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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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ELECTROSTAR, INC.
(Name of Subject Company)
ELECTROSTAR, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
286164108
(CUSIP Number of Class of Securities)
KENTON K. ALDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ELECTROSTAR, INC.
710 NORTH 600 WEST
LOGAN, UTAH 84321
(801) 753-4700
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
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COPIES TO:
BRUCE E. MACDONOUGH
GREENBERG, TRAURIG, HOFFMAN, LIPOFF, ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
(305) 579-0500
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is ElectroStar, Inc., a Florida corporation
(the "Company"), and the address of the principal executive offices of the
Company is 710 North 600 West, Logan, Utah 84321. The title of the class of
equity securities to which this statement relates is the Company's Common Stock,
par value $.01 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1, dated December 5, 1996 (as amended or
supplemented, the "Schedule 14D-1"), filed by Tyco International Ltd., a
Massachusetts corporation ("Tyco"), and its wholly owned subsidiary, T3
Acquisition Corp., a Florida corporation (the "Purchaser"), with the Securities
and Exchange Commission (the "Commission"), relating to an offer by the
Purchaser to purchase all the issued and outstanding Shares at a price of $14.00
per Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase, dated December 5, 1996, and the related Letter of
Transmittal (together the "Offer Documents"), copies of which are filed as
Exhibits (a)(1) and (a)(2) to this Solicitation/Recommendation Statement on
Schedule 14D-9 (this "Schedule 14D-9"), respectively.
The Offer Documents indicate that the principal executive offices of the
Purchaser and Tyco are located at One Tyco Park, Exeter, New Hampshire 03833.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated as
of November 27, 1996 (the "Merger Agreement"), among the Company, Tyco and the
Purchaser. A copy of the Merger Agreement is filed as Exhibit (c)(1) to this
Schedule 14D-9, and is incorporated herein by reference in its entirety.
Pursuant to the Merger Agreement, as soon as practicable following the
consummation of the Offer and the satisfaction or waiver of certain conditions,
the Purchaser will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving Corporation").
In the Merger, each Share outstanding at the Effective Time (as defined below)
(other than Shares held in the treasury of the Company, Shares owned by Tyco,
the Purchaser or any other subsidiary of Tyco or of the Company or shares held
by shareholders who properly exercise their dissenters' rights under the Florida
Business Corporation Act ("Florida Law")) will, by virtue of the Merger and
without any action by the holder thereof, be converted into the right to receive
$14.00 per Share, net to the Seller in cash, without interest thereon (the
"Merger Consideration"), upon the surrender of the certificate formerly
representing such Share ("Certificate"). The Merger Agreement is summarized in
Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the Company
and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in the Company's Information Statement attached
hereto as Annex A under the headings "Executive Compensation and Other
Information," "Principal Stockholders," "Certain Transactions," Description of
Stock Option Plan" and "Description of 1995 Employee Stock Purchase Plan." In
addition, pursuant to the Company's Second Amended and Restated Stock Option
Plan (the "Option Plan"), effective as of January 29, 1996, the Company granted
to each of Brevator J. Creech, M.D., and James J. Pinto, directors of the
Company, an option to purchase 5,000 shares of Common Stock at a per share
exercise price of $8.875.
STOCK OPTIONS. The Merger Agreement provides that each holder of an
outstanding option to purchase shares of the Company's Common Stock under the
Company's Option Plan shall receive at the effective time of the Merger (the
"Effective Time"), for each share of the Company's Common Stock subject to such
option, an amount (subject to any applicable withholding tax) in cash equal to
the difference between $14.00 and the exercise price of such option.
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FINANCIAL ADVISORY AGREEMENT. Effective November 22, 1996, the Company and
Trivest II, Inc. ("Trivest"), a corporation owned by Earl W. Powell, Phillip T.
George, M.D. and Peter C. Brockway, directors of the Company, entered into an
agreement providing for the Company's retention of Trivest as its financial
adviser and exclusive agent in connection with identifying and seeking out
"Prospective Purchasers." The agreement, a copy of which is filed as Exhibit
(c)(2) to this Schedule 14D-9, provides that if a "Transaction" is consummated,
the Company will pay Trivest a cash fee based upon the specified, graduated
percentages of "Transaction Consideration." Pursuant to such agreement, upon
consummation of the Offer and the Merger, the Company will pay Trivest a fee of
approximately $1.4 million.
INDEMNIFICATION ARRANGEMENTS. The Company has previously entered into
indemnification agreements with each person who as of December 21, 1995 was
either an executive officer or a director of the Company. The indemnification
agreements generally provide (i) for indemnification against all costs and
expenses (including attorneys' fees) actually and reasonably incurred in
connection with the investigation, defense or appeal of any threatened, pending
or completed action, suit or proceeding related to the fact that such indemnitee
is or was serving the Company or any affiliate of the Company as a director,
officer, employee, agent or fiduciary, or by reason of anything done or not done
by such indemnitee in any such capacity and any and all judgments, fines,
penalties and amounts paid in settlement of any claim, unless it is determined
that such indemnification is not permitted under applicable law or as a result
of certain culpable action by such indemnitee, and (ii) for the prompt
advancement of expenses to an indemnitee as well as the reimbursement by such
indemnitee of any such advances to the Company if it is determined that the
indemnitee is not entitled to such indemnification. Indemnitees' rights under
the indemnification agreements are not exclusive of any other rights they may
have under Florida Law, the Company's Articles of Incorporation or otherwise. A
copy of the form of indemnification agreement has been filed as Exhibit (c)(3)
to this Schedule 14D-9 and is incorporated herein by reference in its entirety.
Article VI of the Company's Amended and Restated Articles of Incorporation
provides for indemnification of the officers and directors of the Company to the
full extent permitted by law. A copy of such Article VI has been filed as
Exhibit (c)(4) to this Schedule 14D-9 and is incorporated herein by reference in
its entirety.
The Merger Agreement provides that the rights to indemnification set forth
in the above-described agreements and provisions of the Company's Articles will
survive the Merger and continue in effect in accordance with their terms. In
addition, Tyco has agreed to provide, or to cause the Surviving Corporation to
provide for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides for coverage for events occurring at or prior to the Effective
Time (the "D&O Insurance") that is no less favorable than the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that Tyco and the Surviving
Corporation shall not be required to pay an annual premium for the D&O Insurance
in excess of 200% of the annual premium currently paid by the Company for such
insurance, but in such case will purchase as much coverage as possible for such
amount.
MERGER AGREEMENT. The following summary of the Merger Agreement is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is filed as Exhibit (c)(1) to this Schedule 14D-9. The Merger Agreement should
be read in its entirety for a more complete description of the matters
summarized below.
THE OFFER. Pursuant to the Merger Agreement, the Purchaser has made the
Offer to purchase all outstanding Shares at $14.00 per Share in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer
Documents.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with Florida Law,
the Purchaser shall be merged with and into the Company. Following the Effective
Time, the separate corporate existence of the Purchaser will cease and the
Company will continue as the Surviving Corporation and will succeed to and
assume all the rights and obligations of the Purchaser in accordance with
Florida Law. The Articles of Incorporation of the Company, as in effect
immediately prior to the Effective Time, will be the Articles of Incorporation
of the Surviving Corporation, except that the capital stock of the Surviving
Corporation will consist of 1,000
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shares of common stock and certain provisions not appropriate for a wholly-owned
subsidiary will be eliminated. The bylaws of the Purchaser prior to the
Effective Time will be the bylaws of the Surviving Corporation.
CONVERSION OF SHARES. At the Effective Time, each then outstanding Share
(other than Shares owned by the Company, any subsidiary of the Company, Tyco,
the Purchaser, any other subsidiary of Tyco or by shareholders, if any, who are
entitled to and who properly exercise dissenters' rights under Florida law) will
be converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the Offer.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is
subject to the satisfaction of the following conditions: (a) if required by
applicable law, the Merger Agreement shall have been approved and adopted by the
holders of a majority of the Shares; (b) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other Federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
domestic, foreign or supranational (a "Governmental Entity") or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; and (c) the Purchaser shall have previously accepted for payment and
paid for Shares pursuant to the Offer.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Tyco and the
Purchaser relating to the Company and its subsidiaries, including, among other
things with respect to, organization and qualification, capitalization,
authority relative to the Merger Agreement, consents and approvals, filings with
the Commission, financial statements, absence of certain changes or events,
undisclosed liabilities, employee benefit matters, other compensation
arrangements, litigation, compliance with law, tax matters, brokers,
intellectual property, labor matters, title to property, environmental matters,
accounts receivable, customers, interested party transactions, the absence of
certain payments, insurance, product liability and inventory.
Tyco and the Purchaser have also made customary representations and
warranties to the Company relating to Tyco and the Purchaser, including, among
other things, with respect to organization and qualification, authority relative
to the Merger Agreement, consents and approvals and the availability of
sufficient funds to consummate the Offer and the Merger.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that,
until such time as Tyco's designees constitute a majority of the Company's Board
of Directors, except as otherwise expressly contemplated by the Merger Agreement
or to the extent that Tyco shall otherwise consent in writing, (a) the Company
and its subsidiaries will carry on their respective businesses in the ordinary
course and use all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them; (b) the Company will not, and will not
permit any of its subsidiaries to, (i) declare or pay any dividends on, or make
other distributions in respect of, any of its capital stock, except for
dividends by a direct or indirect wholly-owned subsidiary of the Company to its
parent, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company or (iii)
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or its subsidiaries or any other securities thereof; (c) the Company
will not, and will not permit any of it subsidiaries to, issue, deliver, sell,
pledge or encumber, or authorize the issuance, delivery, sale, pledge or
encumbrance of, any shares of its capital stock of any class or any securities
convertible into, or rights, warrants, calls, subscriptions or options to
acquire, any such shares or convertible securities, or any other ownership
interest in the Company, other than (i) the issuance of Shares upon the exercise
of Stock Options outstanding on the date of the Merger Agreement in accordance
with their terms, (ii) the issuance of Shares upon the conversion of shares of
Class B Common Stock of the Company outstanding as of November 27, 1996 and in
accordance with their terms, or (iii) issuance by a wholly-owned subsidiary of
the Company of its capital stock to its parent; (d) the Company will not, and
will not permit any of its
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subsidiaries to, amend or propose to amend its certificate or articles of
incorporation or its bylaws (or similar organizational documents); (e) the
Company will not, and will not permit any of its subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by purchasing any equity
interest in or any substantial assets of (except purchases of inventory and
equipment in the ordinary course of business consistent with past practice not
otherwise prohibited by the Merger Agreement) or by any other manner, any
business, corporation, partnership, joint venture, association or other business
organization or division thereof; (f) the Company will not, and will not permit
any of its subsidiaries to, sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise dispose of, any of
its assets, other than dispositions in the ordinary course of business
consistent with past practice; (g) the Company will not, and will not permit any
of its subsidiaries to, (i) incur indebtedness for borrowed money or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of others,
enter into any "keep-well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for working capital borrowings
incurred in the ordinary course of business consistent with past practice under
the Company's credit facility existing and in effect on the date of the Merger
Agreement, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than (A) with respect to both of the
foregoing clauses (i) and (ii), to the Company or any direct or indirect
wholly-owned subsidiary of the Company or (B) any advances to employees in
accordance with past practice; (h) the Company will confer with Tyco on a
regular basis as reasonably requested by Tyco, report on operational matters and
promptly advise Tyco of any material adverse change with respect to the Company
and will promptly provide to Tyco (or its counsel) copies of all filings made by
the Company with any Governmental Entity in connection with the Merger Agreement
and the transactions contemplated thereby; (i) the Company will not make any
material change, other than in the ordinary course of business, consistent with
past practice or as required by the Commission or law, with respect to any
accounting methods, principles or practices used by the Company (except insofar
as may be required by a change in generally accepted accounting principles); (j)
the Company will not, and will not permit any of its subsidiaries to, (i) pay,
discharge, settle or satisfy any claims, liabilities or obligations, other than
the discharge of certain liabilities of the Company in the ordinary course of
business consistent with past practice or in accordance with their terms or (ii)
waive the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its subsidiaries
is a party; (k) the Company and its subsidiaries will not, except as may be
required by law and except as otherwise specifically permitted, (A) enter into,
adopt, amend or terminate any Company Benefit Plan (as defined) or other
employee benefit plan or any agreement, arrangement, plan or policy for the
benefit of any director, executive officer or current or former key employee,
(B) increase in any manner the compensation or fringe benefits of, or pay any
bonus to, any director, executive officer or key employee, except as required by
any Company Benefit Plan or agreement with such employees existing on the date
the Merger Agreement, (C) enter into, adopt, amend or terminate any Company
Benefit Plan or other benefit plan or agreement, arrangement, plan or policy for
the benefit of any employees who are not directors, executive officers or
current or former key employees of the Company, other than increases in the
compensation of employees made in the ordinary course of business consistent
with past practice, or (D) pay any benefit not required by any plan or
arrangement as currently in effect (including the granting of, acceleration of
exercisability of or vesting of stock options, stock appreciation rights or
restricted stock); (l) neither the Company nor any of its subsidiaries will
modify, amend or terminate any material contract or agreement to which the
Company or such subsidiary is a party or waive, release or assign any material
rights or claims; (m) the Company will not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation of the
Company or any of its subsidiaries; (n) the Company will not make any tax
election or settle or compromise any material income tax liability (except as
otherwise permitted pursuant to the Merger Agreement); (o) the Company will not,
and will not permit any of its subsidiaries to, take or agree to commit to take
any action that is reasonably likely to result in any of the Company's
representations and warranties under the Merger Agreement being untrue in any
material respect at, or as of any time prior to, the Effective Time; and (p)
neither the Company nor any of its subsidiaries will authorize, commit or agree
to take any of, the foregoing actions.
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TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time of the Merger, whether before or after
approval of the terms of the Merger Agreement by the shareholders of the
Company:
(1) by mutual written consent of Tyco and the Company;
(2) by either Tyco or the Company if (a)(i) as a result of the failure
of any of the conditions to the Offer, the Offer shall have terminated or
expired in accordance with its terms without the Purchaser having accepted
for payment any Shares pursuant to the Offer or (ii) the Purchaser shall not
have accepted for payment any Shares pursuant to the Offer prior to the 60th
day after commencement of the Offer; PROVIDED, HOWEVER, that the right to
terminate the Merger Agreement pursuant to either clause (2)(a)(i) or
(2)(a)(ii) shall not be available to any party whose failure to perform any
of its obligations under the Merger Agreement results in the failure of any
such condition or if the failure of such condition results from facts or
circumstances that constitute a breach of any representation, warranty or
covenant under the Merger Agreement by such party; or (b) if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting
the acceptance for payment of, or payment for, Shares pursuant to the Offer
or the Merger and such order, decree or ruling or other action shall have
become final and nonappealable; PROVIDED, HOWEVER, that the right to
terminate the Merger Agreement pursuant to this clause 2(b) shall not be
available to any party that has failed to perform its obligations described
under "Reasonable Efforts" below or to use reasonable efforts (subject to
other terms and conditions of the Merger Agreement) to prevent the entry of
any such injunction or other order and to have vacated as promptly as
possible any injunction or other order that may be entered;
(3) by Tyco or the Purchaser if (i) the representation and warranties of
the Company with respect to the capitalization of the Company shall not have
been true and correct in all material respects when made or any other
representation or warranty of the Company shall not have been true and
correct in all material respects when made, except in any case where such
failure to be true and correct would not, in the aggregate, (x) have a
material adverse effect (as defined) on the Company, or (y) prevent or
materially delay the consummation of the Offer and/or the Merger; (ii) the
representation and warranties of the Company with respect to the
capitalization of the Company (other than representations and warranties
made as of a specific date) shall have ceased at any later date to be true
and correct in all material respects as if made at such later date or any
other representation or warranty of the Company (other than representations
and warranties made as of a specific date) shall have ceased at any later
date to be true and correct in all material respects as if made at such
later date, except in any case where such failure to be true and correct
would not, in the aggregate, (x) have a material adverse effect, or (y)
prevent or materially delay the consummation of the Offer and/or the Merger;
or (iii) the Company shall have failed to comply in any material respect
with any of its material obligations or covenants contained in the Merger
Agreement; PROVIDED, HOWEVER, that the right of Tyco or the Purchaser to
terminate this Agreement pursuant to this paragraph (3) shall not be
available if the Purchaser or any affiliate of the Purchaser shall acquire
any Shares pursuant to the Offer;
(4) by Tyco or the Purchaser if either Tyco or the Purchaser is
entitled, pursuant to the Merger Agreement, to terminate the Offer as a
result of (i) the Board of Directors of the Company having withdrawn or
modified in a manner adverse to Tyco or the Purchaser its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or approved
or recommended any Acquisition Proposal (as defined below), (ii) the Company
having entered into any agreement with respect to any Superior Proposal (as
defined below) as described under "Acquisition Proposals" below or (iii) the
Board of Directors of the Company shall have resolved to take any of the
actions set forth in clauses 4(i) and 4(ii) above; or
(5) by the Company in connection with entering into a definitive
agreement with respect to a Superior Proposal as described below under
"Acquisition Proposals," provided it has complied with certain provisions of
the Merger Agreement with respect thereto, including notice to Tyco and the
payment of the Termination Fee (as defined below under "Expenses and
Termination Fee"), and
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provided that the Company shall not have breached in any material respect
the other provisions described below under "Acquisition Proposals"; or
(6) by the Company if (x) any representation or warranty of Tyco or the
Purchaser shall not have been true and correct in all material respects when
made or shall have ceased at any later date to be true and correct in all
material respects as if made at such later date; or (y) Tyco or the
Purchaser shall have failed to comply in any material respect with any of
its material obligations or covenants contained in the Merger Agreement.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto except as described under "Expenses and Termination
Fee" below or as otherwise expressly provided for in the Merger Agreement;
PROVIDED, HOWEVER, that nothing in the Merger Agreement will relieve any party
from liability for any breach thereof.
ACQUISITION PROPOSALS. Pursuant to the Merger Agreement, the Company has
agreed that the Company and its officers, directors, employees, representatives
and agents will cease any discussions or negotiations with any parties with
respect to any Acquisition Proposal (as defined below). The Merger Agreement
further provides that the Company will not, nor will it permit any of its
subsidiaries to, authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries, directly or
indirectly, (1) to solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal or (2) to participate in any discussions or
negotiations regarding any Acquisition Proposal; PROVIDED, HOWEVER, that if, at
any time prior to the acceptance for payment of Shares pursuant to the Offer,
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's shareholders under applicable
law, the Company may, in response to an unsolicited Acquisition Proposal, and
subject to compliance with the notification provisions discussed below, (i)
furnish information with respect to the Company to any person pursuant to a
confidentiality agreement in reasonably customary form and (ii) participate in
negotiations regarding such Acquisition Proposal. The Merger Agreement defines
"Acquisition Proposal" as any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 20% or more of the
assets of the Company and its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of equity securities of the Company or any of
its subsidiaries, any merger, consolidation, business combination, sale of all
or substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its subsidiaries (other than
transactions between the parties to, and contemplated by, the Merger Agreement),
or any other transaction the consummation of which could reasonably be expected
to impede, interfere with, prevent or materially delay the Offer or the Merger
or which could reasonably be expected to dilute materially the benefits to Tyco
of the transactions contemplated thereby.
The Merger Agreement provides further that, except as described below,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Tyco, the approval or recommendation by the Board of Directors or such committee
of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) cause the
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that prior to the acceptance for
payment of Shares pursuant to the Offer the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
shareholders under applicable law, the Board of Directors may (subject to the
other provisions regarding Acquisition Proposals) withdraw or modify its
approval or recommendation of the Offer, the Merger Agreement or the Merger,
approve or recommend a Superior Proposal, cause the Company to enter into an
agreement with respect to a Superior Proposal or
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terminate the Merger Agreement, in each case at any time after the fifth
business day following Tyco's receipt of written notice advising Tyco that the
Board of Directors of the Company has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any Acquisition Proposal, it must
concurrently with entering into such agreement pay, or cause to be paid, to Tyco
the Termination Fee. See "Expenses and Termination Fee". For purposes of the
Merger Agreement, a "Superior Proposal" means any bona fide proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 20% of the Shares then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
the Company's shareholders than the Offer and the Merger.
In addition to the obligations of the Company described in the preceding two
paragraphs, the Merger Agreement provides that the Company shall immediately
advise Tyco orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making any such request or
Acquisition Proposal.
The Merger Agreement provides that nothing contained therein shall prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure to so disclose would be inconsistent with its fiduciary duties to the
Company's shareholders under applicable law; PROVIDED, HOWEVER, that neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by the Merger Agreement and as described above, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger or
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal.
EXPENSES AND TERMINATION FEE. Except as described below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such costs and expenses. The Merger Agreement provides that the
Company will pay, or cause to be paid, to Tyco a termination fee of $3,000,000
(the "Termination Fee") if (i) Tyco or the Purchaser terminates the Merger
Agreement by reason of the failure of the Company to comply with its material
obligations or covenants, as described in clause (3)(iii) under "Termination of
the Merger Agreement" above, or the Company or its Board of Directors has
withdrawn or modified its approval of the Offer or the Merger, recommended an
Acquisition Proposal, entered into an agreement with respect to a Superior
Proposal or resolved to do any of the foregoing, as described in clause (4)
under "Termination of the Merger Agreement" above, (ii) either Tyco or the
Company terminates the Merger Agreement as described under clause 2(a) under
"Termination of the Merger Agreement" above, the Minimum Condition has failed to
be satisfied and such failure is the result of a breach by any of the parties to
the Shareholder Agreement (as defined below) of its obligation thereunder to
tender its Shares in the Offer or (iii) the Company terminates the Merger
Agreement in connection with entering into a definitive agreement with respect
to any Superior Proposal, as described under clause (5) of "Termination of the
Merger Agreement" above.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, a majority of the outstanding Shares
by the Purchaser pursuant to the Offer, Tyco shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give Tyco, subject to compliance with Section
14(f) of the Exchange Act, representation on the Board of Directors equal to the
product of (x) the total number of directors on the Board of Directors and (y)
the percentage that the number of Shares purchased by the Purchaser bears to the
number of Shares outstanding; PROVIDED, HOWEVER, that in the event that Tyco's
designees are elected to the Board of Directors, until the Effective Time such
Board of Directors shall have at least two directors who were directors on the
date of the Merger Agreement and who are not
7
<PAGE>
officers of the Company (the "Independent Directors"); and PROVIDED FURTHER
that, in such event, if the number of Independent Directors shall be reduced
below two, the remaining Independent Director shall fill such vacancy or, if no
Independent Director then remains, the other directors shall designate two
persons who shall not be officers or affiliates of the Company or any of its
subsidiaries, or officers or affiliates of Tyco or any of its subsidiaries, to
fill such vacancies, and such persons shall be deemed Independent Directors for
purposes of the Merger Agreement. Subject to applicable law, the Company has
agreed to take all action requested by Tyco necessary to effect any such
election, including mailing to its shareholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, which Information Statement is attached as
Annex A to the Schedule 14D-9, and increasing the size of the Board of Directors
and/or obtaining the resignation of such number of the current directors of the
Company.
Following the election or appointment of the Tyco designated directors, the
affirmative vote of a majority of the Independent Directors then in office will
be required by the Company to (i) amend or terminate the Merger Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
the Merger Agreement or (iii) extend the time for performance of Tyco's and the
Purchaser's respective obligations under the Merger Agreement.
STOCK OPTIONS. Pursuant to the Merger Agreement, Tyco and the Company have
agreed, effective as of the Effective Time, (i) to cause each outstanding option
to purchase Shares (a "Company Stock Option") issued pursuant to the Company's
Second Amended and Restated Stock Option Plan, whether or not exercisable or
vested, to become fully exercisable and vested, (ii) cause each Company Stock
Option that is outstanding to be canceled and (iii) in consideration for such
cancellation, and except to the extent that Tyco or the Purchaser and the holder
of any such Company Stock Option agree, cause the Company (or, at Tyco's option,
the Purchaser) to pay (net of applicable withholding taxes) such holders of
Company Stock Options an amount in respect thereof equal to the product of (x)
the excess, if any, of the Offer price over the exercise price of each such
Company Stock Option and (y) the number of Shares subject to the Company Stock
Option immediately prior to its cancellation.
EMPLOYMENT AND BENEFIT ARRANGEMENTS. Tyco has agreed pursuant to the Merger
Agreement that, from and after the Effective Time, it shall cause the Surviving
Corporation to honor all employment, severance, termination and retirement
agreements to which the Company is a party, as such agreements are in effect on
the date of the Merger Agreement. Tyco has also agreed that, for a one-year
period following the Effective Time, it shall cause the Surviving Corporation to
provide those employees who are employees of the Surviving Corporation at the
Effective Time with benefits that are, in the aggregate, no less favorable to
such employees as are the benefits of the Company available to such employees
immediately prior to the Effective Time. These provisions are not intended,
however, to create rights of third party beneficiaries.
INDEMNIFICATION AND INSURANCE. In the Merger Agreement, Tyco and the
Purchaser have agreed that all rights to indemnification for acts or omissions
occurring prior to the effectiveness of the Merger that are in existence as of
the date of the Merger Agreement in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
certificates or articles of incorporation or by-laws or contractual arrangements
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, pursuant to the Merger Agreement, Tyco
has agreed to provide, or cause the Surviving Corporation to provide, for a
period of not less than six years after the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; PROVIDED, HOWEVER, that Tyco and the Surviving Corporation
will not be required to pay an annual premium for the D&O Insurance in excess of
200% of the annual premium currently paid by the Company for such insurance, but
in such case will purchase as much coverage as possible for such amount.
8
<PAGE>
REASONABLE EFFORTS. The Merger Agreement provides that each of the parties
will use its reasonable efforts to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
itself with respect to the Offer and the Merger and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their subsidiaries in connection with the
Offer and the Merger and will, and will cause its subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by any of them or any of
their subsidiaries in connection with the Offer and the Merger or the taking of
any action contemplated thereby or by the Merger Agreement, except that no party
need waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of or hold separate any assets or otherwise take any
action that would require a waiver of, or that is inconsistent with the
satisfaction of, certain related conditions of the Offer set forth in the Merger
Agreement.
AMENDMENT. The Merger Agreement may be amended by the parties thereto, by
action taken or authorized by their respective Boards of Directors; PROVIDED,
HOWEVER, that after any approval of the Merger Agreement by the shareholders of
the Company, no amendment will be made to the Merger Agreement which by law
requires further approval by such shareholders without such further approval.
CONDITIONS TO THE OFFER. For a description of the conditions to the Offer,
see Section 15 of the Offer to Purchase contained in the Offer Documents.
THE SHAREHOLDER AGREEMENT. Simultaneously with the execution of the Merger
Agreement, Trivest Fund I, Ltd., Trivest Equity Partners I, Ltd., LAC Partners,
Heller Financial, Inc. Kenton K. Alder, John Mayer and F.G. Lindsay Burton,
(collectively, the "Shareholders") entered into a Shareholder Agreement with
Tyco and the Purchaser (the "Shareholder Agreement"). The following is a summary
of the material terms of the Shareholder Agreement. This summary is not a
complete description of the terms and conditions thereof and is qualified in its
entirety by reference to the full text thereof which is incorporated herein by
reference and a copy of which has been filed with the Commission as Exhibit
(c)(5) to this Schedule 14D-9.
Upon the terms and subject to the conditions of the Shareholder Agreement,
the Shareholders have severally agreed to validly tender and not to withdraw
pursuant to and in accordance with the terms of the Offer the approximately 61%
of the outstanding Shares owned beneficially by them.
Subject to the right of certain Shareholders to make charitable gifts of up
to 74,000 Shares, each of the Shareholders has agreed not to: (i) transfer
(which term includes, without limitation, any sale, gift, pledge or other
disposition), consent to any transfer, or enter into any contract, option or
other arrangement with respect to the transfer of, Shares subject to the
Shareholder Agreement owned by such Shareholder; (ii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares; (iii) deposit any such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any such Shares; or (iv) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations under the Shareholder Agreement or the transactions
contemplated thereby. Each of the Shareholders has also agreed not to solicit,
initiate or encourage the submission of any Acquisition Proposal and not to take
certain other actions with respect to any Acquisition Proposal.
Under the Shareholder Agreement each Shareholder has granted an irrevocable
proxy with respect to the Shares subject to the Shareholder Agreement to Tyco to
vote such Shares against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company, and (ii) any
amendment of the Company's Articles of Incorporation or bylaws or other proposal
or transaction (including any consent solicitation to remove or elect any
directors of the Company) involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, or result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under or with
9
<PAGE>
respect to, the Offer, the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement.
Except as described herein or as otherwise disclosed in this Schedule 14D-9,
to the knowledge of the Company, as of the date hereof there are no material
contracts, agreements, arrangements or understandings with respect to the Offer
or the Merger Agreement, or any potential or actual conflicts of interest,
between the Company or its affiliates and (i) the Company, its directors,
executive officers or affiliates, or (ii) the Purchaser, Tyco or their
directors, executive officers or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Company's Board of Directors has determined unanimously that the
Offer and the Merger are fair to and in the best interests of the shareholders
of the Company and recommends that all shareholders of the Company accept the
Offer and tender all their Shares pursuant to the Offer. This recommendation is
based in part upon an opinion (the "Fairness Opinion") received by the Company
from Alex. Brown & Sons, Incorporated ("Alex. Brown") that the consideration to
be received by the Company's shareholders in the Offer and the Merger is fair to
the shareholders from a financial point of view. No limitations were imposed by
the Board of Directors or management of the Company on Alex. Brown with respect
to the investigations made, or the procedures followed by it, in rendering the
Fairness Opinion. For purposes of its opinion, Alex. Brown relied, without
independent verification, on the accuracy, completeness and fairness of all
financial and other information reviewed by it. The Fairness Opinion contains a
description of the factors considered, the assumptions made and the scope of
review undertaken by Alex. Brown in rendering its opinion. THE FULL TEXT OF THE
FAIRNESS OPINION RECEIVED BY THE COMPANY FROM ALEX. BROWN IS FILED AS EXHIBIT
(a)(4) TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B.
SHAREHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least that
number of Shares which would constitute a majority of the total number of
outstanding Shares on a fully diluted basis (the "Minimum Condition"). Pursuant
to the Shareholder Agreement described above, beneficial owners of approximately
61% (57% on a fully diluted basis) of the total outstanding Shares have agreed
to tender all of their Shares pursuant to this Offer. Under Florida Law, the
approval of the Board and the affirmative vote of the holders of a majority of
the outstanding Shares are required to approve the Merger. Accordingly, if the
Minimum Condition is satisfied, the Purchaser will have sufficient voting power
to cause the approval of the Merger without the affirmative vote of any other
shareholder.
The Offer is scheduled to expire at 12:00 Midnight, New York City time, on
Friday, January 3, 1997, unless the Purchaser, subject to certain limitations,
elects to extend the period of time for which the Offer is open. A copy of the
press release issued jointly by the Company and the Purchaser on November 29,
1996 announcing the Merger and the Offer is filed as Exhibit (a)(3) to this
Schedule 14D-9 and is incorporated herein by reference in its entirety.
(b) Since its initial public offering in late December 1995 (the "IPO"), the
Company has regularly reviewed acquisition prospects that would augment or
complement the Company's operations or offer significant growth opportunities.
In addition, the Company's Board of Directors and senior management have
reviewed the Company's strategic position in the printed circuit board industry,
near and longer term prospects for that industry and the Company's potential
position in it and strategic alternatives available to the Company, with a view
to maximizing shareholder value. As part of its review, the Company had periodic
discussions with representatives of the managing underwriters for the Company's
IPO--Robertson, Stephens & Company LLC, the Purchaser's financial advisor
("Robertson Stephens") and Alex. Brown.
Among other discussions, representatives of Trivest asked Alex. Brown and
Robertson Stephens to informally inquire as to whether any potential purchasers
would be interested in a possible acquisition of the Company. Each of Robertson
Stephens and Alex. Brown identified a list of the most likely potential
10
<PAGE>
acquirers of the Company. Since July 1996, representatives of Trivest, Robertson
Stephens or Alex. Brown contacted approximately 15 participants in the
electronics industry to assess their interest in pursuing a potential
transaction with the Company.
On or about October 9, 1996, Tyco requested Robertson Stephens to contact
the Company on behalf of Tyco to present Tyco's potential interest in acquiring
the Company. Following such contact, on October 28 and 29, 1996, J. Brad McGee,
Vice President of Tyco, and other representatives of Tyco, met with Kenton K.
Alder, President and Chief Executive Officer of the Company, John Mayer, Chief
Operating Officer of the Company, and Michael E. Moran, Senior Vice President of
Trivest. The Tyco representatives visited the Company's manufacturing facilities
in Inglewood, California and Logan, Utah and obtained information about the
Company and provided the Company with certain information concerning Tyco.
On November 1, 1996, Tyco and the Company executed a confidentiality
agreement. Also on November 1, 1996, Trivest invited Tyco to submit an
indication of interest in acquiring the stock of the Company.
On November 12, 1996, Tyco, through Robertson Stephens, verbally expressed
an interest in acquiring the stock of the Company for $14.00 per share. Tyco
indicated that financing the transaction would be through existing financing
sources of Tyco and that due diligence could start immediately. Between November
12 and November 18, 1996, representatives of Tyco and the Company conducted
several discussions concerning the possibility of an acquisition transaction,
including price, structure, timing, due diligence and Tyco's valuation analysis.
On November 18, 1996, the Company and Tyco executed an exclusivity and
standstill agreement which, among other things, provided Tyco exclusive access
to non-public information concerning the Company until November 22, 1996 so that
Tyco could perform a definitive evaluation of an acquisition of the Company by
Tyco, as well as Tyco's agreement to certain standstill provisions. The
exclusivity agreement was extended on November 22, 1996 until November 27, 1996.
During the week of November 18, 1996, representatives of Tyco conducted a due
diligence review of the Company's business and held discussions concerning the
review with representatives of the Company. Between November 25 and November 27,
1996, the legal advisors of Tyco and the Company negotiated the terms of the
Merger Agreement and the Shareholder Agreement, drafts of which had been
previously furnished by the Company to Tyco.
On November 27, 1996, the Board of Directors of Tyco considered the proposal
to acquire the Company. Following the presentation of Tyco's management, Tyco's
Board voted to approve an offer to acquire the Company for $14.00 per Share
substantially on the terms set forth in the Merger Agreement.
On November 27, 1996, following the action of Tyco's Board, the Board of
Directors of the Company met to consider the Tyco offer. The Company's Board
reviewed the terms of the Merger Agreement and received the opinion of Alex.
Brown that the offer price of $14.00 per share was fair to the Shareholders from
a financial point of view. Thereafter, the Board of Directors of the Company
unanimously approved the Merger Agreement, the Offer and the Merger. On November
27, 1996, Tyco and the Company executed the Merger Agreement. Public disclosure
of the Merger Agreement was made on the morning of November 29, 1996, prior to
the opening of trading of Shares on the National Market of the Nasdaq Stock
Market.
In arriving at its decision to approve the Offer and Merger and recommend
that the Company's shareholders accept the Offer and tender their Shares, the
Board of Directors of the Company considered a number of factors, including,
without limitation, the following:
(i) the financial and other terms and conditions of the Offer and the
Merger Agreement;
(ii) the fact that the $14.00 per Share price to be received by the
Company's shareholders in both the Offer and the Merger represents a
substantial premium over the historical trading prices for the Shares since
the Company's December 21, 1995 initial public offering of Common Stock at
$9.00 per
11
<PAGE>
share, including a premium over the closing market price of $11.75 per Share
on November 26, 1996, the last full trading day prior to the approval and
execution of the Merger Agreement;
(iii) the oral opinion of Alex. Brown, confirmed in writing, that the
consideration to be received by the Company's shareholders pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view. A copy of Alex. Brown's written opinion is attached to this Schedule
14D-9 as Annex B and is incorporated herein by reference. Such opinion
should be read in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered and limitations of
the review undertaken by Alex. Brown;
(iv) the presentation of Alex. Brown to the Board of Directors at its
meeting on November 27, 1996, as to various financial and other matters
deemed relevant to the Board of Director's consideration, including, among
other things, (a) an analysis of the Company's historical and projected
operating performance, (b) a review of public information with respect to
certain other companies in the printed circuit board business, (c) a review
of the historical stock prices and trading volumes of the Shares, (d) a
hypothetical public market valuation of the Company, (e) an analysis of the
Offer Price as a multiple of various measures of the Company's operating
performance, and (f) the terms of recent comparable business combinations in
the printed circuit board industry in comparison with the terms of the
proposed transaction;
(v) the results of the process undertaken by Trivest to identify and
solicit indications of interest with respect to a possible purchase of the
Company, including the fact that no other potential strategic partner had
expressed an interest in engaging in a business combination or other
strategic transaction that would likely be on terms as favorable to the
Company's shareholders as those of the Offer and Merger;
(vi) the fact that the beneficial owners of approximately 61% of the
Shares were prepared to endorse the Merger Agreement;
(vii) the fact that the Offer and the Merger were not conditioned on the
availability of financing which, combined with the experience, reputation
and financial condition of Tyco, increased the likelihood that the proposed
Offer and Merger will be consummated;
(viii) the fact that, to the extent required by the fiduciary obligations
of the Board of Directors of the Company to the shareholders under Florida
Law, the Company may terminate the Merger Agreement in order to approve a
tender offer or exchange offer for the Shares or other proposed business
combination by a third party on terms more favorable to the Company's
shareholders than the Offer and the Merger taken together, upon the payment
of a $3.0 million termination fee (see "Termination" under the description
of the Merger Agreement above);
(ix) the effect of the Offer and the Merger on the Company's
relationships with its employees and customers;
(x) the advice of the Company's legal advisors with respect to the terms
of the Merger Agreement, the Offer and the Merger; and
(xi) the Board of Directors' knowledge of the Company's business,
operations, prospects and competitive position and current trends in the
printed circuit board industry, including the advantages in a competitive
environment of strategically aligning with a large, well-capitalized
company.
