<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
ANDROS INCORPORATED
(Name of Subject Company)
ANDROS ACQUISITION INC.
ANDROS HOLDINGS INC.
(Bidder)
------------------------------
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
345281
(CUSIP Number of Class of Securities)
------------------------------
RICHARD D. PATERSON
ANDROS HOLDINGS INC.
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404-2121
Telephone: (415) 286-2350
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPY TO:
Michael J. Kennedy, Esq.
Shearman & Sterling
555 California Street
San Francisco, California 94104-1522
Telephone: (415) 616-1100
February 21, 1996
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUE AMOUNT OF FILING FEE
<S> <C>
$83,304,972(1) $16,660.99(2)
</TABLE>
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
- ------------------------
(1) Calculated by multiplying $18.00, the per share tender offer price, by the
4,628,054 shares of Common Stock outstanding.
(2) 1/50 of 1% of Transaction Valuation.
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<PAGE>
CUSIP No. 345281 14D-1
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Andros Acquisition Inc.
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
BK, AF, SC, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Not Applicable
10 TYPE OF REPORTING PERSON
CO
<PAGE>
CUSIP No. 345281 14D-1
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Andros Holdings Inc.
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) //
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Not Applicable
10 TYPE OF REPORTING PERSON
HC
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates to
the offer by Andros Acquisition Inc., a corporation organized and existing under
the laws of the State of Delaware ("Purchaser") and a wholly owned subsidiary of
Andros Holdings Inc., a corporation organized and existing under the laws of the
State of Delaware ("Parent") and formed at the direction of Genstar Capital
Partners II, L.P. ("GCP II"), a Delaware limited partnership, the sole general
partner of which is Genstar Capital LLC ("GCLLC"), to purchase all outstanding
shares of common stock, par value $.01 per share (the "Shares"), of Andros
Incorporated, a corporation organized and existing under the laws of the State
of Delaware (the "Company"), at a price of $18.00 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated February 21, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer"), copies of
which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Andros Incorporated, a corporation
organized and existing under the laws of the State of Delaware, which has its
principal executive offices at 2332 Fourth Street, Berkeley, California
94710-2402.
(b) The class of equity securities being sought is all the outstanding
shares of common stock, par value $.01 per share, of the Company. The
information set forth in the Introduction and Section 1 ("Terms of the Offer;
Expiration Date") of the Offer to Purchase is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer
to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser and Parent. The
information concerning the name, state or other place of organization, principal
business and address of the principal office of each of Purchaser, Parent, GCP
II and GCLLC and the information concerning the name, business address, present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment or occupation
is conducted, material occupations, positions, offices or employments during the
last five years and citizenship of each of the executive officers and directors
of Purchaser, Parent and GCLLC are set forth in the Introduction, Section 8
("Certain Information Concerning Purchaser and Parent") and Schedule I of the
Offer to Purchase and are incorporated herein by reference.
(e) and (f) During the last five years, none of Purchaser, Parent, GCP II
or GCLLC, and, to the best knowledge of Purchaser, Parent, GCP II and GCLLC,
none of the persons listed in Schedule I of the Offer to Purchase has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser, Parent, GCP II and GCLLC") and Section 10 ("Background of the Offer;
Contacts with the Company; the Merger Agreement") is incorporated herein by
reference.
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information Concerning
Purchaser, Parent, GCP II and GCLLC"), Section 10 ("Background of the Offer;
Contacts with the Company; the Merger Agreement") and Section 11 ("Purpose of
the Offer; Plans for the Company After the Offer and the Merger") of the Offer
to Purchase is incorporated herein by reference.
2
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Financing of the Offer and
the Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement") and
Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the
Merger") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer
on the Market for Shares, Exchange Listing and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning Purchaser and Parent") of the Offer to Purchase is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser and Parent"), Section 10 ("Background of the
Offer; Contacts with the Company; the Merger Agreement") and Section 11
("Purpose of the Offer; Plans for the Company After the Offer and the Merger")
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser, Parent, GCP II and GCLLC") of the Offer to Purchase is incorporated
herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) and (c) The information set forth in Section 15 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase is incorporated
herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated February 21, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Georgeson & Company, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
3
<PAGE>
(a)(7) Summary Advertisement as published in THE NEW YORK TIMES on February
21, 1996.
(a)(8) Press Release issued by the Company on February 14, 1996.
(b)(1) Commitment Letter, dated February 14, 1996, from Banque Paribas and
The Bank of Nova Scotia.
(b)(2) Commitment Letter, dated February 14, 1996, from London Pacific
International Limited.
(c)(1) Agreement and Plan of Merger, dated as of February 14, 1996, among
Parent, Purchaser and the Company.
(c)(2) Form of Management Roll-Over Agreement.
(d) None.
(e)] Not applicable.
(f) None.
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
February 21, 1996 ANDROS ACQUISITION INC.
By /s/ RICHARD D. PATERSON____________
Richard D. Paterson
President
ANDROS HOLDINGS INC.
By /s/ RICHARD D. PATERSON____________
Richard D. Paterson
Chairman and President
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. ITEM
- --------- --------------------------------------------------------------------------------------------
<C> <S> <C>
(a)(1) Form of Offer to Purchase dated February 21, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Georgeson & Company Inc. to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to
Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(7) Summary Advertisement as published in THE NEW YORK TIMES on February 21, 1996.
(a)(8) Press Release issued by Andros Incorporated on February 14, 1996.
(b)(1) Commitment Letter, dated February 14, 1996, from Banque Paribas and the Bank of Nova Scotia.
(b)(2) Commitment Letter, dated February 14, 1996, from London Pacific International Limited.
(c)(1) Agreement and Plan of Merger, dated as of February 14, 1996, among Andros Holdings Inc.,
Andros Acquisition Inc. and Andros Incorporated.
(c)(2) Form of Management Roll-Over Agreement.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
6
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
AT
$18.00 NET PER SHARE
BY
ANDROS ACQUISITION INC.
A DIRECT WHOLLY OWNED SUBSIDIARY OF
ANDROS HOLDINGS INC.
A CORPORATION FORMED BY
GENSTAR CAPITAL PARTNERS II, L.P.
----------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MARCH 20, 1996, UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS AND (II) ANDROS ACQUISITION INC. HAVING OBTAINED FINANCING
PURSUANT TO, OR ON TERMS AND CONDITIONS NO LESS FAVORABLE THAN THOSE CONTAINED
IN, THE FINANCING COMMITMENTS (AS DEFINED HEREIN).
------------------------
THE BOARD OF DIRECTORS OF ANDROS INCORPORATED, AFTER RECEIVING THE
RECOMMENDATION IN FAVOR THEREOF (WITH ONE VOTE AGAINST AND ONE ABSTENTION) OF
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF ANDROS INCORPORATED FORMED TO
CONSIDER, AMONG OTHER THINGS, THE OFFER AND THE MERGER, HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF ANDROS INCORPORATED, AND RECOMMENDS (WITH ONE VOTE AGAINST AND
ONE ABSTENTION) THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL OF THEIR
SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the "Shares"), of Andros
Incorporated should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
February 21, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
INTRODUCTION........................................................................................... 3
1. Terms of the Offer; Expiration Date......................................................... 4
2. Acceptance for Payment and Payment for Shares............................................... 6
3. Procedures for Accepting the Offer and Tendering Shares..................................... 7
4. Withdrawal Rights........................................................................... 9
5. Certain Federal Income Tax Consequences..................................................... 10
6. Price Range of Shares; Dividends............................................................ 10
7. Certain Information Concerning the Company.................................................. 11
8. Certain Information Concerning Purchaser, Parent, GCP II and GCLLC.......................... 13
9. Financing of the Offer and the Merger....................................................... 14
10. Background of the Offer; Contacts with the Company; the Merger
Agreement.................................................................................. 25
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger.................. 35
12. Dividends and Distributions................................................................. 36
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act
Registration............................................................................... 37
14. Certain Conditions of the Offer............................................................. 38
15. Certain Legal Matters and Regulatory Approvals.............................................. 39
16. Fees and Expenses........................................................................... 41
17. Miscellaneous............................................................................... 41
Schedule I. Directors and Executive Officers of Parent, Purchaser and GCLLC........................... I-1
</TABLE>
2
<PAGE>
To the Holders of Common Stock of
Andros Incorporated:
INTRODUCTION
Andros Acquisition Inc., a corporation organized and existing under the laws
of the State of Delaware ("Purchaser") and a direct wholly owned subsidiary of
Andros Holdings Inc., a corporation organized and existing under the laws of the
State of Delaware ("Parent") and formed at the direction of Genstar Capital
Partners II, L.P. ("GCP II"), a Delaware limited partnership, the sole general
partner of which is Genstar Capital LLC ("GCLLC"), hereby offers to purchase all
outstanding shares (the "Shares") of common stock, par value $.01 per share (the
"Common Stock"), of Andros Incorporated, a corporation organized and existing
under the laws of the State of Delaware (the "Company"), at a price of $18.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Chemical Mellon Shareholder Services, L.L.C. (the "Depositary") and Georgeson &
Company Inc. (the "Information Agent") incurred in connection with the Offer.
See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), AFTER RECEIVING THE
RECOMMENDATION IN FAVOR THEREOF (WITH ONE VOTE AGAINST AND ONE ABSTENTION) OF
THE SPECIAL COMMITTEE OF THE BOARD (THE "SPECIAL COMMITTEE") FORMED TO CONSIDER,
AMONG OTHER THINGS, THE OFFER AND THE MERGER, HAS DETERMINED THAT EACH OF THE
OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS (WITH ONE VOTE AGAINST AND
ONE ABSTENTION) THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL OF THEIR
SHARES PURSUANT TO THE OFFER.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has delivered to
the Board its written opinion that the consideration to be received by the
stockholders of the Company pursuant to each of the Offer and the Merger is fair
to such stockholders from a financial point of view. A copy of the opinion of
DLJ, which sets forth the assumptions made, matters considered and limitations
on the review undertaken by DLJ, is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) PURCHASER HAVING OBTAINED
FINANCING PURSUANT TO, OR ON TERMS AND CONDITIONS NO LESS FAVORABLE THAN THOSE
CONTAINED IN, THE FINANCING COMMITMENTS (AS DEFINED BELOW) (THE "FINANCING
CONDITION"). SEE SECTION 14, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE
OFFER.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of February 14, 1996 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as promptly
as practicable after the expiration of the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware (the
"GCL"), Purchaser will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a direct wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than
3
<PAGE>
Shares held in the treasury of the Company or owned by Purchaser, Parent or the
Company or any direct or indirect wholly owned subsidiary of Purchaser, Parent
or of the Company, and other than Shares held by stockholders who shall have
demanded and perfected appraisal rights, if any, under the GCL) will be
converted into the right to receive $18.00 in cash, or any higher price that may
be paid per Share in the Offer, without interest (the "Merger Consideration").
The Merger Agreement is more fully described in Section 10.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Board as shall give 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 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 Purchaser, at the
Company's election, either increase the number of directors comprising the Board
or seek and accept resignations of incumbent directors.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company. See Section 10. Under
the Company's certificate of incorporation and the GCL, the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the Merger. Consequently, if Purchaser acquires
(pursuant to the Offer or otherwise) at least a majority of the outstanding
Shares, Purchaser will have sufficient voting power to approve and adopt the
Merger Agreement and the Merger without the vote of any other stockholder.
Under the GCL, if Purchaser acquires, pursuant to the Offer or otherwise, at
least 90% of the then outstanding Shares, Purchaser will be able to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger, without a vote of the Company's stockholders. In such event, Parent,
Purchaser and the Company have agreed to take, at the request of Purchaser, 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. If, however, Purchaser does not acquire at least 90% of
the then outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under the GCL, a significantly longer period
of time will be required to effect the Merger. See Section 11.
The Company has advised Purchaser that as of January 31, 1996, (i) 4,628,054
Shares were issued and outstanding, (ii) no shares were held in the treasury of
the Company, (iii) 671,021 Shares were reserved for future issuance pursuant to
outstanding stock options (the "Options") granted pursuant to the Company's
stock option plans, and (iv) 16,430 Shares were reserved for issuance under the
Company's employee stock purchase plan. As a result, as of such date, the
Minimum Condition would be satisfied if Purchaser acquired 2,649,538 Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Wednesday, March
20, 1996, unless and until Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger
4
<PAGE>
Agreement), shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any of the conditions specified in Section 14,
by giving oral or written notice of such extension to the Depositary. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time and from time to time, (i) to delay acceptance for
payment of, or, regardless of whether such Shares were theretofore accepted for
payment, payment for, any Shares pending receipt of any regulatory approval
specified in Section 15, (ii) to terminate the Offer and not accept for payment
any Shares upon the occurrence of any of the conditions specified in Section 14
and (iii) to waive any condition or otherwise amend the Offer in any respect, by
giving oral or written notice of such delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof. The Merger Agreement
provides that, without the consent of the Company, Purchaser will 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. Purchaser
acknowledges that (i) Rule 14e-1(c) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), requires Purchaser to pay the consideration
offered or return the Shares tendered promptly after the termination or
withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment
of, or payment for (except as provided in clause (i) of the first sentence of
this paragraph), any Shares upon the occurrence of any of the conditions
specified in Section 14 without extending the period of time during which the
Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to stockholders in
a manner reasonably designed to inform them of such changes) and without
limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c)
and 14d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all stockholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business
5
<PAGE>
day period. For purposes of the Offer, a "business day" means any day other than
a Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), Purchaser
will accept for payment, and will pay for, all Shares validly tendered prior to
the Expiration Date and not properly withdrawn promptly after the latest to
occur of (i) the Expiration Date, (ii) the expiration or termination of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (iii) the satisfaction or waiver of
the conditions to the Offer set forth in Section 14. Subject to applicable rules
of the Commission, Purchaser expressly reserves the right to delay acceptance
for payment of, or payment for, Shares pending receipt of any regulatory
approvals specified in Section 15 or in order to comply in whole or in part with
any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii)
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined below) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's
6
<PAGE>
account at a Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 3, such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser shall increase the consideration
offered to holders of Shares pursuant to the Offer, such increased consideration
shall be paid to all holders of Shares that are purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase and
either (i) the Share Certificates evidencing tendered Shares must be received by
the Depositary at such address or such Shares must be tendered pursuant to the
procedure for book-entry transfer described below and a Book-Entry Confirmation
must be received by the Depositary, in each case prior to the Expiration Date,
or (ii) the tendering stockholder must comply with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry transfer, and any other required documents,
must, in any case, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution", as such term is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(each of the foregoing being referred to as an "Eligible Institution"), except
in cases where Shares are tendered (i) by a registered holder of Shares who has
not completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. If a Share Certificate is registered
in the name of a person other than the person who or which signs of the Letter
of Transmittal, or if payment
7
<PAGE>
is to be made, or a Share Certificate not accepted for payment or not tendered
is to be returned, to a person other than the registered holder(s), then the
Share Certificate must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s) appear
on the Share Certificate, with the signature(s) on such Share Certificate or
stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of
the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is received
by the Depositary prior to the Expiration Date as provided below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message), and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market ("NNM") trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity, in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of Purchaser, Parent, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after February 14,
1996). All such proxies shall be considered coupled
8
<PAGE>
with an interest in the tendered Shares. Such appointment will be effective
when, and only to the extent that, Purchaser accepts such Shares for payment.
Upon such acceptance for payment, all prior proxies given by such stockholder
with respect to such Shares (and such other Shares and securities) will be
revoked without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
UNDER THE FEDERAL INCOME TAX LAWS, THE DEPOSITARY WILL BE REQUIRED TO
WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN STOCKHOLDERS PURSUANT
TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH
SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION
9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after April 20, 1996.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares, in which case a notice of withdrawal
will be effective if delivered to the Depositary by any method described in the
first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
9
<PAGE>
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for federal
income tax purposes and may also be a taxable transaction under applicable
state, local or foreign tax laws. In general, a stockholder will recognize gain
or loss for federal income tax purposes equal to the difference between the
amount of cash received in exchange for the Shares sold and such stockholder's
adjusted tax basis in such Shares. Assuming the Shares constitute capital assets
in the hands of the stockholder, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if the stockholder has held such
Shares for more than one year.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO
ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES, AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NNM. The following table sets forth, for the calendar quarters
indicated, the high and low sales prices per Share on the NNM as reported by the
Dow Jones News Service.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1993
- ----------------------------------------------------------------------------
First Quarter............................................................... $ 19 1/4 $ 12
Second Quarter.............................................................. 17 3/4 13 1/4
Third Quarter............................................................... 17 13 1/2
Fourth Quarter.............................................................. 16 3/4 13
<CAPTION>
1994
- ----------------------------------------------------------------------------
<S> <C> <C>
First Quarter............................................................... $ 21 1/4 $ 15
Second Quarter.............................................................. 19 3/4 13 1/2
Third Quarter............................................................... 18 1/4 15 1/4
Fourth Quarter.............................................................. 18 1/4 14 3/4
<CAPTION>
1995
- ----------------------------------------------------------------------------
<S> <C> <C>
First Quarter............................................................... $ 18 $ 15
Second Quarter.............................................................. 18 3/4 14 3/4
Third Quarter............................................................... 19 1/2 15 3/4
Fourth Quarter.............................................................. 18 1/4 15
<CAPTION>
1996
- ----------------------------------------------------------------------------
<S> <C> <C>
First Quarter (through February 20, 1996)................................... 18 1/4 12 3/4
</TABLE>
10
<PAGE>
Although there is no legal restriction on the payment of dividends by the
Company, historically the Company has never declared or paid dividends.
On February 14, 1996, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on the NNM was $15 1/2. On
February 20, 1996, the last full trading day prior to the commencement of the
Offer, the closing price per Share as reported on the NNM was $17 3/4.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Neither Purchaser nor Parent
assumes any responsibility for the accuracy or completeness of the information
concerning the Company furnished by the Company or contained in such documents
and records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Purchaser or Parent.
GENERAL. The Company is a corporation organized and existing under the laws
of the State of Delaware with its principal executive offices located at 2332
Fourth Street, Berkeley, California 94710-2402. The Company designs and
manufactures non-dispersive infrared gas analyzers for sale to original
equipment manufacturers of automotive diagnostic equipment and medical
monitoring devices, and portable spectrum analysis instrumentation designed to
detect and measure selected elements in a material in its natural location and
condition using x-ray fluorescence technology.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1995
(the "Form 10-K") and the unaudited financial statements contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended October 29, 1995,
(the "Form 10-Q"). More comprehensive financial information is included in the
Form 10-K, the Form 10-Q and other documents filed by the Company with the
Commission. The financial information that follows is qualified in its entirety
by reference to such reports and other documents, including the financial
statements and related notes contained therein. Such reports and other documents
may be examined and copies may be obtained from the offices of the Commission in
the manner set forth below.
11
<PAGE>
ANDROS INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
JULY 30/31/25, OCTOBER 29/30,
------------------------------------- -----------------------
1995 1994 1993 1995 1994
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales......................................... $ 42,753.4 $ 57,741.7 $ 39,723.5 $ 9,220.7 $ 11,847.2
Cost of Sales................................. 25,427.7 33,790.2 22,547.7 5,983.4 6,711.7
----------- ----------- ----------- ---------- -----------
Gross Profit.................................. 17,325.7 23,951.5 17,175.8 3,237.3 5,135.5
----------- ----------- ----------- ---------- -----------
Expenses and Other Income:
Research and Development...................... 5,100.9 4,297.3 3,528.5 1,311.9 1,285.3
Marketing, general and administrative......... 10,201.8 8,765.8 5,580.7 1,311.9 1,285.3
Interest and other income..................... (1,354.9) (1,040.3) (898.0) (290.5) (3401.7)
----------- ----------- ----------- ---------- -----------
Total......................................... 13,947.8 12,022.8 8,211.2 3,000 3,391.4
----------- ----------- ----------- ---------- -----------
Income before income taxes.................... 3,377.9 11,928.7 8,964.6 237.3 1,744.1
Income tax provision.......................... 512.4 3,909.7 3,092.8 75.9 558.2
----------- ----------- ----------- ---------- -----------
Net Income.................................... 2,865.5 8,019.0 5,871.8 161.4 1,185.9
----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ---------- -----------
Net income per common and common equivalent
share........................................ $ 0.59 $ 1.67 $ 1.25 $ 0.03 $ 0.25
Average oustanding shares and outstanding
share equivalents............................ 4,820.9 4,797.9 4,698.6 4,875.7 4,827.6
</TABLE>
<TABLE>
<CAPTION>
AT JULY 30/31 AT OCTOBER 29/30
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Total Current Assets..................................... $ 51,856.0 $ 45,071.6 $ 52,675.9 $ 51,856.0
Total Assets............................................. 63,870.5 58,097.5 64,584.2 63,870.5
Total Current Liabilities................................ 5,122.4 2,808.1 5,253.4 5,122.4
Total Liabilities........................................ 5,502.3 3,322.3 5,633.3 5,502.3
Total Shareholders' Equity............................... 58,368.2 54,775.2 58,950.9 58,368.2
Total Liabilities and Equity............................. 63,870.5 58,097.5 64,584.2 63,870.5
</TABLE>
CERTAIN COMPANY PROJECTIONS. In connection with Parent's review of the
Company and in the course of the negotiations between the Company and Parent
described in Section 10 which led to the execution of the Merger Agreement, the
Company provided Parent with certain business and financial information which
Parent and Purchaser believe is not publicly available. The projections were
prepared by the management of the Company for the fiscal years ending July 31,
1996, 1997, 1998, 1999 and 2000 based on assumptions as of January 1996, and
projected total revenues of $45.0 million, $48.5 million, $63.0 million, $75.1
million and $89.6 million, respectively, and net income of $4.4 million, $6.0
million, $8.0 million, $10.6 million and $13.6 million, respectively.
12
<PAGE>
THE COMPANY DOES NOT AS A MATTER OF COURSE MAKE PUBLIC ANY PROJECTIONS AS TO
FUTURE PERFORMANCE OR EARNINGS, AND THE PROJECTIONS SET FORTH ABOVE ARE INCLUDED
IN THIS OFFER TO PURCHASE ONLY BECAUSE THE INFORMATION WAS MADE AVAILABLE TO
PARENT AND PURCHASER BY THE COMPANY. THE COMPANY HAS INFORMED PARENT AND
PURCHASER THAT THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC
DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND FORECASTS. THE COMPANY HAS ALSO INFORMED PARENT AND
PURCHASER THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS
PROVIDED TO PARENT AND PURCHASER WERE BASED IN PART) ARE, IN GENERAL, PREPARED
SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT
DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS
SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL
EXPERIENCE AND BUSINESS DEVELOPMENTS. PROJECTED INFORMATION OF THIS TYPE IS
BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY,
PURCHASER OR PARENT OR THEIR RESPECTIVE FINANCIAL ADVISORS. MANY OF THE
ASSUMPTIONS UPON WHICH THE FOREGOING PROJECTIONS WERE BASED, NONE OF WHICH WERE
APPROVED BY PARENT OR PURCHASER, ARE DEPENDENT UPON ECONOMIC FORECASTING (BOTH
GENERAL AND SPECIFIC TO THE COMPANY'S BUSINESSES), WHICH IS INHERENTLY UNCERTAIN
AND SUBJECTIVE. NONE OF PARENT, PURCHASER, THE COMPANY OR THEIR RESPECTIVE
FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF
ANY OF SUCH PROJECTIONS. INCLUSION OF THE FOREGOING PROJECTIONS SHOULD NOT BE
REGARDED AS AN INDICATION THAT PARENT, PURCHASER, THE COMPANY OR ANY OTHER
PERSON WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF
FUTURE EVENTS, AND NEITHER PURCHASER NOR PARENT HAS RELIED ON THEM AS SUCH.
