<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
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ZERO CORPORATION
(NAME OF ISSUER)
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS
(NAMES OF PERSONS FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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989484 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
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WILFORD D. GODBOLD, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ZERO CORPORATION
444 SOUTH FLOWER STREET, SUITE 2100
LOS ANGELES, CALIFORNIA 90071-2922
(213) 629-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSONS FILING STATEMENT)
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COPY TO:
PETER F. ZIEGLER, ESQ.
GIBSON, DUNN & CRUTCHER
333 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071-3197
(213) 229-7000
FEBRUARY 1, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
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CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$72,000,000 $14,400
(*) Determined pursuant to Rule 0-11(b)(1) of the Securities Exchange Act of
1934. Assumes the purchase of 4,000,000 shares at the maximum tender offer
price of $18.00 per share.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
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<PAGE>
This Issuer Tender Offer Statement on Schedule 13E-4 (this "Statement")
relates to an offer by ZERO Corporation, a Delaware corporation (the
"Company"), and Electronic Solutions, a Nevada corporation and a wholly owned
subsidiary of the Company (the "Subsidiary"), to purchase, upon the terms and
subject to the conditions contained in the Offer to Purchase, dated February
1, 1996 (the "Offer to Purchase"), and the accompanying Letter of Transmittal
(which together constitute the "Offer" and which are annexed to and filed with
this Statement as Exhibits (a)(1) and (a)(2), respectively) up to 4,000,000
shares of Common Stock of the Company, par value $.01 per share (the
"Shares"), at prices, net to the seller in cash, without interest thereon, not
greater than $18.00 nor less than $15.75 per Share, taking into consideration
the number of Shares so tendered and the prices specified by the tendering
stockholders.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is ZERO Corporation, a Delaware corporation. The
address of its principal executive office is 444 South Flower Street, Suite
2100, Los Angeles, California 90071-2922.
(b) The class of equity securities to which this Statement relates is the
Common Stock, par value $.01 per Share. Reference is hereby made to the
information set forth on the cover page, including the inside front cover
page, of the Offer to Purchase, which is incorporated herein by reference.
(c) Reference is hereby made to the information set forth in "8. PRICE RANGE
OF SHARES; DIVIDENDS; REDUCTION IN DIVIDENDS" of the Offer to Purchase, which
is incorporated herein by reference.
(d) Electronic Solutions, a Nevada corporation and wholly owned subsidiary
of the issuer is jointly filing this Statement with the issuer. The address of
Electronic Solutions' principal executive office is c/o ZERO Corporation, 444
South Flower Street, Suite 2100, Los Angeles, California 90071-2922.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Reference is hereby made to the information set forth in "11. SOURCE AND
AMOUNT OF FUNDS" of the Offer to Purchase, which is incorporated herein by
reference.
(b) Reference is hereby made to the information set forth in "11. SOURCE AND
AMOUNT OF FUNDS" of the Offer to Purchase, which is incorporated herein by
reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) Reference is hereby made to the information set forth in "9. PURPOSE
OF THE OFFER; CERTAIN EFFECTS OF THE OFFER" of the Offer to Purchase, which is
incorporated herein by reference. Except as set forth in the Offer to
Purchase, neither the Company nor the Subsidiary has any present plans or
proposals which would relate to, or would result in, any transaction, change
or other occurrence with respect to the Company or any class of equity
securities of the Company as is listed in paragraphs (a) through (j) of Item 3
of Schedule 13E-4.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is hereby made to the information set forth in "12. TRANSACTIONS
AND AGREEMENTS CONCERNING THE SHARES" of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Reference is hereby made to the information set forth in "12. TRANSACTIONS
AND AGREEMENTS CONCERNING THE SHARES" of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Reference is hereby made to the information set forth in "15. FEES AND
EXPENSES" of the Offer to Purchase, which is incorporated herein by reference.
2
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ITEM 7. FINANCIAL INFORMATION.
(a)-(b) Reference is hereby made to the information set forth in "10.
CERTAIN INFORMATION CONCERNING THE COMPANY AND THE SUBSIDIARY; RESULTS OF
RECENT OPERATIONS" of the Offer to Purchase, which is incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not applicable.
(d) None.
(e) Reference is hereby made to the entire text of the Offer to Purchase and
the related Letter of Transmittal, which are incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated February 1, 1996.
(a)(2) Form of Letter of Transmittal, together with Guidelines for
Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Form of Letter to Stockholders from Wilford D. Godbold, Jr.,
President and Chief Executive Officer of the Company, dated February
1, 1996.
(a)(7) Form of press release issued by the Company on January 30, 1996.
(a)(8) Form of Memorandum and Election Form, dated February 1, 1996, to
participants in the ZERO Corporation Retirement Savings Plan.
(b) Form of Private Shelf Agreement by and among the Company, the
Subsidiary, The Prudential Insurance Company of America, and each
Prudential Affiliate (as defined in the Private Shelf Agreement)
which becomes bound by certain provisions of the Private Shelf
Agreement, dated as of January 31, 1996.
(c) None.
(d) None.
(e) None.
(f) None.
</TABLE>
3
<PAGE>
SIGNATURES
After due inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
ZERO CORPORATION
/s/ WILFORD D. GODBOLD, JR.
By:__________________________________
Wilford D. Godbold, Jr.
President and Chief Executive
Officer
ELECTRONIC SOLUTIONS
/s/ WILFORD D. GODBOLD, JR.
By:__________________________________
Wilford D. Godbold, Jr.
Chairman
Dated: February 1, 1996
4
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
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<C> <S> <C>
(a)(1) Offer to Purchase, dated February 1, 1996.
(a)(2) Form of Letter of Transmittal, together with Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Form of Letter to Stockholders from Wilford D. Godbold,
Jr., President and Chief Executive Officer of the Company,
dated February 1, 1996.
(a)(7) Form of press release issued by the Company on January 30,
1996.
(a)(8) Form of Memorandum and Election Form, dated February 1,
1996, to participants in the ZERO Corporation Retirement
Savings Plan.
(b) Form of Private Shelf Agreement by and among the Company,
the Subsidiary,
The Prudential Insurance Company of America, and each
Prudential Affiliate (as defined in the Private Shelf
Agreement) which becomes bound by certain provisions of the
Private Shelf Agreement, dated as of January 31, 1996.
(c) None.
(d) None.
(e) None.
(f) None.
</TABLE>
5
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 4,000,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE,
OF ZERO CORPORATION
AT A PURCHASE PRICE NOT GREATER THAN $18.00
NOR LESS THAN $15.75 PER SHARE
BY
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 29, 1996,
UNLESS THE OFFER IS EXTENDED.
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ZERO Corporation, a Delaware corporation (the "Company"), and Electronic
Solutions, a Nevada corporation and a wholly owned subsidiary of the Company
(the "Subsidiary"; the Company and the Subsidiary are referred to herein
collectively as the "Purchasers" and each is sometimes referred to herein
individually as a "Purchaser"), hereby jointly invite the stockholders of the
Company to tender shares of Common Stock of the Company, par value $.01 per
share (the "Shares"), at prices, net to the seller in cash, without interest
thereon, not greater than $18.00 nor less than $15.75 per Share specified by
such tendering stockholders, upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal (which together
constitute the "Offer"). The Purchasers will determine a single per Share
price (not greater than $18.00 nor less than $15.75 per Share) that they will
pay for the Shares validly tendered pursuant to the Offer and not withdrawn
(the "Purchase Price"), taking into consideration the number of Shares so
tendered and the prices specified by the tendering stockholders. The
Purchasers will select the lowest Purchase Price that will enable them to
purchase 4,000,000 Shares (or such lesser number of Shares as are validly
tendered and not withdrawn at prices not greater than $18.00 nor less than
$15.75 per Share) pursuant to the Offer. The Purchasers will purchase all
Shares validly tendered at prices at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date (as defined in Section 1), upon
the terms and subject to the conditions of the Offer, including the provisions
thereof relating to proration and conditional tenders described herein. The
Purchase Price will be paid in cash, net to the seller, without interest
thereon, with respect to all Shares purchased. All Shares tendered at prices
in excess of the Purchase Price, Shares not purchased because of proration and
Shares that were conditionally tendered and not accepted for purchase will be
returned. Stockholders must complete the section of the Letter of Transmittal
relating to the price at which they are tendering Shares in order to validly
tender Shares.
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THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED.THE OFFER IS, HOWEVER, SUBJECT TO OTHER CONDITIONS. SEE SECTION 7.
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IMPORTANT
Any stockholder desiring to tender all or any portion of his or her 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 First Interstate Bank of
California (the "Depositary"), and either mail or deliver the certificates
representing Shares to be tendered to the Depositary along with the Letter of
Transmittal or deliver such Shares pursuant to the procedure for book-entry
transfer set forth in Section 3 or (2) request his or her broker, dealer,
commercial bank, trust company or nominee to effect the transaction for him or
her. A stockholder whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or nominee must contact such broker,
dealer, commercial bank, trust company or nominee if he or she desires to
tender such Shares. Any stockholder who desires to tender Shares and whose
certificates for such Shares are not immediately available, or who cannot
comply in a timely manner with the procedure for book-entry transfer, should
tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3.
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NEITHER THE COMPANY, THE SUBSIDIARY, NOR THEIR RESPECTIVE BOARDS OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER
TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR
HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE.
THE PURCHASERS HAVE BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE
COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
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CONCURRENTLY WITH ANNOUNCING THE OFFER, THE COMPANY ANNOUNCED THAT UPON
THE CONSUMMATION OF THE OFFER THE BOARD OF DIRECTORS OF THE COMPANY
(THE "BOARD") INTENDS TO REDUCE THE ANNUAL CASH DIVIDEND OF THE
COMPANY FROM $.44 PER SHARE TO $.12 PER SHARE EFFECTIVE FOR
THE APRIL 1996 QUARTERLY DIVIDEND DECLARATION. SEE SECTION 8.
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THE DEALER MANAGER FOR THE OFFER IS:
PAINEWEBBER INCORPORATED
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THE DATE OF THIS OFFER TO PURCHASE IS FEBRUARY 1, 1996
<PAGE>
As of January 30, 1996, the Company had issued and outstanding 16,107,976
Shares and had reserved for issuance upon exercise of outstanding stock
options 869,871 Shares. The 4,000,000 Shares that the Purchasers are offering
to purchase pursuant to the Offer represent approximately 25% of the Shares
then outstanding, or approximately 24% of the Shares then outstanding on a
fully diluted basis (assuming the exercise of all outstanding stock options).
The Shares are listed and principally traded on the New York Stock Exchange
(the "NYSE"). The Shares are also listed and traded on the Pacific Stock
Exchange. The Shares trade under the symbol "ZRO." On January 30, 1996, the
closing price of the Shares on the NYSE Composite Tape was $15.25 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase, and such copies will be furnished promptly at the Purchasers'
expense. Stockholders may also contact their local broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
PURCHASERS AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE
OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE RELATED LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION
AND SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY EITHER OF THE PURCHASERS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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1. NUMBER OF SHARES; PRORATION.................................. 2
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES.................. 4
3. PROCEDURE FOR TENDERING SHARES............................... 4
4. WITHDRAWAL RIGHTS............................................ 7
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE
PRICE....................................................... 8
6. CONDITIONAL TENDER OF SHARES................................. 9
7. CERTAIN CONDITIONS OF THE OFFER.............................. 10
8. PRICE RANGE OF SHARES; DIVIDENDS; REDUCTION IN DIVIDENDS..... 12
9. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER........... 12
10. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE
SUBSIDIARY; RESULTS OF RECENT OPERATIONS.................... 14
11. SOURCE AND AMOUNT OF FUNDS................................... 17
12. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES............ 19
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES...................... 19
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.............. 23
15. FEES AND EXPENSES............................................ 23
16. MISCELLANEOUS................................................ 24
Schedule A CERTAIN TRANSACTIONS INVOLVING SHARES........................ A-1
</TABLE>
<PAGE>
To the Holders of Shares of Common Stock of
ZERO Corporation:
ZERO Corporation, a Delaware corporation (the "Company"), and Electronic
Solutions, a Nevada corporation and a wholly owned subsidiary of the Company
(the "Subsidiary"; the Company and the Subsidiary are referred to herein
collectively as the "Purchasers" and each is sometimes referred to herein
individually as a "Purchaser"), hereby jointly invite the stockholders of the
Company to tender shares of the Common Stock of the Company, par value $.01
per share (the "Shares") at a price, net to the seller in cash, without
interest thereon, not greater than $18.00 nor less than $15.75 per Share
specified by such tendering stockholders, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer").
The Purchasers will determine a single per Share price (not greater than
$18.00 nor less than $15.75 per Share) that they will pay for the Shares
validly tendered pursuant to the Offer and not withdrawn (the "Purchase
Price"), taking into account the number of Shares so tendered and the prices
specified by tendering stockholders. The Purchasers will select the lowest
Purchase Price that will enable them to purchase 4,000,000 Shares (or such
lesser number of Shares as is validly tendered and not withdrawn at prices not
greater than $18.00 nor less than $15.75 per Share) pursuant to the Offer. The
Purchasers will purchase all Shares validly tendered at prices at or below the
Purchase Price and not withdrawn on or prior to the Expiration Date (as
defined in Section 1), upon the terms and subject to the conditions of the
Offer, including the provisions relating to proration and conditional tenders
described below. The Purchase Price will be paid in cash, net to the seller,
without interest thereon, with respect to all Shares purchased. Shares
tendered at prices in excess of the Purchase Price, Shares not purchased
because of proration and Shares that were conditionally tendered and not
accepted for purchase will be returned. The Purchasers have not yet determined
what respective proportions each Purchaser will contribute toward the total
amount of funds required to consummate the Offer and stockholders should be
aware that the percentage of Shares to be purchased by each of the Purchasers
will not be determined until after the Expiration Date and after the time at
which Shares may be withdrawn pursuant to the terms of the Offer. This may
affect the tax treatment of tendering stockholders who are corporations and
tendering stockholders who own or constructively own (within the meaning of
Section 318 of the Internal Revenue Code of 1986, as amended) shares in
corporations. See Section 13. All of the funds contributed by the Subsidiary
will be obtained from borrowings pursuant to a private shelf agreement. See
Section 11. The Purchasers shall purchase Shares from each tendering
stockholder whose Shares are to be purchased pursuant to the Offer
proportionately to the amount of each Purchaser's respective contribution
toward the aggregate Purchase Price for all Shares purchased pursuant to the
Offer (with appropriate adjustments to avoid purchases of fractional Shares).
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 7.
If more than 4,000,000 Shares (or such greater number of Shares as the
Purchasers may elect to purchase) have been validly tendered at or below the
Purchase Price and not withdrawn on or prior to the Expiration Date, the
Purchasers will purchase Shares first from stockholders who owned
beneficially, as of the close of business on January 31, 1996, and continue to
own beneficially as of the Expiration Date, an aggregate of fewer than 100
Shares (other than Shares held in the Fund or in the Dividend Reinvestment
Plan (as such terms are defined below)) who properly tender all their Shares
at or below the Purchase Price, and then on a pro rata basis from all other
stockholders who validly tender Shares at or below the Purchase Price. See
Sections 1 and 2. Tendering stockholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to the Instructions to
the Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Purchasers pursuant to the Offer. The Purchasers will pay certain expenses
of PaineWebber Incorporated (the "Dealer Manager"), First Interstate Bank of
California (the "Depositary") and Morrow & Co. (the "Information Agent")
incurred in connection with the Offer. See Section 15. ANY TENDERING
STOCKHOLDER 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 UNITED
STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS
PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE
SECTIONS 3 AND 13.
1
<PAGE>
As of January 24, 1996, the ZERO Corporation Stock Fund (the "Fund") held
9,783 Shares in accounts for participants in the ZERO Corporation Retirement
Savings Plan (the "Plan"). Under the terms of the Plan, participants may
instruct the trustee for the Plan to tender Shares held in the Fund allocated
to the participant's account as of January 31, 1996. See Section 3.
As of January 29, 1996, the ZERO Corporation Dividend Reinvestment Plan (the
"Dividend Reinvestment Plan") held 250,578.95 Shares in accounts for
participants therein. Participants in the Dividend Reinvestment Plan may
instruct First Interstate Bank of California, as administrator of the Dividend
Reinvestment Plan, to tender Shares allocated to the participant's account.
See Section 3.
NEITHER THE COMPANY, THE SUBSIDIARY, NOR THEIR RESPECTIVE BOARDS OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER
ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT
PRICE.
THE PURCHASERS HAVE BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF
THE COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
As of January 30, 1996, the Company had issued and outstanding 16,107,976
Shares and had reserved for issuance upon exercise of outstanding stock
options 869,871 Shares. The 4,000,000 Shares that the Purchasers are offering
to purchase pursuant to the Offer represent approximately 25% of the Shares
then outstanding, or approximately 24% of the Shares then outstanding on a
fully diluted basis (assuming the exercise of all outstanding stock options).
The Shares are listed and principally traded on the New York Stock Exchange
("NYSE"). The Shares are also listed and traded on the Pacific Stock Exchange.
The Shares trade under the symbol "ZRO." On January 30, 1996, the closing
price of the Shares on the NYSE Composite Tape was $15.25 per Share. See
Section 8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
CONCURRENTLY WITH ANNOUNCING THE OFFER, THE COMPANY ANNOUNCED THAT UPON THE
CONSUMMATION OF THE OFFER THE BOARD INTENDS TO REDUCE THE ANNUAL CASH DIVIDEND
OF THE COMPANY FROM $.44 PER SHARE TO $.12 PER SHARE EFFECTIVE FOR THE APRIL
1996 QUARTERLY DIVIDEND DECLARATION. SEE SECTION 8.
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions described herein and in the
Letter of Transmittal, the Purchasers will purchase up to 4,000,000 Shares
that are validly tendered on or prior to the Expiration Date (as defined
below) (and not properly withdrawn in accordance with Section 4) at a price
(determined in the manner set forth below) not greater than $18.00 nor less
than $15.75 per Share. The later of 12:00 midnight, New York City time, on
Thursday, February 29, 1996, or the latest time and date to which the Offer is
extended pursuant to Section 14, is referred to herein as the "Expiration
Date." If the Offer is oversubscribed as described below, only Shares tendered
at or below the Purchase Price on or prior to the Expiration Date will be
eligible for proration. The proration period also expires on the Expiration
Date.
The Purchasers will determine the Purchase Price taking into consideration
the number of Shares so tendered and the prices specified by tendering
stockholders. The Purchasers will select the lowest Purchase Price that will
enable them to purchase 4,000,000 Shares (or such lesser number of Shares as
is validly tendered and not withdrawn at prices not greater than $18.00 nor
less than $15.75 per Share) pursuant to the Offer. Subject to Section 14, the
Purchasers reserve the right, in their sole discretion, to purchase more than
4,000,000 Shares
2
<PAGE>
pursuant to the Offer, but do not currently plan to do so. The Offer is not
conditioned on any minimum number of Shares being tendered. THE OFFER IS,
HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
In accordance with Instruction 5 of the Letter of Transmittal, each
stockholder who wishes to tender Shares must specify the price (not greater
than $18.00 nor less than $15.75 per Share) at which such stockholder is
willing to have the Purchasers purchase such Shares. As promptly as
practicable following the Expiration Date, the Purchasers will determine the
Purchase Price (not greater than $18.00 nor less than $15.75 per Share) that
they will pay for Shares validly tendered and not withdrawn pursuant to the
Offer, taking into account the number of Shares so tendered and the prices
specified by tendering stockholders. All Shares purchased pursuant to the
Offer will be purchased at the Purchase Price. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices greater than the
Purchase Price and Shares not purchased because of proration or because they
were conditionally tendered and not accepted for purchase, will be returned to
the tendering stockholders at the Purchasers' expense as promptly as
practicable following the Expiration Date.
The Purchasers have not yet determined what respective proportions each
Purchaser will contribute toward the total amount of funds required to
consummate the Offer and stockholders should be aware that the percentage of
Shares to be purchased by each of the Purchasers will not be determined until
after the Expiration Date and after the time at which Shares may be withdrawn
pursuant to the terms of the Offer. This may affect the tax treatment of
certain tendering stockholders. See Section 13. All of the funds contributed
by the Subsidiary will be obtained from borrowings pursuant to a private shelf
agreement. See Section 11. The Purchasers shall purchase Shares from each
tendering stockholder whose Shares are to be purchased pursuant to the Offer
proportionately to the amount of each Purchaser's respective contribution
toward the aggregate Purchase Price for all Shares purchased pursuant to the
Offer (with appropriate adjustments to avoid purchases of fractional Shares).
Upon the terms and subject to the conditions of the Offer, if 4,000,000 or
fewer Shares have been validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date, the Purchasers will purchase all
such Shares. Upon the terms and subject to the conditions of the Offer, if
more than 4,000,000 Shares have been validly tendered at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date, the Purchasers
will purchase Shares in the following order of priority:
(a) first, all Shares (other than Shares held in the Fund or in the
Dividend Reinvestment Plan) validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date by or on behalf of any
stockholder who owned beneficially, as of the close of business on January
31, 1996 and continues to own beneficially as of the Expiration Date, an
aggregate of fewer than 100 Shares (other than Shares held in the Fund or
in the Dividend Reinvestment Plan) and who validly tenders all of such
Shares (partial and conditional tenders will not qualify for this
preference) and completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, subject to the
conditional tender provisions described in Section 6, all other Shares
(including Shares held in the Fund and in the Dividend Reinvestment Plan)
validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date on a pro rata basis, if necessary (with
appropriate adjustments to avoid purchases of fractional Shares).
If proration of tendered Shares is required, (i) because of the difficulty
in determining the number of Shares validly tendered (including Shares
tendered by the guaranteed delivery procedure described in Section 3), (ii) as
a result of the "odd lot" procedure described in Section 2, and (iii) as a
result of the conditional tender procedure described in Section 6, the
Purchasers do not expect that they would be able to announce the final
proration factor or to commence payment for any Shares purchased pursuant to
the Offer until approximately seven NYSE trading days after the Expiration
Date. Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Holders of Shares may
obtain such preliminary information from the Dealer Manager or the Information
Agent and may also be able to obtain such information from their brokers.
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The Purchasers expressly reserve the right, in their sole discretion, at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary
and making public announcement thereof. See Section 14. There can be no
assurance, however, that the Purchasers will exercise their right to extend
the Offer.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Copies of this Offer to Purchase and the related Letter of Transmittal are
being mailed to record holders of Shares and will be furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear
on the Company's stockholder 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. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES
All Shares validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date by or on behalf of any stockholder who
owned beneficially, as of the close of business on January 31, 1996, and
continues to own beneficially as of the Expiration Date, an aggregate of fewer
than 100 Shares (other than Shares held in the Fund or in the Dividend
Reinvestment Plan), will be accepted for purchase before proration, if any, of
other tendered Shares. Partial or conditional tenders will not qualify for
this preference, and it is not available to beneficial holders of 100 or more
Shares, even if such holders have separate stock certificates for fewer than
100 Shares. By accepting the Offer, a stockholder owning beneficially fewer
than 100 Shares (other than Shares held in the Fund or in the Dividend
Reinvestment Plan) will avoid the payment of brokerage commissions and the
applicable odd lot discount payable in a sale of such Shares in a transaction
effected on a securities exchange. Shares held in the Fund and in the Dividend
Reinvestment Plan will be subject to any proration, even if owned by a person
who beneficially owned, as of the close of business on January 31, 1996, and
continues to own beneficially as of the Expiration Date, fewer than 100 Shares
held in the either or both of the Fund and the Dividend Reinvestment Plan. See
Section 1.
As of January 29, 1996, there were approximately 6,190 holders of record of
Shares. Approximately 60% of these holders of record held individually fewer
than 100 Shares and held in the aggregate approximately 79,245.703 Shares.
Because of the large number of Shares held in the names of brokers and
nominees, the Purchasers are unable to estimate the number of beneficial
owners of fewer than 100 Shares or the aggregate number of Shares they own.
Any stockholder wishing to tender all of his or her Shares pursuant to this
Section should complete the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery.
The Purchasers also reserve the right, but will not be obligated, to
purchase all Shares duly tendered by any stockholder who tendered all Shares
beneficially owned at or below the Purchase Price and who, as a result of
proration, would then beneficially own an aggregate of fewer than 100 Shares.
If the Purchasers exercise this right, they will increase the number of Shares
that they are offering to purchase in the Offer by the number of Shares
purchased through the exercise of such right.
3. PROCEDURE FOR TENDERING SHARES
To validly tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal or facsimile thereof,
together with any required signature guarantees 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 and
either (i) certificates for the Shares to be tendered must be received by the
Depositary at one of such addresses or (ii) such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such delivery received by the Depositary), in each case on or
prior to the Expiration Date, or (b) the tendering holder of Shares must
comply with the guaranteed delivery procedure described below including,
without limitation, completion and execution of one or more Letters of
Transmittal.
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IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, IN ORDER TO
TENDER SHARES PURSUANT TO THE OFFER, A STOCKHOLDER MUST INDICATE IN THE
SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING
TENDERED" ON THE LETTER OF TRANSMITTAL, THE PRICE (IN MULTIPLES OF $0.25) AT
WHICH SUCH SHARES ARE BEING TENDERED, EXCEPT THAT ANY STOCKHOLDER WHO OWNED
BENEFICIALLY, AS OF THE CLOSE OF BUSINESS ON JANUARY 31, 1996, AND CONTINUES
TO OWN BENEFICIALLY AS OF THE EXPIRATION DATE, AN AGGREGATE OF FEWER THAN 100
SHARES (OTHER THAN SHARES HELD IN THE FUND OR IN THE DIVIDEND REINVESTMENT
PLAN) MAY CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL ENTITLED
"ODD LOTS" INDICATING THAT THE STOCKHOLDER IS TENDERING ALL OF SUCH
STOCKHOLDER'S SHARES AT THE PURCHASE PRICE DETERMINED BY THE PURCHASERS IN
ACCORDANCE WITH THE TERMS OF THE OFFER. Stockholders wishing to tender Shares
at more than one price must complete separate Letters of Transmittal for each
price at which such Shares are being tendered. The same Shares cannot be
tendered at more than one price. FOR A TENDER OF SHARES TO BE VALID, A PRICE
BOX, BUT ONLY ONE PRICE BOX, ON EACH LETTER OF TRANSMITTAL MUST BE CHECKED.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company ("DTC"), Midwest Securities Trust Company ("MSTC")
and Philadelphia Depository Trust Company ("PDTC") (hereinafter collectively
referred to as 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 the system of any Book-Entry
Transfer Facility may make delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account in
accordance with the procedures of such Book-Entry Transfer Facility. Although
delivery of Shares may be effected through book-entry transfer, a properly
completed and duly executed Letter of Transmittal or facsimile thereof,
together with any required signature guarantees 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
on or prior to the Expiration Date, or the tendering holder of Shares must
comply with the guaranteed delivery procedure described below. Delivery of the
required documents to one of the Book-Entry Transfer Facilities in accordance
with its procedures does not constitute delivery to the Depositary and will
not constitute a valid tender.
Except as set forth below, all signatures on a Letter of Transmittal must be
guaranteed by a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc., or by a
commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (each of the foregoing being referred to as an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed if
(a) the Letter of Transmittal is signed by the registered holder of the Shares
(which term, for the purposes of this Section, includes any participant in any
Book-Entry Transfer Facility whose name appears on a security position listing
as the holder of the Shares) tendered therewith and such holder has not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal, (b) such Shares
are tendered for the account of an Eligible Institution, or (c) the Letter of
Transmittal is signed by a participant in the Dividend Reinvestment Plan whose
account is credited with the Shares tendered therewith. See Instructions 1 and
6 of the Letter of Transmittal.
If a stockholder desires to tender Shares pursuant to the Offer and cannot
deliver certificates for such Shares and all other required documents to the
Depositary on or prior to the Expiration Date or the procedure for book-entry
transfer cannot be complied with in a timely manner, such Shares may
nevertheless be tendered if all of the following conditions are met:
(i) such tender is 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 Purchasers (with any required
signature guarantees) is received by the Depositary, as provided below, on
or prior to the Expiration Date; and
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(iii) the certificates for such tendered Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities as described above), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal, are
received by the Depositary no later than 5:00 p.m., New York City time, on
the third NYSE trading day after the date of execution of the Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, transmitted by
facsimile transmission or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31%
OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING STOCKHOLDER
MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTAIN OTHER INFORMATION BY PROPERLY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN
STOCKHOLDERS (AS DEFINED IN SECTION 13) MUST SUBMIT A PROPERLY COMPLETED FORM
W-8 (WHICH MAY BE OBTAINED FROM THE DEPOSITARY) IN ORDER TO PREVENT BACKUP
WITHHOLDING. IN GENERAL, BACKUP WITHHOLDING DOES NOT APPLY TO CORPORATIONS OR
TO FOREIGN STOCKHOLDERS SUBJECT TO 30% (OR LOWER TREATY RATE) WITHHOLDING ON
GROSS PAYMENTS RECEIVED PURSUANT TO THE OFFER (AS DISCUSSED IN SECTION 13).
FOR A DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO TENDERING
STOCKHOLDERS, SEE SECTION 13. EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING HIS, HER OR ITS QUALIFICATION FOR EXEMPTION FROM
BACKUP WITHHOLDING AND THE PROCEDURE FOR OBTAINING ANY APPLICABLE EXEMPTION.
It is a violation of Rule 14e-4 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for a person to tender Shares
for his or her own account unless the person so tendering (i) has a net long
position equal to or greater than the amount of (x) Shares tendered or (y)
other securities immediately convertible into, exercisable, or exchangeable
for the amount of Shares tendered and will acquire such Shares for tender by
conversion, exercise or exchange of such other securities and (ii) will cause
such Shares to be delivered in accordance with the terms of the Offer. Rule
14e-4 provides a similar restriction applicable to the tender or guarantee of
a tender on behalf of another person. The tender of Shares pursuant to any one
of the procedures described herein will constitute the tendering stockholder's
representation and warranty that (i) such stockholder has a net long position
in the Shares being tendered within the meaning of Rule 14e-4 promulgated
under the Exchange Act, and (ii) the tender of such Shares complies with Rule
14e-4. The Purchasers' acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement among the tendering stockholder
and the Purchasers upon the terms and subject to the conditions of the Offer.
All questions as to the Purchase Price, the form of documents, the number of
Shares to be accepted and the validity, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by the Purchasers, in their sole discretion, which determination shall be
final and binding on all parties. The Purchasers reserve the absolute right to
reject any or all tenders of Shares that they determine are not in proper form
or the acceptance for payment of or payment for Shares that may, in the
opinion of the Purchasers' counsel, be unlawful. The Purchasers also reserve
the absolute right to waive any defect or
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irregularity in any tender of any particular Shares. None of the Company, the
Subsidiary, the Dealer Manager, the Depositary, the Information Agent or any
other person is or will be under any duty to give notice of any defect or
irregularity in tenders, nor shall any of them incur any liability for failure
to give any such notice.
As of January 24, 1996, the Fund held 9,783 Shares in accounts for
participants in the Plan. Under the terms of the Plan, a participant may
instruct the trustee for the Plan to tender Shares held in the Fund and
allocated to the participant's account as of January 31, 1996. Participants in
the Plan who wish to tender Shares held in the Fund allocated to their
respective accounts should so indicate by completing, executing and returning
to the trustee for the Plan, the election form included with the memorandum
furnished to such participants. PLAN PARTICIPANTS MAY NOT USE THE LETTER OF
TRANSMITTAL TO TENDER THEIR FUND SHARES, BUT MUST USE THE SEPARATE ELECTION
FORM REFERRED TO ABOVE. Participants in the Plan are urged to read such
separate memorandum and election form and related materials carefully.
As of January 29, 1996, the Dividend Reinvestment Plan held 250,578.95
Shares in accounts for participants therein. Participants in the Dividend
Reinvestment Plan may instruct First Interstate Bank of California, as
administrator of the Dividend Reinvestment Plan, to tender Shares allocated to
the participant's account. Shares for which the administrator has not received
timely instructions from participants will not be tendered. The administrator
will make available to the participants whose accounts are credited with
Shares under the Dividend Reinvestment Plan all documents furnished to
stockholders generally in connection with the Offer. Because the Depositary
for the Offer also acts as administrator of the Dividend Reinvestment Plan,
participants in the Dividend Reinvestment Plan may use the Letter of
Transmittal to instruct the administrator to tender such participant's Shares
in the Offer by completing the box entitled "Dividend Reinvestment Plan
Shares" on the Letter of Transmittal. Each participant may direct that all,
some or none of the Shares credited to the participant's account under the
Dividend Reinvestment Plan be tendered and the price at which such
participant's Shares are to be tendered. Participants in the Dividend
Reinvestment Plan who intend to tender Shares held in the Dividend
Reinvestment Plan in addition to Shares which are not held in the Dividend
Reinvestment Plan (other than Shares held in the Fund) may use one Letter of
Transmittal to tender all of such Shares if such participant wishes to tender
all such Shares at the same price. Separate Letters of Transmittal must be
used if a participant in the Dividend Reinvestment Plan intends to tender
Shares held in the Dividend Reinvestment Plan and Shares not held in the
Dividend Reinvestment Plan (other than Shares held in the Fund) at different
prices. See Instruction 5 to the Letter of Transmittal. Participants in the
Dividend Reinvestment Plan who do not wish to tender their Shares held in the
Dividend Reinvestment Plan do not need to take any action. Participants may
complete the box entitled "Dividend Reinvestment Plan Shares" on only one
Letter of Transmittal submitted by such participant. If a participant submits
more than one Letter of Transmittal and completes such box on more than one
Letter of Transmittal, the participant will be deemed to have elected to
tender all Shares credited to the stockholder's account under the Dividend
Reinvestment Plan at the lowest of the prices specified in such Letters of
Transmittal. Participants in the Dividend Reinvestment Plan are urged to read
the Letter of Transmittal and related materials carefully.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL,
MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE PURCHASERS. ANY SUCH
DOCUMENTS DELIVERED TO THE COMPANY OR TO THE SUBSIDIARY WILL NOT BE FORWARDED
TO THE DEPOSITARY AND THEREFORE WILL NOT BE DEEMED TO BE PROPERLY TENDERED.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after 12:00 midnight, New York City time, March 29,
1996 unless theretofore accepted for payment by the Purchasers as provided in
this Offer to Purchase. If the Purchasers extend the period of time during
which the Offer is open, are delayed in accepting for payment or paying for
Shares, or are unable to accept for payment or pay for Shares pursuant to the
Offer for
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any reason, then, without prejudice to the Purchasers' rights under the Offer,
the Depositary may, on behalf of the Purchasers, retain all Shares tendered,
and such Shares may not be withdrawn except as otherwise provided in this
Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which provides
that the issuer making the tender offer shall either pay the consideration
offered, or return the tendered securities promptly after the termination or
withdrawal of the tender offer.
Withdrawal of Shares Held in Physical Form. Tenders of Shares made pursuant
to the Offer may not be withdrawn after the Expiration Date, except that they
may be withdrawn after 12:00 midnight, New York City time, March 29, 1996
unless accepted for payment by the Purchasers as provided in this Offer to
Purchase. For a withdrawal to be effective, a stockholder of Shares held in
physical form must provide a written, telegraphic or facsimile transmission
notice of withdrawal to the Depositary at one of its addresses set forth on
the back cover page of this Offer to Purchase before the Expiration Date,
which notice must contain: (A) the name of the person who tendered the Shares;
(B) a description of the Shares to be withdrawn; (C) the certificate numbers
shown on the particular certificates evidencing such Shares; (D) the signature
of such stockholder executed in the same manner as the original signature on
the Letter of Transmittal (including any signature guarantee (if such original
signature was guaranteed)); and (E) if such Shares are held by a new
beneficial owner, evidence satisfactory to the Purchasers that the person
withdrawing the tender has succeeded to the beneficial ownership of the
Shares. A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a tender previously made.
Withdrawal of Shares Held with the Book-Entry Transfer Facility. Tenders of
Shares made pursuant to the Offer may not be withdrawn after the Expiration
Date, except that they may be withdrawn after 12:00 midnight, New York City
time, March 29, 1996 unless accepted for payment by the Purchasers as provided
in this Offer to Purchase. For a withdrawal to be effective, a stockholder of
Shares held with any of the Book-Entry Transfer Facilities must (i) call such
stockholder's broker and instruct such broker to withdraw such tender of
Shares by debiting the Depositary's account at such Book-Entry Transfer
Facility of all Shares to be withdrawn; and (ii) instruct such broker to
provide a written, telegraphic or facsimile transmission notice of withdrawal
to the Depositary on or before the Expiration Date. Such notice of withdrawal
shall contain (A) the name of the person who tendered the Shares; (B) a
description of the Shares to be withdrawn; and (C) if such Shares are held by
a new beneficial owner, evidence satisfactory to the Purchasers that the
person withdrawing the tender has succeeded to the beneficial ownership of the
Shares. A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a tender previously made.
Any permitted withdrawals of tenders of Shares may not be rescinded, and any
Shares so withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer; provided, however, that withdrawn Shares may be re-
tendered by following the procedures for tendering prior to the Expiration
Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchasers, in their sole
discretion, which determination shall be final and binding on all parties.
None of the Company, the Subsidiary, the Dealer Manager, the Depositary, the
Information Agent or any other person is or will be under any duty to give
notification of any defect or irregularity in any notice of withdrawal or
incur any liability for failure to give any such notification.
Participants in the Plan should follow the procedures for withdrawal
included in the memorandum furnished to such participants.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer and as promptly as
practicable after the Expiration Date, the Purchasers will determine the
Purchase Price, taking into consideration the number of Shares tendered and
the prices specified by tendering stockholders, announce the Purchase Price,
and (subject to the proration and conditional tender provisions of the Offer)
accept for payment and pay the Purchase Price for Shares validly
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tendered and not withdrawn at or below the Purchase Price. Thereafter, payment
for all Shares validly tendered on or prior to the Expiration Date and
accepted for payment pursuant to the Offer will be made by the Depositary by
check as promptly as practicable. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made only after timely receipt by
the Depositary of certificates for such Shares (or of a timely confirmation of
a book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities), a properly completed and duly executed
Letter of Transmittal or facsimile thereof, with any required signature
guarantees, and any other required documents.
