Exhibit 99.2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant þ
Filed by a party other than the registrant o
Check the appropriate box:
o Preliminary proxy statement
o Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2))
þ Definitive proxy statement
o Definitive additional materials
o Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SUNAIR SERVICES CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
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Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
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Form, schedule or registration statement no.:
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SUNAIR
SERVICES CORPORATION
1350 E. NEWPORT CENTER
DRIVE, SUITE 201
DEERFIELD BEACH, FLORIDA 33442
November 20,
2009
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of Sunair Services Corporation
(Sunair) on December 14, 2009 at
11:00 a.m. Eastern Daylight Time, at the Hilton Hotel,
100 Fairway Drive, Deerfield Beach, Florida 33441.
The board of directors of Sunair has approved a merger agreement
providing for the merger of Sunair with and into Buyer
Acquisition Company, Inc. (Merger Sub), a
wholly-owned subsidiary of Massey Services, Inc.
(Massey). If the merger is completed, you will
receive $2.75 in cash for each share of Sunairs common
stock that you own and Sunair will become a wholly owned
subsidiary of Massey.
At the special meeting, you will be asked to consider and vote
on a proposal to adopt the Agreement and Plan of Merger, dated
as of September 28, 2009, by and among Sunair, Massey and
Merger Sub. After careful consideration, our board of directors
approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement and determined
that the merger agreement, the merger and the other transactions
contemplated by the merger agreement are advisable, fair to and
in the best interests of our shareholders. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION
OF THE MERGER AGREEMENT.
The proxy statement attached to this letter provides you with
information about the merger and the special meeting. A copy of
the merger agreement is attached as Annex A to this proxy
statement. We encourage you to read the entire proxy statement
carefully. You may also obtain additional information on Sunair
from documents we have filed with the Securities and Exchange
Commission.
Your vote is very important, regardless of the number of shares
of our common stock you own. The merger cannot be completed
unless shareholders holding a majority of the outstanding shares
of Sunairs common stock as of October 14, 2009, the
record date, approve the merger agreement. If you fail to vote
on the merger agreement or fail to instruct your broker on how
to vote, it will have the same effect as voting against the
approval of the merger agreement.
On behalf of the board of directors, thank you for your
continued support.
Sincerely,
Jack I. Ruff
President and Chief Executive Officer
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
THIS PROXY STATEMENT IS DATED NOVEMBER 20, 2009 AND IS
FIRST BEING
MAILED TO SHAREHOLDERS ON OR ABOUT NOVEMBER 24, 2009.
SUNAIR
SERVICES CORPORATION
DEERFIELD BEACH, FLORIDA 33487
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 14, 2009
A special meeting of the shareholders of Sunair Services
Corporation, a Florida corporation (Sunair,
we, us or our), will be held
at the Hilton Hotel, 100 Fairway Drive, Deerfield Beach, Florida
33441, on December 14, 2009 beginning at 11:00 a.m.,
local time, for the following purposes:
1. Adoption of the merger agreement. To
consider and vote on a proposal to adopt the Agreement and Plan
of Merger, dated as of September 28, 2009, among Massey
Services, Inc. (Massey), Buyer Acquisition Company
Inc., a wholly owned subsidiary of Massey (Merger
Sub), and Sunair, pursuant to which, upon the merger
becoming effective, each outstanding share of Sunair common
stock (other than shares held by Massey, Merger Sub or any
direct or indirect wholly owned subsidiary of Massey or Merger
Sub) will be converted into the right to receive $2.75 in cash,
without interest.
2. Adjournment of the Special Meeting. To
approve the adjournment of the special meeting, if necessary or
appropriate, for, among other reasons, the solicitation of
additional proxies in the event that there are not sufficient
votes at the time of the special meeting to approve the proposal
to adopt the merger agreement.
3. Other Matters. To transact such other
business as may properly come before the special meeting or any
adjournment thereof.
Only shareholders of record of our common stock as of the close
of business on October 14, 2009, will be entitled to notice
of, and to vote at, the special meeting and any adjournment or
postponement of the special meeting. All shareholders of record
are cordially invited to attend the special meeting in person.
Your vote is very important, regardless of the number of
shares of our common stock you own. The merger
cannot be completed unless shareholders holding a majority of
the outstanding shares of Sunairs common stock as of the
record date approve the merger agreement. If you fail to vote on
the merger agreement or fail to instruct your broker on how to
vote, it will have the same effect as voting against the
approval of the merger agreement. Even if you plan to attend the
meeting in person, we request that you complete, sign, date and
return the enclosed proxy in the envelope provided and thus
ensure that your shares will be represented at the meeting if
you are unable to attend.
The board of directors of Sunair recommends that shareholders
vote FOR the adoption of the merger agreement and FOR the
approval of the adjournment of the special meeting, if necessary
or appropriate, for the solicitation of additional proxies in
the event that there are not sufficient votes at the time of the
special meeting to approve the proposal to adopt the merger
agreement.
BY ORDER OF THE BOARD OF DIRECTORS,
Jack I. Ruff
President and Chief Executive Officer
Deerfield Beach, Florida
November 20, 2009
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
TABLE
OF CONTENTS
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Page No.
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3
SUMMARY
This summary highlights selected information from this proxy
statement and may not contain all of the information that is
important to you. To understand the merger fully, and for a more
complete description of the legal terms of the merger, you
should carefully read this entire proxy statement, the annexes
attached to this proxy statement and the documents referred to
or incorporated by reference in this proxy statement. We have
included page references in parentheses to direct you to the
appropriate place in this proxy statement for a more complete
description of the topics presented in this summary. In this
proxy statement, the terms Sunair, we,
us and our refer to Sunair Services
Corporation.
The
Parties to the Merger (page 17)
Sunair
Sunair, through its wholly owned subsidiary, Middleton Pest
Control, Inc. (Middleton), with headquarters located
in Orlando, Florida, provides pest control and lawn care
services to both residential and commercial customers. Middleton
provides essential pest control services and protection against
termites and insects to homes and businesses. In addition,
Middleton supplies lawn care services to homes and businesses,
which includes fertilization treatments and protection against
disease, weeds and insects for lawns and shrubs.
Sunair was incorporated in Florida on September 20, 1956.
Sunairs principal executive offices is located at
1350 E. Newport Center Drive, Suite 201,
Deerfield Beach, Florida 33442 and its telephone number is
(561) 208-7400.
Massey
Massey, along with its subsidiaries, provides residential and
commercial pest control, termite protection and lawn, tree and
shrub care services in Florida, Georgia, and Louisiana. Its
services include pest control, termite protection, drain line
services, flying insect program, bird control program, termite
protection, and landscape care, including GreenUP landscape
services, such as soil testing, customized nutritional programs,
weed control and prevention, insect control and prevention,
disease control and prevention, tree and shrub care, and lawn
aeration.
Massey was incorporated in the state of Florida on
February 5, 1985. Masseys principal executive office
is located at 315 Groveland Street, Orlando, Florida 32804 and
its telephone number is
(407) 645-2500.
Merger
Sub
Buyer Acquisition Company, Inc. (Merger Sub), a
Florida corporation and a wholly owned subsidiary of Massey, was
formed solely for the purpose of entering into the merger
agreement with Sunair and completing the merger, and has not
conducted any business operations.
Merger Sub was incorporated in the state of Florida on
September 21, 2009. Merger Subs principal executive
office is located at 315 Groveland Street, Orlando, Florida
32804 and its telephone number is
(407) 645-2500.
The
Special Meeting (page 13)
Date, Time, Place and Purpose. The special
meeting will be held on December 14, 2009, at
11:00 a.m., local time, at the Hilton Hotel, 100 Fairway
Drive, Deerfield Beach, Florida 33441. At the special meeting,
you will be asked to consider and vote upon proposals to:
(i) approve the merger agreement;
(ii) adjourn the special meeting, if necessary or
appropriate to permit further solicitation of proxies if there
are not sufficient votes at the time of the special meeting to
approve the merger agreement; and
(iii) transact such other business as may properly come
before the special meeting or any adjournments of the special
meeting.
4
Record Date and Voting. Only shareholders who
hold shares of our common stock at the close of business on
October 14, 2009, the record date (record date)
for the special meeting, will be entitled to vote at the special
meeting. Each share of our common stock outstanding on the
record date will be entitled to one vote on each matter
submitted to shareholders for approval at the special meeting.
As of the record date, there were 13,093,588 shares of our
common stock outstanding.
Vote Required. The approval of the merger
agreement requires the affirmative vote of at least a majority
of the outstanding shares of our common stock as of the record
date. The proposal to approve the adjournment of the special
meeting if necessary or appropriate, to solicit additional
proxies requires (i) if a quorum exists, that the number of
shares voted in favor of adjournment are greater than those
voted against, or (ii) in the absence of a quorum, the
affirmative vote of the holders of a majority of the shares of
our common stock represented at the special meeting.
Coconut
Palm Proxy (page 14)
Coconut Palm Capital Investors II, Ltd. (Coconut
Palm) has the power to vote shares of Sunairs common
stock owned by its limited partners pursuant to proxy agreements
executed by its limited partners upon redemption of their
partnership interests. Richard Rochon, our Chairman, and Mario
Ferrari, our Vice Chairman, are deemed to be the beneficial
owners of Coconut Palm. Mr. Rochon and Mr. Ferrari
have advised us that they will not exercise their proxy
authority to vote the shares of Sunairs common stock owned
by Coconut Palms former limited partners (limited
partners) at the special meeting held on December 14,
2009 and these limited partners will be entitled to vote these
shares at the special meeting held on December 14, 2009.
Mr. Rochon and Mr. Ferraris decision not to
exercise their proxy to vote the shares of Sunairs common
stock owned by the limited partners is only for the proposals to
be presented at the special meeting held on December 14,
2009, and they reserve the right to exercise their proxy voting
authority for the limited partners at any subsequent meetings of
shareholders or on any matters approved by written consent.
There is litigation relating to the validity of the Coconut Palm
proxy. See Coconut Palm Proxy
Litigation on page 15.
Certain
Effects of the Merger (page 32)
If the merger agreement is adopted by our shareholders and the
other conditions to closing are satisfied, Merger Sub will merge
with and into Sunair, the separate corporate existence of Merger
Sub will cease, and Sunair will continue as the surviving
corporation, wholly owned by Massey. Upon completion of the
merger, our common stock (other than shares held by Massey) will
be converted into the right to receive $2.75 per share, without
interest and less any required withholding taxes. The surviving
corporation will be a privately held corporation, and you will
cease to have any ownership interest in the surviving
corporation or any rights as a shareholder.
Recommendation
of Our Board of Directors (page 25)
After careful consideration, our board of directors approved the
merger agreement, the merger and the other transactions
contemplated by the merger agreement and declared that the
merger agreement, the merger and the other transactions
contemplated by the merger agreement are advisable, fair to and
in the best interests of our shareholders. ACCORDINGLY, OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ADOPTION OF THE MERGER AGREEMENT.
In reaching its decision, our board of directors evaluated a
variety of business, financial and market factors and consulted
with our management team, legal and financial advisors and our
special committee. In considering the recommendation of our
board of directors with respect to the merger, you should be
aware that certain of our directors and executive officers have
interests in the merger that differ from, or are in addition to,
your interests as a shareholder. See The
Merger Interests of Our Directors and Executive
Officers in the Merger beginning on page 33.
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For the factors considered by our board of directors in reaching
its decision to approve the merger agreement and the merger, see
The Merger Reasons for the Merger
beginning on page 24.
Opinion
of Hyde Park Capital (page 26)
On September 27, 2009, Hyde Park Capital rendered its oral
opinion to our board of directors (which was subsequently
confirmed in writing by delivery of Hyde Park Capitals
written opinion dated September 28, 2009) to the
effect that, as of September 28, 2009, the merger
consideration to be received by the holders of Sunair common
stock in the merger was fair to the holders of Sunair common
stock from a financial point of view.
Hyde Park Capitals opinion was directed to
Sunairs board of directors and only addressed the fairness
from a financial point of view of the merger consideration to be
received by the holders of Sunair common stock in the merger and
not any other aspect or implication of the merger. The summary
of Hyde Park Capitals opinion in this proxy statement is
qualified in its entirety by reference to the full text of the
written opinion which is included as Annex B to this proxy
statement and sets forth the procedures followed, assumptions
made, qualifications and limitations on the review undertaken
and other matters considered by Hyde Park Capital in preparing
its opinion. Sunair encourages its shareholders to carefully
read the full text of Hyde Park Capitals written opinion.
However, neither Hyde Park Capitals opinion nor the
summary of its opinion and the related analyses set forth in
this proxy statement are intended to be, and do not constitute,
advice or a recommendation to any Sunair shareholder as to how
Sunair shareholders should act or vote with respect to the
proposed merger. We paid Hyde Park Capital a customary fee in
connection with the delivery of its opinion. See The
Merger Opinion of Hyde Park Capital.
Goodwill
Impairment (page 30)
In conjunction with the merger and agreed upon purchase price,
Sunair concluded that it needed to take a goodwill impairment in
September 2009. The amount of the goodwill impairment is
approximately $14.2 million for the quarter ended
September 30, 2009. See Goodwill
Impairment on page 30.
Financing
(page 45)
Massey estimates the total amount of funds necessary to complete
the merger and the related transactions to be approximately
$54 million, which includes approximately
$36,007,367 million to be paid to our shareholders, with
$287,192.50 to cash out existing options and the remainder to be
applied to pay our outstanding debt and fees and expenses
incurred in connection with the merger and the related
transactions. These payments are expected to be funded with a
$33 million senior credit facility from SunTrust Bank and
M&I Marshall and Ilsley Bank (M&I Bank).
In addition, Massey has received a commitment letter from AEA
Mezzanine Management LP (AEA Mezzanine) for
additional financing of up to $20 million.
Effect on
Stock Options and Warrants (page 39)
Stock
Options
At the effective time of the merger, all outstanding options to
purchase shares of our common stock will be cancelled by us and
will be converted into the right to receive a cash payment equal
to the excess, if any, of $2.75 per share in cash over the
exercise price per share of the option, multiplied by the number
of shares subject to the applicable option, whether or not then
exercisable, without interest and less any applicable
withholding tax. If the exercise price per share of any option
is $2.75 or greater, the holder thereof will not receive any
cash payment when the option is cancelled.
Warrants
We currently have warrants outstanding to purchase an aggregate
of 6 million shares of our common stock, at prices of $6.30
per share for 1 million warrants and $7.00 per share for
5 million warrants, which
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expire on dates ranging from February 7, 2010 through
January 27, 2011. Massey has agreed to assume these
warrants and at the effective time each outstanding and
unexercised warrant shall be assumed by the surviving
corporation on the same terms and conditions. If a warrant
holder exercises a warrant after the merger is closed, the
surviving company has made provision so that the holder upon
exercise of all or any part of the holders warrant by
paying the exercise price specified in the warrant agreement,
either $6.30 per share or $7.00 per share, shall be entitled to
receive upon such exercise, the cash, $2.75 per share, that such
warrant holder would have been entitled to receive if such
warrant holder had exercised the warrant prior to the closing.
Interests
of Our Directors and Executive Officers in the Merger
(page 33)
Our directors and executive officers may have interests in the
merger that are different from, or in addition to, yours,
including the following:
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our directors and executive officers will receive cash
consideration for their stock options to the extent the exercise
price of such options is less than $2.75 per share;
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in the event that certain executive officers or an officer
resigns from their employment for good reason or are terminated
without cause following completion of the merger, they are
entitled to the severance benefits described under The
Merger Interests of Our Directors and Executive
Officers in the Merger;
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the merger agreement provides for indemnification by Massey and
liability insurance arrangements for each of our current and
former directors and officers for a period of six years after
completion of the merger, in each case for certain events
occurring at or before the effective time of the merger; and
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RPC Financial Advisors, LLC (RPC), a company
affiliated with two of our directors and our chief executive
officer, will receive a payment equal to two percent (2%) of
Sunairs enterprise value, as determined by using the most
recently available financial statements of Sunair at the
closing. Based on Sunairs financial statements as of
June 30, 2009, RPC would have received a transaction fee
equal to $1,090,386.
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Our board of directors was aware of these interests and
considered them, among other matters, in making its decisions.
No
Appraisal Rights (page 36)
Under Florida law, you do not have appraisal rights in
connection with the merger.
Material
United States Federal Income Tax Consequences of the Merger
(page 36)
For U.S. federal income tax purposes, the merger will be
treated as a sale of the shares of our common stock for cash by
each of our shareholders that receives cash pursuant to the
merger. As a result, in general, each shareholder will recognize
gain or loss equal to the difference, if any, between the amount
of cash received in the merger and such shareholders
adjusted tax basis in the shares surrendered. Such gain or loss
will be capital gain or loss if the shares of common stock
surrendered are held as a capital asset in the hands of the
shareholder, and will be long-term capital gain or loss if the
shares of common stock have a holding period of more than one
year at the time of the merger. Shareholders are urged to
consult their own tax advisors as to the particular tax
consequences to them of the merger.
Regulatory
Approvals (page 38)
Except for filing of articles of merger in Florida at or before
the effective date of the merger and filing the proxy statement
with the Securities and Exchange Commission (SEC),
we are unaware of any material federal, state or foreign
regulatory requirements or approvals required for the execution
of the merger agreement or completion of the merger.
7
Procedure
for Surrender of Certificates and Receipt of Merger
Consideration (page 39)
Shortly after the effective time of the merger, a paying agent
will mail a letter of transmittal and instructions to you and
the other Sunair shareholders. The letter of transmittal and
instructions will tell you how to surrender your stock
certificates in exchange for the merger consideration. You
should not return your stock certificates with the enclosed
proxy card, and you should not forward your stock certificates
to the paying agent without a letter of transmittal.
No
Solicitation of Competing Transaction Proposals
(page 44)
The merger agreement restricts our ability to solicit or engage
in discussions or negotiations with a third party regarding
specified transactions involving Sunair. Despite these
restrictions, under certain limited circumstances required for
our board of directors to comply with its fiduciary duties, our
board of directors may respond to a bona fide written takeover
proposal or terminate the merger agreement and enter into an
agreement with respect to a superior proposal if we pay a
termination fee. We are required to pay a termination fee
ranging from $2.75 million to a maximum of
$3.5 million, which depends on when the merger agreement is
terminated and Masseys costs of obtaining financing
extensions or closing on the financing. We are required to pay
this termination fee within 6 months after we terminate the
merger agreement.
Conditions
to Consummation of the Merger (page 46)
We and Massey will not complete the merger unless a number of
conditions are satisfied or waived, as applicable, including
approval by our shareholders of the merger agreement and Massey
having sufficient funds at closing to satisfy all of its
obligations under the merger agreement, including payment in
full of the merger consideration.
Deposit
(page 47)
Massey deposited $4 million in an escrow account on the
date of signing the merger agreement. If the merger agreement
closes, this deposit will be applied to Sunairs closing
expenses and any remaining amount will be deposited in the
exchange fund and the paying agent will use the funds to pay the
merger consideration to Sunairs shareholders. If the
merger agreement does not close, this deposit will be returned
to Massey, unless Sunair terminates the merger agreement in
situations where it is entitled to a termination fee. If Sunair
is entitled to a termination fee, the $4 million deposit
will be advanced to Sunair by the escrow agent as payment in
full of the termination fee.
Termination
of the Merger Agreement (page 47) and Termination Fees
(page 48)
The merger agreement contains provisions addressing the
circumstances under which we or Massey may terminate the merger
agreement. We are required to pay Massey a termination fee of
$2.75 million if we terminate the merger agreement on or
before November 15, 2009 because we have received a
superior acquisition proposal. If we terminate the merger
agreement after November 15, 2009 because we have received
a superior acquisition proposal, the amount of the termination
fee is equal to $2.75 million plus the actual cost of
lenders fee paid by Massey to extend the termination date
of the financing letters beyond November 15, 2009 or to
close on such financing, up to a maximum of $3.5 million.
