<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 7)
MAXSERV, INC.
(NAME OF SUBJECT COMPANY)
SEARS, ROEBUCK AND CO.
MAX ACQUISITION DELAWARE INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
005779171
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
MICHAEL D. LEVIN, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SEARS, ROEBUCK AND CO.
3333 BEVERLY ROAD
HOFFMAN ESTATES, IL 60179
(847) 286-2500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
COPY TO:
MARK D. GERSTEIN, ESQ.
LATHAM & WATKINS
SEARS TOWER, SUITE 5800
233 SOUTH WACKER DRIVE
CHICAGO, IL 60606-6401
(312) 876-7700
CALCULATION OF FILING FEE:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee**
- ------------------------------------------------------------------------------
<S> <C>
$35,998,711 $7,200
- ------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* For purposes of calculating the amount of filing fee only. The amount
assumes the purchase of 5,142,673 shares of Common Stock, par value $.01
per share, of MaxServ, Inc., at $7.00 net in cash per share.
** The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934 equals 1/50th of 1% of the
value of the shares to be purchased.
[_]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.
Amount Previously Paid:
Not applicable. Filing Party:Not applicable.
Form or Registration No.:
Not applicable. Date Filed: Not applicable.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Continued on following page(s))
(Page 1 of 7 Pages)
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 005779171 Page 2 of 7 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS: SEARS, ROEBUCK AND CO.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 36-1750680
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(A) [_]
(B)[_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS):
WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(E) OR 2(F): [_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
NEW YORK
- -------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
7,033,333
- -------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS):
[_]
- -------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED TO AMOUNT IN ROW (7):
64.4%
- -------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
CO
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 005779171 Page 3 of 7 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS: MAX ACQUISITION DELAWARE INC.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
IRS IDENTIFICATION NO. APPLIED FOR
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
(A) [_]
(B)[_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS):
AF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(E) OR 2(F): [_]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
DELAWARE
- -------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
- -------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS):
[_]
- -------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED TO AMOUNT IN ROW (7):
- -------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):
CO
- -------------------------------------------------------------------------------
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") relates
to a tender offer by Max Acquisition Delaware Inc., a Delaware corporation
("Purchaser") and a wholly-owned subsidiary of Sears, Roebuck and Co., a New
York corporation ("Parent"), to purchase any and all outstanding shares of
Common Stock, par value $.01 per share, of MaxServ, Inc., a Delaware
corporation, not currently directly or indirectly owned by Purchaser or
Parent, for a purchase price of $7.00 per share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated February 4, 1997 (the "Offer to
Purchase") and in the related Letter of Transmittal (the "Letter of
Transmittal" and, together with the Offer to Purchase, the "Offer"), and is
intended to satisfy the reporting requirements of Section 14(d) of the
Securities Exchange Act of 1934, as amended. Copies of the Offer to Purchase
and the related Letter of Transmittal are filed with this Schedule 14D-1 as
Exhibits (a)(1) and (a)(2) hereto, respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is MaxServ, Inc., a Delaware corporation
(the "Company"), which has its principal executive and operating offices at
8317 Cross Park Drive, Austin, Texas 78754.
(b) The title of the securities which are the subject of the Offer is the
Company's Common Stock, $.01 par value (the "Shares"), and the Offer is for
any and all outstanding Shares at a price of $7.00 per Share, net to the
seller in cash. The information set forth in the section entitled
"INTRODUCTION" of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in the section entitled "THE TENDER OFFER--
Price Range of Shares; Dividends" of the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by Purchaser and Parent.
The information set forth in the sections entitled "INTRODUCTION" and "THE
TENDER OFFER--Certain Information Concerning Parent and Purchaser" of the
Offer to Purchase and in Annex I to the Offer to Purchase is incorporated
herein by reference.
(e)-(f) During the last five (5) years, none of Purchaser, Parent nor, to
the best knowledge of Purchaser and Parent, any executive officer or director
of Purchaser or Parent has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) nor has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the sections entitled "INTRODUCTION,"
"SPECIAL FACTORS--Background of the Offer" and "SPECIAL FACTORS--Purpose and
Structure of the Offer; Plans for the Company after the Offer" of the Offer to
Purchase is incorporated herein by reference.
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the section entitled "THE TENDER OFFER--
Source and Amount of Funds" of the Offer to Purchase is incorporated herein by
reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the sections entitled "INTRODUCTION,"
"SPECIAL FACTORS--Purpose and Structure of the Offer; Plans for the Company
After the Offer" and "THE TENDER OFFER--Certain Effects of the Transaction" of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the sections entitled "INTRODUCTION,"
"SPECIAL FACTORS--Background of the Offer" and "THE TENDER OFFER--Certain
Information Concerning Parent and Purchaser" of the Offer to Purchase and in
Annex I to the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the sections entitled "INTRODUCTION" and
"SPECIAL FACTORS--Background of the Offer" of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the sections entitled "INTRODUCTION," "SPECIAL
FACTORS--Background of the Offer" and "THE TENDER OFFER--Fees and Expenses" of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the section entitled "THE TENDER OFFER--Certain
Information Concerning Parent and Purchaser" of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in the section entitled "THE TENDER OFFER--
Certain Regulatory and Legal Matters" of the Offer to Purchase is incorporated
herein by reference.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) The information set forth in the entire Offer to Purchase and the Letter
of Transmittal, copies of which are filed with this Schedule 14D-1 as Exhibits
(a)(1) and (a)(2), respectively, is incorporated herein by reference.
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Form W-9.
(a)(7) Text of Press Release issued by Purchaser, dated February 4, 1997.
(a)(8) Summary Advertisement, dated February 4, 1996.
(b)Not applicable.
(c)Not applicable.
(d)Not applicable.
(e)Not applicable.
(f)Not applicable.
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT
THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
Dated: February 4, 1997 Max Acquisition Delaware Inc.
/s/ John T. Pigott
By: _________________________________
Name: John T. Pigott
Title: Vice President and
Treasurer
Sears, Roebuck and Co.
/s/ Michael D. Levin
By: _________________________________
Name: Michael D. Levin
Title: Senior Vice President,
General Counsel and Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<C> <S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Form W-9.
(a)(7) Text of Press Release issued by Parent, dated February
4, 1997.
(a)(8) Summary Advertisement, dated February 4, 1996.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAXSERV, INC.
AT
$7.00 NET PER SHARE
BY
MAX ACQUISITION DELAWARE INC.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES OF COMMON
STOCK OF MAXSERV, INC. (THE "COMPANY"), PAR VALUE $.01 ("SHARES"), BEING
TENDERED OR UPON THE APPROVAL OF THE BOARD OF DIRECTORS OF THE COMPANY OR ANY
COMMITTEE THEREOF. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS.
SEE "THE TENDER OFFER--CERTAIN CONDITIONS OF THE OFFER."
SEARS, ROEBUCK AND CO. CURRENTLY BENEFICIALLY OWNS 7,033,333 SHARES,
REPRESENTING APPROXIMATELY 64.4% OF THE OUTSTANDING SHARES AT NOVEMBER 30,
1996. SEARS, ROEBUCK AND CO. HAS NEGOTIATED WITH THE COMPANY, REPRESENTED BY A
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "SPECIAL
COMMITTEE"), AS TO THE TERMS OF THE ACQUISITION OF THE SHARES NOT OWNED BY
SEARS, ROEBUCK AND CO. THESE NEGOTIATIONS HAVE BEEN UNSUCCESSFUL TO DATE.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
IMPORTANT
Any stockholder desiring to tender all or a portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required
by Instruction 1 to the Letter of Transmittal, and mail or deliver the Letter
of Transmittal together with the certificate(s) representing tendered Shares
and all other required documents to the Depositary, or tender such Shares
pursuant to the procedure for book-entry transfer set forth in "THE TENDER
OFFER--Procedure for Tendering Shares" or (ii) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such person if they desire to tender their Shares. Any stockholder who
desires to tender Shares and whose certificates representing such Shares are
not immediately available, or who cannot comply with the procedures for book-
entry transfer on a timely basis, may tender such Shares pursuant to the
guaranteed delivery procedure set forth in "THE TENDER OFFER--Procedure for
Tendering Shares."
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks and trust
companies.
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
February 4, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION............................................................. 1
SPECIAL FACTORS.......................................................... 3
Background of the Offer................................................ 3
Purpose and Structure of the Offer; Plans for the Company after the
Offer................................................................. 8
Fairness of the Offer.................................................. 11
Opinion of Merrill Lynch as Financial Advisor to Parent................ 12
Certain United States Federal Income Tax Consequences.................. 15
Appraisal Rights....................................................... 16
THE TENDER OFFER......................................................... 17
Terms of the Offer..................................................... 17
Acceptance for Payment and Payment for Shares.......................... 19
Procedure for Tendering Shares......................................... 20
Withdrawal Rights...................................................... 22
Price Range of Shares; Dividends....................................... 23
Certain Effects of the Transaction..................................... 24
Certain Information Concerning the Company............................. 25
Certain Information Concerning Parent and Purchaser.................... 27
Source and Amount of Funds............................................. 29
Dividends and Distributions............................................ 29
Certain Conditions of the Offer........................................ 29
Certain Regulatory and Legal Matters................................... 32
Fees and Expenses...................................................... 33
Miscellaneous.......................................................... 33
ANNEX I--Certain Information Concerning the Directors and Executive
Officers of Parent and Purchaser
ANNEX II--Opinion of Merrill Lynch
ANNEX III--Section 262 of the General Corporation Law of the State of
Delaware
</TABLE>
i
<PAGE>
To the Holders of Common Stock of
MaxServ, Inc.
INTRODUCTION
Max Acquisition Delaware Inc., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Sears, Roebuck and Co., a New York corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $.01 per share, of MaxServ, Inc., a Delaware corporation ("MaxServ"
or the "Company") not owned by Parent, at a purchase price of $7.00 per Share
(the "Offer Price"), net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, as amended and supplemented
from time to time, together constitute the "Offer").
Parent currently beneficially owns 7,033,333 Shares, representing
approximately 64.4% of the outstanding Shares at November 30, 1996.
Accordingly, Parent already has the power, subject to any applicable duties
under Delaware law, to elect the entire Board of Directors of the Company (the
"MaxServ Board") and, following consummation of the Offer, to approve as
stockholder a merger or other business combination involving the Company
without the affirmative vote of any other stockholder. Such ownership,
however, does not give Parent or Purchaser the power to compel any stockholder
of the Company to accept the Offer.
The purpose of the Offer is to enable Parent and Purchaser to own the entire
equity interest in the Company. Parent desires to acquire the minority equity
interest at this time because it intends to substantially expand its network
systems for customer support and does not wish to undertake such a proprietary
effort in an entity it does not wholly own. Parent and Purchaser are making
the Offer to satisfy a prerequisite to Parent acquiring additional Shares
established by the Second Purchase Agreement (as defined below) and in order
to permit holders of Shares to receive the Offer Price in as prompt a manner
as is practicable. See "SPECIAL FACTORS--Background of the Offer."
Since December 9, 1996, Parent has sought to negotiate the acquisition of
the Shares not owned by Parent with a special committee comprised of members
of the MaxServ Board not designated by Parent (the "Special Committee"), most
recently by a proposal to offer $7.00 per Share. This proposal was publicly
rejected by the Special Committee as inadequate on January 29, 1997. The Offer
has not been approved by the MaxServ Board or any committee thereof. Purchaser
and Parent believe the Offer to be fair to holders of Shares other than Parent
and Purchaser for the reasons described below under "SPECIAL FACTORS--Fairness
of the Offer." Each stockholder should make its own determination as to
whether to accept or reject the Offer.
Following consummation of the Offer, Parent and Purchaser intend to have the
Company consummate a merger (the "Second Step Merger") in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware
(the "DGCL") in which Purchaser will be merged with and into the Company. At
the effective time of the Second Step Merger (the "Effective Time"), each
Share not tendered pursuant to the Offer (other than Shares owned by the
Company as treasury stock, Shares owned by Parent or Purchaser or any
subsidiary thereof, or Shares with respect to which appraisal rights are
properly exercised under Delaware law) will be converted into the right to
receive an amount in cash equal to the highest price per Share paid in the
Offer (the "Merger Consideration"). Following consummation of the Second Step
Merger, the Company would continue as the surviving corporation (the
"Surviving Corporation") and would be a wholly owned subsidiary of Parent.
If Purchaser owns at least 90% of the outstanding Shares following
consummation of the Offer (assuming the transfer of Parent's currently owned
Shares to Purchaser), Purchaser would have the ability to consummate the
Second Step Merger without a meeting or vote of the MaxServ Board or of the
stockholders of the Company pursuant to the "short form" merger provisions of
Section 253 of the DGCL. In such circumstances, Purchaser currently intends to
so effectuate the Second Step Merger as soon as practicable. See "SPECIAL
FACTORS--Purpose and Structure of the Offer; Plans for the Company after the
Offer."
<PAGE>
If Parent and Purchaser own less than 90% of the outstanding Shares following
consummation of the Offer, they will nonetheless have the power as stockholders
to (i) take such steps as are necessary to assure that Parent's designees
constitute a majority or more of the directors on the MaxServ Board, including
the removal of certain of the current directors serving on the MaxServ Board
and the appointment of new directors to the MaxServ Board by written consent in
lieu of a meeting of the Company's stockholders (it is likely that no
"independent" or "outside" directors will then remain on the MaxServ Board),
and (ii) indirectly seek to effect the Second Step Merger. See "THE TENDER
OFFER--Certain Effects of the Transaction." In such circumstances, Parent and
Purchaser intend to either (i) elect to promptly take such steps as are
necessary to cause the Second Step Merger to be effected pursuant to a merger
agreement to be approved by the Boards of Directors and stockholders of
Purchaser and the Company, which will, if the Shares remain registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), require
filing with the United States Securities and Exchange Commission (the
"Commission") of certain disclosure materials prior to approval of the Second
Step Merger by the Company's stockholders, or (ii) for an indeterminate period,
delay the Second Step Merger and engage in certain open market or privately
negotiated purchases, at prices which may be greater or less than the Offer
Price, in order to increase Parent and Purchaser's combined ownership to or
above 90% of the outstanding Shares, so as to enable Purchaser to effect the
Second Step Merger as a "short form" merger. See "THE TENDER OFFER--Certain
Effects of Transaction." As a consequence, no assurance can be given as to when
Purchaser will cause the Second Step Merger to be consummated and, similarly,
no assurance can be given as to when the Merger Consideration will be paid to
stockholders who do not tender their Shares in the Offer. IN NO EVENT WILL ANY
INTEREST BE PAID ON THE MERGER CONSIDERATION. See "SPECIAL FACTORS--Purpose and
Structure of the Offer; Plans for the Company After the Offer."
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED
OR UPON THE APPROVAL OF THE MAXSERV BOARD OR ANY COMMITTEE THEREOF. THE OFFER
IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "THE TENDER OFFER--
CERTAIN CONDITIONS OF THE OFFER." PURCHASER RESERVES THE RIGHT (BUT SHALL NOT
BE OBLIGATED) TO WAIVE ANY OR ALL CONDITIONS TO THE OFFER.
According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 1996 (the "Company's 10-Q"), there were 10,926,006
Shares issued and outstanding as of November 30, 1996. Parent owns 7,033,333
Shares, representing approximately 64.4% of the outstanding Shares as of such
date. In addition, according to the Company's Annual Report on Form 10-KSB for
the fiscal year ended May 31, 1996 (the "Company's 10-KSB"), as of such date,
(i) options to purchase approximately 1,200,000 Shares (the "Options") and (ii)
warrants to purchase 50,000 Shares (the "Warrants"), were outstanding.
Purchaser is not offering to acquire the Options or Warrants in the Offer;
holders of the Options and Warrants desiring to obtain the Offer Price must
exercise such instruments and tender the Shares obtained thereby in the Offer.
See "SPECIAL FACTORS--Purpose and Structure of the Offer; Plans for the Company
after the Offer." According to the Company's 10-KSB, there were approximately
1,500 holders of record of Shares on August 14, 1996.
Tendering holders of Shares will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, transfer
taxes on the purchase of Shares by Purchaser pursuant to the Offer. Purchaser
will pay all charges and expenses of Merrill Lynch & Co. ("Merrill Lynch"),
which is acting as the Dealer Manager (the "Dealer Manager") in connection with
the Offer, First Chicago Trust Company of New York, which is acting as the
Depositary (the "Depositary") for the Offer, and D.F. King & Co., Inc., which
is acting as the Information Agent (the "Information Agent") in connection with
the Offer. See "THE TENDER OFFER--Fees and Expenses."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE OFFER
Parent is, and has been since 1983, a customer of the Company, accounting for
over 90% of the Company's revenues in the fiscal year ended May 31, 1996. The
Company is engaged in the business of, among other things, providing
information services for the repair and servicing of a full range of household
and other appliances. See "THE TENDER OFFER--Certain Information Concerning the
Company."
Initial Share Purchases. In 1993, Parent purchased 2,900,000 Shares,
approximately 45.3% of the then-outstanding Shares of the Company (the "Initial
Purchase"). The Initial Purchase was effected pursuant to a Stock Purchase
Agreement, dated as of May 20, 1993, by and between Parent and the Company (the
"Initial Purchase Agreement"). Under the terms of the Initial Purchase
Agreement, in consideration for the issuance of Shares to Parent in connection
with the Initial Purchase, Parent (i) paid $950,000 in cash to the Company,
(ii) transferred furniture and equipment to the Company, the aggregate fair
market value of which was approximately $500,000, and repair, service and
installation materials, the aggregate fair market value of which was
approximately $250,000, and (iii) executed a Service Agreement between Parent
and the Company with a seven-year term, obligating the Company to provide
services to Parent (the "Initial Service Agreement"), along with other
agreements ancillary to the Initial Service Agreement. See "SPECIAL FACTORS--
Purpose and Structure of the Offer; Plans for the Company after the Offer." In
connection with, and at the time of, the Initial Purchase, Parent and the
Company also entered into a Registration Rights Agreement (the "Registration
Rights Agreement"), which accorded Parent certain rights to register its
Shares. The directors of the Company, none of whom were affiliated with Parent
at the time of the Initial Purchase, approved the Initial Purchase Agreement,
the Initial Service Agreement and the Registration Rights Agreement.
In 1994 Parent acquired 400,000 additional Shares from each of Renaissance
Capital Partners, Ltd. and Sunwestern Investment Group and its affiliates
(collectively, "Sunwestern"), respectively, at a price of $4.50 per Share.
Parent further acquired 3,333,333 Shares pursuant to a Stock Purchase Agreement
dated as of December 29, 1994, by and between Parent and the Company (the
"Second Purchase Agreement"), which resulted in Parent acquiring a controlling
share interest in the Company, in consideration of the payment of $4,500,000 to
the Company, the transfer to the Company of the assets of Parent's teleparts
call operation, having an approximate fair market value of $1,200,000, the
assignment of certain leases to the Company and the execution of a Parts
Service Agreement with a ten-year term obligating the Company to provide
certain parts services to Parent (the "Parts Service Agreement"). See "SPECIAL
FACTORS--Purpose and Structure of the Offer; Plans for the Company after the
Offer." At the time of the Second Purchase Agreement, Parent and the Company
also amended the Registration Rights Agreement to extend Parent's registration
rights to its newly purchased Shares. As a result of these purchases, Parent
currently owns 7,033,333 Shares, representing approximately 64.4% of the
outstanding Shares at November 30, 1996. These agreements and amendments and
the acquisition of the controlling share interest in the Company were approved
by the directors of the Company who were not affiliated with Parent.