For purposes of the Offer, the Purchasers shall be deemed to have accepted
for payment (and thereby purchased), subject to proration and conditional
tenders, Shares that are validly tendered and not withdrawn as, if and when
the Company gives oral or written notice, on behalf of the Company and the
Subsidiary, to the Depositary of the Purchasers' acceptance for payment of
such Shares. In the event of proration, the Purchasers will determine the
proration factor and pay for those tendered Shares accepted for payment as
soon as practicable after the Expiration Date. However, the Purchasers do not
expect to be able to announce the final results of any such proration until
approximately seven NYSE trading days after Expiration Date. The Purchasers
will pay for Shares that they have purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefor with the Depositary. The
Depositary will act as agent for tendering stockholders for the purpose of
receiving payment from the Purchasers and transmitting payment to tendering
stockholders. Under no circumstances will interest be paid on amounts to be
paid to tendering stockholders, regardless of any delay in making such
payment.
Certificates for all Shares not purchased, including all Shares tendered at
prices greater than the Purchase Price, Shares not purchased because of
proration and Shares that were conditionally tendered and not accepted, will
be returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to an account maintained with one of the Book-Entry
Transfer Facilities by the participant therein who so delivered such Shares)
as promptly as practicable following the Expiration Date without expense to
the tendering stockholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered or if proration is required. See
Section 1. In addition, if certain events occur, the Purchasers may not be
obligated to purchase Shares pursuant to the Offer. See Section 7.
The Purchasers will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares to them or their order pursuant
to the Offer. If, however, payment of the Purchase Price is to be made to, or
a portion of the Shares delivered (whether in certificated form or by book-
entry) but not tendered or not purchased are to be registered in the name of,
any person other than the registered holder, or if tendered Shares are
registered in the name of any person other than the person signing the Letter
of Transmittal (unless such person is signing in a representative or fiduciary
capacity), the amount of any stock transfer taxes (whether imposed on the
registered holder, such other person or otherwise) 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. See Instruction 7 to the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A FOREIGN INDIVIDUAL, A FORM W-8) MAY BE SUBJECT TO REQUIRED FEDERAL
INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER
OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
6. CONDITIONAL TENDER OF SHARES
Under certain circumstances and subject to the exceptions set forth in
Section 1, the Purchasers may prorate the number of Shares purchased pursuant
to the Offer. As discussed in Section 13, the number of Shares to be purchased
from a particular stockholder might affect the tax treatment of such purchase
to such stockholder and such stockholder's decision whether to tender. EACH
STOCKHOLDER IS URGED TO CONSULT WITH HIS
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OR HER OWN TAX ADVISOR. A stockholder may tender Shares subject to the
condition that a specified minimum number of such holder's Shares tendered
pursuant to a Letter of Transmittal or, if applicable, a Notice of Guaranteed
Delivery must be purchased if any such Shares so tendered are purchased, and
any stockholder desiring to make such a conditional tender must so indicate in
the box captioned "Conditional Tender" in such Letter of Transmittal or Notice
of Guaranteed Delivery.
Any tendering stockholders wishing to make a conditional tender must
calculate and appropriately indicate such minimum number of Shares. If the
effect of accepting tenders on a pro rata basis would be to reduce the number
of Shares to be purchased from any stockholder (tendered pursuant to a Letter
of Transmittal or Notice of Guaranteed Delivery) below the minimum number so
specified, such tender will automatically be regarded as withdrawn (except as
provided in the next paragraph) and all Shares tendered by such stockholder
pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will
be returned as promptly as practicable thereafter.
If conditional tenders, that would otherwise be so regarded as withdrawn,
would cause the total number of Shares to be purchased to fall below
4,000,000, then, to the extent feasible, the Purchasers will select enough of
such conditional tenders that would otherwise have been so withdrawn to permit
the Purchasers to purchase 4,000,000 Shares (or such greater number of Shares
as the Purchasers may elect to purchase). In selecting among such conditional
tenders, the Purchasers will select by lot and will limit their purchase in
each case to the minimum number of Shares designated by the stockholder in the
applicable Letter of Transmittal or Notice of Guaranteed Delivery as a
condition to his or her tender.
7. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Purchasers will not be
required to accept for payment or pay for any Shares tendered, and may
terminate or amend and may postpone (subject to the requirements of the
Exchange Act for prompt payment for or return of Shares tendered) the
acceptance for payment of Shares tendered, if at any time after January 31,
1996 and at or before acceptance for payment of any Shares any of the
following shall have occurred:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign,
or before any court, authority, agency or tribunal that (i) challenges the
acquisition of Shares pursuant to the Offer or otherwise in any manner
relates to or affects the Offer or (ii) in the sole judgment of the
Purchasers, could materially and adversely affect the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or any
of its subsidiaries or materially impair the Offer's contemplated benefits
to the Purchasers;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any legislative body, court, authority, agency
or tribunal which, in the Purchasers' sole judgment, would or might
directly or indirectly (i) make the acceptance for payment of, or payment
for, some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer, (ii) delay or restrict the ability of the
Purchasers, or render the Purchasers unable, to accept for payment or pay
for some or all of the Shares, (iii) materially impair the contemplated
benefits of the Offer to the Purchasers or (iv) materially affect the
business, condition (financial or other), income, operations or prospects
of the Company and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries;
(c) it shall have been publicly disclosed or the Purchasers shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding Shares whether
through the acquisition of stock,
10
<PAGE>
the formation of a group, the grant of any option or right, or otherwise
(other than as disclosed in a Schedule 13D or 13G on file with the
Securities and Exchange Commission (the "Commission") on January 31, 1996)
or (ii) any such person or group that on or prior to January 31, 1996 had
filed such a Schedule with the Commission thereafter shall have acquired or
shall propose to acquire whether through the acquisition of stock, the
formation of a group, the grant of any option or right, or otherwise,
beneficial ownership of additional Shares representing 2% or more of the
outstanding Shares;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) any decline in the market price of
the Shares by an amount in excess of 10% measured from the close of
business on January 30, 1996, or any significant decline in the general
level of market prices of equity securities in the United States or abroad,
(iii) any change in the general political, market, economic or financial
condition in the United States or abroad that could have a material adverse
effect on the business of the Company or any of its subsidiaries, condition
(financial or otherwise), income, operations, prospects or ability to
obtain financing generally or the trading in the Shares, (iv) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation on, or any event
which, in the Purchasers' sole judgment, might affect, the extension of
credit by lending institutions in the United States, (v) the commencement
of a war, armed hostilities or other international or national calamity
directly or indirectly involving the United States or (vi) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
in the Purchasers' sole judgment, a material acceleration or worsening
thereof;
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger, acquisition or other business
combination proposal for the Company, shall have been proposed, announced
or made by another person or group (within the meaning of Section 13(d)(3)
of the Exchange Act);
(f) there shall have occurred any event or events that has resulted, or
may in the sole judgment of the Purchasers result, directly or indirectly,
in an actual or threatened change in the business, condition (financial or
other), income, operations, stock ownership or prospects of the Company or
any of its subsidiaries; or
(g) there shall have occurred any decline in the Standard & Poor's 600
Small Cap Stock Index (120.71 at the close of business on January 30, 1996)
by an amount in excess of 10% measured from the close of business on
January 30, 1996;
and, in the sole judgment of the Purchasers, such event or events make it
undesirable or inadvisable to proceed with the Offer or with such acceptance
for payment.
The foregoing conditions are for the sole benefit of the Purchasers and may
be asserted by the Purchasers regardless of the circumstances (including any
action or inaction by the Company or the Subsidiary) giving rise to any such
condition, and any such condition may be waived by the Purchasers, in whole or
in part, at any time and from time to time in their sole discretion. The
failure by the Purchasers at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Purchasers concerning the events described
above will be final and binding on all parties.
The Exchange Act requires that all conditions to the Offer must be satisfied
or waived before the Expiration Date.
11
<PAGE>
8. PRICE RANGE OF SHARES; DIVIDENDS; REDUCTION IN DIVIDENDS
The Shares are listed and principally traded on the NYSE. The Shares are
also listed and traded on the Pacific Stock Exchange. The Shares trade under
the symbol "ZRO." The following table sets forth the high and low intraday
sales prices per Share on the NYSE Composite Tape and the declared cash
dividends per Share for the Company's fiscal quarters indicated.
<TABLE>
<CAPTION>
DECLARED CASH
DIVIDENDS
FISCAL QUARTERS HIGH LOW PER SHARE
--------------- ----- ----- -------------
<C> <S> <C> <C> <C>
1994: 1st Quarter................................. 15.13 13.00 $.10
2nd Quarter................................. 14.75 12.75 .10
3rd Quarter................................. 16.63 12.75 .10
4th Quarter................................. 16.13 12.63 .10
1995: 1st Quarter................................. 14.00 11.63 .10
2nd Quarter................................. 13.50 12.13 .10
3rd Quarter................................. 14.00 12.13 .10
4th Quarter................................. 14.75 12.63 .10
1996: 1st Quarter................................. 15.25 13.00 .11
2nd Quarter................................. 16.88 14.63 .11
3rd Quarter................................. 17.88 14.88 .11
4th Quarter (to January 30, 1996)........... 17.63 15.13 .11
</TABLE>
On January 30, 1996, the closing price of the Shares on the NYSE Composite
Tape was $15.25 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
CONCURRENTLY WITH ANNOUNCING THE OFFER, THE COMPANY ANNOUNCED THAT UPON THE
CONSUMMATION OF THE OFFER THE BOARD INTENDS TO REDUCE THE ANNUAL CASH DIVIDEND
OF THE COMPANY FROM $.44 PER SHARE TO $.12 PER SHARE EFFECTIVE FOR THE APRIL
1996 QUARTERLY DIVIDEND DECLARATION. THE COMPANY INTENDS TO UTILIZE THE
INCREASE IN CASH FLOW RESULTING FROM THE DIVIDEND REDUCTION FOR GENERAL
CORPORATE PURPOSES.
9. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
The Purchasers believe that the purchase of the Shares at this time
represents an attractive investment opportunity that will benefit the Company
and its stockholders. The Company and the Board believe that the Offer is in
the best interests of the Company and its stockholders and that it will
enhance stockholder value both in the short term and long term. For the period
from December 31, 1990 through December 31, 1995, the Company's cash and short
term investments have ranged from a low of approximately $20.1 million to a
high of approximately $39.0 million. As the Company has been active in making
acquisitions of businesses over the years, the management of the Company
determined that it was important to maintain both the safety and liquidity of
these funds so that such funds would be available for immediate use for
acquisitions. However, the Company's return on investment of such funds has
been less than the return achieved from the Company's operations.
The Company has three priorities for the cash it has been accumulating:
first, to maintain its technological leadership in the electronics
marketplace; second, to acquire complementary businesses; and third, to
repurchase Shares. The Company has addressed the first of its three priorities
by completing construction of new plants in England and Minnesota, building a
new plant in New Jersey and making significant upgrades in several other
businesses through direct investment, tools and machinery. At the current
time, the Company is not engaged in serious discussions regarding larger
acquisitions that might require use of these cash balances. Furthermore, the
current low interest rates make borrowing of any amounts necessary to complete
the purchase of Shares at this time attractive. Additionally, the Company
believes that the Shares are currently undervalued and that the repurchase
thereof is the best investment available to the Company at this time. The
Company's cash flow generating abilities, together with the $20 million loan
facility for acquisitions (see Section 11) and the reduction of the dividend
rate (see Section 8), will permit the Company to remain active in pursuing
acquisitions of complementary businesses.
12
<PAGE>
The Offer will afford to stockholders who are considering the sale of all or
a portion of their Shares the opportunity to determine the price (not greater
than $18.00 nor less than $15.75 per Share) at which they are willing to sell
their Shares and, in the event the Purchasers accept such Shares, to dispose
of Shares without the usual transaction costs associated with a market sale.
The Offer will also allow qualifying stockholders owning beneficially fewer
than 100 Shares (other than Shares held in the Fund or in the Dividend
Reinvestment Plan) to avoid the payment of brokerage commissions and the
applicable odd lot discount payable on a sale of Shares in a transaction
effected on a securities exchange. Correspondingly, the costs to the Company
for servicing the accounts of odd lot holders will be reduced. See Section 2.
Stockholders whose Shares are not purchased in the Offer will realize an
increase in their percentage ownership in the Company and thus, in the
Company's future earnings and assets. After consummation of the Offer,
increases or decreases in net income will likely be reflected in greater
increases or decreases in earnings per Share than is presently the case
because of the smaller number of Shares outstanding thereafter. CONCURRENTLY
WITH ANNOUNCING THE OFFER, THE COMPANY ANNOUNCED THAT UPON CONSUMMATION OF THE
OFFER THE BOARD INTENDS TO REDUCE THE ANNUAL CASH DIVIDEND OF THE COMPANY FROM
$.44 PER SHARE TO $.12 PER SHARE EFFECTIVE FOR THE APRIL 1996 QUARTERLY
DIVIDEND DECLARATION. See Section 8.
If fewer than 4,000,000 Shares are purchased pursuant to the Offer, either
of the Purchasers may repurchase the remainder of such Shares on the open
market, in privately negotiated transactions or otherwise. In the future,
either of the Purchasers may determine to purchase additional Shares on the
open market, in privately negotiated transactions, through one or more tender
offers or otherwise. Any such purchases may be on the same terms as, or on
terms which are more or less favorable to stockholders than, the terms of the
Offer. However, Rule 13e-4 under the Exchange Act prohibits the Purchasers and
their affiliates from purchasing any Shares, other than pursuant to the Offer,
until at least ten business days after the Expiration Date. Any future
purchases of Shares by either of the Purchasers would depend on many factors,
including the market price of the Shares, the Company's consolidated business
and financial position, and general economic and market conditions.
Shares that the Company acquires pursuant to the Offer shall become treasury
shares of the Company and will be available for sale or transfer by the
Company without further stockholder action. Such Shares could be sold or
transferred without stockholder approval for, among other things, the raising
of additional capital for use in the Company's business, stock dividends or in
connection with employee stock, stock option and other plans, or a combination
thereof. Shares that the Company and the Subsidiary acquire pursuant to the
Offer shall not be treated as outstanding for the purposes of calculation of
earnings per share, nor, under Delaware law, shall such Shares be entitled to
vote or be counted for quorum purposes. Neither the Company nor the Subsidiary
have any current plans for the Shares that the Purchasers may acquire pursuant
to the Offer, other than transfers of such Shares between and among the
Company and its wholly owned subsidiaries.
As of January 30, 1996, the Company had issued and outstanding 16,107,976
Shares and had reserved for issuance upon exercise of outstanding stock
options 869,871 Shares. The 4,000,000 Shares that the Purchasers are offering
to purchase pursuant to the Offer represent approximately 25% of the Shares
then outstanding, or approximately 24% of the Shares then outstanding on a
fully diluted basis (assuming the exercise of all outstanding stock options).
As of January 30, 1996, all directors and executive officers of the Company as
a group owned beneficially an aggregate of approximately 384,123 Shares
(including an aggregate of 191,635 Shares that may be acquired pursuant to the
exercise of outstanding stock options exercisable within 60 days of the date
hereof, approximately 1,432 Shares attributable to the accounts of all
directors and executive officers as a group who are participants in the Plan
and 45.393 Shares attributable to the accounts of all directors and executive
officers as a group under the Dividend Reinvestment Plan) or approximately
2.4% of the Shares outstanding as of January 30, 1996. The Purchasers have
been advised that no director or executive officer of the Company intends to
tender Shares pursuant to the Offer. If the Purchasers purchase 4,000,000
Shares pursuant to the Offer and no director or executive officer of the
Company tenders Shares in the Offer, the percentage of outstanding Shares
owned beneficially by all of the Company's directors and executive officers as
a group would
13
<PAGE>
increase to approximately 3.2% of the Shares then outstanding (including, for
this purpose, Shares that may be acquired by such directors and executive
officers pursuant to the exercise of outstanding stock options exercisable
within 60 days of the date hereof).
Except as disclosed in this Offer to Purchase, the Purchasers have no plans
or proposals which relate to or would result in: (a) the acquisition by any
person (other than by any subsidiary or subsidiaries of the Company) of
additional securities of the Company or the disposition of securities of the
Company (other than to any subsidiary or subsidiaries of the Company); (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries which is
material to the Company and its subsidiaries, taken as a whole; (c) a sale or
transfer of a material amount of assets of the Company and its subsidiaries,
taken as a whole; (d) any change in the present Board or management of the
Company; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company; (f) any other material change
in the Company's corporate structure or business; (g) any change in the
Company's Certificate of Incorporation or By-Laws or any actions which may
impede the acquisition of control of the Company by any person; (h) a class of
equity security of the Company being delisted from a national securities
exchange; (i) a class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act;
or (j) the suspension of the Company's obligation to file reports pursuant to
Section 15(d) of the Exchange Act.
The Purchasers do not expect that the Offer will result in delisting of the
Shares on either the NYSE or Pacific Stock Exchange or termination of
registration of the Shares under the Exchange Act.
NEITHER THE COMPANY, THE SUBSIDIARY, NOR THEIR RESPECTIVE BOARDS OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER
ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE
PURCHASERS HAVE BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE
COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
10. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE SUBSIDIARY; RESULTS OF
RECENT OPERATIONS
The Company, through the Subsidiary and other wholly owned subsidiaries, is
a leader in the engineering, manufacturing and marketing of engineered cases,
system packaging to enclose and cool electronic equipment and various products
used in the airline/air cargo industry. The Company was incorporated in
Delaware in 1988 as the successor in interest to a California corporation of
the same name that was originally incorporated in California in 1952. The
Company's principal executive offices are located at 444 South Flower Street,
Suite 2100, Los Angeles, California 90071-2922 and its telephone number is
(213) 629-7000.
Subsidiary is a wholly owned subsidiary of the Company. Subsidiary provides
state-of-the-art system packaging solutions including backplanes, card cages
and enclosures. Subsidiary was originally incorporated in Nevada in 1987. The
address of the Subsidiary's principal executive office is c/o ZERO
Corporation, 444 South Flower Street, Suite 2100, Los Angeles, California
90071-2922 and its telephone number is (800) 423-3868.
RESULTS OF RECENT OPERATIONS
On January 19, 1996 the Company announced results for the third quarter of
fiscal 1996 and nine-month period ended December 31, 1995. For the third
quarter, net sales rose approximately 12.1 percent to approximately $50.3
million, net income rose approximately 8.5 percent to approximately $3.9
million, and earnings per share rose approximately 9.1 percent to $.24 per
share, compared to approximately $44.9 million, approximately $3.5 million and
$.22, respectively, for the third quarter of fiscal 1995. Net sales for the
nine-month period ended December 31, 1995 grew approximately 11.2 percent to
approximately $150.3 million, compared to approximately $135.2 million, for
the first nine months of fiscal 1995. Net income increased approximately 11.5
percent to approximately $12.1 million, or $.75 per share, versus
approximately $10.9 million, or $.68 per share, for the same period of fiscal
1995.
14
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION FOR THE COMPANY
The following selected financial data for each of the six months ended
September 30, 1995 and September 30, 1994 (unaudited) are derived from the
unaudited consolidated financial statements of the Company and its
subsidiaries set forth in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995. In the opinion of the Company's management,
all adjustments considered necessary for a fair statement of the results for
the periods, which consisted only of normal recurring accruals, have been
made. Results for the six months are not necessarily indicative of the results
for the entire year for most of the Company's businesses. The following
selected financial data for each of the years ended March 31, 1995 and March
31, 1994 were derived from the audited consolidated financial statements of
ZERO Corporation and subsidiaries incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended March 31, 1995. The data should
be read in conjunction with, and is qualified in its entirety by reference to,
such audited consolidated financial statements and their related notes. The
foregoing reports may be obtained from the Commission in the manner specified
in Section 16 or over the Internet under the URL "http://www.sec.gov/cgi-
bin/srch-edgar" by searching under "ZERO." The Company's results for the
nine-month period ended December 31, 1995, are summarized above in "Results of
Recent Operations."
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
----------------- -----------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................. $100,004 $ 90,299 $179,694 $171,821
Total revenue.............................. 101,575 91,732 182,741 173,883
Income before income taxes................. 13,763 11,957 24,226 20,963
Net income................................. 8,257 7,306 14,825 12,851
Primary earnings per share................. $ .51 $ .46 $ .93 $ .81
Average number of common shares outstanding
(in thousands)............................ 16,152 15,976 16,020 15,958
Ratio of earnings to fixed charges(1)...... 21 19 19 19
BALANCE SHEET DATA (AT PERIOD END):
Total assets............................... $179,448 $165,296 $171,524 $158,734
Current liabilities........................ 18,524 18,146 19,361 16,933
Non-current liabilities.................... 9,805 6,112 6,569 5,324
Stockholders' equity....................... 151,119 141,038 145,594 136,477
Stockholders' equity per share............. $ 9.41 $ 8.86 $ 9.12 $ 8.57
</TABLE>
NOTE TO SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(1) The ratio of earnings to fixed charges was computed by dividing earnings
before fixed charges and income taxes by the fixed charges. Earnings
consist of income from operations, to which has been added fixed charges
and income taxes. Fixed charges consist of interest and debt expense and
one-third of rent expense, which approximates the interest factor.
15
<PAGE>
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following summary unaudited consolidated pro forma financial information
gives effect to the purchase of Shares pursuant to the Offer as if such
purchase had occurred at the beginning of the periods presented based on
certain assumptions described in the Notes to Summary Unaudited Consolidated
Pro Forma Financial Information. The summary unaudited consolidated pro forma
financial information should be read in conjunction with the summary
consolidated historical financial information and does not purport to be
indicative of the results that would actually have been obtained had the
purchase of the Shares pursuant to the Offer been completed at the dates
indicated or that may be obtained in the future.
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------------------ ------------------------------
PRO FORMA (1) PRO FORMA (1)
------------------- -------------------
ASSUMED ASSUMED ASSUMED ASSUMED
$15.75 $18.00 $15.75 $18.00
PER SHARE PER SHARE PER SHARE PER SHARE
UNAUDITED PURCHASE PURCHASE PURCHASE PURCHASE
HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $100,004 $100,004 $100,004 $179,694 $179,694 $179,694
Total revenue........... 101,575 101,207 100,976 182,741 181,933 181,459
Income before income
taxes.................. 13,763 11,645 11,414 24,226 19,918 19,444
Net income.............. 8,257 6,987 6,848 14,825 11,951 11,666
Primary earnings per
share(2)............... $ .51 $ .57 $ .56 $ .93 $ .99 $ .97
Average number of common
shares outstanding (in
thousands)............. 16,152 12,152 12,152 16,020 12,020 12,020
Pro forma ratio of
earnings to fixed
charges(3)............. 21 6 6 19 5 5
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995 AT MARCH 31, 1995
------------------------------ ------------------------------
PRO FORMA (1) PRO FORMA (1)
------------------- -------------------
ASSUMED ASSUMED ASSUMED ASSUMED
$15.75 $18.00 $15.75 $18.00
PER SHARE PER SHARE PER SHARE PER SHARE
UNAUDITED PURCHASE PURCHASE PURCHASE PURCHASE
HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Total assets............ $179,448 $164,710 $155,479 $171,524 $155,356 $145,882
Current liabilities..... 18,524 17,677 17,584 19,361 17,638 17,448
Other non-current
liabilities............ 8,325 8,325 8,325 6,569 6,569 6,569
Long-term debt.......... 1,480 51,480 51,480 -- 50,000 50,000
Stockholders' equity(4). 151,119 87,228 78,090 145,594 81,149 71,865
Stockholders' equity per
share(4)............... $ 9.41 $ 7.23 $ 6.48 $ 9.12 $ 6.78 $ 6.01
</TABLE>
16
<PAGE>
NOTES TO SUMMARY UNAUDITED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
The following assumptions regarding the Offer were made in determining the
summary unaudited consolidated pro forma financial information:
(1) The information assumes 4,000,000 Shares are purchased at $15.75 per Share
and at $18.00 per Share, with the purchase plus estimated expenses of
$500,000 being financed with $50 million borrowed by the Subsidiary under
a Private Shelf Agreement, and $13.5 million and $22.5 million in cash
respectively, derived from the sale of short term investments by the
Company. The information reflects the resultant interest income foregone
due to the sale of such short term investments and the increased interest
expense relating to the $50 million of borrowings by the Subsidiary under
the Private Shelf Agreement and the related impact of these items on the
provision for taxes. There can be no assurance that the Purchasers will
purchase 4,000,000 Shares or the price at which Shares will be purchased.
(2) The primary earnings per share calculation gives effect to the reduced
number of Shares that result from the repurchase of Shares pursuant to the
Offer.
(3) The pro forma ratio of earnings to fixed charges was computed by dividing
earnings before fixed charges and income taxes by the fixed charges.
Earnings consist of income from operations, to which has been added fixed
charges and income taxes. Fixed charges consist of interest and debt
expense and one-third of rent expense, which approximates the interest
factor.
(4) Adjustments have been made to reflect the reduction in historical
dividends paid on the 4,000,000 Shares repurchased pursuant to the Offer.
The Board of Directors of the Company intends to reduce the current annual
dividend rate from $.44 per Share to $.12 per Share effective with the
April 1996 dividend declaration. This intended reduction in future
dividend rates has not been reflected in the pro forma balance sheet data.
11. SOURCE AND AMOUNT OF FUNDS
Assuming that the Purchasers purchase 4,000,000 Shares pursuant to the Offer
at a price of $18.00 per Share, the total amount required by the Purchasers to
purchase such Shares will be $72 million, exclusive of fees and other
expenses.
Funds for the purchase of Shares shall be obtained from the following
sources: (i) borrowings by the Subsidiary of up to $50 million pursuant to a
Private Shelf Agreement (the "Private Shelf Agreement"), dated as of January
31, 1996, by and among the Company, the Subsidiary, The Prudential Insurance
Company of America ("Prudential") and each Prudential Affiliate (as defined in
the Private Shelf Agreement) which becomes bound by certain provisions of the
Private Shelf Agreement; and (ii) available cash and/or cash derived from the
sale of short term investments of the Company. The Purchasers have not yet
determined what respective proportions each Purchaser will contribute toward
the total amount of funds required to consummate the Offer and stockholders
should be aware that the percentage of Shares to be purchased by each of the
Purchasers will not be determined until after the Expiration Date and after
the time at which Shares may be withdrawn pursuant to the terms of the Offer.
This may affect the tax treatment of certain tendering stockholders. See
Section 13. The Subsidiary's contribution will not, under any circumstances,
exceed $50 million. All of the funds contributed by the Subsidiary will be
obtained from its borrowings pursuant to the Private Shelf Agreement. The
Purchasers shall purchase Shares from each tendering stockholder whose Shares
are to be purchased pursuant to the Offer proportionately to the amount of
each Purchaser's respective contribution toward the aggregate Purchase Price
for all Shares purchased pursuant to the Offer (with appropriate adjustments
to avoid purchases of fractional Shares). A copy of the Private Shelf
Agreement is filed as an exhibit to the Schedule 13E-4 and is incorporated
herein by reference. Capitalized terms used in this Section 11 without
definition shall have the meanings ascribed to such terms in the Private Shelf
Agreement.
Pursuant to the Private Shelf Agreement, the Subsidiary will authorize the
issue of its unsecured guaranteed senior promissory notes (the "Subsidiary
Notes") in the aggregate principal amount of up to $50 million. Subject
17
<PAGE>
to the occurrence of certain events and the terms and conditions of the
Private Shelf Agreement, Prudential will purchase from the Subsidiary and/or
cause the purchase thereof by one or more Prudential Affiliates, the
Subsidiary Notes at a price equal to 100% of the principal amount thereof. As
required by the terms of the Private Shelf Agreement, the Subsidiary intends
to use the proceeds from the sale of the Subsidiary Notes solely for the
purchase of the Shares pursuant to the Offer, and payment of expenses related
thereto. The full and prompt payment when due, and the due and punctual
performance of all obligations of the Subsidiary under the Subsidiary Notes
shall be absolutely, unconditionally and irrevocably guaranteed by the
Company.
The Company has paid Prudential a non-refundable structuring fee of $25,000,
and will be obligated to pay another structuring fee installment of $25,000 if
the purchase and sale of Subsidiary Notes does not occur on or before June 28,
1996. The Subsidiary will also be obligated to pay certain fees in the event
of any delay in or cancellation of the purchase and sale of the Subsidiary
Notes. The Subsidiary and the Company also jointly and severally have agreed
to pay Prudential for all out-of-pocket expenses arising in connection with
transactions contemplated by the Private Shelf Agreement.
Each Subsidiary Note shall be dated the date of issue thereof, shall have a
maturity date of not more than 15 years from the date of issue and an Average
Life to Maturity of not more than 10 years. The Subsidiary expects that the
Subsidiary Notes will have a maturity date 15 years from the date of issue.
The interest rate per annum on the outstanding principal balance of the
Subsidiary Notes will be determined at the time of issue, and will be equal to
(i) the yield reported for a series of actively traded U.S. Treasury
securities having an average life to maturity comparable to the Subsidiary
Notes, plus (ii) a credit spread to be determined by Prudential. The
Purchasers expect that the interest rate on the Subsidiary Notes will be
approximately 7% per annum. Interest on the Subsidiary Notes shall be payable
semi-annually in arrears. Pursuant to the Private Shelf Agreement, the
Subsidiary intends to select a schedule of required payments of principal
under the Subsidiary Notes whereby principal due under each Subsidiary Note
shall be paid in annual installments of an amount equal to one-eleventh (
1/11) of the original principal amount of such Subsidiary Note, commencing at
the end of the fifth year after the issue of the Subsidiary Notes and
continuing every year thereafter until such principal balance is paid in full.
The Subsidiary Notes may be prepaid, in whole at any time or in part from time
to time, by paying 100% of the principal amount so prepaid plus interest
thereon to the prepayment date and the Yield-Maintenance Amount.
The Private Shelf Agreement provides for the customary events of default,
including, without limitation: (i) certain defaults by the Company or any of
its subsidiaries on other indebtedness; (ii) under certain circumstances, the
rendering of one or more final judgments against the Company or any of its
subsidiaries exceeding, in the aggregate, $2,500,000; (iii) the ownership
beneficially and of record by the Company of less than 80% of the outstanding
voting stock of the Subsidiary; and (iv) certain events with respect to any
employee pension benefit plan of the Company and its subsidiaries which could
reasonably be expected to result in a Material Adverse Change.
Additionally, so long as any Subsidiary Note is outstanding and unpaid, the
Company has agreed to certain covenants, including, without limitation,
covenants that require (i) the ratio of current assets of the Company and its
subsidiaries on a consolidated basis to the current liabilities of the Company
and its subsidiaries on a consolidated basis to be no less than 1.25 to 1.0 at
any time and (ii) a minimum Consolidated Tangible Net Worth. Additionally, the
Company has entered into certain covenants, including without limitation,
covenants that would limit the ability of the Company to (i) create certain
liens, (ii) incur certain additional indebtedness, (iii) enter into certain
loans, advances and investments, (iv) enter into certain mergers or
consolidations, (v) transfer, including the sale, exchange, conveyance, lease,
transfer or other disposition of, certain of the Company's assets, (vi) enter
into certain transactions with affiliates, (vii) enter into any agreement
limiting or restricting the payment of dividends by any of the Company's
subsidiaries and (viii) other covenants which are customary for such type of
agreement. The Private Shelf Agreement also includes representations and
warranties customary for such type of agreement.
The Private Shelf Agreement also authorizes the Company to issue its senior
promissory notes (the "Company Notes") in the aggregate principal amount of
$20 million. Prudential will consider, in its sole
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discretion, the purchase of Company Notes pursuant to the Private Shelf
Agreement. Neither Prudential nor any Prudential Affiliate is obligated to
make or accept offers to purchase Company Notes, or to quote rates, spreads or
other terms with respect to specific purchases of Company Notes under the
Private Shelf Agreement. The Company does not intend to issue and sell Company
Notes to provide any portion of the funds required to consummate the Offer.
The Company has a commitment from a commercial bank regarding, and intends
after the commencement of the Offer to enter into, a $20 million unsecured
revolving credit agreement for a term of 2 years. Any borrowings under this
revolving credit facility would be used for working capital and for general
corporate purposes. The Company will not utilize this revolving credit
facility to provide any portion of the funds required to consummate the Offer.
The Subsidiary has no specific plans or arrangements to finance or repay the
indebtedness incurred under the Private Shelf Agreement other than according
to the expected schedule of required payments of principal described above.
12. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
The Company has not acquired any Shares within the past 5 years. Except as
set forth above and on Schedule A hereto, based upon the Purchasers' records
and upon information provided to the Purchasers by their respective directors
and executive officers, neither the Company, the Subsidiary, nor, to the
Purchasers' knowledge, any of their respective associates, subsidiaries,
directors, executive officers or any associate of any such director or
executive officer has engaged in any transactions involving the Shares during
the 40 business days preceding the date hereof. Neither the Company, the
Subsidiary, nor, to the Purchasers' knowledge, any of their respective
directors or executive officers is a party to any contract, arrangement,
understanding or relationship relating directly or indirectly to the Offer
with any other person with respect to the Shares (including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such Shares, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies, consents or authorizations).
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In General. The following is a discussion of the material United States
federal income tax consequences to stockholders with respect to a sale of
Shares pursuant to the Offer. The discussion is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, Internal Revenue Service ("IRS") rulings and judicial decisions,
all in effect as of the date hereof and all of which are subject to change
(possibly with retroactive effect) by subsequent legislative, judicial or
administrative action. The discussion does not address all aspects of United
States federal income taxation that may be relevant to a particular
stockholder in light of such stockholder's particular circumstances or to
certain types of holders subject to special treatment under the United States
federal income tax laws (such as certain financial institutions, tax-exempt
organizations, life insurance companies, dealers in securities or currencies,
or stockholders holding the Shares as part of a conversion transaction, as
part of a hedge or hedging transaction, or as a position in a straddle for tax
purposes). In addition, the discussion below does not consider the effect of
any foreign, state, local or other tax laws that may be applicable to
particular stockholders. The discussion assumes that the Shares are held as
"capital assets" within the meaning of Section 1221 of the Code.
EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THAT STOCKHOLDER
TENDERING SHARES PURSUANT TO THE OFFER AND THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS AND RECENT CHANGES IN APPLICABLE TAX LAWS.
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Characterization of the Surrender of Shares Pursuant to the Offer. The
surrender of Shares by a stockholder to the Purchasers pursuant to the Offer
will be a taxable transaction for United States federal income tax purposes
and may also be a taxable transaction under applicable state, local and
foreign tax laws. The United States federal income tax consequences to a
stockholder may vary depending upon the stockholder's particular facts and
circumstances. Under Section 302 of the Code, the surrender of Shares by a
stockholder to the Purchasers pursuant to the Offer will be treated as a "sale
or exchange" of such Shares for United States federal income tax purposes
(rather than as a distribution by the Company with respect to the Shares held
by the tendering stockholder) if the receipt of cash upon such surrender (i)
is "substantially disproportionate" with respect to the stockholder, (ii)
results in a "complete redemption" of the Shares owned by the stockholder, or
(iii) is "not essentially equivalent to a dividend" with respect to the
stockholder (each as described below).
If any of the above three tests is satisfied, and the surrender of the
Shares is therefore treated as a "sale or exchange" of such Shares for United
States federal income tax purposes, the tendering stockholder will recognize
gain or loss equal to the difference between the amount of cash received by
the stockholder and the stockholder's tax basis in the Shares surrendered
pursuant to the Offer. Any such gain or loss will be capital gain or loss, and
will be long term capital gain or loss if the Shares have been held for more
than one year.
If none of the above three tests is satisfied, the tendering stockholder
will be treated as having received a distribution by the Company with respect
to such stockholder's Shares in an amount equal to the cash received by the
stockholder pursuant to the Offer. The distribution will be treated as a
dividend taxable as ordinary income to the extent of the Company's (or, in the
case of Shares acquired by the Subsidiary, first to the extent of the
Subsidiary's and then to the extent of the Company's) current or accumulated
earnings and profits for tax purposes. The amount of the distribution in
excess of such current or accumulated earnings and profits will be treated as
a return of the stockholder's tax basis in the Shares, and then as gain from
the sale or exchange of such Shares. The Company believes that it has
sufficient current and accumulated earnings and profits, such that
stockholders who do not qualify for sale or exchange treatment will be treated
as having received a dividend taxable as ordinary income in the full amount of
the cash received pursuant to the Offer. In that event, the tendering
stockholder's basis in the Shares surrendered pursuant to the Offer generally
will be added to such stockholder's basis in his or her remaining Shares, if
any.
Constructive Ownership. In determining whether any of the three tests under
Section 302 of the Code is satisfied, stockholders must take into account not
only the Shares which are actually owned by the stockholder, but also Shares
which are constructively owned by the stockholder within the meaning of
Section 318 of the Code. Under Section 318 of the Code, a stockholder may be
deemed to own Shares actually owned, and in some cases constructively owned,
by certain related individuals or entities and Shares which the stockholder
has the right to acquire by exercise of an option or by conversion.
Furthermore, because of the application of Section 304 of the Code to
purchases of stock through the use of related corporations, more liberal
constructive ownership rules generally will apply to stockholders who are
corporations and stockholders who own or constructively own (within the
meaning of Section 318 of the Code) shares in corporations for purposes of
determining whether any of the three tests under Section 302 of the Code is
satisfied with respect to Shares purchased by the Subsidiary. These rules may
result in a Stockholder constructively owning more Shares than he or she would
otherwise constructively own if instead such Shares were purchased by the
Company and may make the tests for sale or exchange treatment more difficult
to satisfy. The Purchasers have not yet determined what respective proportions
each Purchaser will contribute toward the total amount of funds required to
consummate the Offer and stockholders should be aware that the percentage of
Shares to be purchased by each of the Purchasers will not be determined until
after the Expiration Date and after the time at which Shares may be withdrawn
pursuant to the terms of the Offer. The Company and the Subsidiary shall
purchase Shares from each tendering stockholder whose Shares are to be
purchased pursuant to the Offer proportionately to the amount of their
respective contributions toward the aggregate Purchase Price for all Shares
purchased pursuant to the Offer (with appropriate adjustments to avoid
purchases of fractional Shares). See Sections 1 and 11. EACH STOCKHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISER SPECIFICALLY WITH RESPECT TO THE
IMPACT OF THESE CONSTRUCTIVE OWNERSHIP RULES ON THE PROPER APPLICATION OF THE
TESTS UNDER SECTION 302 OF THE CODE.
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Proration. Contemporaneous dispositions or acquisitions of Shares by a
stockholder or related individuals or entities may be deemed to be part of a
single integrated transaction which will be taken into account in determining
whether any of the three tests under Section 302 of the Code has been
satisfied. Each stockholder should be aware that because proration may occur
in the Offer, even if all the Shares actually and constructively owned by a
stockholder are tendered pursuant to the Offer, fewer than all of such Shares
may be purchased by the Company and the Subsidiary. Thus, proration may affect
whether the surrender by a stockholder pursuant to the Offer will meet any of
the three tests under Section 302 of the Code. See Section 6 for information
regarding each stockholder's option to make a conditional tender of a minimum
number of Shares. Therefore, a stockholder should consult his or her own tax
advisor regarding whether to make contemporaneous dispositions or acquisitions
of Shares, and whether to make a conditional tender of a minimum number of
Shares, and the appropriate calculation thereof.