The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current shareholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Offer and the Merger, determined that the
historical results of operations and future prospects of the Company are
adequately reflected in the $14.00 price per Share.
In light of all the factors set forth above, the Board of Directors approved
the Offer and the Merger. In view of the variety of factors considered in
connection with its evaluation, the Board of Directors did not
12
<PAGE>
assign relative weights to the specific factors considered in reaching its
decision or determine that any factor was of particular importance. Rather, the
Board of Directors viewed its position and recommendations as being based on the
totality of the information presented to it and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Trivest to act as its financial advisor and exclusive
agent in connection with identifying and seeking out "Prospective Purchasers"
who would be interested in entering into a "Transaction" with the Company.
Pursuant to a letter agreement, dated November 22, 1996, between the Company and
Trivest, the Company has agreed to pay Trivest a fee of approximately $1.4
million if the Offer and Merger are consummated. In addition, whether or not the
Offer or the Merger is completed, the Company has agreed to reimburse Trivest
periodically for its reasonable out-of-pocket expenses, including the fees and
disbursements of its counsel, and to indemnify Trivest against certain expenses
and liabilities incurred in connection with its engagement, including
liabilities under Federal securities laws.
The Company retained Alex. Brown to provide the Fairness Opinion in
connection with the proposed Offer and Merger. Pursuant to a letter agreement,
dated November 25, 1996, between the Company and Alex. Brown, the Company has
agreed to pay Alex. Brown a fee of $200,000 upon delivery of the Fairness
Opinion. The Company has also agreed to reimburse Alex. Brown for its reasonable
out-of-pocket expenses incurred in connection with the engagement, including
fees and disbursements of its legal counsel, whether or not the Offer or Merger
is consummated. The Company has also agreed to indemnify Alex. Brown and its
directors, offices, agents, employees and controlling persons for certain costs,
expenses and liabilities to which it may be subjected arising out of or related
to its engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty (60) days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of the Shareholders (see
Item 3, "Identity and Background--The Shareholder Agreement," above) and all of
the Company's other executive officers and directors who own Shares of Common
Stock currently intend to tender all of their Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to, or would result in, one or more of the events referred to in Item 7(a)
above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The information contained in Exhibits (a)(1), (a)(2), (a)(4), (c)(1),
(c)(2), (c)(3), (c)(4) and (c)(5) referred to in Item 9 below is incorporated
herein by reference.
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The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Tyco, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase, dated December 5, 1996*
(a)(2) Letter of Transmittal*
(a)(3) Press release issued by the Company and Tyco on November 29, 1996
(a)(4) Fairness Opinion of Alex. Brown dated November 27, 1996*
(a)(5) Letter to Shareholders, dated December 5, 1996, from Kenton K. Alder, Chief Executive Officer and
President of the Company*
(c)(1) Agreement and Plan of Merger, dated as of November 27, 1996, among Tyco, the
Purchaser and the Company
(c)(2) Trivest Financial Advisory Agreement
(c)(3) Form of Indemnification Agreement
(c)(4) Article VI of the Company's Amended and Restated Articles of Incorporation
(c)(5) Shareholder Agreement, dated November 27, 1996, among Tyco, the Purchaser and the Shareholders
identified therein.
</TABLE>
- ------------------------
* Included in copies mailed to Shareholders.
14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
December 5, 1996
ELECTROSTAR, INC.
BY: /S/ KENTON K. ALDER
-----------------------------------------
Kenton K. Alder
PRESIDENT AND CHIEF EXECUTIVE OFFICER
15
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ANNEX A
ELECTROSTAR, INC.
710 North 600 West
Logan, Utah 84321
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
This information Statement is being mailed on or about December 5, 1996 as a
part of ElectroStar, Inc.'s (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
shares of Common Stock, par value $.01 per share, of the Company (the "Shares")
at the close of business on or about November 29, 1996. You are receiving this
Information Statement in connection with the possible election of persons
designated by Tyco International Ltd. ("Tyco") to a majority of the seats on the
Board of Directors of the Company.
On November 27, 1996, the Company, T3 Acquisition Corp., a wholly-owned
subsidiary of Tyco (the "Purchaser"), and Tyco entered into an Agreement and
Plan of Merger (the "Merger Agreement") in accordance with the terms and subject
to the conditions of which (i) Tyco has caused the Purchaser to commence a
tender offer (the "Offer") for all outstanding Shares at a price of $14.00 per
Share net to the seller in cash, and (ii) the Purchaser will be merged with and
into the Company (the "Merger"). In addition, on November 27, 1996, the
Purchaser, the Company and certain shareholders of the Company (collectively the
"Shareholders") entered into a Shareholder Agreement pursuant to which the
Shareholders have agreed to tender to the Purchaser in the Offer, approximately
61% (57% on a fully diluted basis) of the Company's outstanding Shares. As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Tyco.
The Merger Agreement requires the Company to use all reasonable efforts to
cause the Purchaser's designees to be elected to the Board of Directors under
the circumstances described therein. See "Board of Directors and Executive
Officers."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 5, 1996. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on January 3, 1997 unless the Offer is extended.
The following information contained in this Information Statement concerning
Tyco and the Purchaser has been furnished to the Company by the Purchaser, and
the Company assumes no responsibility for the accuracy or completeness of such
information.
Pursuant to the Merger Agreement, promptly upon the purchase of a majority
of the outstanding Shares pursuant to the Offer, Tyco shall be entitled to
designate such number of directors (the "Tyco Designees"), rounded up to the
next whole number, on the Board of Directors of the Company as will give Tyco
representation on the Board of Directors equal to the product of (a) the total
number of directors on the Board and (b) the percentage that the number of
Shares purchased by the Purchaser bears to the number of Shares outstanding;
provided, however, that in the event that Tyco's designees are elected to the
Board of Directors, until the Effective Time such Board of Directors shall have
at least two directors who were directors on the date of the Merger Agreement
and who are not officers of the Company (the "Independent Directors"); and
provided further that, in such event, if the number of the Independent Directors
shall be reduced below two, the remaining Independent Director shall fill such
vacancy or, if no Independent Director then remains, the other directors shall
designate two directors who shall not be
A-1
<PAGE>
officers or affiliates of the Company or any of its subsidiaries, or officers or
affiliates of Tyco or any of its subsidiaries, to fill such vacancies, and such
persons shall be deemed Independent Directors for purposes of the Merger
Agreement. Subject to applicable law, the Company has agreed to take all action
requested by Tyco necessary to effect such election, including the mailing of
this Information Statement and increasing the size of the Board of Directors
and/or obtaining the resignation of such number of its current directors as is
necessary to enable Tyco's designees to be elected or appointed to, and to
constitute a majority of the Company's Board of Directors as provided above.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 1, 1996, there were
6,916,360 Shares outstanding. The Board of Directors currently consists of three
classes, with regular three year staggered terms and initial terms of one, two
and three years for each of the Class I, Class II and Class III directors,
respectively. The Board of Directors has fixed the number of directors at nine
that presently constitute the Board. At each annual meeting of shareholders,
three directors are elected. The officers serve at the discretion of the Board.
Tyco has informed the Company that it will choose the Tyco Designees from
the executive officers of Tyco and the Purchaser listed in Annex I to the Offer
to Purchase, a copy of which is being mailed to the Company's shareholders
together with this Schedule 14D-9. Tyco has informed the Company that each of
the executive officers of Tyco and the Purchaser listed on Annex I to the Offer
to Purchase has consented to act as a director, if so designated. The
information on such Annex I is incorporated herein by reference. None of such
executive officers (i) is currently a director of, or holds any position with,
the Company, (ii) has a familial relationship with any of the directors or
executive officers of the Company or (iii) to the best knowledge of the
Purchaser, beneficially owns any securities (or rights to acquire any
securities) of the Company. The Company has been advised by the Purchaser that,
to the best of the Purchaser's knowledge, none of such executive officers has
been involved in any transaction with the Company or any of its directors,
executive officers or affiliates which are required to be disclosed pursuant to
the rules and regulations of the Commission, except as may be disclosed herein
or in the Schedule 14D-9.
It is expected that the Tyco Designees may assume office at any time
following the purchase by the Purchaser of a majority of outstanding Shares
pursuant to the Offer, and that, upon assuming office, the Tyco Designees will
thereafter constitute a majority of the Board of Directors.
Biographical information concerning each of the Company's current directors
and executive officers as of November 30, 1996 is presented on the following
pages.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
NAME AGE APPOINTED POSITION WITH THE COMPANY
- ----------------------------------------------- --- ----------- -----------------------------------------------
<S> <C> <C> <C>
Kenton K. Alder................................ 46 1987 President, Chief Executive Officer
and Director
John Mayer..................................... 45 1989 Executive Vice President, Chief
Operating Officer and Director
F. G. Lindsay Burton, Jr....................... 44 1986 Vice President, Chief Financial
Officer and Director
Earl W. Powell................................. 57 1994 Chairman of the Board
Phillip T. George, M.D......................... 56 1994 Director
Peter C. Brockway.............................. 39 1994 Director
Michael E. Moran............................... 32 1994 Director
Brevator J. Creech, M.D........................ 55 1996 Director
James J. Pinto................................. 45 1996 Director
</TABLE>
A-2
<PAGE>
MR. ALDER has served as the President, Chief Executive Officer and a
director of the Company since December 1994 and as the President of Lundahl
Astro Circuits, Inc., a subsidiary of the Company ("Lundahl") since 1987. Mr.
Alder joined Lundahl in 1979 and served in various capacities before being
appointed President.
MR. MAYER has served as the Chief Operating Officer and a director of the
Company since December 1994, Executive Vice President since October 1995 and as
President of Electro-Etch Circuits, Inc., a subsidiary of the Company
("ElectroEtch") since 1989. Mr. Mayer joined ElectroEtch in 1985 and served in
various capacities before being appointed President.
MR. BURTON has served as the Chief Financial Officer and as a director of
the Company since December 1994 and as Vice President since October 1995. Mr.
Burton joined Lundahl as its Chief Financial Officer in 1986.
MR. POWELL has served as Chairman of the Board of the Company since December
1994. Mr. Powell also serves as President and Chief Executive Officer of
Trivest, Inc. ("Trivest"), a private investment firm formed by Messrs. Powell
and George in 1981 that specializes in management services and acquisitions,
dispositions and leveraged buyouts. Since May 1984, Mr. Powell has served as
Chairman of Atlantis Plastics, Inc., whose subsidiaries are engaged in the
plastics industry ("Atlantis"). Mr. Powell served as Chief Executive Officer of
Atlantis from May 1984 to February 1995 and as President of Atlantis from
November 1993 to February 1995. Mr. Powell has served as Chairman of the Board
of Biscayne Apparel, Inc., whose subsidiaries are engaged in the apparel
industry ("Biscayne"), since 1985. He served as President and Chief Financial
Officer of Biscayne at various times since October 1985. Mr. Powell also serves
as Chairman of the Board of Directors of WinsLoew Furniture, Inc., which is
engaged in the manufacture of contract seating and casual and ready-to-assemble
furniture ("WinsLoew"). From 1971 until 1985, Mr. Powell was a partner with
KPMG/Peat Marwick, certified public accountants ("Peat Marwick"), where his
positions included serving as managing partner of Peat Marwick's Miami office.
DR. GEORGE has served as a director of the Company since December 1994. Dr.
George serves as the Chairman of the Board of Trivest, which he formed with Mr.
Powell in 1981 and also serves as Vice Chairman of Atlantis' Board of Directors,
Vice Chairman of Biscayne's Board of Directors and a director of WinsLoew. Dr.
George's executive position with Trivest has been his principal occupation since
retiring from the private practice of plastic and reconstructive surgery in
February 1986.
MR. BROCKWAY has served as a director of the Company since December 1994.
Mr. Brockway has served as an executive officer of Trivest since September 1986
and is presently a Managing Director and Executive Vice President of Trivest.
Mr. Brockway has also served as Vice President of Atlantis since September 1986
and a director of WinsLoew since December 1994.
MR. MORAN, appointed a director of the Company in December 1994, has served
as Vice President of Trivest since June 1994. From 1986 until such time, Mr.
Moran was employed by the Corporate Finance Consulting Group of Arthur Andersen
LLP, where he most recently served as Manager.
DR. CREECH has served as a director of the Company since January 1996. Dr.
Creech has been in the private practice of plastic and reconstructive surgery
for over 25 years. He has served on the Advisory Board of North State National
Bank of Chico California and is past Chief of Staff of Chico Community Hospital
and past president of the Butte-Glenn Medical Society.
MR. PINTO has served as a director of the Company since January 1996. Mr.
Pinto has been Chairman of National Capital Management Corp., a specialty
finance company, since 1989. Since 1990, Mr. Pinto has also been the President
of Private Finance Group Corporation, an investment firm. Mr. Pinto also serves
as a director of Biscayne Apparel, Inc., an apparel company listed on the
American Stock Exchange, and Andersen Group, Inc., an electronics products
company.
A-3
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held one meeting during 1995, which was attended by
all directors. The Board also took actions by written consent.
The Board of Directors has established two standing committees: (1) the
Audit Committee and (2) the Compensation Committee.
Messrs. Brevator J. Creech, M.D., James J. Pinto and Michael E. Moran are
members of the Audit Committee, which was established in January 1996 and thus
did not hold any meetings during 1995. Mr. Pinto is the Chairman of that
committee. The duties and responsibilities of the Audit Committee include (a)
recommending to the full Board the appointment of the Company's auditors and any
termination of engagement, (b) reviewing the plan and scope of audits, (c)
reviewing the Company's significant accounting policies and internal controls,
and (d) having general responsibility for all related auditing matters.
Messrs. Brevator J. Creech, M.D. and James J. Pinto are members of the
Compensation Committee, which was established in January 1996 and thus did not
hold any meetings during 1995. Dr. Creech is Chairman of that committee. The
Compensation Committee is responsible for setting and administering policies
that govern annual compensation of the Company's executive officers. The
Compensation Committee has the exclusive power and authority to make
compensation decisions and make recommendations to the Board of Directors on
compensation matters affecting the Company's executive officers. The
Compensation Committee administers the Company's Second Amended and Restated
Stock Option Plan (the "Stock Option Plan") and 1995 Employee Stock Purchase
Plan.
A-4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and each of the most highly compensated
executive officers of the Company whose total annual salary and bonus,
determined as of the end of the last fiscal year, exceeded $100,000 (the "Named
Executive Officers"), for the fiscal years ended December 31, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION NO. OF
------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------------- ----------- ---------- ------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenton K. Alder................ 1995 $ 130,000 $ 161,804(1) --(2) -- $ 2,311(3)
President and Chief Executive 1994 100,000 119,401(4) --(2) 49,316 3,353(3)
Officer
John Mayer..................... 1995 270,000 1,866,667(5) --(2) -- 2,855,145(6)
Executive Vice President and 1994 260,000 1,464,000(7) $ 184,000(8) 68,998 --
Chief Operating Officer
F. G. Lindsay Burton, Jr. ..... 1995 80,000 49,355(1) --(2) -- 1,637(3)
Vice President and 1994 70,000 35,245(4) --(2) 14,797 2,139(3)
Chief Financial Officer
</TABLE>
- ------------------------
(1) Reflects estimated bonus payable in 1996 relating to 1995 services.
(2) The aggregate amount of perquisites and other personal benefits provided to
such Named Officer is less than 10% of the total annual salary and bonus of
such officer.
(3) Reflects matching contributions to the Company's 401(k) plan.
(4) Reflects bonus paid in 1995 relating to 1994 services.
(5) Reflects accrued bonus for 1995, which was paid to Mr. Mayer from the
proceeds of the Company's initial public offering in December 1995 (the
"IPO").
(6) In 1995, Mr. Mayer agreed to terminate all future incentive compensation
obligations under his employment agreement in consideration of a payment of
$2,855,145, which was paid to Mr. Mayer from the proceeds of the Company's
IPO.
(7) Includes (i) $764,000 "stay" bonus accrued in 1994 at the time of the
Company's acquisition of ElectroEtch and paid in 1995, and (ii) a $700,000
bonus paid by the Company's predecessor in connection with such acquisition.
(8) Reflects the dollar value difference between the price paid by Mr. Mayer for
his Common Stock and the fair market value of such Common Stock at the date
of purchase.
OPTION GRANTS TABLE
No option grants were made during the fiscal year ended December 31, 1995 to
any of the Named Executive Officers.
A-5
<PAGE>
STOCK OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
No Named Executive Officer exercised stock options during the year ended
December 31, 1995. The following table sets forth certain information concerning
the number of stock options held by the Named Executive Officers as of December
31, 1995, and the value (based on the fair market value of a share of stock at
year-end) of in-the-money options outstanding as of such date.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1995 DECEMBER 31, 1995(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenton K. Alder........................................... 12,329 36,987 $ 81,926 $ 245,779
John Mayer................................................ 13,800 55,198 91,701 366,791
F. G. Lindsay Burton, Jr.................................. 3,699 11,098 24,580 73,746
</TABLE>
- ------------------------
(1) The closing sales price for the company's common stock as reported on the
NASDAQ National Market System on December 29, 1995 was $8.625. Value is
calculated by multiplying (a) the difference between $8.625 and the option
exercise price by (b) the number of shares of common stock underlying the
option.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
The Company entered into five-year employment agreements with each of
Messrs. Alder and Burton in November 1993 and Mr. Mayer in December 1994. The
employment agreements for Messrs. Alder, Burton and Mayer were amended and
restated in December 1994. The employment agreements for Mr. Alder and Mr.
Burton provide for annual salaries of $200,000 and $110,000, respectively, plus
incentive compensation based on net income targets, with guaranteed 1996
incentive compensation bonuses of $95,000 and $30,000 for Mr. Alder and Mr.
Burton, respectively. Mr. Mayer's employment agreement provides for an annual
salary of $260,000, subject to a 5% increase on January 1, 1996 and each January
1 thereafter during the term of the agreement.
Each employment agreement also provides for severance payments (the
"Severance Payments") in the event such executive's employment is terminated
"without cause" in the following amounts: (i) with respect to Messrs. Alder and
Burton, one year's annualized base salary and incentive compensation, and (ii)
with respect to Mr. Mayer, base salary for a period of 30 months (or the number
of months remaining in the initial term, if less). The employment agreements for
Messrs. Alder, Mayer and Burton further provide that such executive will not
compete with the Company (i) while employed by the Company, (ii) for a period of
one year following termination of employment (unless such termination is as a
result of a change of control), and (iii) while such Executive is receiving
Severance Payments.
Each of the Named Executive Officers holds options to purchase Common Stock
granted under the Company's Stock Option Plan. To the extent not already
exercisable, such options generally become exercisable upon liquidation or
dissolution of the Company, a sale or other disposition of all or substantially
all of the Company's assets, or a merger or consolidation pursuant to which the
ownership of more than 49% of the voting power of the Company's voting stock is
transferred. In addition, Mr. Mayer's employment agreement provides that in the
event his employment is terminated without cause, as a result of his death or
disability, or upon a change of control, all options to purchase Common Stock
held by Mr. Mayer shall become immediately exercisable.
DIRECTOR COMPENSATION
The Company pays each non-employee director an annual director's fee of
$20,000 ($40,000 for the Chairman), payable quarterly. The Company also
reimburses all directors for out-of-pocket expenses incurred in connection with
the rendering of services as a director. Each director who is not an employee of
the Company nor affiliated with any beneficial owner of more than 10% of the
Company's Common
A-6
<PAGE>
Stock will receive on (i) the date of his or her appointment as a director an
option to purchase 5,000 shares of common stock, and (ii) March 31 of each year,
commencing March 31, 1997 (if such person continues to serve as a director on
such date), an option to purchase 5,000 shares of common stock. Such options
become exercisable for 20% of the shares on the first anniversary date of grant
and the balance in equal annual installments over the four-year period
thereafter.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, the Company is required to
provide a report explaining the rationale and considerations that led to
fundamental compensation decisions affecting the Company's executive officers
(including the Named Executive Officers) during the past fiscal year. The
Company had no compensation committee or other board committee performing
equivalent functions for the year ended December 31, 1995. Accordingly, this
report is provided by the entire Board of Directors (other than Dr. Creech and
Mr. Pinto, both of whom did not serve as a director during 1995).
The Board's general philosophy with respect to the compensation of the
Company's executive officers is to offer competitive compensation programs
designed to attract and retain key executives critical to the long-term success
of the Company and to recognize an individual's contribution and personal
performance. Such compensation programs include a base salary and an annual
performance-based bonus as well as stock option plans designed to provide
long-term incentives.
In establishing the Company's executive compensation program, the Board
takes into account current market data and compensation trends for comparable
companies, compares corporate performance to that of a selected peer group and
gauges achievement of corporate and individual objectives. The base salaries of
the Named Executive Officers have been fixed at levels which the Board believes
are competitive with amounts paid to senior executives with comparable
qualifications, experience and responsibilities. All employment agreements with
the Named Executive Officers were approved by the Board prior to such officer
joining the Board or the Company, and all amendments to such officers'
employment agreements were approved by the Board, exclusive of such officers.
In January 1996, the Board of Directors established a Compensation Committee
comprised of Dr. Creech and Mr. Pinto, which will be responsible for setting and
administering policies that govern for 1996 and subsequent fiscal years annual
compensation of the Company's executive officers, as well as the Company's stock
option and stock purchase plans.
Mr. Mayer agreed to terminate all future incentive compensation obligations
under his employment agreement in consideration of a payment of $2,855,145 from
the proceeds of the IPO in December 1995.
Earl W. Powell
Phillip J. George, M.D.
Peter C. Brockway
Michael E. Moran
Kenton K. Alder
John Mayer
F.G. Lindsay Burton, Jr.
A-7
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of November 20, 1996, certain information
with respect to Shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors and
Named Officers, (iii) all current directors and executive officers as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act. Under this rule, certain shares may be deemed to be beneficially
owned by more than one person (if, for example, persons share the power to vote
or the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares
(for example, upon exercise of an option) within 60 days of the date as of which
the information is provided; in computing the percentage ownership of any
person, the amount of shares is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these
acquisition rights. As a result, the percentage of outstanding shares of any
person as shown in the following table does not necessarily reflect the person's
actual voting power at any particular date.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(2)
-----------------------
<S> <C> <C>
NAME OF BENEFICIAL OWNER(1) SHARES PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
Trivest Group, Inc. (3)(4).................................................................. 2,867,518 41.8%
LAC Partners (4)(5)......................................................................... 367,557 5.4
Earl W. Powell (4)(6)....................................................................... 3,235,075 47.2
Phillip T. George, M.D. (4)(6).............................................................. 3,235,075 47.2
Heller Financial, Inc. (7).................................................................. 620,737 8.3
Kenton K. Alder (8)......................................................................... 465,309 6.7
John Mayer (9).............................................................................. 247,049 3.4
F.G. Lindsay Burton, Jr. (10)............................................................... 156,482 2.3
Brevator J. Creech, M.D. (11)............................................................... 367,557 5.4
James J. Pinto (11)......................................................................... 367,557 5.4
All directors and executive officers as a group (9 persons) (12)............................ 4,103,915 58.8
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 710 North 600 West, Logan, Utah 84321.
(2) Except with respect to the calculation of ownership percentages for Heller
Financial, Inc. ("Heller"), the holder of all of the outstanding shares of
Class B non-voting common stock, the percentages set forth in this table
assume that none of the shares of Class B non-voting common stock have been
converted into shares of Common Stock. Pursuant to the rules of the
Securities and Exchange Commission (the "Commission"), certain shares of the
Company's Common Stock which a person has the right to acquire within 60
days of the date hereof pursuant to the exercise of stock options are deemed
to be outstanding for the purpose of computing the percentage ownership of
such person but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Trivest Group, Inc. serves as the sole general partner of Trivest 1988 Fund
Managers, Ltd., which in turn is the sole general partner of each of (a)
Trivest Fund I, Ltd. ("Trivest Fund I"), a privately held investment
partnership that holds of record 2,185,115 shares of Common Stock, and (b)
Trivest Equity Partners I, Ltd. ("Equity Partners"), a privately held
investment partnership that holds of record 682,403 shares of Common Stock.
Messrs. Powell and George are executive officers and directors of Trivest
Group, Inc. and own a controlling interest of its outstanding capital stock.
(4) The beneficial owners' address is 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133.
(5) LAC Partners is a Florida general partnership of which Messrs. Powell,
George Creech and Pinto are each general partners.
A-8
<PAGE>
(6) Reflects shares held of record by Trivest Fund I, Equity Partners and LAC
Partners. See footnotes (3) and (5).
(7) Reflects 620,737 shares of Common Stock issuable upon conversion of 620,737
shares of Class B non-voting common stock presently held by Heller. Heller
is an indirect wholly owned subsidiary of the Fuji Bank Ltd. Heller's
address is 500 W. Monroe Street, Chicago, Illinois 60661.
(8) Reflects (i) 440,651 shares held of record, and (ii) 24,658 shares subject
to presently exercisable options.
(9) Reflects (i) 219,450 shares held of record, and (ii) 27,599 shares subject
to presently exercisable options. Mr. Mayer's address is 8636 Aviation
Boulevard, Inglewood, California 90301.
(10) Reflects (i) 149,084 shares held of record, and (ii) 7,398 shares subject
to presently exercisable options.
(11) Reflects shares held of record by LAC Partners. See footnote (5).
(12) Includes shares owned of record by Trivest Fund I, Equity Partners and LAC
Partners, and shares beneficially owned by directors and executive officers
as described in footnotes 8, 9, 10 and 11.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return (assuming reinvestment of dividends) of Nasdaq
Market Index and the SIC Index that includes all organizations in the Company's
Standard Industrial Classification (SIC) Code 3672-Printed Circuit Design Index
for the period of December 21, 1995 (the commencement date of the Company's
initial public offering) and December 31, 1995.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG ELECTROSTAR, INC., THE NASDAQ STOCK MARKET-US INDEX
AND SIC CODE 3672 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ELECTROSTAR, SIC CODE 3672-PRINTED CIRCUIT DESIGN
INC. INDEX NASDAQ STOCK MARKET-US
<S> <C> <C> <C>
12/21/95 100 100 100
12/31/96 96 105 101
</TABLE>
- ------------------------
* $100 invested on 12/21/95 in stock or index including reinvestment of
dividends. Fiscal year ending December 31.
A-9
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than 10 percent of the Company's Common Stock, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common
Stock. Officers, directors and greater than 10 percent shareholders are required
by Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with
during the fiscal year ended December 31, 1995 and the fiscal year ending
December 31, 1996, except that the one required Report on Form 4 with respect to
two purchase transactions of Common Stock by Dr. Creech in May 1996 was not
filed until June 19, 1996.
A-10
<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT. In connection with the acquisition of Lundahl in
November 1993, the Company and Trivest entered into a management agreement (the
"Management Agreement") pursuant to which Trivest agreed to provide corporate
finance, strategic and capital planning and other management advice to the
Company, including rendering advice with respect to acquisitions, dispositions,
financings and refinancings. The Management Agreement also provided that (i) the
base management fee would be increased in connection with each additional
business acquired by the Company, and (ii) for each acquisition or disposition
introduced or negotiated by Trivest, Trivest would receive a one-time
transaction fee. In connection with the acquisition of ElectroEtch in December
1994, the Management Agreement was amended to increase the annual management fee
to $279,000, which amount was paid to Trivest in 1995. Effective December 31,
1995, the Management Agreement was terminated. In consideration of the
termination of the Management Agreement, the Company paid Trivest an additional
one-time fee of $250,000 in 1995.
PAYMENT OF SENIOR SUBORDINATED NOTES. In November 1993, an investor group
formed by affiliates of Trivest acquired Lundahl for $15.0 million, including
$3.0 million principal of 12.5% Senior Subordinated Notes ("Notes") due May
2000. The Notes were issued to Institutional Fund ($1,476,328 aggregate
principal amount), Investors Fund ($461,052 aggregate principal amount), LAC
Partners ($248,332 aggregate principal amount), Heller ($428,572 aggregate
principal amount), Kenton K. Alder ($300,000 aggregate principal amount) and
F.G. Lindsay Burton, Jr. ($85,716 aggregate principal amount). The Notes were
retired with the proceeds from the Company's IPO in December 1995. During 1995,
the Company made interest payments totaling $232,214, $75,520, $39,061, $54,000,
$47,188, and $13,482 to Institutional Fund, Investors Fund, LAC Partners,
Heller, Mr. Alder and Mr. Burton, respectively, with respect to the Notes.
PAYMENTS TO SENIOR LENDER. Heller has been the Company's senior lender
since November 1993. During 1995, the Company accrued $1,300,000 of aggregate
interest with respect to its credit agreement with Heller. In addition, the
Company retired approximately $5.3 million of principal amount of indebtedness
owed to Heller with the proceeds from the IPO in December 1995.
REPAYMENT OF LOAN. In 1994, the Company loaned Mr. Burton a principal
amount of $64,286 to fund an additional capital contribution to the Company
evidenced by a promissory note bearing interest at a rate of 8% per annum. In
December 1995, Mr. Burton repaid the principal amount of the note plus accrued
interest of $5,242.
A-11
<PAGE>
DESCRIPTION OF STOCK OPTION PLAN
GENERAL
In December 1995, the Company's Board of Directors and shareholders adopted
the Company's Stock Option Plan, pursuant to which 850,000 shares of Common
Stock are reserved for issuance upon the exercise of stock options granted under
the Stock Option Plan. The purpose of the Stock Option Plan is to provide an
additional incentive to attract and retain qualified competent persons who
provide management services and upon whose efforts and judgment the success of
the Company is largely dependent, through the encouragement of stock ownership
in the Company by such persons. In furtherance of this purpose, the Stock Option
Plan authorizes, among other things, the discretionary granting of incentive or
nonqualified stock options to purchase Common Stock to persons selected by the
administrators of the Stock Option Plan from the class of all regular employees
of the Company, including directors and officers who are regular employees, and
certain non-employee directors of the Company. In addition, each non-employee
director that is not affiliated with any beneficial owner of more than 10% of
the Company's common stock is eligible to receive certain automatic grants of
options as further described below, but not discretionary grants. The Stock
Option Plan also provides for loans to participants to finance the exercise of
options and the payment of taxes in connection therewith, and the use of already
owned Common Stock as payment of the exercise price for options granted under
the Stock Option Plan.
The Stock Option Plan limits the total aggregate number of options that any
one person can receive under the Stock Option Plan to no more than 30% of the
total number of options available for grant under the Stock Option Plan. The
purpose of this limit is to help ensure that the Company's tax deductions for
compensation expense under the Stock Option Plan are not limited by Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Section
162(m) can limit the deductibility of compensation expenses over $1 million with
respect to certain executives in certain circumstances.
The Stock Option Plan provides that it shall be administered by a committee
consisting of not less than two directors designated by the Board of Directors
(the "Committee") or, if a Committee is not designated, by the Board of
Directors. The Stock Option Plan also requires that the Committee consist of
directors who are "disinterested persons," as required for compliance with Rule
16b-3. A disinterested person is a director who is not, during the one year
prior to his or her service as an administrator of the Stock Option Plan, or
during such service, granted or awarded equity securities pursuant to the Stock
Option Plan or any other plan of the Company, with certain exceptions. The Board
has designated its Compensation Committee to administer the Stock Option Plan.
The Committee in its sole discretion determines the persons to be awarded
options, the number of shares subject thereto and the exercise price and other
terms thereof. In addition, the Committee has full power and authority to
construe and interpret the Stock Option Plan, and the acts of the Committee are
final, conclusive and binding upon all interested parties, including the
Company, its shareholders, its officers and employees, recipients of grants
under the Stock Option Plan, and all persons or entities claiming by or through
such persons.
An aggregate of 850,000 shares of Common Stock (subject to adjustment as
described below) are reserved for issuance upon exercise of options granted
under the Stock Option Plan. The shares acquired upon exercise of options
granted under the Stock Option Plan will be authorized and issued shares of
Common Stock. The Company's shareholders will not have any preemptive rights to
purchase or subscribe for any Common Stock by reason of the reservation and
issuance of Common Stock under the Stock Option Plan. If any option granted
under the Stock Option Plan should expire or terminate for any reason other than
having been exercised in full, the unpurchased shares subject to that option
will again be available for purposes of the Stock Option Plan.
A-12
<PAGE>
The table below indicates, as of December 1, 1996, certain information about
options that have been granted under the Stock Option Plan to the persons and
groups indicated. The options were granted at exercise prices ranging from $1.14
to $9 per share.
<TABLE>
<CAPTION>
NUMBER OF
OPTIONEES OPTIONS GRANTED
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Kenton K. Alder.............................................................. 49,316
John Mayer................................................................... 68,998
F.G. Lindsay Burton.......................................................... 14,797
All current executive officers as a group (3 persons)........................ 133,111
All current directors who are not executive officers as a group (6
persons)................................................................... 10,000
All employees as a group, other than executive officers...................... 354,018
</TABLE>
The Company's management believes that options granted under the Stock
Option Plan will be awarded primarily to those persons who possess a capacity to
contribute significantly to the successful performance of the Company. Because
persons to whom discretionary grants of options are to be made are to be
determined from time to time by the Committee in its discretion, it is
impossible at this time to indicate the precise number, name or positions of
persons who will hereafter receive such options or the number of shares for
which options will be granted. See "Executive Compensation and Other
Information--Compensation of Directors" for a description of the automatic
formula grants of options to certain non-employee directors provided under the
Stock Option Plan.
CERTAIN TERMS AND CONDITIONS
All grants of options under the Stock Option Plan must be evidenced by a
written agreement between the Company and the grantee. Such agreement shall
contain such terms and conditions as the Committee shall prescribe, consistent
with the Stock Option Plan, including, without limitation, the exercise price,
term and any restrictions on the exercisability of the options granted.
The price per share for discretionary grants may be any price determined by
the Committee; provided, however, that in no event shall the option price of any
incentive stock option be less than the fair market value per share of Common
Stock on the date of grant. The option price per share for formula grants must
be equal to the fair market value per share of Common Stock on the date of
grant. For purposes of the Stock Option Plan, and for so long as the Company's
Common Stock is listed on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") National Market System, the term "fair
market value" means the closing price of the Common Stock as reported on the
NASDAQ National Market System on the business day immediately preceding the date
of grant, unless the Committee shall determine otherwise in a fair and uniform
manner. The exercise price of an option may be paid in cash, by certified or
official bank check, by money order, by delivery of already owned shares of
Common Stock having a fair market value equal to the exercise price, or by a
combination of the foregoing. The Stock Option Plan also authorizes the Company
to make loans to optionees to enable them to exercise their options. If the
exercise price is paid with the optionee's promissory note, the note must (i)
provide for recourse to the optionee, (ii) bear interest at a rate no less than
the prime rate of interest of the Company's principal lender, (iii) be
collateralized as the pledge of the shares that the optionee purchases upon
exercise of such options and (iv) contain such other terms as the Board in its
sole discretion shall reasonably require.
A-13
<PAGE>
Already owned shares of Common Stock may be used to pay the exercise price
of an option in a single transaction or by "pyramiding" already owned shares in
successive, simultaneous option exercises. In general, pyramiding permits an
option holder to start with as little as one share of Common Stock and exercise
an entire option to the extent then exercisable (no matter what the number of
shares subject thereto). By utilizing already owned shares of Common Stock, no
cash (except for fractional share adjustments) is needed to exercise an option.
Consequently, the optionee would receive Common Stock equal in value to the
spread between the fair market value of the shares subject to the option and the
exercise price of the option.
Generally, options granted under the Stock Option Plan are not assignable or
transferable, other than by will or by the laws of descent and distribution.
During the lifetime of an optionee, an option is exercisable only by the
optionee. The expiration date of an option will be determined by the Committee
at the time of the grant, but in no event will an option be exercisable after
the expiration of 10 years from the date of grant. An option may be exercised at
any time or from time to time or only after a period of time or in installments,
as the Committee determines. The Committee may in its sole discretion accelerate
the date on which any option may be exercised. Each outstanding option will
automatically become exercisable in the event of certain transactions, including
certain changes in control of the Company, certain mergers and reorganizations,
and certain dispositions of substantially all the Company's assets.
The unexercised portion of any option granted under the Stock Option Plan
shall automatically be terminated (a) on the date on which the optionee's
employment is terminated (or three months after the date of termination in the
case of incentive stock options) for any reason other than (i) cause (as defined
in the Stock Option Plan), (ii) mental or physical disability, or (iii) death;
(b) immediately upon the termination of the optionee's employment for cause; (c)
one year after the date on which the optionee's employment is terminated by
reason of the optionee's death, or three months after the date of the optionee's
death if death occurs during the one year period following the termination of
the optionee's employment by reason of mental or physical disability.
To prevent dilution of the rights of a holder of an option, the Stock Option
Plan provides for appropriate adjustment of the number of shares for which
options may be granted, the number of shares subject to outstanding options and
the exercise price of outstanding options, in the event of any increase or
decrease in the number of issued and outstanding shares of the Company's capital
stock resulting from a stock dividend, recapitalization or other capital
adjustment of the Company. The Committee has discretion to make appropriate
antidilution adjustments to outstanding options in the event of a merger,
consolidation or other reorganization of the Company or a sale or other
disposition of substantially all the Company's assets.
The Stock Option Plan will expire on December 21, 2005, and any option
outstanding on such date will remain outstanding until it expires or is
exercised. The Committee may amend the Stock Option Plan or any option at any
time, provided that such amendment may not substantially impair the rights of an
optionee under an outstanding option without the optionee's consent. In
addition, no such amendment may, without approval of the Company's shareholders
(a) materially increase the benefits accruing to participants under the Stock
Option Plan, (b) materially increase the number of shares of Common Stock
reserved for issuance under the Stock Option Plan, or (c) materially modify the
requirements for eligibility to receive options under the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
The Stock Option Plan is not qualified under the provisions of section
401(a) of the Code and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
NONQUALIFIED STOCK OPTIONS. On exercise of a nonqualified stock option
granted under the Stock Option Plan, an optionee (other than an officer or
director of the Company) will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the option of the
shares of Common Stock acquired on exercise over the exercise price. That income
will be subject to the withholding of Federal income tax. The optionee's tax
basis in those shares will be equal to their fair
A-14
<PAGE>
market value on the date of exercise of the option, and his holding period for
those shares will begin on that date.