Pursuant to the terms of the Second Purchase Agreement, neither Parent nor
its affiliates (other than certain permitted affiliates) (the "Parent Group")
may acquire, directly or indirectly, without the approval of a majority of the
directors of the Company who are not affiliated with Parent, any Voting
Securities (as defined therein) (including any Shares) of the Company, if the
effect of such acquisition would be to increase the aggregate voting power in
the election of directors of all Voting Securities then owned by the Parent
Group to greater than 64.93% of such total aggregate voting power of all Voting
Securities then outstanding; provided that the Parent Group may acquire Voting
Securities without regard to the foregoing limitation if a tender offer is made
by Parent or any one or more members of the Parent Group to acquire all
outstanding Voting Securities not already owned by the Parent Group. The Offer
is being made, among other reasons, in order to meet the requirements of this
provision. See "SPECIAL FACTORS--Purpose and Structure of the Offer; Plans for
the Company after the Offer."
Due to its ownership of over 50% of the outstanding Shares, Parent has the
ability to elect the entire MaxServ Board or to approve a merger or other
business combination involving the Company without the affirmative vote of any
other stockholder of the Company. Currently, of the seven directors of MaxServ
(the
3
<PAGE>
MaxServ Board currently has one vacancy), three directors were designated as
nominees to the MaxServ Board by Parent.
Events Leading Up to the Offer. In the fall of 1996, Parent began to review
and evaluate its strategic options with respect to its investment in the
Company. Parent concluded that under all of its alternatives, the continued
involvement in the Company of Mr. Charles Bayless, President and Chief
Executive Officer of the Company, was desirable. Accordingly, on October 14,
1996, Mr. Lowell Peters and Mr. John Pigott, officers of Parent, met with Mr.
Bayless to present an analysis of the strategic alternatives that Parent was
considering for its future relationship with the Company. The first three
alternatives assumed the Company remained public and were: (1) for Parent to
curtail or eliminate the amount of new services that Parent would seek to have
the Company provide; (2) for Parent to continue using the Company for systems
development but develop its own network support using the Company's software;
and (3) for the Company to continue to develop for Parent both system software
and network support. The fourth alternative assumed that Parent would acquire
all of the outstanding Shares of the Company it did not then own (the
"Acquisition Alternative"). No conclusions were reached at this meeting,
although Parent indicated it preferred the Acquisition Alternative because it
desired to develop its new proprietary customer relationship network within a
wholly owned company and not make such network available to third parties.
Messrs. Bayless, Peters and Pigott met again on November 13, 1996 to review
the compensation program Mr. Bayless might participate in if the Acquisition
Alternative were to be pursued by Parent, assuming Mr. Bayless were to
continue as Chief Executive Officer of the resulting entity. That compensation
program was similar to that provided to the executive officers of other
businesses in Parent's Home Services Group, and was comprised of base
compensation and bonuses based on profits of Parent's Home Services Group and
revenues of the Company, as well as participation in Parent's stock option
plan. No agreement was then or has to date been reached with Mr. Bayless as to
his compensation program should he choose to remain as Chief Executive Officer
of the Company following the consummation of the Offer. Mr. Pigott and Mr.
Bayless also discussed the procedures Parent might follow if it were to
further explore the Acquisition Alternative, and that Parent's next step would
be to initiate discussions with Sunwestern to assess its level of interest in
selling its Shares in the Company pursuant to the Acquisition Alternative, as
Parent did not wish to initiate the Acquisition Alternative without the
support of Sunwestern.
On December 3, 1996, Messrs. Peters and Pigott met with Mr. James F. Leary
and Mr. Patrick A. Rivelli, both representatives of Sunwestern. While Mr.
Leary and Mr. Rivelli were both directors of the Company at that time (Mr.
Leary resigned as a director on December 20, 1996), they and Parent agreed in
advance of the meeting they would be attending in their capacities as
representatives of stockholders of the Company, and not as members of the
MaxServ Board. At this meeting, the same alternatives presented to Mr. Bayless
on October 14, 1996 were presented to Messrs. Leary and Rivelli.
As a result of the discussions with Mr. Bayless and Sunwestern, Parent
concluded that Mr. Bayless was likely to remain with the Company should the
Acquisition Alternative be consummated, and that Sunwestern was prepared to
sell its Shares if the price proposed in an offer were acceptable. Based upon
these conclusions, Parent determined the Acquisition Alternative best suited
its plans for expansion of its proprietary customer relationship network.
On December 4, 1996, Parent sent the following letter to the MaxServ Board:
Gentlemen:
Sears, Roebuck and Co. ("Sears"), through a wholly-owned subsidiary,
is interested in pursuing a transaction in which Sears would acquire
all outstanding shares of common stock (the "Shares") of MaxServ, Inc.
("MaxServ") that Sears does not currently own, as well as all
outstanding warrants to acquire common stock of MaxServ (the
"Warrants").
In light of the presence of designees of Sears on the Board of
Directors of MaxServ, Sears requests that you appoint a committee of
the MaxServ Board of Directors (the "Special Committee")
4
<PAGE>
with which Sears can commence negotiations for such an acquisition.
Once the Special Committee is appointed, Sears anticipates working with
the Special Committee to establish a mutually acceptable price for the
Shares and Warrants, and other essential terms.
Once you have notified us that you have appointed the Special
Committee, we would like to immediately proceed with negotiations. We
look forward to working with the Special Committee to accomplish a
successful transaction for the shareholders of MaxServ.
Sincerely,
Sears, Roebuck and Co.
/s/ Jane J. Thompson
by: _________________________________
Jane J. Thompson
President, Home Services
On December 9, 1996, Parent was advised that the Special Committee had been
appointed and was comprised of Mr. Nathaniel P. Turner, Mr. Stephen J. Keane
and Mr. Rivelli. On December 18, 1996, Messrs. Peters and Pigott met with the
Special Committee in Dallas (the "December 18 Meeting") at which time Parent
provided the Special Committee with an overview of the reasons Parent wanted
to proceed with the transaction proposed in Parent's December 4 letter (the
"Proposed Transaction"). The presentation outlined the alternatives previously
reviewed with Mr. Bayless and Sunwestern, and why Parent had selected the
Acquisition Alternative. The Special Committee asked Messrs. Peters and Pigott
why Parent did not commence a tender offer for the outstanding Shares not
owned by Parent or its affiliates without Special Committee support, as
permitted by the Second Purchase Agreement. Mr. Pigott explained that Parent
preferred to work with the Special Committee to reach an agreed-upon value of
the Shares, and further, that it was Parent's impression that the Special
Committee preferred to negotiate in that manner and on that basis. The Special
Committee inquired as to whether Parent would consider selling any portion of
the Shares already owned by Parent. Mr. Pigott emphasized that Parent was not
considering and did not intend to sell any portion of its Shares, but that if
the Proposed Transaction could not be effected, Parent would be forced to
rethink its future business relationship with MaxServ and that those
decisions, in turn, could have an impact on Parent's desire to continue to
hold more than a simple majority of the Shares. The Special Committee also
asked Messrs. Peters and Pigott at the December 18 Meeting (i) whether Parent
would consider a non-cash offer to reduce potential tax liability to the
Company's shareholders, and (ii) whether Parent would consider an agreement to
delay commencing a tender offer until the earlier of January 30, 1997 or two
weeks after a proposal by Parent on price. Mr. Pigott stated that Parent would
not consider a non-cash offer and that he did not think Parent would agree to
such a standstill, but that he would discuss the proposal with Parent's
officers and counsel. The Special Committee also asked if Parent would
consider a provision that would provide the MaxServ shareholders any
additional proceeds from a subsequent sale of the Company by Parent in the two
years following the closing of any offer by Parent to purchase all the
outstanding Shares of MaxServ; such proposal was rejected. On December 24,
1996, Mr. Pigott advised Mr. Turner that Parent had decided against agreeing
to the proposed standstill.
On January 9, 1997, the Special Committee, counsel to the Special Committee,
representatives of Broadview Associates ("Broadview"), the financial advisor
to the Special Committee, officers of Parent and counsel to Parent met to
discuss the possible purchase price which might be paid by Parent in an
acquisition of the outstanding Shares of the Company it did not own (the
"Minority Interests"). At that meeting, Parent proposed a range of $6.50 to
$6.75 per Share in cash to be paid in the Proposed Transaction. Officers of
Parent stated Parent's belief that such a price range was appropriate in light
of (i) the premium it represented to historic trading prices of the Shares
(33-38% to the $4.88 closing price of the Shares on December 4, 1996, the last
trading day prior to Parent's announcement of its interest in acquiring all
outstanding Shares, and 69-75% to the $3.85 average trading price during the
12-month period ending on December 4, 1996), (ii) Parent's discounted cash
flow analysis of the value of the Company, (iii) the post-announcement trading
prices of the Shares reflecting a similar valuation of the Company's minority
shares, and (iv) no "control premium" being
5
<PAGE>
attributable to the acquisition of the minority shares. The Special Committee
expressed the view that such a price range was not acceptable, and Broadview
stated that its data supported a price per share "in the teens" for the
minority's interest, both from the perspective of the valuations of comparable
companies as well as from a discounted cash flow analysis prepared by
Broadview. At the end of this meeting, Parent and the Special Committee agreed
a further meeting should be held to evaluate the data which supported Parent's
and the Special Committee's respective views on value.
On January 14, 1997, representatives of Parent and Broadview met and
exchanged views and data on Parent's and the Special Committee's respective
valuation methods and assumptions. The discussion focused on Broadview's
discounted cash flow analysis (the "Broadview DCF Analysis") and its revenue
projections for the Company as compared to Parent's assessment of valuation.
See "THE TENDER OFFER--Certain Information Concerning the Company" at which
the projections utilized in the Broadview DCF Analysis are set forth.
On January 16, 1997, in a conference call in which the members of the
Special Committee, officers of Parent and counsel and financial advisors to
each of the Special Committee and Parent participated, a representative of
Merrill Lynch, as financial advisor to Parent, presented its views on
comparable premiums for minority interest transactions, mathematical errors it
identified in the Broadview DCF Analysis and the appropriateness of the "peer"
companies utilized by Broadview in Broadview's valuation analysis. Merrill
Lynch's representative also noted that the Company's stock price since the
announcement of Parent's interest in acquiring the Minority Interests had not
risen to a level commensurate with the valuation Broadview was presenting, and
that a valuation methodology which assumes the markets are efficient could not
support a value "in the teens." Representatives of Parent expressed
disagreement with the assumptions made in the Broadview DCF Analysis regarding
projected growth of revenues from Parent (25% compounded annual growth for the
fiscal years 1997 to 2002) and the Company's ability to expand revenues from
third party customers, i.e., customers other than Parent (projected to grow
from $5 million to $110 million, approximately 85% compounded annual growth,
in the fiscal years 1997 to 2002). The Special Committee and representatives
of Parent exchanged additional views on the future prospects of the Company.
The call ended with an agreement to meet again on January 23, 1997.
On January 17, 1997, Mr. Pigott and Mr. Turner, the Chairman of the Special
Committee, spoke and reviewed the current positions of Parent and the Special
Committee as to the price per share to be paid pursuant to the Proposed
Transaction by Parent. Mr. Turner advised Mr. Pigott that the Special
Committee would accept a $10.00 per Share proposal, and that he was confident
it would reject an $8.00 per Share offer. Mr. Pigott also requested a meeting
with management of the Company so that Parent might better understand the
basis for the Company's growth projections used by Broadview, as (i)
management of the Company had not previously prepared for the MaxServ Board
any long-term business plan or projections beyond May 1997, and (ii) Broadview
had previously advised representatives of Parent that the information used in
the Broadview DCF Analysis had been prepared solely in connection with its
analysis of the Proposed Transaction. Mr. Turner stated that further
discussions regarding the cash flow projections prepared by Broadview would
not be productive in resolving the difference between Parent's valuation and
the Special Committee's valuation of the Company. Mr. Pigott then requested
that Parent be permitted to speak with Company management under the condition
that the projections used in the Broadview DCF Analysis would not be
discussed. Soon thereafter, Mr. Turner called Mr. Pigott and agreed that
representatives of Parent could meet with management of the Company if the
Broadview DCF Analysis was not discussed.
On January 20, 1997, Mr. Turner left a voicemail message for Mr. Pigott
stating that unless Parent's range of offer prices connected with the Special
Committee's "range," there was no purpose in having the previously agreed
January 23 meeting. Mr. Pigott contacted Mr. Turner and expressed Parent's
view that the meeting on January 23 should still be held. Mr. Turner advised
Mr. Pigott that he would speak with the Special Committee and respond as to
whether they believed the meeting should be held.
Mr. Turner and the Special Committee never responded to Parent's request
that a meeting be held. In an effort to move the negotiations forward, on the
afternoon of January 23, 1997, Merrill Lynch advised Broadview that Parent was
prepared to make an offer of $7.00 per share for the Shares in the Proposed
Transaction. Later
6
<PAGE>
that day, Broadview responded to Merrill Lynch that the Special Committee had
evaluated Parent's proposed offer and would not recommend such an offer if it
were made to stockholders. Broadview did not offer any alternative price per
Share and did not propose any means of resolving the impasse.
In light of the Special Committee's unwillingness to accept Parent's offer of
$7.00 per Share in the Proposed Transaction or to propose a means to resolve
the impasse, Parent concluded that reaching agreement with the Special
Committee on price was unlikely and, on January 27, 1997, advised the Special
Committee it was withdrawing its proposal to the Special Committee to offer
$7.00 per Share.
On January 28, 1997, Mr. Turner telephoned Mr. Pigott and expressed his
displeasure with some of the statements contained in Parent's amended Schedule
13D filing, dated January 27, 1997, in which Parent disclosed its withdrawal of
the proposal to offer to acquire the Shares at a per Share price of $7.00. Mr.
Turner questioned whether Mr. Pigott was aware that the Special Committee would
negotiate a transaction at a per Share price "in the eights." Mr. Pigott
responded that the Special Committee had never informed Parent that a
transaction could be negotiated at any price lower than $10.00 per Share, and
that in an earlier conversation between Broadview and Merrill Lynch in which
Broadview had mentioned $8.00 as a possible price, Broadview had not indicated
that it was conveying any position of the Special Committee or that the Special
Committee would support such a price. Mr. Pigott then stated that Parent had
withdrawn its proposal to offer $7.00 per Share because Parent determined it
was unlikely to reach agreement on price with the Special Committee in light of
discussions to date. Mr. Turner reiterated his belief that a transaction could
be negotiated between Parent and the Special Committee at a per Share price
between $8.00 and $9.00.
On January 29, 1997, the Special Committee issued the following press release
(the "Special Committee Announcement"):
SPECIAL COMMITTEE OF MAXSERV, INC. REJECTS SEARS' $7.00 OFFER
AS INADEQUATE; REMAINS WILLING TO NEGOTIATE
Dallas, Texas, Jan29 -- The Special Committee of the Board of
Directors of MaxServ, Inc. (Nasdaq Small Cap: MXSV) believes that a
public response to the recent Schedule 13D amendment by Sears,
Roebuck and Co., indicating Sears' withdrawal of a proposal to offer
$7.00 per share for the shares of MaxServ it does not currently own,
is appropriate.
The Special Committee, established at the request of Sears to
negotiate a transaction with Sears at a mutually acceptable price,
unanimously rejected Sears' proposal to offer $7.00 per share as
"inadequate." This decision was made after deliberations with the
Special Committee's financial advisor, Broadview Associates, and its
legal counsel and was predicated upon the Special Committee's
assessment of the long-term strategic value of MaxServ, the current
values represented by comparable public teleservice companies,
comparable transactions involving teleservice businesses, and a
discounted cash flow analysis of MaxServ management's long-term
financial forecasts. The Special Committee noted, among other unique
assets, MaxServ's new generation of proprietary call taking software
which is well along in development.
Prior to the filing of the amended Schedule 13D, Sears was advised
that a proposal in the range of $8.00 to $10.00 per share would be
supported by the Special Committee. Subsequent to Sears' recent
filing, the Special Committee further narrowed its range of
acceptable values to between $8.00 and $9.00 per share.
Based upon preliminary inquiries received by Broadview, the Special
Committee believes that the sale of 100% of MaxServ to a third party
in a transaction voluntarily supported by Sears might command a
significantly higher valuation. Sears has repeatedly indicated,
however, that it has no interest in selling its interest in MaxServ,
although it reserved the right to do so in its amended Schedule 13D.
The Special Committee is committed to working with Sears to
maximize MaxServ's shareholders' value either as an independent
public company, in an acquisition by Sears, or in an acquisition by a
third party with Sears' support.
7
<PAGE>
On February 3, 1997, an officer of Parent received a letter from Advanced
Telemarketing Corporation ("ATC") dated January 29, 1997, expressing ATC's
desire for a personal meeting to express ATC's interest in acquiring the
Company. The letter did not propose a price or other terms of such an
acquisition. In light of Sears determination it would retain ownership of a
majority share interest in the Company for so long as it had a material
business relationship with the Company, on February 3, 1997 Parent sent a
letter to ATC stating a meeting regarding an acquisition of the Company would
be unproductive and unnecessary.
After withdrawing its proposal, Parent evaluated alternatives available to
Parent to acquire the Minority Interests with its counsel and with Merrill
Lynch. On February 3, 1997, Parent determined to commence the Offer.
In connection with the commencement of the Offer, Parent sent the following
letter to the members of the MaxServ Board:
February 4, 1997
Dear Members of the Board:
I am writing to advise you that our wholly-owned subsidiary, Max
Acquisition Delaware Inc., has today commenced a cash tender offer to
purchase all of the outstanding shares of MaxServ, Inc. common stock
(the "Shares") that it does not already own for $7.00 per share. This
price represents a 43% premium to the $4.88 per share closing price for
the shares on December 4, 1996, the last trading day prior to Sears
announcement of its interest in acquiring the outstanding Shares. We
believe this offer is fair to all stockholders (other than Sears) and
have obtained the opinion of Merrill Lynch & Co. that this offer is
fair, from a financial point of view, to the holders of shares other
than Sears.
As you know, we have attempted to negotiate a transaction with the
Special Committee. At present, however, given the rejection of Sears
proposal to offer $7.00 per Share by the Special Committee and our
inability to resolve our differences over the value attributable to the
Shares held by the minority stockholders, Sears has determined that it
is desirable to commence this tender offer to enable the minority
stockholders to benefit from this attractive opportunity in a timely
manner and to end the uncertainties which have arisen out of this
lengthy process.