We are required to pay this termination fee within six months
after the date of the termination of the merger agreement.
Massey will pay us a termination fee of $4 million if
(i) we terminate the merger agreement because the merger
has not closed on or before February 25, 2010 due to the
failure of Massey to satisfy any of its obligations under the
merger agreement or (ii) Massey has breached its covenants
and obligations under the merger agreement, and these matters
can not be cured, if curable, with 30 days notice, provided
that in both situations we can not be in breach of any of our
obligations under the merger agreement.
8
Market
Price of Our Common Stock (page 49)
Our common stock is listed on the American Stock Exchange (the
AMEX) under the trading symbol SNR. The
closing sale price of our common stock on the AMEX on
September 28, 2009, which was the last trading day before
we announced the merger, was $1.84. On November 19, 2009,
the last trading day before the date of this proxy statement,
the closing price of our common stock on AMEX was $2,69.
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address some
commonly asked questions regarding the special meeting and the
merger. These questions and answers may not address all
questions that may be important to you as our shareholder.
Please refer to the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement.
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What is the date, time and place of the special meeting? |
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The special meeting of our shareholders will be held at the
Hilton Hotel, 100 Fairway Drive, Deerfield Beach, Florida 33441,
on December 14, 2009, beginning at 11:00 a.m., local
time. |
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What am I being asked to vote on? |
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You are being asked to vote on the following: |
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Approval of the merger agreement (Proposal 1);
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Approval of the adjournment of the special meeting,
if necessary or appropriate, to solicit additional proxies if
there are insufficient votes at the time of the meeting to
approve the merger agreement (Proposal 2); and
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The transaction of any other business that may
properly come before the special meeting or any adjournments or
postponements of the special meeting.
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How does the board of directors recommend that I vote? |
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Our board of directors recommends that you vote: |
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FOR the approval of the merger
agreement (Proposal 1); and
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FOR the approval of the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies if there are insufficient votes at
the time of the meeting to approve the merger agreement
(Proposal 2).
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How many shares must be present or represented at the special
meeting in order to conduct business? |
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A quorum of shareholders is necessary to hold a valid special
meeting. A quorum is present at the special meeting if a
majority of the outstanding shares of our common stock entitled
to vote on the record date are present in person or represented
by proxy. Withheld votes, abstentions and broker non-votes are
counted as present for the purpose of determining whether a
quorum is present. |
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What vote of our shareholders is required to approve the
proposals? |
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The vote requirements to approve the proposals are as follows: |
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The proposal to approve the merger agreement
(Proposal 1) requires the affirmative vote of the
holders of a majority of the outstanding shares of our common
stock as of the record date for the special meeting. Because
the required vote is based on the number of shares of our common
stock outstanding and not the number of votes cast, failure to
vote your shares (including as a result of broker non-votes) and
abstentions will have the same effect as voting against approval
of the merger agreement; and
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The proposal to approve the adjournment of the
special meeting (Proposal 2), if necessary or appropriate,
to solicit additional proxies requires (i) if a quorum
exists, that the number of shares voted in favor of adjournment
are greater than those voted against, or (ii) in the
absence or a quorum, the affirmative votes of the holders of a
majority of the shares of our common stock represented at the
special meeting. If a quorum is present, abstentions will not
count as a vote cast on the proposal to adjourn the meeting, if
necessary or appropriate to solicit additional proxies, but will
count for the purpose of determining whether a quorum is
present. As a result if a quorum is present and you abstain, it
will have no effect on this proposal. If a quorum is not
present, then an abstention or broker non-vote will have the
same effect as a vote against this proposal.
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We urge you to complete, sign and return the enclosed proxy card
to assure the representation of your shares of Sunairs
common stock at the special meeting. |
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Who is entitled to vote at the special meeting? |
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Only shareholders of record as of the close of business on
October 14, 2009, the record date for the special meeting,
are entitled to receive notice of and to vote at the special
meeting. You will have one vote at the special meeting for each
share of our common stock you owned at the close of business on
the record date. On the record date, 13,093,588 shares of
our common stock were outstanding and entitled to be voted at
the special meeting. |
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What do I need to do now? How do I vote? |
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We urge you to carefully read this proxy statement, including
its annexes and any documents referred to herein in their
entirety, and to consider how the merger affects you. If you are
a shareholder of record, then you can ensure that your shares
are voted at the special meeting by completing, signing, dating
and mailing the accompanying proxy card and returning it in the
envelope provided. If you are a registered shareholder and you
attend the special meeting, you may deliver your completed proxy
card in person or vote at the special meeting. |
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Please do NOT send in your stock certificates at this time. |
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If your shares of our common stock are held in street
name by your broker, be sure to give your broker
instructions on how you want to vote your shares because your
broker will not be able to vote on the merger agreement proposal
without instructions from you. See the question below If
my broker holds my shares in street name, will my
broker vote my shares for me? |
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What if I return my proxy card but do not provide voting
instructions? |
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If you sign and return your proxy card and do not indicate how
you want to vote, your proxy card will be voted
FOR the proposal to approve the merger
agreement, FOR the proposal to approve the
adjournment of the special meeting, if necessary or appropriate
to solicit additional proxies, and in accordance with the
recommendation of our board of directors on any other matters
properly brought before the meeting for a vote. |
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If my broker holds my shares in street name, will
my broker vote my shares for me? |
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Yes, but only if you provide specific instructions to your
broker on how to vote. You should follow the directions provided
by your broker regarding how to instruct your broker to vote
your shares. Unless you follow the instructions, your shares
will not be voted and will have the same effect as if you voted
against the approval of the merger agreement. |
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What is the difference between holding shares as a
shareholder of record and as a beneficial owner? |
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Many of our shareholders hold their shares through a broker,
trustee or other nominee (such as a bank) rather than directly
in their own name. As summarized below, there are some
distinctions between shares owned of record and those owned
beneficially. |
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Shareholder of Record. If your shares are
registered directly in your name with our transfer agent,
American Stock Transfer & Trust Company, you are
considered to be the shareholder of record with respect
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to those shares and these proxy materials are being sent
directly to you. As the shareholder of record, you have the
right to grant your proxy directly to us or to vote in person at
the special meeting. We have enclosed a proxy card for you to
use. |
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Beneficial Owner. If your shares are held in
a brokerage account, by a trustee or by another nominee (such as
a bank), you are considered the beneficial owner of shares held
in street name and these proxy materials are being
forwarded to you, together with a voting instruction card by
your broker, trustee or nominee. As the beneficial owner, you
have the right to direct your broker, trustee or other nominee
on how to vote and you may also attend the special meeting.
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May I attend the special meeting? |
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You are entitled to attend the special meeting only if you were
a shareholder as of the close of business on the record date or
if you hold a valid proxy for the special meeting. You should be
prepared to present photo identification for admittance to the
special meeting. If you are a shareholder of record, your name
will be verified against the list of shareholders of record on
the record date prior to your being admitted to the special
meeting. If you are not a shareholder of record but hold shares
in street name through a broker, trustee or other
nominee, you should provide proof of beneficial ownership on the
record date, such as your most recent brokerage account
statement, a copy of the voting instruction card provided to you
by your broker or other nominee, or other similar evidence of
ownership. If you do not provide photo identification or comply
with the procedures outlined above, you will not be admitted to
the special meeting. |
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Should I send in my stock certificate(s) now? |
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NO. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR
PROXY. After the merger is completed, you will receive written
instructions, including a letter of transmittal, for exchanging
your shares of our common stock for the merger consideration of
$2.75 per share in cash, without interest and less applicable
withholding tax. |
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May I change my vote after I have mailed my signed proxy
card? |
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Yes. You may change your vote at any time before the shares of
our common stock reflected on your proxy card are voted at the
special meeting. If you hold your shares in your name, you have
the unconditional right to revoke your proxy at any time prior
to its exercise by employing any of the following three methods: |
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first, you can deliver to our Corporate Secretary,
at our offices located at 1350 E. Newport Center
Drive, Suite 201, Deerfield Beach, Florida 33442, a written
notice (dated later than the date of your proxy card) stating
that you would like to revoke your proxy;
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second, you can submit by mail a proxy dated after
the date of the proxy you wish to revoke, provided the new proxy
is received before the polls close at the special meeting; or
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third, you can attend the meeting and vote in person.
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Any written notice of revocation should be delivered to our
Corporate Secretary at or before the taking of the vote at the
special meeting. Revocation of your proxy, without any further
action, will mean your shares will not be voted at the special
meeting or counted towards satisfying the quorum requirements.
Your attendance at the special meeting will not revoke your
proxy unless you specifically request to vote at the special
meeting. |
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If you have instructed your broker to vote your shares, you must
follow directions received from your broker to change your vote.
You cannot vote shares held in street name by
returning a proxy card directly to us or by voting in person at
the special meeting, unless you obtain a legal proxy from your
bank, broker or other nominee. |
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Who will bear the cost of the solicitation? |
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The expense of soliciting proxies in the enclosed form will be
borne by Sunair. In addition, we may reimburse brokers, banks
and other custodians, nominees and fiduciaries representing
beneficial owners of |
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shares for their expenses in forwarding soliciting materials to
such beneficial owners. Proxies may also be solicited by certain
of our directors, officers and employees, personally or by
telephone, facsimile or other means of communication. |
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What does it mean if I receive more than one set of voting
materials? |
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If you have shares of our common stock that are registered
differently and are in more than one account, you will receive
more than one proxy card. Please follow the directions for
submitting a proxy on each of the proxy cards you receive to
ensure that all of your shares are voted. |
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What happens if I sell my shares before the special
meeting? |
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The record date of the special meeting is earlier than the
special meeting and the date that the merger is expected to be
completed. If you transfer your shares of Sunair common stock
after the record date but before the special meeting, you will
retain your right to vote at the special meeting but will have
transferred the right to receive $2.75 per share in cash to be
received by our shareholders in the merger. In order to receive
the $2.75 per share, you must hold your shares through the
completion of the merger. |
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When do you expect the merger to be completed? |
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We are working toward completing the merger as quickly as
possible, but we cannot predict the exact timing. We expect to
complete the merger no later than five business days after all
closing conditions contained in the merger agreement have been
satisfied or waived. See The Merger
Agreement Conditions to the Merger. |
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When will I receive the cash consideration for my shares? |
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After the merger is completed, you will receive written
instructions, including a letter of transmittal, that will
explain how to exchange your shares for the cash consideration
to be paid in the merger. When you properly complete and return
the required documentation described in the written
instructions, you will receive from the paying agent a payment
of the cash consideration for your shares. |
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Am I entitled to appraisal rights? |
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No, you do not have appraisal rights in connection with the
merger. |
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Who can help answer my other questions? |
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If you have additional questions about the special meeting or
the merger, including the procedures for voting your shares, or
if you would like additional copies, without charge, of this
proxy statement, you should contact our Corporate Secretary at
(561) 208-7400.
If your broker holds your shares, you may also call your broker
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CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking statements about
our plans, objectives, expectations and intentions.
Forward-looking statements include information concerning
possible or assumed future results of operations of our company,
the expected completion and timing of the merger and other
information relating to the merger. Generally these
forward-looking statements can be identified by the use of
forward-looking terminology such as anticipate,
believe, estimate, expect,
may, should, plan,
intend, project and similar expressions.
For each of these statements, we claim the protection of the
safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. You should
read statements that contain these words carefully. They discuss
our future expectations or state other forward-looking
information, and may involve known and unknown risks over which
we have no control. Those risks include, without limitation:
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the current market price of our common stock may reflect a
market assumption that the merger will occur, and a failure to
complete the merger could result in a decline in the market
price of our common stock;
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the occurrence of any event, change or other circumstances that
could give rise to a termination of the merger agreement;
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under certain circumstances, we may have to pay a termination
fee to Massey of $2.75 million up to a maximum of
$3.5 million;
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the inability to complete the merger due to the failure to
obtain shareholder approval or the failure to satisfy other
conditions to consummation of the merger;
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the failure of the merger to close for any other reason,
including Masseys inability to have adequate funds to
purchase Sunair at closing;
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our remedies against Massey with respect to certain breaches of
the merger agreement may not be adequate to cover our damages;
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the proposed transactions may disrupt current business plans and
operations, and there may be potential difficulties in
attracting and retaining employees as a result of the announced
merger;
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due to restrictions imposed in the merger agreement, we may be
unable to respond effectively to competitive pressures, industry
developments and future opportunities;
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the effect of the announcement of the merger on our business
relationships, operating results and business generally;
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the costs, fees, expenses and charges we have incurred, and may
incur, related to the merger, whether or not the merger is
completed;
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the risk that we may be subject to litigation in connection with
the merger; and
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other risks detailed in our filings with the Securities and
Exchange Commission (the SEC), including
Item 1A. Risk Factors in our Annual Report on
Form 10-K
for our fiscal year ended September 30, 2008. See
Where You Can Find More Information on
page 52.
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We believe that the assumptions on which our forward-looking
statements are based are reasonable. However, we cannot assure
you that the actual results or developments we anticipate will
be realized or, if realized, that they will have the expected
effects on our business or operations. All subsequent written
and oral forward-looking statements concerning the merger or
other matters addressed in this proxy statement and attributable
to us or any person acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained or
referred to in this section. Forward-looking statements speak
only as of the date of this proxy statement or the date of any
document incorporated by reference in this document. Except as
required by applicable law or regulation, we do not undertake to
release the results of any revisions of these forward-looking
statements to reflect future events or circumstances.
THE
SPECIAL MEETING
Place,
Time and Purpose of the Special Meeting
This proxy statement is being furnished to our shareholders as
part of the solicitation of proxies by our board of directors
for use at the special meeting to be held at the Hilton Hotel,
100 Fairway Drive, Deerfield Beach, Florida 33441 on
December 14, 2009, beginning at 11:00 a.m., Eastern
Daylight Time, or at any postponement or adjournment thereof.
The purpose of the special meeting is for our shareholders to
consider and vote upon the adoption of the merger agreement. Our
shareholders must adopt the merger agreement for the merger to
occur. If the shareholders fail to adopt the merger agreement,
the merger will not occur. A copy of the merger agreement is
attached to this proxy statement as Annex A. This proxy
statement and the enclosed form of proxy are first being mailed
to our shareholders on or about November 24, 2009.
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Record
Date and Quorum
The holders of record of our common stock as of the close of
business on October 14, 2009, the record date for the
special meeting, are entitled to receive notice of, and to vote
at, the special meeting. On the record date, there were
13,093,588 shares of our common stock outstanding.
The holders of a majority of the outstanding shares of our
common stock at the close of business on the record date
represented in person or by proxy will constitute a quorum for
purposes of the special meeting. A quorum is necessary to hold
the special meeting. Once a share is represented at the special
meeting, it will be counted for the purpose of determining a
quorum at the special meeting and any postponement or
adjournment of the special meeting. However, if a new record
date is set for the adjourned special meeting, then a new quorum
will have to be established.
Required
Vote
The approval of the merger agreement requires the affirmative
vote of the shareholders of a majority of our outstanding shares
of common stock as of the record date of the special meeting. If
you abstain from voting, either in person or by proxy, or do not
instruct your broker or other nominee how to vote your shares,
it will effectively count as a vote against the approval of the
merger agreement. The approval of the proposal to adjourn the
meeting, if necessary or appropriate, to solicit additional
proxies requires (i) if a quorum exists, that the number of
shares voted in favor of adjournment are greater than those
voted against, or (ii) in the absence of a quorum, the
affirmative vote of the holders of a majority of the shares of
our common stock represented at the special meeting. If you
abstain from voting, either in person or by proxy, or do not
instruct your broker or other nominee how to vote your shares,
(i) if a quorum is present, it will not affect the
adjournment, if necessary or appropriate, to permit further
solicitation of proxies or (ii) if a quorum is not present,
then an abstention will have the same effect as a vote against
this proposal.
Coconut
Palm Proxy
On February 8, 2005, Coconut Palm purchased 5 million
units (Units) in Sunair for an aggregate purchase
price of $25 million. Each Unit consisted of (i) one
share of our common stock, (ii) one warrant to purchase one
share of our common stock at an exercise price of $6 per share
with a term of three years which expired on February 7,
2008 and (iii) one warrant to purchase one share of our
common stock at an exercise price of $7 per share with a term of
five years to expire on February 7, 2010. Coconut Palm
obtained the $25 million for its investment in Sunair by
selling limited partnership interests to accredited investors.
Following the closing of its initial investment on
February 8, 2005, Coconut Palm beneficially owned
5 million shares, or approximately 55.46% of Sunairs
then outstanding shares of common stock, exclusive of
outstanding options and warrants. As of October 14, 2009,
Coconut Palm beneficially owns 4,194,700 or 37.54% of
Sunairs outstanding shares of common stock, exclusive of
outstanding options and warrants.
Since its initial purchase of Sunairs Units on
February 8, 2005 through the record date, Coconut Palm has
distributed an aggregate of 4,928,998 shares of our common
stock plus warrants to purchase 4,297,832 additional shares of
common stock to its limited partners in exchange for the
redemption of their respective limited partnership interests. In
connection with the distributions of shares, Coconut Palms
limited partners granted to Coconut Palm Capital Investors II,
Inc. (Coconut Palm, Inc.), the general partner of
Coconut Palm, a proxy to vote, in its sole discretion, the
securities owned by the limited partners at any meeting of
Sunairs shareholders, as well as in any action by written
consent of Sunairs shareholders.
Richard Rochon, our Chairman, and Mario Ferrari, our Vice
Chairman, are deemed to be the beneficial owners of Coconut Palm
and Coconut Palm, Inc. and exercise the proxy authority to vote
the shares of Sunairs common stock owned by the Coconut
Palm limited partners. Mr. Rochon and Mr. Ferrari have
advised us that they will not exercise their proxy authority to
vote the shares of Sunairs common stock owned by Coconut
Palms former limited partners at the special meeting held
on December 14, 2009 and these limited partners will be
entitled to vote these shares at the special held meeting held
on December 14, 2009. Mr. Rochon and
Mr. Ferraris decision not to exercise their proxy to
vote the shares of Sunairs common stock owned by the
limited partners is only for the proposals to be presented at
the special meeting held on
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December 14, 2009 and they reserve the right to exercise
their proxy voting authority for the limited partners at any
subsequent meetings of shareholders or on any matters approved
by written consent.
There is litigation relating to the validity of the Coconut Palm
proxy. See Coconut Palm Proxy
Litigation on page 15.
Coconut
Palm Proxy Litigation
Lawsuit
filed by the Dissident Group against Sunair
On February 19, 2009, Michael Brauser, Dru Schmitt and
Michael Herman (the Dissident Group) filed a
complaint in the Fifteenth Judicial Circuit Court
(Court or the Palm Beach Court) in Palm
Beach County, Florida against us, Coconut Palm and Coconut Palm
Inc. The claims relate to the Dissident Groups actions in
February 2009 to take control of Sunair by replacing our current
board with their six nominees and their claim that certain
proxies granted to Coconut Palm Inc. by Mr. Brauser and
Mr. Schmitt are not valid.
In the complaint, the Dissident Group demanded that (i) we
provide it with a copy of our shareholder list and pre-addressed
mailing labels for our shareholders as of January 28, 2009,
the record date for our 2009 Annual Meeting of Shareholders
(Count I), (ii) the Court issue a declaratory
judgment relating to the validity of proxies granted to Coconut
Palm Inc. by Mr. Brauser and Mr. Schmitt (Count
II), and (iii) that the Court enjoin our Annual
Meeting to be held on March 18, 2009 because our proxy
materials contained misrepresentations and omissions of material
facts (Count III). On March 17, 2009, Sunair,
Coconut Palm and Coconut Palm Inc. filed a notice of removal to
remove the lawsuit to the United States District Court, the
Southern District of Florida (Federal Court), which
the Palm Beach Court granted two days later. On April 16,
2009, the Dissident Group filed a motion to remand the lawsuit
to the state court, the Palm Beach Court. On July 6, 2009,
the Federal Court entered an order denying the motion to remand.