Section 302 Tests. The receipt of cash by a stockholder will be
"substantially disproportionate" if the percentage of the outstanding Shares
actually and constructively owned by the stockholder immediately following the
surrender of Shares pursuant to the Offer is less than 80% of the percentage
of the outstanding Shares actually and constructively owned by such
stockholder immediately before the sale of Shares pursuant to the Offer.
Stockholders should consult their tax advisors with respect to the application
of the "substantially disproportionate" test to their particular situation.
The receipt of cash by a stockholder will be a "complete redemption" of all
the Shares owned by the stockholder if either (i) all of the Shares actually
and constructively owned by the stockholder are surrendered pursuant to the
Offer, or (ii) all of the Shares actually owned by the stockholder are
surrendered pursuant to the Offer and, with respect to Shares constructively
owned by the stockholder which are not surrendered pursuant to the Offer, the
stockholder is eligible to waive (and effectively waives) constructive
ownership of all such Shares under procedures described in Section 302(c) of
the Code.
Even if the receipt of cash by a stockholder fails to satisfy the
"substantially disproportionate" test or the "complete redemption" test, a
stockholder may nevertheless satisfy the "not essentially equivalent to a
dividend" test, if the stockholder's surrender of Shares pursuant to the Offer
results in a "meaningful reduction" in the stockholder's interest in the
Company. Whether the receipt of cash by a stockholder will be "not essentially
equivalent to a dividend" will depend upon the individual stockholder's facts
and circumstances. The IRS has indicated in published rulings that even a
small reduction in the proportionate interest of a small minority stockholder
in a publicly held corporation who exercises no control over corporate affairs
may constitute such a "meaningful reduction." Stockholders expecting to rely
upon the "not essentially equivalent to a dividend" test should consult their
own tax advisors as to its application in their particular situation.
Corporate Stockholder Dividend Treatment. If a sale of Shares by a corporate
stockholder is treated as a dividend, the corporate stockholder may be
entitled to claim a deduction equal to 70% of the dividend under Section 243
of the Code, subject to applicable limitations. Corporate stockholders should,
however, consider the effect of Section 246(c) of the Code, which disallows
the 70% dividends-received deduction with respect to stock that is held for 45
days or less. For this purpose, the length of time a taxpayer is deemed to
have held stock may be reduced by periods during which the taxpayer's risk of
loss with respect to the stock is diminished by reason of the existence of
certain options or other transactions. Moreover, under Section 246A of the
Code, if a corporate stockholder has incurred indebtedness directly
attributable to an investment in Shares, the 70% dividends-received deduction
may be reduced.
In addition, amounts received by a corporate stockholder pursuant to the
Offer that are treated as a dividend may constitute an "extraordinary
dividend" under Section 1059 of the Code. Generally, an "extraordinary
dividend" is a dividend that (i) equals or exceeds 10% of the stockholder's
basis in the Shares (treating all dividends having ex-dividend sales within an
85-day period as a single dividend) or (ii) exceeds 20% of the stockholder's
adjusted basis in the Shares (treating all dividends having ex-dividend sales
within a 365-day period as a single dividend). Accordingly, if applicable, a
corporate stockholder would be required under Section 1059(a) of the Code to
reduce its basis (but not below zero) in its Shares by the non-taxed portion
of the dividend (i.e., the portion of the dividend for which a deduction is
allowed), and if such portion exceeds the stockholder's tax basis for its
Shares, to treat the excess as gain from the sale of such Shares in the year
in which
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a sale or disposition of such Shares occurs (which, in certain circumstances,
may be the year in which Shares are sold pursuant to the Offer).
Corporate stockholders also should be aware that legislation is pending in
Congress which, if enacted in its current form, would generally require
immediate gain recognition whenever the basis of stock with respect to which
any extraordinary dividend was received is reduced below zero. Legislation
also has been proposed to reduce the amount a corporate shareholder may deduct
under Section 243 of the Code from 70% to 50% of the amount of the dividend
received and disallow the dividends received deduction if the 46 day holding
period under Section 246(c) of the Code is not satisfied with respect to such
stock over a period immediately before and immediately after the stockholder
becomes entitled to receive the dividend. It is impossible to predict whether
this or similar legislation will be enacted.
Additional Tax Considerations. The distinction between long-term capital
gains and ordinary income is relevant because, in general, individuals
currently are subject to taxation at a reduced rate on their "net capital
gain" (i.e., the excess of net long-term capital gains over net short-term
capital losses) for the year. Legislation is pending in Congress which, if
enacted in its current form, would substantially reduce the tax rate
applicable to net capital gains of individuals and corporations. It is
impossible to predict whether this or similar legislation will be enacted.
Stockholders are urged to consult their own tax advisors regarding any
possible impact on their obligation to make estimated tax payments as a result
of the recognition of any capital gain (or the receipt of any ordinary income)
caused by the surrender of any Shares to the Purchasers pursuant to the Offer.
Foreign Stockholders. The Purchasers will withhold United States federal
income tax at a rate of 30% from gross proceeds paid pursuant to the Offer to
a foreign stockholder or his or her agent, unless the Purchasers determine
that a reduced rate of withholding is applicable pursuant to a tax treaty or
that an exemption from withholding is applicable because such gross proceeds
are effectively connected with the conduct of a trade or business by the
foreign stockholder within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, or (iii) any estate or
trust the income of which is subject to United States federal income taxation
regardless of its source. Without definite knowledge to the contrary, the
Purchasers will determine whether a stockholder is a foreign stockholder by
reference to the stockholder's address. A foreign stockholder may be eligible
to file for a refund of such tax or a portion of such tax if such stockholder
(i) meets the "complete redemption," "substantially disproportionate" or "not
essentially equivalent to a dividend" tests described above, (ii) is entitled
to a reduced rate of withholding pursuant to a treaty and the Purchasers
withheld at a higher rate, or (iii) is otherwise able to establish that no tax
or a reduced amount of tax was due. In order to claim an exemption from
withholding on the ground that gross proceeds paid pursuant to the Offer are
effectively connected with the conduct of a trade or business by a foreign
stockholder within the United States or that the foreign stockholder is
entitled to the benefits of a tax treaty, the foreign stockholder must deliver
to the Depositary (or other person who is otherwise required to withhold
United States tax) a properly executed statement claiming such exemption or
benefits. Such statements may be obtained from the Depositary. Foreign
stockholders are urged to consult their own tax advisors regarding the
application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and the refund
procedures.
Backup Withholding. See Section 3 with respect to the application of the
United States federal income tax backup withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND MAY NOT APPLY TO SHARES ACQUIRED IN CONNECTION WITH THE EXERCISE OF STOCK
OPTIONS OR PURSUANT TO OTHER COMPENSATION ARRANGEMENTS WITH THE COMPANY. THE
TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING
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STOCKHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF
TENDERING SHARES PURSUANT TO THE OFFER AND THE EFFECT OF THE CONSTRUCTIVE
OWNERSHIP RULES DESCRIBED ABOVE.
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Purchasers expressly reserve the right, in their sole discretion and at
any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary and making a public announcement thereof. There can be no
assurance, however, that the Purchasers will exercise their right to extend
the Offer. During any such extension, all Shares previously tendered will
remain subject to the Offer, except to the extent that such Shares may be
withdrawn as set forth in Section 4. The Purchasers also expressly reserve the
right, in their sole discretion, (i) to terminate the Offer and not accept for
payment any Shares not theretofore accepted for payment or, subject to Rule
13-4(f)(5) under the Exchange Act, which requires the Company either to pay
the consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer, to postpone payment for Shares upon
the occurrence of any of the conditions specified in Section 7 hereof by
giving oral or written notice of such termination to the Depositary and making
a public announcement thereof and (ii) at any time, or from time to time, to
amend the Offer in any respect. Amendments to the Offer may be effected by
public announcement. Without limiting the manner in which the Purchasers may
choose to make public announcement of any extension, termination or amendment,
neither the Company nor the Subsidiary shall have any obligation (except as
otherwise required by applicable law) to publish, advertise or otherwise
communicate any such public announcement, other than by making a release to
the Dow Jones News Service, except in the case of an announcement of an
extension of the Offer, in which case the Purchasers shall have no obligation
to publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Material changes to information previously provided to holders of the
Shares in this Offer or in documents furnished subsequent thereto will be
disseminated to holders of Shares in compliance with Rule 13e-4(e)(2)
promulgated by the Commission under the Exchange Act.
The Offer will continue or be extended for at least ten business days from
the time that either of the Company or the Subsidiary publishes, sends or
gives to holders of Shares a notice that the Purchasers will(a) increase or
decrease the price they will pay for Shares or the amount of the Dealer
Manager's soliciting fee or (b) increase (except for an increase not exceeding
2% of the outstanding Shares) or decrease the number of Shares they seek to
purchase.
15. FEES AND EXPENSES
PaineWebber Incorporated will act as Dealer Manager for the Purchasers in
connection with the Offer. The Purchasers have agreed to pay the Dealer
Manager a fee of $50,000 plus $.05 per Share purchased by the Purchasers
pursuant to the Offer. The Dealer Manager will also be reimbursed by the
Purchasers for its reasonable out-of-pocket expenses, including attorneys'
fees, up to $50,000 and will be indemnified against certain liabilities,
including liabilities under the federal securities laws, in connection with
the Offer.
The Purchasers have retained First Interstate Bank of California as
Depositary and Morrow & Co. as Information Agent in connection with the Offer.
The Information Agent may contact stockholders by mail, telephone, telex,
telegraph and personal interviews, and may request brokers, dealers and other
nominee stockholders to forward materials relating to the Offer to beneficial
owners. The Depositary and the Information Agent will receive reasonable and
customary compensation for their services and will also be reimbursed for
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<PAGE>
certain out-of-pocket expenses. The Purchasers have agreed to indemnify the
Depositary and the Information Agent against certain liabilities, including
certain liabilities under the federal securities laws, in connection with the
Offer. Neither the Information Agent nor the Depositary has been retained to
make solicitations or recommendations in connection with the Offer.
Neither the Company nor the Subsidiary will pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer (other than the fee of the Dealer Manager). The Purchasers will,
upon request, reimburse brokers, dealers, commercial banks and trust companies
for reasonable and customary handling and mailing expenses incurred by them in
forwarding materials relating to the Offer to their customers.
16. MISCELLANEOUS
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Certain information as of particular dates concerning the
Company's directors and officers, their remuneration, 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 filed with the Commission.
The Purchasers have also filed an Issuer Tender Offer Statement on Schedule
13E-4 with the Commission, which includes certain additional information
relating to the Offer. Such reports, as well as such other material, may be
inspected and copies may be obtained at the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington, D.C., and should also be
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may be obtained by mail, upon payment
of the Commission's customary fees, from the Commission's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports, proxy
statements and other information also should be available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York, and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California. The foregoing
information may also be obtained over the Internet under the URL
"http://www.sec.gov/cgi-bin/srch-edgar" by searching under "ZERO". The
Purchasers' Schedule 13E-4 may not be available at the Commission's regional
offices.
The Offer is being made to all holders of Shares. The Purchasers are not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to a valid state statute. If either
of the Purchasers becomes aware of any valid state statute prohibiting the
making of the Offer, the Purchasers will make a good faith effort to comply
with such statute. If, after such good faith effort, the Purchasers cannot
comply with such statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, holders of Shares in such state. In those
jurisdictions whose securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchasers by the Dealer Manager or one or more registered
brokers or dealers licensed under the laws of such jurisdictions.
ZERO CORPORATION
February 1, 1996 ELECTRONIC SOLUTIONS
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SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
On December 29, 1995, J.F. Hermanson, an executive officer of the Company,
exercised options to purchase 5,500 Shares at an exercise price of $11.56 per
Share.
R.H. Bolton, an executive officer of the Subsidiary, exercised options to
purchase 1,100 Shares at an exercise price of $11.56 per Share on December 5,
1995; 1,800 Shares at an exercise price of $11.56 per Share on January 10,
1996; and 2,000 Shares at an exercise price of $11.31 per Share on January 24,
1996.
A-1
<PAGE>
The Dealer Manager for the Offer is:
PAINEWEBBER INCORPORATED
725 South Figueroa Street, Suite 4100, Los Angeles, California 90017
Telephone: (213) 972-1759 (call collect)
Telephone: (800) 526-8910 (toll-free)
Any questions concerning the terms of the Offer may be directed to the Dealer
Manager.
The Information Agent for the Offer is:
MORROW & CO.
909 Third Avenue, New York, New York 10022
Telephone: (212) 754-8000 (call collect)
Telephone: (800) 662-5200 (toll-free)
Any questions concerning tender procedures or requests for additional copies
of this Offer to Purchase, the Letter of Transmittal or other tender offer
materials may be directed to the Information Agent.
The Depositary for the Offer is:
FIRST INTERSTATE BANK OF CALIFORNIA
By Mail: Facsimile Transmission:
First Interstate Bank of California (For Eligible Institutions Only)
c/o Chemical/Mellon Shareholder Services (201) 296-4293
P.O. Box 817
Midtown Station Confirm by Telephone:
New York, New York 10018
(800) 522-6645
By Overnight Delivery or By Hand:
First Interstate Bank of California First Interstate Bank of California
15821 Ventura Blvd., Suite 670 120 Broadway, 13th Floor
Encino, California 91436-2946 New York, New York 10271
Any questions concerning tender procedures may be directed to the Depositary
at (800) 522-6645.
<PAGE>
EXHIBIT (a)(2)
ZERO CORPORATION
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
ZERO CORPORATION
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 1, 1996
BY
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 29, 1996, UNLESS THE OFFER
IS EXTENDED.
TO: FIRST INTERSTATE BANK OF CALIFORNIA, DEPOSITARY
By Mail: By Hand or By Overnight By Facsimile:
Courier:
First Interstate Bank of First Interstate Bank of (201) 296-4293
California California (for Eligible
c/o Chemical/Mellon 15821 Ventura Blvd., Institutions Only)
Shareholder Services Suite 670
P. O. Box 817 Encino, CA 91436-2946 Confirm by Telephone:
Midtown Station or
New York, NY 10018 First Interstate Bank of (800) 522-6645
California
120 Broadway, 13th Floor
New York, NY 10271
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED SHARES
NUMBER(S)* BY CERTIFICATE(S)* TENDERED**
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
TOTAL SHARES:
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer and
stockholders tendering Shares held in the Dividend Reinvestment Plan (as
defined in the Offer to Purchase) credited to their account.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if certificates are to be forwarded
herewith or if delivery of Shares (as defined below) is to be made by book-
entry transfer to the Depositary's account at The Depository Trust Company
("DTC"), Midwest Securities Trust Company ("MSTC") or Philadelphia Depository
Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-
Entry Transfer Facilities") pursuant to the procedures set forth in Section 3
of the Offer to Purchase (as defined below). This Letter of Transmittal also
may be used to tender Shares held in the Dividend Reinvestment Plan by
completing the box entitled "Dividend Reinvestment Plan" below. See
Instruction 14. This Letter of Transmittal may not, however, be used for
Shares held in the Fund (as defined in the Offer to Purchase) and credited to
accounts of participants in the Plan (as defined in the Offer to Purchase).
See Instruction 13.
Stockholders who cannot deliver their Shares and all other documents
required hereby to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) must tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. Delivery of documents to the Company, the Subsidiary or to a
Book-Entry Transfer Facility does not constitute a valid delivery.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Check Applicable Box: [_] DTC [_] MSTC [_] PDTC
Account No. _______________________________________________________________
Transaction Code No. ______________________________________________________
[_] 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 Stockholder(s) ______________________________________
Date of Execution of Notice of Guaranteed Delivery ________________________
Name of Institution that Guaranteed Delivery ______________________________
If delivery is by book-entry transfer:
Name of Tendering Institution _____________________________________________
Check Applicable Box: [_] DTC [_] MSTC [_] PDTC
Account No. _______________________________________________________________
Transaction Code No. ______________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to ZERO Corporation, a Delaware corporation
(the "Company"), and Electronic Solutions, a Nevada corporation and a wholly
owned subsidiary of the Company (the "Subsidiary"; the Company and the
Subsidiary are collectively referred to herein as the "Purchasers" and each is
sometimes referred to herein individually as a "Purchaser"), the above-
described shares of Common Stock of the Company, par value $.01 per share (the
"Shares") at a price per Share hereinafter set forth, pursuant to the
Purchasers' offer to purchase up to 4,000,000 Shares, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated February
1, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which together constitute 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 (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchasers
all right, title and interest in and to all the Shares, including Shares held
in the Dividend Reinvestment Plan and credited to the undersigned's account,
that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after February 1, 1996
(collectively, "Distributions")) or orders the registration of such Shares
tendered by book-entry transfer that are purchased pursuant to the Offer or
upon the order of the Purchasers and irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares and all
Distributions, or transfer ownership of such Shares and all Distributions on
the account books maintained by any of the Book-Entry Transfer Facilities,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchasers, as the undersigned's
agent, of the Purchase Price (as defined below) with respect to such Shares,
(b) present certificates for such Shares and all Distributions for
cancellation 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 all Distributions, all in accordance with the terms of the Offer.
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 all Distributions and that, when and to the extent the same are
accepted for payment by the Purchasers, the Purchasers will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and the same will not be
subject to any adverse claims. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary, the Company or the
Subsidiary to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions.
The undersigned hereby represents and warrants that the undersigned has read
and agrees to all of the terms of the Offer. All authority herein conferred or
agreed to be conferred shall not be affected by, and shall survive the death
or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 or 3 of the Offer to Purchase and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer, including the undersigned's representation and
warranty that (i) the undersigned has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) the tender of such Shares complies
with Rule 14e-4. The Purchasers' acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the
undersigned and the Purchasers upon the terms and subject to the conditions of
the Offer.
3
<PAGE>
The undersigned understands that the Purchasers will determine a single per
Share price (not greater than $18.00 nor less than $15.75 per Share) net to
the Seller in cash, without interest thereon, (the "Purchase Price") that they
will pay for Shares validly tendered and not withdrawn pursuant to the Offer
taking into account the number of Shares so tendered and the prices specified
by tendering stockholders. The undersigned understands that the Purchasers
will select the lowest Purchase Price that will enable them to purchase Shares
(or such lesser number of Shares as are validly tendered and not withdrawn at
prices not greater than $18.00 nor less than $15.75 per Share) pursuant to the
Offer. The undersigned understands that all Shares properly tendered and not
withdrawn at prices at or below the Purchase Price will be purchased at the
Purchase Price, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions of the Offer, including its proration and
conditional tender provisions, and that the Purchasers will return all other
Shares, including Shares tendered and not withdrawn at prices greater than the
Purchase Price, Shares not purchased because of proration and Shares that were
conditionally tendered and not accepted. The undersigned understands that
tenders of Shares pursuant to any one of the procedures described in Section 2
or 3 of the Offer to Purchase and in the instructions hereto will constitute
an agreement between the undersigned and the Purchasers upon the terms and
subject to the conditions of the Offer.
The undersigned understands that the Purchasers have not yet determined what
respective proportions each Purchaser will contribute toward the total amount
of funds required to consummate the Offer and is aware that the percentage of
Shares to be purchased by each of the Purchasers will not be determined until
after the Expiration Date and after the time at which Shares may be withdrawn
pursuant to the terms of the Offer. The undersigned understands this may
affect the tax treatment of certain tendering stockholders. See Section 13 of
the Offer to Purchase. The undersigned understands that the Purchasers shall
purchase Shares from each tendering stockholder whose Shares are to be
purchased pursuant to the Offer proportionately to the amount of each
Purchaser's respective contribution toward the aggregate Purchase Price for
all Shares purchased pursuant to the Offer (with appropriate adjustments to
avoid purchases of fractional Shares).
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchasers may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may not be required to purchase any of the Shares tendered hereby or may
accept for payment fewer than all of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please mail
the check for the purchase price of any Shares purchased and/or any
certificates for Shares not tendered or not purchased (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the check for the purchase price of any Shares purchased and/or return any
Shares not tendered or not purchased in the name(s) of, and mail said check
and/or any certificates to, the person(s) so indicated. The undersigned
recognizes that neither the Company nor the Subsidiary has any obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if the Purchasers do not accept
for payment any of the Shares so tendered.
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
- -------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO
VALID TENDER OF SHARES.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
[_] $15.75 [_] $16.00 [_] $16.25 [_] $16.50 [_] $16.75
[_] $17.00 [_] $17.25 [_] $17.50 [_] $17.75 [_] $18.00
</TABLE>
4
<PAGE>
ODD LOTS
(SEE INSTRUCTION 9)
This section is to be completed ONLY if Shares are being tendered by or
on behalf of a person owning beneficially, as of the close of business on
January 31, 1996, and who continues to own beneficially as of the
Expiration Date, an aggregate of fewer than 100 Shares other than Shares
held in the Fund or in the Dividend Reinvestment Plan.
The undersigned either (check one box):
[_] was the beneficial owner as of the close of business on January 31,
1996, and continues to be the beneficial owner as of the Expiration
Date, of an aggregate of fewer than 100 Shares (other than Shares
held in the Fund or in the Dividend Reinvestment Plan), all of which
are being tendered, or
[_] is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and (ii) believes, based
upon representations made to it by each such beneficial owner, that
such beneficial owner owned beneficially as of the close of business
on January 31, 1996, and continues to own beneficially as of the
Expiration Date, an aggregate of fewer than 100 Shares (other than
Shares held in the Fund or in the Dividend Reinvestment Plan), and is
tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box,
in which case you will be deemed to have tendered at the Purchase Price
determined by the Purchasers in accordance with the terms of the Offer
(persons checking this box need not indicate the price per Share in the
box entitled "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" in this Letter of Transmittal). [_]
DIVIDEND REINVESTMENT PLAN
(SEE INSTRUCTION 14)
This section is to be completed ONLY if Shares held in the Dividend
Reinvestment Plan are to be tendered.
[_] By checking this box, the undersigned represents that the undersigned
is a participant in the Dividend Reinvestment Plan and hereby
instructs the administrator of the Dividend Reinvestment Plan to
tender the following number of Shares credited to the undersigned's
Dividend Reinvestment Plan account at the price per Share indicated
in the box entitled "Price (in Dollars) Per Share At Which Shares Are
Being Tendered" in this Letter of Transmittal:
______Shares*
* The undersigned understands and agrees that all Shares held in the
Dividend Reinvestment Plan account(s) of the undersigned will be
tendered if the above box is checked and the space above is left blank.
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 6, 7 AND 8) (SEE INSTRUCTIONS 6, 7 AND 8)
To be completed ONLY if the To be completed ONLY if the
check for the purchase price of check for the purchase price of
Shares purchased and/or certifi- Shares purchased and/or certifi-
cates for Shares not tendered or cates for Shares not tendered or
not purchased are to be issued not purchased are to be mailed
in the name of someone other to someone other than the under-
than the undersigned. signed or to the undersigned at
an address other than that shown
below the undersigned's signa-
ture(s).
Issue [_] check
and/or [_] certificate(s) to:
Name ____________________________ Mail [_] check
_________________________________ and/or [_] certificates to:
_________________________________ Name_____________________________
(PLEASE PRINT) _________________________________
Address _________________________ _________________________________
_________________________________ (PLEASE PRINT)
(INCLUDE ZIP CODE) Address _________________________
_________________________________ _________________________________
(TAXPAYER IDENTIFICATION OR (INCLUDE ZIP CODE)
SOCIAL SECURITY NO.)
CONDITIONAL TENDER
A tendering stockholder may condition his or her tender of Shares upon
the purchase by the Purchasers of a specified minimum number of the Shares
tendered hereby, all as described in the Offer to Purchase, particularly
in Section 6 thereof. Unless at least such minimum number of Shares is
purchased by the Purchasers pursuant to the terms of the Offer, none of
the Shares tendered hereby will be purchased. It is the tendering
stockholder's responsibility to calculate such minimum number of Shares,
and each stockholder is urged to consult his or her own tax advisor.
Unless this box has been completed and a minimum specified, the tender
will be deemed unconditional.
Minimum number of Shares that must be purchased, if any are purchased:
______Shares
6
<PAGE>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED IN THIS LETTER OF
TRANSMITTAL)
___________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
___________________________________________________________________________
Dated __________________ , 1996
Name(s) ___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) _____________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. _______________________________________________
(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 a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set
forth full title and see Instruction 6.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm ______________________________________________________________
Authorized Signature ______________________________________________________
Dated __________________ , 1996
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is
a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States which is a
participant in an approved Signature Guarantee Medallion Program (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
(a) 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 one of the Book-Entry Transfer Facilities whose name appears on
a security position listing as the owner of Shares) tendered herewith and such
holder(s) have not completed the box entitled "Special Payment Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal, (b) if such Shares are tendered for the account of an Eligible
Institution, or (c) if this Letter of Transmittal is signed by a participant
in the Dividend Reinvestment Plan whose account is credited with Shares
tendered herewith. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or if delivery of Shares is to be made by book-
entry transfer pursuant to the procedures set forth in Section 3 of the Offer
to Purchase. This Letter of Transmittal also may be used to tender Shares held
in the Dividend Reinvestment Plan by completing the box entitled "Dividend
Reinvestment Plan." See Instruction 14. Certificates for all physically
delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all
Shares delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the front page of this Letter of Transmittal
on or prior to the Expiration Date (as defined in the Offer to Purchase).
Stockholders whose certificates are not immediately available, who cannot
deliver their Shares and all other required documents to the Depositary or who
cannot complete the procedure for delivery by book-entry transfer prior to the
Expiration Date may tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchasers (with any required
signature guarantees) must be received by the Depositary on or prior to the
Expiration Date and (c) the certificates for all physically delivered Shares,
or a confirmation of a book-entry transfer into the Depositary's account at
one of the Book-Entry Transfer Facilities of all Shares delivered
electronically, in each case together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal must be received by the Depositary
within three New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 3
of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Except as specifically permitted by Section 6 of the Offer to Purchase, no
alternative or contingent tenders will be accepted. Fractional Shares will be
purchased, unless proration of tendered Shares is required (in which event no
fractional Shares will be purchased). See Section 1 of the Offer to Purchase.
By executing this Letter of Transmittal (or facsimile thereof), the tendering
stockholder waives any right to receive any notice of the acceptance for
payment of the Shares.
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.
8
<PAGE>
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate
delivered to the Depositary 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, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the "Special Payment Instructions"
or "Special Delivery Instructions" boxes on this Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be
validly tendered, the stockholder must check the box indicating the price per
Share at which he or she is tendering Shares under "Price (In Dollars) Per
Share at Which Shares Are Being Tendered" in this Letter of Transmittal,
except that any stockholder who owned beneficially as of the close of business
on January 31, 1996, and continues to own beneficially as of the Expiration
Date, an aggregate of fewer than 100 Shares (other than Shares held in the
Fund or in the Dividend Reinvestment Plan), may check the box above in the
section entitled "Odd Lots" indicating that such stockholder is tendering all
Shares at the Purchase Price determined by the Purchasers. Only one box may be
checked. If more than one box is checked or if no box is checked (except as
provided in the Odd Lots box and this Instruction 5), there is no valid tender
of Shares. A stockholder wishing to tender portions of his or her Share
holdings at different prices must complete a separate Letter of Transmittal
for each price at which he or she wishes to tender each such portion of his or
her Shares. Participants in the Dividend Reinvestment Plan who intend to
tender Shares held in the Dividend Reinvestment Plan in addition to Shares
which are not held in the Dividend Reinvestment Plan (other than Shares held
in the Fund) may use one Letter of Transmittal to tender all of such Shares if
such participant wishes to tender all such Shares at the same price. Separate
Letters of Transmittal must be used if a participant in the Dividend
Reinvestment Plan intends to tender Shares held in the Dividend Reinvestment
Plan and Shares not held in the Dividend Reinvestment Plan (other than Shares
held in the Fund) at different prices. The same Shares cannot be tendered
(unless previously validly withdrawn as provided in Section 4 of the Offer to
Purchase) at more than one price.
6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
hereby, the signature(s) must correspond with the name(s) as written on the
face of the certificates (or, in the case of Shares held in the Dividend
Reinvestment Plan, on the account credited with the tendered Shares) without
alteration, enlargement or any change whatsoever.
If any of the Shares hereby are held of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different 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 tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s). Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate
stock powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear(s) on the certificates for such Shares. Signature(s) on any
such certificates or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
9
<PAGE>
If this Letter of Transmittal or any certificate or stock power is 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 Purchasers of the authority of such person so to act must be submitted.
7. STOCK TRANSFER TAXES. The Purchasers will pay or cause to be paid any
stock transfer taxes with respect to the sale and transfer of any Shares to it
or its order pursuant to the Offer. If, however, payment of the purchase price
is to be made to, or Shares not tendered or not purchased are to be registered
in the name of, any person other than the registered holder(s), or if tendered
Shares 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(s), such other person or otherwise)
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. See Section 5 of the Offer to Purchase.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY TO AFFIX
TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED HEREBY.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any Shares purchased is to be issued in the name of, and/or any
Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal or if the check and/or
any certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of
Shares Tendered," then the boxes captioned "Special Payment Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained
by such stockholder at the Book-Entry Transfer Facility from which such
transfer was made.
9. ODD LOTS. As described in the Offer to Purchase, if fewer than all Shares
validly tendered at or below the Purchase Price and not withdrawn on or prior
to the Expiration Date are to be purchased, the Shares purchased first will
consist of all Shares tendered by any stockholder who owned beneficially as of
the close of business on January 31, 1996, and continues to own beneficially
as of the Expiration Date, an aggregate of fewer than 100 Shares (other than
Shares held in the Fund or in the Dividend Reinvestment Plan) and who validly
and unconditionally tendered all such Shares at or below the Purchase Price
(including by not designating a purchase price as described above). Shares
held in the Fund and in the Dividend Reinvestment Plan will be subject to any
proration, even if such Shares are owned by a person who beneficially owned,
as of the close of business on January 31, 1996, and continues to own
beneficially as of the Expiration Date, fewer than 100 Shares held in either
or both of the Fund and the Dividend Reinvestment Plan. Partial or conditional
tenders of Shares will not qualify for this preference. This preference will
not be available unless the box captioned "Odd Lots" in this Letter of
Transmittal and the Notice of Guaranteed Delivery, if any, is completed.
10. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering stockholder is required
to provide the Depositary with either a correct Taxpayer Identification Number
("TIN") on Substitute Form W-9, which is provided under "Important Tax
Information" below, or a properly completed Form W-8. Failure to provide the
information on either Substitute Form W-9 or Form W-8 may subject the
tendering stockholder to 31% federal income tax backup withholding on the
payment of the purchase price. The box in Part 2 of Substitute Form W-9 may be
checked if the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future. If the box
in Part 2 is checked and the Depositary is not provided with a TIN by the time
of payment, the Depositary will withhold 31% on all payments of the purchase
price thereafter until a TIN is provided to the Depositary.
10
<PAGE>
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager
at their respective telephone numbers and addresses listed below. Questions
concerning the tender of Shares held in the Dividend Reinvestment Plan should
be directed to the administrator of the Dividend Reinvestment Plan. Requests
for additional copies of the Offer to Purchase, this Letter of Transmittal or
other tender offer materials may be directed to the Information Agent or the
Dealer Manager and such copies will be furnished promptly at the Purchasers'
expense. Stockholders may also contact their local broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
12. IRREGULARITIES. All questions as to the Purchase Price, the form of
documents, and the validity, eligibility (including time of receipt) and
acceptance of any tender of Shares will be determined by the Purchasers, in
their sole discretion, and their determination shall be final and binding. The
Purchasers reserve the absolute right to reject any or all tenders of Shares
that they determine are not in proper form or the acceptance for payment of or
payment for Shares that may, in the opinion of the Purchasers' counsel, be
unlawful. Except as otherwise provided in the Offer to Purchase, the
Purchasers also reserve the absolute right to waive any of the conditions to
the Offer or any defect or irregularity in any tender of Shares and the
Purchasers' interpretation of the terms and conditions of the Offer (including
these instructions) shall be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as
the Purchasers shall determine. None of the Company, the Subsidiary, the
Dealer Manager, the Depositary, the Information Agent or any other person
shall be under any duty to give notice of any defect or irregularity in
tenders, nor shall any of them incur any liability for failure to give any
such notice. Tenders will not be deemed to have been made until all defects
and irregularities have been cured or waived.
13. FUND. Participants in the Plan may not use this Letter of Transmittal to
direct the tender of Shares held in the Fund and credited to a participant's
account, but must use the separate election form sent to them by the
Purchasers.
14. DIVIDEND REINVESTMENT PLAN. If a tendering stockholder desires to tender
Shares held in the Dividend Reinvestment Plan credited to the stockholder's
account under the Dividend Reinvestment Plan, the box captioned "Dividend
Reinvestment Plan Shares" must be completed. A participant in the Dividend
Reinvestment Plan may complete such box on only one Letter of Transmittal
submitted by such participant. If a participant submits more than one Letter
of Transmittal and completes such box on more than one Letter of Transmittal,
the participant will be deemed to have elected to tender all Shares credited
to the stockholder's account under the Dividend Reinvestment Plan at the
lowest of the prices specified in such Letters of Transmittal. Questions
concerning the tender of Shares held in the Dividend Reinvestment Plan should
be directed to the administrator of the Dividend Reinvestment Plan.
Participants in the Dividend Reinvestment Plan who intend to tender Shares
held in the Dividend Reinvestment Plan in addition to Shares which are not
held in the Dividend Reinvestment Plan (other than Shares held in the Fund)
may use one Letter of Transmittal to tender all of such Shares if such
participant wishes to tender all such Shares at the same price. Separate
Letters of Transmittal must be used if a participant in the Dividend
Reinvestment Plan intends to tender Shares held in the Dividend Reinvestment
Plan and Shares not held in the Dividend Reinvestment Plan (other than Shares
held in the Fund) at different prices. Participants in the Dividend
Reinvestment Plan who do not wish to tender their Shares held in the Dividend
Reinvestment Plan do not need to take any action.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF) TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
11
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with
such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is his or her social security number.
For businesses and other entities, the number is the employer identification
number. If the Depositary is not provided with the correct TIN or properly
completed Form W-9, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to these backup withholding
and reporting requirements. In order for a noncorporate foreign stockholder to
qualify as an exempt recipient that stockholder must complete and sign a Form
W-8, Certificate of Foreign Status, attesting to that stockholder's exempt
status. The Form W-8 can be obtained from the Depositary. Exempt stockholders,
other than noncorporate foreign stockholders, 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.
If federal income tax backup withholding applies, the Depositary is required
to withhold 31% of any payments made to the stockholder. Backup withholding is
not an additional tax. Rather, the federal income tax liability of persons
subject to backup withholding will be reduced by the amount of the tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of his or her correct TIN by completing the
Substitute Form W-9 included in this Letter of Transmittal certifying that the
TIN provided on Substitute Form W-9 is correct and that (1) the stockholder
has not been notified by the Internal Revenue Service that he or she is
subject to federal income tax backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has
notified the stockholder that he or she is no longer subject to federal income
tax backup withholding. Foreign stockholders must submit a properly completed
Form W-8 in order to avoid the applicable backup withholding; provided,
however, that backup withholding will not apply to foreign stockholders
subject to 30% (or lower treaty rate) withholding on gross payments received
pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the registered 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 guidance on which
number to report.
12
<PAGE>
PAYER'S NAME: FIRST INTERSTATE BANK OF CALIFORNIA
PART 1--PLEASE PROVIDE TIN _________________
SUBSTITUTE YOUR TIN IN THE BOX AT Social Security
FORM W-9 RIGHT AND CERTIFY BY Number or Employer
SIGNING AND DATING Identification
BELOW. Number
----------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE NAME (PLEASE PRINT)
--------------------------- PART 2--For Payees
PAYOR'S REQUEST FOR ADDRESS exempt from backup
TAXPAYER IDENTIFICATION withholding, see the
NUMBER (TIN) --------------------------- Important Tax
AND CERTIFICATION CITY STATE ZIP CODE Information above and
Guidelines for
Certification of
Taxpayer
Identification Number
on Substitute Form W-
9 enclosed herewith
and completed as
instructed herein.
Awaiting TIN [_]
----------------------------------------------------
PART 3--CERTIFICATION-UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT (1) the number shown on
this form is my correct taxpayer identification
number (or a TIN has not been issued to me but I
have mailed or delivered an application to
receive a TIN or intend to do so in the near
future), (2) I am not subject to backup
withholding either because I have not been
notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as
a result of a failure to report all interest or
dividends or the IRS has notified me that I am no
longer subject to backup withholding, and (3) all
other information provided on this form is true,
correct and complete.
SIGNATURE _________________________ DATE _________
You must cross out item (2) above if you have
been notified by the IRS that you are currently
subject to backup withholding because of
underreporting interest or dividends on your tax
return.
- --------------------------------------------------------------------------------
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 DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 2 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments of the purchase price made to me
thereafter will be withheld until I provide a number.
SIGNATURE ________________________________ DATE:____________, 1996
13
<PAGE>
THE INFORMATION AGENT:
MORROW & CO.
909 THIRD AVENUE, NEW YORK, NEW YORK 10022
BANKS AND BROKERS CALL COLLECT:
(212) 754-8000
ALL OTHERS CALL TOLL FREE:
1-800-662-5200
THE DEALER MANAGER:
PAINEWEBBER INCORPORATED
725 SOUTH FIGUEROA STREET, SUITE 4100
LOS ANGELES, CALIFORNIA 90017
TELEPHONE: (213) 972-1759 (CALL COLLECT)
TELEPHONE: (800) 526-8910 (TOLL-FREE)
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
PURPOSE OF FORM. -- A person who is required to file an information return with
the IRS must obtain your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an IRA. Use Form W-9 to furnish
your correct TIN to the requester (the person asking you to furnish your TIN)
and, when applicable, (1) to certify that the TIN you are furnishing is correct
(or that you are waiting for a number to be issued), (2) to certify that you are
not subject to backup withholding, and (3) to claim exemption from backup
withholding if you are an exempt payee. Furnishing your correct TIN and making
the appropriate certifications will prevent certain payments from being subject
to backup withholding.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form.
HOW TO OBTAIN A TIN. -- If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1 (or check box 2 of Substitute Form W-9), sign and
date the form, and give it to the requester. Generally, you must obtain a TIN
and furnish it to the requester by the time of payment. If the requester does
not receive your TIN by the time of payment, backup withholding, if applicable,
will begin and continue until you furnish your TIN to the requester.
