Agreement, the Surviving Corporation and its officers and
directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the constituent
corporations in the Merger, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of
such constituent corporations, all such other acts and things
necessary, desirable or proper, consistent with the terms of
this Agreement, to vest, perfect or confirm the Surviving
Corporations right, title or interest in, to or under any
of the rights, privileges, powers, franchises, properties or
assets of such constituent corporations and otherwise to carry
out the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE CORPORATION
Except as set forth in the corresponding schedules of the
disclosure letter delivered by the Corporation to the Parent and
Acquisition upon or prior to entering into this Agreement (the
Corporation Disclosure Letter), the
Corporation hereby represents and warrants to the Parent and
Acquisition as follow as of the date hereof and as of the
Closing Date:
Section 3.1 Corporate
Existence; Power and Authority. Each of the
Corporation and its Subsidiaries is a corporation or limited
liability company, as applicable, duly organized and validly
existing under the laws of its jurisdiction of organization and
is duly qualified as a foreign corporation in all states or
other jurisdictions where the nature and extent of the business
transacted by it or the ownership of its assets makes such
qualification necessary, except for those jurisdictions in which
the failure to so qualify would not have a Material Adverse
Effect. The execution, delivery and performance of this
Agreement, the other agreements contemplated hereunder and the
transactions contemplated hereunder and thereunder (a) are
all within the Corporations corporate powers,
(b) have been duly authorized, (c) are not in
contravention of law or the terms of the Corporations or
any of its Subsidiaries articles of incorporation, bylaws,
or other organizational documentation, or any indenture,
agreement or undertaking to which the Corporation or any of its
Subsidiaries is a party or by which any of their property is
bound, (d) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any
lien, security interest, charge or other encumbrance upon any
property of the Corporation or its Subsidiaries and
(e) will not require any approval of shareholders or any
approval or consent of any Person under any contract of the
Corporation or its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date
and are disclosed in Schedule 3.1 of the Corporation
Disclosure Letter. This Agreement and the other agreements
contemplated hereunder have been duly executed and delivered by
the Corporation and constitute a legal, valid and binding
obligation of the Corporation enforceable in accordance with
their respective terms, except that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting the enforcement of
creditors rights generally, and by general equitable
principles. The execution, delivery and performance by the
Corporation of this Agreement and the agreements contemplated
hereunder and the consummation of the transactions contemplated
by this Agreement and the agreements contemplated hereunder do
not and will not require any registration with, consent or
approval of or notice to, or other action to, with or by, any
Governmental Authority or public body or subdivision thereof.
Section 3.2 Financial
Statements; No Material Adverse Change.
(a) All financial statements relating to the Corporation
and its Subsidiaries (including the financial statements
contained in any Commission Filings) that have been or may
hereafter be delivered by the
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Corporation to the Parent or Acquisition or any of their
Affiliates (collectively, the Financial
Statements), have been prepared in accordance with
GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end
adjustments, none of which would be material or recurring, and
do not include any notes) and fairly present in all material
respects the consolidated financial condition and the
consolidated results of operation of the Corporation and its
Subsidiaries as of the dates and for the periods set forth
therein. Except as set forth on Schedule 3.2(a) of
the Corporation Disclosure Letter, since December 31, 2009,
there has not been (i) any act, condition or event which
has had or is reasonably likely to have a Material Adverse
Effect, (ii) any general increase in the compensation of
officers or employees of the Corporation or any of its
Subsidiaries (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any
increase in the compensation payable or to become payable to any
officer or employee of the Corporation or any of its
Subsidiaries, except for increases in the ordinary course of
business and in accordance with past practice that are
immaterial in the aggregate, (iii) any sale, transfer or
other disposition of any material tangible asset of the
Corporation or any of its Subsidiaries, except in the ordinary
course of business, or any sale, assignment, transfer or other
disposition of any of the Corporations or its
Subsidiaries Intellectual Property or other intangible
assets, (iv) any incurrence of any lien, security interest,
pledge, mortgage, encumbrance, restriction or change of any kind
permitted or allowed with respect to any of the properties,
business or assets of the Corporation and its Subsidiaries,
(v) any declaration, setting aside, making or paying of any
dividend or other distribution in respect of the
Corporations Capital Stock or any direct or indirect
redemption, purchase or other acquisition of any shares of the
Corporations or its Subsidiaries respective Capital
Stock, (vi) any setting aside, making or incurring of any
Capital Expenditure or commitment, or series of related Capital
Expenditures or commitments, by the Corporation and any of its
Subsidiaries in the aggregate amount above $100,000 or
(vii) any decrease in the amount of the Corporations
or any of its Subsidiaries reserves and accruals, except
as through the normal course of business, based on consistent
methods of reserve and accrual calculations. The projections for
the fiscal years ending 2010 through 2012 that have been
delivered to the Parent or Acquisition and any projections
hereafter delivered to the Parent or Acquisition or any of their
Affiliates have been prepared in light of the past operations of
the business of the Corporation and its Subsidiaries and are
based upon estimates and assumptions stated therein, all of
which the Corporation and its Subsidiaries have determined to be
reasonable and fair in light of the then current conditions and
current facts and reflect the good faith and reasonable
estimates of the Corporation and its Subsidiaries of the future
financial performance of the Corporation and its Subsidiaries
and of the other information projected therein for the periods
set forth therein.
(b) Except as fully reflected in the Financial Statements
or the notes thereto, there are no liabilities or obligations
with respect to the Corporation or any of its Subsidiaries of
any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or
in aggregate, would be material to the Corporation and its
Subsidiaries, taken as a whole. Except as set forth in the
Financial Statements or the notes thereto, the Corporation and
its Subsidiaries do not know of any basis for the assertion
against the Corporation or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not
fully reflected in the Financial Statements or the notes thereto
which, either individually or in the aggregate, could be
material to the Corporation and its Subsidiaries, taken as a
whole.
(c) Schedule 3.2(c) of the Corporation
Disclosure Letter sets forth a complete and accurate description
of all Indebtedness of the Corporation or any of its
Subsidiaries (other than Indebtedness owed pursuant to the Loan
Agreement), including the principal amount thereof, the lender
thereof, the interest rate, the maturity date, the collateral
subject thereto and the principal documentation related thereto.
There is no Indebtedness outstanding except for Indebtedness
that is owed pursuant to the Loan Agreement or set forth on
Schedule 3.2(c) of the Corporation Disclosure Letter.
Section 3.3 Title
to Properties. The Corporation and each of
its Subsidiaries has good and marketable fee simple title to or
valid leasehold interests in all of its Real Property and good,
valid and merchantable title to all of its other properties and
assets subject to no liens, mortgages, pledges, security
interests, encumbrances
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or charges of any kind, except those granted to H.I.G. All
American, LLC and such others as are specifically listed on
Schedule 3.3 to the Corporation Disclosure Letter or
Permitted Encumbrances.
Section 3.4 Authorized
Capital. The authorized capital stock of the
Corporation consists of 100,000,000 shares of common stock,
no par value per share, of which (a) 36,750,083 are issued and
outstanding, (b) 35,700 are reserved for issuance upon
exercise of outstanding options, (c) 0 are reserved for issuance
under The Corporations Long Term Incentive Performance
Based Restricted Stock Plan, (d) 0 are reserved for issuance to
directors of the Corporation and (e) 21,156,658 are reserved for
issuance upon conversion of the Tranche B Notes. Of the
36,750,083 outstanding shares, 0 are unvested restricted shares.
All outstanding shares of Common Stock are duly and validly
issued, fully paid and nonassessable. There are no outstanding
subscriptions, Options or other rights (including registration
rights and preemptive rights) or any other agreements or
commitments of any nature relating to any Capital Stock of the
Corporation or any of its Subsidiaries, except as disclosed in
Schedule 3.4 of the Corporation Disclosure Letter.
The Parent has been furnished with a true and complete copy of
each agreement and document disclosed in
Schedule 3.4 of the Corporation Disclosure Letter.
Section 3.5 Tax
Returns and Payments. The Corporation and its
Subsidiaries have timely filed with the appropriate taxing
authority, or have caused to be filed with the appropriate
taxing authority, all returns, statements, forms, and reports
for Taxes (the Returns) required to be filed
by or with respect to the income, properties or operations of
the Corporation
and/or any
of its Subsidiaries except for such filings listed on
Schedule 3.5(a) of the Corporation Disclosure Letter
as to which the Corporation or the applicable Subsidiary has
properly requested an extension of time. The Returns accurately
reflect in all material respects all liability for Taxes of the
Corporation and its Subsidiaries as a whole for the periods
covered thereby. The Corporation and its Subsidiaries have paid
all Taxes payable by them other than those contested in good
faith and adequately disclosed for which adequate reserves have
been established in accordance with GAAP. Except as set forth on
Schedule 3.5(b) of the Corporation Disclosure
Letter, there is no action, suit, proceeding, investigation,
audit, or claim now pending or, to the best knowledge of the
Corporation and its Subsidiaries, threatened by any Governmental
Authority against the Corporation and its Subsidiaries regarding
any Taxes. Neither the Corporation nor any of its Subsidiaries
has entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of
the Corporation or any of its Subsidiaries, or are aware of any
circumstances that would cause the taxable years or other
taxable periods of the Corporation or any of its Subsidiaries
not to be subject to the normally applicable statute of
limitations.
Section 3.6 Litigation. Except
as set forth on Schedule 3.6 to the Corporation
Disclosure Letter, there is no investigation by any Governmental
Authority pending, or to the best of the Corporations
knowledge, threatened, against or affecting the Corporation or
any of its Subsidiaries, or their respective assets or
businesses and there is no action, suit, proceeding or claim by
any Person pending, or to the best of the Corporations
knowledge, threatened, against the Corporation or any of its
Subsidiaries or their respective assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, in
each case that if adversely determined against the Corporation
or such Subsidiary has or could reasonably be expected to have a
Material Adverse Effect on the Corporation or such Subsidiary.
Section 3.7 Compliance
with Other Agreements and Applicable Laws.
(a) Except as set forth on Schedule 3.7 to the
Corporation Disclosure Letter, neither the Corporation nor any
of its Subsidiaries is in default in any respect under, or in
violation in any respect of the terms of, any material
agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are
bound and the Corporation and each of its Subsidiaries are in
compliance with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority relating to
their respective businesses, including, without limitation,
those set forth in or promulgated pursuant to the Occupational
Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, ERISA, the Code, as amended,
and the rules and regulations thereunder, and all Environmental
Laws.
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(b) The Corporation and each of its Subsidiaries have
obtained all material permits, licenses, approvals, consents,
certificates, orders or authorizations of any Governmental
Authority required for the lawful conduct of their respective
businesses (the Permits). All of the Permits
are valid and subsisting and in full force and effect. There are
no actions, claims or proceedings pending or to the best of the
Corporations knowledge, threatened, that seek the
revocation, cancellation, suspension or modification of any of
the Permits.
(c) Neither the Corporation nor any of its Subsidiaries is
subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act
or the Investment Company Act of 1940 or under any other federal
or state statute or regulation which may limit its ability to
incur Indebtedness. Neither the Corporation nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose
of purchasing or carrying any margin stock.
Section 3.8 Environmental
Compliance.
(a) Except as set forth on Schedule 3.8 of the
Corporation Disclosure Letter, the Corporation and its
Subsidiaries have not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off their premises (whether or not
owned by them) in any manner which at any time violates in any
material respect any applicable Environmental Law or Permit, and
the operations of the Corporation and its Subsidiaries comply in
all material respects with all Environmental Laws and all
Permits.
(b) Except as set forth on Schedule 3.8 of the
Corporation Disclosure Letter, there has been no investigation
by any Governmental Authority or any proceeding, complaint,
order, directive, claim, citation or notice by any Governmental
Authority or any other person nor is any pending or to the best
of the Corporations knowledge threatened, with respect to
any non-compliance with or violation of the requirements of any
Environmental Law by the Corporation or any of its Subsidiaries
or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of
any Hazardous Materials or any other environmental, health or
safety matter, which adversely affects or could reasonably be
expected to adversely affect in any material respect its
businesses, operations or assets or any properties at which the
Corporation or any of its Subsidiaries has transported, stored
or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 3.8 to the
Corporation Disclosure Letter, the Corporation and its
Subsidiaries have no material liability (contingent or
otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous
Materials.
(d) The Corporation and its Subsidiaries have all Permits
required to be obtained or filed in connection with their
operations under any Environmental Law and all of such licenses,
certificates, approvals or similar authorizations and other
Permits are valid and in full force and effect.
Section 3.9 Employee
Benefits.
(a) Schedule 3.9(a) of the Corporation
Disclosure Letter sets forth a true and complete list of each
Plan and Multiemployer Plan. Except as disclosed on
Schedule 3.9 of the Corporation Disclosure Letter,
none of the Corporation or its Subsidiaries or the ERISA
Affiliates have any commitment to establish any additional Plans
or to modify or change materially any existing Plan. The
Corporation has made available to the Parent with respect to
each Plan (i) true and complete copies of all written
documents comprising such Plan (including amendments and
individual agreements relating thereto) or, if there is no such
written document, an accurate and complete description of such
Plan and (ii) the most recent annual report on Internal
Revenue Service
Form 5500-series
and financial statements, if any.
(b) Each Plan is in compliance in form and operation with
its terms and with all applicable Laws, including ERISA and the
Code, and all contributions and payments required to be made
under any Plan
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or related agreement have been made in a timely fashion or have
been properly reflected on the Financial Statements.
(c) Each Plan (and each related trust, if any) which is
intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from
the Internal Revenue Service to the effect that it meets the
requirements of Sections 401(a) and 501(a) of the Code
covering all applicable Tax Law changes and no event has
occurred, and no condition exists, which could reasonably be
expected to adversely affect such determination.
(d) Except as set forth on Schedule 3.9(d) of
the Corporation Disclosure Letter, no Plan provides for
post-employment or retiree welfare benefits, except as required
by Section 4980B of the Code or Part 6 of subtitle B
of Title I of ERISA or for death benefits under any
employee pension plan (as such term is defined in
Section 3(2) of ERISA).
(e) There are no pending or, to the best of the
Corporations knowledge, threatened, claims, lawsuits,
actions, audits, investigations, or other proceedings (other
than routine claims for benefits) with respect to any Plan.
There has been no violation of the fiduciary responsibility
rules with respect to any Plan.
(f) (i) No ERISA Event has occurred or is reasonably
expected to occur, (ii) there exists no Unfunded Pension
Liability with respect to Plans that are employee pension
benefit plans (as such term is defined in Section 3(2) of
ERISA) in the aggregate (taking into account only Plans with
positive Unfunded Pension Liability) in excess of $100,000,
(iii) none of the Corporation or its Subsidiaries or the
ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the five calendar years
immediately preceding the date hereof, made or accrued an
obligation to make contributions to any Multiemployer Plan,
(iv) no Plan which is subject to Section 412 of the
Code or Section 302 of ERISA has applied for or received an
extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of
ERISA, (v) none of the Corporation or its Subsidiaries or
the ERISA Affiliates has ceased operations at a facility so as
to become subject to the provisions of Section 4068(a) of
ERISA, withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA or
ceased making contributions to any Plan subject to
Section 4064(a) of ERISA to which it made contributions,
(vi) none of the Corporation or its Subsidiaries or the
ERISA Affiliates has incurred or reasonably expects to incur any
liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan and (vii) none of the Corporation
or its Subsidiaries or the ERISA Affiliates have any liability
under Section 4069 or 4212(c) of ERISA.
(g) There are no participants in the Corporations
(i) Executive Annual Performance Incentive Plan or
(ii) Supplemental Deferred Compensation Plan, other than
John Helm, Donald A. Medd and Carel A. Whiteside.
Section 3.10 Intellectual
Property. Each of the Corporation and its
Subsidiaries owns or licenses or otherwise has the right to use
all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As
of the date hereof, neither the Corporation nor any of its
Subsidiaries has any Intellectual Property registered, or
subject to pending applications, in the United States Patent and
Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or
in any other country, other than those described in
Schedule 3.10 of the Corporation Disclosure Letter
and has not granted any licenses with respect thereto other than
as set forth in Schedule 3.10 to the Corporation
Disclosure Letter. No event has occurred which permits or would
permit after notice or passage of time or both, the revocation,
suspension or termination of such rights. To the best of the
Corporations knowledge, no slogan or other advertising
device, product, process, method, substance or other
Intellectual Property or goods bearing or using any Intellectual
Property presently contemplated to be sold by or employed by the
Corporation or any of its Subsidiaries infringes any patent,
trademark, servicemark, tradename, copyright, license or other
Intellectual Property owned by any other Person presently and no
claim or litigation is pending or threatened against or
affecting the Corporation or any of its Subsidiaries contesting
their right to sell or use any such Intellectual Property.
Schedule 3.10 of the Corporation Disclosure Letter
sets forth all of the agreements or other arrangements of the
Corporation and
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each of its Subsidiaries pursuant to which the Corporation or
such Subsidiary has a license or other right to use any
trademarks, logos, designs, representations or other
Intellectual Property owned by another person and the dates of
the expiration of such agreements or other arrangements of the
Corporation or such Subsidiary (collectively, together with such
agreements or other arrangements as may be entered into by the
Corporation or such Subsidiary after the date hereof,
collectively, the License Agreements and
individually, a License Agreement). No
trademark, servicemark, copyright or other Intellectual Property
at any time used by the Corporation or any of its Subsidiaries
that is owned by another Person, or owned by the Corporation or
such Subsidiary subject to any security interest, lien,
collateral assignment, pledge or other encumbrance in favor of
any Person other than H.I.G. All American, LLC, is affixed to
any inventory, except (a) to the extent permitted under the
term of the License Agreements listed on
Schedule 3.10 of the Corporation Disclosure Letter
and (b) to the extent the sale of inventory to which such
Intellectual Property is affixed is permitted to be sold by the
Corporation or such Subsidiary under applicable law (including
the United States Copyright Act of 1976).
Section 3.11 Subsidiaries;
Affiliates; Capitalization.
(a) The Corporation does not have any direct or indirect
Subsidiaries and is not engaged in any joint venture or
partnership except as set forth in Schedule 3.11 of
the Corporation Disclosure Letter. Except as disclosed in
Schedule 3.11 of the Corporation Disclosure Letter,
no executive officer or director of the Corporation or any of
its Subsidiaries or any person related by blood or marriage, to
any such person or any entity in which any such person owns any
beneficial interest (excluding five percent (5%) or less of a
publicly held company), is a party to any agreement, contract,
commitment or transaction with the Corporation or any of its
Subsidiaries or which pertains to any of their respective
businesses or had any interest in any property, real or personal
or mixed, tangible or intangible, used in or pertaining to any
of their respective businesses.
(b) All of the issued and outstanding shares of Capital
Stock of each of the Corporations Subsidiaries are owned
beneficially and of record by the Persons listed on
Schedule 3.11 of the Corporation Disclosure Letter
and there are no proxies, irrevocable or otherwise, with respect
to such shares and no equity securities of any of the
Corporations Subsidiaries are or may become required to be
issued by reason of any Options or other rights to subscribe to
any equity securities, calls or commitments of any kind or
nature and there are no contracts, commitments, understandings
or arrangements by which any Subsidiary of the Corporation is or
may become bound to issue additional Capital Stock or securities
convertible into or exchangeable for Capital Stock.
(c) All of the issued and outstanding Capital Stock of each
of the Corporations Subsidiaries has been duly authorized
and is fully paid and non-assessable, free and clear of all
claims, liens, pledges and encumbrances of any kind.
Section 3.12 Labor
Disputes.
(a) Set forth on Schedule 3.12 to the
Corporation Disclosure Letter is a true and complete list
(including dates of termination) of all collective bargaining or
similar agreements between or applicable to the Corporation or
any of its Subsidiaries and any union, labor organization or
other bargaining agent in respect of the employees of the
Corporation and any of its Subsidiaries.
(b) There is (i) no significant unfair labor practice
complaint pending against the Corporation and any of its
Subsidiaries or, to the best of the Corporations
knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective
bargaining agreement is pending against the Corporation and any
of its Subsidiaries or, to best of the Corporations
knowledge, threatened against it and (ii) no significant
strike, labor dispute, slowdown or stoppage is pending against
the Corporation and any of its Subsidiaries or, to the best of
the Corporations knowledge, threatened against the
Corporation and any of its Subsidiaries.
Section 3.13 Restrictions
on Subsidiaries. Except for restrictions
contained in the Loan Agreement or any other agreement with
respect to Indebtedness of the Corporation and its Subsidiaries
permitted under the Loan Agreement, there are no contractual or
consensual restrictions on the Corporation or any of its
Subsidiaries that prohibit or otherwise restrict (a) the
transfer of cash or other assets (i) between the
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Corporation and any of its Subsidiaries or (ii) between any
Subsidiaries of the Corporation, or (b) the ability of the
Corporation or any of its Subsidiaries to incur Indebtedness or
grant the security interests granted pursuant to the Loan
Agreement and the other Transaction Documents (as defined in the
Loan Agreement).
