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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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ANDROS INCORPORATED
(NAME OF SUBJECT COMPANY)
ANDROS INCORPORATED
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
345281
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DANE NELSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ANDROS INCORPORATED
2332 FOURTH STREET
BERKELEY, CALIFORNIA 94710-2402
(510) 849-5700
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of
the Person(s) Filing Statement)
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WITH A COPY TO:
<TABLE>
<S> <C>
STEVEN J. TONSFELDT, ESQ. SUSAN COOPER PHILPOT, ESQ.
BROBECK, PHLEGER & HARRISON LLP COOLEY GODWARD CASTRO HUDDLESON & TATUM
ONE MARKET, SPEAR STREET TOWER ONE MARITIME PLAZA, SUITE 2000
SAN FRANCISCO, CALIFORNIA 94105 SAN FRANCISCO, CALIFORNIA 94111
(415) 442-0900 (415) 693-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Andros Incorporated, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 2332 Fourth Street, Berkeley, California 94710-2402. The title of
the class of equity securities to which this Statement relates is the common
stock, par value $.01 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
The Statement relates to a tender offer by Andros Acquisition Inc., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Andros
Holdings Inc., a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated February 21, 1996, to
purchase all outstanding shares of Common Stock (the "Shares") at a price of
$18.00 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereafter referred to as the "Per Share Amount"), net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 21, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal (which together constitute the "Offer"). Parent
and the Purchaser are each direct or indirect wholly owned subsidiaries of
Genstar Capital Partners II, L.P. ("GCP II"). The sole general partner of GCP II
is Genstar Capital LLC ("GCLLC").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 14, 1996 (the "Merger Agreement"), among Parent, the Purchaser
and the Company. The Merger Agreement provides that, among other things, as
promptly as practicable after the consummation of the Offer and satisfaction or,
if permissible, waiver of all conditions to the Merger, the Purchaser will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation (the "Surviving Corporation"). A copy of the Merger
Agreement is attached hereto as Exhibit 2 and incorporated herein by reference.
According to the Offer of Purchase, the principal executive offices of the
Purchaser and Parent are located at Metro Tower, Suite 1170, 950 Tower Lane,
Foster City, California 94404-2121.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding between
the Company or its affiliates and (i) the Company, its executive officers,
directors or affiliates or (ii) the Purchaser, its executive officers, directors
or affiliates, is described in the Company's Information Statement set forth on
SCHEDULE I hereto or set forth below.
INDEMNIFICATION UNDER DGCL AND THE COMPANY'S CHARTER
The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "DGCL"), which provides that a
corporation may indemnify any person who is, or is threatened to be made, a
party to any threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the indemnified person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best in interests and, for
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is
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adjudged to be liable to the corporation. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses that such officer
or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director to the corporation or
its stockholders for violations of the director's fiduciary duty, except (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Article Twelfth of the Certificate of Incorporation of the Company provides
that, except under certain circumstances, directors of the Company shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duties as a director.
Article 5 of the Company's Bylaws provides that the Company shall, to the
fullest extent permitted by Section 145 of the DGCL, indemnify any director,
officer or trustee which it shall have power to indemnify under the Section
against any expenses, liabilities or other matters referred to in or covered by
that Section. Article 5 further provides that expenses incurred by a director of
the Company in defending a civil or criminal action, suit or proceeding by
reason of the fact that he is or was a director of the Company (or was serving
at the Company's request as a director or officer of another corporation) shall
be paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized by relevant sections of the DGCL.
The Merger Agreement provides that the Certificate of Incorporation and
Bylaws of the Surviving Corporation shall contain the respective provisions that
are set forth in the Article Twelfth of the Certificate of Incorporation of the
Company and Article 5 of the Bylaws of the Company, which provisions shall not
be amended, repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at, or any time prior to, the Effective Time were
entitled to indemnification thereunder unless such modification is required by
law. The Merger Agreement also provides that the Surviving Corporation shall use
commercially reasonable efforts to maintain in effect for six (6) years from the
Effective Time, officers' and directors' liability insurance covering those
persons who are currently covered by the Company's officers' and directors'
liability insurance policy on terms comparable to such existing insurance
coverage (including coverage amounts); provided, however, that in no event shall
the Surviving Corporation be required to expend more than an amount per year
equal to 150% of the current annual premiums paid by the Company for such
insurance (which the Company has represented to be $61,000), and provided
further that, if the annual premiums exceed such amount, Parent shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
The Merger Agreement provides that Parent shall assume, as of the Effective
Time, all obligations of the Company under Article Twelfth of the Certificate of
Incorporation of the Company and Article 5 of the Bylaws of the Company, and
shall pay all amounts that become due and payable under such provisions. The
Merger Agreement also provides that the Surviving Corporation and Parent shall
honor and fulfill in all respects the obligations of the Company pursuant to
indemnification agreements with the Company's directors and officers existing at
or before the Effective Time.
The Company has entered into Indemnification Agreements with the following
employees, directors and a former director of the Company: Dane Nelson, Lee R.
Carlson, Ph.D., Robert L. Turner, Edward A. McClatchie, Ph.D., Moshe Alafi, John
M. Huneke, Eugene Kleiner, Karl H. Schimmer, M.D., Robert C. Wilson and William
W. Weiss. The Indemnification Agreements generally provide
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that the Company shall hold harmless and indemnify each employee or director to
the full extent authorized or permitted by the provisions of the DGCL, as may be
amended from time to time. Subject to certain exclusions, the Company further
agrees to hold harmless and indemnify each director and/ or employee (i) against
any and all expenses (including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by such director in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an action by
or in the right of the Company) to which the director is, was or at any time
becomes a party, or is threatened to be made a party, by reason of the fact that
the director is, was or at any time becomes an officer, director, employee of
agent of the Company, or is or was serving or at any time serves at the request
of the Company as an officer, director, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise; and (ii)
otherwise to the fullest extent as may be provided to such director by the
Company under the non-exclusivity provisions of Article 5 of the Company's
Bylaws and of the DGCL.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
Such summary is qualified in its entirety by reference to the Merger Agreement.
Capitalized terms not otherwise defined in the following summary of certain
provisions of the Merger Agreement have the respective meaning ascribed to them
in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five (5)
business days following the initial public announcement of the Purchaser's
intention to commence the Offer. The obligation of the Purchaser to accept for
payment Shares tendered pursuant to the Offer is subject to the satisfaction of
the Minimum Condition and the Financing Condition and certain other conditions
that are described in Section 14 of the Offer to Purchase. The Purchaser has
agreed that it shall not amend or modify the terms of the Offer to reduce the
cash price to be paid pursuant to the Offer, reduce the number of Shares as to
which the Offer is made, change the form of consideration to be paid in the
Offer, modify or waive the Minimum Condition, or impose conditions to its
obligation to accept for payment or pay for the Shares in addition to those set
forth in Section 14 of the Offer to Purchase without the prior consent of the
Company.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the DGCL, at the Effective
Time, the Purchaser will be merged with and into the Company. As a result of the
Merger, the separate corporate existence of the Purchaser will cease and the
Company will continue as the Surviving Corporation and will become a direct
wholly owned subsidiary of Parent. Upon consummation of the Merger, each issued
and then outstanding Share (other than any Shares held in the treasury of the
Company, or owned by the Purchaser, Parent or the Company or any direct or
indirect wholly owned subsidiary of Parent or of the Company and any Shares
which are held by stockholders who have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with the DGCL) shall be converted into
the right to receive the Merger Consideration.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of the Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
The Merger Agreement provides that the directors and officers of the
Purchaser immediately prior to the Effective Time shall become the directors and
officers of the Surviving Corporation. The Merger Agreement further provides
that, at the Effective Time the certificate of incorporation of the Purchaser,
as in effect immediately prior to the Effective Time, will become the
certificate of incorporation of the Surviving Corporation; provided, however,
that, at the Effective Time, Article I of the certificate of incorporation of
the Surviving Corporation will be amended to read as follows: "The
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name of the corporation is Andros Incorporated." The Merger Agreement also
provides that the bylaws of the Purchaser, as in effect immediately prior to the
Effective Time, will become the bylaws of the Surviving Corporation.
AGREEMENTS OF PARENT, THE PURCHASER AND THE COMPANY. Pursuant to the Merger
Agreement, the Company shall, if required by the DGCL in order to consummate the
Merger, cause a meeting of its stockholders (the "Stockholders' Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of the Merger Agreement and the transactions
contemplated thereby. If the Purchaser acquires at least a majority of the
outstanding Shares, the Purchaser will have sufficient voting power to approve
the Merger, even if no other stockholder votes in favor of the Merger.
The Merger Agreement provides that in connection with the Stockholders'
Meeting the Company shall promptly prepare and file with the Commission, use all
reasonable efforts to have cleared by the Commission and thereafter mail to its
stockholders as promptly as practicable a proxy statement and related proxy
materials (the "Proxy Statement") with respect to such Stockholders' Meeting.
The Company has agreed, subject to the fiduciary duties of the Board as advised
by counsel to include in the Proxy Statement the recommendation of the Board
that the stockholders of the Company approve and adopt the Merger Agreement and
the transactions contemplated thereby and to use all reasonable efforts to
obtain the necessary approvals of the Company's stockholders of the Merger
Agreement and the transactions contemplated thereby. Parent has agreed to cause
the Purchaser to vote all Shares beneficially owned by it in favor of adoption
of the Merger Agreement and the transactions contemplated thereby at the
Stockholders' Meeting, if any such meeting shall be required by the DGCL and, if
no such meeting shall be required by the DGCL, to file a certificate ownership
providing for the Merger as soon as permitted under applicable regulatory
requirements and law. The Merger Agreement provides that, in the event that the
Purchaser shall acquire at least 90% of the then outstanding Shares, Parent, the
Purchaser and the Company agree, at the request of the Purchaser, to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with the DGCL.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, during the period commencing on the date of the Merger Agreement and
continuing until the first date on which designees of the Purchaser shall
constitute a majority of the Board (the "Cut-Off Date") or until the termination
of the Merger Agreement in accordance with its terms, the Company and each of
its Subsidiaries shall conduct its operations in the ordinary and usual course
consistent with past practice, and the Company and its Subsidiaries will each
endeavor to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory relations
with suppliers, contractors, distributors, licensors, licensees, customers and
others having business relationships with it. The Merger Agreement provides that
without limiting the generality of the foregoing and except as provided therein,
prior to the Cut-Off Date, neither the Company nor any of its Subsidiaries shall
directly or indirectly do, or propose to do, any of the following, without the
prior written consent of Parent: (a) declare or pay any dividends on or make any
other distribution in respect of any of the capital stock of the Company; (b)
split, combine or reclassify any of the capital stock of the Company or issue or
authorize any other securities in respect of, in lieu of or in substitution for,
shares of the capital stock of the Company or repurchase, redeem or otherwise
acquire any shares of the capital stock of the Company; (c) issue, deliver,
encumber, sell, or purchase any shares of the capital stock of the Company or
any securities convertible into, or rights, warrants, options or other rights of
any kind to acquire, any such shares of capital stock, other convertible
securities or any other ownership interest (including, without limitation, any
phantom interest) (other than the issuance of Common Stock upon the exercise of
outstanding Stock Options); (d) amend or otherwise change its certificate of
incorporation or bylaws (or other comparable organizational document); (e)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership,
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association or other business organization or division thereof; (f) sell, lease
or otherwise dispose of any of its assets, other than in the ordinary course of
business consistent with its past practices; (g) incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of the Company or any corporation an amount of whose voting
securities sufficient to elect at least a majority of its board of directors is
owned directly or indirectly by the Company (any such corporation being referred
to herein as a "Subsidiary") or guarantee any debt securities of others, other
than in the ordinary course of business consistent with past practice; (h) enter
into any contract or agreement other than in the ordinary course of business,
consistent with past practice; (i) authorize any single capital expenditure
which is in excess of $50,000 or capital expenditures which are, in the
aggregate, in excess of $250,000 for the Company and its Subsidiaries taken as a
whole; (j) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practices in
salaries or wages of employees of the Company or any Subsidiary who are not
officers of the Company, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director, officer or other
employee of the Company or any Subsidiary, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee; (k) take
any action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to cash
management, the payment of accounts payable and the collection of accounts
receivable); (l) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes; (m) amend or modify the warranty policy of the Company or any Subsidiary;
(n) pay, discharge, satisfy, settle or compromise any suit, claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or reserved
against in the Company's consolidated balance sheet dated as of July 30, 1995,
as filed by the Company with the SEC in its Annual Report on Form 10-K for its
fiscal year ended July 30, 1995, or subsequently incurred in the ordinary course
of business and consistent with past practice; or (o) take any action that would
result in any of the representations and warranties of the Company set forth in
the Merger Agreement becoming untrue in any material respect or in any of the
conditions to the Offer or any of the conditions to the Merger set forth in the
Merger Agreement not being satisfied.
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the
Purchaser shall be entitled to designate the number of directors, rounded up to
the next whole number, on the Board as shall give the Purchaser representation
on the Board that equals the product of (i) the total number of directors on the
Board (giving effect to the election of any additional directors pursuant to
this sentence) and (ii) the percentage that the number of Shares owned by the
Purchaser, Parent and any direct or indirect wholly owned subsidiary of Parent
(including Shares purchased in the Offer) bears to the total number of Shares
outstanding, and to effect the foregoing the Company shall upon request by the
Purchaser, at the Company's election, either increase the number of directors
comprising the Board or seek and accept resignations of incumbent directors. The
Merger Agreement also provides that, at such times, the Company will use its
reasonable best efforts to cause individuals designated by the Purchaser to
constitute the same percentage as such individuals represent on the Board of (i)
each committee of the Board, (ii) each board of directors of each Subsidiary and
(iii) each committee of each such board.
The Merger Agreement provides that following the Cut-Off Date and prior to
the Effective Time, any amendment of the Merger Agreement or the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, any
termination of the Merger Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations or other acts of
Parent or the
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Purchaser or any exercise or waiver of any of the Company's rights thereunder,
will require the concurrence of a majority of the directors of the Company then
in office who were neither designated by the Purchaser, employees of the Company
or any of its Subsidiaries nor otherwise affiliated with the Purchaser.
Pursuant to the Merger Agreement, until the Effective Time, the Company
shall, and shall cause its Subsidiaries and the officers, directors, employees,
auditors and agents of the Company and its Subsidiaries to, afford the officers,
employees and agents of Parent and the Purchaser and persons providing or
committing to provide Parent or the Purchaser with financing for the
transactions contemplated by the Merger Agreement reasonable access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company and each Subsidiary, and
shall furnish Parent and the Purchaser and persons providing or committing to
provide Parent or the Purchaser with financing for the transactions contemplated
by the Merger Agreement with all financial, operating and other data and
information as Parent or the Purchaser, through its officers, employees or
agents, may reasonably request and Parent and the Purchaser have agreed to keep
such information confidential, except in certain circumstances.
The Company has agreed that neither it nor any Subsidiary shall, directly or
indirectly, through any officer, director, agent or otherwise, initiate, solicit
or intentionally encourage (including by way of furnishing nonpublic information
or assistance), or take any other action to intentionally facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as defined below), or enter into
or maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of the Company or any investment banker,
financial advisor, attorney, accountant or other agent or representative of the
Company to take any such action; provided, however, that the foregoing shall not
prohibit the Board from (i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited, bona fide written proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, business combination, tender or exchange
offer or other similar transaction, if, and only to the extent that, (A) the
Board determines in good faith (after consultation with its financial advisor)
that the proposal would, if consummated, result in a transaction more favorable
to the Company's stockholders from a financial point of view than the
transactions contemplated by the Merger Agreement, (B) the Board further
determines in good faith after consultation with counsel that the failure to do
so would cause the Board to breach its fiduciary duties to the Company or its
stockholders under applicable law (any such proposal being referred to herein
and in the Merger Agreement as a "Superior Proposal"), and (C) no information is
so furnished, and no such discussions or negotiations are held, prior to the
execution by the receiving party and the Company of a confidentiality and
standstill agreement on terms no less favorable to the Company than those
contained in the Confidentiality Agreement, or (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer.
The Company has further agreed to notify Parent promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Parent, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Company
has also agreed not to release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which the Company is a party
(except to the extent necessary in connection with the delivery of a Superior
Proposal). For purposes of this Offer to Purchase and the Merger Agreement,
"Competing Transaction" means any of the following involving the Company: (i)
any merger, consolidation, share exchange, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of more than 25% of the assets of the Company in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for more than 25% of the Shares or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any person having acquired
beneficial ownership or the
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right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) having been formed which beneficially owns or has the
right to acquire beneficial ownership of, more than 25% of the Shares.
The Merger Agreement provides that, prior to the Effective Time, the Board
of Directors of the Company (or, if appropriate, any committee administering the
Stock Option Plans (as defined below)) shall adopt such resolutions or take such
other actions as are required to provide that each option ("Company Options")
theretofore granted under any stock option, stock appreciation rights or stock
purchase plan, program or arrangement of the Company (collectively, the "Stock
Option Plans") outstanding immediately prior to consummation of the Merger,
whether or not then exercisable, shall, unless otherwise consented to by Parent
in its sole discretion, be exchanged, in whole and not in part, for a cash
payment from the Company in an amount (subject to any applicable withholding
tax) equal to the product of (i) the excess of $18.00 over the per share
exercise price of the Company Option multiplied by (ii) the number of Shares
covered by the option immediately prior to the Effective Time.
The Merger Agreement provides that except as provided therein or as
otherwise agreed to by the parties and to the extent permitted by the Stock
Option Plans, (i) the Stock Option Plans shall terminate as of the Effective
Time and (ii) the Company shall use reasonable efforts to ensure that following
the Effective Time no holder of options or any participant in the Stock Option
Plans shall have any right thereunder to acquire any equity securities of the
Company, the Surviving Corporation or any subsidiary thereof.
The Merger Agreement provides that the Company shall take all actions
necessary pursuant to the terms of the Company's Stock Purchase Plan (the "Stock
Purchase Plan") in order to shorten the offering period under such plan which
includes the Effective Time (the "Current Offering"), such that the Current
Offering shall terminate at or prior to the Effective Time (the final day of the
Current Offering period being referred to as the "Final Purchase Date"). On the
Final Purchase Date, the Company shall apply the funds credited as of such date
under the Stock Purchase Plan within each participant's payroll withholdings
account to the purchase of whole shares of Common Stock in accordance with the
terms of the Stock Purchase Plan. The cost to each participant in the Stock
Purchase Plan for shares of Common Stock shall be the lower of 85% of the
closing sale price of Common Stock on the Nasdaq National Market (the "NNM") on
(i) the first day of the Current Offering period and (ii) the last trading day
on or prior to the Final Purchase Date.
The Merger Agreement provides that the Company shall promptly notify Parent,
and Parent shall promptly notify the Company of (i) receipt of any notice or
other communication from any person alleging that the consent of such person is
or may be required in connection with the transactions contemplated by the
Merger Agreement; (ii) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by the
Merger Agreement; (iii) receipt of notice that any actions, suits, claims,
investigations or proceedings have been commenced or, to the knowledge
threatened against, or involving the Company or any of its Subsidiaries, or
Parent, as applicable, which, if pending on the date of the Merger Agreement,
would have been required to have been disclosed under the terms of the Merger
Agreement or which relate to the consummation of the transactions contemplated
by the Merger Agreement; (iv) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty of it (and, in the case of Parent, of the Purchaser)
contained in the Merger Agreement to be untrue or inaccurate; and (v) any
failure of the Company, Parent or the Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under the Merger Agreement.
The Merger Agreement further provides that the certificate of incorporation
and bylaws of the Surviving Corporation shall contain the respective provisions
that were set forth, as of the date of the Merger Agreement, in Article Twelfth
of the certificate of incorporation and Article 5 of the bylaws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of
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six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at or at any time prior to the Effective
Time were entitled to indemnification thereunder, unless such modification shall
be required by law.
The Merger Agreement provides that the Surviving Corporation shall use
commercially reasonable efforts to maintain in effect for six years from the
Effective Time directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy with respect to matters occurring prior to the
Effective Time on terms comparable to such existing insurance coverage
(including coverage amounts); provided, however, that in no event shall the
Surviving Corporation be required to expend more than an amount per year equal
to 150% of the current annual premiums paid by the Company for such insurance
(which premiums the Company has represented to Parent and the Purchaser to be
$61,000 in the aggregate) and provided further that if the annual premiums
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
Parent, the Purchaser and the Company have each agreed that it will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to the Offer and the Merger
(including furnishing all information required under the HSR Act) and will take
all reasonable actions necessary to cooperate promptly with and furnish
information to the other parties in connection with any such requirements
imposed upon such other parties in connection with the Offer and the Merger.