NOTE: Writing "Applied for" (or checking box 2 of the Substitute Form W-9) on
the form means that you have already applied for a TIN OR that you intend to
apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN, or
3. You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and Payments
under Specific Instructions, below, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING.--The following is a list of
payees exempt from backup withholding and for which no information reporting is
required. For interest and dividends, all listed payees are exempt except item
(9). For broker transactions, payees listed in (1) through (13) and a person
registered under the Investment Advisers Act of 1940 who regularly acts as a
broker are exempt. Payments subject to reporting under sections 6041 and 6041A
are generally exempt from backup withholding only if made to payees described in
items (1) through (7), except a corporation that provides medical and health
care services or bills and collects payments for such services is not exempt
from backup withholding or information reporting. Only payees described in
items (2) through (6) are exempt from backup withholding for barter exchange
transactions, patronage dividends, and payments by certain fishing boat
operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct
TIN to a requester, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINs. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally provide the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on
your social security card and/or as it was used to apply for your EIN on Form
SS-4.
SIGNING THE CERTIFICATION.
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You are required to furnish your
correct TIN, but you are not required to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross
out item 2 of the certification.
4. OTHER PAYMENTS. You are required to furnish your correct TIN, but you are
not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in
<PAGE>
the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services, payments
to a nonemployee for services (including attorney and accounting fees), and
payments to certain fishing boat crew members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
6. EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding, you
should complete this form to avoid possible erroneous backup withholding. Enter
your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign
and date the form. If you are a nonresident alien or foreign entity not subject
to backup withholding, give the requester a completed FORM W-8, Certificate of
Foreign Status.
7. TIN "APPLIED FOR." Follow the instructions under HOW TO OBTAIN A TIN, on
page 1, and sign and date this form.
SIGNATURE. -- For a joint account, only the person whose TIN is shown in Part I
should sign.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify
the accuracy of your tax return. You must provide your TIN whether or not you
are required to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SOCIAL SECURITY NUMBER OF:
- -------------------------------- ----------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual
on the account/1/
3. Custodian account of The minor/2/
a minor (Uniform Gift
to Minors Act)
4. a. The usual The grantor-trustee/1/
revocable savings
trust (grantor is
also trustee)
b. So-called trust The actual owner/1/
account that is not
a legal or valid trust
under state law
5. Sole proprietorship The owner/3/
- ------------------------------ -------------------------------------
FOR THIS TYPE OF ACCCOUNT: GIVE NAME AND EMPLOYER IDENTIFICATION
NUMBER OF:
6. A valid trust, estate or Legal entity/4/
pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a state or local
government, school
district, or prison) that
receives agricultural
program payments
- --------------------------------------------------------------------------------
/1/ List first and circle the name of the person whose number you furnish.
/2/ Circle the minor's name and furnish the minor's Social Security Number.
/3/ Show your individual name. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
/4/ List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
EXHIBIT (a)(3)
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the shares of Common
Stock of ZERO Corporation are not immediately available, if the procedure for
book-entry transfer cannot be completed on a timely basis, or if time will not
permit all other documents required by the Letter of Transmittal to be
delivered to the Depositary on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase defined below). Such form may be delivered
by hand or transmitted by mail, or (for Eligible Institutions only) by
facsimile transmission, to the Depositary. See Section 3 of the Offer to
Purchase. THE ELIGIBLE INSTITUTION, WHICH COMPLETES THIS FORM, MUST
COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF
TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME
SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH
ELIGIBLE INSTITUTION.
To: FIRST INTERSTATE BANK OF CALIFORNIA, Depositary
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or By Overnight Courier:
First Interstate Bank of California (201) 296-4293 First Interstate Bank of California
c/o Chemical/Mellon (For Eligible Institutions Only) 15821 Ventura Blvd., Suite 670
Shareholder Services Encino, CA 91436-2946
P.O. Box 817 Confirm by Telephone:
Midtown Station (800) 522-6645 or
New York, NY 10018 First Interstate Bank of California
120 Broadway, 13th Floor
New York, NY 10271
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to ZERO Corporation, a Delaware corporation
(the "Company"), and Electronic Solutions, a Nevada corporation and a wholly
owned subsidiary of the Company (the "Subsidiary"; the Company and the
Subsidiary are collectively referred to herein as the "Purchasers" and each is
sometimes referred to herein individually as a "Purchaser"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
February 1, 1996 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of shares of Common Stock, par value $.01 per
share (the "Shares") of the Company listed below, pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
- ------------------------------------- -------------------------------------
NUMBER OF SHARES SIGNATURE(S)
- ------------------------------------- -------------------------------------
CERTIFICATE NOS. (IF AVAILABLE) NAME(S) (PLEASE PRINT)
-------------------------------------
IF SHARES WILL BE TENDERED BY BOOK ADDRESS
ENTRY TRANSFER:
- ------------------------------------- -------------------------------------
NAME OF TENDERING INSTITUTION AREA CODE AND TELEPHONE NUMBER
- ------------------------------------- Dated: ______________________ , 1996
ACCOUNT NO. AT (CHECK ONE):
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
<PAGE>
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
- --------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF
NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTSBOX BELOW), THERE IS NO
VALID TENDER OF SHARES.
- --------------------------------------------------------------------------------
[_] $15.75 [_] $16.00 [_] $16.25 [_] $16.50 [_] $16.75
[_] $17.00 [_] $17.25 [_] $17.50 [_] $17.75 [_] $18.00
- --------------------------------------------------------------------------------
CONDITIONAL TENDER ODD LOTS
UNLESS THIS BOX HAS BEEN COMPLETED To be completed ONLY if Shares are
AND A MINIMUM SPECIFIED, THE TEN- being tendered by or on behalf of
DER WILL BE DEEMED UNCONDITIONAL persons owning beneficially, as of
(see Sections 6 and 13 of the Of- the close of business on January
fer to Purchase). 31, 1996, and who continue to own
beneficially as of the Expiration
Date, an aggregate of fewer than
100 Shares, excluding Shares held
in the Fund or in the Dividend Re-
investment Plan (as such terms are
defined in the Offer to Purchase).
Minimum number of Shares that must The undersigned either (check one):
be purchased, if any are
purchased:
_________ Shares [_] was the beneficial owner as of
the close of business on January
31, 1996, and continues to be the
beneficial owner as of the
Expiration Date, of an aggregate
of fewer than 100 Shares, ex-
cluding Shares held in the Fund or
in the Dividend Reinvestment Plan,
all of which are tendered, or
[_] is a broker, dealer, commercial
bank, trust company or other
nominee that (i) is tendering, for
the beneficial owners there-of,
Shares with respect to which it is
the record owner, and (ii)
believes, based upon representa-
tions made to it by each such
beneficial owner, that such ben-
eficial owner owned beneficially
as of the close of business on
January 31, 1996, and continues to
own as of the Expiration Date, an
aggregate of fewer than 100
Shares, excluding Shares held in
the Fund or in the Divi-dend
Reinvestment Plan, and is
tendering all of such Shares.
If you do not wish to specify a
purchase price, check the
following box, in which case you
will be deemed to have tendered at
the Purchase Price determined by
the Purchasers in accordance with
the terms of the Offer (persons
checking this box need not
indicate the price per Share in
the box entitled "Price (In
Dollars) Per Share at which Shares
Are Being Tendered" above.) [_]
<PAGE>
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program, guarantees (a) that the above-named person(s) has a net
long position in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended, (b) that
such tender of Shares complies with Rule 14e-4 and (c) to deliver to the
Depositary at one of its addresses set forth above certificate(s) for the
Shares tendered hereby, in proper form for transfer, or a confirmation of the
book-entry transfer of the Shares tendered hereby into the Depositary's
account at The Depository Trust Company, Midwest Securities Trust Company or
Philadelphia Depository Trust Company, in each case together with a properly
completed and duly executed Letter(s) of Transmittal (or facsimile(s)
thereof), with any required signature guarantee(s) and any other required
documents, all within three New York Stock Exchange, Inc. trading days after
the date hereof.
- ------------------------------------- -------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ------------------------------------- -------------------------------------
ADDRESS NAME (PLEASE PRINT)
- ------------------------------------- -------------------------------------
CITY, STATE, ZIP CODE TITLE
- -------------------------------------
AREA CODE AND TELEPHONE NUMBER
Dated: __________________, 1996
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4)
PAINEWEBBER INCORPORATED
725 SOUTH FIGUEROA STREET, SUITE 4100
LOS ANGELES, CALIFORNIA 90017
OFFER TO PURCHASE FOR CASH
UP TO 4,000,000 SHARES OF COMMON STOCK OF ZERO CORPORATION
BY
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 29, 1996, UNLESS THE OFFER
IS EXTENDED.
February 1, 1996
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
In our capacity as Dealer Manager, we are enclosing the material listed
below relating to the offer of ZERO Corporation, a Delaware corporation (the
"Company"), and Electronic Solutions, a Nevada corporation and a wholly owned
subsidiary of the Company (the "Subsidiary"; the Company and the Subsidiary
are collectively referred to herein as the "Purchasers" and each is sometimes
referred to herein individually as a "Purchaser"), to purchase up to 4,000,000
shares of the Common Stock of the Company, par value $.01 per share (the
"Shares") at prices, net to the seller in cash, without interest thereon, not
greater than $18.00 nor less than $15.75 per Share, specified by tendering
stockholders, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated February 1, 1996 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer"). The
Purchasers will determine a single per share price (not greater than $18.00
nor less than $15.75 per Share) that they will pay for Shares validly tendered
pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into
consideration the number of Shares so tendered and the prices specified by
tendering stockholders. The Purchasers will select the lowest Purchase Price
that will enable them to purchase 4,000,000 Shares (or such lesser number of
Shares, as are validly tendered and not withdrawn at prices not greater than
$18.00 nor less than $15.75 per Share) pursuant to the Offer. The Purchasers
will purchase all Shares validly tendered at prices at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase), upon the terms and subject to the
conditions of the Offer, including the provisions relating to proration and
conditional tenders described in the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller, without interest
thereon, with respect to all Shares purchased. Shares tendered at prices in
excess of the Purchase Price, Shares not purchased because of proration and
Shares that were conditionally tendered and not accepted will be returned.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. The Offer is, however, subject to other conditions. See Section 7 of
the Offer to Purchase.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Purchasers will, upon request, reimburse you for
reasonable and customary handling and mailing expenses incurred by you in
forwarding any of the enclosed materials to your clients.
<PAGE>
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal for your use and for the information of your
clients.
3. A letter to stockholders of the Company from Wilford D. Godbold, Jr.,
President and Chief Executive Officer of the Company.
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
the Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date.
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
for obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding.
7. A return envelope addressed to First Interstate Bank of California,
the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 29, 1996, UNLESS THE OFFER
IS EXTENDED.
The Purchasers will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer (other
than the Dealer Manager). The Purchasers will, upon request, reimburse
brokers, dealers, commercial banks and trust companies for reasonable and
customary handling and mailing expenses incurred by them in forwarding
materials relating to the Offer to their customers. The Purchasers will pay
all stock transfer taxes applicable to their purchase of Shares pursuant to
the Offer, subject to Instruction 7 of the Letter of Transmittal.
As described in the Offer to Purchase, if more than 4,000,000 Shares have
been validly tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date, the Purchasers will purchase Shares in the
following order of priority: (a) first, all Shares, other than Shares held in
the Fund or in the Dividend Reinvestment Plan (as such terms are defined in
the Offer to Purchase), validly tendered at or below the Purchase Price and
not withdrawn on or prior to the Expiration Date by any stockholder who owned
beneficially, as of the close of business on January 31, 1996, and continues
to own beneficially as of the Expiration Date, an aggregate of fewer than 100
Shares (excluding any Shares held in the Fund or in the Dividend Reinvestment
Plan) and who validly tenders all of such Shares (partial and conditional
tenders will not qualify for this preference) and completes the box captioned
"Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of
Guaranteed Delivery; and (b) then, after purchase of all the foregoing Shares,
subject to the conditional tender provisions described in Section 6 of the
Offer to Purchase, all other Shares (including Shares held in the Fund and in
the Dividend Reinvestment Plan) validly tendered at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date on a pro rata
basis, if necessary (with appropriate adjustments to avoid purchases of
fractional Shares).
NEITHER THE COMPANY, THE SUBSIDIARY, NOR THEIR RESPECTIVE BOARDS OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER
ALL OR ANY SHARES. STOCKHOLDERS MUST MAKE THEIR OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE
PURCHASERS HAVE BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE
COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
<PAGE>
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth on the
back cover of the enclosed Offer to Purchase.
Very truly yours,
PAINEWEBBER INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE SUBSIDIARY, THE DEALER MANAGER, THE INFORMATION
AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
EXHIBIT (a)(5)
OFFER TO PURCHASE FOR CASH
UP TO 4,000,000 SHARES OF COMMON STOCK OF ZERO CORPORATION
BY
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 29, 1996,
UNLESS THE OFFER IS EXTENDED
February 1, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated February 1,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") setting forth an offer by ZERO Corporation, a
Delaware corporation (the "Company"), and Electronic Solutions, a Nevada
corporation and a wholly owned subsidiary of the Company (the "Subsidiary";
the Company and the Subsidiary are collectively referred to herein as the
"Purchasers" and each is sometimes referred to herein individually as a
"Purchaser"), to purchase up to 4,000,000 shares of the Common Stock of the
Company, par value $.01 per share (the "Shares"), at prices, net to the seller
in cash, without interest thereon, not greater than $18.00 nor less than
$15.75 per Share, specified by tendering stockholders, upon the terms and
subject to the conditions of the Offer. The Purchasers will determine a single
per Share price (not greater than $18.00 nor less than $15.75 per Share) that
they will pay for the Shares validly tendered pursuant to the Offer and not
withdrawn (the "Purchase Price"), taking into consideration the number of
Shares so tendered and the prices specified by tendering stockholders. The
Purchasers will select the lowest Purchase Price that will enable them to
purchase 4,000,000 Shares (or such lesser number of Shares as are validly
tendered and not withdrawn at prices not greater than $18.00 nor less than
$15.75 per Share) pursuant to the Offer. The Purchasers will purchase all
Shares validly tendered at prices at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase), upon the terms and subject to the conditions of the Offer,
including the provisions thereof relating to proration and conditional tenders
described in the Offer to Purchase.
We are the holder of record of Shares held for your account. A tender of
such Shares can be made only by us as the holder of record and pursuant to
your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
WE REQUEST INSTRUCTIONS AS TO WHETHER YOU WISH US TO TENDER ANY OR ALL OF
THE SHARES HELD BY US FOR YOUR ACCOUNT, UPON THE TERMS AND SUBJECT TO THE
CONDITIONS SET FORTH IN THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL.
Your attention is invited to the following:
(1) You may tender Shares at prices (in multiples of $0.25), net to you
in cash, without interest thereon, not greater than $18.00 nor less than
$15.75 per Share, as indicated in the attached instruction form.
(2) The Offer is for up to 4,000,000 Shares, constituting approximately
25% of the total Shares outstanding as of January 30, 1996, or
approximately 24% of the Shares on a fully diluted basis (assuming the
exercise of all outstanding stock options) outstanding as of January 30,
1996. Although they have no present intention of so doing, the Purchasers
reserve the right to purchase more than 4,000,000 Shares pursuant to the
Offer. The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set
forth in the Offer.
<PAGE>
(3) The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, New York City time, on Thursday, February 29, 1996, unless
the Offer is extended. Your instructions to us should be forwarded to us in
ample time to permit us to submit a tender on your behalf. If you would
like to withdraw your Shares that we have tendered, you can withdraw them
so long as the Offer remains open or any time after the expiration of forty
business days from the commencement of the Offer if they have not been
accepted for payment.
(4) As described in the Offer to Purchase, if more than 4,000,000 Shares
have been validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date, the Purchasers will purchase Shares in
the following order of priority:
(a) first, all Shares, other than Shares held in the Fund or in the
Dividend Reinvestment Plan (as such terms are defined in the Offer to
Purchase), validly tendered at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date by any stockholder who
owned beneficially as of the close of business on January 31, 1996, and
continues to own beneficially as of the Expiration Date, an aggregate
of fewer than 100 Shares (other than Shares held in the Fund or in the
Dividend Reinvestment Plan), and who validly tenders all of such Shares
(partial and conditional tenders will not qualify for this preference)
and completes the box captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, the Notice of Guaranteed Delivery; and (b) then,
after purchase of all the foregoing Shares, subject to the conditional
tender provisions described in Section 6 of the Offer to Purchase, all
other Shares (including Shares held in the Fund and in the Dividend
Reinvestment Plan) validly tendered at or below the Purchase Price and
not withdrawn on or prior to the Expiration Date on a pro rata basis,
if necessary (with appropriate adjustments to avoid purchases of
fractional Shares). See Section 1 of the Offer to Purchase for a
discussion of proration.
(5) Tendering stockholders will not be obligated to pay any brokerage
commissions or solicitation fees on the Purchasers' purchase of Shares in
the Offer. Any stock transfer taxes applicable to the sales of Shares to
the Purchasers pursuant to the Offer will be paid by the Purchasers, except
as otherwise provided in Instruction 7 of the Letter of Transmittal.
(6) If you wish to tender portions of your Shares at different prices you
must complete a separate Instruction Form for each price at which you wish
to tender each portion of your Shares. We must submit separate Letters of
Transmittal on your behalf for each price you will accept.
(7) If you owned beneficially as of the close of business on January 31,
1996, and continue to own beneficially as of the Expiration Date, an
aggregate of fewer than 100 Shares (other than Shares held in the Fund or
in the Dividend Reinvestment Plan), and you instruct us to tender at or
below the Purchase Price on your behalf all such Shares on or prior to the
Expiration Date and check the box captioned "Odd Lots" in the instruction
form, all such Shares will be accepted for purchase before proration, if
any, of the purchase of other tendered Shares.
NEITHER THE COMPANY, THE SUBSIDIARY, NOR THEIR RESPECTIVE BOARDS OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER
ALL OR ANY SHARES. STOCKHOLDERS MUST MAKE THEIR OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE
PURCHASERS HAVE BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE
COMPANY INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer,
please so instruct us by completing, executing, detaching and returning to us
the instruction form on the detachable part hereof. An envelope to return your
instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise specified on the detachable part
hereof. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf by the expiration of the Offer.
A tendering stockholder may condition the tender of Shares upon the purchase
by the Purchasers of a specified minimum number of Shares tendered, all as
described in Section 6 of the Offer to Purchase. Unless
<PAGE>
such specified minimum is purchased by the Purchasers pursuant to the terms of
the Offer to Purchase and the related Letter of Transmittal, none of the
Shares tendered by the stockholder will be purchased. If you wish us to
condition your tender upon the purchase of a specified minimum number of
Shares, please complete the box entitled "Conditional Tender" on the
instruction form. It is the tendering stockholder's responsibility to
calculate such minimum number of Shares, and you are urged to consult your own
tax advisor.
The Offer is being made to all holders of Shares. The Purchasers are not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to a valid state statute. If the
Purchasers become aware of any valid state statute prohibiting the making of
the Offer, the Purchasers will make a good faith effort to comply with such
statute. If, after such good faith effort, the Purchasers cannot comply with
such statute, the Offer will not be made to, nor will tenders be accepted from
or on behalf of, holders of Shares in such state. In those jurisdictions whose
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchasers by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdictions.
<PAGE>
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 4,000,000 SHARES OF COMMON STOCK OF ZERO CORPORATION
BY
ZERO CORPORATION
AND
ELECTRONIC SOLUTIONS,
A WHOLLY OWNED SUBSIDIARY OF
ZERO CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 1, 1996, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer by ZERO
Corporation (the "Company") and Electronic Solutions, a wholly owned
subsidiary of the Company (the "Subsidiary"; the Company and the Subsidiary
are collectively referred to as the "Purchasers" and each is sometimes
referred to individually as a "Purchaser") to purchase up to 4,000,000 shares
of the Common Stock of the Company, par value $.01 per share (the "Shares"),
at prices, net to the undersigned in cash, without interest thereon, not
greater than $18.00 nor less than $15.75 per Share, specified by the
undersigned, upon the terms and subject to the conditions of the Offer.
This will instruct you to tender to the Purchasers the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, at the price per Share
indicated below, upon the terms and subject to the conditions of the Offer.
CONDITIONAL TENDER
By completing this box, the undersigned conditions the tender authorized
hereby on the following minimum number of Shares being purchased if any are
purchased:
SHARES
Unless this box is completed, the tender authorized hereby will be made
unconditionally.
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
- -------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR
IF NO BOX IS CHECKED (EXCEPT AS PROVIDED UNDER "ODD LOTS" BELOW),
THERE IS NO VALID TENDER OF SHARES.
- -------------------------------------------------------------------------------
[_] $15.75 [_] $16.00 [_] $16.25 [_] $16.50 [_] $16.75
[_] $17.00 [_] $17.25 [_] $17.50 [_] $17.75 [_] $18.00
<PAGE>
ODD LOTS
[_] By checking this box, the undersigned represents that the undersigned
owned beneficially as of the close of business on January 31, 1996, and
continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Shares, other than Shares held in the Fund or in the Dividend
Reinvestment Plan (as such terms are defined in the Offer to Purchase), and
is tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box in
which case you will be deemed to have tendered at the Purchase Price
determined by the Purchasers in accordance with the terms of the Offer
(persons checking this box need not indicate the price per Share in the box
entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered"
above). [_]
Number of Shares to be Tendered:
Shares: __________________*
Dated:, 1996 SIGN HERE
-------------------------------------
SIGNATURE(S)
Name ________________________________
Address _____________________________
_____________________________________
_____________________________________
_____________________________________
SOCIAL SECURITY OR TAXPAYER ID NO.
- --------
* Unless otherwise indicated, it
will be assumed that all Shares
held by us for your account are to
be tendered.
<PAGE>
EXHIBIT (a)(6)
[LETTERHEAD OF ZERO CORPORATION]
February 1, 1996
To the Stockholders of ZERO Corporation:
ZERO Corporation ("ZERO"), and one of its wholly owned subsidiaries (the
"Subsidiary"), are making an offer (the "Offer") to all ZERO Stockholders to
purchase up to 4,000,000 shares of the Common Stock of ZERO at prices not
greater than $18.00 nor less than $15.75 per share in a procedure known as a
"Dutch Auction." The technical details of the Offer are set forth in the
enclosed Offer to Purchase and Letter of Transmittal.
The important components of the Offer and the related actions being taken by
ZERO include:
1. The Offer to purchase up to 4,000,000 shares;
2. The intended reduction of ZERO's annual cash dividend rate from its
current $.44 per share to $.12 per share, effective upon ZERO's April 1996
quarterly dividend declaration;
3. The use of ZERO's cash and cash derived from the sale of short term
investments, as well as borrowing by the Subsidiary under a new $50 million
unsecured loan with a proposed maturity of 15 years and an interest rate
expected to be approximately 7% per annum, to acquire the shares to be
purchased pursuant to the Offer;
4. The establishment of a new $20 million loan facility which would be
available to ZERO, upon satisfaction of certain conditions, to make
acquisitions of businesses; and
5. The establishment of a new two year $20 million revolving credit
facility which would be available for working capital and general corporate
purposes.
The Offer provides you the opportunity to either (1) sell all or a portion of
your shares without the usual transaction costs associated with open market
sales or (2) retain your shares by taking no action with respect to the Offer.
If all 4,000,000 shares are purchased, the outstanding shares of Common Stock
will be reduced by approximately 25%.
Why is ZERO making the Offer?
. For the period from December 31, 1990 through December 31, 1995, ZERO's
cash and short term investments ranged from a low of approximately $20.1
million to a high of approximately $39.0 million.
. As ZERO has been active in making acquisitions of businesses over the
years, we determined that it was important to maintain both the safety
and liquidity of these funds so that they would be available for
immediate use for acquisitions, even though our return on investment of
these funds was less than the return achieved from our operations.
. At the current time, ZERO is not engaged in serious discussions for
larger acquisitions that might require use of these cash balances.
. Furthermore, the current low interest rates make borrowing at this time
attractive.
. ZERO's cash flow generating abilities, together with the $20 million
loan facility for acquisitions and the reduction of the dividend rate
will permit ZERO to remain active in pursuing acquisitions of
complementary businesses.
<PAGE>
. ZERO has three priorities for the cash it has been accumulating: (1) to
maintain ZERO's technological leadership in the electronics marketplace,
(2) to acquire complementary businesses, and (3) to buy back ZERO's own
stock.
. ZERO has addressed the first of its three priorities by completing
construction of new plants in England and Minnesota, building a new
plant in New Jersey and making significant upgrades in several other
businesses through direct investment in equipment, tools and machinery.
. ZERO believes that its stock is undervalued and that the repurchase of
its stock is the best investment available to ZERO at this time.
For all of these reasons, ZERO and its Board of Directors believe that the
Offer is in the best interests of ZERO and its stockholders and that it will
enhance stockholder value both in the short and long term.
NEITHER ZERO NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER WHETHER TO TENDER ALL OR ANY SHARES. NEITHER I NOR ANY OTHER
DIRECTOR OR EXECUTIVE OFFICER OF ZERO INTENDS TO TENDER SHARES PURSUANT TO THE
OFFER.
Please note that the Offer is scheduled to expire at 12:00 midnight, New
York City time, on THURSDAY, FEBRUARY 29, 1996, unless extended. Please read
the enclosed Offer to Purchase and Letter of Transmittal carefully before
making any decision on the Offer. Questions regarding the Offer should be
directed to Morrow & Co., the Information Agent, at (800) 662-5200 (toll-
free), or to PaineWebber Incorporated, the Dealer Manager, at (800) 526-8910
(toll-free).
Sincerely,
/s/ Wilford D. Godbold, Jr.
Wilford D. Godbold, Jr.
President and Chief Executive Officer
Enclosure
<PAGE>
EXHIBIT (a)(7)
[LOGO OF ZERO CORPORATION] NEWS RELEASE
CONTACT: George Daniels
FOR IMMEDIATE RELEASE Vice President/CFO
- --------------------- (800) 423-3868
ZERO CORPORATION TO OFFER TO BUY 25% OF ITS STOCK
LOS ANGELES, California (January 30, 1996)--ZERO Corporation (NYSE/PSE:ZRO)
today announced that it intends to acquire up to 4,000,000 of its approximately
16,100,000 outstanding shares of common stock in a "Dutch Auction" at a purchase
price not greater than $18.00 per share nor less than $15.75 per share. The
Offer to Purchase and Letter of Transmittal will be mailed to stockholders, and
the tender offer will commence, on February 1 and will expire at 12 p.m. EST on
February 29, 1996. The dealer manager for the offer is PaineWebber Incorporated.
On January 30, 1996, ZERO Corporation's closing stock price on the NYSE
composite tape was $15.25. ZERO also announced that today its board intends to
reduce ZERO's annual cash dividend from its current $.44 per share rate to $.12
per share effective with the April 1996 quarterly dividend declaration. ZERO and
a wholly owned subsidiary will use cash plus a $50 million loan to acquire the
shares.
Wilford D. Godbold, Jr., president and chief executive officer of ZERO, said,
"We believe that ZERO stock is undervalued and that the repurchase is the best
investment available to us at this time.
"Over the past few years, we have indicated that ZERO has three priorities for
the cash we have been accumulating. Our first priority is to maintain our
technological leadership in the niches we serve, our second priority is to
acquire complementary businesses, and our third is to buy back our own stock.
"ZERO has addressed the first of its three priorities by completing construction
of new plants in England and Minnesota, building a new plant in New Jersey and
making significant upgrades in several other businesses through direct
investment in equipment, tools and machinery.
"We have acquired several businesses during this fiscal year. ZERO's cash flow
generating abilities and the reduction of the dividend rate, coupled with a new
$20 million loan facility for acquisitions, will enable us to remain active in
pursuing acquisitions of complementary businesses," said Mr. Godbold.
Mr. Godbold concluded, "ZERO is a growth company in the electronics marketplace
which has and will continue to expand both internally and through acquisitions.
We are confident that the stock repurchase will be beneficial to our
stockholders and better position ZERO for the future."
ZERO Corporation primarily serves the electronics industry. ZERO is a leading
designer, manufacturer and marketer of engineered products to enclose, cool and
protect electronic equipment. ZERO also serves the air cargo industry and
produces the famous line of ZERO Hilliburton(R) cases for consumers worldwide.
# # #
ZERO CORPORATION, 444 SOUTH FLOWER, SUITE 2100,
LOS ANGELES, CALIFORNIA, 90071-2922
<PAGE>
EXHIBIT (a)(8)
ZERO CORPORATION RETIREMENT SAVINGS PLAN
To: Participants in the ZERO Corporation Retirement Savings Plan (the "Plan")
Re: Offer to Purchase for Cash Up to 4,000,000 Shares of the Common Stock of
ZERO Corporation by ZERO Corporation and Electronic Solutions, a wholly
owned subsidiary of ZERO Corporation
Date: February 1, 1996
This memorandum is being sent to you because you are a participant in the
ZERO Corporation Retirement Savings Plan (the "Plan"), and the records of the
Plan indicate that the Plan holds shares of common stock, par value $.01 per
share (the "Shares") of ZERO Corporation (the "Company") in the ZERO
Corporation Stock Fund credited to your Plan accounts. The Plan is described
in the ZERO Corporation Retirement Savings Plan Prospectus dated October 26,
1994, and the supplements thereto (the "Prospectus"). Please refer to your
Prospectus for more information on the Plan. Other materials included with
this memorandum are:
1. Letter from Wilford D. Godbold, Jr., President and Chief Executive
Officer of the Company to stockholders of the Company
2. Offer to Purchase
3. Letter of Transmittal
4. Election Form
5. Return envelope for Election Form
THE PURCHASERS ARE OFFERING TO PURCHASE SHARES OF
THE COMPANY'S COMMON STOCK
The Company and Electronic Solutions, a wholly owned subsidiary of the
Company (the "Subsidiary"; the Company and the Subsidiary are referred to
herein collectively as the "Purchasers") currently are inviting stockholders
of the Company to tender their Shares for sale directly to the Purchasers.
Stockholders are being invited to tender their Shares at prices not greater
than $18.00 per Share nor less than $15.75 per Share. The details of the
invitation are described in the Purchasers' Offer to Purchase dated February
1, 1996 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer"). Copies of the Offer to Purchase and of the
Letter of Transmittal, and related materials, which are being sent to the
Company's stockholders, are enclosed for your review. IT IS IMPORTANT THAT YOU
READ THE OFFER TO PURCHASE FOR A COMPLETE DESCRIPTION OF THE TERMS AND
CONDITIONS OF THE OFFER.
Because the Purchasers intend to purchase only a limited number of Shares, a
tender of Shares within the specified price range does not guarantee that the
Purchasers will accept every such tender. The Purchasers will select the
lowest price within the range that will enable them to purchase the target
number of shares pursuant to the Offer (the "Purchase Price"); provided,
however, all stockholders will receive the same Purchase Price for Shares
accepted by the Purchasers. (For example, if stockholders offer to sell
4,000,000 Shares at prices ranging from $15.75 to $16.50, all stockholders who
offer to sell their Shares will receive $16.50. In the same example, any
stockholder who tenders Shares at a price above $16.50 will not have his/her
Shares purchased by the Purchasers.) If more Shares are tendered at the
Purchase Price than the Purchasers intend to buy, the Shares will be purchased
on a pro rata basis for the Purchase Price.
Please note that the special rules applicable to holders of fewer than 100
Shares as described in Section 2 of the Offer to Purchase, called "odd lot
holdings," are not applicable to individual Plan participants. Consequently,
if the Company prorates its purchases (see Section 1 of the Offer to
Purchase), proration will apply to any Shares tendered from the Plan, even if
you hold less than 100 Shares in your Plan accounts.
<PAGE>
YOUR DECISION WHETHER TO TENDER
As a participant in the Plan, you may direct the Plan's Trustee, American
Express Trust Company, a Minnesota corporation (the "Trustee"), to tender
Shares allocated to your Plan accounts pursuant to the Offer. PLEASE NOTE THAT
THE ENCLOSED LETTER OF TRANSMITTAL IS BEING FURNISHED TO YOU FOR YOUR
INFORMATION ONLY. The Letter of Transmittal CANNOT be used by you to tender
the Shares held in your Plan accounts. Because only the Trustee of the Plan
can tender Shares held in your Plan accounts, you must direct the Trustee if
you wish to tender such Shares, and only the Election Form can be used for
that purpose. THE ENCLOSED OFFER TO PURCHASE PROVIDES A DETAILED DESCRIPTION
OF THE TERMS AND CONDITIONS OF THE OFFER. YOU SHOULD READ THIS MATERIAL
CAREFULLY BEFORE DECIDING WHETHER TO TENDER ANY OF YOUR SHARES HELD IN THE
PLAN. THIS IS AN IMPORTANT INVESTMENT DECISION FOR WHICH YOU ARE RESPONSIBLE.
IN DECIDING WHETHER OR NOT TO TENDER YOUR SHARES UNDER THE PLAN, BEAR IN MIND
THAT PLAN PROVISIONS ALSO PERMIT YOU TO CHANGE THE INVESTMENT OF YOUR ACCOUNTS
UNDER THE PLAN, WITH THE RESULT THAT UNDER THE PLAN YOU EFFECTIVELY CAN
REINVEST THE PORTION OF YOUR ACCOUNTS NOW HELD IN THE ZERO CORPORATION STOCK
FUND EVEN THOUGH YOU DO NOT CHOOSE TO TENDER SHARES IN ACCORDANCE WITH THIS
OFFER. ALSO, THE PROCEEDS FROM ANY SALE OF SHARES FROM YOUR PLAN ACCOUNTS WILL
NOT BE DISTRIBUTED TO YOU. INSTEAD, ANY PROCEEDS WILL CONTINUE TO BE HELD IN
YOUR PLAN ACCOUNTS, AND WILL BE REINVESTED IN THE AVAILABLE PLAN INVESTMENT
ALTERNATIVES. (See "Reinvestment of Sale Proceeds; Effect on Other Plan
Transactions" below.)
Neither the Employee Benefit Committee (as such term is defined in the Plan)
under the Plan nor the Trustee anticipates causing any Shares to be tendered
for which a properly completed election has not been communicated by a
Participant. Accordingly, IF YOU DO NOT WISH TO TENDER YOUR SHARES, YOU DO NOT
NEED TO TAKE ANY ACTION AND YOU MAY DISREGARD THE ENCLOSED ELECTION FORM.
HOW TO TENDER SHARES
If you wish to direct the Trustee to tender your Shares, you must complete
and return the enclosed Election Form in accordance with the instructions
specified on the Election Form. If you do not wish to tender your Shares, you
do not need to complete the Election Form, and you should not return the
Election Form. If you do not return a validly executed Election Form, the
Trustee will NOT tender your Shares.
Before deciding whether or not to tender your Shares, please carefully read
the enclosed materials. If you decide to tender some or all of your Shares,
please be aware that YOUR ELECTION TO TENDER WILL BE EFFECTIVE ONLY IF YOUR
PROPERLY COMPLETED ELECTION FORM, WITH ORIGINAL SIGNATURE, IS RECEIVED BY THE
TRUSTEE AT ITS ADDRESS SET FORTH ON THE ELECTION FORM NO LATER THAN 2:00 P.M.,
CENTRAL STANDARD TIME, ON WEDNESDAY, FEBRUARY 28, 1996. FAXED COPIES OF
ELECTION FORMS WILL NOT BE ACCEPTED. Election Forms that are received after
this deadline, and Election Forms which are not properly completed, will not
be accepted. Examples of improperly completed Election Forms include Forms
which are not signed, and Forms which contain incorrect, missing or incomplete
information. YOUR DECISION TO TENDER (OR NOT TO TENDER) WILL REMAIN
CONFIDENTIAL.
REINVESTMENT OF SALE PROCEEDS; EFFECT ON OTHER PLAN TRANSACTIONS
If you choose to tender any of your Shares, and the Shares actually are
purchased by the Purchasers, the proceeds from the sale of Shares will NOT be
distributed to you. As required by the Internal Revenue Code and the Plan, the
sale proceeds will continue to be held under the Plan. All sale proceeds will
continue to be subject to all Plan rules. The tender proceeds will be invested
in the American Express Trust Collective Income Fund II under the Plan. You
may, of course, reinvest those proceeds among other investment alternatives
made available
2
<PAGE>
under the Plan, in accordance with the ordinary procedures of the Plan
applicable to investment changes. Please note that if Shares are tendered as a
result of your election, the proceeds may not be available for reinvestment
for several weeks. In addition, if Shares are tendered as a result of your
election, other Plan transactions involving your accounts, such as loans,
hardship withdrawals, distributions, and routine investment changes that you
make, may be delayed for a similar period, as required to process instructions
to tender and pending receipt and crediting of funds in payment of tendered
shares accepted for payment.
WITHDRAWING YOUR DECISION TO TENDER
As more fully described in Section 4 of the Offer to Purchase, tenders will
be deemed irrevocable unless withdrawn in accordance with the following
procedures. If you send in an Election Form to tender Shares, and you decide
to withdraw your election, you may do so by sending a notice of withdrawal to
the Trustee. The notice of withdrawal will be effective only if it is in
writing and is received in the original by the Trustee on or before 2:00 p.m.,
Central Standard Time, on Wednesday, February 28, 1996 at the following
address: P.O. Box 534, Minneapolis, Minnesota 55440-0534. FAXES WILL NOT BE
ACCEPTED. Any notice of withdrawal must specify your name, your social
security number, the name of the Plan, the percentage of Shares tendered in
your original Election Form, and the percentage of Shares held in your Plan
accounts to be withdrawn. Upon receipt of a timely written notice of
withdrawal, previous instructions to tender with respect to such Shares will
be deemed cancelled and the Trustee will not tender such Shares. If you later
wish to retender Shares, you may call the Trustee at (612) 671-3610 to obtain
a new Election Form. Any new Election Form must be submitted to the Trustee on
or before 2:00 p.m., Central Standard Time, on Wednesday, February 28, 1996 in
accordance with the instructions provided above ("How to Tender Shares") and
on the Election Form.
IF YOU HAVE QUESTIONS
If you have any questions about the Offer, please call Morrow & Co. (the
"Information Agent"), telephone number (212) 754-8000 (call collect) or (800)
662-5200 (toll-free). If you have questions concerning completion of the
Election Form, or any of the matters discussed above, please call the Trustee,
telephone number (612) 671-3610. If you have questions about the Plan, please
refer to your Prospectus. Copies of the Summary Plan Description may be
obtained from the Human Resources Department of the Company.