Section 3.14 Material
Contracts. Schedule 3.14 of the
Corporation Disclosure Letter sets forth all Material Contracts
to which the Corporation or any of its Subsidiaries are a party
or are bound. The Corporation has delivered true, correct and
complete copies of such Material Contracts to the Parent.
Neither the Corporation nor any of its Subsidiaries is in breach
or in default in any material respect of or under any Material
Contract and no condition exists that, with the giving of notice
or the lapse of time or both, constitutes such a default.
Neither the Corporation nor any of its Subsidiaries has received
any written notice of the intention of any other party thereto
to terminate any Material Contract. Neither the Corporation nor
any of its Subsidiaries is a party to or otherwise subject to
any agreements or instruments or any charter or other internal
restrictions which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
Section 3.15 Real
Property. Schedule 3.15 of the
Corporation Disclosure Letter contains a true, accurate and
complete list of (i) leases, subleases or assignments of
leases, or any agreements similar to the foregoing (together
with all amendments, modifications, supplements, renewals or
extensions of any thereof), affecting each parcel of Real
Property leased by the Corporation or any of its Subsidiaries,
regardless of whether the Corporation or such Subsidiary is the
landlord or tenant (whether directly or as an assignee or
successor in interest) under such lease, sublease, assignment or
similar assignment and (ii) Real Property owned in fee by
the Corporation or any of its Subsidiaries. Except as specified
in Schedule 3.15 of the Corporation Disclosure
Letter, each agreement listed therein is in full force and
effect with respect to the Corporation or Subsidiary party
thereto and the Corporation or such Subsidiary does not have any
knowledge of a default that has occurred and is continuing
thereunder and each constitutes the legally valid and binding
obligation of the Corporation or such Subsidiary, enforceable
against the Corporation or such Subsidiary in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors rights generally or by equitable
principles.
Section 3.16 Certain
Fees. Except for the fees and expenses of
Houlihan Lokey Financial Advisors, Inc. (the Financial
Advisor), which shall be paid in full by the
Corporation as set forth on Schedule 3.16 of the
Corporation Disclosure Letter, no brokers or finders fee or
commission will be payable with respect to this Agreement or any
of the transactions contemplated hereby.
Section 3.17 Commission
Filings. The Corporation has filed, and will
file, all required registration statements, reports, schedules,
forms, statements and other documents required to be filed by it
with the Commission prior to the Effective Time (the
Commission Filings). The Corporation has made
or will make available to the Parent a correct and complete copy
of each such Commission Filing filed by the Corporation. As of
their respective dates, the Commission Filings (a) were
prepared, or will be prepared, in accordance with, and comply in
all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such
Commission Filings, and (b) did not, or do not, at the time
they were filed (and if amended or superseded by a filing, then
on the date of such filing and as so amended or superseded)
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All of
such Commission Filings (including any financial statements
included or incorporated by reference therein), as of their
respective dates (and as of the date of any amendment to the
respective Commission Filing), complied or will comply as to
form in all material respects with the applicable requirements
of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
Section 3.18 Proxy
Statement. The Proxy Statement to be sent to
the shareholders of the Corporation in connection with the
Merger will not, on the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to shareholders
of the Corporation or on the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided,
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that the Corporation makes no representation or warranty
with respect to any information supplied or to be supplied by
the Parent, Acquisition or any of their respective
representatives in writing for inclusion in the Proxy Statement.
The Proxy Statement shall comply in all material respects with
the requirements of the Exchange Act and any other applicable
Laws. If at any time after the date hereof but prior to the
Closing Date, any event occurs that should be described in an
amendment or supplement to the Proxy Statement, the Corporation
will file and disseminate, as required, an amendment or
supplement that complies in all material respects with the
Exchange Act and any other applicable Laws.
Section 3.19 State
Business Combination Statutes; Rights Agreement.
(a) (a) The requirements of
Section 23-1-43-18
of the IBCL are satisfied with respect this Agreement, the
Merger and the other transactions contemplated hereby pursuant
to the terms of the Loan Agreement whereby H.I.G. was approved
to purchase shares of the Corporation prior to H.I.Gs
shares acquisition date. Except for
Section 23-1-43-18
of the IBCL (the requirements of which have been satisfied), no
other fair price, moratorium,
control share acquisition, business
combination or other state takeover statute or similar
statute or regulation of any state is applicable to this
Agreement, the Merger or the other transactions contemplated
hereby.
(b) The Corporations Amended and Restated Rights
Agreement, dated October 23, 2009 (the Rights
Agreement), is in full force and effect and no
amendment, restatement, supplement or other modification thereto
has been made or will be made at or prior to the Effective Time.
Neither the Parent nor Acquisition is, or at any time at or
prior to the Effective Time will be, an Acquiring
Person as defined in the Rights Agreement, and neither
this Agreement nor any of the transactions contemplated hereby
will trigger the right of any Person to purchase Common Stock or
other securities thereunder.
Section 3.20 Voting
Requirements. The affirmative vote of the
majority of the outstanding shares of Common Stock is the only
vote of the holders of any class or series of the
Corporations Capital Stock necessary to adopt this
Agreement and approve the transactions contemplated hereby.
Section 3.21 Opinion
of Financial Advisor. The Special Committee
has received the opinion of the Financial Advisor, a complete
and correct signed copy of which will be delivered to the Parent
solely for information purposes after receipt thereof by the
Special Committee, to the effect that, as of the date of this
Agreement, the Merger Consideration to be received by the
holders of Common Stock (except as set forth in such opinion) is
fair, from a financial point of view, to such holders, subject
to the assumptions, limitations and qualifications contained
therein.
Section 3.22 Board
Approval and Recommendation. The Special
Committee has, at a meeting thereof duly called and held,
(a) determined that the Merger and the other transactions
contemplated herein are fair to, and in the best interests of,
the Corporation and the shareholders of the Corporation, and has
declared that the Merger is advisable, (b) approved the
Merger and this Agreement and (c) recommended that the
board of directors of the Corporation approve and adopt the
Merger and this Agreement. The board of directors of the
Corporation has, at a meeting duly called and held,
(a) determined that the Merger and the other transactions
contemplated herein are fair to, and in the best interests of,
the Corporation and the shareholders of the Corporation, and
declared that the Merger is advisable and (b) approved the
Merger and this Agreement. None of the foregoing determinations,
approvals or recommendations will have been revoked or otherwise
modified or amended at any time on or prior to the Closing Date.
Section 3.23 Survival
of Warranties; Cumulative. All
representations and warranties contained in this Agreement or
any of the other agreements, certificates or other documents
contemplated hereby shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to
the Parent and Acquisition on and as of the Closing Date and
shall be conclusively presumed to have been relied on by the
Parent and Acquisition regardless of any investigation made or
information possessed by the Parent and Acquisition. The
representations and warranties set forth herein shall be
cumulative and in addition to any other representations or
warranties that the Corporation shall now or hereafter give, or
cause to be given, to the Parent or Acquisition.
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Section 3.24 Accuracy
and Completeness of Information. All
information furnished by or on behalf of the Corporation in
writing to the Parent or Acquisition in connection with this
Agreement or any of the other agreements or documents
contemplated hereby or any transaction contemplated hereby or
thereby, including all information in the Corporation Disclosure
Letter, is true and correct in all material respects on the date
as of which such information is dated or certified and does not
omit any material fact necessary in order to make such
information not misleading. No event or circumstance has
occurred that has had or could reasonably be expected to have a
Material Adverse Affect that has not been fully and accurately
disclosed to the Parent in writing.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION
Each of the Parent and Acquisition hereby represents and
warrants to the Corporation as follows as of the date hereof and
as of the Closing Date:
Section 4.1 Due
Organization, Good Standing and Corporate
Power. The Parent and Acquisition are each a
corporation duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of
organization and have all requisite corporate power and
authority to own, lease and operate their respective properties
and to carry on their respective business as now being conducted.
Section 4.2 Authorization
and Validity of Agreement. Each of the Parent
and Acquisition has the requisite corporate power and authority
to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by the Parent and Acquisition and the
consummation by each of them of the transactions contemplated
hereby have been duly authorized by the board of directors of
each of the Parent and Acquisition. No other corporate action on
the part of either of the Parent or Acquisition is necessary to
authorize the execution, delivery and performance of this
Agreement by each of the Parent and Acquisition and the
consummation of the transactions contemplated hereby (other than
the filing of the appropriate merger documents as required by
the IBCL). This Agreement has been duly executed and delivered
by the Parent and Acquisition and, assuming that this Agreement
constitutes a valid and binding obligation of the Corporation,
constitutes valid and binding obligations of the Parent and
Acquisition enforceable against the Parent and Acquisition in
accordance with its terms, except that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting the enforcement of
creditors rights generally, and by general equitable
principles.
Section 4.3 Consents
and Approvals; No Violations. Assuming
(a) the requirements of the Exchange Act relating to the
Proxy Statement, if any, are met and (b) the filing of the
Articles of Merger and other appropriate merger documents, if
any, as required by the IBCL, are made, the execution and
delivery of this Agreement by the Parent and Acquisition and the
consummation by the Parent and Acquisition of the transactions
contemplated hereby will not (w) violate or conflict with
any provision of the certificate or articles of incorporation or
bylaws of the Parent or Acquisition, (x) violate or
conflict with any Law applicable to the Parent or Acquisition or
by which either of their respective properties or assets may be
bound, (y) require any filing with, consent or approval of,
Permit from, or the giving of any notice to, any Governmental
Authority or (z) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse
of time or both) a default under (or give rise to any right of
termination, cancellation or acceleration or any right which
becomes effective upon the occurrence of a merger, consolidation
or change of control under), or result in the creation of any
lien upon any of the properties or assets of the Parent or
Acquisition under, or give rise to any obligation under any
agreement, contract, arrangement, lease or other instrument or
obligation to which the Parent or Acquisition or any of their
properties or assets may be bound.
Section 4.4 Brokers
or Finders Fee. Except for H.I.G.
Capital LLC (whose fees and expenses shall be payable by the
Parent), no agent, broker, Person or firm (other than legal
counsel to the Parent or Acquisition) acting on behalf of the
Parent or Acquisition is or shall be entitled to any fee,
commission or brokers or finders fees in connection
with this Agreement or any of the transactions contemplated
hereby.
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Section 4.5 Registration
Statement. The Registration Statement to be
filed with the Commission in connection with the Merger will
not, on the date the Registration Statement (or any amendment or
supplement thereto) is submitted to the Commission prior to the
Closing Date, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
provided, that neither the Parent nor Acquisition
makes any representation or warranty with respect to any
information supplied or to be supplied by the Corporation or any
of its representatives in writing for inclusion in the
Registration Statement. The Registration Statement shall comply
in all material respects with the requirements of the Exchange
Act and any other applicable Laws. If at any time after the date
hereof but prior to the Closing Date, any event occurs that
should be described in an amendment or supplement to the
Registration Statement, the Parent will file and disseminate, as
required, an amendment or supplement that complies in all
material respects with the Exchange Act and any other applicable
Laws.
Section 4.6 Acquisitions
Operations. Acquisition was formed solely for
the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or
conducted any operations other than in connection with such
transactions.
ARTICLE V
COVENANTS
Section 5.1 Access
to Information Concerning Properties and
Records. During the period commencing on the
date hereof and ending on the earlier of (a) the Closing
Date and (b) the date on which this Agreement is terminated
pursuant to Section 7.1 hereof, the Corporation shall, and
shall cause each of its Subsidiaries to, upon reasonable notice
from the Parent, afford the Parent, Acquisition, their potential
financing sources and each of their respective Affiliates,
employees, counsel, accountants, consultants and other
authorized representatives, reasonable access during normal
business hours to the officers, directors, employees,
accountants, properties, books and records of the Corporation
and its Subsidiaries in order that they may have the opportunity
to make such investigations as they shall desire of the affairs
of the Corporation and its Subsidiaries; provided,
however, that such investigation shall not affect the
representations and warranties made by the Corporation in this
Agreement. The Corporation shall furnish promptly to the Parent
and Acquisition (i) a copy of each Commission Filing filed
by it during such period and (ii) all other information
concerning the Corporations or its Subsidiaries
business, properties and personnel as the Parent and Acquisition
may request. The Corporation agrees to cause its officers and
employees to furnish such additional financial and operating
data and other information and respond to such inquiries as the
Parent, Acquisition, or their potential financing sources and
their Affiliates shall from time to time request.
Section 5.2 Confidentiality. The
Parent, Acquisition and the Corporation hereby agree that,
unless and until the transactions contemplated hereby have been
consummated, each of the Parent, Acquisition and the
Corporation, and their respective representatives and advisors
shall hold in strict confidence, and shall not divulge to any
Person other than an Affiliate or potential financing source of
the Parent or Acquisition, all data and information obtained
from the Parent or Acquisition (in the case of the Corporation)
or the Corporation (in the case of the Parent or Acquisition) in
connection with the transactions contemplated hereby, except any
of the same that (a) was, is now, or becomes generally
available to the public (but not as a result of a breach of any
duty of confidentiality by which the Parent, Acquisition, the
Corporation or any of their respective Affiliates,
representatives and advisors are bound), (b) was known to
the party receiving such information on a non-confidential basis
prior to its disclosure to such party as demonstrated by the
written records of such party, (c) is disclosed to the
Parent, Acquisition or the Corporation by a third party not
subject to any duty of confidentiality to the Parent,
Acquisition or the Corporation, as applicable, prior to its
disclosure in connection with the transactions contemplated
hereby, or (d) may be required to be disclosed by
applicable Law (provided that the affected party first uses
reasonable efforts to preserve the confidentiality of such
information). If this Agreement is properly terminated in
accordance with Article VII hereunder, each of the Parent
and Acquisition, on the one hand, and the Corporation, on the
other hand, and their representatives and advisors will promptly
return to the other party or destroy all such data, information
and other written material
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(including all copies thereof) which has been obtained by such
party in connection with the transactions contemplated by this
Agreement, and each such party shall make no further use
whatsoever of any of such material or any information and
knowledge contained therein or derived therefrom. The provisions
of this Section 5.2 shall supersede any confidentiality or
similar agreement that may exist between the Parent and
Acquisition and their Affiliates, on the one hand, and the
Corporation, on the other hand, prior to the date hereof, and
shall survive until November 6, 2011.
Section 5.3 Conduct
of the Business of the Corporation Pending the Closing
Date. The Corporation agrees that, except as
expressly permitted or required by this Agreement or otherwise
consented to in writing by the Parent, during the period
commencing on the date hereof and ending at the earlier of
(a) the Closing Date and (b) termination of this
Agreement pursuant to Section 7.1:
(a) the Corporation and each of its Subsidiaries shall
conduct their respective operations only according to their
ordinary and usual course of business consistent with past
practice and shall use their commercially reasonable efforts to
preserve intact their respective business organization and
maintain satisfactory relationships with suppliers,
distributors, customers and other Persons having significant
business relationships with them;
(b) neither the Corporation nor any of its Subsidiaries
shall:
(i) make any change in or amendment to its articles of
incorporation or organization or by laws or operating agreement
(or comparable governing documents);
(ii) (A) issue or sell, or authorize to issue or sell,
any (1) shares of its Capital Stock (except pursuant to the
exercise of Vested Options or the conversion of all or a portion
of the Tranche B Notes ), (2) other securities
convertible into or exchangeable for shares of Capital Stock
(other than Tranche B Notes) or (3) Options, warrants
or other rights to purchase or subscribe for shares of Capital
Stock, or (B) enter into any arrangement or contract with
respect to the issuance or sale of any shares of its Capital
Stock or any other securities, or make any other changes in its
capital structure;
(iii) sell, pledge or dispose of or agree to sell, pledge
or dispose of any Capital Stock or other equity interest owned
by it in any other Person;
(iv) (A) declare, pay or set aside any dividend or
other distribution or payment with respect to, or split,
combine, reclassify, or purchase or otherwise redeem or acquire,
any shares of its Capital Stock or its other securities (other
than the Tranche B Notes), except pursuant to the exercise
of any currently outstanding Vested Options or (B) offer to
do, or enter into any agreement or arrangement to do, any of the
foregoing;
(v) enter into any contract or commitment with respect to
capital expenditures requiring expenditures by the Corporation
or any of its Subsidiaries that exceed the amounts budgeted
therefor in the financial projections delivered to the Parent by
$50,000 or more in the aggregate;
(vi) acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of,
or by any other manner, any business of any Person, or otherwise
acquire any assets of any Person (other than the purchase of
assets in the ordinary course of business and consistent with
past practice);
(vii) except to the extent required under existing employee
and director benefit plans and written agreements in effect on
the date of this Agreement, increase the compensation or fringe
benefits of any of its directors, officers or key employees, or
grant any severance or termination pay not currently required to
be paid under such existing agreements or plans, or enter into
any employment, consulting, indemnification or severance
agreement or arrangement with any present or former director,
officer or other employee of the Corporation or any of its
Subsidiaries, or establish, adopt, enter into or amend or
terminate, except for the termination of the Incentive Plans
pursuant to Section 2.7 and to the extent that amendments
are required by applicable Law, any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension,
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retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or
employees;
(viii) transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of, subject to any lien (other than a Permitted
Encumbrance) or otherwise encumber any material assets, or incur
or modify any Indebtedness or other material liability, other
than in the ordinary course of business consistent with past
practice, or issue any debt securities or assume, guarantee or
endorse or otherwise as an accommodation become responsible for
the obligations of any Person or make any loan or other
extension of credit;
(ix) agree to the settlement of or waive any material Claim;
(x) file or cause to be filed any amended Returns or Claims
for refund of Taxes;
(xi) except to the extent permitted by Section 5.11 or
required by Law, issue any press release or otherwise make any
public announcements without prior consultation and review by,
and consent (which consent shall not be unreasonably withheld)
of, the Parent, other than in the ordinary course of business
consistent with past practice;
(xii) except as required by applicable Law or GAAP, make
any material change in its accounting practices, policies or
procedures or any of its methods of reporting income, deductions
or other items for income Tax purposes;
(xiii) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Corporation or
any of its Subsidiaries (other than the Merger) or any agreement
relating to an Acquisition Proposal, except as expressly
permitted in Section 5.6;
(xiv) (A) incur, assume, guarantee or prepay any
Indebtedness except to the extent permitted by the Loan
Agreement, or (B) make any loans, extensions of credit or
advances to any other Person, other than to the Corporation or
any wholly-owned Subsidiary of the Corporation, except
extensions of credit or advances constituting trade payables in
the ordinary course of business;
(xv) accelerate the payment, right to payment or vesting of
any bonus, severance, profit sharing, retirement, deferred
compensation, Option, insurance or other compensation or
benefits;
(xvi) pay, discharge or satisfy any Claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction (A) of any such Claims, liabilities or
obligations in the ordinary course of business and consistent
with past practice or (B) of Claims, liabilities or
obligations reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto)
contained in the Commission Filings;
(xvii) enter into any Material Contract other than in the
ordinary course of business consistent with past practice,
except pursuant to Section 5.6;
(xviii) other than as disclosed in the Commission Filings
filed prior to the date hereof, plan, announce, implement or
effect any reduction in force, lay-off, early retirement
program, severance program or other program or effort concerning
the termination of employment of employees of the Corporation or
its Subsidiaries; provided, however, that routine
employee terminations for cause shall not be considered subject
to this clause (xviii);
(xix) take any action, engage in any transaction or enter
into any agreement which would cause any of the representations
or warranties set forth in Article III that are subject to,
or qualified by, Material Adverse Effect or other materiality
qualification to be untrue as of the Effective Time, or any such
representations and warranties that are not so qualified to be
untrue in any material respect;
(xx) take any action, including the adoption of any
stockholder-rights plan or amendments to its articles of
incorporation or organization or bylaws or operating agreement
(or comparable governing documents) that would, directly or
indirectly, restrict or impair the ability of the Parent to
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vote or otherwise to exercise the rights and receive the
benefits of a shareholder with respect to securities of the
Corporation that may be acquired or controlled by the Parent or
Acquisition, or which would permit any shareholder to acquire
securities of the Corporation from the Corporation on a basis
not available to the Parent or Acquisition in the event that the
Parent or Acquisition were to acquire any shares of Common Stock;
(xxi) materially modify, amend or terminate any Material
Contract or waive any of its material rights or Claims;
(xxii) (A) prepare any Return in a manner that is
inconsistent with the past practices of the Corporation or any
of its Subsidiaries, as the case may be, with respect to the
treatment of items on such Returns, (B) incur any material
liability for Taxes other than in the ordinary course of
business or (C) enter into any settlement or closing
agreement with a taxing authority that adversely affects or may
adversely affect the Tax liability of the Surviving Corporation,
the Corporation or any of their respective Subsidiaries, as the
case may be, for any period;
(xxiii) fail to maintain, with financially responsible
insurance companies, insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as
are consistent with past practice; or
(xxiv) authorize, agree or announce an intention, in
writing or otherwise, to take any of the foregoing actions.