An officer or director of the Company or any other person to whom the
short-swing profit recovery provisions of section 16(b) of the Exchange Act
apply in connection with an option under the Stock Option Plan (a "Reporting
Person") generally will not recognize ordinary income until the earlier of the
expiration of the six month period after the exercise of an option and the first
day on which a sale at a profit of shares acquired on exercise of the option
would not subject the Reporting Person to suit under section 16(b) of the
Exchange Act. The amount of ordinary income will equal the excess, if any, of
the fair market value of the shares on the date the income is recognized over
the exercise price of the option. A Reporting Person, however, is entitled under
section 83(b) of the Code to elect to recognize ordinary income on the date of
exercise of the option, in which case the amount of income will be equal to the
excess, if any, of the fair market value of the shares on that date over the
exercise price of the option. A section 83(b) election must be made within 30
days after exercising an option.
If an optionee pays for shares of Common Stock on exercise of an option by
delivering shares of the Company's Common Stock, the optionee will not recognize
gain or loss on the shares delivered, even if their fair market value at the
time of exercise differs from the optionee's tax basis in them. The optionee,
however, otherwise will be taxed on the exercise of the option in the manner
described above as if he had paid the exercise price in cash. If a separate
identifiable stock certificate is issued for that number of shares equal to the
number of shares delivered on exercise of the option, the optionee's tax basis
in the shares represented by that certificate will be equal to his tax basis in
the shares delivered, and his holding period for those shares will include his
holding period for the shares delivered. The optionee's tax basis and holding
period for the additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in exchange for cash.
The Company will be entitled to a deduction for Federal income tax purposes
equal to the amount of ordinary income taxable to the optionee, provided that
amount constitutes an ordinary and necessary business expense for the Company
and is reasonable in amount, and either the employee includes that amount in
income or the Company timely satisfies its reporting requirements with respect
to that amount.
INCENTIVE STOCK OPTIONS. The Stock Option Plan provides for the grant of
stock options that qualify as "incentive stock options" as defined in section
422 of the Code. Under the Code, an optionee generally is not subject to tax
upon the grant or exercise of an incentive stock option. In addition, if the
optionee holds a share received on exercise of an incentive stock option for at
least two years from the date the option was granted and at least one year from
the date the option was exercised (the "Required Holding Period"), the
difference, if any, between the amount realized on a sale or other taxable
disposition of that share and the holder's tax basis in that share will be
long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on exercise of an
incentive stock option before the end of the Required Holding Period (a
"Disqualifying Disposition"), the optionee generally will recognize ordinary
income in the year of the Disqualifying Disposition equal to the excess, if any,
of the fair market value of the share on the date the incentive stock option was
exercised over the exercise price. If, however, the Disqualifying Disposition is
a sale or exchange on which a loss, if realized, would be recognized for Federal
income tax purposes, and if the sales proceeds are less than the fair market
value of the share on the date of exercise of the option, the amount of ordinary
income the optionee recognizes will not exceed the gain, if any, realized on the
sale. If the amount realized on a Disqualifying Disposition exceeds the fair
market value of the share on the date of exercise of the option, that excess
will be short-term or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
An optionee who exercises an incentive stock option by delivering shares of
Common Stock acquired previously pursuant to the exercise of an incentive stock
option before the expiration of the Required Holding Period for those shares is
treated as making a Disqualifying Disposition of those shares. This rule
prevents "pyramiding" the exercise of an incentive stock option (that is,
exercising an incentive stock option for one share and using that share, and
others so acquired, to exercise successive incentive stock options) without the
imposition of current income tax.
A-15
<PAGE>
For purposes of the alternative minimum tax, the amount by which the fair
market value of a share of Common Stock acquired on exercise of an incentive
stock option exceeds the exercise price of that option generally will be an item
of adjustment included in the optionee's alternative minimum taxable income for
the year in which the option is exercised. If, however, there is a Disqualifying
Disposition of the share in the year in which the option is exercised, there
will be no item of adjustment with respect to that share. If there is a
Disqualifying Disposition in a later year, no income with respect to the
Disqualifying Disposition is included in the optionee's alternative minimum
taxable income for that year. In computing alternative minimum taxable income,
the tax basis of a share acquired on exercise of an incentive stock option is
increased by the amount of the item of adjustment taken into account with
respect to that share for alternative minimum tax purposes in the year the
option is exercised.
The Company is not allowed an income tax deduction with respect to the grant
or exercise of an incentive stock option or the disposition of a share acquired
on exercise of an incentive stock option after the Required Holding Period.
However, if there is a Disqualifying Disposition of a share, the Company is
allowed a deduction in an amount equal to the ordinary income includible in
income by the optionee, provided that amount constitutes an ordinary and
necessary business expense for the Company and is reasonable in amount, and
either the employee includes that amount in income or the Company timely
satisfies its reporting requirements with respect to that amount.
IMPORTANCE OF CONSULTING TAX ADVISER. The information set forth above is a
summary only and does not purport to be complete. In addition, the information
is based upon current Federal income tax rules and therefore is subject to
change when those rules change. Moreover, because the tax consequences to any
optionee may depend on his particular situation, each optionee should consult
his or her tax adviser as to the Federal, state, local and other tax
consequences of the grant or exercise of an option or the disposition of Common
Stock acquired on exercise of an option.
A-16
<PAGE>
DESCRIPTION OF 1995 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
In December 1995, the Board of Directors adopted and the shareholders
approved, the 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan").
DESCRIPTION OF THE STOCK PURCHASE PLAN
PURPOSE. The purpose of the Stock Purchase Plan is to encourage stock
ownership by the employees of the Company and its subsidiaries, thereby
enhancing employee interest in the continued success and progress of the
Company.
ELIGIBILITY; TERM. The Stock Purchase Plan permits employees to purchase
stock of the Company at a favorable price and possibly with favorable tax
consequences to the participants. All participants (including officers) of the
Company or of its subsidiaries regularly scheduled to work at least 20 hours per
week and more than five months per year are eligible to participate in any of
the purchase periods of the Stock Purchase Plan. However, any participant who
would own (as determined under the Internal Revenue Code), immediately after the
grant of an option, stock possessing 5% or more of the total combined voting
power or value of all classes of the stock of the Company will not be granted an
option under the Stock Purchase Plan. As of December 31, 1995, the Company had
approximately 500 eligible participants.
ADMINISTRATION. The Stock Purchase Plan is administered by the Compensation
Committee appointed by the Board consisting of persons who are "disinterested"
persons under Rule 16b-3 under the Exchange Act. The Stock Purchase Plan gives
broad powers to the Committee to administer and interpret the Stock Purchase
Plan.
OPTIONS. The Stock Purchase Plan has one purchase period, which commenced
on December 21, 1995 (the commencement date of the Company's IPO) and terminates
on December 31, 1997 (the "Offering Period"). Within 30 days of the commencement
date of the Offering Period, each participant must have elected to have
compensation withheld during the Offering Period, up to a maximum of 15% of his
or her compensation during the Offering Period. In addition, the market value of
the Common Stock that any participant may purchase in one calendar year cannot
exceed $25,000 (based on the market price at the beginning of the Offering
Period). The percentage or amount designated may be increased or decreased
during the Offering Period, within the limits contained in the Stock Purchase
Plan; provided, however, the participant may not change the rate or amount more
than twice in any one calendar year. As of the first day of the Offering Period,
a participant is granted an option to purchase shares of the Company's Common
Stock on any exercise date during the Offering Period determined by dividing (i)
thirty (30%) percent of the participant's compensation for calendar year 1995 by
(ii) ninety percent (90%) of the fair market value of a share of the Company's
Common Stock on the initial date of the Offering Period; subject to the
limitations set forth in the Stock Purchase Plan. The exercise dates are each of
June 30, 1996; December 31, 1996; June 30, 1997; and December 31, 1997. The
purchase price to be paid by the participants will be the lower of the amount
determined under Paragraphs A and B below:
A. 90% of the fair market value of a share of the common stock of the
Company on the initial date of the Offering Period; or
B. 90% of the fair market value of a share of the common stock of the
Company on the exercise date.
Any funds not used to purchase shares will remain credited to the
participant's bookkeeping account and applied to the purchase of shares of
Common Stock at the next exercise date. No interest is paid by the Company on
funds withheld, and such funds are used by the Company for general operating
purposes. No shares of Common Stock have been issued to date under the Stock
Purchase Plan.
A-17
<PAGE>
AMENDMENT. The Compensation Committee may, from time to time, revise or
amend the Stock Purchase Plan as the Compensation Committee may deem proper and
in the best interest of the Company or as may be necessary to comply with
Section 423 of the Code; provided, that no such revision or amendment may,
without prior approval of the Company's shareholders, (i) increase the total
number of shares for which options may be granted under the Stock Purchase Plan
except as provided in the case of stock splits, consolidations, stock dividends
or similar events, (ii) materially modify requirements as to eligibility for
participation in the Stock Purchase Plan, or (iii) materially increase the
benefits accruing to participants under the Stock Purchase Plan.
Under the Stock Purchase Plan, 50,000 shares of the Company's Common Stock
are reserved for issuance during the duration of the Stock Purchase Plan.
The Board of Directors shall equitably adjust the number of shares remaining
reserved for issuance, the number of shares of stock subject to outstanding
options and the price per share of stock subject to an option in the event of
certain increases or decreases in the number of outstanding shares of Common
Stock of the Company effected as a result of stock splits or consolidations,
stock dividends or other transactions in which the Company receives no
consideration.
FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK PURCHASE PLAN. Options granted
under the Stock Purchase Plan are intended to qualify for favorable tax
treatment to the employees under Sections 421 and 423 of the Code. Employee
contributions are made on an after-tax basis. A capital gain or capital loss on
Common Stock purchased under the Stock Purchase Plan would not be realized until
the participant would sell the shares of Common Stock. If a participant disposes
of shares two years or more after the date of the beginning of the Offering
Period when the shares were acquired, and more than one year after the shares
are purchased, the participant would recognize as ordinary income the lesser of:
(i) the excess of the fair market value of the shares on the date of sale over
the price paid or (ii) 10% of the fair market value of the shares at the
beginning of the Offering Period(s). Additionally, the participant would
recognize a long-term capital gain or loss (within the meaning of the Code)
equal to the difference between the amount realized from the sale of the shares
and the basis (the basis would be the purchase price plus any amount taxed as
ordinary compensation income). If a participant disposes of shares within two
years of the date of the beginning of the Offering Period when the shares were
acquired, or within one year after the shares are purchased, the participant
would recognize ordinary compensation income equal to the excess of the fair
market value of the shares on the purchase date(s) over the price paid for the
shares. Additionally, the participant would recognize a capital gain or loss
(within the meaning of the Code) equal to the difference between the amount
realized from the sale of the shares and the basis (the basis would be the
purchase price plus the amount taxed as ordinary compensation income). If the
participant held the shares for more than one year, the capital gain or loss
would be a long-term gain or loss. The Company generally will not receive an
income tax deduction upon either the grant or exercise of the option.
The information set forth above is a summary only and does not purport to be
complete. In addition, the information is based upon current Federal income tax
rules and therefore is subject to change when those rules change. Moreover,
because the tax consequences to any participant may depend on his particular
situation, each participant should consult his or her tax adviser as to the
Federal, state, local and other tax consequences of the purchase or disposition
of Common Stock acquired under the Stock Purchase Plan.
A-18
<PAGE>
ANNEX B
[ALEX. BROWN LET. HD]
November 27, 1996
ElectroStar, Inc.
710 North 600 West
Logan, Utah 84321
Dear Sirs:
ElectroStar, Inc. (the "Company"), Tyco International Ltd. ("Buyer") and T3
Acquisition Corp., a Florida Corporation and a wholly-owned subsidiary of Buyer
(the "Merger Sub"), intend to enter into an Agreement and Plan of Merger dated
as of November 27, 1996 (the "Agreement"). Pursuant to the Agreement, Merger Sub
will commence a tender offer to purchase all outstanding shares of the common
stock, $0.01 par value per share ("Common Stock"), of the Company at a price of
$14.00 per share, net to the seller in cash. The Agreement also provides that
following such tender offer, Merger Sub will be merged with and into the Company
(the "Merger"), and that each share of Common Stock, other than shares of Common
Stock owned directly or indirectly by Buyer or the Company, will be converted
into the right to receive $14.00 in cash. You have requested our opinion as to
whether the consideration to be received by the holders of Common Stock pursuant
to the Agreement (the "Consideration") is fair, from a financial point of view,
to such holders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We will receive a fee for rendering our opinion to the Board of
Directors. We were also the co-manager in the Company's December 1995 initial
public offering. Alex. Brown maintains a market in the Common Stock of the
Company and regularly publishes research reports regarding the printed circuit
board industry and the businesses and securities of the Company and other
publicly owned companies in the printed circuit board industry. In the ordinary
course of business, Alex. Brown may actively trade the securities of the Company
for our own account and the account of our customers and, accordingly, may at
any time hold a long or short position in securities of the Company.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning the Company and Buyer and
certain internal analyses and other information furnished to us by the Company.
We have also held discussions with the members of the senior management of the
Company regarding the business and prospects of the Company. In addition, we
have (i) reviewed the reported prices and trading activity for the common stock
of the Company, (ii) compared certain financial and stock market information for
the Company with similar information for certain other companies whose
securities are publicly traded, (iii) reviewed the financial terms of certain
recent business combinations, (iv) reviewed the terms of the Agreement and
certain related documents, and (v) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of the
Company, we have assumed that such information reflects the best currently
available judgments and estimates of the management of the Company as to the
likely future financial performance of the Company. In addition, we have not
made an independent evaluation or appraisal of the assets of the Company, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
based on market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
[ALEX. BROWN LET. HD.]
B-1
<PAGE>
In arriving at our opinion, we were not authorized to solicit on behalf of
the Company, and did not solicit on behalf of the Company, interest from any
party with respect to the acquisition of the Company or any of its assets, nor
did we have discussions or negotiate with Buyer in connection with the Merger.
We understand, however, that Trivest, Inc. on behalf of the Company, engaged in
a process pursuant to which a number of potential buyers have been contacted
regarding the potential sale of the Company.
We have been retained by the Board of Directors of the Company as financial
advisor solely for the purpose of rendering this opinion and accordingly, we
have not been requested to and have not provided any other services in
connection with the Merger.
Our opinion expressed herein was prepared for the use of the Board of
Directors of the Company and does not constitute a recommendation to the
Company's stockholders as to how they should vote with respect to the Merger. We
hereby consent, however, to the inclusion of this opinion as an exhibit to any
proxy statement distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Consideration is fair, from a financial point of view,
to the Company's stockholders.
Very truly yours,
[Alex. Brown & Sons sig cut]
ALEX. BROWN & SONS INCORPORATED
B-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
- --------- ---------------------------------------------------------------------------------------- --------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated December 5, 1996*
(a)(2) Letter of Transmittal*
(a)(3) Press release issued by the Company and Tyco on November 29, 1996
(a)(4) Fairness Opinion of Alex. Brown dated November 27, 1996*
(a)(5) Letter to Shareholders, dated December 5, 1996, from Kenton K. Alder, Chief Executive
Officer and President of the Company*
(c)(1) Agreement and Plan of Merger, dated as of November 27, 1996, among Tyco, the
Purchaser and the Company
(c)(2) Trivest Financial Advisory Agreement
(c)(3) Form of Indemnification Agreement
(c)(4) Article VI of the Company's Amended and Restated Articles of Incorporation
(c)(5) Shareholder Agreement, dated November 27, 1996, among Tyco, the Purchaser and the
Shareholders identified therein.
</TABLE>
- ------------------------
* Included in copies mailed to Shareholders.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ELECTROSTAR, INC.
AT
$14.00 NET PER SHARE
BY
T3 ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
TYCO INTERNATIONAL LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JANUARY 3, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS HEREINAFTER DEFINED) REPRESENTING AT LEAST A MAJORITY OF THE TOTAL
NUMBER OF OUTSTANDING SHARES OF ELECTROSTAR, INC. (THE "COMPANY") ON A FULLY
DILUTED BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE
OFFER. BENEFICIAL OWNERS OF APPROXIMATELY 61% (57% ON A FULLY DILUTED BASIS) OF
THE TOTAL NUMBER OF OUTSTANDING SHARES OF THE COMPANY HAVE AGREED TO TENDER ALL
OF THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS ALSO SUBJECT TO CERTAIN
OTHER TERMS AND CONDITIONS SET FORTH IN SECTION 15 OF THIS OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL, MAIL OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO THE
DEPOSITARY AND EITHER DELIVER THE CERTIFICATE(S) FOR SUCH TENDERED SHARES TO THE
DEPOSITARY ALONG WITH THE LETTER OF TRANSMITTAL OR TENDER SUCH SHARES PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 2 OF THIS OFFER
TO PURCHASE, OR (2) REQUEST SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR THE SHAREHOLDER.
SHAREHOLDERS HAVING SHARES REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF THEY DESIRE TO TENDER
SUCH SHARES.
A SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATE(S) FOR
SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH THE PROCEDURES
FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH SHARES BY FOLLOWING
THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 2 OF THIS OFFER TO
PURCHASE.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT AT ITS ADDRESS AND TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS
OFFER TO PURCHASE. REQUESTS FOR ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE
LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO
THE INFORMATION AGENT OR TO BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST
COMPANIES.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
December 5, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Introduction............................................................................................... 1
The Tender Offer........................................................................................... 3
1. Terms of the Offer; Extension of Tender Period; Termination; Amendments.............................. 3
2. Procedure for Tendering Shares....................................................................... 4
3. Withdrawal Rights.................................................................................... 7
4. Acceptance for Payment and Payment of Offer Price.................................................... 8
5. Certain Federal Income Tax Consequences.............................................................. 9
6. Price Range of Shares; Dividends..................................................................... 9
7. Effects of the Offer on the Market for Shares; Stock Quotations; Registration Under the Exchange
Act................................................................................................... 10
8. Certain Information Concerning the Company........................................................... 11
9. Certain Information Concerning Tyco and the Purchaser................................................ 12
10. Source and Amount of Funds........................................................................... 14
11. Contacts with the Company; Background of the Offer................................................... 14
12. Purpose of the Offer; Short Form Merger; Plans for the Company; Dissenters' Rights; Going Private
Transactions.......................................................................................... 15
13. The Merger Agreement; Shareholder Agreement.......................................................... 17
14. Dividends and Distributions.......................................................................... 25
15. Certain Conditions of the Offer...................................................................... 25
16. Certain Legal Matters................................................................................ 27
17. Fees and Expenses.................................................................................... 29
18. Miscellaneous........................................................................................ 29
Annex I Certain Information Concerning the Directors and Executive Officers of Tyco International Ltd. and
the Purchaser...................................................................................... 31
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
ELECTROSTAR, INC.
INTRODUCTION
T3 Acquisition Corp., a Florida corporation (the "Purchaser") and a wholly
owned subsidiary of Tyco International Ltd., a Massachusetts corporation
("Tyco"), hereby offers to purchase all outstanding shares of common stock, par
value $.01 per share (the "Shares"), of ElectroStar, Inc., a Florida corporation
(the "Company"), at $14.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer.
However, any tendering shareholder or other payee who fails to complete and sign
the Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the gross
proceeds payable to such shareholder or other payee pursuant to the Offer. See
Section 2. The Purchaser will pay all charges and expenses of MacKenzie
Partners, Inc., as Information Agent (the "Information Agent"), and ChaseMellon
Shareholder Services, L.L.C., as Depositary (the "Depositary"), incurred in
connection with the Offer. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING
SHARES OF THE COMPANY ON A FULLY DILUTED BASIS AS OF THE DATE THE SHARES ARE
ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. BENEFICIAL OWNERS OF APPROXIMATELY
61% (57% ON A FULLY DILUTED BASIS) OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF
THE COMPANY HAVE AGREED TO TENDER ALL OF THEIR SHARES PURSUANT TO THE OFFER. THE
OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN SECTION
15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 27, 1996 (the "Merger Agreement"), among Tyco, the Purchaser and
the Company. The Merger Agreement provides, among other things, that upon the
terms and subject to the conditions therein, as soon as practicable after the
consummation of the Offer, the Purchaser will be merged with and into the
Company (the "Merger"), with the Company being the corporation surviving the
Merger (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each outstanding Share (other than Shares owned by the
Company, any subsidiary of the Company, Tyco, the Purchaser, any other
subsidiary of Tyco or by shareholders, if any, who are entitled to and who
properly exercise dissenters' rights under the Florida Business Corporation Act
(the "FBCA")), will be converted into and represent the right to receive $14.00
in cash or any higher price that may be paid per Share in the Offer (the "Merger
Consideration"), without interest. See Section 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
Alex. Brown & Sons Incorporated ("Alex. Brown"), the Company's financial
advisor, has delivered to the Company's Board of Directors its written opinion
that the consideration to be received by the shareholders of the Company
pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view. A copy of such opinion is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 which is being
distributed to the Company's shareholders herewith.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, Tyco will be entitled to designate for election to the
Board of Directors of the Company a number of
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directors (rounded up to the next whole number) equal to that number of
directors which equals the product of (i) the total number of directors on the
Board of Directors and (ii) the percentage that the aggregate number of Shares
purchased by the Purchaser in the Offer bears to the total number of Shares
outstanding. The Company has agreed, upon the request of Tyco, to increase the
size of the Board of Directors of the Company and/or use its reasonable best
efforts to secure the resignations of such number of directors as is necessary
to enable Tyco's designees to be elected to the Board of Directors and to cause
Tyco's designees to be so elected.
The Company has informed the Purchaser that as of December 1, 1996 there
were 7,537,097 Shares outstanding (including 620,737 Shares issuable upon
conversion of the Company's Class B Common Stock, par value $.01 per share), and
497,129 Shares reserved for issuance pursuant to outstanding options. As of the
date hereof, neither the Purchaser, Tyco nor any of their affiliates
beneficially owns any Shares (other than Shares that they may be deemed to
beneficially own by virtue of the Shareholder Agreement described herein). Based
on such number of outstanding Shares and options, if the Purchaser acquires at
least 4,017,114 Shares in the Offer, it will own a majority of the outstanding
Shares on a fully diluted basis. In such event the Purchaser would have
sufficient voting power to approve the Merger without the affirmative vote of
any other shareholder. Beneficial owners of approximately 61% (57% on a fully
diluted basis) of the total number of outstanding Shares of the Company have
agreed to tender all of their Shares pursuant to the Offer. If the Purchaser
acquires 80% or more of the outstanding Shares in the Offer, the Purchaser would
be able to effect the Merger pursuant to the short form merger provisions of the
FBCA, without the action of any other shareholder of the Company.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION;
AMENDMENTS. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
such extension or amendment), the Purchaser will accept for payment and pay for
all Shares which are validly tendered on or prior to the Expiration Date (as
hereinafter defined) and not theretofore withdrawn as permitted by Section 3.
The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday,
January 3, 1997, unless and until the Purchaser (subject to the terms and
conditions of the Merger Agreement) shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition (as defined in Section 15). The Purchaser reserves the right
(but shall not be obligated) to waive or reduce the Minimum Condition or to
waive any or all of the other conditions of the Offer. If, by 12:00 Midnight,
New York City time, on Friday, January 3, 1997, or any subsequent Expiration
Date, any or all of such conditions have not been satisfied or waived, subject
to the provisions of the Merger Agreement, the Purchaser may elect to (i)
terminate the Offer and return all tendered Shares to tendering shareholders,
(ii) waive all of the unsatisfied conditions and, subject to any required
extension, purchase all Shares validly tendered by the Expiration Date and not
withdrawn, (iii) extend the Offer and, subject to the right of shareholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered until the expiration of the Offer as extended, or (iv) delay acceptance
for payment of, or payment for, Shares, subject to complying with applicable
law, until the satisfaction or waiver of the conditions of the Offer. Under the
terms of the Merger Agreement, the Purchaser may not (except as described in the
next sentence), without the prior written consent of the Company, waive or amend
the Minimum Condition, reduce the number of Shares subject to the Offer, reduce
the price per Share to be paid pursuant to the Offer, extend the Offer if all of
the conditions to the Offer are satisfied or waived, change the form of
consideration payable in the Offer, or add, modify or amend any condition of the
Offer in any manner that would adversely affect the shareholders of the Company.
Notwithstanding the foregoing, the Purchaser may, without the consent of the
Company, extend the Offer (i) if, at the then scheduled Expiration Date of the
Offer, any of the conditions to the Purchaser's obligation to accept for payment
and pay for Shares shall not have been satisfied or waived until such time as
such conditions are satisfied or waived, (ii) for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "Commission") or the Commission staff applicable to the Offer or
(iii) for an aggregate period of not more than 10 business days (for all such
extensions) beyond the latest Expiration Date that would be permitted under
clause (i) or (ii) of this sentence if all of the conditions to the Offer are
satisfied or waived but the number of Shares tendered is less than 80% of the
then outstanding number of Shares.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right (subject to the provisions of the Merger
Agreement), in its sole discretion, at any time or from time to time, to (i)
delay acceptance for payment of or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares, (ii) terminate the
Offer (whether or not any Shares have theretofore been accepted for payment) if
any of the conditions referred to in Section 15 have not been satisfied or upon
the occurrence of any of the events specified in Section 15, and (iii) waive any
condition or otherwise amend the Offer in any respect, in each case by giving
oral or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. If the Purchaser accepts
for payment any Shares pursuant to the terms of the Offer, it will accept for
payment all Shares validly tendered prior to the Expiration Date and not
withdrawn and, subject to clause (i) above, will promptly pay for all Shares so
accepted for payment. The Purchaser acknowledges that its reservation of the
right to delay payment for Shares that it has accepted for payment is limited by
(a) Rule 14e-l(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which requires the Purchaser to pay the consideration offered
or return the Shares tendered promptly after the termination or
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<PAGE>
withdrawal of the Offer, and (b) the requirement that the Purchaser may not
delay acceptance for payment of, or payment for, any Shares upon the occurrence
of any of the events specified in Section 15 without extending the period of
time during which the Offer is open.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 15. Any extension, delay,
termination or amendment of the Offer will be followed as promptly as
practicable by public announcement thereof, such announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirements of Rule 14e-1(d) under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to shareholders in connection with the Offer be
promptly disseminated to shareholders in a manner reasonably designed to inform
shareholders of such change) and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including the Minimum Condition), the Purchaser will disseminate
additional tender offer materials (including by public announcement as set forth
above) and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act. The minimum period during which an offer must
remain open following material changes in the terms of the Offer, other than a
change in price, percentage of securities sought or inclusion of or change to a
dealer's soliciting fee, will depend upon the facts and circumstances, including
the materiality, of the changes. In the Commission's view, an offer should
remain open for a minimum of five business days from the date the material
change is first published, sent or given to shareholders, and, if material
changes are made with respect to information that approaches the significance of
price and share levels, a minimum of ten business days may be required to allow
for adequate dissemination and investor response. With respect to a change in
price or, subject to certain limitations, a change in the percentage of
securities sought or inclusion of or change to a dealer's soliciting fee, a
minimum ten business day period from the date of such change is generally
required to allow for adequate dissemination to shareholders. Accordingly, if,
prior to the Expiration Date, the Purchaser decreases the number of Shares being
sought or increases or decreases the consideration offered pursuant to the
Offer, and if the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from the date that notice of such
increase or decrease is first published, sent or given to holders of Shares, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
The Company has provided or will provide the Purchaser with the Company's
shareholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed to registered holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES. Except as set forth below, in order for
Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message (as hereinafter
defined) in connection with a book-entry transfer of Shares, and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date, and either (i) certificates
representing
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tendered Shares must be received by the Depositary, or such Shares must be
tendered pursuant to the procedure for book-entry transfer set forth below (and
confirmation of receipt of such delivery must be received by the Depositary), in
each case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternative, conditional or
contingent tenders will be accepted.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (i) if such Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith, unless such holder has completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" in the Letter of Transmittal, or (ii) if Shares are
tendered for the account of a firm that is a member in good standing of the
Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (each being
hereinafter referred to as an "Eligible Institution"). See Instruction 1 of the
Letter of Transmittal.
If a certificate representing Shares is registered in the name of a person
other than the signer of the Letter of Transmittal (or a facsimile thereof), or
if payment is to be made, or Shares not accepted for payment or not tendered are
to be returned to a person other than the registered holder, the certificate
must be endorsed or accompanied by an appropriate stock power, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificate, with the signature(s) on the certificate or stock power guaranteed
by an Eligible Institution. If the Letter of Transmittal or stock powers are
signed or any certificate is endorsed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and, unless waived by the Purchaser, proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted. See Instruction 5 of
the Letter of Transmittal.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company and the Philadelphia Depository Trust
Company (individually, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in any of the Book-Entry Transfer Facilities' systems may
make book-entry delivery of the Shares by causing any Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedure for such transfer. However,
although delivery of Shares may be effected through book-entry transfer at any
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with. The term
"Agent's Message" means a message transmitted through electronic means by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a book-entry confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares that such participant has
received, and agrees to be bound by, the terms of the Letter of Transmittal.
Delivery of documents to a Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures does not constitute delivery to the
Depositary.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates representing Shares are not
immediately available (or the procedures for book-entry transfer cannot be
completed on a timely basis) or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such Shares may nevertheless
be tendered, provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
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<PAGE>
(b) the Depositary receives, prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by the Purchaser; and
(c) the certificates representing all tendered Shares in proper form for
transfer (or confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities), together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees (or, in connection
with a book-entry transfer, an Agent's Message) and any other documents
required by the Letter of Transmittal are received by the Depositary within
three trading days after the date of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the National Market of the Nasdaq Stock
Market ("The Nasdaq National Market") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, telex, facsimile transmission or mail, to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility), (ii) properly completed and duly executed Letter(s) of Transmittal
(or facsimile(s) thereof), together with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message), and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
shareholders may be paid at different times depending upon when certificates
representing Shares or confirmations of book-entry transfers of such Shares are
actually received by the Depositary.
The method of delivery of all documents, including certificates for Shares,
is at the option and risk of the tendering shareholder, and the delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tendered Shares will be determined by the Purchaser in its sole
discretion, and its determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of any Shares
that it determines are not in appropriate form or the acceptance for payment of
or payment for which may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in any tender with respect
to any particular Shares or any particular shareholder, and the Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects or irregularities relating thereto have been cured or expressly waived
to the satisfaction of the Purchaser. None of the Purchaser, Tyco, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders, nor shall any of
them incur any liability for failure to give any such notification.
OTHER REQUIREMENTS. By executing the Letter of Transmittal, a tendering
shareholder irrevocably appoints designees of the Purchaser as such
shareholder's proxies, in the manner set forth in the Letter of Transmittal,
each with full power of substitution, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Purchaser (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after December 2,
1996), effective if, when and to the extent that the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior proxies given by such shareholder with respect to such Shares or other
securities accepted for payment will, without further action, be revoked, and no
subsequent proxies may be given by such shareholder nor any subsequent written
consents executed
6
<PAGE>
(and, if given or executed, will not be deemed effective). Such designees of the
Purchaser will, with respect to such Shares and other securities or rights
issuable in respect thereof, be empowered to exercise all voting and other
rights of such shareholder as they, in their sole discretion, may deem proper in
respect of any annual, special or adjourned meeting of the Company's
shareholders, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares the Purchaser must be able to exercise full voting rights with
respect to such Shares.
The Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT FEDERAL INCOME TAX BACKUP WITHHOLDING ON PAYMENTS MADE TO
SHAREHOLDERS WITH RESPECT TO SHARES PURCHASED PURSUANT TO THE OFFER, EACH
SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS CORRECT TAXPAYER IDENTIFICATION
NUMBER AND CERTIFY THAT HE IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID BACKUP
WITHHOLDING. THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 10
AND 11 OF THE LETTER OF TRANSMITTAL.
3. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer will be
irrevocable, except that Shares tendered may be withdrawn at any time prior to
the Expiration Date, and, unless theretofore accepted for payment by the
Purchaser as provided herein, may also be withdrawn on or after February 4,
1997.
For a withdrawal of Shares tendered to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name(s) in which the certificate(s) representing such Shares are registered,
if different from that of the person who tendered such Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, the name of the registered holder and the serial numbers shown on
the particular certificates evidencing such Shares to be withdrawn must also be
furnished to the Depositary prior to the physical release of the Shares to be
withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been tendered pursuant to the procedures for
book-entry transfer set forth in Section 2, any notice of withdrawal must
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with such withdrawn Shares and must otherwise
comply with such Book-Entry Transfer Facility's procedures.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of any Shares tendered, or is unable to accept for payment or pay for Shares
tendered pursuant to the Offer, for any reason whatsoever, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that the tendering shareholder
is entitled to and duly exercises withdrawal rights as described in this Section
and as otherwise required by Rule 14e-1(c) under the Exchange Act. Any such
delay will be accompanied by an extension of the Offer to the extent required by
law.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described in Section 2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, and its determination will be final and binding on all parties. None
of the Purchaser, Tyco, the Depositary, the Information Agent or any other
person will be
7
<PAGE>
under any duty to give notification of any defects or irregularities in any
notice of withdrawal, nor shall any of them incur any liability for failure to
give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT OF OFFER PRICE. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any extension or amendment), the Purchaser
will accept for payment and will pay for all Shares validly tendered prior to
the Expiration Date (and not properly withdrawn in accordance with Section 3
above) as soon as practicable after the latest to occur of (a) the expiration or
termination of the waiting period applicable to the acquisition of the Shares
pursuant to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (b) the Expiration Date, and (c) subject to
compliance with Rule 14e-1(c) under the Exchange Act, the satisfaction or waiver
of the conditions of the Offer set forth in Section 15. Any determination
concerning the satisfaction of such terms and conditions shall be within the
sole discretion of the Purchaser, and such determination shall be final and
binding on all tendering shareholders. See Section 15.
The Purchaser expressly reserves the right to delay acceptance for payment
of, or payment for, Shares in order to comply in whole or in part with any
applicable law. If the Purchaser desires to delay payment for Shares accepted
for payment pursuant to the Offer, and such delay would otherwise be in
contravention of Rule 14e-1(c) of the Exchange Act, the Purchaser will formally
extend the Offer. In all cases, payment for Shares accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities, as described in Section 2), (ii) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in connection with a book-entry transfer, an Agent's
Message), and (iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares when, as and if the Purchaser
gives oral or written notice to the Depositary, as agent for the tendering
shareholders, of the Purchaser's acceptance for payment of such Shares. Payment
for Shares so accepted for payment will be made by the deposit of the purchase
price therefor with the Depositary, which will act as agent for the tendering
shareholders for the purpose of receiving such payment from the Purchaser and
transmitting such payment to tendering shareholders. If, for any reason
whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or the Purchaser is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to the Purchaser's rights under
Section 1, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn, except to the extent that
the tendering shareholders are entitled to withdrawal rights as described in
Section 3 and as otherwise required by Rule 14e-1(c) under the Exchange Act.
Under no circumstances will interest be paid on the purchase price by reason of
any delay in making such payments.
If any tendered Shares are not accepted for payment and paid for,
certificates representing such Shares will be returned (or, in the case of
Shares delivered by book-entry transfer with any Book-Entry Transfer Facility as
permitted by Section 2, such Shares will be credited to an account maintained
with such Book-Entry Transfer Facility) without expense to the tendering
shareholder as promptly as practicable following the expiration or termination
of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid for Shares pursuant to the Offer, the Purchaser will pay such
increased consideration for all Shares accepted for payment pursuant to the
Offer, whether or not such Shares have been tendered or accepted for payment
prior to such increase in the consideration.
The Purchaser reserves the right to transfer or assign in whole or in part
to one or more affiliates of the Purchaser or Tyco the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve the Purchaser of its obligations under the Offer
and will
8
<PAGE>
in no way prejudice the rights of tendering shareholders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer (or in the Merger) will be a taxable transaction for
federal income tax purposes (and may also be a taxable transaction under
applicable state, local or other tax laws). In general, a shareholder will
recognize gain or loss for such purposes equal to the difference between such
shareholder's adjusted tax basis for the Shares such shareholder sells in such
transaction and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted to
cash in the Merger. Such gain or loss will be capital gain or loss if the Shares
are a capital asset in the hands of the shareholder and will be long term
capital gain or loss if the Shares were held for more than one year on the date
of sale (in the case of the Offer) or the Effective Time of the Merger (in the
case of the Merger). The receipt of cash for Shares pursuant to the exercise of
dissenters' rights, if any, will generally be taxed in the same manner described
above. Long-term capital gains for individuals currently are taxed at a maximum
rate of 28%. Legislative proposals may be introduced that would decrease the tax
rate applicable to an individual's long-term capital gains. It is not known
whether any such proposal will be enacted, and, if enacted, what the new rate
(if changed) will be and when any such new rate will become effective.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the shareholder (a) fails to furnish his social security number or TIN, (b)
furnishes an incorrect TIN, or (c) under certain circumstances, fails to provide
a certified statement, signed under penalties of perjury, that the TIN provided
is his correct number and that he is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are entitled to exemption from backup withholding, including
corporations and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include reportable payments in
income. Each shareholder should consult with his own tax advisor as to his
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. Tendering shareholders may be able to prevent backup
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal.
The foregoing discussion may not be applicable to a shareholder who acquired
Shares pursuant to the exercise of employee stock options or otherwise as
compensation, or to a shareholder who is not a citizen or resident of the United
States or who is otherwise subject to special tax treatment under the Internal
Revenue Code. In addition, the foregoing discussion does not address the tax
treatment of holders of Stock Options (as defined in Section 13).