NEITHER THE COMPANY, THE SUBSIDIARY, THEIR RESPECTIVE BOARDS OF DIRECTORS,
THE TRUSTEE, NOR ANY PLAN REPRESENTATIVE MAKES ANY RECOMMENDATION AS TO
WHETHER TO TENDER ALL OR ANY SHARES. YOU MUST MAKE YOUR OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT
PRICE.
3
<PAGE>
ZERO CORPORATION RETIREMENT SAVINGS PLAN
ELECTION FORM
TO TENDER SHARES OF ZERO COMMON STOCK
Important Information about this Election Form:
(1) Before completing this Form, please read all of the enclosed documents
carefully.
(2) You do not need to complete this Form if you do not wish to tender any
shares.
(3) In order for your tender to be accepted, you must properly complete
Parts 1, 2, 3, and 4 of this Election Form and the properly completed
Form, with original signature, must be received by the Trustee at P.O.
Box 534, Minneapolis, Minnesota 55440-0534, by 2:00 p.m., Central
Standard Time, on Wednesday, February 28, 1996. An envelope addressed
to the Trustee is enclosed. NO FAX COPIES OF ELECTION FORMS WILL BE
ACCEPTED.
In accordance with the materials that were enclosed with this Election Form,
including the memorandum to participants in the ZERO Corporation Retirement
Savings Plan (the "Plan") dated February 1, 1996, and the Offer to Purchase of
ZERO Corporation (the "Company") and Electronic Solutions, a wholly owned
subsidiary of the Company (the "Subsidiary"; the Company and the Subsidiary
are collectively referred herein to as the "Purchasers"), dated February 1,
1996, I hereby instruct American Express Trust Company, a Minnesota
corporation, the Trustee of the Plan (the "Trustee"), to tender shares of
Common Stock of the Company, par value $.01 per share (the "Shares"), held in
the ZERO Corporation Stock Fund of the Plan and credited to my Plan accounts,
prior to the expiration of such Offer to Purchase, as follows:
PART 1: ELECTION TO TENDER SHARES
(If you wish to tender Shares from your Plan accounts, insert the percentage
of such shares that you wish to tender.)
I ELECT TO TENDER % OF THE SHARES IN MY PLAN ACCOUNTS AT THE PRICE
INDICATED BELOW IN "PART 2: PRICE AT WHICH TO TENDER SHARES."
<PAGE>
PART 2: PRICE AT WHICH TO TENDER SHARES
(If you tendered Shares in Part 1 above, please check the box indicating the
price at which you wish to tender the Shares from your Plan accounts. Only one
box may be checked. If more than one box is checked, or if no box is checked,
there is no valid tender of Shares. If you have questions about selecting a
price, see the memorandum to participants in the ZERO Corporation Retirement
Savings Plan, and Section 1 of the enclosed Offer to Purchase.
I WISH MY SHARES TENDERED AT THE PRICE INDICATED BELOW:
[_] $15.75 [_] $16.00 [_] $16.25 [_] $16.50 [_] $16.75
[_] $17.00 [_] $17.25 [_] $17.50 [_] $17.75 [_] $18.00
PART 3: REINVESTMENT OF SALE PROCEEDS
I acknowledge that the sale proceeds will be invested in the American
Express Trust Collective Income Fund II under the Plan, subject thereafter to
my reinvestment of those proceeds among other investment alternatives made
available under the Plan, in accordance with the ordinary procedures of the
Plan applicable to investment changes.
PART 4: YOUR SIGNATURE AND ACKNOWLEDGMENT
My signature below indicates that I have received and read the memorandum to
Plan participants holding common stock of the Company dated February 1, 1996,
and the Offer to Purchase dated February 1, 1996. I agree to all of the terms
and conditions described in the enclosed materials.
-------------------------------------
Signature
-------------------------------------
Please print name
-------------------------------------
Social Security Number
-------------------------------------
Work telephone number
-------------------------------------
Home telephone number
NEITHER THE COMPANY, THE SUBSIDIARY, THEIR RESPECTIVE BOARDS OF DIRECTORS,
THE TRUSTEE, NOR ANY PLAN REPRESENTATIVE MAKES ANY RECOMMENDATION AS TO
WHETHER TO TENDER ALL OR ANY SHARES. YOU MUST MAKE YOUR OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT
PRICE.
2
<PAGE>
EXHIBIT (b)
ZERO CORPORATION
ELECTRONIC SOLUTIONS
PRIVATE SHELF AGREEMENT
$50,000,000
Shelf Facility with Electronic Solutions
$20,000,000
Shelf Facility with Zero Corporation
Dated as of January 31, 1996
<PAGE>
TABLE OF CONTENTS
(not part of agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1A. AUTHORIZATION OF ISSUE OF ELECTRONIC NOTES.................... 1
1B. AUTHORIZATION OF ISSUE OF COMPANY NOTES....................... 1
2A. PURCHASE AND SALE OF ELECTRONIC NOTES......................... 2
2A(1). AGREEMENT TO PURCHASE ELECTRONIC NOTES........... 2
2A(2). AVAILABILITY PERIOD.............................. 2
2A(3). PURCHASE REQUEST................................. 2
2A(4). RATE QUOTES...................................... 3
2A(5). ACCEPTANCE....................................... 3
2A(6). MARKET DISRUPTION................................ 4
2B. PURCHASES AND SALE OF COMPANY NOTES........................... 4
2B(1). FACILITY......................................... 4
2B(2). ISSUANCE PERIOD.................................. 5
2B(3). REQUEST FOR PURCHASE............................. 5
2B(4). RATE QUOTES...................................... 6
2B(5). ACCEPTANCE....................................... 6
2B(6). MARKET DISRUPTION................................ 7
2C. CLOSINGS AND FEES............................................. 7
2C(1). CLOSINGS......................................... 7
2C(2). STRUCTURING FEE.................................. 8
2C(3). ISSUANCE FEE..................................... 8
2C(4). DELAYED DELIVERY FEE............................. 8
2C(5). CANCELLATION FEE................................. 9
3. CONDITIONS OF CLOSING......................................... 10
3A. CERTAIN DOCUMENTS................................ 10
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL........... 11
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT....... 11
3D. PURCHASE PERMITTED BY APPLICABLE LAWS............ 11
3E. PAYMENT OF FEES.................................. 11
3F. ADDITIONAL ELECTRONIC CLOSING MATTERS............ 11
4. PREPAYMENTS................................................... 11
4A. REQUIRED PREPAYMENTS OF NOTES.................... 12
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT 12
4C. NOTICE OF OPTIONAL PREPAYMENT.................... 12
4D. APPLICATION OF PREPAYMENTS....................... 12
4E. RETIREMENT OF NOTES.............................. 12
5. AFFIRMATIVE COVENANTS......................................... 13
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS......... 13
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5B. INFORMATION REQUIRED BY RULE 144A................ 15
5C. INSPECTION OF PROPERTY........................... 15
5D. COVENANT TO SECURE NOTES EQUALLY................. 15
5E. MAINTENANCE OF INSURANCE......................... 15
5F. COMPLIANCE WITH LAWS............................. 16
6. NEGATIVE COVENANTS............................................ 16
6A. CURRENT RATIO.................................... 16
6B. TANGIBLE NET WORTH............................... 16
6C. CREDIT AND OTHER RESTRICTIONS.................... 16
6C(1). LIEN RESTRICTIONS................................ 16
6C(2). DEBT............................................. 17
6C(3). LOANS, ADVANCES AND INVESTMENTS.................. 18
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES........... 19
6C(5). MERGER AND CONSOLIDATION......................... 19
6C(6). TRANSFER OF ASSETS............................... 19
6C(7). LEASE RENTALS.................................... 20
6C(8). SALE, PLEDGE OR DISCOUNT OF RECEIVABLES.......... 20
6C(9). RELATED PARTY TRANSACTIONS....................... 20
6C(10). SUBSIDIARY DIVIDEND RESTRICTIONS................. 20
6D. ISSUANCE OF STOCK BY SUBSIDIARIES................ 20
7. EVENTS OF DEFAULT............................................. 21
7A. ACCELERATION..................................... 21
7B. RESCISSION OF ACCELERATION....................... 24
7C. NOTICE OF ACCELERATION OR RESCISSION............. 25
7D. OTHER REMEDIES................................... 25
8. REPRESENTATIONS, COVENANTS AND WARRANTIES..................... 25
8A. ORGANIZATION..................................... 25
8B. FINANCIAL STATEMENTS............................. 25
8C. ACTIONS PENDING.................................. 26
8D. OUTSTANDING DEBT................................. 26
8E. TITLE TO PROPERTIES.............................. 27
8F. TAXES............................................ 27
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS......... 27
8H. OFFERING OF NOTES................................ 28
8I. USE OF PROCEEDS, REGULATION G, ETC............... 28
8J. ERISA............................................ 28
8K. GOVERNMENTAL COMPLIANCE.......................... 29
8L. COMPLIANCE....................................... 29
8M. HOSTILE TENDER OFFERS............................ 29
8N. DISCLOSURE....................................... 29
8O. HOLDING COMPANY STATUS........................... 30
8P. INVESTMENT COMPANY STATUS........................ 30
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9. REPRESENTATIONS OF EACH PURCHASER............................. 30
9A. NATURE OF PURCHASE............................... 30
9B. SOURCE OF FUNDS.................................. 30
9C. NO RELIANCE ON PURCHASED COMMON STOCK............ 30
10. DEFINITIONS; ACCOUNTING MATTERS............................... 31
10A. YIELD-MAINTENANCE TERMS.......................... 31
10B. OTHER TERMS...................................... 32
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS.. 43
11. COMPANY GUARANTY OF ELECTRONIC'S OBLIGATIONS.................. 43
11A. GUARANTY OF PAYMENT & PERFORMANCE OF OBLIGATIONS. 43
11B. OBLIGATIONS UNCONDITIONAL........................ 44
11C. OBLIGATIONS UNIMPAIRED........................... 45
11D. WAIVERS OF COMPANY............................... 46
11E. REVIVAL.......................................... 48
11F. OBLIGATION TO KEEP INFORMED...................... 48
11G. BANKRUPTCY....................................... 49
12. MISCELLANEOUS................................................. 49
12A. NOTE PAYMENTS.................................... 49
12B. EXPENSES......................................... 49
12C. CONSENT TO AMENDMENTS............................ 50
12D. TRANSFER LIMITATIONS: FORM, REGISTRATION,
TRANSFER AND EXCHANGE OF NOTES; LOST NOTES....... 51
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS............ 51
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT................................. 52
12G. SUCCESSORS AND ASSIGNS........................... 52
12H. NOTICES.......................................... 52
12I. CONFIDENTIALITY.................................. 53
12J. PAYMENTS DUE ON NON-BUSINESS DAYS................ 54
12K. SATISFACTION REQUIREMENT......................... 54
12L. DESCRIPTIVE HEADINGS............................. 54
12M. GOVERNING LAW.................................... 54
12N. COUNTERPARTS..................................... 54
</TABLE>
- iii -
<PAGE>
EXHIBITS AND SCHEDULES
Information Schedule
Exhibit A - Form of Electronic Note
Exhibit A-2 - Form of Company Note
Exhibit B-1 - Form of Purchase Request (Electronic Notes)
Exhibit B-2 - Form of Request for Purchase (Company Notes)
Exhibit C-1 - Form of Confirmation of Acceptance (Electronic Notes)
Exhibit C-2 - Form of Confirmation of Acceptance (Company Notes)
Exhibit D-1 - Form of Opinion of Counsel, Electronic Note Closing
Exhibit D-2 - Form of Opinion of Counsel, Company Note Closings
Exhibit E - Subordination Terms
Schedule 6C(3) - Existing Loans, Advances and Investments
Schedule 6C(6) - Permitted Transfers of Assets
Schedule 8A - Subsidiary Information
Schedule 8C - Actions Pending
- iv -
<PAGE>
ZERO CORPORATION
ELECTRONIC SOLUTIONS
444 South Flower Street, #2100
Los Angeles, California 90071
As of January 31, 1996
The Prudential Insurance Company
of America ("PRUDENTIAL")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential,
the "PURCHASERS")
c/o Prudential Capital Group
777 South Figueroa Street
Suite 2950
Los Angeles, California 90017
Ladies and Gentlemen:
The undersigned, Zero Corporation (the "COMPANY") and Electronic Solutions
("ELECTRONIC"), hereby agree with you as follows:
1A. AUTHORIZATION OF ISSUE OF ELECTRONIC NOTES. Electronic will authorize
the issue of its guaranteed senior promissory notes (the "ELECTRONIC NOTES") in
the aggregate principal amount of $50,000,000, to be dated the date of issue
thereof, to mature no more than fifteen years from the date of original issuance
thereof, to have an Average Life to Maturity of not more than ten years, to bear
interest on the unpaid balance thereof at the rate per annum, and to have such
other particular terms as shall be set forth in the Confirmation of Acceptance
delivered pursuant to paragraph 2A(5), and to be substantially in the form of
Exhibit A-1 attached hereto. Each Electronic Note shall be unconditionally
- -----------
guaranteed by the Company pursuant to the guarantee set forth in paragraph 11
hereof.
1B. AUTHORIZATION OF ISSUE OF COMPANY NOTES. The Company will authorize
the issue of its senior promissory notes (the "COMPANY NOTES") in the aggregate
principal amount of $20,000,000, to be dated the date of issue thereof, to
mature, in
<PAGE>
the case of each Note so issued, no more than fifteen years after the date of
original issuance thereof, to have an Average Life to Maturity of not more than
ten years, to bear interest on the unpaid balance thereof from the date thereof
at the rate per annum, and to have such other particular terms, as shall be set
forth, in the case of each Note so issued, in the Confirmation of Acceptance
with respect to such Note delivered pursuant to paragraph 2B(5), and to be
substantially in the form of Exhibit A-2 attached hereto. The terms "NOTE" and
-----------
"NOTES" as used herein shall include each Electronic Note and each Company Note
delivered pursuant to any provision of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision.
Notes which would have (i) the same final maturity, (ii) the same principal
prepayment dates, (iii) the same principal prepayment amounts (as a percentage
of the original principal amount of each Note), (iv) the same interest rate, (v)
the same interest payment periods, (vi) the same date of issuance (which, in the
case of a Note issued in exchange for another Note, shall be deemed for these
purposes the date on which such Note's ultimate predecessor Note was issued) and
(vii) the same issuer, are herein called a "SERIES" of Notes.
2A. PURCHASE AND SALE OF ELECTRONIC NOTES
2A(1). AGREEMENT TO PURCHASE ELECTRONIC NOTES. Subject to the occurrence
of an Electronic Acceptance with respect to any Electronic Notes and the terms
and conditions herein set forth, Prudential hereby agrees to purchase from
Electronic and/or cause the purchase thereof by one or more Prudential
Affiliates, Electronic Notes in an aggregate principal amount determined as
hereinafter provided, at a price equal to 100% of the principal amount thereof.
Electronic Notes shall not be issuable hereunder on more than one occasion.
2A(2). AVAILABILITY PERIOD. Electronic Notes may be issued and sold
pursuant to this Agreement until June 28, 1996. The period during which
Electronic Notes may be issued and sold pursuant to this Agreement is herein
called the "AVAILABILITY PERIOD".
2A(3). PURCHASE REQUEST. Electronic may during the Availability Period
make a request for purchase of Electronic Notes (any such request being herein
called a "PURCHASE REQUEST"). A Purchase Request shall be made to Prudential by
telecopier or overnight delivery service, and shall (i) specify the aggregate
principal amount of Electronic Notes covered thereby, which shall not be less
than $10,000,000 and shall not be greater than $50,000,000, (ii) specify the
principal amount, final maturity, principal prepayment dates and amounts and
interest payment periods (which shall be semi-annually in arrears) of the
Electronic Notes (which specification must
2
<PAGE>
provide for a maturity of not more than fifteen years and an Average Life to
Maturity of not more than ten years), (iii) confirm that the use of proceeds of
such Electronic Notes shall be the purchase of publicly traded common stock of
the Company pursuant to a tender offer therefor and payment of expenses related
thereto, (iv) specify the proposed day for the closing of the purchase and sale
of the Electronic Notes, which shall be a Business Day during the Availability
Period not less than 5 Business Days after the making of such Purchase Request
and not later than June 28, 1996, (v) specify the number of the account and the
name and address of the depository institution to which the aggregate purchase
price of such Electronic Notes are to be transferred on the Closing Day for such
purchase and sale, (vi) certify that the representations and warranties
contained in paragraph 8 are true on and as of the date of such Purchase
Request, that there exists on the date of such Purchase Request no Event of
Default or Default and that no Material Adverse Change has occurred and (vii) be
substantially in the form of Exhibit B-1 attached hereto. Each Purchase Request
-----------
shall be in writing and shall be deemed made when such Purchase Request and any
supplemental information requested by Prudential have been received by
Prudential. No Purchase Request may be submitted during any period of Market
Disruption.
2A(4). RATE QUOTES. Not later than three Business Days after Prudential
shall have received from the Company a Purchase Request pursuant to paragraph
2A(3), Prudential shall, unless the Purchase Request contains a false
certification or is non-conforming or a Market Disruption or Material Adverse
Change has occurred, provide to the Company by telephone or telecopier, in each
case between 9:30 a.m. and 1:30 p.m. New York City local time (or such later
time as Prudential may elect) an interest rate quote ("RATE QUOTE") for the
Electronic Notes specified in such Purchase Request. Each Rate Quote shall
represent the interest rate per annum payable on the outstanding principal
balance of such Electronic Notes at which Prudential or a Prudential Affiliate
would be willing to purchase such Notes at 100% of the principal amount thereof.
Each Rate Quote provided shall be determined by Prudential by adding (a) the
yield reported (as of the time of determination thereof by Prudential) on the
Telerate Service (or any comparable successor service or publication used by
Prudential) for a series (the "BASE TREASURY NOTES") of actively traded U.S.
Treasury securities having an Average Life to Maturity comparable to that of the
Electronic Notes proposed to be issued (using more than one such series of Base
Treasury Notes and interpolating linearly between them, if appropriate in
Prudential's determination) plus (b) a credit spread determined by Prudential.
2A(5). ACCEPTANCE. Within 15 minutes after Prudential shall have provided
any Rate Quote or such shorter period as
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<PAGE>
Prudential may specify to Electronic (such period herein called the "ACCEPTANCE
WINDOW"), Electronic may, subject to paragraph 2A(6), elect to accept such Rate
Quote as to the Electronic Notes specified in the related Purchase Request.
Such election shall be made by an Authorized Officer of Electronic notifying
Prudential by telephone within the Acceptance Window that Electronic elects to
accept such interest rate quote, specifying the Notes (each such Note being
herein called an "ACCEPTED ELECTRONIC NOTE") as to which such acceptance (herein
called an "ELECTRONIC ACCEPTANCE") relates. The day Electronic notifies
Prudential of an Electronic Acceptance with respect to the Accepted Electronic
Notes is herein called the "ACCEPTANCE DAY" for such Accepted Electronic Notes.
Any interest rate quotes as to which Prudential does not receive an Electronic
Acceptance within the Acceptance Window shall expire, and no purchase or sale of
Electronic Notes hereunder shall be made based on such expired interest rate
quotes. Subject to paragraph 2A(6) and the other terms and conditions hereof,
the Company agrees to sell to Prudential or a Prudential Affiliate, and
Prudential agrees to purchase, or to cause the purchase by a Prudential
Affiliate of, any Accepted Electronic Notes at 100% of the principal amount of
such Notes. As soon as practicable following the Acceptance Day, Electronic,
the Company, Prudential and each Prudential Affiliate which is to purchase any
such Accepted Electronic Notes will execute a confirmation of such Electronic
Acceptance substantially in the form of Exhibit C-1 attached hereto (herein
-----------
called a "CONFIRMATION OF ACCEPTANCE").
2A(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2A(5), if Prudential shall have provided a Rate Quote pursuant to paragraph
2A(4) and thereafter prior to the time an Electronic Acceptance with respect to
such Rate Quote shall have been notified to Prudential in accordance with
paragraph 2A(5) a Market Disruption occurs, then such Rate Quote shall be deemed
to have then expired, and no purchase or sale of Notes hereunder shall be made
based on such expired Rate Quote. If Electronic thereafter notifies Prudential
of an Electronic Acceptance of any such Rate Quote, such Electronic Acceptance
shall be ineffective for all purposes of this Agreement, and Prudential shall
promptly notify Electronic that the provisions of this paragraph 2A(6) are
applicable with respect to such Electronic Acceptance.
2B. PURCHASE AND SALE OF COMPANY NOTES.
2B(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
and Prudential Affiliates from time to time, the purchase of Company Notes
pursuant to this Agreement. The willingness of Prudential to consider such
purchase of Company Notes is herein called the "FACILITY". At any time, the
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aggregate principal amount of Company Notes stated in paragraph 1B, minus the
-----
aggregate principal amount of Company Notes purchased and sold prior to such
time pursuant to this Agreement, minus the aggregate principal amount of
-----
Accepted Company Notes which have not yet been purchased and sold hereunder
prior to such time, is herein called the "AVAILABLE FACILITY AMOUNT" at such
time. NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF
COMPANY NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT
NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR
ACCEPT OFFERS TO PURCHASE COMPANY NOTES, OR TO QUOTE RATES, SPREADS OR OTHER
TERMS WITH RESPECT TO SPECIFIC PURCHASES OF COMPANY NOTES, AND THE FACILITY
SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL
AFFILIATE.
2B(2). ISSUANCE PERIOD. Company Notes may be issued and sold pursuant to
this Agreement until the earlier of (i) the second anniversary of the date of
this Agreement (or if such anniversary is not a Business Day, the Business Day
next preceding such anniversary) and (ii) the thirtieth day after Prudential
shall have given to the Company, or the Company shall have given to Prudential,
written notice stating that it elects to terminate the issuance and sale of
Company Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day). The period
during which Company Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".
2B(3). REQUEST FOR PURCHASE. The Company may from time to time during the
Issuance Period make requests for purchases of Company Notes (each such request
being herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase shall
be made to Prudential by telecopier or overnight delivery service, and shall (i)
specify the aggregate principal amount of Company Notes covered thereby, which
shall not be less than $5,000,000 and shall not be greater than the Available
Facility Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (which shall be semi-annually in arrears) of the
Company Notes covered thereby, (iii) specify the use of proceeds of such Company
Notes, (iv) specify the proposed day for the closing of the purchase and sale of
such Company Notes, which shall be a Business Day during the Issuance Period not
less than 10 days and not more than 30 days after the making of such Request for
Purchase, (v) specify the number of the account and the name and address of the
depository institution to which the aggregate purchase price of such Company
Notes are to be transferred on the Closing Day for such purchase and sale, (vi)
certify that the representations and warranties contained in paragraph 8 are
true on and as of the date of such Request for Purchase and that there exists on
the date of such
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<PAGE>
Request for Purchase no Event of Default or Default and (vii) be substantially
in the form of Exhibit B-2 attached hereto. Each Request for Purchase shall be
-----------
in writing and shall be deemed made when received by Prudential.
2B(4). RATE QUOTES. Not later than five Business Days after the Company
shall have given Prudential a Request for Purchase pursuant to paragraph 2B(3),
Prudential may, but shall be under no obligation to, provide to the Company by
telephone or telecopier, in each case between 9:30 a.m. and 1:30 p.m. New York
City local time (or such later time as Prudential may elect) interest rate
quotes for the several principal amounts, maturities, principal prepayment
schedules, and interest payment periods of Company Notes specified in such
Request for Purchase. Each quote shall represent the interest rate per annum
payable on the outstanding principal balance of such Company Notes at which
Prudential or a Prudential Affiliate would be willing to purchase such Notes at
100% of the principal amount thereof.
2B(5). ACCEPTANCE. Within 15 minutes after Prudential shall have provided
any interest rate quotes pursuant to paragraph 2B(4) or such shorter period as
Prudential may specify to the Company (such period herein called the "ACCEPTANCE
WINDOW"), the Company may, subject to paragraph 2B(6), elect to accept such
interest rate quotes as to not less than $5,000,000 aggregate principal amount
of the Notes specified in the related Request for Purchase. Such election shall
be made by an Authorized Officer of the Company notifying Prudential by
telephone within the Acceptance Window that the Company elects to accept such
interest rate quotes, specifying the Notes (each such Note being herein called
an "ACCEPTED COMPANY NOTE") as to which such acceptance (herein called a
"COMPANY ACCEPTANCE") relates. The day the Company notifies Prudential of a
Company Acceptance with respect to any Accepted Company Notes is herein called
the "ACCEPTANCE DAY" for such Accepted Company Notes. Any interest rate quotes
as to which Prudential does not receive a Company Acceptance within the
Acceptance Window shall expire, and no purchase or sale of Notes hereunder shall
be made based on such expired interest rate quotes. Subject to paragraph 2B(6)
and the other terms and conditions hereof, the Company agrees to sell to
Prudential or a Prudential Affiliate, and Prudential agrees to purchase, or to
cause the purchase by a Prudential Affiliate of, the Accepted Notes at 100% of
the principal amount of such Notes. As soon as practicable following the
Company Acceptance Day, the Company, Prudential and each Prudential Affiliate
which is to purchase any such Accepted Company Notes will execute a confirmation
of such Acceptance substantially in the form of Exhibit C-2 attached hereto
-----------
(herein called a "CONFIRMATION OF ACCEPTANCE"). If the Company should fail to
execute and return to Prudential (by facsimile or overnight delivery service)
within three Business Days following receipt thereof a Confirmation of
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<PAGE>
Acceptance with respect to any Accepted Company Notes, Prudential may at its
election at any time prior to its receipt thereof cancel the closing with
respect to such Accepted Company Notes by so notifying the Company in writing.
2B(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2B(5), if Prudential shall have provided interest rate quotes pursuant to
paragraph 2B(4) and thereafter prior to the time a Company Acceptance with
respect to such quotes shall have been notified to Prudential in accordance with
paragraph 2B(5) a Market Disruption occurs, then such interest rate quotes shall
be deemed to have then expired, and no purchase or sale of Notes hereunder shall
be made based on such expired interest rate quotes. If the Company thereafter
notifies Prudential of a Company Acceptance of any such interest rate quotes,
such Company Acceptance shall be ineffective for all purposes of this Agreement,
and Prudential shall promptly notify the Company that the provisions of this
paragraph 2B(6) are applicable with respect to such Company Acceptance.
2C. CLOSINGS AND FEES.
2C(1). CLOSINGS. Not later than 11:30 a.m. (New York City local time) on
the Closing Day for any Accepted Notes, the Company or Electronic (as the case
may be) will deliver to each Purchaser listed in the Confirmation of Acceptance
relating thereto at the offices of Prudential Capital Group, Two Prudential
Plaza, Suite 5600, Chicago, IL 60601-6716 (or such other address as Prudential
may specify), the Accepted Notes to be purchased by such Purchaser in the form
of one or more Notes in authorized denominations as such Purchaser may request
for each Accepted Note to be purchased on the Closing Day, dated the Closing Day
and registered in such Purchaser's name (or in the name of its nominee), against
payment of the purchase price thereof by transfer of immediately available funds
for credit to the Company's or Electronic's account specified in the Purchase
Request or Request for Purchase (as the case may be) with respect to such Notes.
If Electronic or the Company (as the case may be) fails to tender to any
Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled
Closing Day for such Accepted Notes as provided above in this paragraph 2C(1),
or any of the applicable conditions specified in paragraph 3 shall not have been
fulfilled by the time required on such scheduled Closing Day, the Company shall,
prior to 1:00 p.m., New York City local time, on such scheduled Closing Day
notify Prudential (which notification shall be deemed received by each
Purchaser) in writing whether (i) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Availability Period or the
Issuance Period, as applicable, not less than one Business Day and not more
than 10 Business Days after such scheduled Closing Day (the "RESCHEDULED CLOSING
DAY")) and
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<PAGE>
certify to Prudential (which certification shall be for the benefit of each
Purchaser) that the Company reasonably believes that it will be able to comply
with the conditions set forth in paragraph 3 on such Rescheduled Closing Day and
that the Company will pay the Delayed Delivery Fee in accordance with paragraph
2C(4) or (ii) such closing is to be canceled. In the event that the Company
shall fail to give such notice referred to in the preceding sentence, Prudential
(on behalf of each Purchaser) may at its election, at any time after 1:00 p.m.,
New York City local time, on such scheduled Closing Day, notify the Company in
writing that such closing is to be canceled. Notwithstanding anything to the
contrary appearing in this Agreement, the Company may not elect to reschedule a
closing with respect to any given Accepted Notes on more than one occasion,
unless Prudential shall have otherwise consented in writing.
2C(2). STRUCTURING FEE. In consideration for the time, effort and expense
involved in the preparation, negotiation, execution and monitoring of this
Agreement, the Company will pay to Prudential a non-refundable structuring fee .
Prudential has previously received a $25,000 installment of such structuring
fee. A second and final $25,000 installment shall be paid by the Company to
Prudential on June 28, 1996; provided, however, that the Company shall not be
obligated to make payment of such second and final installment if a closing of
the purchase and sale of Electronic Notes occurs on or before June 28, 1996.
2C(3). ISSUANCE FEE. The Company will pay to Prudential in immediately
available funds a fee (herein called the "ISSUANCE FEE") on each Closing Day
with respect to Company Notes in an amount equal to 0.15% of the aggregate
principal amount of Company Notes sold on such Closing Day. No Issuance Fee
shall be due in connection with any issuance of the Electronic Notes.
2C(4). DELAYED DELIVERY FEE. If the closing of the purchase and sale of
any Accepted Note is delayed for any reason beyond the original Closing Day for
such Accepted Note, the Company or Electronic (as applicable) will pay to
Prudential (i) on the Cancellation Date or actual closing date of such purchase
and sale a fee (herein called the "DELAYED DELIVERY FEE") calculated as follows:
(BEY - MMY) X DTS/365 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled
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<PAGE>
Closing Days (a new alternative investment being selected by Prudential each
time such closing is delayed); "DTS" means Days to Settlement, i.e., the number
of actual days elapsed from and including the original Closing Day with respect
to such Accepted Note (in the case of the first such payment with respect to
such Accepted Note) or from and including the date of the next preceding payment
to but excluding the date of such payment; and "PA" means Principal Amount,
i.e., the principal amount of the Accepted Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any Accepted
Note on any day other than the Closing Day for such Accepted Note, as the same
may be rescheduled from time to time in compliance with paragraph 2C(1)
2C(5). CANCELLATION FEE. If Electronic or the Company (as the case may
be) at any time notifies Prudential in writing that Electronic or the Company
(as the case may be) is canceling the closing of the purchase and sale of any
Accepted Note, or if Prudential notifies Electronic or the Company (as the case
may be) in writing under the circumstances set forth in the last sentence of
either paragraph 2A(5) or 2B(5) or the penultimate sentence of paragraph 2C(1)
that the closing of the purchase and sale of such Accepted Note is to be
canceled, or if the closing of the purchase and sale of such Accepted Note is
not consummated on or prior to the last day of the Availability Period or the
Issuance Period, as applicable (the date of any such notification, or the last
day of the Availability Period or Issuance Period, as the case may be, being
herein called the "CANCELLATION DATE"), Electronic or the Company , (as
applicable), will pay to Prudential in immediately available funds an amount
(the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as reasonably determined
by Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the
bid price (as reasonably determined by Prudential) of the Hedge Treasury
Notes(s) on the Acceptance Day for such Accepted Note by (b) such bid price; and
"PA" has the meaning ascribed to it in paragraph 2C(4). The foregoing bid and
ask prices shall be as reported by Telerate Systems, Inc. (or, if such data for
any reason ceases to be available through Telerate Systems, Inc., any publicly
available source of similar market data selected by Prudential and reasonably
acceptable to Electronic or the Company). Each price shall be based on a U.S.
Treasury security having a par value of $100.00 and shall be rounded to the
second decimal place. In no case shall the Cancellation Fee be less than zero.
9
<PAGE>
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase and
pay for any Notes is subject to the satisfaction, on or before the Closing Day
for such Notes, of the following conditions:
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the following,
each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors of
the Company and Electronic , authorizing the execution and delivery of this
Agreement (including, in the case of the Company, its guarantee set forth
in paragraph 11 hereof) and the issuance of their respective Notes, and of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes.
(iii) Certificates of the Secretary or an Assistant Secretary and one
other officer of Electronic (if the closing involves Electronic Notes) and
the Company, certifying the names and true signatures of the officers
authorized to sign this Agreement and the Notes and the other documents to
be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and By-laws
of Electronic (if the closing involves Electronic Notes) and the Company.
(v) A favorable opinion of Gibson, Dunn & Crutcher, special counsel
to the Company and Electronic (or such other counsel designated by the
Company and acceptable to the Purchaser(s)) satisfactory to such Purchaser
and substantially in the form of Exhibit D-1 (in the case of the Electronic
-----------
Notes) or D-2 (in the case of the Company Notes) attached hereto and as to
such other matters as such Purchaser may reasonably request. Electronic (if
the closing involves Electronic Notes) and the Company hereby direct such
counsel to deliver such opinion, agree that the issuance and sale of any
Notes will constitute a reconfirmation of such direction, and understand
and agree that each Purchaser receiving such an opinion will and is hereby
authorized to rely on such opinion.
(vi) A good standing certificate for Electronic (if the closing
involves Electronic Notes) from the Secretary of State of each of Nevada
and California and for the Company from the Secretary of State of each of
Delaware and California, in each case dated as of a recent date, and such
other evidence of the status thereof as such Purchaser may reasonably
request.
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<PAGE>
(vii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from James F. Evert, Assistant General Counsel of Prudential, or such
other counsel who is acting as special counsel for it in connection with this
transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 shall be true on and as of such Closing Day;
there shall exist on such Closing Day no Event of Default or Default (assuming
for purposes hereof, if no Notes are then outstanding, that Notes have been
issued and are outstanding); and the Company and Electronic (if the closing
involves Electronic Notes) shall have each delivered to such Purchaser an
Officer's Certificate, dated such Closing Day, to both such effects.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds from the sale of such Notes)
shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation G, T or X of
the Board of Governors of the Federal Reserve System) and shall not subject such
Purchaser to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation.
3E. PAYMENT OF FEES. The Company or Electronic shall have paid to
Prudential any fees due it pursuant to this Agreement, including any Structuring
Fee due pursuant to paragraph 2C(2), any Issuance Fee due pursuant to paragraph
2C(3) and any Delayed Delivery Fee due pursuant to paragraph 2C(4).
3F. ADDITIONAL ELECTRONIC CLOSING MATTERS. If the closing is with respect
to the Electronic Notes, (i) the Purchasers shall have received a solvency
certificate with respect to Electronic executed by the Company's chief financial
officer, (ii) the Company shall have prepared and delivered to Prudential a pro
---
forma consolidated balance sheet giving effect to the purchase of the Purchased
- -----
Common Stock, which balance sheet shall be used in determining Base Tangible Net
Worth and (iii) the purchase price of the Purchased Common Stock, to the extent
in excess of $50,000,000, shall be funded with internally generated cash of
Electronic, the Company or one of the other Subsidiaries.
4. PREPAYMENTS. The Notes shall be subject to required prepayment as and
to the extent provided in paragraph 4A. The
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Notes shall also be subject to prepayment under the circumstances set forth in
paragraph 4B. Any prepayment made by the Company pursuant to any other
provision of this paragraph 4 shall not reduce or otherwise affect its
obligation to make any required prepayment referenced in paragraph 4A.
4A. REQUIRED PREPAYMENTS OF NOTES. Each Series of Notes shall be subject
to required prepayments, if any, set forth in the Notes of such Series.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of each
Series shall be subject to prepayment, in whole at any time or in part from time
to time (in integral multiples of $500,000 and in a minimum amount of
$1,000,000), at the option of Electronic or the Company (as applicable), at 100%
of the principal amount so prepaid plus interest thereon to the prepayment date
and the Yield-Maintenance Amount, if any, with respect to each such Note. Any
partial prepayment of a Series of Notes pursuant to this paragraph 4B shall be
applied in satisfaction of required payments of principal in inverse order of
their scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. Electronic or the Company (as
applicable) shall give the holder of each Note of a Series to be prepaid
pursuant to paragraph 4B irrevocable written notice of such prepayment not less
than 10 Business Days prior to the prepayment date, specifying such prepayment
date, the aggregate principal amount of the Notes of such Series to be prepaid
on such date, the principal amount of the Notes of such Series held by such
holder to be prepaid on that date and that such prepayment is to be made
pursuant to paragraph 4B. Notice of prepayment having been given as aforesaid,
the principal amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with the Yield-Maintenance
Amount, if any, herein provided, shall become due and payable on such prepayment
date.
4D. APPLICATION OF PREPAYMENTS. In the case of each prepayment of less
than the entire unpaid principal amount of all outstanding Notes of any Series
pursuant to paragraph 4A or 4B, the amount to be prepaid shall be applied pro
rata to all outstanding Notes of such Series (including, for the purpose of this
paragraph 4D only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates other
than be prepayment pursuant to paragraph 4A or 4B) according to the respective
unpaid principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraphs 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or
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<PAGE>
indirectly, Notes of any Series held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same proportion of the
aggregate principal amount of Notes of such Series held by each other holder of
Notes of such Series at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by
the Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purposes under this Agreement, except as provided in
------
paragraph 4D.