EXCHANGE ACT FILINGS. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
also should be available for inspection at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may also be obtained by mail, upon payment of
the Commission's customary fees, by writing to its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The information should
also be available for inspection at the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington D.C. 20006.
8. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT, GCP II AND GCLLC.
PARENT AND PURCHASER. Parent and Purchaser were organized under the laws of
the State of Delaware on December 5, 1995, in connection with the Offer, and
neither Parent nor Purchaser has carried on any activities other than in
connection with the Offer. The principal offices of Parent and Purchaser are
located at Metro Tower, Suite 1170, 950 Tower Lane, Foster City, California
94404-2121. Purchaser is a direct wholly owned subsidiary of Parent.
Parent and Purchaser were formed for the purpose of acquiring the Company.
Until immediately prior to the time that Purchaser will purchase Shares pursuant
to the Offer, it is not anticipated that Parent or Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer. Because each of Parent and Purchaser is newly formed and has
minimal assets and capitalization, no meaningful financial information regarding
Parent or Purchaser is available.
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GCP II AND GCLLC. GCLLC is a privately-held investment firm which is
engaged in the purchase of controlling equity positions in leveraged
acquisitions. GCLLC is the general partner of GCP II, which is an investment
fund formed in 1995 having as its principal purpose making investments in the
equity of leveraged buyouts structured by GCLLC. GCP II's investment in Parent
will be its first investment. The limited partners of GCP II consist primarily
of major domestic and international banks, insurance companies, pension funds
and other institutional investors. The principal offices of GCP II and GCLLC are
located at Metro Tower, Suite 1170, 950 Tower Lane, Foster City, California
94404-2121.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser, Parent and GCLLC and certain other information are set
forth in Schedule I hereto.
Except as described in this Offer to Purchase, (i) none of Purchaser,
Parent, GCP II, GCLLC nor, to the best knowledge of Purchaser, Parent, GCP II
and GCLLC, any of the persons listed in Schedule I hereto or any associate or
majority-owned subsidiary of Purchaser, Parent, GCP II, GCLLC or any of the
persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of Purchaser, Parent, GCP II, GCLLC nor, to
the best knowledge of Purchaser, Parent, GCP II and GCLLC, any of the persons or
entities referred to above nor any director, executive officer or subsidiary of
any of the foregoing has effected any transaction in the Shares during the past
60 days.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of Purchaser, Parent, GCP II, GCLLC nor, to the
best knowledge of Purchaser, Parent, GCP II and GCLLC, any of the persons listed
in Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since January 1, 1993, neither Purchaser,
Parent, GCP II nor GCLLC nor, to the best knowledge of Purchaser, Parent, GCP II
and GCLLC, any of the persons listed on Schedule I hereto, has had any business
relationship or transaction with the Company or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. Except as set forth in
this Offer to Purchase, since January 1, 1993, there have been no contacts,
negotiations or transactions between any of Purchaser, Parent, GCP II or GCLLC
or any of their respective subsidiaries or, to the best knowledge of Purchaser,
Parent, GCP II and GCLLC, any of the persons listed in Schedule I hereto, on the
one hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by Purchaser to consummate the Offer and the Merger and to pay fees and
expenses related thereto is estimated to be approximately $94.8 million.
Parent and Purchaser expect to obtain the funds required to purchase all of
the Shares to be purchased pursuant to the Offer (approximately $83.3 million)
and to pay certain fees related to the Offer (approximately $3.8 million) from
(i) the proceeds of the sale of shares of common stock, par value $.01 per
share, of Parent (the "Parent Common Stock") to GCP II for an aggregate of
approximately $17.0 million, (ii) the proceeds of loans from the Banks (as
defined below) to Purchaser pursuant to a senior term loan facility (the "Tender
Offer Facility") in an aggregate amount of approximately $41.7 million, (iii)
the proceeds of the sale of senior subordinated notes of Purchaser (the "Notes")
to certain investors for an aggregate of approximately $15.0 million and (iv)
approximately $13.4 million of Company cash on hand.
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Parent and Purchaser expect to obtain the funds required to cash-out the
Options (other than the Options rolled over by certain members of the Company's
management) pursuant to the Merger (approximately $4.3 million), to repay
indebtedness of the Surviving Corporation under the Tender Offer Facility
(approximately $41.7 million), and to pay certain other fees and expenses
related to the Offer and the Merger (approximately $3.4 million) from (i) the
proceeds of loans from the Banks to the Surviving Corporation pursuant to a
senior term loan facility (the "Term Loan Facility") and a revolving credit
facility (the "Revolving Credit Facility") (collectively, the "Permanent
Facilities" and, together with the Tender Offer Facility, the "Bank Facilities")
in an aggregate amount of approximately $34.8 million and (ii) approximately
$14.6 million of Company cash on hand.
Parent and Purchaser have received firm commitments (the "Bank Commitments")
from Banque Paribas ("Paribas", and as administrative agent thereunder, the
"Agent") and The Bank of Nova Scotia (together with Paribas and such other
banks, financial institutions and accredited investors which from time to time
shall be party to the Credit Documents, the "Banks") to provide the Bank
Facilities. Parent and Purchaser have also received a firm commitment (the "Note
Purchase Commitment" and, together with the Bank Commitments, the "Financing
Commitments") from London Pacific International Limited ("LPIL") to purchase the
Notes. Parent has also received a firm commitment from GCP II pursuant to which
GCP II has committed to purchase Parent Common Stock in an aggregate amount of
$17.0 million.
Set forth below are summary descriptions of the Financing Commitments. Such
descriptions are qualified in their entirety by reference to the Financing
Commitments which have been filed as exhibits to the Schedule 14D-1, and may be
inspected and copied in the same place and manner described in Section 7 (except
that they will not be available at the regional offices of the Commission).
SENIOR DEBT FINANCING. Pursuant to the Bank Commitments, the Banks have
committed to provide Purchaser up to $50.0 million under the Tender Offer
Facility, up to $27.0 million under the Term Loan Facility and up to $15.0
million under the Revolving Credit Facility. The Bank Commitments are subject to
the negotiation, execution and delivery by Purchaser, Parent and the Banks of
definitive credit agreements and related documents with respect to the Bank
Facilities satisfactory to the Banks (collectively, the "Credit Documents").
The Tender Offer Facility will consist of a term loan of up to $50.0
million. The Banks' Tender Offer Facility commitment will terminate immediately
upon consummation of the Offer. The Tender Offer Facility will in no event be
available unless the Offer has been consummated on or prior to April 15, 1996.
Funds will be available under the Tender Offer Facility only to the extent
needed after utilizing all proceeds received by Purchaser as a result of the
capital contributions described below under "Equity Commitment; Stockholders'
Agreement" and the proceeds of the Notes described below under "Subordinated
Debt Financing", and may only be used (i) to pay the consideration for the
Shares pursuant to the Offer in an aggregate maximum amount of approximately
$83.3 million and (ii) to pay fees in connection with the Offer and the Merger
and the related financings and to pre-fund interest payments on the Tender Offer
Facility in an aggregate maximum amount of $6.0 million and to pay reasonable
expenses in connection therewith.
The Tender Offer Facility will have a final maturity date of the earlier of
(i) 120 days following the date of the first purchase of Shares pursuant to the
Offer (the "Closing Date") and (ii) the consummation of the Merger. The Tender
Offer Facility will be guaranteed by Parent and the Company. All extensions of
credit to Purchaser under the Tender Offer Facility will be secured by a pledge
of 100% of the stock of the Company acquired by Purchaser in the Offer, as well
as a negative pledge on all assets of Purchaser and its subsidiaries (subject to
certain exceptions), and a pledge of $28.0 million in cash by the Company. The
guaranty of Parent will be secured by a pledge of the stock of Purchaser. All
amounts outstanding under the Tender Offer Facility will bear interest at the
"Base Rate" (which rate will have the meaning customary and appropriate for
financings of this type) plus 1.75% per annum. After the occurrence and during
the continuation of an event of default, interest will accrue at a rate equal to
the Base Rate plus 3.75% per annum and will be payable upon demand. Interest
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payments will be due 90 days after the Closing Date, at maturity and upon
prepayment, will be payable in arrears and computed on the basis of a 365-day
year. The Tender Offer Facility may be prepaid in whole or in part without
premium or penalty upon at least one business day's notice. Purchaser must
prepay loans under the Tender Offer Facility in an amount equal to 100% of the
proceeds of the sale or other disposition of any of the Shares, payable no later
than the first business day following the date of receipt.
In the event that Purchaser purchases not less than 90% of the outstanding
Shares in the Offer and all conditions to the making of the loans under the
Permanent Facilities have been satisfied (other than the prior making of the
loan under the Tender Offer Facility), Parent and the Company will be required
to cause the merger of Purchaser and the Company pursuant to Section 253 of the
GCL and the Merger Agreement to occur prior to or concurrently with the payment
for the Shares purchased in the Offer and Purchaser will be required to elect to
borrow amounts sufficient to pay all consideration due in the Merger under the
Permanent Facilities (rather than the Tender Offer Facility).
The Term Loan Facility will consist of a term loan of $27.0 million. The
Banks' Term Loan Facility commitment will terminate immediately upon
consummation of the Merger. The Term Loan Facility will in no event be available
unless the Offer has been consummated on or prior to April 15, 1996. The Term
Loan Facility will have a final maturity date of five years after the Closing
Date. Quarterly amortization will be required under the Term Loan Facility,
commencing June 30, 1996. The Revolving Credit Facility will mature five years
after the Closing Date and be in an original principal amount of up to $15.0
million. Letters of credit may be issued under the Revolving Credit Facility up
to an aggregate face amount of $3.0 million at any time outstanding.
The proceeds of the Term Loan Facility, up to $7.8 million of the Revolving
Credit Facility and cash in the Cash Accounts (as defined below) will be used
(i) to refinance the Tender Offer Facility in its entirety; (ii) to pay the
purchase price of any Shares not purchased in the Offer; (iii) to cash out up to
573,000 outstanding options to purchase Common Stock; and (iv) to pay fees in
connection with the Offer and the Merger and the related financings in an
aggregate maximum amount of $6.0 million and to pay reasonable expenses in
connection therewith. The Revolving Credit Facility will also be available to
provide for the working capital requirements and general corporate purposes of
the Company and its subsidiaries and to provide a portion of the purchase price
of acquisitions of similar or related businesses; provided that, in addition to
certain other limitations to be contained in the Credit Documents, (x) not more
than $5.0 million may be borrowed under the Revolving Credit Facility for any
single such acquisition and not more than $10.0 million may be so borrowed for
all acquisitions in any calendar year and (y) the purchase price of any business
so acquired shall not exceed four times the PRO FORMA EBITDA of such business
for the most recent fiscal year of such business.
The Permanent Facilities will be guaranteed by Parent and all domestic
subsidiaries of the Surviving Corporation. All extensions of credit to the
Surviving Corporation under, and all guaranties of the subsidiaries of the
Surviving Corporation in connection with, the Permanent Facilities will be
secured by all existing and after-acquired personal property of the Surviving
Corporation and the subsidiary guarantors, including 100% of the stock of all
domestic subsidiaries of the Surviving Corporation and 66% of the stock of all
foreign subsidiaries of the Surviving Corporation and the assignment of all
material contracts and patents. The Permanent Facilities will also be secured by
first priority liens on all existing and after-acquired real property fee and
leasehold interests of the Surviving Corporation and the subsidiary guarantors
(subject to certain exceptions). To effect such liens securing the Permanent
Facilities, the Surviving Corporation and the subsidiary guarantors will be
required to execute and deliver to the Agent all security agreements, financing
statements, deeds of trust, mortgages and other documents and instruments as are
necessary to grant a first priority perfected security interest in and lien upon
all such property of the Surviving Corporation and the subsidiary guarantors
(subject to certain customary permitted liens). In addition, the Permanent
Facilities will be secured by a negative pledge on all assets of the Surviving
Corporation and its subsidiaries (subject to certain exceptions). The guaranty
of Parent will be secured by a pledge of the stock of the Surviving Corporation.
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All amounts outstanding under the Permanent Facilities will bear interest,
at the Surviving Corporation's option, (i) at the Base Rate plus the Applicable
Base Rate Margin (as defined below) per annum or (ii) at the "reserve adjusted
LIBOR" (which rate will have the meaning customary and appropriate for
financings of this type) plus the Applicable LIBOR Margin (as defined below) per
annum. Until the first anniversary of the Closing Date, the Applicable LIBOR
Margin will be 3.00% and the Applicable Base Rate Margin will be 1.75%.
Thereafter, the applicable margin will be determined on the basis of the ratio
of senior debt to EBITDA (calculated on a rolling four quarter basis net of
management fees paid and certain restructuring charges incurred in connection
with the Offer and the Merger not exceeding $500,000) as follows: (i) for a
senior debt/EBITDA ratio of greater than 2.50 the Applicable LIBOR Margin will
be 3.00% and the Applicable Base Rate Margin will be 1.75%; (ii) for a senior
debt/EBITDA ratio of greater than 2.00 but less than or equal to 2.50 the
Applicable LIBOR Margin will be 2.50% and the Applicable Base Rate Margin will
be 1.25%; and (iii) for a senior debt/ EBITDA ratio of less than or equal to
2.00 the Applicable LIBOR Margin will be 2.00% and the Applicable Base Rate
Margin will be 0.75%. After the occurrence and during the continuation of a
payment event of default, interest will accrue at a rate equal to the rate on
loans bearing interest at the rate determined by reference to the Base Rate plus
an additional 2.00% per annum and shall be payable on demand.
Interest payments under the Permanent Facilities will be payable quarterly
for Base Rate loans and on the last day of selected interest periods (which will
be one, two, three and six months) for LIBOR loans (and at the end of every
three months, in the case of interest periods of longer than three months); and
upon prepayment, in each case payable in arrears and computed on the basis of a
365-day year in the case of Base Rate loans and a 360-day year in the case of
LIBOR loans.
The Surviving Corporation will be required to obtain, within 90 days after
the Closing Date, interest rate protection pursuant to interest rate caps or
other similar arrangements satisfactory to the Agent, against increases in
interest rates (above a per annum rate to be specified by the Agent) with
respect to a notional amount equal to not less than 50% of the aggregate amount
of the Term Loan Facility, such arrangements to remain in effect for a period of
not less than three years after the Closing Date.
Availability of loans under the Revolving Credit Facility will be subject to
a borrowing base equal to the sum of (i) 70% of eligible accounts receivable,
including a sublimit for foreign accounts receivable, and (ii) 50% of eligible
inventories; provided, however, that advances against inventories may not exceed
$7.0 million.
The letter of credit fee will be a percentage equal to the applicable margin
for LIBOR loans under the Revolving Credit Facility, which will be shared by all
of the Banks, and an additional 0.25% per annum, which will be retained by the
Bank issuing the letter of credit, in each case based upon the applicable
percentage multiplied by the amount available from time to time for drawing
under such letter of credit.
Commitment fees equal to 0.50% per annum times the daily average unused
portion of the Revolving Credit Facility will accrue from the consummation of
the Merger and will be computed on the basis of a 360-day year and payable
quarterly in arrears and upon the maturity or termination of the Revolving
Credit Facility.
The Permanent Facilities may be prepaid in whole or in part without premium
or penalty (LIBOR loans prepayable only on the last days of related interest
periods) upon at least three business days' notice. The Bank's commitments may
be reduced or terminated upon such notice and in such amounts as may be agreed
upon. Voluntary prepayments of the Term Loan Facility will be applied on a pro
rata basis to all remaining scheduled installments thereof.
The Surviving Corporation must prepay the loans and/or the commitments under
the Revolving Credit Facility will be reduced (subject to certain basket amounts
to be agreed upon) by (i) 100% of the net after-tax cash proceeds of the sale or
other disposition of any property or assets of the Surviving
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Corporation or any of its subsidiaries, other than (x) net cash proceeds of
sales or other dispositions of inventory in the ordinary course of business, (y)
proceeds from sales of assets used to purchase equivalent or improved assets
with six months of such sales, and (z) a $100,000 basket, in each case payable
no later than the first business day following the date of receipt (prepayment
amounts to be applied on a pro rata basis to all remaining scheduled
installments); (ii) 100% of the net cash proceeds received under any casualty
insurance maintained by Parent or any of its subsidiaries, other than (x)
proceeds not exceeding $5,000,000 in the aggregate applied to rebuild or replace
assets damaged or destroyed and (y) a $100,000 basket, or as a result of the
taking of any assets of Parent or any of its subsidiaries pursuant to the power
of eminent domain or condemnation, in each case payable no later than the first
business day following the date of receipt (prepayment amounts to be applied to
the remaining scheduled installments in the inverse order of maturity); (iii)
100% of the net cash proceeds received from the issuance of equity securities of
Parent or any of its subsidiaries (other than proceeds received upon the
exercise of employee stock options), in each case payable no later than the
first business day following the date of receipt (prepayment amounts to be
applied to the remaining scheduled installments in the inverse order of
maturity); (iv) 100% of the net cash proceeds received from certain issuances of
debt securities by Parent or any of its subsidiaries, in each case payable no
later than the first business day following the date of receipt (prepayment
amounts to be applied to the remaining scheduled installments in the inverse
order of maturity); and (v) 65% of "Excess Cash Flow" (to be defined) for each
fiscal year until such time as a total of $6.0 million from such Excess Cash
Flow sweep has been repaid and 50% of Excess Cash Flow for each fiscal year
thereafter, in each case payable within 120 days after the end of the applicable
fiscal year (prepayment amounts during the period in which 65% of Excess Cash
Flow is prepaid to be applied to the remaining scheduled installments in the
inverse order of maturity and prepayment amounts during the period in which 50%
of Excess Cash Flow is prepaid to be applied on a pro rata basis to all
remaining scheduled installments). All such amounts will be applied first to the
prepayment of the Term Loan Facility and thereafter to the prepayment of the
Revolving Credit Facility and the reduction of the commitments thereunder and
all such mandatory prepayments of the Term Loan Facility will be applied as
indicated above.
The obligations of the Banks to fund the Tender Offer Facility will be
subject to the satisfaction or waiver of certain conditions, including, in
addition to conditions customary for these types of facilities, that (i) the
Credit Documents shall be prepared by counsel to the Banks and shall be in form
and substance satisfactory to the Banks; (ii) the definitive documentation
relating to the Offer and the Merger (the "Definitive Acquisition Documents")
shall be in form and substance satisfactory to the Banks, and the Definitive
Acquisition Documents shall be in full force and effect; (iii) on or prior to
the Closing Date, Parent shall have received not less than $17.0 million in cash
common equity contributions from GCP II (the "Equity Contribution") and $400,000
in rollovers of common equity contributions from certain members of management
of the Company, in each case on terms and conditions satisfactory to the Agent
and the Banks; (iv) on or prior to the Closing Date Purchaser shall have
received not less than $15.0 million in gross proceeds from the issuance of the
Notes; (v) the proceeds of the Equity Contribution and the proceeds of the
issuance of the Notes shall have been used to purchase Shares in the Offer prior
to the expenditure of the proceeds of the loan under the Tender Offer Facility;
(vi) Purchaser shall acquire pursuant to the Offer not less than that number of
Shares required to fulfill the Minimum Condition, and all other aspects of the
Offer shall be consummated pursuant to the Definitive Acquisition Documents, no
provision of which shall have been amended, supplemented, waived or otherwise
modified in any material respect without the prior written consent of the Banks;
(vii) Purchaser shall cause the Company to pledge and deposit not less than
$28.0 million into the Cash Accounts; (viii) after giving effect to the
consummation of the Offer, the aggregate consideration for the Shares shall not
exceed $83.3 million; (ix) all governmental and third party approvals necessary
in connection with the Offer, the financings contemplated thereby and the
continuing operations of the business of the Company and its subsidiaries shall
have been obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise
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impose adverse conditions on the Offer or the Merger or the financing thereof;
(x) the Agent shall have received satisfactory evidence that the fees to be
incurred in connection with the Offer and the Merger and the related financings
will not exceed $6.0 million in the aggregate; (xi) the Agent, for the benefit
of the Lenders, shall have been granted on the Closing Date a perfected security
interest in all assets to the extent described above; (xii) the Agent shall have
received an audit of all inventory, accounts receivable, cash controls and
accounting procedures of the Company and its subsidiaries, the results of which
will be satisfactory to the Agent and the Banks; (xiii) the Banks shall have
received (A) audited financial statements of the Company and its subsidiaries
for the fiscal years ended July 31, 1993, 1994 and 1995, (B) unaudited financial
statements of the Company and its subsidiaries for the fiscal periods most
recently ended prior to the Closing Date (including, without limitation, monthly
financial statements for any such period of less than three months), (C) a PRO
FORMA balance sheet of the Company and its subsidiaries as of the Closing Date
after giving effect to the Offer and the Merger and the financings contemplated
thereby, and (D) projected financial statements (including balance sheets and
statements of operations, stockholders' equity and cash flows) of the Company
and its subsidiaries for the five-year period after the Closing Date, all of the
foregoing to be substantially consistent with any financial statements for the
same periods delivered to the Agent prior to the date of the Bank Commitments
and, in the case of any such projections for subsequent periods, substantially
consistent with any projected financial results for such periods delivered to
the Banks prior to the date of such commitments; (xiv) since July 31, 1995,
there shall have occurred no material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or otherwise)
or prospects of the Company and its subsidiaries, taken as a whole; (xv) the
Agent and the Banks shall have received an opinion from an independent valuation
consultant or appraiser satisfactory to the Agent and the Banks and a
certificate of the chief financial officer of the Company, in each case in form
and substance satisfactory to the Agent and the Banks, supporting the
conclusions that, after giving effect to the Offer and the Merger and the
related transactions contemplated thereby, neither Parent nor the Company will
be insolvent or be rendered insolvent by the indebtedness incurred in connection
therewith, or be left with unreasonably small capital with which to engage in
its businesses, or have incurred debts beyond its ability to pay such debts as
they mature; (xvi) the management fees to be paid by Company to Parent or any of
its affiliates shall be subordinated to the loans under the Bank Facilities on
terms satisfactory to the Agent and the Banks and shall not exceed $450,000
during any year, and for the first three years such fees shall be payable solely
from that portion of Excess Cash Flow not required to be used to prepay such
loans; and (xvii) all documents required to be delivered under the Credit
Documents, including customary legal opinions, corporate records, documents from
public officials and officers' certificates, shall have been delivered.