Very truly yours,
/s/ Alan J. Lacy
-------------------------------------
Executive Vice President and Chief
Financial Officer
PURPOSE AND STRUCTURE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER
Purpose. The purpose of the Offer is to enable Parent and Purchaser to
acquire the entire equity interest in the Company. Parent desires to own the
Minority Interests at this time because it intends to substantially expand its
network systems for customer support, and does not wish to undertake such a
proprietary effort in an entity it does not wholly own. Parent and Purchaser
are making the Offer to satisfy a prerequisite to Parent acquiring additional
Shares established by the Second Purchase Agreement and in order to permit
holders of Shares to receive the Offer Price in as prompt a manner as is
practicable. Following consummation of the Offer, Parent and Purchaser intend
to cause Purchaser and the Company to consummate the Second Step Merger in
accordance with the relevant provisions of the DGCL in which Purchaser will be
merged with and into the Company. Following consummation of the Second Step
Merger, the Company will continue as the Surviving Corporation and will be a
wholly owned subsidiary of Parent. The purpose of the Second Step Merger is to
acquire all Shares not tendered and purchased pursuant to the Offer or
otherwise held by Purchaser or Parent. In the Second Step Merger, each then-
outstanding Share (other than Shares owned by the Company as treasury stock,
Shares owned by Parent or Purchaser, or Shares with respect to which appraisal
rights are properly exercised under Delaware law) will be converted into the
right to receive the Merger Consideration.
8
<PAGE>
Parent has considered alternative relationships with the Company other than
ownership of the entire equity interest in the Company. See "SPECIAL FACTORS--
Background of the Offer." None of these alternatives satisfy Parent's business
objectives.
Structure. The Offer is structured so that no approval of the unaffiliated
stockholders of the Company or of the MaxServ Board or any committee thereof
is required. Purchaser will, subject to the conditions of the Offer, accept
for payment Shares properly tendered in accordance with this Offer to Purchase
and the Letter of Transmittal, regardless of the amount tendered. Parent
considered the alternative of immediately taking the steps necessary to elect
Parent's designees as a majority of the MaxServ Board, but chose instead to
first complete the Offer so as to provide holders of Shares the opportunity to
sell their Shares prior to Parent appointing a majority or more of the
directors of MaxServ.
Plans for the Company after the Offer. Once the Offer is consummated, if
permitted by the National Association of Securities Dealers, Inc. (the "NASD")
and the Exchange Act, it is the intention of Purchaser to seek to cause the
Company to file applications to withdraw the Shares from listing on the Nasdaq
SmallCap MarketSM and to terminate the registration of the Shares under the
Exchange Act. See "THE TENDER OFFER--Certain Effects of the Transaction." In
the event that the Shares are no longer included in the Nasdaq SmallCap
MarketSM, it is possible that the Shares would continue to trade in the over-
the-counter market and that price quotations would be reported by other
sources. The extent of the public market for the Shares and the availability
of such quotations would, however, depend on the number of holders of Shares
remaining at such time, the interests in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of shares
under the Exchange Act, as described below, and other factors. To the extent
the Shares are delisted from the Nasdaq SmallCap MarketSM, the market for
Shares could be adversely affected. Further, Purchaser cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly, if
any, effected by the Offer would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price. See "THE
TENDER OFFER--Certain Effects of the Transaction."
If, following consummation of the Offer, Parent and Purchaser own 90% or
more of the outstanding Shares, Parent intends to transfer the Shares it
directly owns to Purchaser and to cause Purchaser and the Company to
consummate the Second Step Merger, which would not require the approval of any
holder of Shares other than Purchaser or of the MaxServ Board (the "Short-Form
Merger"). Assuming all outstanding Options and Warrants are exercised and the
Shares thus acquired are outstanding, Purchaser will need to purchase
approximately 3,921,473 Shares pursuant to the Offer to reach the 90%
ownership level necessary to effect a Short-Form Merger.
If Parent and Purchaser own less than 90% of the outstanding Shares
following consummation of the Offer, they will nonetheless have the power as
stockholders to (i) take such steps as are necessary to assure that Parent's
designees constitute a majority or more of the directors on the MaxServ Board,
including the removal of certain of the current directors serving on the
MaxServ Board and the appointment of new directors to the MaxServ Board by
written consent in lieu of a meeting of the Company's stockholders (in such
circumstances, it is likely no "independent" or "outside" directors will
remain on the MaxServ Board), and (ii) indirectly seek to effect the Second
Step Merger. In such circumstances, Purchaser intends to either (i) elect to
promptly take such steps as are necessary to cause the Second Step Merger to
be effected pursuant to a merger agreement approved by the Boards of Directors
and stockholders of Purchaser and the Company which, if the Shares remain
registered under the Exchange Act, will require filing with the Commission of
certain disclosure materials prior to such approval of the Second Step Merger
by the Company's stockholders, or (ii) for an indeterminate period, delay the
Second Step Merger and engage in open market or privately negotiated purchases
in order to increase Parent and Purchaser's combined ownership to or above 90%
of the outstanding Shares, at prices which may be greater or less than the
Offer Price. Any such acquisition of Shares by Purchaser would have to be made
in accordance with applicable legal requirements, including those of
Regulation 13D and Rules 10b-18 and 13e-3 under the Exchange Act. After
completion or termination of the Offer, Parent and Purchaser also reserve the
right, but have no current intention, to sell Shares in open market or
negotiated transactions. There can be no assurance
9
<PAGE>
that Purchaser will acquire such additional Shares in such circumstances or
over what period of time such additional Shares, if any, might be acquired. As
a consequence, no assurance can be given as to when Purchaser will cause the
Second Step Merger to be consummated, and similarly no assurance can be given
as to when the Merger Consideration will be paid to stockholders who do not
tender their Shares in the Offer.
Pursuant to the Second Step Merger, each then outstanding Share (other than
Shares owned by Parent or Purchaser, Shares held in the treasury of the Company
and Shares owned by stockholders who perfect any available appraisal rights
under the DGCL) would be converted into the right to receive an amount in cash
equal to the Merger Consideration. See "THE TENDER OFFER--Appraisal Rights."
If the Second Step Merger is consummated, Purchaser intends (i) to have the
Shares delisted from the Nasdaq SmallCap MarketSM and (ii) to terminate the
registration of the Shares under the Exchange Act.
Purchaser is not offering to acquire outstanding Options or Warrants in the
Offer. If any holders of the Options or Warrants do not exercise such
instruments and tender the Shares obtained thereby in the Offer, Parent may, in
its sole discretion, elect, or cause the Company to elect, after consummation
of the Offer, to negotiate the acquisition or retirement of such Options and
Warrants from the holders thereof (i) for cash, (ii) in exchange for securities
of Parent or its affiliates or (iii) for other consideration, the value of
which in each case may be greater or less than the Offer Price.
Following the Second Step Merger, the Company would be a wholly-owned
subsidiary of Parent. Parent and Purchaser intend to seek to retain key
management personnel of the Company following consummation of the Offer and the
Second Step Merger, including Mr. Bayless. See "SPECIAL FACTORS--Background of
the Offer." Except as set forth herein, neither Parent nor Purchaser have
discussed with such personnel, nor reached any agreement with respect to, the
terms of such employment.
Except as otherwise described in this Offer to Purchase, Purchaser has no
current plans or proposals which relate to or would result in: (a) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company; (b) a sale or transfer of a material amount
of assets of the Company; (c) any change in the MaxServ Board or management of
the Company, including, but not limited to, any plan or proposal to change the
number or term of directors, to fill any existing vacancy on the MaxServ Board
or any change any material term of the employment contract of any executive
officer; (d) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; (e) any other material change in
the Company's corporate structure or business; (f) a class of equity securities
of the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (g) the suspension of the Company's
obligation to file reports pursuant to Section 15(d) of the Exchange Act.
Business Relationship between the Company and Parent. The Company has,
throughout the period since the Initial Purchase, been operated as an
independent public company. Except for the participation by Parent's designees
on the MaxServ Board, neither Parent nor Purchaser has had any involvement in
the management of the Company, and (notwithstanding its majority ownership) at
no time have Parent's designees on the MaxServ Board constituted a majority of
the MaxServ directors. Currently, of the seven directors of MaxServ (the
MaxServ Board currently has one vacancy), three directors are representatives
of Parent. Although, due to its ownership of more than 50% of the Shares,
Parent has had the ability to elect the entire MaxServ Board, it has not
attempted to do so to date.
According to the Company's 10-KSB, over 90% of the Company's revenues for the
year ended May 31, 1996 were attributable to services provided to Parent
pursuant to the Initial Service Agreement and the Parts Service Agreement. See
"SPECIAL FACTORS--Background of the Offer." The Initial Service Agreement,
entered into in May 1993, is for a seven-year term and covers consumer, parts
and technical support, database maintenance, home office center support, and
administrative services. Parent paid approximately $21.1 million in 1996, $17.9
million in 1995 and $16.8 million in 1994 in fees to the Company for services
provided under the
10
<PAGE>
Initial Service Agreement and related agreements. The Parts Service Agreement,
entered into in December 1994, is for a ten-year term and covers telemarketing
and Technical Assistant Desk services. Parent paid approximately $30.3 million
in 1996, $25.7 million in 1995 and $1.8 million in 1994 in fees to the Company
for services provided under the Parts Service Agreement and related
agreements. These agreements provide that after the lapse of any applicable
cure periods, each of the agreements is terminable by either party in the
event of noncompliance by the other party with certain provisions relating to
performance of services in accordance with specified minimum standards,
maintenance of required insurance and fulfillment of indemnity and
confidentiality obligations. Parent may, in certain circumstances, terminate
each agreement (or, in some cases, certain services provided under such
agreement), upon 180 days notice, if Parent determines to exit the business of
internally providing product repair, service and installation or no longer
provides services to its customers provided by the Company under the
agreements, or if the Company (i) merges with or into or is acquired by
another entity; (ii) sells all or substantially all its assets; (iii) takes
action to liquidate or dissolve; or (iv) as a result of any transaction,
experiences or undergoes a change in control. In specified termination
situations under the Parts Service Agreement during the first three years of
the term of such agreement, Parent is obligated to assume certain leases and
purchase certain assets from the Company, which obligations abate during such
three-year period. Neither the Initial Service Agreement nor the Parts Service
Agreement obligate Sears to purchase any particular amount of services from
the Company. In November 1995, the Company contacted Parent because it was
concerned that the Company's sales and profitability were down. Parent agreed
to work with the Company to resolve the situation. As a result of this
discussion, on January 31, 1996, Parent and Company executed an Amendment
Agreement to the Parts Service Agreement in which Parent agreed to amend the
fee schedules for teleparts services, retroactive to January 1, 1996, to
increase revenues to the Company. Among other things, the Amendment Agreement
provided that Parent would make a nonrecurring one-time payment to the Company
in the first quarter of 1996, of $500,000 and assured the Company an
additional incremental $3 million in services fees in 1996 from what the
Company would have received if the fee structure used in 1995 had been applied
to the 1996 projected teleparts revenue.
Unless it is able to acquire the outstanding Shares that it does not already
own, Parent intends to develop new projects outside of the Company, as Parent
does not desire to develop new proprietary customer communication programs
within an entity it does not wholly own. In such circumstances, Parent would
also intend to reevaluate its existing contractual programs with the Company.
FAIRNESS OF THE OFFER
Parent currently owns a majority of the outstanding Shares of the Company
and, as such, Parent and Purchaser are deemed "affiliates" of the Company
under Rule 12b-2 of the Exchange Act. Accordingly, Purchaser and Parent have
complied with Rule 13e-3 under the Exchange Act and have considered the
fairness of the Offer to the stockholders of the Company other than Purchaser
and Parent and, in connection with the Offer, have filed with the Commission a
Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3").
Purchaser and Parent believe the Offer to be fair to the Company's
stockholders other than Parent. In making this determination, Purchaser and
Parent gave significant weight to the opinion of Merrill Lynch. In addition,
Purchaser and Parent took into account the following factors: (i) the Offer
Price represents a 44% premium over the closing price for the Shares on
December 4, 1996, the last full trading day prior to announcement of Parent's
desire to acquire the Minority Interests (the "Pre-Announcement Date") and an
85% premium over the average trading price of the Shares for the 12 month
period ending on the Pre-Announcement Date; (ii) the Offer Price is higher
than, or at the higher end of the range of, the implied value of the Shares
derived from the analyses performed by Merrill Lynch and described below;
(iii) the Offer Price is higher than the highest price paid by Parent for any
Shares acquired by Parent; and (iv) the Offer is a cash offer for all of the
Minority Interests. Purchaser and Parent did not find it practicable to, and
did not, assign specific relative weights to the foregoing factors in reaching
their opinion as to the fairness of the Offer. In light of the nature of the
Company's business, Parent did not deem net book value or liquidation value to
be relevant indicators of the value of the Minority Interests.
11
<PAGE>
Because the Company represents a significant investment for Parent, and
because Parent accounted for over 90% of the Company's revenues for the fiscal
year 1996, Parent is familiar with the Company's financial information and
historical performance and believes it is able to make informed judgments
regarding the positive and negative aspects of the Company. As a consequence,
in reaching its conclusion as to fairness, Parent and Purchaser, in
conjunction with Merrill Lynch, evaluated the Broadview DCF Analysis which had
been provided to Parent and which was referenced in the Special Committee
Announcement. In evaluating the propriety of the assumptions used by Broadview
as to the forecasted growth in revenues and margin of the Company during the
five-year period ending May 31, 2002, Parent considered (i) its own views
based on its historic involvement with the Company as to (A) the propriety of
the projected growth of revenues and margin to be derived from the Company's
business with Parent, which are not supported by Parent's current plans for
the Company and (B) the Company's historic weakness in attracting and growing
third party customers, which Parent believes is the best indicator of the
Company's future ability to grow such customer base and which does not support
the 85% compounded annual growth in such third party customer revenues as used
in the Broadview DCF Analysis and (ii) that Parent has been advised that such
projections were not prepared as part of the Company's management's long-term
forecasting (which only had been prepared for fiscal year 1997), but only in
connection with the preparation of the Broadview DCF Analysis. Parent's views
as to the appropriate assumptions for such revenue growth were incorporated in
the discounted cash flow analysis of the Company performed by Merrill Lynch:
15% in calendar year 1997 and 20% in each of calendar years 1998-2001 for
third party customer revenue growth and 7.7%, 2.4%, 5.1%, 5.1% and 5.1% for
calendar years 1997-2001 for Parent revenue growth. See "SPECIAL FACTORS--
Opinion of Merrill Lynch as Financial Advisor to Parent." In light of these
factors, Parent concluded the Broadview DCF Analysis was not a reliable
measure of the value of the Shares and accorded little weight thereto in
reaching its determination as to fairness. For purposes of Merrill Lynch's
opinion described below, and with the concurrence of Parent's management,
Merrill Lynch considered only those forecasts in the Broadview DCF Analysis
relating to the years ended December 31, 1996 and 1997, since in the opinion
of Merrill Lynch and Parent, the forecasts for subsequent periods were based
on assumptions concerning the Company's business and prospects that are
unreasonable. See "SPECIAL FACTORS--Opinion of Merrill Lynch as Financial
Advisor to Parent."
OPINION OF MERRILL LYNCH AS FINANCIAL ADVISOR TO PARENT
Parent retained Merrill Lynch to act as its financial advisor and Dealer
Manager in connection with the Offer. On February 3, 1997, Merrill Lynch
rendered to the Parent's Board of Directors its written opinion (the "Merrill
Lynch Opinion") that, as of such date and based upon and subject to the
factors and assumptions set forth therein, the proposed cash consideration to
be paid by Parent pursuant to the Offer was fair from a financial point of
view to the holders of Shares other than Parent.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX II TO THIS OFFER TO PURCHASE
AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE MERRILL LYNCH
OPINION SET FORTH IN THIS OFFER TO PURCHASE IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. THE MERRILL LYNCH OPINION WAS
PROVIDED TO THE PARENT'S BOARD OF DIRECTORS FOR ITS INFORMATION AND IS
DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE PROPOSED
CASH CONSIDERATION TO BE PAID BY PARENT PURSUANT TO THE OFFER TO THE HOLDERS
OF SHARES OTHER THAN PARENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SUCH HOLDER AS TO WHETHER SUCH HOLDER SHOULD TENDER SHARES PURSUANT TO THE
OFFER. THE MERRILL LYNCH OPINION IS BASED UPON MARKET, ECONOMIC, FINANCIAL AND
OTHER CONDITIONS AS THEY EXISTED AND COULD BE EVALUATED AS OF THE DATE OF THE
MERRILL LYNCH OPINION.
In arriving at its opinion, Merrill Lynch, among other things: (1) reviewed
the Company's Annual Reports, Forms 10-K and related financial information for
the three fiscal years ended May 31, 1996 and the Company's Forms 10-Q and
related unaudited financial information for the quarterly periods ended August
31, 1996 and November 30, 1996; (2) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets and
prospects of the Company, furnished to Merrill Lynch by members of Parent's
management who monitor the operations of the Company; (3) reviewed certain
financial forecasts prepared by the financial advisor to the Special
Committee; (4) conducted discussions with members of Parent's management
12
<PAGE>
who monitor the operations of the Company concerning the Company's business
and prospects; (5) reviewed the historical market prices and trading activity
for the Shares and compared them with those of certain publicly traded
companies which Merrill Lynch deemed to be reasonably similar to the Company;
(6) compared the results of operations of the Company with those of certain
companies which Merrill Lynch deemed to be reasonably similar to the Company;
(7) reviewed premiums paid in certain minority interest transactions which
Merrill Lynch deemed to be relevant; and (8) reviewed such other financial
studies and analyses and performed such other investigations and took into
account such other matters as Merrill Lynch deemed necessary, including its
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
Parent, and Merrill Lynch did not independently verify such information or
undertake an independent appraisal of the assets or liabilities of the
Company. With respect to the financial forecasts of the Company furnished to
it by Parent, Merrill Lynch assumed that they had been reasonably prepared and
reflected the best currently available estimates and judgment of the
management of Parent as to the expected future financial performance of the
Company. Merrill Lynch was not provided with any information by the Company
and neither received nor reviewed any financial forecasts prepared by the
Company pertaining to its future prospects. In addition, Merrill Lynch had no
discussions with members of the Company's management concerning the Company's
business and prospects. Although Merrill Lynch was provided with certain
financial forecasts prepared by the financial advisor to the Special
Committee, Merrill Lynch, for purposes of its opinion and with the concurrence
of members of Parent's management who monitor the operations of the Company,
considered only those forecasts relating to the years ended December 31, 1996
and 1997 since, in the view of Merrill Lynch and such management, the
forecasts for subsequent periods were based on assumptions concerning the
Company's business and prospects that are unreasonable.
The following is a summary of the analyses performed by Merrill Lynch in
connection with the preparation of the Merrill Lynch Opinion.