Section 5.4 Registration
Statement; Proxy Statement; Special Meeting.
(a) As promptly as practicable after the date hereof, the
Corporation shall prepare and file with the Commission a proxy
statement relating to the Special Meeting (together with any
amendments thereof or supplements thereto, the Proxy
Statement), and the Parent shall prepare and file with
the Commission a registration statement on
Form S-4
(together with all amendments thereto, the Registration
Statement), in which the Proxy Statement shall be
included, as a prospectus in connection with the registration
under the Securities Act of the Units of the Liquidating Trust
to be issued to the shareholders of the Corporation pursuant to
the Merger. Each of the Parent and the Corporation will use all
reasonable efforts to respond to any comments made by the SEC
with respect to the Proxy Statement, and to cause the
Registration Statement to become effective as promptly as
practicable. Each of the Parent and the Corporation shall
furnish all information concerning it and the holders of its
capital stock as the other may reasonably request in connection
with such actions and the preparation of the Registration
Statement and the Proxy Statement. As promptly as practicable
after the Registration Statement shall have become effective,
but not later than two (2) days thereafter, the Corporation
shall mail the Proxy Statement to its shareholders. The Proxy
Statement shall include a recommendation by the Special
Committee and the Corporations board of directors that the
Corporations shareholders approve this Agreement and the
Merger.
(b) If at any time before the Effective Time, any event or
circumstance relating to (i) the Parent or any of its
Subsidiaries, or their respective officers or directors, is
discovered by the Parent, or (ii) the Corporation or any of
its Subsidiaries, which should be set forth in an amendment or a
supplement to the Registration Statement or the Proxy Statement,
the party hereto to which the event or circumstance relates
shall promptly inform the other parties hereto. All documents
that the Parent and the Corporation are responsible for filing
with the SEC in connection with the transactions contemplated
herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act
and the rules and regulations thereunder, the Exchange Act and
the rules and regulations thereunder, and other applicable Laws,
provided, that the neither the Parent nor the Corporation shall
be responsible hereunder for the substance of statements or
omissions included in the Registration Statement or Proxy
Statement based upon information furnished in writing to such
Person by the other Person specifically for use therein).
(c) Neither the Parent nor the Corporation shall amend or
supplement, or permit an amendment or supplement, to the Proxy
Statement or the Registration Statement without the approval of
the other party (which approval shall not be unreasonably
withheld, delayed or conditioned). The Parent and the
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Corporation each will advise the other, promptly after it
receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order, the
suspension of the qualification of the Units of the Liquidating
Trust issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the Commission for
amendment of the Proxy Statement or the Registration Statement
or comments thereon and responses thereto or requests by the
Commission for additional information and shall provide each
other with all copies of correspondence with the Commission or
any Governmental Authority relating thereto.
(d) For the avoidance of doubt, it is expressly understood
and agreed that (i) the Parent, Acquisition and the
Corporation shall cooperate with each other in connection with
all aspects of the preparation, filing and clearance by the
Commission of the Proxy Statement and Registration Statement
(including the preliminary Proxy Statement and any and all
amendments or supplements thereto), (ii) each of the
Corporation and the Parent shall give the other party and its
counsel the opportunity to review the Proxy Statement and
Registration Statement prior to it being filed with the
Commission and shall give the other party and its counsel the
opportunity to review all amendments and supplements thereto and
all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the
Commission and each of the Corporation, the Parent and
Acquisition agrees to use its commercially reasonable efforts,
after consultation with the other, to respond promptly to all
such comments of and requests by the Commission, (iii) to
the extent practicable, each of the Corporation, the Parent and
Acquisition and their respective counsels shall permit the
parties and their counsel to participate in all communications
with the Commission and its staff (including, without
limitation, all meetings and telephone conferences) relating to
the Proxy Statement and Registration Statement, this Agreement
or any of the transactions contemplated thereby (provided that
in the event that such participation is not practicable, the
party communicating with the Commission shall promptly inform
the other parties and their counsel of the content of all such
communications and the participants involved therein), and
(iv) neither the Corporation, the Parent nor Acquisition
shall file with, or send to, the Commission, the Registration
Statement (including any preliminary Proxy Statement and any and
all amendments or supplements thereto and any and all responses
to requests for additional information and replies to comments
relating thereto) without the prior approval of the other
parties, which approval shall not be unreasonably withheld,
conditioned or delayed.
(e) The Corporation, acting through its board of directors,
shall (i) duly set a record date for, call and establish a
date for, and give notice of, the Special Meeting (with the
record date and meeting date each set for a date as soon as
reasonably practicable and in consultation with the Parent), and
(ii) convene and hold the Special Meeting as soon as
reasonably practicable after the date on which the Registration
Statement becomes effective. The Special Meeting shall be
scheduled to be held approximately 30 days after the
mailing of the Proxy Statement. The Corporation may adjourn or
postpone the Special Meeting only if as of any time the Special
Meeting is scheduled (as set forth in the Proxy Statement) there
are insufficient shares of Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct
the business for which the Special Meeting was called. The
Parent shall cause all shares of Common Stock owned by the
Parent, Acquisition or their Affiliates to be voted in favor of
adoption of this Agreement and approval of the Merger.
Section 5.5 Best
Efforts to Satisfy Conditions
Precedent. Subject to the terms and
conditions provided herein, each of the Corporation, the Parent
and Acquisition shall, and the Corporation shall cause each of
its Subsidiaries to, cooperate and use their best efforts to
take, or cause to be taken, all appropriate action, and do, or
cause to be done, and assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated
hereby, including the delivery of by the Corporation of the
Required Releases and the satisfaction of all of the other the
respective conditions of each of the parties hereto set forth in
Article VI, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by
this Agreement, including their commercially reasonable efforts
to (a) obtain, prior to the Closing Date, all licenses,
Permits, consents,
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approvals, authorizations, qualifications and orders of
Governmental Authorities and parties to contracts with the
Corporation or its Subsidiaries as are necessary for
consummation of the transactions contemplated by this Agreement
and to fulfill the conditions precedent to the Merger and
(b) defend any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the
consummation of any of the transactions contemplated hereby
(including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Authority
vacated or reversed), it being understood and agreed that the
Corporation shall promptly notify the Parent of any litigation
(including any shareholder litigation), other than where the
Parent or Acquisition is the adverse party, against the
Corporation
and/or its
directors relating to any of the transactions contemplated by
this Agreement and the Corporation shall give the Parent the
opportunity to participate in the defense or settlement of any
such litigation (provided, that no settlement with respect to
any such litigation shall be agreed to without the Parents
prior consent, which shall not be unreasonably withheld).
Section 5.6 Notification
of Certain Matters. The Parent and the
Corporation shall promptly notify each other of the occurrence
or non-occurrence of any fact or event which has caused or could
reasonably likely cause (a) any representation or warranty
made by it (including, in the case of the Parent, Acquisition )
in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time
or (b) any covenant, condition or agreement under this
Agreement not to be complied with or satisfied by it (including,
in the case of the Parent, Acquisition ) in any material
respect; provided, however, that no such
notification shall modify the representations and warranties of
any party or the conditions to the obligations of any party
hereunder. Each of the Corporation, the Parent and Acquisition
shall give prompt notice to the other parties hereof of any
notice or other communication from any third party alleging that
the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
Section 5.7 Directors
and Officers Insurance.
(a) The articles of incorporation and bylaws of the
Surviving Corporation shall contain provisions providing for
indemnification and exculpation from liability of directors and
officers of the Surviving Corporation that are no less favorable
to such directors and officers, taken as a whole, as the
corresponding director and officer indemnification provisions
set forth in the Corporations articles of incorporation,
as amended through the date hereof, and bylaws as in effect on
the date hereof, and such provisions shall not be amended,
repealed or otherwise modified for a period of four
(4) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or
prior to the Effective Time were directors or officers of the
Corporation, unless such modification is required by Law.
(b) The Surviving Corporation shall purchase a tail
officers and directors liability insurance policy
covering those Persons who are currently covered on the date of
this Agreement by the Corporations directors and
officers liability insurance policy (a copy of which has
been heretofore delivered to the Parent) (the
Indemnified Parties) that will cover, on
substantially the same basis as the Corporations current
liability policy, claims against the Indemnified Parties
relating to events occurring on or before the Effective Time;
provided the aggregate premium for such tail policy does not
exceed 200% of the annual premium for the Corporations
existing directors and officers liability insurance
policy. If the aggregate premium of such tail liability policy
does exceed 200% of the annual premium for the
Corporations existing directors and officers
liability insurance policy, the Surviving Corporation shall
purchase a policy with the greatest coverage available for a
cost not exceeding 200% of such annual premium.
(c) The Surviving Corporation and its successors shall
indemnify all Indemnified Parties to the fullest extent
permitted by the IBCL with respect to all acts and omissions
arising out of such individuals services as officers,
directors, employees or agents of the Corporation or any of its
Subsidiaries or as trustees or fiduciaries of any plan for the
benefit of employees of the Corporation or any of its
Subsidiaries, occurring prior to the Effective Time, including
the transactions contemplated by this Agreement. Without
limitation of the foregoing, in the event any such Indemnified
Party is or becomes
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involved, in any capacity, in any Claim in connection with any
matter, including the transactions contemplated by this
Agreement, occurring prior to and including the Effective Time,
the Surviving Corporation, from and after the Effective Time,
shall pay, as incurred, such Indemnified Partys reasonable
legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
Subject to Section 5.7(d) below, the Surviving Corporation
shall pay all reasonable expenses, including attorneys
fees, that may be incurred by any Indemnified Party in enforcing
this Section 5.7 or any action involving an Indemnified
Party resulting from the transactions contemplated by this
Agreement.
(d) Any Indemnified Party wishing to claim indemnification
under paragraph (a) or (c) of this Section 5.7,
upon learning of any such Claim, shall promptly notify the
Surviving Corporation thereof. In the event of any such Claim
(whether arising before or after the Effective Time),
(i) the Surviving Corporation shall have the right, from
and after the Effective Time, to assume the defense thereof, and
the Surviving Corporation shall not be liable to such
Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Party
in connection with the defense thereof, (ii) such
Indemnified Party shall cooperate in the defense of any such
matter and (iii) the Surviving Corporation shall not be
liable for any settlement effected without its prior written
consent; provided that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by the IBCL or other
applicable Law. The Indemnified Parties shall be third party
beneficiaries of, and entitled to seek enforcement of, this
Section 5.7.
Section 5.8 Public
Announcements. The Parent and the Corporation
shall consult with each other before issuing any press release
or otherwise making any public statements with respect to the
transactions contemplated by this Agreement and shall not issue
any such press release without the prior consent of the other
party, which shall not be unreasonably withheld;
provided, however, that the Corporation and the
Parent may, without the prior consent of the other party, issue
such press release or make such public statement as may be
required by Law if it has used all commercially reasonable
efforts to consult with the other party and to obtain such
partys consent, but has been unable to do so in a timely
manner.
Section 5.9 Subsequent
Filings. Until the Effective Time, the
Corporation shall timely file with the Commission each
Commission Filing required to be filed by the Corporation after
the date hereof (each such filing a Subsequent
Filing) and promptly deliver to Acquisition and the
Parent copies of each such Subsequent Filing filed with the
Commission. As of their respective dates, each of the Subsequent
Filings shall (a) not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading and (b) comply in all material
respects with all applicable requirements of the federal
securities Laws and the Commission rules and regulations
promulgated thereunder. Each of the audited consolidated
financial statements and unaudited interim financial statements
(including, in each case, any related notes and schedules)
contained or to be contained in any Subsequent Filing shall
(a) be prepared from, and be in accordance with, the books
and records of the Corporation and its consolidated
Subsidiaries, (b) comply in all material respects with
applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, (c) be
prepared in accordance with GAAP (except as may be indicated in
the notes thereto) and (d) fairly present the consolidated
financial position and consolidated results of operations and
cash flows of the Corporation and its consolidated Subsidiaries
at the dates and for the periods covered thereby.
Section 5.10 Material
Consents and Waivers. The Corporation shall
obtain or file (and furnish to the Parent evidence thereof) any
and all material authorizations, approvals, consents or orders
of, or declarations or filings with, any Governmental Authority
or other third party that are required in connection with the
execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement, and all such
authorizations, approvals, consents and orders shall not expire
or be withdrawn prior to the Effective Time.
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Section 5.11 Financing
Cooperation. The Corporation agrees to
provide, and shall cause its Subsidiaries and each of their
respective officers, employees and advisers to provide, upon the
reasonable request of the Parent, all cooperation reasonably
necessary in connection with the arrangement of any financing to
be consummated at or after the Closing on behalf of the
Surviving Corporation, including participation in meetings, due
diligence sessions, preparation of offering memoranda, private
placement memoranda, prospectuses and similar documents, the
execution and delivery of any commitment letters, underwriting
or placement agreements, pledge and security documents or other
definitive financing documents or requested certificates or
documents, including a certificate of the chief financial
officer of the Corporation with respect to solvency matters,
comfort letters of accountants, legal opinions and such other
documents as are customary for similar financing transactions
that are reasonably requested by the Parent.
Section 5.12 Shareholders
Representative.
(a) Appointment of Shareholders Representative. For
purposes of (i) negotiating and settling, on behalf of the
Corporations shareholders, any dispute that arises under
this Agreement after the Effective Time, (ii) accepting
delivery of notices hereunder to the former Corporation
stockholders after the Effective Time, (iii) negotiating
and settling matters with respect to the amounts to be paid to
the holders of Units of the Liquidating Trust pursuant to the
Liquidating Trust Agreement, if any, the Shareholders
Representative is hereby appointed, authorized and empowered to
be the exclusive representative, agent and attorney-in-fact of
the Corporation shareholders and holders of Units of the
Liquidating Trust, with full power of substitution, to make all
decisions and determinations and to act (or not act) and
execute, deliver and receive all agreements, documents,
instruments and consents on behalf of and as agent for such
Corporation shareholders or holders of Units of the Liquidating
Trust at any time in connection with, and that may be necessary
or appropriate to accomplish the intent and implement the
provisions of this Agreement and the Liquidating
Trust Agreement, and to facilitate the consummation of the
transactions contemplated hereby and thereby. By executing this
Agreement, the Shareholders Representative accepts such
appointment, authority and power. Without limiting the
generality of the foregoing, the Shareholders Representative
shall have the power to take any of the following actions on
behalf of the Corporations former shareholders: to give
and receive notices, communications and consents under this
Agreement and the Liquidating Trust Agreement on behalf of
the Corporations former shareholders and holders of Units
of the Liquidating Trust; to negotiate, enter into settlements
and compromises of, resolve and comply with orders of courts and
other third-party intermediaries with respect to any disputes
arising under this Agreement or the Liquidating
Trust Agreement; and to make, execute, acknowledge and
deliver all such other agreements, guarantees, orders, receipts,
endorsements, notices, requests, instructions, certificates,
stock powers, letters and other writings, and, in general, to do
any and all things and to take any and all action that the
Shareholders Representative, in its sole and absolute
discretion, may consider necessary or proper or convenient in
connection with or to carry out the activities described in this
Section 5.12.
(b) Authority. The appointment of the Shareholders
Representative by each shareholder and holder of Units of the
Liquidating Trust and the Corporation shareholders
collective adoption of this Agreement is coupled with an
interest and may not be revoked in whole or in part (including,
without limitation, upon the death or incapacity of any
shareholder). Such appointment shall be binding upon the heirs,
executors, administrators, estates, personal representatives,
officers, directors, security holders, successors and assigns of
each shareholder. All decisions of the Shareholders
Representative shall be final and binding on all of the
shareholders and holders of Units of the Liquidating Trust, and
no shareholder or holder of Units of the Liquidating Trust,
shall have the right to object, dissent, protest or otherwise
contest the same. The Parent shall be entitled to rely upon,
without independent investigation, any act, notice, instruction
or communication from the Shareholders Representative and any
document executed by the Shareholders Representative on behalf
of any shareholder (other than the Parent) or holder of Units of
the Liquidating Trust and shall be fully protected in connection
with any action or inaction taken or omitted to be taken in
reliance thereon by the Parent absent willful misconduct by the
Parent. The Shareholders Representative shall not be responsible
for any loss suffered by, or liability of any kind to, the
shareholders or holders of Units of the Liquidating Trust
arising out of any act done or omitted by the Shareholders
Representative in connection with the acceptance or
administration of the Shareholders
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Representatives duties hereunder, unless such act or
omission involves gross negligence or willful misconduct.
(c) Successor Shareholders Representative. In the
event that the Shareholders Representative dies, becomes unable
to perform his or her responsibilities hereunder or resigns from
such position, Mr. William P. Johnson shall fill such
vacancy and such substituted representative shall be deemed to
be the Shareholders Representative for all purposes of this
Agreement and the Liquidating Trust Agreement. If
Mr. Johnson or Mr. Lavers is unable to serve for any
reason, either Mr. Lavers or Mr. Johnson may appoint a
successor Shareholders Representative. The alternate
Shareholders Representative shall notify the Parent, the
Surviving Corporation and any other appropriate Person in
writing of the substitution and provide appropriate contact
information for purposes of this Agreement and the Liquidating
Trust Agreement.
(d) Termination of Duties and Obligations. Subject
to the following sentence, the Shareholders
Representatives duties and obligations under this
Section 5.12 shall survive the Effective Time indefinitely.
After the Liquidating Trust Termination Date, the
Shareholders Representative shall be relieved of any and all
duties and obligations under this Agreement and the Liquidating
Trust Agreement.
Section 5.13 Sale
of Specialty Vehicle Business.
(a) Appointment of Sale Committee. Not later than
five (5) days prior to the Effective Time, the Special
Committee of the Board of Directors of the Corporation shall
appoint a special committee (the Sale
Committee) for the sole purpose of conducting and
negotiating a Sale of the Specialty Vehicle Business subject to
the terms and conditions hereof. The Sale Committee shall be
comprised of three (3) directors of the Corporation, one
(1) of which shall be chosen by Parent and two (2) of
which shall be chosen by the Special Committee so long as such
directors are not employees, stockholders, or agents of, or
otherwise affiliated with, the Parent or any of its Affiliates.
The Sale Committee may act only as a committee and no individual
member may bind the Surviving Corporation. A majority of the
members (which shall include the Parent designee) of the Sale
Committee shall be present in person or by means of a conference
telephone or similar communications equipment that allows all
persons participating in the meeting to hear each other at the
same time at any meeting of the Sale Committee in order to
constitute a quorum for the transaction of business at such
meeting. The act of a majority of the members present at any
meeting at which a quorum is present shall be the act of the
Sale Committee. Any action that may be taken at a meeting may be
taken by written consent signed by all of the members of the
Sale Committee.
(b) Sale Procedures.
(i) Subject to the terms and conditions hereof, the
Surviving Corporation shall use its commercially reasonable
efforts to assist the Sale Committee in selling the Specialty
Vehicle Business prior to the Outside Sale Date. Not later than
thirty (30) days after the Effective Time, the Sale
Committee, in consultation with the Parent, shall engage an
investment bank on behalf of the Surviving Corporation to
commence a Sale of the Specialty Vehicles Business. Prior to the
Outside Sale Date and subject to Section 5.13(b)(ii), the
Sale Committee shall have the exclusive power and authority to
negotiate the terms and conditions of the Sale of the Specialty
Vehicle Business in consultation with the Parent. If either
(A) the Surviving Corporation has not entered into a bona
fide binding letter of intent with a thirty party for a Sale of
the Specialty Vehicles Business prior to the Outside Sale Date,
subject to the terms and conditions set forth in
Section 5.13(b)(ii), or (B) the Surviving Corporation
has entered into such a bona fide letter of intent but fails to
consummate such Sale of the Specialty Vehicle Business on such
terms prior to the ninetieth (90th) day after the Outside Sale
Date, then the Surviving Corporation shall no longer have an
obligation to attempt to effect or effect a Sale of the
Specialty Vehicle Business. Subject to the immediately preceding
sentence, if for any reason a Sale of the Specialty Vehicle
Business is consummated after the Outside Sale Date, the
Surviving Corporation shall be entitled to retain all proceeds
therefrom.
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(ii) The Surviving Corporation may, but shall not be
required to, sell the Specialty Vehicle Business if (A) the
Net Sale Proceeds from the Sale of Specialty Vehicle Business
available to the Surviving Corporation immediately upon the
closing of such sale would be less than Twelve Million Dollars
($12,000,000), (B) such sale would require the Parent, the
Surviving Corporation or either of their Subsidiaries to
indemnify the purchaser thereof (provided that the Sale
Committee may agree to provide indemnification from the Excess
Sale Proceeds), (C) such sale fails to close within ninety
(90) days of the Outside Sale Date as set forth in
Section 5.13(b)(i)(B), or (D) such sale is prohibited
by applicable Law.