Parent, the Purchaser and the Company have also each agreed that it will take or
cause to be taken all reasonable actions necessary to obtain (and will take all
reasonable actions necessary to cooperate promptly with the other parties in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any court, administrative agency, commission or other governmental or
regulatory authority or instrumentality, domestic or foreign (a "Government
Entity"), or other third party, required to be obtained or made by any such
party in connection with the Offer or the Merger or the taking of any action
contemplated thereby or by the Merger Agreement.
Parent has agreed that it will take all action necessary to cause the
Purchaser to perform its obligations under the Merger Agreement and to
consummate the Merger on the terms and conditions set forth in the Merger
Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the conduct of the Company's business and
the absence of certain changes or events with respect thereto, financial
statements and other documents filed with the Commission, litigation, labor
relations and employees, employee benefit plans, taxes and intellectual
property.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) if required
by the DGCL, the Merger Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of stockholders of the Company to the
extent required by the DGCL and the certificate of incorporation of the Company;
(b) no temporary restraining order, preliminary or permanent injunction or other
order issued by any Governmental Entity of competent jurisdiction nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Entity, nor other legal restriction, restraint or prohibition,
preventing the consummation of the Merger shall be in effect; provided however,
that each of the parties shall have used reasonable efforts to prevent the entry
of any such injunction or other order and to appeal as promptly practicable any
injunction or other order that may be entered; and (c) the Purchaser shall have
purchased Shares pursuant to the Offer.
TERMINATION; FEES AND EXPENSES. The Merger Agreement provides that it may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, notwithstanding any approval of the Merger Agreement by the stockholders
of the Company: (a) by mutual written consent duly authorized by the boards of
directors of Parent, the Purchaser and the Company; (b) by either Parent
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<PAGE>
or the Company if (i) the Cut-Off Date shall not have occurred on or before May
31, 1996; provided, however, that the right to terminate the Merger Agreement
pursuant to this clause shall not be available (A) to any party whose failure to
fulfill any obligation under the Merger Agreement has been the substantial cause
of, or resulted in, the failure of the Cut-Off Date to occur on or before such
date, or (B) to Parent if it shall fail to designate persons that will
constitute a majority of the Board in accordance with the Merger Agreement by
May 24, 1996; or (ii) any court of competent jurisdiction or other governmental
authority shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) by Parent or the Company if (i) as a result of an occurrence or circumstance
that would result in a failure to satisfy any condition set forth in Section 14
hereof the Offer shall have terminated or expired in accordance with its terms
without the Purchaser having accepted for payment any Shares pursuant to the
Offer, or (ii) the Purchaser shall not have accepted for payment any Shares
pursuant to the Offer within 100 days following commencement of the Offer;
provided, however, that the right to terminate the Merger Agreement pursuant to
this clause shall not be available to any party the failure of which (or the
failure of the affiliates of which) to perform in any material respect any of
its material obligations under the Merger Agreement results in the failure of
any such condition or if the failure of such condition results from facts or
circumstances that constitute a material breach of a representation or warranty
under the Merger Agreement by such party; (d) by Parent if prior to the purchase
of Shares pursuant to the Offer, (i) the Board or any committee thereof shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent its
approval or recommendation of the Offer, the Merger Agreement, the Merger or any
other transaction contemplated by the Merger Agreement, (ii) the Board or any
committee thereof shall have recommended to the stockholders of the Company
acceptance of a Competing Transaction, (iii) the Company shall have entered into
any definitive agreement with respect to a Competing Transaction, or (iv) the
Board or any committee thereof shall have resolved to do any of the foregoing;
or (e) by the Company if (i) the Board shall have withdrawn or modified in a
manner adverse to the Purchaser or Parent its approval or recommendation of the
Offer, the Merger Agreement or the Merger in order to approve the execution by
the Company of a definitive agreement providing for the transactions
contemplated by a Superior Proposal or (ii) Parent or the Purchaser shall have
breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement
which breach cannot be or has not been cured 20 days after the giving of written
notice to Parent or the Purchaser, as applicable, except, in any case, for such
breaches which are not reasonably likely to affect adversely Parent's or the
Purchaser's ability to complete the Offer or the Merger.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and of no effect with no
liability on the part of any party thereto, except for fraud and for willful
breach of a material obligation contained therein and except under the
provisions of the Merger Agreement related to fees described below and under
certain other provisions of the Merger Agreement which survive termination.
The Merger Agreement provides that in the event that (a) any person
(including, without limitation, the Company or any affiliate thereof), other
than Parent or any affiliate of Parent, shall have become the beneficial owner
of a majority of the then outstanding Shares and the Merger Agreement shall have
been terminated pursuant to the provisions described in the second preceding
paragraph above; (b) any person shall have commenced, publicly proposed or
communicated to the Company a Competing Transaction and (i) the Offer shall have
remained open for at least 20 business days, (ii) the Minimum Condition shall
not have been satisfied, (iii) the Merger Agreement shall have been terminated
pursuant to the provisions described in the second preceding paragraph above,
and (iv) the Company shall have consummated a Competing Transaction with any
person other than Parent or any of its affiliates before or within 12 months
after the date of such termination; or (c) the Merger Agreement is terminated
(i) pursuant to the provisions described in clause (d) or (e)(i) of the second
preceding paragraph or (ii) pursuant to the provisions described in clause (c)
of the second preceding
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<PAGE>
paragraph to the extent that the termination or the failure to accept any Shares
for payment as set forth in such clause (c) shall relate to the intentional
failure of the Company to perform in any material respect any material covenant
or agreement of it contained in the Merger Agreement or the intentional material
breach by the Company of any material representation or warranty of it contained
in the Merger Agreement; then, in any such event, the Company shall pay Parent
promptly (but in no event later than one business day after the first of such
events shall have occurred) a fee of $3.1 million, which amount shall be payable
in immediately available funds.
MANAGEMENT ROLL-OVER AGREEMENTS
As set forth above, the Merger Agreement provides that, prior to the
Effective Time, the Board of Directors of the Company (or, if appropriate, the
Stock Option Committee of the Board of Directors) shall adopt such resolutions
or take such other actions as are required to that each Company Option
theretofore granted under any Stock Option Plan outstanding immediately prior to
the consummation of the Merger, whether or not then exercisable, shall, unless
otherwise consented to by Parent in its sole discretion, be exchanged, in whole
and not in part, for a cash payment from the Company in an amount (subject to
any applicable withholding tax) equal to the product of (i) the excess of $18.00
over the per share exercise price of the Company Option multiplied by (ii) the
number of Shares covered by the option immediately prior to the Effective Time.
In the exercise of this discretion, Parent has requested that all or a portion
of the Company Options held by four of the Company's officers not be cashed out
in the foregoing manner, but instead be rolled over and exchanged for options to
acquire shares of Parent common stock. The four Company officers (the "Roll-Over
Officers") who will be permitted to roll-over their Company Options in this
manner are: (i) Dane Nelson (as to Company Options to acquire 72,000 shares of
Common Stock); Donald Madsen (as to Company Options to acquire 20,000 shares of
Common Stock); William W. Weiss (as to Company Options to acquire 3,000 shares
of Common Stock); and Susan M. Fixmer (as to Company Options to acquire 3,400
shares of Common Stock). To formalize this arrangement, Parent and the the
Purchaser has entered into a Management Roll-Over Agreement dated February 14,
1996 with each of the Roll-Over Officers. These agreements further provide that
the Roll-Over Officers will, at or prior to the consummation of the Merger,
enter into a stockholders' agreement, upon reasonably satisfactory terms,
governing the post-Merger exercise of such options and the terms of common stock
issuable pursuant to such options. The form of the Management Roll-Over
Agreement is attached hereto as Exhibit 3 and incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board has approved the Merger
Agreement and the transactions contemplated thereby and determined that each of
the Offer and the Merger is fair to, and in the best interests of, the
stockholders of the Company. The Board recommends that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer.
BACKGROUND. In the period preceding and immediately following the
conclusion of the Company's fiscal year ending July 31, 1994, there developed a
general view among the members of the Board of Directors of the Company that,
while the Company's financial performance had improved significantly as compared
with recent periods, this improvement was generally not reflected in the market
price for the Common Stock. In addition, it was noted that relatively few
research analysts followed the Company and the trading volume in the Common
Stock remained relatively low. There was also a broadly held view among the
members of the Board that, because the Company operated in a number of different
market sectors, the market did not truly understand the Company and its
operations and business plan. Consequently, the members of the Board believed
that the market valuation of the Company did not adequately reflect the
Company's financial performance and prospects and that there was not a
significant likelihood that the market would begin to recognize the true value
of the Company at anytime in the near future. In response to these factors and
after numerous informal discussions among its members, the Board authorized the
formation of a Special
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Committee, consisting of two members of the Board, which was charged with the
responsibility of exploring various alternatives to maximize shareholder value.
The Special Committee was further empowered to contact possible finacial
advisors to assist it in the performance of this assignment.
In September 1994, the Special Committee approached DLJ concerning a
possible engagement to consider various strategic and financial alternatives for
the Company, including a possible sale of the Company. On October 25, 1994, a
letter agreement (the "Engagement Letter") was entered into between the Special
Committee and DLJ, pursuant to which the Special Committee engaged DLJ to
consider and advise it with respect to various strategic and financial
alternatives and to evaluate, and as appropriate to render a "fairness opinion"
regarding, (i) any proposal which the Company might receive for the acquisition
of all or a substantial amount of its business, stock or assets, whether by
means of merger, consolidation, or other business combination, tender or
exchange offer, public or private purchase of the Company's securities or
assets, or otherwise, or (ii) any other similar transaction, including any
leveraged buyout, recapitalization, recapitalization involving management or
employee stock or stock option plans and incentives, divestiture, sale or
spinoff. At the time DLJ was retained to serve as the Company's financial
advisor, the Special Committee also retained special outside counsel to advise
it with respect to any strategic or financial proposals that it might be asked
to consider.
Following a presentation in December 1994 by DLJ to the Board regarding
various strategic and financial alternatives that the Board might consider, the
Board (upon the recommendation of the Special Committee and with one abstention)
directed DLJ to begin exploring a possible sale of the Company, among other
financial alternatives. Acting on that direction, the Company and DLJ prepared a
descriptive memorandum regarding the Company which set forth certain information
regarding the Company's operations and its financial performance and prospects.
DLJ, on behalf of the Company, contacted numerous corporations and other
entities which the Company and DLJ believed might have an interest in purchasing
the Company ("Potential Purchasers"), and based upon interest expressed by
certain of such Potential Purchasers, distributed to such Potential Purchasers
copies of the descriptive memorandum on a confidential basis.
From time to time thereafter, Potential Purchasers who expressed interest in
a transaction were given the opportunity to tour the Company's facilities, talk
with management and conduct other due diligence inquiries. The Company, through
DLJ, invited such Potential Purchasers to submit proposals regarding an
acquisition. The invitation stated that the proposals should include, among
other things, the proposed purchase price and form of consideration, as well as
a description of sources of financing and evidence of firm lending commitments,
if any. No assurances were given that the Company would enter into an agreement
with any party, it being the Company's intention to enter into a definitive
agreement only on the basis of a proposal which it, in its sole discretion,
considered satisfactory.
From December 1994 until it entered into the Letter of Intent (as defined
below) pursuant to which it committed to the Exclusivity Period (each as defined
below), the Company entertained proposals from and engaged in discussions with
several Potential Purchasers. No definitive agreement was reached with any such
Potential Purchaser. Also, during this period the Special Committee of the Board
was reconstituted to include all of the members of the Board other than Mr.
Nelson.
In the last week of September 1995, DLJ received, on behalf of the Company,
two formal acquisition proposals, one of which was a proposal from GCLLC (the
"GCLLC Proposal") regarding an acquisition of the Company in a leveraged buy-out
transaction for $20.00 per Share. DLJ also received at that time several
informal indications of interest from other Potential Purchasers. The GCLLC
Proposal set forth a plan pursuant to which an affiliate of GCLLC would commence
a tender offer for all of the Shares at $20.00 per Share, payable in cash,
subject to certain conditions, to be followed by a merger of such affiliate with
and into the Company. The GCLLC Proposal was conditioned upon
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completion of financing arrangements, execution of a definitive merger agreement
and reaching understandings with senior management of the Company as to their
future levels of compensation and their equity investments in Parent.
The Board (upon the recommendation of the Special Committee and with one
abstention), with the advice and assistance of its legal and financial advisors,
determined that of the acquisition proposals received, the GCLLC Proposal was
the most attractive to the Company's stockholders.
A letter of intent between the Company and GCLLC was signed on September 29,
1995 (the "Letter of Intent"). The Letter of Intent contemplated that the Offer
would be made at a price of $20.00 per Share. The Letter of Intent provided that
consummation of the proposed transaction was conditioned upon, among other
things, satisfactory completion by GCLLC of a due diligence review of the
Company and completion of financing arrangements by GCLLC. The Letter of Intent
also provided that the Company would not solicit, encourage or negotiate with
others concerning any proposal for the sale of the Company until November 14,
1995 (the "Exclusivity Period") and that the Company would reimburse GCLLC for
up to $75,000 of GCLLC's expenses in the event that the Company elected not to
proceed with the contemplated transactions for any reason.
Between September 29, 1995 and November 10, 1995, GCLLC and its
representatives continued their due diligence investigation of the Company and
their efforts to complete their financing arrangements. On November 10, 1995, an
amendment to the Letter of Intent was executed pursuant to which (i) the Offer
price was set at $20.25, (ii) certain conditions, including the condition
regarding due diligence, were deleted, and (iii) the Exclusivity Period was
extended until December 21, 1995, by which time the parties contemplated that
the Offer would be commenced.
Between November 10, 1995 and December 21, 1995, GCLLC, its representatives
and financing sources continued their due diligence investigations of the
Company. On December 21, 1995, another amendment to the Letter of Intent was
signed pursuant to which the Exclusivity Period was extended until January 10,
1996 and the Company's obligation to reimburse GCLLC for expenses was deleted.
On January 8, 1996, certain prospective purchasers of subordinated debt of
the Purchaser notified GCLLC that they were no longer interested in providing
financing to the Purchaser in connection with the Offer and the Merger on the
terms originally contemplated under their financing proposal. On January 10,
1996, GCLLC informed the Company that, in light of certain developments with
respect to the Company, including its deteriorating operating performance and
regulatory and market uncertainties with respect to its products, financing for
the transactions contemplated by the Offer and the Merger would not be available
on the terms and conditions previously contemplated, and that therefore the
Offer and the Merger could not be consummated at a price of $20.25.
At GCLLC's request, the Special Committee convened a meeting on January 13,
1996 to consider a revised proposal from GCLLC. At that meeting GCLLC made an
oral presentation of alternatives which it believed addressed the Company's
changed circumstances and would be satisfactory to prospective financing
sources. On January 23, 1996, GCLLC reiterated in writing its proposal to the
Company that the cash tender offer price for all of the Shares would be reduced
to $18.00 per share. At a meeting of the Board held on January 26, 1996, the
Board voted (upon the recommendation of the Special Committee and with one
abstention and with one member voting against the proposal) to pursue an
agreement with Parent and the Purchaser based on an all cash tender offer for
all outstanding Shares at a price of $18.00 per Share.
Between January 26, 1996 and February 14, 1996, the parties completed
negotiations regarding the Merger Agreement and GCLLC completed its arrangement
of financing. At a meeting on February 5, 1996, the Board, after presentations
by the Special Committee's financial and legal advisors and the Company's
outside counsel, voted (upon the recommendation of the Special Committee and
with one abstention and with one member voting against the proposal) to approve
the form of Merger
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Agreement presented to it, as well as the Offer and the Merger. On February 14,
1996, Parent, the Purchaser and the Company executed the Merger Agreement, and
the financing commitment letters were signed and delivered to GCP II.
On February 21, 1996, the Purchaser commenced the Offer.
REASONS FOR THE BOARD'S CONCLUSIONS. In approving the Merger Agreement and
the transactions contemplated thereby and recommending that all stockholders
tender their Shares pursuant to the Offer, the Board considered a number of
factors, including:
-Information relating to the financial condition and results of operations
of the Company and management's estimates of the prospects of the Company
which, in the Board's view, supported a determination that the Offer and
the Merger were fair to the Company's stockholders;
-The Board's general belief that the market price for the Common Stock would
not adequately reflect the true value of the Company and its business (with
reference to its financial performance and prospects) for the foreseeable
future due to the fact or Board's perception, among other things, that (i)
relatively few research analysts follow the Company, (ii) trading volume in
the Common Stock remains relatively low and is anticipated to remain
relatively low in the foreseeable future, and (iii) because the Company
will continue to operate in a number of different market sectors, the
market does not, and would continue not to, truly understand the Company
and its operations and business plan;
-The fact that the Company had made a public announcement in April 1995 that
it had retained DLJ to explore strategic and financial alternatives on the
Company's behalf, thereby alerting the market that the Company would be
open to inquiries and possible proposals from potential purchasers or
partners;
-The relationship of the Offer price to recent historical market prices of
the Shares, particularly that the $18.00 per share Offer price represents a
premium of approximately 22% over the closing sales price for shares in the
Nasdaq National Market on February 5, 1996, the last trading day prior to
the approval of the Merger Agreement and the transactions contemplated
thereby by the Company's Board of Directors, and a premium of approximately
16% over the closing sales price for shares in the Nasdaq National Market
on February 14, 1996, the last trading day prior to the public announcement
of the execution of the Merger Agreement;
-The financial and valuation analyses presented to the Board by DLJ, the
financial advisor to the Company, at various Board meetings beginning in
December 1994 and continuing through February 1996, including market prices
and financial data relating to other companies engaged in business
considered comparable to the Company, the prices and premiums paid in
recent selected acquisitions of companies engaged in business considered by
DLJ to be comparable to that of the Company;
-The written opinion (the "Fairness Opinion") of DLJ, dated February 14,
1996, that the consideration to be received by the stockholders of the
Company pursuant to the Merger Agreement, is fair to the Company's
stockholders from a financial point of view. The Fairness Opinion contains
a description of the factors considered, the assumptions made and the scope
of review undertaken by DLJ in rendering the Fairness Opinion and is
attached hereto as Exhibit 5 and is incorporated by reference herein.
STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION CAREFULLY AND IN ITS
ENTIRETY;
-The likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of GCLLC and
its affiliates; and
-The terms and conditions of the Merger Agreement, including, without
limitation, the fact that, the Company is not prohibited from responding to
any unsolicited proposal made in writing to acquire the Company pursuant to
a merger, consolidation, share exchange, business combination, or other
similar transaction or to acquire all or substantially all of the assets of
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the Company, to the extent the Board, after consultation with independent
legal counsel, determines in good faith that such action is required for
the Board to comply with its fiduciary duty to the Company's stockholders
imposed by the DGCL.
The members of the Board evaluated the factors listed above in light of
their knowledge of the business and operations of the Company and their business
judgment. In view of the wide variety of factors considered in connection with
its evaluation of the Offer and the Merger, the Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. The
Board recognized that the Merger is not structured to require the approval of a
majority of the stockholders of the Company other than the Purchaser, and that
the Purchaser, if it purchases a sufficient number of Shares to satisfy the
Minimum Condition, would have sufficient voting power to approve the Merger
without the affirmative vote of any other stockholder of the Company. While
consummation of the Offer would result in the stockholders of the Company
receiving a premium for their Shares over the trading prices of the Shares prior
to the announcement of the Offer and the Merger, it would eliminate any
opportunity for stockholders of the Company other than Parent and the Purchaser
to participate in the potential future growth prospects of the Company. The
Board, however, believed that this was reflected in the Offer price to be paid
and also recognized that there can be no assurance as to the level of growth, if
any, to be attained by the Company in the future.
The Board determined that it was necessary to appoint a committee of
independent directors for the purpose of negotiating the terms of the Merger
Agreement. In making such determination, the Board considered that one of the
directors is employed by the Company and will have a financial interest in the
Company following consummation of the Merger. As noted above, the Board has
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the stockholders of the Company. In addition, the Board recognized
that certain officers of the Company may have interests in the Offer and the
Merger that could be deemed to present them with certain conflicts of interest.