5. AFFIRMATIVE COVENANTS. During the Availability Period, the Issuance
Period and for so long as any Note is outstanding and unpaid, the Company
covenants as follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants that
it will deliver to each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of income, cash flows and
shareholders' equity of the Company and its Subsidiaries for the period
from the beginning of the then current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified to by the
Chief Financial Officer or Corporate Controller of the Company, subject to
changes resulting from year-end adjustments; provided, however, that
-------- -------
delivery pursuant to clause (iii) below of copies of the Quarterly Report
on Form 10-Q of the Company for such quarterly period filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days after the
end of each fiscal year (a) consolidated statements of income, cash flows
and shareholders' equity, (b) consolidating statements of income, and (c)
to the extent prepared by the Company or reviewed or audited its
independent public accountants in the normal course of business,
consolidating statements of cash flows and shareholders' equity, in each
case of the Company and its Subsidiaries for such year, and a consolidating
and a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required Holders and, as
to the consolidated financial statements, reported on by
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independent public accountants of recognized national standing selected by
the Company whose report shall be unqualified and without limitation as to
the scope of their audit and otherwise reasonably satisfactory in substance
to the Required Holders and, as to the consolidating financial statements,
certified by an authorized financial officer of the Company; provided,
--------
however, that delivery pursuant to clause (iii) below of copies of the
-------
Annual Report on Form 10-K of the Company for such fiscal year filed with
the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii) (including with respect to consolidating
statements);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports (if any) which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission);
(iv) promptly upon any Significant Holder's request therefor, a copy
of each other report submitted to the Company by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company; and
(v) with reasonable promptness, such other financial data as such
holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder a certificate
from an Authorized Officer of the Company having knowledge of the Company's
financial matters (a) demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of paragraphs
6A, 6B, 6C(1), 6C(2), 6C(3), 6C(6), 6C(7), (b) identifying the sixty consecutive
day period referenced in paragraph 6C(2) and, if applicable, the maximum amount
of Current Debt referenced therein and (c) stating that there exists no Event of
Default or Default, or, if any Event of Default or Default exists, specifying
the nature and period of existence thereof and what action the Company proposes
to take with respect thereto. Together with each delivery of financial
statements required by clause (ii) above, the Company will deliver to each
Significant Holder a report from such accountants stating that, in making the
audit necessary for their report on such financial statements, they have
obtained no knowledge of any Event of Default or Default insofar at they relate
to financial or accounting matters, or, if they have obtained knowledge of any
such Event of Default or Default , specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by reason of
their failure to obtain
14
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knowledge of any Event of Default or Default insofar as they relate to financial
or accounting matters which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to the reporting requirements of section 13 or 15(d)
of the Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will permit any
Person designated by any Significant Holder in writing, at such Significant
Holder's expense, to visit and inspect any of the properties of the Company and
its Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
any Responsible Officer of the Company and its independent public accountants,
all at such reasonable times during normal business hours and as often as such
Significant Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if it
or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of paragraph 6C(1) (unless prior written consent to the creation
or assumption thereof shall have been obtained pursuant to paragraph 12C), it
will make or cause to be made effective provision whereby the Notes will be
secured by such Lien equally and ratably with any and all other obligations
thereby secured so long as any such other obligations shall be so secured.
5E. MAINTENANCE OF INSURANCE. The Company covenants that it and each
Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as
customarily is maintained by other companies operating similar businesses.
Together with each
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delivery of financial statements under paragraph 5A, the Company will, upon the
request of any Significant Holder, deliver an Officer's Certificate specifying
the details of such insurance in effect.
5F. COMPLIANCE WITH LAWS. The Company covenants that it will, and will
cause each of the Subsidiaries to, comply in a timely fashion with, or operate
pursuant to valid waivers of the provisions of, all applicable statutes, rules,
regulations and orders of all Federal, state, local and foreign governments,
courts, agencies or regulatory bodies, including all Environmental Laws,
except(i) where a good faith dispute exists between the Company or a Subsidiary
and any such governmental authority regarding compliance with or application of
any such statute, rule, regulation or order (including Environmental Laws)
and(ii)where noncompliance would not materially adversely affect the business,
condition (financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
6. NEGATIVE COVENANTS. During the Availability Period, the Issuance
Period and at all times during which any Note or other amount due hereunder is
outstanding and unpaid, the Company covenants as follows:
6A. CURRENT RATIO. The Company covenants that it will not permit the
ratio of the current assets of the Company and Subsidiaries on a consolidated
basis to the current liabilities of the Company and Subsidiaries on a
consolidated basis to be less than 1.25 to 1.0 at any time.
6B. TANGIBLE NET WORTH. The Company covenants that it will not permit
Consolidated Tangible Net Worth at any time to be less than the sum of (i) Base
Net Worth plus (ii) to the extent positive, 25% of the aggregate amount of
Consolidated Net Earnings for the period, taken as one accounting period,
commencing on October 1, 1995 and ending on the last day of the fiscal year most
recently ended as of any date of determination (exclusive of that portion (if
any) of Consolidated Net Earnings already reflected in Base Net Worth).
6C. CREDIT AND OTHER RESTRICTIONS. The Company covenants that it will not
and will not permit any Subsidiary to:
6C(1). LIEN RESTRICTIONS. Create, assume or suffer to exist any Lien upon
any of its property or assets (excluding the Purchased Company Stock), whether
now owned or hereafter acquired (whether or not provision is made for the equal
and ratable securing of Notes in accordance with the provisions of paragraph 5D
hereof), except:
------
(i) Liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings,
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(ii) Liens incidental to the conduct of its business or the ownership
of its property and assets which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and which do not
in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its
business,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or a Wholly-Owned Subsidiary,
(iv) Liens existing on any property of any corporation at the time it
becomes a Subsidiary (so long as such Lien was not created or incurred in
anticipation of such corporation becoming a Subsidiary), or existing prior
to the time of acquisition upon any property acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise, whether
or not assumed by the Company or such Subsidiary, or placed upon property
at the time of acquisition by the Company or any Subsidiary to secure all
or a portion of (or to secure Debt incurred to pay all or a portion of) the
purchase price thereof, provided that (a) any such Lien shall not encumber
any other property of the Company or such Subsidiary, and (b) the aggregate
amount of Debt secured by all such Liens at no time exceeds an amount equal
to 15% of Consolidated Tangible Net Worth, and
(v) other Liens securing Debt so long as the aggregate amount of
Priority Debt at no time exceeds an amount equal to 15% of Consolidated
Tangible Net Worth;
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt, except:
------
(i) Funded Debt and Current Debt of any Subsidiary to the Company or a
Wholly-Owned Subsidiary,
(ii) Funded Debt and Current Debt of the Company to any Subsidiary if
such Subsidiary has entered into and delivered to Prudential a
subordination agreement substantially in the form of Exhibit E hereto,
(iii) Funded Debt evidenced by the Notes,
(iv) additional Funded Debt, and
(v) additional Current Debt;
provided that (a) Aggregate Funded Debt shall not exceed 55% of
--------
Consolidated Tangible Capitalization at any time through March 31, 1998 or
50% of Consolidated Tangible Capitalization at any time thereafter, (b) all
Current Debt
17
<PAGE>
described in clause (iv), above, has been simultaneously reduced to zero
for a period of sixty consecutive days in each rolling twelve month period
or, alternatively, there could have been incurred and outstanding on each
day of a sixty consecutive day period selected by the Company during each
such rolling twelve month period an amount of Funded Debt equal to the
maximum amount of Current Debt outstanding during such sixty consecutive
day period and (c) Priority Debt shall at no time exceed 15% of
Consolidated Tangible Net Worth;
6C(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding any loan or advance to, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person, except:
------
(i) loans or advances to any Subsidiary,
(ii) Purchased Common Stock,
(iii) stock, obligations or securities of a Subsidiary or of a Person
which immediately after such purchase or acquisition will be a Subsidiary,
(iv) (a) direct obligations of, or obligations guaranteed by, the
United States of America, (b) certificates of deposit and banker's
acceptances (and repurchase agreements with respect to same) in each case
payable in the United States in United States dollars and maturing not more
than one year from the date of purchase and issued by a commercial bank
located and incorporated in the United States or Canada with capital and
surplus in excess of $250 million (U.S.), (c) commercial paper rated P-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P") and maturing not more than one year from the date of
purchase thereof and (d) bonds, debentures, notes or similar debt
obligations issued by a United States domiciled corporation or by a state
or municipality which are rated "A" or better by Moody's or S&P and mature
not more than two years from the date of purchase,
(v) stock, obligations or securities received in settlement of debts
(created in the ordinary course of business) owing to the Company or any
Subsidiary,
(vi) travel and other like advances to officers and employees of the
Company or a Subsidiary in the ordinary course of business,
(vii) the cash value of life insurance policies owned by the Company
on the lives of members of the Company's management,
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(viii) loans, advances and investments existing on the date hereof as
set forth on Schedule 6C(3), and
(ix) other loans, advances and investments, provided that the
aggregate amount thereof (determined using original cost in the case of
investments) shall at no time exceed 10% of Consolidated Tangible Net
Worth;
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise dispense
of, or part with control of, any shares of stock or Debt of any Subsidiary,
except to the Company or a Wholly-Owned Subsidiary, and except that all shares
of stock and Debt of any Subsidiary (other than Electronic) at the time owned by
or owed to the Company and all Subsidiaries may be sold as an entirety for a
cash consideration which represents the fair value (as determined in good faith
by the Board of Directors of the Company) at the time of sale of the shares of
stock and Debt so sold; provided that (i) such sale or other disposition is
--------
treated as a Transfer of the assets of such Subsidiary and is permitted by
paragraph 6C(6) and (ii) at the time of such sale, such Subsidiary shall not
own, directly or indirectly, any shares of stock or Debt of any other Subsidiary
(unless all of the shares of stock and Debt of such other Subsidiary owned,
directly or indirectly, by the Company and all Subsidiaries are simultaneously
being sold as permitted by this paragraph 6C(4));
6C(5). MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, except that:
------
(i) any Subsidiary may merge or consolidate with or into the Company,
provided that the Company is the continuing or surviving corporation,
--------
(ii) any Subsidiary may merge or consolidate with or into a Wholly-
Owned Subsidiary,
(iii) the Company may merge with any other solvent corporation,
provided that (a) the Company shall be the continuing or surviving
--------
corporation, and (b) no Default or Event of Default exists or would exist
immediately after giving effect to such merger, and
(iv) the Company may merge with a Wholly-Owned Subsidiary which has
essentially no assets or liabilities and has been formed solely for
purposes of effecting a change of domicile of the Company through such
merger, so long as no Default or Event of Default exists or would exist
after giving effect thereto;
6C(6). TRANSFER OF ASSETS. Transfer any of its assets (excluding the
Purchased Company Stock) except that:
------
(i) any Subsidiary may Transfer assets to the Company or a Wholly-
Owned Subsidiary, and the Company or any
19
<PAGE>
Subsidiary may sell inventory in the ordinary course of business,
(ii) the Company and Subsidiaries may Transfer the assets set forth
on Schedule 6C(6), provided that (a) each such Transfer shall be effected
on or before February 1, 1998, (b) the Company or the Subsidiary selling
such assets receives in each case an amount equal to the fair market value
thereof and (c) if the Transfer involves the Transfer of a Subsidiary, no
additional material loan, advance or investment is made in or to such
Subsidiary subsequent to the date hereof; and
(iii) the Company or any Subsidiary may otherwise Transfer assets,
provided that after giving effect thereto (a) the Twelve Month Percentage
--------
of Assets Transferred pursuant to this clause (iii) and paragraph 6C(4)
shall not exceed 15% and (b) the Cumulative Percentage of Assets
Transferred pursuant to this clause (iii) and paragraph 6C(4) shall not
exceed 40%;
6C(7). LEASE RENTALS. Enter into or permit to remain in effect any
operating lease as lessee if the aggregate rentals payable by the Company and
Subsidiaries on a consolidated basis under all operating leases during any
fiscal year would exceed 2.5% of the consolidated revenues of the Company and
Subsidiaries for the immediately preceding fiscal year of the Company;
6C(8). SALE, PLEDGE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
pledge or discount or otherwise sell for less than the face value thereof, any
of its notes or accounts receivable, other than notes and accounts receivable
the collectability of which has become doubtful in accordance with generally
accepted accounting principles (provided that the foregoing shall not prohibit a
sale of a Subsidiary's notes and receivables which is effected pursuant to a
sale of such Subsidiary permitted by paragraph 6C(4));
6C(9). RELATED PARTY TRANSACTIONS. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, in the ordinary course of business or otherwise, any
Related Party; provided that the foregoing shall not apply to (i) any
--------
transaction between the Company and any Subsidiary or between Subsidiaries, or
(ii) transactions in the ordinary course of business (including payment of
officer and director compensation) which are on terms no less favorable to the
Company or such Subsidiary than if no such relationship existed; or
6C(10). SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or be otherwise
subject to, any contract or agreement (including its charter) which limits the
amount of, or otherwise imposes restrictions on the payment of, dividends by any
Subsidiary.
20
<PAGE>
6D. ISSUANCE OF STOCK BY SUBSIDIARIES. The Company covenants that it will
not permit any Subsidiary (either directly, or indirectly by the issuance of
rights or options for, or securities convertible into, such shares) to issue,
sell or otherwise dispose of any shares of any class of such Subsidiary's stock
(other than directors' qualifying shares) except to the Company or a Wholly-
Owned Subsidiary or if (i) no Default or Event of Default exists or would exist
immediately after giving effect thereto and (ii) such Subsidiary would continue
to be a Subsidiary hereunder.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) Electronic or the Company defaults in the payment of any
principal of or Yield-Maintenance Amount on any Note when the same shall
become due, either by the terms thereof or otherwise as provided in this
Agreement; or
(ii) Electronic or the Company defaults in the payment of any
interest on any Note for more than five Business Days after the date due;
or
(iii) Electronic, the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capital Lease Obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit)in each case beyond any period of grace
provided with respect thereto, or Electronic, the Company or any Subsidiary
fails to perform or observe any other agreement, term or condition
contained in any agreement under which any such obligation is created (or
if any other event thereunder or under any such agreement shall occur and
be continuing) and the effect of such failure or other event is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due
prior to any originally stated maturity, or to be repurchased by
Electronic, the Company or any Subsidiary; provided that the aggregate
--------
amount of all obligations as to which such a payment default shall occur
and be continuing or such a failure or other event causing or permitting
acceleration (or resale to the Company, Electronic or any Subsidiary) shall
occur and be continuing exceeds $2,500,000; or
21
<PAGE>
(iv) any representation or warranty made by Electronic or the Company
in this Agreement or in any writing furnished in connection with or
pursuant to this Agreement shall be false in any material respect on the
date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 6 of this Agreement; or
(vi) Electronic or the Company fails to perform or observe any other
agreement, term or condition contained in this Agreement and such failure
shall not be remedied within thirty (30) days after any officer of
Electronic or the Company obtains actual knowledge thereof; or
(vii) Electronic, the Company or any Subsidiary makes an assignment
for the benefit or creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of Electronic, the
Company or any Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect ("Bankruptcy
Law"), of any jurisdiction; or
(ix) Electronic, the Company or any Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of, or the taking of
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Subsidiary or of any substantial part of the
property of Electronic, the Company or any Subsidiary, or commences a
voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to Electronic, the Company or any Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any petition or application referred to in clause (ix) of this
paragraph 7A is filed, or any such proceedings are commenced, against
Electronic, the Company or any Subsidiary and Electronic, the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceedings
against Electronic or the Company decreeing the dissolution of Electronic
or the Company and such order, judgment or decree remains unstayed and in
effect for more than sixty (60) days; or
22
<PAGE>
(xii) any order, judgment or decree is entered in any proceedings
against Electronic, the Company or any Subsidiary decreeing a split-up of
Electronic, the Company or such Subsidiary that requires the divestiture of
property representing a substantial part, or the divestiture of the stock
of a Subsidiary whose property represents a substantial part, of the
property of Electronic or the Company and the Subsidiaries, and such order,
judgment or decree remains unstayed and in effect for more than sixty (60)
days; or
(xiii) one or more final judgments in an aggregate amount in excess
of $2,500,000 are rendered against Electronic, the Company or any
Subsidiary and, within sixty (60) days after entry thereof, any such
judgment is not discharged or execution thereof stayed pending appeal, or
within sixty (60) days after the expiration of any such stay, such judgment
is not discharged; or
(xiv) if (a) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (b) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified Electronic, the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (c) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001 (a) (18) of ERISA) under all Plans determined in accordance with Title
IV of ERISA, shall exceed $1,000,000, (d) Electronic, the Company or any
ERISA Affiliate withdraws from any Multiemployer Plan, or (f) Electronic,
the Company or any Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of Electronic, the Company or any
Subsidiary thereunder; and any such event or events described in clauses
(a) through (f) above, either individually or together with any other such
event or events, could reasonably be expected to result in a Material
Adverse Change; or
(xv) the Company at any time when any Electronic Notes are
outstanding or Electronic has any obligation hereunder, shall contest or
deny in writing the validity or enforceability of, or deny in writing that
it has any liability or obligation under, its guarantee set forth in
paragraph 11 hereof, or such guarantee shall be determined
23
<PAGE>
or asserted in writing by the Company to be void or unenforceable; or
(xvi) less than 80% of the outstanding Voting Stock of Electronic
shall be owned beneficially and of record by the Company;
then (a) if such event is an Event of Default specified in clause (i) or (ii)
of this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to Electronic or the
Company (as applicable) declare all of the Notes held by such holder to be, and
all of the Notes held by such holder shall thereupon be and become, immediately
due and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, (b) if such event is an Event of Default specified in
clause (viii), (ix) or (x) of this paragraph 7A with respect to the Company, all
of the Notes at the time outstanding shall automatically become immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, and (c) with respect to any event constituting an Event of Default, the
Required Holder(s) of the Notes of any Series may at its or their option during
the continuance of such Event of Default, by notice in writing to Electronic or
the Company (as applicable) declare all of the Notes of such Series to be, and
all of the Notes of such Series shall thereupon be and become, immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note of such Series, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by Electronic or the Company (as applicable).
7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
of any Series shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) of the Notes of such Series may, by notice
in writing to Electronic or the Company (as applicable), rescind and annul such
declaration and its consequences if (i) Electronic or the Company shall have
paid all overdue interest on the Notes of such Series, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes of such
Series which have become due otherwise than by reason of such declaration, and
interest on such overdue interest and overdue principal and Yield-Maintenance
Amount at the rate specified in the Notes of such Series, (ii) neither
Electronic nor the Company shall have paid any amounts which have become due
solely by reason of such declaration, (iii) all Events of Default and Defaults,
other than non-payment of amounts which have become due solely by reason of
24
<PAGE>
such declaration, shall have been cured or waived pursuant to paragraph 12C, and
(iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes of such Series or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, Electronic
or the Company shall forthwith give written notice thereof to the holder of each
Note of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, Electronic is
a corporation duly organized and existing in good standing under the laws of the
State of Nevada and each other Subsidiary is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated. Schedule 8A sets forth as of the date of this Agreement the name
and jurisdiction of incorporation of each Subsidiary, as well as a description
of the share ownership thereof by the Company and Subsidiaries.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser of any
Accepted Notes with the following financial statements, identified by an
authorized Financial Officer of the Company: (i) consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the last
day in each of the five fiscal years of the Company most recently completed
prior to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 90 days prior to such date
for which audited financial
25
<PAGE>
statements have not been released) and consolidated and consolidating statements
of income and cash flows of the Company and its Subsidiaries for each such
year, all such consolidated statements having been certified by Deloitte &
Touche (or another nationally recognized accounting firm) and all such
consolidating statements having been prepared by the Company; and (ii) unaudited
consolidated balance sheets of the Company and each of its Subsidiaries as at
the end of the quarterly period (if any) most recently completed prior to such
date and after the end of the most recent fiscal year (other than quarterly
periods completed within 45 days prior to such date for which financial
statements have not been released) and the comparable quarterly period in the
preceding fiscal year and unaudited consolidated statements of income and cash
flows of the Company and its Subsidiaries for the periods from the beginning of
the fiscal years in which such quarterly periods are included to the end of such
quarterly periods, prepared by the Company. The delivery of Annual Reports and
Quarterly Reports on Forms 10-K and 10-Q of the Company for the applicable
financial periods specified above shall be deemed to constitute compliance with
the foregoing representation. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from year-end adjustments), have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show all liabilities,
direct and contingent, of the Company and its Subsidiaries required to be shown
in accordance with such principles. The balance sheets fairly present the
condition of the Company and its Subsidiaries as at the dates thereof, and the
statements of income and statements of cash flows fairly present the results of
their operations for the periods indicated. There has been no Material Adverse
Change since the end of the most recent fiscal year for which such audited
financial statements have been furnished.
8C. ACTIONS PENDING. Set forth on Schedule 8C hereto is the litigation to
which the Company or any Subsidiary is a party on the date of this Agreement
where an adverse determination could,in any case, reasonably be expected to
exceed $500,000. There is no action, suit, investigation or proceeding pending
(including the litigation set forth on Schedule 8C) or, to the knowledge of the
Company, threatened against Electronic, the Company or any other Subsidiary or
any properties or rights of Electronic, the Company or any other Subsidiary, by
or before any court, arbitrator or administrative or governmental body which
individually or in aggregate could reasonably be expected to result in any
Material Adverse Change.
8D. OUTSTANDING DEBT. None of Electronic, the Company or any other
Subsidiary has any Debt outstanding except as permitted by paragraph 6C(2).
There exists no default under the provisions of any instrument evidencing such
Debt or of any agreement
26
<PAGE>
relating thereto, other than defaults with respect to Debt which in aggregate
does not exceed $500,000 in principal amount.
8E. TITLE TO PROPERTIES. The Company has, and Electronic and each other
Subsidiary has, good and indefeasible title (subject to minor defects) to its
respective real properties (other than properties which it leases) and good
title to all of its other properties, including the properties reflected in the
most recent audited balance sheet referred to in paragraph 8B (other than
properties disposed of in the ordinary course of business), subject to no Lien
of any kind except Liens permitted by paragraph 6C(1). Electronic, the Company
and each other Subsidiary enjoys peaceful and undisturbed possession of all
leases necessary in any material respect for the conduct of their respective
businesses, none of which contains any unusual or burdensome provisions which
might materially affect or impair the operation of such businesses. All such
leases are valid and subsisting and are in full force and effect.
8F. TAXES. The Company has, and Electronic and each other Subsidiary has,
filed all Federal, state and other income tax returns which, to the best
knowledge of the officers of the Company, are required to be filed, and each has
paid all taxes as shown on such returns and on all assessments received by it to
the extent that such taxes have become due, except such taxes (i) as are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with generally accepted accounting
principles or (ii) which do not collectively, together with any interest or
penalties thereon, exceed $250,000.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. None of Electronic, the
Company or any other Subsidiary is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects the business, property or assets, or financial condition of
the Company and its Subsidiaries taken as a whole. Neither the execution nor
delivery of this Agreement or the Notes, nor the offering, issuance and sale of
the Notes, nor fulfillment of nor compliance with the terms and provisions
hereof and of the Notes will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of Electronic, the Company or any other Subsidiary pursuant to, the
charter or by-laws of Electronic, the Company or any other Subsidiary, any award
of any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statue, law, rule or regulation to which
Electronic, the Company or any of its other Subsidiaries is subject. None of
Electronic, the Company or any of the other Subsidiaries is a party to, or
otherwise
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subject to any provision contained in, any instrument evidencing indebtedness of
Electronic, the Company or any of the other Subsidiaries, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
Electronic or the Company of the type to be evidenced by the Notes or the
guarantee set forth in paragraph 11 hereof.
8H. OFFERING OF NOTES. Neither the Company nor Electronic, nor any agent
acting on either of their behalf has, directly or indirectly, offered the Notes
or any similar security of Electronic or the Company for sale to, or solicited
any offers to buy the Notes or any similar security of Electronic or the Company
from, or otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither the Company nor
Electronic, nor any agent acting on either of their behalf has taken or will
take any action which would subject the issuance or sale of the Notes to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS; REGULATION G, ETC. Electronic will use the proceeds
of the Electronic Notes to purchase publicly traded common stock of the Company
pursuant to a tender offer therefor and to pay expenses related thereto. As of
the date of this Agreement and as of the Closing Day for the Electronic Notes,
neither the Company nor any Subsidiary owns or has agreed or intends to acquire
any "margin stock" (as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System) other than (i) the Purchased Common
Stock and (ii) other margin stock the aggregate market value of which does not
exceed $250,000. The Company will use the proceeds of any Company Notes for the
purposes set forth in the applicable Confirmation of Acceptance therefor and to
pay expenses thereto. Neither Electronic nor the Company, nor any agent acting
on either's behalf, has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation G, Regulation T, Regulation X, or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate the Securities Exchange Act of 1934, in each case as in effect now or
as the same may hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by Electronic, the
Company, any other Subsidiary or any ERISA Affiliate which has or may result in
Material Adverse Change. None of Electronic, the Company, any other Subsidiary
nor any
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ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
has or may result in a Material Adverse Change. The execution and delivery of
this Agreement and the issuance and sale of the Notes will be exempt from, or
will not involve any transaction which is subject to the prohibitions of,
section 406 of ERISA and will not involve any transaction in connection with
which a penalty could be imposed under section 502(i) of ERISA or a tax could be
imposed pursuant to section 4975 of the Code. The representation by the Company
in the next preceding sentence is made in reliance upon and subject to the
accuracy of each Purchaser's representation in paragraph 9B.
8K. GOVERNMENTAL CONSENT. Neither the nature of Electronic, the Company
or of any other Subsidiary, nor any of their respective businesses or
properties, nor any relationship between Electronic, the Company or any other
Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and Exchange Commission
and/or state Blue Sky authorities) in connection with the execution and delivery
of this Agreement, the offering, issuance, sale or delivery of the Notes or
fulfillment of or compliance with the terms and provisions hereof or of the
Notes.
8L. COMPLIANCE. Electronic, the Company and its other Subsidiaries, and
all of their respective properties and facilities, have complied at all times
and in all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations (including Environmental Laws) except, in any such case, where
failure to comply would not result in a Material Adverse Change.
8M. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any Notes
will be used to finance a Hostile Tender Offer.
8N. DISCLOSURE. Neither this Agreement (as it relates to the Company and
its Subsidiaries) nor any other document, certificate or statement furnished to
any Purchaser by or on behalf of Electronic or the Company in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which has or in the future may (so far as any of the Responsible
Officers of the Company can now foresee) result in a Material Adverse Change
which has not been set forth in this Agreement or in the other
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documents, certificates and statements furnished to each Purchaser by or on
behalf of Electronic or the Company prior to the date this representation is
made or repeated in connection with the transactions contemplated hereby.
8O. HOLDING COMPANY STATUS. Neither Electronic nor the Company is a
"holding company", or a "subsidiary" or "affiliate" of a "holding company", or a
"public utility", within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or a public utility within the meaning of the Federal Power
Act, as amended.
8P. INVESTMENT COMPANY STATUS. Neither Electronic nor the Company is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
adviser" within the meaning of the Investment Advisers Act of 1940, as amended.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents as
follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes to be
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control.
9B. SOURCE OF FUNDS. The source of the funds being used by such Purchaser
to pay the purchase price of the Notes being purchased by such Purchaser
hereunder constitutes assets allocated to: (i) the "insurance company general
account" of such Purchaser (as such term is defined under Section V of the
United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60 or (ii) a separate account maintained by such Purchaser in which
no employee benefit plan, other than employee benefit plans identified on a list
which has been furnished by such Purchaser to the Company, participates to the
extent of 10% or more. For the purpose of this paragraph 9B, the terms
"SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the respective
meanings specified in Section 3 of ERISA.
9C. NO RELIANCE ON PURCHASED COMMON STOCK. In connection with the
purchase of the Electronic Notes, each Purchaser thereof, in good faith, has not
relied on any margin stock (including without limitation the Purchased Common
Stock)as indirect security in agreeing to purchase the Electronic Notes.
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10. DEFINITIONS; ACCOUNTING MATTERS. For purposes of this Agreement, the
terms defined in paragraphs 10A and 10B (or within the text of any other
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10C.
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"DESIGNATED SPREAD" shall mean 0% in the case of each Note of any Series
unless the Confirmation of Acceptance with respect to the Notes of such Series
specifies a different Designated Spread in which case it shall mean, with
respect to each Note of such Series, the Designated Spread so specified.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if payable other
than on a semi-annual basis) equal to the Reinvestment Yield with respect to
such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the Designated Spread over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City local time) on the Business Day
next preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such yields shall
not be reported as of such time or the yields reported as of such time shall not
be ascertainable, the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported as of the Business
Day next preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield shall be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent
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yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of years (calculated
to the nearest one-twelfth year) which will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date with respect to
such Called Principal. The Yield-Maintenance Amount shall in no event be less
than zero.
10B. OTHER TERMS.
"ACCEPTANCE" shall mean an Electronic Acceptance or a Company Acceptance,
as applicable.
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2A(5) or
2B(5), as applicable.
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2A(5) or
2B(5), as applicable.
"ACCEPTED COMPANY NOTE" shall have the meaning specified in paragraph
2B(5).
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"ACCEPTED NOTE" shall mean an Accepted Electronic Note or an Accepted
Company Note, as applicable.
"ACCEPTED ELECTRONIC NOTE" shall have the meaning specified in paragraph
2A(5).
"AFFILIATE" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such first Person, except a Subsidiary shall not be an Affiliate of the Company
or another Subsidiary. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"AGGREGATE FUNDED DEBT" shall mean, as of any time of determination
thereof, the aggregate amount of Funded Debt of the Company and Subsidiaries,
excluding (i) any amount thereof which is owed by a Subsidiary to the Company or
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a Wholly-Owned Subsidiary and (ii) any amount thereof owed by the Company to a
Subsidiary which has been subordinated to the Notes pursuant to a note including
subordination terms in the form of Exhibit E hereto.
"AUTHORIZED OFFICER" shall mean (i) in the case of Electronic and the
Company, the Company's Chairman of the Board, President, Chief Executive
Officer, Chief Financial Officer, Treasurer, Corporate Secretary and any Vice
President thereof designated as an "Authorized Officer" of Electronic and the
Company for purposes of this Agreement in an Officer's Certificate executed by
the Company's Chairman of the Board, President, Chief Executive Officer, Chief
Financial Officer, Corporate Secretary or Treasurer and (ii) in the case of
Prudential, any officer of Prudential designated as its "Authorized Officer" in
the Information Schedule or any officer of Prudential designated as its
"Authorized Officer" for the purpose of this Agreement in a certificate executed
by one of its Authorized Officers. Any action taken under this Agreement on
behalf of Electronic or the Company by any individual who on or after the date
of this Agreement shall have been an Authorized Officer of Electronic or the
Company and whom Prudential in good faith believes to be an Authorized Officer
of Electronic or the Company at the time of such action shall be binding on
Electronic and the Company even though such individual shall have ceased to be
an Authorized Officer of Electronic and the Company, and any action taken under
this Agreement on behalf of Prudential by any individual who on or after the
date of this Agreement shall have been an Authorized Officer of Prudential, and
whom Electronic or the Company in good faith believes to be an Authorized
Officer of Prudential at the time of such action shall be binding on
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Prudential even though such individual shall have ceased to be an Authorized
Officer of Prudential.
"AVAILABILITY PERIOD" shall have the meaning set forth in paragraph 2A(2).
"AVERAGE LIFE TO MATURITY" shall mean, as applied to any Debt at any date,
the number of years obtained by dividing (a) the then outstanding principal
amount of such Debt into (b) the sum of the products obtained by multiplying (x)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment, including payment at final maturity, in respect thereof,
by (y) the number of years (calculated to the nearest one-twelfth year) which
will elapse between such date and the date as of which such payment is to be
made.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BASE NET WORTH" shall mean the greater of (i) an amount equal to 75% of
the Company's consolidated stockholders' equity upon giving effect to the
purchase of the Purchased Common Stock, and (ii) $65,000,000.
"BASE TREASURY NOTES" shall have the meaning set forth in paragraph 2A(5).
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday,
(ii) a day on which commercial banks in New York City are required or authorized
to be closed and (iii) for purposes of paragraphs 2A(3) and 2B(3) hereof only, a
day on which The Prudential Insurance Company of America is not open for
business.
"CANCELLATION DATE" shall have the meaning specified in paragraph 2C(5).
"CANCELLATION FEE" shall have the meaning specified in paragraph 2C(5).
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any Person, any
rental obligation which, under generally accepted accounting principles, is or
will be required to be capitalized on the books of such Person, taken at the
amount thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CLOSING DAY" shall mean, with respect to any Accepted Note, the Business
Day specified for the closing of the purchase and sale of such Accepted Note in
the Purchase Request or Request for Purchase with respect to such Accepted Note,
provided that (i) if
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Electronic or the Company (as applicable) and the Purchaser which is obligated
to purchase such Accepted Note agree on an earlier Business Day for such
closing, the "CLOSING DAY" for such Accepted Note shall be such earlier Business
Day, and (ii) if the closing of the purchase and sale of such Accepted Note is
rescheduled pursuant to paragraph 2C(1), the Closing Day for such Accepted Note,
for all purposes of this Agreement except references to "original Closing Day"
in paragraph 2C(4), shall mean the Rescheduled Closing Day with respect to such
Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY ACCEPTANCE" shall have the meaning specified in paragraph 2B(5).
"COMPANY NOTES" shall have the meaning specified in paragraph 1B.
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in paragraph
2A(5) or 2B(5), as applicable.
"CONSOLIDATED NET EARNINGS" means, for any period, an amount equal to
consolidated gross revenues of the Company and the Subsidiaries less all
operating and non-operating expenses of the Company and the Subsidiaries
including all charges of a proper character (including current and deferred
taxes on income, provision for taxes on unremitted foreign earnings that are
included in gross revenues, and current additions to reserves), but not
including in gross revenues for such period
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses resulting from the sale, conversion or
other disposition of capital assets, any gains resulting
from the write-up of assets (other than the write-up of
current assets as a result of revaluations or realignment of
currencies),
(ii) any equity of the Company or any Subsidiary in the
unremitted earnings of any corporation that is not a
Subsidiary,
(iii) any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or
otherwise for any period prior to the acquisition, or
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(iv) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary.
"CONSOLIDATED TANGIBLE CAPITALIZATION" shall mean, as of any time of
determination thereof, the sum of Consolidated Tangible Net Worth and Aggregate
Funded Debt.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, as of any time of
determination thereof, the stockholders' equity of the Company, less the amount
of any Intangibles in excess of $2,000,000 which are booked subsequent to
September 30, 1995.
"CUMULATIVE PERCENTAGE OF ASSETS TRANSFERRED" shall mean, as of an time of
determination thereof, the sum of the Percentages of Assets Transferred for all
assets of the Company and Subsidiaries Transferred pursuant to paragraph 6C(4)
or clause (iii) of paragraph 6C(6) after the date hereof.
"CURRENT DEBT" means, with respect to any Person at any time of
determination, any obligation of such Person for borrowed money (and any notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money) payable on demand or within a
period of one year from the date of creation thereof, and any Guarantee of any
such obligation of any other Person; provided that any obligation shall be
treated as Funded Debt, regardless of its term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar agreement
effective for more than one year after the date of creation thereof, or may be
payable out of the proceeds of a similar obligation pursuant to the terms of
such obligation or of any such agreement. Any such obligation secured by a Lien
on property of such Person shall be deemed to be Current Debt of such Person
even though such obligation shall not be assumed by such Person.
"DEBT" shall mean Current Debt and Funded Debt.
"ELECTRONIC ACCEPTANCE" has the meaning specified in paragraph 2A(5).
"ELECTRONIC NOTES" has the meaning specified in paragraph 1A.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air,
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surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, and any and all regulations, codes, plans,
orders, decrees, judgements, injunctions, notices or demand letters issued,
entered, promulgated or approved thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"FACILITY" shall have the meaning specified in paragraph 2B(1).
"FUNDED DEBT" shall mean with respect to any Person without duplication,
(i) any obligation payable more than one year from the date of
creation thereof (including current maturities thereof) which under
generally accepted accounting principles should be shown on the balance
sheet as a liability (including Capitalized Lease Obligations and excluding
reserves for deferred income taxes and other reserves to the extent not
constituting an obligation),
(ii) any obligation payable more than one year from the date of
creation thereof which is secured by any Lien on property owned by such
Person, whether or not the obligation secured thereby shall have been
assumed by such Person,
(iii) all Swaps of such Person, and
(iv) all obligations of the type described in the foregoing clauses
(i), (ii) and (iii) with respect to which such Person has become liable by
way of a Guarantee;
but shall not include any contingent reimbursement obligation of such Person
with respect to letters of credit (i) issued to its
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workers' compensation insurance carriers in connection with retrospective rated
insurance policies or (ii) to the extent the underlying obligation which is
supported by such letter of credit is already included in the calculation of
such Person's Funded Debt.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted Note, the
United States Treasury Note or Notes whose duration (as determined by
Prudential) most closely matches the duration of such Accepted Note.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds of
any Note, any offer to purchase, or any purchase of, shares of capital stock of
any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases of such shares,
equity interests, securities or rights which, together with any such shares,
equity interests, securities or rights then owned by the Company or
Subsidiaries, represent less than 5% of the equity interests or
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beneficial ownership of such corporation or other entity for portfolio
investment purposes, and such offer or purchase has not been duly approved by
the board of directors of such corporation or the equivalent governing body of
such other entity prior to the date on which the Company makes the Request for
Purchase of such Note.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation."
"INTANGIBLES" shall mean any patents, trademarks, copyrights, trade names,
licenses, operating agreements, treasury stock, deferred or capitalized research
and development costs, goodwill (including any amounts, however designated,
representing the cost of acquisition of businesses and investments in excess of
the book value thereof), unamortized debt discount and expense, any write-up of
asset values after September 30, 1995 and any other amounts reflected in contra-
equity accounts and any other assets treated as intangible assets under
generally accepted accounting principles.
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B(2).
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
"MARKET DISRUPTION" shall mean any suspension or material limitation or
significant disruption in trading in securities generally on the New York Stock
Exchange or in the markets for U.S. Treasury Notes and other financial
instruments conducted in New York, New York.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in (i) the
business, prospects, assets, liabilities, condition (financial or otherwise) or
operations of the Company and its Subsidiaries, taken as a whole or (ii) the
Company's ability to perform its obligations with respect to the Notes and this
Agreement.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" shall have the meaning set forth in paragraph 1B.
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"OBLIGATIONS" shall mean all indebtedness, obligations (including any
obligation to perform) and liabilities existing on the date hereof or arising
from time to time hereafter, whether direct or indirect, joint, several or joint
and several, actual, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, of Electronic to Prudential and the holders of the Electronic Notes,
including, without limitation, the outstanding principal amount of the
Electronic Notes and all present and future indebtedness, liabilities and
obligations of Electronic now or hereafter owned to Prudential and the holders
of the Electronic Notes evidenced by or arising under, by virtue of or pursuant
to this Agreement, the Notes and all renewals and extensions thereof, including,
without limitation, all Yield-Maintenance Amounts and interest on the Electronic
Notes accruing before, during or after any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding, and, if interest ceases to accrue by operation of law by reason of
any such proceeding, interest which would have accrued in the absence of such
proceeding.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
Electronic or the Company by an Authorized Officer of Electronic or the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERCENTAGE OF ASSETS TRANSFERRED" shall mean, with respect to each asset
Transferred pursuant to paragraph 6C(4) and clause (iii) of paragraph 6C(6), the
percentage of the total assets of the Company and Subsidiaries determined on a
consolidated basis which is represented by the greater of the book value or fair
market value of such asset, in each case as of the last day of the fiscal
quarter most recently ended prior to the effective date of such Transfer. In
each instance where a calculation is made utilizing an asset's fair market
value, the total assets of the Company and Subsidiaries on a consolidated basis
shall be increased by the difference between such asset's fair market value and
its book value for purposes of such calculation.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
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"PREFERRED STOCK" shall mean, with respect to any corporation or limited
liability company, any capital stock or equity interest that is preferred in
right of payment of dividends, earnings, or liquidation proceeds over any other
class of capital stock or equity interest.