(c) Payment of Excess Sale Proceeds to Liquidating
Trust. Subject to Section 5.13, if the Surviving
Corporation consummates a Sale of the Specialty Vehicles
Business prior to the Outside Sale Date, the Surviving
Corporation shall deliver the Excess Sale Proceeds, if any, to
the Liquidating Trust within five (5) days after the
consummation of such sale; provided that the Surviving
Corporation shall not be required to pay over any portion of the
Excess Sale Proceeds until such portion is actually received by
the Surviving Corporation. If any Excess Sale Proceeds received
by the Surviving Corporation are in a form other than cash, the
Surviving Corporation shall have the right to pay to the
Liquidating Trust an amount equal to the fair value of the
property received by the Surviving Corporation, as determined by
the Surviving Corporation in good faith and in consultation with
the Sale Committee.
Section 5.14 Dissenters
Rights. During the period commencing on the
date hereof and ending upon the Effective Time, the Parent shall
not, and shall cause its Affiliates not to, directly or
indirectly take any action that would reasonably be expected to
prevent the holders of the Common stock to exercise their
dissenters rights to demand appraisal of their shares of
Common Stock in connection with the Merger.
ARTICLE VI
CONDITIONS
PRECEDENT
Section 6.1 Conditions
Precedent to Each Partys Obligation to Effect the
Merger. The respective obligations of each
party to this Agreement to effect the Merger shall be subject to
the satisfaction or waiver (to the extent permissible by
applicable Law) on or prior to the Effective Time of each of the
following conditions:
(a) Injunction. No temporary restraining order,
preliminary or permanent injunction or other order shall have
been issued by any federal, state or foreign court or by any
federal, state or foreign Governmental Authority, and no other
legal restraint or prohibition preventing the consummation of
the Merger shall be in effect; provided, that, the
right to assert this condition shall not be available to any
party whose material failure to fulfill any obligation under
this Agreement has been the principal cause of or resulted in
the failure of this condition to be satisfied.
(b) Illegality. There shall have been no action
taken, or Law promulgated, entered, enforced, enacted, issued or
deemed applicable to the Merger by any Governmental Authority,
that directly or indirectly prohibits or makes illegal the
consummation of the Merger or the other transactions
contemplated by this Agreement.
(c) Registration Statement. The Registration
Statement shall have become effective pursuant to the Securities
Act.
(d) Liquidating Trust Agreement. The Parent and
the Stockholders Representative shall have executed and
delivered the Liquidating Trust Agreement.
Section 6.2 Condition
Precedent to the Corporations Obligation to Effect the
Merger. In addition to the conditions
precedent set forth in Section 6.1, the obligation of the
Corporation to effect the Merger shall
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be subject to the satisfaction or waiver (to the extent
permissible by applicable Law) on or prior to the Effective Time
of each of the following conditions:
(a) Shareholder Approval. The Corporations
shareholders shall have approved this Agreement and the Merger
pursuant to
Section 23-1-40-3
of the IBCL.
(b) Representations, Warranties and Covenants of the
Purchaser and Acquisition. The representations and
warranties of the Parent and Acquisition set forth in this
Agreement (i) that are not modified by materiality
qualifiers or Material Adverse Effect shall be true and correct
in all material respects, and (ii) that are modified by
materiality qualifiers or Material Adverse Effect shall be true
and correct, in each case, as of the date hereof and the Closing
Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such
representations and warranties shall speak as to such earlier
date). There shall not be any material breach by the Parent or
Acquisition of any of their respective covenants or agreements
contained in this Agreement, which either is not reasonably
capable of being cured or, if reasonably capable of being cured,
has not been cured by the date that is ten (10) days after
the giving of written notice to the Parent of such breach.
(c) Closing Certificate. The Parent shall have
delivered a certificate in the form of Exhibit 6.2
hereto certifying that the conditions in Sections 6.1 and
6.2 have been satisfied.
Section 6.3 Conditions
Precedent to the Parents and Acquisitions
Obligations to Effect the Merger. In addition
to the conditions precedent set forth in Section 6.1, the
obligations of the Parent and Acquisition to effect the Merger
shall be subject to the satisfaction or waiver (to the extent
permissible by applicable Law) on or prior to the Effective Time
of each of the following conditions:
(a) Employment Related Agreements. The senior
executives of the Corporation and it Subsidiaries shall have
entered agreements relating to such executives employment
with the Corporation or its Subsidiaries that supersede and
replace their existing employment related agreements on terms
and conditions that are satisfactory to the Parent and
Acquisition.
(b) Required Consents. The Corporation shall have
delivered to the Parent all consents, approvals, orders, Permits
and other authorizations required by all applicable Laws and any
contracts or agreements to which the Corporation or any of its
Subsidiaries is a party or which is binding on any of their
properties or assets, with respect to the execution, delivery
and performance of this Agreement and the transactions
contemplated hereby, the financing and consummation of the
transactions contemplated hereby and the conduct of the business
of the Corporation and its Subsidiaries in the same manner
immediately after the Closing as immediately before the Closing.
(c) Proxy Statement. (i) The Corporation shall
have delivered the Proxy Statement to each holder of Common
Stock in compliance with its obligations pursuant to
Section 5.4 and all applicable securities Laws and
(ii) a period of not fewer than twenty (20) days shall
have elapsed since the making of such delivery.
(d) Representations, Warranties and Covenants of the
Corporation. The representations and warranties of the
Corporation set forth in this Agreement (i) that are not
modified by materiality qualifiers or Material Adverse Effect
shall be true and correct in all material respects, and
(ii) that are modified by materiality qualifiers or
Material Adverse Effect shall be true and correct, in each case,
as of the date hereof and the Closing Date, except to the extent
such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties
shall speak as to such earlier date). There shall not be any
material breach by the Corporation of any of its covenants or
agreements contained in this Agreement, which either is not
reasonably capable of being cured, or if reasonably capable of
being cured, has not been cured by the date that is ten
(10) days after the giving of written notice to the
Corporation of such breach.
(e) Closing Certificate. The Corporation shall have
delivered a certificate in the form of Exhibit 6.3
hereto certifying that the conditions in Section 6.1 and
6.3 have been satisfied.
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ARTICLE VII
TERMINATION
AND ABANDONMENT
Section 7.1 Termination. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned, at any time prior to the Effective Time:
(a) by mutual consent of the Corporation, on the one hand,
and of the Parent and Acquisition, on the other hand;
(b) by either the Parent and Acquisition, on the one hand,
or the Corporation, on the other hand, if (i) any court of
competent jurisdiction or any Governmental Authority shall have
issued an order, decree or ruling or taken any other action
permanently restricting, enjoining, restraining or otherwise
prohibiting the acceptance of payment for the shares of Common
Stock pursuant to Article II, and such order, decree or
ruling or other action shall have become final and
nonappealable, (ii) there shall have been an action taken,
or Law promulgated, entered, enforced, enacted, issued or deemed
applicable to the Merger by any Governmental Authority, that
directly or indirectly prohibits or makes illegal the
consummation of the Merger or (iii) all of the conditions
precedent to the consummation of the Merger set forth in
Section 6.1 have not been satisfied on or prior to
March 31, 2011; provided, that, the right to
terminate this Agreement under this Section 7.1(b) shall
not be available to any party whose material failure to fulfill
any obligation under this Agreement has been a principal cause
of any of (i) through (iii) above;
(c) by the Corporation if the conditions precedent to the
consummation of the Merger set forth in Section 6.2 shall
not have been satisfied or waived by the Corporation on or prior
to March 31, 2011; provided, that, the
Corporations right to terminate this Agreement under this
Section 7.1(c) shall not be available to the Corporation if
it is in material breach of this Agreement at such time; and
(d) by the Parent if the conditions precedent to the
consummation of the Merger set forth in Section 6.3 shall
not have been satisfied or waived by the Parent on or prior to
March 31, 2011; provided, that, the
Parents right to terminate this Agreement under this
Section 7.1(d) shall not be available to the Parent if it
is in material breach of this Agreement at such time.
The right of any party hereto to terminate this Agreement
pursuant to this Section 7.1 shall remain operative and in
full force and effect regardless of any investigation made by or
on behalf of such terminating party, any Person controlling such
terminating party or any of their respective Affiliates,
officers or directors, whether prior to or after the execution
of this Agreement.
Section 7.2 Effect
of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1 by
the Parent or Acquisition, on the one hand, or the Corporation,
on the other hand, written notice thereof shall forthwith be
given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this
Agreement shall become void and have no effect, and there shall
be no further obligation liability hereunder on the part of the
Parent, Acquisition or the Corporation, except that
Section 5.2, this Section 7.2 and Article VIII
shall survive any termination of this Agreement, and each of the
parties to this Agreement shall remain liable for any breach of
this Agreement occurring prior to the effective date of such
termination.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees
and Expenses. All costs and expenses incurred
in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
Section 8.2 Representations
and Warranties. The respective
representations and warranties of the Corporation, on the one
hand, and each of the Parent and Acquisition, on the other hand,
contained herein or in any certificates or other documents
delivered prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any party.
Each and every such representation and warranty
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shall expire with, and be terminated and extinguished by, the
Closing, and thereafter none of the Corporation, the Parent or
Acquisition shall have any liability whatsoever with respect to
any such representation or warranty.
Section 8.3 Extension;
Waiver. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein by any other
party or in any document, certificate or writing delivered
pursuant hereto by any other party or (iii) waive
compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 8.4 Notices. All
notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if
delivered in person or mailed, by certified or registered mail
with postage prepaid, by next day delivery, or sent by facsimile
(upon confirmation of receipt), as follows:
(a) if to the Corporation:
All American Group, Inc.
2831 Dexter Drive
Elkhart, IN 46515
Attention: Chief Executive Officer, General Counsel
Facsimile:
(574) 266-2559
(b) if to either the Parent or Acquisition:
H.I.G. All American Holdings, Inc.
c/o H.I.G.
Capital, LLC
1001 Brickell Bay Drive, 27th Floor
Miami, Florida, 33131
Attention: Matthew Sanford
Facsimile:
(305) 379-3655
with a copy (which shall not constitute notice) to:
White & Case LLP
200 S. Biscayne Boulevard, Suite 4900
Miami, Florida 33131
Attention: Jorge L. Freeland, Esq.
Facsimile:
(305) 358-5744
or to such other Person or address as any party shall specify by
notice in writing to each of the other parties. All such
notices, requests, demands, waivers and communications shall be
deemed to have been received on the date of delivery unless if
mailed, in which case on the third (3rd) Business Day after the
mailing thereof, except for a notice of a change of address,
which shall be effective only upon receipt thereof.
Section 8.5 Entire
Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein and supersedes all prior agreements and
understandings, oral and written, with respect thereto.
Section 8.6 Binding
Effect; Benefit; Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties
hereto and, with respect to the provisions of Section 5.7,
shall inure to the benefit of the Persons or entities benefiting
from the provisions thereof who are intended to be third-party
beneficiaries thereof. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of
each of the other parties, except that Acquisition may assign
and transfer its right and obligations hereunder to any of its
Affiliates. Except as provided in the first sentence of this
Section 8.6, nothing in this Agreement, expressed or
implied, is intended to confer on
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any Person (including any current or former employees of the
Corporation), other than the parties hereto, any rights or
remedies.
Section 8.7 Amendment
and Modification. Subject to applicable Law,
this Agreement may be amended, modified and supplemented in
writing by the parties hereto in any and all respects before the
Effective Time by action authorized by the respective boards of
directors of the Parent, Acquisition and the Corporation or, in
the case of the Parent or Acquisition, by the respective
officers authorized by their respective board of directors.
Section 8.8 Time
Is of the Essence. With regard to the dates
and time periods set forth or referred to in this Agreement,
time is of the essence.
Section 8.9 Headings. The
descriptive headings of the several Articles and Sections of
this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 8.10 Counterparts. This
Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all of which together
shall be deemed to be one and the same instrument.
Section 8.11 APPLICABLE
LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA, WITHOUT REGARD
TO THE CONFLICT OF LAWS RULES THEREOF. THE STATE OR FEDERAL
COURTS LOCATED WITHIN THE STATE OF INDIANA SHALL HAVE
JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES
HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY, AND THE PARTIES CONSENT TO AND AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES
HEREBY WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTYS PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY
SUCH COURTS OR (III) ANY LITIGATION OR OTHER PROCEEDING
COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
THE PARTIES HEREBY AGREE THAT MAILING OF PROCESS OR OTHER PAPERS
IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 8.4, OR IN SUCH OTHER MANNER AS MAY BE
PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF
AND HEREBY WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE
MANNER HEREIN PROVIDED.
Section 8.12 Severability. If
any term, provision, covenant or restriction contained in this
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions,
covenants and restrictions contained in this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable term, provision, covenant or
restriction or any portion thereof had never been contained
herein.
Section 8.13 Interpretation. When
a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings
contained in this Agreement are for convenience only and shall
not affect in any way the meaning or interpretation of this
Agreement. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation.
Section 8.14 Specific
Enforcement. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached.
Accordingly, the parties hereto shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which
they are entitled at Law or in equity.
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Section 8.15 Waiver
of Jury Trial. Each of the parties hereto
hereby irrevocably waives all right to a trial by jury in any
action, proceeding or counterclaim arising out of or relating to
this Agreement or the transactions contemplated hereby.
* * * * *
IN WITNESS WHEREOF, each of the Parent, Acquisition and the
Corporation have caused this Agreement and Plan of Merger to be
executed by their respective officers thereunto duly authorized,
all as of the date first above written.
ALL AMERICAN GROUP HOLDINGS, LLC
Name: Fabian de Armas
ALL AMERICAN ACQUISITION CORPORATION
Name: Fabian de Armas
ALL AMERICAN GROUP, INC.
Name: Richard M. Lavers
Richard M. Lavers, solely in his capacity as
Shareholders Representative
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APPENDIX B
LIQUIDATING
TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST, dated as
of ,
2010, by and between All American Group, Inc., an Indiana
corporation (the Corporation),
and
as trustee (the Trustee). Capitalized terms
used herein not otherwise defined have the meanings ascribed to
them in the Merger Agreement (as defined below).
WHEREAS, in connection with that certain Agreement and Plan of
Merger, dated November 8, 2010, by and among All American
Group Holdings, LLC, a Delaware limited liability company (the
Parent), All American Acquisition
Corporation, an Indiana corporation
(Acquisition), the Corporation and Richard M.
Lavers, as shareholders representative (the
Merger Agreement), Acquisition will merge
with and into the Corporation;
WHEREAS, the Merger Agreement provides that the Corporation
shall use its commercially reasonable efforts to effect a Sale
of the Specialty Vehicles business (the Specialty Vehicles
Business) and that each share of Common Stock of the
Corporation (other than Dissenting Shares), shall be entitled to
receive one Unit of this Liquidating Trust (this
Trust), which Unit represents a contingent
right to receive a pro rata portion of the Excess Sale Proceeds
therefrom, if any;
WHEREAS, the Board of Directors of the Corporation (the
Board) has approved this Agreement; and
WHEREAS, the Trustee shall administer the Trust pursuant to the
terms of this Trust Agreement and, upon the earlier of such
time as (a) all of the Excess Sale Proceeds, if any, have
been distributed pursuant to the terms of Merger Agreement and
this Trust, and (b) it has been determined that there are
either no Excess Sale Proceeds or a Sale of the Specialty
Vehicles Business has not been consummated pursuant to the terms
of the Merger Agreement, the Trust shall terminate and no holder
of Units shall have any further rights thereunder.
NOW, THEREFORE, in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
NAMES AND
DEFINITIONS
1.1 Name. The Trust shall be
known as the Specialty Vehicles Liquidating Trust.
1.2 Defined Terms. For all
purposes of this instrument, unless the context otherwise
requires:
(a) Affiliate of any Person means any
entity that controls, is controlled by, or is under common
control with such Person. As used herein, control
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such entity, whether through ownership of voting securities or
other interests, by contract or otherwise.
(b) Agreement shall mean this instrument
as originally executed or as it may from time to time be amended
pursuant to the terms hereof.
(c) Beneficiary shall mean each holder
of Units.
(d) Common Stock shall mean the issued
and outstanding common stock of the Corporation, no par value
per share.
(e) Initial Trust Asset means the
contingent right to receive the Excess Sale Proceeds, if any,
pursuant to the terms and conditions of the Merger Agreement.
(f) Liabilities shall mean all of the
Trusts unsatisfied debts, claims, liabilities,
commitments, suits and other obligations, whether contingent or
fixed or otherwise, including, without limitation, any
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obligation of the Trust to indemnify any Person in connection
with a Sale of the Specialty Vehicle Business.
(g) Person shall mean an individual, a
corporation, a partnership, an association, a joint stock
company, a limited liability company, a trust, a joint venture,
any unincorporated organization, or a government or political
subdivision thereof.
(h) Record Date shall mean the date
fixed by the Board of Directors of the Corporation as the record
date for determining the shareholders of the Corporation
entitled to vote at a special meeting of shareholders of the
Corporation for the purpose of considering approval of the
Merger Agreement and the merger provided for therein.
(i) Shares shall mean the shares of
Common Stock.
(j) Shareholders shall mean the holders
of record of the outstanding Shares of the Corporation at the
close of business on the Record Date.
(k) Transfer Date shall mean the date
hereof.
(l) Trust shall mean the Trust created
by this Agreement.
(m) Trust Assets shall mean the
Initial Trust Asset, and any interest accumulated after any
such Excess Sale Proceeds have been delivered to the Trustee,
less any of the foregoing utilized by the Trustee to pay
expenses of the Trust, satisfy Liabilities or to make
distributions to the Beneficiaries pursuant to the terms and
conditions hereof.
(n) Trustee shall mean the original
Trustee under this Agreement and any successors thereto,
pursuant to and in accordance with the terms of this Agreement.
(o) Unit means a beneficial interest in
this Trust equal to a fraction, the numerator of which is one
and the denominator of which is the number of shares of Common
Stock (other than Dissenting Shares) in-the-money
and/or
exercised outstanding immediately prior to the Effective Time.
Each Unit will be nontransferable by the holder thereof except
pursuant to the laws of descent and distribution.
ARTICLE II
GRANT TO AND
NATURE OF TRANSFER
2.1 Grant. The Corporation
hereby grants, delivers, releases, assigns and conveys to the
Trustee, to be held in trust for the benefit of the
Beneficiaries of the Trust, the Initial Trust Asset,
pursuant to the terms and provisions of the Merger Agreement and
as set out below, and the Trustee hereby accepts such Initial
Trust Asset, subject to the following terms and provisions.
Nothing herein is intended to give any greater rights to the
Beneficiaries to receive a portion of the Excess Sale Proceeds
than as set forth in the Merger Agreement.
2.2 Purpose of Trust.
(a) The Trust is organized for the sole purpose of
receiving and distributing the Excess Sale Proceeds from a Sale
of the Specialty Vehicles Business, if any, and shall not have
any authority to continue or engage in the conduct of a trade or
business.
(b) The Initial Trust Asset granted, assigned and
conveyed to the Trustee shall be held in the Trust, and the
Trustee will (i) liquidate the Trust Assets as it
deems necessary to carry out the purpose of the Trust and
facilitate distribution of the Trust Assets,
(ii) allocate, protect, conserve and manage the
Trust Assets in accordance with the terms and conditions
hereof, (iii) act on behalf of the Beneficiaries, and
(iv) distribute the Trust Assets in accordance with
the terms and conditions hereof.
(c) It is intended that for Federal, state and local income
tax purposes, the Trust shall be treated as a liquidating trust
under, and the Trust is established for the primary purpose of
liquidating the assets transferred to it in accordance with,
Treasury
Regulation Section 301.7701-4(d)
and any analogous provision of state or
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local law. The Beneficiaries shall be treated as the owners of
their respective share of the Trust pursuant to
Sections 671 through 679 of the Internal Revenue Code of
1986, as amended (the Code) and any analogous
provision of state or local law, and shall be taxed on their
respective share of the Trusts taxable income (including
both ordinary income and capital gains) pursuant to
Section 671 of the Code and any analogous provision of
state or local law. The Trustee shall file all tax returns
required to be filed with any governmental agency consistent
with this position, including, but not limited to, any returns
required of grantor trusts pursuant to
Section 1.671-4(a)
of the Income Tax Regulations.
2.3 No Reversion to the
Corporation. In no event shall any part of
the Trust Assets revert to or be distributed to the
Corporation.