On March 24, 2009, Sunair, Coconut Palm and Coconut Palm
Inc. filed a motion to dismiss the lawsuit and the Dissident
Group filed a response to this motion on May 18, 2009.
Sunair, Coconut Palm and Coconut Palm, Inc. filed a reply to the
Dissident Groups response to the motion to dismiss on
May 29, 2009. On August 10, 2009, the Federal Court
granted the motion to dismiss as to Count III and denied
the motion as to Counts I and II, without prejudice to Sunair,
Coconut Palm and Coconut Palm, Inc. We believe this lawsuit is
without merit and intend to continue to vigorously defend
ourselves by, among other things, filing a motion for summary
judgment on Counts I and II.
Complaint
filed by Sunair against the Dissident Group
On March 12, 2009, we filed a complaint in the Federal
Court against the Dissident Group and certain other
co-defendants for violations of federal securities laws. The
complaint relates to actions that have arisen in connection with
the information statement that the Dissident Group filed with
the SEC on January 28, 2009, as amended on
February 25, March 6 and March 9, 2009 (collectively,
the Information Statement), in which the Dissident
Group sought to remove our current board of directors and
replace it with their nominees.
The complaint alleges that the Dissident Group and certain other
co-defendants unlawfully solicited proxies from our shareholders
in violation of Section 14(a) and 14(c) of the Exchange Act
of 1934, as amended (Exchange Act) in connection
with their actions to take control of the Company and replace
our current board of directors with their six nominees. It also
alleges that the Information Statement filed by the Dissident
Group omits material information relating to
Mr. Brausers background.
With our lawsuit, we are seeking injunctive relief against the
Dissident Group to prevent them from voting any proxies obtained
in the unlawful proxy solicitation, requiring corrective
disclosure in the Information Statement and establishing a
90-day
cooling off period before the Dissident Group can commence any
further activity relating to a change of control. The Dissident
Group has filed motions for extension of time to respond to the
Complaint. On September 1, 2009, the Federal Court granted
an extension of time through September 30, 2009, for the
Dissident Group to file an answer to the complaint. On
September 3, 2009, the Federal Court stayed the lawsuit
until the earlier of the following dates: (i) within three
days of the sale of Sunair or (ii) November 1, 2009.
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Dismissal
of Lawsuits relating to Validity of the Coconut Palm Proxy at
Closing
Massey has reached a settlement agreement with the Dissident
Group that provides that at the closing of the merger
(i) the Dissident Group will dismiss its lawsuit against
Sunair, (ii) Massey will cause Sunair to dismiss its
lawsuit against the Dissident Group and (iii) the Dissident
Group will grant a general release to Sunair and Massey and
their respective officers, directors and employees as to all
potential claims by the Dissident Group.
Proxies;
Revocation
If you are a shareholder of record and submit a proxy by
returning a signed proxy card by mail, your shares will be voted
at the special meeting as you indicate on your proxy card. If no
instructions are indicated on your proxy card, your shares of
Sunair common stock will be voted FOR the
adoption of the merger agreement and FOR any
adjournment or postponement of the special meeting, if necessary
or appropriate, to solicit additional proxies.
If your shares are held in street name by your
broker, you should instruct your broker how to vote your shares
using the instructions provided by your broker. If you have not
received such voting instructions or require further information
regarding such voting instructions, contact your broker and they
can give you directions on how to vote your shares. Under the
rules of the stock exchanges (NYSE, NASDAQ and AMEX), brokers
who hold shares in street name for customers may not
exercise their voting discretion with respect to the approval of
non-routine matters such as the merger proposal and thus, absent
specific instructions from the beneficial owner of such shares,
brokers are not empowered to vote such shares with respect to
the adoption of the merger agreement (i.e., broker
non-votes). Shares of our common stock held by persons
attending the special meeting but not voting, or shares for
which we have received proxies with respect to which holders
have abstained from voting, will be considered abstentions.
Abstentions and properly executed broker non-votes, if any, will
be treated as shares that are present and entitled to vote at
the special meeting for purposes of determining whether a quorum
exists but will have the same effect as a vote
AGAINST adoption of the merger agreement and
any adjournment of the special meeting if a quorum is not
present at the special meeting.
You may revoke your proxy at any time before the vote is taken
at the special meeting. To revoke your proxy, you must either
advise the Corporate Secretary of Sunair in writing, submit by
mail a new proxy card dated after the date of the proxy you wish
to revoke or attend the special meeting and vote your shares in
person. Attendance at the special meeting will not by itself
constitute revocation of a proxy.
Please note that if you hold your shares in street
name and you have instructed your broker to vote your
shares, the options for revoking your proxy described in the
paragraph above do not apply and instead you must follow the
directions provided by your broker to change your vote.
We do not expect that any matter other than the adoption of the
merger agreement (and the approval of the adjournment of the
special meeting, if necessary or appropriate, to solicit
additional proxies) will be brought before the special meeting.
If, however, any such other matter is properly presented at the
special meeting or any adjournment of the special meeting, the
persons appointed as proxies will have discretionary authority
to vote the shares represented by duly executed proxies in
accordance with their discretion and judgment.
Solicitation
of Proxies
Sunair will pay the cost of this proxy solicitation. In addition
to soliciting proxies by mail, our directors, officers and
employees may solicit proxies personally and by telephone,
facsimile or other electronic means of communication. These
persons will not receive additional or special compensation for
such solicitation services. We will, upon request, reimburse
brokers, banks and other nominees for their expenses in sending
proxy materials to their customers who are beneficial owners and
obtaining their voting instructions. At this time, we do not
anticipate that we will be retaining a third-party solicitation
firm, but should we determine, in
16
the future, that it is in our best interests to do so, we will
retain a solicitation firm and pay for all costs and expenses
associated with retaining this solicitation firm.
THE
PARTIES TO THE MERGER AGREEMENT
Sunair
Services Corporation
Sunair, through its wholly owned subsidiary, Middleton, with
headquarters located in Orlando, Florida, provides pest control
and lawn care services to both residential and commercial
customers. Middleton provides essential pest control services
and protection against termites and insects to homes and
businesses. In addition, Middleton supplies lawn care services
to homes and businesses, which includes fertilization treatments
and protection against disease, weeds and insects for lawns and
shrubs. A detailed description of our business can be found in
our
Form 10-K
for our fiscal year ended September 30, 2008 and other
filings with the SEC. See Where You Can Find More
Information.
Sunair was incorporated in the state of Florida on
September 20, 1956. Sunairs principal executive
office is located at 1350 E. Newport Center Drive,
Suite 201, Deerfield Beach, Florida 33442 and its telephone
number is
(561) 208-7400.
Massey
Services, Inc.
Massey, along with its subsidiaries, provides residential and
commercial pest control, termite protection and lawn, tree and
shrub care services in Florida, Georgia, and Louisiana. Its
services include pest control, termite protection, drain line
services, flying insect program, bird control program, termite
protection, and landscape care, including GreenUP landscape
services, such as soil testing, customized nutritional programs,
weed control and prevention, insect control and prevention,
disease control and prevention, tree and shrub care, and lawn
aeration.
Massey was incorporated in the state of Florida on
February 5, 1985. Masseys principal executive office
is located at 315 Groveland Street, Orlando, Florida 32804 and
its telephone number is
(407) 645-2500.
Merger
Sub
Merger Sub, a Florida corporation and wholly owned subsidiary of
Massey, was formed solely for the purpose of entering into the
merger agreement with Sunair and completing the merger, and has
not conducted any business operations. Its address is
c/o Massey
Services, Inc., 315 Groveland Street, Orlando, Florida 32804,
and its telephone number is
(407) 645-2500.
Merger Sub was incorporated in the state of Florida on
September 21, 2009. Merger Subs principal executive
office is located at 315 Groveland Street, Orlando, Florida
32804 and its telephone number is
(407) 645-2500.
THE
MERGER
Background
of the Merger
In July 2008, Richard Rochon, our chairman, was contacted by
Harvey L. Massey, the chairman and CEO of Massey to discuss a
possible combination of Sunair and Massey. Mr. Rochon and
Mr. Massey met at Sunairs executive offices in Boca
Raton, Florida on July 3, 2008. At their initial meeting,
Mr. Massey indicated that Massey would like to make an
offer to acquire Sunair.
On July 28, 2008, Sunair received a letter from Massey in
which it expressed an interest in acquiring Sunair through
acquisition by merger with a subsidiary of Massey or another
form of acquisition, at a price not to exceed $4.00 per share.
In this letter, Massey proposed entering into a confidentiality
agreement with Sunair for the purpose of gaining access to
Sunairs books, records and other confidential information
for due
17
diligence purposes and stated that it would be in a position to
make a definitive proposal after it had completed its due
diligence.
At this point, the board concluded that a special committee of
the board should be formed to review the proposal. On
August 1, 2008, the board authorized the formation of a
special committee, comprised of three independent directors, to
review the proposal received from Massey and to report its
recommendations back to the full board. The members of the
special committee were Robert Griffin, the Chairman,
Dr. Arnold Heggestad and Charles P. Steinmetz.
The special committee held its first meeting on August 5,
2008. The meeting was attended by a representative of Akerman
Senterfitt, who serves as Sunairs and the special
committees legal advisor. Our legal advisor reviewed with
the special committee its fiduciary duties in the context of
evaluating strategic alternatives, including a potential sale or
merger of Sunair. The special committee discussed and concluded
that it first wanted to determine the value of Sunair so that it
could properly evaluate any offers from Massey or any other
bidders. The special committee also discussed the engagement of
an investment banking firm to render financial advisory and
investment banking services to Sunair in connection with our
consideration of the Massey proposal. The special committee
decided to interview two investment banking firms, one of which
was Hyde Park Capital.
On August 8, 2008, the special committee interviewed Hyde
Park Capital and another investment banking firm. Each
investment banking firm made presentations to the special
committee and the special committee reviewed and discussed the
presentations. The special committee determined that both firms
were qualified and that it should proceed to negotiate an
engagement on the best terms possible to provide valuation
consulting and a fairness opinion relating to a possible sale of
the company.
On August 12, 2008, we entered into an engagement letter
with Hyde Park Capital in which it agreed to serve as our
investment banking firm and provide financial advisory and
investment banking services.
On September 16, 2008, Massey, through Michael Brauser, a
shareholder of Sunair, sent us a non-binding summary of terms
for the acquisition of all of Sunairs issued and
outstanding common stock through a merger with a subsidiary of
Massey resulting in a cash payment to our shareholders of
approximately $3.00 per share, subject to certain adjustments
which may have resulted in a lower price per share. Massey also
requested that Sunair agree not to enter into negotiations with
any other companies during the 60 day period following the
date of its letter.
On September 18, 2008, the special committee met to
consider a response to Masseys offer. The meeting was
attended by legal counsel, who once again reviewed the fiduciary
duties of the special committee, and representatives of Hyde
Park Capital who discussed a number of different models for
evaluating the value of Sunair. After a thorough review of the
Massey offer, the special committee decided to reject
Masseys offer based on the proposed purchase price
adjustments and the contingencies of the offer, including
uncertain financing to fund the proposed transaction.
On September 19, 2008, we sent Massey a letter in which we
rejected its offer because we could not ask our shareholders to
vote on an offer unless there was a fixed price without
adjustments and more definitive closing conditions, rather than
a price subject to adjustments and a financing condition with
uncertain financing. We also advised Massey that the proposed
price did not reflect the value of Sunair in the opinion of the
special committee.
On September 19, 2008, Massey entered into a
180-day
consulting agreement with Michael Brauser. Under the agreement
Mr. Brauser agreed to use his best efforts to advise Massey
on areas that would facilitate Masseys potential
acquisition of Sunair. If Massey acquired Sunair while the
consulting agreement was in effect, Mr. Brauser would have
been paid a cash fee of $1,000,000 at closing provided
Mr. Brauser had performed his services as set forth in the
consulting agreement. This agreement expired on March 18,
2009 and was not renewed and no further consulting agreement has
been entered into between Mr. Brauser and Massey since that
time.
18
On September 29, 2008, Michael Brauser, Dru Schmitt,
Michael Herman and Joseph Q. DiMartini filed a Schedule 13D
indicating they were part of a group that has agreed to act
together to cause Sunair to be sold and the net proceeds being
distributed to its shareholders.
On October 20, 2008, Massey purchased 880,000 shares
of Sunairs common stock from an institutional investor
through a licensed broker.
On October 27, 2008, the special committee held a meeting
attended by legal counsel and representatives of Hyde Park
Capital to discuss certain new developments, which included
Masseys request for a meeting with management. The special
committee requested our legal counsel and that representatives
of Hyde Park Capital attend the meeting with Sunair management.
The special committee believed that the Massey offer, due to
certain contingencies, was not in a form suitable for the
acquisition of a public company and had issues relating to the
price. The special committee also discussed recent developments
and improvements to Sunairs business.
On October 29, 2008, a meeting was held attended by legal
counsel, Hyde Park Capital, Richard Rochon, representatives of
Massey and its legal counsel. The parties discussed the issues
relating to the offer made by Massey.
On October 30, 2008, Massey filed a Schedule 13D with
the SEC reporting that it owned 1,260,972 shares or 9.63%
of Sunairs common stock. In the Schedule 13D, Massey
reported that the purpose of its acquisition of
880,000 shares of Sunairs common stock on
October 20, 2008 was (i) to accumulate shares of our
common stock in connection with Masseys proposal to
acquire us by merger or other form of acquisition, (ii) to
own shares which may be voted to effectuate an acquisition of us
by Massey, or (iii) to hold shares for investment purposes.
In the Schedule 13D, Massey also reported that it had made
an offer to us to purchase our shares at a price of $3.00 per
share, subject to certain adjustments (which may have resulted
in a lower payment per share) and that we had rejected the
offer. Massey indicated at that time that it was evaluating
whether or not to submit another offer to us.
In November, 2008, due to the Massey 13D filing we received
inquiries from certain third parties regarding the sale of
Sunair, including an executive of a large national company in
the lawn and pest control industry, which we refer to as
Company A, and an executive from another large
national well-known company in the pest control industry, which
we refer to as Company B, also called us to ask us
if we were for sale.
On November 21, 2008, the special committee met, as well as
legal counsel, to review the current status of discussions with
Massey as well as its and certain other shareholders 13D
filings.
On December 5, 2008, Massey submitted a second offer letter
to the special committee to acquire Sunair through a merger with
a subsidiary of Massey, resulting in a cash payment to the
Sunair shareholders of $3.00 per share, which would not be
subject to any adjustments following execution of definitive
agreements. Massey informed Sunair in the offer letter that
Massey had obtained appropriate commitments from SunTrust Bank
and other major lending institutions for the financing necessary
to complete the proposed transaction.
On December 8, 2008, the special committee held a meeting
attended by legal counsel and representatives of Hyde Park
Capital to consider a response to Masseys
December 5th proposal. The special committee concluded
Masseys December 5th offer to be substantially
similar to its September offer which was previously rejected.
The special committee had concerns about the offer relating to
(i) the price, (ii) the absence of committed
financing, (iii) the lack of a non-refundable deposit, and
(iv) the lack of a provision allowing Sunair to
shop the offer. Hyde Park Capital gave a
presentation to the special committee relating to the value of
Sunair and the value of Masseys recent bid. After
discussion, the special committee requested that management
provide it with its projections of Sunairs revenues and
expenses for 2009 to assist it in evaluating the bid.
On December 16, 2008, our legal counsel sent Massey a
letter in which it outlined our objections to the offer. We
advised Massey that our special committee would require the
following assurances prior to
19
considering any transaction: (i) a firm price;
(ii) firm bank commitments for financing; (iii) a
$5 million non-refundable cash deposit, and (iv) a
right to shop the offer.
Subsequent thereto, there were discussions between
representatives of Sunair and Massey regarding the December 16
letter, which centered on the financing arrangements and the
amount and type of deposit.
On January 8, 2009, the special committee held a meeting to
review recent developments. Legal counsel and representatives of
Hyde Park Capital were present at the meeting. The special
committee considered Masseys recent offer which provided a
$3.00 per share bid price, but was silent about the deposit and
did not include committed financing. The special committee also
reviewed Sunairs current business operations which
reflected lower revenue but decreased expenses and improved
EBITDA. The special committee also considered long term risks to
Sunair and current economic conditions. The special committee
recommended that Sunair provide Massey with updated numbers and
give them a period of 2 weeks to sign an agreement. Sunair
would accept the $3.00 per share price, but would require
(i) a substantial nonrefundable deposit, (ii) a
20 day go shop clause, (iii) a 3%
break-up fee
and (iv) an upfront $250,000 nonrefundable deposit to cover
expenses. The special committee approved recommending that the
full board approve this proposal.
On January 8, 2009, the board had its scheduled meeting.
Also in attendance were Sunairs Chief Executive Officer,
Chief Financial Officer, legal counsel and representatives from
Hyde Park Capital. Legal counsel reviewed with the board its
fiduciary duties in evaluating strategic alternatives. The
special committee then summarized for the board the discussions
with Massey over the past several months. The special committee
presented its recommendations to the board, including a
recommendation to move forward with Massey with the following
terms: (i) a $250,000 non-refundable deposit; (ii) a
$5 million escrow deposit; (iii) a three-week
exclusivity clause; (iv) a
20-day
go-shop period; (v) a 3%
break-up
fee; and (vi) $3.00 per share price. The board discussed
the valuation of Sunair and the special committees
recommendation. After further discussion, the board determined
to make a counter offer to Massey with the following adjustments
to the special committees recommendation: $3.25 per share
and two-week exclusivity period.
On January 12, 2009, Sunair sent Massey a letter advising
Massey that the terms of the offer letter were not acceptable
and Sunairs board of directors would require Massey to
agree to (i) a per share price of $3.25 per share,
(ii) a $5 million non-refundable deposit, (iii) a
definitive agreement executed by January 31, 2009,
(iv) a 20 day go shop clause, and (v) a 3%
break-up fee
prior to engaging in negotiation regarding a transaction.
On January 15, 2009, Massey submitted a response letter to
Sunair advising us that Massey continued to view the proposed
acquisition of Sunair as attractive and reiterated its
non-binding offer to acquire Sunair through a merger with a
subsidiary of Massey resulting in a cash payment to
Sunairs shareholders of $3.00 per share, which would not
be subject to any adjustments following execution of definitive
agreements. Massey also advised Sunairs board of directors
that it would withdraw its offer if Sunairs board of
directors did not agree to begin negotiating a transaction under
the terms proposed in the response letter by January 26,
2009.
On January 16, 2009, the special committee met along with
legal counsel and a representative from Hyde Park Capital and
reviewed this offer. The per share offer was lower than targeted
by the board, the deposit was lower than requested and comprised
of $1 million cash and 1 million shares of
Sunairs common stock owned by Massey. The special
committee voted in favor of recommending to the board that
Sunair respond to Massey by saying that the price was
acceptable, but the lack of an adequate cash deposit.
On January 16, 2009, Richard Rochon received a call from a
senior executive of Company A affirming their interest in
discussing a possible transaction with Sunair.
On January 17, 2009, the special committees
recommendations were presented to the full board. Also attending
was legal counsel and a representative from Hyde Park Capital.
The purpose of the meeting was to review the offer. The primary
issues were (i) the $3.00 per share offer price was lower
than the $3.25 per share price targeted by the board and
(ii) the deposit was made up of a total $1 million in
cash and 1 million shares of Sunairs common stock,
rather than all cash. Our board concluded that it was in the
shareholders best interest to place Sunair up for auction
and seek the best terms and price for its shareholders.
20
On January 20, 2009, Sunairs legal counsel sent
Massey a letter explaining that it was not turning the offer
down, but rather opening an auction process to all third
parties. At that time, the board also authorized the special
committee to consider and review all acquisition proposals that
Sunair received from third parties in addition to Masseys
proposals.
On January 20, 2009, Sunair issued a press release in which
it announced that it had retained Hyde Park to explore a range
of strategic alternatives, including a possible sale of Sunair.