The federal income tax discussion set forth above is included for general
information only and is based upon present law. Shareholders are urged to
consult their tax advisors with respect to the specific tax consequences of the
Offer and the Merger to them, including the application and effect of the
alternative minimum tax, and state, local or foreign income and other tax laws.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares commenced trading on The
Nasdaq National Market on December 21, 1995 under the symbol "ESTR." The
following table sets forth, for the periods indicated, the high and low closing
per Share sales prices on The Nasdaq National Market as reported by Nasdaq. The
Company has not declared or paid any cash dividends with respect to the Shares
for the periods indicated.
9
<PAGE>
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal Year Ended December 31, 1995:
Fourth Quarter............................................................. $10 $ 8 1/2
Fiscal Year Ending December 31, 1996:
First Quarter.............................................................. $13 1/8 $ 7 3/4
Second Quarter............................................................. $13 3/4 $10
Third Quarter.............................................................. $12 $ 8 3/4
Fourth Quarter (through December 3, 1996).................................. $14 5/8 $10 3/4
</TABLE>
On November 27, 1996, the last full trading day prior to the public
announcement of the terms of the Offer and the Merger, the closing per Share
sales price on The Nasdaq National Market was $13.00. On December 4, 1996, the
last full trading day prior to commencement of the Offer, the closing per Share
sales price on The Nasdaq National Market was $13 13/16. Shareholders are urged
to obtain a current market quotation for the Shares.
7. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATIONS;
REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares pursuant to the
Offer will reduce the number of holders of Shares and the number of Shares that
might otherwise trade publicly. Consequently, depending upon the number of
Shares purchased and the number of remaining holders of Shares, the purchase of
Shares pursuant to the Offer may adversely affect the liquidity and market value
of the remaining Shares held by the public. The Purchaser cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether it would cause future market prices to be greater or
less than the Offer price.
The Shares are currently listed and traded on The Nasdaq National Market,
which constitutes the principal trading market for the Shares. Depending upon
the aggregate market value and the number of Shares not purchased pursuant to
the Offer, the Shares may no longer meet the quantitative maintenance criteria
of the National Association of Securities Dealers, Inc. (the "NASD") for
continued inclusion on The Nasdaq National Market and may cease to be authorized
for quotation on such markets. The Nasdaq National Market's published guidelines
require that an issuer have at least 200,000 publicly held shares (exclusive of
holdings of officers, directors or beneficial owners of more than 10%), held
either by at least 400 beneficial shareholders or 300 beneficial shareholders of
round lots, with a market value of at least $1 million and must have net
tangible assets of at least either $1 million, $2 million or $4 million
depending on profitability levels during the issuer's four most recent fiscal
years. If these standards are not met, shares of an issuer might nevertheless
continue to be included in The Nasdaq Stock Market with quotations published in
The Nasdaq Stock Market's "additional list" or in one of the "local lists," but
if the number of beneficial holders were to fall below 300, or if the number of
publicly held shares were to fall below 100,000 or there were not at least two
registered and active market makers for the Shares, the NASD's rules provide
that such shares would no longer be "qualified" for reporting by The Nasdaq
Stock Market.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in The Nasdaq National Market or in any other tier of The Nasdaq Stock
Market, and the Shares are no longer included in The Nasdaq National Market or
in any other tier of The Nasdaq Stock Market, the market for Shares could be
adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of The Nasdaq Stock Market, it is possible that
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interest in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
10
<PAGE>
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if such Shares are not listed on a national securities exchange and there are
fewer than 300 holders of record of the Shares. The termination of the
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its shareholders and to
the Commission, and would make certain of the provisions of the Exchange Act,
such as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with shareholders'
meetings and the related requirement of an annual report to shareholders, and
the requirements of Rule 13e-3 with respect to going private transactions, no
longer applicable with respect to the Shares or to the Company. Furthermore, if
registration of the Shares under the Exchange Act were terminated, the ability
of "affiliates" of the Company and persons holding "restricted securities" of
the Company to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended, may be impaired or, with respect to
certain persons, eliminated. According to the Company, as of December 2, 1996,
there were approximately 11 holders of record of Shares.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on such Shares as collateral. Depending on factors similar to those described
above regarding listing and market quotations, it is possible the Shares would
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations and therefore could no longer be used as collateral
for loans made by brokers. If registration of Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Although neither the
Purchaser nor Tyco has any knowledge that would indicate that the statements
contained herein based on such information are untrue, neither the Purchaser nor
Tyco takes any responsibility for the accuracy or completeness of the
information concerning the Company furnished by the Company or contained in such
documents and records or for any failure by the Company to disclose events or
information which may have occurred or may affect the significance or accuracy
of any such information but which are unknown to the Purchaser or Tyco.
The Company was incorporated in December 1994 under the laws of the State of
Florida under the name "Interconnect Technology, Inc." and changed its name to
"ElectroStar, Inc." in August 1995. The Company has two subsidiaries, Lundahl
Astro Circuits, Inc. ("Lundahl") and Electro-Etch Circuits, Inc. ("ElectroEtch")
Lundahl was acquired in November 1993 by LAC Acquisitions Corp., which merged
into Lundahl. ElectroEtch was acquired in December 1994 by EE Acquisition
Corporation, a subsidiary of ElectroStar that merged into ElectroEtch. In
connection with the acquisition of ElectroEtch in December 1994, the
shareholders of Lundahl exchanged their shares of stock for shares of
ElectroStar, resulting in the current corporate structure of the Company. The
Company's principal executive offices are located at 710 North 600 West, Logan,
Utah 84321 and its telephone number is (801) 753-4700. The following description
of the Company's business has been taken from the Company's 1995 Annual Report:
"[The Company] produces complex printed circuit boards [("PCBs")],
ranging from double-sided to 20 layers, that are used in the manufacture of
sophisticated electronic equipment. The Company seeks to establish long-term
relationships with its customers by also providing flexible manufacturing
services, including computer aided manufacturing and engineering services
and quick-turnaround manufacturing of prototype and preproduction PCBs."
Set forth below is a summary of certain consolidated financial information
with respect to the Company and its consolidated subsidiaries, excerpted or
derived from the information contained in the Company's 1995 Annual Report and
the Company's Report on Form 10-Q for the quarter ended
11
<PAGE>
September 28, 1996. More comprehensive financial information is included in such
report and other documents filed by the Company with the Commission. The
financial information summary set forth below is qualified in its entirety by
reference to such report and other documents filed with the Commission and all
of the financial information and related notes contained therein. Such report
and other documents may be inspected and copies may be obtained from the offices
of the Commission in the manner set forth below.
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
---------------------------- ----------------------
<S> <C> <C> <C> <C>
SEPTEMBER 28, SEPTEMBER 29,
1996 1995 1995 1994
------------- ------------- ---------- ----------
INCOME STATEMENT:
Net sales............................................................. $ 52,332 $ 44,213 $ 61,404 $ 22,902
Gross profit.......................................................... 15,423 13,633 18,857 6,211
Operating income...................................................... 9,880 6,316 3,686 1,331
Income before extraordinary item and provision for income taxes....... 9,494 4,885 1,719 61
Net income (loss) $ 5,753 $ 2,857 $ 252(1) $ (29)
Net income (loss) per share........................................... $ 0.75 $ 0.48 $ 0.04(1) $ (0.01)
BALANCE SHEET:
Working capital (deficits)............................................ $ 6,364 $ (1,669) $ 1,379
Total assets.......................................................... $ 42,608 $ 34,175 $ 29,606
Long-term debt, including current maturities.......................... $ 8,155 $ 1,535 $ 16,818
Shareholders' equity.................................................. $ 26,900 $ 19,895 $ 6,421
</TABLE>
- --------------------------
(1) After an Extraordinary item of $637 ($0.11 per share).
OTHER INFORMATION. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, is obligated to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in such proxy statements and
distributed to the Company's shareholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities at the Commission's principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a site on the World Wide Web, and the
reports, proxy statements and other information filed by the Company with the
Commission may be accessed electronically on the Web at http://www.sec.gov.
Copies of such material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549.
9. CERTAIN INFORMATION CONCERNING TYCO AND THE PURCHASER. The Purchaser is
a newly formed Florida corporation and a wholly owned subsidiary of Tyco. To
date, the Purchaser has not conducted any business other than incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer.
Tyco, a Massachusetts corporation, is a global manufacturer, installer and
distributor of products and systems for a broad spectrum of markets, including
disposable medical products, packaging, life and life
12
<PAGE>
safety, industrial process control and telecommunications. Tyco's Printed
Circuit Group is a leading manufacturer of complex multi-layered printed circuit
boards and assembler of backplanes in the northeastern United States. The
principal executive offices of Tyco and the Purchaser are located at One Tyco
Park, Exeter, New Hampshire 03833.
Until immediately prior to the time that the Purchaser purchases Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Since the Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information is available.
Set forth below is certain selected historical consolidated financial
information with respect to Tyco excerpted or derived from financial information
contained in Tyco's Annual Report on Form 10-K for the year ended June 30, 1996,
and Tyco's Report on Form 10-Q for the quarter ended September 30, 1996 (which
reports are hereby incorporated by reference herein). More comprehensive
financial information is included in such reports and other documents filed by
Tyco with the Commission, and the following summary is qualified in its entirety
by reference to such reports and such other documents and of the financial
information (including any related notes) contained therein. Such reports and
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth in Section 8. Such reports and other
documents should also be available for inspection at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, where the common
stock of Tyco is listed for trading.
SELECTED CONSOLIDATED FINANCIAL DATA OF TYCO INTERNATIONAL LTD.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
-------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1994
------------ ------------ ------------ ------------ ------------
INCOME STATEMENT:
Sales.................................... $ 1,479,152 $ 1,216,202 $ 5,089,828 $ 4,534,651 $ 4,076,383
Net income............................... $ 83,050 $ 65,664 $ 310,147 $ 213,993(1) $ 189,191
Net income per share (2)................. $ 0.54 $ 0.43 $ 2.03 $ 1.42(1) $ 1.28
</TABLE>
- ------------------------
(1) After Merger and transaction related costs of $31,170 ($0.21 per share) and
an Extraordinary Item of $2,600 ($0.02 per share).
(2) Restated to give effect to Tyco's two-for-one stock split on November 14,
1995.
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, JUNE 30,
1996 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET:
Working capital...................................................... $ 217,654 $ 403,714 $ 367,186
Total assets......................................................... $ 5,017,042 $ 3,953,936 $ 3,381,461
Long-term debt....................................................... $ 839,992 $ 511,622 $ 506,417
Shareholders' equity................................................. $ 2,133,799 $ 1,938,439 $ 1,634,681
</TABLE>
The name, citizenship, business address, present principal occupation or
employment and five year employment history of each of the directors and
executive officers of Tyco and the Purchaser are set forth in Annex I hereto.
None of Tyco or the Purchaser or, to the best of their knowledge, any of the
persons listed on Annex I hereto, or any associate or majority-owned subsidiary
of Tyco, the Purchaser or any of the persons so listed,
13
<PAGE>
owns or has the right to acquire any Shares (except pursuant to the Shareholder
Agreement described in Section 13) or has effected any transaction in the Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, none of Tyco or the Purchaser
or, to the best of their knowledge, any of the persons listed in Annex I hereto,
(a) has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss, or the giving or withholding of proxies; (b) has engaged in contacts,
negotiations or transactions with the Company or its affiliates concerning a
merger, consolidation, acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets; or (c) has had any other transaction with the Company or any
of its executive officers, directors or affiliates that would require disclosure
under the rules and regulations of the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Tyco
and the Purchaser to purchase all Shares that may be tendered pursuant to the
Offer and in the Merger, and to pay related fees and expenses, is estimated to
be approximately $113 million.
The Purchaser will obtain all such funds from Tyco or its affiliates. Tyco
has sufficient financial resources to satisfy its and the Purchaser's
obligations under the Offer and the Merger Agreement. This Offer is not
conditioned upon any financing arrangements.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER. On or about
October 9, 1996, Tyco requested Robertson, Stephens & Company LLC ("Robertson
Stephens") to contact the Company on behalf of Tyco to present Tyco's potential
interest in acquiring the Company. Following such contact, on October 28 and 29,
1996, J. Brad McGee, Vice President of Tyco, and other representatives of Tyco
met with Kenton K. Alder, President and Chief Executive Officer of the Company,
John Mayer, Chief Operating Officer of the Company, and Michael E. Moran, Senior
Vice President of Trivest, Inc., the Company's financial advisor ("Trivest").
The Tyco representatives visited the Company's manufacturing facilities in
Inglewood, California and Logan, Utah and obtained information about the Company
and provided the Company with certain information concerning Tyco.
On November 1, 1996 Tyco and the Company executed a confidentiality
agreement. Also on November 1, 1996, Trivest invited Tyco to submit an
indication of interest in acquiring the stock of the Company.
On November 12, 1996 Tyco, through Robertson Stephens, verbally expressed an
interest in acquiring the stock of the Company for $14.00 per share. Tyco
indicated that financing the transaction would be through existing financing
sources of Tyco and that due diligence could start immediately. Between November
12, and November 18, 1996 representatives of Tyco and the Company conducted
several discussions concerning the possibility of an acquisition transaction,
including with respect to price, structure, timing, due diligence and Tyco's
valuation analysis.
On November 18, 1996 the Company and Tyco executed an exclusivity and
standstill agreement which, among other things, provided Tyco exclusive access
to non-public information concerning the Company until November 22, 1996, so
that Tyco could perform a definitive evaluation of an acquisition of the Company
by Tyco, and also contained Tyco's agreement to certain standstill provisions.
The exclusivity and standstill agreement was extended on November 22, 1996 until
November 27, 1996. During the week of November 18, 1996, representatives of Tyco
conducted a due diligence review of the Company's business and held discussions
concerning the review with representatives of the Company. Between November 25
and November 27, 1996, the legal advisors of Tyco and the Company negotiated the
terms of the Merger Agreement and the Shareholder Agreement, drafts of which had
been previously furnished by the Company to Tyco.
14
<PAGE>
On November 27, 1996, the Board of Directors of Tyco considered the proposal
to acquire the Company. Following the presentation of Tyco's management, Tyco's
Board voted to approve an offer to acquire the Company for $14.00 per Share
substantially on the terms set forth in the Merger Agreement.
On November 27, 1996, following the action of Tyco's Board, the Board of
Directors of the Company met to consider the Tyco offer. The Company's Board
reviewed the terms of the Merger Agreement and received the opinion of Alex.
Brown that the offer price of $14.00 per share was fair to the shareholders of
the Company from a financial point of view. Thereafter, the Board of Directors
of the Company unanimously approved the Merger Agreement, the Offer and the
Merger. On November 27, 1996, Tyco, the Purchaser and the Company executed the
Merger Agreement. Public disclosure of the Merger Agreement was made on the
morning of November 29, 1996, prior to the opening of trading of Shares on The
Nasdaq National Market.
12. PURPOSE OF THE OFFER; SHORT FORM MERGER; PLANS FOR THE COMPANY;
DISSENTERS' RIGHTS; GOING PRIVATE TRANSACTIONS.
PURPOSE OF THE OFFER. The purpose of the Offer is for the Purchaser to
acquire control of, and a majority equity interest in, the Company. The purpose
of the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer. The acquisition of the entire equity interest in the
Company has been structured as a cash tender offer followed by a cash merger in
order to provide a prompt and orderly transfer of ownership of the Company from
the public shareholders to Tyco and to provide shareholders with cash for all of
their Shares.
Under the FBCA and the Company's Articles of Incorporation, the approval of
the Board of Directors of the Company and the affirmative vote of a majority of
the holders of outstanding Shares are required to approve and adopt the Merger
Agreement and the Merger. The Board of Directors of the Company has approved the
Offer, the Merger and the Merger Agreement and the transactions contemplated
thereby, and, unless the Merger is consummated pursuant to the short-form merger
provisions under the FBCA described below, the only remaining required corporate
action of the Company is the approval and adoption of the Merger Agreement and
the Merger by the affirmative vote of the holders of a majority of the
outstanding Shares. If the Minimum Condition is satisfied, the Purchaser will
have sufficient voting power to cause the approval and adoption of the Merger
Agreement and the Merger without the affirmative vote of any other shareholder.
Beneficial owners of approximately 61% (57% on a fully diluted basis) of the
total number of outstanding Shares of the Company have agreed to tender all of
their Shares pursuant to the Offer.
The Merger Agreement provides that, if approval of the Merger by the
shareholders of the Company is required by law, the Company will, as soon as
possible following payment for Shares in the Offer, duly call and hold a meeting
of shareholders for the purpose of obtaining shareholder approval of the Merger,
and the Company, through its Board of Directors, will recommend to shareholders
that such approval be given.
SHORT FORM MERGER. Under the FBCA, if the Purchaser acquires at least 80%
of the outstanding Shares, the Purchaser will be able to approve the Merger
without a vote of the Company's other shareholders. The Merger Agreement
provides that if the Purchaser, or any other direct or indirect subsidiary of
Tyco, acquires at least 80% of the outstanding Shares, Tyco, the Purchaser and
the Company will take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a meeting of shareholders of the Company, in accordance with Section
607.1104 of the FBCA. Among other things, Section 607.1104 provides that the
articles of merger may not be filed with the Florida Department of State until
at least 30 days after the date a copy or summary of the plan of merger is
mailed to each shareholder of the Company who did not waive such mailing
requirement or, if earlier, upon the waiver thereof by the holders of all the
Shares. In the event that all of the conditions to the Purchaser's obligation to
purchase Shares in the Offer are satisfied or waived and the number of Shares
tendered is less than 80% of the outstanding Shares, the
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Purchaser may, subject to the limitations set forth in the Merger Agreement,
extend the Offer for an aggregate period of not more than 10 business days (for
all such extensions) without the consent of the Company. See Section 1. If the
Purchaser does not acquire at least 80% of the outstanding Shares, a
significantly longer period of time may be required to effect the Merger,
because a vote of the Company's shareholders would be required under the FBCA.
PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. The directors of the
Purchaser will be the initial directors of the Surviving Corporation, and the
officers of the Company and such other persons as are designated by Tyco will be
the initial officers of the Surviving Corporation. Upon completion of the Offer,
Tyco intends to conduct a detailed review of the Company and its assets,
corporate structure, capitalization, operations, policies, management and
personnel. After such review, Tyco will determine what actions or changes, if
any, would be desirable in light of the circumstances which then exist, and
reserves the right to effect such actions or changes.
Except as described in this Offer to Purchase, neither Tyco nor the
Purchaser has any present plans or proposals that would relate to or result in
(i) any extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, (ii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries, (iii) any change in the Company's Board of Directors or
management, (iv) any material change in the Company's capitalization or dividend
policy, (v) any other material change in the Company's corporate structure or
business, (vi) a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
or (vii) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g) of the Exchange Act.
DISSENTERS' RIGHTS. Pursuant to Section 607.1302 of the FBCA, holders of
shares do not have dissenters' rights as a result of the Offer. If the Merger is
effected with a vote of the Company's shareholders and if on the record date
fixed to determine the shareholders entitled to vote, the Shares are registered
on a national securities exchange or designated as a national market system
security on an interdealer quotation system by the NASD or are held of record by
2,000 or more of such shareholders, then holders of the Shares will not have
dissenters' rights under the FBCA. If, however, the Merger is consummated with
or without the vote of the Company's shareholders but the Shares are not so
listed or designated or are not held of record by at least 2,000 shareholders,
holders of Shares will have certain rights pursuant to the provisions of
Sections 607.1301, 607.1302, and 607.1320 of the FBCA to dissent and demand
determination of and to receive payment in cash of the fair value of, their
Shares. If the statutory procedures are complied with, such rights could lead to
a judicial determination of the fair value required to be paid in cash to such
dissenting holders for their Shares. Any such judicial determination of the fair
value of the Shares or the market value of the Shares could be more or less than
the Offer Price or the price provided for in the Merger Agreement. Section
607.1301(2) of FBCA defines "fair value" as the value of the shares excluding
any appreciation or depreciation in anticipation of the transaction in question
unless such exclusion would be inequitable.
If any holder of Shares who asserts dissenters' rights under the FBCA fails
to perfect, or effectively withdraws or loses his or her dissenters' rights, as
provided in the FBCA, the Shares of such shareholder will be converted into the
right to receive the Merger Consideration provided for in the Merger Agreement
in accordance with the Merger Agreement. A shareholder may withdraw his or her
notice of election to dissent by delivery of a written withdrawal of his or her
notice of election to dissent.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable Federal law operative at the time. The Commission has adopted Rule
13e-3 under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable
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to the Merger or another business combination following the purchase of Shares
pursuant to the Offer in which the Purchaser or Tyco seeks to acquire the
remaining Shares not held by it. The Purchaser believes, however, that Rule
13e-3 will not be applicable to the Merger. If applicable, Rule 13e-3 requires,
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of such transaction and the
consideration offered to minority shareholders in such transaction be filed with
the Commission and disclosed to shareholders prior to the consummation of such
transaction.
13. THE MERGER AGREEMENT; SHAREHOLDER AGREEMENT.
THE MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement, a copy
of which is filed as an exhibit to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Merger Agreement.
THE OFFER. The Purchaser commenced the Offer in accordance with the terms
of the Merger Agreement.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the FBCA, the
Purchaser shall be merged with and into the Company. Following the Effective
Time, the separate corporate existence of the Purchaser will cease and the
Company will continue as the Surviving Corporation and will succeed to and
assume all the rights and obligations of the Purchaser in accordance with the
FBCA. The Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, will be the Articles of Incorporation of the
Surviving Corporation, except that the capital stock of the Surviving
Corporation will consist of 1,000 shares of common stock and certain provisions
not appropriate for a wholly-owned subsidiary will be eliminated. The bylaws of
the Purchaser prior to the Effective Time will be the bylaws of the Surviving
Corporation.
CONVERSION OF SHARES. At the Effective Time, each then outstanding Share
(other than Shares owned by the Company, any subsidiary of the Company, Tyco,
the Purchaser, any other subsidiary of Tyco or by shareholders, if any, who are
entitled to and who properly exercise dissenters' rights under Florida law) will
be converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the Offer.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is
subject to the satisfaction of the following conditions: (a) if required by
applicable law, the Merger Agreement shall have been approved and adopted by the
holders of a majority of the Shares; (b) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other Federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
domestic, foreign or supranational (a "Governmental Entity") or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; and (c) the Purchaser shall have previously accepted for payment and
paid for Shares pursuant to the Offer.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Tyco and the
Purchaser relating to the Company and its subsidiaries, including, among other
things with respect to, organization and qualification, capitalization,
authority relative to the Merger Agreement, consents and approvals, filings with
the Commission, financial statements, absence of certain changes or events,
undisclosed liabilities, employee benefit matters, other compensation
arrangements, litigation, compliance with law, tax matters, brokers,
intellectual property, labor matters, title to property, environmental matters,
accounts receivable, customers, interested party transactions, the absence of
certain payments, insurance, product liability and inventory.
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Tyco and the Purchaser have also made customary representations and
warranties to the Company relating to Tyco and the Purchaser, including, among
other things, with respect to organization and qualification, authority relative
to the Merger Agreement, consents and approvals and the availability of
sufficient funds to consummate the Offer and the Merger.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that,
until such time as Tyco's designees constitute a majority of the Company's Board
of Directors, except as otherwise expressly contemplated by the Merger Agreement
or to the extent that Tyco shall otherwise consent in writing, (a) the Company
and its subsidiaries will carry on their respective businesses in the ordinary
course and use all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them; (b) the Company will not, and will not
permit any of its subsidiaries to, (i) declare or pay any dividends on, or make
other distributions in respect of, any of its capital stock, except for
dividends by a direct or indirect wholly-owned subsidiary of the Company to its
parent, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company or (iii)
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or its subsidiaries or any other securities thereof; (c) the Company
will not, and will not permit any of it subsidiaries to, issue, deliver, sell,
pledge or encumber, or authorize the issuance, delivery, sale, pledge or
encumbrance of, any shares of its capital stock of any class or any securities
convertible into, or rights, warrants, calls, subscriptions or options to
acquire, any such shares or convertible securities, or any other ownership
interest in the Company, other than (i) the issuance of Shares upon the exercise
of Stock Options outstanding on the date of the Merger Agreement in accordance
with their terms, (ii) the issuance of Shares upon the conversion of shares of
Class B Common Stock of the Company outstanding as of November 27, 1996 and in
accordance with their terms, or (iii) issuance by a wholly-owned subsidiary of
the Company of its capital stock to its parent; (d) the Company will not, and
will not permit any of its subsidiaries to, amend or propose to amend its
certificate or articles of incorporation or its bylaws (or similar
organizational documents); (e) the Company will not, and will not permit any of
its subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or any substantial assets of
(except purchases of inventory and equipment in the ordinary course of business
consistent with past practice not otherwise prohibited by the Merger Agreement)
or by any other manner, any business, corporation, partnership, joint venture,
association or other business organization or division thereof; (f) the Company
will not, and will not permit any of its subsidiaries to, sell, lease, license,
encumber or otherwise dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets, other than dispositions in the ordinary
course of business consistent with past practice; (g) the Company will not, and
will not permit any of its subsidiaries to, (i) incur indebtedness for borrowed
money or issue or sell any debt securities or warrants or rights to acquire any
debt securities of the Company or any of its subsidiaries, guarantee any debt
securities of others, enter into any "keep-well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
working capital borrowings incurred in the ordinary course of business
consistent with past practice under the Company's credit facility existing and
in effect on the date of the Merger Agreement, or (ii) make any loans, advances
or capital contributions to, or investments in, any other person, other than (A)
with respect to both of the foregoing clauses (i) and (ii), to the Company or
any direct or indirect wholly-owned subsidiary of the Company or (B) any
advances to employees in accordance with past practice; (h) the Company will
confer with Tyco on a regular basis as reasonably requested by Tyco, report on
operational matters and promptly advise Tyco of any material adverse change with
respect to the Company and will promptly provide to Tyco (or its counsel) copies
of all filings made by the Company with any Governmental Entity in connection
with the Merger Agreement and the transactions contemplated thereby; (i) the
Company will not make any material change, other than in the ordinary course of
business, consistent with past practice or as required by the Commission or law,
with respect to any accounting methods, principles or practices used by the
Company (except insofar as may be required by a change in generally accepted
accounting principles); (j) the Company will not, and will not
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permit any of its subsidiaries to, (i) pay, discharge, settle or satisfy any
claims, liabilities or obligations, other than the discharge of certain
liabilities of the Company in the ordinary course of business consistent with
past practice or in accordance with their terms or (ii) waive the benefits of,
or agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its subsidiaries is a party; (k) the
Company and its subsidiaries will not, except as may be required by law and
except as otherwise specifically permitted, (A) enter into, adopt, amend or
terminate any Company Benefit Plan (as defined) or other employee benefit plan
or any agreement, arrangement, plan or policy for the benefit of any director,
executive officer or current or former key employee, (B) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
executive officer or key employee, except as required by any Company Benefit
Plan or agreement with such employees existing on the date the Merger Agreement,
(C) enter into, adopt, amend or terminate any Company Benefit Plan or other
benefit plan or agreement, arrangement, plan or policy for the benefit of any
employees who are not directors, executive officers or current or former key
employees of the Company, other than increases in the compensation of employees
made in the ordinary course of business consistent with past practice, or (D)
pay any benefit not required by any plan or arrangement as currently in effect
(including the granting of, acceleration of exercisability of or vesting of
stock options, stock appreciation rights or restricted stock); (l) neither the
Company nor any of its subsidiaries will modify, amend or terminate any material
contract or agreement to which the Company or such subsidiary is a party or
waive, release or assign any material rights or claims; (m) the Company will not
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation of the Company or any of its subsidiaries; (n)
the Company will not make any tax election or settle or compromise any material
income tax liability (except as otherwise permitted pursuant to the Merger
Agreement); (o) the Company will not, and will not permit any of its
subsidiaries to, take or agree to commit to take any action that is reasonably
likely to result in any of the Company's representations and warranties under
the Merger Agreement being untrue in any material respect at, or as of any time
prior to, the Effective Time; and (p) neither the Company nor any of its
subsidiaries will authorize, commit or agree to take any of, the foregoing
actions.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time of the Merger, whether before or after
approval of the terms of the Merger Agreement by the shareholders of the
Company:
(1) by mutual written consent of Tyco and the Company;
(2) by either Tyco or the Company if (a)(i) as a result of the failure
of any of the conditions to the Offer, the Offer shall have terminated or
expired in accordance with its terms without the Purchaser having accepted
for payment any Shares pursuant to the Offer or (ii) the Purchaser shall not
have accepted for payment any Shares pursuant to the Offer prior to the 60th
day after commencement of the Offer; PROVIDED, HOWEVER, that the right to
terminate the Merger Agreement pursuant to either clause (2)(a)(i) or
(2)(a)(ii) shall not be available to any party whose failure to perform any
of its obligations under the Merger Agreement results in the failure of any
such condition or if the failure of such condition results from facts or
circumstances that constitute a breach of any representation, warranty or
covenant under the Merger Agreement by such party; or (b) if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting
the acceptance for payment of, or payment for, Shares pursuant to the Offer
or the Merger and such order, decree or ruling or other action shall have
become final and nonappealable; PROVIDED, HOWEVER, that the right to
terminate the Merger Agreement pursuant to this clause 2(b) shall not be
available to any party that has failed to perform its obligations described
under "Reasonable Efforts" below or to use reasonable efforts (subject to
other terms and conditions of the Merger Agreement) to prevent the entry of
any such injunction or other order and to have vacated as promptly as
possible any injunction or other order that may be entered;
(3) by Tyco or the Purchaser if (i) the representation and warranties of
the Company with respect to the capitalization of the Company shall not have
been true and correct in all material respects when made or any other
representation or warranty of the Company shall not have been true and
correct in
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all material respects when made, except in any case where such failure to be
true and correct would not, in the aggregate, (x) have a material adverse
effect (as defined) on the Company, or (y) prevent or materially delay the
consummation of the Offer and/or the Merger; (ii) the representation and
warranties of the Company with respect to the capitalization of the Company
(other than representations and warranties made as of a specific date) shall
have ceased at any later date to be true and correct in all material
respects as if made at such later date or any other representation or
warranty of the Company (other than representations and warranties made as
of a specific date) shall have ceased at any later date to be true and
correct in all material respects as if made at such later date, except in
any case where such failure to be true and correct would not, in the
aggregate, (x) have a material adverse effect, or (y) prevent or materially
delay the consummation of the Offer and/or the Merger; or (iii) the Company
shall have failed to comply in any material respect with any of its material
obligations or covenants contained in the Merger Agreement; PROVIDED,
HOWEVER, that the right of Tyco or the Purchaser to terminate this Agreement
pursuant to this paragraph (3) shall not be available if the Purchaser or
any affiliate of the Purchaser shall acquire any Shares pursuant to the
Offer;
(4) by Tyco or the Purchaser if either Tyco or the Purchaser is
entitled, pursuant to the Merger Agreement, to terminate the Offer as a
result of (i) the Board of Directors of the Company having withdrawn or
modified in a manner adverse to Tyco or the Purchaser its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or approved
or recommended any Acquisition Proposal (as defined below), (ii) the Company
having entered into any agreement with respect to any Superior Proposal (as
defined below) as described under "Acquisition Proposals" below or (iii) the
Board of Directors of the Company shall have resolved to take any of the
actions set forth in clauses 4(i) and 4(ii) above; or
(5) by the Company in connection with entering into a definitive
agreement with respect to a Superior Proposal as described below under
"Acquisition Proposals," provided it has complied with certain provisions of
the Merger Agreement with respect thereto, including notice to Tyco and the
payment of the Termination Fee (as defined below under "Expenses and
Termination Fee"), and provided that the Company shall not have breached in
any material respect the other provisions described below under "Acquisition
Proposals"; or
(6) by the Company if (x) any representation or warranty of Tyco or the
Purchaser shall not have been true and correct in all material respects when
made or shall have ceased at any later date to be true and correct in all
material respects as if made at such later date; or (y) Tyco or the
Purchaser shall have failed to comply in any material respect with any of
its material obligations or covenants contained in the Merger Agreement.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto except as described under "Expenses and Termination
Fee" below or as otherwise expressly provided for in the Merger Agreement;
PROVIDED, HOWEVER, that nothing in the Merger Agreement will relieve any party
from liability for any breach thereof.
ACQUISITION PROPOSALS. Pursuant to the Merger Agreement, the Company has
agreed that the Company and its officers, directors, employees, representatives
and agents will cease any discussions or negotiations with any parties with
respect to any Acquisition Proposal (as defined below). The Merger Agreement
further provides that the Company will not, nor will it permit any of its
subsidiaries to, authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries, directly or
indirectly, (1) to solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal or (2) to participate in any discussions or
negotiations regarding any Acquisition Proposal; PROVIDED, HOWEVER, that if, at
any time prior to the acceptance for payment of Shares pursuant to the Offer,
the Board of Directors of the Company determines in good faith, after
consultation
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with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Company
may, in response to an unsolicited Acquisition Proposal, and subject to
compliance with the notification provisions discussed below, (i) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement in reasonably customary form and (ii) participate in
negotiations regarding such Acquisition Proposal. The Merger Agreement defines
"Acquisition Proposal" as any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 20% or more of the
assets of the Company and its subsidiaries or 20% or more of any class of equity
securities of the Company or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of equity securities of the Company or any of
its subsidiaries, any merger, consolidation, business combination, sale of all
or substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its subsidiaries (other than
transactions between the parties to, and contemplated by, the Merger Agreement),
or any other transaction the consummation of which could reasonably be expected
to impede, interfere with, prevent or materially delay the Offer or the Merger
or which could reasonably be expected to dilute materially the benefits to Tyco
of the transactions contemplated thereby.
The Merger Agreement provides further that, except as described below,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Tyco, the approval or recommendation by the Board of Directors or such committee
of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) cause the
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that prior to the acceptance for
payment of Shares pursuant to the Offer the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
shareholders under applicable law, the Board of Directors may (subject to the
other provisions regarding Acquisition Proposals) withdraw or modify its
approval or recommendation of the Offer, the Merger Agreement or the Merger,
approve or recommend a Superior Proposal, cause the Company to enter into an
agreement with respect to a Superior Proposal or terminate the Merger Agreement,
in each case at any time after the fifth business day following Tyco's receipt
of written notice advising Tyco that the Board of Directors of the Company has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person making such Superior Proposal.
In addition, if the Company proposes to enter into an agreement with respect to
any Acquisition Proposal, it must concurrently with entering into such agreement
pay, or cause to be paid, to Tyco the Termination Fee. See "Expenses and
Termination Fee". For purposes of the Merger Agreement, a "Superior Proposal"
means any bona fide proposal to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 20% of the Shares
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's shareholders than
the Offer and the Merger.
In addition to the obligations of the Company described in the preceding two
paragraphs, the Merger Agreement provides that the Company shall immediately
advise Tyco orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making any such request or
Acquisition Proposal.
The Merger Agreement provides that nothing contained therein shall prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's shareholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure to so disclose would be inconsistent with its fiduciary duties to the
Company's shareholders under applicable law;
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PROVIDED, HOWEVER, that neither the Company nor its Board of Directors nor any
committee thereof shall, except as permitted by the Merger Agreement and as
described above, withdraw or modify, or propose to withdraw or modify, its
position with respect to the Merger or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal.
EXPENSES AND TERMINATION FEE. Except as described below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such costs and expenses. The Merger Agreement provides that the
Company will pay, or cause to be paid, to Tyco a termination fee of $3,000,000
(the "Termination Fee") if (i) Tyco or the Purchaser terminates the Merger
Agreement by reason of the failure of the Company to comply with its material
obligations or covenants, as described in clause (3)(iii) under "Termination of
the Merger Agreement" above, or the Company or its Board of Directors has
withdrawn or modified its approval of the Offer or the Merger, recommended an
Acquisition Proposal, entered into an agreement with respect to a Superior
Proposal or resolved to do any of the foregoing, as described in clause (4)
under "Termination of the Merger Agreement" above, (ii) either Tyco or the
Company terminates the Merger Agreement as described under clause 2(a) under
"Termination of the Merger Agreement" above, the Minimum Condition has failed to
be satisfied and such failure is the result of a breach by any of the parties to
the Shareholder Agreement (as defined below) of its obligation thereunder to
tender its Shares in the Offer or (iii) the Company terminates the Merger
Agreement in connection with entering into a definitive agreement with respect
to any Superior Proposal, as described under clause (5) of "Termination of the
Merger Agreement" above.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, a majority of the outstanding Shares
by the Purchaser pursuant to the Offer, Tyco shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give Tyco, subject to compliance with Section
14(f) of the Exchange Act, representation on the Board of Directors equal to the
product of (x) the total number of directors on the Board of Directors and (y)
the percentage that the number of Shares purchased by the Purchaser bears to the
number of Shares outstanding; PROVIDED, HOWEVER, that in the event that Tyco's
designees are elected to the Board of Directors, until the Effective Time such
Board of Directors shall have at least two directors who were directors on the
date of the Merger Agreement and who are not officers of the Company (the
"Independent Directors"); and PROVIDED FURTHER that, in such event, if the
number of Independent Directors shall be reduced below two, the remaining
Independent Director shall fill such vacancy or, if no Independent Director then
remains, the other directors shall designate two persons who shall not be
officers or affiliates of the Company or any of its subsidiaries, or officers or
affiliates of Tyco or any of its subsidiaries, to fill such vacancies, and such
persons shall be deemed Independent Directors for purposes of the Merger
Agreement. Subject to applicable law, the Company has agreed to take all action
requested by Tyco necessary to effect any such election, including mailing to
its shareholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
which Information Statement is attached as Annex A to the Schedule 14D-9, and
increasing the size of the Board of Directors and/or obtaining the resignation
of such number of the current directors of the Company.
Following the election or appointment of the Tyco designated directors, the
affirmative vote of a majority of the Independent Directors then in office will
be required by the Company to (i) amend or terminate the Merger Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
the Merger Agreement or (iii) extend the time for performance of Tyco's and the
Purchaser's respective obligations under the Merger Agreement.