The obligations of the Banks to initially fund the Permanent Facilities will
be subject to the satisfaction or waiver of certain conditions, including, in
addition to conditions customary for these types of facilities, that (i) the
Merger shall have been consummated pursuant to the Definitive Acquisition
Documents (including, if so elected, the consummation of the Merger pursuant to
Section 253 of the GCL), no provision of which shall have been amended,
supplemented, waived or otherwise modified in any material respect without the
prior written consent of the Banks; upon consummation of the Merger, all of the
shares of Company shall be owned by Parent, and Parent shall be controlled,
directly or indirectly, by GCP II; (ii) concurrently with the making of the
loans under the Permanent Facilities, the Tender Offer Facility shall be repaid
in full; (iii) after giving effect to the consummation of the Offer and the
Merger and the purchase of the outstanding options held by certain members of
management of the Company, the aggregate consideration for the Shares and the
options (the "Acquisition Consideration") shall not exceed $87.6 million; (iv)
the Company shall have used cash on deposit in the Cash Accounts to refinance
the Tender Offer Facility and to pay the Acquisition Consideration; (v) all
governmental and third party approvals necessary in connection with the Merger,
the financings contemplated thereby and the continuing operations of the
business of the Company and its subsidiaries shall have been obtained and be in
full force and effect, and all applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the
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Offer or the Merger or the financing thereof; (vi) the Agent shall have received
satisfactory evidence that the fees incurred in connection with the Offer and
the Merger and the related financings will not exceed $6.0 million in the
aggregate; (vii) the Agent, for the benefit of the Banks, shall have been
granted on the Closing Date a perfected security interest in all assets to the
extent described above; (viii) since July 31, 1995, there shall have occurred no
material adverse change in the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of the Company and
its subsidiaries, taken as a whole; (ix) the Banks shall have received (x)
unaudited financial statements of the Company and its subsidiaries for the
fiscal periods subsequent to those for which financial statements were delivered
on or before the Closing Date (including, without limitation, monthly financial
statements for any such period of less than three months) and (y) a PRO FORMA
balance sheet of Company and its subsidiaries as of the date of the consummation
of the Merger after giving effect to the Merger and the financings contemplated
thereby; and (x) all documents required to be delivered under the Credit
Documents, including customary legal opinions, corporate records, documents from
public officials and officers' certificates, shall have been delivered.
The Credit Documents will include customary and appropriate representations
and warranties, including, without limitation, due organization and
authorization, enforceability, financial condition, no material adverse changes,
title to properties, liens, litigation, payment of taxes, no material adverse
agreements, compliance with laws, employee benefit liabilities, environmental
liabilities, perfection and priority of liens securing the Bank Facilities, full
disclosure, and the accuracy of all representations and warranties in the Credit
Documents.
The Credit Documents will also include customary and appropriate affirmative
and negative covenants, including, without limitation, limitations on other
indebtedness, liens, investments, guarantees, restricted junior payments
(dividends, redemptions and payments on subordinated debt), mergers and
acquisitions, sales of assets (other than inventory in the ordinary course of
business and assets with a fair market value not to exceed $1,000,000 during any
fiscal year), leases, transactions with affiliates, conduct of business and
other provisions customary and appropriate for financings of the type
contemplated, including exceptions and baskets to be agreed upon among the
parties thereto. In addition to such customary covenants, Purchaser will
covenant that (i) concurrently with the making of any loan under the Tender
Offer Facility, Purchaser will cause the Company to pledge cash in an amount of
not less than $28.0 million (the "Minimum Deposit Amount") and to deposit such
cash in accounts (the "Cash Accounts") maintained with the Banks, or another
bank or banks designated by the Banks and acceptable to Purchaser and the
Company, and that all funds deposited in the Cash Accounts will be invested
solely in approved cash equivalent investments and no withdrawals will be made
from the Cash Accounts without the consent of the Banks if such withdrawal would
cause the remaining balance on deposit to be less than the Minimum Deposit
Amount; (ii) it will comply with, and will cause the Company to comply with, all
covenants set forth in the Merger Agreement applicable prior to the consummation
of the Merger (including, without limitation, Section 5.1 thereof) and that
during the period prior to the consummation of the Merger (x) it will retain the
Shares acquired pursuant to the Offer sufficient to fulfill the Minimum
Condition and (y) it will not terminate or amend the Definitive Acquisition
Documents without the prior written consent of the Banks; and (iii) the
financial performance of the Surviving Corporation will meet certain
specifications, including, without limitation, a fixed charge ratio, and
interest coverage ratio, a senior debt ratio, a total debt ratio, a minimum
EBITDA, and limitations on capital expenditures and research and development
expenditures.
The Credit Documents will also include customary and appropriate events of
default (subject to customary and appropriate grace periods), including, without
limitation, failure to make payments when due, defaults under other agreements
or instruments of indebtedness, noncompliance with covenants, breaches of
representations and warranties, bankruptcy, judgments in excess of specified
amounts, invalidity of guaranties, impairment of security interests in
collateral, and "changes of control" (to be defined).
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Parent and Purchaser have agreed to pay certain fees to the Banks with
respect to the Bank Facilities and expect to pay a financing fee equal to 3.0%
of the aggregate principal amount of the Tender Offer Facility, or $1.5 million.
The Agent will also be paid an annual administrative fee of $50,000. In
addition, the Banks will receive a commitment fee equal to 0.50% per annum on
the committed undrawn amount of the Bank Facilities commencing to accrue at the
date of acceptance of the commitments by Purchaser. In addition, the Banks will
receive upon consummation of the Offer warrants (exercisable at a nominal
purchase price) to purchase Parent Common Stock ("Warrants") representing 5% of
the equity of Parent on a fully diluted basis. The terms and provisions of the
Warrants are described more fully below under "Warrants".
Purchaser has agreed to indemnify the Banks and hold them harmless from all
costs, expenses and liabilities of the Banks arising out of or relating to the
proposed transactions; provided, however that the Banks will not be indemnified
for their gross negligence or wilful misconduct.
SUBORDINATED DEBT FINANCING. Pursuant to the Note Purchase Commitment, LPIL
(LPIL or any affiliate of LPIL or any other investor or investors which purchase
Notes pursuant to the Note Purchase Agreement (as defined below) being referred
to herein as the "Note Holders") has committed to purchase $15.0 million in
aggregate principal amount of Notes.
The Note Purchase Commitment is subject to the negotiation, execution and
delivery by Purchaser, Parent and the Note Holders of a definitive note purchase
agreement (the "Note Purchase Agreement") and related documentation. Such
commitments will be available from the date the Note Purchase Agreement and
related documentation is executed and delivered until May 31, 1996.
The proceeds of the Notes, together with (i) the Equity Contribution and
(ii) gross proceeds of not less than $34.5 million under the Bank Facilities
will be used (A) to pay the consideration for the Shares pursuant to the Offer
in an aggregate maximum amount of approximately $87.6 million; (B) to pay fees
and expenses in connection with the Offer and the Merger not to exceed $7.2
million; and (C) for working capital purposes. Parent must contribute the entire
amount of the Equity Contributions to Purchaser as equity. The number of Shares
acquired pursuant to the Offer must be not less than the Minimum Shares and the
per Share price paid for the Shares must not exceed $18.00.
Purchaser will be required to cause the Company, on or prior to the Closing
Date, to deposit in the Cash Account an amount in cash not less than $25.0
million currently in the Company. No withdrawals will be permitted from the Cash
Account without the consent of the Note Holders if such withdrawal would cause
the remaining balance on deposit to be less than $25.0 million. Parent and all
domestic subsidiaries of the Surviving Corporation will guarantee the
obligations of Purchaser under the Note Purchase Agreement.
Purchaser will be required to pay to LPIL, on the Closing Date, an
international arrangement and consulting fee of $1,350,000. In addition, LPIL
will receive upon consummation of the Offer Warrants representing 3% of the
equity of Parent on a fully diluted basis. The terms and provisions of the
Warrants are described more fully below under "Warrants".
All amounts outstanding under the Notes will bear interest at a rate of 13%
per annum. After the occurrence and during the continuation of an event of
default, all amounts outstanding under the Notes will bear interest at a rate
equal to 15% per annum. Interest will be calculated on the basis of actual days
elapsed in a 360-day year. Payments of interest will be due and payable
quarterly in arrears on the last day of each calendar quarter. Interest payments
will be increased or "grossed up" in an amount equal to any amount Purchaser
determines it is required by law to withhold from any interest payment to the
Note Holders. If Purchaser is required to increase or gross up an interest
payment, Purchaser may elect to prepay without premium the entire principal
amount of the Notes plus accrued and unpaid interest thereon.
Purchaser may, at its option, prepay all or any portion of the outstanding
principal amount of the Notes so long as (i) such prepayment is in integral
multiples of the lesser of $250,000 and the entire
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principal amount then outstanding of the Notes and (ii) in connection with such
prepayment, Purchaser pays the Prepayment Premium (as defined below). Each such
optional prepayment will be
applied to reduce the principal amounts payable under the Notes in reverse order
in which such amounts are due. Except as described above, if the principal of
the Notes is wholly or partially prepaid for any reason, whether voluntarily or
involuntarily, prior to March 31, 2001, Purchaser will be required to pay to
each Note Holder a "Prepayment Premium" equal to a declining percentage (from
the Closing Date until March 31, 1997--5%; from April 1, 1997 until March 31,
1998--4%; from April 1, 1998 until March 31, 1999--3%; from April 1, 1999 until
March 31, 2000--2%; from April 1, 2000 until March 31, 2001--1%; and
thereafter--0%) of the principal amount being prepaid.
Purchaser will be required to repay 1/8 of the original principal amount of
the Notes ($1.875 million) at the end of each calendar quarter following the
repayment in full of the Term Loan Facility, but commencing no later than June
30, 2003 and no earlier than 90 days after the repayment in full of all amounts
outstanding under the Tender Offer Facility. All interest, principal and other
amounts owing under the Notes will be due and payable at maturity on March 30,
2005. In addition, all outstanding principal and interest relating to the Notes
will be due and payable (together with the Prepayment Premium) within 15 days
after either (i) the sale of all or substantially all of Purchaser's assets or
(ii) the closing of any public offering of equity by Purchaser.
The obligations of the Note Holders to purchase the Notes will be subject to
the satisfaction or waiver of certain conditions, including that (i) the
definitive documentation evidencing the Notes and the Warrants, and
documentation related thereto, shall be prepared by counsel to Berkeley
International Capital Corporation ("Berkeley") and the Note Holders and shall be
in form and substance satisfactory to Berkeley and the Note Holders; (ii) the
Definitive Acquisition Documents shall be in form and substance satisfactory to
Berkeley and the Note Holders and the Definitive Acquisition Documents shall be
in effect; in addition, after closing of the Offer, the Note Holders shall be
third party beneficiaries of Purchaser's and the Company's obligations to take
actions to effect the Merger; (iii) on or prior to the Closing Date, Parent
shall have received the Equity Contributions on terms and conditions
satisfactory to Berkeley and the Note Holders and caused the entire amount of
the Equity Contributions to have been contributed to Purchaser on terms and
conditions satisfactory to Berkeley and the Note Holders; there shall not have
occurred any waiver, amendment, modification or lapse of any of the terms or
conditions of the Equity Contributions without the prior consent of Berkeley and
the Note Holders; (iv) on or prior to the Closing Date, Purchaser shall have
established a senior debt facility in the amount of $40.0 million and received
gross proceeds thereunder sufficient to satisfy Purchaser's obligations pursuant
to the Offer; the Senior Debt shall include covenants, defaults, subordination
provisions, remedies and other terms and conditions satisfactory to Berkeley and
the Note Holders; there shall not have occurred any waiver, amendment or lapse
of any of the terms or conditions of the senior debt without the prior consent
of Berkeley and the Note Holders; (v) the proceeds of the Equity Contributions
and the senior debt shall have been used to purchase Shares pursuant to the
Offer prior to the expenditure of the proceeds of the Notes; (vi) Purchaser
shall acquire not less than the Minimum Shares pursuant to the Offer, and all
other aspects of the Offer shall be consummated pursuant to the Definitive
Acquisition Documents, no provision of which shall have been amended,
supplemented, waived or otherwise modified in any material respect (including,
without limitation, amending, supplementing, waiving or modifying any of the
terms and conditions set forth in the Definitive Acquisition Documents) without
the prior written consent of Berkeley and the Note Holders; the Offer and the
financing thereof shall be consummated in compliance with all applicable laws
and regulations (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System); (vii) after giving effect to the
consummation of the Offer, the aggregate consideration for the Shares shall not
exceed $83.3 million; on or prior to the Closing Date, Purchaser shall cause the
Company to deposit into the Cash Accounts an amount not less than $25.0 million
of the Company's cash; at the time of the Merger, all amounts in the Cash
Accounts shall be applied to satisfy the Purchaser's obligation to pay for
Shares in the Offer and/or pay down the senior debt; (viii) all governmental and
third party approvals necessary in connection with the Offer, the financings
contemplated thereby and the continuing operations of the business of the
Company and
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its subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Offer or the Merger or the financing
thereof; (ix) Berkeley and the Note Holders shall have received satisfactory
evidence that the fees and expenses to be incurred in connection with the Offer
and the Merger and the related financings thereof will not exceed $7.0 million
in the aggregate; (x) Berkeley and the Company shall have received (A) audited
financial statements of the Company and its subsidiaries for the fiscal years
ended July 31, 1993, 1994 and 1995, (B) unaudited monthly financial statements
of the Company and its subsidiaries for each calendar month beginning August
1995 through the Closing Date, (C) a PRO FORMA balance sheet of the Company and
its subsidiaries as of the Closing Date after giving effect to the Offer, the
Merger and the financings contemplated thereby and (D) projected financial
statements (including balance sheets and statements of operations, stockholders'
equity and cash flows) of the Company and its subsidiaries for the five year
period after the Closing Date, all of the foregoing to be substantially
consistent with any financial statements for the same periods delivered to
Berkeley and LPIL prior to February 9, 1996 and, in the case of any such
projections, substantially consistent with any projected financial results for
such periods delivered to Berkeley and LPIL prior to February 9, 1996; (xi)
since July 31, 1995, there shall have occurred no material adverse change in the
business, operations, properties, assets, liabilities, conditions (financial or
otherwise) or prospects of the Company and its subsidiaries; (xii) Berkeley and
the Note Holders shall have received an opinion from an independent valuation
consultant or appraiser satisfactory to Berkeley and the Note Holders and a
certificate of the chief financial officer of the Company, in each case in form
and substance satisfactory to Berkeley and the Note Holders, supporting the
conclusions that, after giving effect to the Offer, the Merger and the related
transactions contemplated hereby, neither Parent nor the Company will be
insolvent or be rendered insolvent by the indebtedness incurred in connection
therewith, or be left with unreasonably small capital with which to engage in
its businesses, or have incurred debts beyond its ability to pay such debts as
they mature; (xiii) Parent, Purchaser and the Company shall have taken all
corporate acts necessary to carry out the Offer and Merger; (xiv) GCP II shall
have paid to Berkeley an expense deposit in an amount not less than $50,000;
(xv) there shall not be pending or threatened a preliminary or permanent
injunction, temporary restraining order or other order, action, proceeding,
claim or litigation seeking to restrain, impair, prevent or delay the Offer, the
Merger or any of the transactions contemplated under the Note Purchase
Commitment or to make any of the foregoing materially more difficult to
accomplish; and (xvi) in addition, Note Holders shall not be obligated to
purchase the Notes if the Note Holders believe in their good faith discretion
that there exists a substantial possibility that the Merger will not occur
before May 31, 1996.
The Note Purchase Commitment provides that the Note Purchase Agreement will
contain such covenants, terms and conditions, representations and warranties and
events of default with respect to Purchaser, Parent, the Company and its
subsidiaries as are customary and appropriate in similar transactions. In
addition, Purchaser will covenant that it will comply with and will cause the
Company to comply with all covenants set forth in the Merger Agreement
applicable prior to the consummation of the Merger and will further covenant
that during the period prior to the consummation of the Merger (i) it will not
sell, pledge, hypothecate or otherwise encumber any of the Shares purchased
pursuant to the Offer and required to fulfill the Minimum Condition except for a
pledge of the Shares to the Banks under the Bank Facilities and (ii) it will not
terminate or amend the Definitive Acquisition Documents without the prior
written consent of the Note Holders.
The Notes will be unsecured indebtedness of Merger Sub and payment of
principal and interest will, on terms and conditions satisfactory to the Note
Holders, be subordinated to prior payment in full of all amounts due and payable
under the Bank Facilities. The Note Holders will enter into a subordination
agreement with the Banks, which agreement will include terms and conditions
satisfactory to the Note Holders.
WARRANTS. In connection with (i) the Banks' advance of funds under the Bank
Facilities and (ii) the Note Holders' purchase of the Notes pursuant to the Note
Purchase Agreement, Parent will
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issue to the Banks and the Note Holders Warrants to purchase 5% and 3%,
respectively, of the fully diluted common equity of Parent. Warrant holders may
exercise at any time by surrendering the certificate representing the Warrants.
The holder may elect to reduce the number of shares of Parent Common Stock which
would otherwise have been issued in lieu of paying the exercise price. Upon
exercise Parent will issue to the holder thereof a certificate representing the
shares of Parent Common Stock issued upon exercise of the Warrants. Parent will
pay all expenses and taxes imposed by law or any governmental agency
attributable to the issuance of the Warrants or issuance of shares of Parent
Common Stock upon the exercise of the Warrants. Parent will reserve sufficient
shares to issue upon exercise of the Warrants, so long as the Warrants remain
outstanding.
The Warrants will include such covenants, terms and conditions and
representations and warranties with respect to Purchaser, Parent, the Company
and its subsidiaries as are appropriate and customary in similar transactions.
In the event that Parent issues or sells shares of Parent Common Stock or
issues convertible securities or options entitling the holder to acquire shares
of Parent Common Stock (excluding certain options issued to management while the
Warrants are outstanding for not more than 10% of the number of shares of Parent
Common Stock outstanding on the date that such Warrants are issued) for a
consideration per share less than the fair value of such shares of Parent Common
Stock, immediately before such issuance the exercise price of the Warrants will
be reduced to the lower of (i) the price determined by dividing (A) an amount
equal to the sum of (x) the number of shares of Parent Common Stock outstanding
immediately prior to such issuance or sale multiplied by the then current
exercise price plus (y) the aggregate consideration, if any, received by Parent
upon such issuance or sale by (B) the number of shares of Parent Common Stock
outstanding immediately after such issuance or sale, and (ii) the price
determined by multiplying the current exercise price by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Parent Common
Stock outstanding immediately prior to such issuance or sale plus (B) the number
of shares of Parent Common Stock that the aggregate consideration, if any,
received by Parent upon such issuance or sale would purchase at the greater of
the initial purchase price or the fair value on the date of such issuance or
sale and (ii) the denominator of which shall be the number of shares of Parent
Common Stock outstanding immediately after and giving effect to such issuance or
sale. Upon each adjustment of the exercise price as described in the preceding
sentence, each Warrant outstanding prior to the making of the adjustment in the
exercise price shall evidence the right to purchase, at the adjusted exercise
price, that number of shares of Parent Common Stock obtained by (i) multiplying
the number of shares of Parent Common Stock purchasable upon exercise of a
warrant prior to adjustment by the exercise price in effect prior to adjustment,
and (ii) dividing the product so obtained by the exercise price in effect after
such adjustment of the exercise price.
The terms of the Warrants will also (i) prohibit Parent from making
dividends and distributions in certain circumstances, (ii) prohibit Parent from
issuing capital stock of any class which has the right to more than one vote per
share or any capital stock of any class which is preferred as to dividends or as
to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding up and (iii) set forth the rights of holders of Warrants
upon any corporate reorganization of Parent.
The Warrants will provide Parent certain call rights and the holders of
Warrants certain put rights, including, without limitation, call and put rights
in the event of prepayment in full of all amounts outstanding under the
Permanent Facilities or the Notes, as the case may be.
EQUITY COMMITMENT; STOCKHOLDERS' AGREEMENT. Parent has received a firm
commitment from GCP II to purchase Parent Common Stock in an aggregate amount of
$17.0 million. Parent has committed to make a capital contribution in an
aggregate amount of $17.0 million to Purchaser in exchange for Purchaser's
issuance of common stock to Parent. It is expected that the holders of Parent
Common Stock and Warrants, as well as certain members of management who will
acquire options to purchase shares of Parent Common Stock pursuant to the
management roll-over agreements described in Section 10, will enter into a
stockholders' agreement which will contain, among other things, transfer
restrictions on shares of Parent Common Stock, registration rights, rights of
first refusal and tag-along and drag-along rights with respect to private sales
of Parent Common Stock.
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SOLVENCY. After giving effect to the Merger, in the event that the Company
is, as a matter of state or federal law, determined to have been insolvent at
the time of the Merger or to have become insolvent as a result of the Merger or
to have been left with unreasonably small capital, the transfer of consideration
represented by the cash distributed to the Company's stockholders in the Offer
or upon consummation of the Merger may be deemed to be a "fraudulent
conveyance," or an impermissible dividend or distribution under applicable law
and therefore may be subject to claims of certain creditors of the Company or
its trustee in bankruptcy in a bankruptcy proceeding. ln the event that such a
claim is asserted after the Merger, there is a risk that stockholders who
received cash pursuant to the Offer or in the Merger will be ordered by a court
to turn over to the Company's creditors or its trustee in bankruptcy all or a
portion of the cash received by them. Based on the capital structure of the
Surviving Corporation and the terms of the Financing, Parent believes that the
Company will not be rendered insolvent or be left with unreasonably small
capital at the time of the Merger or as a result of the Merger.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT; THE MANAGEMENT ROLL-OVER AGREEMENTS.
BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
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 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. 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 did not believe that the public market valuation of the
Company adequately reflected its financial performance and prospects or that
there was a significant likelihood that the market would begin to recognize the
true underlying value of the Company at any time 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 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 potential financial 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,
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.
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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 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 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
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(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
Purchaser notified GCLLC that they were no longer interested in providing
financing to 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 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 vote
against and one abstention) to pursue an agreement with Parent and 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 of the Merger Agreement and GCLLC completed 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
vote against and one abstention) to approve the Merger Agreement presented to
it, as well as the Offer and the Merger. On February 14, 1996, Parent, Purchaser
and the Company executed the Merger Agreement and the Bank Commitments and the
Note Purchase Commitment were signed.
On February 21, 1996, Purchaser commenced the Offer.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and a copy of which has
been filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed by Purchaser and Parent with the Commission in
connection with the Offer. The Merger Agreement may be examined, and copies
thereof may be obtained, as set forth in Section 7.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days following the initial public announcement of Purchaser's intention to
commence the Offer. The obligation of 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 hereof. 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 hereof without the
prior consent of the Company.
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THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the GCL, at the Effective
Time, Purchaser will be merged with and into the Company. As a result of the
Merger, the separate corporate existence of 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 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 GCL) 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 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 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 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 name of the corporation is
Andros Incorporated." The Merger Agreement also provides that the by-laws of
Purchaser, as in effect immediately prior to the Effective Time, will become the
by-laws of the Surviving Corporation.
AGREEMENTS OF PARENT, PURCHASER AND THE COMPANY. Pursuant to the Merger
Agreement, the Company shall, if required by the GCL 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 Purchaser acquires at least a majority of the
outstanding Shares, 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 such approval and adoption. Parent has agreed to cause 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 GCL, and, if no such meeting shall be
required by the GCL, to file a certificate of ownership providing for the Merger
as soon as permitted under applicable regulatory requirements and law. The
Merger Agreement provides that, in the event that Purchaser shall acquire at
least 90% of the then outstanding Shares, Parent, Purchaser and the Company
agree, at the request of 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 GCL.
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 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
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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 by-laws (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
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 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; (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.
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The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Board as shall give 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 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 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 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 by-laws 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 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 Purchaser, employees of
the Company or any of its Subsidiaries nor otherwise affiliated with Purchaser.