Historical Stock Price Analyses. Merrill Lynch reviewed the trading
performance of the Shares for the period from December 4, 1991 to January 29,
1997 and identified certain events that had a significant effect on the
trading price of the Shares. Merrill Lynch determined that the average trading
prices of the Shares for the five-year, three-year and one-year periods
ending, in each case, on December 4, 1996, the last full day of trading prior
to Parent's announcement of its intention to acquire the Shares not then owned
by it, were $2.97, $3.97 and $3.85, respectively, and that the Offer Price
represents a premium to such average prices of 136%, 76% and 85%,
respectively. Merrill Lynch noted that the Offer Price represented a premium
of (1) 44% over the closing price for the Shares on the Pre-Announcement Date
and (2) 6% over the closing price on January 29, 1997. Merrill Lynch also
reviewed the historical price/earnings multiples (the "P/E Multiples") of the
Shares from June 1994 to December 4, 1996 and determined that (1) for fiscal
1995, the average current fiscal year ("CFY") P/E Multiple was 23.2x and the
average next fiscal year ("NFY") P/E Multiple was 14.4x, (2) for fiscal 1996,
the average CFY P/E Multiple was 16.4x and the average NFY P/E Multiple was
12.8x and (3) for fiscal 1997 through the Pre-Announcement Date, the average
CFY P/E Multiple was 18.0x and the average NFY P/E Multiple was 13.8x.
Near Term Earnings Expectations. Merrill Lynch reviewed earnings estimates
for the second half of the 1997 fiscal year prepared for the Company by
Broadview and compared such estimates to each of (1) the Company's actual
results for the second half of the 1996 fiscal year and (2) publicly available
research analysts' earnings estimates for the Company for the second half of
the 1997 fiscal year compiled by First Call Corporation ("First Call").
Merrill Lynch observed that the Broadview earnings per shares ("EPS") estimate
was approximately 71% below actual second half 1996 results and approximately
67% below First Call estimates as of January 24, 1997.
Comparable Public Company Analysis. Using publicly available information
(including estimates by First Call, Institutional Brokers Estimate System,
Inc. and Nelson's Publications), Merrill Lynch compared certain financial and
operating information and ratios (described below) for the Company with
corresponding financial
13
<PAGE>
and operating information and ratios for a group of publicly traded companies
with market capitalizations of less than $250 million that Merrill Lynch deemed
to be similar to the Company. The comparable public companies were ATC
Communications Group, Inc., Boston Communications Group Inc., ICT Group Inc.,
Metro One Telecommunications Inc. and RMH Teleservices (collectively, the
"Public Comparables"). Merrill Lynch compared (1) the closing price on January
29, 1997 of each of the Public Comparables as a multiple of their respective
estimated EPS for each of the calendar years 1996 and 1997 and (2) market
capitalization as a multiple of (a) latest 12 months ("LTM") sales (b) LTM
earnings before interest and taxes ("EBIT") and (c) LTM earnings before
interest, taxes, depreciation and amortization ("EBITDA"). The following
multiples were derived from such calculation: (1) for price as a multiple of
estimated 1996 EPS, a median of 29.3x; (2) for price as a multiple of estimated
1997 EPS, a median of 21.2x; (3) for market capitalization as a multiple of LTM
sales, a median of 1.73x; (4) for market capitalization as multiple of LTM
EBIT, a median of 22.8x; and (5) for market capitalization as multiple of LTM
EBITDA, a median of 15.8x. The comparable public company analysis yielded per
Share values, net of debt, ranging from $3.00 to $5.00.
No company utilized in the comparable public company analysis was identical
to the Company. Accordingly, an analysis of the results of such a comparison is
not purely mathematical but instead it involves complex considerations and
judgments concerning differences in historical and projected financial and
operating characteristics of the comparable companies and other factors that
could affect the public trading value of the comparable companies or company to
which they are being compared.
Premiums in Selected Minority Interest Buy-Side Transactions. Merrill Lynch
reviewed certain publicly available information regarding certain transactions
involving the purchase of a minority interest announced between February 1988
and December 1996 (the "Minority Interest Comparables"). For each of the
Minority Interest Comparables, Merrill Lynch (1) compared the per share
acquisition price and the per share pre-announcement trading price and (2)
calculated the premium over the pre-announcement trading price represented by
the acquisition price. Premiums paid in the Minority Interest Comparables
showed a mean of 29.0% and a median of 19.5%. The Offer Price represented a
premium of 44% over the closing price for the Shares on the Pre-Announcement
Date.
Discounted Cash Flow Analyses of the Company. Merrill Lynch calculated ranges
of equity value for the Company based upon the sum of (1) the discounted
present value of the five-year (1997-2001) stream of projected unlevered after-
tax free cash flows, (2) the discounted present value of the projected terminal
value based on both the net income multiple method and the perpetuity growth
method and (3) an assumed cash value net of debt. In each instance, Merrill
Lynch used financial forecasts provided to it by members of Parent's management
who monitor the operations of the Company (the "Parent Management Case") and a
sensitivity case, which assumed an increased rate of revenue growth from Parent
and from other sources (the "Sensitivity Case"). Merrill Lynch utilized
discount rates of 14.0%, 16.0% and 18.0%, terminal value net income multiples
of 15.0x, 20.0x and 25.0x, and terminal value perpetuity growth rates of 6.0%,
7.0% and 8.0%. The various ranges for discount rates and terminal value net
income multiples and perpetuity growth rates were chosen to reflect theoretical
analyses of the weighted average cost of capital and a range of trading values
and growth rates for the Company. Based on such analyses, the implied per Share
values were estimated to range from $3.00 to $4.50 for the Parent Management
Case and $4.00 to $7.00 for the Sensitivity Case.
The preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances, and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Merrill Lynch believes
that its analyses must be considered as a whole and that selecting portions of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion. No limitations were imposed by Parent
upon Merrill Lynch with respect to investigations made or procedures followed
by Merrill Lynch in rendering the Merrill Lynch Opinion.
14
<PAGE>
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control
of Parent or the Company. Any estimates contained in the analyses performed by
Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses do not
purport to be appraisals or to reflect the prices at which such businesses
might actually be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. In addition, as described
above, the Merrill Lynch Opinion and the analyses provided by Merrill Lynch to
Parent were among several factors taken into consideration by Parent in making
its determination to make the Offer. Consequently, the Merrill Lynch analyses
described below should not be viewed as determinative of the decision of
Parent to make the Offer.
Parent retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. Merrill Lynch has, in the past, provided financial advisory and
financing services to Parent and has received fees for such services. Merrill
Lynch is also currently providing financial advisory services to Parent and
will receive fees for such services. Merrill Lynch currently owns
approximately 6,312,900 shares of common stock of Parent. In the ordinary
course of its business, Merrill Lynch and its affiliates may actively trade
the debt and equity securities of Parent and the Company for their own account
and for the accounts of their customers and, accordingly, may at any time hold
a long or short position in such securities. See "THE TENDER OFFER--Fees and
Expenses."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the Offer and the Second Step Merger to holders whose Shares are purchased
pursuant to the Offer or whose Shares are converted to cash in the Second Step
Merger (including pursuant to the exercise of appraisal rights). The
discussion applies only to holders of Shares in whose hands Shares are capital
assets, and may not apply to Shares received pursuant to the exercise of
employee stock options or otherwise as compensation, or to holders of Shares
who are in special tax situations (such as insurance companies, tax-exempt
organizations, non-United States persons or persons who have engaged in
"straddles" or other hedging transactions with respect to their Shares).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S
OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO
SUCH HOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER INCOME
TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Second Step
Merger (including pursuant to the exercise of appraisal rights) will be a
taxable transaction for federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and also may be a taxable transaction
under applicable state, local, foreign and other income tax laws. In general,
for federal income tax purposes, a holder of Shares will recognize gain or
loss equal to the difference between his or her adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Second Step
Merger and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted to
cash in the Second Step Merger. Such gain or loss generally will be capital
gain or loss provided the Shares are a capital asset in the hands of the
stockholders and will be long-term capital gain or loss if, on the date of
sale (or, if applicable, the date of the Second Step Merger), the Shares were
held for more than one year. If a holder exercises such holder's appraisal
rights and receives an amount treated as interest for federal income tax
purposes, such amount will be taxed as ordinary income.
15
<PAGE>
Payments in connection with the Offer or the Second Step Merger may be
subject to "backup withholding" at a rate of 31%. Backup withholding generally
applies if the holder (a) fails to furnish such holder's social security number
or taxpayer identification number ("TIN"), (b) furnishes an incorrect TIN, (c)
is subject to backup withholding due to previous failures to include reportable
interest or dividend payments on such holder's federal income tax return, or
(d) under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN provided is such holder's correct
number and that such holder is not subject to backup withholding. Backup
withholding is not an additional tax, but rather it is an advance tax payment
that is subject to refund if and to the extent that it results in an
overpayment of tax. Certain taxpayers are generally exempt from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include reportable payments in income. Each holder of Shares should consult
with his or her own tax advisor as to his or her qualification for exemption
from backup withholding and the procedure for obtaining such exemption.
Tendering holders of Shares may be able to prevent backup withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
"THE TENDER OFFER--Procedure for Tendering Shares."
APPRAISAL RIGHTS
If the Second Step Merger is consummated, stockholders of the Company at the
time of the Second Step Merger will have certain rights under the DGCL to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares (the "Appraisal Shares"). Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares (excluding any element of value arising from
the accomplishment or expectation of the Second Step Merger), required to be
paid in cash to such dissenting holders for their Shares. See "THE TENDER
OFFER--Certain Regulatory and Legal Matters." In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Second Step Merger on the amount
determined to be the fair value of their Shares. Annex III sets forth Section
262 of the DGCL ("Section 262") regarding appraisal rights, which will only be
available in connection with the Second Step Merger.
Under Section 262, if the Second Step Merger is submitted to the stockholders
of the Company at a meeting thereof, the Company must, not less than 20 days
prior to the meeting held for the purpose of obtaining stockholder approval of
the Second Step Merger, notify each of the Company stockholders entitled to
appraisal rights that such rights are available, and must include in such
notice a copy of Section 262. If no stockholder vote is required or if
stockholder approval is obtained by written consent in lieu of a meeting, the
Company, either before the effective date of the Second Step Merger or within
ten days thereafter, must notify each of the stockholders entitled to appraisal
rights of the effective date of the Second Step Merger and that appraisal
rights are available, and must include in such notice a copy of Section 262.
A holder of Appraisal Shares wishing to exercise such holder's appraisal
rights will be required to deliver to Purchaser within 20 days after the date
of mailing the notice described in the preceding paragraph a written demand for
appraisal of such holder's Appraisal Shares. A holder of Appraisal Shares
wishing to exercise such holder's appraisal rights must be the record holder of
such Appraisal Shares on the date the written demand for appraisal (as
described below) is made and must continue to hold such Appraisal Shares of
record through the effective date of the Second Step Merger. Accordingly, a
holder of Appraisal Shares who is the record holder of Appraisal Shares on the
date the written demand for appraisal is made (if such demand is made prior to
the effectiveness of the Second Step Merger), but who thereafter transfers such
Appraisal Shares prior to the consummation of the Second Step Merger, will lose
any right to appraisal in respect of such Appraisal Shares.
Within 120 days after the effective date of the Second Step Merger, but not
thereafter, Purchaser or any stockholder who has complied with the statutory
requirements summarized above and who is otherwise entitled to appraisal rights
may file a petition in the Delaware Chancery Court demanding a determination of
the fair value of the Appraisal Shares. Purchaser is under no obligation to
file a petition with respect to the appraisal of the fair value of the
Appraisal Shares and does not intend to do so. Accordingly, it will be the
obligation of the stockholders seeking appraisal rights to initiate all
necessary action to perfect any appraisal rights within the time prescribed in
Section 262.
16
<PAGE>
If a petition for appraisal is timely filed, after hearing on such petition,
the Delaware Chancery Court will determine the stockholders entitled to
appraisal rights and will appraise the fair value of their Appraisal Shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Second Step Merger, together with a fair rate of interest,
if any, to be paid upon the amount determined to be the fair value. In
determining the "fair value" of the Appraisal Shares, a Delaware court would be
required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset values and
earning capacity of the Company. In Weinberger v. UOP, Inc., the Delaware
Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be different from the Merger Consideration. Several decisions
by the Delaware courts, which may or may not apply to the Second Step Merger,
have held that a controlling stockholder of a company involved in a merger has
a fiduciary duty to other stockholders which requires that the merger be
"entirely fair" to such other stockholders. In determining whether a merger is
fair to minority stockholders, Delaware courts have considered, among other
things, the type and amount of the consideration to be received by the
stockholders and whether there was fair dealing among the parties. The Delaware
Supreme Court stated in Weinberger that, although the remedy ordinarily
available in a merger that is found not to be "fair" to minority stockholders
is the right to appraisal described above, such appraisal remedy may not be
adequate "in certain cases, particularly where fraud, misrepresentation, self-
dealing, deliberate waste of corporate assets, or gross and palpable
overreaching are involved," and that in such cases the Delaware Chancery Court
would be free to fashion any form of appropriate relief.
The costs of the proceeding may be determined by the Delaware Chancery Court
and taxed upon the parties as the Delaware Chancery Court deems equitable in
the circumstances. Upon application of a stockholder, the Delaware Chancery
Court may also order all or a portion of the expenses incurred by any
stockholder in reasonable attorneys' fees and the fees and expenses of experts,
to be charged pro rata against the value of all of the Appraisal Shares
entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, from and after the effective date of the
Second Step Merger, be entitled to vote the Appraisal Shares subject to such
demand for any purpose or to receive payment of dividends or other
distributions on those Appraisal Shares (except dividends or other
distributions payable to stockholders of record at a date which is prior to the
effective date of the Second Step Merger).
If any stockholder who properly demands appraisal of such holder's Appraisal
Shares under Section 262 fails to perfect, or effectively withdraws or loses,
such holder's right to appraisal, as provided in the DGCL, the Appraisal Shares
of such stockholder will be converted into the right to receive the
consideration receivable with respect to such Appraisal Shares pursuant to the
Second Step Merger. A stockholder will fail to perfect, or effectively lose or
withdraw, such stockholder's right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after the consummation of the
Second Step Merger, or if the stockholder delivers to Purchaser a written
withdrawal of such stockholder's demand for appraisal. Any such attempt to
withdraw an appraisal demand more than 60 days after the consummation of the
Second Step Merger will require the written approval of Purchaser.
THE TENDER OFFER
TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with "THE TENDER OFFER--Withdrawal Rights" as soon as legally
permitted after the commencement of the Offer. The term "Expiration Date" means
12:00 Midnight, New York City time, on Tuesday, March 4, 1997, unless
17
<PAGE>
Purchaser shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date
at which the Offer, as so extended by Purchaser, shall expire. UNDER NO
CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED OR UPON THE APPROVAL OF THE MAXSERV BOARD OR ANY COMMITTEE THEREOF.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "THE TENDER
OFFER--CERTAIN CONDITIONS OF THE OFFER."
Purchaser reserves the right (but shall not be obligated), in accordance
with applicable rules and regulations of the Commission, to waive any
condition of the Offer. If any of the conditions described in "THE TENDER
OFFER--Certain Conditions of the Offer" have not been satisfied by 12:00
Midnight, New York City time, on Tuesday, March 4, 1997 (or any other time
then set as the Expiration Date), Purchaser may elect to (1) extend the Offer
and, subject to applicable withdrawal rights, retain all tendered Shares until
the expiration of the Offer, as extended, (2) subject to complying with
applicable rules and regulations of the Commission, waive such condition and
accept for payment all Shares so tendered and not extend the Offer or (3)
terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders. Assuming the prior satisfaction or
waiver of the conditions of the Offer and subject to the preceding sentence,
Purchaser will, and Parent will cause Purchaser to, accept for payment and pay
for Shares validly tendered and not withdrawn pursuant to the Offer as soon as
legally permitted after the commencement thereof.
Purchaser reserves the right (but will not be obligated), at any time or
from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that Purchaser will exercise its right to extend the Offer. Any
extension of the period during which the Offer is open, delay in acceptance
for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14e-1(d) under the Exchange Act. Without
limiting the obligation of Purchaser under such rules or the manner in which
Purchaser may choose to make any public announcement, Purchaser currently
intends to make announcements by issuing a press release to the Dow Jones News
Service and making any appropriate filing with the Commission.
Subject to the applicable rules and regulations of the Commission, Purchaser
also expressly reserves the right, at any time and from time to time, in its
sole discretion, (i) to delay payment for any Shares regardless of whether
such Shares were theretofore accepted for payment, or to terminate the Offer
and not to accept for payment or pay for any Shares not theretofore accepted
for payment or paid for, upon the occurrence of any of the conditions set
forth in "THE TENDER OFFER--Certain Conditions of the Offer," by giving oral
or written notice of such delay or termination to the Depositary and (ii) at
any time or from time to time, to amend the Offer in any respect. Purchaser's
right to delay payment for any Shares or not to pay for any Shares theretofore
accepted for payment is subject to the applicable rules and regulations of the
Commission, including Rule 14e-1(c) of the Exchange Act, relating to
Purchaser's obligation to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act or otherwise. The minimum period during which a tender
offer must remain open following material changes in the terms of the Offer or
the information concerning the Offer, other than a change in price or a change
in percentage
18
<PAGE>
of securities sought, will depend upon the facts and circumstances, including
the relative materiality of the terms or information changes. With respect to
a change in price or a change in percentage of securities sought, a minimum
ten business day period is generally required to allow for adequate
dissemination to stockholders and investor response.
Requests are being made to the Company for use of the Company's stockholder
list and security position listings for disseminating the Offer to holders of
Shares and communicating with holders of Shares in connection with the Offer.
This Offer to Purchase and related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares, and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the stockholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for, all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with "THE TENDER OFFER--Withdrawal Rights" promptly after the later
to occur of (a) the Expiration Date and (b) subject to compliance with the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, the satisfaction or waiver of the conditions set forth
in "THE TENDER OFFER--Certain Conditions of the Offer." Subject to such
compliance, Purchaser expressly reserves the right to delay payment for Shares
in order to comply in whole or in part with any applicable law. See "THE
TENDER OFFER--Certain Regulatory and Legal Matters." In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in "THE TENDER OFFER--
Procedure for Tendering Shares," (ii) a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with all
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message and (iii) any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message transmitted by a Book-
Entry Transfer Facility to, and received by, the Depositary and forming a part
of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when Purchaser gives oral or written notice to the Depositary of
Purchaser's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from Purchaser and transmitting such
payment to tendering stockholders. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering stockholders,
Purchaser's obligation to make such payment shall be satisfied, and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares
pursuant to the Offer. If, for any reason whatsoever, acceptance for payment
of any Shares tendered pursuant to the Offer is delayed, or Purchaser is
unable to accept for payment Shares tendered pursuant to the Offer, then,
without prejudice to Purchaser's rights under "THE TENDER OFFER--Terms of the
Offer," the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Shares, and, subject to compliance with the applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act,
such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in "THE TENDER
OFFER--Withdrawal Rights" below. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID
BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
19
<PAGE>
If any tendered Shares are not accepted for payment pursuant to the terms and
conditions of the Offer for any reason, or if certificates are submitted
representing more Shares than are tendered, certificates representing such
unpurchased or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares delivered by book-entry
transfer to a Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date, or
the tendering stockholder must comply with the guaranteed delivery procedure
set forth below. In addition, either (i) certificates representing such Shares
must be received by the Depositary along with the Letter of Transmittal or such
Shares must be tendered pursuant to the procedure for book-entry transfer set
forth below, and a Book-Entry Confirmation must be received by the Depositary,
in each case prior to the Expiration Date or (ii) the guaranteed delivery
procedure set forth below must be complied with. No alternative, conditional or
contingent tenders will be accepted. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date or (ii) the guaranteed delivery
procedures described below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i)
by a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to
20
<PAGE>
be issued or returned to, a person other than the registered owner or owners,
then the tendered certificates must be endorsed or accompanied by duly executed
stock powers, in either case signed exactly as the name or names of the
registered owner or owners appear on the certificates, with the signatures on
the certificates or stock powers guaranteed by an Eligible Institution as
provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter
of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless be
tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the 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 Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three New York
Stock Exchange, Inc. ("NYSE") trading days after the date of execution of
such Notice of Guaranteed Delivery. A "trading day" is any day on which the
NYSE is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE STOCKHOLDER TENDERING SUCH SHARES.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding with respect to payment of the Offer Price of Shares purchased
pursuant to the offer, each tendering stockholder must provide the Depositary
with his or her correct TIN and certify that such stockholder is not subject to
backup federal income tax withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. See "SPECIAL FACTORS--Certain United
States Federal Income Tax Consequences of the Offer" of this Offer to Purchase
and Instruction 8 of the Letter of Transmittal. If the stockholder is a
nonresident alien or foreign entity not subject to back-up withholding, the
stockholder must give the Depositary a completed Form W-8 Certificate of
Foreign Status prior to receipt of any payments.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Shares will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Purchaser, be unlawful. Purchaser also reserves
the absolute right to
21
<PAGE>
waive any of the conditions of the Offer, or any defect or irregularity in the
tender of any Shares. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the Instructions to the
Letter of Transmittal) will be final and binding on all parties. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, Parent, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification.