The Board was aware of these potential conflicts of interest and considered them
along with the other matters described above. The Company has been advised by
each of its directors and executive officers that they intend either to tender
all Shares beneficially owned by them to the Purchaser pursuant to the Offer or
to vote such Shares in favor of the approval and adoption by the stockholders of
the Company of the Merger Agreement and the transactions contemplated hereby.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement dated October 25, 1994 (the "Engagement
Letter"), the Company retained DLJ to act as the exclusive financial advisor to
the Company and the Special Committee of the Company's Board of Directors with
respect to the sale, merger, consolidation or any other business combination, in
one or a series of transactions, involving all or a substantial amount of the
business, securities or assets of the Company. The Company agreed to compensate
the DLJ for its services in an amount of (a) $100,000, payable upon the
execution of the Engagement Letter, (b) $300,000 as compensation for the
delivery of the Fairness Opinion, payable at the time DLJ notifies the Special
Committee that it is prepared to deliver the Fairness Opinion, and (c) an amount
equal to one percent (1%) of the aggregate amount of consideration received by
the Company and/or its stockholders in connection with any of the
above-mentioned transactions less any amounts paid by the Company pursuant to
clause (a) or (b) above. The Company also agreed to reimburse DLJ for all
reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred by DLJ in connection with its engagement, whether or not a
transaction is consummated. The Company further agreed to indemnify DLJ against
certain liabilities and expenses in connection with its engagement, including
liabilities arising under federal securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate.
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(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director or affiliate of the Company currently intends to tender all Shares over
which he or she has sole dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth above, the Company is not engaged in any negotiation
in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Items 3(b) or 4 above, there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as SCHEDULE I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Letter to Stockholders of the Company, dated February 21, 1996.*
Exhibit 2 Agreement and Plan of Merger, dated as of February 14, 1996, among Andros
Holdings Inc. (formerly CHO Holdings Inc.), Andros Acquisition Inc.
(formerly CHO Acquisition Inc.), and the Company.
Exhibit 3 Form of Management Roll-Over Agreement dated February 14, 1996 entered into
among Andros Holdings Inc. (fomerly CHO Holdings Inc.) and Andros
Acquisition Inc. (formerly CHO Acquisition Inc.) and each of Dane Nelson,
Donald Madsen, William W. Weiss and Susan M. Fixmer.
Exhibit 4 Engagement Letter, dated October 25, 1994, between the Company and
Donaldson, Lufkin & Jenrette Securities Corporation.
Exhibit 5 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated
February 14, 1996.*
Exhibit 6 Press Release issued jointly by the Company and Genstar Capital Partners II,
L.P., dated February 14, 1996.
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to stockholders.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 21, 1996 ANDROS INCORPORATED
By: /s/__Dane Nelson__________________
Dane Nelson
President and Chief Executive
Officer
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SCHEDULE I
ANDROS INCORPORATED
2332 Fourth Street
Berkeley, California 94710-2402
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about February 21, 1996, as
a part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about February 20, 1996. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company.
The Merger Agreement requires the Company to use its reasonable best efforts to
cause the Purchaser Designees (as defined below) to be elected to the Board of
Directors of the Company (the "Board" or "Board of Directors") under the
circumstances described therein. This Information Statement is required by
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. See "Board of
Directors, Executive Officers and The Purchaser Designees -- Right to Designate
Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
February 20, 1996. The Offer is scheduled to expire at midnight, New York City
time, on Monday, March 20, 1996, unless the Offer is extended.
Following the election of the Purchaser Designees and prior to the
consummation of the Merger, any amendment of the Merger Agreement or the
Certificate of Incorporation or By-Laws of the Company, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or the acts of Parent or the Purchaser
or waiver of any of the Company's rights thereunder shall require the
concurrence of a majority of the directors of the Company who are neither (i)
designees of the Purchaser nor (ii) employees of the Company.
This information contained in this Information Statement concerning the
Purchaser and the Purchaser Designees has been furnished to the Company by the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
INFORMATION WITH RESPECT TO THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote. As of January 31, 1996, there
were 4,628,054 Shares outstanding. The Board of Directors currently consists of
five (5) members. Each director holds office until such director's successor is
elected and qualified or until such director's earlier resignation or removal.
<PAGE>
BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND PURCHASER DESIGNEES
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors (the
"Purchaser Designees"), rounded up to the next whole number, on the Company's
Board of Directors as shall give the Purchaser representation equal to the
product of the total number of directors on the Company's Board of Directors
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares owned by the Purchaser,
Parent and any direct or indirect wholly-owned subsidiary of Parent (including
the Shares purchased pursuant to the Offer) bears to the total number of Shares
outstanding, and the Company shall, upon request by the Purchaser and at the
Company's election, increase the number of directors comprising the Company's
Board of Directors or seek and accept resignations of incumbent directors. At
such times, the Company shall use its reasonable best efforts to cause persons
designated by the Purchaser to constitute the same percentage as persons
designated by the Purchaser shall constitute of the board of each committee of
the Board, each board of directors of each Subsidiary of the Company and each
committee of such board.
The Purchaser has informed the Company that each of the Purchaser Designees
listed below has consented to act as a director.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the Shares pursuant to
the Offer, which purchase cannot be earlier than midnight March 20, 1996, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least a majority of the Board.
Biographical information concerning each of the Purchaser Designees,
directors and executive officers is presented on the following pages.
PURCHASER DESIGNEES
Set forth below are the names of the Purchaser Designees, their principal
occupations and certain other information about them:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ------------------------- -----------------------------------------------------------------------------
<S> <C>
Richard D. Paterson Director and Chairman of Parent and Chairman of Purchaser since February 12,
1996. Managing member of GCLLC since September 1995. Executive Vice
President of Genstar Investment Corporation, Metro Tower, Suite 1170, 950
Tower Lane, Foster City, California 94404-2121, since February 1987.
Director of Wolverine Tube, Inc., 1525 Perimeter Parkway, Huntsville,
Alabama 35806, from January 1991 to October 1995. Director and Chairman of
Prestolite Electric Inc., 2100 Commonwealth Boulevard, Ann Arbor, Michigan
48105, since October 1991. Director and Chairman of Seaspan International
Ltd., 10 Pemberton, North Vancouver, British Columbia V7P 2R1, Canada, since
October 1994. Director, Genstar Capital Corporation, 40 King Street West,
Suite 4900, Toronto, Ontario M5H 4A2, Canada, from November 1988 to August
1995. Director of Gentek Building Products, 280 North Park Avenue, Warren,
Ohio 44481, since December 1994. Director, Atlantic Industries, Inc., 999
Jenkins Road, Hardeeville, South Carolina 29927, from December 1990 to
November 1993. Director of Eurocal Trading, Inc., 3478 Buskirk Avenue,
Pleasant Hill, California 94523 from August 1991 to October 1995.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Mark E. Bandeen Director and President of Parent and President of Purchaser since February
12, 1996. Managing director of GCLLC since September 1995. Senior Vice
President of Genstar Investment Corporation, Metro Tower, Suite 1170, 950
Tower Lane, Foster City, California 94404-2121, since July 1987. Director of
Wolverine Tube, Inc., 1525 Perimeter Parkway, Huntsville, Alabama 35806,
from January 1991 to September 1995. Director of Prestolite Electric Inc.,
2100 Commonwealth Boulevard, Ann Arbor, Michigan 48105, since October 1991.
Director of Seaspan International Ltd., 10 Pemberton, North Vancouver,
British Columbia V7P 2R1, Canada, since October 1994. Director, Genstar
Capital Corporation, 40 King Street West, Suite 4900, Toronto, Ontario M5H
4A2, Canada, from April 1989 to May 1995. Director of Gentek Building
Products, 280 North Park Avenue, Warren, Ohio 44481, since December 1994.
David J. Boverman Director and Vice President and Secretary of Parent and Purchaser since
February 12, 1996. Principal of GCLLC since September 1995. Vice President
of Genstar Investment Corporation, Metro Tower, Suite 1170, 950 Tower Lane,
Foster City, California 94404-2121, since April 1989.
Jean-Pierre L. Conte Director and Vice President and Treasurer of Parent and Purchaser since
February 12, 1996. Principal of GCLLC since September 1995. Vice President
of Genstar Investment Corporation, Metro Tower, Suite 1170, 950 Tower Lane,
Foster City, California 94404-2121 since July 1995. Principal of The NTC
Group, Inc., 3 Pickwick Plaza, Greenwich, Connecticut 06830, from June 1989
to March 1995. Director of TB Woods Corporation, 440 North First Avenue,
Chambersburg, Pennsylvania 17201, since March 1990.
</TABLE>
CURRENT DIRECTORS
Set forth below are the names of the Company's directors, their principal
occupations and their ages at January 31, 1996, and certain other information
about them:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
John M. Huneke 66 Private Investor
Eugene Kleiner 72 Private Investor
Dane Nelson 43 President and Chief Executive Officer
Karl H. Schimmer, M.D. 73 Private Investor
Robert C. Wilson 76 Private Consultant and Advisor to the President
</TABLE>
Mr. Huneke is a founder of the Company and has been a director of Andros
since its inception in 1968. Between 1973 and 1987, he was employed in various
capacities by companies comprising the Bechtel Group, including Bechtel
Investments and Bechtel National, Inc. Since 1987, he has been a private
investor.
Mr. Kleiner has been a director of Andros since 1972 and served as Chairman
of the Board from January 1993 until July 1995. He was a founding partner of
Kleiner Perkins Caufield & Byers. Since 1987, Mr. Kleiner has been a private
investor. Mr. Kleiner is currently a director of Resound Corporation and a
trustee of Polytechnic University in New York.
Mr. Nelson joined Andros in 1990. He was promoted to President, Chief
Executive Officer and a Director of the Company on September 1, 1991. From May
1990 to September 1991, he was Vice President, Operations. Prior to joining
Andros, Mr. Nelson served as President, Nelken Supplies
3
<PAGE>
Solutions, a retail computer and office supplies company, from March 1989
through May 1990. Mr. Nelson served as Operations Manager of the Supplies
Division of Convergent Technologies, a computer manufacturer, from 1988 through
March 1989.
Dr. Schimmer has been a director of Andros since 1975. From 1959 until his
retirement in 1981, he was a member of the staff, Department of Anesthesiology,
St. Francis Memorial hospital in San Francisco. Since 1981, he has been a
private investor.
Mr. Wilson has been a director of Andros since December 1992, and has served
as Chairman of the Board since July 1995. He has also been employed by the
Company as an advisor to the President of the Company since November 1992. He is
Chairman of Wilson & Chambers Inc., a consulting firm. He is currently also a
director of Storage Technology Corporation, Resound Corporation, Syquest
Technology, Inc., and Giga-Tronics Incorporated. From 1974 until his retirement
in 1980, Mr. Wilson served as Chief Executive Officer of Memorex.
BOARD COMMITTEES
The Compensation Committee, consisting of Mr. Huneke, Mr. Kleiner and Dr.
Schimmer as of the end of fiscal 1995, considers matters concerning compensation
of employees, including officers. It also has the authority to select optionees
for the Company's employee stock option plan and determine the number of shares
covered by options granted under that plan. The Compensation Committee held
seven meetings during fiscal 1995.
The Audit Committee reviews, acts on and reports to the Board of Directors
with respect to various auditing and accounting matters, including the scope and
results of the audit procedures and the internal accounting controls and
procedures of the Company. The Audit Committee held one meeting during fiscal
1995. The members of the Audit Committee, as of the end of fiscal 1995, were Mr.
Huneke and Mr. Kleiner.
ATTENDANCE AT MEETINGS
During fiscal 1995, the Board of Directors of the Company held a total of 8
meetings. All directors of the Company attended 75% or more of the aggregate of
all Board meetings and all meetings of Committees of which they were members.
DIRECTORS' REMUNERATION
Each non-employee director of the Company received an annual fee of $9,000
in fiscal 1995, a fee of $1,000 for each of the other meetings of the Board of
Directors attended in person (except for Mr. Kleiner, formerly Chairman of the
Board, received a fee of $1,500 for each of such meetings), and a fee of $500
for each meeting of the Board of Directors in which such director participated
by telephone (including any committee meeting) (except that Mr. Kleiner received
a fee of $750 for each of such meetings). In fiscal 1995, the total compensation
paid to non-employee directors was $113,000.
Non-employee directors are granted options pursuant to the 1991 Stock Option
Plan (the "Plan") under the Automatic Grant Program (the "Automatic Program").
Under the Automatic Program, each individual who was serving as a non-employee
Board member on October 4, 1991, was automatically granted on such date a
non-statutory stock option to purchase 25,000 shares of Common Stock at an
exercise price of $8.00 per share, the fair market value of the Common Stock at
date of grant. The Automatic Program also provides for an automatic grant of an
option to purchase 25,000 shares of Common Stock to each individual who becomes
a new non-employee Board member after October 4, 1991. Each option granted under
the Automatic Program has a ten year term, becomes exercisable for 15,000 share
upon completion of one year of Board service (measured from the date of grant)
and for an addition 5,000 shares upon completion of each of the next two years
of Board service thereafter, and provides for an exercise price equal to 100% of
the fair market value per share of the Company's Common Stock on the date of
grant. Options granted under the Automatic Program are intended by the Company
not to qualify as incentive stock options under the Internal Revenue Code of
1986, as amended (the "Code").
4
<PAGE>
During fiscal 1994 and fiscal 1995, no options were granted under the
Automatic Program. During fiscal 1994, all four non-employee directors exercised
options (granted under the Company's former Stock Option Plan for Directors,
which was consolidated with the Company's other stock option plans into the Plan
in October 1991) to purchase an aggregate of 42,500 shares of Common Stock at an
exercise price of $9.13 per share (and with a net value realized equal to the
excess of fair market value at the date of exercise over the exercise price) as
follows: Mr. Alafi, 15,000 shares ($127,425); Mr. Huneke, 7,500 shares
($59,650); Mr. Kleiner, 15,000 shares ($125,300); Dr. Schimmer, 5,000 shares
($53,100). The aggregate value realized on such exercises was $365,475.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers (excluding Donald Madsen, the "Named Executive Officers") of
the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------
<S> <C> <C>
Dane Nelson 43 President, Chief Executive Officer
Edward A. McClatchie, Ph.D. 54 Senior Vice President, Sales & Corporate
Development
William W. Weiss 50 Acting Chief Financial Officer
Robert L. Turner 58 Vice President, Marketing
Lee R. Carlson, Ph.D. 48 Vice President, Engineering
Donald Madsen 51 Vice President, Sales
</TABLE>
Dane Nelson, 43, joined the Company in 1990. He was promoted to President,
Chief Executive Officer and a Director of the Company on September 1, 1991. From
May 1990 to September 1991, he was Vice President, Operations. Prior to joining
the Company, Mr. Nelson served as President, Nelken Supplies Solutions, a retail
computer and office supplies company, from March 1989 through May 1990. Mr.
Nelson served as Operations Manager of the Supplies Division of Convergent
Technologies, a computer manufacturer, from 1988 through March 1989.
Edward A. McClatchie, Ph.D., 54, joined the Company in 1969. He became
Senior Vice President, Sales & Corporate Development in September 1991. From
1988 to 1991, Dr. McClatchie was Vice President, Corporate Development. Prior to
joining the Company, Dr. McClatchie was a Postdoctoral Fellow at the Lawrence
Radiation Laboratory in Berkeley, California, and a Science Research Fellow at
Queens University, Belfast, Northern Ireland. His doctorate is in Physics.
William W. Weiss, 50, joined the Company in 1977. He was elected Acting
Chief Financial Officer on October 17, 1994. From 1984 to 1994, he was
Controller. Mr. Weiss has a B.S. in Business Administration from California
State University, Hayward, California.
Robert L. Turner, 58, joined the Company in 1992. He is the Vice President,
Marketing. Prior to joining the Company, Mr. Turner was hired as Vice President,
Marketing & Sales at Microsensor Technology, a developer and manufacturer of a
proprietary gas analyzer, in 1982. He was elected to the office President at
Microsensor Technology in 1985 and remained so until coming to the Company. Mr.
Turner has a B.S. degree in Electrical Engineering from UC Davis, California.
Lee R. Carlson, Ph.D., 48, joined the Company in 1990 and is the Vice
President, Engineering. Prior to joining the Company, Dr. Carlson was Vice
President and founder of Iris Medical Instruments from 1989 to 1990, and headed
up their product development effort on a diode laser endophotocoagulator. Dr.
Carlson previously held positions of Director of Research & Development at
Coherent Inc. in 1988, and Engineering Manager at Spectra Physics from 1982 to
1988. His doctorate is in Physical Chemistry from UC Berkeley, and he has a B.A.
degree from Purdue University.
On September 15, 1995, Donald Madsen, 51, became Vice President, Sales. He
has been with the Company since March 1986, acting as Vice President over
various departments. He was previously with ITT/Qume Corporation for more than
13 years, having hired on there as one of their start-up engineers. He holds an
A.A. degree in Engineering.
5
<PAGE>
Officers serve at the discretion of the Board of Directors.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the ownership
of the Company's common stock as of January 31, 1996 by: (i) each director; (ii)
each Named Executive Officer; (iii) all executive officers and directors of the
Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than 5% of its common stock:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
--------------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED TOTAL
- ----------------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Persons and entities affiliated with S.A.C. Capital Management (2) ...................... 719,494 15.5%
520 Madison Avenue
New York, NY 10022
Neuberger & Berman (3) .................................................................. 536,200 11.6
605 Third Avenue
New York, NY 10158
Dimensional Fund Advisors Inc. (4) ...................................................... 237,500 5.1
Dane Nelson (5) ......................................................................... 150,000 3.1
John M. Huneke (6) ...................................................................... 35,905 *
Eugene Kleiner (6) ...................................................................... 85,845 1.8
Karl H. Schimmer, M.D. (6)(7) ........................................................... 44,785 *
Robert C. Wilson (5) .................................................................... 55,000 1.2
Edward A. McClatchie, Ph.D. (5).......................................................... 100,109 2.1
Lee R. Carlson, Ph.D. (5)(6) ............................................................ 55,800 1.2
Robert L. Turner (5) .................................................................... 61,000 1.3
William W. Weiss (5) .................................................................... 10,132 *
All executive officers and directors as a group (9 persons) (9) ......................... 532,278 10.5
</TABLE>
- ------------------------
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the SEC. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, each of the stockholders named in this table
has sole voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 4,628,054 shares
outstanding on January 31, 1996, adjusted as required by rules promulgated
by the SEC.
(2) Based on a Schedule 13D filed with the SEC on February 1, 1996. Of such
shares: 333,300 shares are owned by Steven A. Cohen; 220,130 shares are
owned by S.A.C. Capital Management, L.P.; and 166,064 shares are owned by
S.A.C. Investments, L.P. Mr. Cohen has the sole power and dispose of the
shares held by him, and has shared voting and dispositive power with respect
to the other shares. Mr. Cohen is the Managing Member of S.A.C. Capital
Management, LLC, the General Partner of S.A.C. Capital Management, L.P. and
S.A.C. Investments, L.P.
(3) Based on a Schedule 13G filed with the SEC on September 10, 1995. The
Schedule 13G states that N&B disclaims any economic interest in such
securities, that portfolio clients of N&B have the sole right to receive and
the power to direct the receipt of dividends from or proceeds from the sale
of such securities and that no client has an interest that related to 5% or
more of this security. Of the shares set forth above, N&B has shared
dispositive power with respect to all 536,200 shares, sole voting power with
respect to 288,900 shares and shared voting power with respect to 100,000
6
<PAGE>
shares. Partners of N&B own 2,000 shares. Partners own these shares in their
own personal securities accounts. N&B disclaims beneficial ownership of
these shares because these shares were purchased with each partners'
personal funds and each partner has exclusive dispositive and voting power
over the shares held in their respective accounts.
(4) Based on a Schedule 13G filed with the SEC on February 7, 1996. All of such
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company; in series of the DFA Investment
Trust Company, a Delaware business trust; or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans. Dimensional Find Advisors Inc., a registered investment
adviser, serves as investment manager to each of such entities, and
disclaims beneficial ownership of such shares.
(5) Includes shares subject to outstanding stock options that will be
exercisable on March 31, 1996, subject to the Company's right to repurchase
all or a portion of the unvested shares, as follows: Dane Nelson, 150,000
shares; Robert C. Wilson, 50,000 shares; Edward A. McClatchie, Ph.D.,
90,500; Lee R. Carlson, Ph.D., 54,000 shares; Robert L. Turner, 60,000
shares; William W. Weiss, 10,132 shares; and all employee directors and
executive officers as a group (6 persons), 442,218 shares.
(6) Includes shares that certain non-employee directors of the Company have the
right to acquire by March 31, 1996 pursuant to outstanding options and
warrants, as follows: John M. Huneke, 30,000 shares; Eugene Kleiner, 30,000
shares; Karl H. Schimmer, M.D., 25,000 shares.