STOCK OPTIONS. Pursuant to the Merger Agreement, Tyco and the Company have
agreed, effective as of the Effective Time, (i) to cause each outstanding option
to purchase Shares (a "Company Stock Option") issued pursuant to the Company's
Second Amended and Restated Stock Option Plan, whether or
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<PAGE>
not exercisable or vested, to become fully exercisable and vested, (ii) cause
each Company Stock Option that is outstanding to be canceled and (iii) in
consideration for such cancellation, and except to the extent that Tyco or the
Purchaser and the holder of any such Company Stock Option agree, cause the
Company (or, at Tyco's option, the Purchaser) to pay (net of applicable
withholding taxes) such holders of Company Stock Options an amount in respect
thereof equal to the product of (x) the excess, if any, of the Offer price over
the exercise price of each such Company Stock Option and (y) the number of
Shares subject to the Company Stock Option immediately prior to its
cancellation.
EMPLOYMENT AND BENEFIT ARRANGEMENTS. Tyco has agreed pursuant to the Merger
Agreement that, from and after the Effective Time, it shall cause the Surviving
Corporation to honor all employment, severance, termination and retirement
agreements to which the Company is a party, as such agreements are in effect on
the date of the Merger Agreement. Tyco has also agreed that, for a one-year
period following the Effective Time, it shall cause the Surviving Corporation to
provide those employees who are employees of the Surviving Corporation at the
Effective Time with benefits that are, in the aggregate, no less favorable to
such employees as are the benefits of the Company available to such employees
immediately prior to the Effective Time. These provisions are not intended,
however, to create rights of third party beneficiaries.
INDEMNIFICATION AND INSURANCE. In the Merger Agreement, Tyco and the
Purchaser have agreed that all rights to indemnification for acts or omissions
occurring prior to the effectiveness of the Merger that are in existence as of
the date of the Merger Agreement in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
certificates or articles of incorporation or by-laws or contractual arrangements
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, pursuant to the Merger Agreement, Tyco
has agreed to provide, or cause the Surviving Corporation to provide, for a
period of not less than six years after the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring at or prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; PROVIDED, HOWEVER, that Tyco and the Surviving Corporation
will not be required to pay an annual premium for the D&O Insurance in excess of
200% of the annual premium currently paid by the Company for such insurance, but
in such case will purchase as much coverage as possible for such amount.
REASONABLE EFFORTS. The Merger Agreement provides that each of the parties
will use its reasonable efforts to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
itself with respect to the Offer and the Merger and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their subsidiaries in connection with the
Offer and the Merger and will, and will cause its subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by any of them or any of
their subsidiaries in connection with the Offer and the Merger or the taking of
any action contemplated thereby or by the Merger Agreement, except that no party
need waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of or hold separate any assets or otherwise take any
action that would require a waiver of, or that is inconsistent with the
satisfaction of, certain related conditions of the Offer set forth in the Merger
Agreement.
AMENDMENT. The Merger Agreement may be amended by the parties thereto, by
action taken or authorized by their respective Boards of Directors; PROVIDED,
HOWEVER, that after any approval of the Merger Agreement by the shareholders of
the Company, no amendment will be made to the Merger Agreement which by law
requires further approval by such shareholders without such further approval.
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<PAGE>
SHAREHOLDER AGREEMENT
As an inducement to Tyco and the Purchaser entering into the Merger
Agreement with the Company, shareholders owning approximately 61% (57% on a
fully diluted basis) of the Shares (each a "Shareholder") have entered into a
Shareholder Agreement (the "Shareholder Agreement") with Tyco and the Purchaser.
The following summary of certain provisions of the Shareholder Agreement, a
copy of which is filed as an exhibit to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Shareholder Agreement.
AGREEMENT TO TENDER. Each Shareholder has agreed that it shall tender its
Shares (including Shares issuable upon the conversion of all Class B Common
Stock) in the Offer and that it shall not withdraw any Shares so tendered. In
connection therewith, the Company has agreed with, and covenanted to, Tyco that
the Company shall not register the transfer of any certificate representing any
Shareholder's Shares, unless such transfer is made to Tyco or the Purchaser or
otherwise in compliance with the Shareholder Agreement.
GRANT OF IRREVOCABLE PROXY. Each Shareholder has irrevocably granted to,
and appointed, Tyco and any individual designated by Tyco as such Shareholder's
proxy and attorney-in-fact, to vote such Shareholder's Shares, or grant a
consent or approval in respect of such Shares, at any meeting of shareholders of
the Company or in any other circumstances upon which such Shareholder's vote,
consent or other approval is sought, against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, joint venture, recapitalization,
dissolution, liquidation or winding up of or by the Company and (ii) any
amendment of the Company's Articles of Incorporation or bylaws or other proposal
or transaction (including any consent solicitation to remove or elect any
directors of the Company) involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, or result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under or with respect to, the Offer, the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS. Each
Shareholder has made certain representations and warranties in the Shareholder
Agreement, including with respect to (i) ownership of the Shares, (ii) the
authority to enter into and perform its obligations under the Shareholder
Agreement and the absence of required consents and statutory or contractual
conflicts or violations, (iii) the absence of liens, claims, security interests,
proxies, voting trusts or other arrangements or any other encumbrances on or in
respect of its Shares, (iv) finder's fees, and (v) an acknowledgement of Tyco's
reliance upon such Shareholder's execution of the Shareholder Agreement in
entering into, and causing the Purchaser to enter into, the Merger Agreement. In
addition, each Shareholder has agreed not to transfer, or consent to any
transfer of any or all of such Shareholder's Shares or any interest therein
(except as contemplated by the Shareholder Agreement), enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares or any interest therein, deposit such Shares into a voting trust or enter
into a voting arrangement or agreement with respect to such Shares or take any
other action that would in any way restrict, limit or interfere with its
obligations under the Shareholders Agreement. Each Shareholder has also agreed,
directly or indirectly, not to solicit, initiate or encourage the submission of
any Acquisition Proposal or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
24
<PAGE>
TERMINATION. The Shareholder Agreement, and all rights and obligations
thereunder, shall terminate upon the earlier of (a) the termination of the
Merger Agreement in accordance with its terms either (i) by Tyco or the
Purchaser (provided that no termination under this clause shall relieve any
Shareholder of liability for such Shareholder's breach of its obligations under
the Shareholder Agreement) or (ii) by the mutual written consent of Tyco, the
Purchaser and the Company, or (b) the date that Tyco or the Purchaser shall have
purchased and paid for the Shares of each Shareholder pursuant to the terms of
the Shareholder Agreement.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will (x) declare or pay any dividends on, or make other
distributions in respect of, any of its capital stock, other than dividends by a
direct or indirect wholly-owned subsidiary of the Company to its parent, (y)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof.
If on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should (i) split, combine or otherwise change
the Shares or its capitalization, (ii) acquire presently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares, or (iii) issue
or sell any shares of any class or any securities convertible into any such
shares, or any rights, warrants or options to acquire any such shares or
convertible securities (other than Shares issued pursuant to, and in accordance
with the terms in effect on the date of the Merger Agreement of, stock options
issued prior to such date), then, without prejudice to the Purchaser's rights
under the Merger Agreement, the Purchaser (subject to the Merger Agreement), in
its sole discretion, may make such adjustments in the Offer price and other
terms of the Offer as it deems appropriate to reflect such action.
If, on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should declare or pay any cash, non-cash or
stock dividend or other distribution on, or issue any rights with respect to,
the Shares, payable or distributable to shareholders of record on a date prior
to the transfer to the name of the Purchaser or its nominees or transferees on
the Company's stock transfer records of the Shares purchased pursuant to the
Offer, then, without prejudice to the Purchaser's rights under the Merger
Agreement, (i) the price per Share payable by the Purchaser pursuant to the
Offer may (subject to the Merger Agreement), in the sole discretion of the
Purchaser, be reduced by the amount of any such cash dividend or distribution,
and (ii) any non-cash dividend, distribution or right to be received by the
tendering shareholders will (a) be received and held by the tendering
shareholders for the account of the Purchaser and will be required to be
promptly remitted and transferred by each tendering shareholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance,
the Purchaser will be, subject to applicable law, entitled to all rights and
privileges as owner of any such non-cash dividend, distribution or right or such
proceeds and may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Purchaser in its sole
discretion.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the
Offer or the Merger Agreement, the Purchaser shall not be required to accept for
payment or pay for, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) of the Exchange Act, any Shares not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Shares, unless (i) there shall have been validly tendered and
not withdrawn prior to the expiration of the Offer that number of Shares which
would represent at least a majority of the outstanding Shares on a fully diluted
basis (the "Minimum Condition"), and (ii) any waiting period under the HSR Act
applicable to the
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<PAGE>
purchase of Shares pursuant to the Offer shall have expired or been terminated.
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, the Purchaser shall not be required to accept for payment or, subject
as aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate or amend the Offer, if at any time on or after the date
of the Merger Agreement and before the acceptance of such Shares for payment or
the payment therefor, any of the following conditions exist or shall occur and
remain in effect:
(a) there shall have been instituted, pending or threatened any action
or proceeding by any court or other Governmental Entity, which (i) seeks to
challenge the acquisition by Tyco or the Purchaser (or any of its
affiliates) of Shares pursuant to the Offer, restrain or prohibit the making
or consummation of the Offer or the Merger, or obtain damages in connection
therewith in an amount which would reasonably be expected to have a material
adverse effect, (ii) seeks to make the purchase of or payment for some or
all of the Shares pursuant to the Offer or the Merger illegal, (iii) seeks
to impose limitations on the ability of Tyco (or any of its affiliates)
effectively to acquire or hold, or to require Tyco or the Company or any of
their respective affiliates or subsidiaries to dispose of or hold separate,
any portion of the assets or the business of Tyco and its affiliates or any
material portion of the assets or the business of the Company and its
subsidiaries taken as a whole, as a result of the Offer or the Merger or
(iv) seeks to impose material limitations on the ability of Tyco (or its
affiliates) to exercise full rights of ownership of the Shares purchased by
it, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the shareholders of the Company; or
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any statute, rule,
regulation, judgment, decree, order or injunction, other than the
application of waiting periods under the HSR Act, that is reasonably likely
to directly or indirectly result in any of the consequences referred to in
clauses (i) through (iv) of subsection (a) above; or
(c) (A) the representations and warranties of the Company with respect
to capitalization shall not have been true and correct in all material
respect when made, or shall thereafter have ceased to be true and correct in
all material respects as if made as of such later date (other than
representations and warranties made as of a specified date) or (B) the
representations and warranties made by the Company in the Merger Agreement
shall not have been true and correct in all material respects when made, or
shall thereafter have ceased to be true and correct in all material respects
as if made as of such later date (other than representations and warranties
made as of a specified date), except in any case where such failure to be
true and correct would not, in the aggregate, have a material adverse effect
or prevent or materially delay the consummation of the Offer and/or the
Merger; or
(d) the Company shall not in all material respects have performed in a
timely manner any material obligation and agreement and complied with any
material covenant to be performed and complied with by it under the Merger
Agreement; or
(e) (i) the Board of Directors of the Company shall have failed to
approve and recommend or shall have withdrawn or modified in a manner
adverse to Tyco or the Purchaser its approval or recommendation of the
Offer, the Merger or the Merger Agreement or approved or recommended any
Acquisition Proposal, (ii) the Company shall have entered into any agreement
with respect to any Superior Proposal or (iii) the Board of Directors of the
Company shall have resolved to take any of the foregoing actions; or
(f) any change, development, effect or circumstance shall have occurred
or be threatened (other than any affecting the electronics industry
generally) that would reasonably be expected to have a material adverse
effect on the Company; or
(g) the Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition under
any chapter of Title XI of the United States
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<PAGE>
Code or any similar law or regulation is filed against the Company which is
not dismissed within five business days; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Tyco and the Purchaser
except as otherwise provided in the Merger Agreement and may be asserted by Tyco
or the Purchaser regardless of the circumstances giving rise to any such
condition and may be waived by Tyco or the Purchaser, in whole or in part, at
any time and from time to time, in the sole discretion of Tyco. The failure by
Tyco or the Purchaser at any time to exercise any of the foregoing rights will
not be deemed a waiver of any right, the waiver of such right with respect to
any particular facts or circumstances shall not be deemed a waiver with respect
to any other facts or circumstances, and each right will be deemed an ongoing
right which may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering shareholders.
16. CERTAIN LEGAL MATTERS.
GENERAL. Except as described in this Section 16, based on a review of
publicly available filings by the Company with the Commission and other publicly
available information concerning the Company, neither Tyco nor the Purchaser is
aware of any license or regulatory permit that appears to be material to the
business of the Company and that might be adversely affected by the Purchaser's
acquisition of Shares pursuant to the Offer, or of any approval or other action
by any governmental, administrative or regulatory agency or authority, domestic
or foreign, that would be required for the acquisition or ownership of Shares by
the Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought, except as described below under "State Takeover Laws." While the
Purchaser does not currently intend to delay acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter, there can
be no assurance that any such approval or other action, if required, would be
obtained without substantial conditions or that adverse consequences would not
result to the Company's business or that certain parts of the Company's business
would not have to be disposed of in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser may decline to accept for
payment or pay for any Shares tendered. See Section 15.
STATE TAKEOVER LAWS. The Company and certain of its subsidiaries conduct
business in a number of states throughout the United States, some of which have
adopted laws and regulations applicable to offers to acquire shares of
corporations that are incorporated or have substantial assets, shareholders
and/or a principal place of business in such states. In Edgar v. MITE Corp., the
Supreme Court of the United States held that the Illinois Business Takeover
Statute, which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and was therefore unconstitutional. In CTS Corp. v. Dynamics Corp. of America,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that such laws were applicable only under certain
conditions, in particular, that the corporation has a substantial number of
shareholders in and is incorporated under the laws of such state.
The Company is incorporated under the laws of the State of Florida. Section
607.0901 of the FBCA (the "Affiliated Transactions Statute") prohibits certain
"affiliated transactions" (defined to include mergers and consolidations)
involving a Florida corporation and an "interested shareholder" (defined
generally as a person who is the beneficial owner of more than 10% of the
outstanding voting shares of the
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subject corporation) unless the transaction has been approved by (i) a majority
of "disinterested directors" of the subject corporation (defined generally as
directors who were elected to the board prior to the time the shareholder became
an interested shareholder), (ii) holders of two-thirds of the outstanding voting
shares of the subject corporation, exclusive of those shares beneficially owned
by the shareholder who, but for such approval, would be an "interested
shareholder" or (iii) certain other statutory conditions have been met. At a
meeting held on November 27, 1996, the Board of Directors of the Company
approved the Merger Agreement, the Merger and the transactions contemplated
thereby (collectively, the "Merger Transaction") and determined that each of the
Offer and the Merger are fair to, and in the best interest of, the Company's
shareholders. Accordingly, the Affiliated Transactions Statute is inapplicable
to the Merger.
Section 607.0902 of the FBCA (the "Control Share Acquisitions Statute")
limits, in certain circumstances, the voting rights of "control shares" (defined
generally as those shares of an issuing public corporation which, when added to
the number of shares of the corporation already owned or controlled by a person,
entitle that person, immediately after the acquisition of the shares, to
exercise, directly or indirectly, alone or as part of a group, at least
one-fifth of the voting power of the corporation in the election of directors)
acquired in a "control share acquisition" (defined generally to mean the
acquisition directly or indirectly by any person of ownership of, where the
person is to direct the exercise of, voting power with respect to issued and
outstanding control shares) unless the acquisition of the control shares of an
issuing public corporation has been approved by the board of directors of such
issuing public corporation or certain other statutory conditions have been met.
At a meeting held on November 27, 1996, the Board of Directors of the Company
approved the acquisition of the Shares pursuant to the Offer and the Merger.
Accordingly, the Control Share Acquisition Statute is inapplicable to Tyco and
the Purchaser in connection with the Offer and the Merger.
Neither Tyco nor the Purchaser has determined whether any other state
takeover laws and regulations will by their terms apply to the Offer, and,
except as set forth above, neither Tyco nor the Purchaser has presently sought
to comply with any state takeover statute or regulation. Tyco and the Purchaser
reserve the right to challenge the applicability or validity of any state law or
regulation purporting to apply to the Offer or the Merger, and neither anything
in this Offer nor any action taken in connection herewith is intended as a
waiver of such right. In the event it is asserted that one or more state
takeover statutes is applicable to the Offer or the Merger and an appropriate
court does not determine that such statute is inapplicable or invalid as applied
to the Offer or the Merger, Tyco or the Purchaser might be required to file
certain information with, or to receive approval from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the U.S. Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer
is subject to such requirements. See Section 15.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, purchases may not be consummated until the expiration of
a 15-calendar day waiting period after the filing of certain required
information and documentary material with the Antitrust Division and the FTC
with respect to the Offer (unless earlier terminated pursuant to a request
therefor, which Tyco will make). If, within such 15-day waiting period, either
the Antitrust Division or the FTC requests additional information or documentary
material relevant to the Offer from Tyco, the waiting period will be extended
for an additional period of 10 calendar days following the date of substantial
compliance with such request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the rules promulgated
under the HSR Act. Thereafter, such waiting period may be extended only by court
order or by agreement of Tyco. A request for additional information issued to
the Company cannot extend
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the waiting period. Tyco expects to file, or cause to be filed, a Notification
and Report Form with respect to the Offer under the HSR Act on December 9, 1996,
and, in such event, the required waiting period with respect to the Offer will
expire at 11:59 p.m., New York City time, on December 23, 1996, unless Tyco
receives a request for additional information or documentary material or the
Antitrust Division or the FTC terminates the waiting period prior thereto.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of Shares by
the Purchaser pursuant to the Offer. At any time before or after such purchase,
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the transaction or seeking divestiture of the Shares so
acquired or divestiture of substantial assets of Tyco or its subsidiaries.
Litigation seeking similar relief could also be brought by private persons and
the state attorneys general.
Based upon an examination of publicly available information relating to the
businesses in which Tyco and the Company are engaged, Tyco and the Purchaser do
not believe that consummation of the Offer will result in violation of any
applicable antitrust laws. However, there can be no assurance that a challenge
to the Offer on antitrust grounds will not be made, or, if such a challenge is
made, what the result would be. See Section 15 for certain conditions to the
Offer, including conditions with respect to litigation and certain governmental
actions.
17. FEES AND EXPENSES. The Purchaser has retained MacKenzie Partners, Inc.
to act as the Information Agent and ChaseMellon Shareholder Services, L.L.C. to
act as the Depositary in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telecopy and personal
interview and may request brokers, dealers and other nominee shareholders to
forward the Offer materials to beneficial owners. The Information Agent and the
Depositary will receive reasonable and customary compensation for services
relating to the Offer and will be reimbursed for certain out-of-pocket expenses.
The Purchaser and Tyco have also agreed to indemnify the Information Agent and
the Depositary against certain liabilities and expenses in connection with the
Offer, including certain liabilities under the federal securities laws.
Neither Tyco nor the Purchaser will pay any fees or commissions to any
broker or dealer or any other person (other than to the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies will, upon request, be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding offering
materials to their customers.
18. MISCELLANEOUS. The Offer is being made to all holders of Shares. The
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute or
seek to have such statute declared inapplicable to the Offer. If, after such
good faith effort, the Purchaser cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of the Purchaser by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Tyco, the Purchaser or the Company not contained in
this Offer to Purchase or in the related Letter of Transmittal and, if given or
made, such information or representation must not be relied upon as having been
authorized.
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Tyco and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with all exhibits thereto, pursuant to
Rule 14d-3 of the General Rules and Regulations under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such Tender
Offer Statement and any amendments thereto, including exhibits, may be inspected
and copies may be obtained from the offices of the Commission in the manner set
forth in Section 8 (except that they will not be available at the regional
offices of the Commission).
T3 ACQUISITION CORP.
December 5, 1996
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ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF TYCO INTERNATIONAL LTD.
AND THE PURCHASER
The following table sets forth the name, current business address, present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
Tyco and the Purchaser. Unless otherwise indicated, positions held shown in the
following table are positions with Tyco. Positions held with the Purchaser are
shown in italics. Each such person is a citizen of the United States of America.
None of the listed persons, during the past five years, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND POSITION HELD CURRENT BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- ------------------------------ ---------------------------------------
<S> <C> <C>
L. Dennis Kozlowski,................... One Tyco Park Mr. Kozlowski has been Chairman of the
Chairman of the Board, President and Exeter, NH 03833 Board of Directors of Tyco since
Chief Executive Officer 1993, Chief Executive Officer since
1992 and President since 1989.
Joshua M. Berman,...................... 919 Third Avenue Mr. Berman has been counsel to Kramer,
Director, Secretary New York, NY 10022 Levin, Naftalis & Frankel since 1985.
Richard S. Bodman,..................... 2 Wisconsin Circle Mr. Bodman has been Managing General
Director Suite 610 Partner of AT&T Ventures LLC since
Chevy Chase, MD 20815 1996. Previously, since 1990, he was
Senior Vice President, Corporate
Strategy and Development, of AT&T
Corporation.
John F. Fort,.......................... 2003 Milford Street Mr. Fort was Chairman of the Board and
Director Houston, TX 77098 Chief Executive Officer of Tyco from
1982 to 1992.
Stephen W. Foss,....................... 380 Lafayette Road Mr. Foss has been President of Foss
Director Hampton, NH 03842 Manufacturing Company, Inc. since
1969.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND POSITION HELD CURRENT BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- ------------------------------ ---------------------------------------
<S> <C> <C>
Richard A. Gilleland,.................. 2829 Townsgate Road Mr. Gilleland was President and Chief
Director Suite 101 Executive Officer of Amsco
West Lake Village, CA 91361 International, Inc. from 1995 to 1996
and Senior Vice President of Tyco
from 1994 to 1995. From 1990 to 1994,
he was President and Chief Executive
Officer of Kendall International,
Inc., which was acquired by Tyco in
1994.
Philip M. Hampton,..................... 399 Park Avenue Mr. Hampton has been Chairman of
Director 32nd Floor Metzler Corporation since 1989.
New York, NY 10022
Frank E. Walsh, Jr.,................... 330 South Street Mr. Walsh has been Chairman of the
Director Morristown, NJ 07962-1975 Sandyhill Foundation since 1996.
Previously, from 1982 to 1996, he was
Chairman of Wesray Capital
Corporation.
Jerry R. Boggess,...................... Three Tyco Park Mr. Boggess has been Vice President of
Vice President Exeter, NH 03833 Tyco since February 1996 and
President of the Fire and Safety
Services Division since 1993.
Previously, from 1989, he was
Executive Vice President of the
Grinnell Fire Protection Division of
Tyco's Grinnell Corporation
Subsidiary ("Grinnell").
David P. Brownell,..................... One Tyco Park Mr. Brownell has been Senior Vice
Senior Vice President Exeter, NH 03833 President of Tyco since 1993. He
served as Executive Vice President of
the Flow Control Division of Grinnell
from 1991 to 1993.
Neil R. Garvey,........................ 2073 Woodbury Avenue Mr. Garvey has been Vice President of
Vice President Portsmouth, NH 03802 Tyco since 1996 and President of its
Simplex Technologies subsidiary
("Simplex") since 1995. Previously,
from 1989, he was Vice President of
Marketing of Simplex.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND POSITION HELD CURRENT BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------- ------------------------------ ---------------------------------------
<S> <C> <C>
John J. Guarnieri,..................... One Tyco Park Mr. Guarnieri has been Vice President
Vice President and Corporate Exeter, NH 03833 and Corporate Controller of Tyco
Controller since 1993. He served as Corporate
Controller from 1991 to 1993.
J. Brad McGee,......................... One Tyco Park Mr. McGee has been Vice President of
Vice President; Exeter, NH 03833 Tyco since 1996 and Vice President of
DIRECTOR AND VICE PRESIDENT OF THE Tyco's Specialty Products Division
PURCHASER since 1995. From 1993 to 1995, he was
Director of Financial Planning and
Development of Tyco and previously
since 1991 was associated with Tyco
in other capacities.
Robert P. Mead,........................ Three Tyco Park Mr. Mead has been Vice President of
Vice President Exeter, NH 03833 Tyco and President of Grinnell's Flow
Control Division since 1993. From
1992 to 1993, he was Executive Vice
President of Tyco's Allied Tube and
Conduit Corp. subsidiary. He served
as Managing Director of Tyco's
Australian operations from 1991 to
1992.
Barbara S. Miller,..................... One Tyco Park Ms. Miller has been Vice President of
Vice President and Treasurer; Exeter, NH 03833 Tyco since 1996 and Treasurer of Tyco
DIRECTOR, VICE PRESIDENT AND since 1993. She was Assistant
TREASURER OF THE PURCHASER Corporate Controller from 1989 to
1993.
Mark H. Swartz,........................ One Tyco Park Mr. Swartz has been Vice President and
Vice President and Chief Financial Exeter, NH 03833 Chief Financial Officer of Tyco since
Officer; 1995. From 1993 to 1995, he was
DIRECTOR AND PRESIDENT OF THE Tyco's Director of Mergers and
PURCHASER Acquisitions, and previously since
1991 was associated with Tyco in
other capacities.
M. Brian Moroze,....................... One Tyco Park Mr. Moroze has been General Counsel of
VICE PRESIDENT AND SECRETARY OF THE Exeter, NH 03833 Tyco since 1994, and served as
PURCHASER Associate General Counsel from 1986
to 1994.
</TABLE>
33
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each shareholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND OR BY OVERNIGHT BY FACSIMILIE:
COURIER:
CHASEMELLON CHASEMELLON (201) 329-8936
SHAREHOLDER SERVICES, L.L.C. SHAREHOLDER SERVICES, (FOR ELIGIBLE INSTITUTIONS
P.O. BOX 798 L.L.C. ONLY)
MIDTOWN STATION 120 BROADWAY, 13TH FLOOR CONFIRM BY TELEPHONE:
NEW YORK, NY 10018 NEW YORK, NY 10271 (201) 296-4209
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or the Depositary. Shareholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ELECTROSTAR, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 5, 1996
OF
T3 ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
TYCO INTERNATIONAL LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JANUARY 3, 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND OR BY OVERNIGHT
BY MAIL: COURIER: BY FACSIMILE:
<S> <C> <C>
ChaseMellon ChaseMellon (201) 329-8936
Shareholder Services, Shareholder Services, (For Eligible Institutions
L.L.C. L.L.C. Only)
P.O. Box 798 120 Broadway, 13th Floor
Midtown Station New York, NY 10271 CONFIRM BY TELEPHONE:
New York, NY 10018 (201) 296-4209
</TABLE>
------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates representing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in Instruction 2) is utilized, if
delivery is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company or the Philadelphia Depository Trust
Company (individually, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Shareholders whose certificates are not
immediately available, or who cannot deliver their certificates or confirmation
of the book-entry transfer of their Shares into the Depositary's account at a
Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents
required hereby to the Depositary on or prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase), must tender their Shares according to
the guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Check Box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Name of Institution that Guaranteed Delivery:________________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
Name of Tendering Institution _______________________________________________
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ______________________________________________________________
Transaction Code Number _____________________________________________________
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LISTS IF NECESSARY)
<S> <C> <C> <C>
TOTAL NUMBER OF
SHARES
REPRESENTED NUMBER OF
CERTIFICATE BY SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
TOTAL SHARES
* NEED NOT BE COMPLETED BY SHAREHOLDERS TENDERING BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY ANY CERTIFICATES DELIVERED
TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4.
</TABLE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to T3 Acquisition Corp., a Florida
corporation (the "Purchaser") and a wholly owned subsidiary of Tyco
International Ltd., a Massachusetts corporation ("Tyco"), the above-described
shares of common stock, par value $.01 per share (the "Shares"), of
ElectroStar,Inc., a Florida corporation (the "Company"), pursuant to the
Purchaser's offer to purchase all of the outstanding Shares at a price of $14.00
per Share, net to the tendering shareholder in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated December 5, 1996
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer"). The Purchaser
reserves the right to transfer or assign, in whole or from time to time in part,
to Tyco or to one or more affiliates of Tyco, the right to purchase Shares
tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby (and any and all other Shares
or other securities or rights issued or issuable in respect thereof on or after
December 2, 1996) and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
any such other Shares or securities or rights), with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates representing such Shares (and any such
other Shares or securities or rights), or transfer ownership of such Shares (and
any such other Shares or securities or rights) on the account books maintained
by a Book-Entry Transfer Facility, together in either such case with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Purchaser upon receipt by the Depositary, as the undersigned's agent, of the
purchase price (adjusted, if appropriate, as provided in the Offer to Purchase),
(b) present such Shares (and any such other Shares or securities or rights) for
registration and transfer on the books of the Company, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby irrevocably appoints Mark H. Swartz and Barbara S.
Miller and each of them or any other designee of the Purchaser, the attorneys
and proxies of the undersigned, each with full power of substitution, to vote in
such manner as each such attorney and proxy or his substitute shall, in his sole
discretion, deem proper, and otherwise act (including pursuant to written
consent) with respect to all the Shares tendered hereby which have been accepted
for payment by the Purchaser prior to the time of such vote or action (and any
and all other Shares or securities or rights issued or issuable in respect
thereof on or after December 2, 1996), which the undersigned is entitled to vote
at any meeting of shareholders (whether annual or special and whether or not an
adjourned meeting) of the Company, or consent in lieu of any such meeting, or
otherwise. This proxy and power of attorney is coupled with an interest in the
Shares tendered hereby and is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Shares (and any such
other Shares or securities or rights) by the Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke all prior proxies
granted by the undersigned at any time with respect to such Shares (and any such
other Shares or securities or rights) and no subsequent proxies will be given
(and if given will be deemed not to be effective) with respect thereto by the
undersigned. The undersigned acknowledges that in order for Shares to be deemed
validly tendered, immediately upon the acceptance for payment of such Shares,
the Purchaser or the Purchaser's designee must be able to exercise full voting
and other rights of a record and beneficial holder with respect to such Shares.
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or securities or rights issued or issuable
in respect thereof on or after December 2, 1996) and that, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any such other Shares or securities or rights).
No authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated in
the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment (and accompanying
documents, as appropriate) to the registered holder(s) appearing under
"Description of Shares Tendered" at the address shown below such registered
holder(s) name(s). In the event that either or both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates representing
Shares not tendered or accepted for payment in the name(s) of, and deliver such
check and/or return such certificates to, the person or persons so indicated.
Shareholders tendering Shares by book entry transfer may request that any Shares
not accepted for payment be returned by crediting such account maintained at a
Book-Entry Transfer Facility as such shareholder may designate by making an
appropriate entry under "Special Payment Instructions." The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not accept for payment any of the Shares so
tendered hereby.
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates To be completed ONLY if certificates
representing Shares not tendered or not representing Shares not tendered or not
purchased and/or the check for the purchased and/or the check for the
purchase price of Shares purchased are purchase price of Shares purchased are
to be issued in the name of someone to be sent to someone other than the
other than the undersigned, or if undersigned, or to the undersigned at
Shares tendered by book-entry transfer an address other than that shown under
which are not purchased are to be "Description of Shares Tendered."
returned by credit to an account
maintained at a Book-Entry Transfer
Facility other than that account
designated above.
Issue: / / Check and/or Certificate(s) Issue: / / Check and/or Certificate(s)
to: to:
Name: Name:
(Please (Please Print)
Print) Address:
Address:
(Include Zip Code)
(Include Zip Code)
(Tax Identification or Social Security
No.)
/ / Credit unpurchased Shares tendered
by book-entry transfer to the
Book-Entry Transfer Facility
account set forth below.
Check appropriate box:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust
Company
(Account Number)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Signature(s) of Holder(s) of Shares
Dated: , 199
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s)
or on a security position listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of corporations or others
acting in a fiduciary or representative capacity, please set forth the full title and see
Instruction 5.)
Name(s)
(Please Print)
Capacity (full title)
Address
(Including Zip Code)
(Area Code and Telephone No.) (Tax Identification
or Social Security No.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY
PLACE MEDALLION GUARANTEE IN SPACE BELOW.
Authorized Signature(s)
Name
(Please Print)
Title
Name of Firm
Address
(Include Zip Code)
Area Code and Telephone Number
Dated: , 199
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal, or (ii) if such Shares are tendered for the account
of a firm that is a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (each being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by shareholders either if certificates
representing Shares are to be forwarded herewith to the Depositary or, unless an
Agent's Message (as defined below) is utilized, if tenders of Shares are to be
made pursuant to the procedures for delivery by book-entry transfer set forth in
Section 2 of the Offer to Purchase. Certificates representing all physically
tendered Shares, or any book-entry confirmation of Shares, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in connection
with a book-entry transfer, an Agent's Message, and any other documents required
by this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). If a shareholder's certificate(s)
representing Shares are not immediately available (or the procedure for the
book-entry transfer cannot be completed on a timely basis) or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date, such shareholder's Shares may nevertheless be tendered if the
procedures for guaranteed delivery set forth in Section 2 of the Offer to
Purchase are followed. Pursuant to such procedure, (i) such tender must be made
by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchaser, must be received by the Depositary on or prior to the Expiration
Date, and (iii) the certificates representing all tendered Shares, in proper
form for transfer, or Book-Entry Confirmation of Shares, as the case may be, in
each case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq Stock Market's National Market trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided in
Section 2 of the Offer to Purchase. The term "Agent's Message" means a message
transmitted through electronic means by a Book-Entry Transfer Facility to, and
received by, the Depositary and forming a part of a book-entry confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares that such participant has received, and agrees to be bound
by, this Letter of Transmittal.
The method of delivery of this Letter of Transmittal, the certificate(s)
representing Shares and all other required documents, including delivery through
a Book-Entry Transfer Facility, is at the option and sole risk of the tendering
shareholder. The delivery will be deemed made only when actually received by the
Depositary. If such delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to insure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/ or the number of Shares should be listed on a separate
signed schedule attached hereto.
<PAGE>
4. PARTIAL TENDERS (not applicable to shareholders who tender Shares by
book-entry transfer). If fewer than all the Shares represented by any
certificate submitted are to be tendered, fill in the number of Shares that are
to be tendered in the box entitled "Number of Shares Tendered." In such case,
new certificate(s) representing the remainder of the Shares that were
represented by the old certificate(s) will be sent to the registered holder(s),
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face(s) of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and tendered hereby, no endorsements of certificates or separate
stock powers are required, unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority so to act must be submitted.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution, unless the signature is that of an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates representing Shares not tendered or accepted for payment are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such other person) payable on
account of the transfer to such person will be deducted from the purchase price,
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
certificates representing Shares not tendered or accepted for payment are to be
issued in the name of a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Shareholders tendering Shares by book-entry
transfer may request that Shares not accepted for payment be credited to such
account maintained at a Book-Entry Transfer Facility as such shareholder may
designate hereon. If no such instructions are given, such Shares not accepted
for payment will be returned by crediting the account at the Book-Entry Transfer
Facility designated above.
<PAGE>
8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time and from time to time in the
Purchaser's sole discretion, in the case of any Shares tendered hereby.
10. SUBSTITUTE FORM W-9. The tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the shareholder's social security or federal employer's identification number,
on Substitute Form W-9, which is provided below, and to certify whether the
shareholder is subject to backup withholding of Federal income tax. If a
tendering shareholder is subject to backup withholding, the shareholder must
cross out item (2) of the Certification box of the Substitute Form W-9. Failure
to provide the information on the Substitute Form W-9 may subject the tendering
shareholder to 31% Federal income tax withholding on the payment of the purchase
price. If the tendering shareholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he or she
should write "Applied For" in the space provided for the TIN in Part I, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
11. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at the address set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent at the address set forth below or from your broker, dealer,
commercial bank or trust company.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof), together
with certificates representing Shares or confirmation of book-entry transfer and
all other required documents, or the Notice of Guaranteed Delivery, must be
received by the Depositary on or prior to the Expiration Date.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is
an individual, the TIN is his social security number. If a tendering shareholder
is subject to backup withholding, he must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not provided
with the correct TIN, the shareholder may be subject to a $50 penalty imposed by
the Internal Revenue Service ("IRS"). In addition, payments that are made to
such shareholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit to the Depositary a properly completed
IRS Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements may be obtained from the Depositary. Exempt
shareholders, other than foreign individuals, should furnish their TIN, write
"Exempt" on the face of the Substitute Form W-9 below, and sign, date and return
the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of his correct TIN by completing the
Substitute Form W-9 below certifying that the TIN provided on such form is
correct (or that such shareholder is awaiting a TIN) and that (i) such holder is
exempt from backup withholding, (ii) such holder has not been notified by the
IRS that he is subject to backup withholding as a result of a failure to report
all interest or dividends, or (iii) the IRS has notified such holder that he is
no longer subject to backup withholding (see Part II of Substitute Form W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report. If the tendering shareholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he should
write "Applied For" in the space provided for in the TIN in Part I, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
<PAGE>
<TABLE>
<S> <C> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN SOCIAL SECURITY NUMBER
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY SIGNING OR
AND DATING BELOW Employer identification
number
(If awaiting TIN write
"Applied For")
DEPARTMENT OF PART 2--For Payees exempt from backup withholding, see the enclosed
THE TREASURY Taxpayer Identification Number (TIN) Guidelines for Certification of
INTERNAL REVENUE Taxpayer Identification Number on Substitute Form W-9 and complete as
SERVICE instructed therein.
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or a Taxpayer Identification Number has not
been issued to me) and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service ("IRS") or Social Security
Administration office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not
provide a Taxpayer Identification Number within sixty (60) days,
31% of all reportable payments made to me thereafter will be
withheld until I provide a number; and
(2) I am not subject to backup withholding either because (a) I am
exempt from backup withholding, (b) I have not been notified by the
IRS that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you
PAYER'S REQUEST FOR have been notified by the IRS that you are subject to backup
TAXPAYER withholding because of underreporting interest or dividends on your
IDENTIFICATION tax return. However, if after being notified by the IRS that you were
NUMBER (TIN) subject to backup withholding, you received another notification from
the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed
Guidelines).