Appointment. By executing the Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), a tendering stockholder
irrevocably appoints designees of Purchaser as such stockholder's attorneys-in-
fact and proxies, each with full power of substitution, in the manner set forth
in the Letter of Transmittal, to the full extent of such stockholder's right
with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after February 4,
1997). All such powers of attorney and proxies shall be considered coupled with
an interest in the tendered Shares. This appointment is effective upon the
acceptance for payment of the Shares by Purchaser. Upon acceptance for payment,
all prior powers of attorney and proxies given by the stockholder with respect
to such Shares or other securities or rights will, without further action, be
revoked and no subsequent proxies may be given or written consent executed
(and, if given or executed, will not be deemed effective). The designees of
Purchaser will, with respect to the Shares and other securities or rights, be
empowered to exercise all voting and other rights of such stockholder as they
in their sole judgment deem proper in respect of any annual or special meeting
of the Company's stockholders, any adjournment or postponement thereof, actions
by written consent in lieu of such meeting or otherwise. Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon Purchaser's acceptance for payment of such Shares, Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares and the other securities or rights issued or issuable in respect of
such Shares, including voting at any meeting of stockholders (whether annual or
special or whether or not adjourned) or acting by written consent without a
meeting in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above will
constitute the tendering stockholder's acceptance of the terms and conditions
of the Offer, as well as the tendering stockholder's representation and
warranty that (i) such stockholder has the full power and authority to tender,
sell, assign and transfer the tendered Shares (and any and all other Shares or
other securities issued or issuable in respect of such Shares on or after
February 4, 1997), and (ii) when the same are accepted for payment by
Purchaser, Purchaser will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and Purchaser upon the terms and subject to the conditions of the
Offer.
WITHDRAWAL RIGHTS
Except as otherwise provided in this section, tenders of Shares made pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after April 4, 1997. If purchase of or payment for Shares is delayed for any
reason or if Purchaser is unable to purchase or pay for Shares for any reason,
then, without prejudice to Purchaser's rights under the Offer, tendered Shares
may be retained by the Depositary on behalf of Purchaser and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this section, subject to Rule 14e-1(c) under
the Exchange Act, which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the
Shares to be
22
<PAGE>
withdrawn, the number of Shares to be withdrawn and the name in which the
certificates representing such Shares are registered, if different from that
of the person who tendered the Shares. If certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown
on such certificates must be submitted to the Depositary and, unless such
Shares have been tendered by an Eligible Institution, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer set forth
in "THE TENDER OFFER--Procedure for Tendering Shares," any notice of
withdrawal must also specify the name and number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares. All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by Purchaser, in its sole
discretion, and its determination will be final and binding on all parties.
None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in "THE
TENDER OFFER--Procedure for Tendering Shares."
PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed on the Nasdaq SmallCap MarketSM under the symbol
"MXSV." The following table sets forth for the quarterly fiscal periods ended
May 31, August 31, November 30 and February 28 the closing high and low bid
quotations per Share on the Nasdaq SmallCap MarketSM based on published
financial sources.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal 1995:
First Quarter..................................................... $5.25 $3.75
Second Quarter.................................................... 5.00 3.50
Third Quarter..................................................... 4.50 3.75
Fourth Quarter.................................................... 4.00 3.13
Fiscal 1996:
First Quarter..................................................... $4.13 $3.00
Second Quarter.................................................... 3.75 3.00
Third Quarter..................................................... 3.63 2.25
Fourth Quarter.................................................... 4.25 2.75
Fiscal 1997:
First Quarter..................................................... 5.50 3.50
Second Quarter.................................................... 5.50 4.63
Third Quarter (through February 3, 1997).......................... 7.25 4.63
</TABLE>
On December 4, 1996, the last full trading before Parent publicly announced
its desire to acquire, through Purchaser, all of the outstanding Shares not
already owned by Purchaser or Parent and the commencement of negotiations with
the Company, the last reported bid quotation per Share as reported by the
National Quotation Bureau was $4.88. On February 3, 1997, the last full day of
trading prior to the commencement of the Offer, the last reported bid
quotation per Share as reported by the National Quotation Bureau was $7.00.
HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
The Company has publicly stated it has not paid, and does not intend to pay,
any cash dividends on the Shares. See "THE TENDER OFFER--Dividends and
Distributions."
CERTAIN EFFECTS OF THE TRANSACTION
Board of Directors of the Company. Following consummation of the Offer,
Purchaser currently intends to take such steps as are necessary to assure that
Parent's designees constitute a majority or more of the directors
23
<PAGE>
on the MaxServ Board, including the removal of certain of the current
directors serving on the MaxServ Board and the appointment of new directors to
the MaxServ Board, by written consent in lieu of a meeting of the Company's
stockholders. No prior notice of such action to shareholders of the Company or
the consent of any shareholder other than the Parent is required to take such
action. If Parent and Purchaser exercise their power to designate a majority
of the directors of the Company, it expects to nominate some or all of the
officers of Purchaser identified on Annex I hereto, and, if additional
directors are necessary to comprise a majority of the MaxServ Board, to select
from among such of Parent's executive officers identified in Annex I hereto
who agree to be nominated and to serve as directors of the Company. In such
circumstances it is likely that no "independent" or "outside" directors will
remain on the MaxServ Board.
Effect upon the Shares. The purchase of the Shares by Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by holders of
Shares other than Purchaser or Parent. According to the Company's 10-KSB for
the fiscal year ended May 31, 1996, as of August 14, 1996 there were
approximately 1,500 holders of record of the Shares.
Depending upon the number of Shares purchased pursuant to the Offer and the
aggregate market value of any Shares not purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on the Nasdaq
SmallCap MarketSM and may be delisted from, and upon the initiative of the
Nasdaq SmallCap MarketSM. The Nasdaq SmallCap MarketSM published guidelines
indicate that the Nasdaq SmallCap MarketSM would consider delisting the Shares
if, among other things, the number of holders of Shares should fall below 300
or if the number of publicly held Shares should fall below 100,000 or if the
aggregate market value of the publicly held Shares should fall below $200,000.
Once the Offer is consummated, if permitted by the NASD and the Exchange
Act, it is the intention of Purchaser to seek to cause the Company to file
applications to withdraw the Shares from listing on the Nasdaq SmallCap
MarketSM and to terminate the registration of the Shares under the Exchange
Act. In the event that the Shares are no longer included in the Nasdaq
SmallCap MarketSM, it is possible that the Shares would continue to trade in
the over-the-counter market and that price quotations would be reported by
other sources. The extent of the public market for the Shares and the
availability of such quotations would, however, depend on the number of
holders of Shares remaining at such time, the interests in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration of the Shares under the Exchange Act, as described below, and
other factors. To the extent the Shares are delisted from the Nasdaq SmallCap
MarketSM, the market for the Shares could be adversely affected. Further,
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly, if any, effected by the Offer would have an
adverse or beneficial effect on the market price for or marketability of the
Shares or whether it would cause future market prices to be greater or less
than the Offer Price.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if there are fewer than 300 holders of record of Shares. It is the
intention of Purchaser to seek to cause an application for such termination to
be made as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met. If such registration were
terminated, the Company would no longer legally be required to disclose
publicly in proxy materials distributed to stockholders the information which
it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports
required to be filed with the Commission under the Exchange Act; and the
executive officers and directors of the Company and beneficial owners of more
than 10% of the Shares would no longer be subject to the "short-swing" insider
trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 or 144A promulgated under the Securities Act of
1933, as amended.
24
<PAGE>
If registration of the Shares is not terminated and the Shares are not
delisted prior to the Second Step Merger, then the Shares will cease to be
listed on the Nasdaq SmallCap MarketSM and the registration of the Shares
under the Exchange Act will be terminated following the Second Step Merger.
Tax Sharing Agreement. In the event the Offer is consummated and Purchaser
owns 80% or more (but less than 100%) of the outstanding Shares, Purchaser
intends to enter into a Federal income tax sharing agreement with the Company
on customary terms. Such agreement is expected to provide for the filing of
consolidated Federal income tax returns and would require the Company to make
payments to Purchaser in amounts equal to their tax liabilities computed on a
separate basis. If the Company generates losses or credits which actually
reduce Purchaser's consolidated Federal income tax liability or which would
have resulted in a refund on a separate company basis during the period the
Company is a member of the affiliated group, such agreement would generally
require Purchaser to pay to the Company the amount of such reduction or
refund. Such agreements would also address the timing of such payments, the
resolution of tax disputes and other similar matters.
CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither Purchaser, Parent nor the Dealer Manager has any
knowledge that would indicate that statements contained herein based upon such
documents are untrue, neither Purchaser, Parent nor the Dealer Manager assumes
any responsibility for the accuracy or completeness of the information
concerning the Company, furnished by the Company, or contained in such
documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Purchaser, Parent or the Dealer Manager.
According to the Company's 10-KSB, the Company provides information services
for household products, offering diagnostic assistance and support to
professional technicians and consumers involved with the installation, repair,
care and operation of a full range of appliances, personal computers,
entertainment and other electronic products, heating and air conditioning
systems, and lawn and garden equipment. The Company also provides
telemarketing services for replacement parts and accessories covering all
major home products, service order reservations and logistical support
services. The Company's information products and services include in-bound and
out-bound telephone services, systems consulting and design and development
for network centric environments and electronic publishing. The Company
delivers its services throughout the United States and Canada, from four
service centers in Alabama, Arizona and Texas, utilizing advanced technology
and telecommunications systems. According to the Company's 10-Q, the Company
derives over 90% of its revenue and margin from services to Parent.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived in part from financial information
contained in the Company's 10-KSB and the Company's 10-Q. More comprehensive
financial information is included in such reports and other documents filed by
the Company with the Commission. For the periods covered by such reports, the
following summary is qualified in its entirety by reference to such reports
and such other documents and all the financial information (including any
related notes) contained therein. Such reports and other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth below.
25
<PAGE>
MAXSERV, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
------------------------- -------------------
NOVEMBER 30, NOVEMBER 30, MAY 31, MAY 31,
1996 1995 1996 1995
------------ ------------ --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Service fees...................... $28,531 $25,084 $ 52,571 $ 31,841
Cost of services.............. 24,357 24,372 47,622 26,323
------- ------- --------- ---------
Service margin.................. 4,174 712 4,949 5,518
General operating expenses.... 2,090 1,707 3,445 3,169
Interest income (expense)..... 64 (52) 41 49
------- ------- --------- ---------
Income (loss) before taxes...... $ 2,148 $(1,047) $ 1,545 $ 2,398
Provision or income taxes..... 816 (393) 463 751
------- ------- --------- ---------
Net Income (Loss)................. $ 1,332 $ (654) $ 1,082 $ 1,647
Net Income (loss) per Share:
Primary......................... $ .12 $ (.06) $ .10 $ .18
Fully Diluted................... .12 (.06) .10 .18
<CAPTION>
AT AT AT AT
NOVEMBER 30, NOVEMBER 30, MAY 31, MAY 31,
1996 1995 1996 1995
------------ ------------ --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Working Capital................. $ 9,351 $ 4,694 $ 8,035 $ 6,968
Total Assets.................... 22,224 18,786 21,660 21,194
Total Liabilities............... 4,082 3,789 4,920 5,559
Stockholders' Equity............ 18,142 14,997 16,740 15,635
</TABLE>
The book value per Share as of November 30, 1996 was $1.66 and as of May 31,
1996 was $1.53.
Projections. Parent has received certain non-public information that was
given to Parent and Merrill Lynch by the Company, which is set forth below and
which provided the basis of the Broadview DCF Analysis. In reaching its
conclusion as to fairness, Parent and Purchaser, in conjunction with Merrill
Lynch, evaluated the Broadview DCF Analysis. In evaluating the propriety of
the assumptions used by Broadview as to the projected growth in revenues and
margin of the Company during the five-year period ending May 31, 2002, Parent
considered (i) its own views based on its historic involvement with the
Company as to (A) the propriety of the projected growth of revenues and margin
to be derived from the Company's business with Parent, which are not supported
by Parent's current plans for the Company and (B) the Company's historic
weakness in attracting and growing third party customers, which Parent
believes is the best indicator of the Company's future ability to grow such
customer base and which does not support the 85% compounded annual growth in
such third party customer revenues as used in the Broadview DCF Analysis and
(ii) that Parent has been advised that such projections were not prepared as
part of the Company's management's long-term forecasting (which only had been
prepared for fiscal year 1997), but only in connection with the preparation of
the Broadview DCF Analysis. Parent's views as to the appropriate assumptions
for such revenue growth were incorporated in the discounted cash flow analysis
of the Company performed by Merrill Lynch: 15% in calendar year 1997 and 20%
in each of calendar years 1998-2001 for third party customer revenue growth
and 7.7%, 2.4%, 5.1%, 5.1% and 5.1% for calendar years 1997-2001 for Parent
revenue growth. See "Special Factors--Opinion of Merrill Lynch as Financial
Advisor to Parent." In light of these factors, Parent concluded the Broadview
DCF Analysis was not a reliable measure of the value of the Shares and
accorded little weight thereto in reaching its determination as to fairness.
26
<PAGE>
PROJECTIONS UTILIZED IN THE BROADVIEW DCF ANALYSIS
(THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MAY 31,
---------------------------------------------------
1997 1998 1999 2000 2001 2002
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sears Revenue............... $58,091 $70,511 $ 87,278 $109,913 $140,470 $181,723
Other Business Revenue...... 4,994 11,500 27,537 56,569 84,280 110,452
------- ------- -------- -------- -------- --------
Total Revenue............. 63,085 82,011 114,815 166,482 224,750 292,175
Gross Profit................ 7,026 10,547 16,744 27,148 40,522 57,714
Operating Income............ 2,766 4,845 8,531 14,906 29,547 35,061
Net Income.................. 1,838 3,088 5,300 9,125 14,310 21,128
Revenue Growth.............. 20.0% 30.0% 40.0% 45.0% 35.0% 30.0%
Gross Margin................ 11.1% 12.9% 14.6% 16.3% 18.0% 19.8%
Operating Margin............ 4.4% 5.9% 7.4% 9.0% 10.5% 12.0%
Net Margin.................. 2.9% 3.8% 4.6% 5.5% 6.4% 7.3%
</TABLE>
- --------
THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED BY PARENT OR PURCHASER OR
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF
THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FOR
PROSPECTIVE FINANCIAL INFORMATION. THE PROJECTIONS ARE INCLUDED HEREIN SOLELY
BECAUSE SUCH INFORMATION WAS FURNISHED TO PARENT ON JANUARY 14, 1997.
ACCORDINGLY, THE INCLUSION OF THE PROJECTIONS IN THIS OFFER TO PURCHASE SHOULD
NOT BE REGARDED AS AN INDICATION THAT PARENT, PURCHASER OR ITS FINANCIAL
ADVISOR, OR THEIR RESPECTIVE OFFICERS AND DIRECTORS, CONSIDER SUCH INFORMATION
TO BE ACCURATE OR RELIABLE, AND NONE OF SUCH PERSONS OR ENTITIES ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY THEREOF.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports,
proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. The Commission also maintains a World Wide Web site
on the internet at http://www.sec.gov that contains reports and other
information regarding registrants that file electronically with the
Commission.
CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
Purchaser is a Delaware corporation and a wholly owned subsidiary of Parent,
a New York corporation. To date, Purchaser has not conducted any business
other than that incident to its formation and the commencement of the Offer.
The principal executive offices of Purchaser and Parent are located at 3333
Beverly Road, Hoffman Estates, Illinois 60179. Parent originated from an
enterprise established in 1886. It was incorporated under the laws of New York
in 1906. With its consolidated subsidiaries, Parent conducts domestic and
international merchandising and credit operations. Parent, a multi-line
retailer, is among the largest retailers in the world on the basis of sales of
merchandise and services. Domestic operations include merchandising and credit
operations in the United States and Puerto Rico. The domestic credit
operations primarily relate to the Sears Card, the largest proprietary credit
card in the United States, which is used to pay for purchases of goods and
services from Retail Store, Home Services and Direct Response Marketing
businesses. International operations consist of merchandising and credit
operations conducted through majority-owned subsidiaries in Canada and Mexico.
27
<PAGE>
Set forth below is certain selected historical consolidated financial
information with respect to Parent excerpted or derived from financial
information contained in Parent's Annual Report on Form 10-K for the year ended
December 30, 1995. Income Statement Data for the twelve months ended December
28, 1996 was derived from Parent's earnings press release dated January 23,
1997. More comprehensive financial information is included in such reports and
other documents filed by Parent with the Commission, and the following summary
is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein.
SEARS, ROEBUCK AND CO.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR THE 52
WEEKS ENDED:
-------------------------
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
OPERATING RESULTS
Revenues............................................ $38,236 $34,925
Operating income.................................... 2,083 1,705
Income from continuing operations................... 1,271 1,025
Income from discontinued operations................. -- 776
Net income.......................................... 1,271 1,801
Earnings per common share:
From continuing operations........................ $ 3.12 $ 2.53
From discontinued operations...................... -- 1.97
Net income........................................ 3.12 4.50
</TABLE>
Parent is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports and other information with the
Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in "THE TENDER OFFER--Certain Information Concerning the Company."