2.4 Instruments of Further
Assurance. The Corporation will, upon
reasonable request of the Trustee, execute, acknowledge, and
deliver such further instruments and do such further acts as may
be necessary or proper to carry out effectively the purposes of
this Agreement, to confirm or effectuate the transfer to the
Trustee of any property intended to be covered hereby, and to
vest in the Trustee and its successors and assigns, the estate,
powers, instruments or funds in trust hereunder.
2.5 Payment of
Liabilities. The Trustee, in its capacity as
Trustee hereunder and not in its individual capacity, hereby
assumes all Liabilities and agrees hereafter to cause the Trust
to pay, discharge and perform when due all of the Liabilities.
Should any Liability be asserted against the Trustee as the
transferee of the Trust Assets or as a result of the
assumption made in this Section 2.5, the Trustee may use
such part of the Trust Assets as may be necessary in
contesting any such Liability or in payment thereof, but in no
event shall the Trustee, Beneficiaries or agents of the Trust be
personally liable, nor shall resort be had to the private
property of such Persons, in the event that the
Trust Assets are not sufficient to satisfy the Liabilities.
ARTICLE III
BENEFICIARIES
3.1 Beneficial Interests.
(a) The beneficial interest of each Shareholder of this
Trust shall be determined in accordance with a certified copy of
the Corporations shareholder list as of the Record Date
and shall be represented by Units. The Corporations
transfer agent will deliver such certified copy of the
Corporations shareholder list to the Trustee within a
reasonable time after such date. The Trustee shall be entitled
to rely and shall be fully protected in relying upon the
certified copy of the Corporations shareholder list. Each
share of Common Stock (other than Dissenting Shares) shall
receive one Unit for each Share as set forth in the Merger
Agreement. Each Beneficiary shall have a pro rata interest in
the Trust Assets equal to the number of Units held by such
owner divided by the total number of Units held by all
Beneficiaries.
(b) The rights of Beneficiaries in, to and under the
Trust Assets and the Trust shall not be represented by any
form of certificate or other instrument, and no Beneficiary
shall be entitled to such a certificate. The Trustee shall
maintain at its place of business a record of the name and
address of each Beneficiary and such Beneficiarys
aggregate Units in the Trust.
(c) If any conflicting claims or demands are made or
asserted with respect to the ownership of any Units, or if there
is any disagreement between the transferees, assignees, heirs,
representatives or legatees succeeding to all or part of the
interest of any Beneficiary resulting in adverse claims or
demands being made in connection with such Units, then, in any
of such events, the Trustee shall be entitled, at its sole
election, to refuse to comply with any such conflicting claims
or demands. In so refusing, the Trustee may elect to make no
payment or distribution with respect to such Units, or to make
such payment to a court of competent jurisdiction or an escrow
agent, and in so doing, the Trustee shall not be or become
liable to any of such parties for its failure or refusal to
comply with any of such conflicting claims or demands or to take
any other action with respect thereto, nor shall the Trustee be
liable for interest on any funds which it may so withhold.
Notwithstanding anything to the contrary set forth in this
Section 3.1(c), the Trustee shall be entitled to refrain
and refuse to act until either (i) the rights of the
adverse claimants have been adjudicated by a final judgment
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of a court of competent jurisdiction, (ii) all differences
have been adjusted by valid written agreement between all of
such parties, and the Trustee shall have been furnished with an
executed counterpart of such agreement, or (iii) there is
furnished to the Trustee a surety bond or other security
satisfactory to the Trustee, as it shall deem appropriate, to
fully indemnify it as between all conflicting claims or demands.
3.2 Rights of
Beneficiaries. Each Beneficiary shall be
entitled to participate in the rights and benefits due to a
Beneficiary hereunder according to the Beneficiarys Units.
Each Beneficiary shall take and hold the same subject to all the
terms and provisions of this Agreement. The interest of each
Beneficiary hereunder is declared, and shall be in all respects,
personal property and upon the death of an individual
Beneficiary, the Beneficiarys beneficial interest shall
pass as personal property to the Beneficiarys legal
representative and such death shall in no way terminate or
affect the validity of this Agreement. A Beneficiary shall have
no title to, right to, possession of, management of, or control
of, the Trust Assets except as expressly provided herein.
No widower, widow, heir or devisee of any person who may be a
Beneficiary shall have any right of dower, homestead, or
inheritance, or of partition, or of any other right, statutory
or otherwise, in any property forming a part of the
Trust Assets but the whole title to all the
Trust Assets shall be vested in the Trustee and the sole
interest of the Beneficiaries shall be the rights and benefits
given to such Persons under this Agreement.
3.3 Limitations on Transfer of Interests of
Beneficiaries.
(a) NO UNITS MAY BE ASSIGNED OR TRANSFERRED EXCEPT BY WILL,
OR INTESTATE SUCCESSION.
(b) Except as may be otherwise required by law, the Units
of the Beneficiaries hereunder shall not be subject to
attachment, execution, sequestration or any order of a court,
nor shall such interests be subject to the contracts, debts,
obligations, engagements or liabilities of any Beneficiary, but
the interest of a Beneficiary shall be paid by the Trustee to
the Beneficiary free and clear of all assignments, attachments,
anticipations, levies, executions, decrees and sequestrations
and shall become the property of the Beneficiary only when
actually received by such Beneficiary.
3.4 Trustee as
Beneficiary. The Trustee, either individually
or in a representative or fiduciary capacity, may be a
Beneficiary to the same extent as if it were not a Trustee
hereunder and shall have all rights of a Beneficiary, including,
without imitation, the right to receive distributions, to the
same extent as if it was not the Trustee hereunder.
ARTICLE IV
DURATION AND
TERMINATION OF THE TRUST
4.1 Duration. The existence
of the Trust shall terminate upon the earliest of such time as
(i) all of the Excess Sale Proceeds, if any, have been
distributed pursuant to the terms of Merger Agreement and this
Trust, (ii) as it has been determined that there are no
Excess Sale Proceeds or, (iii) a Sale of the Specialty
Vehicles Business has not been consummated within the time
period and pursuant to the other terms of the Merger Agreement
(the earlier of such time is the Trust Termination
Date).
4.2 Other Obligations of Trustee upon
Termination. Upon termination of the Trust,
the Trustee shall provide for the retention of the books,
records, lists of holders of Units, and files which shall have
been delivered to or created by the Trustee. At the
Trustees discretion, all of such records and documents may
be destroyed at any time after seven years from the distribution
of all the Trust Assets. Except as otherwise specifically
provided herein, after the Trust Termination Date, the
Trustee shall have no further duties or obligations hereunder.
ARTICLE V
ADMINISTRATION
OF TRUST ASSETS
5.1 Sale of
Trust Assets. The Trustee shall not
sell, transfer or otherwise convey any interest in the Initial
Trust Asset to any Person, without the prior written
consent of the holders of a majority of the Units.
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5.2 Efforts to Resolve
Claims. Subject to the terms and conditions
of this Agreement, the Trustee shall make appropriate efforts to
resolve any contingent or unliquidated claims and outstanding
contingent liabilities for which the Trust may be responsible,
and may be reimbursed from the Trust Assets only to the
extent necessary to resolve such claims and liabilities.
5.3 Continued Collection of Property of
Trust Assets. All property that is
determined to be a part of the Trust Assets shall continue
to be collected by the Trustee and held as a part of the Trust,
if and when any right to receive them arises. The Trustee shall
hold the Trust Assets without being obligated to provide
for or pay any interest thereon to any Beneficiary, except to
the extent of such Beneficiarys share of interest actually
earned by the Trust after payment of the Trusts
liabilities and expenses as provided in Section 5.5.
5.4 Restriction on
Trust Assets. The Trustee shall cause to
be distributed any assets prohibited by Revenue Procedure
82-58 (as
amplified by Revenue Procedure
91-15), as
the same may be further amended, supplemented, or modified,
including, but not limited to, any listed stocks or securities,
any readily-marketable assets, any operating assets of a going
business, any unlisted stock of a single issuer that represents
80% or more of the stock of such issuer, or any general or
limited partnership interest. The Trustee shall not retain cash
in excess of a reasonable amount to meet expenses, charges and
obligations of the Trust, the Trust Assets and all
Liabilities.
5.5 Payment of Expenses and
Liabilities. The Trustee shall pay from the
Trust Assets, if and when Trust Assets arise, all
expenses, charges, and obligations of the Trust and of the
Trust Assets and all Liabilities and obligations which the
Trustee specifically assumes and agrees to pay pursuant to this
Agreement and such transferee liabilities which the Trustee may
be obligated to pay as transferees of the Trust Assets,
including, but not limited to, interest, penalties, taxes,
assessments, and public charges of any kind or nature and the
costs, charges, and expenses connected with or growing out of
the execution or administration of the Trust and such other
payments and disbursements as are provided in this Agreement or
which may be determined to be a proper charge against the
Trust Assets by the Trustee.
5.6 Interim
Distributions. At such times as may be
determined in its sole discretion, or upon the written consent
of the holders of the majority of Units, the Trustee shall
distribute, or cause to be distributed to the Beneficiaries, in
proportion to the number of Units held by each Beneficiary on
the record date for such distribution as determined by the
Trustee in its sole discretion, such cash or other property
comprising a portion of the Trust Assets as the Trustee may
in its sole discretion determine may be distributed; provided,
however, that the Trustee shall distribute, or cause to be
distributed, at least annually to the Beneficiaries all cash
proceeds from receipt of the Trust Assets, if any, in
excess of a reasonable amount (as determined by the Trustee) to
satisfy the Liabilities and expenses described in
Section 5.5.
5.7 Final Distribution. If
the Corporation and the Trustee agree that the Liabilities and
all other claims, expenses, charges, and obligations of the
Trust have been paid or discharged, and there are no further
Excess Sale Proceeds to be received, the Trustee shall, as
expeditiously as is consistent with the conservation and
protection of the Trust Assets, distribute the remaining
Trust Assets, if any, to the Beneficiaries in proportion to
the number of Units held by each Beneficiary.
5.8 Reports to Beneficiaries and Others.
(a) As soon as practicable after the Transfer Date, the
Trustee will mail to each Beneficiary a notice indicating how
many Units such person beneficially owns and the Trustees
address and other contact information. As soon as practicable
after the end of each tax year and after termination of the
Trust, but in any event within 90 days after each such
event, the Trustee shall submit a written report and account to
the Beneficiaries showing (i) the assets and liabilities of
the Trust at the end of such taxable year or upon termination
and the receipts and disbursements of the Trustee for such
taxable year or period, prepared in accordance with generally
accepted accounting principles, (ii) any changes in the
Trust Assets and Liabilities that they have not previously
reported, (iii) statements of cash flow for such taxable
year, and (iv) any action taken by the Trustee in the
performance of its duties under this Agreement that it has not
previously reported, and which, in its opinion, materially
affects the Trust Assets or Liabilities.
(b) The tax year of the Trust shall end on December 31 of
each year.
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(c) During the course of a tax year, whenever a material
event relating to the Trusts Assets occurs, the Trustee
shall, within a reasonable period of time after such occurrence,
prepare and mail to the Beneficiaries an interim report
describing such event. The occurrence of a material event need
not be reported in an interim report if an annual report
pursuant to Section 5.8(a) will be issued at approximately
the same time that such interim report would be issued and such
annual report describes the material event as it would be
discussed in an interim report. The occurrence of a material
event will be determined solely by the Trustee or as may be
required by the rules and regulations promulgated by the
Securities and Exchange Commission.
(d) Indiana Code §30-4-5-12 shall apply to the
Trustees reports pursuant to this Section.
5.9 Federal Income Tax
Information. As soon as practicable after the
close of each tax year, the Trustee shall mail to each Person
who was a Beneficiary during such year, a statement showing, on
a per Unit basis, the information necessary to enable a
Beneficiary to determine its taxable income (if any) from the
Trust as determined for Federal income tax purposes. In
addition, after receipt of a request in good faith, the Trustee
shall furnish to any Person who has been a Beneficiary at any
time during the preceding year, at the expense of such Person
and at no cost to the Trust, a statement containing such further
tax information as is reasonably requested by such Person.
5.10 Books and Records.
(a) The Trustee shall maintain in respect of the Trust and
the holders of Units books and records relating to the
Trust Assets, income and liabilities of the Trust in such
detail and for such period of time as may be necessary to enable
it to make full and proper accounting in respect thereof in
accordance with this Article V and to comply with
applicable law. Such books and records shall be maintained on a
basis or bases of accounting necessary to facilitate compliance
with the tax reporting requirements of the Trust and the
reporting obligations of the Trustee under Section 5.8.
Except as provided in Section 5.8, nothing in this
Agreement requires the Trustee to file any accounting or seek
approval of any court with respect to the administration of the
Trust or as a condition for managing any payment or distribution
out of the Trust Assets. Beneficiaries shall have the right
upon 30 days prior written notice delivered to the
Trustee to inspect during normal business hours such books and
records (including financial statements); provided that, if so
requested, such Beneficiaries shall have entered into a
confidentiality agreement satisfactory in form and substance to
the Trustee.
5.11 Appointment of Agents, etc.
(a) The Trustee shall be responsible for the general
policies of the Trust and for the general supervision of the
activities of the Trust conducted by all agents, advisors or
managers of the Trust. The Trustee shall have the power to
appoint or contract with any Person or Persons as the Trustee
may deem necessary or proper for the transaction of all or any
portion of the activities of the Trust.
(b) The Trustee shall have the power to determine the terms
and compensation of any Person with whom it may contract
pursuant to Section 5.11(a), subject to the provisions of
Section 5.12.
(c) The Trustee shall not be required to administer the
Trust as its sole and exclusive function and the Trustee may
have other business interests and may engage in other activities
similar or in addition to those relating to the Trust, including
the rendering of advice or services of any kind to investors or
any other Persons and the management of other investments,
subject to the Trustees obligations under this Agreement
and applicable law.
5.12 Fiduciary Duty.
(a) To the extent that, at law or in equity, the Trustee
has duties (including fiduciary duties) and liabilities relating
thereto to the Trust, the Beneficiaries or to any other Person,
a Trustee acting under this Agreement shall not be liable to the
Trust, the Beneficiaries or to any other Person for its good
faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict
the duties and liabilities of the Trustee otherwise existing at
law or in equity are agreed by the parties hereto to replace
such other duties and liabilities of the Trustee.
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(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between the Trustee or any of its Affiliates, on the one hand,
and the Trust or any Beneficiaries or any other Person, on the
other hand; or
(ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that the Trustee shall
act in a manner that is, or provides terms that are, fair and
reasonable to the Trust, any Beneficiaries or any other Person,
the Trustee shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the
relative interest of each party (including its own interest) to
such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interests, in any
customary or accepted industry practices, and in compliance with
any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Trustee, the
resolution, action or terms so made, taken or provided by the
Trustee shall not constitute a breach of this Agreement or any
other agreement contemplated herein or of any duty or obligation
of the Trustee at law or in equity or otherwise.
(c) Notwithstanding any other provision of this Agreement
or otherwise applicable law, whenever in this Agreement the
Trustee is permitted or required to make a decision:
(i) in its discretion or under a grant
of similar authority, the Trustee shall be entitled to consider
such interests and factors as it desires, and, to the fullest
extent permitted by applicable law, shall have no duty or
obligation to give any consideration to any interest of or
factors affecting the Trust, the Beneficiaries or any other
Person; or
(ii) in its good faith or under another
express standard, the Trustee shall act under such express
standard and shall not be subject to any other or different
standard.
(d) The Trustee and any Affiliate of the Trustee may engage
in or possess an interest in other profit-seeking or business
ventures of any nature or description, independently or with
others, whether or not such ventures are competitive with the
Trust and the doctrine of corporate opportunity, or any
analogous doctrine, shall not apply to the Trustee. No Trustee
who acquires knowledge of a potential transaction, agreement,
arrangement or other matter that may be an opportunity for the
Trust shall have any duty to communicate or offer such
opportunity to the Trust, and such Trustee shall not be liable
to the Trust or to the Beneficiaries for breach of any fiduciary
or other duty by reason of the fact that such Trustee pursues or
acquires for, or directs such opportunity to another Person or
does not communicate such opportunity or information to the
Trust. Neither the Trust nor any Beneficiary shall have any
rights or obligations by virtue of this Agreement or the trust
relationship created hereby in or to such independent ventures
or the income or profits or losses derived therefrom, and the
pursuit of such ventures, even if competitive with the
activities of the Trust, shall not be deemed wrongful or
improper. Any Trustee may engage or be interested in any
financial or other transaction with the Beneficiaries or any
Affiliate of the Trust or the Beneficiaries, or may act as
depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Trust
or the Beneficiaries or their Affiliates.
ARTICLE VI
POWERS OF
AND LIMITATIONS ON THE TRUSTEE
6.1 Limitations on
Trustee. The Trustee shall not at any time,
on behalf of the Trust or Beneficiaries, enter into or engage in
any trade or business except as necessary for the orderly
liquidation of the Trust Assets. The Trustee shall be
restricted to collection and enforcement of the
Trust Assets and the payment and distribution thereof for
the purposes set forth in this Agreement and to the conservation
and protection of the Trust Assets and the administration
thereof in accordance with the provisions of this Agreement. In
no event shall the Trustee take any action which would
jeopardize the status of the Trust as a liquidating
trust for Federal income tax purposes within the meaning
of Treasury
Regulation Section 301.7701-4(d).
The Trustee shall not invest any of the cash held as
Trust Assets, except that the Trustee may invest in
(i) direct obligations of the United States of America or
obligations of any agency or instrumentality thereof which
mature not later
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than one year from the date of acquisition thereof, or
(ii) money market deposit accounts, checking accounts,
savings accounts, or certificates of deposit, or other time
deposit accounts which mature not later than one year from the
date of acquisition thereof which are issued by a commercial
bank or savings institution organized under the laws of the
United States of America or any state thereof. Neither the
Trustee nor any Affiliate of the Trustee shall take any action
to facilitate or encourage trading in the Units or in any
instrument tied to the value of the Units. The Trustee shall not
have any power or authority whatsoever to act for or on behalf
of the Corporation, its successors or assigns.
6.2 Specific Powers of
Trustee. Subject to the provisions of the
terms and conditions of this Agreement, the Trustee shall have
the following specific powers in addition to any powers
conferred upon it by any other Section or provision of this
Agreement or any laws of the State of Indiana; provided that the
enumeration of the following powers shall not be considered in
any way to limit or control the power of the Trustee to act as
specifically authorized by any other Section or provision of
this Agreement and to act in such a manner as the Trustee may
deem necessary or appropriate to conserve and protect the
Trust Assets or to confer on the Beneficiaries the benefits
intended to be conferred upon them by this Agreement:
(a) to collect, liquidate or otherwise convert into cash
the Trust Assets, and to pay, discharge, and satisfy all
other claims, expenses, charges, Liabilities and obligations
existing with respect to the Trust Assets, the Trust or the
Trustee in its capacity as such;
(b) to elect, appoint, engage or retain any Persons as
agents, representatives or independent contractors (including
without limitation real estate advisors, investment advisors,
accountants, transfer agents,
attorneys-at-law,
managers, appraisers, brokers, or otherwise) in one or more
capacities, and to pay reasonable compensation from the
Trust Assets for services in as many capacities as such
Person may be so elected, appointed, engaged or retained
(provided that any such agreements or arrangements with a person
or entity affiliated with the Trustee shall be on terms no less
favorable to the Trust than those available to the Trust in
similar agreements or arrangements with unaffiliated third
parties, and such agreements or arrangements shall be
terminable, without penalty, on 60 days prior written
notice by the Trust), to prescribe the titles, powers and
duties, terms of service and other terms and conditions of the
election, appointment, engagement or retention of such Persons
and, except as prohibited by law, to delegate any of the powers
and duties of the Trustee to agents, representatives,
independent contractors or other Persons;
(c) to retain and set aside such funds out of the
Trust Assets as the Trustee shall in good faith deem
necessary or expedient to pay, or provide for the payment of
(i) unpaid claims, expenses, charges, Liabilities and
obligations of the Trust; and (ii) the expenses of
administering the Trust Assets;
(d) to do and perform any and all acts necessary or
appropriate for the conservation and protection of the
Trust Assets, including acts or things necessary or
appropriate to maintain the Trust Assets held by the
Trustee pending distribution thereof to the Beneficiaries;
(e) to institute or defend actions or judgments for
declaratory relief or other actions or judgments and to take
such other action, in the name of the Trust or as otherwise
required, as the Trustee may deem necessary or desirable to
enforce any instruments, contracts, agreements, causes of
action, or rights relating to or forming a part of the
Trust Assets;
(f) to determine conclusively from time to time the value
of and to revalue the securities and other property of the
Trust, in accordance with independent appraisals or other
information as it deems necessary or appropriate;
(g) to cancel, terminate, or amend any instruments,
contracts, agreements, obligations, or causes of action relating
to or forming a part of the Trust Assets, and to execute
new instruments, contracts, agreements, obligations or causes of
action notwithstanding that the terms of any such instruments,
contracts, agreements, obligations, or causes of action may
extend beyond the terms of the Trust;
(h) to cause any investments of any part of the
Trust Assets to be registered and held in its name or in
the names of a nominee or nominees without increase or decrease
of liability with respect thereto;
B-8
(i) to perform any act authorized, permitted, or required
under any instrument, contract, agreement, right, obligation, or
cause of action relating to or forming a part of the
Trust Assets whether in the nature of an approval, consent,
demand, or notice thereunder or otherwise, unless such act would
require the consent of the Beneficiaries in accordance with the
express provisions of this Agreement or is otherwise prohibited
hereby.