(7) Does not include 13,275 shares beneficially owned by the Anesthesiologist
Medical Group of San Francisco Inc. Profit Sharing and Pension Trust, of
which Dr. Schimmer is a beneficiary but does not have or share investment or
voting control.
(8) Does not include 600 shares held by Dr. Carlson's son, with respect to which
Dr. Carlson disclaims beneficial ownership.
(9) Includes shares described in the notes above, where applicable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for setting policies related to the Company's
executive compensation program and overseeing its administration. During fiscal
1995, the Compensation Committee consisted of Mr. Huneke, Mr. Kleiner, Dr.
Schimmer and, until July 21, 1995, Mr. Moshe Alafi (a former member of the Board
of Directors), none of whom is or has been an employee of the Company. In August
1995, the Board of Directors reconstituted the Compensation Committee to consist
of all of the members of the Board of Directors and delegated the administration
of the Company's 1991 Stock Option Plan and Employee Stock Purchase Plan to the
Stock Option Committee, which now consists of all members of the Board of
Directors except Mr. Nelson.
The objective of the Company's executive compensation program is to attract,
motivate and retain executive officers capable of leading the Company to the
fulfillment of its business objectives. To this end, the Compensation Committee
approaches its responsibilities with the philosophy that the Company should
provide executives with total compensation opportunities that are competitive
and that reward executive contributions to corporate and stockholder value.
Until August 1995, the Compensation Committee articulated this philosophy
through its administration of the various components of the executive
compensation program, including annual compensation in the form of base salary
and long-term incentive compensation in the form of stock option grants. The
Compensation Committee will continue to articulate this philosophy through
determination of base salaries and incentive bonus compensation, and the Stock
Option Committee will do the same in its administration of the Company's 1991
Stock Option Plan and Employee Stock Purchase Plan.
In making decisions regarding compensation, the Compensation Committee has
typically considered a mix of factors, including individual merit, corporate
performance (including revenues, profits
7
<PAGE>
and other corporate developments such as acquisitions and restructurings),
competitive pay practices and long-term incentive value. The Compensation
Committee historically has not assigned relative weights to any one factor or
set specific individual or corporate performance goals, but rather evaluates
corporate performance and individual executive achievement on a subjective
basis. However, in August 1995, the Compensation Committee adopted new
guidelines for executive compensation that contemplate an annual bonus to
executives based on specific performance objectives to be set by the
Compensation Committee.
BASE SALARY. The Compensation Committee sets executive salaries with
reference to executive salary levels at companies in the electronics industry
that are comparable to the Company in terms of annual revenues. Market salary
levels are estimated based on independent published reports of executive
compensation in the electronics industry. These survey reports reflect
compensation payments at a broad sample of companies, including a significant
number of privately-owned companies. The group of companies that participate in
the surveys is not identical to the companies that make up the industry index
used in the Comparison of Five Year Total Cumulative Return on Investment, which
is entirely made up of publicly-owned companies. The Compensation Committee also
engaged an independent consultant to study executive salaries relative to market
to assist it in determining fiscal 1995 salary levels. The new compensation
guidelines adopted by the Compensation Committee in August 1995 also call for
each executive's salary to be set within a range based on that executive's
performance for the prior fiscal year.
None of the Named Executive Officers' (as defined herein) base salaries were
materially changed from fiscal 1994 to fiscal 1995. The Compensation Committee
believes that the adjustments made during fiscal 1993 for fiscal 1994 (discussed
in the report of the Compensation Committee in the Proxy Statement for the 1993
Annual Meeting of Stockholders) were sufficient to maintain salary levels at a
competitive level through fiscal 1995. In particular, the Compensation Committee
believes that Mr. Nelson's salary was between the estimated market's 50th and
75th percentiles throughout fiscal 1995 and that the other Named Executive
Officers' salaries generally approximated the market median, except that the
salary of Mr. McClatchie (who, subsequent to the end of fiscal 1995, is no
longer an executive officer of the Company) exceeded the market median. Salary
ranges for fiscal 1996 will be determined in a manner substantially similar to
that described above.
INCENTIVE BONUS COMPENSATION. In each of fiscal 1993, fiscal 1994 and
fiscal 1995, there was no executive incentive bonus plan and, with the exception
of an amount paid to one executive officer during fiscal 1993 as reimbursement
for unused vacation time, no bonuses were paid to any of the Named Executive
Officers. As described above, the Compensation Committee has adopted guidelines
for the payment of incentive bonus compensation in subsequent fiscal years.
STOCK OPTION COMPENSATION. In each of fiscal 1993, fiscal 1994 and fiscal
1995, the Compensation Committee used stock option grants to increase the
recipient's incentive to remain in the Company's employ and to maximize the
value of the Company's stock. By providing executives with an opportunity to
increase their ownership of the Company and to participate in the appreciation
of the Company's stock price, stock options align executive interests with those
of the stockholders while helping ensure that the total executive compensation
opportunity is competitive. Further, because stock options generally become
exercisable over a multi-year period, they encourage executives to remain in the
long-term employ of the Company. As described above, the Stock Option Committee
is now charged with making stock option grants to achieve the same objectives.
The Compensation Committee generally has set the exercise price of stock
options equal to 85% of the grant date fair market value of the Company's stock.
This practice is intended to increase the compensation value of the stock
options, and to strengthen the link that the stock options provide between the
recipient's long-term interests and those of the stockholders by providing the
executive with an immediate gain that (a) is unrealizable until the options vest
and (b) changes in value when the price of the Company's stock changes, whether
the change is an increase or a decrease.
8
<PAGE>
During fiscal 1995, the Compensation Committee did not make stock option
grants to any of the Named Executive Officers (as defined herein), because it
believes that the option grants made to date (including those made in fiscal
1994) are sufficient to provide the necessary incentive for such executive
officers to remain in the Company's employ on a long-term basis and to maximize
the value of the Company's stock.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. In December 1993, the Internal
Revenue Service (the "IRS") issued proposed regulations limiting the deduction a
publicly-held corporation may take for compensation paid to its Chief Executive
Officer and its four other most highly compensated employees paid over $100,00
per year. The IRS regulations limit the amount that such a company may deduct to
$1 million per person unless the compensation constitutes "performance based"
compensation, as defined in the Internal Revenue Code. The statute containing
this law and the applicable Treasury regulations offer a number of transitional
exemptions to this deduction limit for preexisting compensation plans,
arrangements and binding contracts.
The Compensation Committee believes that no Named Executive Officer's
compensation currently exceeds the $1 million limit. As a result, the
Compensation Committee has not yet formulated a policy for determining which
forms of compensation will be designated to qualify as "performance-based
compensation." The Compensation Committee intends to continue to evaluate the
effects of such statute and Treasury regulations and to comply with Internal
Revenue Code Section 162(m) in the future to the extent in keeping with the best
interests of the Company.
The members of the Compensation Committee are Mr. John M. Huneke, Mr. Eugene
Kleiner and Mr. Karl H. Schimmer, M.D.
SUMMARY COMPENSATION TABLE
The following table sets forth, for fiscal years 1995, 1994 and 1993,
certain compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive officers
at the end of fiscal 1995:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS (2)
-------------
ANNUAL COMPENSATION (1) SECURITIES
------------------------------------- UNDERLYING ALL OTHER
FISCAL SALARY (3) BONUS OPTIONS (4) COMPENSATION (5)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- -------------------------------------------- --------- ----------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Dane Nelson 1995 $ 215,010 -- -- $ 4,620
President and 1994 221,742 -- 30,000 9,117
Chief Executive Officer 1993 172,723 -- 35,000 --
Edward A. McClatchie, Ph.D. 1995 175,011 -- -- 4,620
Senior Vice President, 1994 181,550 -- -- 4,622
Sales and Corporate Development 1993 167,903 $ 13,078(6) 20,000 5,960
Lee R. Carlson, Ph.D. 1995 115,003 -- -- 3,822
Vice President, 1994 117,533 -- 5,000 4,125
Marketing 1993 98,547 -- 30,000 4,049
Robert L. Turner 1995 113,422 -- -- 3,970
Vice President, 1994 115,280 -- 10,000 2,965
Marketing 1993 104,826 -- 20,000 4,854
William W. Weiss 1995 71,569 -- -- --
Acting Chief Financial Officer 1994 -- -- -- --
and Controller 1993 -- -- -- --
</TABLE>
- ------------------------
(1) As permitted by rules promulgated by the SEC, with respect to fiscal 1993,
1994 and 1995, no amounts are shown for "perquisites", as such amounts for
each Named Executive Officer do not exceed the lesser of 10% of such
executive's salary plus bonus or $50,000.
9
<PAGE>
(2) To date, the Company has not granted any awards of restricted stock. The
Company does not have any long-term incentive plan.
(3) Includes amounts earned but deferred at the election of the Named Executive
Officer pursuant to the Company's Savings and Investment Plan, which is a
qualified plan under Section 401(k) of the Code.
(4) To date, the Company has not granted any stock appreciation rights (SARs)
under the Plan, although the Company has granted limited stock appreciation
rights in tandem with outstanding options held by officers and directors of
the Company.
STOCK OPTIONS
The Company grants options to its executive officers under the discretionary
Grant Program of the Plan ("Discretionary Program"). As of September 1, 1995,
options to purchase an aggregate of 2,050,000 shares had been granted under the
Plan and options to purchase 373,198 shares remained available for grant
thereunder. There were no option grants under the Plan in fiscal 1995.
The terms of options granted to the Named Executive Officers are generally
consistent with those of options granted to other employees under the
Discretionary Program. Options granted under the Discretionary Program may be
either incentive or non-statutory stock options. The exercise price of
non-statutory options must be at least 85% of fair market value on the date of
grant and the exercise price of incentive stock options must be at least 100%.
In the event of certain changes in control of the Company, vesting of
outstanding options automatically accelerates, and the options remain exercis-
able through the option term. In the event of certain other corporate
transactions, unless assumed by a successor corporation, vesting of outstanding
options will automatically accelerate, and the options will expire if not
exercised prior to the consummation of such corporate transaction. Certain
limited stock appreciation rights are granted to officers and directors of the
Company in tandem with their outstanding options. Any option with such a limited
stock appreciation right in effect for at least six months will automatically be
cancelled upon the occurrence of certain hostile takeovers, and the optionee
will in return be entitled to a cash distribution from the Company in an amount
equal to the excess of (i) the take-over price of the shares of common stock at
the time subject to the cancelled option (whether or not the option is otherwise
at the time exercisable for such shares, or (ii) the aggregate exercise price
payable for such shares. The 1991 Plan contains provisions permitting the
Compensation Committee to reprice outstanding options. Options generally vest in
equal daily installments over a four-year period.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
During fiscal 1995, no options were granted to executive officers. The
following table shows, for fiscal 1995, aggregated option exercises and the
fiscal year-end option values by the names executive officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARE ACQUIRED ON VALUE OPTIONS AT FY-END (#) FY-END ($) EXERCISABLE/
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE/UNEXERCISABLE (2/3) UNEXERCISABLE (2/4)
- ------------------ ------------------- ----------------- ----------------------------- -----------------------
<S> <C> <C> <C> <C>
Mr. Nelson -- -- 107,102 / 42,898 $688,676 / $117,274
Dr. McClatchie -- -- 75,194 / 15,306 543,372 / 49,228
Dr. Carlson -- -- 33,108 / 20,892 146,979 / 53,141
Mr. Turner -- -- 38,554 / 21,446 152,886 / 62,214
Mr. Weiss -- -- 6,131 / 4,001 27,076 / 10,843
</TABLE>
- ------------------------
(1) Represents the fair market value of the Company's common stock on the date
of exercise (based on the closing sales price reported on the Nasdaq
National Market or the actual sales price if the shares were sold by the
optionee) less the exercise price, and does not necessarily imply that the
shares were sold by the optionee.
10
<PAGE>
(2) Reflects shares vested and unvested at fiscal year end. Options granted
under the Discretionary Program are immediately exercisable, but are subject
to the Company's right to repurchase unvested shares on termination of
employment.
(3) Includes both "in-the-money" and "out-of-the-money" options. In-the-money
options are options with exercise prices below the market price of the
Company's common stock at July 30, 1995.
(4) Represents the fair market clue of the Company's common stock at July 30,
1995 ($15.875), based on the closing sales price reported on the Nasdaq
National Market, less the exercise price.
<TABLE>
<S> <C> <C> <C> <C> <C>
07/27/90 07/26/91 07/24/92 07/24/93 07/29/94 07/28/95
- --------- --------- --------- --------- --------- ---------
100.0 64.6 143.9 151.2 161.0 154.9
100.0 114.6 133.6 165.8 171.8 100.0
100.0 106.6 128.4 212.3 242.7 562.5
</TABLE>
11
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors and executive officers and any persons holding more
than ten percent (10%) of the Company's Common Stock are required by Section 16
of the Securities Exchange Act of 1934 to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this proxy statement
any failure to file by these dates. To the Company's knowledge, all of these
filing requirements were satisfied during fiscal 1995.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors that provide, among other things, that the Company will indemnify such
officers or directors, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he or she may
be required to pay in actions or proceedings to which he is or may be made a
party by reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's By-Laws.
In December 1993, Scitec entered into a three-year employment agreement with
Lawrence R. Lynott providing for an annual base salary of $100,000, subject to
increase in accordance with the policies of the Company. On June 7, 1995, Mr.
Lynott's employment with Scitec was terminated and on September 19, 1995,
pursuant to the terms of the contract, Mr. Lynott was paid a lump sum severance
of $155,890.26 and vesting on options on 13,655 shares of the Company's common
stock was accelerated.
12
<PAGE>
EXHIBIT 1
[ANDROS INCORPORATED LETTERHEAD]
February 21, 1996
To Our Stockholders:
I am pleased to inform you that on February 14, 1996 Andros Incorporated
entered into an Agreement and Plan of Merger with Andros Holdings Inc. and
Andros Acquisition Inc., both direct or indirect wholly owned subsidiaries of
Genstar Capital Partners II, L.P. Under the Agreement, Andros Acquisition Inc.
has commenced a cash tender offer to purchase all of the outstanding shares of
Andros Common Stock for $18.00 per share. The Offer will be followed by a Merger
in which any remaining shares of Andros Common Stock will be converted into the
right to receive $18.00 per share in cash, without interest.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS
APPROVED THE OFFER AND THE MERGER, AND RECOMMENDS THAT COMPANY STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, which are described in the attached
Schedule 14D-9 that is being filed today with the Securities and Exchange
Commission. These factors include, among other things, the opinion of Donaldson,
Lufkin & Jenrette Securities Corporation, the Company's financial advisor, that
the consideration to be received by the stockholders of the Company pursuant to
the Agreement is fair to the stockholders of the Company from a financial point
of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated February 21, 1996, of Andros
Acquisition Inc., together with related materials to be used for tendering your
shares. These documents set forth the terms and conditions of the Offer and the
Merger and provide instructions as to how to tender your shares. I urge you to
read the enclosed materials carefully.
Sincerely,
/s/ Dane Nelson
Dane Nelson
President and Chief Executive Officer
<PAGE>
EXHIBIT 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF
FEBRUARY 14, 1996
BY AND AMONG
CHO HOLDINGS INC.,
CHO ACQUISITION INC.
AND
ANDROS INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE I THE TENDER OFFER.............................................................. 1
SECTION 1.1 The Offer..................................................................... 1
SECTION 1.2 Company Action................................................................ 3
SECTION 1.3 Directors..................................................................... 4
ARTICLE II THE MERGER.................................................................... 5
SECTION 2.1 Merger........................................................................ 5
SECTION 2.2 Conversion of Shares.......................................................... 6
SECTION 2.3 Exchange of Certificates...................................................... 7
SECTION 2.4 Dissenting Shares............................................................. 8
SECTION 2.5 Certificate of Incorporation and Bylaws of the Surviving Corporation.......... 9
SECTION 2.6 Directors and Officers of the Surviving Corporation........................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.................... 9
SECTION 3.1 Corporate Organization........................................................ 9
SECTION 3.2 Authority..................................................................... 10
SECTION 3.3 Consents and Approvals; No Violation.......................................... 10
SECTION 3.4 Financing..................................................................... 11
SECTION 3.5 Surviving Corporation After the Merger........................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................. 11
SECTION 4.1 Corporate Organization........................................................ 11
SECTION 4.2 Capitalization................................................................ 12
SECTION 4.3 Subsidiaries.................................................................. 12
SECTION 4.4 Authority..................................................................... 13
SECTION 4.5 Consents and Approvals; No Violation.......................................... 13
SECTION 4.6 Proxy or Information Statement................................................ 14
SECTION 4.7 Conduct of Business........................................................... 14
SECTION 4.8 SEC Documents................................................................. 15
SECTION 4.9 Litigation.................................................................... 16
SECTION 4.10 Labor Relations; Employees.................................................... 16
SECTION 4.11 Certain Agreements and Employee Benefit Plans................................. 17
SECTION 4.12 Taxes......................................................................... 18
SECTION 4.13 Absence of Certain Changes or Events.......................................... 20
SECTION 4.14 Properties.................................................................... 21
SECTION 4.15 Intellectual Property......................................................... 21
SECTION 4.16 Material Contracts............................................................ 21
SECTION 4.17 Fees.......................................................................... 22
SECTION 4.18 Business Combination Statute Inapplicable..................................... 22
ARTICLE V COVENANTS OF THE COMPANY AND PARENT........................................... 22
SECTION 5.1 Conduct of Business of the Company............................................ 22
SECTION 5.2 Stockholder Meeting; Proxy Material; Information Statement.................... 24
SECTION 5.3 No Solicitation of Competing Transactions..................................... 25
ARTICLE VI ADDITIONAL AGREEMENTS......................................................... 26
SECTION 6.1 Access to Information......................................................... 26
SECTION 6.2 Legal Conditions to Offer and Merger.......................................... 27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
SECTION 6.3 Confidentiality Agreement..................................................... 27
<S> <C> <C> <C>
SECTION 6.4 Public Announcements.......................................................... 28
SECTION 6.5 Directors' and Officers' Insurance and Indemnification........................ 28
SECTION 6.6 Employee Arrangements......................................................... 29
SECTION 6.7 Company Stock Option Plans.................................................... 29
SECTION 6.8 Company Employee Stock Purchase Plan.......................................... 30
SECTION 6.9 Notice of Certain Events...................................................... 30
SECTION 6.10 Obligations of Purchaser...................................................... 31
SECTION 6.11 Voting of Shares.............................................................. 31
ARTICLE VII CONDITIONS PRECEDENT.......................................................... 31
SECTION 7.1 Conditions of Each Party's Obligation to Effect the Merger.................... 31
SECTION 7.2 Conditions to the Obligations of the Company to Effect the Merger............. 31
ARTICLE VIII TERMINATION................................................................... 32
SECTION 8.1 Termination................................................................... 32
SECTION 8.2 Effect of Termination......................................................... 33
SECTION 8.3 Certain Payments.............................................................. 33
ARTICLE IX GENERAL PROVISIONS............................................................ 34
SECTION 9.1 Amendment..................................................................... 34
SECTION 9.2 Extension; Waiver............................................................. 34
SECTION 9.3 Nonsurvival of Representations, Warranties and Agreements..................... 34
SECTION 9.4 Entire Agreement.............................................................. 34
SECTION 9.5........... Severability.................................................................. 34
SECTION 9.6 Notices....................................................................... 35
SECTION 9.7 Headings...................................................................... 36
SECTION 9.8 Expenses...................................................................... 36
SECTION 9.9 Benefits; Assignment.......................................................... 36
SECTION 9.10 Specific Performance.......................................................... 36
SECTION 9.11 Governing Law................................................................. 37
SECTION 9.12 Counterparts.................................................................. 37
ANNEX I CONDITIONS TO THE OFFER
</TABLE>
ii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM REFERENCE
- --------------------------------------------------------------------------------- ------------
<S> <C>
Agreement........................................................................ Preamble
CERCLA........................................................................... Section.47(c)
Certificates..................................................................... Section.23(a)
Code............................................................................. Section.411(a)
Common Stock..................................................................... Recitals
Company.......................................................................... Preamble
Competing Transaction............................................................ Section 5.3
Confidentiality Agreement........................................................ Section 6.3
Constituent Corporations......................................................... Section 2.1 (a)
Cut-off Date..................................................................... Section 1.3 (a)
Current Offering................................................................. Section 6.8
DGCL............................................................................. Recitals
Dissenting Shares................................................................ Section 2.4 (a)
Dissenting Stockholder........................................................... Section 2.4 (a)
Effective Time................................................................... Section 2.1 (b)
Environmental Laws............................................................... Section 4.7 (c)
ERISA............................................................................ Section 4.11(b)
Exchange Act..................................................................... Section 1.1 (a)
Exchange Agent................................................................... Section 2.3 (a)
Financing Commitments............................................................ Section 3.4
Fully Diluted Shares............................................................. Section 4.2
Governmental Entity.............................................................. Section 3.3
Hazardous Materials.............................................................. Section 4.7 (c)
HSR Act.......................................................................... Section 3.3
Information Statement............................................................ Section 4.6
ISO.............................................................................. Section 4.11(c)
IRS.............................................................................. Section 4.11(b)
Lien............................................................................. Section 4.14
Material Adverse Effect.......................................................... Section 4.1
Material Contracts............................................................... Section 4.16
Material Plans................................................................... Section 4.11(b)
Merger........................................................................... Recitals
Merger Price..................................................................... Section 2.2 (a)
Minimum Shares................................................................... Section 1.1 (a)
Minimum Share Condition.......................................................... Section 1.1 (a)
Offer............................................................................ Recitals
Offer Documents.................................................................. Section 1.1 (b)
Parent........................................................................... Preamble
Permits.......................................................................... Section 4.7 (b)
Proxy Statement.................................................................. Section 4.6
Purchaser........................................................................ Preamble
Schedule 14D-9................................................................... Section 1.2 (b)
SEC.............................................................................. Section 1.1 (b)
SEC Documents.................................................................... Section 4.8
Securities Act................................................................... Section 4.8
Shares........................................................................... Recitals
Special Committee................................................................ Section 1.2 (a)
Stock Options.................................................................... Section 4.2
Stock Option Plans............................................................... Section 6.7 (a)
Stock Purchase Plan.............................................................. Section 4.2
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM REFERENCE
- --------------------------------------------------------------------------------- ------------
Stockholders' Meeting............................................................ Section.52(a)
<S> <C>
Subsidiary....................................................................... Section.13(a)
Superior Proposal................................................................ Section.53
Surviving Corporation............................................................ Section.21(a)
Taxes............................................................................ Section.412(a)
Tendered Shares.................................................................. Section.11(a)
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
14, 1996, is entered into by and among CHO HOLDINGS INC., a Delaware corporation
("Parent"), CHO ACQUISITION INC., a Delaware corporation and a wholly owned
subsidiary of Parent (the "Purchaser"), and ANDROS INCORPORATED, a Delaware
corporation (the "Company").