Except as set forth in this Offer to Purchase, neither Parent nor Purchaser,
nor, to the best knowledge of Parent or Purchaser, any of the persons listed in
Annex I hereto owns or has any right to acquire any Shares and none of them has
effected any transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither Parent nor Purchaser,
nor, to the best knowledge of Parent or Purchaser, any of the persons listed in
Annex I hereto has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
without limitation, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, neither Parent nor Purchaser, nor, to the best
knowledge of Parent or Purchaser, any of the persons listed in Annex I hereto
has had any transactions with the Company, or any of its executive officers,
directors or affiliates that would require reporting under the rules of the
Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or Purchaser, or their respective
subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the
persons listed in Annex I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
28
<PAGE>
SOURCE AND AMOUNT OF FUNDS
If all Shares (assuming the exercise and/or conversion of the Options and
the Warrants) are validly tendered and purchased by Purchaser, the aggregate
purchase price for the Shares will be approximately $35,998,711. Purchaser
will obtain all of such funds from Parent, which will obtain such funds from
its working capital. The Offer is not conditioned upon obtaining any
arrangements for the financing of the Offer.
DIVIDENDS AND DISTRIBUTIONS
If, on or after February 4, 1997, the Company should (i) directly or
indirectly redeem, purchase, or otherwise acquire any shares of capital stock
of the Company or make any commitment for any such action; (ii) split, combine
or reclassify any of its capital stock; or (iii) issue or sell additional
Shares, shares of any other class of capital stock, other voting securities or
any securities convertible into or exchangeable for, or rights, warrants or
options (other than in connection with the Warrants and the Options),
conditional or otherwise, to acquire any of the foregoing, then, subject to
the provisions set forth in "THE TENDER OFFER--Certain Conditions of the
Offer" below, Purchaser, in its sole discretion, may make such adjustments as
it deems appropriate to Offer Price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after February 4, 1997, the Company should declare, set aside or
pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options (other than in connection with the
Warrants and the Options), conditional or otherwise, to acquire any of the
foregoing, payable or distributable to stockholders of record on a date prior
to the transfer of the Shares purchased pursuant to the Offer to Purchaser or
its nominee or transferee on the Company's stock transfer records, then,
subject to the provisions set forth in "THE TENDER OFFER--Certain Conditions
of the Offer" below, (i) the Offer Price may, in the sole discretion of
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (ii) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering stockholders will (A) be received and
held by the tendering stockholders for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer, or (B) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of such exercise will
promptly be remitted to Purchaser. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as
owner of any such noncash dividend, distribution, issuance or proceeds and may
withhold the entire Offer Price or deduct from the Offer Price the amount of
value thereof, as determined by Purchaser in its sole discretion.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term or provision of the Offer, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
Purchaser will not be required to accept for payment, purchase or pay for any
Shares of the Company tendered, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for any Shares, if at any
time prior to the expiration of the Offer and before the time of acceptance
for payment for any such Shares any of the following shall occur or exist:
(a) there shall have been threatened, instituted or be pending any
action, proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by any other
person, domestic or foreign, before any court or governmental regulatory or
administrative agency, authority or tribunal, domestic or foreign, (i)
challenging the acquisition by Parent or Purchaser of the Shares, seeking
to restrain or prohibit the making or consummation of the Offer, including,
but not limited
29
<PAGE>
to any such challenge to the Offer based upon the provisions of the Second
Purchase Agreement; (ii) seeking to obtain from Parent or Purchaser any
damages, fines or legal sanctions; (iii) seeking to prohibit or limit the
ownership or operation by Parent or Purchaser or any of their affiliates of
any portion of the business or assets of the Company or to compel Parent or
Purchaser or any of their affiliates to dispose of or hold separate all or
any portion of the business or assets of the Company or of Purchaser or
seeking to impose any limitation on the ability of Parent or Purchaser or
any of their affiliates to conduct such business or own such assets; (iv)
seeking to impose or confirm limitations on the ability of Parent or
Purchaser or any of their affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by Parent or Purchaser or any of their
affiliates on all matters properly presented to the Company's stockholders;
(v) seeking to require divestiture by Parent or Purchaser or any of their
affiliates of any Shares; or (vi) seeking any material diminution in the
benefits expected to be derived by Parent or Purchaser or any of their
affiliates as a result of the transactions contemplated by the Offer,
which, in Parent's sole discretion, could be expected to have a material
adverse effect on the business, properties, assets, liabilities,
shareholder's equity, capitalization, prospects, condition (financial or
otherwise) or results of operations of the Company considered on a
consolidated basis or on the ability of the Company, Parent or Purchaser to
consummate the transactions contemplated by the Offer, the Second Step
Merger or any similar business combination by Purchaser or any affiliate of
Parent with the Company, or otherwise directly or indirectly relating to
the transactions contemplated by the Offer, the Second Step Merger or any
such business combination by Purchaser or any affiliate of Parent with the
Company; or
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction proposed, enacted,
promulgated, entered, enforced, issued or deemed applicable to the Offer,
the Second Step Merger, or other similar business combination by Purchaser
or any affiliate of Parent with the Company, or any other action shall have
been taken by any government, governmental authority or agency or court
with respect to a proceeding described in paragraph (a) above, domestic or
foreign, that has, or, in Parent's sole discretion, could be expected to
result in, any of the consequences referred to in paragraph (a) above; or
(c) any change shall have occurred or been threatened (or any condition,
event or development shall have occurred or been threatened involving a
prospective change) in the business, properties, assets, liabilities,
capitalization, stockholder's equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of
the Company that, in the sole judgment of Parent, is or may be materially
adverse to the Company or to the value of the Shares to Purchaser, Parent
or any other affiliate of Parent or Purchaser, or Parent shall have become
aware of any facts that, in the sole judgment of Parent, have or may have
material adverse significance with respect to either the value of the
Company or the value of the Shares to Purchaser, Parent or any other
affiliate of Parent; or
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange, Inc., any other national securities exchange or in
the over-the-counter market in the United States; (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory); (iii) any extraordinary or
material adverse change in the financial markets or major stock exchange
indices in the United States or abroad or in the market price of Shares,
including, without limitation, a decline of at least 10% in either the Dow
Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from
that existing at the close of business on February 3, 1997; (iv) any
material change in United States currency exchange rates or any other
currency exchange rates or a suspension of, or limitation on, the markets
therefor; (v) the commencement of a war or armed hostilities or other
international 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, a material acceleration or worsening thereof; or
(e) unless Parent shall have consented in writing, the Company shall have
(i) split, combined or otherwise changed, or authorized or proposed a
split, combination or other change of, the Shares or its capitalization;
(ii) issued, distributed, pledged or sold, or authorized, proposed or
announced the issuance, distribution, pledge or sale of (A) any shares of
capital stock (including, without limitation, the Shares), or
30
<PAGE>
securities convertible into any such shares, or any rights, warrants, or
options to acquire any such shares or convertible securities, or (B) any
other securities in respect of, in lieu of, or in substitution for Shares;
(iii) purchased or otherwise acquired or caused a reduction in the number
of, or proposed or offered to purchase or otherwise acquire or cause a
reduction in the number of, any outstanding Shares or other securities of
the Company; (iv) declared or paid any dividend or distribution on any
shares of capital stock or issued, or authorized, recommended or proposed
the issuance of, any other distribution in respect of the Shares, whether
payable in cash, securities or other property, or altered or proposed to
alter any material term of any outstanding security; (v) issued, or
announce its intention to issue, any debt securities or any rights,
warrants or options entitling the holder thereof to purchase or otherwise
acquire any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with its past practice; (vi) authorized, recommended, proposed
or publicly announced its intention to enter into a (A) any merger,
consolidation, liquidation, dissolution, business combination, acquisition
or assets or securities or disposition of assets or securities other than
in the ordinary course of business, (B) any material change in its
capitalization, (C) any release or relinquishment of any material contract
rights, or (D) any comparable event not in the ordinary course of business;
(vii) authorized, recommended or proposed or announced its intention to
authorize, recommend or propose any transaction which could adversely
affect the value of the Shares; (viii) proposed, adopted or authorized any
amendment to its Certificate of Incorporation or Bylaws or similar
organizational documents or Purchaser or Parent shall have learned about
any such proposal or amendment which shall not have been previously
disclosed; (ix) entered into any new material contracts or cancelled or
substantially changed the terms of any existing material contracts; or (x)
agreed in writing or otherwise to take any of the foregoing actions; or
(f) the Company shall have (i) entered into any employment, severance or
similar agreement, arrangement or plan with any of its employees other than
in the ordinary course of business; (ii) entered into or amended any
agreements, arrangements or plans so as to provide for increased or
accelerated benefits to any employee as a result of or in connection with
the transactions contemplated by the Offer, the Second Step Merger or other
business combination; or (iii) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in
Section 3(2) of the Employee Retirement and Income Security Act of 1974, as
amended) of the Company, or Purchaser shall have become aware of any such
action that was not disclosed in publicly available filings prior to the
date of this Offer to Purchase; or
(g) Purchaser, Parent or another affiliate of Parent and the Company
shall have entered into an agreement that the Offer be terminated or
amended or Purchaser, Parent or another affiliate of Parent shall have
entered into an agreement with the Company providing for a merger or other
business combination with the Company,
which, in the sole judgment of Parent or Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser,
Parent or any affiliate of Parent) giving rise to any such condition makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment
or payment.
The foregoing conditions are for the sole benefit of Parent and Purchaser and
may be asserted by Parent or Purchaser regardless of the circumstances giving
rise to any such condition and may be waived by Parent or Purchaser, in whole
or in part, at any time and from time to time, in its sole discretion. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right, and the waiver of such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts or circumstances, and each such right
will be deemed an ongoing right which may be asserted at any time and from time
to time. Any determination by Parent or Purchaser concerning the events
described above will be final and binding upon all parties.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be
returned by the Depositary to the tendering stockholders.
31
<PAGE>
CERTAIN REGULATORY AND LEGAL MATTERS
Except as set forth in this Section, Purchaser is not aware of any approval
or other action by any governmental or administrative agency which would be
required for the acquisition or ownership of Shares by Purchaser as
contemplated herein. Should any such approval or other action be required, it
will be sought, but Purchaser has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such
matter, subject, however, to Purchaser's right to decline to purchase Shares
if any of the conditions specified in "THE TENDER OFFER--Certain Conditions of
the Offer" shall have occurred. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that adverse consequences might not result
to the Company's business or that certain parts of the Company's business
might not have to be disposed of if any such approvals were not obtained or
other action taken. If certain types of adverse action are taken with respect
to the matters discussed below, Purchaser could decline to accept for payment
or pay for any Shares tendered. See "THE TENDER OFFER--Certain Conditions of
the Offer" above for certain conditions of the Offer.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware and operations are conducted from four service centers in Alabama,
Arizona and Texas. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or principal places of business
in such states. In Edgar v. MITE Corp., the Supreme Court of the United States
held that the Illinois Business Takeover Act, which involved state securities
laws that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, a
number of Federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside
the state of enactment.
The Company's Certificate of Incorporation provides that it shall not be
subject to the provisions of Section 203 of the DGCL with respect to
restrictions upon business combinations involving the Company. Purchaser has
not attempted to comply with any other state takeover laws in connection with
the Offer and believes none of such laws to be applicable to the Offer. Should
any person seek to apply any state takeover law, Purchaser reserves the right
to take such action as then appears desirable, which may include challenging
the validity or applicability of any such statute allegedly applicable to the
Offer in appropriate court proceedings. Nothing in this Offer to Purchase nor
any action taken in connection herewith is intended as a waiver of that right.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Second Step Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment or pay for any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment or pay for any Shares tendered. See "THE TENDER OFFER--Certain
Conditions of the Offer."
Appraisal Rights. Holders of the Shares do not have appraisal rights as a
result of the Offer. However, if the Second Step Merger is consummated,
holders of the Shares in connection with the Second Step Merger will have
certain rights pursuant to the provisions of Section 262 of the DGCL to
dissent and demand appraisal of their Shares. Under Section 262, dissenting
stockholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Second Step Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such
judicial determination of the fair value of the Shares could be based upon
factors other than, or in addition to, the price per share to be paid in the
Second Step Merger or the market value of the Shares. The value so determined
could be more or less than the price per share to be paid in the Merger. See
"SPECIAL FACTORS--Appraisal Rights" and Annex III to this Offer to Purchase.
32
<PAGE>
Going Private Transactions. The Offer constitutes a "going private"
transaction under Rule 13e-3 of the Exchange Act. Consequently, Purchaser and
Parent have filed with the Commission the Schedule 13E-3, together with
exhibits, in addition to filing with the Commission a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"). Pursuant to Rule 13e-3, this Offer to
Purchase contains information relating to, among other matters, the fairness of
the Offer to the Company's stockholders.
Legal Proceedings. Purchaser is not aware of any pending or overtly
threatened legal proceedings which would affect the Offer or the Second Step
Merger. If any such matters were to arise, Purchaser could decline to accept
for payment or pay for any Shares tendered in the Offer. See "THE TENDER
OFFER--Certain Conditions of the Offer."
FEES AND EXPENSES
Parent and Purchaser have engaged Merrill Lynch as the Dealer Manager in
connection with the Offer. In addition, Merrill Lynch is acting as financial
advisor to Parent in connection with the proposed acquisition of the Company.
In consideration for these services Parent and Purchaser have agreed to pay
Merrill Lynch a fee equal to $500,000 upon commencement of the Offer. Purchaser
also has agreed to reimburse Merrill Lynch for its expenses, including
reasonable counsel fees, and to indemnify it against certain liabilities and
expenses, including certain liabilities under the federal securities laws.
Purchaser has retained D.F. King & Co., Inc., as Information Agent, and First
Chicago Trust Company of New York, as Depositary, in connection with the Offer.
The Information Agent and the Depositary will receive reasonable and customary
compensation for their services hereunder and reimbursement for their
reasonable out-of-pocket expenses. The Information Agent and the Depositary
will also be indemnified by Purchaser against certain liabilities in connection
with the Offer.
Neither Purchaser nor Parent, nor any officer, director, stockholder, agent
or other representative of Purchaser or Parent, will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Dealer Manager) for soliciting tenders of Shares pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies and other
nominees will, upon request, be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding materials to their
customers.
Expenses estimated to be incurred by Parent and Purchaser in connection with
the Offer are as follows:
<TABLE>
<S> <C>
Financial Advisor fees and expenses............................ $ 575,000
Depositary..................................................... $ 10,000
Information Agent.............................................. $ 10,000
Legal Fees..................................................... $ 500,000
Printing, mailing and distribution expenses.................... $ 98,000
Commission filing fee.......................................... $ 7,200
Miscellaneous fees and expenses................................ $ 9,800
----------
Total...................................................... $1,210,000
==========
</TABLE>
MISCELLANEOUS
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such state statute. If, after such
good faith effort, the Offer cannot comply with such state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares in such state. In any jurisdiction where the securities, blue
sky or other laws require the offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of Purchaser by Merrill Lynch or
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
33
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OTHER THAN AS CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY PURCHASER.
Purchaser and Parent have filed with the Commission the Schedule 14D-1,
pursuant to Rule 14d-1 of the Exchange Act, and the Schedule 13E-3, pursuant to
Rule 13e-3 of the Exchange Act, respectively, together with exhibits furnishing
certain information with respect to the Offer. Such Schedule 14D-1, Schedule
13E-3 and any amendments thereto, including exhibits, may be examined and
copies may be obtained at the same places and in the same manner as set forth
with respect to the Company in "THE TENDER OFFER--Certain Information
Concerning the Company" (except that they may not be available at the regional
offices of the Commission).
MAX ACQUISITION DELAWARE INC.
February 4, 1997
34
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The names, present principal
occupation or employment, and material occupations, positions, offices, or
employments during the last five years of each director and executive officer
of Sears, Roebuck and Co. are set forth below. Unless otherwise noted, the
officers and directors have held the positions indicated below with Parent for
the last five years or have served Parent in various administrative or
executive capacities for at least that long. The business address of each
person listed below is 3333 Beverly Road, Hoffman Estates, Illinois 60179, and
each person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
DIRECTORS POSITION WITH PARENT AND FIVE-YEAR EMPLOYMENT
HISTORY
Hall Adams, Jr............... Director since 1993. Chairman of the Board and
Chief Executive Officer of Leo Burnett Company,
Inc. (advertising agency) from January 1987 un-
til his retirement on January 1, 1992, Mr.
Adams is also a director of The Dun &
Bradstreet Corporation and McDonald's Corpora-
tion and a Trustee of Rush-Presbyterian St.
Luke's Medical Center.
Warren L. Batts.............. Director since 1986. Chairman of the Board of
Premark International, Inc. (consumer and com-
mercial products) from September 1986 until
June 1996 and Chairman of the Board and Chief
Executive Officer of Tupperware Corporation
since June 1996, Mr. Batts is also a director
of The Allstate Corporation, Cooper Industries,
Inc. and Sprint Corporation. He is also a
Trustee of the Art Institute of Chicago,
Children's Memorial Hospital of Chicago and
Northwestern University.
Alston D. Correll............ Director since 1996. Chairman of the Board and
Chief Executive Officer of Georgia-Pacific
Corp. since December 1993; President and Chief
Operating Officer of Georgia-Pacific Corp. from
1991 to 1993, Mr. Correll is also a Director of
Trust Company of Georgia and The Southern Com-
pany.
James W. Cozad............... Director since 1993. Chairman of the Board and
Chief Executive Officer of Whitman Corporation
(a diversified consumer and commercial products
company) from January 1990 until his retirement
on May 9, 1992, Mr. Cozad is also a director of
Eli Lilly and Company, Northern Funds, Inland
Steel Industries, Inc., Inland Steel Company,
and Whitman Corporation. He is also President
of the Lyric Opera of Chicago, a director of
the Indiana University Foundation and a Life
Trustee of the Northwestern Memorial Hospital
Corporation.
Arthur C. Martinez........... Director since 1995. Chairman of the Board,
President and Chief Executive Officer of Parent
since August 1995 and Chairman and Chief Execu-
tive Officer of the former Merchandise Group of
Parent from September 1992 until August 1995,
Mr. Martinez previously served as Vice Chairman
and a director of Saks Fifth Avenue from August
1990 to August 1992. Mr. Martinez is a member
of the board of directors of Ameritech Corpora-
tion, the Federal Reserve Bank of Chicago and
Northwestern Memorial Hospital and is a
<PAGE>
DIRECTORS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH PARENT AND FIVE-YEAR EMPLOYMENT
HISTORY
trustee of Northwestern University, the Orches-
tral Association of the Chicago Symphony Or-
chestra and the Art Institute of Chicago. Mr.
Martinez serves as chairman of the National Mi-
nority Supplier Development Council, Inc.
(NMSDC) and is Chairman of the Board of Trust-
ees of Polytechnic University.
Michael A. Miles............. Director since 1992. Chairman of the Board and
Chief Executive Officer of Philip Morris Compa-
nies Inc. (a holding company engaged primarily
in the manufacture and sale of various consumer
products) from September 1991 until his retire-
ment in July 1994, Mr. Miles served as Deputy
Chairman of Philip Morris Companies Inc. from
April 1991 to August 1991. Mr. Miles is a Spe-
cial Limited Partner of Forstmann Little & Co.
(a New York investment firm with interests in
electronics, aerospace, publishing and other
industries). He is also a director of The
Allstate Corporation, Dean Witter, Discover &
Co., Dell Computer Corp. and Time Warner Inc.
and a member of the International Advisory Com-
mittee of Chase Manhattan Bank. Mr. Miles is
also a Trustee of Northwestern University.