On January 23, 2009, Massey submitted a letter to our board
withdrawing its non-binding offer to acquire 100% of the common
stock of Sunair. Massey also amended its Schedule 13D to
include a copy of its January 23, 2009 letter withdrawing
its offer.
On February 2, 2009, Michael Brauser, Michael Herman and
Dru Schmitt (the Dissident Group) filed an
Information Statement with the SEC in which they sought to
remove by written consent six of the seven members of
Sunairs current board of directors (except Charles P.
Steinmetz) and replace them with their nominees.
On February 19, 2009, the Dissident Group filed a lawsuit
in the Fifteenth Judicial Circuit in Palm Beach County, Florida
against us, Coconut Palm and Coconut Palm, Inc. See
Coconut Palm Proxy Litigation on page 15
for more detail about the litigation.
The Dissident Group filed three supplements to their information
statement on February 25, March 6 and March 9, 2009.
In the supplement filed on March 9, 2009, the Dissident
Group listed the shareholders owning more than 50% of
Sunairs common stock who it expected to sign a written
consent removing Sunairs current board. Massey was listed
as one of the shareholders who would sign the written consent.
On March 10, 2009, our board held a meeting to discuss
certain issues relating to the lawsuit filed by the Dissident
Group. Outside litigation counsel, Gunster, gave its analysis of
the litigation filed by the Dissident Group.
On March 12, 2009, we filed a complaint in the Federal
Court against the Dissident Group for violations of the federal
securities laws. See Coconut Palm Proxy
Litigation on page 15 for more information about
this lawsuit.
On March 13, 2009, Massey filed an amendment to its
Schedule 13D in which it reported that it had informed
members of the Dissident Group that it did not expect to decide
whether to execute the written consent to replace six of the
seven members of the Sunairs current board of directors
until judicial determination had been made regarding the
validity of the proxies granted by certain members of the
Dissident Group to Coconut Palm.
On March 18, 2009, our board held a meeting and received an
update on Hyde Park Capitals progress in soliciting
interest in acquiring the company. The board was advised that
Hyde Park Capital had completed background materials of Sunair
to present to potential investors. Management updated the board
on recent revenue initiatives.
Beginning in late January and continuing into April 2009, Hyde
Park Capital contacted 89 potential purchasers including 27
possible strategic acquirers and 62 possible financial acquirers
to gauge their interest in entering into a transaction with us.
Twenty seven potential buyers executed non-disclosure
agreements, indicated an interest in a possible transaction with
us and received an information package.
On May 20, 2009, our board held a meeting to review four
indications of interest that Sunair had received from various
bidders. Representatives from Hyde Park Capital summarized the
results. The board after review of the bids rejected two of the
bids, one due to the price and the second due to the
contingencies of the bid. Our board then focused its discussion
on the offers to buy Sunair from Massey and Company A. With
respect to the Massey offer, the board remained concerned about
its ability to obtain the financing necessary to complete a
transaction. The board then discussed proceeding with an offer
from Company A, which was for a higher price and contained no
financing contingencies. However, Company A had conditioned its
offer on having an exclusive right to conduct due diligence
during a 30 day period. The board concluded the offer from
21
Company A was the superior offer. Sunair granted Company A an
exclusive thirty (30) day period to complete its due
diligence review of Sunair. On May 20, 2009, the Company
signed a letter of intent with Company A providing a per share
price range of $3.15 to $3.25 and no financing contingency.
On June 16, 2009, our board held a meeting to be updated on
the recent developments relating to its consideration of
potential offers to purchase Sunair. The negotiation exclusivity
period with Company A expired on June 15, 2009, and Sunair
was, therefore, free to negotiate with any other company. The
board also discussed Sunairs current share price and the
effect an announced sale would have on the current price of its
shares.
On June 25, 2009, a representative of Hyde Park Capital
received a call from Company A stating they were not moving
forward, but may have an interest in purchasing our lawn care
operations only at a reduced price.
On June 30, 2009, our board held a meeting to discuss the
status of the sale process. Company A had let its exclusivity
period expire. We had granted Company A additional time to
conduct its due diligence even after the expiration of its
exclusivity period. Company A had informed us that it was not
interested in purchasing the entire business but did state that
it may be interested in purchasing our lawn care operations
only. Our board concluded any decision to sell only our lawn
operations would severely and detrimentally affect the business
and was not a viable alternative. Our board then discussed
speaking to Massey about its continued interest. The directors
discussed whether Massey was still interested in acquiring
Sunair. A representative of Hyde Park Capital was asked to
contact Massey to see if it was still interested in considering
an acquisition of Sunair. The Hyde Park Capital representative
spoke to the Massey group on June 30 and July 2, 2009.
On July 9, 2009 Sunair received a further indication of
interest from Massey which included a price of $2.75 per share,
a financing condition, a $4 million deposit made up of
stock and cash and the request for an exclusive due diligence
period.
On July 13, 2009, our board held a meeting attended by
legal counsel and a representative of Hyde Park Capital to
discuss the interests of potential investors in acquiring Sunair
and was informed that our negotiations with Company A had ended.
The history of the negotiations with Massey was recapped,
including the review of the July 9, 2009 indication of
interest. The representative of Hyde Park Capital reviewed the
value of Sunair using various metrics. The board approved a
motion for us to continue talks with Massey and a representative
of Hyde Park was authorized to tell Massey that it had been
granted a
30-day due
diligence exclusivity period commencing immediately. The Hyde
Park representative was instructed to restate the boards
issues with respect to Masseys offer.
On July 27, 2009, we sent Massey a draft of a merger
agreement. We received comments from Masseys counsel on
August 3, 2009. These comments primarily related to the
deposit, the treatment of stock options, termination of the
merger agreement and D&O insurance.
On August 11, 2009, Massey obtained commitments letters
from SunTrust Bank, M&I Bank and AEA Mezzanine to finance
the merger.
On August 12, 2009, Massey sent us copies of these
commitment letters. On August 13, 2009, Hyde Park Capital
spoke with these financial institutions to confirm the terms of
the financing.
On August 17, 2009, our board held a meeting to be updated
on the recent developments involving a potential sale of Sunair
to Massey. Mr. Rochon summarized recent events, including
discussions between the parties since the last board meeting,
our delivery to Massey of a draft of a merger agreement on
July 27, 2009, comments to the draft from Masseys
counsel received on August 3, 2009, and a letter dated
August 12, 2009 to Hyde Park Capital which included
commitment letters from financial institutions to finance the
transaction. Mr. Rochon reviewed the material open issues
remaining including the price per share of $2.75, continuation
of D&O insurance, treatment of Sunairs options, the
deposit, which was still made up of stock and cash, and timing
of the transaction. The board concluded that we should continue
negotiations with Massey to seek among things a deposit of all
cash.
22
Since August 17, 2009, the parties have worked to complete
Masseys due diligence, complete the schedules to the
merger agreement and negotiate a definitive agreement.
On September 19, 2009, we informed Massey that the primary
issues to complete the merger agreement were the terms of the
deposit and D&O insurance. Our counsel had several
telephone calls with Masseys counsel and Mr. Rochon
had discussions with Harvey L. Massey during the afternoon and
evening of September 19, 2009, and the parties were able to
reach agreement over these terms. Massey agreed that the deposit
would be all cash and non-refundable (i) if it failed to
close the merger agreement within 150 days after signing
the merger agreement because of the failure of Massey to satisfy
its obligations under the merger agreement or (ii) if it
breached any of its representations and warranties which
prevented it from closing, provided that Sunair was not in
breach of any of its obligations under the merger agreement.
Massey also agreed that there would be no monetary limit on its
indemnification obligations to Sunairs former officers and
director after the closing.
On September 22, 2009, we distributed a revised draft of
the merger agreement. During the next several days, we discussed
severance payments to our officers. With respect to the
severance payments, Massey advised us that it would notify us
prior to closing if it wanted any officers to resign prior to
closing. Massey agreed it would pay at closing all amounts due
to the officer under his employment or retention agreement, if
the officer agreed to waive the 60 day notice period. If an
officer did not agree to waive the notice period, Massey agreed
to make payments post closing in accordance with the terms of
the employment or retention agreement. Massey insisted that the
termination fee be increased because of the extensive
out-of-pocket costs that it had incurred in the due diligence
process. We agreed to increase the amount of the termination fee
payable to Massey to $2.75 million, if we terminate the
merger agreement on or before November 15, 2009 if we
receive a superior acquisition proposal. If we terminate the
merger agreement after November 15, 2009, because we
receive a superior acquisition proposal, the amount of the
termination fee is equal to $2.75 million plus the actual
cost of lenders fee paid by Massey to extend the
termination date of the financing letters beyond
November 15, 2009, or to close on such financing up to a
maximum of $3.5 million.
On September 25, 2009, we circulated a revised draft of the
merger agreement to Massey.
On September 27, 2009, a joint telephonic meeting of the
special committee and the board of directors was held at which
representatives from Akerman and Hyde Park Capital (for a
portion of the meeting) were present. At this meeting,
Mr. Rochon and representatives from Akerman and Hyde Park
Capital advised the board of directors on the status of
Sunairs discussions with Massey and updated the board on
the events that had occurred since the boards last
meeting. Mr. Rochon reviewed the key business issues in the
deal: (i) the purchase price of $2.75 per share,
(ii) the cash deposit of $4 million, (iii) the
circumstances where the deposit would be returned to Massey or
advanced to Sunair, and (iv) D&O insurance after the
closing.
Representatives of Akerman reviewed with the board the final
terms of the proposed merger agreement, and further discussed
the boards fiduciary duties. Also at this meeting,
representatives of Hyde Park Capital reviewed with the board
Hyde Park Capitals financial analysis of the merger
consideration, and upon the request of the board rendered to the
board an oral opinion, which opinion was confirmed by delivery
of a written opinion dated September 28, 2009, 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
offered to Sunairs shareholders was fair, from a financial
point of view. A copy of Hyde Park Capitals written
opinion dated September 28, 2009, describing the
assumptions made, matters considered and review undertaken by
Hyde Park Capital is attached to the proxy statement as
Annex B.
Following additional discussion and deliberation, the board took
a recess so the special committee could meet. The members of the
special committee considered the adoption and approval of the
merger agreement, the merger and the other transactions
contemplated by the merger agreement. Charles P. Steinmetz
abstained from voting on the approval of the merger agreement.
Robert C. Griffin, the chairman of the special committee and
Arnold Heggestad, voted in favor of approving the merger
agreement, the merger and the transactions contemplated thereby.
The special committee adjourned its meeting.
23
The board of directors reconvened their meeting and Robert C.
Griffin, the chairman of the special committee informed the
board that the special committee had voted in favor of approving
the merger agreement, the merger and the transactions
contemplated thereby with two votes in favor of the proposal and
one director, Charles P. Steinmetz had abstained from voting on
the proposal. The full board then took a vote on the approval of
the merger agreement, the merger and the transactions
contemplated thereby. Mario C. Ferrari, Richard C. Rochon and
Charles P. Steinmetz abstained from voting on the approval of
the merger agreement. Joseph S. DiMartino, Robert C. Griffin,
Arnold Heggestad, and Stephen P. Oppeneheim voted in favor of
approving the merger agreement, the merger and the transactions
contemplated thereby.
On September 28, 2009, we executed the definitive merger
agreement with Massey. Early the next morning on
September 29, 2008, we issued a press release announcing
the merger transaction. We filed a
Form 8-K
disclosing the execution of the merger agreement on
October 1, 2009 and attached a copy of the definitive
merger agreement as an exhibit.
Reasons
for the Merger
Our board, acting with the assistance of our management and
legal and financial advisors and the recommendations of the
special committee, evaluated Masseys proposal, including
the terms and conditions of the merger agreement. Three of our
directors, Mario B. Ferrari, Richard C. Rochon and Charles B.
Steinmetz have abstained from voting on the merger agreement.
After careful deliberation at the September 27, 2009
meeting described above under Background of the
Merger, the board members voting on the merger
agreement, determined that the merger agreement is in the best
interests of Sunair and its shareholders. Joseph S. DiMartino,
Robert C. Griffin, Arnold Heggestad and Steven P. Oppenheim
voted in favor of the merger agreement. In reaching this
determination, our board considered the following factors and
potential benefits of the merger agreement, each of which our
board believes supported its decision:
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the $2.75 per share merger consideration represents a premium of
approximately 47% to the closing price of our common stock on
September 25, 2009, the last full trading day before the
announcement of the signing of the merger agreement;
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the fact that the merger consideration of $2.75 per share was
achieved through a competitive, multi-party process and produced
a transaction on price and terms that, in our boards
judgment, was more favorable than any other definitive offer
received by us from any other potential acquirer;
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our boards belief that the merger is more favorable to our
unaffiliated shareholders than the alternative of remaining a
shareholder in a public company;
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the ability of our board to change its recommendation with
respect to the merger and to terminate the merger agreement upon
the payment of a termination fee of $2.75 million to a
maximum of $3.5 million, to Massey, should we receive an
unsolicited proposal that our board determines to be a superior
acquisition proposal and concurrently enter into a definitive
acquisition agreement for a superior acquisition proposal;
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the fact that Massey received a commitment for a
$33 million senior credit facility from SunTrust, M&I
Bank and a commitment for additional financing of up to
$20 million from AEA Mezzanine to complete the merger;
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Massey, which is a party to the merger agreement, is not a shell
entity but is an entity that operated in Florida for many years,
with substantial operations and assets;
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the fact that the merger consideration is all cash, which
provides certainty of value to our shareholders;
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the fact that, although at various times over the past several
years, our stock price traded in excess of $2.75 per share, our
board believed it was unlikely that our stock would trade in
excess of $2.75 per share for an extended period in the
foreseeable future; and
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the opinion, dated September 28, 2009, of Hyde Park Capital
to our board as to the fairness, from a financial point of view
and as of the date of the opinion, of the consideration to be
received in the
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24
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merger by holders of our common stock (other than excluded
holders), as more fully described under the caption
Opinion of Hyde Park Capital.
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Our board also considered a variety of risks and other
potentially negative factors concerning the merger, including
the following:
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the fact that we will no longer exist as an independent,
publicly traded company and our shareholders will no longer
participate in any of our future earnings or growth and will not
benefit from any appreciation in the value of our company;
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the fact that any gains realized from an all-cash transaction
would generally be taxable to our shareholders for
U.S. federal income tax purposes;
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the impact of the announcement and pendency of the merger,
including the impact of the merger on our employees, customers,
and our relationships with other third parties and the risk of
diverting management focus and resources from other strategic
opportunities and from operational matters while working to
negotiate and close the merger with Massey, which could impair
our prospects as an independent company if the merger is not
completed;
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the fact that, pursuant to the merger agreement, we must
generally conduct our business in the ordinary course and we are
subject to a variety of other restrictions on the conduct of our
business prior to closing of the merger or termination of the
merger agreement, which may delay or prevent us from pursuing
business opportunities that may arise or preclude actions that
would be advisable if we were to remain an independent company;
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the lack of availability of appraisal rights under applicable
law to holders of our common stock in connection with the merger;
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the possibility of significant costs, delays and non-completion
of the merger resulting from seeking the regulatory approvals
necessary for the completion of the merger or non fulfillment of
the closing condition, including Masseys failure to obtain
financing to close the merger;
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the fact that under the terms of the merger agreement, we cannot
solicit other acquisition proposals and must pay Massey a
termination fee of $2.75 million to a maximum of
$3.5 million if the merger agreement is terminated under
certain circumstances, which, in addition to being costly, might
have the effect of discouraging other parties from proposing an
alternative transaction that might be more advantageous to our
shareholders than the merger; and
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the interests of our executive officers and directors in the
merger that may be different or in addition to the interests of
our shareholders generally. See The Merger
Interests of Our Directors and Executive Officers in the
Merger.
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The foregoing discussion summarizes the material factors
considered by our board in its consideration of the merger, but
it is not intended to be exhaustive. After considering these
factors, our board concluded that the positive factors relating
to the merger agreement and the merger outweighed the negative
factors. In view of the wide variety of factors considered by
our board, our board did not find it practicable to quantify or
otherwise assign relative weights to the foregoing factors. In
addition, individual directors may have assigned different
weights to various factors. Our board approved and recommends
the merger agreement and the merger based upon the totality of
the information presented to and considered by it.
Recommendation
of Our Board of Directors
On September 27, 2009, after evaluating, with the
assistance of our management and legal and financial advisors
and the various business, financial and market factors described
above, and after due discussion and consideration of the
recommendations of the special committee, our board determined
that the merger is in the best interest of Sunair and our
shareholders and approved, adopted and declared advisable the
merger agreement and the transactions contemplated thereby,
including the merger. ACCORDINGLY, OUR BOARD
25
OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF SUNAIR VOTE
FOR THE APPROVAL OF THE MERGER AGREEMENT.
Opinion
of Hyde Park Capital
Sunair retained Hyde Park Capital to act as its financial
advisor in connection with the merger. In connection with Hyde
Parks engagement, Sunair requested that Hyde Park Capital
evaluate the fairness, from a financial point of view, of the
$2.75 per share consideration to be received in the merger by
holders of Sunair common stock (other than Massey). On
September 27, 2009, at a meeting of our board of directors
held to evaluate the proposed merger, Hyde Park Capital rendered
to our board of directors an oral opinion, which opinion was
confirmed by delivery of a written opinion dated
September 28, 2009, to the effect that, as of that date and
based on and subject to the matters described in its opinion,
the consideration to be received in the merger by holders of
Sunair common stock (other than Massey) was fair, from a
financial point of view, to such holders.
The full text of Hyde Park Capitals written opinion,
dated September 28, 2009, to our board of directors, which
sets forth, among other things, the procedures followed,
assumptions made, matters considered and limitations on the
scope of review undertaken, is attached as Annex B and is
incorporated by reference, in its entirety, into this proxy
statement. Hyde Park Capitals opinion was provided to our
board of directors for its information in connection with its
evaluation of the merger consideration. The opinion addresses
only the fairness of the consideration provided for in the
merger from a financial point of view, does not address any
other aspect of the proposed merger and does not constitute
advice or a recommendation to any shareholder as to how such
shareholder should vote or act on any matter relating to the
proposed merger.
In arriving at its opinion, Hyde Park Capital reviewed the
merger agreement and certain publicly available business and
financial information relating to Sunair. Hyde Park Capital also
reviewed certain other information relating to Sunair provided
to or discussed with Hyde Park Capital by Sunair, including
financial forecasts relating to Sunair and certain industry and
business sensitivities to such forecasts prepared by
Sunairs management, and met with Sunairs management
to discuss Sunairs business and prospects. Hyde Park
Capital also considered certain financial and stock market data
of Sunair, and compared that data with similar data for other
publicly held companies in businesses Hyde Park Capital deemed
relevant in evaluating Sunair, and Hyde Park Capital considered,
to the extent publicly available, the financial terms of certain
other transactions which had been effected or announced. Hyde
Park Capital also considered such other information, financial
studies, analyses and investigations and financial, economic and
market criteria which it deemed relevant.
In connection with its review, Hyde Park Capital did not
independently verify any of the foregoing information and
assumed and relied on such information being complete and
accurate in all material respects. With respect to the financial
forecasts for Sunair that Hyde Park Capital used in its
analyses, Sunairs management advised Hyde Park Capital,
and Hyde Park Capital assumed, with Sunairs consent, that
such forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of
Sunairs management as to Sunairs future financial
performance both before and after giving effect to certain
industry and business sensitivities referred to in the preceding
paragraph. Hyde Park Capital also assumed, with Sunairs
consent, that, in the course of obtaining any regulatory or
third party consents, approvals or agreements in connection with
the merger, no delay, limitation, restriction or condition would
be imposed that would have an adverse effect on Sunair or the
merger and that the merger would be consummated in accordance
with the terms of the merger agreement without waiver,
modification or amendment of any material term, condition or
agreement. Hyde Park Capital was not requested to, and did not,
make an independent evaluation or appraisal of Sunairs
assets or liabilities, contingent or otherwise, and Hyde Park
Capital was not furnished with any such evaluations or
appraisals.