"PRIORITY DEBT" shall mean (i) Debt of the Company secured by any Lien, and
(ii) Debt and Preferred Stock of Subsidiaries (including any Guarantee by a
Subsidiary of Debt of the Company), but excluding (a) Debt and Preferred Stock
---------
of Subsidiaries which are held by the Company or a Wholly-Owned Subsidiary, (b)
the Electronic Notes and (c) Debt secured by any Lien described in clause (iv)
of paragraph 6C(1), subject to the limitation on the amount thereof.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PRUDENTIAL AFFILIATE" shall mean any corporation or other entity all of
the Voting Stock (or equivalent voting securities or interests) of which is
owned by Prudential either directly or through Prudential Affiliates.
"PURCHASED COMPANY STOCK" shall mean the publicly traded common stock of
the Company purchased by Electronic pursuant to a tender offer therefor
concurrently with the closing of the purchase and sale of the Electronic Notes.
"PURCHASE REQUEST" shall have the meaning specified in paragraph 2A(3).
"PURCHASER(S)" shall mean Prudential or a Prudential Affiliate purchasing
any Note.
"RATE QUOTE" shall have the meaning specified in paragraph 2A(4).
"RELATED PARTY" shall mean (i) any Significant Stockholder, (ii) all
Persons to whom any Significant Stockholder is related by blood, adoption or
marriage and (iii) all Affiliates of the foregoing Persons.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph 2B(3).
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 51% of
the aggregate principal amount of the Notes or of a Series of Notes, as the
context may require, from time to time outstanding.
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"RESCHEDULED CLOSING DAY" shall have the meaning specified in paragraph
2C(1).
"RESPONSIBLE OFFICER" means each of the Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, President, any Vice President, or
the Treasurer or Corporate Secretary of Electronic or the Company, as the case
may be.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES" shall have the meaning specified in paragraph 1B.
"SIGNIFICANT HOLDER" shall mean (i) Prudential or any Prudential Affiliate,
so long as Prudential or any Prudential Affiliate shall hold any Note or any
amount remains available under the Facility or (ii) any other holder of at least
5% of the aggregate principal amount of any Series of Notes from time to time
outstanding.
"SIGNIFICANT STOCKHOLDER" shall mean and include any Person who owns,
beneficially or of record, directly or indirectly, at any time during any year
with respect to which a computation is being made, either individually or
together with all persons to whom such Person is related by blood, adoption or
marriage, 5% or more of the Voting Stock of the Company.
"SUBSIDIARY" means any corporation at least 80% of the outstanding Voting
Stock of which is, at the time as of which any determination is being made,
owned by the Company either directly or through Subsidiaries.
"SWAPS" shall mean, with respect to any Person, payment obligations with
respect to interest rate swaps or hedges, currency swaps or hedges and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TRANSFER" shall mean, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
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"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased under this Agreement.
"TWELVE MONTH PERCENTAGE OF ASSETS TRANSFERRED" shall mean, as of any time
of determination thereof, the sum of the Percentages of Assets Transferred for
all assets of the Company and Subsidiaries Transferred pursuant to paragraph
6C(4) or clause (iii) of paragraph 6C(6) during the immediately preceding twelve
month period.
"VOTING STOCK" shall mean, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary 100% of the outstanding
stock of every class of which (except directors' qualifying shares) is, at the
time of determination, owned by the Company or Wholly-Owned Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "generally accepted accounting principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
11. COMPANY GUARANTY OF ELECTRONIC'S OBLIGATIONS.
11A. GUARANTY OF PAYMENT AND PERFORMANCE OF ELECTRONIC'S OBLIGATIONS. The
Company absolutely, unconditionally and irrevocably guaranties the full and
prompt payment when due (whether at maturity, a stated or optional prepayment
date, by reason of acceleration or otherwise) and at all times thereafter, and
the due and punctual performance, of all Obligations. The Company agrees to pay
and to indemnify and save Prudential and each holder of Notes harmless from and
against any damage, loss, cost or expense (including attorneys' fees) which such
Person may incur or be subject to as a consequence, direct or indirect, of
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endeavoring to enforce any rights under this paragraph 11 or to collect all or
any part of the Obligations from, or in pursuing any action against Electronic
or the Company or enforcing any rights of Prudential or any holder of Notes in
any security for the Obligations or the liabilities of the Company hereunder and
any taxes, fees or penalties which may be paid or payable in connection
therewith. This is a continuing guarantee of payment and performance and not of
collection.
Upon an Event of Default specified in clause (i) or (ii) of paragraph 7A,
any holder of a Note may, and upon any Event of Default, the Required Holders
may, at its or their sole election and without notice, proceed directly and at
once against the Company to seek and enforce performance of, and to collect and
recover, the Obligations, or any portion thereof, without first proceeding
against Electronic or any other Person, or any security for the Obligations or
for the liability of any such other Person. Prudential and the holders of Notes
shall have the exclusive right to determine the application of payments and
credits, if any, from the Company, Electronic, or from any other Person on
account of the Obligations or otherwise. The obligations under this paragraph
11 and all covenants and agreements of the Company contained herein shall
continue in full force and effect and shall not be discharged until such time as
all of the Obligations shall be paid or otherwise performed in full.
11B. OBLIGATIONS UNCONDITIONAL. The obligation of the Company under this
paragraph 11 shall be continuing, absolute and unconditional, irrespective of
(i) the invalidity or unenforceability of any part of this Agreement or any
Electronic Note or any provision of any thereof;(ii) the absence of any attempt
by any holder of an Electronic Note to collect the Obligations or any portion
thereof from Electronic, any other guarantor of all or any portion of the
Obligations or any other Person or other action to enforce the same; (iii) any
action taken by Prudential or any holder of a Note whether or not authorized by
this paragraph 11; (iv) any failure by Prudential or any holder of a Note to
acquire, perfect or maintain any security interest or lien in, or take any steps
to preserve its rights to, any security for the Obligations or any portion
thereof or for the liability of the Company hereunder or the liability of any
other guarantor of any or all of the Obligations; (v) any defense arising by
reason of any disability or other defense (other than a defense of payment,
unless the payment on which such defense is based was or is subsequently
invalidated, declared to be fraudulent or preferential, otherwise avoided and/or
required to be repaid to Electronic or the Company, as the case may be, or the
estate of any such party, a trustee, receiver or any other Person under any
bankruptcy law, state or federal law, common law or equitable cause, in which
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case there shall be no defense of payment with respect to such payment) of
Electronic or any other Person liable on the Obligations or any portion thereof;
(vi) any election by a holder of any Note in any proceeding instituted under
Chapter 11 of Title 11 of the Federal Bankruptcy Code (11 U.S.C. (S)101 et seq.)
-- ---
(the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the
Bankruptcy Code; (vii) any borrowing or grant of a security interest to any
holder of a Note by Electronic, as debtor-in-possession, or extension of credit,
under Section 364 of the Bankruptcy Code; (viii) the disallowance or avoidance
of all or any portion of any claim(s) of Prudential or a holder of a Note for
repayment of the Obligations under the Bankruptcy Code or any similar state law
or the avoidance, invalidity or unenforceability of any Lien securing the
Obligations or the liability of the Company hereunder or of any other guarantor
of all or any part of the Obligations; (ix) any amendment to, waiver or
modification of, or consent, extension, indulgence or other action or inaction
under or in respect of other provisions of this Agreement or the Notes,
including, without limitation, any increase in the interest rate on or method of
calculation of any Obligations; (x) any change in any provision of any
applicable law or regulation; (xi) any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or foreign, binding on
or affecting the Company or Electronic or any of their assets; (xii) the charter
or by-laws of the Company or Electronic; (xiii) any mortgage, indenture, lease,
contract, or other agreement (including, without limitation, any agreement with
stockholders), instrument or undertaking to which the Company or Electronic is a
party or which purports to be binding on or affect such Person or any of its
assets; (xiv) any bankruptcy, insolvency, readjustment, composition, liquidation
or similar proceeding with respect to Electronic or any other guarantor of all
or any portion of any Obligations or such Persons's property and any failure by
Prudential or any holder of a Note to file or enforce a claim against Electronic
or such other Person in any proceeding; (xv) any failure on the part of
Electronic for any reason to comply with or perform any of the terms of any
other agreement with the Company; or (xvi) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor or
surety.
11C. OBLIGATIONS UNIMPAIRED. Prudential and each holder of a Note is
authorized, without demand or notice, which demand and notice are hereby waived,
and without discharging or otherwise affecting the obligations of the Company
hereunder (which shall remain absolute and unconditional notwithstanding any
such action or omission to act), from time to time to (i) renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, the Obligations or any portion thereof, including, without limitation,
increasing the interest rate on
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any Obligations, or otherwise modify, amend or change the terms of this
Agreement or the Notes; (ii) accept partial payments on the Obligations; (iii)
take and hold security for the Obligations or any portion thereof or any other
liabilities of Electronic and the obligations under any other guaranties and
sureties of all or any of the Obligations, and exchange, enforce, waive,
release, sell, transfer, assign, abandon, fail to perfect, subordinate or
otherwise deal with any such security; (iv) apply such security and direct the
order or manner of sale thereof as such holder may determine in its sole
discretion; (v) settle, release, compromise, collect or otherwise liquidate the
Obligations or any portion thereof and any security therefor or guarantee
thereof in any manner; (vi) extend additional loans, credit and financial
accommodations to Electronic and otherwise create additional Obligations; (vii)
waive strict compliance with any of the terms of this Agreement or the Notes and
otherwise forbear from asserting Prudential's or such holder's rights and
remedies thereunder; (viii) take and hold additional guarantees or sureties and
enforce or forbear from enforcing any guarantee or surety of any other guarantor
or surety of the Obligations, any portion thereof or release or otherwise take
any action with respect to any such guarantor or surety; (ix) assign the
obligations hereunder in part or in whole in connection with any assignment of
the Obligations or any portion thereof; (x) exercise or refrain from exercising
any rights against Electronic; and (xi) apply any sums, by whomsoever paid or
however realized, to the payment of the Obligations as Prudential or such holder
of a Note in its sole discretion may determine.
11D. WAIVERS OF COMPANY. The Company waives for the benefit of Prudential
and each holder of a Note:
(i) any right to require Prudential or any holder of a Note, as a
condition of payment or performance by the Company or otherwise, to (a) proceed
against Electronic or any other guarantor of the Obligations or any other
Person, (b) proceed against or exhaust any security given to or held by
Prudential or any holder of a Note in connection with the Obligations or any
other guarantee, or (c) pursue any other remedy available to Prudential or any
holder of a Note whatsoever;
(ii) any defense arising by reason of (a) the incapacity, lack of
authority or any disability or other defense of Electronic, including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto, (b) the cessation of the liability of Electronic from any cause other
than indefeasible payment in full of the Obligations, or (c) any act or omission
of Prudential, any holder of a Note or any other Person which directly or
indirectly, by operation of law or otherwise, results in or aids the discharge
or release of
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Electronic or any security given to or held by any holder of a Note in
connection with the Obligations or any other guarantee;
(iii) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(iv) any defense based upon Prudential's or any holder's errors or
omissions in the administration of the Obligations;
(v) (a) any principles or provisions of law, statutory or otherwise, which
are or might be in conflict with the terms of this paragraph 11 and any legal or
equitable discharge of the Company's obligations hereunder, (b) the benefit of
any statute of limitations affecting the Obligations or the Company's liability
hereunder or the enforcement hereof, (c) any rights to set-offs, recoupments and
counterclaims, and (d) promptness, diligence and any requirement that Prudential
and any holder of a Note protect, maintain, secure, perfect or insure any Lien
or any property subject thereto;
(vi) notices (a) of the issuance of any Electronic Notes, (b) of
nonperformance or dishonor, (c) of acceptance of this paragraph 11 by
Prudential, the Purchasers or any holder of a Note, (d) of default in respect of
the Obligations or any other guarantee, (e) of the existence, creation or
incurrence of new or additional indebtedness, arising either from additional
loans extended to Electronic or otherwise, (f) that the principal amount, or any
portion thereof, and/or any interest or Yield Maintenance Amount on any document
or instrument evidencing all or any part of the Obligations is due, (g) of any
and all proceedings to collect from Electronic or any other guarantor of all or
any part of the Obligations, or from any other Person, (h) of exchange, sale,
surrender or other handling of any security or collateral given to Prudential or
any holder of a Note to secure payment of the Obligations or any guarantee
therefor, (i) of incurrence, renewal, extension or modification of any of the
Obligations, (j) of assignment, sale or other transfer of any Note to another
Person, or (k) of any of the matters referred to in paragraph 11B and any right
to consent to any thereof;
(vii) presentment, demand for payment or performance and protest and
notice of protest with respect to the Obligations or any guarantee with respect
thereto; and
(viii) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or which
may conflict with the terms of this paragraph 11.
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The Company agrees that no holder of a Note shall be under any obligation
to marshall any assets in favor of the Company or against or in payment of any
or all of the Obligations.
The Company will not exercise any rights which it may have acquired by way
of subrogation under this paragraph 11, by any payment made hereunder or
otherwise, or accept any payment on account of such subrogation rights, or any
rights of contribution, reimbursement, indemnity, exoneration or any rights or
recourse to any security for the Obligations unless at the time of its exercise
of any such right there shall have been performed and indefeasibly paid in full
all of the Obligations.
11E. REVIVAL. The Company agrees that, if any payment made by Electronic
or any other Person is applied to the Obligations and is at any time annulled,
set aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any security are
required to be returned by Prudential or any holder of a Note to Electronic or
its estate, trustee, receiver or any other Person, under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or repayment, the Company's liability hereunder (and any Lien or other
collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, or, if prior thereto
the obligations under this paragraph 11 shall have been canceled or surrendered
(and if any Lien or other collateral securing the Company's liability hereunder
shall have been released or terminated by virtue of such cancellation or
surrender), the obligations under this paragraph 11 (and such Lien or other
collateral) shall be reinstated and returned in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect the obligations of the Company in respect of the amount of
such payment (or any Lien or other collateral securing such obligation).
11F. OBLIGATION TO KEEP INFORMED. The Company shall be responsible for
keeping itself informed of the financial condition of Electronic and any other
Persons primarily or secondarily liable on the Obligations or any portion
thereof, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations or any portion thereof, and the Company agrees that neither
Prudential nor any holder of a Note shall have a duty to advise the Company of
information known to Prudential or such holder regarding such condition or any
such circumstance. If Prudential or any holder of a Note, in its discretion,
undertakes at any time or from time to time to provide any such information to
the Company, neither Prudential nor any such holder shall be under any
obligation (i) to undertake any investigation, whether or not a part of its
regular business
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routine, (ii) to disclose any information which it wishes to maintain as
confidential, or (iii) to make any other or future disclosures of such
information or any other information to the Company.
11G. BANKRUPTCY. Upon an Event of Default specified in clause (viii),
(ix) or (x) of paragraph 7A with respect to Electronic, any and all obligations
of the Company hereunder shall forthwith become due and payable without notice.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. Electronic and the Company each agree that, so long
as any Purchaser shall hold any Note, it will make payments of principal of,
interest on and any Yield-Maintenance Amount payable with respect to such Note,
which comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to (i) the account or accounts specified in the applicable
Confirmation of Acceptance or (ii) such other account or accounts in the United
States as such Purchaser may designate in writing, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. Each
Purchaser agrees that, before disposing of any Note, such Purchaser will make a
notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid.
Electronic and the Company each agree to afford the benefits of this paragraph
12A to any Transferee which shall have made the same agreement as each Purchaser
has made in this paragraph 12A.
12B. EXPENSES. Electronic and the Company jointly and severally agree,
whether or not the transactions contemplated hereby shall be consummated, to
pay, and save Prudential, each Purchaser and any Transferee harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with such transactions, including (i) all document production and duplication
charges and the fees and expenses of any special counsel engaged by Prudential,
such Purchaser or such Transferee in connection with this Agreement, the
transactions contemplated hereby and any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the costs
and expenses, including attorneys' fees, incurred by Prudential, such Purchaser
or such Transferee in enforcing (or in determining whether or how to enforce)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the transactions contemplated hereby or by reason of such
Purchaser or such Transferee having acquired
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any Note, including without limitation costs and expenses incurred in any
bankruptcy case. The obligations of Electronic and the Company under this
paragraph 12B shall survive the transfer of any Note or portion thereof or
interest therein by any Purchaser or any Transferee and the payment of any Note.
12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and Electronic
or the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if Electronic or the Company (as the case
may be) shall obtain the written consent to such amendment, action or omission
to act, of the Required Holder(s) of the Notes of each Series except that, (i)
with the written consent of the holders of all Notes of a particular Series, and
if an Event of Default shall have occurred and be continuing, of the holders of
all Notes of all Series, at the time outstanding (and not without such written
consents), the Notes of such Series may be amended or the provisions thereof
waived to change the maturity thereof, to change or affect the principal
thereof, or to change or affect the rate or time of payment of interest or
Yield-Maintenance Amount payable with respect to the Notes of such Series, (ii)
without the written consent of the holder or holders of all Notes at the time
outstanding, no amendment to or waiver of the provisions of this Agreement shall
change or affect the provisions of paragraph 7A or this paragraph 12C insofar as
such provisions relate to proportions of the principal amount of the Notes of
any Series, or the rights of any individual holder of Notes, required with
respect to any declaration of Notes to be due and payable or with respect to any
consent, (iii) with the written consent of Prudential (and not without the
written consent of Prudential), the provisions of paragraph 2 may be amended or
waived (except insofar as any such amendment or waiver would affect any rights
or obligations with respect to the purchase and sale of Notes which shall have
become Accepted Notes prior to such amendment or waiver) and (iv) with the
written consent of all of the Purchasers which shall have become obligated to
purchase Accepted Notes of any Series (and not without the written consent of
all such Purchasers), any of the provisions of paragraphs 2 and 3 may be amended
or waived insofar as such amendment or waiver would affect only rights or
obligations with respect to the purchase and sale of the Accepted Notes of such
Series or the terms and provisions of such Accepted Notes. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 12C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between Electronic
or the Company and Prudential or the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of Prudential or any holder of such Note. As used herein and in the
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Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
12D. TRANSFER LIMITATIONS; FORM, REGISTRATION, TRANSFER AND EXCHANGE OF
NOTES; LOST NOTES. The Notes are issuable as registered notes without coupons
in denominations of at least $1,000,000, except as necessary to reflect any
amount not evenly divisible by $1,000,000. Electronic and the Company shall
each keep at its principal office a register in which it shall provide for the
registration of Notes and of transfers of Notes which it has issued. Upon
surrender for registration of transfer of any Note at the principal office of
Electronic or the Company, Electronic or the Company (as appropriate) shall, at
its expense, execute and deliver one or more new Notes of like tenor and of a
like aggregate principal amount, registered in the name of such transferee or
transferees. At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor and of any authorized denominations, of
a like aggregate principal amount, upon surrender of the Note to be exchanged at
the principal office of Electronic or the Company (as appropriate). Whenever
any Notes are so surrendered for exchange, Electronic or the Company (as
appropriate) shall, at its expense, execute and deliver the Notes which the
holder making the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer duly executed, by the holder of such Note or
such holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of such Person's
unsecured indemnity agreement, or in the case of any such mutilation upon
surrender and cancellation of such Note, Electronic or the Company (as
appropriate) will make and deliver a new Note, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note. Notwithstanding anything to the
contrary appearing herein, each Purchaser agrees, and each Transferee by its
acceptance of a Note agrees, not to transfer any Note or any interest therein to
any Person other than an institutional investor which is domiciled in North
America, Europe, Australia or South America.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, Electronic and the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving
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payment of principal of, interest on and any Yield-Maintenance Amount payable
with respect to such Note and for all other purposes whatsoever, whether or not
such Note shall be overdue, and Electronic and the Company shall not be affected
by notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in all or any part of such Note
to any Person on such terms and conditions as may be determined by such holder
in its sole discretion and absolute discretion.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of Electronic or the Company in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between Prudential, the
Purchasers, Electronic and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
12H. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2, which shall be sent in the
manner so specified therein) shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to any Purchaser,
addressed to such Purchaser at the address specified for such communications in
the applicable Confirmation of Acceptance, or at such other address as any
Purchaser shall have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to such other holder at such address as such other
holder shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then addressed to
such other holder in care of the last holder of such Note which shall have so
specified an address to the Company, and (iii) if to Electronic or the Company,
addressed to it at 444 South Flower Street, #2100, Los Angeles, California
90071, Attention: Chief Financial Officer, or at such other address as
Electronic or the Company shall have specified to the holder of each Note in
writing; provided, however, that any such communication to Electronic or the
Company may also, at the
52
<PAGE>
option of the holder of any Note, be delivered by any other means either to
Electronic or the Company at its address specified above or to any officer of
the Company.
12I. CONFIDENTIALITY. Each holder of a Note agrees to use its best
efforts to hold in confidence and not disclose any written information delivered
or made available to such holder by or on behalf of the Company, Electronic or
any Subsidiary in connection with or pursuant to this Agreement that is clearly
marked or labeled as being confidential information, other than information
(i) that was publicly known or otherwise known to such holder at the
time of disclosure (except pursuant to disclosure in connection with
this Agreement),
(ii) that subsequently becomes publicly known through no act or omission
by such holder, or
(iii) that otherwise becomes known to such holder, other than through
disclosure by the Company, Electronics or any other Subsidiary,
and provided that nothing in this Agreement shall prevent the holder of any Note
from delivering copies of any financial statements and other documents delivered
to such holder, or from disclosing any confidential information disclosed to
such holder, by or on behalf of the Company, Electronic or any Subsidiary in
connection with our pursuant to this Agreement, to,
(a) such holder's directors, officers, employees, agents and
professional consultants,
(b) any other holder of any Note,
(c) any Person to which such holder offers to sell such Note or any
part thereof (excluding any Person to which a Note may not be
sold pursuant to paragraph 12D), subject to such Person first
agreeing to be bound by the terms of this paragraph 12I,
(d) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note, subject to such
Person first agreeing to be bound by the terms of this paragraph
12I,
(e) any federal or state regulatory authority having jurisdiction
over such holder,
53
<PAGE>
(f) the National Association of Insurance Commissioners or any
similar organization, or
(g) any other Person to which such delivery or disclosure may be
necessary or appropriate, in compliance with any law, rule,
regulation or order applicable to such holder, in response to any
subpoena or other legal process, in connection with any
litigation to which such holder is a party, or in order to
protect such holder's investment in such Note.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to Prudential, a Purchaser or the Required
Holder(s), the determination of such satisfaction shall be made by Prudential,
such Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
12L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12M. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
internal law of the State of New York.
12N. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
[Balance of Page Left Blank Intentionally.]
54
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between you and
Electronic and the Company.
Very truly yours,
ZERO CORPORATION
By: ________________________
Title:______________________
ELECTRONIC SOLUTIONS
By: ________________________
Title: _____________________
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ______________________________
Title: ___________________________
55
<PAGE>
INFORMATION SCHEDULE
Authorized Officers for Prudential
----------------------------------
Allen Weaver E. Allen Rodriguez
Managing Director Vice President
Prudential Capital Group Prudential Capital Group
180 North Stetson Street 777 South Figueroa Street
Suite 5600 Suite 2950
Chicago, IL 60601-6716 Los Angeles, CA 90017
Tel.: (312) 540-4211 Tel.: (213) 486-5372
Fax: (312) 540-4222 Fax: (213) 623-9764
Raymond Kennedy Tom Cecka
Vice President Managing Director
Prudential Capital Group Prudential Capital Group
777 South Figueroa Street 100 Mulberry Street
Suite 2950 Gateway Center Four, 7th Fl.
Los Angeles, CA 90017 Newark, NJ 07102
Tel.: (213) 486-5376 Tel.: (201) 802-8286
Fax: (213) 623-9764 Fax: (201) 624-6432
Authorized Officers for Electronic Solutions and Zero Corporation
-----------------------------------------------------------------
Each of the officers referenced in the definition of "Authorized Officer"
appearing in paragraph 10B of the Agreement.
444 South Flower Street
Suite 2100
Los Angeles, California 90071-2922
Telephone: (213) 629-7000
Facsimile: (213) 620-2366
<PAGE>
EXHIBIT A-1
-----------
[FORM OF SHELF NOTE]
ELECTRONIC SOLUTIONS
GUARANTEED SENIOR SERIES A NOTE
No. ____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Electronic Solutions (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Nevada, hereby promises to pay to ________________________, or
registered assigns, the principal sum of
__________________________________________ DOLLARS [on the Final Maturity Date
specified above] [, payable on the Principal Prepayment Dates and in the amounts
specified above, and on the Final Maturity Date specified above in an amount
equal to the unpaid balance of the principal hereof,] with interest (computed on
the basis of a 360-day year--30-day month) (a) on the unpaid balance thereof at
the Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above, commencing
with the Interest Payment Date next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
Yield Maintenance Amount and any overdue payment of interest, payable on each
Interest Payment Date as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of
interest publicly announced by Morgan Guaranty Trust Company of New York from
time to time in New York City as its Prime Rate.
Payments of principal, Yield Maintenance Amount, if any, and interest
are to be made at the main office of Morgan Guaranty Trust Company of New York
in New York City or at such other place as the holder hereof shall designate to
the Company in writing, in lawful money of the United States of America.
A-1-1
<PAGE>
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Private Shelf Agreement, dated as of January 31,
1996 (herein called the "Agreement"), between the Company and Zero Corporation,
on the one hand, and The Prudential Insurance Company of America and each
Prudential Affiliate (as defined in the Agreement) which becomes party thereto,
on the other hand.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
The Company's obligations under this Note are guaranteed by Zero
Corporation pursuant to the guarantee set forth in paragraph 11 of the
Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the internal law of such
State.
ELECTRONIC SOLUTIONS
By: ________________________________
Title: _____________________________
A-1-2
<PAGE>
EXHIBIT A-2
-----------
[FORM OF SHELF NOTE]
ZERO CORPORATION
SENIOR SERIES ___ NOTE
No. ____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Zero Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to ________________________, or registered
assigns, the principal sum of __________________________________________ DOLLARS
[on the Final Maturity Date specified above] [, payable on the Principal
Prepayment Dates and in the amounts specified above, and on the Final Maturity
Date specified above in an amount equal to the unpaid balance of the principal
hereof,] with interest (computed on the basis of a 360-day year--30-day month)
(a) on the unpaid balance thereof at the Interest Rate per annum specified
above, payable on each Interest Payment Date specified above and on the Final
Maturity Date specified above, commencing with the Interest Payment Date next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of Yield Maintenance Amount and any overdue
payment of interest, payable on each Interest Payment Date as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 2% over the Interest Rate specified
above or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty
Trust Company of New York from time to time in New York City as its Prime Rate.
Payments of principal, Yield Maintenance Amount, if any, and interest
are to be made at the main office of Morgan Guaranty Trust Company of New York
in New York City or at such other place as the holder hereof shall designate to
the Company in writing, in lawful money of the United States of America.
A-2-1
<PAGE>
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Private Shelf Agreement, dated as of January 31,
1996 (herein called the "Agreement"), between the Company and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America and
each Prudential Affiliate (as defined in the Agreement) which becomes party
thereto, on the other hand.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the internal law of such
State.
ZERO CORPORATION
By: ________________________________
Title: _____________________________
A-2-2
<PAGE>
EXHIBIT B-1
-----------
[FORM OF PURCHASE REQUEST]
ELECTRONIC SOLUTIONS
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996, between Electronic Solutions (the "Company") and Zero
Corporation, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Pursuant to Paragraph 2A(3) of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes") ................... $________________/1/
2. Individual specifications of the Notes:
Principal
Final Prepayment Interest
Principal Maturity Dates and Payment
Amount Date Amounts Period
- --------- -------- ---------- --------
Semi-annually
3. Use of proceeds of the Notes: Purchase shares of the publicly
traded common stock of Zero Corporation pursuant to a tender offer
therefor and payment of related expenses.
4. Proposed day for the closing of the purchase and sale of the Notes:
__________________
/1/ Minimum principal amount of $10,000,000.
B-1-1
<PAGE>
5. The purchase price of the Notes is to be transferred to:
Name, Address
and ABA Routing Number of
Number of Bank Account
--------------- ---------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Purchase Request (b) that there exists on the date of
this Purchase Request no Event of Default or Default and (c) no
Material Adverse Change has occurred since the date of the most recent
audited financial statements delivered pursuant to paragraph 5A of the
Agreement or, if no such audited financial statements have been
delivered, since the date of the most recent audited financial
statements referenced in paragraph 8B of the Agreement.
7. In connection with any rate quotes it may provide, Prudential should
assume a Designated Spread of _____%.
Dated: ELECTRONIC SOLUTIONS
By: ____________________
Authorized Officer
B-1-2
<PAGE>
EXHIBIT B-2
-----------
[FORM OF REQUEST FOR PURCHASE]
ZERO CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996, between Zero Corporation (the "Company") and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Pursuant to Paragraph 2B(3) of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes") ................... $________________/1/
2. Individual specifications of the Notes:
Principal
Final Prepayment Interest
Principal Maturity Dates and Payment
Amount Date Amounts Period
- --------- -------- ---------- --------
Semi-annually
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the Notes:
__________________
/1/ Minimum principal amount of $5,000,000.
B-2-1
<PAGE>
5. The purchase price of the Notes is to be transferred to:
Name, Address
and ABA Routing Number of
Number of Bank Account
--------------- ---------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Request for Purchase (b) that there exists on the date of
this Request for Purchase no Event of Default or Default and (c) no
Material Adverse Change has occurred since the date of the most recent
audited financial statements delivered pursuant to paragraph 5A of the
Agreement or, if no such audited financial statements have been
delivered, since the date of the most recent audited financial
statements referenced in paragraph 8B of the Agreement.
7. In connection with any rate quotes it may provide, Prudential should
assume a Designated Spread of _____%.
Dated: ZERO CORPORATION
By: ____________________
Authorized Officer
B-2-2
<PAGE>
EXHIBIT C-1
-----------
[FORM OF CONFIRMATION OF ACCEPTANCE]
ELECTRONIC SOLUTIONS
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996 between Electronic Solutions (the "Company") and Zero
Corporation, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Prudential or the Prudential Affiliate which is named below as a Purchaser
of Notes hereby confirms the representations as to such Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of
paragraphs 2A(5) and 2A(7) of the Agreement relating to the purchase and sale of
such Notes and by the provisions of the penultimate sentence of paragraph 12A of
the Agreement.
Pursuant to paragraph 2A(5) of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $__________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
[(C), (D)..... same information as above.]
C-1-1
<PAGE>
II. Closing Day:
Dated: ELECTRONIC SOLUTIONS
By: ________________________________
Title: _____________________________
ZERO CORPORATION
By: ________________________________
Title: _____________________________
[THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA]
By: ________________________________
Vice President
[PRUDENTIAL AFFILIATE]
By: ________________________________
Vice President
C-1-2
<PAGE>
EXHIBIT C-2
-----------
[FORM OF CONFIRMATION OF ACCEPTANCE]
ZERO CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996 between Zero Corporation (the "Company") and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Prudential or the Prudential Affiliate which is named below as a Purchaser
of Notes hereby confirms the representations as to such Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of
paragraphs 2B(5) and 2B(7) of the Agreement relating to the purchase and sale of
such Notes and by the provisions of the penultimate sentence of paragraph 12A of
the Agreement.
Pursuant to paragraph 2B(5) of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $__________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
[(C), (D)..... same information as above.]
C-2-1
<PAGE>
II. Closing Day:
Dated: ZERO CORPORATION
By: ________________________________
Title: _____________________________
[THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA]
By: ________________________________
Vice President
[PRUDENTIAL AFFILIATE]
By: ________________________________
Vice President
C-2-2
<PAGE>
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER]
EXHIBIT D-1
_____________, 1996
(213) 229-7000 C99007-00937
To: The Purchasers listed on Schedule 1 hereto (the "Purchasers")
Re: Note Purchase Agreement dated as of January __, 1996 among Zero
Corporation, Electronic Solutions and The Prudential Insurance Company of
America (the "Note Purchase Agreement")
-------------------------
Ladies and Gentlemen:
We have acted as counsel to Zero Corporation, a Delaware corporation
(the "Guarantor"), and Electronic Solutions, a Nevada corporation (the "Issuer"
or, together with the Guarantor, the "Companies"), in connection with the Note
Purchase Agreement and the Notes of the Issuer in the aggregate principal amount
of $____________ dated the date hereof and issued pursuant thereto
(collectively, the "Documents"). Capitalized terms not otherwise defined herein
have the respective meanings set forth in the Note Purchase Agreement. This
opinion is delivered to you pursuant to Section 3A(v) of the Note Purchase
Agreement and with the understanding that the Purchasers are purchasing the
Notes in reliance hereon.
We have assumed with your permission that:
(a) The signatures on all documents examined by us are genuine, all
individuals executing such documents had all requisite legal capacity and
<PAGE>
____________, 1996
Page 2
competency and (except individuals acting on behalf ofthe Companies) were
duly authorized, the documents submitted to us as originals are authentic
and the documents submitted to us as certified or reproduction copies
conform to the originals;
(b) Each Purchaser is an "insurance company" within the meaning of
Section 2(13) of the Securities Act of 1933, as amended, and an
"incorporated admitted insurer" within the meaning of Section 1100.1 of the
California Insurance Code;
(c) Each Purchaser has access to such information as it deems
necessary to make its investment decisions with respect to the Notes;
(d) Each Purchaser has filed all required franchise tax returns, if
any, and paid all required taxes, if any, under the California Revenue &
Taxation Code (see White Dragon Productions, Inc. v. Performance
-------------------------------------------------
Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745 (1987); Damato v.
---------------- ---------
Slevin, 214 Cal. App. 3d 668, 262 Cal. Rptr. 879 (1989); California Revenue
------
and Taxation Code Section 23301 et seq.); and
-- ---
(e) There are no agreements or understandings between or among the
Purchasers, the Companies or third parties that would expand, modify or
otherwise affect the terms of the Documents or the respective rights or
obligations of the parties thereunder (see Trident Center v. Connecticut
---------------------------------
General Life Insurance Company, 847 F.2d 564 (9th Cir. 1988)).
------------------------------
In rendering this opinion, we have made such inquiries and examined,
among other things, originals or copies, certified or otherwise identified to
our satisfaction, of such records, agreements, certificates, instruments and
other documents as we have considered necessary or appropriate for purposes of
this opinion. As to certain factual matters, we have relied upon the
representations and warranties of the Companies in the Documents, certificates
of officers of the Companies or certificates obtained from public officials.
Except as expressly stated otherwise herein, whenever an opinion
herein with respect to the existence or
<PAGE>
_____________, 1996
Page 3
absence of facts is stated to be to the best of our knowledge, such statement is
intended to signify that no information has come to the attention of the lawyers
who have devoted substantive attention to the representation of the Companies
during the twelve months preceding the date hereof that would give us actual
knowledge of facts contrary to the existence or absence of the facts indicated.
However, we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our knowledge of the
existence or absence of such facts should be drawn from our representation of
the Companies or any affiliate thereof.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. The Issuer is a validly existing corporation in good standing
under the laws of the State of Nevada and the Guarantor is a validly existing
corporation in good standing under the laws of the State of Delaware. Each of
the Companies is duly qualified as a foreign corporation under the laws of the
State of California and has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents.
2. The execution and delivery of the Documents by the Companies party
thereto and the performance of their respective obligations thereunder have been
duly authorized by all necessary corporate action of the Companies. The
Documents have each been duly executed and delivered by the Companies party
thereto.
3. The Note Purchase Agreement and the Notes constitute legal, valid
and binding obligations of the Issuer, enforceable against the Issuer in
accordance with their respective terms.
4. The Note Purchase Agreement constitutes a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms.
5. Neither the execution and delivery by either Company of the Note
Purchase Agreement or by the Issuer of
<PAGE>
_____________, 1996
Page 4
the Notes, nor the consummation of the transactions contemplated by the Note
Purchase Agreement nor the performance by the Companies of the terms and
provisions thereof, or by the Issuer of the Notes, will (A) violate or conflict
with the charter or bylaws of either Company, or, to the best of our knowledge,
any order, judgment or decree of any court or other agency of government binding
on either Company, (B) to the best of our knowledge based solely upon review of
documents identified to us by officers of the Companies as material contracts of
the Companies (the "Contractual Obligations"), conflict in any material respect
with, result in a material breach of or constitute a material default under any
Contractual Obligation of the Companies, (C) violate any material law, statute,
rule or regulation of the State of California or the State of New York or the
United States of America applicable to either Company that, in our experience,
is normally applicable to unsecured debt securities transactions entered into by
companies similar to the Companies (other than (i) federal securities laws, as
to which we express no opinion, other than as set forth in paragraph 7 below,
and (ii) securities or "blue sky" laws of any state, including California and
New York, as to which we express no opinion), or (D) to the best of our
knowledge result in or require the creation or imposition of any Lien upon any
of the assets of either Company.
6. The extension, arranging and obtaining of the credit represented
by the Notes do not result in a violation of Regulation G or X of the Board of
Governors of the Federal Reserve System.
7. The issuance and sale of the Notes on the date hereof is exempt
from the registration requirement of Section 5 of the Securities Act and it is
not necessary to qualify the Note Purchase Agreement under the Trust Indenture
Act of 1939, as amended, in connection therewith.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We render no opinion herein as to matters involving the laws of
any jurisdiction other than the State of California, the State of New York, the
United States of America and, solely for purposes of paragraphs 1 and 2 above,
the States of Delaware and Nevada. We are not
<PAGE>
_____________, 1996
Page 5
admitted to practice in the States of Delaware and Nevada; however, we are
generally familiar with the Delaware General Corporation Law and the Nevada
General Corporation Law as presently in effect and have made such inquiries as
we consider necessary to render the opinions contained in paragraphs 1 and 2. We
have not examined the question of what law would govern the interpretation or
enforcement of the Documents and our opinion is based on the assumption that the
internal laws of either the State of New York or the State of California, and
the laws of the United States of America, would govern the provisions of the
Documents and the transactions contemplated thereby. This opinion is limited to
the effect of the present state of the laws of the State of California, the
State of New York, the United States of America and, to the limited extent set
forth above, the States of Delaware and Nevada and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the event
of future changes in such laws or the interpretations thereof or such facts.