R E C I T A L S
WHEREAS, the respective Boards of Directors of the Company, Parent and the
Purchaser have approved the acquisition of the Company by the Purchaser and, in
furtherance of such acquisition, Parent proposes to cause the Purchaser to make
a cash tender offer (the "Offer") for all of the outstanding shares of common
stock, par value $.01 per share ("Common Stock"), of the Company ("Shares") on
the terms specified herein and the Board of Directors of the Company has
approved the Offer and recommended that it be accepted by the stockholders of
the Company; and
WHEREAS, the Boards of Directors of the Company and the Purchaser deem it
advisable and in the best interests of the stockholders of such corporations to
effect the merger (the "Merger") of the Purchaser with and into the Company
following the consummation of the Offer, all pursuant to this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, Parent, the Purchaser and
the Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
SECTION 1.1 THE OFFER.
(a) Subject to the provisions of this Agreement and provided that nothing
shall have occurred that would result in a failure to satisfy any of the
conditions set forth in ANNEX I hereto, Parent shall cause the Purchaser to, as
promptly as reasonably practicable after the date hereof, but in no event later
than five (5) business days following the initial public announcement of the
Purchaser's intention to commence the Offer, commence (within the meaning of
Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), the Offer for all of the outstanding Shares at a price of
$18.00 per Share, net to the seller in cash, subject only (i) to a minimum of
2,649,538 Shares (or such other number of Shares, when added to the number of
Shares already owned by Parent, the Purchaser or any direct or indirect wholly
owned Subsidiary (as defined in Section 1.3(a)) of Parent, as shall constitute a
majority of the Company's Fully Diluted Shares (as defined in Section 4.2) (the
"Minimum Shares") being validly tendered prior to the expiration or termination
of the Offer and not withdrawn (the "Minimum Share Condition") and (ii) to the
other conditions to the Offer set forth in ANNEX I. The Purchaser may at any
time transfer or assign to one or more corporations directly or indirectly
wholly owned by Parent the right to purchase all or any portion of the Shares
tendered pursuant to the Offer (the "Tendered Shares"), but no such assignment
shall relieve the Purchaser of its obligations hereunder. The Purchaser
expressly reserves the right to waive any of the conditions to the Offer set
forth in ANNEX I and to modify the terms and conditions of the Offer; PROVIDED,
HOWEVER, that, without the prior written approval of the Company, the Purchaser
shall not amend or modify the terms of the Offer to (i) reduce the cash price to
be paid pursuant to the Offer, (ii) reduce the number of Shares as to which the
Offer is made, (iii) change the form of consideration to be paid in the Offer,
(iv) modify or waive the Minimum Share Condition, or (v) impose conditions to
its obligation to accept for payment or pay for the Tendered Shares other than
those set forth in ANNEX I. The Offer may not be extended without the Company's
prior written consent; PROVIDED, HOWEVER, that the Purchaser may extend (and
re-extend) the Offer for up to a total of 20
1
<PAGE>
business days if, as of the initial expiration date, which shall be 20 business
days following commencement of the Offer, there shall not have been validly
tendered and not withdrawn that number of Shares necessary to permit the Merger
to be effected without a meeting of the Company's stockholders in accordance
with the DGCL.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Purchaser shall file with the Securities and Exchange Commission
("SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer,
which shall contain or shall incorporate by reference an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents included therein or incorporated therein by reference pursuant to
which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents"). Parent and the Purchaser agree that the Offer
Documents shall comply as to form in all material respects with the Exchange
Act, and the rules and regulations promulgated thereunder, and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or the Purchaser with respect to information supplied by the
Company or any of its representatives which is included in the Offer Documents.
Each of Parent, the Purchaser and the Company agrees to correct promptly any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading, and each of Parent
and the Purchaser further agrees to take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. Parent and the Purchaser agree to provide the Company and its
counsel any comments Parent, the Purchaser or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
(c) Subject to the terms and conditions of the Offer, the Purchaser shall
pay for Shares which have been validly tendered and not withdrawn pursuant to
the Offer as promptly as practicable following expiration of the Offer.
SECTION 1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and represents
that at a meeting duly called and held the Board of Directors of the Company
has, after receiving the recommendation in favor thereof of the special
committee of the Board of Directors of the Company (the "Special Committee")
formed to consider this Agreement and the transactions contemplated hereby, (i)
approved and adopted this Agreement and the transactions contemplated hereby and
determined that the Offer and the Merger are in the best interests of the
Company and its stockholders and on terms that are fair to such stockholders,
and (ii) recommended that the Company's stockholders accept the Offer and tender
all of their Shares in connection therewith and, if required under the DGCL,
approve this Agreement and the transactions contemplated hereby. The Company
represents that its Board of Directors has received the written opinion of
Donaldson, Lufkin & Jenrette Securities Corporation that the consideration to be
received by the Company's stockholders pursuant to each of the Offer and the
Merger is fair to the Company's stockholders from a financial point of view, and
that a complete and correct signed copy of such opinion will be delivered
promptly following the date hereof by the Company to Parent. The Company
represents that the Special Committee has duly adopted resolutions providing for
the dissolution of the Special Committee on the Cut-Off Date (as defined below).
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to
2
<PAGE>
the Offer (such Schedule 14D-9, as amended and supplemented from time to time,
the "Schedule 14D-9") and shall mail the Schedule 14D-9 to the stockholders of
the Company. Subject to the fiduciary duties of the Board of Directors as
advised by counsel, the Offer Documents and the Schedule 14D-9 shall contain the
recommendation of the Company's Board of Directors described in Section 1.2(a).
The Company agrees that the Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or the Purchaser or any of their respective
representatives which is included in the Schedule 14D-9. Each of the Company,
Parent and the Purchaser agrees to correct promptly any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading, and the Company further agrees to take
all steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-9 and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Parent and its
counsel with any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer, the Company shall cause its transfer agent
to furnish the Purchaser promptly with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to the Purchaser such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as the Purchaser may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer or the Merger, Parent and the Purchaser and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the other
transactions contemplated hereby and, if this Agreement shall be terminated,
will deliver, and will use their reasonable best efforts to cause their agents
to deliver, to the Company all copies of such information then in their
possession or control.
SECTION 1.3 DIRECTORS.
(a) Promptly upon the purchase by the Purchaser of Shares in the Offer, and
from time to time thereafter, the Purchaser shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Company's Board
of Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section 1.3) and (ii) the percentage that the number
of Shares owned by the Purchaser, Parent and any direct or indirect wholly owned
Subsidiary of Parent (including Shares purchased in the Offer) bears to the
total number of Shares outstanding, and to effect the foregoing the Company
shall upon request by the Purchaser, at the Company's election, either increase
the number of directors comprising the Company's Board of Directors or seek and
accept resignations of incumbent directors. The first date on which designees of
the Purchaser shall constitute a majority of the Company's Board of Directors is
referred to in this Agreement as the "Cut-Off Date." At such times, the Company
will use its reasonable best efforts to cause individuals designated by the
Purchaser to constitute the same percentage as such individuals represent on the
Company's
3
<PAGE>
Board of Directors of (x) each committee of the Board, (y) each board of
directors of each Subsidiary of the Company and (z) each committee of each such
board. As used in this Agreement, a "Subsidiary" of any other corporation means
a corporation an amount of whose voting securities sufficient to elect at least
a majority of its Board of Directors is owned directly or indirectly by such
other corporation.
(b) The Company shall promptly take all actions required pursuant to Section
14(f) and Rule 14f-1 in order to fulfill its obligations under this Section and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors as is required under Section 14(f) and Rule 14f-1
to fulfill its obligations under this Section 1.3. The Purchaser will supply to
the Company and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) Following the Cut-Off Date and prior to the Effective Time, any
amendment of this Agreement or the Certificate of Incorporation or Bylaws of the
Company or any of its Subsidiaries, any termination or amendment of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or the Purchaser
or any exercise or waiver of any of the Company's rights hereunder, will require
the concurrence of a majority of the directors of the Company then in office who
are neither designated by the Purchaser, employees of the Company or any of its
Subsidiaries nor otherwise affiliated with the Purchaser.
ARTICLE II
THE MERGER
SECTION 2.1 MERGER.
(a) At the Effective Time (as defined in subsection (b) below) and subject
to the terms and conditions hereof and the provisions of the DGCL, the Purchaser
will be merged with and into the Company in accordance with the DGCL, the
separate existence of the Purchaser shall thereupon cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation"). The
Purchaser and the Company are sometimes hereinafter referred to collectively as
the "Constituent Corporations."
(b) Subject to the terms and conditions hereof, the Merger shall be
consummated as promptly as practicable after the expiration of the Offer and the
Stockholders' Meeting (as defined in Section 5.2), if any, by duly filing an
appropriate certificate of merger or certificate of ownership, as the case may
be, in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL. The Merger shall be effective at such time as
the certificate of merger or certificate of ownership is duly filed with the
Secretary of State of the State of Delaware in accordance with the DGCL or at
such later time as is specified in the certificate of merger or certificate of
ownership (the "Effective Time"). Prior to such filing, a closing shall take
place at the offices of Shearman & Sterling, 555 California Street, San
Francisco, California, or at such other place as the parties shall agree, for
the purpose of confirming the satisfaction or waiver of the conditions contained
in Article VII hereof.
(c) The separate corporate existence of the Company, as the Surviving
Corporation, with all its purposes, objects, rights, privileges, powers,
certificates and franchises, shall continue unimpaired by the Merger. The
Surviving Corporation shall succeed to all the properties and assets of the
Constituent Corporations and to all debts, choses in action and other interests
due or belonging to the Constituent Corporations and shall be subject to, and
responsible for, all the debts, liabilities and duties of the Constituent
Corporations with the effect set forth in Section 259 of the DGCL.
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SECTION 2.2 CONVERSION OF SHARES.
At the Effective Time and by virtue of the Merger and without any action on
the part of the holders of the capital stock of the Constituent Corporations:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than (i) Shares to be cancelled pursuant to subsection (b) below
and (ii) Dissenting Shares (as defined in Section 2.4)) shall be converted
into the right to receive in cash an amount per Share equal to the highest
price paid per Share pursuant to the Offer (the "Merger Price");
(b) Each Share held in the treasury of the Company and each Share owned
by Parent, the Purchaser or the Company, or by any direct or indirect wholly
owned Subsidiary of any of them, shall be cancelled and retired without
payment of any consideration therefor; and
(c) Each share of Common Stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 2.3 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, a bank or trust company to be
designated by Parent with the concurrence of the Company shall act as exchange
agent (the "Exchange Agent") in effecting the exchange of the Merger Price for
certificates which prior to the Effective Time represented Shares and which as
of the Effective Time represent the right to receive the Merger Price (the
"Certificates"). Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder of Certificates a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Price therefor in a form approved by Parent and the Company. At or prior to the
Effective Time, the Purchaser shall deposit in trust with the Exchange Agent
immediately available funds in an amount sufficient to pay the Merger Price for
all such Shares to the Company's stockholders as contemplated by this Section
2.3. Such funds shall be invested by the Exchange Agent as directed by Parent or
the Surviving Corporation, PROVIDED that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $250 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise). Upon the
surrender of each Certificate and the issuance and delivery by the Exchange
Agent of the Merger Price for the Shares represented thereby in exchange
therefor, the Certificate shall forthwith be cancelled. Until so surrendered and
exchanged, each Certificate shall represent solely the right to receive the
Merger Price for the Shares represented thereby, without any interest thereon.
Upon the surrender and exchange of such an outstanding Certificate, the holder
thereof shall receive the Merger Price multiplied by the number of Shares
represented by such Certificate, without any interest thereon. If any cash is to
be paid to a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition to such payment or
exchange that the person requesting such payment or exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the payment of
such cash to a name other than that of the registered holder of the Certificate
surrendered, or such person shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Certificates for any part of the Merger Price payments made to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(b) Promptly following the sixth month after the Effective Time, the
Exchange Agent shall return to the Surviving Corporation all cash relating to
the transactions described in this Agreement,
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and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
exchange therefor the Merger Price for such Shares, without any interest
thereon, but shall have no greater rights against the Surviving Corporation than
may be accorded to general creditors of the Surviving Corporation under
applicable law. At and after the Effective Time, holders of Certificates shall
cease to have any rights as stockholders of the Company except for the right to
surrender such Certificates in exchange for the Merger Price for such Shares or
to perfect their right to receive payment for their Shares pursuant to Section
262 of the DGCL and Section 2.4 below, and there shall be no transfers on the
stock transfer books of the Company or the Surviving Corporation of any Shares
that were outstanding immediately prior to the Merger.
SECTION 2.4 DISSENTING SHARES.
(a) Notwithstanding the provisions of Section 2.2 or any other provision of
this Agreement to the contrary, Shares that are issued and outstanding
immediately prior to the Effective Time and are held by stockholders who have
not voted such Shares in favor of the approval and adoption of this Agreement
and who shall have properly demanded appraisal of such Shares in accordance with
Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the
right to receive the Merger Price at the Effective Time, unless and until the
holder of such Dissenting Shares shall have failed to perfect or shall have
effectively withdrawn or lost such right to appraisal and payment under the
DGCL. If a holder of Dissenting Shares (a "Dissenting Stockholder") shall have
so failed to perfect or shall have effectively withdrawn or lost such right to
appraisal and payment, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such Dissenting Shares shall be converted into and
represent solely the right to receive the Merger Price, without any interest
thereon, as provided in Section 2.2.
(b) The Company shall give Parent (i) prompt notice of any written demands
for appraisal, withdrawals of demands for appraisal and any other instruments
served pursuant to Section 262 of the DGCL received by the Company, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under Section 262 of the DGCL. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal or settle or offer to settle any such demands.
SECTION 2.5 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION.
(a) Subject to the terms of Section 6.5, at the Effective Time the
Certificate of Incorporation of the Purchaser, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation; PROVIDED, HOWEVER, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Andros Incorporated."
(b) Subject to the terms of Section 6.5, the Bylaws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation or such Bylaws.
SECTION 2.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the directors of the Purchaser immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation, until the
next annual stockholders' meeting of the Surviving Corporation and until their
successors shall be duly elected or appointed and shall duly qualify. At the
Effective Time, the officers of the Purchaser immediately prior to the Effective
Time shall become the officers of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby jointly and severally represent and warrant
to the Company that, except as and to the extent set forth in a Disclosure
Schedule delivered to the Company on or prior to the date hereof setting forth
additional exceptions specified therein to the representations and warranties
contained in this Article III, which Disclosure Schedule shall identify
exceptions by specific Section references:
SECTION 3.1 CORPORATE ORGANIZATION.
(a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Purchaser has not
engaged in any business since it was incorporated other than in connection with
the transactions contemplated by this Agreement. Parent owns all of the
outstanding capital stock of the Purchaser.
SECTION 3.2 AUTHORITY. Each of Parent and the Purchaser has the full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to consummate
the transactions so contemplated (other than, with respect to the Merger, the
filing and recordation or the appropriate merger documents as required by the
DGCL). This Agreement has been duly executed and delivered by each of Parent and
the Purchaser and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser, enforceable against such parties in accordance with
its terms.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Parent and the Purchaser nor the consummation
by Parent and the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of their respective
Certificates of Incorporation or Bylaws, or (ii) assuming compliance with the
matters referred to in clause (iii) below, constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation contained in or to the loss of a benefit under, or result in the
creation of any lien or other encumbrance upon any of the properties or assets
of Parent or the Purchaser under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease agreement or
other agreement, instrument, obligation, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or the Purchaser, or to which either of them or any of their
respective properties or assets may be subject, except for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of liens
or other encumbrances, which, individually or in the aggregate, will not have a
material adverse effect on Parent and its Subsidiaries taken as a whole or (iii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency, commission or other
governmental or regulatory authority or instrumentality, domestic or foreign (a
"Governmental Entity"), except (A) pursuant to the Exchange Act, (B) filing a
certificate of merger or certificate of ownership, as the case may be, pursuant
to the DGCL, (C) filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the termination of the
waiting periods thereunder or (D) consents, approvals, authorizations, permits,
filings or notifications which if not obtained or made will not, individually or
in the aggregate, have a material adverse effect on Parent and its Subsidiaries
taken as a whole or prevent or materially delay consummation of the Offer or the
Merger.
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SECTION 3.4 FINANCING. The Purchaser has received loan commitment letters
from one or more commercial banks and purchase commitment letters from
subordinated debt investors (together, the "Financing Commitments"), copies of
which have been provided to the Company. The Purchaser has or will have, prior
to the expiration of the Offer and the Effective Time of the Merger, sufficient
cash or cash-equivalent funds available to purchase all of the Shares
outstanding in the Offer and the Merger, to provide adequate working capital for
the Company following the Effective Time and to pay all related fees and
expenses incurred in connection with the Offer and the Merger.
SECTION 3.5 SURVIVING CORPORATION AFTER THE MERGER. At the Effective Time
and after and giving effect to any changes in the Surviving Corporation's assets
and liabilities as a result of the Merger and after and giving effect to the
financing contemplated by the Financing Commitments, the Surviving Corporation
will not (i) be insolvent (either because its financial condition is such that
the sum of its debts is greater than the fair value of its assets or because the
present fair saleable value of its assets will be less than the amount required
to pay its probable liability on its debts as they become absolute and matured),
(ii) have unreasonably small capital with which to engage in its business or
(iii) have incurred or plan to incur debts beyond its ability to pay as they
become absolute and matured.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser that,
except as and to the extent set forth in a Disclosure Schedule delivered to
Parent on or prior to the date hereof setting forth additional exceptions
specified therein to the representations and warranties contained in this
Article IV, which Disclosure Schedule shall identify exceptions by specific
Section references:
SECTION 4.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. All Subsidiaries of the Company are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and the Company and its Subsidiaries have the
requisite corporate power and authority and all necessary governmental approvals
to own or lease and operate their properties and assets and to carry on their
businesses as they are now being conducted, and are duly qualified or licensed
as foreign corporations to do business and in good standing in each jurisdiction
in which the nature of the businesses conducted by them or the character or
location of the properties owned or leased by them makes such qualification or
licensing necessary, except where the failure to be so organized, existing, in
good standing, qualified or licensed would not have a Material Adverse Effect.