Hyde Park Capitals opinion addressed only the fairness,
from a financial point of view and as of the date of its
opinion, to the holders of Sunair common stock of the
consideration to be received in the merger and did not address
any other aspect or implication of the merger or any other
agreement, arrangement or
26
understanding entered into in connection with the merger or
otherwise or the fairness of the amount or nature of, or any
other aspect relating to any fees or compensation to any
officers, directors or employees of any party to the merger, or
class of such persons, relative to the merger consideration or
otherwise. The issuance of Hyde Park Capitals opinion was
approved by Hyde Park Capitals authorized internal
committee. Hyde Park Capitals opinion was based upon
information made available to it as of the date of its opinion
and financial, economic, market and other conditions as they
existed and could be evaluated on the date of its opinion. These
conditions have been and remain subject to extraordinary levels
of volatility and uncertainty and Hyde Park Capital expressed no
view as to the impact of such volatility and uncertainty on
Sunair or the merger. Hyde Park Capitals opinion did not
address the relative merits of the merger as compared to
alternative transactions or strategies that might be available
to Sunair, nor did it address the underlying business decision
of Sunair to proceed with the merger.
In preparing its opinion to the board of directors, Hyde Park
Capital performed a variety of financial and comparative
analyses, including those described below. The summary of Hyde
Park Capitals analyses described below is not a complete
description of the analyses underlying Hyde Park Capitals
opinion. The preparation of a fairness opinion is a complex
process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. Hyde Park Capital
arrived at its ultimate opinion based on the results of all
analyses undertaken by it and assessed as a whole and did not
draw, in isolation, conclusions from or with regard to any one
factor or method of analysis. Accordingly, Hyde Park Capital
believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors or focusing
on information presented in tabular format, without considering
all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In its analyses, Hyde Park Capital considered industry
performance, general business, economic, market and financial
conditions and other matters, many of which are beyond
Sunairs control. No company, transaction or business used
in Hyde Park Capitals analyses is identical or directly
comparable to Sunair or the proposed merger, and an evaluation
of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and
other factors that could affect the acquisition, public trading
or other values of the companies, business segments or
transactions analyzed. The estimates contained in Hyde Park
Capitals analyses and the ranges of valuations resulting
from any particular 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 the analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Accordingly, the estimates used in, and the results
derived from, Hyde Park Capitals analyses are inherently
subject to substantial uncertainty.
Hyde Park Capital was instructed by the board of directors to
solicit interest in Sunair from potential strategic and
financial buyers. Hyde Park Capital considered its experience
marketing Sunair for sale, and specific feedback from potential
buyers during the marketing process regarding valuation and
pricing, in connection with rendering its fairness opinion.
The decision to enter into the merger agreement was solely that
of the Sunair board of directors. Hyde Park Capitals
opinion and financial analyses were only one of many factors
considered by the board of directors in its evaluation of the
proposed merger and should not be viewed as determinative of the
views of Sunairs board of directors or management with
respect to the merger or the merger consideration.
Total
Consideration
Based on the Massey offer of $2.75 cash per share, Hyde Park
Capital calculated an implied value for total consideration paid
by Massey to Sunair shareholders of $36.3 million in equity
value and $54.5 million in enterprise value. Equity value
was derived by the $2.75 per share consideration per common
share of $36.0 million in addition to the $2.75 per share
for approximately 323,000 in-the-money options at a $1.80
weighted-average strike price ($0.3 million). Enterprise
value was determined by adding the implied total
27
equity value to the sum of (i) the long term debt of
$11.6 million, (ii) the current portion of long term
debt of $4.0 million, and (iii) the net working
capital deficit of $2.6 million.
Premiums
Paid Analysis
Hyde Park Capital compared the premiums paid by acquirors on
other comparable public company mergers and acquisitions during
2007, 2008 and 2009 year-to-date (YTD) to the
premium paid to Sunair shareholders.
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The premiums paid over the closing share price before
announcement for public companies headquartered in the United
States that were acquired for between $10 million and
$1 billion in majority transactions.
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Public
Company Transactions Purchase Price
Premiums
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Period
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Sample Size
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Premium 1-Day
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Premium 1-Week
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Premium 30-Day
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YTD 2009
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52
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43.3
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%
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46.8
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%
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58.1
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%
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2008
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19
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40.7
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%
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40.0
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%
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36.1
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%
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2007
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33
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26.0
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%
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29.3
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%
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34.2
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%
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Avg. Premium
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36.7
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%
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38.7
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%
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42.8
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%
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SNR Premium
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51.1
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%
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48.3
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%
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48.2
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%
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Sunair
Valuation
Hyde Park Capital calculated an indicated valuation range for
Sunair based on multiple valuation methodologies including
comparable company analysis, precedent transaction analysis, and
discounted cash flow analysis, each as more fully discussed
below. Hyde Park Capital utilized the average enterprise value
range derived from this approach to arrive at an indicated
equity value range of between approximately $31.1 million
to approximately $33.9 million. The indicated equity value
range derived for Sunair implied an indicated equity value range
per share of between approximately $2.37 to $2.59, based on
13.1 million common shares outstanding.
Sunair
Comparable Companies Analysis
A comparable company analysis reviews the trading multiples of
publicly traded companies that are similar to Sunair with
respect to type of business and revenue model, industry,
operating sector, size and target customer base. An analysis of
publicly traded comparable companies is not mathematical; rather
it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
comparable companies and other factors that could affect the
public trading of the comparable companies.
Hyde Park Capital calculated multiples of enterprise value to
fiscal year 2008, June 2009 trailing-twelve-months (TTM), and
fiscal year 2009 projected revenue and EBITDA and considered
certain financial data for selected companies that provide lawn
and/or pest
control services. Hyde Park Capital then applied those multiples
to Sunairs company specific data. None of the comparable
companies have characteristics identical to Sunair and all of
the comparable public companies are significantly larger in size
and scale and have better operating margins and higher revenue
growth rates. Because of these factors, Hyde Park Capital
ascribed a 20% discount to the multiples of the public
comparable companies.
The selected public companies used were:
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Rentokil Initial, plc;
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The Scotts Miracle-Gro Co.;
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Rollins, Inc.
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This selected companies analysis indicated the following:
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Multiple Description
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Low
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High
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Enterprise Value as a Multiple of:
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2008 Revenue
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1.1
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x
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1.2
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x
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2008 EBITDA
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9.0
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x
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9.6
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x
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TTM Revenue
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1.1
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x
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1.2
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x
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TTM EBITDA
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8.2
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x
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8.3
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x
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2009E Revenue
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1.1
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x
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1.2
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x
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2009E EBITDA
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8.1
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x
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8.1x
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Hyde Park Capital applied multiple ranges based on this selected
companies analysis to corresponding financial data for Sunair,
including estimates provided by Sunairs management. This
selected companies analysis indicated an implied reference
enterprise value range of $39.9 million to
$42.9 million, an equity value of $24.6 million to
$27.6 million and a per share value of $1.88 to $2.11.
Sunair
Precedent Transactions Analysis
A precedent transaction analysis involves a review of merger,
acquisition and asset purchase transactions involving target
companies that are in related industries to Sunair. Information
typically is not disclosed for transactions involving a private
seller, even when the buyer is a public company, unless the
acquisition is deemed to be material for the
acquiror. As a result, the selected precedent transaction
analysis is typically limited to transactions involving the
acquisition of a public company, or substantially all of its
assets, or the acquisition of a large private company, or
substantially all of its assets, by a public company.
Hyde Park Capital calculated multiples of enterprise value to
the nearest trailing-twelve-months revenue at the transaction
date based on the purchase prices paid in six selected
publicly-announced transactions. These target companies share
similar characteristics, however, none of the target companies
in the precedent transactions have characteristics identical to
Sunair.
The selected transactions (and date of announcement) were:
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Target
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Acquiror
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Date of Announcement
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Island Environmental Services, Inc
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General Environmental Management, Inc.
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August 2008
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HomeTeam Pest Defense, Inc.
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Rollins, Inc.
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February 2008
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Southern Management Company
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ABM Industries, Inc.
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January 2008
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Presto-X Company
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Rentokil Initial, plc
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August 2007
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ServiceMaster Co.
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Clayton, Dubilier, & Rice, Inc.
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March 2007
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J.C. Ehrlich Co., Inc.
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Rentokil Initial, plc
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January 2006
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This selected transactions analysis indicated the following:
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Multiple Description
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Low
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High
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Mean
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Median
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Enterprise Value as a Multiple of:
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TTM Revenue
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0.7
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x
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1.6
|
x
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1.2
|
x
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1.1
|
x
|
TTM EBITDA
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12.8
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x
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12.8
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x
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12.8
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x
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12.8x
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Hyde Park Capital applied multiple ranges based on this selected
transactions analysis to corresponding financial data for the
above mentioned businesses. This selected transactions analysis
indicated an implied reference range enterprise value of
$46.1 million to $48.0 million, an equity value of
$27.9 million to $29.7 million and a per share price
of $2.13 to $2.27.
29
Sunair
Discounted Cash Flow Analysis
A discounted cash flow analysis estimates value based upon a
companys projected future free cash flow discounted at a
rate reflecting risks inherent in its business and capital
structure. Unlevered free cash flow represents the amount of
cash generated and available for principal, interest and
dividend payments after providing for ongoing business
operations. While the discounted cash flow analysis is the most
scientific of the methodologies used, it is dependent on
projections and is further dependent on numerous
industry-specific and macroeconomic factors.
Hyde Park Capital calculated the net present value of the
unlevered, after-tax cash flows based on estimates provided by
Sunairs management. In performing this analysis, Hyde Park
Capital used the weighted average cost of capital for Sunair as
the risk adjusted discount rate. Hyde Park Capital calculated a
terminal value by using a terminal Revenue multiple of 1.1x to
1.2x, consistent with the comparable transaction analysis
referenced previously. This discounted cash flow analysis
indicated an implied reference range enterprise value for Sunair
of approximately $61.8 million to $65.6 million,
equity value range of $43.6 million to $47.4 million
and a per share value range of $3.33 to $3.62.
Summary
Based on its combined analyses of Sunair, Hyde Park Capital
determined an implied reference range enterprise value of Sunair
of $49.3 million to $52.2 million, an equity value
range of $31.1 million to $33.9 million, and an
implied price per share of $2.37 to $2.59. This compares
favorably to the consideration offered to Sunair shareholders of
$2.75 per share. Additionally, the premiums received by Sunair
shareholders to its
1-day,
1-week, and
1-month
share price of 51.1%, 48.3%, 48.2%, respectively; are higher
than the median transaction premiums received in comparable
transactions since January 1, 2007. Finally, the offer
price of $2.75 per share was superior to and significantly
higher than any other purchase offer received by Sunair at the
conclusion of its direct marketing of Sunair for potential sale.
Other
Matters
Sunair selected Hyde Park Capital to act as its financial
advisor in connection with the merger based on Hyde Parks
qualifications, experience, reputation and investment banking
experience, pursuant to a letter agreement dated August 13,
2008. As part of its investment banking business, Hyde Park
Capital regularly is engaged in the evaluation of businesses and
their securities in connection with mergers, acquisitions,
corporate restructurings, private placements and for other
purposes. Sunair determined to use the services of Hyde Park
Capital because it is a recognized investment banking firm that
has substantial experience in these matters.
Sunair has agreed to pay Hyde Park Capital a customary fee for
its financial advisory services in connection with the merger, a
significant portion of which is contingent upon the consummation
of the merger. Hyde Park Capital also will receive a fee upon
the rendering of its fairness opinion. In addition pursuant to
its engagement letter, Sunair has agreed to reimburse Hyde Park
Capital for its reasonable expenses and to indemnify Hyde Park
Capital and certain related parties for certain liabilities and
other items, including liabilities under the federal securities
laws, arising out of or related to its engagement.
Goodwill
Impairment
Sunair has concluded that in conjunction with the merger and the
agreed upon purchase price, in accordance with Statement of
Financial Accounting Standards 142 (SFAS 142) a
goodwill impairment triggering event occurred in September 2009.
SFAS 142 requires goodwill to be tested for impairment
annually and more frequently if events or changes in
circumstances indicate that an asset might be impaired. We test
goodwill for impairment annually as of September 30, which
is the last day of our fiscal year. Additionally, goodwill
impairment is reviewed each quarter by management in connection
with the preparation of our quarterly financial statements.
We entered into the merger agreement with Massey as of
September 28, 2009. As of the date of the merger agreement,
our book value per share was approximately $3.81 per share. We
anticipate we will
30
recognize an impairment to our goodwill as of September 30,
2009. The impairment amount will be approximately
$14.2 million, which was determined by multiplying the per
share purchase price of $2.75 by the number of shares on a fully
diluted basis (13,396,838), which totals $36.8 million,
plus the assumed liabilities of approximately $23 million,
which totals approximately $59.8 million, minus the total
assets of approximately $74 million, which totals
($14.2 million). The write down is a non-cash event and has
no effect on our liquidity, cash flows, tangible capital ratios
or operations.
In addition to our annual testing for impairment, management
monitors changes in circumstances and financial results for
potential impairment indicators. During each of the quarters in
fiscal year 2009, after carefully considering many factors we
determined that no indicators of impairment to our goodwill had
occurred during the period prior to September 30, 2009, and
therefore no impairment charges were recorded in the interim
reporting periods.
Among the factors we reviewed during this period were
Sunairs decreased stock price. We concluded that
Sunairs share price was not a primary indicator of its
value but more a result of depressed share prices generally
caused by overall economic and market conditions. We also
reviewed our financial results. We observed that notwithstanding
our decrease in revenue for each period tested (approximately
$5.4 million lower than revenue for fiscal year
2008) due to significant changes to the way we operated our
business, Middletons EBITDA increased $2.2 million
from $5.2 million in fiscal year 2008 to $7.4 million
in fiscal year 2009, an increase of 41.7%. So although revenue
was lower in 2009, cash flow and profitability increased
significantly. See Non-GAAP Financial Measures
below. Our financial results for fiscal 2009 have not been
audited.
In addition, the Statement of Financial Accounting Standards
142, paragraph 28e provides that impairment testing shall
be completed when there is a more-likely-than-not, expectation
that a reporting unit or a significant portion of a reporting
unit will be sold or otherwise disposed of. In our case, the
ongoing discussions with Massey and others brought into question
whether the enterprise value of the reporting unit, Middleton,
had incurred an impairment. During the time periods that we were
discussing a possible transaction with Massey, including during
each of the our quarters in fiscal year 2009, we concluded that
due to several significant terms and conditions of the various
bids from Massey, which were unacceptable to us, including a
lack of committed financing and a lack of a nonrefundable
deposit, we could not conclude that it was more likely than not
that a transaction would occur and we therefore determined that
no impairment to our goodwill had occurred during the periods
prior to September 2009. During the fourth quarter of fiscal
2009, the proposal from Massey provided for committed financing,
a nonrefundable deposit, and the parties reached agreement on
other open issues, therefore making it more likely than not that
a transaction would occur and that an impairment charge was
necessary.
Non-GAAP Financial
Measures
EBITDA is a Non-GAAP financial measure. EBITDA is defined as net
income plus net interest expense, provision for income taxes,
depreciation and amortization. EBITDA has certain material
limitations, including:
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|
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|
|
It does not include interest expense. Because
we have borrowed money in order to finance our operations,
interest expense is a necessary element of our costs and ability
to generate profits and cash flows. Therefore any measure that
excludes interest expense has material limitations;
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|
|
|
It does not include depreciation and amortization
expense. Because we use capital assets, depreciation is
necessary element of our costs and ability to generate profits.
In addition, because a significant portion of our assets consist
of customer lists that were acquired in connection with our
acquisitions of companies in the Lawn and Pest Control Services
segment, amortization is necessary element of our costs and
ability to generate profits. Therefore, any measure that
excludes deprecation and amortization expense has material
limitations; and
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|
|
|
It does not include provision for income
taxes. Because the payment of income taxes is a
necessary element of our costs, particularly in the future, any
measure that excludes tax expense has material limitations.
|
31
We have included these non-GAAP financial measures, because we
believe EBITDA is an indicator of the profitability and
performance of our core operations and reflects the changes in
our operating results. These Non-GAAP financial measures are not
intended to be an alternative measure of operating income or
gross profit margin as determined in accordance with generally
accepted accounting principles. We compensate for these
limitations by using Non-GAAP financial measures as only one of
several comparative tools, together with GAAP measurements, to
assist in the evaluation of our profitability and operating
results.
A reconciliation of EBITDA to income from Middleton operations
for the fiscal years ended September 30, 2008 and 2009 is
shown below:
MIDDLETON
PEST CONTROL, INC.
Reconciliation
of Net Income to EBITDA
Fiscal Years Ended September 30, 2009* and 2008
|
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|
|
|
|
|
|
|
|
|
2009*
|
|
|
2008
|
|
|
Net Income
|
|
$
|
6,412,298
|
|
|
$
|
3,998,214
|
|
|
|
|
|
|
|
|
|
|
EBITDA addbacks:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
340,014
|
|
|
|
418,692
|
|
Depreciation
|
|
|
818,579
|
|
|
|
855,906
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA addbacks
|
|
|
1,158,593
|
|
|
|
1,274,598
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
7,570,891
|
|
|
$
|
5,272,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The financial results for fiscal 2009 have not been
audited. |
Certain
Effects of the Merger
If the merger and merger agreement are approved by our
shareholders and the other conditions to the closing of the
merger are either satisfied or waived, Merger Sub, a wholly
owned subsidiary of Massey created solely for the purpose of
engaging in the transactions contemplated by the merger
agreement, will be merged with and into us, and we will remain
as the surviving corporation. When the merger is completed, we
will cease to be a publicly traded company and will instead
become a privately held wholly owned subsidiary of Massey.
When the merger is completed, each share of our common stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares held by Massey, Merger Sub or
any direct or indirect wholly-owned subsidiary of Massey and
Merger Sub) will be cancelled and converted into the right to
receive $2.75 in cash, without interest and less any applicable
withholding tax.
Each share of common stock of Merger Sub issued and outstanding
immediately prior to the effective time of the merger will be
converted into one share of common stock of the surviving
corporation. After the effective time of the merger, each
certificate evidencing ownership of shares of Merger Sub common
stock will evidence ownership of such shares of the surviving
corporation.
The merger agreement provides that, except as otherwise agreed
to in writing by Massey and us, immediately prior to the
effective time of the merger, all outstanding options to
purchase shares of our common stock, whether or not exercisable,
will be cancelled and converted into the right to receive a cash
payment equal to the excess, if any, of $2.75 per share in cash
over the exercise price per share of the option, multiplied by
the number of shares subject to the option, whether or not then
exercisable, without interest and less any applicable
withholding tax. If the exercise price per share of the option
is $2.75 or greater, the option will be cancelled and no cash
payment will be made. The merger agreement provides that the
surviving corporation will assume any outstanding warrants to
purchase shares of Sunairs common stock.
At the effective time of the merger, our shareholders will have
the right to receive the merger consideration but will cease to
have ownership interests in Sunair or rights as Sunair
shareholders. Therefore,
32
our shareholders will not participate in our future earnings or
growth and will not benefit from any appreciation in our value.
Our common stock is currently registered under the Exchange Act
and is quoted on the American Stock Exchange under the symbol
SNR. As a result of the merger, Sunair will be a
wholly owned subsidiary of Massey, our common stock will cease
to be quoted on the American Stock Exchange and there will be no
public market for our common stock. In addition, the
registration of our common stock under the Exchange Act will be
terminated and we will no longer be required to file periodic
reports with the SEC.
Effects
on Sunair if the Merger is Not Completed
If the merger agreement is not approved by our shareholders or
if the merger is not completed for any other reason, our
shareholders will not receive any payment for their shares in
connection with the merger. Instead, we will remain an
independent public company and our common stock will continue to
be quoted on the American Stock Exchange. In addition, if the
merger is not completed, we expect that management will operate
our business in a manner similar to that in which it is being
operated today and that our shareholders will continue to be
subject to the same risks and opportunities to which they are
currently subject.