SIGNATURE DATE , 199
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
The Information Agent for the Offer is:
abcdef
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
<PAGE>
[Tyco Logo]
one tyco park
exeter, new hampshire
03833-1108
(603) 778-9700
NEWS
FOR IMMEDIATE RELEASE
Contact: Contact:
F.G. Lindsay Burton, Jr. David P. Brownell
Vice President and Chief Financial Officer Senior Vice President
ElectroStar, Inc. Tyco International Ltd.
(801) 753-4700 (603) 778-9700
TYCO INTERNATIONAL TO ACQUIRE ELECTROSTAR, INC.
Exeter, New Hampshire and Logan, Utah, November 29, 1996 -- Tyco
International Ltd. (NYSE-TYC), a diversified manufacturer of industrial and
commercial products, and ElectroStar, Inc. (NASDAQ-ESTR), a leading
manufacturer of complex printed circuit boards, jointly announced today that
they have entered into a definitive Merger Agreement under which Tyco would
purchase, for cash, all of the outstanding common shares of ElectroStar at a
price of $14 per share.
Under the Agreement, a subsidiary of Tyco will shortly commence a tender
offer to purchase all of ElectroStar's 7,537,097 shares of common stock for
$14 per share in cash, for a total of approximately $106 million. The tender
offer will be followed by a merger in which each of the remaining shares of
ElectroStar will be exchanged for $14 in cash.
The offer will be made pursuant to definitive offering documents to be
filed with the Securities and Exchange Commission. The offer is conditioned
on the tender of a majority of the outstanding shares of common stock on a
fully diluted basis, as well as certain other conditions.
"ElectroStar is an excellent fit with Tyco's printed circuit board
group. The two groups have complimentary products that will allow us to expand
into rapidly growing market segments and enlarge our mutual customer base.
Additionally, the ElectroStar acquisition strengthens our quick-turn service
capability," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive
Officer. Mr. Kozlowski also noted that the acquisition would provide an
immediate positive contribution to Tyco's earnings.
<PAGE>
Kent K. Alder, President and Chief Executive Officer of ElectroStar
stated, "We are excited about joining the Tyco family. We believe that this
offer is a superior value for our shareholders and an excellent opportunity
to continue our growth."
ElectroStar, with revenues over $70 million, is headquartered in Logan,
Utah. They operate two manufacturing facilities, one in Logan, Utah and
another in Inglewood, California. ElectroStar is a leading manufacturer of
complex printed circuit boards used in sophisticated electronic equipment.
ElectroStar is an affiliate of Trivest, Inc., a Miami, Florida based private
equity firm engaged in the acquisition and expansion of middle market
companies.
Tyco is a worldwide manufacturer with strong leadership positions in
disposable medical products, packaging materials, flow control products,
eletrical and electronic components and is the world's largest manufacturer
and installer of fire and safety systems and services. The Company operates
in more than 50 countries around the world and has revenues in excess of $6
billion.
412/112996
XXX
<PAGE>
ANNEX B
[ALEX. BROWN LET. HD]
November 27, 1996
ElectroStar, Inc.
710 North 600 West
Logan, Utah 84321
Dear Sirs:
ElectroStar, Inc. (the "Company"), Tyco International Ltd. ("Buyer") and T3
Acquisition Corp., a Florida Corporation and a wholly-owned subsidiary of Buyer
(the "Merger Sub"), intend to enter into an Agreement and Plan of Merger dated
as of November 27, 1996 (the "Agreement"). Pursuant to the Agreement, Merger Sub
will commence a tender offer to purchase all outstanding shares of the common
stock, $0.01 par value per share ("Common Stock"), of the Company at a price of
$14.00 per share, net to the seller in cash. The Agreement also provides that
following such tender offer, Merger Sub will be merged with and into the Company
(the "Merger"), and that each share of Common Stock, other than shares of Common
Stock owned directly or indirectly by Buyer or the Company, will be converted
into the right to receive $14.00 in cash. You have requested our opinion as to
whether the consideration to be received by the holders of Common Stock pursuant
to the Agreement (the "Consideration") is fair, from a financial point of view,
to such holders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We will receive a fee for rendering our opinion to the Board of
Directors. We were also the co-manager in the Company's December 1995 initial
public offering. Alex. Brown maintains a market in the Common Stock of the
Company and regularly publishes research reports regarding the printed circuit
board industry and the businesses and securities of the Company and other
publicly owned companies in the printed circuit board industry. In the ordinary
course of business, Alex. Brown may actively trade the securities of the Company
for our own account and the account of our customers and, accordingly, may at
any time hold a long or short position in securities of the Company.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning the Company and Buyer and
certain internal analyses and other information furnished to us by the Company.
We have also held discussions with the members of the senior management of the
Company regarding the business and prospects of the Company. In addition, we
have (i) reviewed the reported prices and trading activity for the common stock
of the Company, (ii) compared certain financial and stock market information for
the Company with similar information for certain other companies whose
securities are publicly traded, (iii) reviewed the financial terms of certain
recent business combinations, (iv) reviewed the terms of the Agreement and
certain related documents, and (v) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of the
Company, we have assumed that such information reflects the best currently
available judgments and estimates of the management of the Company as to the
likely future financial performance of the Company. In addition, we have not
made an independent evaluation or appraisal of the assets of the Company, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
based on market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
[ALEX. BROWN LET. HD.]
B-1
<PAGE>
In arriving at our opinion, we were not authorized to solicit on behalf of
the Company, and did not solicit on behalf of the Company, interest from any
party with respect to the acquisition of the Company or any of its assets, nor
did we have discussions or negotiate with Buyer in connection with the Merger.
We understand, however, that Trivest, Inc. on behalf of the Company, engaged in
a process pursuant to which a number of potential buyers have been contacted
regarding the potential sale of the Company.
We have been retained by the Board of Directors of the Company as financial
advisor solely for the purpose of rendering this opinion and accordingly, we
have not been requested to and have not provided any other services in
connection with the Merger.
Our opinion expressed herein was prepared for the use of the Board of
Directors of the Company and does not constitute a recommendation to the
Company's stockholders as to how they should vote with respect to the Merger. We
hereby consent, however, to the inclusion of this opinion as an exhibit to any
proxy statement distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Consideration is fair, from a financial point of view,
to the Company's stockholders.
Very truly yours,
[Alex. Brown & Sons sig cut]
ALEX. BROWN & SONS INCORPORATED
B-2
<PAGE>
[LETTERHEAD TO COME]
December 5, 1996
DEAR ELECTROSTAR SHAREHOLDER:
We are pleased to inform you that on November 27, 1996, ElectroStar, Inc.
("ElectroStar") entered into an agreement with Tyco International Ltd. ("Tyco")
and T3 Acquisition Corp., a wholly owned subsidiary of Tyco ("Purchaser"), which
provides for the acquisition of ElectroStar by means of a cash tender offer and
a subsequent merger.
As the first step of this acquisition, Purchaser is making a cash tender
offer for any and all outstanding shares of ElectroStar's common stock (the
"Shares") at a price of $14.00 per Share, net to the seller in cash. Subject to
certain conditions, Purchaser and ElectroStar will be merged subsequent to the
completion of the tender offer, and the remaining outstanding Shares will be
converted into the right to receive $14.00 per Share.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TENDER OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF ELECTROSTAR'S SHAREHOLDERS AND
RECOMMENDS THAT EVERY SHAREHOLDER OF THE COMPANY ACCEPT THE TENDER OFFER AND
TENDER HIS OR HER SHARES.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Recommendation/
Solicitation Statement on Schedule 14D-9 that is being filed today with the
Securities and Exchange Commission, including the opinion of Alex. Brown & Sons
Incorporated, the Company's financial advisor, to the effect that the
consideration to be received by the shareholders pursuant to the offer and the
merger is fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9, also enclosed with this letter
is the Purchaser's Offer to Purchase, dated December 5, 1996, together with
related materials, including a Letter of Transmittal to be used for tendering
your Shares. The Offer to Purchase and the Letter of Transmittal set forth in
detail the terms and conditions of the tender offer and provide instructions as
to how to tender your shares. I urge you to read the enclosed material
carefully.
If you desire assistance in completing the Letter of Transmittal or
tendering your Shares, please call MacKenzie Partners, Inc., the Information
Agent, collect at (212) 929-5500 or call toll-free at (800) 322-2885.
Very truly yours,
KENTON K. ALDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF MERGER
Among
Tyco International, Ltd.,
T3 Acquisition Corp.
and
ElectroStar, Inc.
Dated as of November 27, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER
SECTION 1.01. The Offer................................................. 2
SECTION 1.02. Company Actions........................................... 3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger................................................ 4
SECTION 2.02. Closing................................................... 4
SECTION 2.03. Effective Time............................................ 4
SECTION 2.04. Effects of the Merger..................................... 4
SECTION 2.05. Articles of Incorporation and By-laws..................... 4
SECTION 2.06. Directors................................................. 5
SECTION 2.07. Officers.................................................. 5
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.01. Effect on Capital Stock................................... 5
SECTION 3.02. Exchange of Certificates.................................. 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization.............................................. 7
SECTION 4.02. Subsidiaries.............................................. 7
SECTION 4.03. Capitalization............................................ 7
SECTION 4.04. Authority................................................. 8
SECTION 4.05. Consents and Approvals; No Violations..................... 8
SECTION 4.06. SEC Reports and Financial Statements...................... 9
SECTION 4.07. Absence of Certain Changes or Events...................... 9
SECTION 4.08. No Undisclosed Liabilities................................ 10
SECTION 4.09. Information Supplied...................................... 10
SECTION 4.10. Benefit Plans............................................. 10
SECTION 4.11. Other Compensation Arrangements........................... 11
SECTION 4.12. Litigation................................................ 11
SECTION 4.13. Permits; Compliance with Law.............................. 11
SECTION 4.14. Tax Matters............................................... 12
SECTION 4.15. State Takeover Statutes................................... 13
SECTION 4.16. Brokers; Fees and Expenses................................ 13
SECTION 4.17. Intellectual Property..................................... 14
SECTION 4.18. Vote Required............................................. 14
SECTION 4.19. Labor Matters............................................. 15
(i)
<PAGE>
SECTION 4.20. Title to Property......................................... 15
SECTION 4.21. Environmental Matters..................................... 15
SECTION 4.22. Accounts Receivable....................................... 16
SECTION 4.23 Customers................................................. 16
SECTION 4.24 Interested Party Transactions............................. 16
SECTION 4.25 Absence of Certain Payments............................... 16
SECTION 4.26 Insurance................................................. 16
SECTION 4.27 Product Liability and Recalls............................. 16
SECTION 4.28 Inventory................................................. 17
SECTION 4.29 Full Disclosure........................................... 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 5.01. Organization.............................................. 17
SECTION 5.02. Authority................................................. 17
SECTION 5.03. Consents and Approvals; No Violations..................... 18
SECTION 5.04. Information Supplied...................................... 18
SECTION 5.05. Interim Operations of Sub................................. 18
SECTION 5.06. Brokers................................................... 18
SECTION 5.07. Financing................................................. 18
SECTION 5.08. Board Determination....................................... 18
SECTION 5.09. Full Disclosure........................................... 19
ARTICLE VI
COVENANTS
SECTION 6.01. Covenants of the Company.................................. 19
SECTION 6.02. No Solicitation........................................... 21
SECTION 6.03. Other Actions............................................. 22
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Shareholder Approval; Preparation of Proxy Statement...... 23
SECTION 7.02. Access to Information..................................... 23
SECTION 7.03. Reasonable Efforts........................................ 23
SECTION 7.04. Company Stock Options; Plans.............................. 24
SECTION 7.05. Directors................................................. 24
SECTION 7.06. Fees and Expenses......................................... 25
SECTION 7.07. Indemnification; Insurance................................ 25
SECTION 7.08 Employment and Benefit Arrangements....................... 25
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Each Party's Obligation To
Effect the Merger...................................... 26
ARTICLE IX
(ii)
<PAGE>
TERMINATION AND AMENDMENT
SECTION 9.01. Termination............................................... 26
SECTION 9.02. Effect of Termination..................................... 28
SECTION 9.03. Amendment................................................. 28
SECTION 9.04. Extension; Waiver......................................... 28
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Nonsurvival of Representations and Warranties............. 28
SECTION 10.02. Notices................................................... 28
SECTION 10.03. Interpretation............................................ 29
SECTION 10.04. Counterparts.............................................. 30
SECTION 10.05. Entire Agreement; Third Party Beneficiaries............... 30
SECTION 10.06. Governing Law............................................. 30
SECTION 10.07. Publicity................................................. 30
SECTION 10.08. Assignment................................................ 30
SECTION 10.09. Enforcement............................................... 30
Exhibit A - Conditions of the Offer
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of November
27, 1996, among Tyco International, Ltd., a Massachusetts corporation
("PARENT"), T3 Acquisition Corp., a Florida corporation and a wholly owned
subsidiary of Parent ("SUB"), and ElectroStar, Inc., a Florida corporation
(the "COMPANY").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "OFFER") to purchase all the outstanding shares of
Common Stock, par value $0.01 per share, of the Company (the "COMPANY COMMON
STOCK"; the outstanding shares of Company Common Stock being hereinafter
collectively referred to as the "SHARES") at a purchase price of $14.00 per
share (the "OFFER PRICE"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this
Agreement; and the Board of Directors of the Company has adopted resolutions
approving the Offer and the Merger (as defined below), recommending that the
Company's shareholders accept the Offer and approving the acquisition of
Shares by Sub pursuant to the Offer and the Shareholder Agreement (as defined
below); and
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have each approved the merger of Sub into the Company (the "MERGER"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each share of Company Common Stock, other than shares of Company Common Stock
owned directly or indirectly by Parent or the Company, will be converted into
the right to receive the price per share paid in the Offer; and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Sub and certain
shareholders of the Company are entering into a Shareholder Agreement (the
"SHAREHOLDER AGREEMENT") pursuant to which (i) if necessary to validly tender
shares in the Offer, the sole holder of the Company's outstanding shares of
Class B non-voting common stock, par value $0.01 per share (the "CLASS B
COMMON STOCK"), has agreed to convert such shares into shares of Company
Common Stock, and (ii) each of such holder and certain other shareholders
have, among other things, agreed to tender all of its Shares in the Offer,
upon the terms and subject to the conditions set forth in the Shareholder
Agreement; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub and the Company hereby agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER.
(a) Subject to the provisions of this Agreement, as promptly as
practicable but in no event later than five business days after the date of
the public announcement by Parent and the Company of this Agreement, Sub
shall, and Parent shall cause Sub to, commence the Offer. The obligation of
Sub to, and of Parent to cause Sub to, commence the Offer and accept for
payment, and pay for, any Shares tendered pursuant to the Offer shall be
subject only to those conditions set forth in Exhibit A (the "OFFER
CONDITIONS") (any of which may be waived in whole or in part by Sub in its
sole discretion, provided that, without the consent of the Company, Sub shall
not waive the Minimum Condition (as defined in Exhibit A)) and to the terms
and conditions of this Agreement. The initial scheduled expiration date of
the Offer shall be 20 business days after the Offer is commenced. Sub
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Sub shall not (and Parent shall not cause
Sub to) (i) reduce the number of Shares subject to the Offer, (ii) reduce the
Offer Price, (iii) add to the Offer Conditions, (iv) except as provided in
the next sentence, extend the expiration date of the Offer, (v) change the
form of consideration payable in the Offer or (vi) amend any other term of
the Offer in any manner adverse to the holders of the Shares. Notwithstanding
the foregoing, Sub may, without the consent of the Company, (A) extend the
Offer, if at the scheduled or extended expiration date of the Offer any of
the Offer Conditions shall not be satisfied or waived, until such time as
such conditions are satisfied or waived (PROVIDED, HOWEVER, that the
expiration date may not be extended beyond January 31, 1997 without the
consent of the Company), (B) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer, or (C)
if all Offer Conditions are satisfied or waived but the number of shares of
Common Stock tendered is less than 80% of the then outstanding number of
shares of Company Common Stock (determined on a fully diluted basis for all
outstanding stock options, Class B Common Stock and any other rights to
acquire Shares), extend the Offer for an aggregate period of not more than 10
business days (for all such extensions) beyond the latest expiration date
that would be permitted under clause (A) or (B) of this sentence. Subject to
the terms and conditions of the Offer and this Agreement, Sub shall, and
Parent shall cause Sub to, accept for payment, and pay for, all Shares
validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to accept for payment, and pay for, pursuant to the Offer as soon
as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1") with respect to the Offer, which shall contain an offer to purchase
and a related letter of transmittal and summary advertisement (such Schedule
14D-1 and the documents included therein pursuant to which the Offer will be
made, together with any supplements or amendments thereto, the "OFFER
DOCUMENTS"). Parent and Sub agree that the Offer Documents shall comply as to
form in all material respects with the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and the rules and regulations promulgated
thereunder and the Offer Documents, on the date first published, sent or
given to the Company's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by Parent or Sub with respect to
information supplied by the Company or any of its shareholders specifically
for inclusion or incorporation by reference in the Offer Documents. Parent,
Sub and the Company each agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect,
and Parent and Sub further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each
case as and to the extent required by applicable Federal securities laws.
The Company and its counsel shall be given reasonable opportunity to review
and comment upon the Offer Documents prior to their filing with
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the SEC or dissemination to the shareholders of the Company. Parent and Sub
agree to provide the Company and its counsel in writing any comments Parent,
Sub or their counsel may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Shares that
Sub becomes obligated to accept for payment, and pay for, pursuant to the
Offer.
SECTION 1.02. COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly
called and held, duly and unanimously adopted resolutions (i) approving this
Agreement, the Offer and the Merger (and such approval is sufficient to
render inapplicable the provisions of Sections 607.0901 and 607.0902 of the
Florida Business Corporations Act (the "CORPORATION LAW")), (ii) determining
that the terms of the Offer and the Merger are fair, from a financial point
of view, to, and in the best interests of, the Company's shareholders, and
(iii) recommending that the Company's shareholders accept the Offer, tender
their shares pursuant to the Offer and approve and adopt this Agreement. The
Company represents that its Board of Directors has received the opinion of
Alex. Brown & Sons Incorporated that the proposed consideration to be
received by the holders of Shares pursuant to the Offer and the Merger is
fair, from a financial point of view, to such holders, and a complete and
correct signed copy of such opinion has been delivered by the Company to
Parent.
(b) On the date the Offer Documents are filed with the SEC, or promptly
thereafter, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9,
as amended from time to time, the "SCHEDULE 14D-9") containing the
recommendation described in paragraph (a) and shall mail the Schedule 14D-9
to the shareholders of the Company. The Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied by
Parent or Sub specifically for inclusion in the Schedule 14D-9. Each of the
Company, Parent and Sub agrees promptly to correct any information provided
by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended
or supplemented to be filed with the SEC and disseminated to the Company's
shareholders, in each case as and to the extent required by applicable
Federal securities laws. Parent and its counsel shall be given reasonable
opportunity to review and comment upon the Schedule 14D-9 prior to its filing
with the SEC or dissemination to shareholders of the Company. The Company
agrees to provide Parent and its counsel in writing any comments the Company
or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall cause
its transfer agent to furnish Sub promptly with mailing labels containing the
names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together
with copies of all lists of shareholders, security position listings and
computer files and all other information in the Company's possession or
control regarding the beneficial owners of Shares, and shall furnish to Sub
such information and assistance (including updated lists of shareholders,
security position listings and computer files) as Parent may reasonably
request in communicating the Offer to the Company's shareholders. Subject to
the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents
necessary to consummate the
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Merger, Parent and Sub and their agents shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver, and will use
their best efforts to cause their agents to deliver, to the Company all
copies of such information then in their possession or control.
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Corporation Law, Sub
shall be merged with and into the Company at the Effective Time (as defined
in Section 2.03). Following the Effective Time, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the Corporation Law. At
the election of Parent, any direct or indirect wholly owned subsidiary (as
defined in Section 10.03) of Parent may be substituted for Sub as a
constituent corporation in the Merger. In such event, the parties agree to
execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 2.02. CLOSING. The closing of the Merger will take place at
10:00 a.m. (New York time) on a date to be specified by Parent or Sub, which
shall be no later than the second business day after satisfaction or waiver
of the conditions set forth in Article VIII (the "CLOSING DATE"), at the
offices of Kramer, Levin, Naftalis & Frankel, counsel to Parent, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 2.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any
such case, the "CERTIFICATE OF MERGER") executed in accordance with the
relevant provisions of the Corporation Law and shall make all other filings
or recordings required under the Corporation Law. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Florida Secretary of State, or at such other time as Sub and the Company
shall agree should be specified in the Certificate of Merger (the time the
Merger becomes effective being hereinafter referred to as the "EFFECTIVE
TIME").
SECTION 2.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the Corporation Law.
SECTION 2.05. ARTICLES OF INCORPORATION AND BY-LAWS.
(a) The Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law; except (A) that Article III
thereof shall be amended and restated to provide in its entirety that the
number of shares of capital stock that the Surviving Corporation shall be
authorized to issue shall consist of 1,000 shares of common stock, (B)
Article V thereof shall be amended and restated to provide in its entirety
that the Surviving Corporation's Board shall consist of not less than three
nor more than eleven members, with the exact number to be fixed from time to
time by resolution of the Board, and (C) Article VIII thereof shall be
eliminated.
(b) The by-laws of the Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
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SECTION 2.06. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. OFFICERS. The officers of the Company immediately prior
to the Effective Time and such other persons as Parent shall designate shall
be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF PARENT OWNED STOCK. Each share of Company Common
Stock that is owned by Parent, Sub or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) CANCELLATION OF COMPANY OWNED STOCK. All Shares (as hereinafter
defined) that are held in the treasury of the Company or by any wholly owned
subsidiary of the Company and any Shares owned by Parent, Sub or any other
wholly owned subsidiary of Parent shall be cancelled and no consideration
shall be delivered in exchange therefor.
(d) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 3.01(e),
each Share (and each share of Class B Common Stock, if any shall be
outstanding, which, for purposes of this Article III, shall be included in
the term "Shares") issued and outstanding (other than Shares to be canceled
in accordance with Section 3.01(b)) shall be converted into the right to
receive from the Surviving Corporation in cash, without interest, the price
paid in the Offer (the "MERGER CONSIDERATION"). As of the Effective Time, all
such Shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration,
without interest.
(e) SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a person
(a "DISSENTING SHAREHOLDER") who objects to the Merger and complies with all
the provisions of Florida law concerning the right of holders of Company
Common Stock to dissent from the Merger and require appraisal of their Shares
("DISSENTING SHARES") shall not be converted as described in Section 3.01(c)
but shall become the right to receive such consideration as may be determined
to be due to such Dissenting Shareholder pursuant to the laws of the State of
Florida. If, after the Effective Time, such Dissenting Shareholder withdraws
his demand for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the Corporation Law, his Shares shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice of any
demands for appraisal of Shares received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect
to any such demands.
SECTION 3.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as paying agent in the Merger (the "PAYING
AGENT"), and, from time to time on, prior to or after the Effective Time,
Parent shall make available, or cause the Surviving Corporation to make
available, to the Paying Agent funds in amounts and at the times necessary
for the payment of the Merger Consideration upon surrender of certificates
representing Shares as part of the Merger pursuant to Section 3.01 (it being
understood that any and all interest earned on funds made available to the
Paying Agent pursuant to this Agreement shall be turned over to Parent).
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Shares (the "CERTIFICATES"), (i) a letter of transmittal (which
shall specify
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that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
Shares theretofore represented by such Certificate shall have been converted
pursuant to Section 3.01, and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 3.02, each
Certificate (other than Certificates representing Dissenting Shares) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which
the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 3.01. No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate. In the event any
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the payment of the Merger
Consideration in respect of the shares represented by such Certificate,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against Parent, the Surviving Corporation or the Paying
Agent.
(c) No FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash paid
upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
At the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article III.
(d) NO LIABILITY. At any time following the expiration of six months
after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to any applicable abandoned property, escheat or similar law) only as
general creditors thereof with respect to the Merger Consideration payable
upon due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, none of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.01. ORGANIZATION. The Company and each of its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority could not be reasonably expected to (i) prevent or
materially delay the consummation of the Offer and/or the Merger or (ii) have
a material adverse effect (as defined in Section 10.03) on the Company. The
Company and each of its subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
could not reasonably be expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or
the Merger. The Company has made available to Parent complete and correct
copies of its Articles of Incorporation and By-laws and the certificates of
incorporation and by-laws (or similar organizational documents) of its
subsidiaries.
SECTION 4.02. SUBSIDIARIES. The only subsidiaries of the Company are
Electro-Etch Circuits, Inc., a California and Lundahl Astro Circuits, Inc., a
Utah corporation (the "Subsidiaries"). All the outstanding shares of capital
stock of each such subsidiary are owned by the Company, by another wholly
owned subsidiary of the Company or by the Company and another wholly owned
subsidiary of the Company, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "LIENS"), except for a first priority lien granted to Heller
Financial, Inc. upon the capital stock of the Subsidiaries pursuant to a
Credit Agreement dated as of January 31, 1996, and are duly authorized,
validly issued, fully paid and nonassessable. Except for the capital stock of
its subsidiaries and the Company's ownership interest in certain incidental
investments (the aggregate book value of which do not exceed $5,000), the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 21,782,934 shares of Company Common Stock, 782,934 shares
of Class B Common Stock and 1,000,000 shares of preferred stock, par value
$0.01 per share ("COMPANY PREFERRED STOCK"). At the close of business on
November 20, 1996, 1996, (i) 6,916,360 shares of Company Common Stock were
issued and outstanding, (ii) 620,737 shares of Class B Common Stock were
issued and outstanding, (iii) 499,129 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding Company Stock Options (as
defined in Section 7.04), and (iv) no shares of Company Preferred Stock were
issued and outstanding. Except as set forth above, and except for shares
issued upon the exercise of Company Stock Options since November 20, 1996, as
of the date of this Agreement, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
All outstanding shares of capital stock of the Company are, and all shares
which may be issued will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. There are
no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, as of the date of this Agreement, there are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
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securities of the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are not
any outstanding contractual obligations (i) of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or (ii) of the Company to vote or to dispose of any
shares of the capital stock of any of its subsidiaries. Except as set forth
in Section 4.03 of the disclosure schedule annexed hereto (the "DISCLOSURE
SCHEDULE"), there are no restrictions on the right of the Company to vote or
dispose of any shares of the capital stock of its subsidiaries.
SECTION 4.04. AUTHORITY. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the terms of this Agreement by the holders of a
majority of the Shares (the "COMPANY SHAREHOLDER APPROVAL")). The execution,
delivery and performance of this Agreement and the consummation by the Company
of the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated (in
each case, other than, with respect to the Merger, the Company Shareholder
Approval). This Agreement has been duly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding obligation of
Parent and Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally.
SECTION 4.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Schedule 14D-9 and a proxy statement relating to
any required approval by the Company's shareholders of this Agreement (the
"PROXY STATEMENT")), the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), and Sections 607.1103 - 607.1105 of the
Corporation Law, neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Articles of Incorporation or By-laws of the
Company or of the similar organizational documents of any of its subsidiaries,
(ii) require any filing with, or permit, authorization, consent or approval
of, any Federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "GOVERNMENTAL
ENTITY") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings could not reasonably be expected
to have a material adverse effect on the Company or prevent or materially
delay the consummation of the Offer and/or the Merger), (iii) except as set
forth in Section 4.05 of the Disclosure Schedule, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation
or acceleration) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound; PROVIDED, HOWEVER, that certain contracts and agreements, the material
ones of which are listed in Section 4.05 of the Disclosure Schedule, (A)
provide for their termination upon a change of control of the Company or (B)
contain provisions restricting their assignment, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its subsidiaries or any of their properties or assets, except
in the case of clauses (iii) or (iv) for violations, breaches or defaults that
could not reasonably be expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or
the Merger.
SECTION 4.06. SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the SEC, and has heretofore made available to Parent true and
complete copies of, all forms, reports,
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schedules, statements and other documents (other than preliminary materials)
required to be filed by it under the Exchange Act or the Securities Act of
1933 (the "SECURITIES ACT") from and after December 1, 1995 (such forms,
reports, schedules, statements and other documents, including any financial
statements or schedules included therein, are referred to as the "COMPANY SEC
DOCUMENTS"). The Company SEC Documents, at the time filed, (a) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. Except to
the extent revised or superseded by a subsequently filed Company SEC
Document, the Company SEC Documents do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X promulgated by the SEC) and fairly present (subject, in the
case of the unaudited statements, to normal, recurring audit adjustments,
none of which will be material) the consolidated financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. None of the Company's subsidiaries is required to file any forms,
reports, schedules, statements or other documents with the SEC.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Company SEC Documents, as contemplated by Section 7.04 or as set forth
in Section 4.07 of the Disclosure Schedule, since September 30, 1996, the
Company and its subsidiaries have conducted their respective businesses only
in the ordinary course consistent with past practice, and there has not been
any material adverse change (as defined in Section 10.03) with respect to the
Company. Except as disclosed in the Company SEC Documents, as contemplated by
Section 7.04 or as set forth in Section 4.07 of the Disclosure Schedule, since
September 30, 1996, there has not been (i) any declaration, setting aside or
payment of any dividend or other distribution with respect to the Company's
capital stock or any redemption, purchase or other acquisition of any of its
capital stock, (ii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (iii) any material change in accounting methods,
principles or practices by the Company, (iv) (w) any granting by the Company
or any of its subsidiaries to any executive officer of the Company or any of
its subsidiaries of any increase in compensation, except in the ordinary
course of business (including in connection with promotions) consistent with
past practice or as was required under employment agreements in effect as of
September 30, 1996, (x) any granting by the Company or any of its subsidiaries
to any such officer of any increase in severance or termination pay, except as
part of a standard employment package to any person promoted or hired, or as
was required under employment, severance or termination agreements in effect
as of September 30, 1996, (y) except employment arrangements in the ordinary
course of business consistent with past practice with employees other than any
executive officer of the Company, any entry by the Company or any of its
subsidiaries into any employment, severance or termination agreement with any
such employee or executive officer or (z) except as contemplated by Section
7.04, any increase in or establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit-sharing, stock option (including the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards or the amendment of any existing stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, (v) any
damage, destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a material adverse effect on the Company,
(vi) any amendments or changes in the Articles of Incorporation or Bylaws of
the Company, (vii) any material revaluation by the Company of any of its
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assets, including writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business, or (viii)
any other action or event that would have required the consent of Parent
pursuant to Section 6.01 had such action or event occurred after the date of
this Agreement.
SECTION 4.08. NO UNDISCLOSED LIABILITIES. Except as and to the extent
set forth in the Company SEC Documents or in Section 4.08 of the Disclosure
Schedule, as of September 30, 1996, neither the Company nor any of its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its subsidiaries (including the notes thereto). Since September
30, 1996, except as and to the extent set forth in the Company SEC Documents
or in Section 4.08 of the Disclosure Schedule and except for liabilities or
obligations incurred in the ordinary course of business consistent with past
practice, neither the Company nor any of its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
that could be reasonably expected to have a material adverse effect on the
Company, or would be required by generally accepted accounting principles to
be reflected on a consolidated balance sheet of the Company and its
subsidiaries (including the notes thereto).
SECTION 4.09. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant
to Rule 14f-1 promulgated under the Exchange Act (the "INFORMATION STATEMENT")
or (iv) the Proxy Statement, will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the respective times the
Offer Documents, the Schedule 14D-9 and the Information Statement are filed
with the SEC or first published, sent or given to the Company's shareholders,
or, in the case of the Proxy Statement (if applicable), at the time the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders Meeting (as defined in Section 7.01), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Schedule
14D-9, the Information Statement and the Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation or
warranty is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent or
Sub specifically for inclusion or incorporation by reference therein.
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SECTION 4.10. BENEFIT PLANS.
(a) Except as set forth in Section 4.10 of the Disclosure Schedule, each
"employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (a "PENSION
PLAN"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
(a "WELFARE PLAN") and each other plan, arrangement or policy (written or
oral) relating to stock options, stock purchases, compensation, deferred
compensation, bonuses, severance, fringe benefits or other employee benefits,
in each case maintained or contributed to, or required to be maintained or
contributed to, by the Company or its subsidiaries for the benefit of any
present or former employee, officer or director (each of the foregoing, a
"BENEFIT PLAN") has been administered in all material respects in accordance
with its terms. The Company and its subsidiaries and all the Benefit Plans
are in compliance in all material respects with the applicable provisions of
ERISA, the Internal Revenue Code of 1986, as amended (the "CODE"), all other
applicable laws and all applicable collective bargaining agreements. Section
4.10 of the Disclosure Schedule sets forth a list of all material Benefit
Plans. Except as set forth in Section 4.10(a) of the Disclosure Schedule,
none of the Welfare Plans promises or provides retiree medical or other
retiree welfare benefits to any person. To the knowledge of the Company, no
fiduciary of a Benefit Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, which breach
would reasonably be expected to result in any material liability to the
Company. Each Benefit Plan intended to qualify under section 401(a) of the
Code and each trust intended to qualify under section 501(a) of the Code is
the subject of a favorable determination letter from the IRS, and nothing has
occurred which would reasonably be expected to impair such determination. All
contributions required to be made with respect to any Benefit Plan pursuant to
the terms of the Benefit Plan or any collective bargaining agreement, have
been made on or before their due dates.
(b) None of the Pension Plans is subject to Title IV of ERISA and none
of the Company or any other person or entity that, together with the Company,
is or was treated as a single employer under Section 414 of the Code or
pursuant to Title IV of ERISA (each, including the Company, a "COMMONLY
CONTROLLED ENTITY") has any liability under Title IV of ERISA (whether actual
or contingent) with respect to a Pension Plan, or to any other employee
pension benefit plan that is or was maintained, contributed to or required to
be contributed to by a Commonly Controlled Entity (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation
(other than for payment of premiums not yet due), which liability has not been
fully paid.
(c) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid or as to which a commonly controlled
entity would have liability pursuant to Section 4212(c) of ERISA.
(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without material liability to
the Company or its subsidiaries.
SECTION 4.11. OTHER COMPENSATION ARRANGEMENTS. Except as disclosed in
the Company SEC Documents or in Section 4.11 of the Disclosure Schedule, and
except as provided in this Agreement, as of the date of this Agreement,
neither the Company nor any of its subsidiaries is a party to any oral or
written (i) consulting agreement not terminable on not more than 60 calendar
days notice and involving the payment of more than $100,000 per annum, (ii)
agreement with any executive officer or other key employee of the Company or
any of its subsidiaries (x) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction
involving the Company of the nature contemplated by this Agreement or (y)
providing any term of employment or compensation guarantee extending for a
period longer than two years or the payment of more than $100,000 per year or
(iii) agreement or plan, including any stock option plan, stock appreciation
right plan, restricted stock
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plan or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
SECTION 4.12. LITIGATION. Except as disclosed in the Company SEC
Documents or Section 4.12 of the Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending before any Governmental Entity or,
to the best knowledge of the Company, threatened against the Company or any of
its subsidiaries that could reasonably be expected to have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger. Except as disclosed in the Company SEC Documents or
Section 4.12 of the Disclosure Schedule, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
that could reasonably be expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or
the Merger.
SECTION 4.13. PERMITS; COMPLIANCE WITH LAW. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "COMPANY PERMITS"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals that
could not reasonably be expected to have a material adverse effect on the
Company. The Company and its subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply could not
reasonably be expected to have a material adverse effect on the Company.
Except as disclosed in the Company SEC Documents or in the Disclosure
Schedule, the businesses of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for violations that could not reasonably be expected to have a
material adverse effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect
to the Company or any of its subsidiaries is pending or, to the best knowledge
of the Company, threatened, nor has any Governmental Entity indicated an
intention to conduct any such investigation or review, other than, in each
case, those the outcome of which could not be reasonably expected to have a
material adverse effect on the Company or prevent or materially delay the
consummation of the Offer and/or the Merger.
SECTION 4.14. TAX MATTERS.
(a) The Company and each of its subsidiaries has filed all Federal
income tax returns and all other material tax returns and reports required to
be filed by it. All such returns are complete and correct in all material
respects (except to the extent a reserve has been established on the most
recent financial statements contained in the Company SEC Documents (the "MOST
RECENT FINANCIAL STATEMENTS")). Each of the Company and each of its
subsidiaries has paid (or the Company has paid on its subsidiaries' behalf)
all taxes required to be paid by it (without regard to whether a tax return is
required or to the amount shown on any tax return), except taxes for which an
adequate reserve has been established on the Most Recent Financial Statements.
The Most Recent Financial Statements reflect an adequate reserve for all taxes
payable by the Company and its subsidiaries for all taxable periods and
portions thereof through the date of such financial statements.
(b) Except as set forth in Section 4.14 of the Disclosure Schedule, no
material tax return of the Company or any of its subsidiaries is under audit
or examination by any taxing authority, and no written or unwritten notice of
such an audit or examination has been received by the Company or any of its
subsidiaries. Each material deficiency resulting from any audit or
examination relating to taxes by any taxing authority has been paid, except
for deficiencies being contested in good faith. No material issues relating
to taxes were raised in writing by the relevant taxing authority during any
presently pending audit or examination, and no material issues relating to
taxes were raised in writing by the relevant taxing authority in any completed
audit or examination that can reasonably be expected to recur in a later
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taxable period. The Federal income tax returns of the Company and each of
its subsidiaries consolidated in such returns have not been examined by and
settled with the Internal Revenue Service.
(c) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes and
no power of attorney with respect to any taxes has been executed or filed with
any taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for liens for
taxes not yet due.
(e) None of the Company or any of its subsidiaries is liable for taxes
of any other person (other than taxes of the Company and its subsidiaries) or
is a party to or is bound by any tax sharing agreement, tax indemnity
obligation or similar agreement, arrangement or practice with respect to taxes
(including any advance pricing agreement, closing agreement or other agreement
relating to taxes with any taxing authority).