Richard C. Notebaert......... Director since 1996. Chairman of the Board,
President and Chief Executive Officer of
Ameritech Corporation (telephone, data and
video communications company) since April 1994.
Mr. Notebaert served as President and Chief Ex-
ecutive Officer of Ameritech from January 1994
to April 1994, as President and Chief Operating
Officer from June 1993 to January 1994 and as
Vice Chairman from January 1993 to June 1993.
He served as President of Ameritech Services,
Inc. (a wholly-owned subsidiary of Ameritech's
five state telephone companies) from June 1992
to January 1993, as President of Ameritech's
Indiana Bell subsidiary from 1989 to 1992 and
as President of Ameritech Mobile Communica-
tions, Inc. from 1986 to 1989. Mr. Notebaert is
a trustee of Northwestern University and the
Chicago Symphony Orchestra and is a member of
The Chicago Council on Foreign Relations, the
Civic Committee of The Commercial Club of Chi-
cago, The Economic Club of Chicago, The Busi-
ness Roundtable, The Council on Competitive-
ness, The Committee for Economic Development
and The Business Council.
Nancy C. Reynolds............ Director since 1982. Senior Consultant to The
Wexler Group, a unit of Hill and Knowlton,
Inc., since August 1992, Mrs. Reynolds was Vice
Chairman of The Wexler Group and Senior Vice
President of Hill and Knowlton Public Affairs
Worldwide (a public affairs consulting firm in
Washington, D.C.) from August 1990 until August
1992. Mrs. Reynolds is also a director of The
Allstate Corporation, Norrell Corporation, The
Wackenhut Corporation, The National Park Foun-
dation, The Central Africa Foundation-USA, The
Leakey Foundation, and a Trustee of The
Smithsonian's National Museum of the American
Indian.
Clarence B. Rogers, Jr.......
Director since 1980. Chairman of the Board of
Equifax Inc. (information-based administrative
services) since January 1997 and Chairman and
Chief Executive Officer of Equifax Inc. from
October 1992
2
<PAGE>
DIRECTORS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH PARENT AND FIVE-YEAR EMPLOYMENT
HISTORY
until December 1996. Mr. Rogers was President
and Chief Executive Officer of Equifax Inc.
from October 1989 until October 1992. He is
also a director of Briggs & Stratton Corpora-
tion, Dean Witter, Discover & Co., Equifax Can-
ada Inc., Oxford Industries, Inc. and Teleport
Communications Group, Inc.
Donald H. Rumsfeld........... Director since 1977. Mr. Rumsfeld is currently
in private business and serves as Chairman of
the Board of Trustees of the RAND Corporation.
He served as Chairman, President and Chief Ex-
ecutive Officer of General Instrument Corpora-
tion (an electronics company) from October 1990
until August 1993. Mr. Rumsfeld was senior ad-
visor to William Blair & Co. (an investment
banking firm) from October 1985 until October
1990. From 1977 to 1985, he served as CEO of
G.D. Searle & Co. He is Chairman of the Board
of Directors of Gilead Sciences, Inc., and also
a director of Asea Brown Boveri, Gulfstream
Aerospace Corp., Kellogg Company, Metricom,
Inc. and Tribune Company. Mr. Rumsfeld served
as Personal Representative of the President of
the United States in the Middle East from No-
vember 1983 to May 1984 and was on leave of ab-
sence as a director during that period. Prior
to joining Searle, Mr. Rumsfeld served in a va-
riety of U.S. Government posts from 1957 to
1977, including U.S. Congress, Ambassador to
NATO, White House Chief of Staff and Secretary
of Defense.
Dorothy A. Terrell........... Director since 1995. President of SunExpress,
Inc. (operating company of Sun Microsystems,
Inc., a leading supplier of open network com-
puting products and services) and Corporate Ex-
ecutive Officer of Sun Microsystems, Inc. since
August, 1991. Ms. Terrell previously served as
a Group Manager in Digital Equipment Corpora-
tion from October, 1987 to July, 1991. She is a
member of the board of directors of General
Mills, Inc., Massachusetts Technology Develop-
ment Corporation and The Computer Museum. Her
professional affiliations include The Boston
Club and the Massachusetts Governor's Council
on Economic Growth and Technology.
3
<PAGE>
EXECUTIVE OFFICERS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH PARENT AND FIVE-YEAR EMPLOYMENT
HISTORY
Paul A. Baffico.............. President, Automotive Group since 1996.
James A. Blanda.............. Vice President and Controller since 1992.
John H. Costello............. Senior Executive Vice President, General Manag-
er, Marketing since April 1993; prior to join-
ing Parent, Mr. Costello was President and
Chief Operating Officer of Nielsen Marketing
Research USA.
Steven D. Goldstein.......... President, Credit and Chairman of Sears Na-
tional Bank since April 1996; prior to joining
Parent he had been Chairman and Chief Executive
Officer of American Express Bank from April
1991 to February 1996.
Alan J. Lacy................. Executive Vice President and Chief Financial
Officer since January 1, 1995; Senior Vice
President, Finance, from 1994 to 1995; prior to
joining Parent he had been Vice President, Fi-
nancial Services and Systems of Philip Morris
Companies, Inc. and President of Philip Morris
Capital Corporation since September 1993, and
Senior Vice President of Kraft General Foods in
charge of finance, strategy and development
matters from September 1989 to September 1993.
Michael D. Levin............. Senior Vice President, General Counsel and Sec-
retary since March 1, 1996; Senior Vice Presi-
dent and General Counsel from January 1, 1996
through February 29, 1996; partner in the law
firm of Latham & Watkins from 1982 through
1995.
Robert L. Mettler............ President, Merchandising-Full Line Stores since
February 1996; President--Apparel Group from
1993-1996; prior to joining Parent he had been
President and Chief Executive Officer of
Robinson's Inc.
William G. Pagonis........... Executive Vice President, Logistics since 1994;
Senior Vice President, Logistics from 1993-
1994; prior to joining Parent he had been a
Lieutenant General in the U.S. Army.
Anthony J. Rucci............. Executive Vice President, Administration since
October 1993; prior to joining Parent he had
been Senior Vice President, Strategy, Business
Development and External Affairs and Senior
Vice President, Human Resources, of Baxter In-
ternational, Inc.
William L. Salter............ President, Home Stores since 1996.
Joseph A. Smialowski......... Senior Vice President and Chief Information Of-
ficer of Parent since 1995; Vice President and
Chief Information Officer from 1993-1995; prior
to joining the Parent, Mr. Smialowski was a
partner in the Management Horizons Division of
Price Waterhouse, LLP.
Allan B. Stewart............. President, Stores-Full Line Stores since 1996.
Jane J. Thompson............. President, Home Services since 1996.
4
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Unless otherwise
indicated, each person identified below has been employed by Parent for the
last five years and all information concerning the current business address,
present principal occupation or employment and five-year employment history
for each person is the same as the information given above. In addition to
holding the offices indicated, Ms. Thompson, Mr. Pigott and Ms. Schneider are
also directors of Purchaser. All persons listed below are citizens of the
United States.
Jane J. Thompson............. President.
John T. Pigott............... Vice President and Treasurer. Vice President,
Finance--Home Services of Parent since January
1996.
Pamela R. Schneider.......... Vice President and Secretary. Vice President,
Law--Home Services of Parent since March 1996;
Senior Vice President and General Counsel of
JMC Group, Inc. from March 1995 through
February 1996 and Vice President and Assistant
General Counsel thereof from 1993-1995; prior
thereto, Ms. Schneider was Assistant Vice
President and Associate Counsel of San Diego
Trust & Savings Bank.
Steven M. Cook............... Assistant Secretary. Assistant General Counsel
of Parent since July 1996; prior thereto, Mr.
Cook was associated with the law firm of
Skadden, Arps, Slate, Meagher & Flom.
5
<PAGE>
ANNEX II
INVESTMENT BANKING
Corporate and
Institutional
Client Group
World Financial Center
North Tower
LOGO New York, New York 10281-1330
February 3, 1997
Board of Directors
Sears, Roebuck and Co.
3333 Beverly Road, B6-1458
Hoffman Estates, IL 60179
Attention: Mr. Alan J. Lacy
Executive Vice President and
Chief Financial Officer
Gentlemen:
Sears, Roebuck and Co. (the "Company") proposes to make a tender offer (the
"Offer") for all outstanding shares of common stock, par value $0.01 per share
(the "Shares"), of MaxServ, Inc., its 64% owned subsidiary (the "Subject
Company"), other than the Shares already owned by the Company, at $7.00 per
Share, net to the seller in cash.
You have asked us whether, in our opinion, the proposed cash consideration
to be paid by the Company pursuant to the Offer is fair from a financial point
of view to holders of Shares other than the Company.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended May 31, 1996 and
the Subject Company's Forms 10-Q and related unaudited financial
information for the quarterly periods ended August 31, 1996 and
November 30, 1996;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Subject Company, furnished to us by members of the Company's management
who monitor the operations of the Subject Company;
(3) Reviewed certain financial forecasts prepared by the financial advisor
to the special committee of independent directors of the Subject
Company;
(4) Conducted discussions with members of the Company's management who
monitor the operations of the Subject Company concerning the Subject
Company's business and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and compared them with those of certain publicly traded
companies which we deemed to be reasonably similar to the Subject
Company;
(6) Compared the results of operations of the Subject Company with those of
certain companies which we deemed to be reasonably similar to the
Subject Company;
<PAGE>
(7) Reviewed premiums paid in certain minority interest transactions which
we deemed to be relevant; and
(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company, and
we have not independently verified such information or undertaken an
independent appraisal of the assets or liabilities of the Subject Company.
With respect to the financial forecasts of the Subject Company furnished to us
by the Company, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the management
of the Company as to the expected future financial performance of the Subject
Company. We have not been provided with any information by the Subject Company
and neither received nor reviewed any financial forecasts prepared by the
Subject Company pertaining to its future prospects. In addition, we have had
no discussions with members of the Subject Company's management concerning the
Subject Company's business and prospects. Although we were provided with
certain financial forecasts prepared by the financial advisor to the special
committee of independent directors of the Subject Company, we have, for
purposes of our opinion and with the concurrence of members of the Company's
management who monitor the operations of the Subject Company, considered only
those forecasts relating to the years ended December 31, 1996 and 1997 since,
in our view and theirs, the forecasts for subsequent periods were based on
assumptions concerning the Subject Company's business and prospects that are
unreasonable.
We have, in the past, provided financial advisory and financing services to
the Company and have received fees for such services. We are also currently
providing financial advisory services to the Company and will receive fees for
such services. We currently own 6,312,900 shares of common stock of the
Company. In addition, in the ordinary course of our business, we may actively
trade the debt and equity securities of the Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash consideration to be paid by the Company pursuant to the
Offer is fair from a financial point of view to holders of Shares other than
the Company.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
<PAGE>
ANNEX III
Set forth below is Section 262 of the General Corporation Law of the State
of Delaware regarding appraisal rights, which rights will only be available in
connection with the Second Step Merger.
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
(S) 262 Appraisal Rights--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
subsection (g) of (S) 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section, provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
2
<PAGE>
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
3
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
4
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of the addresses set forth below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
----------------
Facsimile Transmission:
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
By Hand: By Overnight Courier: By Mail:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Attention: Tenders & Attention: Tenders & Attention: Tenders &
Exchanges Exchanges Exchanges
c/o THE DEPOSITORY TRUST Suite 4680--MXV P.O. Box 2569, Suite 4660
COMPANY 14 Wall Street, 8th Floor Jersey City, NJ 07303-
55 Water Street, DTC TAD New York, NY 10005 2569
Vietnam Veterans Memorial
Plaza
New York, NY 10041
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery
may be directed to the Dealer Manager or the Information Agent at their
respective telephone numbers and locations listed below. Stockholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1330
(212) 449-8209 (call collect)
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING
77 Water Street
New York, New York 10005
Toll Free (800) 848-3405
Banks and Brokerage Firms, please call:
(212) 269-5550
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MAXSERV, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 4, 1997
OF
MAX ACQUISITION DELAWARE INC.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Overnight Courier: By Mail:
By Hand:
First Chicago Trust First Chicago Trust
First Chicago Trust Company Company
Company of New York of New York
of New York Attention: Tenders & Attention: Tenders &
Attention: Tenders & Exchanges Exchanges
Exchanges Suite 4680 -- MXV P.O. Box 2569, Suite 4660
c/o THE DEPOSITORY TRUST 14 Wall Street, 8th Floor Jersey City, NJ 07303-
COMPANY New York, NY 10005 2569
55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, NY 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)A
(PLEASE FILL IN, IF BLANK, EXACTLY AS
NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
- --------------------------------------------------------------------------------
*Need not be completed by stockholders delivering Shares by book-
entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary
are being tendered hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by stockholders of MaxServ,
Inc. (the "Company") if certificates representing Shares (as defined below)
("Share Certificates") are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase (as defined below)) is utilized,
if delivery of Shares is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC") or the Philadelphia Depository
Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in the section
entitled "THE TENDER OFFER--Procedure For Tendering Shares" of the Offer to
Purchase.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedure set forth in the section entitled "THE TENDER OFFER--
Procedure For Tendering Shares" of the Offer to Purchase. See Instruction 2.
Delivery of documents to a Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures does not constitute delivery to the
Depositary.
[_] CHECK HERE IF 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 Box of Applicable Book-Entry Transfer Facility:
(check one)
[_] DTC [_] PDTC
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
[_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Max Acquisition Delaware Inc., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Sears, Roebuck and
Co., a New York corporation ("Parent"), the above-described shares of common
stock, $.01 par value per share (the "Shares"), of MaxServ, Inc., a Delaware
corporation (the "Company"), pursuant to Purchaser's offer to purchase any and
all outstanding Shares at a purchase price of $7.00 per Share (the "Offer
Price"), net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated February
4, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect thereof on or after February 4, 1997
(a "Distribution") and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any Distributions), or transfer ownership of such
Shares (and any 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
Purchaser, (b) present such Shares (and any Distributions) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any Distributions), all in
accordance with the terms of and subject to the conditions to the Offer.
The undersigned hereby irrevocably appoints designees of Purchaser as the
attorneys and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Shares tendered hereby
which have been accepted for payment by Purchaser prior to the time of any
vote or other action (and any Distributions), at any meeting of stockholders
of the Company (whether annual or special and whether or not an adjourned
meeting) or otherwise. This power of attorney and proxy are irrevocable, are
coupled with an interest in the Shares tendered hereby, and are granted in
consideration of, and effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with the terms of the Offer. Such acceptance
for payment shall revoke any other proxy or written consent granted by the
undersigned at any time with respect to such Shares (and any Distributions),
and no subsequent proxies will be given or written consents executed by the
undersigned (and if given or executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that when the same are accepted for payment
by Purchaser, Purchaser will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distributions). All authority herein conferred
or agreed to be conferred 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 the section entitled "THE TENDER OFFER--Procedure
for Tendering Shares" of the Offer to Purchase and in the instructions hereto
will constitute an agreement between the undersigned and Purchaser upon the
terms and subject to the conditions of the Offer. The undersigned acknowledges
that no interest will be paid on the Offer Price for tendered Shares
regardless of any extension of the Offer or any delay in making such payment.
<PAGE>
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing 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 in the box entitled "Special Delivery Instructions," please mail the
check for the purchase price of any Shares purchased and return any Share
Certificates 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 the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of any Shares purchased and return any
Share Certificates evidencing any Shares not tendered or not purchased in the
name(s) of, and mail said check and Share Certificates to, the person(s) so
indicated. The undersigned acknowledges that Purchaser has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if Purchaser does not accept for
payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE
(SEE INSTRUCTIONS 1, 5, 6 AND INSTRUCTIONS 1, 5, 6 AND 7)
7)
To be completed ONLY if the check
To be completed ONLY if the check for the purchase price of Shares
for the purchase price of Shares purchased or Share Certificates
purchased or Share Certificates evidencing Shares not tendered or
evidencing Shares not tendered or not purchased are to be mailed to
not purchased are to be issued in someone other than the under-
the name of someone other than the signed, or to the undersigned at
undersigned, or if Shares tendered an address other than that shown
hereby and delivered by book-entry under the undersigned's signature.
transfer which are not purchased
are to be returned by credit to an
account at one of the Book-Entry
Transfer Facilities other than
that designated above.
Mail [_] check [_] Share Certif-
icate(s) to:
Name ______________________________
(PLEASE PRINT)
Address ___________________________
Issue [_] check [_] Share ___________________________________
Certificate(s) to: (ZIP CODE)
Name ______________________________
(PLEASE PRINT)
Address ___________________________
___________________________________
(ZIP CODE)
___________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9)
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON OTHER SIDE)
----------------------------------------------------
----------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: , 1997
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY
AS NAME(S) APPEAR(S) ON SHARE 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 PROVIDE THE
FOLLOWING INFORMATION AND SEE INSTRUCTION 5.)
Name(s): ___________________________________________
____________________________________________________
(PLEASE PRINT)
Capacity (full title): _____________________________
Address: ___________________________________________
____________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.: ____
(SEE SUBSTITUTE FORM W-9 ON
REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ______________________________
Name: ______________________________________________
(PLEASE TYPE OR PRINT)
Title: _____________________________________________
Name of Firm: ______________________________________
Address: ___________________________________________
____________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________
Dated: , 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 5. If Share
Certificates are registered in the name of a person or persons other than the
signer of this Letter of Transmittal, or if payment is to be made or delivered
to, or certificates evidencing unpurchased Shares are to be issued or returned
to, a person other than the registered owner or owners, then the tendered
Share Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the Share Certificates or stock powers, with the
signatures on the Share Certificates or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase)
is utilized, if the delivery of Shares is to be made by book-entry transfer
pursuant to the procedures set forth in the section entitled "THE TENDER
OFFER--Procedure for Tendering Shares" of the Offer to Purchase. 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 a manually signed
facsimile thereof) and any other documents required by this Letter of
Transmittal, or an Agent's Message in the case of a book-entry delivery, must
be received by the Depositary at one of its addresses set forth on the front
page of this Letter of Transmittal by the Expiration Date. Stockholders who
cannot deliver their Share Certificates and all other required documents to
the Depositary by the Expiration Date must tender their Shares pursuant to the
guaranteed delivery procedure set forth in the section entitled "THE TENDER
OFFER--Procedure for Tendering Shares" 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 Purchaser, must be received by
the Depositary prior to the Expiration Date; and (c) the Share Certificates
for all tendered Shares, in proper form for tender, 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 a manually
signed 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 the section entitled "THE TENDER
OFFER--Procedure for Tendering Shares" of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING PERSON, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
hereof), all tendering stockholders waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any Share Certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be
<PAGE>
tendered in the box entitled "Number of Shares Tendered." In such case, a new
Share Certificate for the remainder of the Shares represented by the old Share
Certificate will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Delivery Instructions"
herein, as promptly as practicable following the expiration or termination of
the Offer. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any other
change whatsoever.
If any of the Shares tendered hereby are owned 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 Share Certificate(s) or separate
stock powers are required, unless payment of the purchase price is to be made,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be returned, in the name of any person other than the registered holder(s).
Signatures on any such Share Certificates or stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of the Shares tendered hereby, the Share Certificate(s) 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 such Share Certificate(s). Signature(s) on any such
Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share 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 Purchaser of the authority, of such person so
to act must be submitted.