Accordingly, if the merger is not completed, there can be no
assurance as to the effect of these risks and opportunities on
the future value of your shares of our common stock. If the
merger is not completed, our board of directors will continue to
evaluate and review our business operations, properties,
dividend policy and capitalization, among other things, make
such changes as are deemed appropriate and seek to identify
strategic alternatives to enhance shareholder value. If the
merger agreement is not approved by our shareholders or if the
merger is not completed for any other reason, there can be no
assurance that any other transaction acceptable to us will be
offered or that our business, prospects or results of operation
will not be adversely impacted.
If the merger agreement is terminated, under certain
circumstances we will be obligated to pay a termination fee of
$2.75 million up to a maximum of $3.5 million to
Massey upon or following such termination. For a description of
the circumstances triggering payment of the termination fee, see
The Merger Termination Fee and
Expenses.
Interests
of Our Directors and Executive Officers in the Merger
In addition to their interests in the merger as shareholders,
certain of our directors and executive officers have interests
in the merger that differ from, or are in addition to, your
interests as a shareholder. In considering the recommendation of
our board of directors to vote FOR the
adoption of the merger agreement, you should be aware of these
interests. Our board of directors was aware of, and considered
the interests of, our directors and executive officers in
approving the merger agreement, the merger and the transactions
contemplated by the merger agreement. Except as described below,
such persons have, to our knowledge, no material interest in the
merger that differs from your interests generally.
Treatment
of Stock Options
The merger agreement provides that, upon completion of the
merger, each outstanding option to purchase shares of our common
stock, including options held by our officers and directors,
whether or not then exercisable, will be canceled and converted
into the right to receive a cash payment equal to the excess (if
any) of $2.75 per share in cash over the exercise price per
share of the option, multiplied by the number of shares subject
to the option immediately prior to completion of the merger,
without interest and less any applicable withholding taxes.
Based on the stock options held by our executive officers and
directors on October 14, 2009, which have exercise prices
of less than $2.75 per share, upon completion of the merger, our
executive officers and directors will be entitled to receive
cash payments (subject to required tax withholding) on account
of such stock options as shown in the table below.
33
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|
Total Number
|
|
|
|
|
Name
|
|
of Options(1)
|
|
|
Cash Payment
|
|
|
Jack I. Ruff
|
|
|
50,000
|
|
|
$
|
36,000
|
|
Edward M. Carriero, Jr.
|
|
|
40,000
|
|
|
$
|
41,300
|
|
Joseph S. DiMartino
|
|
|
10,000
|
|
|
$
|
10,950
|
|
Mario B. Ferrari
|
|
|
10,000
|
|
|
$
|
10,950
|
|
Robert C. Griffin
|
|
|
25,000
|
|
|
$
|
25,800
|
|
Arnold Heggestad, Ph.D.
|
|
|
10,000
|
|
|
$
|
10,950
|
|
Stephen P. Oppenheim
|
|
|
10,000
|
|
|
$
|
10,950
|
|
Richard C. Rochon
|
|
|
10,000
|
|
|
$
|
10,950
|
|
Charles P. Steinmetz
|
|
|
10,000
|
|
|
$
|
10,950
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
175,000
|
|
|
$
|
168,800
|
|
|
|
|
(1) |
|
This table includes options held by our executive officers and
directors which have exercise prices equal to or less than $2.75
per share. |
Change
of Control Provisions in Employment and Retention
Agreements
We have agreed to use our best efforts to obtain and deliver to
Massey resignations of the officers that it has selected for
resignation at the closing of the merger agreement. To the
extent that any officer selected for resignation has an
employment or retention agreement with Sunair or Middleton, this
termination shall be deemed to be a termination by Sunair or
Middleton without good cause or a termination
other than for cause, and all amounts due for
salary, reimbursement, vacation pay, severance pay or other
amounts due under the agreements will be paid at closing if the
officer waives the sixty (60) day notice period for
termination under the employment or retention agreement. If the
officer does not waive the notice period, the payments will be
made post closing in accordance with the terms of the employment
or retention agreement. In the event that Massey does not select
an officer of Sunair or Middleton for resignation or such
officer does not waive the notice provisions, Massey shall cause
the surviving corporation to honor such agreements.
We have employment agreements with Jack I. Ruff, our Chief
Executive Officer, Edward M. Carriero, our Chief Financial
Officer and a retention agreement with Jeffrey Buhler, our Vice
President of Operations. The agreements provide for severance
payments in the event of a termination of the executives
employment (i) by us without cause,
(ii) by the executive for good reason or
(iii) after a change in control in certain
situations (as such terms are defined in the respective
agreements). A
change-in-control
under the employment and retention agreements will occur upon
completion of the merger.
If we terminate the employment of Mr. Ruff without good
cause or if Mr. Ruff terminates his employment with good
cause, we are required to pay Mr. Ruff severance
compensation equal to (i) one years salary,
calculated at the rate of his salary in effect as of the date
immediately preceding the termination date and (ii) the
cost of premiums for any company sponsored insurance policy (or
the cash equivalent) for one year. If Mr. Ruff terminates
his employment for good cause within nine (9) months of a
change in control, then Mr. Ruff will be entitled to the
severance compensation equal to (i) one years salary,
calculated at the rate of his salary in effect as of the date
immediately preceding the termination date and (ii) the
cost of premiums for any company sponsored insurance policy (or
the cash equivalent) for one year. All payments will be made in
the manner and at such times as the salary otherwise would have
been payable to Mr. Ruff if he had continued to be employed
by Sunair. Upon a change in control, any unvested stock options
previously granted to Mr. Ruff will automatically vest.
If we terminate Mr. Carrieros employment agreement
without good cause or Mr. Carriero terminates his
employment agreement with good cause, we are required to pay
Mr. Carriero a severance payment equal to one years salary,
calculated at the rate of his salary in effect as of the date
immediately preceding the termination date. If Mr. Carriero
terminates his employment with us for good cause within one year
after a change in control, Mr. Carriero will be entitled to
severance compensation equal to one years salary,
34
calculated at the rate of his salary in effect as of the date
immediately preceding the termination date. All payments will be
made in the manner and at such times as the salary otherwise
would have been payable to Mr. Carriero if he had continued
to be employed by Sunair. Upon a change in control, any unvested
stock options previously granted to Mr. Carriero will
automatically vest.
If we terminate Mr. Buhlers employment agreement
without good cause or Mr. Buhler terminates his employment
agreement for good reason within one year after a change of
control (the retention period), we are required to
pay Mr. Buhler (i) a bonus equal to one hundred
percent of his current annual base salary, and (ii) the
cost of medical and dental benefits (less any employee
contribution), for a period of twelve months multiplied by a
fraction, which shall be made up of a numerator containing the
number of partial and full months remaining the retention
period, at the time of such termination and the denominator
shall be twelve. Upon a change of control, any unvested stock
options previously granted to Mr. Buhler will automatically
vest.
Potential
Payments under Employment or Retention Agreements
Assuming the completion of the merger on December 14, 2009,
and assuming the termination of each officers employment
by Massey without cause or by the officer for good reason
immediately following the completion of the merger, such officer
will receive the following estimated cash severance payments
pursuant to the terms of his agreement (before any applicable
withholding taxes):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Acceleration
|
|
|
Other Benefit
|
|
|
|
|
Name of Executive
|
|
Cash Value(1)
|
|
|
Value(2)
|
|
|
Value(3)
|
|
|
Total
|
|
|
Jack I. Ruff
|
|
$
|
350,000
|
|
|
$
|
36,000
|
|
|
$
|
21,434
|
|
|
$
|
407,434
|
|
Edward M. Carriero, Jr.
|
|
$
|
200,000
|
|
|
$
|
33,875
|
|
|
$
|
-0-
|
|
|
$
|
233,875
|
|
Jeffrey Buhler
|
|
$
|
150,000
|
|
|
$
|
11,813
|
|
|
$
|
5,200
|
|
|
$
|
167,013
|
|
All executive officers and officer as a group
(3 persons)
|
|
$
|
700,000
|
|
|
$
|
81,688
|
|
|
$
|
26,634
|
|
|
$
|
808,322
|
|
|
|
|
(1) |
|
Represents salary payments for one year. |
|
(2) |
|
Represents the value of stock options that are accelerated and
automatically vested based on a change of control and the per
share merger consideration of $2.75 per share. |
|
(3) |
|
Represents payments for health care benefits. |
Payment
of Transaction Fee to RPC
We entered into a management services agreement
(Management Services Agreement) with RPC on
January 7, 2008, effective as of February 7, 2008, for
a period of three years, which superseded and replaced a prior
management services agreement. Richard Rochon, our Chairman,
Mario Ferrari, our Vice Chairman and Jack Ruff, our Chief
Executive Officer, are affiliates of RPC. The Management
Services Agreement provides that RPC shall receive a transaction
fee equal to 2% of the aggregate consideration (as defined in
the Management Services Agreement) received in the merger
transaction. Sunair, Massey and RPC have agreed that RPC will
receive a transaction fee equal to two percent (2%) of
Sunairs enterprise value, which is determined by using the
most recently available financial statements of Sunair at the
closing. Enterprise value is determined by adding the value of
the options plus the number of shares outstanding x $2.75, plus
the current portion of all notes payable and capital leases,
plus the long term portion of all notes payable and capital
leases, plus or minus working capital. Based on Sunairs
financial statements as of June 30, 2009, RPC would have
received a transaction fee equal to $1,090,386.
Directors
and Officers Indemnification and Insurance
The merger agreement provides that Massey will indemnify and
hold harmless all past and present officers and directors of
Sunair to the fullest extent permitted by applicable law and
Sunairs articles of incorporation and bylaws, subject to
any limitation imposed from time to time under applicable law,
for acts or omissions occurring at or prior to the effective
time of the merger. In addition, prior to the closing, Sunair
35
will purchase a six year prepaid (or tail)
directors and officers liability insurance policy in
respect of acts or omissions occurring at or prior to the
effective time for six years from the effective time.
No
Appraisal or Dissenters Rights
Appraisal rights, also known as dissenters rights, allow
shareholders who object to a major corporate transaction to
elect to receive the fair value of their shares in cash rather
than continue as shareholders of the corporation. Under
Section 607.1302 of the Florida Business Corporation Act,
appraisal rights are accorded to shareholders in substantial
corporate matters such as: (i) a merger to which a
corporation is a party if shareholder approval is required;
(ii) a share exchange to which a corporation is a party as
the corporation whose shares will be acquired if the shareholder
is entitled to vote on the exchange; (iii) a disposition of
assets other than in regular course of business if the
shareholder is entitled to vote on the disposition;
(iv) any amendment to the articles of incorporation,
merger, share exchange, or disposition of assets other than in
regular course of business to the extent provided by the
articles of incorporation, bylaws, or a resolution of the board
of directors; or (v) with regard to certain classes of
shares issued prior to October 1, 2003, any amendment to a
corporations articles of incorporation that would
adversely affect certain enumerated shareholder rights, if the
shareholder is entitled to vote on the amendment.
The restrictions of Section 607.1302 do not apply if the
shareholders own shares of an issuer which is listed on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq
Stock Market. Accordingly, since Sunair is listed on the
American Stock Exchange, our shareholders will not have the
opportunity to dissent from the transaction or to receive an
agreed or judicially appraised value for their shares of common
stock.
Delisting
and Deregistration of Our Common Stock
If the merger is completed, our common stock will be delisted
from the American Stock Exchange and deregistered under the
Exchange Act and we will no longer file periodic reports with
the SEC on account of our common stock.
Material
United States Federal Income Tax Consequences of the
Merger
The following is a summary of the material United States federal
income tax consequences of the merger to holders of Sunair stock
whose shares of Sunair stock are converted into the right to
receive cash in the merger. The summary is based on the Internal
Revenue Code, applicable current and proposed United States
Treasury Regulations issued thereunder, judicial authority and
administrative rulings and pronouncements, all of which are
subject to change, possibly with retroactive effect. The
discussion applies only to shares of Sunair stock held as
capital assets, and does not address the tax consequences that
may be relevant to holders of Sunair stock that are subject to
special tax rules, such as insurance companies, United States
expatriates, tax-exempt organizations, broker-dealers, financial
institutions, cooperatives, traders in securities that elect to
mark to market, United States holders (as defined below) whose
functional currency is not the U.S. dollar, or holders who
hold Sunair stock through pass-through entities, as part of a
hedge, straddle or conversion transaction, holders deemed to
sell Sunair stock under the constructive sale provisions of the
Internal Revenue Code, holders who exercise appraisal rights, or
holders who acquired Sunair stock pursuant to the exercise of
employee stock options or otherwise as compensation. Except as
specifically noted below, this summary does not address any
aspect of state, local or foreign taxation, and does not address
any United States federal taxation other than income taxation.
For purposes of this summary, a United States holder means a
beneficial owner of Sunair stock that is a citizen or resident
of the United States, a corporation (or any entity treated as a
corporation for United States federal income tax purposes)
created or organized in the United States or any State thereof
(including the District of Columbia), or any estate or trust the
income of which is subject to United States federal income tax
regardless of its source. If a partnership (including any entity
treated as a partnership for United States federal income
taxation) is a holder of Sunair stock, the United States federal
income tax treatment of a partner in that partnership will
generally depend upon the status of the partner and the
activities of the partnership.
36
Partners should consult their own tax advisors as to the
particular United States federal income tax consequences to
them. The term
non-United
States holder refers to any beneficial owner of Sunair stock
other than a United States holder.
The United States federal income tax consequences set forth
below are included for general informational purposes only and
are based upon current law as of the date hereof. Because
individual circumstances may differ, each holder of Sunair stock
should consult such holders own tax advisor to determine
the applicability of the rules discussed below to such
shareholder and the particular tax effects of the merger,
including the application and effect of state, local, foreign
and other tax laws.
United States Holders. The receipt of cash by
a United States holder for shares of Sunair stock pursuant to
the merger will be a taxable transaction for United States
federal income tax purposes (and also may be a taxable
transaction under applicable state, local, foreign and other
income tax laws). In general, for United States federal income
tax purposes, a United States holder who receives the merger
consideration will recognize gain or loss equal to the
difference between the holders adjusted tax basis in the
Sunair stock converted to cash in the merger and the amount of
cash received therefor. Gain or loss will be calculated
separately for each block of Sunair stock converted in the
merger (generally shares acquired at the same cost in a single
transaction). Such gain or loss generally will be capital gain
or loss, and will be long-term capital gain or loss if the
Sunair stock has been held for more than one year as of the
effective time of the merger. The deductibility of capital
losses is limited. A United States holder who receives cash
pursuant to the proper exercise of appraisal rights should
consult such holders own tax advisor regarding the tax
implications of the merger.
Cash consideration received by a non-corporate United States
holder in the merger may be subject to backup withholding at a
28% rate. Backup withholding generally will apply only if the
United States holder fails to furnish a correct social security
number or other taxpayer identification number, or otherwise
fails to comply with applicable backup withholding rules and
certification requirements. Corporations generally are exempt
from backup withholding. Each United States holder should
complete and sign the
Form W-9
that will be part of the letter of transmittal to be returned to
the paying agent (or other agent) in order to provide the
information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is
otherwise proved in a manner satisfactory to the paying agent
(or other agent).
Non-United
States Holders. A
non-United
States holder that receives cash for shares of Sunair stock
pursuant to the merger generally will not be subject to United
States federal income tax on any gain realized on the
disposition, unless (i) such holder is an individual who is
present in the United States for 183 or more days during the
taxable year of such disposition and certain other conditions
are met, (ii) the gain is effectively connected with the
conduct of a trade or business in the United States by the
non-United
States holder, subject to an applicable treaty providing
otherwise or (iii) such holders shares constitute a
United States real property interest under the
Foreign Investment in Real Property Tax Act of 1980, or FIRPTA.
If you are a
non-United
States holder who is an individual and has been present in the
United States for 183 or more days during the taxable year of
the merger and certain other conditions are satisfied, you will
be subject to a 30% tax on the gross amount of your capital
gains.
If you are a
non-United
States holder and your gain is effectively connected with a
U.S. trade or business, then you will be subject to
U.S. federal income tax on your gain on a net basis in the
same manner as U.S. shareholders.
Non-United
States holders that are corporations may also be subject to a
branch profits tax on their effectively connected income at a
rate of 30% or such lower rate as may be specified in an
applicable income tax treaty, subject to adjustments. However,
an individual who is present in the United States for
183 days or more in the taxable year will typically be a
resident of the United States and not a
non-United
States holder.
Sunair believes that its shares do not constitute a United
States real property interest for U.S. federal income
tax purposes.
Backup withholding imposed at a rate of 28% and information
reporting may apply to the payment of cash received by a
non-United
States holder for Sunair stock pursuant to the merger unless the
holder certifies
37
under penalties of perjury to its
non-United
States holder status or otherwise establishes an exemption.
Backup withholding is not an additional tax. Amounts so withheld
can be credited against such holders federal income tax
liability and may entitle such holder to a refund, provided that
the required information is furnished to the Internal Revenue
Service, or IRS. To avoid backup withholding, a tendering
non-United
States holder should complete IRS
Form W-8BEN
or other applicable IRS
Form W-8.
Non-United
States holders should consult their tax advisors regarding the
application of United States federal income tax laws, including
information reporting and backup withholding, to their
particular situations.
Regulatory
Approvals
Except for the filing of articles of merger in Florida at or
before the effective date of the merger, we are unaware of any
material federal, state or foreign regulatory requirements or
approvals required for the execution of the merger agreement or
completion of the merger.
THE
MERGER AGREEMENT
The following summary describes certain material provisions
of the merger agreement, which is included in this proxy
statement as Annex A and is incorporated by reference into
this proxy statement. This summary may not contain all the
information about the merger agreement that is important to you.
You are encouraged to read the merger agreement carefully in its
entirety.
The representations, warranties and covenants contained in
the merger agreement were made only for purposes of such
agreement and as of specific dates, were solely for the benefit
of the parties to such agreement, and may be subject to
limitations agreed by the contracting parties, including being
qualified by disclosures exchanged between the parties in
connection with the execution of the merger agreement. The
representations and warranties may have been made for the
purposes of allocating contractual risk between the parties to
the agreement instead of establishing these matters as facts,
and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to
investors.
Form of
Merger
Upon the terms and subject to the conditions of the merger
agreement and in accordance with Florida law, at the effective
time of the merger, Merger Sub, a Florida corporation and wholly
owned direct subsidiary of Massey, will be merged with and into
Sunair. As a result of the merger, the separate corporate
existence of Merger Sub will cease and Sunair will continue as a
direct wholly owned subsidiary of Massey.
Effective
Time of the Merger
The merger will become effective upon the filing of the articles
of merger with the Secretary of State of the State of Florida or
at such later time as is agreed upon by Massey and us and
specified in the articles of merger in accordance with Florida
law.
The closing of the merger will occur on the fifth business day
after the conditions to the merger set forth in the merger
agreement have been satisfied or waived or at such other time
agreed to by us and Massey. Although we expect to complete the
merger shortly after the special meeting of our shareholders, we
cannot specify when, or assure you that, we and Massey will
satisfy or waive all the conditions to the merger.
Articles
of Incorporation and Bylaws
The articles of incorporation and the bylaws of the surviving
corporation will be amended and restated in their entirety at
the effective time of the merger to be identical to the articles
of incorporation and the bylaws of Merger Sub, as in effect
immediately prior to the effective time of the merger, except
that the name of the surviving corporation will continue to be
Sunair Services Corporation, until thereafter amended in
accordance with the provisions thereof and as provided by law.
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Directors
and Officers of the Surviving Corporation
The directors and officers of Merger Sub immediately prior to
the effective time of the merger will be the initial directors
and officers of the surviving corporation. The directors and
officers will serve in accordance with the articles of
incorporation and bylaws of the surviving corporation until
their respective successors are duly elected or appointed and
qualified or until the earlier of their death, resignation or
removal.