Pursuant to the Merger Agreement, until the Effective Time, the Company
shall, and shall cause the Subsidiaries and the officers, directors, employees,
auditors and agents of the Company and the Subsidiaries to, afford the officers,
employees and agents of Parent and Purchaser and persons providing or committing
to provide Parent or 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 Purchaser and persons providing or committing to provide Parent or Purchaser
with financing for the transactions contemplated by the Merger Agreement with
all financial, operating and other data and information as Parent or Purchaser,
through its officers, employees or agents, may reasonably request and Parent and
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
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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 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 of the Board
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 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
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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 Purchaser) contained in the Merger Agreement to be untrue or
inaccurate; and (v) any failure of the Company, Parent or 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 by-laws 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 by-laws 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.
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 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, 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, 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 "Governmental
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 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 and Seller 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.
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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 GCL, 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 GCL 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) 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, Purchaser and the Company; (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 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 Purchaser having accepted for payment any Shares pursuant to the Offer,
or (ii) Purchaser shall not have accepted for payment any Shares pursuant to the
Offer within 100 days following the 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 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 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 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 Purchaser, as applicable, except, in any case, for such
breaches which are not reasonably likely to affect adversely Parent's or
Purchaser's ability to complete the Offer or the Merger.
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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 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 (the "Fee"), which amount shall be payable in immediately available
funds.
THE MANAGEMENT ROLL-OVER AGREEMENTS
As set forth above, the Merger Agreement provides that, prior to the
Effective Time, the Board (or, if appropriate, the Stock Option Committee of the
Board of Directors) shall adopt such resolutions or take such other actions as
are required so 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 Option multiplied by (ii) the number of Shares covered by
the Option. In the exercise of this discretion, Parent has requested that all or
a portion of the 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 Options in this
manner are (i) Dane Nelson (as to Options to acquire 72,000 shares of Common
Stock); Donald Madsen (as to Options to acquire 20,000 shares of Common Stock);
William W. Weiss (as to Options to acquire 3,000 shares of Common Stock); and
Susan M. Fixmer (as to Options to acquire 3,400 shares of Common Stock). To
formalize this arrangement, Parent and the Purchaser have 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 to purchase Parent Common Stock and the terms of the
Parent Common Stock issuable pursuant to such options. The aggregate value of
the Options to be rolled over by the Roll-Over Officers is approximately
$419,000. The foregoing summary description of the Management Roll-Over
Agreements is qualified in its entirety by reference to the form of Management
Roll-Over Agreement which has been filed as an exhibit to the Schedule 14D-1,
and may be inspected and copied in the same place and manner described in
Section 7 (except that they will not be available at the regional offices of the
Commission).
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11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for Parent
to acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Parent to acquire all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will become a direct
wholly owned subsidiary of Parent. The Offer is being made pursuant to the
Merger Agreement.
Under the GCL, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. The Board has approved and adopted (with one vote against and one
abstention) the Merger Agreement and the transactions contemplated thereby, and,
unless the Merger is consummated pursuant to the short-form merger provisions
under the GCL described below, the only remaining required corporate action of
the Company is the approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the affirmative vote of the holders of a
majority of the Shares.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby if such action is
required by the GCL. Parent and Purchaser have agreed that all Shares owned by
them and their subsidiaries will be voted in favor of the Merger Agreement and
the transactions contemplated thereby.
Under the GCL, if Purchaser acquires, pursuant to the Offer or otherwise, at
least 90% of the outstanding Shares, Purchaser will be able to approve the
Merger without a vote of the Company's stockholders. Accordingly, if Purchaser
acquires at least 90% of the outstanding Shares, it will have sufficient voting
power to cause the approval and adoption of the Merger Agreement and the
transactions contemplated thereby without a vote of the Company's stockholders.
In such event, Parent, Purchaser and the Company have agreed in the Merger
Agreement to take, at the request of Purchaser, 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. If,
however, Purchaser does not acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under the GCL, a significantly longer period of time would be required
to effect the Merger.
If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Purchaser will be entitled to designate representatives to serve
on the Board in proportion to Purchaser's ownership of Shares following such
purchase. See Section 10. Purchaser expects that such representation would
permit Purchaser to exert substantial influence over the Company's conduct of
its business and operations.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders will have certain rights under the GCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Such rights to dissent, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value of the
Shares, as of the day prior to the date on which the stockholders' vote was
taken approving the Merger or similar business combination (excluding any
element of value arising from the accomplishment or expectation of the Merger),
required to be paid in cash to such dissenting holders for their Shares. In
addition, such dissenting stockholders would be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the amount
determined to be the fair value of their Shares. In determining the fair value
of the Shares, the court is required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be the same, more, or less than the purchase price per Share in
the Offer or the Merger Consideration.
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In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders which requires that the merger be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of consideration to be received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER
and RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available
to minority stockholders in a cash-out merger is the right to appraisal
described above. However, a damages remedy or injunctive relief may be available
if a merger is found to be the product of procedural unfairness, including
fraud, misrepresentation or other misconduct.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser seeks
to acquire the remaining Shares not held by it. Purchaser believes, however,
that Rule 13e-3 will not be applicable to the Merger. Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period. Thereafter, Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company or any Subsidiary, a sale or transfer of a material amount of assets
of the Company or any Subsidiary or any material change in the Company's
capitalization or dividend policy or any other material changes in the Company's
corporate structure or business or the composition of the Board or the Company's
management.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that,
during the period commencing on the date of the Merger Agreement and continuing
until the Cut-Off Date or until the termination of the Merger Agreement in
accordance with its terms, the Company shall not (i) declare or pay any
dividends on or make any other distribution in respect of any of the capital
stock of the Company, (ii) 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, or (iii) 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 Options). See Section 10. If,
however, the Company should, during the pendency of the Offer, (i) split,
combine or otherwise change the Shares or its capitalization, (ii) acquire or
otherwise cause a reduction in the number of outstanding Shares or (iii) issue
or sell any additional Shares, shares of any other class or series of capital
stock, other voting securities or any securities convertible into, or options,
rights, or warrants, conditional or otherwise, to acquire, any of the foregoing,
then, without prejudice to Purchaser's rights under Section 14, Purchaser may
(subject to the provisions of the Merger Agreement) make such adjustments to the
purchase price and other terms of the Offer (including the number and type of
securities to be purchased) as it deems appropriate to reflect such split,
combination or other change.
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If, on or after February 14, 1996, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's
rights under Section 14, (i) the purchase price per Share payable by Purchaser
pursuant to the Offer will be reduced (subject to the Merger Agreement) to the
extent any such dividend or distribution is payable in cash and (ii) any
non-cash dividend, distribution or right shall be received and held by the
tendering stockholder for the account of Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Parent intends to cause the delisting of the Shares by the NNM following
consummation of the Offer.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the in the
NNM. According to the NNM's published guidelines, the Shares would not be
eligible to be included for listing if, among other things, the number of record
holders of Shares should fall below 400 or the record number of holders of round
lots of Shares should fall below 300, the number of publicly held Shares should
fall below 200,000 or the aggregate market value of publicly held Shares should
fall below $1,000,000. If these standards are not met, quotations might continue
to be published in the NASDAQ SmallCap Market, Inc., but if the number of record
holders of Shares should fall below 300, or if the number of publicly held
Shares should fall below 100,000, or there are not at least two registered and
active market makers, one of which may be a market maker entering a stabilizing
bid, National Association of Securities Dealers, Inc. ("NASD") rules provide
that the Shares would no longer qualify for inclusion in the NNM and the NNM
would cease to provide any quotations. Shares held directly or indirectly by an
officer or director of the Company or by any beneficial owner of more than 10%
of the Shares will ordinarily not be considered as being publicly held for this
purpose. The Company has advised Purchaser that, as of January 31, 1996, there
were 4,628,054 Shares outstanding, held by approximately 400 holders of record.
In the event the Shares were no longer eligible for NNM quotation,
quotations might still be available from other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon such factors as the number of stockholders and/or the aggregate
market value of such securities remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Merger Consideration.
The Shares are currently "margin securities", as such term is defined under
the rules of the Federal Reserve Board, which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, following the Offer it is possible that the
Shares might no longer constitute "margin securities" for purposes of the margin
regulations of the Federal Reserve Board, in which event such Shares could no
longer be used as collateral for loans made by brokers.
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The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with stockholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for NNM reporting. Purchaser currently intends to seek to cause
the Company to terminate the registration of the Shares under the Exchange Act
as soon after consummation of the Offer as the requirements for termination of
registration are met.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the
Offer, Purchaser shall not be required to accept for payment or pay for any
Shares tendered pursuant to the Offer, and may terminate the Offer or amend the
Offer (subject, in certain circumstances, to the Company's consent) and may
postpone the acceptance for payment of and payment for, Shares tendered, if (i)
the Minimum Condition shall not have been satisfied, (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 Financing Condition shall not have been
satisfied, or (iv) at any time on or after February 14, 1996, and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions shall exist:
(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
Purchaser of Shares or otherwise seeking to restrain, materially delay or
prohibit the consummation of the Offer, the Merger or any other transaction
contemplated thereby or seeking damages that would make the Offer, the
Merger or any other transaction contemplated thereby materially more costly
to Parent or Purchaser, (ii) seeking to prohibit or limit materially the
ownership or operation by Purchaser or Parent of all or a material portion
of the business or assets of the Company and its Subsidiaries, or to compel
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 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 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 makers
properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of the Merger Agreement and the
transactions contemplated thereby, or (iv) seeking to require divestiture by
Parent, 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 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, shall have occurred following February 14, 1996;
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(e) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NNM, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) any extraordinary or material adverse
change in the financial markets of the United States, (iv) a commencement of
a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States or Canada, or (v) in the
case of any of the foregoing existing on February 14, 1996, a material
acceleration or worsening thereof;
(f) (i) it shall have been publicly disclosed or 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 has been acquired by any
person, other than Parent or any of its affiliates or (ii) (A) the Board or
any committee thereof shall have withdrawn or modified in a manner adverse
to Parent or Purchaser the approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any Competing
Transactions or any other acquisition of Shares other than the Offer and the
Merger or (B) the Board or any committee thereof shall have resolved to do
any of the foregoing;
(g) the Company shall have breached or failed to perform in any material
respect any of its obligations, covenants or agreements under the Merger
Agreement;
(h) 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; or
(i) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Purchaser and Parent.
The foregoing rights of Purchaser shall be available regardless of the
circumstances giving rise to any such conditions (including any action or
omission to act of Purchaser) and (subject to certain limitations) 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 Purchaser will be final and binding
upon all parties including tendering stockholders.
The failure by 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.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company (see
Section 10), neither Purchaser nor Parent is aware of any license or other
regulatory permit that appears to be material to the business of the Company and
the Subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth
below, of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, it is
Purchaser's present intention to seek such approval or action. Purchaser does
not currently intend, however, to delay the purchase of Shares tendered pursuant
to the Offer pending the outcome of any such action or the receipt of any such
approval (subject to Purchaser's right to decline to purchase Shares if any of
the conditions in Section 14 shall have occurred). There can be no assurance
that any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
business of the Company, Purchaser or Parent or that certain parts of the
businesses of the Company, Purchaser or Parent might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such
39
<PAGE>
approval or other action or in the event that such approval was not obtained or
such other action was not taken. Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 15.
See Section 14.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the GCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On February 5,
1996, prior to the execution of the Merger Agreement, the Board, after receiving
the recommendation in favor thereof (with one vote against and one abstention)
of the Special Committee, by an affirmative vote (with one vote against and one
abstention) at a meeting held on such date, approved the Merger Agreement,
determined that each of the Offer and the Merger is fair to, and in the best
interest of, the stockholders of the Company. In addition, prior to the date of
the Merger Agreement, the Company delivered to Parent a copy of resolutions of
the Board to the effect that pursuant to Section 203(a)(1) of the GCL the
restrictions contained in such Section 203 are inapplicable to the Offer and the
Merger and the transactions contemplated by the Merger Agreement, including,
without limitation, the pledge of the Shares acquired in the Offer to the
financial institutions providing financing therefor, and the transfer of such
Shares upon the exercise of remedies under the applicable financing agreements.
Accordingly, Section 203 of the GCL is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, Purchaser will take such action
as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer, and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 14.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by Purchaser pursuant to the Offer is not subject to such
requirements.
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FEDERAL RESERVE BOARD REGULATIONS. Regulations G, T, U and X (the "Margin
Credit Regulations") of the Board of Governors of the Federal Reserve System
restrict the extension or maintenance of credit for the purpose of buying or
carrying margin stock, including the Shares, if the credit is secured directly
or indirectly by margin stock. Such secured credit may not be extended or
maintained in an amount that exceeds the maximum loan value of the margin stock
and any other collateral securing the credit. Under the Margin Credit
Regulations, the maximum loan value of the Shares is 50% of their current market
value (which is equal to the purchase price of the Shares) and the good faith
loan value of the other collateral. Purchaser believes that the financing of the
Offer and the Merger will comply with the Margin Credit Regulations.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Purchaser and Parent have retained Georgeson & Company Inc., as the
Information Agent, and Chemical Mellon Shareholder Services, L.L.C., as the
Depositary, in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telecopy, telegraph and personal interview
and may request banks, brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Georgeson & Company Inc. will be paid a fee of $10,000 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. Purchaser will pay the Depositary
reasonable and customary compensation for its services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including under federal securities laws. Brokers, dealers, commercial banks and
trust companies will be reimbursed by Purchaser for customary handling and
mailing expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in Section 7 (except that they will not be
available at the regional offices of the Commission).
Andros Acquisition Inc.
February 21, 1996
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT, PURCHASER AND GCLLC
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER. The
following table sets forth the name, current business address, citizenship
and present principal occupation or employment, and material occupations,
positions, offices or employments and business addresses thereof for the
past five years of each director and executive officer of Parent. The
current business address of each such person is Metro Tower, Suite 1170, 950
Tower Lane, Foster City, California 94404-2121.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME AND CITIZENSHIP YEARS AND BUSINESS ADDRESSES THEREOF
- -------------------------- -----------------------------------------------------------------------------------
<S> <C>
Richard D. Paterson; Director, Chairman and President of Parent and President of Purchaser since
Canada February 12, 1996. Managing director 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.
Mark E. Bandeen; Canada Director of Parent 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.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME AND CITIZENSHIP YEARS AND BUSINESS ADDRESSES THEREOF
- -------------------------- -----------------------------------------------------------------------------------
Daniel J. Boverman; United Director, Vice President and Secretary of Parent and Purchaser since February 12,
States 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.
<S> <C>
Jean-Pierre L. Conte; Director, Vice President and Treasurer of Parent and Purchaser since February 12,
United States 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 Wood's Corporation, 440 North First Avenue, Chambersburg,
Pennsylvania 17201, since March 1990.
</TABLE>
2. MANAGING DIRECTORS AND PRINCIPALS OF GCLLC. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
managing director and principal of GCLLC. The current business address of each
such person is Metro Tower, Suite 1170, 950 Tower Lane, Foster City, California
94404-2121.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME AND CITIZENSHIP YEARS AND BUSINESS ADDRESSES THEREOF
- -------------------------- -----------------------------------------------------------------------------------
<S> <C>
Richard D. Paterson; See above.
Canada
Mark E. Bandeen; See above.
Canada
Daniel J. Boverman; See above.
United States
Jean-Pierre L. Conte; See above.
United States
</TABLE>
I-2
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 21, 1996
OF
ANDROS ACQUISITION INC.
A DIRECT WHOLLY OWNED SUBSIDIARY OF
ANDROS HOLDINGS INC.
A CORPORATION FORMED BY
GENSTAR CAPITAL PARTNERS II, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY,
MARCH 20, 1996, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(FOR ELIGIBLE INSTITUTIONS
ONLY)
Chemical Mellon (201) 296-4293 Chemical Mellon
Shareholder Services, L.L.C. CONFIRM BY TELEPHONE: Shareholder Services, L.L.C.
Reorganization Department (201) 296-4100 120 Broadway
P.O. Box 845 13th Floor
Midtown Station New York, New York 10271
New York, New York 10018 Attention: Reorganization
Department
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if delivery of Shares is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC"), the Midwest Securities Trust
Company ("MSTC") or the Philadelphia Depository Trust Company ("PDTC") (each a
"Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer
Facilities") pursuant to the book-entry transfer procedure described in Section
3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis and who wish to
tender their Shares must do so pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase. See Instruction 2.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) / / DTC / / MTC / / PDTC
Account Number: ___________________________________________________________
<PAGE>
Transaction Code Number: __________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): __________________________________________
Window Ticket No. (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution which Guaranteed Delivery: ____________________________
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE CERTIFICATE(S) AND SHARES TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE SHARES EVIDENCED NUMBER OF
CERTIFICATE BY SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
TOTAL SHARES:
- ----------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Andros Acquisition Inc., a corporation
organized and existing under the laws of the State of Delaware ("Purchaser") and
a direct wholly owned subsidiary of Andros Holdings, Inc., a corporation
organized and existing under the laws of the State of Delaware and formed at the
direction of Genstar Capital Partners II, L.P., a Delaware limited partnership,
the sole general partner of which is Genstar Capital LLC, the above-described
shares of common stock, par value $.01 per share (the "Shares"), of Andros
Incorporated, a corporation organized and existing under the laws of the State
of Delaware (the "Company"), pursuant to Purchaser's offer to purchase all
Shares, at $18.00 per Share, 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"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together constitute the "Offer"). The
undersigned understands that Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to one or more of its affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after February 14, 1996 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Jean-Pierre L. Conte and Daniel
J. Boverman, and each of them, as the attorneys and proxies of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or his substitute shall, in his sole discretion, deem proper
and otherwise act (by written consent or otherwise) with respect to all the
Shares tendered hereby which have been accepted for payment by Purchaser prior
to the time of such vote or other action and all Shares and other securities
issued in Distributions in respect of such Shares, which the undersigned is
entitled to vote at any meeting of stockholders of the Company (whether annual
or special and whether or not an adjourned or postponed meeting) or consent in
lieu of any such meeting or otherwise. This proxy and power of attorney is
coupled with an interest in the Shares tendered hereby, is irrevocable and is
granted in consideration of, and is effective upon, the acceptance for payment
of such Shares by Purchaser in accordance with other terms of the Offer. Such
acceptance for payment shall revoke all other proxies and powers of attorney
granted by the undersigned at any time with respect to such Shares (and all
Shares and other securities issued in Distributions in respect of such Shares),
and no subsequent proxy or power of attorney shall be given or written consent
executed (and if given or executed, shall not be effective) by the undersigned
with respect thereto. The undersigned understands that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's acceptance of such
Shares for payment, Purchaser must be able to exercise full voting and other
rights with respect to such Shares and all Distributions, including, without
limitation, voting at any meeting of the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, and that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request,
<PAGE>
shall execute and deliver all additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions. In addition, the
undersigned shall remit and transfer promptly to the Depositary for the account
of Purchaser all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Shares tendered hereby, or deduct from
such purchase price, the amount or value of such Distribution as determined by
Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not
<PAGE>
purchased by crediting the account at the Book-Entry Transfer Facility
designated above. The undersigned recognizes that Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not purchase any of
the Shares tendered hereby.
<TABLE>
<S> <C>
- ---------------------------------------------- ----------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the To be completed ONLY if the check for the
purchase price of Shares or Share Certificates purchase price of Shares purchased or Share
evidencing Shares not tendered or not purchased Certificates evidencing Shares not tendered or
to be issued in the name of someone other than not purchased are to be mailed to someone other
the undersigned, or if Shares tendered hereby than the undersigned, or the undersigned at an
and delivered by book-entry transfer which are address other than that shown under
not purchased are to be returned by credit to "Description of Shares Tendered."
an account at one of the Book-Entry Transfer Mail check and/or certificate(s) to:
Facilities other than that designated above.
Issue check and/or certificate(s) to:
Name: --------------------------------------- Name: ---------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address: -------------------------------------- Address: --------------------------------------
-------------------------------------- ----------------------------------------------
- ---------------------------------------------- ----------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
- ----------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY
NUMBER
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
/ / Credit Shares delivered by book-entry
transfer and not purchased to the account
set forth below:
/ / The Depositary Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
(ACCOUNT NUMBER)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
IMPORTANT
STOCKHOLDER(S): SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: , 199
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information and see Instruction 5).
Name(s): --------------------------------------------------
- --------------------------------------------------------------------------
(PLEASE PRINT)
Capacity: --------------------------------------------------
(PLEASE PROVIDE FULL TITLE)
Address: --------------------------------------------------
--------------------------------------------------
(INCLUDE ZIP CODE)
Telephone No.: --------------------------------------------------
(INCLUDE AREA CODE)
Taxpayer Identification or
Social Security Number:
----------------------------------------------------
SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE
GUARANTEE OF SIGNATURES
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE PROVIDED BELOW.
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be medallion guaranteed by a firm which is a member of the Medallion
Signature Guarantee Program, or by any other "eligible guarantor institution",
as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution") unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in the case of a book-entry
delivery, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the reverse
hereof prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis may
tender their Shares pursuant to the guaranteed delivery procedure described in
Section 3 of the Offer to Purchase. Pursuant to such procedure (i) such tender
must be made by or through an Eligible Institution; (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date; and (iii) the Share Certificates evidencing all physically
delivered Shares in proper form for transfer by delivery, or a confirmation of a
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of all Shares delivered by book-entry transfer, in each case together
with a Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of
book-entry delivery, an Agent's Message), and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
Nasdaq National Market trading days after the date of execution of such Notice
of Guaranteed Delivery, all as described in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Stockholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at a
Book-Entry Transfer Facility as such stockholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
address or telephone number set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify whether such stockholder is subject to backup withholding of
federal income tax. If a tendering stockholder has been notified by the Internal
Revenue Service that such stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such stockholder has since been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding. Failure to provide the information
<PAGE>
on the Substitute Form W-9 may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the purchase price of all Shares
purchased from such stockholder. If the tendering stockholder has not been
issued a TIN and has applied for one or intends to apply for one in the near
future, such stockholder should write "Applied For" in the space provided for
the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute
Form W-9. If "Applied For" is written in Part I and the Depositary is not
provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR
AN AGENT'S MESSAGE IN THE CASE OF BOOK-ENTRY DELIVERY, AND SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A
PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER
TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $500 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit an Internal Revenue Form W-8, signed
under penalties of perjury, attesting to such individual's exempt status. A Form
W-8 may be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE>
<TABLE>
<S> <C> <C>
- -----------------------------
PAYER'S NAME: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer Identification
FORM W-9 Number -- For all accounts, enter SOCIAL SECURITY NUMBER
DEPARTMENT OF THE TREASURY your TIN in the box at right. OR
INTERNAL REVENUE SERVICE (For most individuals, this is
your social security number. If EMPLOYER IDENTIFICATION NUMBER
you do not have a TIN, see How to (IF AWAITING TIN WRITE "APPLIED
Obtain a TIN in the enclosed FOR")
GUIDELINES.) Certify by signing
and dating below. Note: If the
account is in more than one name,
see the chart in the enclosed
GUIDELINES to determine which
number to give the payer.
--------------------------------------------------------------------
PART II -- For Payees Exempt From Backup Withholding, see the
enclosed GUIDELINES and complete as instructed therein.
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
- ---------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for
a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding,
(b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your
tax return. However, if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject to backup withholding,
do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.)