6. STOCK TRANSFER TAXES. Purchaser will pay 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 returned in the name of, any
person other than the registered holder(s), then 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. EXCEPT AS PROVIDED IN THIS
INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER OF TAX STAMPS TO BE
AFFIXED TO THE SHARE CERTIFICATE(S) LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any Share
Certificates not tendered or not purchased are to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address other than that shown above,
the appropriate boxes on this Letter of Transmittal should be completed.
Persons tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at any of the Book-Entry Transfer
Facilities as such stockholder may designate in the box entitled "Special
Payment Instructions." If no such instructions are given, any such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facilities designated above.
8. SUBSTITUTE FORM W-9. The tendering holder of Shares is required to provide
the Depositary with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. In the case of such a holder who has completed the box entitled
"Special Payment Instructions" above, however, the correct TIN on Substitute
Form W-9 should be provided for the recipient of the payment pursuant to such
INSTRUCTIONS. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares to a $50 penalty and to 31% federal
income tax backup withholding on the payment of the purchase price for the
Shares.
<PAGE>
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance 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 Offer to Purchase. Additional copies of the Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as
payer) with such holder's correct TIN on Substitute Form W-9 below. The holder
of Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as
a result of a failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding. If the Depositary is not provided with the correct TIN,
the holder of Shares may be subject to a $50 penalty imposed by the Internal
Revenue Service and payments made to such holder may be subject to backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. 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. If the tendering holder of Shares has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the holder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 30
days, the Depositary may withhold 31% of all payments of the purchase price to
such holder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer PART III--Social
FORM W-9 Identification Number--For Security Number OR
DEPARTMENT OF all accounts, enter taxpayer Employer Identification
THE TREASURY identification number in the Number
box at right. (For most
individuals, this is your
social security number. If
you do not have a number, see
OBTAINING A NUMBER in the
enclosed Guidelines.) Certify
by signing and dating below.
NOTE:If the account is in
more than one name, see chart
in the enclosed Guidelines to
determine which number to
give the payer.
INTERNAL
REVENUE ------------------------
SERVICE (If awaiting TIN write
"Applied For")
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
- --------------------------------------------------------------------------------
PART II--For Payees exempt from backup withholding, see the enclosed
Guidelines and complete as instructed therein.
- --------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not
been notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (b) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if,
after being notified by the IRS that you were subject to backup withholding,
you received another notification from the IRS that you were no longer
subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE ____________________________ DATE _________________________________
NAME ________________________________________________________________________
ADDRESS _____________________________________________________________________
CITY ____________________ STATE ____________________ ZIP ____________________
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON
APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER
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 (a) 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 (b) I intend to mail or deliver an application in
the near future. I understand that, notwithstanding the information I
provided in Part III of the Substitute Form W-9 (and the fact that I have
completed this Certificate of Awaiting Taxpayer Identification Number), if
I do not provide a correct TIN to the Depositary within thirty (30) days,
31% of all reportable payments made to me pursuant to the Offer may be
withheld.
------------------------------------ ------------------------------------
Signature Date
If you have any questions regarding the Offer, please contact the Information
Agent or the Dealer Manager.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (Call Collect)
(800) 755-3107 (Call Toll Free)
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1330
(212) 449-8209 (Call Collect)
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK
OF
MAXSERV, INC.
TO
MAX ACQUISITION DELAWARE INC.
A WHOLLY OWNED SUBSIDIARY
OF
SEARS, ROEBUCK AND CO.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
----------------
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares of common stock, par value $.01 per share (the "Shares"), of MaxServ,
Inc., a Delaware corporation (the "Company"), are not immediately available,
or if the procedure for book-entry transfer cannot be completed on a timely
basis or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date (as defined in the Offer to Purchase, dated
February 4, 1997 (the "Offer to Purchase")). Such form may be delivered by
hand or facsimile transmission, or mail to the Depositary. See the section
entitled "THE TENDER OFFER--Procedure for Tendering Shares" of the Offer to
Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand: By Overnight Courier: By Mail:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Attention: Tenders & Attention: Tenders & Attention: Tenders &
Exchanges Exchanges Exchanges
c/o THE DEPOSITORY TRUST Suite 4680 -- MXV P.O. Box 2569, Suite 4660
COMPANY 14 Wall Street, 8th Floor Jersey City, NJ 07303-
55 Water Street, DTC TAD New York, NY 10005 2569
Vietnam Veterans Memorial
Plaza
New York, NY 10041
By Facsimile Transmission:
(201) 222-4720
or
(201) 222-4721
For Confirmation of Facsimile Transmission:
(201) 222-4707
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Max Acquisition Delaware Inc., a Delaware
corporation and a wholly owned subsidiary of Sears, Roebuck and Co., a New
York corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase and the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which are hereby acknowledged, the number
of Shares specified below pursuant to the guaranteed delivery procedures
described in the section entitled "THE TENDER OFFER--Procedure for Tendering
Shares" of the Offer to Purchase.
Number of Shares: ................... .....................................
Certificate Nos. (If Available): .... .....................................
SIGNATURE(S) OF HOLDER(S)
.....................................
Dated:........................., 1997
Check ONE box if Shares will be
delivered by book-entry transfer: Name(s) of Holder(s): ...............
[_]The Depository Trust Company .....................................
[_]Philadelphia Depository Trust .....................................
Company PLEASE TYPE OR PRINT
Account Number: ..................... .....................................
ADDRESS
.....................................
ZIP CODE
.....................................
AREA CODE AND TELEPHONE NO.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other equity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, guarantees the delivery to the Depositary of the Shares
tendered hereby, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile(s) thereof) and any other
required documents, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery of Shares, all within three New
York Stock Exchange trading days of the date hereto.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing Shares to the Depositary within the time period
shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
..................................... .....................................
NAME OF FIRM AUTHORIZED SIGNATURE
..................................... .....................................
ADDRESS TITLE
..................................... Name: ...............................
ZIP CODE PLEASE TYPE OR PRINT
..................................... Dated: ........................, 1997
AREA CODE AND TELEPHONE NO.
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
2
<PAGE>
World Financial Center
North Tower
LOGO New York, New York 10281-1330
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAXSERV, INC.
AT
$7.00 NET PER SHARE
BY
MAX ACQUISITION DELAWARE INC.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE OFFER IS EXTENDED.
February 4, 1997
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Max Acquisition Delaware Inc., a Delaware corporation ("Purchaser"), and a
wholly owned subsidiary of Sears, Roebuck and Co., a New York corporation
("Parent"), is offering to purchase any and all outstanding shares of common
stock, par value $.01 per share (the "Shares"), of MaxServ, Inc., a Delaware
corporation (the "Company"), at a purchase price of $7.00 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 4, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer") enclosed herewith. All capitalized terms used but not
defined herein shall have the meaning ascribed to them in the Offer to
Purchase.
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary or complete
the procedures for book-entry transfer prior to the Expiration Date must
tender their Shares according to the guaranteed delivery procedures set forth
in the section subtitled "THE TENDER OFFER--Procedure for Tendering Shares" of
the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated February 4, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
<PAGE>
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE
OFFER IS EXTENDED (THE "EXPIRATION DATE").
Please note the following:
1. The tender price is $7.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer is not conditioned upon any minimum number of Shares being
tendered or upon the approval of the Board of Directors of the Company or
any committee thereof. The Offer is, however, subject to the satisfaction
of certain other terms and conditions set forth in the Offer to Purchase.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents should be sent to the
Depositary and (ii) Share Certificates representing the tendered Shares or a
timely Book-Entry Confirmation should be delivered to the Depositary in
accordance with the instructions set forth in the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in the
section subtitled "THE TENDER OFFER--Procedure for Tendering Shares" of the
Offer to Purchase.
Neither Purchaser, Parent nor any officer, director, stockholder, agent or
other representative of Purchaser will pay any fees or commissions to any
broker, dealer or other person (other than the Dealer Manager, the Depositary
and the Information Agent as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. Purchaser will, however, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. Purchaser will pay or
cause to be paid any transfer taxes payable on the transfer of Shares to it,
except as otherwise provided in the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D. F. King & Co., Inc. 77 Water Street, New York, New York 10005, (212) 269-
5550 or (800) 755-3107.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
Merrill Lynch & Co.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAXSERV, INC.
AT
$7.00 NET PER SHARE
BY
MAX ACQUISITION DELAWARE INC.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE OFFER IS EXTENDED.
February 4, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated February 4,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to an offer by Max Acquisition
Delaware Inc., a Delaware corporation ("Purchaser"), and a wholly owned
subsidiary of Sears, Roebuck and Co., a New York corporation ("Parent"), to
purchase any and all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of MaxServ, Inc., a Delaware corporation (the
"Company"), at a purchase price of $7.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer.
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
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.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
Please note the following:
1. The tender price is $7.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, March 4, 1997, unless the Offer is extended.
4. The Offer is not conditioned upon any minimum number of Shares being
tendered or upon the approval of the Board of Directors of the Company or
any committee thereof. The Offer is, however, subject to the satisfaction
of certain other terms and conditions set forth in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAXSERV, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated February 4, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection
with the offer by Max Acquisition Delaware Inc., a Delaware corporation
("Purchaser"), and a wholly owned subsidiary of Sears, Roebuck and Co., a New
York corporation, to purchase any and all outstanding shares of common stock,
par value $.01 per share ("Shares"), of MaxServ, Inc., a Delaware corporation.
This will instruct you to tender to Purchaser 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, upon the terms and subject to the
conditions set forth in the Offer to Purchase.
Date: ______________, 1997
NUMBER OF SHARES OF COMMON STOCK TO BE TENDERED:*_________________
Account Number: ________________
SIGN HERE
___________________________________________
(Signature(s))
___________________________________________
(Print Name(s))
___________________________________________
(Print Address(es))
___________________________________________
(Area Code and Telephone Number(s))
___________________________________________
(Taxpayer Identification or Social
Security Number(s))
- -------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
2
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens,
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, i.e., 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor, the
minor(1)
6. Account in the name of The ward, minor
guardian or committee or incompetent
for a designated ward, person(3)
minor or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust The actual
account that is not owner(1)
a legal or valid
trust under State
law
8. Sole proprietorship The owner(4)
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
9. A valid trust, estate The legal
or pension trust entity(5)
10. Corporate The corporation
11. Religious, charitable The organization
or educational
organization
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district or
prison) that receives
agricultural program
payments
- --------------------------------------------
</TABLE>
(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) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) The name of the owner must be shown.
(5) List first and circle the name of the legal trust, estate or pension
trust. Do not furnish the identification number 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>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees generally exempted from backup withholding on payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A dealer in securities or commodities required to register in the United
States or a possession thereof.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a) of the Code.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
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
of the Code.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is 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: Payees 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 the
payee has not provided his or her correct taxpayer identification number to
the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
. Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
. Payments on tax-free covenant bonds under Section 1451 of the Code.
. Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes and to help verify the accuracy of the recipient's
tax return. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your correct taxpayer identification number to a payer, 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.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup imposition of withholding, you are subject to a
penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
MEDIA CONTACT:
TOM NICHOLSON (847)
286-5231
FOR IMMEDIATE RELEASE
SEARS COMMENCES CASH TENDER OFFER
FOR MAXSERV, INC. COMMON STOCK
CHICAGO, Illinois -- Sears, Roebuck and Co. [NYSE: S] today announced that
its wholly-owned subsidiary, Max Acquisition Delaware Inc., has commenced a
$7.00 per share cash tender offer for all outstanding shares of common stock
of MaxServ, Inc. [Nasdaq SmallCap MarketSM: MXSV] not currently held by Sears.
Sears owns approximately 64.4% of the outstanding shares as of November 30,
1996. The offer is not conditioned on any minimum number of shares being
tendered or upon the approval of the Board of Directors of MaxServ or any
committee of the MaxServ Board. Following consummation of the tender offer,
Sears intends to acquire any remaining MaxServ shares in a cash merger at the
same price as paid in the offer.
Representatives of Sears and members of a Special Committee of the MaxServ
Board of Directors have previously sought to negotiate an offer on terms
agreeable to the parties. Such negotiations, however, have been unsuccessful
to date and Sears proposal to offer $7.00 per share in cash was rejected by
the Special Committee.
Sears today sent the following letter to the MaxServ Board:
Dear Members of the Board:
I am writing to advise you that our wholly-owned subsidiary, Max
Acquisition Delaware Inc., has today commenced a cash tender offer to
purchase all of the outstanding shares of MaxServ, Inc. common stock (the
"Shares") that it does not already own for $7.00 per share. This price
represents a 43% premium to the $4.88 per share closing price for the
Shares on December 4, 1996, the last trading day prior to Sears
announcement of its interest in acquiring the outstanding Shares. We
believe this offer is fair to all stockholders (other than Sears) and have
obtained the opinion of Merrill Lynch & Co. that this offer is fair, from a
financial point of view, to the holders of Shares other than Sears.
As you know, we have attempted to negotiate a transaction with the
Special Committee. At present, however, given the rejection of Sears
proposal to offer $7.00 per Share by the Special Committee and our
inability to resolve our differences over the value attributable to the
Shares held by the minority stockholders, Sears has determined that it is
desirable to commence this tender offer to enable minority stockholders to
benefit from this attractive opportunity in a timely manner and to end the
uncertainties which have arisen out of this lengthy process.
Very truly yours,
/s/ Alan J. Lacy
-------------------------------------
Executive Vice President and
Chief Financial Officer
Merrill Lynch & Co. will act as Dealer Manager for the tender offer. The
consummation of the tender offer is subject only to customary conditions and
is not subject to the tender of a minimum amount of shares. D.F. King & Co.,
Inc. will act as Information Agent for the tender offer.
Sears, Roebuck and Co. owns and operates more than 2,300 department and
specialty stores in the United States, including HomeLife furniture, Sears
Hardware, and automotive parts and tire outlets, which include 390 Western
Auto stores. Sears retail network also extends to over 400 Sears-authorized
dealer stores and over 900 independently owned and operated Western Auto
retail locations. Sears, Roebuck and Co. is a majority owner of Sears Canada
and Sears Mexico. The Hoffman Estates, Illinois-based company had annual
revenue of more than $38 billion in 1996.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated February
4, 1997 and the related Letter of Transmittal, and is being made to all holders
of Shares. Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with such state statute. If, after such good
faith effort, the Offer cannot comply with such state statute, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Merrill Lynch & Co.
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
Any and All Outstanding Shares of Common Stock
of
MaxServ, Inc.
at
$7.00 Net Per Share
by
Max Acquisition Delaware Inc.
a wholly owned subsidiary of
Sears, Roebuck and Co.
Max Acquisition Delaware Inc., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Sears, Roebuck and Co., a New York corporation
("Parent"), is offering to purchase any and all outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of MaxServ, Inc., a Delaware
corporation (the "Company"), at a price of $7.00 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated February 4, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which together constitute the
"Offer"). Following the Offer, Purchaser intends to effect the Second Step
Merger described below.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, MARCH 4, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED OR UPON THE APPROVAL OF THE BOARD OF DIRECTORS OF THE COMPANY OR ANY
COMMITTEE THEREOF. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN TERMS AND
CONDITIONS AS SET FORTH IN THE SECTION ENTITLED "THE TENDER OFFER--CERTAIN
CONDITIONS OF THE OFFER" OF THE OFFER TO PURCHASE.
Parent currently beneficially owns 7,033,333 Shares, representing
approximately 64.4% of the outstanding Shares at November 30, 1996. Parent has
negotiated with the Company, represented by a special committee of the Board of
Directors of the Company (the "Special Committee"), as to the terms of the
acquisition of the Shares not owned by Purchaser. These negotiations have been
unsuccessful to date.
Following the purchase of the Shares pursuant to the Offer and in
accordance with relevant provisions of the General Corporation Law of the State
of Delaware (the "DGCL"), Parent intends to cause Purchaser to be merged with
and into the Company (the "Second Step Merger"). Following consummation of the
Second Step Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and will be a wholly owned subsidiary of Parent. The
timing of the Second Step Merger is set forth in the section entitled "SPECIAL
FACTORS--Purpose and Structure of the Offer; Plans for the Company after the
Offer" of the Offer to Purchase. At the effective time of the Second Step Merger
(the "Effective Time"), each issued and outstanding Share (other than Shares
owned by the Company as treasury stock, Shares owned by Parent or Purchaser or
any subsidiary thereof, or Shares with respect to which appraisal rights are
properly exercised under the DGCL) will be cancelled and converted automatically
into the right to receive $7.00 in cash, or any higher price that may be paid
per Share in the Offer, without interest thereon.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if and when Purchaser gives oral or written notice to First Chicago
Trust Company of New York (the "Depositary") of Purchaser's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for the Shares be paid, regardless of any
extension of the Offer or any delay in making such payment. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined in
the section entitled "THE TENDER OFFER--Acceptance for Payment and Payment of
Shares" of the Offer to Purchase) pursuant to the procedures set forth in the
section entitled "THE TENDER OFFER--Procedure for Tendering Shares" of the Offer
to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message, as defined below, in connection with a book-entry transfer and
(iii) any other documents required under the Letter of Transmittal. The term
"Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility
to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgment from the participant in such Book-Entry Transfer
Facility tendering the Shares that are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
Purchaser expressly reserves the right, at any time and from time to time,
to extend the period of time during which the Offer is open, including upon the
occurrence of any condition specified in the section entitled "THE TENDER OFFER
- -- Certain Conditions of the Offer" of the Offer to PUrchase, by giving oral or
written notice of such extension to the Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be made not later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
During any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer and to the rights of a tendering stockholder to
withdraw such stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on March 4, 1997 (or the latest time and date at which the Offer, if
extended by Purchaser, shall expire) and, unless theretofore accepted for
payment by Purchaser pursuant to the Offer, may also be withdrawn at any time
after April 4, 1997. For the withdrawal to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at its address set forth on the back cover page of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of such Shares, if different from that of the
person who tendered such Shares. If Share Certificates evidencing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such Share Certificates, the serial numbers
shown on such Share Certificates must be submitted to the Depositary, and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in the section entitled "THE TENDER OFFER -- Procedure
for Tendering Shares" of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer" as set forth in the
section entitled "THE TENDER OFFER -- Procedure for Tendering Shares") of the
Offer to Purchase, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including the
time of receipt) of any notice of withdrawal will be determined by Purchaser, in
its sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) and Rule
13e-3(e)(1) of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
Requests are being made to the Company for use of the Company's stockholder
list and security position listings for disseminating the Offer to holders of
Shares and communicating with holders of Shares in connection with the Offer.
The Offer to Purchase and the related Letter of Transmittal will be mailed to
record holders of Shares whose names appear on the Company's stockholder's list
and will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
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.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager as set forth below and additional copies of the
Offer to Purchase and the related Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent and will be furnished
promptly at Purchaser's expense. No fees or commissions will be paid to brokers,
dealers or other persons (other than the Information Agent and the Dealer
Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D. F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (Call Collect)
or
(800) 755-3107 (Call Toll Free)
The Dealer Manager for the Offer is:
Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1330
(212) 449-8209 (Call Collect)
February 4, 1997