Merger
Consideration
At the effective time of the merger, each share of our common
stock issued and outstanding immediately prior to the effective
time of the merger will be cancelled and automatically converted
into the right to receive $2.75 in cash, without interest. The
following shares of common stock will not receive the $2.75 per
share merger consideration, all of which shares will be
automatically cancelled without any payment of consideration
with respect thereto: shares held by Massey, Merger Sub or any
direct or indirect wholly owned subsidiary of Massey or Merger
Sub immediately prior to the effective time of the merger.
Massey and the paying agent will be entitled to deduct and
withhold from the consideration otherwise payable to any holder
of shares of our common stock or stock options such amounts for
taxes that it is required to deduct and withhold with respect to
making such payment under all applicable tax laws.
Effect on
Stock Options
The merger agreement provides that immediately prior to the
effective time of the merger, all outstanding options to
purchase shares of our common stock, whether or not then
exercisable, will be cancelled by us and will no longer be
outstanding. In consideration for such cancellation, the holder
will be entitled to receive, promptly following the effective
time of the merger, a cash payment, without interest, from
Massey in an amount (if any) equal to the product of
(i) the number of shares of our common stock subject to
such stock option, whether or not then exercisable, and
(ii) the excess, if any, of $2.75 per share over the per
share exercise price of the stock option, reduced by any income
or employment tax required to be withheld with respect to such
payment.
Effect on
Warrants
We currently have warrants outstanding to purchase an aggregate
of 6 million shares of our common stock, at a price of
$6.30 per share for 1 million warrants and $7.00 per share
for 5 million warrants, which expire on dates ranging from
February 7, 2010 through January 27, 2011. Massey has
agreed to assume these warrants and at the effective time each
outstanding and unexercised warrant shall be assumed by the
surviving corporation on the same terms and conditions. If a
warrant holder exercises a warrant after the merger is closed,
the surviving company has made provision so that the holder upon
exercise of all or any part of the holders warrant by
paying the exercise price specified in the warrant agreement,
either $6.30 per share or $7.00 per share, shall be entitled to
receive upon such exercise, the cash, $2.75 per share, that such
warrant holder would have been entitled to receive if such
warrant holder had exercised the warrant prior to the closing.
Procedures
for Surrender of Certificates and Receipt of Merger
Consideration
As soon as practicable after the consummation of the merger, the
paying agent will mail to each holder of record of a certificate
or certificates that, immediately prior to the consummation of
the merger, represented outstanding shares of Sunair common
stock subsequently converted into the right to receive $2.75 in
cash, a letter of transmittal that will contain instructions for
use in effecting the exchange of the certificates.
Upon surrender to the paying agent of a certificate for
cancellation, together with a duly completed and executed letter
of transmittal and any other required documents, (i) the
holder of such certificate will be entitled to receive in
exchange a check representing the applicable amount of cash that
such holder has the right to receive and (ii) the
surrendered certificate will be canceled.
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In the event of a transfer of ownership of shares of Sunair
common stock that is not registered in the transfer records of
Sunair, the appropriate amount of the merger consideration may
be paid to a transferee if the certificate representing such
shares of Sunair common stock is presented to the paying agent
properly endorsed or accompanied by appropriate stock powers and
otherwise in proper form for transfer and accompanied by all
documents reasonably required by the paying agent to evidence
and effect such transfer and to evidence that any applicable
taxes have been paid.
Massey or the paying agent will be entitled to deduct and
withhold from amounts otherwise payable pursuant to the merger
agreement to any holder of shares of Sunair common stock or
stock options such amounts as are required to be deducted and
withheld pursuant to any applicable tax laws.
Representations
and Warranties
The merger agreement contains representations and warranties
made by the parties solely for the benefit of each other and for
the purposes of the merger agreement. The assertions embodied in
those representations and warranties were made for purposes of
the merger agreement and are subject to qualifications and
limitations as agreed by Sunair and Massey in connection with
negotiating the terms of the merger agreement. In addition,
certain representations and warranties were made as of a
specified date, may be subject to a contractual standard of
materiality different from what might be viewed as material to
shareholders or may have been used for the purpose of allocation
of risk between the respective parties rather than establishing
matters as facts. For the forgoing reasons, you should not rely
on the representations and warranties as statements of factual
information.
The representations and warranties of Sunair related to, among
other things:
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Organization and Qualification, Subsidiaries
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Articles of Incorporation and Bylaws
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Capitalization
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Authority Relative to this Agreement
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No Conflict, Required Filings and Consents
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Permits, Compliance
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Financial Statements and Undisclosed Liabilities
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Absence of Certain Changes or Events
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Absence of Litigation
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Employees; Employee Benefit Plans
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Real Property, Title to Assets
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Intellectual Property
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Taxes
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Environmental Matters
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Material Contracts
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Insurance
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Board Approval, Vote Required
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Brokers
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Condition of Assets
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Bank Accounts, Letters of Credit, Power of Attorney
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No Other Representations or Warranties
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Several of Sunairs representations and warranties
contained in the merger agreement are qualified by reference to
whether the item in question has or would reasonably be expected
to have a Company Material Adverse Effect. The merger agreement
defines Company Material Adverse Effect, as any
event, circumstance, development, change or effect that,
individually or in the aggregate with all other events,
circumstances, developments, changes and effects, is materially
adverse to the business, assets, financial condition, or results
of operations of Sunair and its subsidiaries taken as a whole or
would reasonably be expected to prevent or materially delay the
consummation of the Transactions or prevent or materially impair
or delay the ability of Sunair to perform its obligations under
the merger agreement, other than (i) the occurrence of any
or all of the changes or events described in Sunairs
disclosure schedule, and (ii) those reasonably resulting
solely from the execution of the merger agreement, the
observance of its terms, or the announcement of the consummation
of the merger, including but not limited to any adjustments to
Sunairs intangible assets.
The representations and warranties of Massey and Merger Sub
related to, among other things:
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Corporate Organization
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Articles of Incorporation and Bylaws
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Authority relative to this Agreement
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No Conflict; Required Filings and Consents
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Absence of Litigation
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Operations of Merger Sub
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Brokers
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Information Supplied
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Board and Shareholder Determinations
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No Parent Stockholder Vote
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Financing Letters
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Several of Massey and Merger Subs representations and
warranties contained in the merger agreement are qualified by
reference to whether the item in question has or would
reasonably be expected to have a material adverse effect
individually or in the aggregate prevents or materially delays
consummation of the merger or otherwise prevents or materially
prevents Massey and Merger Sub from performing their obligations
under the merger agreement.
Conduct
of Business by Sunair Prior to Consummation of the
Merger
Sunair agrees that prior to the consummation of the merger,
unless Massey agrees in writing, Sunair will and will cause each
of its subsidiaries to (i) conduct its business and
operations only in the ordinary and usual course of business and
in a manner consistent with prior practice and in compliance in
all material respects with applicable law, (ii) use its
reasonable best efforts to preserve substantially intact its
business organizations, and (iii) preserve the assets and
properties of Sunair and its subsidiaries in good repair and
condition, in each case in the ordinary course of business in a
manner consistent with past practice.
Further, except as previously disclosed to Massey, Sunair agrees
that until the consummation of the merger, it will not and will
cause each of its subsidiaries not to, among other things:
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amend or otherwise change its Articles of Incorporation, Bylaws
or other similar organizational documents;
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issue shares of capital stock or instruments convertible into
shares of capital stock, except for the issuance of shares of
common stock upon the exercise of any outstanding stock options
or warrants of Sunair as of the date of the merger agreement;
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declare or pay dividends or make any other distributions with
respect to any shares of capital stock;
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reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any capital stock of
Sunair or any of its subsidiaries;
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(i) acquire (including by merger, consolidation, or
acquisition of stock or assets or any other business
combination) any corporation, partnership, other business
organization (or any division thereof) or any property or asset,
except assets (including assets or accounts from suppliers,
vendors or dealers) in the ordinary course of business and in a
manner consistent with past practice; (ii) authorize, or
make any commitment with respect to, any capital expenditure,
other than maintenance expenditures at existing leased
properties in the ordinary course of business and consistent
with past practice; (iii) enter into any new line of
business; or (iv) make investments in persons other than
existing subsidiaries;
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(i) increase the compensation payable or to become payable
or the benefits provided to its current or former directors,
officers or employees, except for increases in compensation for
employees in the ordinary course of business and in a manner
consistent with past practice, except for the payment of bonuses
to employees relating to bonus, incentive plans or employment
agreements as in effect on the date of the merger agreement and
except for the renewal of such bonus or incentive plans in the
ordinary course of business consistent with past practices if
such plans can be terminated without penalty at the effective
time (other than for the payment of incentive compensation or
bonus compensation earned at the time of such termination);
provided, however, in no event shall bonuses of stock, stock
options, stock appreciation rights or any items whose value is
tied to the stock price of the Company be awarded pursuant to
such plans; (ii) grant any retention, severance or
termination pay (other than pursuant to the severance policy of
Sunair or any of its subsidiaries as in effect on the date
hereof which are identified on disclosure schedule) to, or enter
into any employment, bonus, change of control or severance
agreement with, any current or former director, officer or other
employee of Sunair or of any subsidiary; (iii) establish,
adopt, enter into, terminate or amend any plan or establish,
adopt or enter into any plan, agreement, program, policy, trust,
fund or other arrangement that would be a plan if it were in
existence as of the date of the merger agreement for the benefit
of any director, officer or employee except as required by law;
or (iv) loan or advance any money or other property to any
current or former director, officer or employee of Sunair or its
subsidiaries;
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make any change (or file for such change) in any method of tax
accounting;
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revoke, change, file, amend, settle or comprise any taxes or tax
returns;
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waive, release settle or comprise any pending threatened
litigation, proceeding or investigation;
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other than in the ordinary course of business and in a manner
consistent with past practice, (i) enter into, amend,
modify or consent to the termination of any material contract,
or (ii) amend, waive, modify or consent to the termination
of (other than a termination in accordance with its terms)
Sunair or any subsidiarys rights thereunder; provided,
however, in no event shall the Management Services Agreement
between Sunair and RPC be amended or modified, even if such
amendment or modification is in the ordinary course of business
and consistent with past practice;
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make any expenditure in connection with any advertising or
marketing, other than in the ordinary course of business and in
a manner consistent with past practice;
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fail to maintain in full force and effect the existing insurance
policies covering Sunair and its subsidiaries and their
respective properties, assets and businesses;
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enter into, amend, modify or consent to the termination of any
contract that would be a material contract or transaction that
would be required to be set forth in the disclosure schedules as
if in effect on the date of the merger agreement;
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repurchase, repay or incur any indebtedness (other than in
connection with the lease of new vehicles or letters of credit
in the ordinary course of business) or make any loans or
advances, or grant any security interest in any of its assets,
except for repayments of indebtedness, in amounts and at times
determined
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by Sunair in its discretion, under that certain credit agreement
dated as of June 7, 2005, as amended, among Sunair and
Wachovia Bank, National Association, and except in the ordinary
course of business and consistent with past practice;
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file any insurance claim except in the ordinary course of
business and consistent with past practice; or
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announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the
foregoing.
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Other
Covenants under the Merger Agreement
Proxy
Statement and Shareholders Meeting
We have agreed to file a proxy statement with the SEC as
promptly as practicable after signing the merger agreement and
to respond as promptly as practicable to any SEC comments. The
merger agreement also requires us to call a meeting of our
shareholders for the purpose of obtaining shareholder approval
of the merger agreement as soon as reasonably practicable after
the SEC has completed its review of the proxy statement. Except
in the case where the board has withdrawn or modified its
recommendation because it has received a superior acquisition
proposal, the proxy statement shall include the recommendation
of the board in favor of the adoption and approval of the merger
agreement and the merger, and the board is required to use its
reasonable best efforts to obtain from its shareholders approval
of the merger agreement and the merger.
Indemnification
and Insurance
For 6 years after the effective time, Massey shall
indemnify, defend and hold harmless Sunair and its
subsidiaries directors, officers and employees from
certain claims asserted prior to, at or after the effective time
of the merger, to the fullest extent required by Sunair and its
subsidiaries organizational documents or permitted under
applicable law.
Sunair shall obtain prior to the effective time of the merger
tail insurance policies with a claims period of at
least 6 years from the effective time with respect to
directors and officers liability insurance in amount
and scope no less favorable than the existing policy of Sunair
for claims arising from facts or events that occurred on or
prior to the effective time of the merger.
Employee
Matters
The merger agreement provides that Massey will, for a period of
one year after the effective time of the merger, cause the
surviving corporation and its subsidiaries to provide each of
our company employees (affected employees) with
benefits that are, in the aggregate, substantially comparable
and no less favorable to such employees as the benefits that the
employees received prior to the merger (continuing
benefits). Massey has agreed to cause any eligible
expenses incurred by any affected employee and his or her
covered dependents to be taken into account in connection with
continuing benefits for satisfying all applicable deductible,
coinsurance and maximum out-of-pocket requirements applicable to
such affected employees and his or her covered dependents for
the applicable plan year as if such amounts had been paid in
accordance with such continued benefits. In addition, Massey
shall cause all pre-existing condition exclusions and
actively-at-work requirements to be waived for such affected
employee and his or her covered dependents, to the extent such
conditions were inapplicable or waived with respect to affected
employees immediately prior to the effective time.
Massey shall take all actions required so that eligible
employees of Sunair or any subsidiary shall receive service
credit for purposes of continuing benefits and under its
vacation, severance programs, pension plans and post-retirement
welfare benefit plans, for the duration of their service with
Sunair and any subsidiary (including, where applicable, past
service credit with other entities recognized by Sunair or its
subsidiaries prior to the date of the merger agreement).
Notwithstanding anything to the contrary contained therein, the
merger agreement is not intended to create a contract between
Sunair and any of its employees and none of the employees of
Sunair are entitled to rely on the merger agreement as the basis
for any breach of contract
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claim against Massey or Sunair. The merger agreement is also not
intended to modify, amend or create any employee benefit plan
(except as otherwise explicitly provided).
As of the effective time of the merger, we will terminate or
cause to be terminated our stock incentive plans.
Reasonable
Best Efforts
The parties to the merger agreement have agreed to cooperate
with each other and use all reasonable best efforts to promptly
(a) take all actions necessary to cause the conditions to
closing the merger to be satisfied as promptly as practicable
and to consummate the merger, and (b) obtain all approvals,
consents, registrations, permits, authorizations and other
confirmations from any third party or governmental authority
necessary to consummate the transactions contemplated by the
merger.
Certain
Other Covenants
The merger agreement contains additional covenants, including
covenants relating to cooperation regarding filings with
governmental and other agencies and organizations and obtaining
any governmental or third-party consents or approvals, access to
information, fees and expenses, resignations of the directors
and officers of Sunair designated by Massey, our reasonable
efforts to assist Massey in obtaining any estoppel certificates
from any ground lessor under the ground leases underlying the
leased property, public announcements, and mutual notification
of particular events.
No
Solicitation of Competing Transaction Proposals
The merger agreement provides that Sunair will not, nor will it
authorize or permit its subsidiaries or representatives to,
directly or indirectly:
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initiate, solicit or encourage (including by way of furnishing
information or assistance) any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any competing transaction proposal (as defined below),
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enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a competing
transaction proposal,
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enter into any agreement with respect to a competing transaction
proposal,
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agree to or endorse any competing transaction proposal, or
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authorize any of our officers or directors or any of our
subsidiaries to take any such action, and Sunair shall use its
reasonable efforts to cause its directors, officers, employees,
agents and representatives (including, without limitation, any
investment banker, financial advisor, attorney or accountant
retained by Sunair) not to take any such action.
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However, this covenant will not prohibit us from furnishing
information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited, bona fide
expression of interest in writing to enter into a competing
transaction proposal if:
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our board of directors determines in good faith, after
consultation with our outside legal advisors, that the failure
to consider the competing transaction proposal would be
inconsistent with its fiduciary duties under applicable law;
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our board of directors has no reason to believe that such
expression of interest is not made in good faith; and
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promptly after furnishing information to, or entering into
discussions or negotiations with, such person or entity, we
provide verbal notice within 48 hours and written notice
within 72 hours to Massey to the effect that we plan to
furnish information to, or enter into discussions or
negotiations with, such person or entity.
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If the board of directors determines, in good faith, that a
competing transaction proposal is a superior acquisition
proposal (as defined below), the board may terminate the merger
agreement, provided that:
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we provide at least five (5) business days prior written
notice to Massey of our intention to terminate the merger
agreement;
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during such five (5) business day period (or longer period
if extended by Sunair and Massey) (the negotiation
period), we agree to negotiate in good faith with Massey
regarding such changes as Massey may propose to the terms of the
merger agreement, with the intent of enabling us to agree to a
modification of the merger agreement so that the transactions
contemplated in the merger agreement may be consummated;
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after expiration of the negotiation period, the competing
transaction proposal remains a superior acquisition proposal
(taking into account any modifications to the terms proposed by
Massey) and our board of directors confirms its determination
(after consultation with outside legal counsel and its outside
financial advisors) that such competing transaction proposal is
a superior acquisition proposal; and
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we pay a termination fee of $2.75 million if we terminate
the merger agreement on or before November 15, 2009, and a
termination fee of $2.75 million plus actual costs to
Massey to extend its financing letters or to close on the
financing, up to a maximum of $3.5 million, if we terminate
the merger agreement after November 15, 2009. This
termination fee must be paid in full within six months after we
terminate the merger agreement.
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If the party making the superior acquisition proposal comes
forth with a further proposal, we will provide Massey with
further notice of such proposal and an additional five
(5) business day negotiation period (or longer period if
extended by Sunair and Massey).
As described in the merger agreement, competing
transaction proposal means any bona fide inquiry, offer or
proposal (other than from Massey or Merger Sub or their
respective affiliates) concerning any (a) merger,
consolidation, share exchange, business combination or similar
transaction involving Sunair, (b) direct or indirect sale,
lease, exchange, mortgage, pledge, transfer or other disposition
of substantially all of the assets of Sunair and its
subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or (c) any tender offer
(including a self-tender offer) or exchange offer for fifty
(50%) or more of the outstanding shares of Sunairs common
stock or the filing of a registration statement under the
Securities Act, in connection therewith.
As described in the merger agreement, superior acquisition
proposal means any bona fide, written competing
transaction proposal made by a third party, not solicited in
violation of the merger agreement, that is on terms that the
board of directors of Sunair reasonably determines in good faith
(after consulting with its outside financial advisors) would
after taking into account all the terms and conditions of the
competing transaction proposal including any breakup fees,
expenses, reimbursement provisions and conditions (including but
not limited to financial, legal or regulatory conditions) to
consummate the transaction (a) result in a transaction that
is more favorable, from a financial point of view, to
Sunairs shareholders than the transactions contemplated
hereby if such competing transaction proposal were to be
consummated, (b) the board of directors reasonably believes
that the competing transaction proposal has a substantial
likelihood of being consummated, and (c) for which
financing, to the extent required, is evidenced by a financing
commitment letter subject only to its terms, executed by a
credible, nationally recognized lender of significant financial
worth, or is from a person which, in the good faith reasonable
judgment of the board of directors (after consultation with its
outside financial advisors) is financially capable of
consummating the proposal.
Financing
Massey estimates the total amount of funds necessary to complete
the merger and the related transactions to be approximately
$54 million, which includes approximately $36,007,367 to be
paid out to our shareholders, $287,192 to satisfy outstanding
options and the remainder to be applied to pay our outstanding
debt and fees and expenses incurred in connection with the
merger and the related transactions. These payments are
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expected to be funded with a $33 million senior credit
facility from SunTrust Bank and M&I Bank. In addition,
Massey has secured additional financing of up to
$20 million from AEA Mezzanine pursuant to a binding
commitment letter. These financing commitments are subject to
customary conditions.