- ----------------------------------------------------------------------------------------------------
SIGNATURE DATE , 199
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. FOR ADDITIONAL
DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(FOR ELIGIBLE INSTITUTIONS
ONLY)
Chemical Mellon (201) 296-4293 Chemical Mellon
Shareholder Services, L.L.C. CONFIRM BY TELEPHONE: Shareholder Services, L.L.C.
Reorganization Department (201) 296-4100 120 Broadway
P.O. Box 845 13th Floor
Midtown Station New York, New York 10271
New York, New York 10018 Attention: Reorganization
Department
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[GEORGESON & COMPANY LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
ALL OTHERS CALL TOLL FREE: 1-800-223-2064
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates ("Share
Certificates") evidencing shares of common stock, par value $.01 per share (the
"Shares"), of Andros Incorporated, a corporation organized and existing under
the laws of the State of Delaware (the "Company"), are not immediately
available, (ii) if Share Certificates and all other required documents cannot be
delivered to Chemical Mellon Shareholder Services, L.L.C., as Depositary (the
"Depositary"), prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)) or (iii) if the procedure for delivery by
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram
or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
(FOR ELIGIBLE INSTITUTIONS COURIER:
ONLY)
Chemical Mellon Shareholder (201) 296-4293 Chemical Mellon Shareholder
Services, L.L.C. CONFIRM BY TELEPHONE: Services, L.L.C.
Reorganization Department (201) 296-4100 120 Broadway
P.O. Box 845 13th Floor
Midtown Station New York, New York 10271
New York, New York
10018 Attention: Reorganization
Department
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Andros Acquisition Inc., a corporation
organized and existing under the laws of the State of Delaware and a direct
wholly owned subsidiary of Andros Holdings Inc., a corporation organized and
existing under the laws of the State of Delaware and formed at the direction of
Genstar Capital Partners II, L.P., a Delaware limited partnership, the sole
general partner of which is Genstar Capital LLC, 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"), receipt of each of which is hereby acknowledged, the
number of Shares specified below pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.
<TABLE>
<CAPTION>
Number of Shares:
<S> <C>
SIGNATURE(S) OF HOLDER(S)
Certificate Nos. (if available): Dated: , 199
Name(s) of Holder(s):
Check one box if Shares will be delivered
by book-entry transfer:
/ / The Depository Trust Company PLEASE TYPE OR PRINT
/ / Midwest Securities Trust Company
ADDRESS
/ / Philadelphia Depository Trust Company
ZIP CODE
Account No.:
AREA CODE AND TELEPHONE NO.
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or which is a commercial bank or trust company having an office or correspondent
in the United States, guarantees to deliver to the Depositary, at one of its
addresses set forth above, Share Certificates evidencing the Shares tendered
hereby, in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company,
in each case with delivery of a Letter of Transmittal (or facsimile thereof)
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three Nasdaq
National Market trading days of the date hereof.
<TABLE>
<CAPTION>
<S> <C>
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS TITLE
Name:
ZIP CODE PLEASE TYPE OR PRINT
Dated: , 199
AREA CODE AND TELEPHONE NO.
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE>
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
AT
$18.00 NET PER SHARE
BY
ANDROS ACQUISITION INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
ANDROS HOLDINGS INC.
A CORPORATION FORMED BY
GENSTAR CAPITAL PARTNERS II, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MARCH 20, 1996, UNLESS THE OFFER IS EXTENDED
February 21, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Andros Acquisition Inc., a corporation organized
and existing under the laws of the State of Delaware ("Purchaser") and a direct
wholly owned subsidiary of Andros Holdings Inc., a corporation organized and
existing under the laws of the State of Delaware ("Parent") and formed at the
direction of Genstar Capital Partners II, L.P., a Delaware limited partnership,
the sole general partner of which is Genstar Capital LLC, to act as Information
Agent in connection with Purchaser's offer to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Andros Incorporated, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), at a price of $18.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in Purchaser's Offer to Purchase,
dated February 21, 1996 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith. Please
furnish copies of the enclosed materials to those of your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS AND (II) PURCHASER HAVING OBTAINED FINANCING PURSUANT TO, OR
ON TERMS AND CONDITIONS NO LESS FAVORABLE THAN THOSE CONTAINED IN, THE FINANCING
COMMITMENTS (AS DEFINED IN SECTION 9 OF THE OFFER TO PURCHASE).
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated February 21, 1996;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Chemical Mellon
<PAGE>
Shareholder Services, L.L.C. (the "Depositary") by the Expiration Date
(as defined in the Offer to Purchase) or if the procedure for book-entry
transfer cannot be completed by the Expiration Date;
4. A letter to stockholders of the Company from Dane Nelson, President and
Chief Executive Officer of the Company, together with a Solicitation/
Recommendation Statement on Schedule 14D-9 filed with the Securities and
Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the
Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MARCH 20, 1996, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), (ii) a Letter of Transmittal
(or facsimile thereof) properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares and (iii) any other
documents required by the Letter of Transmittal.
If a holder of Shares wishes to tender Shares, but cannot deliver such
holder's certificates or other required documents, or cannot comply with the
procedure for book-entry transfer, prior to the expiration of the Offer, a
tender may be effected by following the guaranteed delivery procedure described
in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Depositary and the Information Agent as described
in the Offer) in connection with the solicitation of tenders of Shares pursuant
to the Offer. However, Purchaser will reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients. Purchaser will pay or cause to be paid any stock transfer taxes
payable with respect to the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
us at our address and telephone number set forth on the back cover page of the
Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
GEORGESON & COMPANY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PARENT, PURCHASER, THE
COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
AT
$18.00 NET PER SHARE
BY
ANDROS ACQUISITION INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
ANDROS HOLDINGS INC.
A CORPORATION FORMED BY
GENSTAR CAPITAL PARTNERS II, L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MARCH 20, 1996 UNLESS THE OFFER IS EXTENDED.
TO OUR CLIENTS:
Enclosed for your consideration are an Offer to Purchase, dated February 21,
1996 (the "Offer to Purchase"), and a related Letter of Transmittal in
connection with the offer by Andros Acquisition Inc., a corporation organized
and existing under the laws of the State of Delaware ("Purchaser") and a direct
wholly owned subsidiary of Andros Holdings Inc., a corporation organized and
existing under the laws of the State of Delaware ("Parent") and formed at the
direction of Genstar Capital Partners II, L.P., a Delaware limited partnership,
the sole general partner of which is Genstar Capital LLC, to purchase all
outstanding shares of common stock, par value $.01 per share (the "Shares"), of
Andros Incorporated, a corporation organized and existing under the laws of the
State of Delaware (the "Company"), at a price of $18.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $18.00 per Share, net to the seller in cash.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company, after receiving the
recommendation in favor thereof (with one vote against and one
abstention) of the special committee of the Board of Directors of the
Company formed to consider, among other things, the Offer and the Merger (as
defined in the Offer to Purchase), has determined that each of the Offer and
the Merger is fair to,
<PAGE>
and in the best interests of, the stockholders of the Company, and
recommends (with one vote against and one abstention) that stockholders
accept the Offer and tender all of their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, March 20, 1996, unless the Offer is
extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the
offer that number of Shares which constitutes at least a majority of the
Shares then outstanding on a fully diluted basis and (ii) Purchaser having
obtained financing pursuant to, or on terms and conditions no less favorable
than those contained in, the Financing Commitments (as defined in Section 9
of the Offer to Purchase).
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes with respect to the purchase of
Shares by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK OF ANDROS INCORPORATED
BY ANDROS ACQUISITION INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 21, 1996, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by Andros
Acquisition Inc., a corporation organized and existing under the laws of the
State of Delaware and an indirect wholly owned subsidiary of Andros Holdings
Inc., a corporation organized and existing under the laws of the State of
Delaware and formed at the direction of Genstar Capital Partners II, L.P., a
Delaware limited partnership, the sole general partner of which is Genstar
Capital LLC, to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of Andros Incorporated, a corporation organized and
existing under the laws of the State of Delaware.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<S> <C>
Dated: ------------------------------- , 199 -- SIGN HERE
--------------------------------------
Number of Shares --------------------------------------
to be Tendered: SIGNATURE(S) OF HOLDER(S)
-------------------------------------- Shares* Name(s) of Holder(s):
--------------------------------------
--------------------------------------
PLEASE TYPE OR PRINT
----------------------------------------
ADDRESS
----------------------------------------
ZIP CODE
----------------------------------------
AREA CODE AND TELEPHONE NUMBER
----------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER
</TABLE>
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens, e.g.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen, e.g., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------
GIVE THE SOCIAL
SECURITY
NUMBER OF --
FOR THIS TYPE OF ACCOUNT:
- -------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. A revocable savings The
trust account (in which grantor-trustee(1)
grantor is also trustee)
b. Any "trust" account that The actual owner(1)
is not a legal or valid
trust under State law
- -------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION NUMBER
OF --
FOR THIS TYPE OF ACCOUNT:
- -------------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at an office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a tax-payer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part 1, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and will
continue until you furnish your taxpayer identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES
Payees specifically exempted from backup withholding on ALL payments include the
following:*
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a),
or an individual retirement plan, or a custodial account under section
403(b)(7).
- The United States or any agency or instrumentality
thereof.
- A State, the District of Columbia, a possession of the
United States, or any political subdivision or instrumentality thereof.
- A foreign government or a political subdivision, agency
or instrumentality thereof.
- An international organization or any agency or
instrumentality thereof.
- A registered dealer in securities or commodities
registered in the United States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section
584(a).
- An entity registered at all times during the tax year under
the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding
under section 1441.
- Payments to partnerships not engaged in a trade or
business in the United States and which have at least one nonresident
partner.
- Payments of patronage dividends where the amount
received is not paid in money.
- ----------
* Unless otherwise noted herein, all references below to section numbers or to
regulations are references to the Internal Revenue Code and the regulations
promulgated thereunder.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by
individuals. NOTE: You may be subject to backup withholding if (i) this
interest is $600 or more, (ii) the interest is paid in the course of the
payer's trade or business and (iii) you have not provided your correct
taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-
interest dividends under section 852).
- Payments described in section 6049(b)(5) to non-
resident aliens.
- Payments on tax-free covenant bonds under
section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifications
or affirmations, you are subject to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION
CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE
<PAGE>
EXHIBIT (A)(7)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
FEBRUARY 21, 1996 AND THE RELATED LETTER OF TRANSMITTAL, AND IS BEING MADE TO
ALL HOLDERS OF SHARES. PURCHASER IS NOT AWARE OF ANY STATE WHERE THE MAKING OF
THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY
VALID STATE STATUTE. IF PURCHASER BECOMES AWARE OF ANY VALID STATE STATUTE
PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES PURSUANT
THERETO, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH STATE
STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, PURCHASER CANNOT COMPLY WITH SUCH
STATE STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH STATE. IN ANY JURISDICTION WHERE
THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A
LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF
PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS
OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ANDROS INCORPORATED
AT
$18.00 NET PER SHARE
BY
ANDROS ACQUISITION INC.
A DIRECT WHOLLY OWNED SUBSIDIARY OF
ANDROS HOLDINGS INC.
A CORPORATION FORMED BY
GENSTAR CAPITAL PARTNERS II, L.P.
Andros Acquisition Inc., a corporation organized and existing under the laws
of the State of Delaware ("Purchaser") and a direct wholly owned subsidiary of
Andros Holdings Inc., a corporation organized and existing under the laws of the
State of Delaware ("Parent") and formed at the direction of Genstar Capital
Partners II, L.P., a Delaware limited partnership, the sole general partner of
which is Genstar Capital LLC, is offering to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Andros Incorporated, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), at a price of $18.00 per Share, 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 in the related Letter of
Transmittal (which together constitute the "Offer"). Following the Offer,
Purchaser intends to effect the Merger (as defined below).
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, MARCH 20, 1996, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS AND (II) PURCHASER HAVING OBTAINED FINANCING PURSUANT TO, OR
ON TERMS AND CONDITIONS NO LESS FAVORABLE THAN THOSE CONTAINED IN, THE FINANCING
COMMITMENTS (AS DEFINED IN SECTION 9 OF THE OFFER TO PURCHASE).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 14, 1996 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with relevant provisions of the General Corporation Law of the State
of Delaware ("Delaware Law"),
<PAGE>
Purchaser will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a direct wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company, or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company, and other than Shares held by stockholders who shall have
demanded and perfected appraisal rights, if any, under Delaware Law) will be
cancelled and converted automatically into the right to receive $18.00 in cash,
or any higher price that may be paid per Share in the Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY, AFTER RECEIVING THE RECOMMENDATION IN
FAVOR THEREOF (WITH ONE VOTE AGAINST AND ONE ABSTENTION) OF THE SPECIAL
COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY FORMED TO CONSIDER, AMONG
OTHER THINGS, THE OFFER AND THE MERGER, HAS DETERMINED THAT EACH OF THE OFFER
AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY, AND RECOMMENDS (WITH ONE VOTE AGAINST AND ONE ABSTENTION) THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not property
withdrawn as, if and when Purchaser gives oral or written notice to Chemical
Mellon Shareholder Services, L.L.C. (the "Depositary") of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for Shares be paid, regardless of any delay
in making such payment. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares (the "Share
Certificates") or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at one of the Book-Entry Transfer Facilities (as
defined in Section 2 of the Offer to Purchase) pursuant to the procedure set
forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in Section 2 of the
Offer to Purchase) in connection with a book-entry transfer, and (iii) any other
documents required under the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period time during which the Offer is
open, including the occurrence of any condition specified in Section 14 of the
Offer to Purchase, by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, such announcement to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of a tendering stockholder to withdraw his or her Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Wednesday, March 20, 1996 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also be withdrawn at any
time after April 20, 1996. For the withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
page of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in
<PAGE>
Section 3 of the Offer to Purchase), unless such Shares have been tendered for
the account of an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares. All questions as to the form and validity (including the time of
receipt) of any notice of withdrawal will be determined by Purchaser, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent as set forth below, and
copies will be furnished promptly at Purchaser's expense. No fees or commissions
will be paid to brokers, dealers or other persons (other than the Information
Agent) for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
All Others Call Toll Free: 1-800-223-2064
February 21, 1996
<PAGE>
EXHIBIT (A)(8)
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
<PAGE>
EXHIBIT (B)(1)
February 14, 1996
Genstar Capital Partners II, L.P.
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404-2121
Attention: Jean-Pierre L. Conte
Re: BANK FACILITIES FOR ACQUISITION
OF ANDROS INCORPORATED
Gentlemen:
You have advised us that Genstar Capital Partners II, L.P. ("Genstar") will
form a new corporation ("Holdings") for the purpose of acquiring (the
"Acquisition") all of the outstanding capital stock (the "Shares") of Andros
Incorporated ("Andros"). We understand that the Acquisition will be accomplished
through a cash tender offer (the "Tender Offer") by a wholly-owned subsidiary of
Holdings ("Merger Sub") for up to 100% of the Shares at a price not to exceed
$18.00 per share followed by a merger (the "Merger") of Merger Sub with and into
Andros in which Andros will be the surviving corporation (any references in this
letter to "Company" being understood to refer to (i) Merger Sub prior to the
Merger and (ii) Andros after the Merger) and in which any Shares not tendered in
the Tender Offer will be cancelled in exchange for cash consideration. We
further understand that the Tender Offer will be conditioned on, among other
things, the tender and purchase of at least that number of Shares required to
permit Merger Sub to cause the Merger to occur (the "Minimum Shares"). You have
advised us that there will be a signed merger agreement prior to the funding of
the Tender Facility referred to below. Upon the consummation of the Acquisition,
Andros will be wholly-owned by Holdings and Holdings will be controlled,
directly or indirectly, by Genstar.
Banque Paribas ("Paribas") and The Bank of Nova Scotia ("Scotiabank") are
pleased to confirm that each severally, and not jointly, agrees to provide up to
$25 million of the $50 million of senior bank credit facilities described below.
Such senior bank credit facilities will consist of (y) a tender offer facility
of up to $50 million (the "Tender Facility") and (z) to refinance the Tender
Facility, a term loan facility of up to $27 million (the "Term Loan Facility")
and a revolving credit facility of up to $15 million (the "Revolving Credit
Facility"; together with the Tender Facility and the Term Loan Facility, the
"Bank Facilities"). Paribas Capital Markets ("PCM"), an affiliate of Paribas,
and Scotiabank intend to arrange for other banks, financial institutions and
other "accredited investors" (as defined in regulations of the Securities and
Exchange Commission; each such bank, financial institution and accredited
investor, including Paribas and Scotiabank, being a "Lender" and, collectively,
the "Lenders") reasonably acceptable to Genstar to provide a portion of the Bank
Facilities. Our commitments, however, are not subject to syndication of the Bank
Facilities. Paribas will act as administrative agent for the Lenders (in such
capacity, the "Agent") and Scotiabank will act as documentation agent for the
Lenders. Certain of the terms of each of the Bank Facilities are set forth in
the Summary of Terms attached hereto as Annex A (the "Term Sheet"). You have
advised us that the proceeds of the Tender Facility, together with (i) not less
than $17 million in cash common equity contributions to Holdings from Genstar
and certain other investors acceptable to Paribas and Scotiabank and (ii) gross
proceeds of not less than $15 million from the issuance of new subordinated debt
securities of Merger Sub (the "New Sub Debt") will be used to pay a portion of
the consideration for the Shares in the Tender Offer and certain fees and
expenses in connection with the Acquisition and the related financings. You have
further advised us that, upon consummation of the Merger, the Term Loan Facility
and up to $7.8 million of the Revolving Credit Facility, together with Company
cash on hand, will be used to refinance
<PAGE>
Genstar Capital Partners II, L.P.
February 14, 1996
Page 2
the Tender Facility and to pay the consideration for the Shares purchased in the
Merger and certain additional fees and expenses. The Revolving Credit Facility
will also be used to provide for the working capital requirements and other
corporate purposes of Company and its subsidiaries.
The commitments of Paribas and Scotiabank are subject to the accuracy and
completeness of the information and projections referred to in the next
succeeding paragraph and the execution of definitive loan documentation
consistent with the terms and conditions hereof and otherwise in form and
substance satisfactory to the Lenders and the satisfaction of conditions set
forth therein, including, without limitation, those conditions set forth in the
Term Sheet.
Genstar hereby represents that to its knowledge (i) all information, which
has been or is hereafter made available to Paribas, Scotiabank or the other
Lenders by Genstar or Andros or any of their representatives in connection with
the transactions contemplated hereby (the "Information") is (or will be, in the
case of Information made available after the date hereof) complete and correct
in all material respects and does not (or will not, as the case may be) contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not materially misleading in
light of the circumstances under which such statements were or are made, and
(ii) the financial projections and/or forecasts concerning Andros and its
subsidiaries that have been or are hereafter made available to Paribas,
Scotiabank or the other Lenders by Genstar or any of its representatives in
connection with the transactions contemplated hereby have been (or will be, in
the case of projections made available after the date hereof) prepared in good
faith based upon reasonable assumptions. Genstar agrees to supplement the
Information and any such projections so that the representation and warranty in
the preceding sentence is correct on the closing date. In arranging and
syndicating the Bank Facilities, Paribas, PCM and Scotiabank will be using and
relying on the Information and any such projections without independent
verification thereof. The representations and covenants contained in this
paragraph shall remain effective until a definitive financing agreement is
executed and thereafter the disclosure representations contained herein shall be
superseded by those contained in such definitive financing agreement.
Genstar shall pay the reasonable costs and expenses (including the
reasonable fees and expenses of counsel to Paribas and Scotiabank, reasonable
professional fees of consultants and other experts and reasonable out-of-pocket
expenses of Paribas, Scotiabank and PCM, including, without limitation,
syndication expenses) arising in connection with the preparation, execution and
delivery of this letter and the definitive financing agreements and the
syndication of the Bank Facilities. Genstar further agrees to indemnify and hold
harmless each of the Lenders (including Paribas and Scotiabank), PCM and each
director, officer, employee, agent, attorney and affiliate thereof (each an
"indemnified person") from and against any losses, claims, damages, liabilities
or other expenses to which a Lender or such indemnified persons may become
subject, insofar as such losses, claims, damages, liabilities (or actions or
other proceedings commenced or threatened in respect thereof) or other expenses
arise out of or in any way relate to or result from the actions of Genstar or
Andros or any of their respective affiliates in connection with the Acquisition,
any of the statements contained in this letter or relating to the extension of
the financing contemplated by this letter, or any use or intended use of the
proceeds of any of the loans and other extensions of credit contemplated by this
letter, and to reimburse each of the Lenders and each indemnified person for any
reasonable legal or other expenses incurred in connection with investigating,
defending or participating in any such investigation, litigation or other
proceeding (whether or not any such investigation, litigation or other
proceeding involves claims made between Genstar or any third party and such
Lender or any such indemnified person, and whether or not such Lender or any
such indemnified person is a party to any investigation, litigation or
proceeding out of which any such expenses arise); PROVIDED, HOWEVER, that the
indemnity contained herein shall not apply to the extent that such losses,
claims, damages, liabilities or other expenses result from the gross negligence
or willful misconduct of such Lender or indemnified person. The
<PAGE>
Genstar Capital Partners II, L.P.
February 14, 1996
Page 3
obligations to indemnify each Lender and such indemnified persons and to pay
such legal and other expenses shall remain effective until the initial funding
under a definitive financing agreement and thereafter the indemnification and
expense reimbursement obligations contained herein shall be superseded by those
contained in such definitive financing agreement. None of Paribas, Scotiabank,
any other Lender or PCM shall be responsible or liable to any other party or any
other person for consequential damages which may be alleged as a result of this
letter. The foregoing provisions of this paragraph shall be in addition to any
rights that any Lender or any indemnified person may have at common law or
otherwise.
In connection with the services to be provided hereunder by Paribas, Paribas
may employ the services of its affiliates, including PCM. Paribas may share with
such affiliates, and such affiliates may share with Paribas, any information
concerning Holdings and Andros; PROVIDED that Paribas and such affiliates agree
to hold any non-public information confidential in accordance with their
respective customary policies relating to non-public information. Any such
affiliate so employed (and its directors, officers, employees, agents, attorneys
and affiliates) shall be entitled to all of the benefits afforded to Paribas
hereunder.
You further acknowledge that Paribas, Scotiabank and their respective
affiliates may be providing or proposing to provide debt financing, equity
capital or other services (including financial advisory services) to other
companies in respect of which you or your affiliates may have conflicting
interests regarding the transactions described herein and otherwise. Paribas,
Scotiabank and their respective affiliates will not use confidential information
obtained from you or any of your affiliates by virtue of the transactions
contemplated by this letter or their other relationships with you and your
affiliates in connection with the performance by Paribas, Scotiabank or their
respective affiliates of services for such other companies, and Paribas,
Scotiabank and their respective affiliates will not furnish any such information
to such other companies. You also acknowledge that neither Paribas nor
Scotiabank has any obligation to use any confidential information obtained from
such other companies in connection with the transactions contemplated by this
letter, or to furnish any such confidential information to you or any of your
affiliates.
This letter is confidential and shall not be disclosed by you to any person
other than your accountants, attorneys and, to the extent approved by Paribas
and Scotiabank, other advisors, and to Andros and its attorneys and, to the
extent approved by Paribas and Scotiabank, other advisors, and then only on a
confidential basis and in connection with the Acquisition and the related
transactions contemplated herein. Additionally, you may make such disclosures of
this letter as are required by law or judicial process or as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation; PROVIDED that you will use your best efforts to notify us of any
such disclosure prior to making such disclosure.