As used herein, the term "Material Adverse Effect" means any change or effect
that, individually or in the aggregate, is or is reasonably likely to be
materially adverse to the business, operations, properties, financial condition,
assets or liabilities (including, without limitation, contingent liabilities) of
the Company and the Subsidiaries taken as a whole.
SECTION 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock. As of the close of business on
January 31, 1996, 4,628,054 shares of Common Stock were issued and outstanding,
671,021 shares of Common Stock were reserved for issuance upon the exercise of
outstanding options to acquire shares of Common Stock ("Stock Options"), no
shares of Common Stock were held by the Company in its treasury and 16,430
shares of Common Stock were reserved for issuance under the Company's employee
stock purchase plan (the "Stock Purchase Plan") and no shares of Preferred Stock
were issued and outstanding. The number of issued and outstanding shares of
Common Stock at any time taken together with the number of shares of Common
Stock reserved for issuance upon the exercise of outstanding Stock Options at
such time is referred to herein as the "Fully Diluted Shares." All of the issued
and outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificates of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which the Company or its assets is bound. Except as
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disclosed in this Section 4.2, there are no shares of capital stock of the
Company issued or outstanding, and except for the Stock Options and rights to
purchase shares of Common Stock under the Stock Purchase Plan, there are no
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character (including, without limitation,
rights which will or could become exercisable as a result of this Agreement or
any transaction contemplated hereby) relating to the issued or unissued capital
stock or other securities of the Company obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company to grant, extend or enter
into any subscription, option, warrant, right, convertible security or other
similar agreement or commitment. There are no voting trusts or other agreements
or understandings to which the Company or any Subsidiary of the Company is a
party with respect to the voting of the capital stock of the Company or such
Subsidiary.
SECTION 4.3 SUBSIDIARIES. The Subsidiaries of the Company are listed on
SCHEDULE 4.3. All of the outstanding shares of capital stock of each Subsidiary
of the Company are validly issued, fully paid and nonassessable and are owned by
the Company or a wholly owned Subsidiary of the Company, free and clear of all
liens, claims or encumbrances. There are no existing subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of any Subsidiary of the Company obligating any such Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of any Subsidiary of the Company or obligating any
Subsidiary of the Company to grant, extend or enter into any subscription,
option, warrant, right, convertible security or other similar agreement or
commitment. Except as disclosed in SCHEDULE 4.3, the Company does not own,
directly or indirectly, any equity or similar interest in, or any interest
convertible into or exchangeable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
SECTION 4.4 AUTHORITY. The Company has the full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
stockholders of the Company if and to the extent required by applicable law, and
the filing and recordation of the appropriate merger documents as required by
DGCL). This Agreement has been duly executed and delivered by, and, assuming the
due authorization, execution and delivery thereof by Parent and the Purchaser,
constitutes a valid and binding obligation of, the Company, enforceable against
the Company in accordance with its terms.
SECTION 4.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or result
in any breach or violation of any provision of the Certificate of Incorporation
or Bylaws (or other comparable organizational documents) of the Company or any
Subsidiary of the Company, or (ii) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or give rise
to a right of termination, cancellation or acceleration of any obligation
contained in or to the loss of a benefit under, or result in the creation of any
lien or other encumbrance upon any of the properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any such Subsidiary or to which they or any of their
respective properties or assets may be subject, except for such violations,
conflicts, breaches, terminations, accelerations or creations of liens or other
encumbrances, which will not have a Material Adverse Effect, or (iii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental
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Entity, except (A) pursuant to the Exchange Act, (B) filing a certificate of
merger pursuant to the DGCL, (C) filings under the HSR Act and the termination
of the waiting periods thereunder or (D) consents, approvals, authorizations,
permits, filings or notifications which if not obtained or made will not have a
Material Adverse Effect or prevent or materially delay consummation of the Offer
or the Merger.
SECTION 4.6 PROXY OR INFORMATION STATEMENT. If the DGCL shall require a
Stockholders' Meeting to be convened in connection with the Merger, the proxy
statement to be provided to stockholders of the Company in connection with the
Stockholders' Meeting (together with the amendments thereof and supplements
thereto, the "Proxy Statement") and all amendments thereof and supplements
thereto shall, and if the DGCL shall not require a Stockholders' Meeting to be
convened in connection with the Merger, the information statement to be provided
to stockholders of the Company in connection with the Merger (together with the
amendments thereof and supplements thereto, the "Information Statement") shall,
comply as to form in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations promulgated thereunder, and shall
not, at the time of (i) first mailing thereof or (ii) in the case of the Proxy
Statement, the Stockholders' Meeting to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that (x) no representation is made by the Company with
respect to information supplied in writing by Parent or any affiliates or
representatives of Parent or Purchaser for inclusion in the Proxy Statement or
Information Statement, as the case may be, and (y) no representation is made
with respect to a Proxy Statement or Information Statement, as the case may be,
prepared by the Company and provided to the Company's stockholders at any time
following the Cut-Off Date.
SECTION 4.7 CONDUCT OF BUSINESS.
(a) The businesses of the Company and its Subsidiaries are not being
conducted in default or violation of any term, condition or provision of (i) its
respective charter or bylaws, or (ii) any note, bond, mortgage, indenture, deed
of trust, lease, agreement, or other instrument or obligation of any kind to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective properties or assets may
be bound, or (iii) any federal, state, local or foreign statue, law, ordinance,
rule, regulation, judgment, decree, order, concession, grant, franchise, permit
or license or other governmental authorization or approval applicable to the
Company or any of its Subsidiaries, excluding from the foregoing clauses (ii)
and (iii) defaults or violations that would not have a Material Adverse Effect.
(b) The Company and each of its Subsidiaries have all licenses, permits,
orders or approvals of, and have made all required registrations with, all
Governmental Entities that are material to the conduct of the business of the
Company and its Subsidiaries taken as a whole (collectively, "Permits"). To the
knowledge of the Company, (i) all Permits are in full force and effect; (ii) no
material violations are or have been recorded in respect of any Permit; and
(iii) no proceeding is pending or threatened to revoke or limit any Permit.
(c) Neither the Company nor any of its Subsidiaries has received any written
communication from a Governmental Entity that alleges that the Company or any
Subsidiary of the Company is not in compliance with any Environmental Law (as
defined below) if such non-compliance could reasonably be expected to have a
Material Adverse Effect. The Company has no knowledge of any environmental
materials or information, including on-site or off-site disposal or releases of
Hazardous Materials (as defined below), that could reasonably be expected to
have a Material Adverse Effect. As used in this Agreement, the term
"Environmental Laws" means any applicable treaties, laws, regulations,
enforceable requirements, orders, decrees or judgments issued, promulgated or
entered into by any Governmental Entity, which relate to (A) pollution or
protection of the environment or (B) the generation, storage, use, handling,
disposal or transportation of or exposure to Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
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amended, 42 U.S.C. SectionSection 9601, ET SEQ. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. SectionSection 6901 ET
SEQ., the Federal Water Pollution Control Act, as amended, 33 U.S.C.
SectionSection 1251 ET SEQ., the Clean Air Act of 1970, as amended, 42 U.S.C.
SectionSection 7401 ET SEQ., the Toxic Substances Control Act of 1976, 15 U.S.C.
SectionSection 2601 ET SEQ., the Hazardous Materials Transportation Act, 49
U.S.C. SectionSection 1801 ET SEQ., and any similar or implementing state or
local law, and all amendments or regulations promulgated thereunder. As used in
this Agreement, the term "Hazardous Materials" means all explosive or regulated
radioactive materials or substances, biological hazards, genotoxic or mutagenic
hazards, hazardous or toxic substances, medical wastes or other wastes or
chemicals, petroleum or petroleum distillates, asbestos or asbestos-containing
materials, and all other materials or chemicals regulated pursuant to any
Environmental Law, including materials listed in 49 C.F.R. SectionSection
172.101 and materials defined as hazardous pursuant to Section 101(14) of
CERCLA.
SECTION 4.8 SEC DOCUMENTS. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since July 31,
1992 (the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and, at the time of filing, none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and their consolidated statements of operations, stockholders'
equity and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments which
were and are not expected to have a Material Adverse Effect). Except as and to
the extent set forth on the consolidated balance sheet of the Company and the
Subsidiaries as at July 30, 1995, including the notes thereto, neither the
Company nor any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in accordance
with generally accepted accounting principles, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since July 30, 1995 which could not reasonably be expected to have a
Material Adverse Effect. The Company has heretofore made available to Parent
complete and correct copies of all of the SEC Documents and all amendments and
modifications thereto, as well as, to the extent any shall exist, all amendments
and modifications that have not been filed by the Company with the SEC to all
agreements, documents and other instruments that previously had been filed by
the Company with the SEC and are currently in effect.
SECTION 4.9 LITIGATION. There is no suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to (i) have a Material Adverse Effect, (ii) materially impair the
ability of the Company to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity outstanding against the Company or any of its subsidiaries
having, or that could reasonably be expected to have, any such effect.
SECTION 4.10 LABOR RELATIONS; EMPLOYEES. (i) Neither the Company nor any
of its Subsidiaries is, directly or indirectly, a party to or bound by any
collective bargaining agreement; (ii) no collective bargaining agreement is
currently being negotiated by the Company or its Subsidiaries; and (iii) to the
knowledge of the Company, no representation question exists respecting the
employees of the Company or its Subsidiaries.
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SECTION 4.11 CERTAIN AGREEMENTS AND EMPLOYEE BENEFIT PLANS.
(a) Neither the Company nor any of its Subsidiaries is a party to any
written (i) employment, severance, collective bargaining or consulting agreement
not terminable on 60 days' or less notice, (ii) agreement with any executive
officer or other key employee of the Company or any Subsidiary of the Company
(A) the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any
Subsidiary of the Company of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee extending for a period longer than one year, or (C) providing
severance benefits or other benefits after the termination of employment of such
executive officer or key employee regardless of the reason for such termination
of employment, (iii) agreement, plan or arrangement under which any person may
receive payments subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (iv) agreement or plan,
including, without limitation, any stock option plan (other than the Stock
Option Plans), stock appreciation right plan, restricted stock plan or stock
purchase plan, the benefits of which would be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(b) SCHEDULE 4.11(B) contains a true and complete summary or list of, or
otherwise describes (i) all employee benefit plans (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligations which while are material
in amount and which are maintained, contributed to or sponsored by the Company
or any Subsidiary for the benefit of any current or former employee, officer or
director of the Company or any Subsidiary and (ii) each employee benefit plan
for which the Company or any Subsidiary could incur liability under Section 4069
of ERISA, in the event such plan were terminated, or under Section 4212(c) of
ERISA, or in respect of which the Company or any Subsidiary remains secondarily
liable under Section 4204 of ERISA (collectively, the "Material Plans"). Each
Material Plan is in writing and the Company has previously made available to
Parent a true and complete copy of each Material Plan and a true and complete
copy of each material document prepared in connection with each such Material
Plan including, without limitation: (i) a copy of each trust or other funding
arrangement, (ii) the most current summary plan description and summary of
material modifications, (iii) the most recently filed Internal Revenue Service
("IRS") Form 5500, (iv) the most recently received IRS determination letter for
each such Material Plan, and (v) the most recently prepared actuarial report and
financial statement in connection with each such Material Plan. Neither the
Company nor any Subsidiary has any express or implied commitment (i) to create,
incur liability with respect to or cause to exist any other employee benefit
plan, program or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual or (iii) to modify, change or
terminate any Material Plan, other than with respect to a modification, change
or termination required by ERISA or the Code. To the extent applicable, the
Material Plans comply with the requirements of ERISA and the Code, and any
Material Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and has been so
qualified during the period from its adoption to date. No Material Plan is
covered by Title IV of ERISA or Section 412 of the Code. Neither the Company,
its Subsidiaries nor any officer or director of the Company or any of its
Subsidiaries has incurred any liability or penalty under Sections 4975 through
4980 of the Code or Title I of ERISA. To the knowledge of the Company, each
Material Plan has been maintained and administered in all material respects in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Material Plans. There are no pending or
anticipated claims against or otherwise involving any of the Material Plans and
no suit, action or other litigation (excluding claims for benefits
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incurred in the ordinary course of Material Plan activities) has been brought,
or to the knowledge of the Company is threatened, against or with respect to any
such Material Plan. All material contributions, reserves or premium payments
required to be made or accrued as of the date hereof to the Material Plans have
been made or accrued.
(c) SCHEDULE 4. 11(C) contains a true and correct list of each person who
holds any Stock Option as of the date hereof, together with (i) the number of
shares of Common Stock subject to such Stock Option, (ii) the date of grant of
such Stock Option, (iii) the extent to which such Stock Option is currently
vested or scheduled to vest by June 30, 1996, (iv) the exercise price of such
Stock Option, (v) whether such Stock Option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO") and (vi) the expiration date of such Stock Option. SCHEDULE 4.11(C) also
sets forth the aggregate number of ISO's and nonqualified Stock Options
outstanding as of the date hereof.
SECTION 4.12 TAXES.
(a) The Company and its Subsidiaries (i) have filed when due (taking into
account extensions) with the appropriate federal, state, local, foreign and
other governmental agencies, all tax returns, estimates and reports required to
be filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued all requisite federal, state, local or foreign
taxes, levies, imposts, duties, licenses and registration fees and charges of
any nature whatsoever, and unemployment and social security taxes and income tax
withholding, including interest and penalties thereon ("Taxes") and there are
and will be no tax deficiencies claimed in writing and received by the Company
or its Subsidiaries in respect of any period preceding the Effective Time that,
in the aggregate, would result in any tax liability in excess of the amount of
the reserves or accruals, and (iii) have established or will establish in
accordance with its normal accounting practices and procedures accruals and
reserves that, in the aggregate, are adequate for the payment of all Taxes not
yet due and payable and attributable to any period preceding the Effective Time.
(b) No taxes, interest, penalties, assessments or deficiencies have been
threatened or claimed in a writing and received by the Company or any of its
Subsidiaries by any taxing authority in respect of any tax returns filed by the
Company and its Subsidiaries (or any predecessor corporations). Neither the
Company nor any of its Subsidiaries (nor any predecessor corporation) have
executed or filed with the IRS or any other taxing authority any agreement or
other document extending, or having the effect of extending, the period of
assessment or collection of any Taxes. Neither the Company nor any of its
Subsidiaries is currently being audited by any taxing authority or have received
notice of a proposed audit pertaining to Taxes. There are no tax liens on any
assets of the Company or any affiliate, except for Taxes not yet due and
payable. The accruals and reserves for taxes reflected in the consolidated
balance sheet of the Company and the Subsidiaries as at July 30, 1995 are in all
material respects adequate to cover all Taxes accruable through the date thereof
(including interest and penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles.
(c) The Company neither is a party to, is bound by, nor has any obligation
under any tax sharing or similar agreement.
(d) Neither the Company nor any of its Subsidiaries is required to include
in income (i) any amount in respect of any adjustment under Section 481 of the
Internal Revenue Code of 1986, as amended (the "Code"), (ii) any deferred
intercompany transaction or (iii) any installment sale gain, where the inclusion
in income would result in a tax liability materially in excess of the reserves
therefor. Neither the Company nor any of its Subsidiaries has given a consent
under Section 341(f) of the Code. Neither the Company nor any of its
Subsidiaries is, or has been at any time, a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(e) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that may result, separately or in the
aggregate, in the payment of any "excess parachute
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payment" within the meaning of Section 280G of the Code by reason of the
consummation of the Offer or the Merger, determined without regard to Section
280G(b)(4) of the Code. No acceleration of the vesting schedule for any property
that is substantially unvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement. Neither the Company nor any of its Subsidiaries
is or has been subject to any accumulated earnings tax or personal holding
company tax. Neither the Company nor any of its Subsidiaries owns stock in (i) a
passive foreign investment company within the meaning of Section 1296 of the
Code or (ii) a controlled foreign corporation within the meaning of Section 957
of the Code. Neither the Company nor any of its Subsidiaries is obligated under
any agreement with respect to industrial development bonds or other obligations
with respect to which the excludibility from gross income of the holder for
federal income tax purposes could be affected by the transactions contemplated
hereunder. Neither the Company nor any of its Subsidiaries has an unrecaptured
overall foreign loss within the meaning of Section 904(f) of the Code or has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code. Neither the Company nor any of its Subsidiaries owns
any property of a character the transfer of which would give rise to (x) a
revaluation of such property for purposes of any AD VALOREM or similar tax, or
(y) any documentary, stamp or other transfer tax. Neither the Company nor any of
its Subsidiaries has an "excess loss account" for purposes of the Treasury
Regulations promulgated under Section 1502 of the Code.
SECTION 4.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 30, 1995,
except as contemplated by this Agreement or disclosed in any SEC Document filed
since July 30, 1995 and prior to the date of this Agreement, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice, and there has not been (i) any damage,
destruction or loss, whether covered by insurance or not, having or which,
insofar as reasonably can be foreseen, in the future would have a Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to Common Stock, or any
redemption, purchase or other acquisition of any of its securities, (iii) any
change in the business, operations, properties, financial condition, assets or
liabilities (including, without limitation, contingent liabilities) of the
Company or any Subsidiary having a Material Adverse Effect, (iv) any labor
dispute, other than routine matters, none of which is material to the Company
and its Subsidiaries taken as a whole, (v) any entry into any material
commitment or transaction (including, without limitation, any borrowing or
capital expenditure) other than in the ordinary course of business consistent
with past practice, (vi) any material change by the Company in its accounting
methods, principles or practices, (vii) any revaluation by the Company of any
asset (including, without limitation, any writing down of the value of inventory
or writing off of notes or accounts receivable), other than in the ordinary
course of business consistent with past practice, or (viii) any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company or any
Subsidiary, except in the ordinary course of business consistent with past
practice.
SECTION 4.14 PROPERTIES. All of the properties and assets owned by the
Company and each of its Subsidiaries are owned by each of them, respectively,
free and clear of any lien, claim, encumbrance or restriction of any nature
whatsoever (a "Lien"), except for Liens which could not reasonably be expected
to have a Material Adverse Effect. To the knowledge of the Company, the Company
and its Subsidiaries have good and marketable title subject to no Liens, other
than those permitted under this Section 4.14, to all of the properties and
assets necessary for the conduct of their business other than to the extent that
the failure to have such title could not reasonably be expected to have a
Material Adverse Effect.
SECTION 4.15 INTELLECTUAL PROPERTY. The Company and the Subsidiaries own
or possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights,
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trade names, trade name rights, copyrights, service marks, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held or intended as of the date
hereof by management of the Company to be used by the Company or any Subsidiary
in, and all such intellectual property necessary in the conduct of, the business
of the Company and the Subsidiaries as currently conducted or as contemplated to
be conducted as of the date hereof by management of the Company, and there are
no other items of intellectual property that are material to the Company or any
Subsidiary or the business of the Company and the Subsidiaries. The Company is
unaware of any assertion or claim challenging the validity of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect.
The conduct of the business of the Company and the Subsidiaries as currently
conducted and as contemplated to be conducted as of the date hereof by
management of the Company does not and will not conflict in any way with any
patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party that could reasonably
be expected to have a Material Adverse Effect, and neither the Company nor any
Subsidiary has received any claim or written notice from any person to such
effect. To the knowledge of the Company, there are no infringements of any
proprietary rights owned by or licensed by or to the Company or any Subsidiary
which could reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, neither it nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any proprietary information on
terms or in a manner which could reasonably be expected to have a Material
Adverse Effect.
SECTION 4.16 MATERIAL CONTRACTS. All contracts, leases and other
agreements to which the Company or any of its Subsidiaries is a party that would
be required to be filed as Exhibits to the SEC Documents (the "Material
Contracts") have been filed as Exhibits to the SEC Documents. To the knowledge
of the Company: (i) each Material Contract is in full force and effect except as
the same may have expired in accordance with its terms; (ii) neither the Company
nor any of its Subsidiaries has received any written assertion of default under
any Material Contract; and (iii) neither the Company nor any of its Subsidiaries
reasonably expects or has received any notice related to any termination or
material change to, or proposal with respect to, any of the Material Contracts
as a result of the transactions contemplated by this Agreement; in each case
except where the result of a failure of a representation contained in clauses
(i), (ii) or (iii) above could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.17 FEES. Except for the fees payable by the Company to
Donaldson, Lufkin and Jenrette Securities Corporation described in an engagement
letter dated October 22, 1994, a complete and correct copy of which has been
provided to Parent, neither the Company nor any of its Subsidiaries has paid or
will become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated hereby.