ARTICLE VII
CONCERNING
THE TRUSTEE, BENEFICIARIES AND AGENTS
7.1 Generally. The Trustee
accepts and undertakes to discharge the Trust, upon the terms
and conditions hereof, on behalf of the Beneficiaries. The
Trustee shall exercise such of the rights and powers vested in
it by this Agreement in good faith and in the best interests of
the Beneficiaries. The Trustee shall not be personally liable
for any act or omission hereunder except as determined by a
final order of a court of competent jurisdiction for its own
grossly negligent action, its own grossly negligent failure to
act, or its own fraud or willful misconduct, in each case, as
determined by a final order of a court of competent jurisdiction
from which no appeal can or is taken, except that:
(a) no successor Trustee shall be responsible for the acts
or omissions of a Trustee in office prior to the date on which
it becomes a Trustee;
(b) the Trustee shall not be liable to the Beneficiaries
for the acts or omissions of an agent, advisor or manager of the
Trust appointed by the Trustee hereunder, except where the
Trustee specifically directs the act of such Person, delegates
the authority to such Person to act where such Trustee was under
a duty not to delegate, does not use reasonable prudence in the
selection or retention of such Person, does not periodically
review such persons overall performance and compliance
with the terms of such delegation; conceals the act or omission
of such Person; or neglects to take reasonable steps to redress
any wrong committed by such Person when such Trustee is aware of
such Persons act or omission; provided, however, that this
subsection (b) shall not apply to acts or omissions of any
Affiliate of Trustee, or any of their respective employees;
(c) the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the
Trustee;
(d) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement;
but in the case of any such certificates or opinions which are
specifically required to be furnished to the Trustee by any
provision hereof, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Agreement;
(e) the Trustee shall not be liable for any reasonable
error of judgment made in good faith; and
(f) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by the Trustee in good faith
in accordance with the terms and conditions of this Agreement
and at the direction of Beneficiaries having aggregate Units of
at least 51% of the total Units held by all Beneficiaries
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising
any right or power conferred upon the Trustee under this
Agreement.
7.2 Reliance by
Trustee. Except as otherwise provided in
Section 7.1:
(a) The Trustee may consult with legal counsel, auditors or
other experts to be selected by it, and the advice or opinion of
such counsel, auditors, or other experts shall be full and
complete personal protection to the Trustee and agents of the
Trust in respect of any action taken or suffered by the Trustee
in good faith and in the reliance on, or in accordance with,
such advice or opinion.
B-9
(b) Persons dealing with the Trustee shall look only to the
Trust Assets to satisfy any liability incurred by the
Trustee to such Person in carrying out the terms of the Trust,
and the Trustee shall have no personal or individual obligation
to satisfy any such liability.
(c) As far as reasonably practicable, the Trustee shall
cause any written instrument creating an obligation of the Trust
to include a reference to this Agreement and to provide that
neither the Beneficiaries, the Trustee nor their agents shall be
liable thereunder, and that the other parties to such instrument
shall look solely to the Trust Assets for the payment of
any claim thereunder or the performance thereof; provided that
the omission of such provision from any such instrument shall
not render the Beneficiaries, the Trustee or their agents
liable, nor shall the Trustee be liable to anyone for such
omission.
7.3 Limitation on Liability to Third
Persons. No Beneficiary shall be subject to
any personal liability whatsoever, in tort, contract, or
otherwise, to any Person in connection with the
Trust Assets or the affairs of the Trust, and, to the
fullest extent permitted by law, no Trustee or agent of the
Trust shall be subject to any personal liability whatsoever in
tort, contract, or otherwise, to any Beneficiary or any other
Person in connection with the Trust Assets or the affairs
of the Trust, except to the extent determined by a court of
competent jurisdiction from which no appeal can be or is taken,
to have resulted from the gross negligence, fraud or willful
misconduct knowingly and intentionally committed in bad faith by
such Trustee or agent of the Trust. All such other Persons shall
look solely to the Trust Assets for satisfaction of claims
of any nature arising in connection with the affairs of the
Trust.
7.4 Recitals. Any written
instrument creating an obligation of the Trust shall be
conclusively taken to have been executed or done by a Trustee or
agent of the Trust only in its capacity as Trustee under this
Agreement, or in its capacity as an agent of the Trust.
7.5 Indemnification. The
Trustee and each Person appointed by the Trustee pursuant to
Section 5.11, and the directors, officers, employees and
agents of each such Person (each an Indemnified
Person and collectively the Indemnified
Persons), shall, to the fullest extent permitted by
law, be indemnified out of the Trust Assets against all
liabilities and expenses, including amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and
counsel fees, reasonably incurred by the Indemnified Persons in
connection with the defense or disposition of any action, suit
or other proceeding by the Trust or any other Person, whether
civil or criminal, in which the Indemnified Person may be
involved or with which the Indemnified Person may be threatened:
(i) in the case of the Trustee or a Person appointed by the
Trustee pursuant to Section 5.11, while in office or
thereafter, by reason of his being or having been such a Trustee
or agent including, without limitation, in connection with or
arising out of any action, suit or other proceeding based on any
alleged breach of duty, neglect, error, misstatement, misleading
statement, omission or act of the Trustee or any such Person in
such capacity; and (ii) in the case of any director,
officer or agent of any such Person, by reason of any such
Person exercising or failing to exercise any right or power
hereunder; provided that the Indemnified Person shall not be
entitled to such indemnification with respect to any matter as
to which the Indemnified Person shall have been adjudicated by a
final order of a court of competent jurisdiction from which no
appeal can be or is taken, to have acted with gross negligence,
fraud or willful misconduct knowingly and intentionally
committed in bad faith. The rights accruing to any Indemnified
Person under these provisions shall not exclude any other right
to which the Indemnified Person may be lawfully entitled;
provided that no Indemnified Person may satisfy any right of
indemnity or reimbursement granted herein, or to which the
Indemnified Person may be otherwise entitled, except out of the
Trust Assets, and no Beneficiary shall be personally liable
to any person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustee may make advance
payments in connection with indemnification under this
Section 7.5, provided that the Indemnified Person shall
have given a written undertaking to repay any amount advanced to
the Indemnified Person and to reimburse the Trust in the event
that it is subsequently determined that the Indemnified Person
is not entitled to such indemnification. Nothing contained
herein shall restrict the right of the Trustee to indemnify or
reimburse such Indemnified Person in any proper case, even
though not specifically provided for herein, nor shall anything
contained herein restrict the right of any such Indemnified
Person to contribution under applicable law.
B-10
ARTICLE VIII
PROTECTION
OF PERSONS DEALING WITH THE TRUSTEE
8.1 Action by Trustee. At
any time there is more than one Trustee all action with respect
to the disposition and distribution of the Trust Assets
required or permitted to be taken by the Trustee, in its
capacity as Trustee, shall be taken by approval, consent, vote
or resolution authorized by at least a majority of the Trustees.
8.2 Reliance on Statements by
Trustee. Any Person dealing with the Trustee
shall be fully protected in relying upon a certificate signed by
the Trustee, stating that it has authority take any action under
the Trust. Any Person dealing with the Trustee shall be fully
protected in relying upon the Trustees certificate setting
forth the facts concerning the action taken by the Trustee
pursuant to this Agreement, including the aggregate number of
Units held by the Beneficiaries causing such action to be taken.
ARTICLE IX
COMPENSATION
OF TRUSTEE
9.1 Compensation. The
Trustee shall only be entitled to the compensation set forth on
Exhibit A hereto, which in no event shall be greater
than the usual and customary fees charged by trustees with
respect to trusts of this type and nature. Unless otherwise
required by law or as may subsequently be approved by
Beneficiaries having a majority of the total Units, the Trustee
shall not receive any other compensation for acting in such
capacity.
9.2 Expenses. The Trustee
shall be reimbursed from the Trust Assets for all expenses
reasonably incurred, and appropriately documented, by the
Trustee in the performance of the Trustees duties in
accordance with this Agreement.
ARTICLE X
TRUSTEE AND
SUCCESSOR TRUSTEE
10.1 Number and Qualification of
Trustee.
(a) Subject to the provisions of Section 10.3 relating
to the period pending the appointment of a successor Trustee,
there shall be one Trustee of this Trust, which shall be a
citizen and resident of or a corporation or other entity which
is incorporated or formed under the laws of a state of the
United States and, if a corporation, it shall be authorized to
act as a corporate fiduciary under the laws of the State of
Indiana or such other jurisdiction as shall be determined by the
Trustee in its sole discretion.
(b) If a corporate Trustee shall ever change its name, or
shall reorganize or reincorporate, or shall merge with or into
or consolidate with any other bank or trust company, such
corporate trustee shall be deemed to be a continuing entity and
shall continue to act as a trustee hereunder with the same
liabilities, duties, powers, titles, discretions, and privileges
as are herein specified for a Trustee.
10.2 Resignation and
Removal. Any Trustee may resign and be
discharged from the Trust hereby created by giving written
notice to the Beneficiaries at their respective addresses as
they appear on the records of the Trustee. Such resignation
shall become effective upon the appointment of such
Trustees successor, and such successors acceptance
of such appointment, whichever is earlier. Any Trustee may be
removed at any time, with or without cause, by Beneficiaries
having aggregate Units of at least a majority of the total Units
held by all Beneficiaries.
10.3 Appointment of
Successor. Should at any time the Trustee
resign or be removed, die, become mentally incompetent or
incapable of action (as determined by the Beneficiaries holding
Trust Units representing an aggregate of at least a
majority of the total Beneficial Interests in the Trust), or be
adjudged bankrupt or insolvent, a vacancy shall be deemed to
exist and a successor shall be appointed by the Beneficiaries
pursuant to Article 12 hereof by the consent of the
Beneficiaries holding Units representing at least a majority
B-11
of the total Units. Pending the appointment of a successor
Trustee, the remaining Trustee or Trustees then serving may take
any action in the manner set forth in Section 8.1.
10.4 Acceptance of Appointment by Successor
Trustee. Any successor Trustee appointed
hereunder shall execute an instrument accepting such appointment
hereunder and shall deliver one counterpart, in case of a
resignation, to the retiring Trustee. Thereupon such successor
Trustee shall, without any further act, become vested with all
the estates, properties, rights, powers, trusts, and duties of
its predecessor in the Trust hereunder with like effect as if
originally named therein; but the retiring Trustee shall
nevertheless, when requested in writing by the successor
Trustee, execute and deliver an instrument or instruments
conveying and transferring to such successor Trustee upon the
trust herein expressed, all the estates, properties, rights,
powers, and trusts of such retiring Trustee, and it shall duly
assign, transfer, and deliver to such successor Trustee all
property and money held by such Trustee hereunder.
10.5 Bonds. Unless required
by the Board prior to the Transfer Date, or unless a bond is
required by law, no bond shall be required of any original
Trustee hereunder. Unless a bond is required by law and such
requirement cannot be waived by or with approval of the
Beneficiaries holding aggregate Units of at least a majority of
the total Units held by all Beneficiaries, no bond shall be
required of any successor Trustee hereunder. If a bond is
required by law, no surety or security with respect to such bond
shall be required unless required by law and such requirement
cannot be waived by or with approval of the Beneficiaries or
unless required by the Board. If a bond is required by the Board
or by law, the Board or the Trustee, as the case may be, shall
determine whether, and to what extent, a surety or security with
respect to such bond shall be required. The cost of any such
bond shall be borne by the Trust.
ARTICLE XI
CONCERNING
THE BENEFICIARIES
11.1 Evidence of Action by
Beneficiaries. Whenever in this Agreement it
is provided that the Beneficiaries may take any action
(including the making of any demand or request, the giving of
any notice, consent, or waiver, the removal of a Trustee, the
appointment of a successor Trustee, or the taking of any other
action), the fact that at the time of taking any such action
such Beneficiaries have joined therein may be evidenced by
any instrument or any number of instruments of similar tenor
executed by the Beneficiaries holding that number of Units as
are necessary to approve the particular action.
11.2 Limitation on Suits by
Beneficiaries. No Beneficiary shall have any
right by virtue of any provision of this Agreement to institute
any action or proceeding at law or in equity against any party
other than the Trustee upon or under or with respect to the
Trust Assets or the agreements relating to or forming part
of the Trust Assets, and the Beneficiaries (by their
acceptance of any distribution made to them pursuant to this
Agreement) waive any such right.
11.3 Requirement of
Undertaking. The Trustee may request any
court to require, and any court may in its discretion require,
in any suit for the enforcement of any right or remedy under
this Agreement, or in any suit against the Trustee for any
action taken or omitted to be taken by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the
costs of such suit, and such court may in its discretion assess
reasonable costs, including reasonable attorneys fees,
against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such
party litigant; provided that the provisions of this
Section 11.3 shall not apply to any suit by the Trustee.
ARTICLE XII
MEETING OF
BENEFICIARIES
12.1 Purpose of Meetings. A
meeting of the Beneficiaries may be called at any time and from
time to time pursuant to the provisions of this Article.
B-12
12.2 Meeting Called by
Trustee. The Trustee may at any time call a
meeting of the Beneficiaries to be held at such time and at such
place as the Trustee shall determine. Written notice of every
meeting of the Beneficiaries shall be given by the Trustee
(except as provided in Section 12.3), which written notice
shall set forth the time and place of such meeting and in
general terms the action proposed to be discussed at such
meeting, and shall be mailed not more than 60 nor less than
5 days before such meeting is to be held to all of the
Beneficiaries of record not more than 60 days before the
date of such meeting. The notice shall be directed to the
Beneficiaries at their respective addresses as they appear in
the records of the Trust.
12.3 Meeting Called on Request of
Beneficiaries. Within 30 days after
written request to the Trustee by Beneficiaries holding an
aggregate of at least 33% of the total Units held by all
Beneficiaries to call a meeting of all Beneficiaries, which
written request shall specify in reasonable detail the action
proposed to be discussed, the Trustee shall proceed under the
provisions of Section 12.2 to call a meeting of the
Beneficiaries, and if the Trustee fails to call such meeting
within such 30 day period then such meeting may be called
by such Beneficiaries, or their designated representatives,
requesting such meeting.
12.4 No Voting. No
Beneficiary shall be entitled to vote at a meeting of the
Beneficiaries either in person or by proxy. To the extent that
this Agreement provides for actions taken by the holders of a
majority of the Units, such action may only be taken
by ,
as the sole holder of a majority of the Units.
12.5 Adjournment of
Meeting. Subject to Section 12.5, any
meeting of Beneficiaries may be adjourned from time to time and
a meeting may be held at such adjourned time and place without
further notice.
12.6 Conduct of
Meetings. The Trustee shall appoint the
Chairman and the Secretary of the meeting.
12.7 Record of Meeting. A
record of the proceedings of each meeting of Beneficiaries shall
be prepared by the Secretary of the meeting. The record shall be
signed and verified by the Secretary of the meeting and shall be
delivered to the Trustee to be preserved by them. Any record so
signed and verified shall be conclusive evidence of all of the
matters therein stated.
ARTICLE XIII
AMENDMENTS
13.1 Consent of
Beneficiaries. At the written direction or
with the written consent of Beneficiaries holding at least a
majority of the total Units, the Trustee shall promptly make and
execute a declaration amending this Agreement for the purpose of
adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or
amendments thereto; provided that no such amendment shall
(a) increase the potential liability of the Trustee or any
Beneficiary hereunder without the written consent of the Trustee
or such Beneficiary, as applicable, permit the Trustee to engage
in any activity prohibited by Section 6.1 hereof or affect
the Beneficiaries rights to receive their pro rata shares
of the Trust Assets, (c) cause the Trust to be treated
for Federal, state or local income tax purposes as other than a
liquidating trust under Treasury
Regulation Section 301.7701-4(d)],
or (d) cause the Beneficiaries to be treated as other than
the owners of their respective shares of the Trusts
taxable income pursuant to Section 671 through 679 of the
Code and any analogous provision of state or local law.
13.2 Notice and Effect of
Amendment. Promptly after the execution by
the Trustee of any such declaration of amendment, the Trustee
shall give notice of the substance of such amendment to the
Beneficiaries or, in lieu thereof, the Trustee may send a copy
of the amendment to each Beneficiary. Upon the execution of any
such declaration of amendment by the Trustee, this Agreement
shall be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights,
obligations, duties, and immunities of the Trustee and the
Beneficiaries under this Agreement shall thereafter be
determined, exercised and enforced hereunder subject in all
respects to such modification and amendments, and all the terms
and conditions of any such amendment shall thereby be deemed to
be part of the terms and conditions of this Agreement for any
and all purposes.
B-13
ARTICLE XIV
MISCELLANEOUS
PROVISIONS
14.1 Filing Documents. This
Agreement shall be filed or recorded in such office or offices
as the Trustee may determine to be necessary or desirable. A
copy of this Agreement and all amendments thereof shall be
maintained in the office of the Trustee and shall be available
at all times during regular business hours for inspection by any
Beneficiary or his duly authorized representative. The Trustee
shall file or record any amendment of this Agreement in the same
places where the original Agreement is filed or recorded. The
Trustee shall file or record any instrument which relates to any
change in the office of the Trustee in the same places where the
original Agreement is filed or recorded.
14.2 Intention of Parties to Establish
Trust. This Agreement is not intended to
create, and shall not be interpreted as creating, a corporation,
association, partnership, or joint venture of any kind for
purposes of Federal income taxation or for any other purpose.
14.3 Beneficiaries Have No Rights or Privileges
as Shareholders of the Corporation. The
Beneficiaries (by their vote with respect to the Merger
and/or their
acceptance of any distributions made to them pursuant to this
Agreement) shall have no rights or privileges attributable to
their former status as shareholders of the Corporation.
14.4 Laws as to
Construction. This Agreement and the trust
created hereby shall be governed by and construed in accordance
with the laws of the State of Indiana. The Trustee, the
Corporation and the Beneficiaries (by their acceptance of any
distributions made to them pursuant to this Agreement) consent
and agree that this Agreement shall be governed by and construed
in accordance with such laws.
14.5 Severability. In the
event any provision of this Agreement or the application thereof
to any Person or circumstances shall be finally determined by a
court of proper jurisdiction to be invalid or unenforceable to
any extent, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Agreement shall be
valid and enforced to the fullest extent permitted by law.
14.6 Notices. Any notice or
other communication by the Trustee to any Beneficiary shall be
deemed to have been sufficiently given, for all purposes, if
deposited, postage prepaid, in the post office or letter box
addressed to such Person at his address as shown in the records
of the Trust.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally or sent by cable, telegram, email, telecopier or
telex to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice:
with a copy to:
|
|
|
|
(b)
|
If to the Corporation:
|
All American Group, Inc.
All American Group, Inc.
2831 Dexter Drive
B-14
Elkhart, IN 46515
Attention: Chief Executive Officer, General Counsel
Facsimile:
(574) 266-2559
with a copy to:
All American Group Holdings, LLC
c/o H.I.G.
Capital, LLC
1001 Brickell Bay Drive, 27th Floor
Miami, Florida, 33131
Attention: Matthew Sanford
Facsimile:
(305) 379-3655
with a copy (which shall not constitute notice) to:
White & Case LLP
200 S. Biscayne Boulevard, Suite 4900
Miami, Florida 33131
Attention: Jorge L. Freeland, Esq.
Facsimile:
(305) 358-5744
14.7 Counterparts. This
Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute one and the same instrument.
B-15
IN WITNESS WHEREOF, All American Group, Inc. has caused this
Agreement to be executed by an authorized officer, and the
Trustee herein has executed this Agreement, effective
this day
of ,
201 .
ALL AMERICAN GROUP, INC.
Name:
[Trustee]
Name:
B-16
Appendix C
IC
23-1-44
Chapter 44. Dissenters Rights
IC
23-1-44-1
Corporation defined
Sec. 1. As used in this chapter, corporation means
the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
IC
23-1-44-2
Dissenter defined
Sec. 2. As used in this chapter, dissenter means a
shareholder who is entitled to dissent from corporate action
under section 8 of this chapter and who exercises that
right when and in the manner required by sections 10
through 18 of this chapter.