Our offer will terminate on February 14, 1996, unless on or before that date
you sign and return an enclosed counterpart of this letter. The Bank Facilities
referred to herein shall in no event be available unless the Tender Offer has
been consummated on or prior to April 15, 1996.
This letter agreement shall be governed by and construed in accordance with
the internal laws of the State of California. This letter agreement may be
executed in any number of counterparts and by
<PAGE>
Genstar Capital Partners II, L.P.
February 14, 1996
Page 4
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
We appreciate having been given the opportunity by you to be involved in
this transaction.
Very truly yours,
BANQUE PARIBAS
By: /s/ LEE S. BUCKNER________________
Title: Group Vice President___________
By: /s/ PATRICK YOUNT_________________
Title: Vice President_________________
THE BANK OF NOVA SCOTIA
By: /s/ JOHN A. QUICK_________________
Title: Senior Relationship Manager____
AGREED AND ACCEPTED
this day of February, 1996
GENSTAR CAPITAL PARTNERS II, L.P.
By: GENSTAR CAPITAL, L.L.C.
By: /s/ JEAN-PIERRE L. CONTE______
Title: Principal__________________
<PAGE>
ANNEX A
ANDROS INCORPORATED
SUMMARY OF TERMS
BANK FACILITIES
The following summarizes selected terms of certain senior bank credit
facilities to be utilized in connection with the proposed acquisition of Andros
by affiliates of Genstar. This Summary of Terms is intended merely as an outline
of certain of the material terms of such bank credit facilities. It does not
include descriptions of all of the terms, conditions and other provisions that
are to be contained in the definitive documentation relating to such bank credit
facilities and it is not intended to limit the scope of discussion and
negotiation of any matters not inconsistent with the specific matters set forth
herein. All terms defined in the financing letter to which this Summary of Terms
is attached and not otherwise defined herein shall have the same meanings when
used herein.
I. THE BANK FACILITIES
<TABLE>
<S> <C>
BORROWER: Merger Sub; upon consummation of the Merger, the
obligations of Merger Sub will be assumed by Andros and
all subsequent extensions of credit will be incurred by
Andros (and any references to "Company" shall be to (i)
Merger Sub prior to the Merger and (ii) thereafter, Andros
as the surviving corporation in the Merger).
LENDERS: Banque Paribas ("Paribas"), The Bank of Nova Scotia
("Scotiabank") and a syndicate of banks, financial
institutions and other accredited investors reasonably
acceptable to Genstar (the "Lenders").
ADMINISTRATIVE AGENT: Paribas (in such capacity, the "Agent").
DOCUMENTATION AGENT: Scotiabank.
ARRANGERS: Paribas Capital Markets ("PCM") and Scotiabank.
THE BANK FACILITIES: The Bank Facilities shall consist of the Tender Facility,
the Term Loan Facility and the Revolving Credit Facility.
</TABLE>
A. THE TENDER FACILITY
<TABLE>
<S> <C>
TYPE AND AMOUNT: The Tender Facility shall consist of a term loan (the
"Tender Loan") of up to $50 million. Lenders' commitment
to make the Tender Loan will terminate immediately upon
the consummation of the Tender Offer. The Tender Loan will
have a final maturity date of the earlier of 120 days
following the first date shares are purchased in the
Tender Offer (such first date being herein called the
"Closing Date") or the consummation of the Merger.
USE OF PROCEEDS: The proceeds of the Tender Facility, together with (i) not
less than $17 million in cash common equity contributions
to Holdings from Genstar and certain other investors
acceptable to Paribas and Scotiabank and (ii) gross
proceeds of not less than
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
$15 million from the proceeds of new subordinated debt
securities of Merger Sub (the "New Sub Debt") shall be
used as follows:
1. to pay the consideration for the Shares pursuant to
the Tender Offer in an aggregate maximum amount of
approximately $83.3 million; and
2. to pay fees in connection with the Acquisition and the
related financings and to pre-fund interest payments on
the Tender Facility in an aggregate maximum amount of
$6 million and to pay reasonable expenses in
connection therewith.
GUARANTOR: Holdings and Andros.
SECURITY: All extensions of credit to Merger Sub will be secured by
a pledge of 100% of the stock of Andros acquired by Merger
Sub in the Tender Offer.
In addition, all extensions of credit to Merger Sub will
be secured by the "Cash Accounts" (as defined in Part I.C.
below).
The guaranty of Holdings will be secured by a pledge of
the stock of Merger Sub.
Negative pledge on all assets of Merger Sub and its
subsidiaries, subject to exceptions to be agreed upon.
INTEREST RATES: All amounts outstanding under the Tender Facility shall
bear interest at the Base Rate plus 1.75% per annum. As
used herein, the term "Base Rate" shall have the meaning
customary and appropriate for financings of this type.
After the occurrence and during the continuation of an
event of default, interest shall accrue at a rate equal to
the Base Rate plus 3.75% per annum and shall be payable on
demand.
INTEREST PAYMENTS: 90 days after the Closing Date, at maturity and upon
prepayment, payable in arrears and computed on the basis
of a 365-day year.
VOLUNTARY PREPAYMENTS: The Tender Facility may be prepaid in whole or in part
without premium or penalty upon at least 1 business day's
notice.
MANDATORY PREPAYMENTS: Merger Sub shall prepay the loans in an amount equal to
100% of the proceeds of the sale or other disposition of
any of the stock of Andros, in each case payable no later
than the first business day following the date of receipt.
CONSUMMATION OF SHORT-FORM In the event that Merger Sub purchases not less than 90%
MERGER: of outstanding shares of the stock of Andros in the Tender
Offer and all conditions to the making of the Loans under
the Permanent Bank Facilities have been satisfied (other
than the prior making of the Tender Loan), Holdings and
Andros shall cause the merger of Merger Sub and Andros
pursuant to Section 253 of the Delaware General
Corporation Law and the Merger Agreement to occur prior to
or concurrently with the payment for the Shares purchased
in the Tender Offer and Merger Sub shall
</TABLE>
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<TABLE>
<S> <C>
elect to borrow amounts sufficient to pay all
consideration due in the Merger under the Permanent Bank
Facility (rather than the Tender Facility).
</TABLE>
B. THE TERM LOAN FACILITY AND THE REVOLVING CREDIT FACILITY
<TABLE>
<S> <C>
TYPE AND AMOUNT: TERM LOAN FACILITY. The Term Loan Facility shall consist
of a term loan (the "Term Loan") of up to $27 million.
Lenders' commitments to make loans under the Term Loan
Facility will terminate immediately upon the consummation
of the Merger. The Term Loan will have a final maturity
date of 5 years after the Closing Date. Quarterly
amortization will be required, commencing June 30, 1996,
resulting in aggregate annual amounts as follows:
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE ANNUAL
YEAR AMORTIZATION
--- ----------------------------
<S> <C> <C>
1......... $ 2,500,000
2......... 4,000,000
3......... 5,500,000
4......... 7,000,000
5......... 8,000,000
------------
$ 27,000,000
</TABLE>
<TABLE>
<S> <C>
REVOLVING CREDIT FACILITY. The Revolving Credit Facility
will mature 5 years after the Closing Date and be in an
original principal amount of up to $15 million. Letters of
credit may be issued under the Revolving Credit Facility
up to an aggregate face amount of $3 million at any time
outstanding.
USE OF PROCEEDS: The proceeds of the Term Loan Facility, up to $7.8 million
of the Revolving Credit Facility and cash in the Cash
Accounts (as defined under the heading "Covenants" in Part
II.C. below) shall be used as follows:
1. to refinance the Tender Facility in its entirety;
2. to pay the purchase price of any Shares not purchased
in the Tender Offer;
3. to purchase up to 573,000 outstanding options to pur-
chase the common stock of Andros; and
4. to pay fees in connection with the Acquisition and the
related financings in an aggregate maximum amount of
$6 million and to pay reasonable expenses in
connection therewith.
The Revolving Credit Facility will also be available to
provide for the working capital requirements and general
corporate purposes of Company and its subsidiaries and to
provide a portion of the purchase price of acquisitions of
similar or related businesses; PROVIDED, subject to
additional limits to be contained in the Definitive
Financing Documents, that (y) not more than $5 million may
be borrowed under the Revolving Credit Facility for any
single such acquisition and not more than $10 million may
be so borrowed for all acquisitions in any calendar year
and
</TABLE>
A-3
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<TABLE>
<S> <C>
(z) the purchase price of any business so acquired shall
not exceed 4 times the pro forma EBITDA of such business
for the most recent fiscal year of such business.
GUARANTORS: Holdings and all domestic subsidiaries of Company.
SECURITY: All extensions of credit to Company and all guaranties of
subsidiaries of Company under the Term Loan Facility and
the Revolving Credit Facility (collectively, the
"Permanent Bank Facilities") will be secured by all
existing and after-acquired personal property of Company
and the subsidiary guarantors, including a pledge of 100%
of the stock of all domestic subsidiaries of Company and
66% of the stock of all foreign subsidiaries of Company
and the assignment of all material contracts and patents.
The Permanent Bank Facilities shall also be secured by
first priority liens on all existing and after-acquired
real property fee and leasehold interests of Company and
the subsidiary guarantors, subject to exceptions to be
agreed upon.
To effect such liens securing the Permanent Bank
Facilities, Company and the subsidiary guarantors shall
execute and deliver to the Agent all security agreements,
financing statements, deeds of trust, mortgages and other
documents and instruments as are necessary to grant a
first priority perfected security interest in and lien
upon all such property of Company and the subsidiary
guarantors, subject to customary permitted liens to be
agreed upon.
The Agent shall receive satisfactory assurances that one
or more ALTA title insurance policies, in amounts and in
form and substance reasonably satisfactory to the Agent,
to insure the interests of the Lenders in such of the real
property securing the Permanent Bank Facilities as may be
designated by the Agent in its discretion at the time of
the consummation of the Merger or within 30 days
thereafter.
The guaranty of Holdings will be secured by a pledge of
the stock of Company.
Negative pledge on all assets of Company and its
subsidiaries, subject to exceptions to be agreed upon.
INTEREST RATES: All amounts outstanding under the Permanent Bank
Facilities shall bear interest, at Company's option, as
follows:
(i) at the Base Rate plus the Applicable Base Rate Margin
per annum; or
(ii) at the reserve adjusted LIBOR plus the Applicable
LIBOR Margin per annum.
</TABLE>
A-4
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<TABLE>
<S> <C>
Until the first anniversary of the Closing Date, the
Applicable LIBOR Margin shall be 3.00% and the Applicable
Base Rate Margin shall be 1.75%. Thereafter, the
Applicable Margin will be determined on the basis of the
ratio of Senior Debt to EBITDA (calculated on a rolling 4
quarter basis) as follows:
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE MARGIN
--------------------------
SENIOR DEBT/EBITDA* LIBOR BASE RATE
--------------------------- ----------- -------------
<S> <C> <C> <C>
> 2.50 3.00% 1.75%
> 2.00 < 2.50 2.50% 1.25%
< 2.00 2.00% 0.75%
</TABLE>
<TABLE>
<S> <C>
------------------------
*(net of management fees paid and certain restructuring
charges incurred in connection with the Acquisition not
exceeding $500,000)
</TABLE>
<TABLE>
<S> <C>
As used herein, the terms "Base Rate" and "reserve
adjusted LIBOR" shall have meanings customary and
appropriate for financings of this type, and the basis for
calculating accrued interest and the interest periods for
loans bearing interest at the reserve adjusted LIBOR
("LIBOR Loans") shall be customary and appropriate for
financings of this type.
After the occurrence and during the continuation of an
event of default, interest shall accrue at a rate equal to
the rate on loans bearing interest at the rate determined
by reference to the Base Rate ("Base Rate Loans") plus an
additional 2 percentage points (2.00%) per annum and shall
be payable on demand.
INTEREST PAYMENTS: Quarterly for Base Rate Loans; on the last day of selected
interest periods (which shall be 1, 2, 3 and 6 months) for
LIBOR Loans (and at the end of every 3 months, in the case
of interest periods of longer than 3 months); and upon
prepayment, in each case payable in arrears and computed
on the basis of a 365-day year in the case of Base Rate
Loans and a 360-day year in the case of LIBOR Loans.
INTEREST RATE PROTECTION: Within 90 days after the Closing Date, Company will obtain
interest rate protection, pursuant to interest rate caps
or other similar arrangements satisfactory to the Agent,
against increases in interest rates (above a per annum
rate to be specified by the Agent) with respect to a
notional amount equal to not less than 50% of the
aggregate amount of the Term Loan Facility, such
arrangements to remain in effect for a period of not less
than 3 years after the Closing Date.
BORROWING BASE: Availability of loans under the Revolving Credit Facility
will be subject to a borrowing base equal to the sum of
(i) 70% of eligible accounts receivable, including a
sublimit for foreign accounts receivable, and (ii) 50% of
eligible inventories; PROVIDED, HOWEVER, that advances
against inventories may not exceed $7 million.
LETTER OF CREDIT FEE: The letter of credit fee shall be a percentage equal to
the applicable margin for LIBOR Loans under the Revolving
Credit Facility, which shall be shared by all Lenders, and
an additional 0.25% per annum, which shall be retained by
the Lender issuing the
</TABLE>
A-5
<PAGE>
<TABLE>
<S> <C>
letter of credit, in each case based upon the applicable
percentage multiplied by the amount available from time to
time for drawing under such letter of credit.
COMMITMENT FEES: Commitment fees equal to 0.50% per annum times the daily
average unused portion of the Revolving Credit Facility
shall accrue from the consummation of the Merger and shall
be computed on the basis of a 360-day year and payable
quarterly in arrears and upon the maturity or termination
of the Revolving Credit Facility.
VOLUNTARY PREPAYMENTS AND The Permanent Bank Facilities may be prepaid in whole or
COMMITMENT REDUCTIONS: in part without premium or penalty (LIBOR Loans prepayable
only on the last days of related interest periods) upon at
least 3 business days' notice. The Lenders' commitments
may be reduced or terminated upon such notice and in such
amounts as may be agreed upon. Voluntary prepayments of
the Term Loan Facility shall be applied on a pro rata
basis to all remaining scheduled installments thereof.
MANDATORY PREPAYMENTS AND Company shall prepay the loans and/or the commitments
COMMITMENT REDUCTIONS: under the Revolving Credit Facility shall be reduced
(subject to certain basket amounts to be agreed upon) in
the amounts indicated below. All such amounts shall be
applied first to the prepayment of the Term Loan Facility
and thereafter to the prepayment of the Revolving Credit
Facility and the reduction of the commitments thereunder
and all such mandatory prepayments of the Term Loan
Facility shall be applied as indicated below.
ASSET SALE PROCEEDS: 100% of the net after-tax cash
proceeds of the sale or other disposition of any property
or assets of Company or any of its subsidiaries, other
than (i) net cash proceeds of sales or other dispositions
of inventory in the ordinary course of business, (ii)
proceeds from sales of assets used to purchase equivalent
or improved assets within six months of such sales, and
(iii) a $100,000 basket, in each case payable no later
than the first business day following the date of receipt;
prepayment amounts to be applied on a pro rata basis to
all remaining scheduled installments.
INSURANCE/CONDEMNATION PROCEEDS: 100% of the net cash pro-
ceeds received under any casualty insurance maintained by
Holdings or any of its subsidiaries, other than (i)
proceeds not exceeding $5,000,000 in the aggregate applied
to rebuild or replace assets damaged or destroyed and (ii)
a $100,000 basket, or as a result of the taking of any
assets of Holdings or any of its subsidiaries pursuant to
the power of eminent domain or condemnation, in each case
payable no later than the first business day following the
date of receipt; prepayment amounts to be applied to the
remaining scheduled installments in the inverse order of
maturity.
PROCEEDS OF EQUITY OFFERINGS: 100% of the net cash
proceeds received from the issuance of equity securities
of Holdings or any of its subsidiaries (other than
proceeds received upon the exercise of employee stock
options), in each case payable no later
</TABLE>
A-6
<PAGE>
<TABLE>
<S> <C>
than the first business day following the date of receipt;
prepayment amounts to be applied to the remaining
scheduled installments in the inverse order of maturity.
PROCEEDS OF DEBT ISSUANCES: 100% of the net cash proceeds
received from certain issuances of debt securities by
Holdings or any of its subsidiaries, in each case payable
no later than the first business day following the date of
receipt; prepayment amounts to be applied to the remaining
scheduled installments in the inverse order of maturity.
EXCESS CASH FLOW: 65% of excess cash flow (to be defined)
for each fiscal year until such time as a total of $6
million from such excess cash flow sweep has been repaid
and 50% of excess cash flow for each fiscal year
thereafter, in each case payable within 120 days after the
end of the applicable fiscal year; prepayment amounts
during the period in which 65% of Excess Cash Flow is
prepaid to be applied to the remaining scheduled
installments in the inverse order of maturity and
prepayment amounts during the period in which 50% of
Excess Cash Flow is prepaid to be applied on a pro rata
basis to all remaining scheduled installments.
</TABLE>
C. OTHER PROVISIONS OF THE BANK FACILITIES
<TABLE>
<S> <C>
REPRESENTATIONS AND WARRANTIES: Customary and appropriate, including, without limitation,
due organization and authorization, enforceability,
financial condition, no material adverse changes, title to
properties, liens, litigation, payment of taxes, no
material adverse agreements, compliance with laws,
employee benefit liabilities, environmental liabilities,
perfection and priority of liens securing the Bank
Facilities, full disclosure, and the accuracy of all
representations and warranties in the Definitive
Acquisition Documents.
COVENANTS: Customary and appropriate affirmative and negative
covenants, including, without limitation, limitations on
other indebtedness, liens, investments, guarantees,
restricted junior payments (dividends, redemptions and
payments on subordinated debt), mergers and acquisitions,
sales of assets (other than inventory in the ordinary
course of business and assets with a fair market value not
to exceed $1,000,000 during any fiscal year), leases,
transactions with affiliates, conduct of business and
other provisions customary and appropriate for financings
of this type, including exceptions and baskets to be
mutually agreed upon.
CASH ACCOUNTS: Concurrently with the making of the Tender
Loan, Merger Sub shall cause Andros to pledge cash in an
amount of not less than $28 million (the "Minimum Deposit
Amount") and to deposit such cash in accounts (the "Cash
Accounts") maintained with Paribas or Scotiabank, or
another bank or banks designated by Paribas and Scotiabank
and acceptable to Merger Sub and Andros. All funds
deposited in the Cash Accounts shall be invested solely in
approved cash equivalent investments and no withdrawals
shall be permitted from the
</TABLE>
A-7
<PAGE>
<TABLE>
<S> <C>
Cash Accounts without the consent of Paribas and
Scotiabank if such withdrawal would cause the remaining
balance on deposit to be less than the Minimum Deposit
Amount.
PRE-MERGER COVENANTS: Merger Sub shall covenant that it
shall comply with, and shall cause Andros to comply with,
all covenants set forth in the Merger Agreement applicable
prior to the consummation of the Merger (including,
without limitation, Section 5.1 thereof) and Merger Sub
shall further covenant that during the period prior to the
consummation of the Merger (i) it shall retain the Minimum
Shares and (ii) it shall not terminate or amend the
Definitive Acquisition Documents without the prior written
consent of Lenders. In addition, the Definitive Financing
Documents shall provide that Merger Sub shall cause Andros
to deposit not less than the Minimum Deposit Amount into
the Cash Accounts and that amounts therein shall be ap-
plied at the time of the Merger so as to refinance the
Tender Facility as provided in Part I.B. above.
FINANCIAL PERFORMANCE COVENANTS: Financial performance
covenants (which will be measured quarterly on a rolling 4
quarter basis commencing on September 30, 1996 except that
through March 31, 1997 amounts will be annualized from the
period beginning July 1, 1996) will include, without
limitation, the following:
Fixed Charge Ratio -- a ratio of EBITDA (excluding any
non-cash expense) to the sum of all interest expense,
capital expenditures and scheduled principal repayments
(calculated on a rolling 4 quarter basis) of at least
1.25:1.00 during the first year and 1.50:1.00 thereafter.
Interest Coverage Ratio -- a ratio of EBITDA to interest
expense (calculated on a rolling 4 quarter basis) of at
least 2.00:1.00 during the first 2 years, 2.50:1.00 during
the next 2 years and 3.00:1.00 thereafter.
Senior Debt Ratio -- a ratio of Senior Debt to EBITDA of
no more than 3.00:1.00 during the first 2 years, 2.00:1.00
during the third year, 1.50:1.00 during the fourth year
and 1.00:1.00 thereafter.
Total Debt Ratio -- a ratio of Total Debt to EBITDA of no
more than 5.00:1.00 during the first 2 years, 4.00:1.00
during the third year, 3.50:1.00 during the fourth year
and 3.00:1.00 thereafter.
Minimum EBITDA -- a minimum EBITDA for each month during
fiscal year 1996 to be agreed upon.
Capital Expenditures -- not to exceed $1,200,000 during
the first year and $750,000 each year thereafter.
Research and Development -- not to exceed 8.5% of total
consolidated sales (to be defined) (calculated on a
rolling four quarter basis).
EVENTS OF DEFAULT: Customary and appropriate (subject to customary and
appropriate grace periods), including, without limitation,
failure to make
</TABLE>
A-8
<PAGE>
<TABLE>
<S> <C>
payments when due, defaults under other agreements or
instruments of indebtedness, noncompliance with covenants,
breaches of representations and warranties, bankruptcy,
judgments in excess of specified amounts, invalidity of
guaranties, impairment of security interests in
collateral, and "changes of control" (to be defined in a
mutually agreed upon manner).
</TABLE>
II. CONDITIONS TO LOANS
A. CONDITIONS TO FUNDING OF TENDER FACILITY
Customary and appropriate conditions precedent to the funding of the Tender
Facility will include, without limitation, the following:
1. SATISFACTORY DOCUMENTATION. The definitive documentation evidencing
the Bank Facilities (the "Definitive Financing Documents") shall be prepared
by counsel to Paribas and Scotiabank and shall be in form and substance
satisfactory to the Agent and the Lenders.
2. ACQUISITION DOCUMENTATION. The definitive documentation relating to
the Acquisition (including the Tender Offer and the Merger) (the "Definitive
Acquisition Documents") shall be in form and substance satisfactory to the
Agent and the Lenders, and the Definitive Acquisition Documents shall be in
full force and effect.
3. EQUITY CAPITALIZATION OF HOLDINGS. On or prior to the Closing Date,
Holdings shall have received not less than $17 million in cash common equity
contributions from Genstar (the "Equity Contribution") and certain other
investors and approximately $400,000 in option rollovers from certain
members of management of Andros, in each case on terms and conditions
satisfactory to the Agent and the Lenders.