SECTION 4.18 BUSINESS COMBINATION STATUTE INAPPLICABLE. As of the date
hereof and pursuant to Section 203(a)(1) of the DGCL, the restrictions contained
in Section 203 of the DGCL are, and at all times on or prior to the Effective
Time such restrictions shall be, inapplicable to the Offer, the Merger and the
transactions contemplated by this Agreement, including, without limitation, the
pledge of the shares of the Company Common Stock acquired in the Offer to the
lending institutions providing the financing for the Offer, and the transfer of
such shares upon the exercise or remedies under the applicable agreements. The
Company has heretofore delivered to Parent a complete and correct copy of the
resolutions of the Board of Directors of the Company to the effect that pursuant
to Section 203(a)(1) of the DGCL the restrictions contained in Section 203 of
the DGCL are and shall be inapplicable to the Offer, the Merger and the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY AND PARENT
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period commencing on the date of this Agreement and
continuing until the Cut-Off
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Date or until the termination of this Agreement in accordance with its terms,
the Company and each of its Subsidiaries shall conduct its operations in the
ordinary and usual course consistent with past practice, and the Company and its
Subsidiaries will each endeavor to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relations with suppliers, contractors, distributors, licensors,
licensees, customers and others having business relationships with it. Without
limiting the generality of the foregoing and except as provided in this
Agreement, prior to the Cut-Off Date, neither the Company nor any of its
Subsidiaries shall directly or indirectly do, or propose to do, any of the
following, without the prior written consent of Parent:
(a) Declare or pay any dividends on or make any other distribution in
respect of any of the capital stock of the Company;
(b) Split, combine or reclassify any of the capital stock of the Company
or issue or authorize any other securities in respect of, in lieu of or in
substitution for, shares of the capital stock of the Company or repurchase,
redeem or otherwise acquire any shares of the capital stock of the Company;
(c) Issue, deliver, encumber, sell or purchase any shares of the capital
stock of the Company or any securities convertible into, or rights,
warrants, options or other rights of any kind to acquire, any such shares of
capital stock, other convertible securities or any other ownership interest
(including, without limitation, any phantom interest) (other than the
issuance of Common Stock upon the exercise of outstanding Stock Options);
(d) Amend or otherwise change its Certificate of Incorporation or Bylaws
(or other comparable organizational document);
(e) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(f) Sell, lease or otherwise dispose of any of its assets, other than in
the ordinary course of business consistent with its past practices;
(g) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or any
Subsidiary of the Company or guarantee any debt securities of others, other
than in the ordinary course of business consistent with past practice;
(h) Enter into any contract or agreement other than in the ordinary
course of business consistent with past practice;
(i) Authorize any single capital expenditure which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$250,000 for the Company and the Subsidiaries taken as a whole;
(j) Increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any Subsidiary
who are not officers of the Company, or grant any severance or termination
pay to, or enter into any employment or severance agreement with any
director, officer or other employee of the Company or any Subsidiary, or
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
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(k) Take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including, without limitation,
procedures with respect to cash management, the payment of accounts payable
and the collection of accounts receivable);
(l) Make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability, or execute or file with the
IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of
any taxes;
(m) Amend or modify the warranty policy of the Company or any
Subsidiary;
(n) Pay, discharge, satisfy, settle or compromise any suit, claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction,
in the ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the Company's consolidated
balance sheet dated as of July 30, 1995, as filed by the Company with the
SEC in its Annual Report on Form 10--K for its fiscal year ended July 30,
1995, or subsequently incurred in the ordinary course of business and
consistent with past practice; or
(o) Take any action that would result in any of the representations and
warranties of the Company set forth in this Agreement becoming untrue in any
material respect or in any of the conditions to the Offer or any of the
conditions to the Merger set forth in Article VII not being satisfied.
SECTION 5.2 STOCKHOLDER MEETING; PROXY MATERIAL; INFORMATION STATEMENT.
(a) If this Agreement is required by the DGCL to be approved by the
Company's stockholders, then the Company shall cause a meeting of its
stockholders (the "Stockholders' Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval and adoption of
this Agreement and the transactions contemplated hereby. The Board of Directors
of the Company shall, subject to their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with such meeting, the Company (i) shall
promptly prepare and file with the SEC, use all reasonable efforts to have
cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable the Proxy Statement and all other proxy materials for such meeting,
(ii) shall notify Parent of the receipt of any comments of the SEC with respect
to the Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC, (iii) shall give Parent and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC, (iv) shall, subject to the fiduciary duties of its Board of
Directors as advised by counsel, use all reasonable efforts to obtain the
necessary approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (v) shall otherwise comply with all legal requirements
applicable to such meeting.
(b) Notwithstanding the foregoing, in the event that Purchaser shall acquire
at least 90% of the then outstanding Shares, the parties hereto agree, at the
request of Purchaser, subject to Article VII, to take all necessary and
appropriate action, including the preparation and mailing of the Information
Statement, to cause the Merger to become effective, in accordance with Section
253 of the DGCL, as soon as reasonably practicable after such acquisition,
without a meeting of the stockholders of the Company.
SECTION 5.3 NO SOLICITATION OF COMPETING TRANSACTIONS. Neither the Company
nor any Subsidiary shall, directly or indirectly, through any officer, director,
agent or otherwise, initiate, solicit or intentionally encourage (including by
way of furnishing non-public information or assistance), or
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take any other action to intentionally facilitate, any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any investment banker, financial advisor, attorney,
accountant or other agent or representative of the Company to take any such
action; provided, however, that nothing contained in this Section 5.3 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to, or entering into discussions or negotiations with, any person or entity that
makes an unsolicited, bona fide written proposal to acquire the Company pursuant
to a merger, consolidation, share exchange, business combination, tender or
exchange offer or other similar transaction, if, and only to the extent that,
(A) the Board of Directors of the Company determines in good faith (after
consultation with its financial advisor) that the proposal would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transactions contemplated
by this Agreement, (B) the Board of Directors of the Company further determines
in good faith after consultation with counsel that the failure to do so would
cause the Board of Directors of the Company to breach its fiduciary duties to
the Company or its stockholders under applicable law (any such proposal, a
"Superior Proposal") and (C) no information is so furnished, and no such
discussions or negotiations are held, prior to the execution by the receiving
party and the Company of a confidentiality and standstill agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement, or (ii) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer. The Company shall notify Parent
promptly if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made and shall, in any such notice to Parent
indicate in reasonable detail the identity of the person making such proposal,
offer, inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or contact. The Company agrees not to release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which the
Company is a party (except to the extent necessary to permit such third party to
deliver a Superior Proposal). For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving the Company: (i) any
merger, consolidation, share exchange, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of more than 25% of the assets of the Company in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for more than 25% of the Shares or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, more than
25% of the Shares.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS TO INFORMATION. Between the date of this Agreement and
the Cut-Off Date, the Company and its Subsidiaries will afford to Parent and its
authorized representatives for the transactions contemplated hereby and the
authorized representatives of such parties and persons providing or committing
to provide Parent or the Purchaser financing for the transactions contemplated
hereby, reasonable access at all reasonable times to the officers, employees,
agents, properties, offices and all other facilities, books and records of the
Company and its Subsidiaries as Parent may reasonably request. Additionally, the
Company will permit Parent and its authorized representatives for the
transactions contemplated hereby, and the authorized representatives of such
parties and persons providing or committing to provide Parent or the Purchaser
financing for the transactions contemplated hereby to make such inspections of
the Company and its operations at all reasonable times as it may reasonably
require and will cause its officers, employees and agents, and those of its
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Subsidiaries to furnish Parent with such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as Parent may from time to time reasonably request. No
investigation pursuant to this Section 6.1 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
SECTION 6.2 LEGAL CONDITIONS TO OFFER AND MERGER.
(a) The Company will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on the Company with
respect to the Offer and the Merger (including furnishing all information
required under the HSR Act) and will take all reasonable actions necessary to
cooperate promptly with and furnish information to the Purchaser or Parent in
connection with any such requirements imposed upon the Purchaser or Parent in
connection with the Offer and the Merger. The Company will take, and will cause
its Subsidiaries to take, all reasonable actions necessary to obtain (and will
take all reasonable actions necessary to cooperate promptly with the Purchaser
and Parent in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, or other third party, required to be
obtained or made by the Company or any of its Subsidiaries (or by the Purchaser
or Parent) in connection with the Offer or the Merger or the taking of any
action contemplated thereby or by this Agreement. In addition to the foregoing,
prior to the Effective Time, the parties shall take, or cause to be taken, all
such actions as may be necessary or appropriate in order to effectuate, as
expeditiously as practicable, the Offer and the Merger and the other
transactions contemplated by this Agreement, including any necessary consents
and waivers.
(b) The Purchaser and Parent will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the Offer and the Merger (including furnishing all information
required under the HSR Act) and will take all reasonable actions necessary to
cooperate promptly with and furnish information to the Company in connection
with any such requirements imposed upon the Company or any Subsidiary of the
Company in connection with the Offer and the Merger. The Purchaser and Parent
will take all reasonable actions necessary to obtain (and will take all
reasonable actions necessary to cooperate promptly with the Company and its
Subsidiaries in obtaining) any consent, authorization, order or approval of, or
exemption by, any Governmental Entity, or other third party, required to be
obtained or made by the Purchaser or Parent (or by the Company or any of its
Subsidiaries) in connection with the Offer or the Merger or the taking of any
action contemplated thereby or by this Agreement.
SECTION 6.3 CONFIDENTIALITY AGREEMENT. The Company and Parent acknowledge
that the existing confidentiality agreement between such parties (the
"Confidentiality Agreement") shall remain in full force and effect at all times
prior to the Effective Time and after any termination of this Agreement, and
such parties agree to comply with the terms of such Agreement.
SECTION 6.4 PUBLIC ANNOUNCEMENTS. he Purchaser, Parent and the Company
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the Offer, the Merger or any
transaction contemplated hereby and shall not issue any such press release or
make any such public statement except as they may mutually agree unless required
so to do by law or by obligations pursuant to any listing agreement with any
national securities exchange or the National Association of Securities Dealers,
Inc. The Company and Parent have agreed as to the form of joint press release
announcing execution of this Agreement.
SECTION 6.5 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) The Certificate of Incorporation and the Bylaws of the Surviving
Corporation shall contain the respective provisions that are set forth, as of
the date of this Agreement, in Article Twelfth of the Certificate of
Incorporation of the Company and Article 5 of the Bylaws of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at or at any time prior to the Effective
Time were entitled to indemnification thereunder unless such modification shall
be required by law.
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(b) Parent hereby agrees (i) to assume, as of the Effective Time, all
obligations of the Company under Article Twelfth of the Certificate of
Incorporation of the Company and Article 5 of the Bylaws of the Company, and
(ii) to pay all amounts that become due and payable under such provisions.
(c) The Surviving Corporation and Parent shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers existing at or before the Effective
Time.
(d) The Surviving Corporation shall use commercially reasonable efforts to
maintain in effect for six years from the Effective Time directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy on terms
comparable to such existing insurance coverage (including coverage amounts);
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 6.5 more than an amount per year equal to
150% of current annual premiums paid by the Company for such insurance (which
premiums the Company represents and warrants to be $61,000 in the aggregate) and
PROVIDED FURTHER that if the annual premiums exceed such amount, Parent shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(e) This Section shall survive the consummation of the Offer and the Merger,
is intended to benefit the Company, the Surviving Corporation and each
indemnified party, shall be binding, jointly and severally, on all successors
and assigns of the Surviving Corporation and Parent, and shall be enforceable by
the indemnified parties.
(f) After the date of consummation of the Offer, neither Parent nor the
Purchaser shall take any action that would cause the Company not to honor in
accordance with their terms, any employment, severance, consulting, change of
control and other compensation contracts between the Company or any of its
Subsidiaries and any current or former director, officer or employee thereof
listed on SCHEDULE 4.11(B).
SECTION 6.6 EMPLOYEE ARRANGEMENTS. From and after the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, cause any employee
benefit plans, programs, policies or arrangements of the Surviving Corporation
covering any active, former or retired employee of the Surviving Corporation or
its Subsidiaries to give full credit for each participant's period of service
with the Company and its Subsidiaries prior to the Effective Time for all
purposes for which such service was recognized under the Material Plans prior to
the Effective Time, including, but not limited to, recognition of service for
vesting, amount of benefits, eligibility to participate and eligibility for
disability and early retirement benefits (including subsidies relating to such
benefits) and full credit for deductibles satisfied under the Material Plans
toward any applicable deductibles for the same period following the Effective
Time.
SECTION 6.7 COMPANY STOCK OPTION PLANS.
(a) Prior to the Effective Time, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Option Plans (as defined
below)) shall adopt such resolutions or take such other actions as are required
to provide that each outstanding Stock Option heretofore granted under any stock
option, stock appreciation rights or stock purchase plan, program or arrangement
of the company (collectively, the "Stock Option Plans") outstanding immediately
prior to the consummation of the Offer, whether or not then exercisable, shall
be, unless otherwise consented to by Parent in its sole discretion, exchanged,
in whole and not in part, for a cash payment from the Company in an amount
(subject to any applicable withholding tax) equal to the product of (i) the
excess of the Merger Price over the per share exercise price of the Stock
Option, multiplied by (ii) the number of Shares covered by the Stock Option
immediately prior to the Effective Time.
(b) Except as provided in this Agreement or as otherwise agreed to by the
parties and to the extent permitted by the Stock Option Plans, (i) the Stock
Option Plans shall terminate as of the Effective Time and (ii) the Company shall
use reasonable efforts to ensure that following the Effective
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Time no holder of options or any participant in the Stock Option Plans shall
have any right thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any Subsidiary thereof.
SECTION 6.8 COMPANY EMPLOYEE STOCK PURCHASE PLAN. The Company shall take
all actions necessary pursuant to the terms of Stock Purchase Plan in order to
shorten the offering period under such plan which includes the Effective Time
(the "Current Offering"), such that the Current Offering shall terminate at or
prior to the Effective Time (the final day of the Current Offering period being
referred to as the "Final Purchase Date"). On the Final Purchase Date, the
Company shall apply the funds credited as of such date under the Stock Purchase
Plan within each participant's payroll withholdings account to the purchase of
whole shares of Common Stock in accordance with the terms of the Stock Purchase
Plan. The cost to each participant in the Stock Purchase Plan for shares of
Common Stock shall be the lower of 85% of the closing sale price of Common Stock
on the Nasdaq National Market on (i) the first day of the Current Offering
period and (ii) the last trading day on or prior to the Final Purchase Date.
SECTION 6.9 NOTICE OF CERTAIN EVENTS. The Company shall notify Parent, and
Parent shall promptly notify the Company, of:
(i) receipt of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
(iii) receipt of notice that any actions, suits, claims, investigations
or proceedings have been commenced or, to the knowledge threatened against,
or involving the Company or any of its Subsidiaries, or Parent, as
applicable, which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.9 or which relate to
the consummation of the transactions contemplated by this Agreement;
(iv) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or
warranty of it (and, in the case of Parent, of the Purchaser) contained in
this Agreement to be untrue or inaccurate; and
(v) any failure of the Company, Parent or the Purchaser, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.9
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 6.10 OBLIGATIONS OF PURCHASER. Parent will take all action
necessary to cause the Purchaser to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.11 VOTING OF SHARES. Parent agrees to cause Purchaser (i) to
vote all Shares beneficially owned by it in favor of adoption of this Agreement
and the Merger at the Stockholders' Meeting, if any such meeting shall be
required by the DGCL, and (ii) if no Stockholders' Meeting shall be required by
the DGCL, file the certificate of ownership providing for the Merger of
Purchaser with and into the Company as soon as permitted under applicable
regulatory requirements and law.
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ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS OF EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction prior to the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVAL. If required by the DGCL, this Agreement and
the Merger shall have been approved and adopted by the affirmative vote or
consent of the stockholders of the Company to the extent required by the
DGCL and the Certificate of Incorporation of the Company.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any
Governmental Entity of competent jurisdiction nor any statute, rule,
regulation or executive order promulgated or enacted by any Governmental
Entity, nor other legal restriction, restraint or prohibition, preventing
the consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that
each of the parties shall have used reasonable efforts to prevent the entry
of any such injunction or other order and to appeal as promptly practicable
any injunction or other order that may be entered.
(c) THE OFFER. Shares shall have been purchased pursuant to the Offer.
SECTION 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Effective Time of the
conditions that Parent and the Purchaser shall have performed in all material
respects each of their obligations under this Agreement required to be performed
by them pursuant to the terms hereof and the representations and warranties of
Parent and the Purchaser contained herein shall be true and correct in all
material respects.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the transactions contemplated hereby by
the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of the Company, Parent and the Purchaser;
(b) by either Parent or the Company if (i) the Cut-Off Date shall not
have occurred on or before May 31, 1996; PROVIDED, HOWEVER, that the right
to terminate this Agreement under this Section 8.1(b) shall not be available
(A) to any party whose failure to fulfill any obligation under this
Agreement has been the substantial cause of, or resulted in, the failure of
the Cut-Off Date to occur on or before such date, or (B) to Parent if it
shall fail to designate persons that will constitute a majority of the Board
of Directors in accordance with Section 1.3 by May 24, 1996; or (ii) any
court of competent jurisdiction or other governmental authority shall have
issued an order, decree, ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the acceptance for payment
of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable;
(c) by either Parent or the Company if (i) as a result of an occurrence
or circumstance that would result in the failure of any of the conditions
set forth in ANNEX I hereto the Offer shall have terminated or expired in
accordance with its terms without the Purchaser having accepted for payment
any Shares pursuant to the Offer; or (ii) the Purchaser shall not have
accepted for payment any Shares pursuant to the Offer within 100 days
following the commencement of the
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Offer; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.1(c) shall not be available to any party the
failure of which (or the failure of the affiliates of which) to perform in
any material respect any of its obligations under this Agreement results in
the failure of any such condition or if the failure of such condition
results from facts or circumstances that constitute a material breach of a
representation or warranty under this Agreement by such party;
(d) by Parent if prior to the purchase of Shares pursuant to the Offer,
(A) the Board of Directors of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent
its approval or recommendation of the Offer, this Agreement, the Merger or
any other transaction contemplated by this Agreement; (B) the Board of
Directors of the Company or any committee thereof shall have recommended to
the stockholders of the Company acceptance of a Competing Transaction; (C)
the Company shall have entered into any definitive agreement with respect to
a Competing Transaction; or (D) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing; or
(e) by the Company if (i) the Board of Directors of the Company shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent
its approval or recommendation of the Offer, this Agreement or the Merger in
order to approve the execution by the Company of a definitive agreement
providing for the transactions contemplated by a Superior Proposal; or (ii)
Parent or the Purchaser shall have breached in any material respect any of
their respective representations, warranties, covenants or other agreements
contained in this Agreement which breach cannot be or has not been cured 20
days after the giving of written notice to Parent or the Purchaser, as
applicable, except, in any case, for such breaches which are not reasonably
likely to affect adversely Parent's or the Purchaser's ability to complete
the Offer or the Merger.
SECTION 8.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except for fraud and for willful
breach of a material obligation contained herein and except that the agreements
contained in Sections 6.3, 8.3 and 9.3 shall survive the termination hereof.
SECTION 8.3 CERTAIN PAYMENTS. In the event that:
(i) any person (including, without limitation, the Company or any
affiliate thereof), other than Parent or any affiliate of Parent, shall have
become the beneficial owner of a majority of the then outstanding Shares and
this Agreement shall have been terminated pursuant to Section 8.1;
(ii) any person shall have commenced, publicly proposed or communicated
to the Company a Competing Transaction and (A) the Offer shall have remained
open for at least 20 business days, (B) the Minimum Condition shall not have
been satisfied, (C) this Agreement shall have been terminated pursuant to
Section 8.1 and (D) the Company shall have consummated a Competing
Transaction with any person other than Parent or any of its affiliates
before or within 12 months after the date of such termination; or
(iii) this Agreement is terminated (A) pursuant to Section 8.1(d) or
Section 8.1(e)(i); or (B) pursuant to Section 8.1(c) to the extent that the
termination or the failure to accept any Shares for payment, as set forth in
Section 8.1(c), shall relate to the intentional failure of the Company to
perform in any material respect any material covenant or agreement of it
contained in this Agreement or the intentional material breach by the
Company of any material representation or warranty of it contained in this
Agreement;
then, in any such event, the Company shall pay Parent promptly (but in no event
later than one business day after the first of such events shall have occurred)
a fee of $3,100,000, which amount shall be payable in immediately available
funds.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 AMENDMENT. This Agreement may be amended by the parties, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 9.2 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties, by action taken by their respective Boards of Directors, may, to
the extent legally allowed (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION 9.3 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger or
termination of this Agreement, as the case may be, except for the agreements
contained in Sections 6.5, 6.6 and 6.7 of this Agreement, each of which shall
survive the Merger, and the agreements contained in Sections 6.3 and 8.3, each
of which shall survive termination of this Agreement.