(f) None of the Company or any of its subsidiaries shall be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method
of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of
the Code or comparable provisions of state, local or foreign tax law.
(g) As used in this Agreement, "TAXES" shall include all Federal, state,
local and foreign income, property, sales, excise, withholding and other
taxes, tariffs or governmental charges of any nature whatsoever, together with
all interest, penalties and additions imposed with respect to such amounts.
(h) Neither the Company nor, to the best knowledge of the Company, any
of its subsidiaries has filed a consent pursuant to or agreed to the
application of Section 341(f) of the Code.
(i) The Company is not a "United States real property holding company"
as defined in Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(j) Neither the Company nor any of its subsidiaries is a party to any
joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes.
(k) Neither the Company nor any of this subsidiaries has entered into
any sale leaseback or any leveraged lease transaction that fails to satisfy
the requirements of Revenue Procedure 75-21 (or similar provisions of foreign
law).
(l) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that would result (taking into
account the transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(m) Except as set forth in Section 4.14 of the Disclosure Schedule,
neither the Company nor any of its subsidiaries has ever been a Subchapter S
corporation (as defined in Section 1361 (a)(1) of the Code).
(n) All material elections with respect to taxes affecting the Company
and its subsidiaries are disclosed or attached to the Company's tax returns.
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(o) There are no private letter rulings in respect of any tax pending
between the Company or its subsidiaries and any taxing authority.
SECTION 4.15. STATE TAKEOVER STATUTES. The Board of Directors of the
Company has approved the Offer, the Merger, this Agreement and the acquisition
of Shares by Sub pursuant to the Offer and the Shareholder Agreement and such
approval is sufficient to render inapplicable to the Offer, the Merger, this
Agreement and the Shareholder Agreement and the transactions contemplated by
this Agreement and the Shareholder Agreement the provisions of Sections
607.0901 and 607.0902 of the Corporation Law. To the best knowledge of the
Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Offer, the Merger, this Agreement, the
Shareholder Agreement or any of the transactions contemplated by this
Agreement.
SECTION 4.16. BROKERS; FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Alex. Brown & Sons Incorporated
and Trivest II, Inc., the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
The Company has furnished to Parent true and complete copies of all written
agreements or arrangements, and reduced to writing and furnished to Parent the
terms of all unwritten agreements or arrangements, providing for any such
broker's, finder's financial advisor's or similar fee or commission between
the Company and either of Alex. Brown & Sons Incorporated and Trivest II, Inc.
SECTION 4.17. INTELLECTUAL PROPERTY.
(a) Except to the extent that the inaccuracy of any of the following (or
the circumstances giving rise to such inaccuracy) could not reasonably be
expected to have a material adverse effect on the Company:
(1) the Company and each of its subsidiaries owns, or is licensed
or otherwise has the legally enforceable right to use (in each case,
clear of any liens or encumbrances of any kind), all Intellectual
Property used in or necessary for the conduct of its business as
currently conducted;
(2) no claims are pending or, to the best knowledge of the Company,
threatened that the Company or any of its subsidiaries is infringing on
or otherwise violating the rights of any person with regard to any
Intellectual Property used by, owned by and/or licensed to the Company or
its subsidiaries and, to the best knowledge of the Company, there are no
valid grounds for any such claims;
(3) to the best knowledge of the Company, no person is infringing
on or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by and/or
licensed to the Company or its subsidiaries.
(4) to the best knowledge of the Company, there are no valid
grounds for any claim challenging the ownership or validity of any
Intellectual Property owned by the Company or any of its subsidiaries or
challenging the Company's or any of its subsidiaries' license or legally
enforceable right to use any Intellectual Property licensed by it; and
(5) to the best knowledge of the Company, all patents, registered
trademarks, service marks and copyrights held by the Company and each of
its subsidiaries are valid and subsisting.
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(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY" means
trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of
any such registration or application; inventions, discoveries and ideas,
whether patented, patentable or not in any jurisdiction; trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works, whether
copyrighted, copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or
proprietary rights and computer programs and software (including source code,
object code and data); licenses, immunities, covenants not to sue and the like
relating to the foregoing; and any claims or causes of action arising out of
or related to any infringement or misappropriation of any of the foregoing.
SECTION 4.18. VOTE REQUIRED. In the event that Section 607.1104 of the
Corporation Law is inapplicable and unavailable to effectuate the Merger, the
affirmative vote of the holders of a majority of the outstanding shares of
Company Stock is the only vote of the holders of any class of capital stock
necessary to approve this Agreement and the Merger.
SECTION 4.19. LABOR MATTERS. Except as set forth in Section 4.19 of the
Disclosure Schedule or the Company SEC Documents, (i) there are no
controversies pending or, to the knowledge of the Company or any of its
subsidiaries, threatened, between the Company or any of its subsidiaries and
any of their respective employees, which controversies have had, or could
reasonably be expected to have, a material adverse effect; (ii) neither the
Company nor any of its subsidiaries is a party to any material collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or its subsidiaries, nor does the Company or any of
its subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither the Company nor any of its
subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of the
Company or any of its subsidiaries which could reasonably be expected to have
a material adverse effect.
SECTION 4.20. TITLE TO PROPERTY. Except as set forth in Section 4.20 of
the Disclosure Schedule, the Company and each of its subsidiaries have good
and defensible title to all of their properties and assets, free and clear of
all liens, charges and encumbrances, except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which could not reasonably be expected to have a
material adverse effect; and, to the knowledge of the Company, all leases
pursuant to which the Company or any of its subsidiaries lease from others
material amounts of real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default), except where the lack of such good
standing, validity and effectiveness or the existence of such default or event
of default could not reasonably be expected to have a material adverse effect.
SECTION 4.21. ENVIRONMENTAL MATTERS. Except as set forth in Section
4.21 of the Disclosure Schedule or the Company SEC Documents, and except in
all cases as have not had and could not reasonably be expected to have a
material adverse effect, to the best knowledge of the Company, the Company and
each of its subsidiaries (i) have obtained all applicable permits, licenses
and other authorization which are required to be obtained under all applicable
federal, state or local laws or any regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder ("Environmental Laws") relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic
material or wastes into ambient air, surface water, ground water or land or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal,
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transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company or its subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or
any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding against the Company or any of its subsidiaries based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, emission, discharge or release into
the environment of any pollutant, contaminant, or hazardous or toxic material
or waste; and (iv) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
SECTION 4.22. ACCOUNTS RECEIVABLE. The accounts receivable of the
Company and its subsidiaries as reflected in the most recent financial
statements contained in the Company SEC Documents, to the extent uncollected
on the date hereof, and the accounts receivable reflected on the books of the
Company and its subsidiaries are valid and existing and represent monies due,
and the Company has made reserves reasonably considered adequate for
receivables not collectible in the ordinary course of business, and (subject
to the aforesaid reserves) are subject to no refunds or other adjustments and
to no defenses, rights of setoff, assignments, restrictions, encumbrances or
conditions enforceable by third parties on or affecting any thereof, except
for such refunds, adjustments, defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions as would not reasonably be expected
to have a material adverse effect.
SECTION 4.23 CUSTOMERS. Section 4.23 of the Disclosure Schedule sets
forth a list of the Company's twenty five (25) largest customers (detailed, in
the case of government agencies, by separate government agency) in terms of
gross sales for the fiscal year ended December 31, 1995. Except as set forth
in Section 4.23 of the Disclosure Schedule, since December 31, 1995, there
have not been any changes in the business relationships of the Company with
any of the customers named therein that would constitute a material adverse
effect.
SECTION 4.24 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 4.24 of the Disclosure Schedule or the Company SEC Documents, since
December 31, 1995, no event has occurred that would be required to be reported
as a Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-K promulgated by the SEC, except for contracts with terms no less
favorable to the Company than would reasonably be expected in a similar
transaction with an unaffiliated third party.
SECTION 4.25 ABSENCE OF CERTAIN PAYMENTS. None of the Company, any of
its subsidiaries or any of their respective affiliates, officers, directors,
employees or agent or other people acting on behalf of any of them have (i)
engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive
or order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company, any of its subsidiaries or any of their respective
affiliates, directors, officers, employees or agents of other persons acting
on behalf of any of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
SECTION 4.26 INSURANCE. All material fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage insurance policies maintained by the Company or any of its subsidiaries
are with reputable insurance carriers, provide coverage of all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets and are in character and amount at least
equivalent to that carried by persons engaged in similar
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businesses and subject to the same or similar perils or hazards, except as
could not reasonably be expected to have a material adverse effect.
SECTION 4.27 PRODUCT LIABILITY AND RECALLS.
(a) Except a disclosed in Section 4.27 of the Disclosure Schedule or the
Company SEC Documents, the Company is not aware of any claim, or the basis of
any claim, against the Company or any of this subsidiaries for injury to
person or property of employees or any third parties suffered as a result of
the sale of any product or performance of any service by the Company or any of
its subsidiaries, including claims arising out of any alleged defective nature
of its products or services, which could reasonably be expected to have a
material adverse effect.
(b) Except as disclosed in Section 4.27 of the Disclosure Schedule or
the Company SEC Documents, there is not pending or, to the knowledge of the
Company, threatened recall or investigation of any product sold by the
Company, which recall or investigation could reasonably be expected to have a
material adverse effect.
SECTION 4.28 INVENTORY. The inventories of the Company and its
subsidiaries as reflected in the most recent financial statements contained in
the Company SEC Documents, or acquired by the Company or any of its
subsidiaries after the date thereof, (i) are carried at an amount not in
excess of the lower of cost or net realizable value, and (ii) do not include
any inventory which is obsolete, surplus or not usable or saleable in the
lawful and ordinary course of business of the Company and its subsidiaries as
heretofore conducted, in each case net of reserves provided therefor.
SECTION 4.29 FULL DISCLOSURE. (i) No statement contained in any
certificate or schedule furnished or to be furnished by the Company or its
subsidiaries to Parent or Sub in, or pursuant to the provisions of, this
Agreement and (ii) none of the monthly consolidated financial statements for
October 1996 and November 1996 furnished or to be furnished by the Company to
Parent, including the accompanying commentary, contains or shall contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary, in the light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
SECTION 5.01. ORGANIZATION. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power and authority could not be reasonably expected to prevent or materially
delay the consummation of the Offer and/or the Merger. Each of Parent and Sub
is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing could not reasonably be expected to
prevent or materially delay the consummation of the Offer and/or the Merger.
Each of Parent and Sub has made available to the Company complete and correct
copies of its articles of incorporation and by-laws.
SECTION 5.02. AUTHORITY. Parent and Sub have requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions
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contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parent and Sub and no other corporate proceedings on
the part of Parent and Sub are necessary to authorize this Agreement or to
consummate such transactions except, in the event that Section 607.1104 of
the Corporation Law is applicable and available to effectuate the Merger,
such proceedings as may be required by such statute. No vote of Parent
shareholders is required to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Sub, as the case may be, and, assuming this Agreement constitutes
a valid and binding obligation of the Company, constitutes a valid and
binding obligation of each of Parent and Sub enforceable against them in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally.
SECTION 5.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Offer Documents), the HSR Act, Sections 607.1103 -
607.1105 of the Corporation Law, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective certificate/articles
of incorporation or by-laws of Parent and Sub, (ii) require any filing with,
or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings could not be reasonably expected to prevent
or materially delay the consummation of the Offer and/or the Merger), (iii)
result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Parent or any
of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which could not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Offer and/or the Merger.
SECTION 5.04. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in the case of the
Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's shareholders, or, in the case of the Proxy Statement, at the time
the Proxy Statement is first mailed to the Company's shareholders or at the
time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
SECTION 5.05. INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.06. BROKERS. No broker, investment banker, financial advisor
or other person, other than Robertson, Stephens & Company, the fees and
expenses of which will be paid by Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with
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the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Sub.
SECTION 5.07. FINANCING. Parent has readily available funds to
purchase, or to cause Sub to purchase, all the Shares pursuant to the Offer
and the Merger and to pay all fees and expenses related to the transactions
contemplated by this Agreement.
SECTION 5.08. BOARD DETERMINATION. The Board of Directors of Parent, at
a meeting duly called and held, duly and unanimously adopted resolutions
approving this Agreement, the Offer and the Merger, determining that the terms
of the Offer and the Merger are fair, from a financial point of view, to, and
in the best interests of, Parent.
SECTION 5.09. FULL DISCLOSURE. No statement contained in any
certificate or schedule furnished or to be furnished by Parent or Sub to the
Company in, or pursuant to the provisions of, this Agreement contains or shall
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in the light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
ARTICLE VI
COVENANTS
---------
SECTION 6.01. COVENANTS OF tHE COMPANY. Until such time as Parent's
designees shall constitute a majority of the members of the Board of Directors
of the Company, the Company agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by this Agreement, as set forth
in the Disclosure Schedule or to the extent that Parent shall otherwise
consent in advance, which consent shall not be unreasonably withheld and shall
subsequently be confirmed in writing):
(a) ORDINARY COURSE. The Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course and the Company shall, and shall cause its subsidiaries
to, use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and
others having business dealings with the Company and its subsidiaries.
(b) DIVIDENDS; CHANGES IN STOCK. The Company shall not, and shall not
permit any of its subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock, except for
dividends by a direct or indirect wholly owned subsidiary of the Company to
its parent, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or its subsidiaries or any other securities thereof.
(c) Issuance of Securities. The Company shall not, and shall not permit
any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of,
any shares of its capital stock of any class or any securities convertible
into, or any rights, warrants, calls, subscriptions or options to acquire, any
such shares or convertible securities, or any other ownership interest
(including stock appreciation rights or phantom stock) other than (i) the
issuance of shares of Company Common Stock upon the exercise of Company Stock
Options outstanding on the date of this Agreement and in accordance with the
terms of such Company Stock Options, (ii) the issuance of shares of Company
Common Stock upon the conversion of shares of Class B Common Stock outstanding
on the date of this Agreement and in accordance with the terms of such Class B
Common Stock or (iii) issuances by a wholly-owned subsidiary of the Company of
its capital stock to its parent.
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(d) GOVERNING DOCUMENTS. The Company shall not, and shall not permit
any of its subsidiaries to, amend or propose to amend its certificate or
articles of incorporation or by-laws (or similar organizational documents).
(e) NO ACQUISITIONS. The Company shall not, and shall not permit any of
its subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or any substantial assets of
(other than inventory and equipment in the ordinary course consistent with
past practice, to the extent not otherwise prohibited by this Agreement), or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof.
(f) NO DISPOSITIONS. Other than dispositions in the ordinary course of
business consistent with past practice, the Company shall not, and shall not
permit any of its subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, or agree to sell, lease, license, encumber or otherwise dispose
of, any of its assets.
(g) INDEBTEDNESS. The Company shall not, and shall not permit any of
its subsidiaries to, (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of others, enter into any
"keep-well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for working capital borrowings incurred in the
ordinary course of business consistent with past practice under the Company's
credit facility existing and in effect on the date of this Agreement, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person, other than, with respect to both clause (i) and (ii) above, (A)
to the Company or any direct or indirect wholly owned subsidiary of the
Company or (B) any advances to employees in accordance with past practice.
(h) ADVICE OF CHANGES; FILINGS. The Company shall confer with Parent on
a regular and frequent basis as reasonably requested by Parent, report on
operational matters and promptly advise Parent orally and, if requested by
Parent, in writing of any change or event having, or which, insofar as can
reasonably be foreseen, is likely to have, a material adverse effect on the
Company. The Company shall promptly provide to Parent (or its counsel) copies
of all filings made by the Company with any Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
(i) ACCOUNTING CHANGES. The Company shall not make any material change,
other than in the ordinary course of business, consistent with past practice,
or as required by the SEC or law, with respect to any accounting methods,
principles or practices used by the Company (except insofar as may be required
by a change in generally accepted accounting principles).
(j) DISCHARGE OF LIABILITIES. Except for fees and expenses related to
the transactions contemplated herein, the Company shall not, and shall not
permit any of its subsidiaries to, pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of (i) liabilities recognized or disclosed
in the Most Recent Financial Statements, or (ii) liabilities incurred since
the date of such financial statements in the ordinary course of business
consistent with past practice. The Company shall not, and shall not permit any
of its subsidiaries to, waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party.
(k) COMPENSATION OF COMPANY EMPLOYEES. Except as provided in Section
4.07 of the Disclosure Schedule or in Section 7.04, the Company and its
subsidiaries will not, without the prior
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written consent of Parent, except as may be required by law, (i) enter into,
adopt, amend or terminate any Company Benefit Plan or other employee benefit
plan or any agreement, arrangement, plan or policy for the benefit of any
director, executive officer or current or former key employee, (ii) increase
in any manner the compensation or fringe benefits of, or pay any bonus to,
any director, executive officer or key employee, except as required by any
Company Benefit Plan or agreement with such employees existing on the date of
this Agreement, (iii) enter into, adopt, amend or terminate any Company
Benefit Plan or other benefit plan or agreement, arrangement, plan or policy
for the benefit of any employees who are not directors, executive offices or
current or former key employees of the Company, other than increases in the
compensation of employees made in the ordinary course of business consistent
with past practice, or (iv) pay any benefit not required by any plan or
arrangement as in effect as of the date hereof (including the granting of,
acceleration of exercisability of or vesting of stock options, stock
appreciation rights or restricted stock).
(l) MATERIAL CONTRACTS. Neither the Company nor any of its subsidiaries
shall (i) modify, amend or terminate any material contract or agreement to
which the Company or such subsidiary is a party, or (ii) waive, release or
assign any material rights or claims.
(m) NO DISSOLUTION, ETC. The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation of the Company or any of its subsidiaries.
(n) TAX ELECTION. Except as set forth in Section 4.14 of the Disclosure
Schedule, the Company shall not make any tax election or settle or compromise
any material income tax liability.
(o) OTHER ACTIONS. The Company shall not nor will it permit any of its
subsidiaries to take or agree or commit to take any action that is reasonably
likely to result in any of the Company's representations or warranties
hereunder being untrue in any material respect at, or as of any time prior to,
the Effective Time.
(p) GENERAL. The Company shall not, and shall not permit any of its
subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 6.01.
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SECTION 6.02. NO SOLICITATION.
(a) The Company and its officers, directors, employees, representatives
and agents shall immediately cease any discussions or negotiations with any
parties that may be ongoing with respect to an Acquisition Proposal (as
hereinafter defined). From and after the date hereof until the termination of
this Agreement, the Company shall not, nor shall it permit any of its
subsidiaries to, authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or knowingly encourage
(including by way of furnishing non-public information or assistance), or
knowingly take any other action to facilitate, any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal; PROVIDED, HOWEVER, that if, at any time
the Board of Directors of the Company determines in good faith, after
consultation with independent legal counsel (who may be the Company's
regularly engaged independent counsel), that it is necessary to do so in
order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Company may, in response to an unsolicited Acquisition
Proposal, and subject to compliance with Section 6.02(c), (x) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement in reasonably customary form, and (y) participate
in discussions or negotiations regarding such Acquisition Proposal. For
purposes of this Agreement, "ACQUISITION PROPOSAL" means any inquiry,
proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company and its
subsidiaries or 20% or more of any class of equity securities of the Company
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries (other than the transactions
between the parties hereto contemplated by this Agreement), or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Offer and/or the Merger or
which could reasonably be expected to dilute materially the benefits to
Parent of the transactions contemplated hereby.
(b) Except as set forth in this Section 6.02, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or (iii) cause the Company to
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that the Board of Directors of the
Company determines in good faith, after consultation with independent legal
counsel (who may be the Company's regularly engaged independent counsel),
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's shareholders under applicable law, the Board of Directors of the
Company may (subject to the other provisions of Section 6.02) withdraw or
modify its approval or recommendation of the Offer, this Agreement and the
Merger, approve or recommend a Superior Proposal (as defined below), cause the
Company to enter into an agreement with respect to a Superior Proposal or
terminate this Agreement, but in each case only at a time that is after the
fifth business day following Parent's receipt of written notice (a "NOTICE OF
SUPERIOR PROPOSAL") advising Parent that the Board of Directors of the Company
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal. In addition, if the Company proposes to enter into an agreement with
respect to any Acquisition Proposal, it shall concurrently with entering into
such agreement pay, or cause to be paid, to Parent the Termination Fee (as
such term is defined in Section 7.06(b)). For purposes of this Agreement, a
"SUPERIOR PROPOSAL" means any bona fide proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 20% of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board
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of Directors of the Company determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to the Company's shareholders than the Offer and the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.02, the Company shall promptly advise
Parent orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal.
(d) Nothing contained in this Section 6.02 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with independent legal counsel
(who may be the Company's regularly engaged independent counsel), failure so
to disclose would be inconsistent with its fiduciary duties to the Company's
shareholders under applicable law; PROVIDED, HOWEVER, neither the Company nor
its Board of Directors nor any committee thereof shall, except as permitted by
Section 6.02(b), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer, this Agreement or the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
SECTION 6.03. OTHER ACTIONS. Except as contemplated by Section 6.02 or
the other provisions of this Agreement, the Company shall not, and shall not
permit any of its subsidiaries to, take any action that could reasonably be
expected to result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not
so qualified becoming untrue in any material respect or (iii) any of the Offer
Conditions not being satisfied in all material respects.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
SECTION 7.01. SHAREHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) If the Company Shareholder Approval is required by law, the Company
will, at Parent's request, as soon as practicable following acceptance for
payment of and payment for shares of Company Common Stock by Sub in the Offer,
duly call, give notice of, convene and hold a meeting of its shareholders (the
"SHAREHOLDERS MEETING") for the purpose of obtaining the Company Shareholder
Approval. The Company will, through its Board of Directors, recommend to its
shareholders that the Company Shareholder Approval be given. Notwithstanding
the foregoing, if Sub or any other subsidiary of Parent shall acquire at least
80% of the outstanding Shares, the parties shall, at the request of Parent,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Shareholders Meeting in accordance with Section 607.1104 of the Corporation
Law.
(b) If the Company Shareholder Approval is required by law, the Company
will, at Parent's request, as soon as practicable following acceptance for
payment of and payment for shares of Company Common Stock by Sub in the Offer,
prepare and file a preliminary Proxy Statement (or, if applicable, an
information statement in lieu of a proxy statement pursuant to Rule 14C under
the Exchange Act, with all references herein to the Proxy Statement being
deemed to refer to such information statement, to the extent applicable) with
the SEC and will use its best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's share-
holders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the
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SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply Parent with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Shareholders Meeting
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail
to its shareholders such an amendment or supplement. The Company will not
mail any Proxy Statement, or any amendment or supplement thereto, to which
Parent reasonably objects.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Parent or any subsidiary of Parent to be voted
in favor of the Company Shareholder Approval.
SECTION 7.02. ACCESS TO INFORMATION. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which the Company
is subject (from which it shall use reasonable efforts to be released), the
Company shall, and shall cause each of its subsidiaries to, afford to Parent
and to the officers, employees, accountants, counsel and other representatives
of Parent access, during normal business hours to all their respective
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each of its subsidiaries to) furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to SEC
requirements and (b) all other information concerning its business, properties
and personnel as Parent may reasonably request. Except as otherwise agreed to
by the Company, unless and until Parent and Sub shall have purchased a
majority of the outstanding Shares pursuant to the Offer or otherwise, and
notwithstanding termination of this Agreement, the terms of the
confidentiality letter agreement, dated as of October 30, 1996, between the
Company and Parent shall apply to all information about the Company which has
been furnished under this Agreement by the Company to Parent or Sub.
SECTION 7.03. REASONABLE EFFORTS. Each of the Company, Parent and Sub
agrees to use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on itself with respect to the Offer and the Merger (which actions
shall include furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity)
and will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of their
subsidiaries in connection with the Offer and the Merger. Each of the
Company, Parent and Sub will, and will cause its subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary to obtain (and
will cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity or other public
or private third party required to be obtained or made by Parent, Sub, the
Company or any of their subsidiaries in connection with the Offer and the
Merger or the taking of any action contemplated thereby or by this Agreement,
except that no party need waive any substantial rights or agree to any
substantial limitation on its operations or to dispose of or hold separate any
assets or otherwise take any action that would require a waiver of, or that is
inconsistent with the satisfaction of, the conditions of the Offer set forth
in clause (iii) or (iv) of subsection (a) of Exhibit A hereto.
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SECTION 7.04. COMPANY STOCK OPTIONS; PLANS.
(a) Parent and the Company shall, effective as of the Effective Time,
(i) cause each outstanding option to purchase Company Common Stock (a
"COMPANY STOCK OPTION") issued pursuant to the Company's Second Amended and
Restated Stock Option Plan (the "COMPANY STOCK OPTION PLAN"), whether or not
exercisable or vested, to become fully exercisable and vested, (ii) cause
each Company Stock Option that is outstanding to be canceled and (iii) in
consideration of such cancellation and, except to the extent that Parent or
Sub and the holder of any such Company Stock Option otherwise agree, cause
the Company (or, at Parent's option, Sub) to pay such holders of Company
Stock Options an amount in respect thereof equal to the product of (x) the
excess, if any, of the Offer price over the exercise price of each such
Company Stock Option and (y) the number of shares of Company Common Stock
subject to the Company Stock Option immediately prior to its cancellation
(such payment to be net of applicable withholding taxes).
(b) Except as may otherwise be agreed by Parent or Sub and the Company,
the Company Stock Option Plan shall terminate as of the Effective Time, and no
holder of Company Stock Options or any participant in the Company Stock Option
Plan shall have any rights thereunder to acquire any equity securities of the
Company, the Surviving Corporation or any subsidiary thereof.
(c) Except as may otherwise be agreed by Parent or Sub and the Company,
all other plans, programs or arrangements providing for the issuance or grant
of any other interest in respect of the capital stock of the Company or any of
its subsidiaries shall terminate as of the Effective Time, and no participant
in any such plans, programs or arrangements shall have any rights thereunder
to acquire any equity securities of the Company, the Surviving Corporation or
any subsidiary thereof.
SECTION 7.05. DIRECTORS. Promptly upon the acceptance for payment of,
and payment for, any Shares by Sub pursuant to the Offer which represent at
least a majority of the outstanding Shares (on a fully diluted basis), Parent
shall be entitled to designate such number of directors, rounded up to the
next whole number, on the Board of Directors of the Company as will give
Parent, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors equal to the product of (a) the
total number of directors on the Board of Directors and (b) the percentage
that the number of shares of Company Common Stock purchased by Sub bears to
the number of shares of Company Common Stock outstanding; PROVIDED, HOWEVER,
that in the event that Sub's designees are elected to the Board of Directors
of the Company, until the Effective Time such Board of Directors shall have
at least two directors who are directors on the date of this Agreement and
who are not officers of the Company (the "INDEPENDENT DIRECTORS"); and
PROVIDED FURTHER that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the remaining
Independent Director shall designate a person to fill such vacancy who shall
be deemed to be an Independent Director for purposes of this Agreement or, if
no Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable law, the
Company shall take all action requested by Parent necessary to effect any
such election, including mailing to its shareholders the Information
Statement containing the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to
make such mailing with the mailing of the Schedule 14D-9 (provided that Sub
shall have provided to the Company on a timely basis all information required
to be included in the Information Statement with respect to Sub's designees).
In connection with the foregoing, the Company will promptly, at the option
of Parent, either increase the size of the Company's Board of Directors
and/or obtain the resignation of such number of its current directors as is
necessary to enable Sub's designees to be elected or appointed to, and to
constitute a majority of, the Company's Board of Directors as provided above.
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SECTION 7.06. FEES AND EXPENSES.
(a) Except as provided below in this Section 7.06, all fees and expenses
incurred in connection with the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Offer or the Merger is
consummated.
(b) If (i) Parent or Sub terminates this Agreement under Section
9.01(c)(iii) or Section 9.01(d), (ii) either Parent or the Company terminates
this Agreement under Section 9.01(b)(i), the Minimum Condition has failed to
be satisfied and such failure is the result of any of the parties to the
Shareholder Agreement having breached its obligation thereunder to tender its
Shares in the Offer or (iii) the Company terminates this Agreement pursuant
to Section 9.01(e), the Company shall assume and pay, or cause to be paid, a
termination fee in the amount of $3,000,000 (the "Termination Fee").
SECTION 7.07. INDEMNIFICATION; INSURANCE.
(a) Parent and Sub agree that all rights to indemnification for acts or
omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers (the "INDEMNIFIED PARTIES") of the
Company and its subsidiaries as provided in their respective certificates or
articles of incorporation or by-laws (or similar organizational documents) or
existing indemnification contracts shall survive the Merger and shall continue
in full force and effect in accordance with their terms.
(b) In addition, Parent will provide, or cause the Surviving Corporation
to provide, for a period of not less than six years after the Effective Time,
the Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring at or prior to the
Effective Time (the "D&O Insurance") that is no less favorable than the
Company's existing D&O Insurance policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, that Parent and the Surviving Corporation shall not be required to
pay an annual premium for the D&O Insurance in excess of 200% of the annual
premium currently paid by the Company for such insurance, but in such case
shall purchase as much such coverage as possible for such amount.
(c) This Section 7.07 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties and their respective heirs, personal
representatives, successors and assigns, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
SECTION 7.08 EMPLOYMENT AND BENEFIT ARRANGEMENTS.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor all employment, severance, termination and retirement
agreements to which the Company is a party, as such agreements are in effect
on the date hereof.
(b) For a one-year period following the Effective Time, Parent shall
cause the Surviving Corporation to provide those employees who are employees
of the Surviving Corporation at the Effective Time with benefits that are, in
the aggregate, no less favorable to such employees as are the benefits of the
Company available to such employees immediately prior to the Effective Time.
(c) The provisions of this Section 7.08 are not intended to create
rights of third party beneficiaries.
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ARTICLE VIII
CONDITIONS
----------
SECTION 8.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) COMPANY SHAREHOLDER APPROVAL. If required by applicable law, the
Company Shareholder Approval shall have been obtained.
(b) NO INJUNCTIONS OR RESTRAINTS. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other Governmental Entity or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that
each of the parties shall have used reasonable efforts (subject to the other
terms and conditions of this Agreement) to prevent the entry of any such
injunction or other order and to have vacated as promptly as possible any
injunction or other order that may be entered.
(c) PURCHASE OF SHARES. Sub shall have previously accepted for payment
and paid for Shares tendered pursuant to the Offer.
ARTICLE IX
TERMINATION AND AMENDMENT
-------------------------
SECTION 9.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions the Offer shall have terminated or expired in accordance with
its terms without Sub having accepted for payment any Shares pursuant to
the Offer or (y) Sub shall not have accepted for payment any Shares
pursuant to the Offer prior to the 60th day after commencement of the
Offer; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 9.01(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of any such condition or if the failure of such
condition results from facts or circumstances that constitute a breach of
representation, warranty or covenant under this Agreement by such party;
or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for,
shares of Company Common Stock pursuant to the Offer or the Merger and
such order, decree or ruling or other action shall have become final and
nonappealable; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 9.01(b)(ii) shall not be available to
any party that has failed to perform its obligations under Section 7.03
or the proviso contained in Section 8.01(b);
27
<PAGE>
(c) by Parent or Sub if
(i) (A) the representations and warranties of the Company in
Section 4.03 shall not have been true and correct in all material
respects when made, or (B) any representation or warranty of the Company
shall not have been true and correct in all material respects when made,
except in any case where such failure to be true and correct would not,
in the aggregate, (x) have a material adverse effect, or (y) prevent or
materially delay the consummation of the Offer and/or the Merger;
(ii) (A) the representations and warranties of the Company in
Section 4.03 (other than representations and warranties made as of a
specified date) shall have ceased at any later date to be true and
correct in all material respects as if made as of such later date, or
(B) any representation or warranty of the Company (other than
representations and warranties made as of a specified date) shall have
ceased at any later date to be true and correct in all material respects
as if made at such later date, except in any case where such failure to
be true and correct would not, (x) in the aggregate, have a material
adverse effect or (y) prevent or materially delay the consummation of the
Offer and/or the Merger; or
(iii) the Company shall have failed to comply in any material
respect with any of its material obligations or covenants contained
herein;
PROVIDED, HOWEVER, that the right of Parent or Sub to terminate this Agreement
pursuant to this clause shall not be available if Sub or any affiliate of Sub
shall acquire any shares of Company Common Stock pursuant to the Offer;
(d) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(e) of Exhibit A to this Agreement;
(e) by the Company in connection with entering into a definitive
agreement in accordance with Section 6.02(b), provided it has complied with
all provisions thereof, including the notice provisions therein and the
payment of the Termination Fee, and provided that the Company shall not have
breached in any material respect the provisions of Section 6.02(a);
(f) by the Company, if
(i) any representation or warranty of Parent or Sub shall not have
been true and correct in all material respects when made or shall have
ceased at any later date to be true and correct in all material respects
as if made at such later date; or
(ii) Parent or Sub fails to comply in any material respect with any
of its material obligations or covenants contained herein;
(g) by the Company, if Sub shall have failed to commence the Offer
within five business days following the date of the initial public
announcement of the Offer (except as a result of any acts or omissions of the
Company that constitutes a material breach of this Agreement).
SECTION 9.02. EFFECT OF TERMINATION. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 9.01,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers, directors, shareholders or affiliates, except with respect to the
last sentence of Section 1.02(c), Section 4.16, Section 5.06, the last
sentence of Section 7.02, Section 7.06, this Section 9.02 and Article X;
PROVIDED, HOWEVER, that nothing herein shall relieve any party for liability
for any breach hereof.
28
<PAGE>
SECTION 9.03. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after obtaining the Company Shareholder Approval (if
required by law), but, after any such approval, no amendment shall be made
which by law requires further approval by such shareholders (or which reduces
the amount or changes the consideration to be delivered to such shareholders)
without obtaining such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. Following the election or appointment of the Sub's designees pursuant
to Section 7.05 and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement or (iii)
extend the time for performance of Parent and Sub's respective obligations
under this Agreement.
SECTION 9.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or, in
the case of the Company, shall survive the acceptance for payment of, and
payment for, Shares by Sub pursuant to the Offer.
SECTION 10.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Parent or Sub, to
Tyco International, Ltd.
One Tyco Park
Exeter, New Hampshire 03833
Attn: General Counsel
Telecopy No.: (603) 778-7700
Confirm No.: (603) 778-9700
29
<PAGE>
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Joshua M. Berman, Esq.
Telecopy No.: (212) 715-8000
Confirm No.: (212) 715-9100
and
(b) if to the Company, to
ElectroStar, Inc.
710 North 600 West
Logan, Utah 84321
Attn: President
Telecopy No.: (801) 753-7544
Confirm No.: (801) 753-4700
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Bruce E. Macdonough, Esq.
Telecopy No.: (305) 579-0717
Confirm No.: (305) 579-0500
SECTION 10.03. INTERPRETATION. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or
a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this
Agreement, they shall be deemed to be followed by the words "WITHOUT
LIMITATION". The phrase "MADE AVAILABLE" in this Agreement shall mean that
the information referred to has been made available if requested by the party
to whom such information is to be made available. As used in this Agreement,
the term "SUBSIDIARY" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more
of the equity interests of which) is owned directly or indirectly by such
first person, and the term "AFFILIATE" shall have the meaning set forth in
Rule 12b-2 promulgated under the Exchange Act. As used in this Agreement,
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when used in
connection with the Company, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, prospects, assets (including
intangible assets), financial condition or results of operations of the
Company and its subsidiaries taken as a whole. Notwithstanding the foregoing,
a material adverse change or material adverse effect shall not include any
material adverse change or material adverse effect to the extent caused by any
change resulting from the announcement of the Offer or the Merger.
SECTION 10.04. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or
30
<PAGE>
more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 10.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 7.07 and Section
7.08, are not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
SECTION 10.06. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York and, to the
extent provided herein, the Corporation Law, without regard to any applicable
conflicts of law.
SECTION 10.07. PUBLICITY. Except as otherwise required by law or the
rules of the New York Stock Exchange or the Nasdaq National Market, for so
long as this Agreement is in effect, neither the Company nor Parent shall, or
shall permit any of its subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
SECTION 10.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
SECTION 10.09. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement. In addition, each of
the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of New York in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from
any such court, and (iii) agrees that such party will not bring any action
relating to this Agreement or any of the transactions contemplated hereby in
any court other than a Federal court sitting in the State of New York. The
prevailing party in any judicial action shall be entitled to receive from the
other party reimbursement for the prevailing party's reasonable attorneys'
fees and disbursements, and court costs.
31
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
TYCO INTERNATIONAL, LTD.
By: /s/ J. Brad McGee
--------------------------------------------
Name: J. Brad McGee
Title: Vice President
T3 ACQUISITION CORP.
By: /s/ J. Brad McGee
--------------------------------------------
Name: J. Brad McGee
Title: Vice President
ELECTROSTAR, INC.