4. ISSUANCE OF NEW SUB DEBT. On or prior to the Closing Date, Merger
Sub shall have received gross proceeds of $15 million from the issuance of
the New Sub Debt. The New Sub Debt shall be unsecured, shall bear interest
at a rate per annum not greater than 13% and shall have no scheduled
principal payments payable prior to the sixth anniversary of the Closing
Date. Any guaranties of the New Sub Debt shall be subordinated to the
guaranties of the Bank Facilities. In addition, the covenants, defaults,
subordination provisions, remedies and all other terms of the New Sub Debt
shall be satisfactory to the Agent and the Lenders; and the holders of the
New Sub Debt and the Agent shall enter into an intercreditor agreement
satisfactory to the Agent and the Lenders relating to the exercise of
remedies relating to the New Sub Debt. Negative covenants and defaults
contained in the documents evidencing the New Sub Debt shall be less
restrictive than those contained in the Definitive Financing Documents. Any
fees payable in connection with the issuance of the New Sub Debt, including,
without limitation, all closing, arrangement and underwriting fees, shall
not be paid prior to consummation of the Tender Offer.
5. USE OF FUNDS. The proceeds of the Equity Contribution and the
issuance of the New Sub Debt shall have been used to purchase Shares in the
Tender Offer prior to the expenditure of the proceeds of the Term Loan.
6. CONSUMMATION OF TENDER OFFER. Merger Sub shall acquire not less
than the Minimum Shares pursuant to the Tender Offer, and all other aspects
of the Tender Offer shall be consummated pursuant to the Definitive
Acquisition Documents, no provision of which shall have been amended,
supplemented, waived or otherwise modified in any material respect
(including, without limitation, amending, waiving or modifying any of the
"Conditions of the Offer" annexed to the Definitive Acquisition Documents)
without the prior written consent of the Agent and the Lenders. The Tender
Offer and the financing thereof shall be consummated in compliance with all
applicable laws and regulations (including, without limitation, Regulation U
of the Board of Governors of the Federal Reserve System).
A-9
<PAGE>
7. CASH ACCOUNTS. Merger Sub shall cause Andros to pledge and deposit
not less than $28 million into the Cash Accounts.
8. AGGREGATE CONSIDERATION. After giving effect to the consummation of
the Tender Offer, the aggregate consideration for the Shares shall not
exceed $83.3 million.
9. SUBORDINATED MANAGEMENT FEES. The management fees to be paid by
Company to Genstar or any of its affiliates shall be subordinated to the
Loans on terms satisfactory to the Agent and the Lenders and shall not
exceed $450,000 during any year. For the first 3 years, such fees shall be
payable solely from that portion of excess cash flow not required to be used
to prepay the Loans.
10. CERTAIN APPROVALS AND AGREEMENTS. All governmental and third party
approvals necessary in connection with the Tender Offer, the financings
contemplated thereby and the continuing operations of the business of Andros
and its subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Acquisition
or the financing thereof.
11. TRANSACTION EXPENSES. The Agent shall have received satisfactory
evidence that the fees to be incurred in connection with the Acquisition and
the related financings will not exceed $6 million in the aggregate.
12. SECURITY. The Agent, for the benefit of the Lenders, shall have
been granted on the Closing Date a perfected security interest in all assets
to the extent described above under the heading "Security" in Part I.A.
above.
13. COLLATERAL AUDIT. The Agent shall have received an audit of all
inventory, accounts receivable, cash controls and accounting procedures of
Andros and its subsidiaries, and the results thereof shall be satisfactory
to the Agent and the Lenders.
14. FINANCIAL STATEMENTS. The Lenders shall have received (i) audited
financial statements of Andros and its subsidiaries for the fiscal years
ended July 31, 1993, 1994 and 1995, (ii) unaudited financial statements of
Andros and its subsidiaries for the fiscal periods most recently ended prior
to the Closing Date (including, without limitation, monthly financial
statements for any such period of less than three months), (iii) a pro forma
balance sheet of Andros and its subsidiaries as of the Closing Date after
giving effect to the Acquisition and the financings contemplated hereby, and
(iv) projected financial statements (including balance sheets and statements
of operations, stockholders' equity and cash flows) of Andros and its
subsidiaries for the 5-year period after the Closing Date, all of the
foregoing to be substantially consistent with any financial statements for
the same periods delivered to the Agent prior to the date of the commitment
letter of Paribas and Scotiabank to which this Summary of Terms is attached
and, in the case of any such projections, substantially consistent with any
projected financial results for such periods delivered to Paribas and
Scotiabank prior to the date of such letter.
15. NO MATERIAL ADVERSE CHANGE. Since July 31, 1995, there shall have
occurred no material adverse change in the business, operations, properties,
assets, liabilities, condition (financial or otherwise) or prospects of
Andros and its subsidiaries, taken as a whole.
16. SOLVENCY. The Agent and the Lenders shall have received an opinion
from an independent valuation consultant or appraiser satisfactory to the
Agent and the Lenders and a certificate of the chief financial officer of
Andros, in each case in form and substance satisfactory to the Agent and the
Lenders, supporting the conclusions that, after giving effect to the
Acquisition and the related transactions contemplated hereby, neither
Holdings nor Andros will be insolvent or be rendered insolvent by the
indebtedness incurred in connection therewith, or be left with unreasonably
small capital with which to engage in its businesses, or have incurred debts
beyond its ability to pay such debts as they mature.
A-10
<PAGE>
17. CUSTOMARY CLOSING DOCUMENTS. All documents required to be
delivered under the Definitive Financing Documents, including customary
legal opinions, corporate records, documents from public officials and
officers' certificates, shall have been delivered.
B. CONDITIONS TO FUNDING OF TERM LOAN FACILITY AND REVOLVING CREDIT
FACILITY
Customary and appropriate conditions precedent to the funding of the Term
Loan Facility and the Revolving Credit Facility will include, without
limitation, the following:
1. CONSUMMATION OF MERGER. The Merger shall have been consummated
pursuant to the Definitive Acquisition Documents (including, if so elected,
the consummation of the Merger pursuant to Section 253 of the Delaware
General Corporation Law), no provision of which shall have been amended,
supplemented, waived or otherwise modified in any material respect without
the prior written consent of the Agent and the Lenders. Upon consummation of
the Merger, all of the shares of Company shall be owned by Holdings, and
Holdings shall be controlled, directly or indirectly, by Genstar.
2. REPAYMENT OF TENDER FACILITY. Concurrently with the making of the
Term Loans, the Tender Facility shall be repaid in full.
3. AGGREGATE ACQUISITION CONSIDERATION. After giving effect to the
consummation of the Tender Offer and the Merger and the purchase of the
outstanding options held by certain members of management of Andros, the
aggregate consideration for the Shares and the options (the "Acquisition
Consideration") shall not exceed $87.6 million.
4. USE OF ANDROS CASH AS PART OF ACQUISITION CONSIDERATION. Company
shall have used cash on deposit in the Cash Accounts to refinance the Tender
Facility and to pay the Acquisition Consideration.
5. CERTAIN APPROVALS AND AGREEMENTS. All governmental and third party
approvals necessary in connection with the Merger, the financings
contemplated thereby and the continuing operations of the business of Andros
and its subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Acquisition
or the financing thereof.
6. TRANSACTION EXPENSES. The Agent shall have received satisfactory
evidence that the fees to be incurred in connection with the Acquisition and
the related financings will not exceed $6 million in the aggregate.
7. SECURITY. The Agent, for the benefit of the Lenders, shall have
been granted on the Closing Date a perfected security interest in all assets
to the extent described above under the heading "Security" in Part I.B.
above.
8. FINANCIAL STATEMENTS. The Lenders shall have received (i) unaudited
financial statements of Andros and its subsidiaries for the fiscal periods
subsequent to those for which financial statements were delivered on or
before the Closing Date (including, without limitation, monthly financial
statements for any such period of less than three months) and (ii) a PRO
FORMA balance sheet of Company and its subsidiaries as of the date of the
consummation of the Merger after giving effect to the Merger and the
financings contemplated hereby.
9. NO MATERIAL ADVERSE CHANGE. Since July 31, 1995, there shall have
occurred no material adverse change in the business, operations, properties,
assets, liabilities, condition (financial or otherwise) or prospects of
Andros and its subsidiaries, taken as a whole.
10. CUSTOMARY CLOSING DOCUMENTS. All documents required to be
delivered under the Definitive Financing Documents, including customary
legal opinions, corporate records, documents from public officials and
officers' certificates, shall have been delivered.
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C. CONDITIONS TO ALL BORROWINGS
The conditions to all borrowings will include requirements relating to prior
written notice of borrowing, the accuracy of representations and warranties, and
the absence of any default or potential event of default, and will otherwise be
customary and appropriate for financings of this type.
III. MISCELLANEOUS
<TABLE>
<S> <C>
SYNDICATION: A syndicate of financial institutions will be arranged by
PCM and Scotiabank. Genstar and Andros shall cooperate
with PCM and Scotiabank in the syndication of the Bank
Facilities (such cooperation to include, without
limitation, participating in meetings with the Lenders and
assisting in the preparation of a Confidential Information
Memorandum and other materials to be used in connection
with such syndication) and shall provide and cause their
respective advisors to provide all information reasonably
deemed necessary by PCM and Scotiabank to successfully
complete such syndication.
ASSIGNMENTS AND PARTICIPATIONS: The Lenders will have the right to assign all or any part
of their shares of the Bank Facilities and to sell
participations, subject to customary limitations on voting
rights, in their shares of the Bank Facilities.
REQUISITE LENDERS: Requisite Lenders shall mean Lenders holding in the
aggregate 66 2/3% of the commitments under the Bank
Facilities.
TAXES, RESERVE REQUIREMENTS & All payments are to be made free and clear of any present
INDEMNITIES: or future taxes (other than franchise taxes and taxes on
overall net income), imposts, assessments, withholdings,
or other deductions whatsoever. Foreign Lenders shall
furnish to the Agent (for delivery to Company) appropriate
certificates or other evidence of exemption from U.S.
federal income tax withholding.
Company shall indemnify the Lenders against all increased
costs of capital resulting from reserve requirements or
otherwise imposed as well as all other increased costs
associated with any regulatory or tax changes or the
breakage of LIBOR periods.
WAIVER OF JURY TRIAL: Company and Lenders will waive any right to trial by jury.
GOVERNING LAW: California law shall govern the Definitive Loan Documents.
COUNSEL TO PARIBAS AND O'Melveny & Myers.
SCOTIABANK:
</TABLE>
A-12
<PAGE>
EXHIBIT (B)(2)
LONDON PACIFIC INTERNATIONAL LIMITED
6 MINDEN HOUSE
ST. HELIER, JERSEY
February 9, 1996
Genstar Capital Partners II, L.P.
Metro Tower, Suite 1170
950 Tower Lane
Foster City, California 94404-2121
Attention: Jean-Pierre L. Conte
Re: Acquisition of Andros Incorporated --
Senior Subordinated Notes and Warrants
Gentlemen:
You have advised us that Genstar Capital Partners II, L.P. ("Genstar") will
form a new corporation ("Holdings") for the purpose of acquiring (the
"Acquisition") all of the outstanding capital stock (the "Shares") of Andros
Incorporated ("Andros"). We understand that the Acquisition will be accomplished
through a cash tender offer (the "Tender Offer") by a wholly-owned subsidiary of
Holdings ("Merger Sub") for up to 100% of the Shares at a price not to exceed
$18.00 per Share followed as promptly as possible, but in all events not later
than May 31, 1996, by a merger (the "Merger") of Merger Sub with and into Andros
in which Andros will be the surviving corporation (any references in this letter
to "Company" being understood to refer to (i) Merger Sub prior to the Merger and
(ii) Andros after the Merger) and in which any Shares not tendered in the Tender
Offer will be canceled in exchange for cash consideration. You have represented
to us that, except for certain options held by management which will be rolled
over into Holdings, all options and warrants to purchase shares of Andros stock
will be cashed out in connection with the Merger at a price equal to the
difference between the tender price and the exercise price. We further
understand that the Tender Offer will be conditioned on, among other things, the
tender and purchase of the legal and beneficial ownership of at least that
number of Shares required to permit Merger Sub to cause the Merger to occur (the
"Minimum Shares"). You have advised us that there will be a signed merger
agreement prior to the funding of any of the Senior Debt referred to below. Upon
the consummation of the Acquisition, Andros will be wholly-owned by Holdings and
Holdings will be controlled, directly or indirectly, by Genstar.
London Pacific International Limited ("LPIL") is pleased to confirm that it
agrees that it, an affiliate of LPIL or one or more other investors
(collectively with LPIL, the "Investors") will purchase from Merger Sub Senior
Subordinated Notes in the original principal amount of $15 million. As
additional consideration for the price paid by the Investors for the Senior
Subordinated Notes, Holdings shall issue to the Investors equity in the form of
Warrants (with a nominal exercise price) equal to 3.0 percent of the fully
diluted common equity of Holdings. Certain of the terms of the Senior
Subordinated Notes and Warrants are set forth in the Summary of Terms attached
hereto as Exhibit A. You have advised us that the proceeds of the Senior
Subordinated Note, together with (i) not less than $17.0 million in cash common
equity contributions to Holdings from Genstar and certain other investors
acceptable to the Investors and (ii) gross proceeds of not less than $34.5
million from the issuance of new senior secured revolving and term loans (the
"Senior Debt") will be used to pay a portion of the consideration for the Shares
in the Tender Offer and certain fees and expenses in connection with the
Acquisition and the related financings. On or prior to the date of purchase of
the Senior Subordinated Notes, not to be later than May 31, 1996 (the "Closing
Date"), Merger Sub shall cause Andros to deposit with one or more financial
institutions acceptable to the Investors an amount not less than $25 million in
cash into accounts (collectively, the "Cash Account") with terms and conditions
satisfactory to the Investors. The cash deposited in the Cash Account shall be
cash shown
<PAGE>
Genstar Capital Partners II, L.P.
February 9, 1996
Page 2
on the Andros balance sheet prior to the Closing Date. Upon consummation of the
Merger, all amounts in the Cash Account shall be applied to satisfy Merger Sub's
obligation to pay for Shares in the Tender Offer and/or pay down the Senior
Debt.
The commitment of LPIL is subject to the accuracy and completeness of the
information and projections referred to in the next succeeding paragraph and the
execution of definitive loan documentation consistent with the terms and
conditions hereof and otherwise in form and substance satisfactory to the
Investors and the satisfaction of conditions set forth therein, including,
without limitation, those conditions set forth in the Summary of Terms.
Genstar hereby represents that (i) all information, which has been or is
hereafter made available to Berkeley International Capital Corporation
("Berkeley") or LPIL by Genstar or Andros or any of their representatives in
connection with the transactions contemplated hereby (the "Information") is (or
will be, in the case of Information made available after the date hereof)
complete and correct in all material respects and does not (or will not, as the
case may be) contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were or are
made, and (ii) the financial projections and/or forecasts concerning Andros and
its subsidiaries that have been or are hereafter made available to Berkeley or
LPIL by Genstar or any of its representatives in connection with the
transactions contemplated hereby have been (or will be, in the case of
projections made available after the date hereof) prepared in good faith based
upon reasonable assumptions. Genstar agrees to supplement the Information and
any such projections so that the representation and warranty in the preceding
sentence is correct on the closing date. In determining whether or not to
purchase the Senior Subordinated Notes, the Investors will be using and relying
on the Information and any such projections without independent verification
thereof. Genstar also agrees to permit Berkeley or LPIL to conduct reasonable
due diligence investigation of the Merger Sub, Holdings, Andros and affiliates
of any of the foregoing. The representations and covenants contained in this
paragraph shall remain in effect until a definitive financing agreement is
executed and thereafter the disclosure representations contained herein shall be
superseded by those contained in such definitive financing agreement.
In addition to conditions precedent set forth in the definitive
documentation of the Senior Subordinated Notes and the Warrants, LPIL and the
Investors' obligation to purchase the Senior Subordinated Notes is subject to
the following conditions:
1. SATISFACTORY DOCUMENTATION. The definitive documentation evidencing
the Senior Subordinated Notes and the Warrants, and documentation related
thereto, shall be prepared by counsel to Berkeley and the Investors and
shall be in form and substance satisfactory to Berkeley and the Investors.
2. ACQUISITION DOCUMENTATION. The definitive documentation relating to
the Acquisition (including the Tender Offer and the Merger) (the "Definitive
Acquisition Documentation") shall be in form and substance satisfactory to
Berkeley and the Investors and the Definitive Acquisition Documents shall be
in effect. In addition, after closing of the Tender Offer the Investors
shall be third party beneficiaries of Merger Sub's and Andros' obligations
to take actions to effect the Merger.
3. EQUITY CAPITALIZATION OF HOLDINGS. On or prior to the Closing Date,
Holdings shall have (i) received not less than $17.0 million in cash common
equity contributions from Genstar (the "Equity Contribution") and certain
other investors and $419,000 in rollovers of common equity contributions
from certain members of management of Andros, in each case on terms and
conditions satisfactory to Berkeley and the Investors and (ii) caused the
entire amount of the Equity Contribution to have been contributed to Merger
Sub on terms and conditions satisfactory to Berkeley and the Investors.
There shall not have occurred any waiver, amendment, modification or lapse
of any of the terms or conditions of the Equity Contribution without the
prior consent of Berkeley and the Investor.
<PAGE>
Genstar Capital Partners II, L.P.
February 9, 1996
Page 3
4. ISSUANCE OF SENIOR DEBT. On or prior to the Closing Date, Merger
Sub shall have established a Senior Debt facility in the amount of $40
million and received gross proceeds thereunder sufficient to satisfy Merger
Sub's obligation pursuant to the Tender Offer. The Senior Debt shall include
covenants, defaults, subordination provisions, remedies and other terms and
conditions satisfactory to Berkeley and the Investors. There shall not have
occurred any waiver, amendment or lapse of any of the terms or conditions of
the Senior Debt without the prior consent of Berkeley and the Investor.
5. USE OF FUNDS. The proceeds of the Equity Contribution and the
Senior Debt shall have been used to purchase Shares in the Tender Offer
prior to the expenditure of the proceeds of the Senior Subordinated Notes.
6. CONSUMMATION OF TENDER OFFER. Merger Sub shall acquire not less
than the Minimum Shares pursuant to the Tender Offer, and all other aspects
of the Tender Offer shall be consummated pursuant to the Definitive
Acquisition Documents, no provision of which shall have been amended,
supplemented, waived or otherwise modified in any material respect
(including, without limitation, amending, supplementing, waiving or
modifying any of the terms and conditions set forth in the Definitive
Acquisition Documents) without the prior written consent of Berkeley and the
Investors. The Tender Offer and the financing thereof shall be consummated
in compliance with all applicable laws and regulations (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System).
7. AGGREGATE CONSIDERATION. After giving effect to the consummation of
the Tender Offer, the aggregate consideration for the Shares shall not
exceed $82.0 million. On or prior to the Closing Date, Merger Sub shall
cause Andros to deposit into the Cash Account an amount not less than $25
million of Andros' cash. At the time of the Merger, all amounts in the Cash
Account shall be applied to satisfy Merger Sub's obligation to pay for
Shares in the Tender Offer and/or pay down the Senior Debt.
8. CERTAIN APPROVALS AND AGREEMENTS. All governmental and third party
approvals necessary in connection with the Tender Offer, the financings
contemplated thereby and the continuing operations of the business of Andros
and its subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Acquisition
or the financing thereof.
9. TRANSACTION EXPENSES. Berkeley and the Investors shall have
received satisfactory evidence that the fees and expenses to be incurred in
connection with the Acquisition and the related financings will not exceed
$7 million in the aggregate.
10. FINANCIAL STATEMENTS. Berkeley and the Investors shall have
received (i) audited financial statements of Andros and its subsidiaries for
the fiscal years ended July 31, 1993, 1994 and 1995, (ii) unaudited monthly
financial statements of Andros and its subsidiaries for each calendar month
beginning August, 1995 through the Closing Date, (iii) a proforma balance
sheet of Andros and its subsidiaries as of the Closing Date after giving
effect to the Acquisition and the financings contemplated hereby and (iv)
projected financial statements (including balance sheets and statements of
operations, stockholders' equity and cash flows) of Andros and its
subsidiaries for the 5 year period after the Closing Date, all of the
foregoing to be substantially consistent with any financial statements for
the same periods delivered to Berkeley and LPIL prior to the date of this
commitment letter and, in the case of any such projections, substantially
consistent with any projected financial results for such periods delivered
to Berkeley and LPIL prior to the date of such letter.
11. NO MATERIAL ADVERSE CHANGE. Since July 31, 1995, there shall have
occurred no material adverse change in the business, operations, properties,
assets, liabilities, conditions (financial or otherwise) or prospects of
Andros and its subsidiaries.
<PAGE>
Genstar Capital Partners II, L.P.
February 9, 1996
Page 4
12. SOLVENCY. Berkeley and the Investors shall have received an
opinion from an independent valuation consultant or appraiser satisfactory
to Berkeley and the Investors and a certificate of the chief financial
officer of Andros, in each case in form and substance satisfactory to
Berkeley and the Investors, supporting the conclusions that, after giving
effect to the Acquisition and the related transactions contemplated hereby,
neither Holdings nor Andros will be insolvent or be rendered insolvent by
the indebtedness incurred in connection therewith, or be left with
unreasonably small capital with which to engage in its businesses, or have
incurred debts beyond its ability to pay such debts as they mature.
13. CORPORATE ACTION. Holdings, Merger Sub and Andros shall have taken
all corporate acts necessary to carry out the Tender Offer and Merger.
14. EXPENSE DEPOSIT. Genstar shall have paid to Berkeley an expense
deposit in an amount not less than $50,000.
15. LITIGATION. There shall not be pending or threatened a preliminary
or permanent injunction, temporary restraining order or other order, action,
proceeding, claim or litigation seeking to restrain, impair, prevent or
delay the Tender Offer, the Merger or any of the transactions contemplated
hereunder or to make any of the foregoing materially more difficult to
accomplish.
In addition, LPIL and the Investors shall not be obligated to purchase
the Senior Subordinated Notes if LPIL and the Investors believe in their
good faith discretion that there exists a substantial possibility that the
Merger will not occur before May 31, 1996.
16. MERGER. Berkeley and LPIL shall not in their good faith discretion
believe that there exists a substantial possibility that the Merger will not
occur before May 31, 1996.
Genstar shall pay the reasonable costs and expenses (including the
reasonable fees and expenses of counsel to Berkeley and the Investors reasonable
professional fees of consultants and other experts and reasonable out-of-pocket
expenses of Berkeley and the Investors) arising in connection with the
preparation, execution and delivery of this letter and definitive financing
agreements. Genstar further agrees to indemnify and hold harmless Berkeley and
the Investors and each director, officer, employee, agent, attorney and
affiliate thereof (each an "indemnified person") from and against any losses,
claims, damages, liabilities or other expenses to which a Lender or such
indemnified persons may become subject, insofar as such losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses arise out of or in any way relate to or result from
the actions of Genstar or Andros or any of their respective affiliates in
connection with the Acquisition, any of the statements contained in this letter
or relating to the extension of the financing contemplated by this letter, or
any use or intended use of the proceeds of any of the loans and other extensions
of credit contemplated by this letter, and to reimburse each of the Lenders and
each indemnified person for any reasonable legal or other expenses incurred in
connection with investigating, defending or participating in any such
investigation, litigation or other proceeding (whether or not any such
investigation, litigation or other proceeding involves claims made between
Genstar or any third party and such Lender or any such indemnified person, and
whether or not such Lender or any such indemnified person is a party to any
investigation, litigation or proceeding out of which any such expenses arise);
PROVIDED, HOWEVER, that the indemnity contained herein shall not apply to the
extent that such losses, claims, damages, liabilities or other expenses result
from the gross negligence or willful misconduct of Berkeley or the Investors or
indemnified person. The obligations to indemnify Berkeley and the Investors and
such indemnified persons and to pay such legal and other expenses shall remain
effective until the funding under a definitive financing agreement and
thereafter the indemnification and expense reimbursement obligations contained
herein shall be superseded by those contained in such definitive financing
agreement. Neither Berkeley nor the Investors shall be
<PAGE>
Genstar Capital Partners II, L.P.