SECTION 9.4 ENTIRE AGREEMENT. This Agreement (including the Annexes,
Schedules and Exhibits), together with the Confidentiality Agreement, contains
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior arrangements and understandings with respect
thereto.
SECTION 9.5 SEVERABILITY. It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any term or other
provision of this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
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SECTION 9.6 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to be sufficient if contained in a written
instrument and shall be deemed given if delivered personally or telecopied to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or the Purchaser:
CHO Holdings Inc. or CHO Acquisition Inc.
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404-2121
Attention: Daniel J. Boverman
Facsimile: (415) 286-2383
with copies in each case to:
Shearman & Sterling
555 California Street
San Francisco, California 94104-1522
Attention: Michael J. Kennedy, Esq.
Facsimile: (415) 616-1199
(b) if to the Company:
Andros Incorporated
2332 Fourth Street
Berkeley, CA 94710-2402
Attention: Chairman of the Board
Facsimile: (510) 849-5849
with copies to:
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza
San Francisco, California 94111-3580
Attn: Susan Cooper Philpot, Esq.
Facsimile: (415) 951-3698
and
Brobeck, Phleger & Harrison LLP
One Market
Spear Street Tower
San Francisco, California 94105
Attn: Steven J. Tonsfeldt, Esq.
Facsimile: (415) 422-1010
All such notices and other communications shall be deemed to have been received
(i) in the case of personal delivery, on the date of such delivery and (ii) in
the case of a telecopy, when the party who receives such telecopy shall have
confirmed receipt of the communication. Notices and other communications which
are delivered by telecopier shall be followed promptly with a copy of the notice
or other communication by registered or certified mail.
SECTION 9.7 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.8 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be borne by the party
incurring such cost or expense.
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SECTION 9.9 BENEFITS; ASSIGNMENT. This Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder
and, except as provided in Section 1.1(a), shall not be assigned other than by
operation of law; PROVIDED, HOWEVER, that the officers and directors of the
Company and its Subsidiaries as provided in Section 6.5 are intended
beneficiaries of the covenants and agreements contained in such Section.
SECTION 9.10 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
SECTION 9.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its principles of conflicts of laws other than principles directing the
application of Delaware law.
SECTION 9.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreements and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized, all as of the date first
written above.
CHO HOLDINGS INC.
By: /s/ RICHARD PATERSON______________
Title: Chairman and President
CHO ACQUISITION INC.
By: /s/ JEAN-PIERRE L. CONTE__________
Title: Vice President and
Treasurer
ANDROS INCORPORATED
By: /s/ BOB TURNER____________________
Title: Vice President
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ANNEX I
CONDITIONS OF THE OFFER
DEFINED TERMS. Capitalized terms used in this Annex I and not otherwise
defined shall have the meanings attributed thereto in the Agreement and Plan of
Merger, dated as of February 14, 1996 (the "Merger Agreement"), by and among CHO
Holdings Inc., CHO Acquisition Inc. and Andros Incorporated.
CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if (i)
the Minimum Share Condition shall not have been satisfied, or (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer, (iii) the Purchaser shall not
have obtained financing pursuant to, or on terms and conditions no less
favorable than those contained in, the Financing Commitments (the "Financing
Condition"), or (iv) at any time on or after the date of the Merger Agreement
and before the acceptance of such Shares for payment or the payment therefor,
any of the following conditions exists:
(a) a preliminary or permanent injunction or other order by any federal,
state or foreign court which prevents the acceptance for payment of, or
payment for, some of or all the Shares shall have been issued and shall
remain in effect;
(b) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity (i) challenging the acquisition by the
Purchaser of Shares or otherwise seeking to restrain, materially delay or
prohibit the consummation of the Offer or the Merger or seeking damages that
would make the Offer, the Merger or any other transaction contemplated
hereby materially more costly to Parent or the Purchaser, (ii) seeking to
prohibit or limit materially the ownership or operation by the Purchaser or
Parent of all or a material portion of the business or assets of the Company
and its Subsidiaries, or to compel the Purchaser or Parent to dispose of or
hold separate all or a material portion of the business or assets of the
Company and its Subsidiaries or the Purchaser or Parent, as a result of the
Offer or the Merger, (iii) seeking to impose or confirm limitations on the
ability of Parent or the Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
the Shares purchased by it on all matters properly presented to the
Company's stockholders, including, without limitation, the approval and
adoption of the Merger Agreement and the transactions contemplated hereby,
or (iv) seeking to require divestiture by Parent, the Purchaser or any other
affiliate of Parent of any Shares;
(c) there shall have been any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Offer, the Merger or any other transaction contemplated hereby, Parent,
the Company or any affiliate of Parent or the Company by any Governmental
Entity, except for the waiting period provisions of the HSR Act, which is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (b) above;
(d) any change or effect that, individually or in the aggregate, is or
is reasonably likely to constitute a Material Adverse Effect shall have
occurred following the date of the Merger Agreement;
(e) the Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements under the Merger
Agreement;
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(f) any representation or warranty of the Company in the Merger
Agreement that is qualified as to materiality shall not be true and correct
or any such representation or warranty that is not so qualified shall not be
true and correct in any material respect, in each case when made and at and
as of such time as if made at and as of such time;
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National
Market; (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or Canada; (iii) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States or
Canada which has or is reasonably likely to have a Material Adverse Effect;
(iv) any extraordinary material adverse change in the financial markets in
the United States which has or is reasonably likely to have a Material
Adverse Effect; or (v) in the case of any of the foregoing existing on the
date hereof, a material acceleration or worsening thereof;
(h) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of a majority of the then outstanding Shares have been
acquired by any person other than Parent or any of its affiliates or (ii)(A)
the Board of Directors of the Company or any committee thereof shall have
withdrawn or modified in a manner adverse to Parent or the Purchaser the
approval or recommendation of the Offer, the Merger or the Merger Agreement,
or approved or recommended any Competing Transaction or any other
acquisition of Shares other than the Offer and the Merger or (B) the Board
of Directors of the Company or any committee thereof shall have resolved to
do any of the foregoing; or
(i) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent. The foregoing rights of the Purchaser shall be available regardless of
the circumstances giving rise to any such conditions (including any action or
omission to act of the Purchaser) and, subject to Section 1.1(a) of the Merger
Agreement, may be waived by Purchaser or Parent in whole or in part at any time
and from time to time in their sole discretion. Any determination by the
Purchaser will be final and binding upon all parties including tendering
stockholders.
The failure by the Purchaser or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
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EXHIBIT 3
FORM OF MANAGEMENT ROLL-OVER AGREEMENT
February 14, 1996
CHO Holdings Inc.
CHO Acquisition Inc.
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404-2121
Gentlemen:
I understand that Andros Incorporated (the "Company"), CHO Holdings Inc.
("Holdings") and CHO Acquisition Inc. ("Acquisition") have entered into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement")
pursuant to which (i) Acquisition shall commence a tender offer (the "Offer")
for all of the outstanding shares of common stock of the Company (the "Shares")
and (ii) Acquisition shall, subject to the satisfaction or waiver of the
conditions set forth in the Merger Agreement, be merged with and into the
Company (the "Merger"). In connection with the Merger Agreement, Acquisition,
Holdings and I hereby agree as follows:
1. I agree that the number of options for Shares (the "Options")
specified below my signature hereto shall not be cashed out pursuant to the
terms of the Merger Agreement, and that I shall not exercise any of such
Options. Instead, prior to the Merger I shall surrender such Options in
exchange for options to acquire shares of common stock of Holdings.
2. At or prior to the consummation of the Merger, I shall enter into a
stockholders' agreement, upon terms and in a form reasonably satisfactory to
me and Holdings, governing the exercise of such Options and the terms of
common stock issuable pursuant to such Options.
3. This Agreement shall terminate upon any termination of the Merger
Agreement (other than as a result of consummation of the Merger).
Please acknowledge your understanding of and agreement to the foregoing by
executing and returning to me the enclosed copy of this letter.
Sincerely,
--------------------------------------
Name:
Number of Rolled Options:
ACKNOWLEDGED AND AGREED:
CHO HOLDINGS INC.
<TABLE>
<S> <C>
By
----------------------------------------
Name:
Title:
CHO ACQUISITION INC.
By
----------------------------------------
Name:
Title:
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Donaldson, Lufkin and Jenrette Securities Corporation
600 California Street, San Francisco, CA 94108-2704
(415) 249-2100
EXHIBIT 4
October 25, 1994
PRIVATE AND CONFIDENTIAL
________________________
Andros Incorporated
2332 Fourth Street
Berkeley, California 94710
Attention: Eugene Kleiner
Chairman of the Board of Directors
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding
that Andros Incorporated (which together with its subsidiaries and affiliates
is hereinafter referred to as the "Company") has engaged Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ") to act as the exclusive financial
advisor to the Company and the Special Committee of the Company's Board of
Directors (the "Committee") for a period of 12 months, commencing upon your
acceptance of this Agreement, with respect to the sale, merger, consolidation
or any other business combination, in one or a series of transactions,
involving all or a substantial amount of the business, securities or assets
of the Company (each, a "Transaction").
As discussed, we propose to undertake certain services on the
Committee's behalf including to the extent requested by the Committee: (i)
assisting in preparing an offering memorandum describing the Company, its
operations, its historical performance and its future prospects; (ii)
identifying and contacting selected qualified acquirors; (iii) arranging for
potential acquirors to conduct business investigations; and (iv) negotiating
the financial aspects of any proposed Transaction under the Committee's
guidance (the "Financial Advisory Services"). Also, DLJ will deliver an
opinion to the Committee as to the fairness from a financial point of view of
the consideration to be received by the Company's stockholders in any
proposed Transaction (a "Fairness Opinion").
As compensation for the Financial Advisory Services to be provided by
DLJ hereunder, the Company agrees to pay to DLJ: (a) $100,000, payable
promptly upon execution of this Agreement, (b) $300,000 as compensation for
the Fairness Opinion, payable at the time DLJ notifies the Committee that it
is prepared to deliver the Fairness Opinion and, (c) an amount equal to one
precent (1%) of the aggregate amount of consideration received by the Company
and/or its shareholders (treating any shares issuable upon exercise of
options, warrants, or other rights of conversion as outstanding) plus the
face amount of any debt securities assumed (excluding trade debt and any
amounts outstanding under the current working capital line) or the
liquidation value of any preferred stock redeemed or remaining outstanding in
connection with the Transaction, including, in the case of a sale or other
disposition by the Company of assets, the net value of any assets not sold by
the
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Andros Incorporated October 25, 1994
Page 2
Company (the "Transaction Value"), less the amount paid by the Company
pursuant to clauses (a) and (b) of this sentence. The compensation referred
to in clause (c) above shall be payable in cash promptly upon consummation of
a Transaction. For purposes of this Agreement, a Transaction shall be deemed
to have been consummated upon the earliest of any of the following events to
occur: (a) the acquisition of a majority of the outstanding common stock of
the Company calculated on a fully-diluted basis, (b) a merger or
consolidation of the Company with another person, (c) the acquisition by
another person of all or a substantial portion of the assets of the Company
or, (d) in the case of any other Transaction, the consummation thereof. Upon
request by DLJ from time to time, the Company shall reimburse DLJ promptly
for all reasonable out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
hereunder, whether or not a Transaction is consummated.
As DLJ will be acting on the Committee's behalf, the Company agrees to
the indemnification and other obligations set forth in Schedule I attached
hereto, which schedule is an integral part hereof:
In the event that the consideration received in a Transaction is paid in
whole or in part in the form of securities or other assets, the value of such
securities or other assets, for purposes of calculating our additional
compensation, shall be the fair market value thereof, as the parties hereto
shall mutually agree, on the day prior to the consummation of the
Transaction; provided, that if such consideration includes securities with an
existing public trading market, the value thereof shall be determined by the
last sales price for such securities on the last trading day thereof prior to
such consummation.
The Company shall make available to DLJ all financial and other information
concerning its business and operations which DLJ reasonably requests as well
as any other information relating to any Transaction prepared by the Company
or any of its other advisors. In performing its services hereunder
(including, without limitation, in giving an opinion of the type referred to
in the second paragraph hereof), DLJ shall be entitled to rely without
investigation upon all information that is available from public sources as
well as all other information supplied to it by or on behalf of the Company
or its advisors and shall not in any respect be responsible for the accuracy
or completeness of, or have any obligation to verify, the same or to conduct
any appraisal of assets. To the extent consistent with legal requirements,
all information given to DLJ by the Company unless publicly available or
otherwise available to DLJ without restriction or breach of any
confidentiality agreement, will be held by DLJ in confidence and will not be
disclosed to anyone other than DLJ's agents and advisors without the
Company's prior approval or used for any purpose other than those referred to
in this Agreement.
Any opinion requested by the Committee and any advice, written or oral,
provided by DLJ pursuant to this Agreement will be treated by the Committee
and the Company as confidential, will be solely for the information and
assistance of the Committee in connection with its consideration of a
transaction of the type referred to in the first paragraph of this Agreement
and will not be used, circulated, quoted or otherwise referred to for any
other purpose, nor will it be filed with, included in or referred to in whole
or in part in any registration statement, proxy statement or any other
document, except in each case with our prior written consent. We understood
that our opinion may be reproduced in full in any proxy statement mailed to
shareholders of the Company, and we agree to provide our written consent to
such use, provided that we are afforded a reasonable opportunity to review
and influence those portions of any such proxy statement that include or
refer to our opinion or otherwise refer to DLJ.
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Andros Incorporated October 25, 1994
Page 3
In order to coordinate our efforts with respect to a possible
Transaction, during the period of our engagement hereunder none of the
Company, the Committee, nor any representative thereof (other than DLJ) will
initiate discussions regarding a Transaction except through DLJ. In the event
the Committee or management of the Company receives an inquiry regarding a
Transaction, it will promptly advise DLJ of such inquiry in order that we may
evaluate such prospective purchaser and its interest and assist the Committee
in any resulting negotiations.
This Agreement may be terminated by either the Company or DLJ upon
receipt of written notice to that effect by the other party. Upon any
termination or expiration of this Agreement, DLJ will be entitled to prompt
payment of all fees accrued prior to such termination or expiration and
reimbursement of all out-of-pocket expenses as described above. The indemnity
and other provisions contained in Schedule I will also remain operative and
in full force and effect regardless of any termination or expiration of this
Agreement.
In addition, if at any time prior to 12 months after the termination or
expiration of this Agreement a Transaction is consummated, DLJ will be
entitled to payment in full of the compensation described in the third
paragraph of this letter.
It is understood that if the Company completes a transaction in lieu of
any Transaction for which DLJ is entitled to compensation pursuant to this
Agreement (including, but not limited to, a recapitalization or a partial or
complete liquidation), DLJ and the Company will in good faith mutually agree
upon acceptable compensation for DLJ taking into account, among other things,
the results obtained and the custom and practice of investment bankers acting
in similar transactions.
The Company further agrees that it will not enter into any transaction
referred to in either of the two preceding paragraphs unless, prior to or
simultaneously with such transaction, adequate provision is made with
respect to the payment of compensation to DLJ as contemplated by such
paragraphs.
Please not that DLJ is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our
trading and brokerage activities, DLJ or its affiliates may at any time hold
long or short positions, and may trade or otherwise effect transactions, for
our own account or on the accounts of customers, in debt or equity securities
of the Company or other entities that may be involved in the Transaction. We
recognize our responsibility for compliance with Federal laws in connection
with any such activities.
The Company acknowledges and agrees that DLJ has been retained solely to
provide the advice or services set forth in this Agreement. DLJ shall act as
an independent contractor, and any duties of DLJ arising out of its
engagement hereunder shall be owned solely to the Committee.
This letter Agreement shall be binding upon and inure to the benefit of
the Committee, the Company, DLJ, each Indemnified Person (as defined in
Schedule I hereto) and their respective successors and assigns.
This letter Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York.
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Andros Incorporated October 25, 1994
Page 4
The Company irrevocably and unconditionally submits to the non-exclusive
jurisdiction of any State or Federal court sitting in New York City over any
suit, action or proceeding arising out of or relating to this letter
(including Schedule I hereto). The Company hereby agrees that service of any
process, summons, notice or document by U.S. registered mail addressed to the
Company shall be effective service of process for any action, suit or
proceeding brought in any such court. The Company irrevocably and
unconditionally waives any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. The Company agrees that a final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon the Company and may be enforced in any other courts to whose
jurisdiction the Company is or may be subject, by suit upon such judgment.
If any term, provision, covenant or restriction contained in this
Agreement, including Schedule I, is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
After reviewing this Agreement, please confirm that the foregoing is in
accordance with your understanding by signing and returning to me the
duplicate of this letter attached hereto, whereupon it shall be our binding
Agreement.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ian H. Zwicker
--------------------------
Accepted and agreed to
this 25th day of October, 1994
By: /s/ Eugene Kleiner
--------------------------------
Eugene Kleiner
Chairman of the Board of
Andros Incorporated and its
Special Committee
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EXHIBIT 5
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
600 California Street, San Francisco, CA 94108-2704 - (415) 249-2100
February 14, 1996
Board of Directors
Andros Incorporated
2332 Fourth Street
Berkeley, CA 94710-2402
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Andros Incorporated (the "Company") of the
consideration to be received by such shareholders pursuant to the terms of the
Agreement and Plan of Merger dated as of February 14, 1996, among CHO Holdings
Inc. ("Holdings"), the Company and CHO Acquisition Inc. ("Acquisition"), a
wholly owned subsidiary of Holdings (the "Agreement").
Pursuant to the Agreement, Acquisition will commence a tender offer for all
outstanding shares of the Company's common stock at a price of $18.00 per share.
The tender offer is to be followed by a merger in which the shares of all
shareholders who did not tender would be converted into the right to receive
$18.00 per share in cash.
In arriving at our opinion, we reviewed financial and other information that
was publicly available or furnished to us by the Company including information
provided during discussions with management. Included in the information
provided during discussions with management were certain financial projections
of the Company for the period beginning July 31, 1995 and ending July 31, 1999
prepared by the management of the Company. In addition, we have compared certain
financial and securities data of the Company with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the common stock of the Company, reviewed prices and
premiums paid in other business combinations and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company or
its representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of the Company's assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have relied as to all legal matters relating to the Agreement
and transactions contemplated thereby on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has been engaged by
Holdings in
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connection with placing $15 million of senior subordinated notes and warrants
which will be used to help finance the acquisition. DLJ's Private Placement
Group will receive usual and customary fees in conjunction with raising the
subordinated notes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the shareholders of the
Company pursuant to the Agreement is fair to the shareholders of the Company
from a financial point of view.
Very trust yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Thomas M. Benninger
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Thomas M. Benninger
MANAGING DIRECTOR
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EXHIBIT 6
ANDROS INCORPORATED TO BE ACQUIRED BY GENSTAR CAPITAL
BERKELEY, Calif., Feb. 14 -- Genstar Capital Partners II, L.P. and Andros
Incorporated (Nasdaq: ANDY) today announced that they have entered into a
definitive merger agreement pursuant to which Andros stockholders will receive
$18.00 per share in cash for each share of Andros common stock. The total value
of the transaction which includes the cash-out of substantially all existing
stock options, is approximately $87.5 million. Pursuant to the merger agreement,
which was approved by Andros Board of Directors, Genstar Capital will commence a
tender offer for all outstanding shares of common stock of Andros within five
business days. Upon completion of the tender offer, the merger agreement
provides that shares of Andros not tendered will be acquired in a merger at the
same price per share in cash. The merger agreement also provides that Andros
will pay Genstar a fee of $3.1 million in certain circumstances.
Andros Incorporated designs, manufactures, and sells instrumentation to
original equipment manufacturers of environmental and medical monitoring
equipment worldwide.
Genstar capital Partners II, L.P. based in Foster City, CA, is a private
investment fund that concentrates on leveraged acquisitions of manufacturing and
services businesses.
CONTACT: Dane Nelson of Andros Incorporated, 510-849-5769; or Richard D.
Paterson of Genstar Capital, 415-286-2350