B. Our opinions set forth in paragraphs 3 and 4 are subject to (i)
the effect of any bankruptcy, insolvency, reorganization, moratorium,
arrangement or similar laws affecting the enforcement of creditors' rights
generally (including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or preferential transfers or distributions by
corporations to stockholders) and (ii) general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
C. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Documents to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
<PAGE>
_____________, 1996
Page 6
D. We express no opinion as to the legality, validity, binding nature
or enforceability (i) of provisions relating to indemnification (or
contribution) to the extent such indemnification relates to any claims under the
Federal securities laws or state securities or Blue Sky laws, or any other
provisions in the Documents indemnifying a party, to the extent such provisions
may be held unenforceable as contrary to public policy, (ii) of any provision of
any Document insofar as it provides for the payment or reimbursement of costs
and expenses or for claims, losses or liabilities in excess of a reasonable
amount determined by any court or other tribunal or (iii) regarding any
Purchaser's ability to collect attorneys' fees and costs in an action involving
the Documents if such Purchaser is not the prevailing party in such action (we
call your attention that, under California law, where a contract permits one
party thereto to recover attorneys' fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorneys' fees).
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any waiver of unknown future rights or
any waiver of rights existing, or duties owed, that is broadly or vaguely stated
or does not describe the right or duty purportedly waived with reasonable
specificity, (ii) any waivers or consents (whether or not characterized as a
waiver or consent in the Documents) relating to the rights of the Issuer or the
Guarantor or duties owing to it existing as a matter of law, including, without
limitation, waivers of the benefits of statutory or constitutional provisions,
to the extent such waivers or consents may be found by a court to be against
public policy or which are ineffective pursuant to applicable statutes and
judicial decisions, (iii) provisions in the Documents that may be construed as
imposing penalties or forfeitures, or (ii) covenants (other than covenants
relating to the payment of principal, interest, yield maintenance amounts,
indemnities and expenses) to the extent they are construed to be independent
requirements as distinguished from conditions to the declaration or occurrence
of a default or an event of default.
F. We express no opinion as to any provision of the Documents
requiring written amendments or waivers of
<PAGE>
_______________, 1996
Page 7
such documents insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by the parties or
that the doctrine of promissory estoppel might not apply.
G. In rendering our opinions expressed in paragraph 5 insofar as they
require interpretation of Contractual Obligations, (i) we have assumed that all
courts of competent jurisdiction would enforce such agreements as written but
would apply the internal laws of the State of California without giving effect
to any choice of law provisions contained therein or any choice of law
principles that would result in application of the internal laws of any other
state, (ii) to the extent that any questions of legality or legal construction
have arisen in connection with our review, we have applied the laws of the State
of California in resolving such questions, and (iii) we express no opinion with
respect to the compliance by the Issuer or the Guarantor with, or any financial
calculations or data in respect of, financial covenants included in any
Contractual Obligation. We advise you that certain of the Contractual
Obligations may be governed by other laws, that such laws may vary substantially
from the law assumed to govern for purposes of this opinion and that this
opinion may not be relied upon as to whether or not a breach or default would
occur under the law actually governing such Contractual Obligations.
Furthermore, with respect to paragraph 5, while we advise you that (subject to
the other assumptions, exceptions, qualifications and limitations herein) the
Documents may be performed in a manner that does not result in a violation,
conflict, breach, default or Lien described therein, we express no opinion as to
whether the actual performance of the terms and provisions of the Documents
after the date hereof will not violate, be in conflict with, breach or
constitute a default under, or result in the creation or imposition of any Lien
in respect of any property of the Issuer or the Guarantor under, any Contractual
Obligation, or violate any statute, rule, regulation, order, judgment or decree
applicable to the Issuer or the Guarantor.
H. We express no opinion regarding the effect on the enforceability
against the Guarantor of the guaranty contained in the Note Purchase Agreement
of any facts or circumstances occurring after the date hereof that would
constitute a defense to the obligation of a surety, unless
<PAGE>
_______________, 1996
Page 8
such defense has been waived effectively by the Guarantor. Without limitation,
we advise you of California statutory provisions and case law to the effect
that, in certain circumstances, a guarantor may be exonerated if the creditor
materially alters the original obligation of the principal without the consent
of the guarantor, elects remedies for default which impair the subrogation
rights of the guarantor against the principal, or otherwise takes any action
without notifying the guarantor which materially prejudices the guarantor.
See, e.g., California Civil Code Section 2810; Union Bank v. Gradsky, 265 Cal.
- --- ---- ---------------------
App. 2d 40, 71 Cal. Rptr. 84 (1968); Sumitomo Bank of California v. Iwasaki, 70
--------------------------------------
Cal. 2d 81, 447 P.2d 956, 73 Cal. Rptr. 564 (1968); Cathay Bank v. Lee, 14 Cal.
------------------
App.4th 1533, 18 Cal. Rptr. 2d 420 (1993). In addition, the California Supreme
Court has found that in some circumstances the creditor has a duty to disclose
certain facts known to it to a guarantor. Sumitomo Bank v. Iwasaki, supra.
------------------------ -----
I. Our opinion set forth in Paragraph 4 is subject to the effect of
California statutory provisions and case law to the effect that a continuing
guaranty may be revoked at any time by a guarantor, in respect to future
transactions, unless there is a continuing consideration as to such transactions
which the guarantor does not renounce. See California Civil Code Section 2815;
---
Sumitomo Bank v. Iwasaki, supra.
- ------------------------ -----
J. We express no opinion as to the applicability or effect of any
Purchaser's compliance with any state or federal laws applicable to the
transactions contemplated by the Documents because of the nature of its
business.
K. We render no opinion regarding any violation of statutory or other
laws regarding fraudulent transfers or distributions by corporations to
stockholders in connection with the distribution by the Issuer to the Guarantor
of any Purchased Common Stock or the effect of any such violation.
L. For purposes of our opinions in paragraph 6 (and our opinions in
paragraph 5, to the extent they cover the same matters), we have assumed,
without any independent investigation by us, the accuracy of each Purchaser's
representations set forth in paragraph 9C of the Note Purchase Agreement.
<PAGE>
_______________, 1996
Page 9
M. For purposes of our opinion under paragraph 7 we have assumed,
without any independent investigation by us, (a) the accuracy of each
Purchaser's representations set forth in paragraph 9A of the Note Purchase
Agreement and of the Companies' representations and warranties set forth in
Section 8H of the Note Purchase Agreement, (b) that each Purchaser and each
other person to which offers were made is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act, (c) none of the
Purchasers has taken or intends to take any action that would subject the
issuance and sale of the Notes to the registration requirements of the
Securities Act, (d) that the offer and sale of the Notes occurred pursuant to
private negotiations between The Prudential Insurance Company of America and the
Companies and Prudential Capital Group, but that no offers with respect to the
Notes were made to any other person.
This opinion is rendered to the Purchasers in connection with the
Documents and may not be relied upon by any person other than the Purchasers and
their Transferees or by the Purchasers or their Transferees in any other
context, provided that the Purchasers and their Transferees may provide this
opinion (i) to insurance regulators and examiners and other regulatory
authorities should they so request or in connection with their normal
examinations, (ii) to the independent auditors and attorneys of the Purchasers
or their Transferees, (iii) pursuant to order or legal process of any court or
governmental agency or (iv) in connection with any legal action to which the
Purchasers or their Transferees are a party arising out of the transactions
contemplated by the Documents. This opinion may not be quoted without the
prior written consent of this Firm.
Very truly yours,
GIBSON, DUNN & CRUTCHER
<PAGE>
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER]
EXHIBIT D-2
_____________, 1996
(213) 229-7000 C99007-00937
To: The Purchasers listed on Schedule 1 hereto (the "Purchasers")
Re: Note Purchase Agreement dated as of January __, 1996 among Zero
Corporation, Electronic Solutions and The Prudential Insurance Company of
America (the "Note Purchase Agreement")
-----------------------
Ladies and Gentlemen:
We have acted as counsel to Zero Corporation, a Delaware corporation
(the "Parent"), and Electronic Solutions, a Nevada corporation (the "Subsidiary"
or, together with the Parent, the "Companies"), in connection with the Note
Purchase Agreement and the Notes of the Parent in the aggregate principal amount
of $____________ dated the date hereof and issued pursuant thereto
(collectively, the "Documents"). Capitalized terms not otherwise defined herein
have the respective meanings set forth in the Note Purchase Agreement. This
opinion is delivered to you pursuant to Section 3A(v) of the Note Purchase
Agreement and with the understanding that the Purchasers are purchasing the
Notes in reliance hereon.
We have assumed with your permission that:
(a) The signatures on all documents examined by us are genuine, all
individuals executing such documents had all requisite legal capacity and
<PAGE>
________________, 1996
Page 2
competency and (except individuals acting on behalf ofthe Companies) were
duly authorized, the documents submitted to us as originals are authentic
and the documents submitted to us as certified or reproduction copies
conform to the originals;
(b) Each Purchaser is an "insurance company" within the meaning of
Section 2(13) of the Securities Act of 1933, as amended, and an
"incorporated admitted insurer" within the meaning of Section 1100.1 of the
California Insurance Code;
(c) Each Purchaser has access to such information as it deems
necessary to make its investment decisions with respect to the Notes;
(d) Each Purchaser has filed all required franchise tax returns, if
any, and paid all required taxes, if any, under the California Revenue &
Taxation Code (see White Dragon Productions, Inc. v. Performance
-------------------------------------------------
Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745 (1987); Damato v.
---------------- ---------
Slevin, 214 Cal. App. 3d 668, 262 Cal. Rptr. 879 (1989); California Revenue
------
and Taxation Code Section 23301 et seq.); and
-- ---
(e) There are no agreements or understandings between or among the
Purchasers, the Companies or third parties that would expand, modify or
otherwise affect the terms of the Documents or the respective rights or
obligations of the parties thereunder (see Trident Center v. Connecticut
---------------------------------
General Life Insurance Company, 847 F.2d 564 (9th Cir. 1988)).
------------------------------
In rendering this opinion, we have made such inquiries and examined,
among other things, originals or copies, certified or otherwise identified to
our satisfaction, of such records, agreements, certificates, instruments and
other documents as we have considered necessary or appropriate for purposes of
this opinion. As to certain factual matters, we have relied upon the
representations and warranties of the Companies in the Documents, certificates
of officers of the Companies or certificates obtained from public officials.
Except as expressly stated otherwise herein, whenever an opinion
herein with respect to the existence or
<PAGE>
_______________, 1996
Page 3
absence of facts is stated to be to the best of our knowledge, such statement is
intended to signify that no information has come to the attention of the lawyers
who have devoted substantive attention to the representation of the Companies
during the twelve months preceding the date hereof that would give us actual
knowledge of facts contrary to the existence or absence of the facts indicated.
However, we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our knowledge of the
existence or absence of such facts should be drawn from our representation of
the Companies or any affiliate thereof.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. The Subsidiary is a validly existing corporation in good standing
under the laws of the State of Nevada and the Parent is a validly existing
corporation in good standing under the laws of the State of Delaware. Each of
the Companies is duly qualified as a foreign corporation under the laws of the
State of California and has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents.
2. The execution and delivery of the Documents by the Companies party
thereto and the performance of their respective obligations thereunder have been
duly authorized by all necessary corporate action of the Companies. The
Documents have each been duly executed and delivered by the Companies party
thereto.
3. The Note Purchase Agreement and the Notes constitute legal, valid
and binding obligations of the Parent, enforceable against the Parent in
accordance with their respective terms.
4. The Note Purchase Agreement constitutes a legal, valid and binding
obligation of the Subsidiary, enforceable against the Subsidiary in accordance
with its terms.
5. Neither the execution and delivery by either Company of the Note
Purchase Agreement or by the Parent of
<PAGE>
________________, 1996
Page 4
the Notes, nor the consummation of the transactions contemplated by the Note
Purchase Agreement nor the performance by the Companies of the terms and
provisions thereof, or by the Parent of the Notes, will (A) violate or conflict
with the charter or bylaws of either Company, or, to the best of our knowledge,
any order, judgment or decree of any court or other agency of government binding
on either Company, (B) to the best of our knowledge based solely upon review of
documents identified to us by officers of the Companies as material contracts of
the Companies (the "Contractual Obligations"), conflict in any material respect
with, result in a material breach of or constitute a material default under any
Contractual Obligation of the Companies, (C) violate any material law, statute,
rule or regulation of the State of California or the State of New York or the
United States of America applicable to either Company that, in our experience,
is normally applicable to unsecured debt securities transactions entered into by
companies similar to the Companies (other than (i) federal securities laws, as
to which we express no opinion, other than as set forth in paragraph 7 below,
and (ii) securities or "blue sky" laws of any state, including California and
New York, as to which we express no opinion), or (D) to the best of our
knowledge result in or require the creation or imposition of any Lien upon any
of the assets of either Company.
6. The extension, arranging and obtaining of the credit represented
by the Notes do not result in a violation of Regulation G or X of the Board of
Governors of the Federal Reserve System.
7. The issuance and sale of the Notes on the date hereof is exempt
from the registration requirement of Section 5 of the Securities Act and it is
not necessary to qualify the Note Purchase Agreement under the Trust Indenture
Act of 1939, as amended, in connection therewith.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We render no opinion herein as to matters involving the laws of
any jurisdiction other than the State of California, the State of New York, the
United States of America and, solely for purposes of paragraphs 1 and 2 above,
the States of Delaware and Nevada. We are not
<PAGE>
________________, 1996
Page 5
admitted to practice in the States of Delaware and Nevada; however, we are
generally familiar with the Delaware General Corporation Law and the Nevada
General Corporation Law as presently in effect and have made such inquiries as
we consider necessary to render the opinions contained in paragraphs 1 and 2. We
have not examined the question of what law would govern the interpretation or
enforcement of the Documents and our opinion is based on the assumption that the
internal laws of either the State of New York or the State of California, and
the laws of the United States of America, would govern the provisions of the
Documents and the transactions contemplated thereby. This opinion is limited to
the effect of the present state of the laws of the State of California, the
State of New York, the United States of America and, to the limited extent set
forth above, the States of Delaware and Nevada and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the event
of future changes in such laws or the interpretations thereof or such facts.
B. Our opinions set forth in paragraphs 3 and 4 are subject to (i)
the effect of any bankruptcy, insolvency, reorganization, moratorium,
arrangement or similar laws affecting the enforcement of creditors' rights
generally (including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or preferential transfers or distributions by
corporations to stockholders) and (ii) general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
C. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Documents to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
<PAGE>
_________________, 1996
Page 6
D. We express no opinion as to the legality, validity, binding nature
or enforceability (i) of provisions relating to indemnification (or
contribution) to the extent such indemnification relates to any claims under the
Federal securities laws or state securities or Blue Sky laws, or any other
provisions in the Documents indemnifying a party, to the extent such provisions
may be held unenforceable as contrary to public policy, (ii) of any provision of
any Document insofar as it provides for the payment or reimbursement of costs
and expenses or for claims, losses or liabilities in excess of a reasonable
amount determined by any court or other tribunal or (iii) regarding any
Purchaser's ability to collect attorneys' fees and costs in an action involving
the Documents if such Purchaser is not the prevailing party in such action (we
call your attention that, under California law, where a contract permits one
party thereto to recover attorneys' fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorneys' fees).
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any waiver of unknown future rights or
any waiver of rights existing, or duties owed, that is broadly or vaguely stated
or does not describe the right or duty purportedly waived with reasonable
specificity, (ii) any waivers or consents (whether or not characterized as a
waiver or consent in the Documents) relating to the rights of the Subsidiary or
the Parent or duties owing to it existing as a matter of law, including, without
limitation, waivers of the benefits of statutory or constitutional provisions,
to the extent such waivers or consents may be found by a court to be against
public policy or which are ineffective pursuant to applicable statutes and
judicial decisions, (iii) provisions in the Documents that may be construed as
imposing penalties or forfeitures, or (ii) covenants (other than covenants
relating to the payment of principal, interest, yield maintenance amounts,
indemnities and expenses) to the extent they are construed to be independent
requirements as distinguished from conditions to the declaration or occurrence
of a default or an event of default.
F. We express no opinion as to any provision of the Documents
requiring written amendments or waivers of
<PAGE>
_________________, 1996
Page 7
such documents insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by the parties or
that the doctrine of promissory estoppel might not apply.
G. In rendering our opinions expressed in paragraph 5 insofar as they
require interpretation of Contractual Obligations, (i) we have assumed that all
courts of competent jurisdiction would enforce such agreements as written but
would apply the internal laws of the State of California without giving effect
to any choice of law provisions contained therein or any choice of law
principles that would result in application of the internal laws of any other
state, (ii) to the extent that any questions of legality or legal construction
have arisen in connection with our review, we have applied the laws of the State
of California in resolving such questions, and (iii) we express no opinion with
respect to the compliance by the Subsidiary or the Parent with, or any financial
calculations or data in respect of, financial covenants included in any
Contractual Obligation. We advise you that certain of the Contractual
Obligations may be governed by other laws, that such laws may vary substantially
from the law assumed to govern for purposes of this opinion and that this
opinion may not be relied upon as to whether or not a breach or default would
occur under the law actually governing such Contractual Obligations.
Furthermore, with respect to paragraph 5, while we advise you that (subject to
the other assumptions, exceptions, qualifications and limitations herein) the
Documents may be performed in a manner that does not result in a violation,
conflict, breach, default or Lien described therein, we express no opinion as to
whether the actual performance of the terms and provisions of the Documents
after the date hereof will not violate, be in conflict with, breach or
constitute a default under, or result in the creation or imposition of any Lien
in respect of any property of the Subsidiary or the Parent under, any
Contractual Obligation, or violate any statute, rule, regulation, order,
judgment or decree applicable to the Subsidiary or the Parent.
H. We express no opinion regarding the effect on the enforceability
against the Parent of the guaranty contained in the Note Purchase Agreement of
any facts or circumstances occurring after the date hereof that would constitute
a defense to the obligation of a surety, unless
<PAGE>
_________________, 1996
Page 8
such defense has been waived effectively by the Parent. Without limitation, we
advise you of California statutory provisions and case law to the effect that,
in certain circumstances, a guarantor may be exonerated if the creditor
materially alters the original obligation of the principal without the consent
of the guarantor, elects remedies for default which impair the subrogation
rights of the guarantor against the principal, or otherwise takes any action
without notifying the guarantor which materially prejudices the guarantor.
See, e.g., California Civil Code Section 2810; Union Bank v. Gradsky, 265 Cal.
- --- ---- ---------------------
App. 2d 40, 71 Cal. Rptr. 84 (1968); Sumitomo Bank of California v. Iwasaki, 70
--------------------------------------
Cal. 2d 81, 447 P.2d 956, 73 Cal. Rptr. 564 (1968); Cathay Bank v. Lee, 14 Cal.
------------------
App.4th 1533, 18 Cal. Rptr. 2d 420 (1993). In addition, the California Supreme
Court has found that in some circumstances the creditor has a duty to disclose
certain facts known to it to a guarantor. Sumitomo Bank v. Iwasaki, supra.
------------------------ -----
I. Our opinion set forth in Paragraph 4 is subject to the effect of
California statutory provisions and case law to the effect that a continuing
guaranty may be revoked at any time by a guarantor, in respect to future
transactions, unless there is a continuing consideration as to such transactions
which the guarantor does not renounce. See California Civil Code Section 2815;
---
Sumitomo Bank v. Iwasaki, supra.
- ------------------------ -----
J. We express no opinion as to the applicability or effect of any
Purchaser's compliance with any state or federal laws applicable to the
transactions contemplated by the Documents because of the nature of its
business.
K. We render no opinion regarding any violation of statutory or other
laws regarding fraudulent transfers or distributions by corporations to
stockholders in connection with the distribution by the Subsidiary to the Parent
of any Purchased Common Stock or the effect of any such violation.
L. For purposes of our opinions in paragraph 6 (and our opinions in
paragraph 5, to the extent they cover the same matters), we have assumed,
without any independent investigation by us, the accuracy of each Purchaser's
representations set forth in paragraph 9C of the Note Purchase Agreement.
<PAGE>
________________, 1996
Page 9
M. For purposes of our opinion under paragraph 7 we have assumed,
without any independent investigation by us, (a) the accuracy of each
Purchaser's representations set forth in paragraph 9A of the Note Purchase
Agreement and of the Companies' representations and warranties set forth in
Section 8H of the Note Purchase Agreement, (b) that each Purchaser and each
other person to which offers were made is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act, (c) none of the
Purchasers has taken or intends to take any action that would subject the
issuance and sale of the Notes to the registration requirements of the
Securities Act, and (d) that the offer and sale of the Notes occurred pursuant
to private negotiations between The Prudential Insurance Company of America and
the Companies and Prudential Capital Group, but that no offers with respect to
the Notes were made to any other person.
This opinion is rendered to the Purchasers in connection with the
Documents and may not be relied upon by any person other than the Purchasers and
their Transferees or by the Purchasers or their Transferees in any other
context, provided that the Purchasers and their Transferees may provide this
opinion (i) to insurance regulators and examiners and other regulatory
authorities should they so request or in connection with their normal
examinations, (ii) to the independent auditors and attorneys of the Purchasers
or their Transferees, (iii) pursuant to order or legal process of any court or
governmental agency or (iv) in connection with any legal action to which the
Purchasers or their Transferees are a party arising out of the transactions
contemplated by the Documents. This opinion may not be quoted without the
prior written consent of this Firm.
Very truly yours,
GIBSON, DUNN & CRUTCHER
<PAGE>
EXHIBIT E
---------
As of ___________, 199__
The Prudential Insurance Company of America
Each Prudential Affiliate described below
c/o Prudential Capital Group
777 South Figueroa Street
Suite 2950
Los Angeles, California 90017
Gentlemen:
In order to induce, and in consideration of, your purchase from (i) Electrical
Solutions ("Electrical") of up to $50,000,000 aggregate principal amount of its
Guaranteed Senior Notes ("Electrical Notes"), which have been guaranteed by Zero
Corporation (the "Company") and (ii) the Company of up to $20,000,000 aggregate
principal amount of its Senior Notes ("Company Notes"), in each case issued
under the Private Shelf Agreement (the "Note Agreement") dated as of [January
___], 1996, as amended from time to time, between the Company and Electrical, on
the one hand, and Prudential and each Prudential Affiliate (as defined therein)
which may become a party thereto, on the other hand, the undersigned agrees with
you as hereinafter provided:
1. All Subordinated Debt is expressly subordinated to the extent and in the
manner set forth in paragraphs 2 through 6 hereof to Senior Debt.
The term "Subordinated Debt" as used in this agreement shall mean and
include the principal, interest, premium, if any, and other amounts due in
connection with all obligations of Company to the undersigned, direct or
contingent, joint, several or independent, now or hereafter existing, due
or to become due to, or held or to be held by, the undersigned, whether
created directly or acquired by assignment or otherwise, and whether "open
account", evidenced by a note or other instrument, or otherwise.
The term "Senior Debt" as used in this agreement shall mean and include the
principal, interest, premium and yield-maintenance amounts, if any, and
other amounts due in connection with all contingent and non-contingent
liabilities of the Company (directly or indirectly by way of its guaranty)
under or with respect to the Note Agreement, the Company Notes, and the
Electrical Notes, and interest thereon at the rate stated in the
instruments evidencing Senior Debt from the date of filing of any petition
(by or with respect to Electrical or the Company) under the United States
Bankruptcy Code to the date of payment.
E-1
<PAGE>
2. If there shall occur an Event of Default or Default, as defined in the Note
Agreement, then unless and until such Event of Default or Default shall
have been cured, or unless and until all Senior Debt shall be paid in full,
the undersigned will not receive or accept any payment on or of
Subordinated Debt from the Company.
3. The undersigned will not receive or accept any principal, interest or other
payment (including, but not limited to, payments-in-kind) from the Company
on account of Subordinated Debt, if the making of such payment would result
in a Default or Event of Default as defined in the Note Agreement.
4. In the event that the undersigned shall receive any payment on Subordinated
Debt which the undersigned is not entitled to receive under the provisions
of the foregoing paragraph 2 or 3, the undersigned will hold any amount so
received in trust for Prudential, each Prudential Affiliate (if any) which
has purchased a Company Note or an Electrical Note and will forthwith turn
over such payment to Prudential or such Prudential Affiliate in the form
received to be applied to Senior Debt pro rata according to the then
--- ----
outstanding principal amounts under such Notes at the time outstanding.
5. The undersigned will not commence any action or proceeding against the
Company to recover all or any part of the Subordinated Debt or join with
any creditor, unless Prudential and each Prudential Affiliate (if any)
which has purchased a Company Note or an Electrical Note shall also join,
in bringing any proceedings against the Company under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the Federal or any state
government unless and until all Senior Debt shall be paid in full.
6. In the event of any receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization or arrangement with creditors,
whether or not pursuant to bankruptcy laws, sale of all or substantially
all of the assets, dissolution, liquidation or any other marshalling of the
assets and liabilities of the Company, the undersigned will, at the request
of Prudential or any Prudential Affiliate which has purchased a Company
Note or an Electrical Note, file any claim, proof of claim or other
instrument of similar character necessary to enforce the obligations of the
Company in respect of Subordinated Debt and will hold in trust for
Prudential and any Prudential Affiliate which has purchased a Company Note
or an Electrical Note and pay over to Prudential or any such Prudential
Affiliate, in the form received, to be applied to Senior Debt pro rata
--- ----
according to the then outstanding principal amounts under the Company Notes
and the Electrical Notes, any and all moneys, dividends or other assets
received in any such proceedings on account of Subordinated Debt, unless
and until Senior Debt shall be paid in full. In the event that the
undersigned shall fail to take such action requested by Prudential or any
Prudential Affiliate, Prudential or any such Prudential Affiliate may, as
attorney-in-fact for the undersigned, take such action on behalf of the
undersigned, and the undersigned hereby appoints Prudential and any such
Prudential Affiliate (and any of them) as attorney-in-fact for the
undersigned to demand, sue for, collect and receive any and all such
moneys, dividends or other assets and give acquittance therefor and to file
any claim, proof of claim or other instrument of similar character and to
take such other action (including acceptance or
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<PAGE>
rejection of any plan of reorganization or arrangement) in its or their own
name or in the name of the undersigned as Prudential or any such Prudential
Affiliate may deem necessary or advisable for the enforcement of the
agreement contained in this letter; and the undersigned will execute and
deliver to Prudential and any such Prudential Affiliate (and any of them)
such other and further powers of attorney or other instruments as any may
request in order to accomplish the foregoing.
7. Each of Prudential and any Prudential Affiliate which has purchased a
Company Note or an Electrical Note may, at any time and from time to time,
without the consent of or notice to the undersigned, without incurring
responsibility to the undersigned and without impairing or releasing any of
its rights, or any of the obligations of the undersigned hereunder:
(a) Change the amount, manner, place or terms of payment or change or
extend the time of payment of or renew or alter Senior Debt or
amend the Note Agreement, Company Notes, or the Electrical Notes
so as to restrict or further restrict payments of principal of
and interest on Subordinated Debt in any manner or enter into or
amend in any manner any other agreement relating to Senior Debt
(including provisions restricting or further restricting payments
of principal of and interest on Subordinated Debt);
(b) Sell, exchange, release or otherwise deal with all or any part of
any property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, Senior Debt;
(c) Release anyone liable in any manner for the payment or collection
of Senior Debt;
(d) Exercise or refrain from exercising any rights against the
Company and others (including the undersigned); and
(e) Apply any sums, by whomsoever paid or however realized, to Senior
Debt.
8. The undersigned will (i) cause all Subordinated Debt to be evidenced by a
note or other instrument which shall bear upon its face a statement or
legend to the effect that such note or other instrument is subordinated to
Senior Debt in the manner and to the extent in this letter set forth, (ii)
will mark the undersigned's books to show that the Subordinated Debt is so
subordinated to Senior Debt.
9. The undersigned represents and warrants that (i) neither the execution nor
delivery of this letter (or any amendment and restatement hereof) nor
fulfillment of nor compliance with the terms and provisions hereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any agreement or instrument to which the
undersigned is now subject, and (ii) none of the Subordinated Debt is or
will be subordinated to any Funded Debt or Current Debt (as defined in the
Note Agreement) of the Company other than Senior Debt.
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<PAGE>
10. Notice of acceptance of the agreement contained in this letter is hereby
waived by the undersigned.
11. This agreement is for your benefit, the benefit of your successors and
assigns and the benefit of any subsequent holder or holders of the Company
Notes and the Electrical Notes, and shall bind the successors and assigns
of the undersigned and any subsequent holder(s) of the Subordinated Debt.
12. This agreement shall be governed by the laws of the State of New York , and
shall be construed and enforced in accordance with, the law thereof.
Very truly yours,
[Name of Subsidiary]
By: ________________________________
Its: ___________________________
The foregoing agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA (directly and on behalf of
each Prudential Affiliate)
By: __________________________________
Title: _______________________________
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<PAGE>
SCHEDULE 6C(3)
EXISTING LOANS, ADVANCES AND INVESTMENTS
1. Promissory Note dated November 22, 1991
G. J. Stoffers and Thea Stoffers
Principal $3,200,000, current balance $2,600,000
Issued by Purchasers for Property located at
1000 Chestnut Street, Burbank, California
Interest at 10% payable monthly
Principal payable $150,000 annually on each November 22
Maturity November 22, 1998 with payment of balance of
principal of $2,450,000 plus interest through such date
2. Series A Preferred Stock of IAC Industries
Issued to ZERO Corporation for assets sold on
September 21, 1990, annual redemption provisions
and dividends payable, carrying value of $257,305
3. Cambridge Aeroflo, Inc.
Loan from ZERO Corporation for $250,000
Interest payable at Bank of America prime
through Maturity October 10, 1996
May be converted to common stock of Cambridge Aeroflo
Anticipate conversion and purchase of all outstanding
Common Stock by March 31, 1996
4. Anvil Cases, Inc.
Wholly-owned subsidiary
Currently negotiating for the sale of this subsidiary
the closing of which is scheduled for January 31, 1996.
Purchase price of $3.8 million payable $300,000 at closing
and delivery of a promissory note to mature in 2002.
Purchase price adjustments provided for based on Adjusted
Shareholders' Equity.
5. Balcor Pension Investors-I and Balcor Pension Investors-VII
Two Illinois real estate limited partnerships
Value $486,994
<PAGE>
SCHEDULE 6C(6)
PERMITTED TRANSFERS OF ASSETS
1. 777 Front Street
Burbank, California
Approximately 286,556 square feet of concrete tilt-up and
office buildings on approximately 8.26 acres.
2. 70 Washington Road
Princeton Junction, New Jersey
Approximately 52,000 square feet of assembly/warehouse/office space
currently occupied by McLean Engineering, a division of the Company.
3. Air Cargo Equipment Corporation
Wholly-owned subsidiary
The Company is evaluating the strategic fit of this subsidiary as it
relates to the long-range plans for the Company. Air Cargo Equipment
Corporation manufactures air cargo systems, containers and related
accessories.
4. Anvil Cases, Inc.
Wholly-owned subsidiary
Currently negotiating for the sale of this subsidiary the closing of which
is currently scheduled for January 31, 1996. Purchase price of $3.8
million payable $300,000 at closing and delivery of a promissory note to
mature in 2002. Purchase price adjustments provided for based on Adjusted
Shareholders' Equity.
<PAGE>
SCHEDULE 8A
SUBSIDIARY INFORMATION
Name and Jurisdiction of Each Subsidiary Share Ownership
- ---------------------------------------- ---------------
Air Cargo Equipment Corporation 100% ZERO Corporation
Delaware
Air Cooling Technology, Inc. 100% ZERO Corporation
California
Anvil Cases, Inc. 100% ZERO Corporation
California
Composite Research, Inc. 100% ZERO Corporation
California (inactive)
Contempo Engineering Co. 100% ZERO Corporation
California
Electronic Solutions 100% ZERO Corporation
Nevada
McLean Midwest Corporation 100% ZERO Corporation
Minnesota
Nielsen Hardware Corporation 100% ZERO Corporation
Connecticut
Precision Fabrication Technologies, Inc. 100% ZERO Corporation
Indiana
Samuel Groves & Co. Limited 99.9% ZERO Corporation
United Kingdom .01% Antony Joynson
ZERO McLean Europe Ltd. 100% Samuel Groves & United
Kingdom (inactive) Co. Limited
Productos Aereos, S.A. 99.9% ZERO Corporation
Mexico .01% Jeanne Tatton,
Javene Black, Lisa
Atwood, R. Borchert
ZERO FSC Corp. 100% ZERO Corporation
Virgin Islands (foreign sales)
ZERO-East Division, ZERO Corporation 100% ZERO Corporation
Massachusetts
ZERO Integrated Systems 100% ZERO Corporation
California
<PAGE>
ZERO Manufacturing Corporation 100% ZERO Corporation
California (inactive)
ZERO International, Inc. 100% ZERO Corporation
California (inactive)
<PAGE>
SCHEDULE 8C
ACTIONS PENDING
I. ENVIRONMENTAL
The following facilities have been identified by the State of California
and/or the Federal government and the Company has received notification
(except as to the Hawker Pacific facility referred to below) that certain
of its operations may have impacted the environment at particular
facilities and as a result the Company may be potentially responsible for
response costs and/or penalties as a result of the Company's operations.
777 Front Street, Burbank, California (Burbank)
415 North Front Street, Burbank, California (Hyrail)
Electronic Solutions, El Monte, California
Sherman Way, North Hollywood, California (Hawker Pacific)
Chatham Brothers Barrel Yard, Escondido, California
In addition, the Company is conducting soil remediation activities at
certain locations identified below.
A. Burbank Facility
The EPA has identified the Company as a PRP at the San Fernando Valley
Superfund Site, Glendale North Operable Unit. The Company has agreed to
participate in the design of the EPA selected interim remedies for the
Glendale North and Glendale South Operable Units.
The Company has joined with other PRPs which have collectively organized a
response to the EPA and negotiated an Administrative Order on Consent to
design the EPA selected interim remedy. The AOC, signed by 24 PRPs
including the Company, became effective on March 30, 1994.
On October 20, 1995 the Company (along with forty-four other PRPs) received
a Special Notice Letter from the EPA in connection with the construction,
operation and maintenance costs for the twelve year interim remedy for the
Site, and for response costs incurred by the government. The PRP Group has
commenced negotiations with the EPA for the formulation of a good faith
offer for the implementation of the interim remedy.
An interim allocation, through the use of mediators using surrogate data,
was established in early-1994, with the Company's current interim
allocation of costs for the design of 9.39%. The PRP Group is also
currently involved in a process to arrive at a final allocation for the
costs for the interim remedy and the remedial design work.
<PAGE>
The Company's liability at the San Fernando Valley Superfund Site is
uncertain at this time because of a number of factors, including: EPA has
not selected the final remedy for the entire Site; there exist
uncertainties regarding the design and therefore the cost; additional PRPs
have been and will continue to be identified; the Company's relative
contribution of VOCs, if any, to the groundwater has not yet been
determined.
In addition, the Company has submitted a workplan to the Regional Water
Quality Control Board for the remediation of the soil at 777 Front Street,
Burbank.
B. Hyrail Facility
The Company received and responded to an information request of the EPA in
December 1992 as a result of the Company's operations on a certain portion
of the Hyrail facility. The Company has not received any further contact
regarding the Hyrail facility since its response to the EPA information
request.
C. Electronics Solutions-El Monte Facility
The Company conducted certain subsurface investigations at this facility at
the request of the State of California Regional Water Quality Control Board
and detected low levels of volatile organic compounds in the near surface
soils nd soil gas. The Company implemented a plan to remediate the soil.
Electronic Solutions received a letter from the EPA on August 18, 1995
advising that the EPA considered it (along with forty-eight other parties)
a PRP for the South El Monte Operable Unit of the San Gabriel Valley
Superfund Sites. The EPA informed the PRPs that it had entered into an AOC
with Cardinal Industrial Finishes for a PRP lead remedial investigation and
feasibility study at the Site, and encouraging the parties to cooperate
with Cardinal. The Company agreed to and has paid funds to Cardinal for
the work to be performed under this AOC.
D. Hawker Pacific Facility
The Company received and responded to an information request from the EPA
in 1992 regarding this facility. The Company has not received any further
contact from the EPA since its response to that request.
In an action entitled United States v. Allied Signal, et al., Consolidated
Case Nos. CIV 93-6490 MRP (Tx) and CIV 93-6570 MRP (Tx), the EPA sued
Hawker Pacific and Wagner and Basinger
<PAGE>
who have filed third party complaints, and two co-defendants on these
third-party complaints have filed cross-claims for contribution,
declaratory relief, and/or contractual indemnity against the Company.
The plaintiffs are seeking to recover response costs in connection with
actions taken by several governmental agencies in response to groundwater
and soil contamination in the North Hollywood Operable Unit of the San
Fernando Valley Superfund Site.
The third-party complaints against the Company were served on or about
October 1994 by the current owner and operator of the property, alleging
the predecessors in interest operated the property from 1969 to 1987.
Cross-claims filed against the Company by Parker Hannifin Corporation and
Inchcape are a part of their responses to the third-party complaints seek
contribution declaratory relief, and/or contractual indemnity from one
another and from the Company, and the third-party plaintiffs.
Counsel for Hawker Pacific has recently notified the Company that
negotiations are being conducted with the EPA whereby each party in this
action would contribute funds to a final settlement. The Company has
received an offer to settle which is currently under consideration. In
addition, the Company intends to file an action against its insurance
carrier for its failure to defend the Company in this action.
E. Chatham Facility
The Company has agreed to participate with other potentially responsible
parties to perform investigative and remedial work at the Chatham facility
and to pay a portion of the past response costs incurred by the State of
California. The Company has been identified as having a 0.05 percent
allocation of material associated with the Chatham facility.
F. 14501 49th Street North
Clearwater, Florida
The Company entered into a Consent Order with the State of Florida
Department of Environmental Regulation for the remediation of soil at this
former facility in Pinellas County, Florida. The leasehold interest in
this property was sold to the County in 1990, subject to compliance by the
Company of the requirements of the Consent Order. The Company is currently
negotiating with the Florida DEP for authority to reduce the testing
required to semi-annual testing and to ultimately reduce the cleanup levels
required under the Consent Order.
<PAGE>
II. SIGNIFICANT LITIGATION
A. West Texas Utilities vs General Electric, et al, including ZERO
Corporation and its ZERO East Division
United States District Court, Northern District of
Texas, Dallas Division
Case No. 394CV-1853-T
In November 1994 the Company received service of the above action in which
the plaintiff seeks to recover damages allegedly suffered as a result of
the failure of transformers, gears for which were sold by ZERO East
Division to General Electric. The damages include repair costs in excess
of $2,000,000. The Company and ZERO East Division are being defended by
The Home Insurance Company.
B. USA and CA vs Allied Signal, Hawker Pacific, et al. See paragraph I-D
above.