In August 2009, Massey obtained financing commitments from
SunTrust Bank and M&I Bank to provide a revolving credit
and term loan facility (senior credit facility) in
the amount of $33 million, consisting of a term loan
facility for $23 million and a revolving credit facility of
$10 million. SunTrust and M&I Bank have each agreed to
finance $16.5 million of the senior credit facility. Massey
will use the proceeds of the senior credit facility to
(i) finance the acquisition of Sunair pursuant to the terms
and conditions of the merger agreement, (ii) refinance
existing debt in connection with the merger, (iii) pay
certain costs and expenses relating to the merger, and
(iv) provide for ongoing working capital and general
corporate purposes at Sunair.
One of the closing conditions in the merger agreement is that
Massey must have sufficient funds at closing to (i) satisfy
all of its obligations under the merger agreement, including
payment of the merger consideration in full, (ii) refinance
the outstanding indebtedness of Sunair, to the extent necessary,
and (iii) pay all of its fees and expenses in connection
with the merger and the financing of the merger.
Conditions
to Consummation of the Merger
The obligations of the parties to consummate the merger are
subject to the satisfaction or waiver on or prior to the date of
closing of the following conditions:
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the approval and adoption of the merger agreement by holders of
at least a majority of the outstanding shares of Sunairs
common stock on the record date;
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no governmental authority shall have enacted, issued,
promulgated, enforced or entered any law, rule regulation,
judgment, decree, executive order or award which is then in
effect and has the effect of making the merger illegal or
otherwise prohibiting consummation of the merger; and
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the receipt of all consents, approvals and authorizations of any
governmental entity required to consummate the merger, other
than the filing of articles of merger with the Secretary of
State of the State of Florida.
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The obligations of Massey to effect the merger are subject to
satisfaction or waiver at or prior to the closing of the merger
of, among other things, the following additional conditions:
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the representations and warranties of Sunair that are qualified
by materiality are true and correct;
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the representations and warranties of Sunair with regards to
capitalization are true and correct in all material respects
(except for stock options exercised between the execution of the
merger agreement and closing);
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all other representations and warranties of Sunair are true and
correct in all material respects;
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Sunair having performed or complied in all material respects
with all agreements and covenants required by it under the
merger agreement at or prior to the consummation of the
merger; and
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Sunair having delivered to Massey a certificate, signed by an
executive officer of Sunair, to the effect that each of the
conditions specified above has been satisfied.
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The obligations of Sunair to effect the merger are subject to
satisfaction or waiver at or prior to the closing of the merger
of, among other things, the following additional conditions:
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the representations and warranties of Massey and Merger Sub that
are qualified by materiality are true and correct;
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all other representation and warranties of Massey and Merger Sub
are true and correct in all material respects;
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Massey and Merger Sub having performed or complied in all
material respects with all agreements and covenants required by
it under the merger agreement at or prior to the consummation of
the merger;
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46
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Massey having delivered to Sunair a certificate, signed by an
executive officer of Massey, to the effect that each of the
conditions specified above has been satisfied; and
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Massey has sufficient funds at the closing to (i) satisfy
all of its obligations under the merger agreement, including
payment of the purchase price in full; (ii) refinance the
outstanding indebtedness of Sunair, to the extent necessary, and
(iii) pay all of its fees and expenses in connection with
the merger and the financing of the merger.
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Termination
of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time of the merger,
whether before or after our shareholders have adopted the merger
agreement, as follows:
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Upon the mutual written agreement of Massey and Sunair;
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By either Massey or Sunair if the effective time shall not have
occurred on or before February 25, 2010, provided, however,
that this right to terminate shall not be available to any party
whose failure to fulfill any obligation under the merger
agreement has been the cause of, or resulted in, the failure of
the effective time to occur on or before such date;
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By either Massey or Sunair if any governmental authority shall
have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary,
preliminary or permanent) or taken any other action (including
the failure to have taken an action) which has become final and
non-appealable and has the effect of making consummation of the
merger illegal or otherwise preventing or prohibiting
consummation of the merger;
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By Massey, if any of our representations and warranties are or
have become untrue or inaccurate, or there has been a breach on
our part of any of our covenants or agreements, and such failure
to be true or accurate or breach (i) would give rise to the
failure of applicable closing conditions; and (ii) is not
capable of being cured prior to the closing of the merger or, if
capable of being cured, is not cured by us within 30 days
following receipt of written notice of such failure to be true
or inaccuracy or breach from us;
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By Sunair, if any of the representations and warranties of
either Massey or Merger Sub are or have become untrue or
inaccurate, or there has been a breach on the part of either
Massey or Merger Sub of any of its covenants or agreements, and
such failure to be true or accurate or breach (i) would
give rise to the failure of applicable closing conditions; and
(ii) is not capable of being cured prior to the closing of
the merger or, if capable of being cured, is not cured by Massey
or Merger Sub within 30 days following receipt of written
notice of such failure to be true or inaccuracy or breach from us
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By either Massey or Sunair if the merger agreement shall fail to
receive the requisite vote for approval by the shareholders of
Sunair at the special meeting; or
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By Sunair, prior to the approval of the merger and the merger
agreement by our shareholders, in order to enter into a
definitive agreement with respect to a competing transaction
proposal as permitted under the merger agreement.
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Deposit
Massey deposited $4 million in an escrow account on the
date of signing the merger agreement. If the merger agreement
closes, this deposit will be applied to Sunairs closing
expense and any remaining amounts will be deposited in the
exchange fund and the paying agent will use the funds to pay the
merger consideration to Sunairs shareholders. If the
merger agreement does not close, this deposit will be returned
to Massey, unless Sunair terminates the merger agreement in
situations where it is entitled to a termination fee. If Sunair
is entitled to a termination fee, the $4 million deposit
will be advanced to Sunair by the escrow agent as payment in
full of the termination fee.
47
Termination
Fees
Massey will pay us a termination fee of $4 million if
(i) we terminate the merger agreement because the merger
has not closed on or before February 25, 2010, due to the
failure of Massey to satisfy its obligations under the merger
agreement, or (ii) Massey has breached its covenants and
obligations under the merger agreement, and these matters can
not be cured, if curable, with 30 days notice, provided
that in both situations we can not be in breach of any of our
obligations under the merger agreement. The termination fee will
be paid with funds that Massey has deposited in escrow. In the
event Massey becomes obligated to pay this termination fee, our
receipt of the termination fee shall be our sole and exclusive
remedy against Massey and Merger Sub for any loss or damage
suffered as a result of the merger to be consummated.
We are required to pay Massey a termination fee of
$2.75 million if we terminate the merger agreement on or
before November 15, 2009 because we have received a
superior acquisition proposal. If we terminate the merger
agreement after November 15, 2009, because we have received
a superior acquisition proposal, the amount of the termination
fee is equal to $2.75 million plus the actual cost of
lenders fee paid by Massey to extend the termination date
of the financing letters beyond November 15, 2009 or to
close on such financing, up to a maximum of $3.5 million.
We are required to pay this termination fee within six months
after the date of the termination of the merger agreement. In
the event we become obligated to pay this termination fee, then
the receipt by Massey and Merger Sub of this termination fee
shall be the sole and exclusive remedy against us for any loss
or damage suffered as a result of the failure of the merger to
be consummated.
If the merger closes, Massey will pay all of Sunairs
out-of-pocket costs and expenses incurred in connection with the
merger agreement, the merger and the other transactions
contemplated by the merger agreement. If the merger does not
close, each party is responsible for their own out of pocket
costs and expenses incurred in connection with the merger
agreement, the merger and the other transactions contemplated by
the merger agreement.
Governing
Law
The merger agreement is governed by Florida law.
Amendment
and Waiver
The merger agreement may be amended by us, Massey and Merger Sub
at any time prior to the effective time of the merger. However,
after approval of the merger agreement by our shareholders, no
amendment can be made except as allowed under applicable law.
Any amendment to the merger agreement must be made by a written
instrument signed by us, Massey and Merger Sub.
Massey, Merger Sub and we may (a) extend the time for the
performance of any obligation or other act of any other party to
be performed for the benefit of the waiving party,
(b) waive any inaccuracy in the representations and
warranties of any other party contained herein or in any
document delivered pursuant hereto, or (c) waive compliance
by any other party with any agreements or conditions compliance
with which is for the benefit of the waiving party contained in
the merger agreement (to the extent permitted by law). Such
waiver must be contained in a written instrument signed by the
parties to be bound by such waiver.
PAST
CONTACTS, TRANSACTIONS OR NEGOTIATIONS
Except as described under Background of the
Merger beginning on page 17 of this proxy
statement, there have not been any negotiations, transactions or
material contacts during the past two years concerning any
merger, consolidation, acquisition, tender offer or other
acquisition of any class of Sunairs securities, election
of Sunairs directors or sale or other transfer of a
material amount of Sunairs assets (i) between Sunair
or any of its affiliates, on the one hand, and Sunair, Massey,
Merger Sub, their respective executive officers, directors,
members or controlling persons, on the other hand,
(ii) between any, or (iii) between Sunair and its
affiliates, on the one hand, and any person not affiliated with
Sunair who would have a direct interest in such matters, on the
other hand.
48
MARKET
PRICE OF OUR COMMON STOCK
Our common stock trades on the American Stock Exchange under the
symbol SNR. As of October 14, 2009, there were
13,093,588 shares of common stock outstanding, held by
349 shareholders of record. The following table sets forth
the high and low reported closing sale prices for our common
stock for the periods shown as reported on the AMEX.
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High
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Low
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Year ended September 30, 2009
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First quarter
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2.30
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1.20
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Second quarter
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1.96
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1.32
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Third quarter
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2.55
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1.63
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Year ended September 30, 2008
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First quarter
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3.12
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1.66
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Second quarter
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2.55
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1.58
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Third quarter
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3.03
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2.21
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Fourth quarter
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2.60
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1.61
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Year ended September 30, 2007
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First quarter
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4.75
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3.61
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Second quarter
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3.81
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3.00
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Third quarter
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3.70
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3.11
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Fourth quarter
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3.51
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2.70
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On September 28, 2009, the last trading day before Sunair
publicly announced the execution of the merger agreement, the
closing sale price for Sunairs common stock as reported on
the AMEX was $1.84. On November 19, 2009, the last trading
day before this proxy statement was printed, the closing price
for our common stock on the AMEX was $2.69.
Shareholders should obtain a current market quotation for
Sunairs common stock before making any decision with
respect to the merger.
49
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows as of October 14, 2009, the
record date (or such other date indicated in the footnotes
below), the number of shares beneficially owned and the
percentage ownership of our common stock, by the following:
(a) each of our named executive officers, who was employed
by us as of the record date, (b) each of our directors,
(c) all of our named executive officers and directors as a
group, and (d) each person known to management to own
beneficially more than 5% of our outstanding common stock. Our
named executive officers are the persons who were
listed in our summary compensation table in our proxy statement
for our 2009 annual meeting of shareholders.
As used herein, the term beneficial ownership with respect to a
security is defined by
Rule 13d-3
under the Exchange Act as consisting of sole or shared voting
power (including the power to vote or direct the vote)
and/or sole
or shared investment power (including the power to dispose or
direct the disposition of) with respect to the security through
any contract, arrangement, understanding, relationship or
otherwise, including a right to acquire such power(s) during the
next 60 days. Unless otherwise noted, beneficial ownership
consists of sole ownership, voting and investment rights. The
address for each named executive officer and director is care of
Sunair Services Corporation, 1350 E. Newport Center
Drive, Suite 201, Deerfield Beach, Florida 33432.
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Amount and
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Nature of
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Beneficial
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Percent of
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Name
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Ownership
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Class
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Directors and Named Executive Officers
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Jack I. Ruff(1)
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12,500
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*
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Edward M. Carriero(2)
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40,625
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*
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Joseph S. DiMartino(3)
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73,500
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*
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Mario B. Ferrari(4)(12)
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9,933,450
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54.84
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%
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Robert C. Griffin(5)
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23,750
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*
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Arnold Heggestad, Ph.D.(6)
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61,750
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*
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Steven P. Oppenheim(7)
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38,750
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*
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Richard C. Rochon(8)
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9,933,450
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54.84
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%
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Charles P. Steinmetz(9)
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430,274
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3.28
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%
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All directors and executive officers as a group
(9 persons)(10)
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10,6147,599
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57.95
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%
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Other 5% or Greater Shareholders
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Coconut Palm Capital Investors II, Ltd.(11)
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9,914,700
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54.80
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%
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Michael Brauser(12)
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1,403,300
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10.25
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%
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Michael Herman(12)
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2,180,600
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16.65
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%
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Dru A. Schmitt(12)
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1,486,014
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11.11
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%
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Joseph Q. DiMartini(12)
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407,124
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3.10
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%
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Leon Brauser(12)
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80,000
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*
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Massey Services, Inc.(13)
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1,260,972
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9.63
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%
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* |
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Less than 1%. |
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(1) |
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Includes 12,500 shares issuable upon currently exercisable
options or options exercisable with 60 days of the record
date. |
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(2) |
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Includes 20,000 shares held by Mr. Carrieros
wife in her IRA account and 20,625 shares issuable upon
currently exercisable options or options exercisable within
60 days of the record date. |
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(3) |
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Includes 40,000 shares held directly by Mr. DiMartino
and 33,750 shares issuable upon exercise of currently
exercisable options or options exercisable within 60 days
of the record date. |
50
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(4) |
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Shares consist of: (i) 18,750 shares issuable upon
exercise of currently exercisable options or options exercisable
within 60 days of the record date; and (ii) all shares
beneficially owned by Coconut Palm (assumes beneficial ownership
of such shares is attributed to Mr. Ferrari, and
Mr. Ferrari disclaims beneficial ownership of these shares). |
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(5) |
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Includes 23,750 shares issuable upon currently exercisable
options or options exercisable within 60 days of the record
date. |
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(6) |
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Includes 38,750 shares issuable upon currently exercisable
options or options exercisable within 60 days of the record
date. |
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(7) |
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Consists of 38,750 shares issuable upon currently
exercisable options or options exercisable within 60 days
of the record date. |
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(8) |
|
Shares consist of: (i) 18,750 shares issuable upon
exercise of currently exercisable options or options exercisable
within 60 days of the record date; and (ii) all shares
beneficially owned by Coconut Palm (assumes beneficial ownership
of such shares is attributed to Mr. Rochon, and
Mr. Rochon disclaims beneficial ownership of these shares). |
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(9) |
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Includes 18,750 shares issuable upon exercise of currently
exercisable options or options exercisable within 60 days
of the record date. |
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(10) |
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Includes 5,224,375 shares issuable upon exercise of
currently exercisable options or options exercisable within
60 days of the record date. |
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(11) |
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Consists of 4,914,700 shares of our common stock and
5,000,000 shares of our common stock underlying warrants
that are immediately exercisable. 9,808,197 of the
9,914,700 shares of our common stock consist of an
aggregate of 4,843,698 shares of common stock and
4,964,499 shares of common stock underlying warrants that
are immediately exercisable which Coconut Palm has the sole
power to vote pursuant to proxy agreements executed by its
limited partners upon the redemption of their limited
partnership interests in Coconut Palm. Richard C. Rochon,
Chairman of our board of directors, and Mario B. Ferrari, Vice
Chairman of our board of directors, are the natural persons who
exercise voting and investment control over the shares. |
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(12) |
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This information was obtained from a Schedule 13D filed by
Mr. Brauser, Dru Schmitt, Michael Herman, Joseph Q.
DiMartini and Leon Brauser on February 2, 2009. With
respect to Mr. Brauser, it includes
(i) 600,000 shares underlying warrants,
(ii) 748,400 shares owned jointly with
Mr. Brausers wife and (iii) 51,000 shares
held in trust of which Mr. Brauser is the trustee. With
respect to Mr. Schmitt and Dr. Martini, it includes
warrants to purchase 285,714 and 50,000 shares of
Sunairs common stock, respectively. The mailing address
for the individuals are as follows: Mr. Brauser is
595 S. Federal Highway, Suite 600, Boca Raton, FL
33432; Mr. Schmitt at 13 Twin Springs Lane, St. Louis,
MO 63124; Mr. Herman at 1160 Lake Plaza Drive,
Suite 210, Colorado Springs, CO 80906; Mr. DiMartini
at 4 Carrsworld, Clayton, MO 63105, and Leon Brauser at 7218
Ayshire Lane, Boca Raton, FL 33496. |
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(13) |
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This information was obtained from a Schedule 13D filed by
Massey Services, Inc. on March 16, 2009. The mailing
address to Massey Services, Inc. is 315 Groveland Street,
Orlando, Florida 32804. |
51
SHAREHOLDERS
SHARING AN ADDRESS
We will deliver only one copy of this proxy statement to
multiple shareholders sharing an address unless we have received
contrary instructions from one or more of the shareholders. Upon
written or oral request, we will promptly deliver a separate
copy of the proxy statement to a shareholder at a shared address
to which a single copy of the proxy statement is delivered. A
shareholder can notify us that the shareholder wishes to receive
a separate copy of the proxy statement by contacting us at:
1350 E. Newport Center Drive, Suite 201,
Deerfield Beach, Florida 33432, Attn: Corporate Secretary, or by
contacting us via telephone at
(561) 208-7400.
Conversely, if multiple shareholders sharing an address receive
multiple proxy statement and wish to receive only one, such
shareholders can notify us at the address or phone number set
forth above.
SUBMISSION
OF SHAREHOLDER PROPOSALS
If the merger is completed, there will be no public shareholders
of Sunair and no public participation in any future meetings of
the shareholders of Sunair. If the merger is not completed, you
will continue to be entitled to attend and participate in our
shareholder meetings and we will hold a 2010 annual meeting of
shareholders, in which case shareholder proposals will be
eligible for consideration for inclusion in the proxy statement
and form of proxy. Proposals of shareholders to be considered
for inclusion in the proxy statement and proxy card for the 2010
Annual Meeting pursuant to
Rule 14a-8
under the Exchange Act must be submitted in writing to the
Corporate Secretary of Sunair, 1350 E. Newport Center
Drive, Suite 201, Deerfield Beach, Florida 33432, and must
be received by October 5, 2009. In addition, our bylaws
include advance notice provisions that require shareholders
desiring to bring nominations for directors or other business
before our annual shareholders meeting to do so in accordance
with the terms of the advance notice provisions in our bylaws.
The advance notice provisions in the bylaws do not apply if the
shareholder only seeks to include such matters in the proxy
statement pursuant to
Rule 14a-8.
To be timely, a shareholder who intends to present nominations
or a proposal (other than a
Rule 14a-8
proposal) at the 2010 Annual Meeting of Shareholders must
provide the information set forth in the Bylaws to the Corporate
Secretary by December 19, 2009. If a shareholder fails to
meet these deadlines and fails to satisfy the requirements of
Rule 14a-4
under the Exchange Act, Sunair may exercise discretionary voting
authority under proxies it solicits to vote on any such proposal
as it determines appropriate. The submission of a shareholder
proposal does not guarantee that it will be included in
Sunairs proxy statement.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
reports, proxy statements or other information that we file with
the SEC at its Public Reference Room, 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. You may
also obtain copies of this information by mail from the Public
Reference Section of the SEC, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. Our public
filings are also available to the public from document retrieval
services and the Internet website maintained by the SEC at
www.sec.gov.
No persons have been authorized to give any information or to
make any representations other than those contained in this
proxy statement and, if given or made, such information or
representations must not be relied upon as having been
authorized by us or any other person. This proxy statement is
dated November 20, 2009. You should not assume that the
information contained in this proxy statement is accurate as of
any date other than that date, and the mailing of this proxy
statement to shareholders shall not create any implication to
the contrary.
52
INTERNET
AVAILABILITY OF PROXY MATERIALS
Important
Notice Regarding the Availability of Proxy Materials for the
Special Meeting of Shareholders to be held On December 14,
2009
The Proxy Statement for our Special Meeting of Shareholders and
the proxy card is available at
http://www.amstock.com/ProxyServices/ViewMaterials.asp?CoNumber=05980.
53