IC
23-1-44-3
Fair value defined
Sec. 3. As used in this chapter, fair value, with
respect to a dissenters shares, means the value of the
shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable.
IC
23-1-44-4
Interest defined
Sec. 4. As used in this chapter, interest means
interest from the effective date of the corporate action until
the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate
that is fair and equitable under all the circumstances.
IC
23-1-44-4.5
Preferred shares defined
Sec. 4.5. As used in this chapter, preferred shares
means a class or series of shares in which the holders of the
shares have preference over any other class or series with
respect to distributions.
IC
23-1-44-5
Record shareholder defined
Sec. 5. As used in this chapter, record shareholder
means the person in whose name shares are registered in the
records of a corporation or the beneficial owner of shares to
the extent that treatment as a record shareholder is provided
under a recognition procedure or a disclosure procedure
established under IC
23-1-30-4.
IC
23-1-44-6
Beneficial shareholder defined
Sec. 6. As used in this chapter, beneficial
shareholder means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
IC
23-1-44-7
Shareholder defined
Sec. 7. As used in this chapter, shareholder means
the record shareholder or the beneficial shareholder.
C-1
IC
23-1-44-8
Right to dissent and obtain payment for shares
Sec. 8.
(a) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholders shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party if:
(A) shareholder approval is required for the merger by IC
23-1-40-3 or
the articles of incorporation; and
(B) the shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than
in the usual and regular course of business, if the shareholder
is entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or
a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one (1) year after the date of sale.
(4) The approval of a control share acquisition under IC
23-1-42.
(5) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) This section does not apply to the holders of shares of
any class or series if, on the date fixed to determine the
shareholders entitled to receive notice of and vote at the
meeting of shareholders at which the merger, plan of share
exchange, or sale or exchange of property is to be acted on, the
shares of that class or series were a covered security under
Section 18(b)(1)(A) or 18(b)(1)(B) of the Securities Act of
1933, as amended.
(c) The articles of incorporation as originally filed or
any amendment to the articles of incorporation may limit or
eliminate the right to dissent and obtain payment for any class
or series of preferred shares. However, any limitation or
elimination contained in an amendment to the articles of
incorporation that limits or eliminates the right to dissent and
obtain payment for any shares:
(1) that are outstanding immediately before the effective
date of the amendment; or
(2) that the corporation is or may be required to issue or
sell after the effective date of the amendment under any
exchange or other right existing immediately before the
effective date of the amendment; does not apply to any corporate
action that becomes effective within one (1) year of the
effective date of the amendment if the action would otherwise
afford the right to dissent and obtain payment.
(d) A shareholder:
(1) who is entitled to dissent and obtain payment for the
shareholders shares under this chapter; or
(2) who would be so entitled to dissent and obtain payment
but for the provisions of subsection (b); may not challenge the
corporate action creating (or that, but for the provisions of
subsection (b), would have created) the shareholders
entitlement.
C-2
(e) Subsection (d) does not apply to a corporate
action that was approved by less than unanimous consent of the
voting shareholders under IC
23-1-29-4.5(b)
if both of the following apply:
(1) The challenge to the corporate action is brought by a
shareholder who did not consent and as to whom notice of the
approval of the corporate action was not effective at least ten
(10) days before the corporate action was effected.
(2) The proceeding challenging the corporate action is
commenced not later than ten (10) days after notice of the
approval of the corporate action is effective as to the
shareholder bringing the proceeding.
IC
23-1-44-9
Dissenters rights of beneficial shareholder
Sec. 9.
(a) A record shareholder may assert dissenters rights
as to fewer than all the shares registered in the
shareholders name only if the shareholder dissents with
respect to all shares beneficially owned by any one
(1) person and notifies the corporation in writing of the
name and address of each person on whose behalf the shareholder
asserts dissenters rights. The rights of a partial
dissenter under this subsection are determined as if the shares
as to which the shareholder dissents and the shareholders
other shares were registered in the names of different
shareholders.
(b) A beneficial shareholder may assert dissenters
rights as to shares held on the shareholders behalf only
if:
(1) the beneficial shareholder submits to the corporation
the record shareholders written consent to the dissent not
later than the time the beneficial shareholder asserts
dissenters rights; and
(2) the beneficial shareholder does so with respect to all
the beneficial shareholders shares or those shares over
which the beneficial shareholder has power to direct the vote.
IC
23-1-44-10
Proposed action creating dissenters rights;
notice
Sec. 10.
(a) If proposed corporate action creating dissenters
rights under section 8 of this chapter is submitted to a
vote at a shareholders meeting, the meeting notice must
state that shareholders are or may be entitled to assert
dissenters rights under this chapter.
(b) If corporate action creating dissenters rights
under section 8 of this chapter is taken without a vote of
shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters rights that the
action was taken and send them the dissenters notice
described in section 12 of this chapter.
IC
23-1-44-11
Proposed action creating dissenters rights; assertion of
dissenters rights
Sec. 11.
(a) If proposed corporate action creating dissenters
rights under section 8 of this chapter is submitted to a
vote at a shareholders meeting, a shareholder who wishes
to assert dissenters rights:
(1) must deliver to the corporation before the vote is
taken written notice of the shareholders intent to demand
payment for the shareholders shares if the proposed action
is effectuated; and
(2) must not vote the shareholders shares in favor of
the proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for the
shareholders shares under this chapter.
C-3
IC
23-1-44-12
Dissenters notice; contents
Sec. 12.
(a) If proposed corporate action creating dissenters
rights under section 8 of this chapter is authorized at a
shareholders meeting, the corporation shall deliver a
written dissenters notice to all shareholders who
satisfied the requirements of section 11 of this chapter.
(b) The dissenters notice must be sent no later than
ten (10) days after approval by the shareholders, or if
corporate action is taken without approval by the shareholders,
then ten (10) days after the corporate action was taken.
The dissenters notice must:
(1) state where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(3) supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters rights certify whether or
not the person acquired beneficial ownership of the shares
before that date;
(4) set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty
(30) nor more than sixty (60) days after the date the
subsection (a) notice is delivered; and
(5) be accompanied by a copy of this chapter.
IC
23-1-44-13
Demand for payment and deposit of shares by
shareholder
Sec. 13.
(a) A shareholder sent a dissenters notice described
in IC
23-1-42-11
or in section 12 of this chapter must demand payment,
certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the
dissenters notice under section 12(b)(3) of this
chapter, and deposit the shareholders certificates in
accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the
shareholders shares under subsection (a) retains all
other rights of a shareholder until these rights are cancelled
or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit
the shareholders share certificates where required, each
by the date set in the dissenters notice, is not entitled
to payment for the shareholders shares under this chapter
and is considered, for purposes of this article, to have voted
the shareholders shares in favor of the proposed corporate
action.
IC
23-1-44-14
Uncertificated shares; restriction on transfer; dissenters
rights
Sec. 14.
(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the
restrictions released under section 16 of this chapter.
(b) The person for whom dissenters rights are
asserted as to uncertificated shares retains all other rights of
a shareholder until these rights are cancelled or modified by
the taking of the proposed corporate action.
C-4
IC
23-1-44-15
Payment to dissenter
Sec. 15.
(a) Except as provided in section 17 of this chapter,
as soon as the proposed corporate action is taken, or, if the
transaction did not need shareholder approval and has been
completed, upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with section 13 of
this chapter the amount the corporation estimates to be the fair
value of the dissenters shares.
(b) The payment must be accompanied by:
(1) the corporations balance sheet as of the end of a
fiscal year ending not more than sixteen (16) months before
the date of payment, an income statement for that year, a
statement of changes in shareholders equity for that year,
and the latest available interim financial statements, if any;
(2) a statement of the corporations estimate of the
fair value of the shares; and
(3) a statement of the dissenters right to demand
payment under section 18 of this chapter.
IC
23-1-44-16
Failure to take action; return of certificates; new action by
corporation
Sec. 16.
(a) If the corporation does not take the proposed action
within sixty (60) days after the date set for demanding
payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed
action, it must send a new dissenters notice under
section 12 of this chapter and repeat the payment demand
procedure.
IC
23-1-44-17
Withholding payment by corporation; corporations estimate
of fair value; after-acquired shares
Sec. 17.
(a) A corporation may elect to withhold payment required by
section 15 of this chapter from a dissenter unless the
dissenter was the beneficial owner of the shares before the date
set forth in the dissenters notice as the date of the
first announcement to news media or to shareholders of the terms
of the proposed corporate action.
(b) To the extent the corporation elects to withhold
payment under subsection (a), after taking the proposed
corporate action, it shall estimate the fair value of the shares
and shall pay this amount to each dissenter who agrees to accept
it in full satisfaction of the dissenters demand. The
corporation shall send with its offer a statement of its
estimate of the fair value of the shares and a statement of the
dissenters right to demand payment under section 18
of this chapter.
IC
23-1-44-18
Dissenters estimate of fair value; demand for payment;
waiver
Sec. 18.
(a) A dissenter may notify the corporation in writing of
the dissenters own estimate of the fair value of the
dissenters shares and demand payment of the
dissenters estimate (less any payment under
section 15 of
C-5
this chapter), or reject the corporations offer under
section 17 of this chapter and demand payment of the fair
value of the dissenters shares, if:
(1) the dissenter believes that the amount paid under
section 15 of this chapter or offered under section 17
of this chapter is less than the fair value of the
dissenters shares;
(2) the corporation fails to make payment under
section 15 of this chapter within sixty (60) days
after the date set for demanding payment; or
(3) the corporation, having failed to take the proposed
action, does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares
within sixty (60) days after the date set for demanding payment.
(b) A dissenter waives the right to demand payment under
this section unless the dissenter notifies the corporation of
the dissenters demand in writing under subsection (a)
within thirty (30) days after the corporation made or
offered payment for the dissenters shares.
IC
23-1-44-19
Court proceeding to determine fair value; judicial
appraisal
Sec. 19.
(a) If a demand for payment under IC
23-1-42-11
or under section 18 of this chapter remains unsettled, the
corporation shall commence a proceeding within sixty
(60) days after receiving the payment demand and petition
the court to determine the fair value of the shares. If the
corporation does not commence the proceeding within the sixty
(60) day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the
circuit or superior court of the county where a
corporations principal office (or, if none in Indiana, its
registered office) is located. If the corporation is a foreign
corporation without a registered office in Indiana, it shall
commence the proceeding in the county in Indiana where the
registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters (whether or
not residents of this state) whose demands remain unsettled
parties to the proceeding as in an action against their shares
and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding
is commenced under subsection (b) is plenary and exclusive.
The court may appoint one (1) or more persons as appraisers
to receive evidence and recommend decision on the question of
fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters
are entitled to the same discovery rights as parties in other
civil proceedings.
(e) Each dissenter made a party to the proceeding is
entitled to judgment:
(1) for the amount, if any, by which the court finds the
fair value of the dissenters shares, plus interest,
exceeds the amount paid by the corporation; or
(2) for the fair value, plus accrued interest, of the
dissenters after-acquired shares for which the corporation
elected to withhold payment under section 17 of this
chapter.
C-6
IC
23-1-44-20
Costs; fees; attorneys fees
Sec. 20.
(a) The court in an appraisal proceeding commenced under
section 19 of this chapter shall determine all costs of the
proceeding, including the reasonable compensation and expenses
of appraisers appointed by the court. The court shall assess the
costs against such parties and in such amounts as the court
finds equitable.
(b) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:
(1) against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 10
through 18 of this chapter; or
(2) against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
C-7
APPENDIX
D
[LETTERHEAD
OF HOULIHAN LOKEY FINANCIAL ADVISORS, INC.]
November 8,
2010
The Special Committee of the Board of Directors
All American Group, Inc.
2831 Dexter Drive
Elkhart, Indiana 46514
Dear Members
of the Special Committee:
We understand that All American Group, Inc. (AAG),
All American Group Holdings, LLC (AAG Acquiror), a
newly-formed entity affiliated with H.I.G. Capital, LLC
(HIG), the majority shareholder of AAG, and All
American Acquisition Corporation, a wholly owned subsidiary of
AAG Acquiror (Merger Sub), propose to enter into a
Merger Agreement (as defined below) pursuant to which, among
other things, Merger Sub will be merged with and into AAG (the
Merger) and each outstanding share of the common
stock, no par value per share, of AAG (AAG Common
Stock) not held by AAG Acquiror or its affiliates will be
converted into the right to receive (i) $0.20 in cash (the
Cash Consideration) and (ii) one beneficial
interest unit of the All American Group Liquidating Trust (the
Liquidating Trust and, such beneficial interest
unit, together with the Cash Consideration, the Per Share
Consideration), which Liquidating Trust will receive
proceeds in excess of $5 million, if any, from the
potential sale of AAGs Specialty Vehicles segment
following consummation of the Transaction. Representatives of
AAG have advised us that certain shareholders of AAG may enter
into arrangements to retain or obtain, directly or indirectly,
an equity interest in AAG or AAG Acquiror following the
consummation of the Transaction (such shareholders and their
respective affiliates, together with HIG, AAG Acquiror, Merger
Sub and their respective affiliates, the Excluded
Holders).
You have requested that Houlihan Lokey Financial Advisors, Inc.
(Houlihan Lokey) provide an opinion (the
Opinion) as to whether, as of the date hereof, the
Per Share Consideration to be received by holders of AAG Common
Stock (other than the Excluded Holders) in the Transaction is
fair to such holders from a financial point of view.
In connection with this Opinion, we have made such reviews and
inquiries as we have deemed necessary and appropriate under the
circumstances. Among other things, we have:
1. reviewed the following agreements:
a. a draft, dated November 7, 2010, of the Agreement
and Plan of Merger to be entered into among AAG, an Indiana
corporation, AAG Acquiror, a Delaware limited liability company,
Merger Sub, an Indiana corporation, and a shareholders
representative to be named therein (the Merger
Agreement);
b. a draft, dated November 6, 2010, of the Agreement
and Declaration of Trust to be entered into between AAG and a
trustee to be named therein (the Liquidating
Trust Agreement);
2. reviewed certain publicly available business and
financial information relating to AAG that we deemed to be
relevant;
3. reviewed certain information relating to the historical,
current and future operations, financial condition and prospects
of AAG made available to us by AAG, including (a) financial
projections prepared by the management of AAG for the fiscal
years ending December 31, 2010 and 2011 reflecting the
future financial results and condition of AAG after giving
effect to AAGs current inability to obtain adequate
bonding for certain commercial construction projects of its
Housing segment and to purchase bus chassis for its Specialty
Vehicles segment (the Financial Projections) and
(b) a liquidation analysis prepared by the management of
AAG (the Liquidation Analysis);
D-1
The Special Committee of the Board of Directors
All American Group, Inc.
November 8, 2010
4. spoken with certain members of the management of AAG and
certain of its representatives and advisors regarding
(a) the business, operations, financial condition and
prospects of AAG, including the liquidity needs of and capital
resources available to AAG, and (b) the Transaction and
related matters;
5. reviewed the current and historical market prices and
trading volume for AAG Common Stock, and the current and
historical market prices of the publicly traded securities of
certain other companies that we deemed to be relevant;
6. reviewed a certificate addressed to us from senior
management of AAG which contains, among other things,
representations regarding certain matters relating to AAGs
financial condition and prospects and the accuracy of the
information, data and other materials (financial or otherwise)
provided to, or discussed with, us by or on behalf of
AAG; and
7. conducted such other financial studies and inquiries and
considered such other information and factors as we deemed
appropriate.
As you are aware, the management of AAG has advised us that
(a) the independent auditors of AAGs audited
financial statements for fiscal years 2008 and 2009 have raised
substantial doubt as to AAGs ability to continue to
operate as a going concern; (b) AAG has not been in
compliance with certain covenants in its existing loan agreement
with HIG (the Loan Agreement) since August 2010;
(c) AAG currently is unable to obtain adequate bid and
performance bonds with reasonable collateral requirements, which
bonds are necessary to perform certain commercial construction
projects of AAGs Housing segment; (d) AAGs
existing line of credit with GMAC has been suspended and is
scheduled to terminate on December 14, 2010 and the
automotive manufacturer from which AAG purchases the vehicle
chassis necessary for the operation of the bus production line
of AAGs Specialty Vehicles segment has advised AAG that
AAGs purchase order for chassis to be delivered in the
first quarter 2011 will not be accepted unless AAG has an open
line of credit in place; (e) HIG has advised AAG that,
absent the execution of a definitive agreement to effect the
Transaction, HIG is unwilling to provide additional credit or
other financial or credit support to AAG and may declare a
default under the Loan Agreement with respect to AAGs
non-compliance with certain covenants thereunder;
(f) attempts by AAG or the Special Committee of the Board
of Directors of AAG (the Special Committee) to
obtain alternative financing or solicit interest from third
parties, other than HIG, in a potential transaction with AAG
were unsuccessful given that all proposals for financing and
interest received were dependent on the agreement of HIG as
AAGs senior lender and majority shareholder, which
agreement HIG declined to provide; and (g) AAG believes
that there are no viable alternatives to the Transaction that
would provide any value to holders of AAG Common Stock,
including, without limitation, a corporate reorganization under
the protection of U.S. bankruptcy laws. The management of
AAG also has advised us that, if the Transaction is not
consummated, AAGs ability to operate as a going concern
will be severely impaired and that this impairment would
reasonably be expected to result in the liquidation of AAG in a
voluntary or involuntary bankruptcy.
We have relied upon and assumed, without independent
verification, the accuracy and completeness of all data,
material and other information furnished, or otherwise made
available, to us, discussed with or reviewed by us, or publicly
available, and do not assume any responsibility with respect to
such data, material and other information. As you are aware,
management of AAG has advised us that, given AAGs
circumstances, managements financial projections for AAG
beyond calendar year 2011 are no longer reliable. With respect
to the Financial Projections, management of AAG has advised us,
and we have assumed, that the Financial Projections have been
reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of such management
as to the future financial results and condition of AAG assuming
access to liquidity necessary to achieve the financial results
reflected in the Financial Projections. Management of AAG has
advised us, however, that AAG is not expected to have such
liquidity. Management of AAG also has advised us, and we have
assumed, that the Liquidation Analysis has been reasonably
prepared in good
D-2
The Special Committee of the Board of Directors
All American Group, Inc.
November 8, 2010
faith on bases reflecting the best currently available estimates
and judgments of such management as to the realizable value for
AAGs assets in an orderly liquidation and the remaining
amounts available upon completion of such liquidation for
distribution to holders of AAG Common Stock. We express no
opinion with respect to the Financial Projections, the
Liquidation Analysis or the assumptions on which they are based.
We have relied upon and assumed, without independent
verification, that there has been no change in the business,
assets, liabilities, financial condition, results of operations,
cash flows or prospects of AAG since the respective dates of the
most recent financial statements and other information,
financial or otherwise, provided to us that would be material to
this Opinion and that there is no information or any facts that
would make any of the information reviewed by us incomplete or
misleading. Given, among other things, the substantial doubts
that exist as to AAGs ability to continue to operate as a
going concern, that the Financial Projections assume access to
sufficient liquidity which the management of AAG has advised us
is unlikely, that the Financial Projections do not reflect any
period beyond calendar year 2011 and that AAG is forecasted by
management under the Financial Projections to continue to incur
significant operating losses and negative cash flow in calendar
year 2011, we have not performed any financial analysis of AAG,
whether relative to other companies or transactions in relevant
industries, based on the discounted cash flows of AAG or
otherwise, and we have relied upon the Liquidation Analysis for
purposes of this Opinion. However, it should be noted that,
under the ownership of a company with adequate liquidity and
capital, the value of AAG could substantially improve, resulting
in significant returns to such an owner if a business
combination or such other strategic transaction such as the
Transaction were consummated.
We have relied upon and assumed, without independent
verification, that (a) the representations and warranties
of all parties to the Merger Agreement and all other related
documents and instruments that are referred to therein
(including, without limitation, the Liquidating
Trust Agreement) are true and correct, (b) each party
to the Merger Agreement and such other related documents and
instruments will fully and timely perform all of the covenants
and agreements required to be performed by such party,
(c) all conditions to the consummation of the Transaction
will be satisfied without waiver thereof, and (d) the
Transaction will be consummated in a timely manner in accordance
with the terms described in the Merger Agreement and such other
related documents and instruments, without any amendments or
modifications thereto. We also have relied upon and assumed,
without independent verification, that (i) the Transaction
will be consummated in a manner that complies in all respects
with all applicable federal and state statutes, rules and
regulations, and (ii) all governmental, regulatory, and
other consents and approvals necessary for the consummation of
the Transaction will be obtained and that no delay, limitations,
restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have an effect on AAG
or the Transaction that would be material to this Opinion. In
addition, we have relied upon and assumed, without independent
verification, that the final form of the Merger Agreement and
the Liquidating Trust Agreement will not differ in any
respect from the drafts thereof identified above.