February 9, 1996
Page 5
responsible or liable to any other party or any other person for consequential
damages which may be alleged as a result of this letter. The foregoing
provisions of this paragraph shall be in addition to any rights that any Lender
or any indemnified person may have at common law or otherwise.
Berkeley and the Investors may share with their affiliates, and such
affiliates may share with their respective affiliates, and such affiliates may
share with Berkeley and the Investors, any information concerning Holdings,
Merger Sub and Andros; provided that Berkeley, the Investors and their
respective affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies relating to non-public
information. Any such affiliate with which Berkeley or the Investors share
information (and its directors, officers, employees, agents, attorneys and
affiliates) shall be entitled to all of the benefits afforded to Berkeley
hereunder. In addition, Berkeley and the Investors may conduct reasonable due
diligence inquiries with non-affiliates.
You further acknowledge that Berkeley and the Investors and their respective
affiliates may be providing or proposing to provide debt financing, equity
capital or other services (including financial advisory services) to other
companies in respect of which you or your affiliates may have conflicting
interests regarding the transactions described herein and otherwise. Berkeley
and the Investors and their respective affiliates will not furnish any such
information to such other companies. You also acknowledge that neither Berkeley
nor the Investors have any obligation to use any confidential information
obtained from such other companies in connection with the transactions
contemplated by this letter, or to furnish any such confidential information to
you or any of your affiliates.
This letter is confidential and shall not be disclosed by you to any person
other than your accountants, attorneys and, to the extent approved by Berkeley,
other advisors, and to Andros and its attorneys and then only on a confidential
basis and in connection with the Acquisition and the related transactions
contemplated herein. Additionally, you may make such disclosures of this letter
as are required by law or judicial process or as may be required or appropriate
in response to any summons or subpoena or in connection with any litigation;
provided that you will use your best efforts to notify us of any such disclosure
prior to making such disclosure.
Our offer will terminate on February 14, 1996, unless on or before that date
you sign and return an enclosed counterpart of this letter. The purchase of
Senior Subordinated Notes referred to herein shall in no event be available
unless the Tender Offer has been consummated on or prior to May 31, 1996.
This letter agreement shall be governed by and construed in accordance with
the internal laws of the State of California. This letter agreement may be
executed in any number of counterparts and by different parties herein in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
The obligation of LPIL under this letter shall not be effective until (i)
Genstar Capital Partners II, L.P. shall have executed this letter in the space
provided below and (ii) Genstar shall have provided to Berkeley or LPIL a copy
of a fully executed commitment letter from one or more financial institutions
committing to provide the Senior Debt on terms and conditions satisfactory to
Berkeley and the Investors.
<PAGE>
Genstar Capital Partners II, L.P.
February 9, 1996
Page 6
We appreciate having been given the opportunity by you to be involved in
this transaction.
Very truly yours,
LONDON PACIFIC INTERNATIONAL LIMITED
By: _/s/_R. W. GREEN__________________
Title: _Director______________________
AGREED AND ACCEPTED
this 14 day of February, 1996
GENSTAR CAPITAL PARTNERS II, L.P.
By: GENSTAR CAPITAL, L.L.C.
By: _/s/_JEAN-PIERRE CONTE____________
Title: _Principal_____________________
<PAGE>
EXHIBIT A
ANDROS INCORPORATED
SUMMARY OF TERMS
SENIOR SUBORDINATED NOTES AND WARRANTS
The following summarizes selected terms of certain Senior Subordinated Notes
and Warrants to be issued in connection with the proposed acquisition of Andros
by affiliates of Genstar. This Summary of Terms is intended merely as an outline
of certain of the material terms of such Senior Subordinated Notes and Warrants.
It does not include descriptions of all of the terms, conditions and other
provisions that are to be contained in the definitive documentation relating to
such Senior Subordinated Notes and Warrants and it is not intended to limit the
scope of discussion and negotiation of any matters not inconsistent with the
specific matters set forth herein. All terms defined in the financing letter to
which this Summary of Terms is attached and not otherwise defined herein shall
have the same meanings when used herein.
I. SENIOR SUBORDINATED NOTES
<TABLE>
<S> <C>
ISSUER: Merger Sub; upon consummation of the Merger, the
obligations of Merger Sub will be assumed by
Andros and all subsequent extensions of credit
will be incurred by Andros (and any references
to "Company" shall be to (i) Merger Sub prior to
the Merger and (ii) thereafter, Andros as the
surviving corporation in the Merger).
INVESTORS: London Pacific International Limited ("LPIL"),
an affiliate of LPIL or one or more other
investors.
ISSUE: Senior Subordinated Notes
AMOUNT: $15.0 million, which shall be deemed received
upon Issuer's receipt of a FedWire
identification number with respect to the wire
transfer of such amount to an account identified
by the Issuer.
GUARANTORS: Holdings and all subsidiaries of Andros.
USE OF PROCEEDS: The proceeds of the Senior Subordinated Notes,
together with (i) not less than $17.0 million in
cash common equity contribution ("Equity
Contribution") to Holdings from Genstar and
certain other investors acceptable to the
Investor, (ii) gross proceeds of not less than
$34.5 million of senior debt of Merger Sub and
(iii) the amounts in the Cash Account shall be
used as follows:
1. to pay the consideration for the Shares
pursuant to the Tender Offer in an aggregate
maximum amount of approximately $82 million;
2. to pay fees and expenses in connection
with the transaction contemplated herein not
to exceed $7.0 million; and
3. for working capital purposes.
Holdings shall contribute the entire amount of
the Equity Contribution to Merger Sub as equity.
The number of Shares acquired pursuant to the
Tender Offer shall be not less than the Minimum
Shares and the per Share price paid for the
Shares shall not exceed $18.00.
CASH ACCOUNT: On or prior to the Closing Date, Merger Sub
shall have caused Andros to deposit in the Cash
Account an amount in cash not less than $25
million currently in Andros. No withdrawals will
be permitted from the Cash Account without the
consent of the Investor if such withdrawal would
cause the remaining balance on deposit to be
less than $25 million.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
INTERNATIONAL ARRANGEMENT AND
CONSULTING FEE: $1,350,000 due and payable on the Closing Date
to LPIL.
INTEREST RATE: All amounts outstanding under the Senior
Subordinated Notes shall bear interest at a rate
of 13% per annum. After the occurrence and
during the continuation of an event of default,
all amounts outstanding shall bear interest at a
rate equal to 15% per annum. Interest shall be
calculated on the basis of actual days elapsed
in a 360-day year.
INTEREST PAYMENTS: Payments of interest shall be due and payable
quarterly in arrears on the last day of each
calendar quarter.
INTEREST PAYMENT ADJUSTMENT: Interest payments shall be increased or "grossed
up" in an amount equal to any amount Issuer
determines it is required by law to withhold
from any interest payment to the Investor. If
Issuer is required to increase or gross up an
interest payment, Issuer may elect to prepay
without premium the entire amount of principal
plus accrued and unpaid interest thereon of the
loan to Issuer.
OPTIONAL PREPAYMENT: Issuer may, at its option, prepay all or any
portion of the outstanding principal amount of
the Senior Subordinated Notes so long as (i)
such prepayment is in integral multiples of the
lesser of $250,000 and the entire principal
amount then outstanding of the Senior
Subordinated Notes and (ii) in connection with
such prepayment, Issuer pays the Prepayment
Premium set forth below. Each prepayment shall
be applied to reduce the principal amounts
payable under the Senior Subordinated Notes in
reverse order in which such amounts are due.
PREPAYMENT PREMIUM: Except as set forth above, should the principal
of the Senior Subordinated Notes be wholly or
partially prepaid for any reason, whether
voluntary or involuntary, prior to March 30,
2001, Issuer shall pay to each Investor a
prepayment premium equal to the percentage of
the principal amount being prepaid as follows:
</TABLE>
<TABLE>
<CAPTION>
PREPAYMENT DATE PERCENTAGE
------------------------------------ ----------
<S> <C> <C>
From the Closing Date
until March 30, 1997................ 5 %
From April 1, 1997
until March 30, 1998................ 4 %
From April 1, 1998
until March 30, 1999................ 3 %
From April 1, 1999
until March 30, 2000................ 2 %
From April 1, 2000
until March 30, 2001................ 1 %
Thereafter.......................... 0 %
</TABLE>
<TABLE>
<S> <C>
MANDATORY REPAYMENT: Issuer shall repay 1/8 of the original principal
amount of the Senior Subordinated Notes ($1.875
million) at the end of each calendar quarter
following the repayment in full of the term loan
facility of the Senior
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Debt, but no later than June 30, 2003. All
interest, principal and other amounts owing
under the Senior Subordinated Notes shall be due
and payable at maturity on March 30, 2005.
In addition, all outstanding principal and
interest relating to the Senior Subordinated
Notes shall be due and payable (together with
the prepayment premium) within 15 days after
either (i) the sale of all or substantially all
of Issuer's assets or (ii) the closing of any
public offering of equity securities by Issuer.
REPRESENTATIONS AND
WARRANTIES: Customary and appropriate representations and
warranties will be included, including, without
limitation, representations and warranties
regarding each of the following:
- legal status and qualification
- no conflict with constituent documents or laws
or regulations
- no breach of material documents
- corporate power and authority
- government or other consents
- due authorization; validity enforceability
- ownership of assets
- financial statements
- absence of undisclosed liabilities
- truth and accuracy of information
- absence of certain changes
- regulatory compliance
- litigation
- taxes
- insurance
- debt instruments
- benefit plans
- contracts and commitments
- labor matters
- compliance with law
- environmental and safety matters
- no subordination
- tender offer and merger
- regulations G, U, T and X
- Investment Company Act
- Foreign Corrupt Practices Act
- valid issuance of securities
- merger agreement
- FIRPTA
PRE-MERGER COVENANTS: Merger Sub shall covenant that it shall comply
with and shall cause Andros to comply with all
covenants set forth in the Merger Agreement
applicable prior to the consummation of the
Merger (including, without limitation, Section
5.1 thereof) and Merger Sub shall further
covenant that during the period prior to the
consummation of the Merger (i) it shall not
sell, pledge, hypothecate or otherwise encumber
any of the Minimum Shares except for a pledge of
the Shares to issuers of the Senior Debt and
(ii) it shall not terminate or amend the
Definitive Acquisition Documents without the
prior written consent of the Investors. In
addition, Merger Sub shall cause Andros to
deposit into the
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Cash Account an amount of not less than $25
million. All amounts in the Cash Account shall
be applied to satisfy Merger Sub's obligation to
pay for Shares in the Tender Offer and/or to pay
down the Senior Debt.
OTHER COVENANTS: Customary and appropriate affirmative and
negative covenants will be included, including,
without limitation, covenants regarding each of
the following:
- punctual payments
- accounting records
- reporting requirements
- existence and compliance with law
- insurance
- facilities; proprietary rights
- taxes and other liabilities
- notices to Investor
- ERISA
- notices to Investor regarding ERISA matters
- visitation rights
- private placement number
- use of funds
- dividends, distributions
- line of business
- indebtedness
- liens
- subsidiaries and investments
- guaranteed indebtedness
- mergers
- restrictions on sales of assets
- financial covenants (it is the intent of the
Investors that the financial covenants be less
restrictive than the financial covenants with
respect to the Senior Debt so long as the
covenants with respect to the Senior Debt are
acceptable to Berkeley and the Investors)
- prepayment of indebtedness
- limit on capital expenditures and research and
development
- transactions with affiliates
- amendments of corporate documents
- executive compensation
- sale or issuance of stock
- operating lease obligations
- amendments to senior loan agreement
- prohibited affiliated holders of senior debt
- use of amounts in Cash Account to pay down
Senior Debt
- consummation of Merger per Definitive
Acquisition Documents
- no amendments to Definitive Acquisition
Documents
- change of control
- FIRPTA
EVENTS OF DEFAULT: Customary and appropriate events of default will
be included, including, without limitation,
events of default regarding each of the
following:
- payment
- representations and warranties
- covenants
- indebtedness
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
- covenants in other agreements
- judgments, orders or decrees
- insolvency, bankruptcy, assignment for the
benefit of creditors
- dissolution, liquidation
- ERISA
- failure of enforceability of loan documents
- change of control
- environmental
Remedies upon occurrence of an event of default
shall include acceleration at the option of the
Investors (without notice, presentment, demand
or protest) and each other remedy accorded the
Investors under the loan documents or under law.
Events resulting from insolvency, bankruptcy or
assignments for the benefit of creditors shall
cause immediate acceleration.
CONDITIONS: Customary and appropriate conditions precedent
to the obligations of the Investors under the
loan documents shall be included, including,
without limitation, conditions relating to the
following:
- all matters satisfactory to legal counsel
- true representations and warranties
- executed documents
- certified documents
- insurance
- satisfactory acquisition documentation
- documents in satisfactory form
- payment of International Arrangement and
Consulting Fee
- financial statement; proforma balance sheet
- projections
- issuance of senior debt
- payment of fees and disbursements of counsel
- equity capitalization
- use of funds to purchase Shares in the Tender
Offer
- Merger Sub acquisition of not less than
Minimum Shares in Tender Offer and all other
aspects of Tender Offer satisfactory to
Investors
- total purchase price not to exceed $82.0
million
- transaction fees not to exceed $7.0 million
- governmental and third party approvals
- no material adverse change
- solvency
- customary closing documents (including,
without limitation, legal opinions, corporate
records, documents from public officials and
officers' certificates
- not less than $25 million in cash deposited in
Cash Account
SUBORDINATION: The Senior Subordinated Notes will be unsecured
indebtedness of Issuer and payment of principal
and interest will be subordinated to prior
payment in full of principal and interest on the
senior debt, on terms and conditions
satisfactory to the Investors. Investors will
enter into a Subordination Agreement with Senior
Lenders including terms and conditions
satisfactory to the Investors.
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MISCELLANEOUS: Transfers will be permitted without limitation.
Notices
Successors and Assigns
Costs, Expenses and Attorneys' Fees
Indemnity
Entire Agreement, Amendment
Time of the Essence
Severability of Provisions
Governing Law: California
Jurisdiction: San Francisco
Exhibits and Schedules
Counterparts
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SURVIVAL
II. WARRANTS
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ISSUANCE: Holdings shall issue to Investors warrants (with
a nominal exercise price) to purchase 3% or the
fully diluted common equity of Holdings. A
warrant certificate shall be issued representing
the warrants. A warrant certificate may be
exchanged for 2 or more certificates
representing the same number of warrants.
Mutilated or missing warrant certificates will
be replaced.
EXERCISE OF WARRANTS: A holder of warrants may exercise at any time by
surrendering a warrant certificate representing
the warrants. The holder may elect to reduce the
number of shares of common stock which would
otherwise have been issued in lieu of paying the
exercise price. Upon exercise Holdings shall
issue to Investor a certificate representing the
shares of common stock issued upon exercise of
the warrants. Holdings shall pay all expenses
and taxes imposed by law or any governmental
agency attributable to the issuance of warrants
or warrant shares upon the exercise of warrants.
Holdings shall reserve sufficient shares to
issue upon exercise of the warrants, so long as
the warrants remain outstanding. Issuance of the
warrants and warrant shares shall be done in
accordance with all applicable state and federal
securities laws.
REPRESENTATIONS AND
WARRANTIES: Customary and appropriate representations and
warranties will be included, including, without
limitation, representations and warranties
regarding the following:
- legal status, qualification
- capitalization
- valid issue
- authority; no conflicts
- binding and enforceable
- governmental and other consents
- truth and accuracy of information
- subordinated debt representations and
warranties
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COVENANTS: Customary and appropriate covenants will be
included, including, without limitation,
representations and warranties regarding the
following:
- records
- reporting requirements
- existence; compliance with law
- insurance
- facilities
- taxes and other liabilities
- notice to holders
- visitation rights
- performance of agreements
ANTI-DILUTION
PROTECTION: If Holdings issues or sells shares of common
stock or issues convertible securities or
options entitling the issuee to acquire shares
of common stock (excluding options issued to
management while the warrants are outstanding
for not more than 10% of the common stock of
Holdings in the aggregate existing on the
Closing Date pursuant to a program satisfactory
to the Investors (the "Management Options")) for
a consideration per share less than the fair
value of such shares of common stock immediately
before such issuance the exercise price shall be
reduced to the lower of:
(i) the price determined by dividing (A) an
amount equal to the sum of (x) the common
stock outstanding immediately prior to such
issuance or sale multiplied by the then
current exercise price, plus (y) the
aggregate consideration, if any, received by
Holdings upon such issuance or sale by (B)
the common stock outstanding immediately
after such issuance or sale or
(ii) the price determined by multiplying
the current exercise price by a fraction (i)
the numerator of which shall be the sum of
(A) the common stock outstanding immediately
prior to such issuance or sale, plus (B) the
number of shares of common stock that the
aggregate consideration, if any, received by
Holdings upon such issuance or sale would
purchase at the greater of the initial
purchase price or the fair value on the date
of such issuance or sale and (ii) the
denominator of which shall be the common
stock outstanding immediately after and
giving effect to such issuance or sale.
Upon each adjustment of the exercise price as a
result of the calculations made pursuant hereto,
each warrant outstanding prior to the making of
the adjustment in the exercise price shall
evidence the right to purchase, at the adjusted
exercise price, that number of shares of common
stock obtained by (i) multiplying the number of
shares of common stock purchasable upon exercise
of a warrant prior to adjustment by the exercise
price in effect prior to adjustment, and (ii)
dividing the product so obtained by the exercise
price in effect after such adjustment of the
exercise price.
CERTAIN CORPORATE
TRANSACTIONS: Prohibition on dividends, distributions (except
that Holdings may pay
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an annual management fee to Genstar in an amount
not in excess of $450,000, subject to certain
conditions set forth in the definitive
documentation evidencing the warrants)
Rights of warrantholders upon corporate
reorganizations
RIGHT OF FIRST REFUSAL: Each holder of warrants shall have a right of
first refusal to purchase its pro rata portion
of any new securities which Holdings may propose
to issue and sell, except for Management Options
and shares issued by Holdings in public
offering.
PREFERENTIAL TREATMENT: Holdings shall not issue capital stock of any
class which has the right to more than one vote
per share or any capital stock of any class
which is preferred as to dividends or as to the
distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding
up.
COMPANY'S RIGHT TO CALL: Holdings shall call not less than all of the
warrants outstanding upon prepayment in full or
all amounts outstanding under the Senior
Subordinated Notes. Holdings may call not less
than all of the warrants outstanding at any time
after payment in full of all amounts outstanding
under the Senior Subordinated Notes. The call
price shall be 103% of the fair value of the
warrants determined as of the call date. A post
call adjustment in the call price shall be made
for certain liquidity events occurring within 12
months after the call date.
HOLDER'S RIGHT TO PUT: Any holder of warrants may put not less than all
of the warrants held by such holder at any time
after all amounts under the Senior Subordinated
Notes have been paid in full. The put price
shall be 100% of the fair value of the put
warrants determined as of the put date. Holdings
shall not enter into any agreement requiring
Holdings to limit or impair the right of a
holder to put the warrants.
CO-SALE RIGHTS: Genstar shall agree that it will not sell,
transfer or otherwise dispose of any shares of
Holdings unless it permits each holder to
participate on a pro rata basis in the sale of
shares on the same terms and conditions.
Investor may effect its participation in such
sale by delivering to Genstar share certificates
or warrant certificates representing the number
of shares of common stock which Investor has
elected to sell, properly endorsed for transfer.
If Genstar sells, transfers or otherwise
disposes of shares without permitting a holder
of warrants the right to participate in the
sale, Investor may (i) request that Holdings not
enter such transfer on the books and records of
Holdings or (ii) sell to Genstar a number of
shares Investor should have been able to sell in
connection with Genstar's sale. Each certificate
representing share of common stock of Holdings
shall bear a legend evidencing application of
the co-sale rights to the shares represented by
such certificate.
DRAG-ALONG RIGHTS: To Be Negotiated
REGISTRATION RIGHTS: Incidental: If Holdings proposes to register any
of its securities, whether or not for its own
account, Holdings shall give notice to all
holders of warrants or warrant shares of its
intent to register. If within 30 days after
receiving such notice a holder of warrants or
warrant shares gives notice to Holdings,
Holdings shall cause the shares of such holder
to be registered.
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Registration Expenses: All costs and expenses
incurred by Holdings or a holder of warrants or
warrant shares shall be paid by Holdings.
Cutbacks: If a holder of warrants or warrant
shares has requested that its shares be
registered incidental to the registration of
other shares, that holder's may be excluded from
registration if:
(i) the managing underwriter has determined
that the registration and distribution of
all or a portion of the common stock as part
of the proposed distribution of securities
by the underwriters will materially and
adversely affect the distribution of such
securities;
(ii) Holdings and the underwriters shall
have first excluded from the proposed
offering any securities offered by the
officers, directors or shareholders of
Holdings not having as of the date of the
agreement any contractual right to include
shares in the offering; and
(iii) Holdings and the underwriters shall
exclude from the proposed offering on a pro
rata basis any securities offered by
officers, directors or other shareholders of
Holdings having as of the date of the
agreement the contractual right to include
shares in the offering.
MISCELLANEOUS: Transfers will be permitted without limitation.
Notices
Confidentiality
Costs of Enforcement
Successors and Assigns
Governing law: California
Jurisdiction: San Francisco
Counterparts
Survival of representations and warranties
Remedies
Incorporation of exhibits and schedules
Entire agreement; amendment
COUNSEL TO LPIL, BERKELEY AND
THE INVESTORS: Heller Ehrman White & McAuliffe
</TABLE>
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EXHIBIT (C)(1)
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- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF
FEBRUARY 14, 1996
BY AND AMONG
CHO HOLDINGS INC.,
CHO ACQUISITION INC.
AND
ANDROS INCORPORATED
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TABLE OF CONTENTS
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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
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SECTION 6.3 Confidentiality Agreement..................................................... 27
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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
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INDEX OF DEFINED TERMS
<TABLE>
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DEFINED TERM REFERENCE
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<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
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DEFINED TERM REFERENCE
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Stockholders' Meeting............................................................ Section.52(a)
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Subsidiary....................................................................... Section.13(a)
Superior Proposal................................................................ Section.53
Surviving Corporation............................................................ Section.21(a)
Taxes............................................................................ Section.412(a)
Tendered Shares.................................................................. Section.11(a)
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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
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<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
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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 D. PATERSON___________
Title: Chairman and President
CHO ACQUISITION INC.
By: /s/ JEAN-PIERRE L. CONTE__________
Title: Vice President and
Treasurer
ANDROS INCORPORATED
By: /s/ ROBERT 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.
2
<PAGE>
EXHIBIT (C)(2)
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> <C>
By /s/ JEAN-PIERRE CONTE
----------------------------------------
Name: Jean-Pierre Conte
Title: Vice President and Treasurer
CHO ACQUISITION INC.
By /s/ JEAN-PIERRE CONTE
----------------------------------------
Name: Jean-Pierre Conte
Title: Vice President and Treasurer
</TABLE>