By: /s/ Kenton K. Alder
--------------------------------------------
Name: Kenton K. Alder
Title: President and Chief Executive Officer
32
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or, subject to applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless (i) there shall have been validly tendered and
not withdrawn prior to the expiration of the Offer such number of Shares that
would constitute a majority of the outstanding Shares (determined on a fully
diluted basis for all outstanding stock options, Class B Common Stock and any
other rights to acquire Shares) (the "MINIMUM CONDITION") and (ii) any
waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated. Furthermore,
notwithstanding any other term of the Offer or this Agreement, Sub shall not
be required to accept for payment or, subject as aforesaid, to pay for any
Shares not theretofore accepted for payment or paid for, and may terminate
the Offer if, at any time on or after the date of this Agreement and before
the acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists (other than as a result of any action or inaction
of Parent or any of its subsidiaries that constitutes a breach of this
Agreement):
(a) there shall have been instituted, pending or threatened any action
or proceeding by any court or other Government Entity which (i) seeks to
challenge the acquisition by Parent or Sub (or any of its affiliates) of
shares of Company Common Stock pursuant to the Offer, restrain or prohibit the
making or consummation of the Offer or the Merger, or obtain damages in
connection therewith in an amount which would reasonably be expected to have a
material adverse effect; (ii) seeks to make the purchase of or payment for
some or all of the shares of Common Stock pursuant to the Offer or the Merger
illegal; (iii) seeks to impose limitations on the ability of Parent (or any of
its affiliates) effectively to acquire or hold, or to require Parent or the
Company or any of their respective affiliates or subsidiaries to dispose of or
hold separate, any material portion of the assets or the business of Parent
and its affiliates or any material portion of the assets or the business of
the Company and its subsidiaries taken as a whole, as a result of the Offer or
the Merger; or (iv) seeks to impose material limitations on the ability of
Parent (or its affiliates) to exercise full rights of ownership of the shares
of Company Common Stock purchased by it, including, without limitation, the
right to vote the shares purchased by it on all matters properly presented to
the shareholders of the Company;
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any statute, rule,
regulation, judgment, decree, order or injunction, other than the application
to the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to directly or indirectly result in any of the
consequences referred to in clauses (i) through (iv) of subsection (a) above;
(c) (A) the representations and warranties of the Company in Section
4.03 of this Agreement shall not have been true and correct in all material
respects when made, or shall thereafter have ceased to be true and correct in
all material respects as if made as of such later date (other than
representations and warranties made as of a specified date) or (B) any of the
representations and warranties made by the Company in this Agreement shall not
have been true and correct in all material respects when made, or shall
thereafter have ceased to be true and correct in all material respects as if
made as of such later date (other than representations and warranties made as
of a specified date), except in any case where such failure to be true and
correct would not, in the aggregate, (x) have a material adverse effect, or
(y) prevent or materially delay the consummation of the Offer and/or the
Merger;
(d) the Company shall not in all material respects have performed in a
timely manner any material obligation and agreement and complied in all
material respects in a timely manner with any material covenant of the Company
to be performed or complied with by it under this Agreement;
<PAGE>
(e) (i) the Board of Directors of the Company shall have failed to
approve and recommend or shall have withdrawn or modified in a manner adverse
to Parent or Sub its approval or recommendation of the Offer, the Merger or
this Agreement, or approved or recommended any Acquisition Proposal, (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 6.02(b) of this Agreement or (iii) the
Board of Directors of the Company thereof shall have resolved to take any of
the foregoing actions;
(f) any change, development, effect or circumstance shall have occurred
or be threatened (other than any affecting the electronics industry generally)
that would reasonably be expected to have a material adverse effect on the
Company;
(g) the Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition under
any chapter of Title XI of the United States Code or any similar law or
regulation is filed against the Company which is not dismissed within five
business days; or
(h) the Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Parent in any such case, and regardless
of the circumstances giving rise to any such condition, makes it inadvisable
to proceed with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and Sub and
may, except as otherwise provided in this Agreement, be asserted by Parent or
Sub regardless of the circumstances giving rise to any such condition and may
be waived by Parent or Sub, in whole or in part, at any time and from time to
time, in the sole discretion of Parent. The failure by Parent or Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed an ongoing right which may be asserted at
any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be
returned by the Paying Agent to the tendering shareholders.
2
<PAGE>
November 22, 1996
ElectroStar, Inc.
710 North 600 West
Logan, Utah 84321
Gentlemen:
We are pleased to confirm our mutual understanding regarding the retention
of Trivest II, Inc. ("Trivest") by ElectroStar, Inc. (collectively with its
subsidiaries, the "Company").
1. Trivest will assist the Company as its financial advisor and exclusive
agent in connection with identifying and seeking out a person, group of persons,
partnership, joint venture, corporation or other entity (each, together with its
affiliates, a "Prospective Purchaser") who would be interested in entering into
a Transaction with the Company. As used in this Agreement, the term
"Transaction" shall mean (a) any merger, consolidation, reorganization,
recapitalization, business combination or other transaction pursuant to which
the Company is acquired, in whole or in part, by, or combined with, a third
party, or (b) the acquisition, directly or indirectly, by a third party or any
affiliates of a third party acting in concert, in a single transaction or series
of transactions, of (i) all or substantially all of the assets or operations of
the Company (or any of its subsidiaries), or (ii) 50% or more of the Company's
(or any of its subsidiaries') capital stock or common equity (whether by way of
tender or exchange offer, open market purchases, negotiated purchases or
otherwise.)
2. Trivest will review and analyze all indications of interest and
proposals, both preliminary and firm, that are received from Prospective
Purchasers, will advise the Company as to structure and valuation, and will
assist the Company in negotiations with any Prospective Purchaser. In connection
with Trivest's activities on the Company's behalf, Trivest will (i) develop a
list of Prospective Purchasers and a strategy for the sale of the Company, (ii)
furnish descriptive information and related materials that describe the
Company's operations, management, results of operations and financial condition,
and (iii) contact and elicit interest from Prospective Purchasers.
3. Any advice rendered by Trivest pursuant to this Agreement may not be
disclosed publicly without our written consent.
4. In order to coordinate efforts to effect a Transaction, during the
period of the engagement of Trivest hereunder, neither the Company nor any other
person acting on the Company's behalf shall, directly or indirectly (except
through Trivest), solicit any offer from any third party to enter into a
Transaction. The Company will inform Trivest of any contacts made by it, or
anyone else on its behalf, with any Prospective Purchasers (including any
Prospective Purchasers who were not identified and/or contacted by Trivest), and
the Company will keep Trivest timely informed of any developments or
negotiations with any Prospective Purchasers. In the event that, during the
period of the engagement of Trivest hereunder, the Company or any of its
officers, directors, employees or representatives are contacted by or on behalf
of any third party concerning the possibility of a Transaction, the Company will
promptly so inform Trivest so that Trivest can evaluate the third party and its
interest and assist the Company, including assisting the Company in any
subsequent discussions.
<PAGE>
ElectroStar, Inc.
November 22, 1996
Page 2
5. In consideration of our services pursuant to this Agreement, Trivest
shall be entitled to receive, and the Company agrees to pay Trivest, the
following compensation:
(a) If a Transaction is consummated, the Company shall pay Trivest,
upon such consummation, a cash fee equal to the following percentages of
the total consideration paid by a purchaser in the Transaction in respect
of (i) the assets of the Company or any of its subsidiaries, (ii) the
capital stock of the Company or any of its subsidiaries (and any securities
convertible into, or options, warrants or other rights to acquire such
capital stock), and (iii) the assumption, directly or indirectly (by
operation of law or otherwise), or repayment of indebtedness for borrowed
money (including, without imitation, indebtedness secured by assets of the
Company or any of its subsidiaries and capitalized lease obligations)
("Transaction Consideration"):
a. 0.75% of the first $95 million of aggregate consideration;
b. 2.5% of the next $15 million of aggregate consideration; and
c. 3.5% of the next $15 million of aggregate consideration;
In the event a Transaction is consummated in one or more steps, including,
without limitation, by way of a second-step merger, any additional
Transaction Consideration paid or to be paid in any subsequent step in the
Transaction shall be included for purposes of calculating Trivest's fee
pursuant to this paragraph 5(a). If all or a portion of the Transaction
Consideration is other than cash, then the value of such non-cash
consideration shall be the fair market value thereof on the date the
Transaction is consummated as mutually agreed upon in good faith by the
Company's Board of Directors and Trivest. If such non-cash consideration
consists of common stock, options, warrants or rights for which a public
trading market existed prior to the consummation of the Transaction, then
the value of such securities shall be determined by the closing or last
sales price thereof on the date of the consummation of the Transaction;
PROVIDED, HOWEVER, that if such non-cash consideration consists of
newly-issued, publicly traded common stock, options, warrants or rights for
which no public trading market existed prior to the consummation of the
Transaction, then the value thereof shall be the average of the closing
prices for the 20 trading days subsequent to the fifth trading day after
the consummation of the Transaction. In such event, the fee payable to
Trivest pursuant to this paragraph 5(a) shall be paid on the 30th trading
day subsequent to the consummation of the Transaction. If no public market
exists for any common stock, options, warrants or rights issued in the
Transaction, then the value thereof shall be as mutually agreed upon in
good faith by the Company's Board of Directors and Trivest. If such
non-cash consideration consists of preferred stock or debt securities,
(regardless of whether a public trading market existed for such preferred
stock or debt securities prior to the consummation of the Transaction or
exists thereafter), then the value thereof shall be as mutually agreed upon
in good faith by the Company's Board of Directors and Trivest. Any amounts
payable by the purchaser at closing to the Company or any shareholder of
the Company (other than affiliates of Trivest) in connection with a
non-competition, licensing, supply or other agreement shall be deemed to
constitute Transaction Consideration. If all or any portion of the
Transaction Consideration includes contingent future payments, then the
Company shall pay to Trivest, at the time such payments are made, an
additional cash fee, determined in accordance with this paragraph 5(a).
<PAGE>
ElectroStar, Inc.
November 22, 1996
Page 3
(b) Trivest shall be entitled to the fees set forth in paragraph 5(a)
with respect to any Transaction that is consummated during the term of this
Agreement, or within one year after the date of termination if the Company
terminates this Agreement.
6. In addition to the fees described in paragraph 5 above, the Company
agrees to reimburse Trivest, upon request from time to time, for all reasonable
out-of-pocket expenses incurred by Trivest (including fees and disbursements of
counsel) in connection with the matters contemplated by this Agreement.
7. The Company will indemnify, defend and hold harmless Trivest and its
present and future officers, directors, affiliates, employees and agents
("Indemnified Parties") to the fullest extent permitted by corporate law as if
any of the Indemnified Parties was an officer or director of the Company. The
Company will reimburse the Indemnified Parties on a monthly basis for any cost
of defending any action or investigation (including attorneys' fees and
expenses) subject to an undertaking from any such Indemnified Party to repay the
Company if such party is determined not to be entitled to indemnity.
8. Either party may terminate this Agreement at any time upon written
notice, without liability or continuing obligation, except as set forth in the
following sentence. Neither termination of this Agreement nor completion of the
assignment contemplated hereby shall effect: (i) any compensation earned by
Trivest up to the date of termination or completion, (ii) any compensation to be
earned by Trivest pursuant to paragraph 5 hereof, (iii) the reimbursement of
expenses incurred by Trivest up to the date of termination or completion, as the
case may be, or (iv) the provisions of paragraphs 5 through 11, inclusive. This
agreement will terminate one year from its date of execution.
9. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF FLORIDA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF FLORIDA TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAW OF THE STATE OF FLORIDA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF
THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
10. The parties to this Agreement agree that any and all actions arising
under or in respect of this Agreement shall be litigated exclusively in any
federal or state court of competent jurisdiction located in the Southern
District of the State of Florida. By execution and delivery of this Agreement,
each party to this Agreement irrevocably submits to the personal and exclusive
jurisdiction of such courts for itself and in respect of its property with
respect to such action. Each party to this Agreement agrees that venue would be
proper in any of such courts, and hereby waives any objection that any such
court is an improper or inconvenient forum for the resolution of any such
action. In the event of any litigation with regard to this
<PAGE>
ElectroStar, Inc.
November 22, 1996
Page 4
Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party and the non-prevailing party shall pay all reasonable fees
and expenses of counselfor the prevailing party.
11. Trivest shall not assign or agree to assign or grant to any other
party (other than any affiliate of Trivest) any rights under this Agreement
without the prior written consent of the Company. The benefits of this Agreement
shall inure to the benefit of the parties hereto and of the Indemnified Parties
and their respective successors, assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
12. This Agreement may be executed in separate counterparts, each of which
will be an original and all of which taken together will constitute one and the
same agreement. This Agreement may only be amended, modified, altered or revoked
by a written instrument, signed by each of the parties hereto.
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
TRIVEST II, INC.
By: /s/ Michael E. Moran
Michael E. Moran
Senior Vice President
Confirmed and agreed to this 25th day
of November, 1996:
ELECTROSTAR, INC.
By: /s/ Kenton K. Alder
Kenton K. Alder
President and Chief Executive Officer
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement"), is made and entered into as
of the 20th day of December, 1995, by and between ELECTROSTAR, INC., a Florida
corporation (the "Company"), and name (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as title
of the Company.
B. As a condition to the Indemnitee's agreement to serve the Company as
such, the Indemnitee requires that he be indemnified from liability to the
fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the
Company shall indemnify and hold harmless the Indemnitee from and against any
and all claims, damages, expenses (including attorneys' fees), judgments,
penalties, fines (including excise taxes assessed with respect to an employee
benefit plan), amounts paid in settlement and all other liabilities actually and
reasonably incurred or paid by him in connection with the investigation,
defense, prosecution, settlement or appeal of any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (other than an action by or in the right of the
Company) and to which the Indemnitee was or is a party or is threatened to be
made a party by reason of the fact that the Indemnitee is or was an officer,
director, shareholder, employee or agent of the Company, or is or was serving at
the request of the Company as an officer, director, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that the Indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
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SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN
THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall
indemnify and hold harmless the Indemnitee from and against any and all expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred or paid by him in connection with the investigation,
defense, prosecution, settlement or appeal of any threatened, pending or
completed action, suit or proceeding by or in the right of the Company to
procure a judgment in its favor, whether civil, criminal, administrative,
investigative or otherwise, and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee or agent of the Company, or is
or was serving at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or by reason of anything done
or not done by the Indemnitee in any such capacity or capacities, provided that
(i) the Indemnitee acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and (ii) no
indemnification shall be made under this Section 2 in respect of any claim,
issue or matter as to which the Indemnitee shall have been adjudged to be liable
to the Company for misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action, suit or
proceeding was brought (or any other court of competent jurisdiction) shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorney's fees) and amounts paid in settlement actually and
reasonably incurred or paid by him in connection with the investigation,
defense, settlement or appeal of any action or suit described in Section 2
hereof that results in an adjudication that the Indemnitee was liable for
negligence, gross negligence or recklessness (but not willful misconduct) in the
performance of his duty to the Company; provided, however, that the Indemnitee
acted in good faith and in a manner he believed to be in the best interests of
the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any
indemnification under Sections 1 and 2 hereof (unless ordered by a court) and
any reimbursement made under Section 3 hereof shall be made by the Company only
as authorized in the specific case upon a determination (the "Determination")
that indemnification or reimbursement of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard of conduct
set forth in Section 1, 2 or 3 hereof, as the case may be. Subject to Sections
5.6, 5.7, 5.8 and 8 of this Agreement, the Determination shall be made in the
following order of preference:
(1) first, by the Company's Board of Directors (the
"Board") by majority vote or consent of a quorum consisting of directors
("Disinterested Directors") who
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are not, at the time of the Determination, named parties to such action, suit or
proceeding; or
(2) next, if such a quorum of Disinterested Directors
cannot be obtained, by majority vote or consent of a committee duly designated
by the Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by
any independent legal counsel (who may be any outside counsel regularly employed
by the Company); or
(4) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company's
Common Stock that are represented in person or by proxy at a meeting called for
such purpose.
4.1 No Presumptions. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
4.2 Benefit Plan Conduct. The Indemnitee's conduct
with respect to an employee benefit plan for a purpose he reasonably believed to
be in the interests of the participants in and beneficiaries of the plan shall
be deemed to be conduct that the Indemnitee reasonably believed to be not
opposed to the best interests of the Company.
4.3 Reliance as Safe Harbor. For purposes of any
Determination hereunder, the Indemnitee shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, or, with respect to any criminal action or proceeding,
to have had no reasonable cause to believe his conduct was unlawful, if his
action is based on (i) the records or books of account of the Company or another
enterprise, including financial statements, (ii) information supplied to him by
the officers of the Company or another enterprise in the course of their duties,
(iii) the advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the
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other circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, as the
case may be.
4.4 Success on Merits or Otherwise. Notwithstanding
any other provision of this Agreement, to the extent that the Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of any action,
suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the
Indemnitee pays less than $25,000.
4.5 Partial Indemnification or Reimbursement. If the
Indemnitee is entitled under any provision of this Agreement to indemnification
and/or reimbursement by the Company for some or a portion of the claims,
damages, expenses (including attorneys' fees), judgments, fines or amounts paid
in settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
4.6 Limitations on Indemnification. No indemnification
pursuant to Sections 1 or 2 hereof shall be paid by the Company if a judgment
(after exhaustion of all appeals) or other final adjudication determines that
the Indemnitee's actions, or omissions to act, were material to the cause of
action so adjudicated and constitute:
(a) a violation of criminal law, unless the
Indemnitee had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
(b) a transaction from which the Indemnitee
derived an improper personal benefit within the meaning of Section 607.0850(7)
of the Florida Business Corporation Act;
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(c) in the event that the Indemnitee is a
director of the Company, a circumstance under which the liability provisions of
Section 607.0834 of the Florida Business Corporation Act are applicable; or
(d) willful misconduct or conscious disregard
for the best interests of the Company in a proceeding by or in the right of the
Company to procure a judgment in its favor or in a proceeding by or in the right
of a shareholder of the Company.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS
HAVE BEEN SATISFIED.
5.1 Costs. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
5.2 Timing of the Determination. The Company shall use its
best efforts to make the Determination contemplated by Section 4 hereof
promptly. In addition, the Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent
legal counsel, such Determination shall be made not later than 30 days after a
Request is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the
shareholders of the Company, such Determination shall be made not later than 90
days after a Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a
Determination may be made in advance of (i) the Indemnitee's payment (or
incurring) of expenses with respect to which indemnification or reimbursement is
sought, and/or (ii) final disposition of the action, suit or proceeding with
respect to which indemnification or reimbursement is sought.
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5.3 Reasonableness of Expenses. The evaluation and finding as
to the reasonableness of expenses incurred by the Indemnitee for purposes of
this Agreement shall be made (in the following order of preference) within 15
days after the Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by majority vote or consent of a
quorum consisting of Disinterested Directors; or
(b) next, if such a quorum cannot be obtained, by
majority vote or consent of a committee duly designated by the Board (in which
designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if such a committee cannot be designated, by
any independent legal counsel (who may be any outside counsel regularly employed
by the Company);
provided, however, that if a determination as to reasonableness of expenses is
not made under any of the foregoing subsections (a), (b) and (c), such
determination shall be made, not later than 90 days after the Indemnitee's
delivery of such Request, by vote or consent of the holders of a majority of the
Company's Common Stock that are represented in person or by proxy at a meeting
called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 Payment of Indemnified Amount. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 Shareholder Vote on Determination. Notwithstanding the
provisions of Section 607.0850 of the Florida Business Corporation Act, the
Indemnitee and any other shareholder who is a party to the proceeding for which
indemnification or reimbursement is sought shall be entitled to vote on any
Determination to be made by the Company's shareholders, including a
Determination made pursuant to Section 5.7 hereof. In addition, in connection
with each meeting at which a shareholder Determination will be
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made, the Company shall solicit proxies that expressly include a proposal to
indemnify or reimburse the Indemnitee. Any Company proxy statement relating to
a proposal to indemnify or reimburse the Indemnitee shall not include a
recommendation against indemnification or reimbursement.
5.6 Selection of Independent Legal Counsel. If the
Determination required under Section 4 is to be made by independent legal
counsel, such counsel shall be selected by the Indemnitee with the approval of
the Board, which approval shall not be unreasonably withheld. The fees and
expenses incurred by counsel in making any Determination (including
Determinations pursuant to Section 5.8 hereof) shall be borne solely by the
Company regardless of the results of any Determination and, if requested by
counsel, the Company shall give such counsel an appropriate written agreement
with respect to the payment of their fees and expenses and such other matters as
may be reasonably requested by counsel.
5.7 Right of Indemnitee to Appeal an Adverse Determination by
Board. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, upon the written request of the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's shareholders at the next regular or
special meeting of shareholders. Subject to Section 8 hereof, such
Determination by the Company's shareholders shall be binding and conclusive for
all purposes of this Agreement.
5.8 Right of Indemnitee To Select Forum For Determination. If,
at any time subsequent to the date of this Agreement, "Continuing Directors" do
not constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal
counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Company shall cause the Determination to be made by a
majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
5.9 Access by Indemnitee to Determination. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the
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Indemnitee the reasonable opportunity to include such evidence and information
in any Company proxy statement relating to a shareholder Determination.
5.10 Judicial Determinations in Derivative Suits. In each
action or suit described in Section 2 hereof, the Company shall cause its
counsel to use its best efforts to obtain from the Court in which such action or
suit was brought (i) an express adjudication whether the Indemnitee is liable
for negligence or misconduct in the performance of his duty to the Company, and,
if the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of a "corporate opportunity," (iv)
responses to a takeover attempt or threatened takeover attempt of the Company,
(v) transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential appearance) as a
witness in any proceeding relating, directly or indirectly, to the Company. In
addition, the Company agrees that, for purposes of this Agreement, all services
performed by the Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established for the benefit
of employees of the Company or any subsidiary, any corporation or partnership or
other entity in which the Company or any subsidiary has a 5% ownership interest,
or any other affiliate of the Company, shall be deemed to be at the request of
the Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1 Mandatory Advance. Expenses (including attorneys' fees,
court costs, judgments, fines, amounts paid in settlement and other payments)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Section 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2 Undertaking to Repay. The Indemnitee hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 7 if
and to the
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extent that it shall ultimately be found that the Indemnitee is not entitled to
be indemnified by the Company for such amounts.
7.3 Miscellaneous. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof) to the court conducting any proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification (and/or reimbursement) if it determines the Indemnitee
is fairly and reasonably entitled to indemnification (and/or reimbursement) in
view of all the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless otherwise required by law,
be described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND
RELEASE OF CLAIMS. No legal action shall be brought and no cause of action
shall be asserted by or on behalf of the Company (or any of its subsidiaries)
against the Indemnitee, his spouse, heirs, executors, personal representatives
or administrators after the expiration of 2 years following the date the
Indemnitee ceases (for any reason) to serve as either an executive officer or
director of the Company, and any and all such claims and causes of action of the
Company (or any of its subsidiaries) shall be extinguished and deemed released
unless asserted by filing of a legal action within such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE.
Notwithstanding any other provision of this Agreement, and regardless whether
indemnification of the Indemnitee would be permitted and/or required under this
Agreement, if the Indemnitee is deceased, the Company shall indemnify and hold
harmless the Indemnitee's estate, spouse, heirs, administrators, personal
representatives and executors (collectively the "Indemnitee's Estate") against,
and the Company shall assume, any and all claims, damages,
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expenses (including attorneys' fees), penalties, judgments, fines and amounts
paid in settlement actually incurred by the Indemnitee or the Indemnitee's
Estate in connection with the investigation, defense, settlement or appeal of
any action described in Section 1 or 2 hereof. Indemnification of the
Indemnitee's Estate pursuant to this Section 11 shall be mandatory and not
require a Determination or any other finding that the Indemnitee's conduct
satisfied a particular standard of conduct.
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES.
Notwithstanding any other provision of this Agreement, and regardless of the
presence or absence of any Determination, the Company promptly (but not later
than 30 days following the Indemnitee's submission of a reasonable accounting)
shall reimburse the Indemnitee for all attorneys' fees and related court costs
and other expenses incurred by the Indemnitee (but not for judgments, penalties,
fines or amounts paid in settlement) in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 13. MISCELLANEOUS.
13.1 Notice Provision. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the respective addresses set
forth below opposite their signatures to this Agreement, or to such other
address as to which notice is given.
13.2 Entire Agreement. Except for the Company's Articles of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
13.3 Severability of Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.4 Applicable Law. This Agreement shall be governed by and
construed under the laws of the State of Florida.
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13.5 Execution in Counterparts. This Agreement and any
amendment may be executed simultaneously or in two or more counterparts, each of
which together shall constitute one and the same instrument.
13.6 Cooperation and Intent. The Company shall cooperate in
good faith with the Indemnitee and use its best efforts to ensure that the
Indemnitee is indemnified and/or reimbursed for liabilities described herein to
the fullest extent permitted by law.
13.7 Amendment. No amendment, modification or alteration of the
terms of this Agreement shall be binding unless in writing, dated subsequent to
the date of this Agreement, and executed by the parties.
13.8 Binding Effect. The obligations of the Company to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
13.9 Gender and Number. Wherever the context shall so require,
all words herein in the male gender shall be deemed to include the female or
neuter gender, all singular words shall include the plural and all plural words
shall include the singular.
13.10 Nonexclusivity. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of shareholders or otherwise.
13.11 Effective Date. The provisions of this Agreement shall
cover claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
(signatures on following page)
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ADDRESS:
ElectroStar, Inc.
710 North 600 West
Logan, Utah 84321
Attention: President
THE COMPANY:
ELECTROSTAR, INC.
By:
Name:
Title:
ADDRESS:
address
THE INDEMNITEE:
name
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AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ELECTROSTAR, INC.
ARTICLE VI
The Corporation shall indemnify and may advance expenses to its officers
and directors to the fullest extent permitted by law in existence either now or
hereafter.
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EXECUTION COPY
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT is made and entered into as of this 27th day
of November 1996, among TYCO INTERNATIONAL, LTD., a Massachusetts corporation
("PARENT"), T3 ACQUISITION CORP., a Florida corporation and a wholly owned
subsidiary of Parent ("SUB"), and the other parties signatory hereto (each, a
"SHAREHOLDER").
WHEREAS each Shareholder desires that ELECTROSTAR, INC., a Florida
corporation (the "Company"), Parent and Sub enter into an Agreement and Plan
of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "MERGER AGREEMENT") with respect to the merger of Sub with
and into the Company (the "MERGER"); and
WHEREAS each Shareholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Sub to enter into and execute,
the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. Each Shareholder
severally, and not jointly, represents and warrants to Parent and Sub as
follows:
(a) Such Shareholder is the record and beneficial owner of the
number of shares of Common Stock, par value $.01 per share, of the Company
(the "COMPANY COMMON STOCK"), including shares of Company Common Stock
issuable upon conversion of shares of the Company's Class B non-voting common
stock, par value $.01 per share (the "Class B Common Stock"), separately
identified as such, set forth opposite such Shareholder's name in SCHEDULE A
hereto (as may be adjusted from time to time pursuant to Section 5, such
Shareholder's "SHARES"). Except for such Shareholder's Shares and any other
shares of Company Common Stock subject hereto, such Shareholder is not the
record or beneficial owner of any shares of Company Common Stock.
(b) This Agreement has been duly authorized, executed and
delivered by such Shareholder and constitutes the legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally. Neither the execution
and delivery of this Agreement nor the consummation by such Shareholder of the
transactions contemplated hereby will result in a violation of, or a default
under, or conflict with, any contract, trust, commitment, agreement,
understanding, arrangement or restriction of any kind to which such
Shareholder is a party or bound or to which such Shareholder's Shares are
subject. To the best of such Shareholder's knowledge, consummation by such
Shareholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to such
Shareholder or such Shareholder's Shares, except for any necessary filing
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(c) Such Shareholder's Shares and the certificates representing
such Shares are now and at all times during the term hereof will be held by
such Shareholder, or by a nominee or custodian for the benefit of such
Shareholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder.
<PAGE>
(d) Except for fees payable to Alex. Brown & Sons Incorporated
and Trivest II, Inc., no broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission from Parent, Sub or the Company in connection with
the transactions contemplated hereby based upon arrangements made by or on
behalf of such Shareholder (it being agreed that the representation set forth
in this Section 1(d) is being given by the holder of the Company's Class B
Common Stock only as to its knowledge).
(e) Such Shareholder understands and acknowledges that Parent
is entering into, and causing Sub to enter into, the Merger Agreement in
reliance upon such Shareholder's execution and delivery of this Agreement.
Such Shareholder acknowledges that the irrevocable proxy set forth in Section
4 is granted in consideration for the execution and delivery of the Merger
Agreement by Parent and Sub.
SECTION 2. AGREEMENT TO TENDER. Each Shareholder hereby severally
agrees that it shall tender its Shares into the Offer (as defined in the
Merger Agreement) and that it shall not withdraw any Shares so tendered (it
being understood that the obligation contained in this sentence is
unconditional). If necessary, the Shareholder holding the outstanding shares
of Class B Common Stock shall convert such shares into Company Common Stock
and tender the Company Common Stock issued upon conversion as provided in the
previous sentence.
SECTION 3. COVENANTS. Each Shareholder severally, and not jointly,
agrees with, and covenants to, Parent and Sub as follows:
(a) Such Shareholder shall not, except as contemplated by the
terms of this Agreement, (i) TRANSFER (the term "transfer" shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Shareholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby;
provided, however, that nothing in this Agreement shall prohibit Kenton K.
Alder and F.G. Lindsey Burton from making charitable contributions of up to
54,000 and 20,000 shares of Company Common Stock, respectively.
(b) Subject to Section 8, such Shareholder shall not, nor shall it
permit any investment banker, attorney or other adviser or representative of
such Shareholder to, directly or indirectly, (i) solicit, initiate or
encourage the submission of, any Acquisition Proposal (as defined in the
Merger Agreement) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by an investment
banker, attorney or other adviser or representative of such Shareholder,
whether or not such person is purporting to act on behalf of such Shareholder
or otherwise, shall be deemed to be a violation of this Section 3(b) by such
Shareholder.
2
<PAGE>
SECTION 4. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(a) Each Shareholder hereby irrevocably grants to, and
appoints, Parent and Jeff Mattfolk, J. Brad McGee, Brian Moroze and any other
individual who shall hereafter be designated by Parent, such Shareholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of such Shareholder, to vote such Shareholder's Shares,
or grant a consent or approval in respect of such Shares, at any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought,
against (i) any merger agreement or merger (other than the Merger Agreement
and the Merger), consolidation, combination, sale of substantial assets,
reorganization, joint venture, recapitalization, dissolution, liquidation or
winding up of or by the Company and (ii) any amendment of the Company's
Articles of Incorporation or By-laws or other proposal or transaction
(including any consent solicitation to remove or elect any directors of the
Company) involving the Company or any of its subsidiaries which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent
or nullify, or result in a breach of any covenant, representation or warranty
or any other obligation or agreement of the Company under or with respect to,
the Offer, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (each of the foregoing in clause (i) or
(ii) above, a "COMPETING TRANSACTION").
(b) Such Shareholder represents that any proxies heretofore
given in respect of such Shareholder's Shares are not irrevocable, and that
any such proxies are hereby revoked.
(c) Such Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 4 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Shareholder under this Agreement. Such
Shareholder hereby further affirms that the irrevocable proxy is coupled with
an interest and may under no circumstances be revoked. Such Shareholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do
or cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section
607.0722 of the Florida Business Corporations Act (the "CORPORATION LAW").
SECTION 5. CERTAIN EVENTS. Each Shareholder agrees that this
Agreement and the obligations hereunder shall attach to such Shareholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation such Shareholder's heirs, guardians,
administrators or successors. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Company Common Stock, or the
acquisition of additional shares of Company Common Stock or other securities
or rights of the Company by any Shareholder, the number of Shares listed on
Schedule A beside the name of such Shareholder shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any
additional shares of Company Common Stock or other securities or rights of the
Company issued to or acquired by such Shareholder.
SECTION 6. STOP TRANSFER; LEGEND. The Company agrees with, and
covenants to, Parent that the Company shall not register the transfer of any
certificate representing any Shareholder's Shares, unless such transfer is
made to Parent or Sub or otherwise in compliance with this Agreement. Each
Shareholder agrees that such Shareholder will tender to the Company, within
five business days after the date hereof, any and all certificates
representing such Shareholder's Shares and the Company will inscribe upon such
certificates the following legend: "The shares of Common Stock, par value
$.01 per share, of the Company represented by this certificate are subject to
a Shareholder Agreement dated as
3
<PAGE>
of November 27, 1996, and may not be sold or otherwise transferred, except in
accordance therewith. Copies of such Agreement may be obtained at the
principal executive offices of the Company.
SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board
of Directors of the Company shall not have duly and validly authorized and
approved by all necessary corporate action the acquisition of Company Common
Stock by Parent and Sub and the other transactions contemplated by this
Agreement and the Merger Agreement, so that by the execution and delivery
hereof Parent or Sub would become, or could reasonably be expected to become,
an "Interested shareholder" with whom the Company would be prevented for any
period pursuant to Section 607.0901 of the Corporation Law from engaging in
any "Affiliated transaction" (as such terms are defined in Section 607.0901 of
the Corporation Law) then this Agreement shall be void and unenforceable until
such time as such authorization and approval shall have been duly and validly
obtained.
SECTION 8. SHAREHOLDER CAPACITY. No person executing this Agreement
who is or becomes during the term hereof a director or officer of the Company
makes any agreement or understanding herein in his or her capacity as such
director or officer. Each Shareholder signs solely in its capacity as the
record holder and beneficial owner of such Shareholder's Shares and nothing
herein shall limit or affect any actions taken by a Shareholder or any
officer, director, partner or affiliate of such Shareholder in its capacity as
an officer or director of the Company to the extent specifically permitted by
the Merger Agreement.
SECTION 9. FURTHER ASSURANCES. Each Shareholder shall, upon request
of Parent or Sub execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent or Sub to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
such Shareholder's Shares as contemplated by Section 4 in Parent and the other
irrevocable proxies described therein.
SECTION 10. TERMINATION. This Agreement, and all rights and
obligations of the parties hereunder, shall terminate upon the earlier of (a)
the date upon which the Merger Agreement is terminated in accordance with its
terms either (i) by Parent or Sub (provided that no termination under this
clause shall relieve any Shareholder of liability for such shareholder's
breach of its or his obligations under this Agreement) or (ii) by mutual
written consent of Parent, Sub and the Company or (b) the date that Parent or
Sub shall have purchased and paid for the Shares of each Shareholder pursuant
to Section 2.
SECTION 11. PUBLIC ANNOUNCEMENTS. Each Shareholder will consult with
Parent before issuing, and provide Parent with the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Merger Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 12. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Parent or Sub, to
the address set forth in Section
4
<PAGE>
10.02 of the Merger Agreement; and (ii) if to a Shareholder, to the address
set forth on Schedule A hereto, or such other address as may be specified in
writing by such Shareholder.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective (even without the signature of any other Shareholder) as to any
Shareholder when one or more counterparts have been signed by each of Parent,
Sub and such Shareholder and delivered to Parent, Sub and such Shareholder.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the New York and, to the extent expressly
provided herein, the Corporation Law, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except by laws of descent. Any assignment in
violation of the foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any event, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law.
(i) Each Shareholder agrees that irreparable damage would occur and
that Parent and Sub would not have any adequate remedy at law in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly
agreed that Parent and Sub shall be entitled to an injunction or injunctions
to prevent breaches by any Shareholder of this Agreement and to enforce
specifically the terms and provisions of this Agreement. Each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of New York in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court located in the State of New York. The prevailing party in any judicial
action shall be entitled to receive from the other party reimbursement for the
prevailing party's reasonable attorneys' fees and disbursements, and court
costs.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing
and signed by such party.
5
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Shareholders have
caused this Agreement to be duly executed and delivered as of the date first
written above.
TYCO INTERNATIONAL LTD.
By: /s/ James B. McGee
------------------
Name: James B. McGee
Title: Vice President
T3 ACQUISITION CORP.
By: /s/ James B. McGee
------------------
Name: James B. McGee
Title: Vice President
ACKNOWLEDGED AND AGREED
TO AS TO SECTION 6:
ELECTROSTAR, INC.
By: /s/ Kenton K. Alder
-------------------
Name: Kenton K. Alder
Title: President and Chief Executive Officer
6
<PAGE>
TRIVEST FUND I, LTD.
By: Trivest 1988 Fund Managers, Ltd.,
its general partner
By: Trivest Group, Inc., its general
partner
By: /s/ Michael E. Moran
--------------------
Michael E. Moran
Senior Vice President
Address: 2665 South Bayshore Drive
8th Floor
Miami, Florida 33133
Taxpayer ID: 06-1224572
Telephone: (305)858-2200
TRIVEST EQUITY PARTNERS I, LTD.
By: Trivest 1988 Fund Managers, Ltd.,
its general partner
By: Trivest Group, Inc., its general
partner
By: /s/ Michael E. Moran
-----------------------
Michael E. Moran
Senior Vice President
Address: 2665 South Bayshore Drive
8th Floor
Miami, Florida 33133
Taxpayer ID: 06-1224574
Telephone: (305) 858-2200
7
<PAGE>
LAC PARTNERS
By: /s/ Earl W. Powell
------------------
Earl W. Powell
Managing General Partner
Address: 2665 South Bayshore Drive
8th Floor
Miami, Florida 33133
Taxpayer ID: 65-0468491
Telephone: (305) 858-2200
HELLER FINANCIAL, INC.
By: /s/ Patricia Weitzman
---------------------
Patricia Weitzman
Senior Vice President
Address: 500 West Monroe Street
Chicago, Illinois 60661
Taxpayer ID: 36-1208070
Telephone: (312) 441-7328
/s/ Kenton K. Alder
-------------------
Kenton K. Alder
/s/ John Mayer
--------------
John Mayer
/s/ F. G. Lindsay Burton, Jr.
-----------------------------
F. G. Lindsay Burton, Jr.
8
<PAGE>
SCHEDULE A
NAME AND ADDRESS OF SHAREHOLDER NUMBER OF SHARES OF
COMMON STOCK OWNED
Trivest Fund I, Ltd.
2665 South Bayshore Drive
8th Floor
Miami, Florida 33133 2,185,115
Trivest Equity Partners I, Ltd.
2665 South Bayshore Drive
8th Floor
Miami, Florida 33133 682,403
LAC Partners
2665 South Bayshore Drive
8th Floor
Miami, Florida 33133 367,557
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661 620,737*
* Class B non-voting common stock (equal number of shares of Common Stock
issuable upon conversion and sale)
Kenton K. Alder
3080 North 1400 East
North Logan, Utah 84341 440,651
John Mayer
14198 Alisal Lane
SantaMonica, California 90402 219,450
F.G. Lindsay Burton
371 South 300 East
Smithfield, Utah 84335 149,084
9