Furthermore, in connection with this Opinion, we have not been
requested to make, and have not made, any physical inspection or
independent appraisal or evaluation of any of the assets,
properties or liabilities (fixed, contingent, derivative,
off-balance sheet or otherwise) of AAG or any other party, nor
were we provided with any such appraisal or evaluation. Although
we reviewed the Liquidation Analysis prepared by AAGs
management, we did not estimate, and express no opinion
regarding, the liquidation value of AAG or any other entity or
business. We have undertaken no independent analysis of any
potential or actual litigation, regulatory action, possible
unasserted claims or other contingent liabilities, to which AAG
is or may be a party or is or may be subject, or of any
governmental investigation of any possible unasserted claims or
other contingent liabilities to which AAG is or may be a party
or is or may be subject.
We have not been requested to, and did not, (a) initiate or
participate in any discussions or negotiations with, or solicit
any indications of interest from, third parties with respect to
the Transaction, the securities, assets, businesses or
operations of AAG or any other party, or any alternatives to the
Transaction, (b) negotiate
D-3
The Special Committee of the Board of Directors
All American Group, Inc.
November 8, 2010
the terms of the Transaction, or (c) advise the Special
Committee, AAG or any other party with respect to alternatives
to the Transaction. This Opinion is necessarily based on
financial, economic, market and other conditions as in effect
on, and the information made available to us as of, the date
hereof. We have not undertaken, and are under no obligation, to
update, revise, reaffirm or withdraw this Opinion, or otherwise
comment on or consider events occurring or coming to our
attention after the date hereof. This Opinion does not purport
to address potential developments in the credit, financial or
stock markets, including, without limitation, the market for
shares of AAG Common Stock. We are not expressing any opinion as
to what the value of beneficial interest units of the
Liquidating Trust actually will be when issued pursuant to the
Transaction, the amount of future distributions, if any, that
holders of such beneficial interest units will receive or the
price or range of prices at which AAG Common Stock will trade at
any time.
This Opinion is furnished for the use and benefit of the Special
Committee (in its capacity as such) in connection with its
evaluation of the Transaction and may not be used for any other
purpose without our prior written consent. This Opinion should
not be construed as creating any fiduciary duty on Houlihan
Lokeys part to any party. This Opinion is not intended to
be, and does not constitute, a recommendation to the Special
Committee, the Board of Directors of AAG, any security holder or
any other person as to how to act or vote with respect to any
matter relating to the Transaction.
In the ordinary course of business, certain of our affiliates,
as well as investment funds in which they may have financial
interests, may acquire, hold or sell, long or short positions,
or trade or otherwise effect transactions, in debt, equity, and
other securities and financial instruments (including loans and
other obligations) of, or investments in, AAG, HIG or any other
party that may be involved in the Transaction and their
respective affiliates or any currency or commodity that may be
involved in the Transaction.
Houlihan Lokey and certain of its affiliates in the past have
provided or currently are providing investment banking,
financial advisory and other financial services to AAG, HIG,
other participants in the Transaction
and/or their
respective affiliates,
and/or one
or more security holders or portfolio companies of such
entities, for which Houlihan Lokey and such affiliates have
received or may receive compensation, including, among other
things, having provided or currently providing certain valuation
advisory services to AAG
and/or HIG
and certain of its affiliates and portfolio companies. In
addition, Houlihan Lokey and certain of its affiliates in the
future may provide investment banking, financial advisory and
other financial services to AAG, HIG, AAG Acquiror, other
participants in the Transaction and their respective affiliates,
and one or more security holders or portfolio companies of such
entities, for which Houlihan Lokey and such affiliates may
receive compensation. In addition, Houlihan Lokey and certain of
its affiliates and certain of our and their respective employees
may have committed to invest in private equity or other
investment funds managed or advised by HIG or other participants
in the Transaction or certain of their respective affiliates or
security holders, and in portfolio companies of such funds, and
may have co-invested with such funds, HIG or other participants
in the Transaction or certain of their respective affiliates or
security holders, and may do so in the future. Furthermore, in
connection with bankruptcies, restructurings, and similar
matters, Houlihan Lokey and certain of its affiliates may have
in the past acted, may currently be acting and may in the future
act as financial advisor to debtors, creditors, equity holders,
trustees and other interested parties (including, without
limitation, formal and informal committees or groups of
creditors) that may have included or represented and may include
or represent, directly or indirectly, or may be or have been
adverse to, AAG, HIG, other participants in the Transaction
and/or their
respective affiliates,
and/or one
or more security holders or portfolio companies of such
entities, for which advice and services Houlihan Lokey and such
affiliates have received and may receive compensation.
Houlihan Lokey has been engaged to render this Opinion to the
Special Committee and we will receive a fee upon delivery of
this Opinion, which is not contingent upon the successful
consummation of the Transaction or the conclusion contained in
this Opinion. AAG also has agreed to reimburse certain of our
D-4
The Special Committee of the Board of Directors
All American Group, Inc.
November 8, 2010
expenses and to indemnify us and certain related parties for
certain potential liabilities arising out of our engagement.
We have not been requested to opine as to, and this Opinion does
not express an opinion as to or otherwise address, among other
things: (i) the underlying business decision of AAG, its
security holders or any other party to proceed with or effect
the Transaction, (ii) the terms of any arrangements,
understandings, agreements or documents related to, or the form,
structure or any other portion or aspect of, the Transaction
(other than the Per Share Consideration to the extent expressly
specified herein) or otherwise, including, without limitation,
the form or structure of the Per Share Consideration,
(iii) the fairness of any portion or aspect of the
Transaction to the holders of any class of securities, creditors
or other constituencies of AAG, or to any other party, except if
and only to the extent expressly set forth in the last paragraph
of this Opinion, (iv) the relative merits of the
Transaction as compared to any alternative business strategies
that might exist for AAG or any other party or the effect of any
other transaction in which AAG or any other party might engage,
(v) the fairness of any portion or aspect of the
Transaction to any one class or group of AAGs or any other
partys security holders or other constituents
vis-à-vis any other class or group of AAGs or such
other partys security holders or other constituents
(including, without limitation, the allocation of any
consideration amongst or within such classes or groups of
security holders or other constituents), (vi) whether or
not AAG, its security holders or any other party is receiving or
paying reasonably equivalent value in the Transaction,
(vii) the solvency, creditworthiness or fair value of AAG
or any other participant in the Transaction, or any of their
respective assets, under any applicable laws relating to
bankruptcy, insolvency, fraudulent conveyance or similar
matters, or (viii) the fairness, financial or otherwise, of
the amount, nature or any other aspect of any compensation to or
consideration payable to or received by any officers, directors
or employees of any party to the Transaction, any class of such
persons or any other party, relative to the Per Share
Consideration or otherwise. Furthermore, no opinion, counsel or
interpretation is intended in matters that require legal,
regulatory, accounting, insurance, tax or other similar
professional advice. It is assumed that such opinions, counsel
or interpretations have been or will be obtained from
appropriate professional sources. Furthermore, we have relied,
with the consent of AAG, on the assessments by AAG and its
advisors as to all legal, regulatory, accounting, insurance and
tax matters with respect to AAG and the Transaction. The
issuance of this Opinion was approved by a committee authorized
to approve opinions of this nature.
Based upon and subject to the foregoing, and in reliance
thereon, it is our opinion that, as of the date hereof, the Per
Share Consideration to be received by holders of AAG Common
Stock (other than the Excluded Holders) in the Transaction is
fair to such holders from a financial point of view.
Very truly yours,
/s/ Houlihan
Lokey Financial Advisors, Inc.
HOULIHAN LOKEY FINANCIAL ADVISORS, INC.
D-5
PART II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
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Item 20.
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Indemnification
of Directors and Officers
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Section 11 of the By-laws of the registrant provides for
the indemnification by the registrant of each director, officer
or employee of the registrant or any of its subsidiaries in
connection with any claim, action, suit or proceeding brought or
threatened by reason of his or her position with the registrant
or any of its subsidiaries. In addition,
sections 23-1-37-1
to 15 of the Indiana Business Corporation Law specifically
empowers the registrant to indemnify, subject to the standards
therein prescribed, any director or officer in connection with
any action, suit or proceeding brought or threatened by reason
of the fact that he or she is or was a director or officer of
the registrant.
Registrant maintains directors and officers liability insurance
covering all directors and officers of the registrant against
claims arising out of the performance of their duties.
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Item 21.
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Exhibits
and Financial Statement Schedules
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(a) Exhibits. See Exhibit Index
immediately following the signature pages.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement,
or the most recent post-effective amendment thereof, which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered,
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act, if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
will be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the purchaser of the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
II-1
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrants annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement will be deemed a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time will be deemed to be the initial bona
fide offering thereof.
(c) (1) The undersigned registrant undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned registrant hereby undertakes that every
prospectus: (i) that is filed pursuant to paragraph
(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities
Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such
post-effective amendment will be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(d) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in the documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) Insofar as indemnification by the Registrant for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement on
Form S-4
to be signed on its behalf by the undersigned, thereunder duly
authorized, in Elkhart, Indiana on December 17, 2010.
ALL AMERICAN GROUP, INC.
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By:
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/s/ Richard
M. Lavers
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Richard M. Lavers
Chief Executive Officer
SPECIALTY VEHICLES LIQUIDATING TRUST
By: All American Group, Inc., as sponsor
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By:
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/s/ Richard
M. Lavers
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Richard M. Lavers
Chief Executive Officer
POWER OF
ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
officers and directors of the Registrant hereby constitutes and
appoints Richard M. Lavers and William P. Johnson his true and
lawful attorney-in-fact and agent, with full power of
substitution, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file
this registration statement under the Securities Act of 1933, as
amended, and any or all amendments (including, without
limitation, post-effective amendments), with all exhibits and
any and all documents required to be filed with respect thereto,
with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorney-in-fact and agent, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same, as fully to all
intents and purposes as he himself might or could do, if
personally present, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Richard
M. Lavers
Richard
M. Lavers
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Chief Executive Officer and Director
(Principal Executive Officer)
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December 17, 2010
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/s/ Colleen
A. Zuhl
Colleen
A. Zuhl
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Chief Financial Officer
(Principal Financial Officer)
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December 17, 2010
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II-3
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Signature
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Title
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Date
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/s/ Stephen
L. Patterson
Stephen
L. Patterson
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Corporate Controller
(Principal Accounting Officer)
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December 17, 2010
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/s/ William
P. Johnson
William
P. Johnson
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Director
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December 17, 2010
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Geoffrey
B. Bloom
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Director
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December 17, 2010
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/s/ Fabian
de Armas
Fabian
de Armas
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Director
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December 17, 2010
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Robert
J. Deputy
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Director
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December 17, 2010
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/s/ John
A. Goebel
John
A. Goebel
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Director
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December 17, 2010
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/s/ Donald
W. Hudler
Donald
W. Hudler
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Director
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December 17, 2010
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/s/ Edwin
W. Miller
Edwin
W. Miller
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Director
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December 17, 2010
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/s/ Matthew
S. Sanford
Matthew
S. Sanford
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Director
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December 17, 2010
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II-4
EXHIBIT INDEX
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Exhibit
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Number
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Description
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2
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.1
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Agreement and Plan of Merger by and among All American Group
Holdings, LLC, All American Acquisition Corporation, All
American Group, Inc., and Richard M. Lavers as Shareholders
Representative, dated November 8, 2010 (included as
Appendix A in this Registration Statement on
Form S-4)
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3
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.1
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Articles of Incorporation of the Company as amended on
May 30, 1995 (incorporated by reference to
Exhibit 3(i) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 1995).
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3
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.2
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Articles of Amendment to Articles of Incorporation (incorporated
by reference to Exhibit 4.2 to the Companys
Form S-3
Registration Statement, File
No. 333-14579).
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3
|
.3
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Articles of Amendment to Articles of Incorporation (incorporated
by reference to the Companys Current Report on
Form 8-K
filed May 5, 2010).
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3
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.4
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Articles of Amendment to Articles of Incorporation (incorporated
by reference to the Companys Current Report on
Form 8-K
filed October 12, 2010).
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3
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.5
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By-Laws as modified through October 27, 2009 (incorporated
by reference to Exhibit 3(ii) to the Companys Current
Report on
Form 8-K/A
filed October 29, 2009).
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4
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.1
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Form of Liquidating Trust Agreement (included as
Appendix B in this Registration Statement on
Form S-4)
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4
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.2
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Demand Promissory Note, dated March 23, 2009, in the
original principal amount of $2,344,801.71 by Coachmen
Industries, Inc. as maker and endorser, payable to Robert J.
Deputy (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed March 24, 2009).
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4
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.3
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Promissory Note dated April 9, 2009 in the original
principal amount of $2,000,000 by Coachmen Industries, Inc. as
maker and endorser, payable to Lake City Bank on or before
April 9, 2012 (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed April 9, 2009).
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4
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.4
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Promissory Note dated April 9, 2009 in the maximum
principal amount of $500,000 by Coachmen Industries, Inc. as
maker and endorser, payable to Lake City Bank on or before
March 31, 2012 (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on
Form 8-K
filed April 9, 2009).
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4
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.5
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Loan Agreement dated as of October 27, 2009 among Coachmen
Industries, Inc., and H.I.G. All American, LLC (incorporated by
reference to Exhibit 2.1 to the Companys Current
Report on
Form 8-K/A
filed October 29, 2009).
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4
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.6
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First Amendment to Loan Agreement dated April 5, 2010 among
Coachmen Industries, Inc. and H.I.G. All American, LLC,
(incorporated by reference to Exhibit 2.1 to the
Companys Current Report on
Form 8-K
filed April 9, 2010).
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4
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.7
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Limited Waiver of Specified Defaults dated as of August 24,
2010 among H.I.G. All American, LLC, All American Group, Inc.
(f/k/a Coachmen Industries, Inc.), All American Homes, LLC, All
American Homes of Colorado, LLC, All American Homes of Georgia,
LLC, All American Homes of Indiana, LLC, All American Homes of
Iowa, LLC, All American Homes of North Carolina, LLC, All
American Homes of Ohio, LLC, All American Building Systems, LLC,
All American Specialty Vehicles, LLC, Coachmen Motor Works, LLC,
Coachmen Motor Works of Georgia, LLC, Consolidated Building
Industries, LLC, Consolidated Leisure Industries, LLC, Coachmen
Operations, Inc., Coachmen Properties, Inc., Mod-U-Kraf Homes,
LLC, and Sustainable Designs, LLC (incorporated by reference to
Exhibit 10 to the Companys Current Report on
Form 8-K
filed August 25, 2010).
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4
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.8
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Senior Secured Revolving Note dated as of October 27, 2009
among Coachmen Industries, Inc., and H.I.G. All American, LLC
(incorporated by reference to Exhibit 4.2 to the
Companys Current Report on
Form 8-K/A
filed October 29, 2009).
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4
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.9
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Second Amended and Restated 20% Secured Subordinated Convertible
Tranche B Note, dated August 24, 2010, by and among
All American Group, Inc. and H.I.G. All American, LLC,
(incorporated by reference to Exhibit 4 to the
Companys Current Report on
Form 8-K
filed August 25, 2010).
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Exhibit
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Number
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Description
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4
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.10
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Amended and Restated Warrant dated April 5, 2010, among
Coachmen Industries, Inc. and H.I.G. All American, LLC,
(incorporated by reference to Exhibit 4.4 to the
Companys Current Report on
Form 8-K
filed April 9, 2010).
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4
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.11
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Common Stock Purchase Warrant dated April 5, 2010, among
Coachmen Industries, Inc. and H.I.G. All American, LLC,
(incorporated by reference to Exhibit 4.6 to the
Companys Current Report on
Form 8-K
filed April 9, 2010).
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4
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.12
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Common Stock Purchase Warrant dated August 5, 2010, among
All American Group, Inc. (f/k/a Coachmen Industries, Inc.) and
H.I.G. All American, LLC, (incorporated by reference to
Exhibit 4 to the Companys Current Report on
Form 8-K
filed August 11, 2010).
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4
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.13
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Registration Rights Agreement dated as of October 27, 2009
among Coachmen Industries, Inc., and H.I.G. All American, LLC
(incorporated by reference to Exhibit 4.5 to the
Companys Current Report on
Form 8-K/A
filed October 29, 2009).
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4
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.14
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First Amendment to Registration Rights Agreement, dated
April 5, 2010, among Coachmen Industries, Inc. and H.I.G.
All American, LLC, (incorporated by reference to
Exhibit 4.5 to the Companys Current Report on
Form 8-K
filed April 9, 2010).
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10
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.1
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Agreement dated as of September 7, 2010 among All American
Building Systems, LLC and Casper/Pope Joint Venture
(incorporated by reference to Exhibit 10(a) to the
Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010).
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*10
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.2
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Executive Benefit and Estate Accumulation Plan, as amended and
restated effective as of September 30, 2000 (incorporated
by reference to Exhibit 10(a) to the Companys Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2001).
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*10
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.3
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2000 Omnibus Stock Incentive Program (incorporated by reference
to Exhibit A to the Companys Proxy Statement dated
March 27, 2000 for its Annual Meeting in 2000).
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*10
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.4
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Resolution regarding Amendment of 2000 Omnibus Stock Incentive
Program adopted by the Companys Board of Directors on
July 27, 2000 (incorporated by reference to
Exhibit 10(b)(i) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2001).
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*10
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.5
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Form of Change in Control Agreements for certain executive
officers (Tier 1) (incorporated by reference to
Exhibit 10(c) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2000).
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*10
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.6
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Form of Change in Control Agreements for certain executive
officers (Tier 2) (incorporated by reference to
Exhibit 10(d) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2000).
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*10
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.7
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Coachmen Industries, Inc. Supplemental Deferred Compensation
Plan (Amended and Restated as of January 1, 2003)
(incorporated by reference to Exhibit 10(e) to the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004).
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*10
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.8
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Executive Annual Performance Incentive Plan effective
January 1, 2002 (incorporated by reference to
Exhibit 10(f) to the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2002).
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*10
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.9
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Form of the 2006 Restricted Stock Award Agreement and listing of
the maximum number of shares each Executive Officer may earn
under the Agreements (incorporated by reference to
Exhibit 10(a) to the Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006).
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10
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.10
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Program Agreement and related Repurchase Agreement dated as of
May 10, 2004 between Textron Financial Corporation and
certain subsidiaries of Coachmen Industries, Inc. (incorporated
by reference to Exhibit 10.2 to the Companys
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004).
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*10
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.11
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Summary of Life Insurance and Long Term Disability Benefits for
Executives (incorporated by reference to Exhibit 10(q) to
the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004).
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*10
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.12
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Description of Non-management Director Compensation
(incorporated by reference to Exhibit 10(r) to the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004).
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10
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.13
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Mentor Protégé Agreement between Coachmen Industries,
Inc. and The Warrior Group, Inc. (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed August 19, 2005).
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Exhibit
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Number
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Description
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*10
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.14
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Severance and Early Retirement Agreement and General Release of
All Claims dated October 23, 2006 among Coachmen
Industries, Inc. and Claire C. Skinner (incorporated by
reference to Exhibit 10(a) to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2006).
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*10
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.15
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Form of the 2006 Restricted Stock Award Agreement and listing of
the maximum number of shares each Executive Officer may earn
under the Agreements (incorporated by reference to
Exhibit 10(a) to the Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006).
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*10
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.16
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2007 Restricted Stock Award Agreement under the 2007 Long-Term
Incentive Plan (incorporated by reference to Exhibit 10(a)
to the Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
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10
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.17
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Standard Purchase Agreement dated October 26, 2006, between
All American Building Systems and the Warrior Group, Inc.
(incorporated by reference to Exhibit 10(b) to the
Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
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10
|
.18
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Standard Purchase Agreement dated December 20, 2007 between
All American Building Systems and the Warrior Group, Inc.
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed January 25, 2008).
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10
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.19
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Standard Purchase Agreement dated December 20, 2007 between
All American Building Systems and the Warrior Group, Inc.
(incorporated by reference to Exhibit 10.2 to the
Companys Current Report on
Form 8-K
filed January 25, 2008).
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10
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.21
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Agreement with ARBOC Mobility, LLC (incorporated by reference to
Exhibit 10(c) to the Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008).
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10
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.22
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Purchase Agreement dated March 1, 2010 between All American
Building Systems and Radford Place Apartments, LLC (incorporated
by reference to the Companys Current Report on
Form 8-K
filed March 2, 2010).
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21
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.1
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Subsidiaries of All American Group, Inc.
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23
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.1
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Consent of Ernst & Young LLP
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23
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.2
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Consent of McGladrey & Pullen LLP
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24
|
.1
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Power of Attorney (included on signature page)
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99
|
.1
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Consent of Houlihan Lokey Financial Advisors, Inc.
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99
|
.2
|
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Form of Proxy Card
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* |
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Management Contract or Compensatory Plan. |